10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2007 Commission File No. 1-7463

Jacobs Engineering Group Inc.

Delaware	95-4081636
State of incorporation	IRS Employer identification number
1111 South Arroyo Parkway Pasadena, California 91105	(626) 578-3500
Address of principal executive offices	Telephone number (including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $1 par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:    x  Yes    ¨  No

Indicate by a check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    ¨  Yes    x  No

Indicate by check-mark whether the Registrant (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.    x  Yes    ¨  No

Indicate by check-mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check-mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer  x                Accelerated filer  ¨                Non-accelerated filer  ¨

Indicate by check-mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)    ¨  Yes    x  No

There were 120,825,975 shares of common stock outstanding as of November 19, 2007. The aggregate market value of the registrant’s common equity held by non-affiliates was approximately $5.6 billion as of March 31, 2007, based upon the last reported sales price on the New York Stock Exchange on that date.

DOCUMENTS INCORPORATED BY REFERENCE

Part III—Portions of the Registrant’s definitive Proxy Statement to be issued in connection with its 2008 Annual Meeting of Shareholders.

JACOBS ENGINEERING GROUP INC.

Fiscal 2007 Annual Report on Form 10-K

Table of Contents

Item		Page No.
Part I
Item 1.	Business	3
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	23
Item 2.	Properties	23
Item 3.	Legal Proceedings	24
Item 4.	Submission of Matters to a Vote of Security Holders	24
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25
Item 6.	Selected Financial Data	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 8.	Financial Statements and Supplementary Data	40
Item 9.	Changes in and Disagreements With Accountants On Accounting and Financial Disclosure	40
Item 9A.	Controls and Procedures	40
Item 9B.	Other Information	41
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	42
Item 11.	Executive Compensation	43
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	43
Item 13.	Certain Relationships and Related Transactions, and Director Independence	43
Item 14.	Principal Accounting Fees and Services	43
Part IV
Item 15.	Exhibits and Financial Statement Schedules	44
Signatures		46

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PART I

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements that are not based on historical fact. When used in this report, words such as “expects”, “anticipates”, “believes”, “seeks”, “estimates”, “plans”, “intends”, and similar words identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Although such statements are based on management’s current estimates and expectations, and currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause our actual results to differ materially from what may be inferred from the forward-looking statements. Some of the factors that could cause or contribute to such differences are listed and discussed in Item 1A—Risk Factors, below. That list is not all-inclusive, and we undertake no obligation to release publicly any revisions or updates to any forward-looking statements that are contained in this document. We encourage you to read carefully the risk factors described in other documents we file from time to time with the United States Securities and Exchange Commission (SEC).

Item 1. BUSINESS

General

We are one of the largest professional services firms in the United States. Our business focuses exclusively on providing a broad range of technical, professional, and construction services to a large number of industrial, commercial, and governmental clients around the world. We provide four broad categories of services: Project Services (which include engineering, design, architectural, and similar services); Process, Scientific, and Systems Consulting services (which includes services performed in connection with a wide variety of scientific testing, analysis, and consulting activities); Construction services (which encompasses traditional field construction services as well as modular construction activities, and includes direct-hire construction and construction management services); and Operations and Maintenance services (which includes services performed in connection with operating large, complex facilities on behalf of clients as well as services involving process plant maintenance). We provide our services through offices and subsidiaries located principally in North America, Europe, Asia, and Australia.

We concentrate our services on selected industry groups and markets including oil and gas exploration, production, and refining; programs for various national governments; pharmaceuticals and biotechnology; chemicals and polymers; buildings (which includes projects in the fields of health care and education as well as civic, governmental, and other buildings); infrastructure; technology and manufacturing; consumer products; and pulp and paper, among others.

Jacobs Engineering Group Inc. was incorporated under the laws of the State of Delaware on January 8, 1987. On March 4, 1987, the corporation succeeded by merger to the business and assets of Jacobs Engineering Group Inc., a California corporation that, in 1974, had succeeded to a business organized originally by our founder, Dr. Joseph J. Jacobs, in 1947. Unless the context otherwise requires, all references herein to “Jacobs” or the “Registrant” are to Jacobs Engineering Group Inc. and its predecessors, and references to the “Company”, “we”, “us” or “our” are to both Jacobs Engineering Group Inc. and its consolidated subsidiaries. The common stock of Jacobs has been publicly held since 1970 and is currently listed on the New York Stock Exchange (NYSE).

Business Strategy

General

There are four major components of our business strategy: safety; a relationship-based approach to client interactions; a strong focus on cost control; and an organizational structure that facilitates efficient project management and execution. Acquisitions play an important role in our business strategy as they allow us to expand on existing client relationships as well as develop new ones. Acquisitions also allow us the opportunity to leverage our cost structure across geographic areas.

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Safety

Key to the success of our business strategy is our uncompromising focus on safety. Providing an injury and incident free work environment is an unequivocal condition of the relationship we have with our employees. It is also a paramount issue in our dealings with our clients, and our safety program is a fundamental element of our overall approach to risk management. A safe work environment is critical to our long-term success and growth. We maintain a centralized quality and safety group to help ensure that the services we provide are delivered safely and in accordance with standard work processes. Unsafe job sites and office environments increase employee turnover, increase the cost of a project to our clients, expose us to types and levels of risk that are fundamentally unacceptable, and raise our operating costs as well. Safe job sites and office environments, on the other hand, benefit our clients, promote employee morale, and enhance the long-term relationships we have with our clients, employees, and business partners.

Relationship-Based Business Model

Our relationship-based business model is central to our sustained growth and profitability. We aggressively pursue the development of long-term affiliations and alliances with our clients. By working as a partner with our clients on their capital programs, we increase our understanding of their overall business needs as well as the unique technical requirements of their projects. This increased understanding gives us the opportunity to provide a greater range of services to our clients. We market all of our services to clients in connection with their projects where the scope of work required is within our expertise. By integrating and bundling our services (i.e., providing design, engineering, and construction services on the same project), we can price contracts more competitively and enhance overall profitability while delivering superior value to our clients. Our relationship-based business model also helps us more fully understand the risks inherent in the projects, which in turn allows us to better manage those risks. Our approach also provides us with opportunities to market those services our clients will need in the post start-up and commissioning phases of a plant, such as operations and maintenance services. This model, however, does not preclude us from undertaking discrete projects that do not conflict with our business strategy. We will accept and perform discrete projects for our clients if we can negotiate acceptable pricing and other contract terms and conditions.

Cost Control

Another important component of our business strategy is our continual emphasis on cost control. As the global economy expands and companies providing technical, professional, and construction services are required to compete against each other across geographic boundaries, the company that can provide its clients with cost efficient solutions to their project needs has the advantage. Our attention to cost control throughout every level of our organization allows us to deliver superior technical, professional, and construction services safely, efficiently, and within the cost and time parameters our clients require.

Organizational Structure

Our organizational structure and integrated system for delivering services is another key component of our business strategy. Our operating units generally use a matrix organizational structure whereby our project management functions are supported by the various technical engineering, design, and construction disciplines that are necessary to effectively execute long-term engineering and construction contracts. Crucial functions, such as project controls and procurement, are local to each of our major offices and serve operations by providing specialized services required by projects. In addition, we actively employ a boundaryless approach to the way we serve our clients. We do not maintain “profit centers” within the Company, nor do our operating groups compete against each other for contracts. Instead, our organizational structure encourages our operating groups to work cohesively while simultaneously helping to reduce costs and promote an efficient delivery system for all of our services. Our multidomestic geographic strategy supports this approach by allowing each office to compete in the local market place while supporting the needs of global clients in conjunction with our global network of offices.

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The Role of Acquisitions in Our Business Strategy

Our relationship-based business model is a significant driver of our acquisition strategy. When we review potential acquisition targets, we are conscious of the effect the acquisition may have on our client base. We favor acquisitions that allow us to expand or enhance the range of services we provide existing clients, and/or gain access to new geographic areas in which our clients either already operate or plan to expand. By expanding into new geographic areas and adding to our existing technical and project management capabilities, we strive to position ourselves as a preferred, single-source provider of technical, professional, and construction services to our major clients. The following is a brief description of two of our larger acquisitions over the past five years:

• In April 2007, we acquired Edwards and Kelcey, Inc. (Edwards and Kelcey). Edwards and Kelcey is a nationally recognized engineering, design, planning, and construction management firm serving public and private clients in the fields of transportation; planning/environmental; communications technology; buildings/facilities; and land development. Headquartered in Morristown, New Jersey, Edwards and Kelcey employs approximately 1,000 people in offices located primarily in the Northeastern region of the United States (U.S.). The primary purpose for acquiring Edwards and Kelcey was to expand our infrastructure business in the U.S.

• In August 2004, we acquired the Babtie Group Limited (Babtie Group). The Babtie Group is a leading provider of technical and professional services to clients in the infrastructure; facilities; environmental; defense; and governmental outsourcing markets, among others. Headquartered in Glasgow, Scotland, the Babtie Group employs approximately 3,500 people in offices located throughout the United Kingdom (U.K.) and Asia, with smaller operations in India and the Czech Republic. The primary purpose for acquiring the Babtie Group was to expand our infrastructure and facilities business in the U.K.

In any particular year, we will also make smaller acquisitions as opportunities arise.

Services Provided

Our business is to provide technical, professional, and construction services. The services we provide generally fall into four broad categories: Project Services (which include engineering, design, architectural, and similar services); Process, Scientific, and Systems Consulting services (which includes services performed in connection with a wide variety of scientific testing, analysis, and consulting activities); Construction services (which encompasses traditional field construction services as well as modular construction activities, and includes direct-hire construction and construction management services); and Operations and Maintenance services (which includes services performed in connection with operating large, complex facilities on behalf of clients as well as services involving process plant maintenance). The scope of services we can provide our clients, therefore, ranges from consulting and conceptual design services, which clients often require in the very early stages of a project, to complete, single-responsibility, design-build-operate contracts.

The following table sets forth our revenues from each of our four service categories for each of the five fiscal years ended September 30 (in thousands of dollars):

	2007		2006		2005		2004		2003
Project Services	$	3,828,179	$	2,894,293	$	2,469,879	$	2,060,288	$	1,894,777
Process, Scientific and Systems Consulting		597,116		482,344		385,700		248,718		225,855
Construction		2,990,177		3,239,613		1,884,066		1,581,023		1,751,875
Operations and Maintenance		1,058,498		805,020		895,356		704,206		743,094
	$	8,473,970	$	7,421,270	$	5,635,001	$	4,594,235	$	4,615,601

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Project Services

We employ all of the engineering, design, architectural, and related disciplines necessary to design and engineer modern process plants (including projects for clients in the chemicals and polymers; pharmaceuticals and biotechnology; oil & gas; refining; food and consumer products; and basic resources industries); buildings (including facilities for clients in the health care; education; and criminal justice markets, as well as other buildings for clients in the private sector); infrastructure projects (including highways, roads, bridges, and other transportation systems; water and wastewater treatment plants; water resources facilities; and other similar plants and facilities); technology and manufacturing facilities (for clients in the aerospace; automotive; defense; semiconductor; and electronics industries); consumer products manufacturing facilities; pulp and paper plants; and other facilities. We also employ many of the requisite scientific, technical, and program management capabilities necessary to provide program integration, testing, and evaluation services for clients in the defense and aerospace industries; for the U.S. Department of Defense (DoD) in support of information systems for weapons acquisition centers; for the National Aeronautics and Space Administration (NASA) for aerospace, testing, and propulsion systems and facilities; and for various agencies of the U.S. federal government in support of environmental programs.

We are capable of providing our clients with a variety of value engineering services including “safety in design”. Through safety in design we integrate best practices, hazard analysis, and risk assessment methods early in the design phase of projects, taking those steps necessary to eliminate or mitigate injury and damage during the construction, start-up, testing and commissioning, and operations phases of a project.

In the area of construction management, we provide our clients with a wide range of services as an agent for our clients. We may act as the program director, whereby we oversee, on the owner’s behalf, the complete planning, design, and construction phases of the project. Alternatively, our services may be limited to providing construction consulting.

Also included in the category of Project Services are certain related services (such as planning, scheduling, procurement, estimating, cost engineering, project accounting, and quality and safety) necessary to support our engineering, design, construction, construction and program management, operations and maintenance, and consulting services.

Process, Scientific and Systems Consulting

We employ all of the professional and technical expertise necessary to provide a broad range of consulting services including: performing pricing studies, market analyses, and financial projections necessary in determining the feasibility of a project; performing gasoline reformulation modeling; analyzing and evaluating layout and mechanical designs for complex processing plants; analyzing automation and control systems; analyzing, designing, and executing biocontainment strategies; developing and performing process protocols with respect to the U.S. Food and Drug Administration-mandated qualification and validation requirements; providing consultation on proposed railway and airport expansion projects; and performing geological and metallurgical studies.

Also included in this service category are the revenues relating to professional and program management services required to assist clients (such as the U.S. federal government and its agencies) in a wide range of defense and aerospace related programs. Such services typically are more technical and scientific in nature than other project services we provide, and may involve such tasks as supporting the development and testing of conventional weapons systems; weapons modeling and simulations; computer systems development, maintenance, and support; evaluation and testing of mission-critical control systems; and other highly technical programs and tasks.

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Construction

We provide traditional field construction services to private and public sector clients in virtually all of the industry groups and markets to which we provide project services. In the area of environmental remediation and restoration, we provide environmental remedial construction services for a variety of public and private sector clients. We also provide many of our clients with modular construction technology. Our modular construction technology is an advanced form of engineering and design, off-site fabrication and assembly, and field erection. It provides our clients with an alternative approach to traditional methods of engineering and construction, which can compress and shorten the construction schedule, reduce risk, and lower costs.

Historically, our field construction activities were focused primarily on those construction projects for which we perform much of the related engineering and design work. By focusing our construction efforts on such projects, we minimize the risks associated with constructing complex plants and facilities based on designs prepared by third parties. The financial risk to us of constructing complex plants and facilities based on designs prepared by third parties may be particularly significant on fixed-price contracts; therefore, we generally avoid this type of project. However, we continue to pursue construction-only projects where we can negotiate pricing and other acceptable contract terms.

Operations and Maintenance (O&M)

O&M generally refers to all of the tasks required to operate and maintain large, complex facilities on behalf of clients. We can provide key management and support services over all of the facility’s operations, including managing subcontractors and other on-site personnel. Within the environmental area, O&M often includes engineering and technical support services as well as program management services necessary to remediate contaminated sites. Within the aerospace and defense areas, O&M often requires us to provide the management and technical support services necessary to operate and maintain engine test facilities, weapons integration, and high-tech simulation and verification centers. Such O&M contracts also frequently require us to provide facilities management and maintenance services; utilities operations and maintenance services; property management and disposition services; and construction support services.

O&M also includes process plant maintenance services, which generally involves all of the tasks required to keep a process plant (typically a refinery or chemical plant) in day-to-day operation. Such tasks could include the repair and replacement of pumps, piping, heat exchangers, and other equipment as well as “turnaround” work, which involves major refurbishment that can only be performed when the plant is shut down. Since shutdowns are expensive to the owners of the plant, turnaround work often requires maximizing the number of skilled craft personnel who can work efficiently on a project on a 24-hours-per-day, seven-days-per-week basis. We use sophisticated computer scheduling and programming to complete turnaround projects quickly, and we maintain contact with a large pool of skilled craft personnel we can hire as needed on maintenance and turnaround projects.

Although the gross profit margins that we realize from O&M services are generally lower than those associated with the other services we provide, the costs to support maintenance activities are also generally lower. Furthermore, we view O&M contracts as presenting a lower financial risk to the Company as compared to some of the other services we provides because O&M contracts are normally cost-reimbursable in nature. Additionally, although engineering and construction projects may be of a short-term nature, O&M services often result in long-term relationships with clients. For example, we have been providing maintenance services at several major process plants for several decades. This aspect of maintenance services greatly reduces the selling costs in respect of such services.

Financial Information About Segments

Although we describe our business in this annual report in terms of the services we provide, the markets in which our clients operate, and the geographic areas in which we operate, we have concluded that our operations may be aggregated into one reportable segment pursuant to Statement of Financial Accounting Standards

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No. 131—Disclosures about Segments of an Enterprise and Related Information. In making this determination, we considered various economic characteristics of our operations including: the nature of the services we provide, our internal processes for delivering those services, and the types of customers we have. In addition to the discussion that follows, please refer to Note 15—Segment Information of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K.

There is a high degree of similarity of the workforces among our service categories. For example, engineering and design services (i.e., services provided by persons who are degreed and in certain circumstances licensed, such as engineers, architects, scientists, and economists) exist in all four service categories. In addition, there is a high degree of similarity among a significant component of the workforces we employ to perform O&M and construction projects. In providing O&M and construction services, we employ a large number of skilled craft labor personnel. These may include welders, pipe fitters, electricians, crane operators, and other personnel who work on very large capital projects (in the case of projects classified within the construction services category) or on smaller capital projects (in the case of maintenance projects classified within the O&M services category).

Our operating units use a matrix organizational structure. Our results, therefore, are dependent on groups representing technical disciplines (e.g., electrical engineering, mechanical engineering, cost engineering, etc.) supporting project management personnel (who maintain the relationship between us and our clients, and who are ultimately responsible for delivering projects to our clients safely, on time, and on budget). Additionally, all of our operating regions and divisions use common tools, policies, and procedures to manage and run their respective units. These include project review meetings, project performance evaluations, and project execution plans.

The use of technology throughout our organization is highly uniform. Whether it is PC-based computer aided design and drafting (CADD) applications used by our engineering and design staff, or PC-based modeling programs used by the scientific and consulting staff, or PC-based scheduling, estimating, and cost control applications used by home-office personnel in support of our construction and maintenance activities, all of the service categories described above are equally affected by changes in technology as they occur in the economy at large.

Furthermore, the types of information and internal reports used by management to monitor performance, evaluate results of operations, allocate resources, and otherwise manage the business support a single reportable segment. Accordingly, based on these similarities, we have concluded that our operations may be aggregated into one reportable segment for purposes of this disclosure.

Industry Groups and Markets

We provide our services to clients that operate in the following industry groups and markets: energy and refining—downstream; long-term programs for various national governments, including the U.S.; chemicals and polymers; oil and gas—upstream; pharmaceuticals and biotechnology; infrastructure; buildings; and other, general industrial and consumer businesses and markets (such as technology and manufacturing; pulp and paper; food and consumer products; and mining and minerals). We believe these industry groups and markets have sufficient common needs to permit cross-utilization of our resources and help to mitigate the negative effects of a downturn in a single industry.

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The following table sets forth our revenues from each of the various industry groups and markets in which our clients operate for each of the five fiscal years ended September 30 (in thousands of dollars):

	2007		2006		2005		2004		2003
Energy & Refining—Downstream (a)	$	2,520,064	$	2,255,928	$	1,637,675	$	991,403	$	882,623
National Government Programs		1,500,007		1,259,361		1,160,664		1,051,016		1,070,740
Chemicals and Polymers		1,238,350		1,124,254		737,872		559,733		559,166
Oil & Gas—Upstream (a)		890,943		546,663		319,796		279,065		210,424
Pharmaceuticals and Biotechnology		756,178		678,989		514,836		713,566		652,036
Infrastructure		681,367		546,999		464,400		304,977		288,193
Buildings		437,122		395,190		462,147		354,742		352,998
Industrial and Other		449,939		613,886		337,611		339,733		599,421
	$	8,473,970	$	7,421,270	$	5,635,001	$	4,594,235	$	4,615,601

(a) In prior annual reports, these amounts were combined into one category called, “Oil & Gas and Refining”. Prior year information has been reclassified to conform to the fiscal 2007 presentation.

Energy & Refining—Downstream

We provide full-service engineering, design, construction, and management services to our clients in the downstream sector of the energy & refining industries. Typical projects include new design and construction, revamps or expansions of existing plants, upgrades of individual process units within refineries, and maintenance services. We also provide a broad range of consulting services to our clients including process assessments, facility appraisals, feasibility studies, technology evaluations, project finance structuring and support, and multi-client subscription services.

Government regulations continue to influence the need for project services by our clients in the refining industry. We see ongoing project activity in refining due to formulation and sulfur directives. New and existing regulations in areas such as off-road Ultra Low Sulfur Diesel, ambient air quality standards, removal of benzene from gasoline and sulfur from bunker fuels will continue to drive new investment requirements in the industry over the next several years. We are actively involved in such regulatory-based projects. In addition to our extensive experience in these types of projects, we offer a recognized proprietary and patented sulfur removal technology (SuperClaus), which has a strong market share for installed capacity. Biofuels, and particularly biodiesel, is an area of increasing activity and opportunity. We are already working on a number of these projects in Europe.

Refineries are also responding to changes in feedstock price and availability as well as the product market. This is leading to investment to facilitate processing heavier crude with higher sulfur content and producing a different product slate, responding to increased demand for diesel. Our North American and European offices continue to be very involved in this market. In addition, investment in new refinery capacity in the Middle East and Asia is occurring due to the overall desire to add value at source and to respond to the regional consumption growth. We are supporting this investment through specialist consultancy and project services from our growing local offices. We are also involved with capacity expansion projects in the U.S.

We have also used our modular construction capabilities on a number of projects in the energy and refining industry. In the U.S. and European refining markets, many projects involve revamping existing processing units or adding new processes to an existing refinery. As a result of the close proximity of processing units in these refineries, we believe using modular construction can decrease congestion at the construction site. Modular construction can also provide cost and project execution benefits in remote locations.

We provide maintenance services to our clients in the refining industry and have also established a number of formal alliances with various clients. Some of these alliances are both domestic (U.S.) and international in scope.

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In this industry group, we also include power generation and cogeneration projects. We provide technical assistance, project management, design, engineering, procurement, construction and construction management, and maintenance services to our clients in the power generation and supply industry and for power generating units within our customers’ process facilities. Typical projects include simple and combined cycle power projects, cogeneration power plants, aeroderivative and industrial gas turbines, and emergency power generation stations. The industry is now focusing on gasification as high energy prices, an increasing need for hydrogen and power, availability of lower priced solid fuels, and the potential to sequester CO2 emissions make this technology a new area for project development.

Oil & Gas—Upstream

Historically, revenues from our hydrocarbon business related primarily to projects associated with petroleum refining and the processes and technologies required to convert crude oil and gas into petroleum fuels, chemical feedstocks, and lubricants. However, beginning in fiscal 2001 with the acquisition of certain elements of the Stork Engineering & Construction businesses in the Netherlands, and continuing in fiscal 2002 with the acquisition of McDermott Engineers & Constructors in Canada, and in fiscal 2007 with the acquisition of W.H.Linder & Associates, Inc., we have expanded our services to include more projects for clients operating in the upstream sector of the oil and gas industries.

We provide full-service engineering, design, construction, and management services to our clients in the areas of exploration and production. Typical projects include new design and construction, revamps or expansions, and maintenance services. We also provide a broad range of consulting services to our clients including process assessments; facility appraisals; feasibility studies; technology evaluations; project finance structuring and support; and multi-client subscription services. Currently, we are expanding our business in the upstream market, working on projects that include heavy oil processing (e.g., oil sands extraction projects); oil recovery through steam injection; and gas treating, gas gathering, and gas storage projects including extraction of commercially valuable elements of the gas stream. A relatively new area of focus for us is offshore production, where we are actively pursuing project opportunities in engineering and design of topside facilities. Higher energy prices and reduced traditional reserves are driving the development of new reserves and the enhanced recovery from existing ones. We are actively supporting our clients in these initiatives in North America, Europe, the Middle East, and Asia.

National Government Programs

We categorize our National Government Programs as generally relating to environmental programs, aerospace and defense programs, or building programs.

Environmental Programs

We are one of the leading providers of environmental engineering and consulting services in the U.S. and abroad, including hazardous and nuclear waste management and site cleanup and closure. Many of our projects for the U.S. federal government span over ten years. Our projects within this market generally relate to all major federal and state environmental statutes, with particular emphasis on the Comprehensive Environmental Response Compensation and Liability Act and the Resource Conservation and Recovery Act. We currently provide environmental investigation, restoration, engineering, construction, and site operations and maintenance services to a number of U.S. federal government agencies, including the Department of Energy (DoE) and the DoD.

As part of our environmental restoration work, we provide support in such areas as underground storage tank removal, contaminated soil and water remediation, and long-term groundwater monitoring. We also design, build, install, operate, and maintain various types of soil and groundwater cleanup systems at multiple project locations across the U.S. and its territories for the U.S. Army Corps of Engineers and the U.S. Air Force Center for Environmental Excellence (AFCEE). Typical projects also include the preparation of feasibility studies and

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performance of remedial investigations, engineering, design, and remediation services on several national programs. As an extension of our environmental support to AFCEE, we also serve AFCEE’s customers with execution of capital projects involving sustainment, repair, and modernization of military facilities and infrastructure.

We provide a full range of environmental consulting services including air quality planning and permitting, water quality compliance, environmental conservation studies, pollution prevention assessments, and compliance with the National Environmental Policy Act.

As part of our support to our clients, we provide asset management services in the form of infrastructure operations and maintenance. This is an integral part of our services for the DOE at the Oak Ridge Environmental Management sites and at the Argonne National Laboratory. Asset management also includes building closures, which may involve deactivation, decommissioning, and demolition of government facilities. We also are providing these services to support the government of the U.K. in its nuclear sites decommissioning program through the Nuclear Decommissioning Authority (NDA). We believe this will be a growing market in the years to come, and we are well-placed to capitalize on it, having won a number of major framework contracts this year at the two highest-hazard sites.

Aerospace and Defense Programs

We provide support to aerodynamic, propulsion, and space facilities and systems for government clients at more than a dozen test centers across the continental U.S. This includes military systems acquisition management and strategic planning; operations and maintenance of test facilities, ranges, space launch facilities, and space chambers; test and evaluation services in computer, laboratory, facility, and range environments; test facility computer systems instrumentation and diagnostics; and test facility design and build. We also provide systems engineering and integration of complex weapons and space systems as well as hardware and software design of complex flight and ground systems. We support and maintain enterprise information systems for government and commercial customers worldwide, ranging from the operation of complex computational networks to the development and validation of specific software applications.

We have provided advanced technology engineering services to the DoD for more than 50 years and currently support defense programs in dozens of locations, both within the United States and internationally. In addition to operating and maintaining several DoD test centers, our support includes services such as aerodynamic testing of next-generation fighter aircraft; propulsion testing for space programs; testing of the U.S. Army’s next generation ground mobile weapon systems; and acquisition support for weapons systems such as air-to-air missile systems and precision guided smart weapons for high-value targets. We also support the acquisition and development of systems and equipment for Special Operations Forces as well as the development of biological, chemical, and nuclear detection and protection systems. We also support the DoD in a number of information technology programs including network design, integration, and support; command and control technology; development and sustainment of databases and customized applications; and security solutions.

We provide a broad range of engineering, science, and technical support services to eight NASA sites, delivering support to virtually every major space program including the International Space Station; space shuttle recertification; space observatories; aerospace transportation systems; space propulsion systems; advanced materials research; and advanced research and development activities such as protein crystal growth experiments for the development of new drugs and vaccines. We also provide operations and maintenance services for NASA’s aerospace and propulsion research test facilities. We play an integral role in ensuring that the launch vehicles and propulsion systems of the future support NASA’s new exploration vision.

Buildings Programs

National Government Programs also include many types of buildings programs for a variety of agencies of the U.S. federal government. We provide a wide range of advance planning, architectural, engineering, construction management, program management, and design-build services to agencies such as the Federal

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Aviation Administration (FAA); the General Services Administration (GSA); the DoD, and the U.S. Departments of State, Treasury, and Agriculture; and the Army National Guard, among others. Typical projects include renovating and modernizing terminal radar control centers, air traffic control towers, and other facilities for the FAA; planning and design services for Internal Revenue Service offices and customer service centers nationwide; and planning, design, and program management services in connection with certain homeland security initiatives for the GSA and the Department of Homeland Security. We have also performed on projects involving highly technical buildings supporting complex applications of physics, such as the National Ignition Facility (NIF) at Lawrence Livermore National Laboratory, and the Spallation Neutron Source (“SNS”, an accelerator-based neutron source facility located in Oak Ridge, Tennessee). We are providing planning, design, design-build construction, and program management services to the DoD on a variety of project types, including military family housing; quality of life, training, maintenance, and readiness facilities; and command and control centers. Other projects include military facilities supporting the DoD’s global re-basing program, the 2005 Base Realignment and Closure program, and the transformation initiatives of the various military services. Similar initiatives are underway in Europe, specifically in the U.K., where we are leading the Custodial Services’ project management delivery program to upgrade the U.K. prison stock, and also certain security-lead programs such as upgrading works to the Palace of Westminster and various regional police authorities.

Chemicals and Polymers

The chemicals and polymers market, which, we believe, is growing after an extended flat period, continues to be an essential part of our diversified business. Expansions and revamps are attracting investments in North America and Europe. This is an area of our traditional skills and we are very active in working with our clients to deliver added value. A large volume of new investment is occurring in the Middle East and Asia due to both low feed stock cost and rapidly growing local markets.

The types of projects we execute for our clients in these industries include feedstock synthesis, chemical synthesis, and polymerization. This includes high-pressure processes to produce industrial chemicals and low-pressure multi-product processes to produce specialty and fine chemicals. We have extensive knowledge of, and experience with, advanced polymerization reactions and state-of-the-art, post-reactor processing techniques. An area of focus due to high feedstock costs is gasification to produce the feeds for chemicals and fertilizers. Our involvement in these early studies positions us to help owners capitalize on return on investment opportunities by streamlining work processes and optimizing existing plant layouts for future expansions.

Another important aspect of serving our clients in the chemicals and polymers business is in the area of field services. We have contracts with major chemical producers worldwide to provide construction, on-site maintenance, and turnaround activities. Many of these contracts are evergreen in nature, with relationships extending over many years due to our focus on safety, value, and client satisfaction. Like the refining industry, we provide maintenance services to our clients in the chemicals industry and have also established numerous formal alliances.

Our clients in this sector focus on safety, reliability, and maintainability to keep operating costs down. To support this initiative, we apply best practices on capital and maintenance work by leveraging synergy and resources within our alliances and partnerships, which in some cases involve more than 25 chemical facilities for a single owner.

As these multi-site relationships increase in magnitude, the range of services we provide often expands. Other services vary from providing ad-hoc, on-site engineering services to completing an entire capital improvement program. We provide technical consulting; project finance structuring; facility appraisal; market analysis; and business consulting services as well as fully-integrated engineering, procurement, construction, and construction management services. Our services can guide and assist our chemical clients from a good project idea to a constructed and operating chemical facility.

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Pharmaceuticals and Biotechnology

We furnish a full line of services to our clients in the pharmaceuticals and biotechnology industries including master planning; programming; feasibility studies; engineering; preliminary and detailed design; procurement; construction; construction management; commissioning; qualification and validation; and maintenance. Accordingly, we are fully capable of executing the industry’s largest capital programs on a single-responsibility basis.

Typical projects for clients in these industries include laboratories; research and development facilities; pilot plants; bulk active pharmaceutical ingredient production facilities; full-scale biotechnology production facilities; and secondary manufacturing facilities. In addition to regulatory compliance issues, state-of-the-art technology and expertise are critical to our clients in these industries. Such technology and knowledge encompasses containment; barrier technology; locally controlled environments; process and building systems automation; and off-the-site design and fabrication of process and building modules.

As companies in the pharmaceuticals industry continue to experience pressure to decrease product time-to-market, reduce costs, and increase return on investment, the types of services we provide have grown over the years to include modular construction as well as consulting and strategic planning to help our clients complete capital projects faster and more efficiently. We are also leaders in applying waste minimization techniques to capital project execution. As an example, we increased our efforts to integrate commissioning and validation services, helping reduce the amount of time required to introduce a new drug into the marketplace. In the biotechnology industry, our multidomestic structure helps clients as new product discovery and development drives capital spending and our ability to act as a capital program partner helps them effectively manage their strategic investment. We believe we are geographically aligned with our customers’ preferred investment locations.

The pharmaceutical industry is becoming increasingly global in both research and development and manufacturing activities. Our expanse of offices throughout North America, Europe, and Asia provides a consistent, high quality, local service where our clients need us. We provide single-point engineering, procurement, construction management, and validation (EPCMV) project delivery. We continue to enhance our 3-D design capabilities, project controls, and automation capabilities as well as other technological aspects of our EPCMV services. This enables us to better serve our clients and to ensure that projects transition from their conceptual design phase through engineering, construction, start-up, commissioning, and validation phases as economically and efficiently as possible.

We have also established formal alliances and preferred provider agreements with numerous clients in the pharmaceuticals and biotechnology industry.

Infrastructure

We provide a broad range of planning; design; consulting; engineering; and construction management services to our clients engaged in civil construction projects throughout the U.S., the U.K., Ireland, Asia, and other selected countries.

Transportation infrastructure development and rehabilitation is a core competency of our infrastructure business. By integrating a broad range of professional disciplines, we provide comprehensive planning, engineering, and construction and program management services for transportation facilities, and systems to include alternative delivery and public-private ventures. Interdisciplinary teams work independently or as an extension of agency staff on highway; bridge; transit; tunnel/underground; airport; railroad; intermodal facility; maritime; and lock and dam projects. Representative clients include national government departments and agencies in the U.S. and U.K., state departments of transportation, other regional and local agencies, and private industry freight transport firms.

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Our services in water infrastructure programs have helped public and private sector clients develop and rehabilitate critical water resource systems. Integrating water, wastewater, air quality, and hazardous waste remediation experience provides these clients with the comprehensive expertise needed to deliver complex projects. We provide planning, design, design-build, and program and construction management services to a diverse market, including regional wastewater treatment agencies, manufacturers and power generators, local water suppliers, and military agencies. We continue to develop water/wastewater conveyance systems and water resources management projects. We have developed micro-tunneling (“trenchless technology”) as a primary service and have successfully applied this specialized process to such projects as water and utility distribution systems and pipelines.

We believe a robust public and private sector infrastructure funding situation will help drive demand for the planning, design, construction, and operations and maintenance services we provide for the foreseeable future. We also believe that opportunities for construction management and design-build services will continue to grow as these project delivery methods gain acceptance in the public sector. We are working collaboratively to leverage our global skill base to develop new client relationships and opportunities in alternative project financing and delivery, and infrastructure-related enterprise management.

Current programs and projects we are performing include transportation program management services for U.S. cities and counties; construction management and asset management services for water and wastewater treatment systems located in the U.S. and the U.K.; design, engineering, and construction management services for transit, highway and bridge projects throughout the world; and multiyear general design and consulting services for a railway entity in the U.K. There is also a particular increase in the market around London relating to the 2012 Olympics and the continuing roll-out of the national development plan in Ireland.

Buildings

Buildings generally refers to our full range of design and construction activities relating to institutional, government, and corporate buildings as well as other specialized facilities, including projects at many of the world’s leading medical and research centers and universities. We are one of the leading providers of architectural, engineering, and construction management services for buildings projects throughout the U.S. and in many parts of Europe.

We focus our efforts and resources in markets where capital spending initiatives drive demand and where changes and advances in technology require innovative, value adding solutions. Typical projects include large, multi-year, U.S. federal and European governments’ building programs; major primary and secondary education capital improvement programs; state, and local government courts and correctional facilities; and hospitals and health and research facilities (including projects at many of the world’s leading medical and research centers). We also provide design and construction-related services for office and corporate headquarters buildings, mission-critical facilities, municipal and civic facilities, commercial centers, and recreation complexes including some of the most high-profile entertainment facilities. We serve a diversified client base encompassing both the public and private sectors.

We provide and/or manage a full range of planning; architectural; engineering; construction; construction management, and/or total program management services for a variety of unique and technically complex buildings and campuses. We provide our services on projects that emphasize new construction as well as those involving expansion, renovation, and refurbishment of existing facilities. As our clients drive towards sustainable design, we are increasingly moving towards energy efficient and “green” building solutions.

Advancing technologies require highly-specialized buildings in the fields of medical research, nano science, biotechnology, and laser sciences, and we offer total integrated design and construction management solutions to these projects, many of which are world leaders in their function.

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In providing best value solutions to our clients, we frequently propose and undertake renewal and refurbishment programs instead of new buildings, and our attention to high levels of health and safety is a critical aspect of working in occupied and operational premises.

Of particular significance is our growing success in applying our diversified, in-house technical skill base to both public and private sector clients requiring complete program management. Such contracts typically involve providing technical, professional, and construction services over multiple years to clients with whom we have long-standing relationships and a tenure of successful service, including alliance or framework programs. We also provide integrated facility management services for which we (often through joint ventures and consortiums with third parties) assume full responsibility for the ongoing operations and maintenance of entire commercial or industrial complexes on behalf of the client.

We include in the National Government Programs group those buildings projects where the work is performed for a national government, and which involve multiple projects that are funded under a single government program, and which are usually performed over more than one year.

Industrial and Other

We provide a broad range of services to our technology and manufacturing; pulp and paper; food and consumer products; and basic resources clients.

Technology and Manufacturing

Included in this revenue category are projects involving highly complex test facilities for clients in the aerospace and automotive industries. Typical projects range from conceptual design and feasibility studies to complete design-build programs of aero-acoustic wind tunnels; engine test facilities; acoustic enclosures; transmission test stands; powertrain, environmental, emissions, altitude, and electromagnetic compatibility test facilities; in-line and end-of-line component test stands; and computer-based measurement and control systems. We are a leader in providing support to automotive manufacturers and component suppliers for the supply of testing services and the management of test assets, with test facility operations and maintenance contracts and usage agreements in place with Ford Motor Company, Visteon, and General Motors. We provide similar services for the U.S. Air Force at Wright-Patterson Air Force Base. We also provide a range of engineering, construction, operation, and maintenance services for advanced research facilities, including facilities supporting research in fusion and fission energy, nanoscale materials, and high-powered lasers and x-rays. These services support important research activities in the U.S., Europe, and the U.K.

This category also includes projects for clients operating in the semiconductor industry. We provide design, engineering, procurement, construction, and construction management services for a variety of clients in this industry. Typical projects range from on-site plant engineering and tool hook-ups to multi-million dollar, state-of-the-art wafer fabrication and crystal growing facilities used to produce solar energy cells, microprocessors for computers and other consumer electronic devices. Projects in the semiconductor industry are more complex than many other commercial facilities, requiring a greater emphasis on cleanroom and similar high-end technologies.

Pulp and Paper

We provide a broad range of consulting, engineering, procurement, construction, construction management, and maintenance services to our clients in the pulp and paper industry, both in the U.S. and internationally. With a strategy of expanding our geographic presence into areas where our clients intend to build facilities, our pulp and paper capability now extends through our offices in the U.K., France, Spain, Italy, and Mexico. Typical projects for our clients in the pulp and paper industry range from small mill projects to complex, multi-million dollar paper machine rebuilds, mill expansions, and the construction of new facilities.

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Pulp and paper projects encompass many areas of a mill, including pulping and bleaching; papermaking; chemical recovery; material handling; effluent treatment; and power and steam generation. In the area of papermaking, our expertise includes tissue and towel, coated and uncoated fine papers, newsprint, and linerboard. Our expertise and skill set also includes the converting and packaging of paper products for distribution and consumer use. We have been instrumental in designing and installing state-of-the-art facilities for recycled fiber, de-inking, and pulp bleaching.

Chemical recovery and power generation are also integral components of the papermaking process. We have broad experience in these areas and apply our expertise in the engineering and construction of such facilities for many of our clients.

A significant portion of our work involves assisting our clients in their compliance with environmental regulations and standards that affect the pulp and paper industry. We monitor all of the key environmental regulations affecting our clients and offer services including compliance studies, permitting support, and design of pollution control systems. We also provide complete permitting services in support of all of our projects, including associated air modeling. In addition, we provide compliance services regarding air pollutant standards and hazardous air pollutant emission limits from industrial boilers for many of our clients.

The pulp and paper industry has been consolidating for many years, leaving a refined customer base with increased assets and highly focused market strategies. Several of the traditional pulp and paper customers are emerging as major consumer product companies. These customers have created new opportunities for us in non-traditional areas such as wall board plants and facilities that manufacture diapers and other personal care products.

Like certain other markets, we have established formal alliances with leaders in the pulp and paper industry. Such alliances allow us to expand the types of services we provide our clients and enable us to improve the overall quality, consistency, and value of our services under the highest of expectations for confidentiality.

Other

Included in this category are projects not classified into any of the other industry and market categories. This includes projects for clients operating in the food and consumer products industries as well as basic resources (such as mining and minerals).

Backlog

For information regarding our backlog, refer to Item 7.—Management’s Discussion and Analysis of Financial Condition and Results of Operations, below.

Significant Customers

The following table sets forth the percentage of total revenues earned directly or indirectly from agencies of the U.S. federal government for each of the five fiscal years ended September 30:

2007		2006		2005		2004		2003
16.6	%	16.4	%	21.2	%	22.3	%	22.6	%

It is rare for a commercial customer to contribute 10% or more of the Company’s total revenue. On occasion, however, we will perform a number of field services projects for a single customer in the same fiscal year which, primarily because of the amount of pass-through costs (discussed below) that is included in revenue, will cause total revenue from that customer to exceed 10% of total consolidated revenues. For the fiscal year ended September 30, 2006 revenues earned from Valero Energy Corporation accounted for 10.2% of total consolidated revenues.

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Financial Information About Geographic Areas

The financial information regarding geographic areas in which we operate is included in Note 15—Segment Information of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K and is incorporated herein by reference.

Contracts

While there is considerable variation in the pricing provisions of the contracts we undertake, our contracts generally fall into three broad categories: cost-reimbursable, fixed-price, and guaranteed maximum price. The following table sets forth the percentages of total revenues represented by these types of contracts for each of the five fiscal years ended September 30:

	2007		2006		2005		2004		2003
Cost-reimbursable	88	%	90	%	85	%	83	%	82	%
Fixed-price	10		9		13		15		17
Guaranteed maximum price	2		1		2		2		1

In accordance with industry practice, most of our contracts (including those with the U.S. federal government) are subject to termination at the discretion of the client. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the date of termination.

When we are directly responsible for engineering, design, procurement, and construction of a project or the maintenance of a client’s plant or facility, we reflect the costs of materials, equipment, and subcontracts in both revenues and costs. On other projects, where the client elects to pay for such items directly, and we have no associated responsibility for such items, these amounts are not reflected in either revenues or costs. The following table sets forth the approximate amount of such pass-through costs included in revenues for each of the five fiscal years ended September 30 (in thousands of dollars):

2007	2006		2005		2004		2003
2,746.7	$	2,680.7	$	1,535.5	$	1,165.7	$	1,389.3

Cost-Reimbursable Contracts

Cost-reimbursable contracts generally provide for reimbursement of costs incurred plus an amount of profit. The profit element may be in the form of a simple mark-up applied to the labor costs incurred or it may be in the form of a fee, or a combination of a mark-up and a fee. The fee element can also take several forms. The fee may be a fixed amount as specified in the contract; it may be an amount based on a percentage of the costs incurred; or it may be an incentive fee based on targets, milestones, or performance factors defined in the contract. In general, we prefer cost-reimbursable contracts because we believe the primary reason for awarding a contract to us should be our technical expertise and professional qualifications rather than price.

Fixed-Price Contracts

Fixed-price contracts include both “lump sum bid” contracts and “negotiated fixed-price” contracts. Under lump sum bid contracts, we are required to bid against other contractors based on specifications the client furnishes. This type of pricing presents certain inherent risks, including the possibility of ambiguities in the specifications received, problems with new technologies, and economic and other changes that may occur over the contract period. Additionally, it is not unusual for lump sum bid contracts to lead to an adversarial relationship with clients, which is contrary to our relationship-based business model. Accordingly, lump sum bid contracts are not our preferred form of contract. Under a negotiated fixed-price contract, we are selected as the contractor first and then we negotiate a price with our client. Negotiated fixed-price contracts frequently exist in single-responsibility arrangements where we perform some portion of the work before negotiating the total price of the project. Thus, although both types of contracts involve a firm price for the client, the lump sum bid

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contract provides the greater degree of risk to us. However, because of economies that may be realized during the contract term, both negotiated fixed-price and lump sum bid contracts may offer greater profit potential than other types of contracts. Over the past five years, most of our fixed-price work has been either negotiated fixed-price contracts or lump sum bid contracts for project services, rather than turn-key construction.

Guaranteed Maximum Price Contracts

Guaranteed maximum price contracts are performed in the same manner as cost-reimbursable contracts; however, the total actual cost plus the fee cannot exceed the guaranteed price negotiated with the client. If the total actual cost of the contract exceeds the guaranteed maximum price, then we will bear at least some, if not all, of the excess. In those cases where the total actual cost and fee are less than the guaranteed price, we will often share the savings on a predetermined basis with the client. These contracts are not our preferred form of contract because they often contribute to an adversarial relationship with clients, which is contrary to our relationship-based business model.

Competition

For information regarding the competitive conditions in our business, please refer to Item 1A—Risk Factors, below.

Employees

At September 30, 2007, we had approximately 36,400 full-time, staff employees (including contract staff). Additionally, as of September 30, 2007, there were approximately 12,800 persons employed in the field on a project basis. The number of field employees varies in relation to the number and size of the maintenance and construction projects in progress at any particular time.

Available Information

The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room located at 100 F Street N.E., Washington, D.C., 20549. In order obtain information about the operation of the Public Reference Room, a person may call the SEC at 1-800-732-0330. The SEC also maintains a site on the Internet that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC The SEC’s website is http://www.sec.gov. You may also read and download the various reports we file with, or furnish to, the SEC free of charge from our website, http://www.jacobs.com.

Item 1A. RISK FACTORS

We engage in a highly competitive business. Increased competition for professional services could reduce our market share and profits.

There is intense competition to provide the various technical professional services and construction and construction management services we provide. The extent of such competition varies according to the industries and markets in which our clients operate as well as the geographic areas in which we operate. The degree and type of competition we face is also often influenced by the type of projects for which we compete. For example, with respect to our construction and operations and maintenance services, clients generally award large projects (multi-million dollar design-build and program management projects, for example) to large contractors. Some of our competitors are larger and may possess greater resources than we do, which may give them an advantage when bidding for certain of these large projects. Conversely, the relatively small amount of capital required for a business providing engineering, design, architectural, and consulting services creates a relative ease of market entry for a new entrant possessing acceptable professional qualifications and certifications. As a result, our competitors range from small, local or regional firms to large, national and international organizations. If we are unable to compete effectively in the geographic areas in which we operate, we may experience a loss of market share or reduced profitability or both.

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Our larger competitors for engineering, construction, and maintenance services for process plants include the Bechtel Corporation; Fluor Corporation; Foster Wheeler Ltd.; Washington Group International; KBR, Inc.; Aker Kvaerner; Technip; WorleyParsons; and AMEC plc. In the area of buildings, our competitors include several of the competitors previously mentioned as well as HDR, Inc.; Hellmuth, Obata & Kassabaum; AeCOM Technology; and Turner Construction. In the area of infrastructure, our competitors include several of the competitors previously mentioned as well as Parsons Brinckerhoff; URS Corporation; HNTB; Tetra Tech Inc.; Parsons Corporation; and W.S. Atkins. In the area of U.S. federal programs, our principal competitors include several of the competitors listed above as well as the Shaw Group; SAIC; CH2M Hill; Weston Solutions; Lockheed Martin Corporation; and Computer Sciences Corporation. And in the area of pulp and paper, our principal competitors include BE&K and AMEC plc.

Our continued success is dependent on our ability to hire and retain qualified personnel.

There is intense demand for employees who are able to perform the services we provide. The success of our business is dependent upon our ability to attract and retain personnel, including engineers, architects, designers, and corporate management professionals who have the necessary and required experience and expertise. In addition, there is significant demand for qualified craft personnel in the geographic areas where our construction and maintenance sites are located. In certain geographic areas we may not be able to satisfy the demand for our services because of our inability to successfully hire and retain qualified personnel. If we cannot find and retain highly qualified and trained engineers, architects, designers and corporate management employees or hire skilled craft personnel as needed, it could have a material adverse impact on our business and financial results.

The outcome of pending and future claims and litigation could have a material adverse effect on our business.

The nature of our business occasionally results in clients, subcontractors and vendors presenting claims against us for recovery of costs they incurred in excess of what they expected to incur, or for which they believe they are not contractually responsible. Similarly, and in the normal course of business, we may present claims and change orders to our clients for costs we have incurred for which we believe we are not contractually responsible or for services provided that were either requested by the client or were otherwise required by the nature of the project. If we fail to document properly the nature of our claims and change orders or are otherwise unsuccessful in negotiating reasonable settlements with our clients, subcontractors, and vendors, we could incur cost overruns and experience reduced profits or, in some cases, suffer a loss for that project. Additionally, irrespective of how well we document the nature of our claims and change-orders, the cost to prosecute and defend claims and change-orders can be significant.

In the normal course of business, we are subject to certain contractual guarantees and litigation. Generally, such guarantees relate to project schedules and plant performance. Most of the litigation in which we are involved as a defendant relates to workers’ compensation; personal injury; environmental; employment/labor; professional liability; and other similar lawsuits. We maintain insurance coverage for various aspects of our business and operations. However, we have elected to retain a portion of losses that may occur through the use of various deductibles, limits, and retentions under our insurance programs which may subject us to some future liability for which we are only partially insured, or completely uninsured.

Construction sites and maintenance sites are inherently dangerous workplaces. If we fail to maintain safe work sites, we can be exposed to significant financial losses as well as civil and criminal proceedings.

Construction sites and maintenance sites are inherently dangerous workplaces. Construction and maintenance projects often require putting our employees in close proximity with large pieces of mechanized equipment, moving vehicles, chemical and manufacturing processes, and highly-regulated materials. On those projects where we are responsible for site safety, we are obligated to implement procedures to ensure that workers are not injured. In the event we either fail to implement such procedures or if the procedures we implement are ineffective, our employees and other may become injured, and we could incur significant financial losses. In addition, the Company could be found liable for failing to comply with government regulations dealing with occupational health and safety.

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Regulations dealing with occupational health and safety are continually evolving. We maintain functional groups within the Company whose primary purpose is to ensure that effective health, safety, and environmental (HSE) work procedures are implemented throughout our organization, including construction sites and maintenance sites. In spite of these efforts, the Company could suffer losses relating to safety issues at our construction and maintenance sites, or fail to comply with all HSE regulations applicable to our business.

We perform certain contracts through partnerships and joint ventures. Participation in joint ventures exposes us to certain other risks and uncertainties.

As is common in the industry, we execute certain contracts jointly with other contractors through various forms of joint ventures, including general partnerships. These arrangements expose us to a number of risks, including the risk that our partners may not be able to fulfill their obligations under the partnership agreements and related client contracts. There is also a risk that our partners may be incapable of providing the required financial support to the partnerships. Disputes can arise not only between us and our joint venture partners, but also between the joint ventures and the clients.

The contracts in our backlog may be adjusted, cancelled or suspended by our clients. Additionally, even if fully performed, our backlog may not be a good indicator of our future gross margins.

At September 30, 2007, our backlog totaled approximately $13.6 billion. In accordance with industry practice, substantially all of our contracts are subject to cancellation or termination at the discretion of the client. In addition, our backlog is subject to changes in the scope of services to be provided as well as adjustments to the costs relating to the contracts. Accordingly, there is no assurance that the amount of backlog in-hand at September 30, 2007 will actually be realized as revenues.

The gross margins (i.e., contract revenue less direct costs of contracts) can vary considerably between contracts. One aspect of our business that can have a significant effect on the gross margins we realize on our contracts and projects is the amount of pass-through costs incurred. When we are directly responsible for engineering, design, procurement and construction of a project or the maintenance of a client’s plant or facility, we reflect the costs of materials, equipment, and subcontracts in both revenues and costs. On other projects, where the client elects to pay for such items directly, and we have no associated responsibility for such items, these amounts are not reflected in either revenues or costs. Since pass-through costs typically do not bring significant margins with them, it is not unusual for us to experience an increase or decrease in revenues without experiencing a corresponding change in our gross margins.

Additionally, the way we perform on our individual contracts can affect greatly our gross margins and hence, future profitability. In some of the markets we serve there is an increasing trend towards cost–reimbursable contracts with incentive-fee arrangements. Typically, our incentive fees are based on such things as achievement of target completion dates or target costs; overall safety performance; overall client satisfaction; and/or other performance criteria. If we fail to meet such targets or achieve the expected performance standards, we may receive a lower, or even zero, incentive fee resulting in lower gross margins. Accordingly, there is no assurance that the contracts in backlog, assuming they produce the revenues currently expected, will generate gross margins at the rates we have realized in the past.

Our business is dependent on the timing and funding of new awards, and we are vulnerable to the cyclical nature of the markets in which our clients operate.

We provide technical professional, and construction services to clients operating in a number of markets including oil and gas exploration, production, and refining; long-term programs for various national governments, including the U.S.; chemicals and polymers; pharmaceuticals and biotechnology; infrastructure; buildings; and other, general industrial and consumer businesses and markets (such as technology and manufacturing; pulp and paper; food and consumer products; and mining and minerals). These individual markets are generally cyclical in nature. Because we are dependent on the timing and funding of new awards, we

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are therefore vulnerable to unanticipated downturns in our clients’ markets and industries. As a result, our past results have varied considerably and may continue to vary depending upon the demand for future projects in the industries listed above, and the geographic regions in which we operate.

Contracts with the U.S. federal government and other governments and their agencies pose additional risks relating to future funding and compliance.

Contracts with the United States and other governments and their agencies are subject to various uncertainties, restrictions and regulations, including oversight audits by various government authorities and profit and cost controls. In the U.S., government contracts are also exposed to uncertainties associated with Congressional funding. The U.S. federal government is under no obligation to maintain funding at any specific level, and funds for a program may even be eliminated.

In addition, U.S. government contracts are subject to specific procurement regulations and a variety of other socio-economic requirements. For example, we must comply with the Federal Acquisition Regulation, the Truth in Negotiations Act, the Cost Accounting Standards, the Service Contract Act, and Department of Defense security regulations. We must also comply with various other government regulations and requirements as well as various statutes related to employment practices, environmental protection, recordkeeping and accounting. If we fail to comply with any of these regulations, requirements or statutes, our existing government contracts could be terminated, and we could be temporarily suspended or even debarred from government contracting or subcontracting.

We also run the risk of the effects of government audits, investigations and proceedings, and so-called “qui tam” actions brought by individuals or the government under the U.S. Federal False Claims Act that, if an unfavorable result occurs, could impact our profits and financial condition, as well as our ability to obtain future government work. For example, government agencies routinely review and audit government contractors. If these agencies determine that a rule or regulation has been violated, a variety of penalties can be imposed including monetary damages, and criminal and civil penalties, all of which would harm our reputation with the government or even debar us from future government activities.

If one or more of our government contracts are terminated for any reason including for convenience, if we are suspended from government contract work, or if payment of our costs is disallowed, we could suffer a significant reduction in expected revenues and profits.

We bear the risk of cost overruns in fixed-price and guaranteed maximum price contracts (these contracts accounted for approximately 12% of our fiscal 2007 revenues). We may experience reduced profits or, in some cases, losses under these contracts if costs increase above our estimates.

For the year ended September 30, 2007, approximately 12% of our revenues was earned under contracts that were either fixed-price or guaranteed maximum price in nature. For such contracts, we bear the risk of paying some, if not all, of any cost overruns. Under fixed price and guaranteed maximum-price contracts, contract prices are established in part on cost and scheduling estimates which are based on a number of assumptions, including assumptions about future economic conditions, prices and availability of labor, equipment and materials, and other exigencies. If these estimates prove inaccurate, or if circumstances change such as unanticipated technical problems, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather delays, cost of raw materials or our suppliers’ or subcontractors’ inability to perform, cost overruns may occur and we could experience reduced profits or, in some cases, a loss for that project. Errors or ambiguities as to contract specifications can also lead to cost-overruns.

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International operations, unfavorable political developments, natural disasters and weak foreign economies may seriously harm our financial condition.

For the year ended September 30, 2007, approximately 41% of our revenues was earned from clients outside the U.S. Our business is dependent on the continued success of our international operations, and we expect that our international operations will continue to account for a significant portion of our total revenues. At a minimum, our reported financial condition and results of operations are exposed to the effects (both positive and negative) that fluctuating exchange rates have on the process of translating the financial statements of our international operations, which are denominated in currencies other than the U.S. dollar, into the U.S. dollar. In addition, our international operations are subject to a variety of risks, including:

• Recessions in foreign economies and the impact on our costs of doing business in those countries;

• Difficulties in staffing and managing foreign operations;

• Unexpected changes in regulatory requirements;

• The adoption of new, and the expansion of existing, trade restrictions;

• Acts of war and terrorism;

• The ability to finance efficiently our foreign operations;

• Social, political and economic instability;

• Limitations on the ability to repatriate foreign earnings; and

• Natural disasters or other crises, such as the outbreak of Severe Acute Respiratory Syndrome commonly known as SARS or Avian “bird” flu.

Rising inflation, interest rates and/or construction costs could reduce the demand for our services as well as decrease our profit on our existing contracts, in particular with respect to our fixed price contracts.

Because a significant portion of our revenues are earned from cost-reimbursable type contracts (approximately 88% during fiscal 2007) the effects of inflation on our financial condition and results of operations over the past few years have been generally minor. However, we bear all of the risk of rising inflation with respect to those contracts that are fixed-price and may be at risk to the effects of rising inflation with respect to those contracts that are guaranteed maximum-price. In addition, rising inflation, interest rates and/or construction costs could reduce the demand for our services. Furthermore, if we expand our business into markets and geographic areas where fixed-price and lump-sum work is more prevalent, inflation may have a larger impact on our results of operations in the future. Therefore, increases in inflation, interest rates and/or construction costs could have a material adverse effect on our business and financial results.

Our business strategy relies in part on acquisitions to sustain our growth. Acquisitions of other companies present certain risks and uncertainties.

Our business strategy involves growth through, among other things, the acquisition of other companies. Such growth involves a number of risks, including:

• Difficulties relating to combining previously separate entities into a combined, integrated, and efficient business;

• Diversion of management’s attention from day-to-day operations;

• Assumption of liabilities of an acquired business, including liabilities that were unknown at the time the acquisition transaction was negotiated;

• Failure to realize anticipated benefits, such as cost savings and revenue enhancements;

• Potentially substantial transaction costs associated with business combinations;

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• Potential impairment resulting from the overpayment for an acquisition;

• Difficulties relating to assimilating the personnel, services and systems of an acquired business and to assimilating marketing and other operational capabilities; and

• Difficulties in applying and integrating our system of internal controls to an acquired business.

In addition, there is no assurance that we will continue to locate suitable acquisition targets or that we will be able to consummate any such transactions on terms and conditions acceptable to us. Acquisitions may bring us into businesses we have not previously conducted and expose us to additional business risks that are different than those we have traditionally experienced.

In the event we issue stock as consideration for certain acquisitions we may make, we could dilute share ownership.

We grow our business organically as well as through acquisitions. One method of acquiring companies or otherwise funding our corporate activities is through the issuance of additional equity securities. Should we issue additional equity securities, such issuances could have the effect of diluting our earnings per share as well as our existing stockholders’ individual ownership percentages in the Company.

Delaware law and our charter documents may impede or discourage a takeover or change of control.

We are a Delaware corporation. Certain anti-takeover provisions of the Delaware general corporation law impose restrictions on the ability of others to acquire control of us. In addition, certain provisions of our charter documents may impede or discourage a takeover. For example:

• Our Board of Directors is divided into three classes serving staggered three year terms;

• Only our Board of Directors can fill vacancies on the board;

• There are various restrictions on the ability of a stockholder to nominate a director for election; and

• Our Board of Directors can authorize the issuance of preference shares.

These types of provisions, as well as our Shareholder Rights Agreement, could make it more difficult for a third party to acquire control of us, even if the acquisition would be beneficial to our stockholders. Accordingly, stockholders may be limited in the ability to obtain a premium for their shares.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

Our properties consist primarily of office space in general, commercial office buildings located in major cities in the following countries: United States; Austria; Australia; Belgium; Canada; the Czech Republic; China; Finland; France; Germany; Greece; India; Italy; Mexico; The Netherlands; Poland; Puerto Rico; Republic of Ireland; Saudi Arabia; Singapore; Spain; Sweden; United Arab Emirates; and the U.K. Such space is used for operations (providing technical, professional, and other home office services), sales, and administration. Most of our properties are leased. In addition, we own facilities located in Charleston, South Carolina which serve as our principal manufacturing and fabrication site for our modular construction activities. The total amount of space used by us for all of our operations is approximately 5.1 million square feet.

We also lease smaller, project offices located throughout the U.S., the U.K., and in certain other countries. We also rent a portion of our construction equipment on a short-term basis.

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Item 3. LEGAL PROCEEDINGS

The information required by this Item 3 is included in Note 12—Contractual Guarantees, Litigation, Investigations, and Insurance of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K and is incorporated herein by reference.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Jacobs’ common stock is listed on the NYSE, and trades under the symbol “JEC”. The Registrant has provided to the NYSE, without qualification, the required annual certification of its Chief Executive Officer regarding compliance with the NYSE’s corporate governance listing standards. The following table sets forth the low and high sales prices of a share of Jacobs common stock during each of the fiscal quarters presented, based on the NYSE consolidated transaction report (and giving effect to the March 2007 stock split discussed below):

	Low Sales Price		High Sales Price
Fiscal 2007:
First quarter	$	36.025	$	42.925
Second quarter		38.250		47.330
Third quarter		46.500		60.000
Fourth quarter		55.660		78.290
Fiscal 2006:
First quarter	$	29.350	$	34.705
Second quarter		33.900		44.875
Third quarter		34.280		46.635
Fourth quarter		34.650		44.150

Holders

According to the records of our transfer agent, there were 1,283 stockholders of record as of November 19, 2007.

Dividends

Our policy is to use cash flows from operations to fund future growth, pay down debt, and, subject to market conditions, repurchase common stock under a stock buy-back program approved by our Board of Directors. Accordingly, we have not paid a cash dividend since fiscal 1984. Although our Board of Directors periodically reviews the merits of paying cash dividends, we currently have no plans to pay cash dividends in the foreseeable future.

On January 25, 2007 the Board of Directors of Jacobs declared a two-for-one stock split that was paid in the form of a 100% stock dividend on March 15, 2007 to shareholders of record on February 15, 2007.

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table presents certain information about our equity compensation plans as of September 30, 2007:

	Column A	Column B		Column C
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants, and rights	Weighted- average exercise price of outstanding options, warrants, and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column A)
Equity compensation plans approved by shareholders—Note (a)	8,463,131	$	25.96	3,993,238
Equity compensation plans not approved by shareholders	—		—	—
Total	8,463,131	$	25.96	3,993,238

Note (a): The number in Column A excludes purchase rights accruing under our two, broad-based, shareholder-approved employee stock purchase plans: The Jacobs Engineering Group Inc. 1989 Employee Stock Purchase Plan (1989 ESPP), and the Global Employee Stock Purchase Plan (GESPP). These plans give employees the right to purchase shares at an amount and price that are not determinable until the end of the specified purchase periods, which occurs monthly. Our shareholders have authorized a total of 22.8 million shares of common stock to be issued through the 1989 ESPP and the GESPP, which our Board of Directors voluntarily reduced by 1.2 million shares on July 26, 2001. From the inception of the 1989 ESPP and the GESPP through September 30, 2007, a total of 20.2 million shares have been issued, leaving 1.4 million shares of common stock available for future issuance at that date.

Unregistered Sales of Equity Securities and Use of Proceeds

On August 9, 2007, we acquired certain assets of John F. Brown Company, Inc., an Ohio corporation, and John F. Brown Canada, Inc., an Ontario corporation, for cash and shares of our common stock. In connection with the acquisition, we issued 10,447 shares of our common stock with an aggregate value of approximately $640,000 to John F. Brown Company, Inc. No underwriters or placement agents were involved with this acquisition.

The issuance of our common stock in the acquisition was exempt from the registration requirements of the Securities Act of 1933, as amended pursuant to Rule 506 thereof. The offer and sale of the shares of our common stock was made as part of a transaction that involved only accredited investors and did not involve any general solicitation or general advertising.

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Performance Graph

The following graph shows the changes over the past five-year period in the value of $100 invested in (1) the common stock of Jacobs Engineering Group Inc., (2) the Standard & Poor’s 500 Index, and (3) the Dow Jones Heavy Construction Group Index. The values of each investment are based on share price appreciation, with reinvestment of all dividends, assuming any were paid. For each graph, the investments are assumed to have occurred at the beginning of each period presented.

Comparison of Five Year Cumulative Total Return Among

Jacobs Engineering Group Inc. (JEC), the S&P 500 Index, and

the Dow Jones Heavy Construction Group Index (DJHC)

	9/02		9/03		9/04		9/05		9/06		9/07
Jacobs Engineering Group	$	100.00	$	146.05	$	124.00	$	218.26	$	242.00	$	489.51
S&P 500 Index	$	100.00	$	124.40	$	141.65	$	159.01	$	176.17	$	205.13
Dow Jones Heavy Construction Group Index	$	100.00	$	141.60	$	155.75	$	249.39	$	297.32	$	600.74

Note: The above information was provided by Research Data Group, Inc.

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Item 6. SELECTED FINANCIAL DATA

The following table presents selected financial data for each of the last five fiscal years. This selected financial data should be read in conjunction with the Consolidated Financial Statements and related notes beginning on page F-1 of this Annual Report on Form 10-K. Amounts are presented in thousands, except for per share information:

	2007			2006			2005			2004			2003
Results of Operations:
Revenues	$	8,473,970		$	7,421,270		$	5,635,001		$	4,594,235		$	4,615,601
Net earnings		287,130			196,883			131,608			115,574			112,645
Financial Position:
Current ratio		1.78 to 1			1.75 to 1			1.70 to 1			1.58 to 1			1.59 to 1
Working capital	$	1,001,644		$	776,766		$	552,336		$	397,599		$	358,683
Current assets		2,278,078			1,817,961			1,337,431			1,083,513			970,097
Total assets		3,389,421			2,853,884			2,378,859			2,093,819			1,688,096
Long-term debt		40,450			77,673			89,632			78,758			17,806
Stockholders’ equity		1,843,662			1,423,214			1,165,780			1,027,802			859,669
Return on average equity		17.58	%		15.21	%		12.00	%		12.25	%		14.41	%
Backlog:
Technical professional services	$	6,188,500		$	5,153,400		$	4,329,000		$	3,989,000		$	3,383,200
Field services		7,397,300			4,624,300			4,314,000			3,463,500			3,657,800
Total	$	13,585,800		$	9,777,700		$	8,643,000		$	7,452,500		$	7,041,000
Per Share Information:
Basic earnings per share	$	2.42		$	1.69		$	1.15		$	1.03		$	1.02
Diluted earnings per share		2.35			1.64			1.12			1.01			1.00
Stockholders’ equity		15.08			11.82			9.93			8.95			7.62
Average Number of Shares of Common Stock and Common Stock Equivalents Outstanding (Diluted)		122,226			120,373			117,379			114,867			112,784

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this Management’s Discussion and Analysis (MD&A) is to provide an overview of the Company’s consolidated financial condition and results of operations as well as an analysis of the factors that caused certain key elements of our financial statements to change from one year to the next.

In this MD&A, we use certain terms and abbreviations that are defined as follows:

AICPA	The American Institute of Certified Public Accountants (like the APB and the FASB, the accounting guidance promulgated by the AICPA are part of the authoritative accounting literature comprising “generally accepted accounting principles” in the U.S.).
APB	Accounting Principles Board.
Backlog	Backlog represents the total dollar amount of revenues we expect to record in the future as a result of performing work under contracts that have been awarded to us. With respect to operations and maintenance (O&M) contracts, however, we include in backlog the amount of revenues we expect to receive for only one succeeding year, regardless of the remaining life of the contract. For national government programs (other than U.S. federal O&M contracts), our policy is to include in backlog the full contract award, whether funded or unfunded, excluding option periods.
SG&A expenses	From our Consolidated Statements of Earnings, “SG&A expenses” means selling, general and administrative expenses.
Operating profit	From our Consolidated Statements of Earnings, “operating profit” means revenues, less direct costs of contracts and SG&A expenses.
SFAS	Statement of Financial Accounting Standards (these are accounting standards adopted by the Financial Accounting Standards Board (FASB)).

Overview

Net earnings in fiscal 2007 increased by $90.2 million, or 45.8%, as compared to last year, and EPS (diluted) grew by 43.3%. Contributing to the growth in net earnings was increased activity on contracts with clients in a number of industries and markets including: energy and refining-downstream; upstream oil and gas; national government programs; and chemicals and polymers. Project Services revenues increased by $933.9 million, or 32.3%, in fiscal 2007 as compared to last year. Project Services consist of engineering, design, architectural, and other “home office” services that typically bring higher gross margin rates as compared to our “field services”.

Cash and cash equivalents totaled $613.4 million at September 30, 2007; an increase of $179.3 million, or 41.3%, as compared to September 30, 2006. Our “net cash” position (defined as cash and cash equivalents less bank debt) was $572.4 million at September 30, 2007; an increase of $230.5 million, or 67.4%, as compared to September 30, 2006. Additions to property and equipment used $64.6 million of cash and cash equivalents during fiscal 2007 as compared to $54.0 million last year. Our cash balances, combined with a borrowing capacity of $290.0 million under our long-term, unsecured revolving credit facility, provide sufficient capital resources for us to fund our on-going operations.

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Critical Accounting Policies

In order to understand better the changes that may occur to key elements of our financial condition and operating results, a reader of this MD&A should be aware of the critical accounting policies we apply in preparing our consolidated financial statements.

The consolidated financial statements contained in this report were prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements and the financial statements of any business performing long-term engineering and construction-type contracts requires management to make certain estimates and judgments that affect both the entity’s results of operations and the carrying values of its assets and liabilities. Although our significant accounting polices are described in Note 2 of the Notes to Consolidated Financial Statements, the following discussion is intended to describe those accounting policies that are especially critical to the preparation of our consolidated financial statements.

Revenue Accounting for Contracts and Use of Joint Ventures—In accounting for long-term engineering and construction-type contracts, we follow the provisions of the AICPA’s Statement of Position 81-1—Accounting for Performance of Construction-Type and Certain Production-Type Contracts. In general, we recognize revenues at the time we provide services. Depending on the commercial terms of the contract, we recognize revenues either when costs are incurred, or using the percentage-of-completion method of accounting by relating contract costs incurred to date to the total estimated costs at completion. This method of revenue recognition requires us to prepare estimates of costs to complete contracts in progress. In making such estimates, judgments are required to evaluate contingencies such as potential variances in schedule, the cost of materials and labor, and productivity, and the impact of change orders, liability claims, contract disputes, and achievement of contractual performance standards. Many of our engineering and construction contracts provide for reimbursement of costs plus a fixed or percentage fee. In some of the markets we serve there is an increasing trend towards cost-reimbursable contracts with incentive-fee arrangements. In certain instances, we base our incentive fees on achievement of target completion dates, target costs, and/or other performance criteria. Failure to meet these targets or increases in contract costs can result in unrealized incentive fees or non-recoverable costs, which could exceed revenues recognized from the project. One such incentive-fee contract is with the U.S. Department of Energy for the Fernald Closure Project (the “Fernald Project”). This contract provides for incentive fees based on schedule and cost. In addition, the terms of the contract provide that the incentive fees may not be fully billed to the DOE until the completion of the project, which we estimate to occur in fiscal 2008. At September 30, 2007 and 2006 there was $5.4 million and $40.0 million, respectively, of fees relating to the Fernald Project recognized as receivables in our Consolidated Balance Sheets.

We provide for contract losses in their entirety in the period they become known, without regard to the percentage of completion.

The nature of our business sometimes results in clients, subcontractors or vendors presenting claims to us for recovery of costs they incurred in excess of what they expected to incur, or for which they believe they are not contractually responsible. In those situations where a claim against us may result in additional costs to the contract, we would include in the total estimated costs of the contract (and therefore, the estimated amount of margin to be earned under the contract) an estimate, based on all relevant facts and circumstances available, of the additional costs to be incurred. Similarly, and in the normal course of business, we may present claims to our clients for costs we have incurred for which we believe we are not contractually responsible. In those situations where we have presented such claims to our clients, we include in revenues the amount of costs incurred, without profit, to the extent it is probable that the claims will result in additional contract revenue, and the amount of such additional revenue can be reliably estimated. Costs associated with unapproved change orders are included in revenues using substantially the same criteria used for claims.

Certain cost-reimbursable contracts with government customers as well as certain commercial clients provide that contract costs are subject to audit and adjustment. In this situation, revenues are recorded at the time services are performed based upon the amounts we expect to realize upon completion of the contracts. In those situations where an audit indicates that we may have billed a client for costs not allowable under the terms of the contract, we estimate the amount of such nonbillable costs and adjust our revenues accordingly.

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As is common in the industry, we execute certain contracts jointly with third parties through various forms of joint ventures and consortiums. For certain of these joint ventures (i.e., where we have an undivided interest in the assets and liabilities of the venture), we recognize our proportionate share of joint venture revenues, costs and operating profit in our Consolidated Statements of Earnings. For other investments in engineering and construction joint ventures, we use the equity method of accounting.

Accounting for Stock Issued to Employees and Others—Effective October 1, 2005, we began accounting for stock issued to employees and outside directors in accordance with the provisions of SFAS No. 123R—Share-Based Payment. SFAS 123R superseded APB Opinion No. 25—Accounting for Stock Issued to Employees and requires that we measure the value of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. The computed fair value is recognized as a non-cash cost over the period the employee provides services.

We use the Black-Scholes option pricing model to compute the grant date fair value of the award. The Black-Scholes model requires the use of highly subjective assumptions in order to compute the hypothetical, fair value of a stock option. Changes in these assumptions can cause drastically different values being assigned to a stock option. The value assigned to any stock options that may be awarded in the future as well as the related expense associated with any such awards will be dependent on the assumptions used.

Accounting for Pension Plans—In accounting for pension plans, we follow the provisions of SFAS No. 87—Employers’ Accounting for Pensions, and SFAS No. 158—Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. SFAS 87 requires the use of assumptions and estimates in order to calculate periodic pension cost, and the value of the plans’ assets and liabilities. These assumptions involve discount rates, investment returns, and projected salary increases, among others. We rely on qualified actuaries to assist us in valuing the financial position of the plans, and to provide advice regarding the actuarial assumptions used. The expected rates of return on plan assets for fiscal 2007 ranged from 5.0% to 9.0%, which is unchanged from last year. We believe this range of rates reflects the long-term returns expected on the plans’ assets, considering projected rates of inflation, the diversification of the plans’ assets, and the expected real rates of market returns. The discount rates used to compute plan liabilities were changed from a range of 4.75% to 6.25% in fiscal 2006 to a range of 5.20% to 5.75% in fiscal 2007. Changes in the actuarial assumptions may have a material affect on the plans’ assets and liabilities, and the associated pension expense. Management, together with our actuaries, monitor trends in the marketplace within which our pension plans operate in order to assure the fairness of the actuarial assumptions used.

In September 2006, the FASB issued SFAS 158. SFAS 158 requires companies to (i) recognize the funded statuses of their single-employer, defined benefit postretirement plans as assets or liabilities in their balance sheets; (ii) recognize as a component of other comprehensive income, net of tax, the gains or losses that arise during the period being reported but are not recognized as a component of periodic benefit cost under existing accounting rules; and (iii) measure defined benefit pension plan assets and obligations as of the date of the sponsor’s balance sheet. In fiscal 2007, we were required to initially recognize the funded statuses of our defined benefit pension plans in our consolidated balance sheet which resulted in a $45.0 million after-tax gain in accumulated other comprehensive income. The other provisions of SFAS 158 (relating to the change in measurement date of the plans’ assets and liabilities) is effective for fiscal years ending after December 15, 2008 (i.e., September 30, 2009 for us). The change in measurement date is not expected to have a material effect on our consolidated financial statements

Accounting for Income Taxes—We account for income taxes in accordance with SFAS No. 109—Accounting for Income Taxes, and other, applicable authoritative pronouncements. Judgment is required in determining our worldwide provision for income taxes. In the normal course of business, we may engage in numerous transactions every day for which the ultimate tax outcome (including the period in which the transaction will ultimately be included in taxable income or deducted as an expense) is uncertain. Additionally, the tax returns we file are subject to audit and investigation by the Internal Revenue Service, most states in the

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United States, and by various government agencies representing many jurisdictions outside the United States. Our effective tax rate was 36.0% in fiscal 2007, 35.5% in fiscal 2006 and 37.2% in fiscal 2005. We routinely monitor the appropriateness of our worldwide tax rate, and we adjust our income tax expense in the period it is probable that actual results will differ from our estimates.

In July 2006, the FASB issued Interpretation No. 48—Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with SFAS 109. FIN 48 prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on an entity’s tax return. FIN 48 also provides guidance on derecognition; classification; interest and penalties; accounting in interim periods; disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006 (i.e., fiscal 2008 for us). We continue to evaluate the impact of FIN 48 but do not expect the adoption to have a material effect on our consolidated financial statements.

Insurance Matters, Litigation, Claims, and Contingencies—In the normal course of business, we are subject to certain contractual guarantees and litigation. The guarantees to which we are a party generally relate to project schedules and plant performance. Most of the litigation involves us as a defendant in workers’ compensation; personal injury; environmental; employment/labor; professional liability; and other similar lawsuits. We maintain insurance coverage for various aspects of our business and operations. We have elected, however, to retain a portion of losses that occur through the use of various deductibles, limits, and retentions under our insurance programs. This situation may subject us to some future liability for which we are only partially insured, or completely uninsured. We intend to mitigate any such future liability by continuing to exercise prudent business judgment in negotiating the terms and conditions of our contracts.

In accordance with SFAS No. 5—Accounting for Contingencies, we record in our Consolidated Balance Sheets amounts representing our estimated liability relating to such claims, guarantees, litigation, and audits and investigations. We rely on qualified actuaries to assist us in determining the level of reserves to establish for insurance-related claims that are known and have been asserted against us, and for insurance-related claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to our claims administrators as of the respective balance sheet dates. We include any adjustments to such insurance reserves in our consolidated results of operations.

In addition, as a contractor providing services to various agencies of the United States federal government, we are subject to many levels of audits, investigations, and claims by, or on behalf of, the U.S. federal government with respect to contract performance, pricing, costs, cost allocations, and procurement practices.

Testing Goodwill for Impairment—In accordance with SFAS No. 142—Goodwill and Other Intangible Assets, the amount of goodwill carried in our Consolidated Balance Sheets is tested annually for possible impairment. In conducting the impairment test, we may apply, in accordance with the provisions of SFAS 142, various valuation techniques to estimate the fair value of our reporting units. The values resulting from the application of these valuation techniques are not necessarily representative of the values we might obtain in a sale of our reporting units to a willing third party.

Foreign Currencies—We transact business in various currencies. The functional currency of each of our foreign operations is the currency of the local country. Consequently, and in accordance with SFAS No. 52—Foreign Currency Translation, revenues and expenses of operations outside the United States are translated into U.S. dollars using weighted-average exchange rates for the applicable period(s) being translated while the assets and liabilities of operations outside the United States are translated into U.S. dollars using period-end exchange rates. The net effect of the foreign currency translation process (translating the income statement accounts at rates that are different from those used to translate the balance sheet accounts) is included in stockholders’ equity as a component of accumulated other comprehensive income in the accompanying Consolidated Balance Sheets. Our net exposure to foreign currency transaction gains and losses is limited because, in general, our various operations invoice clients and satisfy their financial obligations in their respective functional currencies. In

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situations where our operations incur contract costs in currencies other than their functional currencies, we strive to have a portion of the related contract revenues denominated in the same currencies as the costs. In those situations where revenues and costs are transacted in different currencies, we sometimes enter into foreign exchange contracts in order to limit our exposure to fluctuating foreign currencies. In those situations, we follow the provisions of SFAS No. 133—Accounting for Derivative Instruments and Hedging Activities in accounting for our derivative contracts.

Results of Operations

General

Our business focuses exclusively on providing technical, professional, and construction services to a large number of industrial, commercial, and governmental clients around the world. The services we provide generally fall into four broad categories:

• Project Services (which includes engineering, design, architectural, and similar services);

• Process, Scientific, and Systems Consulting services (which includes services performed in connection with a wide variety of scientific testing, analysis, and consulting activities);

• Construction services (which encompasses traditional field construction services as well as modular construction activities, and includes direct-hire construction and construction management services); and

• Operations and Maintenance services (which includes services performed in connection with operating large, complex facilities on behalf of clients as well as services involving process plant maintenance).

The scope of services we can provide our clients, therefore, ranges from consulting and conceptual design services (which are often required by clients in the very early stages of a project) to complete, single-responsibility, design-build-operate contracts.

The following table sets forth our revenues by type of service for each year ended September 30 (in thousands):

	2007		2006		2005
Technical Professional Services Revenues:
Project Services	$	3,828,179	$	2,894,293	$	2,469,879
Process, Scientific, and Systems Consulting		597,116		482,344		385,700
Total Technical Professional Services Revenues		4,425,295		3,376,637		2,855,579
Field Services Revenues:
Construction		2,990,177		3,239,613		1,884,066
Operations and Maintenance		1,058,498		805,020		895,356
Total Field Services Revenues		4,048,675		4,044,633		2,779,422
	$	8,473,970	$	7,421,270	$	5,635,001

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We focus our services on clients operating in certain industry groups and markets. We believe these industry groups and markets have sufficient common needs to permit cross-utilization of our resources. The following table sets forth our revenues by these industry groups and markets for each year ended September 30 (in thousands):

	2007		2006		2005
Energy & Refining—Downstream (a)	$	2,520,064	$	2,255,928	$	1,637,675
National Government Programs		1,500,007		1,259,361		1,160,664
Chemicals and Polymers		1,238,350		1,124,254		737,872
Oil & Gas—Upstream (a)		890,943		546,663		319,796
Pharmaceuticals and Biotechnology		756,178		678,989		514,836
Infrastructure		681,367		546,999		464,400
Buildings		437,122		395,190		462,147
Industrial and Other (b)		449,939		613,886		337,611
	$	8,473,970	$	7,421,270	$	5,635,001

(a) In prior annual reports, these amounts were combined into one category called “Oil & Gas and Refining”. Prior year information has been reclassified to conform to the fiscal 2007 presentation.

(b) Includes projects for our clients operating in the technology and manufacturing; pulp and paper; food and consumer products; and basic resources industries, among others.

Fiscal 2007 Compared to Fiscal 2006

We recorded net earnings of $287.1 million, or $2.35 per diluted share, for fiscal year ended September 30, 2007, compared to net earnings of $196.9 million, or $1.64 per diluted share for fiscal 2006.

Total revenues for fiscal 2007 increased by $1.1 billion, or 14.2%, to $8.5 billion, compared to total revenues of $7.4 billion for fiscal 2006. Revenues increased among most of the industry groups and markets we serve, lead by a combined, $608.4 million increase, or 21.7%, in revenues from clients operating in the energy and refining, and the upstream oil and gas industries. Also contributing to the revenue growth in fiscal 2007 were a $240.6 million increase, or 19.1%, in revenues from projects for our national government programs clients; a $114.1 million increase, or 10.1%, in revenues from projects for our clients operating in the chemicals and polymers industries; and a $134.4 million increase, or 24.6%, in revenues from projects for our infrastructure clients.

With respect to projects for our clients operating in the oil & gas and refining industries, revenue from the downstream sector grew by $264.1 million, or 11.7%, from last year. Most of this increase continues to relate to higher capital spending on projects involving the reconfiguration and expansion of existing refineries, and addressing the effects of changing crude inputs—from lighter crudes to heavier crudes that contain slightly higher levels of sulfur. More recently, we have seen increased capital spending by many of our refinery clients involving projects driven by government regulations. These include projects to comply with the nonroad diesel emission and other similar standards. Revenue from the upstream sector of the oil & gas and refining industries grew by $344.3 million, or 63.0%, from last year. We continued to see a high level of spending in fiscal 2007 by our clients on oil and gas extraction projects, particularly in the oil sands area of Canada.

Revenues from projects for our national government programs clients increased by $240.6 million, or 19.1%, from last year. Most of the increase was due to higher levels of revenue from the U.S. federal government relating to various aerospace and defense projects. Revenues from projects for our clients in the chemicals and polymers industries increased by $114.1 million, or 10.1%, due to continued demand to increase production capacity. Revenues from projects performed for our infrastructure clients increased by $134.4 million, or 24.6%,

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from last year. Part of the increase was due to the acquisition of Edwards and Kelcey, Inc. (Edwards and Kelcey) in April 2007. Edwards and Kelcey contributed $67.2 million in revenues during fiscal 2007. The balance of the increase in infrastructure revenues was due to higher spending by clients on projects for improved roads, highways, and bridges.

Included in the above increase in revenues was a $66.0 million increase in pass-through costs. Pass through costs totaled $2,746.7 million in fiscal 2007 compared to $2,680.7 million in fiscal 2006. When we are responsible for subcontract labor or third-party materials and equipment, we reflect the costs of such items in both revenues and costs. The level of pass-through costs included in revenues and costs will vary between reporting periods depending principally on the amount of procurement that clients choose to do themselves, as opposed to using our services, as well as on the normal ramping-up (and winding-down) of field services activities on construction and O&M projects. Pass through costs as a percentage of field services revenues in fiscal 2007 and 2006 were essentially unchanged.

As a percentage of revenues, direct costs of contracts were 85.7% for fiscal 2007, compared to 87.4% for fiscal 2006 (for the remainder of this MD&A, we refer to this percentage relationship as the “DC%”). The relationship between direct costs of contracts and revenues will fluctuate between reporting periods depending on a variety of factors including the mix of business during the reporting periods being compared as well as the level of margins earned from the various types of services provided. Generally speaking, the more procurement we do on behalf of our clients (i.e., where we purchase equipment and materials for use on projects, and/or procure subcontracts in connection with projects) and the more field services revenues we have relative to technical, professional services revenues, the higher the DC% will be. Because pass-through costs typically generate lower margins, it is not unusual for us to experience an increase or decrease in revenues relating to pass-through costs without experiencing a corresponding increase or decrease in our gross margins and operating profit. The decrease in the DC% in fiscal 2007 as compared to last year was due primarily to the increase in technical professional services revenues relative to field services revenues. Also contributing to the decrease in the DC% was a slight increase in the margin rates earned on our technical professional services revenues.

SG&A expenses for fiscal 2007 increased by $136.7 million, or 21.6%, to $769.4 million, compared to $632.7 million for fiscal 2006. The increase in SG&A expenses was due almost entirely to the business growth we experienced in fiscal 2007, particularly in support of the technical professional services area of our business. Generally speaking, such services require higher labor and facilities costs in order to support those activities. Also contributing to the increase in SG&A expenses was the acquisition of Edwards and Kelcey, which contributed $22.8 million of SG&A expenses in fiscal 2007.

Operating profit for fiscal 2007 increased by $140.4 million, or 46.6%, to $442.0 million, compared to $301.6 million for fiscal 2006. As a percentage of revenues, operating profit was 5.2% for fiscal 2007 compared to 4.1% in fiscal 2006. The increase in operating profit during fiscal 2007 as compared to last year was due primarily to the increase in technical professional services revenues; the improvement in our level of SG&A expenses relative to technical professional services revenues; and a slight improvement in the margin rates earned on our technical professional services revenues.

Interest income for fiscal 2007 increased by $4.6 million, or 29.9%, to $19.8 million, compared to $15.2 million for fiscal 2006. The increase in interest income was due primarily to higher average cash balances on deposit during fiscal 2007 as compared to last year combined with a slight increase in the rate of interest earned on our deposits.

We recorded income tax expense of $161.5 million during fiscal 2007, compared to $108.4 million during fiscal 2006. Our overall effective tax rate was 36.0% for fiscal 2007 compared to 35.5% last year. The Company’s overall effective tax rate for fiscal 2006 was positively affected by the favorable settlement of a matter with the U.S. Internal Revenue Service (IRS), off-set in part by provisions recorded for certain other income tax exposures. The net effect of the IRS settlement and the other income tax exposures was a net reduction of $1.5 million to the fiscal 2006 total tax expense. In the normal course of our business, we may

35

engage in numerous transactions for which the ultimate tax outcome (including the period in which the transaction will ultimately be included in income or deducted as an expense) is uncertain. Additionally, we file income, franchise, gross receipts and similar tax returns in many jurisdictions. Our tax returns are subject to audit and investigation by the Internal Revenue Service, most states in the United States, and by various government agencies representing many jurisdictions outside the United States. We continually monitor the appropriateness of the rate, and we adjust our income tax expense in the period it is probable that actual results will change.

Fiscal 2006 Compared to Fiscal 2005

We recorded net earnings of $196.9 million, or $1.64 per diluted share, for fiscal year ended September 30, 2006, compared to net earnings of $131.6 million, or $1.12 per diluted share for fiscal 2005.

Total revenues for fiscal 2006 increased by $1.8 billion, or 31.7%, to $7.4 billion, compared to total revenues of $5.6 billion for fiscal 2005. Revenues increased among most of the industry groups and markets we serve, lead by a 52.4% increase in revenues from clients operating in the chemicals and polymers markets, and a 43.2% increase in revenues from clients operating in the energy and refining-downstream industries. The increase in revenues from clients operating in the chemicals and polymers markets was driven by demand by a number of our clients to increase capacity. The increase in revenues from our clients operating in the oil & gas and refining industries was due primarily to new and continuing projects reconfiguring existing refineries in order to increase production and address the effects of changing crude inputs—from lighter crudes to heavier crudes that contain slightly higher levels of sulfur.

Also contributing to the increase in revenues were new awards in the oil & gas upstream market relating to oil sands extraction projects, as well as a $1,145.2 million increase in pass-through costs. The increase in pass-through costs from fiscal 2005 to 2006 was consistent with the overall increase in field services revenues.

The DC% was 87.4% for fiscal 2006, compared to 85.7% for fiscal 2005. The increase in the DC% in fiscal 2006 from fiscal 2005 was due to the increase in field services activity combined with slightly lower fees from our technical professional services revenues, off-set in part by slightly higher fees from field services.

We were successful in keeping SG&A growth in-line with our increased business activity during fiscal 2006. SG&A expenses during fiscal 2006 increased by $41.3 million, or 7.0%, to $632.7 million, compared to $591.4 million during fiscal 2005. Contributing to the increase in SG&A expenses was increased professional technical services activity and the effects of foreign currency translation. SG&A expense as a percentage of revenue decreased from 10.5% in fiscal 2005 to 8.5% in fiscal 2006. SG&A expense as a percentage of gross margin decreased from 73.3% in fiscal 2005 to 67.7% in fiscal 2006. Contributing to the decrease in these relationships is the result of increased field services activity, which generally requires less SG&A expense to support.

Operating profit for fiscal 2006 increased by $86.7 million, or 40.3%, to $301.6 million, compared to $214.9 million during fiscal 2005. The increase in operating profit during fiscal 2006 as compared to fiscal 2005 was due to the overall increase in business activity. As a percentage of revenues, operating profit was 4.1% for fiscal 2006 compared to 3.8% in fiscal 2005. Notwithstanding the increase in the direct costs of contracts as a percentage of revenue, the Company was able to increase its operating profit by limiting the increase in SG&A expenses.

Interest income increased by $10.9 million to $15.2 million during fiscal 2006, compared to $4.3 million of interest income during fiscal 2005. Included in interest income for fiscal 2006 is $3.3 million relating to the favorable settlement of a matter with the IRS (discussed below). The balance of the increase in interest income was a result of higher cash balances on deposit during fiscal 2006 as compared to fiscal 2005. Interest expense increased by $1.0 million to $7.5 million during fiscal 2006, compared to $6.5 million of interest expense during fiscal 2005. The increase in interest expense is due primarily to higher levels of borrowing by our operations outside the U.S. (in support of the growth in business) combined with slightly higher interest rates.

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We recorded income tax expense of $108.4 million during fiscal 2006, compared to $77.9 million during fiscal 2005. Our overall effective tax rate was 35.5% during fiscal 2006 compared to 37.2% for fiscal 2005. The overall effective tax rate for fiscal 2006 was impacted by the favorable settlement of a matter with the IRS, off-set in part by provisions recorded for certain other income tax exposures. The net effect of the IRS settlement and the other income tax exposures was a net reduction to the Company’s income tax expense of $1.5 million. Impacting the overall effective tax rate for fiscal 2005 was certain stock-based compensation expense amounts relating to the Company’s employee stock purchase plans where no tax benefit was available to the Company. In the normal course of our business, we may engage in numerous transactions for which the ultimate tax outcome (including the period in which the transaction will ultimately be included in income or deducted as an expense) is uncertain. Additionally, we file income, franchise, gross receipts and similar tax returns in many jurisdictions. Our tax returns are subject to audit and investigation by the Internal Revenue Service, most states in the United States, and by various government agencies representing many jurisdictions outside the United States. We continually monitor the appropriateness of the rate, and we adjust our income tax expense in the period it is probable that actual results will change.

Contractual Obligations

The following table sets forth certain information about our contractual obligations as of September 30, 2007 (in thousands):

	Payments Due by Fiscal Period
	Total		1 Year or Less		2 - 3 Years		4 - 5 Years		More than 5 Years
Long-term debt obligations	$	40,450	$	—	$	—	$	40,450	$	—
Operating leases (a)		557,678		111,230		179,913		138,512		128,023
Obligations under defined benefit pension plans (b)		107,852		27,188		57,682		22,982		—
Obligations under nonqualified deferred compensation plans (c)		73,172		5,592		11,864		12,833		42,883
Purchase obligations (d)		858,794		858,794		—		—		—
Total	$	1,637,946	$	1,002,804	$	249,459	$	214,777	$	170,906

(a) Assumes the Company will make end of lease term residual value guarantee payments of $35.3 million in 2011 and $38.8 million in 2015 with respect to the lease of two office buildings in Houston, Texas.

(b) Assumes that future contributions will be consistent with amounts projected to be contributed in fiscal 2008, allowing for certain growth based on rates of inflation and salary increases, but limited to the amount recorded as of September 30, 2007. Actual contributions will depend on a variety of factors, including amounts required by local laws and regulations, and other funding requirements.

(c) Assumes that future payments will be consistent with amounts paid in fiscal 2007, allowing for certain growth. Due to the nonqualified nature of the plans, and the fact that benefits are based in part on years of service, the payments included in the schedule were limited to the amount recorded as of September 30, 2007.

(d) Represents those liabilities estimated to be under firm contractual commitments as of September 30, 2007.

Backlog

The following table summarizes our backlog at September 30, 2007, 2006, and 2005 (in millions):

	2007		2006		2005
Technical professional services	$	6,188.5	$	5,153.4	$	4,329.0
Field services		7,397.3		4,624.3		4,314.0
Total	$	13,585.8	$	9,777.7	$	8,643.0

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Because the entire value of contracts is added to backlog as soon as the contracts are awarded to us (rather than adding the contracts to backlog gradually over time), and many of our contracts require us to provide services that span over a number of fiscal quarters (and sometimes over fiscal years), we evaluate our backlog on a year-over-year basis, rather than on a sequential, quarter-over-quarter basis. Our backlog at September 30, 2007 increased by $3.8 billion, or 38.9%, to $13.6 billion from $9.8 billion at September 30, 2006. The increase in backlog during fiscal 2007 was attributable primarily to new awards from clients operating in the upstream oil & gas, and downstream energy and refining industries.

In accordance with industry practice, substantially all of our contracts are subject to cancellation or termination at the discretion of the client. However, we have not experienced cancellations that have had a material effect on the reported backlog amounts. In a situation where a client terminates a contract, we would ordinarily be entitled to receive payment for work performed up to the date of termination and, in certain instances, we may be entitled to allowable termination and cancellation costs. While management uses all information available to it to determine backlog, our backlog at any given time is subject to changes in the scope of services to be provided as well as increases or decreases in costs relating to the contracts included therein.

Total backlog at September 30, 2007 included approximately $2.2 billion, or 16.5% of total backlog, relating to work to be performed either directly or indirectly for the U.S. federal government and its agencies. This compares to approximately $2.2 billion, or 22.3% of total backlog, and $2.2 billion, or 25.3% of total backlog, of U.S. federal backlog at September 30, 2006 and 2005, respectively. Most of our federal contracts require that services be provided beyond one year. In general, these contracts must be funded annually (i.e., the amounts to be spent under the contract must be appropriated by the U.S. Congress to the procuring agency, and then the agency must allot these sums to the specific contracts).

Subject to the factors discussed in Item 1A—Risk Factors, above, we estimate that approximately $7.7 billion, or 56.5%, of total backlog at September 30, 2007 will be realized as revenues within the next fiscal year.

Effects of Inflation

Refer to Item 1A—Risk Factors, above.

Liquidity and Capital Resources

We finance our operations primarily through cash provided by operations. At September 30, 2007, our principal source of liquidity consisted of $613.4 million of cash and cash equivalents, and $249.6 million of available capacity under our $290.0 million unsecured, revolving credit facility discussed below.

During fiscal 2007, our cash and cash equivalents increased by $179.3 million, to $613.4 million. This compares to an increase in cash and cash equivalents of $194.2 million during fiscal 2006, and an increase of $139.8 million during fiscal 2005. During fiscal 2007, we experienced net cash inflows from operating activities of $360.9 million. Additionally, we experienced a $4.5 million increase resulting from changes in exchange rates during fiscal 2007. These inflows were offset in part by net cash outflows from investing activities and financing activities of $165.8 million and $20.3 million respectively.

Our operations provided net cash of $360.9 million during fiscal 2007. This compares to net cash inflows of $223.5 million and $150.3 million during fiscal 2006 and 2005, respectively. The $137.3 million increase in cash provided by operations in fiscal 2007 as compared to fiscal 2006 was due primarily to a $90.2 million increase in net earnings, a $53.4 million increase relating to the timing of cash receipts and payments within our working capital accounts, and increases in certain non-cash items including an increase of $9.1 million in depreciation and amortization of property, equipment and improvements, and a $0.8 million increase in stock-based compensation. These increases in cash flows from operations were offset in part by the effects of a $1.2 million change in deferred income taxes, a $13.0 million change in the excess tax benefits relating to stock based compensation, and a $1.7 million decrease in amortization of intangible assets.

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We used $165.8 million of cash and cash equivalents for investing activities during fiscal 2007. This compares to net cash outflow of $67.6 million and $68.3 million during fiscal 2006 and 2005 respectively. The $98.2 million increase in cash used for investing activities as compared to fiscal 2006 was due primarily to an additional $77.8 million of cash used for acquisitions of businesses. Also contributing to the increase in cash used for investing activities in fiscal 2007 as compared to fiscal 2006 was an additional $10.6 million of cash used for purchases of property and equipment, and a $10.9 million increase in miscellaneous, non-current assets. We used $88.7 million of cash for acquisitions of businesses during fiscal 2007. Included in this amount is cash used to complete the acquisitions of Edwards & Kelcey, W.H. Linder & Associates, Inc., and John F. Brown. Also included in this amount is cash used to acquire all of the minority interest of Jacobs Engineering India Pvt. Ltd.

Our financing activities resulted in net cash outflows of $20.3 million during fiscal 2007. This compares to net cash inflows of $48.3 million and $60.7 million during fiscal 2006 and 2005, respectively. The $68.6 million decrease in cash flows from financing activities during fiscal 2007 as compared to fiscal 2006 was due primarily to a more aggressive strategy in fiscal 2007 of paying-down debt which resulted in an additional use of cash of $46.2 million in fiscal 2007 as compared to last year. Also contributing to the increase in cash used for financing activities was a $40.7 million change in other deferred liability accounts (relating primarily to accrued pension liabilities). These uses of cash were off-set in part by a $13.0 million increase in the excess tax benefits relating to stock based compensation, and a $5.3 million increase in cash from issuances of common stock through our stock option and stock-purchase plans.

We believe we have adequate liquidity and capital resources to fund our operations and service our debt for the foreseeable future. We had $613.4 million in cash and cash equivalents at September 30, 2007, compared to $434.1 million at September 30, 2006. Our consolidated working capital position at September 30, 2007 was $1.0 billion, compared to $776.8 million at September 30, 2006. We have a long-term, unsecured revolving credit facility providing up to $290.0 million of debt capacity, under which only $40.5 million was utilized at September 30, 2007 in the form of direct borrowings. We believe that the capacity, terms and conditions of our long-term revolving credit facility is adequate for our working capital and general business requirements.

New Accounting Pronouncements

In addition to SFAS 158 and FIN 48 (discussed above), readers of this MD&A should be aware of the following new accounting pronouncements:

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157—Fair Value Measurements. SFAS 157 provides a common definition of fair value and establishes a framework to make the measurement of fair value in generally accepted accounting principles more consistent and comparable. SFAS 157 also requires expanded disclosures to provide information about the extent to which fair value is used to measure assets and liabilities, the methods and assumptions used to measure fair value, and the effect of fair value measures on earnings. SFAS 157 is effective for the Company’s 2009 fiscal year, although early adoption is permitted. The Company is currently assessing the potential effect of SFAS 157 on its financial statements.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not enter into derivative financial instruments for trading, speculation or other purposes that would expose the Company to market risk. In the normal course of business, our results of operations are exposed to risks associated with fluctuations in interest rates and currency exchange rates.

Interest Rate Risk

Our only source for long-term credit is a $290.0 million syndicated revolving credit facility. The total amount outstanding under this facility at September 30, 2007 was $40.5 million. This agreement expires in May 2012, and provides for both fixed-rate and variable-rate borrowings. Our objectives in managing our interest rate risk are to limit the impact of interest rate changes on earnings and cash flows, and to lower our overall

39

borrowing costs. To achieve these objectives, we continuously monitor changes in interest rates, and use cash provided from operations to re-pay our borrowings as quickly as possible. Furthermore, the company can use a combination of both fixed rate and variable rate debt to manage our exposure to interest rate risk.

Foreign Currency Risk

In situations where our operations incur contract costs in currencies other than their functional currency, we attempt to have a portion of the related contract revenues denominated in the same currencies as the costs. In those situations where revenues and costs are transacted in different currencies, we sometimes enter into foreign exchange contracts in order to limit our exposure to fluctuating foreign currencies. We follow the provisions of SFAS No. 133—Accounting for Derivative Instruments and Hedging Activities in accounting for our derivative contracts. At September 30, 2007, we had the following derivative contracts outstanding (“USD” refers to U.S. dollar; “GBP”, the British Pound; “BHD”, the Bahraini Dinar):

Hedge Instrument	Notional Amount		Rate	Settlement Year
Euro Put Option	€	4,419,000	0.8105 / USD	2008
Bahraini Dinar Forward		BHD 4,690,000	0.7527 / GBP	2008
Euro Put Option	€	13,200,000	1.4522 / GBP	2009
British Pound Forward	£	520,000	1.3300 / BHD	2008

Concurrent with the acquisition of the Babtie Group, we entered into a forward contract with a large, U.S. bank. The purpose of the contract is to hedge the Company’s exposure to fluctuating foreign currency exchange rates on a £39.9 million intercompany loan between Jacobs and one of its subsidiaries. Based on the terms of the contract, we believe the effect of the loan on future earnings at September 30, 2007 should be limited to $2.7 million of expense. At September 30, 2007, the notional amount of the contract was £39.9 million. It provides for an average exchange rate of 0.5828 GBP-to USD, and terminates in fiscal 2011. This derivative qualifies as a cash flow hedge under the provisions of SFAS 133.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item 8 is submitted as a separate section beginning on page F-1 of this Annual Report on Form 10-K and is incorporate herein by reference.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as defined by Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of September 30, 2007, the end of the period covered by this Annual Report on Form 10-K (the “Evaluation Date”). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the Evaluation Date.

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Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal controls over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Management, with the participation of its Chief Executive Officer and Chief Financial Officer, has assessed the effectiveness of the Company’s internal control over financial reporting as of the Evaluation Date based on the framework established in “Internal Control—Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that the internal controls of the Company over its financial reporting as of the Evaluation Date were effective. The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the Company’s internal control over financial reporting which appears later in this Form 10-K.

Changes in Internal Control

There were no changes in the Company’s internal control over financial reporting during the Company’s fourth quarter ended September 30, 2007, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on Effectiveness of Controls

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures or its system of internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed or operated, can provide only reasonable, but not absolute, assurance that the objectives of the system of internal control are met. The design of the Company’s control system reflects the fact that there are resource constraints, and that the benefits of such control system must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control failures and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the intentional acts of individuals, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part on certain assumptions about the likelihood of future events, and there can be no assurance that the design of any particular control will always succeed in achieving its objective under all potential future conditions.

Item 9B. OTHER INFORMATION

None.

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PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors, Executive Officers, Promoters and Control Persons

The information required by Paragraph (a), and Paragraphs (c) through (g) of Item 401 of Regulation S-K (except for information required by Paragraph (e) of that Item to the extent the required information pertains to our executive officers) is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

The following table presents the information required by Paragraph (b) of Item 401 of Regulation S-K.

Name	Age	Position with the Company	Year Joined the Registrant
Noel G. Watson	71	Chairman of the Board	1965
Craig L. Martin	58	President, Chief Executive Officer and Director	1994
Thomas R. Hammond	56	Executive Vice President, Operations	1975
George A. Kunberger, Jr.	55	Executive Vice President, Operations	1979
Gregory J. Landry	59	Executive Vice President, Operations	1984
John W. Prosser, Jr.	62	Executive Vice President, Finance and Administration and Treasurer	1974
Walter C. Barber	66	Group Vice President	1999
Warren M. Dean	63	Group Vice President	1994
Arlan C. Emmert	62	Group Vice President	1985
Peter M. Evans	62	Group Vice President	2001
Michael J. Higgins	63	Group Vice President	1994
Andrew F. Kremer	50	Group Vice President	1998
Kevin J. McMahon	51	Group Vice President	2007
Earl J. Mitchell, Jr.	54	Group Vice President	1989
Christopher E. Nagel	56	Group Vice President	1982
Rogers F. Starr	64	President, Jacobs Technology, Inc.	1999
Philip J. Stassi	52	Group Vice President	1977
James T. Stewart	59	Group Vice President	2006
Allyn B. Taylor	59	Group Vice President	1993
James W. Thiesing	63	Group Vice President	1992
William J. Birkhofer	59	Senior Vice President, Public Sector Sales	1999
Robert M. Clement	59	Senior Vice President, Global Sales	1990
Martin G. Duvivier	55	Senior Vice President	2000
William C. Markley, III	62	Senior Vice President, General Counsel and Secretary	1981
John McLachlan	61	Senior Vice President, Acquisitions and Strategy	1974
Robert G. Norfleet	44	Senior Vice President, Quality and Safety	1999
Laurence R. Sadoff	60	Senior Vice President, Operations	1993
Patricia H. Summers	50	Senior Vice President, Global Human Resources	2004
Nazim G. Thawerbhoy	60	Senior Vice President and Controller	1979
Mark S. Williams	50	Senior Vice President, Information Technology	1999

All of the officers listed in the preceding table serve in their respective capacities at the pleasure of the Board of Directors and, with the exception of Messrs. McMahon and Stewart, and Ms. Summers, have served in executive and senior management capacities with the Company for more than five years.

Mr. McMahon joined the Company in April 2007 through the acquisition of Edwards and Kelcey, Inc. Mr. McMahon served in various senior management roles with Edwards and Kelcey since first joining them in 1991, most recently as chairman and chief executive officer from 1999 to 2007. Prior to joining Jacobs in 2006, Mr. Stewart was chairman and chief executive officer of Mobile Energy Services Company, an industrial energy

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company and supplier from 2000 to 2005. Prior to joining Jacobs in 2004, Ms. Summers served as corporate vice president of compensation, benefits and executive development for Northrop Grumman Corporation from January 2000 to April 2003.

Code of Ethics

We have adopted a code of ethics for our chief executive, chief financial and principal accounting officers; a code of business conduct and ethics for members of our Board of Directors; and corporate governance guidelines. The full text of the codes of ethics and corporate governance guidelines is available at our website www.jacobs.com. Although we have never done so, in the event we make any amendment to, or grant any waiver from, a provision of the code of ethics that applies to the principal executive officer, principal financial officer or principal accounting officer that requires disclosure under applicable Commission rules, we will disclose such amendment or waiver and the reasons therefor on our website. We will provide any person without charge a copy of any of the aforementioned codes of ethics upon receipt of a written request. Requests should be addressed to: Jacobs Engineering Group Inc., 1111 S. Arroyo Parkway, Pasadena, California, 91105, Attention: Corporate Secretary.

Corporate Governance

The information required Items 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

Item 11. EXECUTIVE COMPENSATION

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 403 of Regulation S-K is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year. The information required by Item 201(d) of Regulation S-K is submitted in a separate section of this Form 10-K. See Item 5.—Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, above.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

43

PART IV

Item 15. EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this report:

(1) The Company’s Consolidated Financial Statements at September 30, 2007 and 2006 and for each of the three years in the period ended September 30, 2007 and the notes thereto, together with the report of the independent auditors on those Consolidated Financial Statements are hereby filed as part of this report, beginning on page F-1.

(2) Financial statement schedules—no financial statement schedules are presented as the required information is either not applicable, or is included in the consolidated financial statements or notes thereto.

(3) See Exhibits and Index to Exhibits, below.

(b) Exhibits and Index to Exhibits:

†3.1	Amended and Restated Certificate of Incorporation of the Registrant.
3.2	Bylaws of the Registrant. Filed as Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2007 and incorporated herein by reference.
4.1	See Sections 5 through 18 of Exhibit 3.1.
4.2	See Article II, Section 3.03 of Article III, Article VI and Section 7.04 of Article VII of Exhibit 3.2.
4.3	Amended and Restated Rights Agreement, amended and restated as of December 20, 2000 by and between the Registrant and Mellon Investor Services LLC, as Rights Agent. Filed as Exhibit 1 to Registrant’s Form 8-A/A filed on December 22, 2000 and incorporated herein by reference.
10.1	The Jacobs Engineering Group Inc. Incentive Bonus Plan for Officers and Key Managers. Filed as Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the year ended September 30, 2006 and incorporated herein by reference.
10.2	The Executive Security Program of Jacobs Engineering Group Inc. Filed as Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended September 30, 2006 and incorporated herein by reference.
10.3	Jacobs Engineering Group Inc. 1991 Executive Deferral Plan, effective June 1, 1991. Filed as Exhibit 10.3 to the Registrant’s Annual Report on Form 10-K for the year ended September 30, 2006 and incorporated herein by reference.
10.4	Jacobs Engineering Group Inc. 1993 Executive Deferral Plan, effective December 1, 1993. Filed as Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K for the year ended September 30, 2006 and incorporated herein by reference.
†10.5	Jacobs Engineering Group Inc. Amended and Restated Executive Deferral Plan.
10.6	The Jacobs Engineering Group Inc. 1989 Employee Stock Purchase Plan, as Amended and Restated. Filed as Exhibit 10.6 to the Registrant’s Annual Report on Form 10-K for the year ended September 30, 2006 and incorporated herein by reference.
10.7	The Jacobs Engineering Group Inc. Global Employee Stock Purchase Plan. Filed as Exhibit 4.1 to the Registration Statement on Form S-8 filed by the Registrant on August 7, 2001, and incorporated herein by reference.
10.8	Form of Indemnification Agreement entered into between the Registrant and certain of its officers and directors. Filed as Exhibit 10.8 to the Registrant’s Annul Report on Form 10-K for the year ended September 30, 2003 and incorporated herein by reference.

44

†10.9	Jacobs Engineering Group Inc. 401(k) Plus Savings Plan and Trust, as Amended and Restated April 1, 2003.
10.10	Jacobs Engineering Group Inc. 1999 Stock Incentive Plan, as Amended and Restated. Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2007 and incorporated herein by reference.
10.11	Jacobs Engineering Group Inc. 1999 Outside Director Stock Plan, as Amended and Restated. Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2007 and incorporated herein by reference.
10.12	Credit Agreement dated as of December 15, 2005 among Jacobs Engineering Group Inc. and certain of its subsidiaries (as “Borrowers”), and the Bank of Nova Scotia, Wachovia Bank N.A., BNP Paribas., Bank of America, N.A. (as “Administrative Agent”), and other lender parties, and Banc of America Securities LLC (as “Sole Lead Arranger”). Filed as Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the year ended September 30, 2006 and incorporated herein by reference.
10.13	Amendment Agreement Entered Into as of May 4, 2007 Among Jacobs Engineering Group Inc. and Certain Subsidiaries, the Bank of Nova Scotia as Canadian Facility Agent, Bank of America, N.A. as Administrative Agent, and Certain Other Lending Banks and Financial Institutions. Filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2007 and incorporated herein by reference
10.14	Assignment Letter Agreement dated February 16, 2005 between the Registrant and Thomas R. Hammond, Executive Vice President. Filed as Exhibit 99.1 to the Registrant’s current report on Form 8-K dated February 22, 2005 and incorporated herein by reference.
11.	Statement of computation of net income per outstanding share of common stock is incorporated by reference from the Company’s Consolidated Financial Statements and notes thereto (see Item 15(a)(1), above).
14.	Jacobs Engineering Group Inc. Code of Ethics for the Chief Executive Officer and Senior Financial Officers. Filed as Exhibit 14 to the Registrant’s Annul Report on Form 10-K for the fiscal year ended September 30, 2003 and incorporated herein by reference.
†21.	List of Subsidiaries of Jacobs Engineering Group Inc.
†23.	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
†31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

† Being filed herewith.

45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	JACOBS ENGINEERING GROUP INC.
Dated: November 27, 2007	By:	/s/    CRAIG L. MARTIN
		Craig L. Martin President, Chief Executive Officer, Director (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/s/    CRAIG L. MARTIN         Craig L. Martin	President, Chief Executive Officer and Director	November 27, 2007
/s/    NOEL G. WATSON         Noel G. Watson	Chairman of the Board	November 27, 2007
/s/    JOSEPH R. BRONSON         Joseph R. Bronson	Director	November 27, 2007
/s/    ROBERT C. DAVIDSON, JR.         Robert C. Davidson, Jr.	Director	November 27, 2007
/s/    EDWARD V. FRITZKY         Edward V. Fritzky	Director	November 27, 2007
/s/    ROBERT B. GWYN         Robert B. Gwyn	Director	November 27, 2007
/s/    JOHN P. JUMPER         John P. Jumper	Director	November 27, 2007
/s/    DALE R. LAURANCE         Dale R. Laurance	Director	November 27, 2007
/s/    LINDA FAYNE LEVINSON         Linda Fayne Levinson	Director	November 27, 2007
/s/    BENJAMIN F. MONTOYA         Benjamin F. Montoya	Director	November 27, 2007
/s/    THOMAS M.T. NILES         Thomas M.T. Niles	Director	November 27, 2007
/s/    JOHN W. PROSSER, JR.         John W. Prosser, Jr.	Executive Vice President, Finance and Administration and Treasurer (Principal Financial Officer)	November 27, 2007
/s/    NAZIM G. THAWERBHOY         Nazim G. Thawerbhoy	Senior Vice President and Controller (Principal Accounting Officer)	November 27, 2007

46

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

September 30, 2007

F-1

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007

Consolidated Balance Sheets at September 30, 2007 and 2006	F-3
Consolidated Statements of Earnings for the Years Ended September 30, 2007, 2006, and 2005	F-4
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended September 30, 2007, 2006, and 2005	F-5
Consolidated Statements of Cash Flows for the Years Ended September 30, 2007, 2006, and 2005	F-6
Notes to Consolidated Financial Statements	F-7–F-28
Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm	F-29–F-30

F-2

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2007 and 2006

(In thousands, except share information)

	2007			2006
ASSETS
Current Assets:
Cash and cash equivalents	$	613,352		$	434,067
Receivables		1,532,602			1,304,262
Deferred income taxes		92,992			46,727
Prepaid expenses and other current assets		39,132			32,905
Total current assets		2,278,078			1,817,961
Property, Equipment and Improvements, Net		192,489			171,276
Other Noncurrent Assets:
Goodwill		626,686			554,986
Miscellaneous		292,168			309,661
Total other noncurrent assets		918,854			864,647
	$	3,389,421		$	2,853,884
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Notes payable	$	529		$	14,474
Accounts payable		376,483			397,007
Accrued liabilities		626,091			495,700
Billings in excess of costs		245,486			112,260
Income taxes payable		27,845			21,754
Total current liabilities		1,276,434			1,041,195
Long-term Debt		40,450			77,673
Other Deferred Liabilities		228,824			304,531
Minority Interests		51			7,271
Commitments and Contingencies
Stockholders’ Equity:
Capital stock:
Preferred stock, $1 par value, authorized—1,000,000 shares; issued and outstanding—none		—			—
Common stock, $1 par value, authorized—240,000,000 shares; issued and outstanding—120,221,871 shares and 58,995,813 shares, respectively		120,222			58,996
Additional paid-in capital		460,468			417,905
Retained earnings		1,272,352			1,023,968
Accumulated other comprehensive loss		(9,380	)		(77,655	)
Total stockholders’ equity		1,843,662			1,423,214
	$	3,389,421		$	2,853,884

See the accompanying Notes to Consolidated Financial Statements.

F-3

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

For the Years Ended September 30, 2007, 2006, and 2005

(In thousands, except per share information)

	2007			2006			2005
Revenues	$	8,473,970		$	7,421,270		$	5,635,001
Costs and Expenses:
Direct costs of contracts		(7,262,621	)		(6,487,022	)		(4,828,697	)
Selling, general and administrative expenses		(769,393	)		(632,692	)		(591,413	)
Operating Profit		441,956			301,556			214,891
Other (Expense) Income:
Interest income		19,764			15,209			4,349
Interest expense		(8,019	)		(7,496	)		(6,471	)
Miscellaneous expense, net		(5,059	)		(3,982	)		(3,293	)
Total other income (expense), net		6,686			3,731			(5,415	)
Earnings Before Taxes		448,642			305,287			209,476
Income Tax Expense		(161,512	)		(108,404	)		(77,868	)
Net Earnings	$	287,130		$	196,883		$	131,608
Net Earnings Per Share:
Basic	$	2.42		$	1.69		$	1.15
Diluted	$	2.35		$	1.64		$	1.12

See the accompanying Notes to Consolidated Financial Statements.

F-4

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Years Ended September 30, 2007, 2006, and 2005

(In thousands)

				Components of Total Stockholders’ Equity
	Comprehensive Income			Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comp- rehensive Income (Loss)			Total Stock- holders’ Equity
Balances at September 30, 2004				$	56,699		$	272,619		$	742,426		$	(43,942	)	$	1,027,802
Net earnings	$	131,608			—			—			131,608						131,608
Foreign currency translation adjustments		(1,626	)		—			—			—			(1,626	)		(1,626	)
Minimum pension liability (net of deferred tax benefit of $19,112)		(49,494	)		—			—			—			(49,494	)		(49,494	)
Other, miscellaneous elements of total comprehensive income (loss), net (net of deferred tax benefit of $1,165)		(2,288	)		—			—			—			(2,288	)		(2,288	)
Comprehensive income	$	78,200
Issuances of equity securities, net					1,576			82,139			—			—			83,715
Repurchases of equity securities					(249	)		(1,170	)		(23,969	)		—			(25,388	)
Issuance of restricted stock, net of forfeitures					104			1,347			—			—			1,451
Balances at September 30, 2005					58,130			354,935			850,065			(97,350	)	$	1,165,780
Net earnings	$	196,883			—			—			196,883						196,883
Foreign currency translation adjustments		(4,811	)		—			—			—			(4,811	)		(4,811	)
Minimum pension liability (net of deferred tax expense of $10,363)		22,426			—			—			—			22,426			22,426
Other, miscellaneous elements of total comprehensive income (loss), net (net of deferred tax expense of $1,092)		2,080			—			—			—			2,080			2,080
Comprehensive income	$	216,578
Issuances of equity securities, net					961			60,676			—			—			61,637
Repurchases of equity securities					(198	)		(1,833	)		(22,980	)		—			(25,011	)
Issuance of restricted stock, net of forfeitures					103			4,127			—			—			4,230
Balances at September 30, 2006					58,996			417,905			1,023,968			(77,655	)	$	1,423,214
Net earnings	$	287,130			—			—			287,130						287,130
Foreign currency translation adjustments		22,088			—			—			—			22,088			22,088
Adjustment to initially apply FASB Statement No. 158, net of tax		45,016			—			—			—			45,016			45,016
Other, miscellaneous elements of total comprehensive income (loss), net (net of deferred tax expense of $610)		1,171			—			—			—			1,171			1,171
Comprehensive income	$	355,405
Two-for-one stock split, paid in the form of a stock dividend					59,401			(59,401	)		—			—			—
Issuances of equity securities, net					1,828			87,778			—			—			89,606
Repurchases of equity securities					(367	)		(1,576	)		(38,746	)		—			(40,689	)
Issuance of restricted stock, net of forfeitures					364			15,762			—			—			16,126
Balances at September 30, 2007				$	120,222		$	460,468		$	1,272,352		$	(9,380	)	$	1,843,662

See the accompanying Notes to Consolidated Financial Statements.

F-5

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended September 30, 2007, 2006, and 2005

(In thousands)

	2007			2006			2005
Cash Flows from Operating Activities:
Net earnings	$	287,130		$	196,883		$	131,608
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization:
Property, equipment and improvements		49,712			40,598			38,721
Intangible assets		5,958			7,664			7,636
Stock based compensation		17,982			17,156			27,849
Excess tax benefits from stock based compensation		(25,803	)		(12,783	)		(11,934	)
Net losses on sales of assets		700			141			261
Changes in assets and liabilities, excluding the effects of businesses acquired:
Receivables		(101,645	)		(245,031	)		(127,769	)
Prepaid expenses and other current assets		(3,675	)		(10,492	)		205
Accounts payable		(54,739	)		128,922			67,276
Accrued liabilities		78,861			75,325			2,534
Billings in excess of costs		119,596			(1,815	)		6,681
Income taxes payable		(12,361	)		25,759			13,384
Deferred income taxes		(1,450	)		(223	)		(7,767	)
Other, net		595			1,427			1,610
Net cash provided by operating activities		360,861			223,531			150,295
Cash Flows from Investing Activities:
Additions to property and equipment		(64,620	)		(53,980	)		(43,902	)
Disposals of property and equipment		1,490			1,302			1,354
Net increase in miscellaneous, non-current assets		(11,092	)		(221	)		(27,346	)
Purchases of investments, net		(2,853	)		(3,714	)		1,564
Acquisition of businesses, net of cash acquired		(88,721	)		(10,955	)		—
Net cash used for investing activities		(165,796	)		(67,568	)		(68,330	)
Cash Flows from Financing Activities:
Proceeds from long-term borrowings		28,474			68,709			64,700
Repayments of long-term borrowings		(70,860	)		(86,779	)		(52,840	)
Net change in short-term borrowings		(13,945	)		7,948			5,439
Proceeds from issuances of common stock		34,691			29,388			37,059
Excess tax benefits from stock based compensation		25,803			12,783			11,934
Other, net		(24,458	)		16,270			(5,596	)
Net cash provided by (used for) financing activities		(20,295	)		48,319			60,696
Effect of Exchange Rate Changes		4,515			(10,064	)		(2,887	)
Increase in Cash and Cash Equivalents		179,285			194,218			139,774
Cash and Cash Equivalents at Beginning of Period		434,067			239,849			100,075
Cash and Cash Equivalents at End of Period	$	613,352		$	434,067		$	239,849

See the accompanying Notes to Consolidated Financial Statements.

F-6

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business and Basis of Presentation

Description of Business

Our principal business is to provide a broad range of technical, professional, and construction services. Such services include engineering, design, and architectural services; construction and construction management services; operations and maintenance services; and process, scientific, and systems consulting services. We provide our services through offices and subsidiaries located primarily in North America, Europe, Asia, and Australia. We provide our services under cost-reimbursable, cost-reimbursable with a guaranteed maximum price, and fixed-price contracts. The percentage of revenues realized from each of these types of contracts for each fiscal year ended September 30 was as follows:

	2007		2006		2005
Cost-reimbursable	88	%	90	%	85	%
Fixed-price	10		9		13
Guaranteed maximum price	2		1		2

Basis of Presentation

The Consolidated Financial Statements include the accounts of the parent company, Jacobs Engineering Group Inc. and its subsidiaries. As used herein, references to the “Company”, “we”, “us” or “our” are to both Jacobs Engineering Group Inc. and its consolidated subsidiaries, and references to “Jacobs” refer to the parent company only. All significant intercompany accounts and transactions have been eliminated in consolidation.

2. Significant Accounting Policies

Revenue Accounting for Contracts and Use of Joint Ventures

In accounting for long-term engineering and construction-type contracts, we follow the provisions of the AICPA’s Statement of Position 81-1—Accounting for Performance of Construction-Type and Certain Production-Type Contracts (“SOP 81-1”). In general, we recognize revenues at the time we provide services. Depending on the commercial terms of the contract, we recognize revenues either when costs are incurred, or using the percentage-of-completion method of accounting by relating contract costs incurred to date to the total estimated costs at completion. Contract losses are provided for in their entirety in the period they become known, without regard to the percentage-of-completion. We also recognize as revenues costs associated with claims and unapproved change orders to the extent it is probable that such claims and change orders will result in additional contract revenue, and the amount of such additional revenue can be reliably estimated.

Certain cost-reimbursable contracts include incentive-fee arrangements. The incentive fees in such contracts can be based on a variety of factors but the most common are the achievement of target completion dates, target costs, and/or other performance criteria. Failure to meet these targets can result in unrealized incentive fees. We recognize incentive fees based on expected results using the percentage-of-completion method of accounting. As the contract progresses and more information becomes available, the estimate of the anticipated incentive fee that will be earned is revised as necessary. We bill incentive fees based on the terms and conditions of the individual contracts. In certain situations we are allowed to bill a portion of the incentive fees over the performance period of the contract. In other situations, we are allowed to bill incentive fees only after the target criterion has been achieved. Incentive fees which have been recognized but not billed are included in receivables in the accompanying Consolidated Balance Sheets.

Certain cost-reimbursable contracts with government customers as well as certain commercial clients provide that contract costs are subject to audit and adjustment. In this situation, revenues are recorded at the time services are performed based upon the amounts we expect to realize upon completion of the contracts. Revenues

F-7

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

are not recognized for non-recoverable costs. In those situations where an audit indicates that we may have billed a client for costs not allowable under the terms of the contract, we estimate the amount of such nonbillable costs and adjust our revenues accordingly.

As is common to the industry, we execute certain contracts jointly with third parties through various forms of joint ventures and consortiums. In general, such contracts fall within the scope of SOP 81-1. We therefore account for these investments in accordance with SOP 81-1 and Emerging Issues Task Force Issue 00-01—Investor Balance Sheet and Income Statement Display under the Equity Method for Investments in Certain Partnerships and Other Ventures. Accordingly, for certain of these joint ventures (i.e., where we have an undivided interest in the assets and liabilities of the joint venture), we recognize our proportionate share of joint venture revenues, costs, and operating profit in our Consolidated Statements of Earnings. For other investments in engineering and construction joint ventures, we use the equity method of accounting.

Very few of our joint ventures have employees. Although the joint ventures own and hold the contracts with the clients, the services required by the contracts are typically performed by us and our joint venture partners, or by other subcontractors under subcontracting agreements with the joint ventures. The assets of our joint ventures, therefore, consist almost entirely of cash and receivables (representing amounts due from the clients); and the liabilities of our joint ventures consist almost entirely of amounts due to the joint venture partners (for services provided by the partners to the joint ventures under their individual subcontracts) and other subcontractors. In general, at any given time, the equity of our joint ventures represents the undistributed profits earned on contracts the joint ventures hold with clients. None of our joint ventures have third-party debt or credit facilities. Our joint ventures, therefore, are simply mechanisms used to deliver engineering and construction services to clients. Rarely do they, in and of themselves, present any risk of loss to us or to our partners separate from those that we would carry if we were performing the contract on our own. Under accounting principles generally accepted in the United States, our share of losses associated with the contracts held by the joint ventures, if and when they occur, has always been reflected in our consolidated financial statements.

In accordance with the provisions of FASB Interpretation No. 46R—Consolidation of Variable Interest Entities (“FIN 46R”), we have analyzed our joint ventures and have classified them into two groups: the first group consists of those variable interest entities (“VIEs”) of which we are the primary beneficiary of the VIEs’ expected residual returns or losses; the second group consists of those VIEs of which we are not the primary beneficiary of the VIEs’ expected residual returns or losses. In accordance with FIN 46R, we apply the consolidation method of accounting for our investment in material VIEs of which we are the primary beneficiary.

At September 30, 2007, the total assets and liabilities of those VIEs for which we are the primary beneficiary were $70.5 million and $54.8 million, respectively, as compared to total assets of $90.9 million and total liabilities of $77.2 million at September 30, 2006. At September 30, 2007, the total assets and liabilities of those VIEs for which we are not the primary beneficiary were $222.9 million and $213.1 million, respectively, as compared to total assets of $94.8 million and total liabilities of $95.1 million at September 30, 2006.

When we are directly responsible for subcontractor labor or third-party materials and equipment, we reflect the costs of such items in both revenues and costs. On those projects where the client elects to pay for such items directly and we have no associated responsibility for such items, these amounts are not reflected in either revenues or costs. The amount of such “pass-through” costs included in revenues during fiscal 2007, 2006, and 2005, totaled approximately $2.7 billion, $2.7 billion, and $1.5 billion, respectively.

Cash Equivalents

We consider all highly liquid investments with original maturities of less than three months to be cash equivalents. Cash equivalents at September 30, 2007 and 2006 consisted primarily of money market mutual funds.

F-8

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Receivables and Billings in Excess of Costs

Included in receivables in the accompanying Consolidated Balance Sheets at September 30, 2007 and 2006 were $790.5 million and $623.3 million, respectively, of unbilled receivables. Unbilled receivables represent costs and amounts earned and reimbursable under contracts in progress as of the balance sheet date. Such amounts become billable according to the contract terms, which usually consider the passage of time, achievement of certain milestones or completion of the project. Included in these unbilled receivables at September 30, 2007 and 2006 were contract retentions totaling $37.1 million and $34.0 million, respectively. We anticipate that substantially all of such unbilled amounts will be billed and collected over the next twelve months. Also included in receivables at September 30, 2007 and 2006 are allowances for doubtful accounts totaling $6.2 million and $8.0 million, respectively.

“Billings in excess of costs” represent cash collected from clients and advance billings to clients in advance of work performed. We anticipate that substantially all such amounts will be earned over the next twelve months.

Amounts due from the U.S. federal government included in receivables in the accompanying Consolidated Balance Sheets totaled $153.6 million and $159.0 million at September 30, 2007 and 2006, respectively.

As discussed above, we include in receivables claims representing the recovery of costs incurred on contracts to the extent it is probable that such claims will result in additional contract revenue and the amount of such additional revenues can be reliably estimated. Such amounts totaled $49.6 million and $42.0 million at September 30, 2007 and 2006, respectively, of which $36.6 million and $33.1 million, respectively, relate to one claim on a waste incineration project performed in Europe (due to the timing of when the claim may be settled, this claim is included in “Other Noncurrent Assets” in the accompanying consolidated balance sheets). The dispute involves proper waste feed, content of residues, final acceptance of the plant, and costs of operation and maintenance of the plant. We have initiated litigation against the client and are seeking in excess of €40.0 million (approximately $56.7 million) in damages. The client has filed a counterclaim against us, which we believe is without merit.

Property, Equipment and Improvements

Property, equipment and improvements are carried at cost, and are shown net of accumulated depreciation and amortization in the accompanying Consolidated Balance Sheets. Depreciation and amortization is computed primarily by using the straight-line method over the estimated useful lives of the assets. The cost of leasehold improvements is amortized using the straight-line method over the lesser of the estimated useful life of the asset or the remaining term of the related lease. Estimated useful lives range from 20 to 40 years for buildings, from 3 to 10 years for equipment and from 4 to 10 years for leasehold improvements.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the cost of an acquired business over the fair value of the net tangible and intangible assets acquired. Goodwill and the cost of intangible assets with indefinite lives are not amortized, but are instead evaluated annually for possible impairment. In conducting the impairment test, we may apply, in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142—Goodwill and Other Intangible Assets, various valuation techniques to estimate the fair values of our reporting units. The resulting fair values are not necessarily representative of the values we might obtain in a sale of our reporting units to a willing third party. The cost of intangible assets with determinable lives is amortized ratably over the useful lives of the related assets. When events or circumstances or changes in our operations occur that could indicate that the value of our intangible assets may be impaired, we would conduct an evaluation of the

F-9

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

recoverability of the carrying value of our intangible assets with determinable lives to determine whether an adjustment should be made to the carrying value of such assets or their remaining useful lives, or both. We did not recognize any goodwill or intangible asset impairment charge in fiscal 2007, 2006 or 2005.

In accordance with SFAS No. 142—Goodwill and Other Intangible Assets, the amount of goodwill carried in our Consolidated Balance Sheets is tested annually for possible impairment. In conducting the impairment test, we may apply, in accordance with the provisions of SFAS 142, various valuation techniques to estimate the fair value of our reporting units. The values resulting from the application of these valuation techniques are not necessarily representative of the values we might obtain in a sale of our reporting units to a willing third party.

Foreign Currencies

In preparing our consolidated financial statements, it is necessary to translate the financial statements of our subsidiaries operating outside the United States, which are denominated in currencies other than the U.S. dollar, into the U.S. dollar. We follow the provisions of SFAS No. 52—Foreign Currency Translation in preparing our consolidated financial statements. Accordingly, revenues and expenses of operations outside the United States are translated into U.S. dollars using weighted-average exchange rates for the applicable period(s) being translated while the assets and liabilities of operations outside the United States are translated into U.S. dollars using period-end exchange rates. The net effect of foreign currency translation adjustments is included in stockholders’ equity as a component of accumulated other comprehensive income in the accompanying Consolidated Balance Sheets.

Earnings Per Share

Earnings per share (“EPS”) is calculated in accordance with SFAS No. 128—Earnings per Share. Basic EPS is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted EPS gives effect to all dilutive securities that were outstanding during the period. Our dilutive securities consist of nonqualified stock options and restricted stock.

As more fully discussed below, we completed a two-for-one stock split during fiscal 2007. In accordance with SFAS 128, all EPS information, and share and per-share information relating to our equity compensation plans has been adjusted retroactively for all periods presented herein to reflect the stock split.

Share-Based Payment

In accounting for stock issued to employees and others, we follow the provisions of SFAS No. 123R—Share-Based Payment. SFAS 123R requires that we measure the value of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. The computed value is recognized as a non-cash cost over the period the employee provides services, which is typically the vesting period of the award. We adopted SFAS 123R effective October 1, 2005 under the modified retrospective application method.

The fair value of each option was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2007		2006		2005
Dividend yield	0	%	0	%	0	%
Expected volatility	27.87	%	30.48	%	30.46	%
Risk-free interest rate	5.03	%	5.21	%	3.80	%
Expected life of options (in years)	4.75		4.75		6.50

F-10

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

With respect to the issuance of restricted stock, the cost of unearned compensation equivalent to the fair value of the stock issued on the date of award is amortized against earnings over the periods during which the restrictions lapse. The adoption of SFAS 123R had no material effect on our method of accounting for restricted stock awards.

Concentrations of Credit Risk

Our cash balances and short-term investments are maintained in accounts held by major banks and financial institutions located primarily in North America, Europe, Canada, and Asia. In the normal course of business, and consistent with industry practices, we grant credit to our clients without requiring collateral. Concentrations of credit risk is the risk that, if we extend a significant amount of credit to clients in a specific geographic area or industry, we may experience disproportionately high levels of default if those clients are adversely affected by factors particular to their geographic area or industry. Concentrations of credit risk relative to trade receivables are limited due to our diverse client base, which includes the U.S. federal government and multi-national corporations operating in a broad range of industries and geographic areas. Additionally, in order to mitigate credit risk, we continually evaluate the credit worthiness of our major commercial clients.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of certain assets and liabilities; amounts contained in certain of the Notes to the Consolidated Financial Statements; and the revenues and expenses reported for the periods covered by the financial statements. Although such assumptions are based on management’s best knowledge of current events and actions the Company may undertake in the future, actual results could differ significantly from those estimates and assumptions.

Earlier in these Notes to Consolidated Financial Statements, we discussed two significant accounting policies that rely on the application of estimates and assumptions: revenue accounting for contracts; and the process for testing goodwill for possible impairment. The following is a discussion of certain other significant accounting policies that rely on the use of estimates:

Accounting for Stock Issued to Employees and Others—As discussed above, we use the Black-Scholes option-pricing model to compute the fair value of stock options we grant to employees and others. The Black-Scholes model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. Like all option-pricing models, the Black-Scholes model requires the use of highly subjective assumptions including (i) the expected volatility of the market price of the underlying stock, and (ii) the expected term of the award, among others. Accordingly, changes in assumptions and any subsequent adjustments to those assumptions can cause drastically different fair values to be assigned to our stock option awards. Additionally, the effects of SFAS 123R on our current consolidated financial statements may not be representative of the effects on our future consolidated financial statements because option awards tend to vest over several years and additional awards of stock options may be made in the future.

Accounting for Pensions—In accounting for pension plans, we follow the provisions of SFAS No. 87—Employers’ Accounting for Pensions, and SFAS No. 158—Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. SFAS 87 requires the use of assumptions and estimates in order to calculate periodic pension cost, and the value of the plans’ assets and liabilities. These assumptions involve discount rates; investment returns; and projected salary increases, among others. We rely on qualified actuaries to assist us in valuing the financial position of the plans, and to provide advice regarding the actuarial assumptions used. Changes in the actuarial assumptions may have a material affect on the plans’ assets and liabilities, and the associated pension expense.

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accounting for Income Taxes—We account for income taxes in accordance with SFAS No. 109—Accounting for Income Taxes, and other applicable accounting standards. Judgment is required in determining our worldwide provision for income taxes. In the normal course of business, we may engage in numerous transactions every day for which the ultimate tax outcome (including the period in which the transaction will ultimately be included in taxable income or deducted as an expense) is uncertain. Additionally, we file income, franchise, gross receipts and similar tax returns in many jurisdictions. Our tax returns are subject to audit and investigation by the Internal Revenue Service, most states in the United States, and by various government agencies representing many jurisdictions outside the United States.

Insurance Matters, Litigation, Claims, and Contingencies—In the normal course of business, we are subject to certain contractual guarantees and litigation. In accordance with SFAS No. 5—Accounting for Contingencies, we record in the Consolidated Balance Sheets amounts representing our estimated liability relating to such claims, guarantees, litigation, and audits and investigations. We rely on qualified actuaries to assist us in determining the level of reserves to establish for both insurance-related claims that are known and have been asserted against us as well as for insurance-related claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to our claims administrators as of the respective balance sheet dates. We include any adjustments to such insurance reserves in our Consolidated Statements of Earnings.

Fair Value of Financial Instruments

The net carrying amounts of cash and cash equivalents; receivables; and notes payable approximate fair value due to the short-term nature of these instruments. Similarly, we believe the carrying value of our long-term debt also approximates fair value based on the interest rates and scheduled maturities applicable to the outstanding borrowings. Certain other assets and liabilities, such as forward contracts and an interest rate swap agreement we purchased as cash-flow hedges (discussed below), are required to be carried in our consolidated financial statements at fair value.

3. Stock Split

On January 25, 2007 the Board of Directors of Jacobs declared a two-for-one stock split that was paid in the form of a 100% stock dividend on March 15, 2007 to shareholders of record on February 15, 2007. The stock split was accounted for by transferring approximately $59.4 million from additional paid-in capital to common stock. The par value of the common stock of Jacobs did not change as a result of the stock split. In accordance with SFAS 128, all EPS information, and share and per-share information relating to our equity compensation plans has been adjusted retroactively for all periods presented herein to reflect the stock split. With respect to the balance sheet presentation of the Company’s capital accounts, however, the stock split was accounted for as a fiscal 2007 transaction.

4. Stock Purchase and Stock Option Plans

Broad-Based, Employee Stock Purchase Plans

We sponsor two, broad-based, shareholder-approved employee stock purchase plans: the 1989 Employee Stock Purchase Plan (the “1989 ESPP”) and the Global Employee Stock Purchase Plan (the “GESPP”). Both plans give employees the right to purchase shares of the common stock of Jacobs.

Prior to fiscal 2006, the price paid for a share of stock by employees participating in the 1989 ESPP and GESPP varied by plan, but in general could not be less than the lower of (i) 90% of the common stock’s closing market price on the first day of the option period, or (ii) 90% of the common stock’s closing market price on the last day of the option period (the “option period” was a period of time (typically six months) during which

F-12

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

employees deferred monies from their base salaries which would be used to purchase shares under the plans). During fiscal 2005, in anticipation of the Company having to adopt SFAS 123R, certain amendments were made to both plans limiting the discount employees received. Therefore, beginning in fiscal 2006, the discount received by employees purchasing shares of common stock through these plans is limited to 5% of the per-share market value on the day shares are sold to employees.

The following table summarizes the stock issuance activity under the 1989 ESPP and the GESPP during each fiscal year ended September 30:

	2007		2006		2005
Aggregate Purchase Price Paid for Shares Sold:
Under the 1989 ESPP	$	23,078,856	$	20,685,889	$	26,533,461
Under the GESPP		2,727,517		2,307,140		3,028,806
Total	$	25,806,373	$	22,993,029	$	29,562,267
Aggregate Number of Shares Sold:
Under the 1989 ESPP		475,160		554,052		1,242,320
Under the GESPP		55,075		62,254		134,192
Total		530,235		616,306		1,376,512

At September 30, 2007, there were 698,654 shares reserved for issuance under the 1989 ESPP, and there were 687,647 shares reserved for issuance under the GESPP.

Stock Option Plans

We sponsor two, continuing, shareholder-approved stock option plans: the 1999 Stock Incentive Plan (the “1999 SIP”) and the 1999 Outside Director Stock Plan (the “1999 OSDP”). The 1999 SIP provides for the issuance of incentive stock options, nonqualified stock options and restricted stock to employees. The 1999 OSDP provides for awards of stock, restricted stock, and restricted stock units, and grants of nonqualified stock options to our outside (i.e., nonemployee) directors. The 1999 SIP and the 1999 OSDP (together, the “1999 Plans”) replaced our 1981 Executive Incentive Plan (the “1981 Plan”). The following table sets forth certain information about the 1999 Plans:

	1999 SIP	1999 OSDP	Total
Number of shares authorized	15,200,000	800,000	16,000,000
Number of remaining shares reserved for issuance at September 30, 2007	10,037,168	577,000	10,614,168
Number of shares relating to outstanding stock options at September 30, 2007	7,775,731	231,500	8,007,231
Number of shares available for future awards:
At September 30, 2007	2,261,437	345,500	2,606,937
At September 30, 2006	2,998,482	369,000	3,367,482

The number of shares of common stock that may be awarded under the 1999 SIP in the form of restricted stock is limited to 3,120,000 shares, and shares of restricted stock that are subsequently forfeited become available again for issuance as restricted stock. At September 30, 2007, there was a total of 2,426,400 shares of common stock that remained available for issuance in the form of restricted stock under the 1999 SIP.

F-13

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Total pre-tax compensation cost relating to stock-based compensation included in the accompanying Consolidated Statements of Earnings for the fiscal years ended 2007, 2006, and 2005 was $18.0 million, $17.2 million, and $27.8 million, respectively.

The following table summarizes the stock option activity under the 1999 Plans and the 1981 Plan for each fiscal year ended September 30:

	Number of Options		Weighted Average Exercise Price
Outstanding at September 30, 2004	11,650,326		$	14.58
Granted	999,100		$	26.31
Exercised	(2,318,110	)	$	9.04
Cancelled or expired	(142,512	)	$	19.98
Outstanding at September 30, 2005	10,188,804		$	16.92
Granted	1,552,200		$	40.92
Exercised	(1,622,386	)	$	13.69
Cancelled or expired	(48,680	)	$	21.15
Outstanding at September 30, 2006	10,069,938		$	21.12
Granted	771,550		$	53.87
Exercised	(2,242,312	)	$	13.70
Cancelled or expired	(136,045	)	$	23.84
Outstanding at September 30, 2007	8,463,131		$	25.96

Options outstanding at September 30, 2007 consisted entirely of nonqualified stock options. Included in the number of options outstanding at September 30, 2007 were options to purchase 455,900 shares of common stock granted under the 1981 Plan. The total intrinsic value of options exercised during fiscal 2007, 2006, and 2005 was $84.3 million, $43.9 million, and $44.5 million, respectively. The total intrinsic value of options exercisable at September 30, 2007 was $117.0 million. Certain other information regarding our stock option plans follows:

	2007		2006		2005
At September 30:
Range of exercise prices for options outstanding	$	5.37 – $57.54	$	5.13 – $43.55	$	5.10 – $26.95
Number of options exercisable		5,958,014		6,828,638		6,956,240
For the fiscal year ended September 30:
Range of prices relating to options exercised	$	5.13 – $37.35	$	5.10 – $26.95	$	4.90 – $23.35
Estimated weighted average fair values of options granted	$	17.94	$	13.96	$	10.47

F-14

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents certain information regarding options outstanding, and options exercisable at September 30, 2007:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number	Weighted Average Remaining Contractual Life (years)	Weighted Average Price		Number	Weighted Average Exercise Price
$ 5.37 – $ 7.73	150,600	1.3	$	7.23	150,600	$	7.23
$ 7.93 – $15.76	1,358,345	3.1	$	10.93	1,358,345	$	10.93
$15.85 – $23.58	3,803,985	4.5	$	20.30	3,635,818	$	20.29
$23.90 – $26.95	864,551	4.9	$	26.83	428,451	$	26.83
$35.46 – $38.33	680,100	5.7	$	37.40	159,800	$	37.33
$42.10 – $46.86	1,032,000	5.9	$	43.88	225,000	$	43.47
$52.13 – $52.13	10,000	6.6	$	52.13	—	$	—
$56.95 – $57.54	563,550	6.7	$	56.96	—	$	—
	8,463,131	4.7	$	25.96	5,958,014	$	19.63

Our stock option plans allow participants to satisfy the exercise price by tendering shares of Jacobs common stock that have been owned by the participants for at least six months. Shares so tendered are retired and canceled, and are shown as repurchases of common stock in the accompanying Consolidated Statements of Changes in Stockholders’ Equity.

At September 30, 2007, the amount of compensation cost relating to nonvested awards not yet recognized in the financial statements is approximately $31.2 million. The majority of the unrecognized compensation costs will be recognized by the fourth quarter of fiscal 2009.

During the fiscal 2007, 2006, and 2005, we issued 155,040, 154,960, and 209,100 shares, respectively, of restricted stock under our stock options plans. The restrictions generally relate to the recipient’s ability to sell or otherwise transfer the stock. There are also restrictions that subject the stock to forfeiture back to the Company until earned by the recipient through continued employment or service.

5. Earnings Per Share

The following table reconciles the denominator used to compute basic EPS to the denominator used to compute diluted EPS for each fiscal year ended September 30 (in thousands):

	2007	2006	2005
Weighted average shares outstanding (denominator used to compute Basic EPS)	118,559	116,648	114,092
Effect of stock options and restricted shares	3,667	3,725	3,287
Denominator used to compute Diluted EPS	122,226	120,373	117,379

F-15

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6. Property, Equipment and Improvements, Net

The following table presents the components of our property, equipment and improvements at September 30, 2007 and 2006 (in thousands):

	2007			2006
Land	$	9,581		$	9,322
Buildings		69,646			65,936
Equipment		351,173			293,953
Leasehold improvements		74,961			59,159
Construction in progress		11,400			11,020
		516,761			439,390
Accumulated depreciation and amortization		(324,272	)		(268,114	)
	$	192,489		$	171,276

Operating expenses include provisions for depreciation and amortization of $49.7 million, $40.6 million, and $38.7 million for fiscal 2007, 2006, and 2005, respectively.

7. Borrowings

Short-Term Credit Arrangements

Although at September 30, 2007 the Company had open credit arrangements with several banks providing for short-term credit capacity and overdraft protection, these arrangements are uncommitted, and no amounts were outstanding as of year-end. At September 30, 2006, the Company had $14.5 million outstanding under various committed and uncommitted bank credit facilities. The weighted average interest rate on those borrowing was 4.96%.

Long-term Debt and Credit Arrangements

Amounts shown as “Long-term Debt” in the accompanying Consolidated Balance Sheets represent borrowings under our $290.0 million, long-term, revolving credit facility. The facility expires in May 2012, and provides for unsecured borrowings by banks (a syndicate consisting of U.S., Canadian, and European banks) at either fixed rates offered by the banks at the time of borrowing on loans not greater than 12 months, or at variable rates based on the agent bank’s base rate, LIBOR or the latest federal funds rate. The agreement contains certain negative covenants relating to the Company’s “consolidated net worth”, and a “leverage ratio” based on outstanding borrowings (including financial letters of credit) and earnings before interest, taxes, depreciation, and amortization (all as defined in the agreement). The agreement requires us to pay a facility fee based on the total amount of the commitments. During fiscal 2007 and 2006, the weighted average interest rates charged on these borrowings were 5.53% and 4.55%, respectively.

Interest payments made during fiscal 2007, 2006, and 2005, totaled $5.4 million, $5.9 million, and $5.2 million, respectively.

F-16

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

8. Pension Plans

Company-Only Sponsored Plans

We sponsor various defined benefit pension plans covering employees of certain U.S. and international subsidiaries. The pension plans provide pension benefits that are based on the employee’s compensation and years of service. Our funding policy is to fund the actuarially determined accrued benefits, allowing for projected compensation increases using the projected unit method.

The following table sets forth the change in the plans’ combined net benefit obligation for each fiscal year ended September 30 (in thousands):

	2007			2006
Net benefit obligation at the beginning of the year	$	785,145		$	709,984
Service cost		25,366			26,313
Interest cost		44,486			37,510
Participants’ contributions		14,367			13,418
Actuarial gains		(31,029	)		(5,714	)
Benefits paid		(32,486	)		(29,439	)
Effect of plan amendments		487			(2,966	)
Curtailments/Settlements		(9,653	)		—
Transfers		1,868			—
Effect of exchange rate changes		57,479			36,039
Net benefit obligation at the end of the year	$	856,030		$	785,145

In December 2006 the Company froze certain benefits under one of its defined benefit pension plans causing a curtailment under SFAS No. 88—Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits. As a result of the curtailment, the assets and liabilities of the plan were remeasured as of the effective date of the curtailment, resulting in a curtailment gain of $9.7 million. The curtailment gain reduced certain unrecognized actuarial losses existing as of the date of the curtailment, and will reduce the Company’s future net periodic pension cost. The amount of the reduction was approximately $2.9 million for the second half of fiscal 2007.

The following table sets forth the change in the combined fair value of the plans’ assets for each fiscal year ended September 30 (in thousands):

	2007			2006
Fair value of plan assets at the beginning of the year	$	601,090		$	481,142
Actual return on plan assets		81,483			58,164
Employer contributions		34,937			51,082
Participants’ contributions		14,367			13,418
Gross benefits paid		(32,486	)		(29,439	)
Transfers		1,868			—
Effect of exchange rate changes		44,930			26,723
Fair value of plan assets at the end of the year	$	746,189		$	601,090

F-17

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table reconciles the combined funded statuses of the plans as well as amounts recognized and not recognized in the accompanying Consolidated Balance Sheets at September 30, 2007 and 2006 (in thousands):

	2007			2006
Funded status at the end of the year	$	(109,841	)	$	(184,055	)
Unrecognized actuarial losses		—			105,598
Additional minimum liability		—			(99,709	)
Contributions after measurement date		12,561			7,741
Effect of exchange rate changes		—			2,781
Net amount recognized at the end of the year	$	(97,280	)	$	(167,644	)

The following table presents the amounts recognized in the accompanying Consolidated Balance Sheets at September 30, 2007 and 2006 (in thousands):

	2007			2006
Non-current pension asset	$	11,382		$	31,106
Additional minimum liability		—			(99,709	)
Accrued benefit cost included in current liabilities		(599	)		—
Accrued benefit cost included in noncurrent liabilities		(108,063	)		(99,041	)
Net amount recognized at the end of the year	$	(97,280	)	$	(167,644	)

The Company adopted SFAS 158 effective September 30, 2007. Accordingly, we now reflect the total funded statuses of our pension plans in our consolidated financial statements as opposed to a “minimum liability”. As a result, the additional minimum liability of $64.7 million, net of tax, previously recorded was eliminated from other comprehensive income, and an actuarial loss of $19.7 million, net of tax, was recorded. Approximately $1.2 million of the actuarial loss will be amortized against earnings as part of our net periodic benefit cost in fiscal 2008.

The following table presents the significant actuarial assumptions used in determining the funded statuses of the plans for each fiscal year ended September 30:

	2007	2006	2005
Weighted average discount rates	5.20% to 5.75%	4.75% to 6.25%	4.0% to 5.5%
Rates of compensation increases	3.5%	3.5%	3.0% to 3.5%
Expected rates of return on plan assets	5.0% to 9.0%	5.0% to 9.0%	6.0% to 9.0%

We consider various factors in developing the estimates for the expected, long-term rates of return on plan assets. These factors include the projected, long-term rates of returns on the various types of assets in which the plans invest, as well as historical returns. The range of 5.0% to 9.0% expected rate of return used in the current valuation of the funded status of the plans was determined after considering the aforementioned factors. In general, investment allocations are determined by each plan’s trustees and/or investment committees. The objectives of the plans’ investment policies are to (i) maximize returns while preserving capital; (ii) provide returns sufficient to meet the current and long-term obligations of the plan as the obligations become due; and (iii) maintain a diversified portfolio of assets so as to avoid concentration of investment risk in any one type of asset, issuer or geography. None of our pension plans hold Jacobs common stock directly (although some plans

F-18

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

may hold shares indirectly through investments in mutual funds). The plans’ weighted average asset allocations at June 30, 2007 and 2006 (the measurement dates used in valuing the plans’ assets and liabilities) were as follows:

	2007		2006
Equity securities	60	%	60	%
Debt securities	28	%	29	%
Real estate investments	7	%	4	%
Other	5	%	7	%

We anticipate our contributions into the plans for fiscal 2008 will total approximately $40.6 million. Total benefit payments expected to be paid to the participants of our pension plans for each of the next five fiscal years, and in total for the five years thereafter, are as follows (in thousands):

2008	$	27,188
2009		29,989
2010		32,560
2011		34,728
2012		36,596
For the period 2013 through 2017		212,294

At September 30, 2007 and 2006, our pension plans were in a net, under-funded status by $109.8 million and $184.1 million, respectively.

The following table presents the components of net periodic pension cost recognized in the accompanying Consolidated Statements of Earnings for each fiscal year ended September 30 (in thousands):

	2007			2006			2005
Service cost	$	25,366		$	26,313		$	21,268
Interest cost		44,486			37,510			34,868
Expected return on plan assets		(45,481	)		(37,577	)		(32,962	)
Other		5,974			11,896			6,218
Net pension cost, before settlement charge		30,345			38,142			29,392
Settlement charge		—			—			(1,802	)
Total, net periodic pension cost recognized	$	30,345		$	38,142		$	27,590

Multiemployer Plans

In the United States and Canada, we contribute to various trusteed pension plans covering hourly construction employees under industry-wide agreements. We also contribute to various trusteed plans in certain countries in Europe covering both hourly and certain salaried employees. Contributions are based on the hours worked by employees covered under these agreements and are charged to direct costs of contracts on a current basis. Information from the plans’ administrators is not available to permit us to determine our share of unfunded benefits, if any. Our contributions to these plans during fiscal 2007, 2006, and 2005 totaled $47.9 million, $48.8 million, $38.1 million, respectively.

F-19

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9. Savings and Deferred Compensation Plans

Savings Plans

We sponsor various defined contribution savings plans which allow participants to make voluntary contributions by salary deduction. Such plans cover substantially all of our domestic, nonunion employees in the U.S. and are qualified under section 401(k) of the United States Internal Revenue Code. Similar plans outside the U.S. cover various groups of employees of our international subsidiaries and affiliates. Several of these plans allow the Company to match, on a voluntary basis, a portion of the employee contributions. Company contributions to these plans during fiscal 2007, 2006, and 2005 totaled $36.8 million, $28.9 million, and $21.5 million, respectively.

Deferred Compensation Plans

Our Executive Security Plan (“ESP”) and Executive Deferral Plans (“EDP”) are nonqualified deferred compensation programs that provide benefits payable to directors, officers, and certain key employees or their designated beneficiaries at specified future dates, upon retirement, or death. Benefit payments under both plans are funded by a combination of contributions from participants and the Company, and most of the participants are covered by life insurance policies with the Company designated as the beneficiary. Amounts charged to expense relating to these programs for each of the three fiscal years ended September 30, 2007, 2006, and 2005 totaled $2.4 million, $4.2 million, and $3.6 million, respectively.

10. Income Taxes

The following table presents the components of our consolidated income tax expense for each fiscal year ended September 30 (in thousands):

	2007			2006			2005
Current tax expense:
Federal	$	137,136		$	66,332		$	54,280
State		17,563			11,555			9,386
Foreign		54,822			36,311			18,318
Total current tax expense		209,521			114,198			81,984
Deferred tax expense (benefit):
Federal		(44,021	)		(4,707	)		(14,564	)
State		(6,184	)		(2,408	)		1,278
Foreign		2,196			1,321			9,170
Total deferred tax benefit		(48,009	)		(5,794	)		(4,116	)
Consolidated income tax expense	$	161,512		$	108,404		$	77,868

F-20

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred taxes reflect the tax effects of the differences between the amounts recorded as assets and liabilities for financial reporting purposes and the comparable amounts recorded for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The following table presents the components of our net deferred tax assets at September 30, 2007 and 2006 (in thousands):

	2007			2006
Deferred tax assets:
Obligations relating to:
Defined benefit pension plans	$	33,156		$	60,206
Other employee benefit plans		105,209			85,440
Self-insurance programs		20,378			16,472
Incremental U.S. tax on unremitted foreign earnings		2,040			9,226
Contract revenues and costs		21,115			—
Other		3,243			1,933
Gross deferred tax assets		185,141			173,277
Deferred tax liabilities:
Depreciation and amortization		(26,923	)		(18,034	)
Contract revenues and costs		—			(7,732	)
State income and franchise taxes		(2,090	)		(2,506	)
Other		(2,269	)		(4,256	)
Gross deferred tax liabilities		(31,282	)		(32,528	)
Net deferred tax assets	$	153,859		$	140,749

During fiscal 2007, 2006, and 2005, we realized income tax benefits of $29.7 million, $15.9 million, and $15.9 million, respectively, relating to exercises of nonqualified stock options, and disqualifying dispositions of stock sold under our employee stock purchase plans.

The reconciliation from the statutory U.S. federal income tax expense to the consolidated effective income tax expense for each fiscal year ended September 30 follows (dollars in thousands):

	2007			2006			2005
Statutory amount (computed using 35%)	$	157,025		$	106,850		$	73,317
State taxes, net of the federal benefit		7,397			5,965			6,932
Other, net		(2,910	)		(4,411	)		(2,381	)
Consolidated income tax expense	$	161,512		$	108,404		$	77,868
Consolidated effective income tax rate		36.0	%		35.5	%		37.2	%

During fiscal 2007, 2006, and 2005, we paid approximately $171.6 million, $86.6 million, and $71.5 million, respectively, in income taxes.

F-21

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents the components of our consolidated earnings before taxes for each fiscal year ended September 30 (in thousands):

	2007		2006		2005
United States earnings	$	248,699	$	189,545	$	155,253
Foreign earnings		199,943		115,742		54,223
	$	448,642	$	305,287	$	209,476

United States income taxes, net of applicable credits, have been provided on the undistributed earnings of the Company’s foreign subsidiaries, except in those instances where the earnings are expected to be permanently reinvested. At September 30, 2007, approximately $50.0 million of such undistributed earnings of certain foreign subsidiaries was expected to be permanently reinvested. Should these earnings be repatriated, approximately $6.5 million of income taxes would be payable.

11. Commitments and Contingencies, and Derivative Financial Instruments

Commitments Under Operating Leases

We lease certain of our facilities and equipment under operating leases with net aggregate future lease payments of approximately $531.7 million at September 30, 2007 payable as follows (in thousands):

Year ending September 30,
2008	$	111,230
2009		98,188
2010		81,725
2011		95,243
2012		43,269
Thereafter		128,023
		557,678
Amounts representing sublease income		(25,952	)
	$	531,726

Rent expense for fiscal years 2007, 2006, and 2005 totaled $105.8 million, $82.6 million, and $84.6 million, respectively, and was offset by sublease income of approximately $13.2 million, $8.3 million, and $5.5 million, respectively. Operating leases relating to many of our major offices generally contain renewal options, and provide for additional rental based on escalation in operating expenses and real estate taxes.

Guarantees

We are party to two synthetic lease agreements involving certain real and personal property located in Houston, Texas that we use in our operations. A synthetic lease is a type of off-balance sheet transaction which provides us with certain tax and other financial benefits. Significant terms of the leases are as follows:

	Lease 1		Lease 2
End of lease term		2011		2015
End of term purchase option (in thousands)	$	49,000	$	52,200
Residual value guaranty (in thousands)	$	35,300	$	38,800

F-22

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Both lease agreements give us the right to request an extension of the lease term. We may also assist the owner in selling the properties at the end of their respective terms, the proceeds from which would be used to reduce our residual value guarantees. In connection with Lease 2, we entered into a floating-to-fixed interest rate swap agreement with a U.S. bank which fixes the amount of the Company’s lease payments. At September 30, 2007 the notional amount of this hedge was $52.2 million. This instrument allows us to receive a floating rate payment tied to the 1-month LIBOR from the counterparty in exchange for a fixed-rate payment from us. We’ve determined this interest rate swap to be highly effective according to the definitions of SFAS No. 133—Accounting for Derivative Instruments and Hedging Activities. The minimum lease payments required by both lease agreements are included in the above lease pay-out schedule. We have determined that the aggregate fair value of the aforementioned financial guarantees is not significant at September 30, 2007.

Derivative Financial Instruments

From time-to-time, we will enter into derivative financial instruments to hedge our exposure to fluctuating foreign currency exchange rates. This situation usually arises in connection with client contracts where certain costs will be incurred in a currency other than the currency in which the related contract revenue is denominated. At September 30, 2007, we had the following derivative contracts outstanding (“USD” refers to the U.S. dollar; “GBP” refers to the British Pound; “BHD” refers to the Bahraini Dinar):

Hedge Instrument	Notional Amount		Rate	Settlement Year
Euro Put Option	€	4,419,000	0.8105 / USD	2008
Bahraini Dinar Forward		BHD 4,690,000	0.7527 / GBP	2008
Euro Put Option	€	13,200,000	1.4522 / GBP	2009
British Pound Forward	£	520,000	1.3300 / BHD	2008

We’ve determined these contracts to be highly effective according to the definitions of SFAS 133. The contracts are recognized in the Consolidated Balance Sheets at their fair values. Changes in the fair values of the derivatives are recorded in other comprehensive income.

Concurrent with the acquisition of the Babtie Group Ltd., we entered into a forward contract with a large, U.S. bank. The purpose of the contract is to hedge the Company’s exposure to fluctuating foreign currency exchange rates on a £39.9 million intercompany loan between Jacobs and one of its subsidiaries. Amounts recognized as expense relating to this contract totaled $0.7 million in both fiscal 2007 and 2006. Based on the terms of the contract, we believe the effect of the loan on future earnings at September 30, 2007 should be limited to $2.7 million of expense. At September 30, 2007, the notional amount of the contract was £39.9 million. It provides for an average exchange rate of 0.5828 GBP-to USD, and terminates in fiscal 2011. This derivative qualifies as a cash flow hedge under the provisions of SFAS 133.

The fair value of derivative contracts included in other deferred liabilities in the accompanying Consolidated Balance Sheets totaled $8.6 million and $3.8 million at September 30, 2007 and 2006, respectively.

Letters of Credit

Letters of credit outstanding at September 30, 2007 totaled $143.0 million.

F-23

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

12. Contractual Guarantees, Litigation, Investigations, and Insurance

In the normal course of business, we are subject to certain contractual guarantees and litigation. The guarantees to which we are a party generally relate to project schedules and plant performance. Most of the litigation involves us as a defendant in workers’ compensation; personal injury; environmental; employment/labor; professional liability; and other similar lawsuits.

We maintain insurance coverage for various aspects of our business and operations. We have elected, however, to retain a portion of losses that occur through the use of various deductibles, limits, and retentions under our insurance programs. This situation may subject us to some future liability for which we are only partially insured, or completely uninsured. We intend to mitigate any such future liability by continuing to exercise prudent business judgment in negotiating the terms and conditions of our contracts.

Additionally, as a contractor providing services to agencies of the United States federal government, we are subject to many levels of audits, investigations and claims by, or on behalf of, the U.S. federal government with respect to our contract performance; pricing; costs; cost allocations; and procurement practices. Furthermore, our income, franchise, and similar tax returns and filings are also subject to audit and investigation by the Internal Revenue Service, most states within the United States as well as by various government agencies representing jurisdictions outside the United States.

In accordance with SFAS No. 5—Accounting for Contingencies, we record in our Consolidated Balance Sheets amounts representing our estimated liability relating to such claims, guarantees, litigation, and audits and investigations. We rely on qualified actuaries to assist us in determining the level of reserves to establish for insurance-related claims that are known and have been asserted against us, and for insurance-related claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to our claims administrators as of the respective balance sheet dates. We include any adjustments to such insurance reserves in our consolidated results of operations.

Management believes, after consultation with counsel, that such guarantees, litigation, United States Government contract-related audits, investigations and claims, and income tax audits and investigations should not have any material adverse effect on our consolidated financial statements.

In addition to the matters described above, we are involved in a dispute with a client relating to a large waste incineration project in Europe. The contract was entered into by one of our subsidiaries several years ago prior to our acquisition of that subsidiary. The dispute involves proper waste feed; content of residues; final acceptance of the plant; and costs of operation and maintenance of the plant. We have initiated litigation against the client and are seeking in excess of €40.0 million (approximately $56.7 million) in damages. The client has filed a counterclaim against us, which we believe is without merit. We believe our claims are valid and enforceable and that we will be ultimately successful in obtaining a favorable judgment.

We are also involved in a dispute where a client has filed suit against a joint venture in which a Jacobs subsidiary is a minority participant. This matter arises from the joint venture’s participation in the design and construction management of an extension of a light-rail project in the United States. The matter is civil in nature and alleges unspecified damages. Although the complaint makes various allegations that include breach of contract, negligence, misrepresentation, and fraud, the joint venture believes that it has meritorious defenses to each and every allegation. The joint venture has filed a counterclaim for unpaid change orders and services provided. We do not believe that this litigation will have any material adverse effect on our consolidated financial statements.

F-24

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13. Common and Preferred Stock

We are authorized to issue two classes of capital stock: common stock and preferred stock (each has a par value of $1.00 per share). The preferred stock may be issued in one or more series. The number of shares to be included in a series as well as each series’ designation, relative powers, dividend and other preferences, rights and qualifications, redemption provisions, and restrictions are to be fixed by our Board of Directors at the time each series is issued. Except as may be provided by the Board of Directors in a preferred stock designation, or otherwise provided for by statute, the holders of our common stock have the exclusive right to vote for the election of Directors and all other matters requiring stockholder action. The holders of our common stock are entitled to dividends if and when declared by the Board of Directors from whatever assets are legally available for that purpose.

In December 2000, the Board of Directors of Jacobs approved the Amended and Restated Rights Agreement dated December 20, 2000 (the “Rights Agreement”). The Rights Agreement is intended to protect the rights of our shareholders in the event of an unsolicited takeover attempt. It is not intended to prevent a takeover of the Company on terms that are favorable and fair to all shareholders, and the Rights Agreement will not interfere with any merger approved by the Board of Directors. Pursuant to the terms of the Rights Agreement, each outstanding share of common stock has attached to it one stock purchase right (a “Right”). Each Right entitles the common stockholder to purchase, in certain circumstances generally relating to a change in control of Jacobs, one four-hundredths of a share of our Series A Junior Participating Cumulative Preferred Stock, par value $1.00 per share (the “Series A Preferred Stock”) at the exercise price of $175.00 per share, subject to adjustment. Alternatively, the Right holder may purchase our common stock having a market value equal to two times the exercise price, or may purchase shares of common stock of the acquiring corporation having a market value equal to two times the exercise price.

The Series A Preferred Stock confers to its holders, rights as to dividends, voting and liquidation which are in preference to common stockholders. The Rights are nonvoting, are not presently exercisable and currently trade in tandem with the common shares. In accordance with the Rights Plan, we may redeem the Rights at $.0025 per Right. The Rights will expire on December 20, 2010, unless earlier exchanged or redeemed.

F-25

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14. Other Financial Information

The following tables present the components of the items indicated as shown in the accompanying Consolidated Balance Sheets at September 30, 2007 and 2006 (in thousands):

	2007			2006
Miscellaneous Noncurrent Assets:
Deferred income taxes	$	81,843		$	112,791
Cash surrender value of life insurance policies		69,841			59,799
Intangible assets (a)		24,742			21,631
Prepaid pension costs		11,382			31,106
Project related long-term receivables		36,888			33,065
Investments		43,400			34,795
Notes receivable		3,115			1,301
Other		20,957			15,173
Total	$	292,168		$	309,661
Accrued Liabilities:
Accrued payroll and related liabilities	$	371,289		$	280,148
Project-related accruals		81,417			67,444
Insurance liabilities		62,363			52,439
Sales and other similar taxes		41,508			36,237
Other		69,514			59,432
Total	$	626,091		$	495,700
Other Deferred Liabilities:
Liabilities relating to defined benefit pension and early retirement plans	$	107,852		$	200,883
Liabilities relating to nonqualified deferred compensation arrangements		71,448			61,599
Deferred income taxes		20,976			18,769
Miscellaneous		28,548			23,280
Total	$	228,824		$	304,531
Components of Total Accumulated Other Comprehensive Income (Loss):
Foreign currency translation adjustments	$	9,837		$	(12,251	)
Adjustments relating to defined benefit pension plans		(19,726	)		(64,742	)
Other (b)		509			(662	)
Total	$	(9,380	)	$	(77,655	)

(a) Consists primarily of intangible assets acquired in connection with various business combinations and recorded in accordance with the provisions of SFAS No. 141—Business Combinations.

(b) Consists of unrealized gains (losses) on available-for-sale marketable securities, and gains (losses) associated with cash flow hedges.

F-26

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15. Segment Information

As discussed above, we provide a broad range of technical, professional, and construction services. We provide our services through offices and subsidiaries located primarily throughout North America and Europe. We also have offices located in selected regions of Asia and Australia.

All of our operations share similar economic characteristics. For example, all of our operations are highly influenced by the general availability of qualified engineers and other technical professional staff. They also provide similar services as well as share similar processes for delivering our services. In addition, the use of technology is highly similar and consistent throughout our organization, as is our client base (with the exception of our operations outside the United States, which perform very little work for the U.S. federal government), and our quality assurance and safety programs. Furthermore, the types of information and internal reports used by management to monitor performance, evaluate results of operations, allocate resources, and otherwise manage the business support a single reportable segment. Accordingly, based on these similarities, we have concluded that our operations may be aggregated into one reportable segment for purposes of this disclosure.

The following table presents certain financial information by geographic area for fiscal 2007, 2006, and 2005 (in thousands):

	2007		2006		2005
Revenues (for the fiscal years ended September 30):
United States	$	5,020,417	$	4,827,262	$	3,741,257
Europe		2,050,867		1,694,723		1,285,957
Canada		1,117,879		745,061		525,467
Asia		242,868		117,814		53,577
Other		41,939		36,410		28,743
Total	$	8,473,970	$	7,421,270	$	5,635,001
Long-Lived Assets (at September 30):
United States	$	118,675	$	114,801	$	109,198
Europe		44,102		34,788		28,182
Canada		11,594		8,554		5,072
Asia		16,575		13,133		12,519
Other		1,543		—		—
Total	$	192,489	$	171,276	$	154,971

Revenues were earned from unaffiliated clients located primarily within the various and respective geographic areas shown. Long-lived assets consist of property and equipment, net of accumulated depreciation and amortization.

For each of the three fiscal years ended September 30, 2007, 2006, and 2005, revenues earned directly or indirectly from agencies of the U.S. federal government accounted for 16.6%, 16.4%, and 21.2%, respectively, of total revenues. For the fiscal year ended September 30, 2006, revenues earned from Valero Energy Corporation accounted for 10.2% of total revenues.

F-27

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16. Selected Quarterly Information—Unaudited

The following table presents selected quarterly financial information for each of the last three fiscal years. Amounts are presented in thousands, except for per share amounts:

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Fiscal Year
2007
Revenues	$	2,018,508	$	2,091,704	$	2,083,689	$	2,280,069	$	8,473,970
Operating profit (a)		94,374		102,489		115,704		129,389		441,956
Earnings before taxes		95,723		105,041		116,863		131,015		448,642
Net earnings		61,262		67,226		74,750		83,892		287,130
Earnings per share:
Basic		0.52		0.57		0.63		0.70		2.42
Diluted		0.51		0.55		0.61		0.68		2.35
2006
Revenues	$	1,683,458	$	1,832,450	$	1,926,071	$	1,979,291	$	7,421,270
Operating profit (a)		67,413		69,440		79,571		85,132		301,556
Earnings before taxes		67,227		69,550		79,094		89,416		305,287
Net earnings		43,025		44,500		50,632		58,726		196,883
Earnings per share:
Basic		0.37		0.38		0.43		0.50		1.69
Diluted		0.36		0.37		0.42		0.49		1.64
2005
Revenues	$	1,283,300	$	1,383,195	$	1,449,047	$	1,519,459	$	5,635,001
Operating profit (a)		47,233		47,393		58,682		61,583		214,891
Earnings before taxes		45,343		45,475		57,485		61,173		209,476
Net earnings		28,864		27,832		36,605		38,307		131,608
Earnings per share:
Basic		0.26		0.25		0.32		0.33		1.15
Diluted		0.25		0.24		0.31		0.32		1.12

(a) Operating profit represents revenues, less direct costs of contracts, and selling, general and administrative expenses.

F-28

Report of Ernst & Young LLP

Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Jacobs Engineering Group Inc.

We have audited the accompanying consolidated balance sheets of Jacobs Engineering Group Inc. and subsidiaries as of September 30, 2007 and 2006, and the related consolidated statements of earnings, changes in stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Jacobs Engineering Group Inc. and subsidiaries at September 30, 2007 and 2006, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 2007, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 8 to the consolidated financial statements, in 2007 the Company adopted the provisions of Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statement No. 87, 88, 106 and 132(R)”.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Jacobs Engineering Group Inc.’s internal control over financial reporting as of September 30, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 16, 2007 expressed an unqualified opinion thereon.

Los Angeles, California

November 16, 2007

F-29

Report of Ernst & Young LLP

Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Jacobs Engineering Group Inc.

We have audited Jacobs Engineering Group Inc.’s internal control over financial reporting as of September 30, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Jacobs Engineering Group Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Jacobs Engineering Group Inc. maintained, in all material respects, effective internal control over financial reporting as of September 30, 2007, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Jacobs Engineering Group Inc. and subsidiaries as of September 30, 2007 and 2006, and the related consolidated statements of earnings, changes in stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2007 and our report dated November 16, 2007 expressed an unqualified opinion thereon.

Los Angeles, California

November 16, 2007

F-30

EX-3.1

Exhibit 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

JACOBS ENGINEERING GROUP INC.

This is the Amended and Restated Certificate of Incorporation of JACOBS ENGINEERING GROUP INC., formerly named JEC ACQUISITION CO. The original Certificate of Incorporation was filed with the Delaware Secretary of State on January 8, 1987. This Amended and Restated Certificate of Incorporation was duly adopted in accordance with the General Corporation Law of Delaware §§ 242 and 245.

1. The name of the Corporation is JACOBS ENGINEERING GROUP INC.

2. The name and address of the registered agent of the Corporation in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.

3. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

4. The name and mailing address of the incorporator of the Corporation is as follows:

Name Mailing Address:

Joseph J. Jacobs

251 South Lake Avenue

Pasadena, CA 91101

5.      (a)     The Corporation is authorized to issue two classes of capital stock, designated Common Stock and Preferred Stock. The total amount of authorized capital stock of the Corporation is 241,000,000 shares, divided into 240,000,000 shares of Common Stock, par value $1.00 per share, and 1,000,000 shares of Preferred Stock, par value $1.00 per share.

(b) The Preferred Stock may be issued in one or more series. The Board of Directors is hereby authorized to issue the shares of Preferred Stock in such series and to fix from time to time before issuance the number of shares to be included in any series and the designation, relative powers, preferences and rights and qualifications, limitations or restriction of all shares of such series. The authority of the Board of Directors with respect to each series shall include, without limiting the generality of the foregoing, the determination of any or all of the following:

(1) the number of shares of any series and the designation to distinguish the shares of such series from the shares of all other series;

(2) the voting powers, if any, and whether such voting powers are full or limited, in any such series;

(3) the redemption provisions, if any, applicable to such series, including the redemption price or prices to be paid;

(4) whether dividends, if any, shall be cumulative or noncumulative, the dividend rate, or method of determining the dividend rate, of such series, and the dates and preferences of dividends on such series;

(5) the rights of such series upon the voluntary or involuntary dissolution of, or upon any distribution of the assets of, the Corporation;

(6) the provisions, if any, pursuant to which the shares of such series are convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock, or any other security, of the Corporation or any other corporation, and the price or prices or the rates of exchange applicable thereto;

(7) the right, if any, to subscribe for or to purchase any securities of the Corporation or any other corporation;

(8) the provisions, if any, of a sinking fund applicable to such series; and

(9) any other relative, participating, optional or other special powers, preferences, rights, qualifications, limitations or restrictions thereof; all as shall be determined from time to time by the Board of Directors and shall be stated in a resolution or resolutions providing for the issuance of such Preferred Stock (a “Preferred Stock Designation”).

(c) The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of not less than 75% of the total voting power of all outstanding securities of the Corporation then entitled to vote generally in the election of directors, considered for this purpose as one class.

(d) Except as may be provided by the Board of Directors in a Preferred Stock Designation or by law,

(i) dividends may be declared and paid or set apart from payment upon the Common Stock out of any assets or funds of the Corporation legally available for the payment of dividends;

(ii) the holders of Common Stock shall have the exclusive right to vote for the election of directors and on all other matters requiring stockholder action, each share being entitled to one vote; and

(iii) upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation shall be distributed pro rata to the holders of the Common Stock in accordance with their respective rights and interests.

(e) The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes, and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law.

6. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind the Bylaws of the Corporation.

7. Bylaws shall not be made, repealed, altered, amended or rescinded by the stockholders of the Corporation except by the affirmative vote of the holders of not less than 75% of the total voting power of all outstanding securities of the Corporation then entitled to vote generally in the election of directors, considered for purposes of this Article 7 as one class.

8. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors consisting of not less than three directors nor more than twenty-one directors, the exact number of directors to be determined from time to time by resolution adopted by affirmative vote of a majority of the entire Board of Directors. The directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of Directors. At the 1987 annual meeting of stockholders, Class I directors shall be elected for a one-year term, Class II directors for a two-year term and Class III directors for a three-year term. At each succeeding annual meeting of stockholders beginning in 1988, successors to the class of directors whose term expires at the annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case will a decrease in the number of directors shorten the term of any incumbent director. Except as set forth below in respect of a director elected by the Board of Directors to fill a vacancy, a director shall hold office until the annual meeting for the year in which his term expires and until his successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office. Any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring in the Board of Directors may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected in accordance with the preceding sentence shall stand for election at the annual meeting immediately following such director’s election by the Board of Directors, unless the appointment occurred less than 30 days prior to such meeting, in which case such director shall stand for election at the following year’s annual meeting, and, in either case, if elected by the stockholders, such director shall hold office for the remainder of the term of the class of directors in which the new directorship was created or the vacancy occurred and until such director’s successor shall have been elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office.

Notwithstanding the foregoing, whenever the holders of any one or more classes or series of preferred stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to this Article 8 unless expressly provided by such terms.

Notwithstanding the rule that the three classes shall be as nearly equal in number of directors as possible, in the event of any change in the authorized number of directors each director then continuing to serve as such shall nevertheless continue as a director of the class in which he is a member until expiration of his current term, or his prior death, resignation or removal. If any newly created directorship may, consistent with the rule that the three classes shall be as nearly equal in number of directors as possible, be allocated to one or two or more classes, the Board shall allocate it to that of the available class whose term of office is due to expire at the earliest date following such allocation.

During any period when the holders of any Preferred Stock or any one or more series thereof, voting as a class, shall be entitled to elect a specified number of directors, by reason of dividend arrearages or other provisions giving them the right to do so, then and during such time as such right continues (1) the then otherwise authorized number of directors shall be increased by such specified number of directors, and the holders of such Preferred Stock or such series thereof, voting as a class, shall be entitled to elect the additional directors so provided for, pursuant to the provisions of such Preferred Stock or series; (2) each such additional director shall serve for such term, and have such voting powers, as shall be stated in the provisions pertaining to such Preferred Stock or series; and (3) whenever the holders of any such Preferred Stock or series thereof are divested of such rights to elect a specified number of directors, voting as a class; pursuant to the provisions of such Preferred Stock or series, the terms of office of all directors elected by the holders of such Preferred Stock or series, voting as a class, pursuant to such provisions, or elected to fill any vacancies resulting from the death, resignation or removal of directors so elected by the holders of such Preferred Stock or series, shall forthwith terminate and the authorized number of directors shall be reduced accordingly.

9. Subject to any rights granted in a Preferred Stock Designation to any series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at an annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing of such stockholders.

10. No vote at any meeting of stockholders need be by written ballot unless the Board of Directors, in its discretion, or the officer of the Corporation presiding at the meeting, in his discretion, specifically directs the use of a written ballot.

11. Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time by the Board of Directors or by a committee of the Board of Directors that has been duly designated by the Board of Directors and whose powers and authority, as provided in a resolution of the Board of Directors or in the Bylaws of the Corporation, include the power to call such meetings or by the Chairman of the Board of Directors, but such special meetings may not be called by any other person or persons; provided, however, that, if and to the extent that any special meeting of the stockholders may be called by any other person or persons specified in any provisions of any certificate filed under Section 151(g) of the Delaware General Corporation Law (or its successor statute as in effect from time to time hereunder), then such special meeting may also be called by the person or persons, in the manner, at the times and for the purposes so specified.

12. Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept (subject to any provision contained in applicable law) outside the State of Delaware at such place as may be designated from time to time by the Board of Directors or the Bylaws of the Corporation.

13. Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of Section 291 of Title 8 of the Delaware General Corporation Law or on the application of trustees in dissolution or of any receiver or

receivers appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware General Corporation Law, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.

14. To the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, a director of this Corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except that this Article 14 shall not eliminate or limit a director’s liability (i) for any breach of the director’s duty of loyalty to the Corporation or its shareholders, (ii) for acts or omissions that are not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is hereafter amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended from time to time. Any repeal or modification of this Article 14 shall not increase the personal liability of any director of this Corporation for any act or occurrence taking place prior to such repeal or modification or otherwise adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. The provisions of this Article 14 shall not be deemed to limit or preclude indemnification of a director by the Corporation for any liability of a director that has not been eliminated by the provisions of this Article 14.

15. The Corporation shall indemnify to the fullest extent authorized or permitted by law any person made, or threatened to be made, a party to any action or proceeding (whether civil or criminal or otherwise) by reason of the fact that he, his testator or intestate, is or was a director or officer of the Corporation or by reason of the fact that such director or officer, at the request of the Corporation, is or was serving any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, in any capacity. Nothing contained herein shall affect any rights to indemnification to which employees other than directors and officers may be entitled by law, a contract to which the Corporation is a party or a bylaw of the Corporation.

16. No contract or other transaction between the Corporation or any other person, firm or corporation and no other act of the Corporation shall, in the absence of fraud, in any way be affected or invalidated by the fact that any of the directors of the Corporation are pecuniarily or otherwise interested in, or are directors or officers of, such other person, firm or corporation. Any director of the Corporation individually or any firm or corporation of which any director may be an officer, director or shareholder, partner or owner, may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the Corporation, provided that the fact that he individually or such firm or corporation is so interested shall be disclosed or shall have been known to

the Board of Directors or a majority of such members thereof as shall be present at any meeting of the Board of Directors at which action upon any such contract or transaction shall be taken. Any director of the Corporation who is also an officer, director or shareholder, partner or owner of such other person, firm or corporation or who is so interested may be counted in determining the existence of a quorum at any meeting of the Board of Directors which shall authorize any such contract or transaction, and may vote thereat to authorize any such contract or transaction with like force and effect as if he were not such officer, director or shareholder, partner or owner of such other person, firm or corporation or not so interested. Any director of the Corporation may vote upon any contract or other transaction between the Corporation and any subsidiary or affiliated corporation without regard to the fact that he is also a director of such subsidiary or affiliated corporation. Any contract, transaction or act of the Corporation or of the directors that is ratified by a majority of a quorum of the stockholders of the Corporation at any annual meeting, or at any special meeting called for such purpose, shall, insofar as permitted by law or by the Certificate of Incorporation of the Corporation, be as valid and as a binding as though ratified by every stockholder of the Corporation; provided, however, that any failure of the stockholders to approve or ratify any such contract, transaction or act, when and if submitted, shall not be deemed in any way to invalidate the same or deprive the Corporation, its directors, officers or employees of its or their right to proceed with such contract, transaction or act.

17. Notwithstanding any other vote that may be required under applicable law, and in addition thereto, the affirmative vote of holders of not less than two-thirds of the total voting power of all outstanding securities entitled to vote in the ordinary election of directors of the Corporation voting together as a single class, shall be required:

(a) To adopt any agreement for, or to approve, the merger or consolidation of this Corporation with or into any other corporation except for mergers for which no stockholder vote is required under Section 253 of the Delaware General Corporation Law or any successor section;

(b) To authorize any sale, lease, transfer, exchange, mortgage, pledge or other disposition to any other corporation, person or entity of all or substantially all of the assets of this Corporation;

(c) To authorize the issuance or transfer by this Corporation of any voting securities of this Corporation in exchange or payment for the securities or assets of any other corporation, person or entity if such authorization is otherwise required by law or by any agreement between this Corporation and any national securities exchange or by any other agreement to which this Corporation is a party; or

(d) To adopt a plan or proposal for the liquidation or dissolution of this Corporation.

18. Notwithstanding anything to the contrary in this Certificate of Incorporation, the provisions set forth in this Article 18 and in Articles 6, 8, 9, 11, 14, 15 and 17 may not be repealed, amended or otherwise modified directly or indirectly in any respect (whether by amendment of this Certificate of Incorporation or the Bylaws of the Corporation or otherwise) and the provisions of Article 7 may not be repealed, amended or otherwise modified directly or indirectly (whether by amendment of this Certificate of Incorporation or the Bylaws of the Corporation or otherwise) in any respect that would reduce or diminish in any manner any requirement set forth in such Articles for stockholder or director approval of any matter described therein; provided, however, that any of the foregoing Articles may be repealed or amended in any respect if such repeal or amendment is approved by such vote as may be required under

applicable law and in addition thereto by the affirmative vote of the holders, voting together as a single class, of not less than two-thirds (2/3) of the total voting power of all outstanding securities that are entitled to vote in the ordinary election of directors of the Corporation.

19. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation. Notwithstanding the foregoing, the provisions set forth in Articles 6, 7, 8, 9, 11, 14, 15 and 17 may not be repealed or amended in any respect unless such repeal or amendment is in conformity with Article 18 of this Certificate of Incorporation.

IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be executed, signed and acknowledged by William C. Markley, III, its Senior Vice President, General Counsel and Secretary, as of the 29th day of January, 2007.

JACOBS ENGINEERING GROUP INC.
By:	/s/ William C. Markley, III
	Name: William C. Markley, III Title: Senior Vice President, General Counsel and Secretary

EX-10.5

EXHIBIT 10.5

JACOBS ENGINEERING GROUP INC.

AMENDED AND RESTATED EXECUTIVE DEFERRAL PLAN

Purpose

The purpose of this Plan is to provide specified benefits to a select group of management and highly compensated Employees and Directors who contribute materially to the continued growth, development and future business success of Jacobs Engineering Group Inc. and its subsidiaries, if any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and for purposes of Title I of ERISA. This Plan represents both an amendment and restatement of the Company’s 1999 Executive Deferral Plan and a merger of the Company’s 1998 Executive Deferral Plan into this amended and restated Plan. This amendment and restatement is effective as of January 1, 2002.

ARTICLE 1

Definitions

For purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:

1.1 “Account Balance” shall mean, at any given time, the balance in a Participant’s Deferral Account. The Account Balance shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan.

1.2 “Annual Bonus” shall mean any cash compensation, in addition to Base Annual Salary, otherwise payable in a Plan Year to a Participant as an Employee under any Employer’s annual bonus, incentive bonus and cash incentive plans.

1.3 “Annual Deferral Amount” shall mean that portion of a Participant’s Base Annual Salary, Annual Bonus and Directors Fees that a Participant elects to have, and is, deferred in accordance with Article 3, for any one Plan Year.

1.4 “Annual Installment Method” shall be an annual installment payment over the number of years selected by the Participant in accordance with this Plan, calculated as follows: The Account Balance of the Participant shall be calculated as of the close of business on the last business day of the Plan Year, in the case of an installment payment under Section 5.2, and on the last business day prior to the Participant’s death, in the case of an installment payment under Section 6.2. The annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one, and the denominator of which is the remaining number of annual payments due the Participant. By way of example, if the Participant elects a 10-year Annual Installment Method, the first payment shall be 1/10 of the Account Balance, calculated as described in this definition. The following year, the payment shall be 1/9 of the Account Balance, calculated as described in this definition. Each annual installment paid shall be divided by 12, and the resulting number shall be the monthly installment payment that shall be paid each month of the Plan Year to which such

annual installment relates. Subject to the payment provisions of Section 5.2 or 6.2, as the case may be, the monthly installment payment shall be paid as soon as practicable after the first day of the month to which it relates.

1.5  “Base Annual Salary” shall mean the annual cash compensation relating to services performed during any calendar year, whether or not paid in such calendar year, excluding bonuses, commissions, overtime, fringe benefits, stock options, relocation bonus and/or expenses, incentive payments, non-monetary awards, directors fees and other fees, automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee’s gross income). Base Annual Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non-qualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant’s gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in compensation only to the extent that, had there been no such plan, the amount would have been payable in cash to the Employee.

1.6  “Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 9, that are entitled to receive benefits under this Plan upon the death of a Participant.

1.7  “Beneficiary Designation Form” shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries.

1.8  “Board” shall mean the board of directors of the Company.

1.9  “Change in Control” shall have the same meaning as contained in the Company’s 1999 Stock Incentive Plan.

1.10   “Claimant” shall have the meaning set forth in Section 14.1.

1.11   “Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.

1.12   “Committee” shall mean the committee described in Article 12.

1.13   “Company” shall mean Jacobs Engineering Group Inc. and any successor to all or substantially all of the Company’s assets or business.

1.14   “Deduction Limitation” shall mean, with respect to those distributions otherwise payable to a Participant (or his or her Beneficiary) under the Plan which are specifically subject to this Deduction Limitation, that amount which, when combined with other compensation paid to a Participant (or his or her Beneficiary) for a taxable year, would not be deductible by the Employer by reason of the limitation imposed by Code Section 162(m). The Deduction Limitation shall be determined by the Company in good faith. Once an amount has been determined by the Company to be subject to the Deduction Limitation, the Company may, at its sole discretion, defer the amount that would otherwise be paid to a Participant (or his or her Beneficiary). Any amounts so deferred will remain in the Participant’s Account Balance, and shall be entitled to continued crediting and debiting of additional amounts in

accordance with Section 3.4 below. The amounts so deferred and amounts credited thereon shall be distributed to the Participant or his or her Beneficiary at the earliest possible date, as determined by the Employer in good faith, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Employer during which the distribution is made will not be limited by Section 162(m), or if earlier, the effective date of a Change in Control. Notwithstanding anything to the contrary in this Plan, the Deduction Limitation shall not apply to distributions that become payable after a Change in Control.

1.15  “Deferral Account” shall mean (i) the sum of all of a Participant’s Annual Deferral Amounts, plus or less, as the case may be, (ii) amounts credited or debited in accordance with all the applicable crediting provisions of this Plan that relate to the Participant’s Deferral Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account.

1.16  “Director” shall mean any member of the board of directors of the Company.

1.17  “Directors Fees” shall mean the annual fees paid by the Company, including retainer fees and meetings fees, as compensation for serving on the board of directors.

1.18  “Disability” shall have the same meaning as contained in the Company’s 1999 Stock Incentive Plan with regards to a Participant who is an employee of any Employer, but not a Director, and the Company’s 1999 Outside Director Stock Plan with regards to a Participant who is a Director, but not an employee of any Employer.

1.19  “Disability Benefit” shall mean the benefit set forth in Article 8.

1.20  “Election Form” shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan.

1.21  “Employee” shall mean a person who is an employee of any Employer.

1.22  “Employer(s)” shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired) unless the subsidiary has been excluded from participation in the Plan, as a sponsor by the Board.

1.23  “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

1.24  “Participant” shall mean any Employee or Director (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Plan Agreement, an Election Form and a Beneficiary Designation Form, (iv) whose signed Plan Agreement, Election Form and Beneficiary Designation Form are accepted by the Committee, (v) who commences participation in the Plan, and (vi) whose Plan Agreement has not terminated. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan or have an account balance under the Plan, even if he or she has an interest in the Participant’s benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce.

1.25  “Plan” shall mean the Company’s Amended and Restated Executive Deferral Plan, which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time.

1.26  “Plan Agreement” shall mean a written agreement, as may be amended from time to time, which is entered into by and between an Employer and a Participant. Each Plan Agreement executed by a Participant and the Participant’s Employer shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement. The terms of any Plan Agreement may be different for any Participant, as described in Section 11.3 below.

1.27  “Plan Year” shall mean a period beginning on January 1 of a particular calendar year and continuing through December 31 of such calendar year.

1.28  “Pre-Retirement Survivor Benefit” shall mean the benefit set forth in Article 6.

1.29  “Retirement” shall have the same meaning as contained in the Company’s 1999 Stock Incentive Plan with regards to a Participant who is an employee of any Employer, but not a Director, and the Company’s 1999 Outside Director Stock Plan with regards to a Participant who is a Director, but not an employee of any Employer.

1.30  “Retirement Benefit” shall mean the benefit set forth in Article 5.

1.31  “Short-Term Payout” shall mean the payout set forth in Section 4.1.

1.32  “Termination Benefit” shall mean the benefit set forth in Article 7.

1.33  “Termination of Employment” shall mean the severing of (i) employment with all Employers or (ii) service as a Director of the Company, in either case voluntarily or involuntarily, for any reason other than Retirement, Disability, death or an authorized leave of absence. If a Participant is both an Employee and a Director, a Termination of Employment shall occur only upon the termination of the last position held.

1.34  “Trust” shall mean one or more trusts established pursuant to that certain Master Trust Agreement, dated as of June 1, 1991 between the Company and the trustee named therein, as amended from time to time.

1.35  “Unforeseeable Financial Emergency” shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant if the Participant continued participation in the Plan resulting from (i) a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, (ii) a loss of the Participant’s property due to casualty, or (iii) such other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee.

1.36  “1998 Executive Deferral Plan” shall mean the Jacobs Engineering Group Inc. 1998 Executive Deferral Plan.

1.37  “1999 Outside Director Stock Plan” shall mean the Jacobs Engineering Group Inc. 1999 Outside Director Stock Plan, as that plan may be amended from time to time, and any successor plan thereto.

1.38  “1999 Stock Incentive Plan” shall mean the Jacobs Engineering Group Inc. 1999 Executive Incentive Plan, as that plan may be amended from time to time, and any successor plan thereto.

ARTICLE 2

Selection, Enrollment, Eligibility

2.1 Selection by Committee. The Committee, in its sole discretion, shall establish eligibility requirements for participation in the Plan. Participation in the Plan shall be limited to a select group of management and highly compensated Employees of the Employers and Directors of the Company.

2.2 Enrollment Requirements. As a condition to participation, each selected Employee or Director shall complete, execute and return to the Committee a Plan Agreement, an Election Form and a Beneficiary Designation Form, all within the time period set by the Committee, in its sole discretion, for the purpose of returning documents and forms. In addition, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary.

2.3 Eligibility; Commencement of Participation. A Participant shall commence participation in the Plan on the first day of the month following the month in which he or she has (i) satisfied all Enrollment Requirements and (ii) has had his or her Plan Agreement, Election Form and Beneficiary Designation Form accepted by the Committee.

2.4 Termination of Participation and/or Deferrals. If the Committee determines in good faith that a Participant no longer qualifies as a member of a select group of management or highly compensated employees, as membership in such group is determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, the Committee shall have the right, in its sole discretion, to (i) terminate any deferral election the Participant has made for the remainder of the Plan Year in which the Participant’s membership status changes, (ii) prevent the Participant from making future deferral elections and/or (iii) immediately distribute the Participant’s then Account Balance as a Termination Benefit and terminate the Participant’s participation in the Plan.

2.5 1998 Executive Deferral Plan. As of January 1, 2002, the Company’s 1998 Executive Deferral Plan shall be merged into this Plan and any participant in that plan shall automatically become a Participant in this Plan. Furthermore, the Participant’s account balance under the 1998 Executive Deferral Plan shall automatically be transferred to this Plan and that account balance shall be governed by the terms and conditions of this Plan, with the following exceptions: (i) any short-term payout elections made under Section 4.2 of the 1998 Executive Deferral Plan for plan years starting before January 1, 2002 shall continue to be governed by the terms of the 1998 Executive Deferral Plan, and (ii) any distribution to be paid after January 1, 2002 that is the result of a participant’s retirement, termination, disability or death prior to January 1, 2002 shall continue to be governed by the terms of 1998 Executive Deferral Plan.

ARTICLE 3

Deferral Commitments/Crediting/Taxes

3.1 Deferral Amounts.

(a) Minimum and Maximum Deferral Commitment. For each Plan Year, a Participant may make an irrevocable election to defer, as his or her Annual Deferral Amount, an amount of Base Annual Salary, Annual Bonus and/or Director’s Fees

that may not be less than the minimum Annual Deferral Amount, nor more than the maximum Annual Deferral Amount, as announced by the Committee prior to the beginning of the Plan Year and set forth in the Election Form for the Plan Year.

(b) Short Plan Year. If a Participant first becomes a Participant after the first day of a Plan Year, the minimum Base Annual Salary deferral shall be the amount determined by the Committee.

(c) Other.

(i) Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year, the maximum Annual Deferral Amount, with respect to Base Annual Salary, Annual Bonus and Directors Fees shall be limited to the amount of compensation not yet earned by the Participant as of the date the Participant’s Plan Agreement and Election Form is accepted by the Committee.

(ii) Notwithstanding any provision of this Plan that may be construed properly to the contrary, a Base Annual Salary deferral shall be a fixed dollar amount, and an Annual Bonus or Directors Fees deferral shall be a fixed percentage of the applicable annual bonus or fee.

3.2 Withholding of Annual Deferral Amounts. For each Plan Year, the Base Annual Salary portion of the Annual Deferral Amount shall be withheld from each regularly scheduled Base Annual Salary payroll in equal amounts. The Annual Bonus and/or Directors Fees portion of the Annual Deferral Amount shall be withheld at the time the Annual Bonus or Directors Fees are or otherwise would be paid to the Participant.

3.3 Vesting. A Participant shall at all times be 100% vested in his or her Deferral Account.

3.4 Crediting/Debiting of Account Balances. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee, in its sole discretion, deferral amounts shall be credited or debited to a Participant’s Account Balance in accordance with the following rules:

(a) Election of Measurement Funds. At the time an Employee becomes a Participant in the Plan, he or she shall designate one or more Measurement Funds which shall be used to determine what additional amounts are to be credited or debited, as the case may be, to his or her Account Balance. Such designations shall apply to the Annual Deferral Amount, as such amounts are deferred by the Participant, and shall remain in force until changed by the Participant in accordance with the policies and procedures as set forth by the Committee, from time to time, which policies and procedures may be changed, modified, and/or amended by the Committee, without prior notice, at the Committee’s sole discretion. Until changed by the Committee: (i) Measurement Fund allocation designations must be made in whole percentage points of 5%, or multiples thereof, not to exceed 100%; (ii) a Participant may change his or hers Measurement Fund allocation elections once per calendar quarter, at any time during such quarter, but no later than the third business day prior to the end of such calendar quarter, and (iii) a change in Measurement Fund allocations will take effect at the beginning of the first calendar quarter immediately

following the date of change. Notice of any change in Measurement Fund elections must be made to the Committee, or its designee, in a form acceptable to it as determined by it in its sole discretion.

(b) Measurement Funds. A Participant may elect one or more measurement funds (the “Measurement Funds”) from among those selected by the Committee for the purpose of crediting or debiting additional amounts to his or her Account Balance. As necessary, the Committee may, in its sole discretion, discontinue, substitute or add Measurement Funds. Each such action will take effect as of the first day of the calendar quarter that follows by thirty (30) days or more the day on which the Committee gives Participants advance written notice of such change. In selecting the Measurement Funds that are available from time to time, neither the Committee nor any Employer shall be liable to any Participant for such selection or adding, deleting or continuing any available Measurement Fund.

(c) Crediting or Debiting Method. The performance of each elected Measurement Fund (either positive or negative) will be determined by the Committee, in its sole discretion, based on the performance of the Measurement Funds themselves. A Participant’s Account Balance shall be credited or debited on a daily basis based on the performance of each Measurement Fund selected by the Participant, as determined by the Committee in its sole discretion, as though (i) a Participant’s Account Balance as of the close of business on the first business day of such calendar quarter were invested in the Measurement Fund(s) selected by the Participant, in the percentages applicable to such calendar quarter, at the closing price on such date; (ii) the portion of the Annual Deferral Amount that was actually deferred during any calendar quarter were invested in the Measurement Fund(s) selected by the Participant, in the percentages applicable to such calendar quarter, no later than the close of business on the third business day after the day on which such amounts are actually deferred from the Participant’s Base Annual Salary through reductions in his or her payroll, at the closing price on such date; and (iii) any distribution made to a Participant that decreases such Participant’s Account Balance ceased being invested in the Measurement Fund(s), in the percentages applicable to such calendar quarter, no earlier than three business days prior to the distribution, at the closing price on such date.

(d) No Actual Investment. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant’s election of any such Measurement Fund, the allocation to his or her Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant’s Account Balance shall not be considered or construed in any manner as an actual investment of his or her Account Balance in any such Measurement Fund. In the event that the Company or the Trustee (as that term is defined in the Trust), in its own discretion, decides to invest funds in any or all of the Measurement Funds, no Participant shall have any rights in or to such investments themselves. Without limiting the foregoing, a Participant’s Account Balance shall at all times be a bookkeeping entry only and shall not represent any investment made on his or her behalf by the Company or the Trust; the Participant shall at all times remain an unsecured creditor of the Company.

3.5 FICA and Other Taxes. For each Plan Year in which an Annual Deferral Amount is being withheld from a Participant, the Participant’s Employer(s) shall withhold from that portion of the Participant’s Base Annual Salary and Bonus that is not being deferred, in a manner determined by the Employer(s), the Participant’s share of FICA and other employment taxes on such Annual Deferral Amount. If necessary, the Committee may reduce the Annual Deferral Amount in order to comply with this Section.

3.6 Distributions. The Participant’s Employer(s), or the trustee of the Trust, shall withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld by the Employer(s), or the trustee of the Trust, in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Employer(s) and the trustee of the Trust.

ARTICLE 4

Short-Term Payout; Unforeseeable Financial Emergencies;

Withdrawal Election

4.1 Short-Term Payout. In connection with each election to defer an Annual Deferral Amount, a Participant may irrevocably elect to receive a future “Short-Term Payout” from the Plan with respect to such Annual Deferral Amount. Subject to the Deduction Limitation, the Short-Term Payout shall be a lump sum payment in an amount that is equal to either (i) a percentage of some or all of the Annual Deferral Amount, as elected at the time of the deferral, or (ii) a stated dollar amount, as elected at the time of the deferral, not to exceed the Annual Deferral Amount, plus, in either case, amounts credited or debited in the manner provided in Section 3.4 above on that elected amount, determined at the time that the Short-Term Payout becomes payable. Subject to the Deduction Limitation and the other terms and conditions of this Plan, each Short-Term Payout elected shall be paid out during a 90 day period commencing immediately after the last day of any Plan Year designated by the Participant that is at least three Plan Years after the Plan Year in which the Annual Deferral Amount is actually deferred. By way of example, if a three year Short-Term Payout is elected for Annual Deferral Amounts that are deferred in the Plan Year commencing January 1, 2002, the three year Short-Term Payout would become payable during a 90 day period commencing January 1, 2006.

4.2 Other Benefits Take Precedence Over Short-Term Payout. Should an event occur that triggers a benefit under Article 5, 6, 7 or 8, any Annual Deferral Amount, plus amounts credited or debited thereon, that is subject to a Short-Term Payout election under Section 4.1 shall not be paid in accordance with Section 4.1 but shall be paid in accordance with the other applicable Article.

4.3 Unforeseeable Financial Emergencies. If the Participant experiences an Unforeseeable Financial Emergency, the Participant may petition the Committee to (i) suspend any deferrals required to be made by a Participant and/or (ii) receive a partial or full payout from the Plan. The payout shall not exceed the lesser of the Participant’s Account Balance, calculated as if such Participant were receiving a Termination Benefit, or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency. If, subject to the sole discretion of the Committee, the petition for a suspension and/or payout is approved, suspension shall take effect upon the date of approval and any payout shall be made within 60 days of the date of approval. The payment of any amount under this Section 4.3 shall not be subject to the Deduction Limitation.

4.4 Withdrawal Election. A Participant (or his or her Beneficiary) may elect, at any time, to withdraw all of his or her Account Balance, less a withdrawal penalty equal to 10% of such amount (the net amount shall be referred to as the “Withdrawal Amount”). This election can be made at any time, before or after Retirement, Disability, death or Termination of Employment, and whether or not the Participant (or Beneficiary) is in the process of being paid pursuant to an installment payment schedule. If made before Retirement, Disability or death, a Participant’s Withdrawal Amount shall be his or her Account Balance calculated as if there had occurred a Termination of Employment as of the day of the election. No partial withdrawals of the Withdrawal Amount shall be allowed. The Participant (or his or her Beneficiary) shall make this election by giving the Committee advance written notice of the election in a form determined from time to time by the Committee. The Participant (or his or her Beneficiary) shall be paid the Withdrawal Amount within 60 days of his or her election. Once the Withdrawal Amount is paid, the Participant shall not be eligible to elect additional deferrals under the Plan for a period of time set by the Committee, which period cannot be less than one Plan Year. The payment of this Withdrawal Amount shall be subject to the Deduction Limitation.

ARTICLE 5

Retirement Benefit

5.1 Retirement Benefit. Subject to the Deduction Limitation, a Participant who Retires shall receive, as a Retirement Benefit, his or her Account Balance.

5.2 Payment of Retirement Benefit. A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form to receive the Retirement Benefit in a lump sum or pursuant to an Annual Installment Method of up to 15 years. The Participant may change his or her election to an allowable alternative payout period by submitting a new Election Form to the Committee, provided that any such Election Form is submitted at least 1 year prior to the Participant’s Retirement and is accepted by the Committee in its sole discretion. The Election Form most recently accepted by the Committee shall govern the payout of the Retirement Benefit. If a Participant does not make any election with respect to the payment of the Retirement Benefit, then such benefit shall be payable in a lump sum. The lump sum payment shall be made, or installment payments shall commence, no later than 60 days after the last day of the Plan Year in which the Participant Retires. Any payment made shall be subject to the Deduction Limitation.

5.3 Death Prior to Completion of Retirement Benefit. If a Participant dies after Retirement but before the Retirement Benefit is paid in full, the Participant’s unpaid Retirement Benefit payments shall continue and shall be paid to the Participant’s Beneficiary over the remaining number of years and in the same amounts as that benefit would have been paid to the Participant had the Participant not died.

ARTICLE 6

Pre-Retirement Survivor Benefit

6.1 Pre-Retirement Survivor Benefit. Subject to the Deduction Limitation, the Participant’s Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to the Participant’s Account Balance if the Participant dies while in the employ of any Employer.

6.2 Payment of Pre-Retirement Survivor Benefit. A Participant, in connection with his or her commencement of participation in the Plan, shall elect on an Election Form whether the Pre-Retirement Survivor Benefit shall be received by his or her Beneficiary in a lump sum or pursuant to an Annual Installment Method of up to 15 years. The Participant may change this election to an allowable alternative payout period by submitting a new Election Form to the Committee, which form must be accepted by the Committee in its sole discretion. The Election Form most recently accepted by the Committee prior to the Participant’s death shall govern the payout of the Participant’s Pre-Retirement Survivor Benefit. If a Participant does not make any election with respect to the payment of the Pre-Retirement Survivor Benefit, then such benefit shall be paid in a lump sum. The lump sum payment shall be made, or installment payments shall commence, no later than 90 days after the date the Committee is provided with proof that is satisfactory to the Committee of the Participant’s death. Any payment made shall be subject to the Deduction Limitation.

ARTICLE 7

Termination Benefit

7.1 Termination Benefit. Subject to the Deduction Limitation, the Participant shall receive a Termination Benefit, which shall be equal to the Participant’s Account Balance if a Participant experiences a Termination of Employment prior to his or her Retirement, death or Disability.

7.2 Payment of Termination Benefit. The Participant’s Termination Benefit shall be paid in a lump sum. The lump sum payment shall be made no later than 90 days after the day the Participant experiences the Termination of Employment. Any payment made shall be subject to the Deduction Limitation.

ARTICLE 8

Disability Waiver and Benefit

8.1 Disability Waiver.

(a) Waiver of Deferral. A Participant who is determined to be suffering from a Disability shall be excused from fulfilling that portion of the Annual Deferral Amount commitment that would otherwise have been withheld from a Participant’s Base Annual Salary, Annual Bonus and/or Directors Fees for the Plan Year during the period the Participant is on a leave of absence from work (or from service on the Board of Directors). The Participant will continue to be considered a Participant for all other purposes of this Plan.

(b) Return to Work. Upon return to employment, or service as a Director, with an Employer, after a Disability ceases, the Participant shall continue his Annual Deferral Amount prospectively from the date the Participant returns to work or service as a Director.

8.2 Continued Eligibility; Disability Benefit. A Participant suffering a Disability shall, for benefit purposes under this Plan, continue to be considered to be employed, or in the service of an Employer as a Director, and shall be eligible for the benefits provided for in Articles 4, 5, 6 or 7 in accordance with the provisions of those Articles. Notwithstanding the above, the Committee shall have the right to, in its sole and absolute discretion and for purposes of this Plan only, and must in the case of a Participant who is otherwise eligible to Retire, deem the Participant to have experienced a Termination of Employment, or in the case of a Participant who is eligible to Retire, to have Retired, at any time (or in the case of a Participant who is eligible to Retire, as soon as practicable) after such Participant is determined to be suffering a Disability, in which case the Participant shall receive a Disability Benefit equal to his or her Account Balance at the time of the Committee’s determination; provided, however, that should the Participant otherwise have been eligible to Retire, he or she shall be paid in accordance with Article 5. The Disability Benefit shall be paid in a lump sum within 60 days of the Committee’s exercise of such right. Any payment made shall be subject to the Deduction Limitation.

ARTICLE 9

Beneficiary Designation

9.1 Beneficiary. Each Participant shall have the right, at any time, to designate his or her Beneficiary(ies) (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates.

9.2 Beneficiary Designation; Change; Spousal Consent. A Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Committee or its designated agent. A Participant shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee’s rules and procedures, as in effect from time to time. If the Participant names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Committee, must be signed by that Participant’s spouse and returned to the Committee. Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Committee prior to his or her death.

9.3 Acknowledgment. No designation or change in designation of a Beneficiary shall be effective until received and acknowledged in writing by the Committee or its designated agent.

9.4 No Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant’s benefits, then the Participant’s designated Beneficiary shall be deemed to be his or her surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary shall be payable to the executor or personal representative of the Participant’s estate.

9.5 Doubt as to Beneficiary. If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to cause the Participant’s Employer to withhold such payments until this matter is resolved to the Committee’s satisfaction.

9.6 Discharge of Obligations. The payment of benefits under the Plan to a Beneficiary shall fully and completely discharge all Employers and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant’s Plan Agreement shall terminate upon such full payment of benefits.

ARTICLE 10

Leave of Absence

10.1  Paid Leave of Absence. If a Participant is authorized by the Participant’s Employer for any reason to take a paid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Annual Deferral Amount shall continue to be withheld during such paid leave of absence in accordance with Section 3.2.

10.2  Unpaid Leave of Absence. If a Participant is authorized by the Participant’s Employer for any reason to take an unpaid leave of absence from the employment of the Employer, the Participant shall continue to be considered employed by the Employer and the Participant shall be excused from making deferrals until the earlier of the date the leave of absence expires or the Participant returns to a paid employment status. Upon such expiration or return, deferrals shall resume for the remaining portion of the Plan Year in which the expiration or return occurs, based on the deferral election, if any, made for that Plan Year. If no election was made for that Plan Year, no deferral shall be withheld.

ARTICLE 11

Termination, Amendment or Modification

11.1  Termination. Although it is anticipated that the Plan will continue for an indefinite period of time, there is no guarantee that the Company will continue the Plan. Accordingly, the Company reserves the right to discontinue its sponsorship of the Plan and/or to terminate the Plan at any time with respect to any Employer by action of the Board. Upon the termination of the Plan with respect to any Employer, the Plan Agreements of the affected Participants who are employed by that Employer, or in the service of that Employer as Directors, shall terminate and their Account Balances, determined as if they had experienced a Termination of Employment on the date of Plan termination or, if Plan termination occurs after the date upon which a Participant was eligible to Retire, then with respect to that Participant as if he or she had Retired on the date of Plan termination, shall be paid to the Participants as follows: Prior to a Change in Control, if the Plan is terminated with respect to all of its Participants, an Employer shall have the right, in its sole discretion, and notwithstanding any elections made by the Participant, to pay such benefits in a lump sum or pursuant to an Annual Installment Method of up to 15 years, with amounts credited and debited during the installment period as provided herein. If the Plan is terminated with respect to less than all of its Participants, an Employer shall be required to pay such benefits in a lump sum. After a Change in Control, the Employer shall be required to pay such benefits in a lump sum. The termination of the Plan shall not adversely affect any Participant or Beneficiary who has become entitled to the payment of

any benefits under the Plan as of the date of termination; provided however, that the Employer shall have the right to accelerate installment payments without a premium or prepayment penalty by paying the Account Balance in a lump sum or pursuant to an Annual Installment Method using fewer years (provided that the present value of all payments that will have been received by a Participant at any given point of time under the different payment schedule shall equal or exceed the present value of all payments that would have been received at that point in time under the original payment schedule).

11.2  Amendment. The Company may, at any time, through the Board amend or modify the Plan, in whole or in part, with respect to any Employer; provided, however, that: (i) no amendment or modification shall be effective to decrease or restrict the value of a Participant’s Account Balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced a Termination of Employment as of the effective date of the amendment or modification or, if the amendment or modification occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired as of the effective date of the amendment or modification, and (ii) no amendment or modification of this Section 11.2 or Section 12.2 of the Plan shall be effective. The amendment or modification of the Plan shall not affect any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification; provided, however, that the Employer shall have the right to accelerate installment payments by paying the Account Balance in a lump sum or pursuant to an Annual Installment Method using fewer years (provided that the present value of all payments that will have been received by a Participant at any given point of time under the different payment schedule shall equal or exceed the present value of all payments that would have been received at that point in time under the original payment schedule).

11.3  Plan Agreement. The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits not set forth in the Plan or limit the benefits otherwise provided under the Plan; provided, however, that any such additional benefits or benefit limitations must be agreed to by both the Employer and the Participant. Despite the provisions of Sections 11.1 and 11.2 above, if a Participant’s Plan Agreement contains benefits or limitations that are not in this Plan document, the Employer may only amend or terminate such provisions with the consent of the Participant.

11.4  Effect of Payment. The full payment of the applicable benefit under Articles 4, 5, 6, 7 or 8 of the Plan shall completely discharge all obligations to a Participant and his or her designated Beneficiaries under this Plan and the Participant’s Plan Agreement shall terminate.

ARTICLE 12

Administration

12.1  Committee Duties. Except as otherwise provided in this Article 12, this Plan shall be administered by a Committee appointed by the Board, which Committee may consist, in part or in full, of persons who are not on the Board. Members of the Committee may be Participants under this Plan. The Committee shall also have the discretion and authority to (i) make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and (ii) decide or resolve any and all questions including

interpretations of this Plan, as may arise in connection with the Plan. Any individual serving on the Committee who is a Participant shall not vote or act on any matter relating solely to himself or herself. When making a determination or calculation, the Committee shall be entitled to rely on information furnished by a Participant or the Company.

12.2  Administration Upon Change in Control. For purposes of this Plan, the Company shall be the “Administrator” at all times prior to the occurrence of a Change in Control. Upon and after the occurrence of a Change in Control, the “Administrator” shall be an independent third party selected by the Trustee and approved by the individual who, immediately prior to such event, was the Company’s Chief Executive Officer or, if not so identified, the Company’s highest ranking officer (the “Ex-CEO”). The Administrator shall have the discretionary power to determine all questions arising in connection with the administration of the Plan and the interpretation of the Plan and Trust including, but not limited to benefit entitlement determinations; provided, however, upon and after the occurrence of a Change in Control, the Administrator shall have no power to direct the investment of Plan or Trust assets or select any investment manager or custodial firm for the Plan or Trust. Upon and after the occurrence of a Change in Control, the Company must: (1) pay all reasonable administrative expenses and fees of the Administrator; (2) indemnify the Administrator against any costs, expenses and liabilities including, without limitation, attorney’s fees and expenses arising in connection with the performance of the Administrator hereunder, except with respect to matters resulting from the gross negligence or willful misconduct of the Administrator or its employees or agents; and (3) supply full and timely information to the Administrator or all matters relating to the Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the date of circumstances of the Retirement, Disability, death or Termination of Employment of the Participants, and such other pertinent information as the Administrator may reasonably require. Upon and after a Change in Control, the Administrator may be terminated (and a replacement appointed) by the Trustee only with the approval of the Ex-CEO. Upon and after a Change in Control, the Administrator may not be terminated by the Company.

12.3  Agents. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to any Employer.

12.4  Binding Effect of Decisions. The decision or action of the Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Plan.

12.5  Indemnity of Committee. All Employers shall indemnify and hold harmless the members of the Committee, any Employee to whom the duties of the Committee may be delegated, and the Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, any of its members, any such Employee or the Administrator.

12.6  Employer Information. To enable the Committee and/or Administrator to perform its functions, the Company and each Employer shall supply full and timely information to the Committee and/or Administrator, as the case may be, on all matters relating to the

compensation of its Participants, the date and circumstances of the Retirement, Disability, death or Termination of Employment of its Participants, and such other pertinent information as the Committee or Administrator may reasonably require.

ARTICLE 13

Other Benefits and Agreements

13.1  Coordination with Other Benefits. The benefits provided for a Participant and Participant’s Beneficiary under the Plan are in addition to any other benefits available to such Participant under any other plan or program for employees of the Participant’s Employer. The Plan shall supplement and shall not supersede, modify or amend any other such plan or program except as may otherwise be expressly provided.

ARTICLE 14

Claims Procedures

14.1  Presentation of Claim. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant.

14.2  Notification of Decision. The Committee shall consider a Claimant’s claim within a reasonable time, and shall notify the Claimant in writing:

(a) that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or

(b) that the Committee has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant:

(i) the specific reason(s) for the denial of the claim, or any part of it;

(ii) specific reference(s) to pertinent provisions of the Plan upon which such denial was based;

(iii) a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and

(iv) an explanation of the claim review procedure set forth in Section 14.3 below.

14.3  Review of a Denied Claim. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Committee a written request for a review of

the denial of the claim. Thereafter, but not later than 30 days after the review procedure began, the Claimant (or the Claimant’s duly authorized representative):

(a) may review pertinent documents;

(b) may submit written comments or other documents; and/or

(c) may request a hearing, which the Committee, in its sole discretion, may grant.

14.4  Decision on Review. The Committee shall render its decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee’s decision must be rendered within 120 days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain:

(a) specific reasons for the decision;

(b) specific reference(s) to the pertinent Plan provisions upon which the decision was based; and

(c) such other matters as the Committee deems relevant.

14.5  Legal Action. A Claimant’s compliance with the foregoing provisions of this Article 14 is a mandatory prerequisite to a Claimant’s right to commence any legal action with respect to any claim for benefits under this Plan.

ARTICLE 15

Trust

15.1  Establishment of the Trust. The Company has establish the Trust, and each Employer shall at least annually transfer over to the Trust such assets as the Employer determines, in its sole discretion, are necessary to provide, on a present value basis, for its respective future liabilities created with respect to the Annual Deferral Amounts for such Employer’s Participants for all periods prior to the transfer, as well as any debits and credits to the Participants’ Account Balances for all periods prior to the transfer, taking into consideration the value of the assets in the trust at the time of the transfer.

15.2  Interrelationship of the Plan and the Trust. The provisions of the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Employers, Participants and the creditors of the Employers to the assets transferred to the Trust. Each Employer shall at all times remain liable to carry out its obligations under the Plan.

15.3  Distributions From the Trust. Each Employer’s obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution shall reduce the Employer’s obligations under this Plan.

15.4  Investment of Trust Assets. The Trustee of the Trust shall be authorized, upon written instructions received from the Committee or investment manager appointed by the Committee, to invest and reinvest the assets of the Trust in accordance with the applicable Trust Agreement, including the disposition of stock and reinvestment of the proceeds in one or more investment vehicles designated by the Committee.

ARTICLE 16

Miscellaneous

16.1  Status of Plan. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that “is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employee” within the meaning of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted to the extent possible in a manner consistent with that intent.

16.2  Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of an Employer. For purposes of the payment of benefits under this Plan, any and all of an Employer’s assets shall be, and remain, the general, unpledged unrestricted assets of the Employer. An Employer’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future.

16.3  Employer’s Liability. An Employer’s liability for the payment of benefits shall be defined only by the Plan and the Plan Agreement, as entered into between the Employer and a Participant. An Employer shall have no obligation to a Participant under the Plan except as expressly provided in the Plan and his or her Plan Agreement.

16.4  Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise.

16.5  Not a Contract of Employment. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between any Employer and the Participant. Such employment is hereby acknowledged to be an “at will” employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of any Employer, either as an Employee or a Director, or to interfere with the right of any Employer to discipline or discharge the Participant at any time.

16.6  Furnishing Information. Participant or his or her Beneficiary will cooperate with the Committee by furnishing any and all information requested by the Committee and take such other actions as may be requested in order to facilitate the administration of the Plan and the payments of benefits hereunder, including but not limited to taking such physical examinations as the Committee may deem necessary.

16.7  Terms. Whenever any words are used herein in the masculine, they shall be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply.

16.8  Captions. The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

16.9  Governing Law. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the internal laws of the State of California without regard to its conflicts of laws principles.

16.10  Notice. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Jacobs Engineering Group Inc.

Employee Benefits

1111 S. Arroyo Parkway

Pasadena, CA 91105

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant.

16.11  Successors. The provisions of this Plan shall bind and inure to the benefit of the Participant’s Employer and its successors and assigns and the Participant and the Participant’s designated Beneficiaries.

16.12  Spouse’s Interest. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse’s will, nor shall such interest pass under the laws of intestate succession.

16.13  Validity. In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein.

16.14  Incompetent. If the Committee determines in its discretion that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person’s property, the Committee may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution

of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Plan for such payment amount.

16.15  Court Order. The Committee is authorized to make any payments directed by court order in any action in which the Plan or the Committee has been named as a party. In addition, if a court determines that a spouse or former spouse of a Participant has an interest in the Participant’s benefits under the Plan in connection with a property settlement or otherwise, the Committee, in its sole discretion, shall have the right, notwithstanding any election made by a Participant, to immediately distribute the spouse’s or former spouse’s interest in the Participant’s benefits under the Plan to that spouse or former spouse.

16.16  Distribution in the Event of Taxation.

(a) In General. If, for any reason, all or any portion of a Participant’s benefits under this Plan becomes taxable to the Participant prior to receipt, a Participant may petition the Committee before a Change in Control, or the trustee of the Trust after a Change in Control, for a distribution of that portion of his or her benefit that has become taxable. Upon the grant of such a petition, which grant shall not be unreasonably withheld (and, after a Change in Control, shall be granted), a Participant’s Employer shall distribute to the Participant immediately available funds in an amount equal to the taxable portion of his or her benefit (which amount shall not exceed a Participant’s unpaid Account Balance under the Plan). If the petition is granted, the tax liability distribution shall be made within 90 days of the date when the Participant’s petition is granted. Such a distribution shall affect and reduce the benefits to be paid under this Plan.

(b) Trust. If the Trust terminates in accordance with Section 3.6(e) of the Trust and benefits are distributed from the Trust to a Participant in accordance with that Section, the Participant’s benefits under this Plan shall be reduced to the extent of such distributions.

16.17  Insurance. The Employers, on their own behalf or on behalf of the trustee of the Trust, and, in their sole discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Employers may choose. The Employers or the trustee of the Trust, as the case may be, shall be the sole owner and beneficiary of any such insurance. The Participant shall have no interest whatsoever in any such policy or policies, and at the request of the Employers shall submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to whom the Employers have applied for insurance.

16.18  Legal Fees to Enforce Rights After Change in Control. The Company and each Employer is aware that upon the occurrence of a Change in Control, the Board or the board of directors of a Participant’s Employer (which might then be composed of new members) or a shareholder of the Company or the Participant’s Employer, or of any successor corporation might then cause or attempt to cause the Company, the Participant’s Employer or such successor to refuse to comply with its obligations under the Plan and might cause or attempt to cause the Company or the Participant’s Employer to institute, or may institute, litigation seeking to deny Participants the benefits intended under the Plan. In

these circumstances, the purpose of the Plan could be frustrated. Accordingly, if, following a Change in Control, it should appear to any Participant that the Company, the Participant’s Employer or any successor corporation has failed to comply with any of its obligations under the Plan or any agreement thereunder or, if the Company, such Employer or any other person takes any action to declare the Plan void or unenforceable or institutes any litigation or other legal action designed to deny, diminish or to recover from any Participant the benefits intended to be provided, then the Company and the Participant’s Employer irrevocably authorize such Participant to retain counsel of his or her choice at the expense of the Company and the Participant’s Employer (who shall be jointly and severally liable) to represent such Participant in connection with the initiation or defense of any litigation or other legal action, whether by or against the Company, the Participant’s Employer or any director, officer, shareholder or other person affiliated with the Company, the Participant’s Employer or any successor thereto in any jurisdiction.

IN WITNESS WHEREOF, the Company has signed this Plan document as of __________.

“Company”

Jacobs Engineering Group Inc.

By:

Title:

EX-10.9

Exhibit 10.9

Jacobs Engineering Group Inc. 401(k) Plus Savings Plan and Trust

As Amended and Restated April 1, 2003

Jacobs Engineering Group Inc. (the “Company”) previously established the Jacobs Engineering Group Inc. 401(k) Plus Savings Plan (the “Plan”) for the exclusive benefit of eligible employees of the Company and its participating affiliates. The Plan is intended to constitute a qualified profit sharing plan, as described in Code section 401(a), which includes a qualified cash or deferred arrangement, as described in Code section 401(k).

The provisions of the Plan and Trust relating to the Trustee constitute the trust agreement which is entered into by and between Jacobs Engineering Group Inc. and Vanguard Fiduciary Trust Company. The Trust is intended to be tax exempt, as described in Code section 501(a).

The Plan is intended to comply with the qualification requirements as amended by the Economic Growth and Tax Relief Reconciliation Act of 2001, the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), the Uruguay Round Agreements Act (GATT), the Small Business Job Protection Act of 1996 (SBJPA), the Taxpayer Relief Act of 1997 (TRA ‘97), and the Restructuring and Reform Act of 1998 (RRA ‘98), and is intended to comply in operation therewith. To the extent that the Plan, as set forth below, is subsequently determined to be insufficient to comply with such requirements and any regulations issued under these qualification requirements, the Plan shall later be amended to so comply.

The Jacobs Engineering Group Inc. 401(k) Plus Savings Plan and Trust, as set forth in this document, is hereby amended and restated effective as of January 1, 2002.

Date: April 1, 2003	Jacobs Engineering Group Inc.
	By:	/S/ John W. Prosser, Jr.
		Title:	Executive Vice President Finance and Administration

TABLE OF CONTENTS

1	DEFINITIONS		1
2	ELIGIBILITY		13
	2.1	Eligibility	13
	2.2	Ineligible Employees	13
	2.3	Ineligible, Terminated or Former Participants	13
3	PARTICIPANT CONTRIBUTIONS		14
	3.1	Pre-Tax Contribution Election	14
	3.2	Changing a Contribution Election	14
	3.3	Revoking and Resuming a Contribution Election	14
	3.4	Contribution Percentage Limits	14
	3.5	Refunds When Contribution Dollar Limit Exceeded	15
	3.6	Timing, Posting and Tax Considerations	15
	3.7	Catch-Up Contributions	16
4	ROLLOVER CONTRIBUTIONS AND TRANSFERS FROM AND TO OTHER QUALIFIED PLANS		17
	4.1	Rollover Contributions from Other Plans	17
	4.2	Transfers From Other Qualified Plans	17
	4.3	Direct Rollovers To Other Plans	18
5	EMPLOYER CONTRIBUTIONS		19
	5.1	Matching Contributions	19
6	ACCOUNTING		20
	6.1	Individual Participant Accounting	20
	6.2	Valuation Date Accounting and Investment Cycle	20
	6.3	Accounting for Investment Funds	20
	6.4	Payment of Fees and Expenses	20
	6.5	Accounting for Participant Loans	21
	6.6	Error Correction	21
	6.7	Participant Statements	21
	6.8	Special Accounting During Conversion Period	22
	6.9	Accounts for Alternate Payees	22
7	INVESTMENT FUNDS AND ELECTIONS		23
	7.1	Investment Funds	23
	7.2	Responsibility for Investment Choice	23
	7.3	Investment Fund Elections	23
	7.4	Default if No Valid Investment Election	24
	7.5	Investment Fund Election Change Fees	24

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8	VESTING		25
	8.1	Fully Vested Accounts	25
9	PARTICIPANT LOANS		26
	9.1	Participant Loans Permitted	26
	9.2	Loan Application, Note and Security	26
	9.3	Spousal Consent	26
	9.4	Loan Approval	26
	9.5	Loan Funding Limits, Account Sources and Funding Order	26
	9.6	Maximum Number of Loans	27
	9.7	Source and Timing of Loan Funding	27
	9.8	Interest Rate	27
	9.9	Loan Payment	27
	9.10	Loan Payment Hierarchy	28
	9.11	Repayment Suspension	28
	9.12	Loan Default	28
	9.13	Call Feature	28
10	IN-SERVICE WITHDRAWALS		29
	10.1	In-Service Withdrawals Permitted	29
	10.2	In-Service Withdrawal Application and Notice	29
	10.3	Spousal Consent	29
	10.4	In-Service Withdrawal Approval	30
	10.5	Payment Form and Medium	30
	10.6	Source and Timing of In-Service Withdrawal Funding	30
	10.7	Hardship Withdrawals	30
	10.8	After-Tax Account Withdrawals	32
	10.9	Rollover Account Withdrawals	33
	10.10	Over Age 59 1/2 Withdrawals	33
11	DISTRIBUTIONS ONCE EMPLOYMENT ENDS OR BY REASON OF A PARTICIPANT'S REQUIRED BEGINNING DATE		34
	11.1	Benefit Information, Notices and Election	34
	11.2	Spousal Consent	35
	11.3	Payment Form and Medium	35
	11.4	Source and Timing of Distribution Funding	35
	11.5	Latest Commencement Permitted	35
	11.6	Payment Within Life Expectancy	36
	11.7	Incidental Benefit Rule	37
	11.8	Payment to Beneficiary	37
	11.9	Beneficiary Designation	38

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12	ADP AND ACP TESTS		39
	12.1	Contribution Limitation Definitions	39
	12.2	ADP and ACP Tests	42
	12.3	Correction of ADP and ACP Tests	43
	12.4	Multiple Use Test	44
	12.5	Correction of Multiple Use Test	44
	12.6	Adjustment for Investment Gain or Loss	45
	12.7	Testing Responsibilities and Required Records	45
	12.8	Separate Testing	45
13	MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS		46
	13.1	“Annual Addition” Defined	46
	13.2	Maximum Annual Addition	46
	13.3	Avoiding an Excess Annual Addition	46
	13.4	Correcting an Excess Annual Addition	47
	13.5	Correcting a Multiple Plan Excess	47
	13.6	“Defined Benefit Fraction” Defined	47
	13.7	“Defined Contribution Fraction” Defined	48
	13.8	Combined Plan Limits and Correction	48
	13.9	Affiliated Companies	48
14	TOP HEAVY RULES		49
	14.1	Top Heavy Definitions	49
	14.2	Special Contributions	51
	14.3	Adjustment to Combined Limits for Different Plans	52
	14.4	Modification of Top Heavy Rules	52
15	PLAN ADMINISTRATION		53
	15.1	Plan Delineates Authority and Responsibility	53
	15.2	Fiduciary Standards	53
	15.3	Company is ERISA Plan Administrator	53
	15.4	Administrator Duties	54
	15.5	Advisors May be Retained	54
	15.6	Delegation of Administrator Duties	55
	15.7	Committee Operating Rules	56
16	MANAGEMENT OF INVESTMENTS		57
	16.1	Trust Agreement	57
	16.2	Investment Funds	57
	16.3	Authority to Hold Cash	58
	16.4	Trustee to Act Upon Instructions	58
	16.5	Administrator Has Right to Vote Registered Investment Company Shares	58

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	16.6	Custom Fund Investment Management	58
	16.7	Master Custom Fund	59
	16.8	Authority to Segregate Assets	59
17	TRUST ADMINISTRATION		60
	17.1	Trustee to Construe Trust	60
	17.2	Trustee To Act As Owner of Trust Assets	60
	17.3	United States Indicia of Ownership	60
	17.4	Tax Withholding and Payment	61
	17.5	Trust Accounting	61
	17.6	Valuation of Certain Assets	61
	17.7	Legal Counsel	62
	17.8	Fees and Expenses	62
	17.9	Trustee Duties and Limitations	62
18	RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION		63
	18.1	Plan Does Not Affect Employment Rights	63
	18.2	Compliance With USERRA	63
	18.3	Limited Return of Contributions	63
	18.4	Assignment and Alienation	64
	18.5	Facility of Payment	64
	18.6	Reallocation of Lost Participant’s Accounts	64
	18.7	Suspension of Certain Plan Provisions During Conversion Period	64
	18.8	Suspension of Certain Plan Provisions During Other Periods	65
	18.9	Claims Procedure	65
	18.10	Construction	66
	18.11	Jurisdiction and Severability	66
	18.12	Indemnification by Employer	66
19	AMENDMENT, MERGER, DIVESTITURES AND TERMINATION		67
	19.1	Amendment	67
	19.2	Merger	67
	19.3	Divestitures	67
	19.4	Plan Termination and Complete Discontinuance of Contributions	68
	19.5	Amendment and Termination Procedures	68
	19.6	Termination of Employer’s Participation	69
	19.7	Replacement of the Trustee	69
	19.8	Final Settlement and Accounting of Trustee	69
APPENDIX A - INVESTMENT FUNDS			71
APPENDIX B - PAYMENT OF PLAN FEES AND EXPENSES			72
APPENDIX C - LOAN INTEREST RATE			73

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1 DEFINITIONS

When capitalized, the words and phrases below have the following meanings unless different meanings are clearly required by the context:

1.1 “Account”. The records maintained by the Administrator for purposes of accounting for a Participant’s interest in the Plan. “Account” may refer to one or all of the following accounts which have been created on behalf of a Participant to hold amounts attributable to specific types of Contributions under the Plan or to hold Contributions made under the plan of a Related Company in which a Participant formerly participated and which have been transferred to this Plan, contributions previously permitted under the Plan and amounts transferred from the Plan in accordance with Section 4.2:

(a) “Pre-Tax Account”. An account created to hold amounts attributable to Pre-Tax Contributions.

(b) “After-Tax Account”. An account created to hold amounts attributable to amounts previously contributed by an eligible Participant on an after-tax basis under former Plan provisions.

(c) “Rollover Account”. An account created to hold amounts attributable to Rollover Contributions.

(d) “Matching Account”. An account created to hold amounts attributable to Matching Contributions.

(e) “Prior Plan Account”. An account created to hold amounts attributable to amounts previously contributed by the Employer on an eligible Participant’s behalf and allocated on a pay based formula under former Plan provisions.

1.2 “ACP” or “Average Contribution Percentage”. The percentage calculated in accordance with Section 12.1.

1.3 “Administrator”. The Company, which may delegate all or a portion of the duties of the Administrator under the Plan to a Committee in accordance with Section 15.6.

1.4 “ADP” or “Average Deferral Percentage”. The percentage calculated in accordance with Section 12.1.

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1.5 “Alternate Payee”. Any spouse, former spouse, child or other dependent (as defined in Code section 152) of a Participant who is recognized by a domestic relations order as having a right to receive all, or a portion, of the Participant’s Account under the Plan.

1.6 “Beneficiary”. The person or persons who is to receive benefits under the Plan after the death of the Participant pursuant to the “Beneficiary Designation” paragraph in Section 11.

1.7 “Code”. The Internal Revenue Code of 1986, as amended. Reference to any specific Code section shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.

1.8 “Committee”. If applicable, the committee which has been appointed by the Administrator to administer the Plan in accordance with Section 15.6.

1.9 “Company”. Jacobs Engineering Group Inc. or any successor by merger, purchase or otherwise.

1.10  “Compensation”. The sum of a Participant’s Taxable Income and salary reductions, if any, pursuant to Code section 125, 402(e)(3), 402(h)(1)(B), 403(b), 408(p)(2)(A)(i) or 457.

For purposes of determining benefits and allocations under the Plan, Compensation is limited to $200,000 per Plan Year, effective January 1, 2002 (as adjusted for cost of living increases under Code sections 401(a)(17)(B) and 415(d)). Annual Compensation for such purposes means compensation during the Plan Year or such other consecutive 12-month period over which compensation is otherwise determined under the Plan (the Determination Period). The cost of living adjustment in effect for a calendar year applies to Annual Compensation for the Determination Period that begins with or within such calendar year.

For limitation ears beginning after December 31, 1997, the definition of “Compensation” for purposes of Code section 415(c)(3) shall include any elective deferrals as defined under Code section 402(g)(3).

For Plan years prior to January 1, 2002, Compensation shall be limited to the limits that were in effect under Code sections 401(a)(17), 414(s), 415(c)(3) and other applicable provisions of the Code and regulations thereunder for periods prior to 2002.

For purposes of determining HCEs and key employees and for purposes of Sections 13.2 and 14.2, Compensation for the entire Plan Year shall be used. For purposes of determining ADP and ACP, Compensation shall be limited to amounts paid to an Eligible Employee while a Participant.

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For limitation years beginning on or after January 1, 2001, for purposes of applying the limitations described in Article 3 of this Plan and for purposes of determining benefits and allocations under the Plan, Compensation paid or made available during such limitation years shall include elective amounts that are not includable in the gross income of the employee by reason of Code section 132(f)(4).

1.11  “Contribution”. An amount contributed to the Plan by the Employer or an Eligible Employee, and allocated by contribution type to Participants’ Accounts, as described in Section 1.1. Specific types of contribution include:

(a) “Pre-Tax Contribution”. An amount contributed by an eligible Participant in conjunction with his or her Code section 401(k) salary deferral election which shall be treated as made by the Employer on the eligible Participant’s behalf.

(b) “Rollover Contribution”. An amount contributed by an Eligible Employee which originated from another employer’s or an Employer’s qualified plan.

(c) “Matching Contribution”. An amount contributed by the Employer on an eligible Participant’s behalf based upon the amount contributed by the eligible Participant.

1.12  “Contribution Dollar Limit”. The annual limit placed on each Participant’s Pre-Tax Contributions under this Plan, or any other qualified plan maintained by the Employer during any tax year, which shall be $11,000 per calendar year effective January 1, 2002, (as adjusted for cost of living increases pursuant to Code sections 402(g)(5) and 415(d)). For purposes of this Section, a Participant’s Pre-Tax Contributions shall include (i) any employer contribution under a qualified cash or deferred arrangement (as defined in Code section 401(k)) to the extent not includible in gross income for the taxable year under Code section 402(e)(3) (determined without regard to Code section 402(g)), (ii) any employer contribution to the extent not includible in gross income for the taxable year under Code section 402(h)(1)(B) (determined without regard to Code section 402(g)), (iii) any employer contribution to purchase an annuity contract under Code section 403(b) under a salary reduction agreement (within the meaning of Code section 3121(a)(5)(D)) and (iv) any elective employer contribution under Code section 408(p)(2)(A)(i). The annual limit referred to above shall not be reduced by Catch-Up Contributions to the extent permitted under Section 3.7 of the Plan. The deferral limits under Code section 402(g) that were in effect for years beginning before January 1, 2002 shall continue to apply for Plan years prior to 2002.

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1.13  “Conversion Period”. The period of converting the prior accounting system of the Plan and Trust or the prior accounting system of any plan and trust which is merged, in whole or in part, into the Plan and Trust, to the accounting system described in Section 6.

1.14  “Direct Rollover”. An Eligible Rollover Distribution that is paid by the Plan directly to an Eligible Retirement Plan for the benefit of a Distributee.

1.15  “Disability”. A Participant’s total and permanent, mental or physical disability resulting in termination of employment as evidenced by (a) receipt of disability payments under the Employer’s long-term disability program or (b) presentation of medical evidence satisfactory to the Administrator.

1.16  “Distributee”. A Participant, a Beneficiary (if he or she is the surviving spouse of a Participant) or an Alternate Payee under a QDRO (if he or she is the spouse or former spouse of a Participant).

1.17  “Effective Date”. The date upon which the provisions of this amended and restated document become effective. This date is January 1, 2002 unless stated otherwise. In general, the provisions of this document only apply to Participants who are Employees on or after the Effective Date. However, investment and distribution provisions apply to all Participants with Account balances to be invested or distributed after the Effective Date. The effective date of the original Plan document is October 1, 1974.

1.18  “Eligible Employee”. An Employee of an Employer, except any Employee:

(a) whose compensation and conditions of employment are covered by a collective bargaining agreement to which the Employer is a party unless the agreement calls for the Employee’s participation in the Plan;

(b) who is treated as an Employee because he or she is a Leased Employee; or

(c) who is a nonresident alien and who (i) receives no earned income (within the meaning of Code section 911(d)(2)), from sources within the United States under Code section 861(a)(3); or (ii) receives such earned income from such sources within the United States but such income is exempt from United States income tax under an applicable income tax convention.

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1.19  “Eligible Retirement Plan”. An individual retirement account described in Code section 408(a), an individual retirement annuity described in Code section 408(b), an annuity plan described in Code section 403(a), or a qualified trust described in Code section 401(a), that accepts a Distributee’s Eligible Rollover Distribution, except that, if the Distributee is the surviving spouse of a Participant, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity.

For Plan Years after December 31, 2001, an eligible retirement plan shall also mean any annuity contract described in Section 403(b) of the Code, and an eligible Section 457(b) deferred compensation plan maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state that agrees to separately account for amounts transferred into such plan from this Plan. An eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a qualified domestic relations order as defined in Section 414(p) of the Code.

1.20  “Eligible Rollover Distribution”. A distribution of all or any portion of the balance to the credit of a Distributee, excluding (i) a distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s designated Beneficiary, or for a specified period of ten years or more; (ii) a distribution to the extent such distribution is required under Code section 401(a)(9); iii) the portion of a distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to Employer securities); (iv) any hardship distribution, or (v) any distribution if the aggregate amount of distributions to the Participant is reasonably expected to be less than $200 for the calendar year.

For distributions after December 31, 2001, a distribution shall not fail to be an eligible rollover distribution merely because the distribution consists of after-tax employee contributions that are not includible in gross income. However, the portion of any such distribution that consists of after-tax employee contributions may be transferred only to an individual retirement account or annuity described in Code section 408(a) or (b), or to a qualified defined contribution plan described in Code section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separate accounting for the portion of the distribution that is includable in gross income and the portion of the distribution that is not includable in gross income.

Effective for calendar years beginning January 1, 1999, an Eligible Rollover Distribution described in Code section 402(c)(4), which the Participant may elect to roll over to another plan under Code section 401()(31), excludes hardship distributions as described in Code section 401(k)(2)(B)(i)(IV), which are attributable to the Participant’s elective contributions under Treas. Reg. §1.401(k)-1(d)(2)(ii).

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1.21  “Employee”. An individual who is:

(a) directly employed by any Related Company and for whom any income for such employment is subject to withholding of income or social security taxes, or

(b) a Leased Employee.

1.22  “Employer”. The Company and any other Related Company that adopts the Plan with the approval of the Company.

1.23  “ERISA”. The Employee Retirement Income Security Act of 1974, as amended. Reference to any specific ERISA section shall include such section, any valid regulation promulgated thereunder, and any comparable provision of any future legislation amending, supplementing or superseding such section.

1.24  “Former Participant”. The Plan status of an individual after he or she is determined to be a Terminated Participant and his or her Account is distributed or forfeited.

1.25  “HCE” or “Highly Compensated Employee”. An Employee who is a Highly Compensated Employee as determined under Section 12.

1.26  “Hour of Service”. Each hour for which an Employee is entitled to:

(a) payment for the performance of duties for any Related Company;

(b) payment from any Related Company on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence;

(c) back pay, irrespective of mitigation of damages, by award or agreement with any Related Company (and these hours shall be credited to the period to which the award or agreement pertains); or

(d) no payment, but is on a Leave of Absence (and these hours shall be based upon his or her normally scheduled hours per week or a 40 hour week if there is no regular schedule).

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The crediting of Hours of Service for which no duties are performed shall be in accordance with the U.S. Department of Labor regulation sections 2530.200b-2(b) and (c). Actual hours shall be used whenever an accurate record of hours are maintained for an Employee. Otherwise, an equivalent number of hours shall be credited for each payroll period in which the Employee would be credited with at least 1 Hour of Service. The payroll period equivalencies are 45 hours weekly, 90 hours biweekly, 95 hours semimonthly and 190 hours monthly.

An Employee’s service with a predecessor or acquired company shall only be counted in the determination of his or her Hours of Service for eligibility and/or vesting purposes if (1) the Company directs that credit for such service be granted, or (2) a qualified plan of the predecessor or acquired company is subsequently maintained by any Related Company.

1.27  “Ineligible”. The Plan status of an individual who is (1) an Employee of a Related Company which is not then an Employer, (2) an Employee of an Employer, but not an Eligible Employee, or (3) not an Employee.

1.28  “Investment Fund”. An investment fund as described in Section 16.2. The Investment Funds authorized by the Administrator to be offered under the Plan as of the Effective Date are set forth in Appendix A.

1.29  “Leased Employee”. An individual other than an Employee who, pursuant to an agreement between the recipient and any other person (“Leasing Organization”) has performed services for the recipient (or for the recipient and related persons determined in accordance with Code section 414(n)(6)) on a substantially full time basis for a period of at lest one year, and such services are performed under the primary direction or control of the recipient. Contributions or benefits provided to a Leased Employee by the Leasing Organization that are attributable to services performed for the recipient Employer shall be treated as provided by the recipient Employer).

A Leased Employee shall not be considered an employee of the recipient if:

(i) such employee is covered by a money purchase pension plan providing: (1) a nonintegrated employer contribution rate of at least 10 percent of compensation, as defined in Code section 415(c)(3), but including amounts contributed pursuant to a salary reduction agreement which are excludable from the employee’s gross income under Code sections 125, 402(e)(3), 402(h)(1)(B) or 403(b), (2) immediate participation, and (3) full and immediate vesting; and

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(ii) leased employees do not constitute more than 20 percent of the recipient’s nonhighly compensated work force.

1.30  “Leave of Absence”. A period during which an individual is deemed to be an Employee, but is absent from active employment, provided that the absence:

(a) was authorized by a Related Company; or

(b) was due to military service in the United States armed forces and the individual returns to active employment within the period during which he or she retains employment rights under federal law.

1.31  “Loan Account”. The record maintained for purposes of accounting for a Participant’s loan and payments of principal and interest thereon.

1.32  “NHCE” or “Non-Highly Compensated Employee”. An Employee who is a Non-Highly Compensated Employee as determined under Section 12.

1.33  “Normal Retirement Date”. The date of a Participant’s 65th birthday.

1.34  “Owner”. A person with an ownership interest in the capital, profits, outstanding stock or voting power of a Related Company within the meaning of Code section 318 or 416 (which exclude indirect ownership through a qualified plan).

1.35  “Parental Leave”. The period of absence from work by reason of the pregnancy of an Employee, the birth of the Employee’s child, the placement of a child with the Employee in connection with the child’s adoption, or the caring for such child immediately after birth or placement as described in Code section 410(a)(5)(E).

1.36  “Participant”. The Plan status of an Eligible Employee after he or she completes the eligibility requirements and enters the Plan as described in Section 2.1 and any individual for whom assets have been transferred from a predecessor plan merged, in whole or in part, with the Plan. An Eligible Employee who makes a Rollover Contribution prior to completing the eligibility requirements as described in Section 2.1 shall also be considered a Participant, except that he or she shall not be considered a Participant for purposes of Plan provisions related to Contributions, other than a Rollover Contribution, until he or she completes the eligibility requirements and enters the Plan as described in Section 2.1. A Participant’s participation continues until his or her employment with all Related Companies ends and his or her Account is distributed or forfeited.

1.37  “Pay”. The base pay paid to an Eligible Employee by an Employer while he or she is a Participant during the current period.

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Pay is neither increased by any salary credit or decreased by any salary reduction pursuant to Code sections 125 or 402(e)(3). Pay is limited to $200,000 per Plan Year effective January 1, 2002 (as adjusted for cost of living increases pursuant to Code sections 401(a)(17) and 415(d)).

1.38  “Plan”. The Jacobs Engineering Group Inc. 401(k) Plus Savings Plan set forth in this document, as from time to time amended.

1.39  “Plan Year”. The annual accounting period of the Plan and Trust which ends on each December 31.

1.40  “QDRO”. A domestic relations order which the Administrator has determined to be a qualified domestic relations order within the meaning of Code section 414(p).

1.41  “Related Company”. With respect to any Employer, that Employer and any corporation, trade or business which is, together with that Employer, a member of the same controlled group of corporations, a trade or business under common control, or an affiliated service group within the meaning of Code sections 414(b), (c), (m) or (o), except that for purposes of Section 13 “within the meaning of Code sections 414(b), (c), (m) or (o), as modified by Code section 415(h)” shall be substituted for the preceding reference to “within the meaning of Code sections 414(b), (c), (m) or (o)”.

1.42  “Required Beginning Date”. The latest date benefit payments shall commence to a Participant.

(a) For calendar years commencing before January 1, 1997, such date shall mean:

(1) with regard to a Participant who attained age 70 ¹/2 in 1996, did not terminate employment with all Related Companies before January 1, 1997, and is not or was not a 5% Owner, the April 1 that next follows (i) the calendar year in which the Participant attained age 70 ¹/2, or (ii) if the Participant elects to apply this clause (ii), the calendar year in which the Participant terminates employment with all Related Companies (and any such election must be made prior to January 1, 1998); and

(2) with regard to a Participant who attained age 70 ¹/2 after December 31, 1987 and before January 1, 1996 or, in 1996 if he or she terminated employment with all Related Companies before January 1, 1997 or is or was a 5% Owner, the April 1 that next follows the calendar year in which the Participant attains age 70 ¹/2; and

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(3) with regard to a Participant who attained age 70 ¹/2 before January 1, 1988 and who is not 5% Owner, the April 1 that next follows the later of (i) the calendar year in which the Participant attained age 70 ¹/2, or (ii) the calendar year in which the Participant terminates employment with all Related Companies; and

(4) with regard to a Participant who attained age 70 ¹/2 before January 1, 1988 and who is a 5% Owner, the April 1 that next follows the later of (i) the calendar year in which the Participant attained age 70 ¹/2, or (ii) the earlier of the calendar year in which or within which ends the Plan Year in which the Participant becomes a 5% Owner or the calendar year in which he or she terminates employment with all Related Companies.

A Participant shall be considered a 5% Owner for this purpose if such Participant is a 5% Owner as defined in Code section 416(i) (determined in accordance with Code section 416 but without regard to whether the Plan is top-heavy) at any time during the Plan Year ending with or within the calendar year in which the Participant attains age 66 ¹/2 or in any subsequent Plan Year.

(b) For calendar years commencing after December 31, 1996 and before January 1, 1999, such date shall mean:

(1) with regard to a Participant who attained age 70 ¹/2 in 1997 or 1998, the April 1 that next follows the calendar year in which he or she attained age 70 ¹/2, except that if the Participant (i) did not terminate employment with all Related Companies before January 1 of the calendar year following the calendar year in which he or she attained age 70 ¹/2, (ii) is not a 5% Owner, such date shall instead mean the April 1 that next follows (i) the calendar year in which the Participant attained age 70 ¹/2, or (ii) if the Participant elects to apply this clause (ii), the calendar year in which the Participant terminates employment with all Related Companies (and any such election must be made prior to the April 1 of the calendar year following the calendar year in which he or she attained age 70 ¹/2); and

(2) with regard to a Participant who is a 5% Owner, the April 1 that next follows the calendar year in which the Participant attains age 70 ¹/2.

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A Participant shall be considered a 5% Owner for this purpose if such Participant is a 5% Owner with respect to the Plan Year ending in the calendar year in which the Participant attains age 70 ¹/2.

(c) For calendar years commencing after December 31, 1998, such date shall mean:

(1) with regard to a Participant who is not a 5% Owner, the April 1 that next follows the later of (i) the calendar year in which the Participant attained age 70 ¹/2, or (ii) the calendar year in which the Participant terminates employment with all Related Companies; and

(2) with regard to a Participant who is a 5% Owner, the April 1 that next follows the calendar year in which the Participant attains age 70 ¹/2.

A Participant shall be considered a 5% Owner for this purpose if such Participant is a 5% Owner with respect to the Plan Year ending in the calendar year in which the Participant attains age 70 ¹/2.

1.43  “Spousal Consent”. The written consent given by a spouse to a Participant’s election or waiver of Beneficiary designation. The spouse’s consent must acknowledge the effect on the spouse of the Participant’s election, waiver or designation, and be duly witnessed by a notary public. Spousal Consent shall be valid only with respect to the spouse who signs the Spousal Consent and only for the particular choice made by the Participant which requires Spousal Consent. A Participant may revoke (without Spousal Consent) a prior election, waiver or designation that required Spousal Consent at any time before payments begin. Spousal Consent also means a determination by the Administrator that there is no spouse, the spouse cannot be located, or such other circumstances as may be established under Code section 417(a)(2)(B).

1.44  “Taxable Income”. Compensation in the amount reported by the Employer or a Related Company as “Wages, tips, other compensation” on Form W-2, or any successor method of reporting under Code section 6041(d).

1.45  “Terminated Participant”. The Plan status of a Participant who is not an Employee and with respect to whom the Administrator has reported to the Trustee that the Participant’s employment has terminated with all Related Companies.

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1.46  “Trust”. The legal entity created by those provisions of this document which relate to the Trustee. The Trust is part of the Plan and holds the Plan assets which are comprised of the aggregate of Participants’ Accounts, and any unallocated funds invested in interest bearing deposits (which may include interest bearing deposits of the Trustee) and/or money market type assets or funds, pending allocation to Participants’ Accounts or disbursement to pay Plan fees and expenses.

1.47  “Trustee”. Vanguard Fiduciary Trust Company

1.48  “USERRA”. The Uniformed Services Employment and Reemployment Rights Act of 1994, as amended.

1.49  “Valuation Date”. Each business day the New York Stock Exchange is open for business.

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2 ELIGIBILITY

2.1 Eligibility

All Participants as of January 1, 1998 shall continue their eligibility to participate.

For purposes of Pre-Tax Contributions, each other individual who is an Eligible Employee on January 1, 1998 shall become a Participant on that date. Each other Eligible Employee shall become a Participant as soon as administratively feasible after date of hire but not more than 30 days.

For purposes of Matching Contributions, each Eligible Employee shall become a Participant on the first day of the next month after the date he or she completes a 12-month eligibility period in which he or she is credited with at least 1,000 Hours of Service. The initial eligibility period begins on the date an Employee first performs an Hour of Service. Subsequent eligibility periods begin with the start of each Plan Year beginning after the first Hour of Service is performed.

2.2 Ineligible Employees

If an Employee completes the above eligibility requirements, but is Ineligible at the time participation would otherwise begin (if he or she were not Ineligible), he or she shall become a Participant on the first subsequent date on which he or she is an Eligible Employee.

2.3 Ineligible, Terminated or Former Participants

An Ineligible, Terminated or Former Participant may not make or share in any Contributions, other than such Contributions due to be made on his or her behalf after the date he or she became an Ineligible, Terminated or Former Participant for periods prior to such date, nor may an Ineligible or Terminated Participant be eligible for a new Plan loan (except as described in Section 9.1), during the period he or she is an Ineligible or Terminated Participant, but he or she shall continue to participate for all other purposes. An Ineligible, Terminated or Former Participant shall automatically become an active Participant on the date he or she again becomes an Eligible Employee.

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3 PARTICIPANT CONTRIBUTIONS

3.1 Pre-Tax Contribution Election

Upon becoming a Participant, an Eligible Employee may elect to reduce his or her Pay by an amount which does not exceed the Contribution Dollar Limit or the limits described in the Contribution Percentage Limits paragraph of this Section 3, and have such amount contributed to the Plan by the Employer as a Pre-Tax Contribution. The election shall be made in such manner and with such advance notice as prescribed by the Administrator and may be limited to a whole percentage of Pay. In no event shall an Employee’s Pre-Tax Contributions under the Plan and comparable contributions to all other plans, contracts or arrangements of all Related Companies exceed the Contribution Dollar Limit for the Employee’s taxable year beginning in the Plan Year.

3.2 Changing a Contribution Election

A Participant who is an Eligible Employee may change his or her Pre-Tax Contribution election at any time in such manner and with such advance notice as prescribed by the Administrator, and such election change shall be effective as soon as administratively feasible after such date. A Participant’s Contribution election made as a percentage of Pay shall automatically apply to Pay increases or decreases.

3.3 Revoking and Resuming a Contribution Election

A Participant may revoke his or her Pre-Tax Contribution election at any time in such manner and with such advance notice as prescribed by the Administrator, and such revocation shall be effective as soon as administratively feasible after such date.

A Participant who is an Eligible Employee may resume Pre-Tax Contributions by making a new election at the same time in which a Participant may change his or her election and such election shall be effective as soon as administratively feasible after such date.

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3.4 Contribution Percentage Limits

The Administrator or the Committee may establish and change from time to time, in writing, without the necessity of amending the Plan and Trust, the minimum, if applicable, and maximum Pre-Tax Contribution percentages, prospectively or retrospectively (for the current Plan Year), for all Participants. In addition, the Administrator may establish any lower percentage limits for Highly Compensated Employees as it deems necessary to satisfy the tests described in Section 12. As of the Effective Date, the maximum Contribution percentages are:

Plan Years	Contribution Type	Highly Compensated Employees		All Other Participants
Prior to 2002	Pre-Tax	10	%	18	%
After 2001	Pre-Tax	10	%	50	%

Irrespective of the limits that may be established by the Administrator in accordance with the paragraph above , in no event shall the Contributions made by or on behalf of a Participant for a Plan Year exceed the maximum allowable under Code section 415.

3.5 Refunds When Contribution Dollar Limit Exceeded

A Participant who makes Pre-Tax Contributions for a calendar year to the Plan and comparable contributions to any other qualified defined contribution plan in excess of the Contribution Dollar Limit may notify the Administrator in writing by the following March 1 (or as late as April 14 if allowed by the Administrator) that an excess has occurred. In this event, the amount of the excess specified by the Participant, adjusted for investment gain or loss, shall be refunded to him or her by the April 15 following the year of deferral and shall not be included as an Annual Addition (as defined in Section 13.1) under Code section 415 for the year contributed. The excess amounts shall first be taken from unmatched Pre-Tax Contributions and then from matched Pre-Tax Contributions. Any Matching Contributions attributable to refunded excess Pre-Tax Contributions as described in this Section, adjusted for investment gain or loss, shall be forfeited and used to reduce future Contributions to be made by an Employer as soon as administratively feasible. Refunds and forfeitures shall not include investment gain or loss for the period between the end of the applicable calendar year and the date of distribution or forfeiture.

3.6 Timing, Posting and Tax Considerations

Participants’ Contributions, other than Rollover Contributions, may only be made through payroll deduction. Such amounts shall be paid to the Trustee in cash and posted to each Participant’s Account(s) as soon as such amounts can reasonably be separated from the Employer’s general assets and balanced against the specific amount made on behalf of each Participant. In no event, however, shall such amounts be paid to the Trustee more than 15 business days following the end of the month that includes the date amounts are deducted from a Participant’s Pay (or as that maximum period may be otherwise extended by ERISA). Pre-Tax Contributions shall be treated as Contributions made by an Employer in determining tax deductions under Code section 404(a).

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3.7 Catch-Up Contributions

All Employees who are eligible to make elective deferrals under this Plan may make Catch-Up Contributions to this Plan on the following terms and conditions:

(a) The Employee may make the Catch-Up Contribution if the Employee has attained age 50 before the close of the Plan Year for which the Catch-Up Contribution is made.

(b) The Catch-Up Contributions must be made in accordance with, and subject to the limitations of Code section 414(b). The Catch-Up Contribution shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Code sections 402(g) and 415. The Plan shall not be treated as failing to satisfy the provisions of the plan implementing the requirements of Code sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416, as applicable, by reason of making such Catch-Up Contributions.

(c) Catch-Up Contributions may be made only for Plan Years beginning after December 31, 2001.

(d) The aggregate Catch-Up Contributions that may be made to this Plan and other Eligible Retirement Plans under Code section 414(v) are the following amounts for the following years:

2001	$0
2002	$1,000
2003	$2,000
2004	$3,000
2005	$4,000
2006	$5,000
2007-2010	$5,000, indexed annually for inflation in $500 increments
2011 and thereafter	$0

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4 ROLLOVER CONTRIBUTIONS AND TRANSFERS FROM AND TO OTHER QUALIFIED PLANS

4.1 Rollover Contributions from Other Plans

The Administrator may authorize the Trustee to accept a Rollover Contribution in cash, directly from an Eligible Employee or as a Direct Rollover from another qualified plan on behalf of the Eligible Employee, even if he or she is not yet a Participant. The Employee shall be responsible for providing satisfactory evidence, in such manner as prescribed by the Administrator, that such Rollover Contribution qualifies as a rollover contribution, within the meaning of Code section 402(c) or 408(d)(3)(A)(ii). Such amounts received directly from an Eligible Employee must be paid to the Trustee in cash within 60 days after the date received by the Eligible Employee from an Eligible Retirement Plan. Rollover Contributions shall be posted to the Eligible Employee’s Rollover Account as of the date received by the Trustee.

If the Administrator later determines that an amount contributed pursuant to the above paragraph did not in fact qualify as a rollover contribution, within the meaning of Code section 402(c) or 408(d)(3)(A)(ii), the balance credited to the Participant’s Rollover Account shall immediately be (1) segregated from all other Plan assets, (2) treated as a nonqualified trust established by and for the benefit of the Participant, and (3) distributed to the Participant. Any such amount shall be deemed never to have been a part of the Plan.

4.2 Transfers From Other Qualified Plans

The Administrator may instruct the Trustee to receive assets in cash or in kind directly from another Eligible Retirement Plan on the following terms and conditions:

(a) The transferor plan must be a qualified plan described in Code section 401(a) or 403(a), excluding after-tax employee contributions. This plan may also accept rollover contributions from an individual retirement account or annuity described in Code section 408(a) or (b) that is eligible to be rolled over and would otherwise be includable in gross income.

(b) The Participant complies with reasonable regulations adopted from time to time by the Administrator. The Participant must provide the name and address of the transferor plan and such other information that is needed to accept the transfer from the other plan.

(c) The transfer will not be accepted if any amounts are not exempted by Code section 401(a)(11)(B) from the annuity requirements of Code section 417 unless the Plan complies with such requirements.

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(d) The transfer will not be accepted if any amounts include benefits protected by Code section 411(d)(6) which would not be preserved under applicable Plan provisions.

(e) The Trustee may refuse to receive any transfer if the Trustee determines that the type of assets are unacceptable. The Trustee will normally accept rollover contributions only of cash or marketable securities.

(f) The Trustee must separately account for amounts rolled over. The amounts shall be posted to the appropriate Accounts of Participants and separately accounted for as of the date received by the Trustee.

(g) To the extent that a transfer includes Participant loans, such loans shall continue in effect subject to the terms and conditions in effect as of the date of the transfer or as otherwise agreed to by the Administrator. The Administrator may for any reason refuse to accept participant loan transfers from other plans.

4.3 Direct Rollovers To Other Plans

A Participant may direct the Trustee to make a Direct Rollover to another IRA or plan if:

(a) the Participant is entitled to receive an Eligible Rollover Distribution;

(b) the plan to which the distribution is transferred is an Eligible Retirement Plan;

(c) the Eligible Retirement Plan receiving the direct rollover authorizes the Direct Rollover into such plan;

(d) the Participant complies with any reasonable procedures for Direct Rollovers requested by the Administrator. The Administrator may require the Participant to provide additional information and documentation, such as the name of the other Eligible Retirement Plan to which the Direct Rollover will be made, a representation that the Eligible Retirement Plan will accept a Direct Rollover, the address of the transferee plan, and any other information that is necessary for the Trustee or Administrator to make a Direct Rollover;

(e) the Participant complies with any other requirements under the Code or regulations for a Direct Rollover.

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5 EMPLOYER CONTRIBUTIONS

5.1 Matching Contributions

(a) Frequency and Eligibility. For each period for which Participants’ Contributions are made, the Employer shall make Matching Contributions, as described in the following Allocation Method paragraph, on behalf of each Participant who contributed during the period and who has met the eligibility requirements of Section 2.1.

(b) Allocation Method. The Matching Contributions for each period shall total 50% of each eligible Participant’s Pre-Tax Contributions for the period. However, no Matching Contributions shall be made based upon a Participant’s Contributions in excess of 6% of his or her Pay. The Employer or the Committee may change the 50% matching rate or the 6% of considered Pay to any other percentages, including 0%, generally by notifying eligible Participants in sufficient time to adjust their Contribution elections prior to the start of the period for which the new percentages apply.

(c) Timing, Medium and Posting. The Employer shall make each period’s Matching Contribution in cash as soon as administratively feasible, and for purposes of deducting such Contribution, not later than the Employer’s federal tax filing date, including extensions, for the Employer’s taxable year that ends with or within the Plan Year for which the Matching Contribution is made. Such amounts shall be paid to the Trustee and posted to each Participant’s Matching Account once the total Matching Contribution received has been balanced against the specific amount to be credited to each Participant’s Matching Account.

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6 ACCOUNTING

6.1 Individual Participant Accounting

The Administrator shall maintain an individual set of Accounts for each Participant in order to reflect transactions both by type of Account and investment medium. Financial transactions shall be accounted for at the individual Account level by posting each transaction to the appropriate Account of each affected Participant. Participant Account values shall be maintained in shares for the Investment Funds and in dollars for the Loan Account. At any point in time, the Account value shall be determined using the most recent Valuation Date values provided by the Trustee.

6.2 Valuation Date Accounting and Investment Cycle

Participant Account values shall be determined as of each Valuation Date. For any transaction to be processed as of a Valuation Date, the Trustee must receive instructions for the transaction by the Valuation Date. Such instructions shall apply to amounts held in the Account on that Valuation Date. Financial transactions of the Investment Funds shall be posted to Participants’ Accounts as of the Valuation Date, based upon the Valuation Date values provided by the Trustee, and settled on the Valuation Date.

6.3 Accounting for Investment Funds

Investments in each Investment Fund shall be maintained in shares. The Trustee is responsible for determining the share values of each Investment Fund as of each Valuation Date. To the extent an Investment Fund is comprised of collective investment funds offered by the Trustee or any other entity authorized to offer collective investment funds, the share values shall be determined in accordance with the rules governing such collective investment funds, which are incorporated herein by reference. All other share values shall be determined by the Trustee. The share value of each Investment Fund shall be based on the fair market value of its underlying assets.

6.4 Payment of Fees and Expenses

Except to the extent Plan fees and expenses related to Account maintenance, transaction and Investment Fund management and maintenance, set forth below, are paid by the Employer directly, such fees and expenses shall be paid as set forth below.

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(a) Account Maintenance: Account maintenance fees and expenses, may include but are not limited to, administrative, Trustee, government annual report preparation, audit, legal, nondiscrimination testing and fees for any other special services. Account maintenance fees shall be charged to Participants on a per Participant basis provided that no fee shall reduce a Participant’s Account balance below zero.

(b) Investment Fund Management and Maintenance: Management and maintenance fees and expenses related to the Investment Funds shall be charged at the Investment Fund level and reflected in the net gain or loss of each Investment Fund.

The Company may determine that the Employers pay a lower portion of the fees and expenses allocable to the Accounts of Participants who are no longer Employees or who are not Beneficiaries, unless doing so would result in discrimination prohibited under Code section 401(a)(4) or a significant detriment prohibited by Code section 411(a)(11). As of the Effective Date, a breakdown of which Plan fees and expenses shall generally be borne by the Trust (and charged to individual Participants’ Accounts or charged at the Investment Fund level and reflected in the net gain or loss of each Investment Fund) and those that shall be paid by the Employer is set forth in Appendix B, which may be changed from time to time by the Company, in writing, without the necessity of amending the Plan and Trust.

The Trustee shall have the authority to pay any such fees and expenses, which remain unpaid by the Employer for 60 days, from the Trust.

6.5 Accounting for Participant Loans

Participant loans shall be held in a separate Loan Account of the Participant and accounted for in dollars as an earmarked asset of the borrowing Participant’s Account.

6.6 Error Correction

The Administrator may correct any errors or omissions in the administration of the Plan by restoring any Participant’s Account balance with the amount that would be credited to the Account had no error or omission been made. Funds necessary for any such restoration shall be provided through payment made by the Employer, or by the Trustee to the extent the error or omission is attributable to actions or inactions of the Trustee.

6.7 Participant Statements

The Administrator shall provide Participants with statements of their Accounts as soon after the end of each quarter of the Plan Year as administratively feasible.

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6.8 Special Accounting During Conversion Period

The Administrator and Trustee may use any reasonable accounting methods in performing their respective duties during any Conversion Period. This includes, but is not limited to, the method for allocating net investment gains or losses and the extent, if any, to which contributions received by and distributions paid from the Trust during this period share in such allocation.

6.9 Accounts for Alternate Payees

A separate Account shall be established for an Alternate Payee entitled to any portion of a Participant’s Account under a QDRO as of the date and in accordance with the directions specified in the QDRO. In addition, a separate Account may be established during the period of time the Administrator, a court of competent jurisdiction or other appropriate person is determining whether a domestic relations order qualifies as a QDRO. Such a separate Account shall be valued and accounted for in the same manner as any other Account.

(a) Distributions Pursuant to QDROs. If a QDRO so provides, the portion of a Participant’s Account payable to an Alternate Payee may be distributed, in a form permissible under Section 11 and Code section 414(p), to the Alternate Payee at any time beginning as soon as practicable after the QDRO determination is made, regardless of whether the Participant is entitled to a distribution from the Plan at such time. The Alternate Payee shall be provided the notice prescribed by Code section 402(f).

(b) Participant Loans. Except to the extent required by law, an Alternate Payee, on whose behalf a separate Account has been established, shall not be entitled to borrow from such Account. If a QDRO specifies that the Alternate Payee is entitled to any portion of the Account of a Participant who has an outstanding loan balance, all outstanding loans shall generally continue to be held in the Participant’s Account and shall not be divided between the Participant’s and Alternate Payee’s Accounts.

(c) Investment Direction. Where a separate Account has been established on behalf of an Alternate Payee and has not yet been distributed, the Alternate Payee may direct the investment of such Account in the same manner as if he or she were a Participant.

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7 INVESTMENT FUNDS AND ELECTIONS

7.1 Investment Funds

Except for Participants’ Loan Account and any unallocated funds invested in interest bearing deposits (which may include interest bearing deposits of the Trustee) and/or money market type assets or funds, pending allocation to Participants’ Accounts, or disbursement to pay Plan fees and expenses, the Trust shall be maintained in various Investment Funds. The Administrator shall select the Investment Funds offered to Participants and may change the number or composition of the Investment Funds, subject to the terms and conditions agreed to with the Trustee. As of the Effective Date, a list of the Investment Funds offered under the Plan is set forth in Appendix A, which may be changed from time to time by the Administrator, in writing, and as agreed to by the Trustee, without the necessity of amending the Plan and Trust.

The Administrator may set a maximum percentage of the total election that a Participant may direct into any specific Investment Fund, which maximum, if any, as of the Effective Date is set forth in Appendix A, which may be changed from time to time by the Administrator, in writing, without the necessity of amending the Plan and Trust.

7.2 Responsibility for Investment Choice

Each Participant shall be solely responsible for the selection of his or her Investment Fund choices. No fiduciary with respect to the Plan is empowered to advise a Participant as to the manner in which his or her Accounts are to be invested, and the fact that an Investment Fund is offered shall not be construed to be a recommendation for investment.

During any Conversion Period, Trust assets may be held in any investment vehicle permitted by the Plan, as directed by the Administrator, irrespective of prior Participant investment elections.

7.3 Investment Fund Elections

A Participant shall provide his or her initial investment election upon becoming a Participant and may change his or her investment election at any time in accordance with procedures established by the Administrator and the Trustee. A Participant shall make his or her investment election in any combination of one or any number of the Investment Funds offered in accordance with the procedures established by the Administrator and Trustee. Investment elections received by the Trustee shall be effective on the Valuation Date.

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7.4 Default if No Valid Investment Election

The Administrator shall specify an Investment Fund for the investment of that portion of a Participant’s Account which is not yet held in an Investment Fund and for which no valid investment election is on file. The Investment Fund specified as of the Effective Date is set forth in Appendix A, which may be changed from time to time by the Administrator, in writing, without the necessity of amending the Plan and Trust.

7.5 Investment Fund Election Change Fees

A reasonable processing fee may be charged directly to a Participant’s Account for Investment Fund election changes in excess of a specified number per year as determined by the Administrator.

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8 VESTING

8.1 Fully Vested Accounts

A Participant shall be fully vested in all Accounts at all times.

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9 PARTICIPANT LOANS

9.1  Participant Loans Permitted

Loans to Participants and Beneficiaries are permitted pursuant to the terms and conditions set forth in this Section, except that a loan shall not be permitted to a Participant who is no longer an Employee or to a Beneficiary, unless such Participant or Beneficiary is otherwise a party in interest (as defined in ERISA section 3(14)).

9.2  Loan Application, Note and Security

A Participant shall apply for any loan in such manner and with such advance notice as prescribed by the Administrator. Each loan shall be evidenced by a promissory note, secured only by the portion of the Participant’s Account from which the loan is made, and the Plan shall have a lien on this portion of his or her Account.

9.3  Spousal Consent

A Participant is not required to obtain Spousal Consent in order to borrow from his or her Account under the Plan, unless they have transferred into this plan with a grandfathered benefit that allows a joint and survivor option.

9.4  Loan Approval

The Administrator, or the Trustee, if otherwise authorized by the Administrator and agreed to by the Trustee, is responsible for determining that a loan request conforms to the requirements described in this Section and granting such request.

9.5  Loan Funding Limits, Account Sources and Funding Order

The loan amount must meet all of the following limits as determined as of the Valuation Date then the loan is processed and shall be funded from the Participant’s Accounts as follows:

(a) Plan Minimum Limit. The minimum amount for any loan is $500.

(b) Plan Maximum Limit, Account Sources and Funding Order. Subject to the legal limit described in (c) below, the maximum a Participant may borrow, including the aggregate outstanding balances of existing Plan loans, is 100% of the Participant’s Accounts.

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(c) Legal Maximum Limit. The maximum a Participant may borrow, including the aggregate outstanding balances of existing Plan loans, is 50% of his or her vested Account balance, not to exceed $50,000. However, the $50,000 maximum is reduced by the Participant’s highest aggregate outstanding Plan loan balance during the 12-month period ending on the day before the Valuation Date as of which the loan is made. For purposes of this paragraph, the qualified plans of all Related Companies shall be treated as though they are part of the Plan to the extent it would decrease the maximum loan amount.

9.6  Maximum Number of Loans

A Participant may have only one loan outstanding at any given time.

9.7  Source and Timing of Loan Funding

A loan to a Participant shall be made solely from the assets of his or her own Account. The available assets shall be determined first by Account and then within each Account used for funding a loan, amounts shall be taken from the Investment Fund in direct proportion to the market value of the Participant’s interest in each Investment Fund as of the Valuation Date on which the loan is processed.

The loan shall be funded on the Valuation Date as of which the loan is processed. The Trustee shall make payment to the Participant as soon thereafter as administratively feasible.

9.8  Interest Rate

The interest rate charged on Participant loans shall be a fixed reasonable rate of interest, determined from time to time by the Administrator, which provides the Plan with a return commensurate with the prevailing interest rate charged by persons in the business of lending money for loans which would be made under similar circumstances. As of the Effective Date, the interest rate is determined as set forth in Appendix C, which may be changed from time to time by the Administrator, in writing, without the necessity of amending the Plan and Trust.

9.9  Loan Payment

Substantially level amortization shall be required of each loan with payments made at least monthly, generally through payroll deduction. Loans may be prepaid in full or in part at any time. The Participant may choose the loan repayment period, not to exceed 5 years.

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9.10  Loan Payment Hierarchy

Loan principal payments shall be credited to the Participant’s Accounts in the inverse of the order used to fund the loan. Loan interest shall be credited to the Participant’s Accounts in direct proportion to the principal payment. Loan payments are credited to the Investment Funds based upon the Participant’s current investment election for new Contributions.

9.11  Repayment Suspension

The Administrator may agree to a suspension of loan payments for up to 12 months for a Participant who is on a Leave of Absence without pay. During the suspension period, interest shall continue to accrue on the outstanding loan balance. At the expiration of the suspension period all outstanding loan payments and accrued interest thereon shall be due unless otherwise agreed upon by the Administrator.

9.12  Loan Default

A loan is treated as in default if a scheduled loan payment is not made at the time required. A Participant shall then have a grace period to cure the default before it becomes final. Such grace period shall be for a period that does not extend beyond the last day of the calendar quarter following the calendar quarter in which the scheduled loan payment was due or such lesser or greater maximum period as may later be authorized by Code section 72(p).

In the event a default is not cured within the grace period, the Administrator may direct the Trustee to report the outstanding principal balance of the loan and accrued interest thereon as a taxable distribution to the Participant. As soon as a Plan withdrawal or distribution to such Participant would otherwise be permitted, the Administrator may instruct the Trustee to execute upon its security interest in the Participant’s Account by distributing the note to the Participant.

9.13  Call Feature

The Administrator shall have the right to call any Participant loan once a Participant’s employment with all Related Companies has terminated, unless he or she is otherwise a party in interest (as defined in ERISA section 3(14)), or if the Plan is terminated.

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10 IN-SERVICE WITHDRAWALS

10.1  In-Service Withdrawals Permitted

In-service withdrawals to a Participant who is an Employee are permitted pursuant to the terms and conditions set forth in this Section and pursuant to the terms and conditions set forth in Section 11 with regard to an in-service withdrawal made in accordance with a Participant’s Required Beginning Date.

10.2  In-Service Withdrawal Application and Notice

A Participant shall apply for any in-service withdrawal in such manner and with such advance notice as prescribed by the Administrator. The Participant shall be provided the notice prescribed by Code section 402(f).

Code sections 401(a)(11) and 417 do not apply to in-service withdrawals under the Plan. An in-service withdrawal may commence less than 30 days after the aforementioned notice is provided, if:

(a) the Participant is clearly informed that he or she has the right to a period of at least 30 days after receipt of such notice to consider his or her option to elect or not elect a Direct Rollover for all or a portion, if any, of his or her in-service withdrawal which constitutes an Eligible Rollover Distribution; and

(b) the Participant after receiving such notice, affirmatively elects a Direct Rollover for all or a portion, if any, of his or her in-service withdrawal which constitutes an Eligible Rollover Distribution or alternatively elects to have all or a portion made payable directly to him or her, thereby not electing a Direct Rollover for all or a portion thereof.

Notwithstanding the foregoing, Hardship Withdrawal amounts withdrawn from a Participant’s Pre-Tax Account shall not constitute an Eligible Rollover Distribution.

10.3  Spousal Consent

A Participant is not required to obtain Spousal Consent in order to receive an in-service withdrawal under the Plan.

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10.4  In-Service Withdrawal Approval

The Administrator, or the Trustee, if otherwise authorized by the Administrator and agreed to by the Trustee, is responsible for determining whether an in-service withdrawal request conforms to the requirements described in this Section and granting such request.

10.5  Payment Form and Medium

The form of payment for an in-service withdrawal shall be a single lump sum and payment shall be made in cash. With regard to the portion of an in-service withdrawal representing an Eligible Rollover Distribution, a Participant may elect a Direct Rollover for all or a portion of such amount.

10.6  Source and Timing of In-Service Withdrawal Funding

An in-service withdrawal to a Participant shall be made solely from the assets of his or her own Account and shall be based on the Account values as of the Trade Date the in-service withdrawal is processed. The available assets shall be determined first by Account and then within each Account used for funding an in-service withdrawal, amounts shall be taken by Investment Fund in direct proportion to the market value of the Participant’s interest in each Investment Fund (which excludes his or her Loan Account balance) as of the Valuation Date on which the in-service withdrawal is processed.

10.7  Hardship Withdrawals

(a) Requirements. A Participant who is an Employee may request the withdrawal of up to the amount necessary to satisfy a financial need including amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the withdrawal. Only requests for withdrawals (1) on account of a Participant’s “Deemed Financial Need” and (2) which are “Deemed Necessary” to satisfy the financial need shall be approved.

(b) “Deemed Financial Need”. An immediate and heavy financial need relating to:

(1) the payment of unreimbursed medical care expenses (described under Code section 213(d)) incurred (or to be incurred) by the Employee, his or her spouse or dependents (as defined in Code section 152);

(2) the purchase (excluding mortgage payments) of the Employee’s principal residence;

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(3) the payment of unreimbursed tuition, related educational fees and room and board for up to the next 12 months of post-secondary education for the Employee, his or her spouse or dependents (as defined in Code section 152);

(4) the payment of amounts necessary for the Employee to prevent losing his or her principal residence through eviction or foreclosure on the mortgage; or

(5) any other circumstance specifically permitted under Code section 401(k)(2)(B)(i)(IV).

(c) “Deemed Necessary”. A withdrawal is “Deemed Necessary” to satisfy the financial need only if the withdrawal amount does not exceed the financial need and all of these conditions are met:

(1) the Employee has obtained all possible withdrawals (other than hardship withdrawals) and nontaxable loans available from the Plan and all other plans maintained by Related Companies, unless repayment of this loan would create an additional financial hardship;

(2) the Administrator shall suspend the Employee from making any contributions to the Plan and all other qualified and nonqualified plans of deferred compensation and all stock option or stock purchase plans maintained by Related Companies for 12 months from the date the withdrawal payment, or six months for Plan Years after December 31, 2001; and

(3) the Administrator shall reduce the Contribution Dollar Limit for the Employee with regard to the Plan and all other plans maintained by Related Companies, for the calendar year next following the calendar year of the withdrawal by the amount of the Employee’s Pre-Tax Contributions for the calendar year of the withdrawal.

(c) Account Sources and Funding Order. All available amounts must first be withdrawn from a Participant’s After-Tax Account. The remaining withdrawal shall come from the following of the Participant’s Accounts, in the priority order as follows:

Rollover Account

Matching Account

Prior Plan Account

Pre-Tax Account

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The amount that may be withdrawn from a Participant’s Pre-Tax Account shall not include any amounts attributable to earnings after December 31, 1988.

The amount that may be withdrawn from a Participant’s Matching Account shall not include any amounts attributable to contributions or earnings after the start of the first Plan Year beginning after December 31, 1988.

(d) Minimum Amount. There is no minimum amount for a hardship withdrawal.

(e) Permitted Frequency. There is no restriction on the number of hardship withdrawals permitted to a Participant.

(f) Suspension from Further Contributions. Upon making a hardship withdrawal, a Participant may not make additional Pre-Tax Contributions (or additional contributions to all other qualified and nonqualified plans of deferred compensation and all stock option or stock purchase plans maintained by Related Companies), if his or her hardship withdrawal was “Deemed Necessary”, and shall not be eligible to receive Match Contributions, for a period of 12 months from the date the withdrawal payment is made. The Suspension Period shall be six months, instead of 12 months, for hardship withdrawals after December 31, 2001.

10.8  After-Tax Account Withdrawals

(a) Requirements. A Participant who is an Employee may make an After-Tax Account withdrawal.

(b) Account Sources and Funding Order. The withdrawal shall come from a Participant’s After-Tax Account.

(c) Minimum Amount. There is no minimum amount for an After-Tax Account withdrawal.

(c) Permitted Frequency. There is no restriction on the number of After-Tax Account withdrawals permitted to a Participant.

(d) Suspension from Further Contributions. An After-Tax Account withdrawal shall not affect a Participant’s ability to make further Contributions.

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10.9  Rollover Account Withdrawals

(a) Requirements. A Participant who is an Employee may make a Rollover Account withdrawal.

(b) Account Sources and Funding Order. The withdrawal shall come from a Participant’s Rollover Account.

(c) Minimum Amount. There is no minimum amount for a Rollover Account withdrawal.

(c) Permitted Frequency. There is no restriction on the number of Rollover Account withdrawals permitted to a Participant.

(d) Suspension from Further Contributions. A Rollover Account withdrawal shall not affect a Participant’s ability to make further Contributions.

10.10  Over Age 59 ¹/2 Withdrawals

(a) Requirements. A Participant who is an Employee and over age 59 ¹/ 2 may make an Over Age 59 ¹/2 withdrawal.

(b) Minimum Amount. There is no minimum amount for an Over Age 59 ¹/ 2 withdrawal.

(c) Permitted Frequency. The maximum number of Over Age 59 ¹/2 withdrawals permitted to a Participant in any 12-month period is not to exceed one per month.

(d) Suspension from Further Contributions. An Over Age 59 ¹/2 withdrawal shall not affect a Participant’s ability to make or be eligible to receive further Contributions.

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11 DISTRIBUTIONS ONCE EMPLOYMENT ENDS OR BY REASON OF A PARTICIPANT’S REQUIRED BEGINNING DATE

11.1  Benefit Information, Notices and Election

A Participant, or his or her Beneficiary in the case of his or her death, shall be provided with information regarding all optional times and forms of distribution available under the Plan, including the notices prescribed by Code sections 402(f) and 411(a)(11). Subject to the other requirements of this Section, a Participant, or his or her Beneficiary in the case of his or her death, may elect, in such manner and with such advance notice as prescribed by the Administrator, to have his or her vested Account balance distributed beginning upon any Valuation Date following the Participant’s termination of employment with all Related Companies and a reasonable period of time during which the Administrator shall process, and inform the Trustee of, the Participant’s termination or, if earlier, at the time of the Participant’s Required Beginning Date.

Notwithstanding, if a Participant’s termination of employment with all Related Companies does not constitute a separation from service for purposes of Code section 401(k)(2)(B)(i)(I) or otherwise constitute an event set forth under Code section 401(k)(10)(A)(ii) or (iii) as described in Section 19.3, the portion of a Participant’s Account subject to the distribution rules of Code section 401(k) may not be distributed until such time as he or she separates from service for purposes of Code section 401(k)(2)(B)(i)(I) or, if earlier, upon such other event as described in Code section 401(k)(2)(B) and as provided for in the Plan.

Code sections 401(a)(11) and 417 do not apply to distributions under the Plan. A distribution may commence less than 30 days after the above notices are provided, if:

(a) the Participant is clearly informed that he or she has the right to a period of at least 30 days after receipt of such notices to consider the decision as to whether to elect a distribution and if so to elect a particular form of distribution and to elect or not elect a Direct Rollover for all or a portion, if any, of his or her distribution which constitutes an Eligible Rollover Distribution; and

(b) the Participant after receiving such notices, affirmatively elects a distribution and a Direct Rollover for all or a portion, if any, of his or her distribution which constitutes an Eligible Rollover Distribution or alternatively elects to have all or a portion made payable directly to him or her, thereby not electing a Direct Rollover for all or a portion thereof.

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11.2  Spousal Consent

A Participant is not required to obtain Spousal Consent in order to receive a distribution under the Plan.

11.3  Payment Form and Medium

Except to the extent otherwise provided by Section 11.4, a Participant may elect to be paid in any of these forms:

(a) a single lump sum; or

(b) a portion paid in a lump sum, and the remainder paid later (partial payment); or

(c) periodic installments over a period not to exceed the life expectancy of the Participant and his or her Beneficiary.

Distributions shall be made in cash, except to the extent a distribution consists of a loan call as described in Section 9. With regard to the portion of a distribution representing an Eligible Rollover Distribution, a Distributee may elect a Direct Rollover for all or a portion of such amount.

11.4  Source and Timing of Distribution Funding

A distribution to a Participant shall be made solely from the assets of his or her own Account and shall be based on the Account values as of the Valuation Date the distribution is processed. The available assets shall be determined first by Account and then within each Account used for funding a distribution, amounts shall be taken from the Investment Fund in direct proportion to the market value of the Participant’s interest in each Investment Fund as of the Valuation Date on which the distribution is processed.

The distribution shall be funded on the Valuation Date as of which the distribution is processed. The Trustee shall make payment to the Participant or on behalf of the Participant as soon thereafter as administratively feasible.

11.5  Latest Commencement Permitted

In addition to any other Plan requirements and unless a Participant elects otherwise, his or her benefit payments shall begin not later than 60 days after the end of the Plan Year in which he or she attains his or her Normal Retirement Date or retires, whichever is later. However, if the amount of the payment or the location of the Participant (after a reasonable search) cannot be ascertained

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by that deadline, payment shall be made no later than 60 days after the earliest date on which such amount or location is ascertained but in no event later than the Participant’s Required Beginning Date. A Participant’s failure to elect in such manner as prescribed by the Administrator to have his or her vested Account balance distributed, shall be deemed an election by the Participant to defer his or her distribution but in no event shall his or her benefit payments commence later than his or her Required Beginning Date.

With regard to a Participant who is an Employee and who commenced benefit payments in accordance with Code section 401(a)(9) as in effect prior to January 1, 1997, and who is not a 5% Owner, he or she may, but is not required to, discontinue such benefit payments until he or she is otherwise required to again commence benefit payments in accordance with Code section 401(a)(9) as in effect for calendar years commencing after December 31, 1996.

Notwithstanding any provision of the Plan to the contrary, distributions may be made pursuant to the terms of any method of distribution elected by an Employee who was a Participant prior to January 1, 1984, in accordance with the terms of the Plan as in effect immediately prior to that date, provided that the election shall remain in effect only until revoked and (if revoked) may not later be reinstated.

If benefit payments cannot begin at the time required because the location of the Participant cannot be ascertained (after a reasonable search), the Administrator may, at any time thereafter, treat such person’s Account as forfeited subject to the provisions of Section 18.6.

11.6  Payment Within Life Expectancy

The Participant’s payment election must be consistent with the requirements of Code section 401(a)(9).

With respect to distributions under the Plan made on or after January 17, 2001 for calendar years beginning on or after January 1, 2001, the Plan will apply the minimum distribution requirements of Code section 401(a)(9) in accordance with the regulations under Code section 401(a)(9) that were proposed on January 17, 2001 (the 2001 Proposed Regulations), notwithstanding any provision of the Plan to the contrary. If the total amount of required minimum distributions made to a participant for 2001 prior to January 17, 2001 are equal to or greater than the amount of required minimum distributions determined under the 2001 Proposed Regulations, then no additional distributions are required for such participant for 2001 on or after such date. If the total amount of required minimum distributions made to a participant for 2001 prior to January 17, 2001 are less than the amount determined under the 2001 Proposed Regulations,

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then the amount of required minimum distributions for 2001 on or after such date will be determined so that the total amount of required minimum distributions for 2001 is the amount determined under the 2001 Proposed Regulations. This amendment shall continue in effect until the last calendar year beginning before the effective date of the final regulations under Code section 401(a)(9) or such other date as may be published by the Internal Revenue Service.

11.7  Incidental Benefit Rule

The Participant’s payment election must be consistent with the requirement that, if the Participant’s spouse is not his or her sole primary Beneficiary, the minimum annual distribution for each calendar year, beginning with the calendar year preceding the calendar year that includes the Participant’s Required Beginning Date, shall not be less than the quotient obtained by dividing (a) the Participant’s vested Account balance as of the last Valuation Date of the preceding year by (b) the applicable divisor as determined under the tables published from time to time by the Internal Revenue Service.

11.8  Payment to Beneficiary

Payment to a Beneficiary must be completed by the end of the calendar year that contains the fifth anniversary of the Participant’s death, except that:

(a) If the Participant designated one or more individual Beneficiaries, then Minimum Distributions may be made in installments beginning by December 31 of the calendar year following the death of Participant. The Minimum Distribution Amount for each Distribution Year following the death of the Participant shall be made by dividing the Participant’s Vested Account Balance as of the last Valuation Date of the preceding year by the applicable divisor as determined under tables published from time to time by the Internal Revenue Service;

(b) If the surviving spouse is the Beneficiary, payments need not begin until the later of (i) the end of the calendar year that includes the first anniversary of the Participant’s death, or (ii) the end of the calendar year in which the Participant would have attained age 70 ¹/2 and must be completed within the spouse’s life or life expectancy; and

(c) If the Participant and the surviving spouse who is the Beneficiary die (i) before the Participant’s Required Beginning Date and (ii) before payments have begun to the spouse, the spouse shall be treated as the Participant in applying these rules.

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11.9  Beneficiary Designation

Each Participant may complete a beneficiary designation form indicating the Beneficiary who is to receive the Participant’s remaining Plan interest at the time of his or her death and such designation may be changed at any time. However, a Participant’s spouse shall be the sole primary Beneficiary unless the designation includes Spousal Consent for another Beneficiary. If no proper designation is in effect at the time of a Participant’s death or if the Beneficiary does not survive the Participant, the Beneficiary shall be, in the order listed, the:

(a) Participant’s surviving spouse,

(b) Participant’s children, in equal shares, (or if a child does not survive the Participant, and that child leaves issue, the issue shall be entitled to that child’s share, by right of representation) or

(c) Participant’s estate.

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12 ADP AND ACP TESTS

12.1  Contribution Limitation Definitions

The following definitions are applicable to this Section 12 (where a definition is contained in both Sections 1 and 12, for purposes of Section 12 the Section 12 definition shall be controlling):

(a) “ACP” or “Average Contribution Percentage”. The Average Percentage calculated using Contributions allocated to Participants as of a date within the Plan Year.

(b) “ACP Test”. The determination of whether the ACP is in compliance with the Basic or Alternative Limitation for a Plan Year (as defined in Section 12.2).

(c) “ADP” or “Average Deferral Percentage”. The Average Percentage calculated using Deferrals allocated to Participants as of a date within the Plan Year.

(c) “ADP Test”. The determination of whether the ADP is in compliance with the Basic or Alternative Limitation for a Plan Year (as defined in Section 12.2).

(d) “Average Percentage”. The average of the calculated percentages for Participants within the specified group. The calculated percentage refers to either the “Deferrals” or “Contributions” (as defined in this Section) made on each Participant’s behalf for the Plan Year, divided by his or her Compensation. (Pre-Tax Contributions to the Plan or comparable contributions to plans of Related Companies which must be refunded solely because they exceed the Contribution Dollar Limit are included in the percentage for the HCE Group but not for the NHCE Group.)

(e) “Contributions” shall include Matching and may include Pre-Tax, but with regard to Pre-Tax, only to the extent that (1) the Administrator elects to use them, (2) they are not used or counted in the ADP Test and (3) they otherwise satisfy the requirements as prescribed under Code section 401(m) permitting treatment as Contributions for purposes of the ACP Test.

(f) “Current Year Testing Method”. The use of the Plan Year’s ADP for the Plan Year’s NHCE Group for purposes of performing the Plan Year’s ADP Test and/or the use of the Plan Year’s ACP for the Plan Year’s NHCE Group for purposes of performing the Plan Year’s ACP Test.

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(g) “Deferrals” shall include Pre-Tax Contributions.

(h) “HCE” or “Highly Compensated Employee”. For Plan Years commencing after December 31, 1996, with respect to all Related Companies, an Employee who (in accordance with Code section 414(q)):

(1) Was a more than 5% Owner (within the meaning of Code section 414(q)(2)) at any time during the Plan Year or the preceding Plan Year; or

(2) Received Compensation during the preceding Plan Year in excess of $80,000 (as adjusted for such Year pursuant to Code sections 414(q)(1) and 415(d)) or, if the Company elects for such preceding Plan Year, “in excess of $80,000 (as adjusted for such Year pursuant to Code sections 414(q)(1) and 415(d)) and was a member of the “top-paid group” (within the meaning of Code section 414(q)(3)) for such preceding Plan Year” shall be substituted for the preceding reference to “in excess of $80,000 (as adjusted for such Year pursuant to Code sections 414(q)(1) and 415(d))”. The $80,000 amount referred to above shall be $90,000 for Plan Years beginning in 2002 (subject to adjustment as provided above).

A former Employee shall be treated as an HCE if (1) such former Employee was an HCE when he or she separated from service, or (2) such former Employee was an HCE in service at any time after attaining age 55.

The determination of who is an HCE and the determination of the number and identity of Employees in the top-paid group shall be made in accordance with Code section 414(q).

(i) “HCE Group” and “NHCE Group”. With respect to all Related Companies, the respective group of HCEs and NHCEs who are eligible to have amounts contributed on their behalf for the respective Plan Year, including Employees who would be eligible but for their election not to participate or to contribute, or because their Pay is greater than zero but does not exceed a stated minimum. For Plan Years commencing after December 31, 1998, with respect to all Related Companies, if the Plan permits participation prior to an Eligible Employee’s satisfaction of the minimum age and service requirements of Code section 410(a)(1)(A), Eligible Employees who have not met the minimum age and service requirements

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of Code section 410(a)(1)(A) may be excluded in the determination of the NHCE Group, but not in the determination of the HCE Group, for purposes of (i) the ADP Test, if Code section 410(b)(4)(B) is applied in determining whether the 401(k) portion of the Plan meets the requirements of Code section 410(b), or (ii) the ACP Test, if Code section 410(b)(4)(B) is applied in determining whether the 401(m) portion of the Plan meets the requirements of Code section 410(b).

(3) If the Related Companies maintain two or more plans which are subject to the ADP or ACP Test and are considered as one plan for purposes of Code sections 401(a)(4) or 410(b), all such plans shall be aggregated and treated as one plan for purposes of meeting the ADP and ACP Tests, provided that the plans may only be aggregated if they have the same plan year.

(4) If an HCE is covered by more than one cash or deferred arrangement, or more than one arrangement permitting employee or matching contributions, maintained by the Related Companies, all such plans shall be aggregated and treated as one plan (other than those plans that may not be permissively aggregated) for purposes of calculating the separate percentage for the HCE which is used in the determination of the Average Percentage. For purposes of the preceding sentence, if such plans have different plan years, the plans are aggregated with respect to the plan years ending with or within the same calendar year.

(j) “Multiple Use Test”. The test described in Section 12.4 which a Plan must meet where the Alternative Limitation (described in Section 12.2) is used to meet both the ADP and ACP Tests. The Multiple Use Test shall not apply for Plan Years after December 31, 2001.

(k) “NHCE” or “Non-Highly Compensated Employee”. An Employee who is not an HCE.

(l) “Prior Year Testing Method”. The use of the preceding Plan Year’s ADP for the preceding Plan Year’s NHCE Group for purposes of performing the Plan Year’s ADP Test and/or the use of the preceding Plan Year’s ACP for the preceding Plan Year’s NHCE Group for purposes of performing the Plan Year’s ACP Test.

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12.2  ADP and ACP Tests

For Plan Years commencing before January 1, 1997, for each Plan Year, the Current Year Testing Method shall be used and the ADP and ACP for the HCE Group must meet either the Basic or Alternative Limitation when compared to the respective ADP and ACP for the NHCE Group, defined below:

For Plan Years commencing after December 31, 1996, for each Plan Year, the Prior Year Testing Method shall be used and the ADP and ACP for the HCE Group must meet either the Basic or Alternative Limitation when compared to the respective preceding Plan Year’s ADP and ACP for the preceding Plan Year’s NHCE Group, defined as follows:

(a) Basic Limitation. The HCE Group Average Percentage may not exceed 1.25 times the NHCE Group Average Percentage.

(b) Alternative Limitation. The HCE Group Average Percentage is limited by reference to the NHCE Group Average Percentage as follows:

If the NHCE Group Average Percentage is:	Then the Maximum HCE Group Average Percentage is:
Less than 2% 2% to 8% More than 8%	2 times NHCE Group Average % NHCE Group Average % plus 2% NA - Basic Limitation applies

Alternatively, the Company may elect to use the Current Year Testing Method and the ADP and/or ACP for the HCE Group must meet either the Basic or Alternative Limitation as defined above when compared to the respective Plan Year’s ADP and/or ACP for the Plan Year’s NHCE Group. If a Current Year Testing Method election is made, such election may not be changed except as provided by the Code.

In the case of the first Plan Year in which the Plan is subject to the requirements of Code section 401(k), the amount taken into account as the “preceding Plan Year’s ADP for the preceding Plan Year’s NHCE Group”, shall be (i) 3%, or (ii) if the Company elects, the Plan Year’s ADP. The preceding sentence shall not apply with regard to a Plan that is a successor plan or, if for such first Plan Year, the Plan is aggregated with another plan that was subject to the requirements of Code section 401(k) in the preceding year and treated as one plan for purposes of meeting the ADP Test.

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12.3  Correction of ADP and ACP Tests

For Plan Years commencing after December 31, 1996, for each Plan Year, if the ADP or ACP Tests are not met, the Administrator shall determine, no later than the end of the next Plan Year, a maximum percentage to be used in place of the calculated percentage for all HCEs that would reduce the ADP and/or ACP for the HCE Group by a sufficient amount to meet the ADP and ACP Tests.

With regard to each HCE whose Deferral percentage and/or Contribution percentage is in excess of the maximum percentage, a dollar amount of excess Deferrals and/or excess Contributions shall then be determined by (i) subtracting the product of such maximum percentage for the ADP and the HCE’s Compensation from the HCE’s actual Deferrals and (ii) subtracting the product of such maximum percentage for the ACP and the HCE’s Compensation from the HCE’s actual Contributions. Such amounts shall then be aggregated to determine the total dollar amount of excess Deferrals and/or excess Contributions. ADP and/or ACP corrections shall be made in accordance with the leveling method as described below.

(a) ADP Correction. The HCE with the highest Deferral dollar amount shall have his or her Deferral dollar amount reduced in an amount equal to the lesser of the dollar amount of excess Deferrals for all HCEs or the dollar amount that would cause his or her Deferral dollar amount to equal that of the HCE with the next highest Deferral dollar amount. The process shall be repeated until the total of the Deferral dollar amount reductions equals the dollar amount of excess Deferrals for all HCEs.

To the extent an HCE’s Deferrals were determined to be reduced as described in the paragraph above, Pre-Tax Contributions shall, by the end of the next Plan Year, be refunded to the HCE, except that such amount to be refunded shall be reduced by Pre-Tax Contributions previously refunded because they exceeded the Contribution Dollar Limit. The excess amounts shall first be taken from unmatched Pre-Tax Contributions and then from matched Pre-Tax Contributions. Any Matching Contributions attributable to refunded excess Pre-Tax Contributions as described in this Section, adjusted for investment gain or loss for the Plan Year to which the excess Pre-Tax Contributions relate, shall be forfeited and used to reduce future Contributions to be made by an Employer as soon as administratively feasible.

(b) ACP Correction. The HCE with the highest Contribution dollar amount shall have his or her Contribution dollar amount reduced in an amount equal to the lesser of the dollar amount of excess Contributions for all

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HCEs or the dollar amount that would cause his or her Contribution dollar amount to equal that of the HCE with the next highest Contribution dollar amount. The process shall be repeated until the total of the Contribution dollar amount reductions equals the dollar amount of excess Contributions for all HCEs.

To the extent an HCE’s Contributions were determined to be reduced as described in the paragraph above, Matching Contributions shall, by the end of the next Plan Year, be refunded to the HCE.

(c) Investment Fund Sources. Once the amount of excess Deferrals and/or Contributions is determined, and with regard to excess Contributions, allocated by type of Contribution, within each Account from which amounts are refunded amounts shall be taken from the Investment Fund in direct proportion to the market value of the Participant’s interest in each Investment Fund (which excludes his or her Loan Account balance) as of the Valuation Date on which the correction is processed.

12.4  Multiple Use Test

If the Alternative Limitation (defined in Section 12.2) is used to meet both the ADP and ACP Tests, the ADP and ACP for the HCE Group must also comply with the requirements of Code section 401(m)(9). Such Code section requires that the sum of the ADP and ACP for the HCE Group (as determined after any corrections needed to meet the ADP and ACP Tests have been made) not exceed the sum (which produces the most favorable result) of:

(a) the Basic Limitation (defined in Section 12.2) applied to either the ADP or ACP for the NHCE Group, and

(b) the Alternative Limitation applied to the other NHCE Group percentage.

The multiple-use test described in this Section 12, and in Section 1.401(m)-2 of the Treasury Regulation, shall not apply for plan years beginning after December 31, 2001.

12.5  Correction of Multiple Use Test

If the multiple use limit is exceeded, the Administrator shall determine a maximum percentage to be used in place of the calculated percentage for all HCEs that would reduce either or both the ADP or ACP for the HCE Group by a sufficient amount to meet the multiple use limit. Any excess shall be corrected in the same manner that excess Deferrals or Contributions are corrected.

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12.6  Adjustment for Investment Gain or Loss

Any excess Deferrals or Contributions to be refunded to a Participant in accordance with this Section 12 shall be adjusted for investment gain or loss. Refunds shall not include investment gain or loss for the period between the end of the applicable Plan Year and the date of distribution.

12.7  Testing Responsibilities and Required Records

The Administrator shall be responsible for ensuring that the Plan meets the ADP Test, and if applicable, the ACP Test and the Multiple Use Test, and that the Contribution Dollar Limit is not exceeded. The Administrator shall maintain records which are sufficient to demonstrate that the ADP Test, and if applicable, the ACP Test and the Multiple Use Test, have been met for each Plan Year for at least as long as the Employer’s corresponding tax year is open to audit.

12.8  Separate Testing

(a) Multiple Employers: The determination of HCEs, NHCEs, and the performance of the ADP Test, and if applicable, the ACP Test and the Multiple Use Test, and any corrective action resulting therefrom, shall be conducted separately with regard to the Employees of each Employer (and its Related Companies) that is not a Related Company with respect to the other Employer(s).

(b) Collective Bargaining Units: The performance of the ADP Test, and if applicable, the ACP Test and the Multiple Use Test, and any corrective action resulting therefrom, shall be conducted separately with regard to Employees who are eligible to participate in the Plan as a result of a collective bargaining agreement.

In addition, testing may be conducted separately, at the discretion of the Administrator and to the extent permitted under Treasury regulations, with regard to any group of Employees for whom separate testing is permissible under such regulations.

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13 MAXIMUM CONTRIBUTION AND BENEFIT LIMITATIONS

13.1  “Annual Addition” Defined

The sum for a Plan Year of all (i) contributions (excluding rollover contributions) and forfeitures allocated to the Participant’s Account and his or her account in all other defined contribution plans maintained by any Related Company, (ii) amounts allocated to the Participant’s individual medical account (within the meaning of Code section 415(l)(2)) which is part of a defined benefit plan maintained by any Related Company, and (iii) if the Participant is a key employee (within the meaning of Code section 419A(d)(3)) for the applicable or any prior Plan Year, amounts attributable to post-retirement medical benefits allocated to his or her separate account under a welfare benefit fund (within the meaning of Code section 419(e)) maintained by any Related Company. The Plan Year refers to the year to which the allocation pertains, regardless of when it was allocated. The Plan Year shall be the Code section 415 limitation year.

13.2  Maximum Annual Addition

A Participant’s Annual Addition for any Plan Year shall not exceed the lesser of (i) 25% of his or her Compensation or (ii) $30,000 (as adjusted for cost of living increases pursuant to Code section 415(d)); provided, however, that clause (i) shall not apply to Annual Additions described in clauses (ii) and (iii) of Section 13.1.

Effective for limitation years beginning after December 31, 2001, the maximum annual addition that may be contributed or allocated to a Participant’s account under the Plan for any limitation year shall not exceed the catch-up contributions permitted under Section 3.7 of the Plan and Code section 414(v), and the lesser of the following amounts:

(a) $40,000, as adjusted for cost of living increases under Code section 415(d), or

(b) 100% of the Participant’s compensation, as defined under Code section 415(c)(3) for the limitation year. The compensation limit shall not apply to any contribution for medical benefits after separation from service (within the meaning of Code section 401(h) or Code section 419A(f)(2)) that is otherwise treated as an annual addition.

13.3  Avoiding an Excess Annual Addition

If, at any time during a Plan Year, the allocation of any additional Contributions would produce an excess Annual Addition for such year, Contributions to be made for the remainder of the Plan Year shall be limited to the amount needed for each affected Participant to receive the maximum Annual Addition.

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13.4  Correcting an Excess Annual Addition

Upon the discovery of an excess Annual Addition to a Participant’s Account (resulting from a reasonable error in determining a Participant’s compensation or the maximum permissible amount of his or her elective deferrals (within the meaning of Code section 402(g)(3)), or other facts and circumstances acceptable to the Internal Revenue Service), the excess amount (adjusted to reflect investment gains) shall first be returned to the Participant to the extent of his or her Pre-Tax Contributions (however to the extent Pre-Tax Contributions were matched, the applicable Matching Contributions shall be forfeited in proportion to the returned matched Pre-Tax Contributions) and the remaining excess, if any, shall be forfeited by the Participant and used to reduce future Contributions to be made by an Employer as soon as administratively feasible.

13.5  Correcting a Multiple Plan Excess

If a Participant, whose Account is credited with an excess Annual Addition, received allocations to more than one defined contribution plan, the excess shall be corrected by reducing the Annual Addition to the Plan only after all possible reductions have been made to the other defined contribution plans.

13.6  “Defined Benefit Fraction” Defined

The fraction, for any Plan Year, where the numerator is the “projected annual benefit” and the denominator is the greater of 125% of the “protected current accrued benefit” or the normal limit which is the lesser of (i) 125% of the dollar limitation in effect under Code section 415(b)(1)(A) for the Plan Year or (ii) 140% of the amount which may be taken into account under Code section 415(b)(1)(B) for the Plan Year, where a Participant’s:

(a) “projected annual benefit” is the annual benefit provided by the plan determined pursuant to Code section 415(e)(2)(A), and

(b) “protected current accrued benefit” in a defined benefit plan in existence (1) on July 1, 1982, shall be the accrued annual benefit provided for under Public Law 97-248, section 235(g)(4), as amended, or (2) on May 6, 1986, shall be the accrued annual benefit provided for under Public Law 99-514, section 1106(i)(3).

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13.7  “Defined Contribution Fraction” Defined

The fraction where the numerator is the sum of the Participant’s Annual Addition for each Plan Year to date and the denominator is the sum of the “annual amounts” for each year in which the Participant has performed service with a Related Company. The “annual amount” for any Plan Year is the lesser of (i) 125% of the dollar limitation in effect under Code section 415(c)(1)(A) (determined without regard to subsection (c)(6)) for the Plan Year or (ii) 140% of the amount which may be taken into account under Code section 415(c)(1)(B) for the Plan Year, where:

(a) each Annual Addition is determined pursuant to the Code section 415(c) rules in effect for such Plan Year, and

(b) the numerator is adjusted pursuant to Public Law 97-248, section 235(g)(3), as amended, or Public Law 99-514, section 1106(i)(4).

13.8  Combined Plan Limits and Correction

The sum of a Participant’s Defined Benefit Fraction and Defined Contribution Fraction for any Plan Year may not exceed 1.0. If the combined fraction exceeds 1.0 for any Plan Year, the Participant’s benefit under any defined benefit plan (to the extent it has not been distributed or used to purchase an annuity contract) shall be limited so that the combined fraction does not exceed 1.0 before any defined contribution limits shall be enforced.

For Plan Years commencing after December 31, 1999, the provisions of the preceding paragraph shall no longer apply.

13.9  Affiliated Companies

If the contribution limit for a Participant exceeds the maximum permissible contribution limits under the Code as a result of the Participant’s participation in more than one qualified plan of the Employer, then the contributions to the account of the Participant shall first be reduced to the extent necessary from the qualified plan, or plans of the affiliated company of the most recent employment of the Participant.

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14 TOP HEAVY RULES

14.1  Top Heavy Definitions

When capitalized, the following words and phrases have the following meanings when used in this Section:

(a) “Aggregation Group”. The group consisting of each qualified plan of the Related Companies (1) in which a Key Employee is a participant or was a participant during the determination period (regardless of whether such plan has terminated), or (2) which enables another plan in the group to meet the requirements of Code sections 401(a)(4) or 410(b). The Administrator may also treat any other qualified plan of the Related Companies as part of the group if the resulting group would continue to meet the requirements of Code sections 401(a)(4) and 410(b) with such plan being taken into account.

(b) “Determination Date”. For any Plan Year, the last Valuation Date of the preceding Plan Year or, in the case of the Plan’s first Plan Year, the last Valuation Date of that Plan Year.

(c) “Key Employee”. A current or former Employee (or his or her Beneficiary) who at any time during the five year period ending on the Determination Date was:

(i) an officer of a Related Company whose Compensation (i) exceeds 50% of the amount in effect under Code section 415(b)(1)(A) and (ii) places him or her within the following highest paid group of officers:

Number of Employees Not Excluded Under Code Section 414(q)5	Number of Highest Paid Officers Included
Less than 30	3
30 to 500	10% of the number of Employees not excluded under Code section 414(q)(5)
More than 500	50

(ii) a more than 5% owner

(iii) a more than 1% Owner whose Compensation exceeds $150,000, or

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(iv) a more than 0.5% Owner who is among the 10 Employees owning the largest interest in a Related Company and whose Compensation exceeds the amount in effect under Code section 415(c)(1)(A).

For Plan Years beginning after December 31, 2001, a “Key Employee” means any employee or former employee (including deceased employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having annual compensation greater than $130,000 (as adjusted under Code section 416(i)(1) for Plan Years beginning after December 31, 2002), a 5% owner of the Employer, or a 1% owner of the Employer having annual compensation of more than $150,000. Annual compensation for such purposes means compensation within the meaning of Code section 415(c)(3). The determination of who is a key employee will be made in accordance with Code section 416(i)(1) and the applicable regulations and other guidance of general applicability issued thereunder.

(d) “Plan Benefit”. The sum as of the Determination Date of (1) an Employee’s Account, (2) the present value of his or her other accrued benefits provided by all qualified plans within the Aggregation Group, and (3) the aggregate distributions made within the five year period ending on such Date. For this purpose, the present value of the Employee’s accrued benefit in a defined benefit plan shall be determined by the method that is used for benefit accrual purposes under all such plans maintained by the Related Companies or, if there is no such single method used under all such plans, as if the benefit accrues no more rapidly than the slowest rate permitted by the fractional accrual rule in Code section 411(b)(1)(C). Plan Benefits shall exclude rollover contributions and similar transfers made after December 31, 1983 as provided in Code section 416(g)(4)(A).

For Plan Years beginning after December 31, 2001, the present value of accrued benefits and the amounts of account balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any Plan aggregated with the Plan under Code section 416(g)(2) during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Code section 416(g)(2)(A)(i). In the case of a distribution made for reason other than separation from service, death or disability, this provision

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shall be applied by substituting “5-year period” for “1-year period.” The accrued benefits and accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Determination Date shall not be taken into account.

(e) “Top Heavy”. The Plan’s status when the Plan Benefits of Key Employees account for more than 60% of the Plan Benefits of all Employees who have performed services at any time during the five year period ending on the Determination Date. The Plan Benefits of Employees who were, but are no longer, Key Employees (because they have not been an officer or Owner during the five year period), are excluded in the determination.

14.2  Special Contributions

(a) Minimum Contribution Requirement. For each Plan Year in which the Plan is Top Heavy, the Employer shall not allow any contributions (other than a Rollover Contribution from a plan maintained by a non Related Company) to be made by or on behalf of any Key Employee unless the Employer makes a contribution (other than contributions made by an Employer in accordance with a Participant’s salary deferral election or contributions made by an Employer based upon the amount contributed by a Participant) on behalf of all Participants who were Eligible Employees as of the last day of the Plan Year in an amount equal to at least 3% of each such Participant’s Compensation.

(b) Overriding Minimum Benefit. Notwithstanding, contributions shall be permitted on behalf of Key Employees if the Employer also maintains a defined benefit plan which automatically provides a benefit which satisfies the Code section 416(c)(1) minimum benefit requirements, including the adjustment provided in Code section 416(h)(2)(A), if applicable. If the Plan is part of an Aggregation Group under which a Key Employee is receiving a benefit and no minimum contribution is provided under any other plan, a minimum contribution of at least 3% of Compensation shall be provided to the Participants specified in the preceding paragraph. In addition, the Employer may offset a defined benefit minimum by contributions (other than contributions made by an Employer in accordance with a Participant’s salary deferral election or contributions made by an Employer based upon the amount contributed by a Participant) made to the Plan.

(c) Matching Contributions. Effective for Plan Years beginning after December 31, 2001, Employer matching contributions shall be taken into account for purposes of satisfying the minimum contribution requirements

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of Code section 416(c)(2) and the Plan. The preceding sentence shall apply with respect to matching contributions under the Plan or, if the Committee provides that the minimum contribution requirement will be met in another plan, such other Plan. Employer matching contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the actual contribution percentage test and the other requirements of Code section 401(m).

14.3  Adjustment to Combined Limits for Different Plans

For each Plan Year in which the Plan is Top Heavy, 100% shall be substituted for 125% in determining the Defined Benefit Fraction and the Defined Contribution Fraction. For Plan Years commencing after December 31, 1999, the provisions of the preceding sentence shall no longer be effective.

14.4  Modification of Top Heavy Rules

The top-heavy requirements of Code section 416 and of Section 14 of this Plan shall not apply in any year beginning after December 31, 2001 in which Plan consists solely of a cash or deferred arrangement that meets the requirements of Code section 401(k)(12) and matching contributions with respect to which the requirements of Code section 401(m)(11) are met.

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15 PLAN ADMINISTRATION

15.1  Plan Delineates Authority and Responsibility

Plan fiduciaries include the Company, the Administrator, the Committee and/or the Trustee, as applicable, whose specific duties are delineated in the Plan and Trust. In addition, Plan fiduciaries also include any other person to whom fiduciary duties or responsibilities are delegated with respect to the Plan. Any person or group may serve in more than one fiduciary capacity with respect to the Plan. To the extent permitted under ERISA section 405, no fiduciary shall be liable for a breach by another fiduciary.

15.2  Fiduciary Standards

Each fiduciary shall:

(a) discharge his or her duties in accordance with the Plan and Trust to the extent they are consistent with ERISA;

(b) use that degree of care, skill, prudence and diligence that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims;

(c) act with the exclusive purpose of providing benefits to Participants and their Beneficiaries, and defraying reasonable expenses of administering the Plan;

(d) diversify Plan investments, to the extent such fiduciary is responsible for directing the investment of Plan assets, so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so; and

(e) treat similarly situated Participants and Beneficiaries in a uniform and nondiscriminatory manner.

15.3  Company is ERISA Plan Administrator

The Company is the administrator of the Plan (within the meaning of ERISA section 3(16)) and is responsible for compliance with all reporting and disclosure requirements, except those that are explicitly the responsibility of the Trustee under applicable law. The Administrator and/or Committee shall have any necessary authority to carry out such functions through the actions of the Administrator, duly appointed officers of the Company and/or the Committee.

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15.4  Administrator Duties

The Administrator or the Committee shall have the discretionary authority to construe the Plan and Trust, other than the provisions which relate to the Trustee, and to do all things necessary or convenient to effect the intent and purposes thereof, whether or not such powers are specifically set forth in the Plan and Trust. Actions taken in good faith by the Administrator or the Committee shall be conclusive and binding on all interested parties, and shall be given the maximum possible deference allowed by law. In addition to the duties listed elsewhere in the Plan and Trust, the Administrator’s and Committee’s authority shall include, but not be limited to, the discretionary authority to:

(a) determine who is eligible to participate, if a contribution qualifies as a rollover contribution, the allocation of Contributions, and the eligibility for loans, in-service withdrawals and distributions;

(b) provide each Participant with a summary plan description no later than 90 days after he or she has become a Participant (or such other period permitted under ERISA section 104(b)(1)), as well as informing each Participant of any material modification to the Plan in a timely manner;

(c) make a copy of the following documents available to Participants during normal work hours: the Plan and Trust (including subsequent amendments), all annual and interim reports of the Trustee related to the entire Plan, the latest annual report and the summary plan description;

(d) determine the fact of a Participant’s death and of any Beneficiary’s right to receive the deceased Participant’s interest based upon such proof and evidence as it deems necessary;

(e) establish and review at least annually a funding policy bearing in mind both the short-run and long-run needs and goals of the Plan and to the extent Participants may direct their own investments, the funding policy shall focus on which Investment Funds are available for Participants to use; and

(f) adjudicate claims pursuant to the claims procedure described in Section 18.

15.5  Advisors May be Retained

The Administrator and Committee may retain such agents and advisors (including attorneys, accountants, actuaries, consultants, record keepers, investment counsel and administrative assistants) as they consider necessary to assist it in the performance of its duties. The Administrator shall also comply with the bonding requirements of ERISA section 412.

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15.6  Delegation of Administrator Duties

The Company, as Administrator of the Plan, has appointed a Committee to administer the Plan on its behalf. The Company shall provide the Trustee with the names and specimen signatures of any persons authorized to serve as Committee members and act as or on its behalf. Any Committee member appointed by the Company shall serve at the pleasure of the Company, but may resign by written notice to the Company. Committee members shall serve without compensation from the Plan for such services. Except to the extent that the Company otherwise provides, any delegation of duties to the Committee shall carry with it the full discretionary authority of the Administrator to complete such duties.

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15.7  Committee Operating Rules

(a) Actions of Majority. Any act delegated by the Company to the Committee may be done by a majority of its members. The majority may be expressed by a vote at a meeting or in writing without a meeting, and a majority action shall be equivalent to an action of all Committee members.

(b) Meetings. The Committee shall hold meetings upon such notice, place and times as it determines necessary to conduct its functions properly.

(c) Reliance by Trustee. The Committee may authorize one or more of its members to execute documents on its behalf and may authorize one or more of its members or other individuals who are not members to give written direction to the Trustee in the performance of its duties. The Committee shall provide such authorization in writing to the Trustee with the name and specimen signatures of any person authorized to act on its behalf. The Trustee shall accept such direction and rely upon it until notified in writing that the Committee has revoked the authorization to give such direction. The Trustee shall not be deemed to be on notice of any change in the membership of the Committee, parties authorized to direct the Trustee in the performance of its duties, or the duties delegated to and by the Committee until notified in writing.

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16 MANAGEMENT OF INVESTMENTS

16.1  Trust Agreement

All Plan assets shall be held by the Trustee in trust, in accordance with those provisions of the Plan and Trust which relate to the Trustee, for use in providing Plan benefits and paying Plan fees and expenses not paid directly by the Employer. Plan benefits shall be drawn solely from the Trust and paid by the Trustee as directed by the Administrator. Notwithstanding, the Company may appoint, with the approval of the Trustee, another trustee to hold and administer Plan assets which do not meet the requirements of Section 16.2.

16.2  Investment Funds

The Administrator is hereby granted authority to direct the Trustee to invest Trust assets in one or more Investment Funds. The number and composition of Investment Funds may be changed from time to time, without the necessity of amending the Plan and Trust. The Trustee may establish reasonable limits on the number of Investment Funds as well as the acceptable assets for any such Investment Fund. Each of the Investment Funds may be comprised of any of the following:

(a) shares of a registered investment company, whether or not the Trustee or any of its affiliates is an advisor to, or other service provider to, such company;

(b) collective investment funds maintained by the Trustee, or any other fiduciary to the Plan, which are available for investment by trusts which are qualified under Code sections 401(a) and 501(a);

(c) individual equity and fixed income securities which are readily tradable on the open market;

(d) synthetic guaranteed investment contracts and guaranteed investment contracts issued by an insurance company and/or synthetic guaranteed investment contracts and bank investment contracts issued by a bank; and

(e) interest bearing deposits (which may include interest bearing deposits of the Trustee).

Any Investment Fund assets invested in a collective investment fund, shall be subject to all the provisions of the instruments establishing and governing such fund. These instruments, including any subsequent amendments, are incorporated herein by reference.

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16.3  Authority to Hold Cash

The Trustee shall have the authority to cause the investment manager of each Investment Fund to maintain sufficient deposit or money market type assets in each Investment Fund to handle the Investment Fund’s liquidity and disbursement needs.

16.4  Trustee to Act Upon Instructions

The Trustee shall carry out instructions to invest assets in the Investment Funds as soon as practicable after such instructions are received from the Administrator, Participants or Beneficiaries. Such instructions shall remain in effect until changed by the Administrator, Participants or Beneficiaries.

16.5  Administrator Has Right to Vote Registered Investment Company Shares

The Administrator shall be entitled to vote proxies or exercise any shareholder rights relating to shares held on behalf of the Plan in a registered investment company. Notwithstanding, the authority to vote proxies and exercise shareholder rights related to such shares held in a Custom Fund is vested as provided otherwise in Section 16.

16.6  Custom Fund Investment Management

The Administrator may designate, with the consent of the Trustee, an investment manager for any Investment Fund established by the Trustee solely for Participants of the Plan and, subject to Section 16.7, any other qualified plan of the Company or a Related Company (a “Custom Fund”). The investment manager may be the Administrator, Trustee or an investment manager pursuant to ERISA section 3(38). The Administrator shall advise the Trustee in writing of the appointment of an investment manager and shall cause the investment manager to acknowledge to the Trustee in writing that the investment manager is a fiduciary to the Plan.

A Custom Fund shall be subject to the following:

(a) Guidelines. Written guidelines, acceptable to the Trustee, shall be established for a Custom Fund. If a Custom Fund consists solely of collective investment funds or shares of a registered investment company (and sufficient deposit or money market type assets to handle the Custom Fund’s liquidity and disbursement needs), its underlying instruments shall constitute the guidelines.

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(b) Authority of Investment Manager. The investment manager of a Custom Fund shall have the authority to vote or execute proxies, exercise shareholder rights, manage, acquire, and dispose of Trust assets.

(c) Custody and Trade Settlement. Unless otherwise agreed to by the Trustee, the Trustee shall maintain custody of all Custom Fund assets and be responsible for the settlement of all Custom Fund trades. For purposes of this Section, shares of a collective investment fund, shares of a registered investment company and synthetic guaranteed investment contracts and guaranteed investment contracts issued by an insurance company and/or synthetic guaranteed investment contracts and bank investment contracts issued by a bank, shall be regarded as the Custom Fund assets instead of the underlying assets of such instruments.

(d) Limited Liability of Co-Fiduciaries. Neither the Administrator nor the Trustee shall be obligated to invest or otherwise manage any Custom Fund assets for which the Trustee or Administrator is not the investment manager nor shall the Administrator or Trustee be liable for acts or omissions with regard to the investment of such assets except to the extent required by ERISA.

16.7  Master Custom Fund

The Trustee may establish, at the direction of the Administrator, a single Custom Fund (the “Master Custom Fund”), for the benefit of the Plan and any other qualified plan of the Company or a Related Company for which the Trustee acts as trustee pursuant to a plan and trust document that contains a provision substantially identical to this provision. The assets of the Plan, to the extent invested in the Master Custom Fund, shall consist only of that percentage of the assets of the Master Custom Fund represented by the shares held by the Plan.

16.8  Authority to Segregate Assets

The Administrator may direct the Trustee to split an Investment Fund into two or more funds in the event any assets in the Investment Fund are illiquid or the value is not readily determinable. In the event of such segregation, the Administrator shall give instructions to the Trustee on what value to use for the split-off assets, and the Trustee shall not be responsible for confirming such value.

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17 TRUST ADMINISTRATION

17.1  Trustee to Construe Trust

The Trustee shall have the discretionary authority to construe those provisions of the Plan and Trust which relate to the Trustee and to do all things necessary or convenient to the administration of the Trust, whether or not such powers are specifically set forth in the Plan and Trust. Actions taken in good faith by the Trustee shall be conclusive and binding on all interested parties, and shall be given the maximum possible deference allowed by law.

17.2  Trustee To Act As Owner of Trust Assets

Subject to the specific conditions and limitations set forth in the Plan and Trust, the Trustee shall have all the power, authority, rights and privileges of an absolute owner of the Trust assets and, not in limitation but in amplification of the foregoing, may:

(a) receive, hold, manage, invest and reinvest, sell, tender, exchange, dispose of, encumber, hypothecate, pledge, mortgage, lease, grant options respecting, repair, alter, insure, or distribute any and all property in the Trust;

(b) borrow money, participate in reorganizations, pay calls and assessments, vote or execute proxies, exercise subscription or conversion privileges, exercise options and register any securities in the Trust in the name of the nominee, in federal book entry form or in any other form as shall permit title thereto to pass by delivery;

(c) renew, extend the due date, compromise, arbitrate, adjust, settle, enforce or foreclose, by judicial proceedings or otherwise, or defend against the same, any obligations or claims in favor of or against the Trust; and

(d) lend, through a collective investment fund, any securities held in such collective investment fund to brokers, dealers or other borrowers and to permit such securities to be transferred into the name and custody and be voted by the borrower or others.

17.3  United States Indicia of Ownership

The Trustee shall not maintain the indicia of ownership of any Trust assets outside the jurisdiction of the United States, except as authorized under ERISA section 404(b).

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17.4  Tax Withholding and Payment

(a) Withholding. The Trustee shall calculate and withhold federal (and, if applicable, state) income taxes as required by law if no election is made or the election is less than the amount required by law. With regard to any taxable distribution that is not an Eligible Rollover Distribution, the Trustee shall calculate and withhold federal (and, if applicable, state) income taxes in accordance with the Participant’s withholding election or as required by law if no election is made.

(b) Taxes Due From Investment Funds. The Trustee shall pay from the Investment Fund any taxes or assessments imposed by any taxing or governmental authority on such Investment Fund or its income, including related interest and penalties.

17.5  Trust Accounting

(a) Annual Report. Within 90 days (or other reasonable period) following the close of the Plan Year, the Trustee shall provide the Administrator with an annual accounting of Trust assets and information to assist the Administrator in meeting ERISA’s annual reporting and audit requirements.

(b) Periodic Reports. The Trustee shall maintain records and provide sufficient reporting to allow the Administrator to properly monitor the Trust’s assets and activity.

(c) Administrator Approval. Approval of any Trustee accounting shall automatically occur 90 days after such accounting has been received by the Administrator, unless the Administrator files a written objection with the Trustee within such time period. Such approval shall be final as to all matters and transactions stated or shown therein and binding upon the Administrator.

17.6  Valuation of Certain Assets

If the Trustee determines the Trust holds any asset which is not readily tradable and listed on a national securities exchange registered under the Securities Exchange Act of 1934, as amended, the Trustee may engage a qualified independent appraiser to determine the fair market value of such property, and the appraisal fees shall be paid from the Investment Fund containing the asset.

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17.7  Legal Counsel

The Trustee may consult with legal counsel of its choice, including counsel for the Employer or counsel of the Trustee, upon any question or matter arising under the Plan and Trust. When relied upon by the Trustee, the opinion of such counsel shall be evidence that the Trustee has acted in good faith.

17.8  Fees and Expenses

The Trustee’s fees for its services as Trustee shall be such as may be mutually agreed upon by the Company and the Trustee. Trustee fees and all reasonable expenses of counsel and advisors retained by the Trustee shall be paid in accordance with Section 6.

17.9  Trustee Duties and Limitations

The Trustee’s duties, unless otherwise agreed to by the Trustee, shall be confined to construing the terms of the Plan and Trust as they relate to the Trustee, receiving funds on behalf of and making payments from the Trust, safeguarding and valuing Trust assets, investing and reinvesting Trust assets in the Investment Funds as directed by the Administrator, Participants or Beneficiaries, and those duties as described in this Section 17.

The Trustee shall have no duty or authority to ascertain whether Contributions are in compliance with the Plan, to enforce collection or to compute or verify the accuracy or adequacy of any amount to be paid to it by the Employer. The Trustee shall not be liable for the proper application of any part of the Trust with respect to any disbursement made at the direction of the Administrator.

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18 RIGHTS, PROTECTION, CONSTRUCTION AND JURISDICTION

18.1  Plan Does Not Affect Employment Rights

The Plan does not provide any employment rights to any Employee. The Employer expressly reserves the right to discharge an Employee at any time, with or without cause, without regard to the effect such discharge would have upon the Employee’s interest in the Plan.

18.2  Compliance With USERRA

Notwithstanding any provision of the Plan to the contrary, effective October 13, 1996, with regard to an Employee who after serving in the uniformed services is reemployed on or after December 12, 1994, within the time required by USERRA, contributions shall be made and benefits and service credit shall be provided under the Plan with respect to his or her qualified military service (as defined in Code section 414(u)(5)) in accordance with Code section 414(u). Furthermore, notwithstanding any provision of the Plan to the contrary, Participant loan payments may be suspended during a period of qualified military service.

18.3  Limited Return of Contributions

Except as provided in this Section 18.3, (i) Plan assets shall not revert to the Employer nor be diverted for any purpose other than the exclusive benefit of Participants and Beneficiaries and defraying reasonable expenses of administering the Plan; and (ii) a Participant’s vested interest shall not be subject to divestment. As provided in ERISA section 403(c)(2), the actual amount of a Contribution or portion thereof made by the Employer (or the current value of such if a net loss has occurred) may revert to the Employer if:

(a) such Contribution or portion thereof is made by reason of a mistake of fact;

(b) a determination with respect to the initial qualification of the Plan under Code section 401(a) is not received and a request for such determination is made within the time prescribed under Code section 401(b) (the existence of and Contributions under the Plan are hereby conditioned upon such initial qualification); or

(c) such Contribution or portion thereof is not deductible under Code section 404 (such Contributions are hereby conditioned upon such deductibility) in the taxable year of the Employer for which the Contribution is made.

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The reversion to the Employer must be made (if at all) within one year of the mistaken payment, the date of denial of qualification, or the date of disallowance of deduction, as the case may be. A Participant shall have no rights under the Plan with respect to any such reversion.

18.4  Assignment and Alienation

As provided by Code section 401(a)(13) and to the extent not otherwise required by law, no benefit provided by the Plan may be anticipated, assigned or alienated, except:

(a) to create, assign or recognize a right to any benefit with respect to a Participant pursuant to a QDRO; or

(b) to use a Participant’s vested Account balance as security for a loan from the Plan which is permitted pursuant to Code section 4975.

18.5  Facility of Payment

If a Plan benefit is due to be paid to a minor or if the Administrator reasonably believes that any payee is legally incapable of giving a valid receipt and discharge for any payment due him or her, the Administrator shall have the payment of the benefit, or any part thereof, made to the person (or persons or institution) whom it reasonably believes is caring for or supporting the payee, unless it has received due notice of claim therefor from a duly appointed guardian or conservator of the payee. Any payment shall to the extent thereof, be a complete discharge of any liability under the Plan to the payee.

18.6  Reallocation of Lost Participant’s Accounts

If the Administrator cannot locate a person entitled to payment of a Plan benefit after a reasonable search, the Administrator may at any time thereafter treat such person’s Account as forfeited and use such amount to reduce future Contributions to be made by an Employer as soon as administratively feasible. If such person subsequently presents the Administrator with a valid claim for the benefit, such person shall be paid the amount treated as forfeited. The Administrator shall pay the amount through an additional amount contributed by the Employer.

18.7  Suspension of Certain Plan Provisions During Conversion Period

Notwithstanding any provision of the Plan to the contrary, during any Conversion Period, in accordance with procedures established by the Administrator and the Trustee, the Administrator may temporarily suspend, in whole or in part, certain provisions under the Plan, which may include, but are not limited to, a Participant’s right to change his or her Contribution election, a Participant’s right to change his or her investment election and a Participant’s right to borrow or withdraw from his or her Account or obtain a distribution from his or her Account.

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18.8  Suspension of Certain Plan Provisions During Other Periods

Notwithstanding any provision of the Plan to the contrary, in accordance with procedures established by the Administrator and the Trustee, the Administrator may temporarily suspend a Participant’s right to borrow or withdraw from his or her Account or obtain a distribution from his or her Account, if (i) the Administrator receives a domestic relations order and the Participant’s Account is a source of the payment for such domestic relations order, or (ii) if the Administrator receives notice that a domestic relations order is being sought by the Participant, his or her spouse, former spouse, child or other dependent (as defined in Code section 152) and the Participant’s Account is a source of the payment for such domestic relations order. Such suspension may continue for a reasonable period of time (as determined by the Administrator) which may include the period of time the Administrator, a court of competent jurisdiction or other appropriate person is determining whether the domestic relations order qualifies as a QDRO.

18.9  Claims Procedure

(a) Right to Make Claim. An interested party who disagrees with the Administrator’s determination of his or her right to Plan benefits must submit a written claim and exhaust this claim procedure before legal recourse of any type is sought. The claim must include the important issues the interested party believes support the claim. The Administrator, pursuant to the authority provided in the Plan, shall either approve or deny the claim.

(b) Process for Denying a Claim. The Administrator’s partial or complete denial of an initial claim must include an understandable, written response covering (1) the specific reasons why the claim is being denied (with reference to the pertinent Plan provisions) and (2) the steps necessary to perfect the claim and obtain a final review.

(c) Appeal of Denial and Final Review. The interested party may make a written appeal of the Administrator’s initial decision, and the Administrator shall respond in the same manner and form as prescribed for denying a claim initially.

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(d) Time Frame. The initial claim, its review, appeal and final review shall be made in a timely fashion, subject to the following time table:

Action	Days to Respond From Last Action
Administrator determines benefit	NA
Interested party files initial request	60 days
Administrator’s initial decision	90 days
Interested party requests final review	60 days
Administrator’s final decision	60 days

However, the Administrator may take up to twice the maximum response time for its initial and final review if it provides an explanation within the normal period of why an extension is needed and when its decision shall be forthcoming.

18.10  Construction

Headings are included for reading convenience. The text shall control if any ambiguity or inconsistency exists between the headings and the text. The singular and plural shall be interchanged wherever appropriate. References to Participant shall include Alternate Payee and/or Beneficiary when appropriate and even if not otherwise already expressly stated.

18.11  Jurisdiction and Severability

The Plan and Trust shall be construed, regulated and administered under ERISA and other applicable federal laws and, where not otherwise preempted, by the laws of the State of Pennsylvania. If any provision of the Plan and Trust is or becomes invalid or otherwise unenforceable, that fact shall not affect the validity or enforceability of any other provision of the Plan and Trust. All provisions of the Plan and Trust shall be so construed as to render them valid and enforceable in accordance with their intent.

18.12  Indemnification by Employer

The Employers hereby agree to indemnify all Plan fiduciaries against any and all liabilities resulting from any action or inaction, (including a Plan termination in which the Company fails to apply for a favorable determination from the Internal Revenue Service with respect to the qualification of the Plan upon its termination), in relation to the Plan or Trust (i) including (without limitation) expenses reasonably incurred in the defense of any claim relating to the Plan or its assets, and amounts paid in any settlement relating to the Plan or its assets, but (ii) excluding liability resulting from actions or inactions made in bad faith, or resulting from the negligence or willful misconduct of the Trustee. The Company shall have the right, but not the obligation, to conduct the defense of any action to which this Section applies. The Plan fiduciaries are not entitled to indemnity from the Plan assets relating to any such action.

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19 AMENDMENT, MERGER, DIVESTITURES AND TERMINATION

19.1  Amendment

The Company reserves the right to amend the Plan and Trust at any time, to any extent and in any manner it may deem necessary or appropriate. The Company (and not the Trustee) shall be responsible for adopting any amendments necessary to maintain the qualified status of the Plan and Trust under Code sections 401(a) and 501(a). The Committee shall have the authority to adopt any Plan and Trust amendments which have no substantial adverse financial impact upon any Employer or the Plan. All interested parties shall be bound by any amendment, provided that no amendment shall:

(a) become effective unless it has been adopted in accordance with the procedures set forth in Section 19.5;

(b) except to the extent permissible under ERISA and the Code, make it possible for any portion of the Trust assets to revert to an Employer or to be used for, or diverted to, any purpose other than for the exclusive benefit of Participants and Beneficiaries entitled to Plan benefits and to defray reasonable expenses of administering the Plan;

(c) decrease the rights of any Participant to benefits accrued (including the elimination of optional forms of benefits) to the date on which the amendment is adopted, or if later, the date upon which the amendment becomes effective, except to the extent permitted under ERISA and the Code; nor

(d) permit a Participant to be paid any portion of his or her Account subject to the distribution rules of Code section 401(k) unless the payment would otherwise be permitted under Code section 401(k).

19.2  Merger

The Plan and Trust may not be merged or consolidated with, nor may its assets or liabilities be transferred to, another plan unless each Participant and Beneficiary would, if the resulting plan were then terminated, receive a benefit just after the merger, consolidation or transfer which is at least equal to the benefit which would be received if either plan had terminated just before such event.

19.3  Divestitures

In the event of a sale by an Employer which is a corporation of: (i) substantially all of the Employer’s assets used in a trade or business to an unrelated corporation, or (ii) a sale of such Employer’s interest in a subsidiary to an unrelated entity or individual, lump sum distributions shall be permitted from the Plan to Participants with respect to Employees who continue employment with the corporation acquiring such assets or who continue employment with such subsidiary, as applicable. The Participant must have a severance from service with the Employer as a condition to receiving a distribution as provided above.

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Notwithstanding the foregoing, distributions shall not be permitted if the purchaser agrees, in connection with the sale, to be substituted as the Company as the sponsor of the Plan or to accept a transfer in a transaction subject to Code section 414(l)(1) of the assets and liabilities representing the Participants’ benefits into a plan of the purchaser or a plan to be established by the purchaser.

19.4  Plan Termination and Complete Discontinuance of Contributions

The Company may, at any time and for any reason, terminate the Plan in accordance with the procedures set forth in Section 19.5, or completely discontinue contributions. Upon either of these events, or in the event of a partial termination of the Plan within the meaning of Code section 411(d)(3), the Accounts of each affected Participant shall be fully vested.

In the event of the Plan’s termination, if no successor plan is established or maintained, lump sum distributions shall be made in accordance with the terms of the Plan as in effect at the time of the Plan’s termination or as thereafter amended, provided that a post-termination amendment shall not be effective to the extent that it violates Section 19.1 unless it is required in order to maintain the qualified status of the Plan upon its termination. The Trustee’s and Employer’s authority shall continue beyond the Plan’s termination date until all Trust assets have been liquidated and distributed.

19.5  Amendment and Termination Procedures

The following procedural requirements shall govern the adoption of any amendment or termination (a “Change”) of the Plan and Trust:

(a) The Company may adopt any Change by action of its board of directors in accordance with its normal procedures.

(b) The Committee may adopt any Change within the scope of its authority provided under Section 19.1 and in the manner specified in Section 15.7(a).

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(c) Any Change must be (1) set forth in writing, and (2) signed and dated by an executive officer of the Company or, in the case of a Change adopted by the Committee, at least one of its members.

(d) If the effective date of any Change is not specified in the document setting forth the Change, it shall be effective as of the date it is signed by the last person whose signature is required under clause (2) above, except to the extent that another effective date is necessary to maintain the qualified status of the Plan and Trust under Code sections 401(a) and 501(a).

(e) No Change shall become effective until it is accepted and signed by the Trustee (which acceptance shall not unreasonably be withheld).

19.6  Termination of Employer’s Participation

Any Employer may, at any time and for any reason, terminate its Plan participation by action of its board of directors in accordance with its normal procedures. Written notice of such action shall be signed and dated by an executive officer of the Employer and delivered to the Company. If the effective date of such action is not specified, it shall be effective on, or as soon as reasonably practicable after, the date of delivery. Upon the Employer’s request, the Company may instruct the Trustee and Administrator to spin off all affected Accounts and underlying assets into a separate qualified plan under which the Employer shall assume the powers and duties of the Company. Alternatively, the Company may continue to maintain the Accounts under the Plan.

19.7  Replacement of the Trustee

The Trustee may resign as Trustee under the Plan and Trust or may be removed by the Company at any time upon at least 90 days written notice (or less if agreed to by both parties). In such event, the Company shall appoint a successor trustee by the end of the notice period. The successor trustee shall then succeed to all the powers and duties of the Trustee under the Plan and Trust. If no successor trustee has been named by the end of the notice period, the Company’s chief executive officer shall become the trustee, or if he or she declines, the Trustee may petition the court for the appointment of a successor trustee.

19.8  Final Settlement and Accounting of Trustee

(a) Final Settlement. As soon as administratively feasible after its resignation or removal as Trustee, the Trustee shall transfer to the successor trustee all property currently held by the Trust. However, the Trustee is

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authorized to reserve such sum of money as it may deem advisable for payment of its accounts and expenses in connection with the settlement of its accounts or other fees or expenses payable by the Trust. Any balance remaining after payment of such fees and expenses shall be paid to the successor trustee.

(b) Final Accounting. The Trustee shall provide a final accounting to the Administrator within 90 days of the date Trust assets are transferred to the successor trustee.

(c) Administrator Approval. Approval of the final accounting shall automatically occur 90 days after such accounting has been received by the Administrator, unless the Administrator files a written objection with the Trustee within such time period. Such approval shall be final as to all matters and transactions stated or shown therein and binding upon the Administrator.

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APPENDIX A - INVESTMENT FUNDS

I. Investment Funds Available

The Investment Funds offered under the Plan as of the Effective Date include this set of daily valued funds:

Funds

Vanguard Prime Money Market Fund

Vanguard Retirement Savings Trust

Vanguard Total Bond Market Index Fund

Vanguard Asset Allocation Fund

Vanguard 500 Index fund

Vanguard PRIMECAP Fund

Vanguard Growth and Income Fund

Vanguard Mid-Cap Index Fund

Vanguard Windsor Fund

VanKampen Emerging Growth Fund

RS Emerging Growth Fund

Janus Overseas Fund

Janus Twenty Fund

II. Default Investment Fund

The default Investment Fund as of the Effective Date is the Vanguard Prime Money Market Fund.

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APPENDIX B - PAYMENT OF PLAN FEES AND EXPENSES

As of the Effective Date, payment of Plan fees and expenses shall be as follows:

I. Investment Management Fees: These are paid by Participants in that management fees reduce the investment return reported and credited to Participants.

II. Recordkeeping Fees: These are paid by Participants and are assessed monthly and billed/collected from Accounts quarterly.

III. Additional Fees Paid by Participants: Audit Fees, periodic RFI expenses, Plan related legal and consulting fees, and other expenses necessary for plan administration shall be added to the recordkeeping fees and assessed against Participants’ Accounts, per 2) above. Estimates of the fees shall be determined and reconciled, at least annually.

IV. Additional Fees Paid by Employer: All other Plan related fees and expenses shall be paid by the Employer. To the extent that the Administrator later elects that any such fees shall be borne by Participants, the fees shall be added to the recordkeeping fees and assessed against Participants’ Accounts, per 2) above and estimates of the fees shall be determined and reconciled, at least annually.

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APPENDIX C - LOAN INTEREST RATE

Effective January 1, 1998, the interest rate charged on Participant loans shall be equal to the U.S. Treasury rate for a note of the same maturity, plus 1%.

Effective January 1, 1999, the interest rate charged on Participant loans shall be equal to the prime rate published in The Wall Street Journal at the time the loan is processed, plus 1%. If multiple prime rates are published in The Wall Street Journal, the prime rate selected shall be the rate closest to the last prime rate used for this purpose.

The rate may be determined once for all loans made in a month, and the maturity may be determined to the nearest year.

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AMENDMENT NO. 1 TO THE

JACOBS ENGINEERING GROUP INC. 401(k) PLUS SAVINGS PLAN AND TRUST

AS AMENDED AND RESTATED APRIL 1, 2003

The Jacobs Engineering Group Inc. 401(k) Plus Savings Plan and Trust, as Amended and Restated April 1, 2003, is hereby further amended by adding Section 4.4 to the Plan to read as follows, effective for the Plan Year ending December 31, 2005:

4.4.  Automatic Rollovers of Mandatory Distributions.

In the event of a mandatory distribution greater than $1,000 in accordance with the provisions of Section 11 of the Plan, if the Participant does not elect to have such distribution paid directly to an eligible retirement plan specified by the Participant in a direct rollover or to receive the distribution directly in accordance with Section 11 of the Plan, then the Plan Administrator shall pay the distribution in a direct rollover to an individual retirement plan designed by the Plan Administrator.

Date: March 28, 2005	Jacobs Engineering Group Inc.
	By:	/S/ John W. Prosser, Jr.
		Title:	Executive Vice President Finance and Administration

AMENDMENT NO. 2 TO THE

JACOBS ENGINEERING GROUP INC. 401(k) PLUS SAVINGS PLAN AND TRUST

AS AMENDED AND RESTATED APRIL 1, 2003

This amendment to the Jacobs Engineering Group Inc. 401(k) Plus Savings Plan and Trust, as Amended and Restated April 1, 2003 (the “Plan”), as described below, is intended to (i) permit Plan participants to specify the extent to which partial distributions are withdrawn from their separate sub-accounts, effective January 1, 2006; (ii) bring the Plan document into compliance with the updated Treasury Department regulations under Sections 401(k) and 401(m) of the Internal Revenue Code, effective January 1, 2006; and (iii) reflect the merger of a portion of the Jacobs Construction Services 401(k) Plus Savings Plan and Trust into the Plan, effective at midnight on January 1, 2007.

The changes in this amendment are effective as noted.

1. Effective January 1, 2006, Section 1.20 is amended by replacing the reference to Treas. Reg. §1.401(k)-1(d)(2)(ii) with a reference to Treas. Reg. §1.401(k)-1(d)(3).

2. Effective January 1, 2006, Section 10.7 (“Hardship Withdrawals”) is amended by modifying subsection (b) to read as follows:

(b) “Deemed Financial Need”. An immediate and heavy financial need relating to:

(1) the payment of unreimbursed medical care expenses (described under Code section 213(d), but without regard to whether the expenses exceed 7.5% of adjusted gross income) incurred (or to be incurred) by the Employee, his or her spouse or dependents (as defined in Code section 152, without regard to subsections (b)(1), (b)(2), and (d)(1)(B) of Code section 152);

(2) the purchase (excluding mortgage payments) of the Employee’s principal residence;

(3) the payment of unreimbursed tuition, related educational fees and room and board for up to the next 12 months of post-secondary education for the Employee, his or her spouse, children, or dependents (as defined in Code section 152, without regard to subsections (b)(1), (b)(2), and (d)(1)(B) of Code section 152);

(4) the payment of amounts necessary for the Employee to prevent losing his or her principal residence through eviction or foreclosure on the mortgage;

(5) the payment of burial or funeral expenses for the Employee’s deceased parent, spouse, children or dependents (as defined in Code section 152, without regard to subsection (d)(1)(B) of Code section 152);

(6) the payment of expenses for the repair of damage to the Employee’s principal residence that would qualify for the casualty deduction under Code section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income); or

(7) any other circumstance specifically permitted under Treasury Regulations section 401(k)-1(d)(3)(iii)(B).

3. Effective January 1, 2006, Section 11.1 (“Benefit Information, Notices, and Election”) is amended by replacing the phrase “separation from service,” in the second paragraph, with the phrase “severance from employment,” and by replacing the phrase “separates from service,” in the second paragraph, with the phrase “has a severance from employment.”

4. Effective January 1, 2006, Section 11.4 (“Source and Timing of Distribution Funding”) is amended by adding the following at the end of the first paragraph:

In the case of a partial distribution pursuant to Section 11.3(b), the Participant may specify the amount to be distributed from each of his or her Accounts. If a Participant fails to specify the source of the distribution in this manner, the distributed amount shall be pro-rated among each of the Participant’s Accounts.

5. Effective January 1, 2006, Section 12.2 (“ADP and ACP Tests”) is amended by deleting the second to last paragraph.

6. Effective January 1, 2006, Section 12.6 (“Adjustment for Investment Gain or Loss”) is amended to read, in its entirety, as follows:

Any excess Deferrals or Contributions to be refunded to a Participant in accordance with this Section 12 shall be adjusted for investment gain or loss, including investment gain or loss attributable to the period between the end of the applicable Plan Year and the date of distribution.

7. Effective at midnight on January 1, 2007, a new Section 19.9 is added to read as follows:

19.9  Merger of Jacobs Construction Services 401(k) Plus Savings Plan and Trust.

Effective January 1, 2007, the account balances of participants in the Jacobs Construction Services 401(k) Plus Savings Plan and Trust who are classified as “staff” employees were merged into this Plan. From that date onward, amounts merged into this Plan from the Jacobs Construction Services 401(k) Plus Savings Plan and Trust have been governed by the terms of this Plan.

Date: December 27, 2006	Jacobs Engineering Group Inc.
	By:	/S/ John W. Prosser, Jr.
		Title:	Executive Vice President Finance and Administration

AMENDMENT NO. 3 TO THE

JACOBS ENGINEERING GROUP INC. 401(k) PLUS SAVINGS PLAN AND TRUST

AS AMENDED AND RESTATED APRIL 1, 2003

This amendment to the Jacobs Engineering Group Inc. 401(k) Plus Savings Plan and Trust, as Amended and Restated April 1, 2003 (the “Plan”), as described below, is intended to clarify certain Plan provisions and bring the Plan into full compliance with the 2005 Cumulative List of Changes in Plan Qualification Requirements, as set forth in IRS Notice 2005-101.

The changes in this amendment are effective as noted.

1. Effective for loans made on or after January 1, 2004, Section 9.12 (“Loan Default”) is amended by adding a new third paragraph to read as follows:

A Participant with an outstanding defaulted loan may not receive a subsequent loan, unless the Participant (i) makes a full repayment of the defaulted loan balance, (ii) provides adequate security for the subsequent loan (in addition to the Participant’s accrued benefit), or (iii) enters into an enforceable agreement to repay the loan through direct payroll deductions.

2. Effective April 1, 2003, Section 11.6 (“Payment Within Life Expectancy”) is renamed “Compliance with Code Section 401(a)(9)” and is amended to read, in its entirety, as follows:

11.6  Compliance with Code Section 401(a)(9)

Notwithstanding any provision of the Plan to the contrary, all distributions from the Plan shall be made in accordance with the minimum distribution requirements of Code section 401(a)(9) (including the incidental death benefit rule of Code section 401(a)(9)(G)) and the regulations thereunder.

3. Effective January 1, 2002, Sections 13.5 through 13.8 are deleted in their entirety, and Section 13.9 is renumbered as Section 13.5.

Date: January 29, 2007	Jacobs Engineering Group Inc.
	By:	/S/ John W. Prosser, Jr.
		Title:	Executive Vice President Finance and Administration

EX-21

EXHIBIT 21

JACOBS ENGINEERING GROUP INC.

SUBSIDIARIES OF THE REGISTRANT

The following table sets forth all subsidiaries of the Company other than subsidiaries that, when considered in the aggregate, would not constitute a significant subsidiary, including the percentage of issued and outstanding voting securities beneficially owned by the Company.

Jacobs Engineering Company, a California corporation	100.00	%
Jacobs Government Services Company, a California corporation	100.00	%
Jacobs Field Services North America Inc., a Texas corporation	100.00	%
JE Remediation Technologies Inc., a Louisiana corporation	100.00	%
Jacobs Consultancy Inc., a Texas corporation	100.00	%
Jacobs Engineering Inc., a Delaware corporation	100.00	%
CODE International Assurance Ltd., a Nevada corporation	100.00	%
Jacobs Engineering España, S.L., a Spanish corporation	100.00	%
Jacobs Engineering Ireland Limited, a Republic of Ireland corporation	100.00	%
Jacobs Lend Lease Ireland Limited, a Republic of Ireland corporation	50.00	%
Jacobs Engineering de México, S.A. de C.V., a Mexican corporation	100.00	%
Jacobs Luxembourg, Sarl, a Luxembourg corporation	100.00	%
Jacobs Holding France SAS, a French corporation	100.00	%
Jacobs France SAS, a French corporation	100.00	%
Jacobs Italia, SpA, an Italian corporation	100.00	%
Jacobs Spain S.L., a Spanish corporation	100.00	%
Jacobs Engineering Deutschland GmbH, a German corporation	100.00	%
Jacobs Services GmbH, a German corporation	100.00	%
Jacobs Projects GmbH, a German corporation	100.00	%
Jacobs Alliance Services GmbH, a German corporation	100.00	%
Jacobs Nederland BV, a Netherlands corporation	100.00	%
Jacobs Österreich GmbH, a Austrian corporation	100.00	%
Jacobs Advanced Manufacturing B.V., a Netherlands corporation	100.00	%
Jacobs België N.V., a Belgian corporation	100.00	%
Interhuis SA, a Belgian corporation	100.00	%
Jacobs Sverige AB, a Swedish corporation	100.00	%
Jacobs U.K. Holdings Limited, a corporation of England and Wales	100.00	%
Jacobs Engineering U.K. Limited, a corporation of England and Wales	100.00	%
Jacobs Consultancy U.K. Limited, a corporation of England and Wales	100.00	%
Jacobs Industrial Services U.K. Limited, a corporation of England and Wales	100.00	%
Jacobs Engineering India Private Limited, an India corporation	100.00	%
GIBB Holdings Limited, a corporation of England and Wales	100.00	%
Jacobs U.K. Limited, a corporation of Scotland	100.00	%
Allott & Lomax Holdings Limited, a corporation of England and Wales	100.00	%
Allott Projects Limited, a corporation of England and Wales	100.00	%
Babtie International Limited, a corporation of Scotland	100.00	%
Babtie Spol s.r.o, a Czech Republic corporation	100.00	%
Jacobs China Limited, a Hong Kong corporation	100.00	%
Babtie Asia Pte Limited, a Singapore corporation	100.00	%
Babtie Asia Technical & Management Consultants Sdn Bhd, a Malaysian corporation	100.00	%
Bear Scotland Limited, a corporation of Scotland	25.00	%
Ringway Babtie Limited, a corporation of Scotland	25.00	%
Le Crossing Company Limited, a corporation of Scotland	57.00	%
Babtie Fichtner Limited, a corporation of Scotland	50.00	%

WUXI Babtie Engineering Consultants Company Limited, a Peoples Republic of China corporation	50.00	%
Ringway Jacobs Limited, a corporation of England and Wales	50.00	%
Jacobs GIBB Limited, a corporation of England and Wales	100.00	%
Westminster & Earley Services Limited, a corporation of England and Wales	100.00	%
Jacobs Suomi Oy, a corporation of Finland	100.00	%
Neste Jacobs Oy, a corporation of Finland	40.00	%
Jacobs International Holdings Inc., a Delaware corporation	100.00	%
JacobsGIBB Hellas A.E. a Greek corporation	100.00	%
Jacobs (Polska) SP z.o.o., a Polish corporation	100.00	%
Jacobs Puerto Rico Inc., a Puerto Rican corporation	100.00	%
Jacobs Holdings Singapore Pte. Limited, a Singapore corporation	100.00	%
Jacobs Constructors Singapore Pte. Limited, a Singapore corporation	100.00	%
Jacobs Engineering Singapore Pte. Limited, a Singapore corporation	100.00	%
Jacobs-Lend Lease Singapore Pte. Limited, a Singapore corporation	50.00	%
Jacobs Pan-American Corporation, a Virgin Islands corporation	100.00	%
Jacobs Canada Inc., a Canadian corporation (“J-CAN”)	100.00	%
Jacobs Industrial Services Limited, a Canadian corporation	100.00	%
Jacobs Consultancy Canada Inc., a Canadian corporation	100.00	%
Jacobs DCSA Saudi Arabia Limited, a Saudi Arabian corporation	60.00	%
Jacobs Advisers Inc., a California corporation	100.00	%*
Jacobs Civil Consultants, Inc., a New York corporation	100.00	%
JE Professional Resources, Inc., a California corporation	100.00	%
Jacobs Technology Inc., a Tennessee corporation	100.00	%
Jacobs Australia, Pty Limited, an Australian corporation	100.00	%
Jacobs Industrial Services Inc., a Delaware corporation	100.00	%
Jacobs Industrial Maintenance Company LLC., a U.S. Virgin Islands corporation	100.00	%
Jacobs Maintenance Inc., a Louisiana corporation	100.00	%
CRSS International Inc., a South Carolina corporation	100.00	%
Jacobs Engineering New York Inc., a New York corporation	100.00	%
Edwards and Kelcey Inc., a New Jersey corporation	100.00	%
Edwards and Kelcey Engineers Inc., a New York corporation	100.00	%
Edwards and Kelcey Technology Inc., a New Jersey corporation	100.00	%
Edwards and Kelcey Caribe Inc., a Puerto Rico corporation	100.00	%
Edwards and Kelcey Design Services Inc., a Illinois corporation	100.00	%
Edwards and Kelcey Partners Inc., a New Jersey corporation	99.00	%
EK Design Services Inc., a Florida corporation	100.00	%
Edwards and Kelcey Wireless LLC, a New Jersey corporation	100.00	%

* Ownership is divided between Jacobs Engineering Group Inc. and J-CAN.

All subsidiaries and affiliates are included in the Consolidated Financial Statements.

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-8 No. 333-67048) pertaining to the Jacobs Engineering Group Inc. Global Employee Stock Purchase Plan,

(2) Registration Statement (Form S-8 No. 333-123448) pertaining to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan

(3) Registration Statement (Form S-8 No. 333-38984) pertaining to the Jacobs Engineering Group Inc. 1999 Outside Director Stock Plan

(4) Registration Statement (Form S-8 No. 333-60296) pertaining to the Jacobs Engineering Group Inc. 1989 Employee Stock Purchase Plan, and

(5) Registration Statement (Form S-8 No. 333-45475) pertaining to the Jacobs Engineering Group Inc. 1981 Executive Incentive Plan;

of our reports dated November 16, 2007, with respect to the consolidated financial statements of Jacobs Engineering Group Inc. and subsidiaries and the effectiveness of internal control over financial reporting of Jacobs Engineering Group Inc., included in the Annual Report (Form 10-K) for the year ended September 30, 2007.

/s/ Ernst & Young LLP

Los Angeles, California

November 27, 2007

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Craig L. Martin, certify that:

1. I have reviewed this Annual Report on Form 10-K of Jacobs Engineering Group Inc.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    CRAIG L. MARTIN        

Craig L. Martin

Chief Executive Officer

November 27, 2007

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John W. Prosser, Jr., certify that:

1. I have reviewed this Annual Report on Form 10-K of Jacobs Engineering Group Inc.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/    JOHN W. PROSSER, JR.        

John W. Prosser, Jr.

Chief Financial Officer

November 27, 2007

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to 18 U.S.C. Section 1350

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Jacobs Engineering Group Inc. (the “Company”) on Form 10-K for the year ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Craig L. Martin, Chief Executive Officer of the Company, certify, 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 results of operations of the Company.

/s/    CRAIG L. MARTIN        

Craig L. Martin

Chief Executive Officer

November 27, 2007

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

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to 18 U.S.C. Section 1350

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Jacobs Engineering Group Inc. (the “Company”) on Form 10-K for the year ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John W. Prosser, Jr., Chief Financial Officer of the Company, certify, 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 results of operations of the Company.

/s/    JOHN W. PROSSER, JR.        

John W. Prosser, Jr.

Executive Vice President,
Finance and Administration

November 27, 2007

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