JACOBS ENGINEERING GROUP INC /DE/, DEF 14A, 2000-01-07

JACOBS ENGINEERING GROUP INC /DE/
DEF 14A, 2000-01-07
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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

Jacobs Engineering Group, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:
<PAGE>

[LOGO OF JACOBS ENGINEERING APPEARS HERE]

Notice of 2000
Annual Meeting of Shareholders

Proxy Statement

Annual Financial Statements and
Review of Operations

<PAGE>

JACOBS ENGINEERING GROUP INC.
1111 South Arroyo Parkway
Pasadena, California 91105

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT

TO OUR SHAREHOLDERS

The Annual Meeting of Shareholders of Jacobs Engineering Group Inc. will be
held on Tuesday, February 8, 2000, at 3:30 p.m. at 1111 South Arroyo Parkway,
Pasadena, California, for the following purposes:

1. To elect four directors to hold office until the 2003 annual meeting;

2. To approve the Company's 1999 Stock Incentive Plan;

3. To approve the Company's 1999 Outside Director Stock Plan;

4. To approve the appointment of Ernst & Young LLP as auditors for the year
ending September 30, 2000; and

5. To act upon such other matters as may properly come before the meeting.

The shareholders of record at the close of business on January 3, 2000, will
be entitled to vote at such meeting and any adjournment thereof. This notice
and proxy statement and the accompanying proxy are being mailed to such
shareholders on or about January 7, 2000. The stock transfer books will not
close.

By Order of the Board of Directors

WILLIAM C. MARKLEY, III
Vice President, General Counsel and
Secretary

Dated: January 3, 2000

You are urged to date, sign, and return promptly the enclosed proxy in the
envelope provided.

PLEASE NOTE THE ADDRESS WHERE THE ANNUAL MEETING WILL BE HELD
<PAGE>

JACOBS ENGINEERING GROUP INC.
1111 South Arroyo Parkway
Pasadena, California 91105

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

PROXY STATEMENT

This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Jacobs Engineering Group Inc., a Delaware corporation
(the "Company"), of proxies to be used at the annual meeting of shareholders
of the Company to be held on February 8, 2000, and any adjournment thereof.
The expenses of the solicitation will be paid by the Company. Some officers
and regular employees may solicit proxies personally and by telephone if
deemed necessary. The proxy is revocable by you by written notice to the
Secretary of the Company at any time prior to the exercise of the authority
granted thereby or by your being present at the meeting and electing to vote
in person.

The holders of common stock of record at the close of business on January 3,
2000, the record date fixed by the Board of Directors (the "Record Date"),
will be entitled to one vote per share on all business of the meeting. This
proxy statement and the accompanying proxy are being mailed on or about
January 7, 2000, to the shareholders of record on the Record Date. As of the
Record Date the Company had 26,149,156 shares of common stock outstanding.

In connection with the solicitation of proxies by the Board of Directors for
the Annual Meeting of Shareholders, the Board of Directors has designated
Joseph J. Jacobs, Noel G. Watson and John W. Prosser, Jr. as proxies. Shares
represented by all properly executed proxy cards received in time for the
meeting will be voted in accordance with the choices specified on the proxy
card. Unless contrary instructions are indicated on the proxy card, the shares
of common stock will be voted FOR the election of the nominees listed below
under "1. Election of Directors". Where no choice is specified, the shares of
common stock will be voted FOR the 1999 Stock Incentive Plan described below
under "2. Approval of the 1999 Stock Incentive Plan," FOR the 1999 Outside
Directors Stock Plan described below under "3. Approval of the 1999 Outside
Director Stock Plan" and FOR the appointment of Ernst & Young LLP as the
independent auditors for the Company for the year ending September 30, 2000,
as described under "4. Approval of Ernst & Young LLP as Auditors", below. The
Board of Directors is not aware of any other issue to be brought before the
meeting. If other matters are properly brought before the meeting, then the
proxies will vote in accordance with their best judgment.

The presence in person or by proxy of the holders of a majority of the
outstanding shares of common stock will constitute a quorum for the
transaction of business at the meeting.

For purposes of the quorum and the discussion below regarding the vote
necessary to take shareholder action, shareholders of record who are present
at the meeting in person or by proxy and who abstain, including brokers
holding customers' shares of record who cause abstentions to be recorded at
the meeting, are considered shareholders who are present and entitled to vote,
and they count toward the quorum.

Brokers holding shares of record for customers generally are not entitled to
vote on certain matters unless they receive voting instructions from their
customers. As used herein, "uninstructed shares" means shares held by a broker
who has not received instructions from its customers on such matters and the
broker has so notified the Company on a proxy form in accordance with industry
practice or has otherwise advised the Company that it lacks voting authority.
As used herein, "broker non-votes" means the votes that could have been cast
on the matter in question by brokers with respect to instructed shares if the
brokers had received their customers' instructions.

1
<PAGE>

Directors are elected by a plurality, and the four nominees who receive the
most votes will be elected. Abstentions and broker non-votes will not be taken
into account in determining the outcome of the election.

To be adopted, Proposals 2, 3 and 4 in this Proxy Statement must receive the
affirmative vote of the majority of the shares present in person or by proxy
at the meeting and entitled to vote. Uninstructed shares are not entitled to
vote on these matters, and, therefore, broker non-votes do not affect the
outcome. Abstentions have the effect of negative votes.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following tables, based in part upon information supplied by officers,
directors and principal shareholders, set forth certain information regarding
the ownership of the common stock of the Company as of the Record Date by (i)
all those persons known by the Company to be beneficial owners of more than
five percent of the outstanding common stock of the Company; (ii) each
director; (iii) each executive officer named in the compensation tables, below
("Named Executive Officer"); and (iv) all officers and directors of the
Company as a group. Unless otherwise indicated, each of these shareholders has
sole voting and investment power with respect to the shares beneficially
owned, subject to community property laws where applicable.

Security Ownership of Certain Beneficial Owners (a)

<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Name and Address Ownership Class
---------------- ---------- ----------
<S> <C> <C>
Joseph J. Jacobs...................................... 3,536,180(b) 13.52%(b)
1111 South Arroyo Parkway
Pasadena, California 91105
</TABLE>

- --------
(a) Security ownership information for beneficial owners is taken from
statements filed with the Securities and Exchange Commission pursuant to
Sections 13(d), (f) and (g) of the Securities Exchange Act of 1934, as
amended, and information made known to the Company.
(b) Dr. Jacobs has sole voting and dispositive power over all shares except
6,180 shares that are owned by the Jacobs Family Foundation as to which he
shares voting and dispositive power.

2
<PAGE>

Security Ownership of Directors, Nominees and Named Executive Officers

<TABLE>
<CAPTION>
Amount of
Common Stock Unexercised Percent
Name of Beneficial Owner Beneficially Owned(a) Options(b) Total of Class(c)
- ------------------------ --------------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Outside Directors:
Joseph F. Alibrandi..... 2,000 6,350 8,350 *
Peter H. Dailey......... 2,000 6,350 8,350 *
Robert B. Gwyn.......... 1,000(d) 4,350 5,350(d) *
Linda K. Jacobs......... 194,000(e) 6,350 200,350(e) 0.77%
James Clayburn LaForce.. 2,625 6,350 8,975 *
Dale R. Laurance........ 1,000 5,350 6,350 *
Linda Fayne Levinson.... -- 3,350 3,350 *
David M. Petrone........ 10,000 6,350 16,350 *
James L. Rainey, Jr. ... 1,450(f) 5,100 6,550(f) *
Employee Directors
(other than NEOs):
William R. Kerler....... 44,753 34,600 79,353 0.30%
Named Executive
Officers:
Noel G. Watson.......... 178,124 221,000 399,124 1.53%
Joseph J. Jacobs........ 3,536,180(e) -- 3,536,180(e) 13.52%
Richard E. Beumer....... 5,000 -- 5,000 *
Thomas R. Hammond....... 12,646 50,200 62,846 0.24%
Richard J. Slater....... 36,371 58,200 94,571 0.36%
James C. Uselton........ 5,000 -- 5,000 *
All directors and
executive officers
as a group............. 4,220,274(g) 753,500 4,973,774(g) 19.02%
</TABLE>

- --------
* Less than 0.1%
(a) Ownership is direct unless indicated otherwise.
(b) Includes only unexercised options exercisable within 60 days following the
date of this proxy statement.
(c) Calculation is based on 26,149,156 shares of Common Stock outstanding as
of January 3, 2000.
(d) Includes 1,000 shares held in a family limited partnership over which Mr.
Gwyn has voting and dispositive power.
(e) Includes 6,180 shares held by the Jacobs Family Foundation as to which Dr.
Linda K. Jacobs and Dr. Joseph J. Jacobs share voting and dispositive
power with the other directors and officers of the Foundation.
(f) Includes 750 shares held in a trust for the benefit of Mr. Rainey's spouse
as to which Mr. Rainey shares voting and dispositive power.
(g) Includes 10,000 shares owned by six executive officers and subject to
certain restrictions as to transferability.

1. ELECTION OF DIRECTORS

The bylaws of the Company presently provide for thirteen directors. The
Certificate of Incorporation and the bylaws of the Company divide the Board of
Directors into three classes with the terms of office of the directors of each
class ending in different years. The terms of Classes I, II and III presently
end at the annual meetings in 2000, 2001 and 2002, respectively. Class I has
four directors, Class II has five directors, and Class III has four directors.

The nominees for Class I are to be voted upon at this annual meeting. The
directors in Classes II and III will continue in office until expiration of
their respective terms. The Board of Directors has nominated Noel G. Watson,
Dr. James Clayburn LaForce, David M. Petrone and James L. Rainey, Jr. for
election as Class I directors for three year terms expiring at the 2003 annual
meeting.

3
<PAGE>

The persons named as proxies on the accompanying proxy card intend to vote
the shares as to which they are granted authority to vote for the election of
the nominees listed above. The proxies may not vote for a greater number of
persons than four.

Although the Board of Directors does not know of any reason why any nominee
will be unavailable for election, in the event any nominee should be
unavailable at the time of the meeting, the proxies may be voted for a
substitute nominee as selected by the Board of Directors.

The following table sets forth information about these nominees and the
directors whose terms of office do not expire at the 2000 annual meeting.

<TABLE>
<CAPTION>
Director
Name and Positions Held with the Company Class since
---------------------------------------- ----- --------
<S> <C> <C>
Joseph J. Jacobs, Chairman of the Board and Director. Dr.
Jacobs, age 83, was chief executive officer of the Company and
its predecessors from 1957 until November 19, 1992. Dr. Jacobs
founded the Company as a sole proprietorship in 1947 and
incorporated it in 1957. ...................................... III 1974
Richard E. Beumer, Vice Chairman of the Board and Director. Mr.
Beumer, age 61, joined the Company in January 1999 in
connection with the Company's merger with Sverdrup Corporation.
Mr. Beumer joined Sverdrup in 1959. He became a member of
Sverdrup's board of directors in 1979. Mr. Beumer was elected
president of Sverdrup Corporation in 1993, assumed the
additional role of CEO in 1994, and became the chairman of
Sverdrup's board of directors in 1996. Mr. Beumer is also a
director of Aid Association for Lutherans (a fraternal
insurance company), and he serves on the Board of Trustees of
Valparaiso University. ........................................ III 1999
Noel G. Watson, President, Chief Executive Officer and
Director. Mr. Watson, age 63, has been with the Company since
1965 and has been President and Chief Executive Officer of the
Company for more than the past five years. .................... I 1986
Joseph F. Alibrandi, Director. Mr. Alibrandi, age 71, was
Chairman of the Board (since 1985) and Chief Executive Officer
(since 1996) of Whittaker Corporation until July 1999 when
Whittaker was acquired by Meggitt plc. Mr. Alibrandi is also a
director of Burlington Northern Southern Pacific Corp. and
Catellus Development Corporation. He was also a director of
BankAmerica Corporation and Bank of America, N.T.& S.A. from
April 1992 to September 1998. ................................. II 1988
The Hon. Peter H. Dailey, Director. Mr. Dailey, age 69, is
Chairman of Enniskerry Financial, a private investment firm. He
is also Chairman of the Board and a director of Fedco, Inc. He
was formerly U.S. Ambassador to Ireland and Special Envoy to
NATO. Prior to government service, he was Vice-chairman of
Interpublic Group of the Dailey International Group. He is a
Director of Chicago Title and Trust, Pinkerton's, Inc.,
Sizzler, Inc. and Wirthlin Worldwide. ......................... II 1991
Robert B. Gwyn, Director. Mr. Gwyn, age 60, is retired. He was
a Managing Director of Amaryn Group, a private investment
company, from 1994 until 1998. He was President, CEO and
Chairman of the Board of Agricultural Minerals and Chemicals,
Inc., a company engaged in the fertilizer and methanol
businesses, from 1990 until 1994, when that company was sold. . II 1995
Linda K. Jacobs, Director. Dr. Linda K. Jacobs, age 52, is
President of Middle East Technology Assistance, a non-profit
corporation. From 1985 until 1993 she was a principal in
Jabara-Jacobs Associates, a consulting firm. She is a daughter
of Dr. Joseph J. Jacobs. ...................................... II 1986
William R. Kerler, Executive Vice President of Operations and
Director. Mr. Kerler, age 70, has been an executive officer of
the Company since 1985. ....................................... II 1998
</TABLE>

4
<PAGE>

<TABLE>
<CAPTION>
Director
Name and Positions Held with the Company Class since
---------------------------------------- ----- --------
<S> <C> <C>
James Clayburn LaForce, Director. Dr. LaForce, age 71, was Dean
of the Anderson Graduate School of Management, University of
California at Los Angeles from 1978 until 1993, when he
retired. Dr. LaForce is a director of Rockwell International
Corporation, Blackrock Funds, The Timken Company, Motor Cargo
Industries, Inc., Provident Investment Counsel Mutual Funds and
Payden and Rygel Investment Trust. ............................ I 1987
Dale R. Laurance, Director. Dr. Laurance, age 54, is the
president and a director of Occidental Petroleum Corporation
where he has been an executive since 1983. Dr. Laurance is also
a director of Canadian Occidental Petroleum, Ltd., Leslie's
Poolmart, Inc., and the American Petroleum Institute. ......... III 1994
Linda Fayne Levinson, Director. Ms. Levinson, age 57, is a
Principal of Global Retail Partners, L.P., a venture capital
firm that invests in early stage internet and retail companies.
Ms. Levinson served as President of Fayne Levinson Associates
from 1982 until January 1998. Ms. Levinson was an executive at
Creative Artists Agency, Inc. from 1993 through February 1994
and was a partner of Wings Partners, a Los Angeles-based
merchant bank, from 1989 until 1993. From 1984 until 1987 Ms.
Levinson was a Senior Vice President of American Express Travel
Related Services Co., Inc., and from 1972 through 1981 she was
at McKinsey & Co., a worldwide general management consulting
firm, where she became the first woman partner in 1979. Ms.
Levinson also serves as a member of the Boards of Administaff,
Inc., CyberSource Corporation, GoTo.com, Inc., Exactis.com,
Inc. and NCR Corporation. ..................................... III 1996
David M. Petrone, Director. Mr. Petrone, age 55, is Chairman of
Housing Capital Company, a real estate lending firm. He was
Vice Chairman of Wells Fargo & Co. from 1986 until March 1,
1992. He is a director of Alexandria Real Estate Equities,
Inc., Spieker Properties, Inc. and Finelite, Inc. ............. I 1987
James L. Rainey, Jr., Director. Mr. Rainey, age 70, is retired.
He was President and Chief Executive Officer of Farmland
Industries, Inc., an agricultural cooperative, from 1986 until
1991. Mr. Rainey is a director of ITEQ, Inc. and Wirthlin
Worldwide. .................................................... I 1993
</TABLE>

Board Committees. The Board has two standing committees. The Audit Committee
advises the Board on internal and external audit matters affecting the
Company, including recommendations as to the appointment of the independent
auditors of the Company; reviews with such auditors the scope and results of
their examination of the financial statements of the Company and any
investigations by such auditors. During fiscal 1999 the Audit Committee held
two meetings. The members of the Audit Committee are Messrs. Petrone
(Chairman), Alibrandi, Dailey and Rainey.

The Compensation and Benefits Committee approves the salaries and bonuses of
the executive officers and approves all grants of stock options and awards of
restricted stock under the Company's 1981 Executive Incentive Plan other than
options issued under the Outside Director Stock Option provisions of that
Plan. The Compensation and Benefits Committee also administers the 1989
Employee Stock Purchase Plan, and approves the employment contract between the
Company and Dr. Joseph J. Jacobs. During fiscal 1999 this committee held
eleven meetings. The members of the Compensation and Benefits Committee are
Dr. LaForce (Chairman), Ms. Levinson, Mr. Gwyn and Dr. Laurance.

Compensation of Directors. The Company pays directors who are not employed
by the Company ("Outside Directors") a retainer in the amount of $25,000 per
year plus a fee of $1,000 for each meeting of the board and each committee on
which they serve that they attend. Pursuant to the terms

5
<PAGE>

of the Outside Director Stock Option Plan, each of the Outside Directors
receives an option for 2,000 shares of common stock on the date of their first
election to the Board and also receives an option for 1,000 shares at an
option price equal to the Fair Market Value (as defined in the Plan) of the
common stock on the first day of March of each year.

The Board of Directors held nine meetings during the year ended September
30, 1999. All directors attended at least 75% of all meetings of the Board of
Directors and of the committees on which they served during fiscal 1999,
except Mr. Gwyn, who attended ten out of a total of eighteen of such meetings.

The Board of Directors recommends that you grant the proxies authority to
VOTE for Messrs. Watson, Petrone and Rainey and Dr. LaForce as directors.

6
<PAGE>

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning the annual and long-
term compensation of the Chief Executive Officer, the Chairman of the Board
and the other four most highly compensated officers ("Named Executive
Officers") of the Company for services in all capacities to the Company and
its subsidiaries during its 1997, 1998 and 1999 fiscal years:

<TABLE>
<CAPTION>
Annual Long-term
Compensation(1) Compensation
-------------------- Other Annual ------------
Compensation Options/SARs
Name Year Salary ($) Bonus ($) ($)(2) (Shares)(3) Other(4)
- ---- ---- ---------- --------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Noel G. Watson.......... 1999 655,320 601,710 -- -- 5,180
Chief Executive Officer 1998 591,160 542,350 7,420 100,000 5,120
1997 540,630 516,680 27,670 50,000 4,910

Joseph J. Jacobs........ 1999 432,200 400,000 -- -- --
Chairman of the Board 1998 432,200 450,000 -- -- --
1997 432,200 400,000 -- -- --

Richard E. Beumer....... 1999 277,500 254,800 -- 20,000 4,000
Vice Chairman of the
Board

Thomas R. Hammond....... 1999 388,000 356,260 -- 20,000 5,000
Executive Vice
President 1998 294,850 218,230 1,230 59,000 5,000
1997 265,880 190,570 4,940 10,000 5,660

Richard J. Slater....... 1999 388,000 356,260 -- 20,000 4,960
Executive Vice
President 1998 297,040 219,740 2,430 59,000 5,160
1997 271,320 194,470 9,870 10,000 4,930

James C. Uselton........ 1999 266,250 244,470 -- 20,000 4,000
Executive Vice
President
</TABLE>

- --------
(1) Represents amounts earned by the named executive during the year
indicated, and includes amounts deferred under the Jacobs Engineering
Group Inc. 401(k) Plus Savings Plan and Trust (the "401(k) Plan") and the
Company's nonqualified Executive Deferral Plans (the "EDPs").
(2) These amounts represent interest credited to the employees' deferred
compensation account balances under the EDPs in excess of 120% of the
applicable federal rate in effect at the times the interest crediting
rates were set for the EDPs.
(3) Consists solely of non-qualified stock options pursuant to the 1981
Executive Incentive Plan.
(4) Consists solely of Company contributions to the 401(k) Plan.

7
<PAGE>

Option/SAR Grants in Last Fiscal Year

The Company's 1981 Executive Incentive Plan permits the grant of options,
restricted stock and stock appreciation rights to employees of, and
consultants and advisors to, the Company and its subsidiaries, including
officers and directors who are serving in such capacities. The following table
contains information concerning options granted during the fiscal year 1999 to
the only Named Executive Officers who were granted options during the year. No
stock appreciation rights have been granted to date.

<TABLE>
<CAPTION>
Potential Realizable Value at
Market Assumed Annual Rates of Stock
Exercise Price on Price Appreciation for Option Term
Options Percentage or Base Date of (10 Yrs.)
Granted of Total Price Grant Expiration -----------------------------------
Name (shares) (1) (2) ($/share) ($/share) Date 0% ($) 5% ($) 10% ($)
- ---- ------------ ---------- --------- --------- ---------- ------ ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Noel G. Watson.......... -- 0.00% -- -- -- -- -- --
Richard E. Beumer....... 20,000 3.27% 36.375 36.375 27-May-09 -- 457,520 1,159,450
Thomas R. Hammond....... 20,000 3.27% 36.375 36.375 27-May-09 -- 457,520 1,159,450
Richard J. Slater....... 20,000 3.27% 36.375 36.375 27-May-09 -- 457,520 1,159,450
James C. Uselton........ 20,000 3.27% 36.375 36.375 27-May-09 -- 457,520 1,159,450
Gain for all shareholders (based on 26,142,992 shares outstanding at September 30,
1999, and a stock price of $32.5000 per share)....................................... $534,338,580 $1,354,118,880
============ ==============
Gain to Named Executive Officers as a percent of total gain to all shareholders....... 0.34% 0.34%
============ ==============
</TABLE>
- -------

(1) All grants consisted of non-qualified options pursuant to the 1981
Executive Incentive Plan.
(2) Calculation based upon grants of options for 611,000 shares during fiscal
1999

Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option SAR Values

The following table sets forth information regarding option exercises during
the fiscal year 1999 by the Named Executive Officers and the value of their
unexercised options on September 30, 1999. All options were granted under the
1981 Executive Incentive Plan. The Company has never granted any stock
appreciation rights.

<TABLE>
<CAPTION>
Total
Shares Value Value of Unexercised
Acquired on Realized Number of Unexercised In-the-Money
Exercises ($) Options at FYE (shares) Options at FYE ($)
Name ----------- -------- ------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Noel G. Watson.......... 11,000 145,131 199,000 136,000 $1,317,375 $484,500
Richard E. Beumer....... -- -- -- 20,000 -- --
Thomas R. Hammond....... 10,900 123,041 53,300 86,800 259,584 443,507
Richard J. Slater....... -- -- 58,200 78,800 497,900 251,000
James C. Uselton........ -- -- -- 20,000 -- --
</TABLE>

8
<PAGE>

Sverdrup Pension Plan

The following table shows the estimated annual pension benefits payable to a
covered participant at normal retirement age under the Sverdrup Corporation
Pension Plan (the "Pension Plan"). Messrs. Beumer and Uselton are the only
Named Executive Officers participating in the Pension Plan. Under the Pension
Plan, benefits are based on the average compensation (salary and bonus as
reported in the Summary Compensation Table) of a participant for the five
consecutive calendar years preceding or coinciding with retirement (whichever
produces the greatest benefit). As of the latest determination date, Messrs.
Beumer's and Uselton's covered compensation under the Pension Plan was
$160,000 each (because there is not a defined benefit or excess award plan
attached to or associated with the Pension Plan, a participant's covered
compensation is limited to amounts allowed under the Internal Revenue Code).
Mr. Beumer's credited years of service was 39.75. Mr. Uselton's credited years
of service was 36.90. Benefits shown are computed as a ten-year certain and
life annuity beginning at age 65 (the normal retirement date under the Pension
Plan), with no deduction for Social Security or other offset amounts:

<TABLE>
<CAPTION>
Years of Service
---------------------------------------------------
Remuneration 20 25 30 35 40 45
------------ ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$150,000.................... $85,500 $93,750 $102,000 $110,250 $118,500 $126,750
$160,000 and above.......... $86,180 $94,650 $103,120 $111,590 $120,060 $128,530
</TABLE>

9
<PAGE>

BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION

The overall objectives of the Company's executive compensation program are
as follows:

--To enable the Company to attract, motivate and retain highly-qualified
executives by offering competitive base salaries that are consistent with the
Company's size.

--To reward executives for past performance through a bonus program that
places a substantial component of their pay at risk based on Company
performance as measured by its return on net equity.

--To provide an incentive for continued service and future performance
through the use of stock options.

--To encourage executives to have an equity ownership in the Company.

The Compensation Committee of the Board of Directors is responsible for
reviewing and approving the compensation of all executive officers and all
stock option grants to all employees.

Base Salary. In setting executive officer base salaries for fiscal 1999 the
Committee considered the recommendations of Dr. Jacobs and Mr. Watson, who
made salary recommendations as to all executive officers except themselves,
the Committee's own subjective evaluations of those executive officers, the
salary spread that has normally been maintained by the Company between levels
of management, and information compiled by the Company regarding prevailing
salaries for professional engineers being offered by companies that the
Company regards as its competitors.

The Committee considered the fact that the principal provisions for the
retirement of the employees of the Company are the Thrift Savings Retirement
((S)401(k)) Plan and the 1989 Employee Stock Purchase Plan, and that the only
domestic employees of the Company who are participants in a defined benefit
retirement plan are employees of certain acquired companies. Enrollment in
those plans was frozen at the time of acquisition, and benefits under those
plans have been adjusted to align them with the Company's overall compensation
structure.

The Committee also considered a study by an outside compensation and
benefits consulting company that it had commissioned. The consulting company
reviewed the compensation and benefits of the Company's executive officers
against two peer groups that were developed by the consulting company: an
industry peer group and a peer group with market capitalization levels between
$800 million and $1.2 billion. The consultants concluded that the industry
peer group would provide information regarding the competitive pay structure
of the Company's direct competitors, while the market capitalization peer
group would provide information regarding the competitive pay structure for
companies employing similar resources.

The consultants approached their analysis using two methods: First, they
compared the Company's top five officers (ranked by total cash compensation)
to the top five officers in the industry and market capitalization groups.
Second, they compared the compensation levels of the CEO and the Executive
Vice Presidents of Operations to the top two positions in both the industry
and market capitalization groups, and the remaining executive officers of the
Company to the fifth highest paid position in both peer groups. Lastly, the
consultants compared the compensation levels of all of the Company's executive
officers to certain published survey information.

Mr. Watson's base salary for 1999 was established in the same manner as the
base salaries of the other executive officers of the Company. The Committee
believes that the total salary and bonus paid to Mr. Watson and each of the
Named Executive Officers was reasonable in light of the performance of the
Company for fiscal 1999.

Dr. Jacobs was the Chief Executive Officer of the Company from its
organization in 1957 until he resigned that position in November 1992; he
continues to serve as Chairman of the Board and as a full-time employee of the
Company. The Company has an employment agreement, originally entered into on
October 1, 1987, with Dr. Jacobs that establishes, among other matters, his
base salary. The original agreement received the approval

10
<PAGE>

of the Board of Directors of the Company in 1987, without dissent and with Dr.
Jacobs not voting. The Board subsequently delegated all decisions regarding
this agreement to the Committee, which has approved subsequent amendments to
it, including extensions of its term, which now expires on September 30, 2004
but there has been no change to Dr. Jacobs' base salary since 1987. The
Committee has approved these amendments based on its subjective judgment of
Dr. Jacobs' past and continuing contributions to the business strategy,
marketing and reputation of the Company.

Annual Incentive Bonuses. Pursuant to the Company's Incentive Bonus Plan,
each year the Compensation Committee approves a target percentage of pre-tax
profits to the net equity of the Company that must be achieved before any
bonuses are paid. This target percentage is established on the basis of the
Committee's judgment of what constitutes a reasonable minimum return for the
shareholders on their investment in the Company. If pre-tax profits exceed the
target, then a predetermined percentage of profits in excess of the target is
placed in the bonus pool; if pre-tax earnings exceed two times the target,
then a larger percentage of the excess is placed into the bonus pool. A major
percentage of the bonus pool is allocated to the officers and key managers of
the Company. Fifty percent of the allocation to the officers and key employees
is then individually allocated to them in proportion to their weighted
salaries, with the salaries of the executive officers given the greatest
weight. The remainder of the executive officer pool is usually allocated in
the same proportions as the initial allocations, but individual allocations
are in some cases adjusted on the basis of the Committee's subjective
evaluations of individual performance. Generally, bonuses are paid in three
annual installments contingent upon continued employment and may be further
deferred by participants in the Company's deferred compensation plans.

Stock Options. In determining stock option awards to executive officers for
1999 the Committee considered Dr. Jacobs' and Mr. Watson's recommendations
with respect to all executive officers other than themselves, the Committee's
own subjective evaluations of the executive officers and previous option
awards to the executive officers. The Committee also considered the stock
option awards made by three of the largest competitors of the Company that are
public companies (Fluor, Foster Wheeler and Morrison-Knudsen) to their
executive officers as a percent of outstanding shares. In general, option
grants by the Company as a percentage of outstanding shares have been the
second highest in the named group, but the Committee considered the fact that
the Company is the only company in the group that has no pension plan (other
than for employees of certain acquired companies, as discussed above under
"Base Salary" ) in evaluating the significance of its ranking in the group.

Mr. Watson declined to accept any stock option awards during 1999. Dr.
Jacobs has never been eligible for stock options by reason of his percentage
interest in the outstanding stock of the Company.

Tax Deductibility Considerations. In 1993, the Internal Revenue Code was
amended to limit the deductibility of certain compensation and benefits paid
to the chief executive officer and the four highest paid executive officers in
excess of $1 million to each of them. The Committee believes that the
compensation payable for fiscal year 2000 will not result in any loss of tax
deductions for the Company. It is the Committee's intent to adopt policies to
obtain maximum deductibility of executive compensation, consistent with the
objectives of the Company's executive compensation program outlined above. The
Committee will continue to monitor the regulations issued by the IRS under
this provision as they are finalized to determine whether any program changes
are appropriate.

JAMES CLAYBURN LAFORCE, Chairman
ROBERT B. GWYN
DALE R. LAURANCE
LINDA FAYNE LEVINSON

11
<PAGE>

PERFORMANCE GRAPHS

The following graphs show the changes over the past five- and ten-year
periods 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., the S&P 500 Index, and
the Dow Jones Heavy Construction Group Index

[PERFORMANCE GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------------
9/94 9/95 9/96 9/97 9/98 9/99
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Jacobs............................................ 100 102 92 126 127 133
S&P 500........................................... 100 130 156 219 239 306
Dow Jones Heavy Construction...................... 100 108 116 120 86 82
</TABLE>

12
<PAGE>

Comparison of Ten Year Cumulative Total Return*
Among Jacobs Engineering Group Inc., the S&P 500 Index, and
the Dow Jones Heavy Construction Group Index

[PERFORMANCE GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
9/89 9/90 9/91 9/92 9/93 9/94 9/95 9/96 9/97 9/98 9/99
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jacobs.................. 100 151 458 483 385 404 412 373 508 514 539
S&P 500................. 100 91 119 132 149 155 201 242 340 370 473
Dow Jones Heavy
Construction........... 100 100 120 124 126 140 152 163 168 120 115
</TABLE>
- -------
* The cumulative total return information used to prepare the preceding graphs
was provided by Research Data Group, Inc.

13
<PAGE>

2. APPROVAL OF THE 1999 STOCK INCENTIVE PLAN.

General

At the meeting the shareholders will be asked to approve the Jacobs
Engineering Group Inc. 1999 Stock Incentive Plan (the "1999 Plan"). The Jacobs
Engineering Group Inc. 1981 Executive Incentive Plan (the "1981 Plan") expires
on March 1, 2001, but there are only approximately 150,000 shares of common
stock remaining for option grants and other awards under the 1981 Plan,
including grants to Outside Directors under the Outside Director Stock Option
provisions of the 1981 Plan.

The 1999 Plan was approved by the Board of Directors of the Company on
December 2, 1999 and became effective on that date. However, no shares of
stock of the Company may be issued under the 1999 Plan until the Plan has been
approved by the shareholders. The complete text of the 1999 Plan will be found
in Exhibit I to this Proxy Statement. The following discussion is qualified in
all respects by reference to Exhibit I.

The purpose of the 1999 Plan is to encourage the acquisition of a financial
interest in the Company by the employees of the Company and its Related
Companies. In addition, the Plan is intended to aid the Company and its
Related Companies in attracting and retaining employees, stimulating the
efforts of their employees and encouraging them to remain in the employ of the
Company and its Related Companies.

The 1999 Plan reserves 3,000,000 shares of the common stock of the Company
for grants of Incentive Awards. The Plan will expire when the shares reserved
for the Plan have been exhausted, but no Incentive Stock Options may be
granted under the Plan after December 2, 2009.

Administration

The 1999 Plan is administered by a committee of the Board of Directors that
is composed solely of directors who are not employed by the Company (the
"Committee"). The Committee is authorized to approve all incentive awards
under the 1999 Plan, to interpret the Plan, to fix the forms and terms of
incentive awards and times of issuance, to implement any provision of the 1999
Plan by appropriate rules and determinations and to exercise such powers as
may be necessary to carry out their functions under the 1999 Plan. None of the
members of the Committee are eligible to receive awards under the 1999 Plan.
It is the policy of the Board that the composition of the Committee be
identical to that of the Compensation and Benefits Committee of the Board.

Eligibility for Awards

In the discretion of the Committee an Incentive Award may be granted to any
employee of the Company or a Related Company who is not a member of a
collective bargaining unit. A Related Company is any corporation or other
business organization in which the Company owns, directly or indirectly, 20%
or more of the voting stock or capital at the time the award is made. In the
course of its business, the Company sometimes obtains a 20% or more interest
in such Related Companies pursuant to strategic alliances that it makes with
other companies. As part of these strategic alliances the Company frequently
furnishes some of its own employees as temporary employees of the Related
Company. The purpose of granting options to such employees is to retain their
loyalty to the Company. At the present time there are approximately 300
employees of the Company and its Related Companies eligible to receive awards
under the 1999 Plan.

Forms of Awards

The 1999 Plan provides for the grant of the following types of awards:

1. Stock Options. The Company may grant nonqualified stock options and
incentive stock options ("ISOs") under the 1999 Plan. A nonqualified stock
option gives the optionee the right to

14
<PAGE>

purchase common stock of the Company at a price that is not less than 85% of
the fair market value of the shares on the date the option is granted. ISOs
must comply with Section 422 of the Internal Revenue Code of 1986, which
requires among other matters that the option price be 100% of the fair market
value of the shares on the date the option is granted. In addition, Section
422 requires that the total fair market value, determined at the time the
option is granted, of shares for which ISOs first become exercisable by an
optionee during any calendar year may not exceed $100,000.

Under both forms of option, an optionee must agree as a condition to the
exercise of the option to remain in the employ of the Company or its Related
Companies for not less than one year after the grant of the option. The option
will become exercisable in such amounts and during such time periods as the
Committee in its sole discretion determines and provides in the option
agreement that the Company enters into with the option holder. In no event,
however, will any option be exercisable after the expiration of the tenth year
following the date on which the option is granted. Except as determined by the
Committee at the time an option is granted, options are not assignable or
transferable other than by will or by the laws of descent and distribution.
Schedule A to the 1999 Plan, a copy of which is attached to this Proxy
Statement, sets forth the effects of the termination of employment, other
changes of employment or employee status, death, retirement or a change in
control on outstanding options. However, the Committee may vary the terms set
forth on Schedule A in particular cases if it deems appropriate. The purchase
price payable upon the exercise of an option is payable in full in cash or its
equivalent acceptable to the Company, as determined by the Committee. In the
discretion of the Committee, the purchase price may be paid by the assignment
and delivery to the Company of shares of common stock of the Company already
owned by the optionee, or by a combination of shares and cash, equal in value
to the option exercise price. In addition, withholding taxes due upon the
exercise of nonqualified options may be satisfied in whole or in part by
reassigning to the Company stock acquired upon the exercise.

2. Restricted Stock. The Company may award and issue Restricted Stock to an
employee. Restricted Stock is common stock of the Company subject to certain
restrictions on transfer. Restricted Stock may not be sold, exchanged,
donated, pledged or otherwise transferred until the expiration of a period of
time fixed by the Committee in the agreement that the Company enters into with
the employee at the time the stock is issued. Upon the termination of the
employee's employment with the Company or a Related Company for any reason,
including death or disability unless the Committee in its sole discretion
decides to release the shares from the restrictions on transfer following
death or disability, the employee is required to forfeit and surrender his or
her Restricted Stock to the Company to the extent it is still subject to the
restrictions on transfer. Withholding taxes due from the employee upon the
lapse of restrictions on transfer may be satisfied in whole or in part by
reassigning shares of stock back to the Company.

15
<PAGE>

Option Grant Policies

Although both the 1981 Plan and the 1999 Plan permit the grant of
nonqualified options at prices less than 100% of the fair market value (but
not less than 85% of the fair market value of the shares), it has been the
general policy of the Compensation and Benefits Committee not to grant
discounted options to Executive Officers except in rare situations (usually as
an incentive in connection with the relocation of an Executive Officer and his
family). The following table summarizes all stock options granted to each of
the Named Executive Officers, as well as to all other Executive Offices as a
group, during the three fiscal years ended September 30, 1999, divided between
options granted at 100% of the common stock's fair market value ("FMV") on the
date of grant, and options granted at not less than 85% of FMV:

<TABLE>
<CAPTION>
As a
Percent
Number of Options of Options
Granted Granted
-------------------------- Over the
At 100% At 85% Past Three
of FMV of FMV Total(1) Years
------- ------ -------- -----------
<S> <C> <C> <C> <C>
Noel G. Watson.......................... 150,000 -- 150,000 9.2%
Richard E. Beumer....................... 20,000 -- 20,000 1.2%
Thomas R. Hammond....................... 89,000 10,000(a) 99,000 6.1%
Richard J. Slater....................... 89,000 -- 89,000 5.4%
James C. Uselton........................ 20,000 -- 20,000 1.2%
All Other Executive Officers as a Group
(20 individuals)(b).................... 353,500 84,000(b) 437,500 26.8%
</TABLE>

- --------
(a) Mr. Hammond received this grant in connection with a relocation.
(b) Includes all individuals who were Executive Officers at any time during
the three years ending September 30, 1999.
(c) Of the 84,000 options granted, 48,000 were granted in connection with the
relocation of the employee; and 31,500 were granted to the individual
prior to his promotion to an Executive Officer.

During the three year period ended September 30, 1999, the Company granted
stock options for a total of 1,633,500 shares to its employees. As the above
table shows, less than 6% of all stock options granted over the past three
years were granted to Executive Officers at a discount (including grants to
employees prior to their becoming Executive Officers, and after they had
ceased being Executive Officers). Additionally, the Company has never awarded
Restricted Stock to any Executive Officer after his promotion to an Executive
Officer.

Federal Income Tax Consequences

Nonqualified Options. An employee will not recognize any income upon receipt
of a nonqualified stock option, and the Company will not be entitled to a
deduction for federal income tax purposes in the year of grant. Ordinary
income will be realized by the holder at the time the nonqualified stock
option is exercised and the shares are transferred to the employee. The amount
of such taxable income, in the case of a nonqualified stock option, will be
the difference, if any, between the option price and the fair market value of
the shares on the date of exercise.

ISOs. An employee who receives an ISO will not recognize any income for
federal income tax purposes upon receipt of the ISO, and the Company will not
realize a deduction for federal income tax purposes. However, the difference
between the fair market value of the stock on the date of grant and the option
exercise price is a tax preference item that may subject the optionee to the
alternative minimum tax. If the optionee does not dispose of the ISO shares
within two years from the date the option was granted or within one year after
the shares were transferred to him on exercise of the

16
<PAGE>

option, then that portion of the gain on the sale of the shares that is equal
to the difference between the sales price and the option exercise price will
be treated as a long term capital gain. The Company will not be entitled to a
deduction either at the time the employee exercises the ISO or subsequently
sells the ISO shares. However, if the employee sells the ISO shares within two
years after the date the ISO is granted or within one year after the date the
ISO is exercised, then the sale is considered a disqualifying sale, and the
spread on exercise will be taxed as ordinary income. The balance of the gain
will be treated as long or short term capital gain depending on the time the
employee held the stock. If the shares decline in value after the date of
exercise, the compensation income will be limited to the difference between
the sale price and the amount paid for the shares. The tax will be imposed in
the year the disqualifying sale is made. The Company will be entitled to a
deduction equal to the ordinary income recognized by the employee.

Restricted Stock. Employees receiving Restricted Stock under the Plan will
not recognize any income upon receipt of the Restricted Stock. Ordinary income
will be realized by the holder at the time that the restrictions on transfer
are removed or have expired. The amount of ordinary income will be equal to
the fair market value of the shares on the date that the restrictions on
transfer are removed. The Company will be entitled to a deduction at the same
time and in the same amount as the ordinary income the employee is deemed to
have realized.

Generally, when an employee disposes of shares acquired under the 1999 Plan,
the difference between the sales price and his or her basis in such shares
will be treated as long or short-term capital gain or loss depending upon the
holding period for the shares.

Options for Employees Outside the U.S.

Under the Plan, in the discretion of the Committee, employees of the Company
and its Related Companies located outside the United States are eligible to
receive options. Since the laws, including tax laws and policies, of the
countries where these employees are located may differ from those of the
United States, the Plan gives the Committee the power to adopt special terms
and conditions for options being granted to employees outside the United
States in order to comply with the laws and policies of the countries
involved. These special terms and conditions may be set forth in agreements
with the employees or in any such other form as the Committee may approve.
However, the Plan does not permit the Committee to approve terms and
conditions for options that are inconsistent with the terms and conditions of
the Plan as then in effect.

Amendment of the Plan

The Board of Directors may terminate, modify or amend the 1999 Plan at any
time without shareholder approval, except that shareholder approval is
required for any amendment that would increase the number of shares reserved
for the 1999 Plan, accelerate the removal of restrictions on Restricted Stock,
increase the time period during which options may be exercised, extend the
life of the 1999 Plan or materially increase the benefits accruing to
participants under the 1999 Plan.

Adjustment of Awards

In the event of any change in capitalization, such as a stock dividend or
stock split, or in the event of a merger where the Company is the surviving
corporation, appropriate adjustments shall be made in the awards that have
been or may be granted under the Plan. In the event that the Company is not
the surviving corporation in a merger or other reorganization, then all
options and stock appreciation rights then outstanding under the Plan will be
fully vested and exercisable, and the forfeiture restrictions on Restricted
Stock will lapse, unless the merger or reorganization agreement provides
participants with substantially similar rights.

17
<PAGE>

Change in Control of the Company

The 1999 Plan provides that, if the employment with the Company of a holder
of an award under the 1999 Plan is terminated for any reason within three
years following a "change in control" of the Company, then all options held by
the employee under the 1999 Plan will be fully vested and exercisable and all
forfeiture provisions imposed on Restricted Stock will lapse. A "Change in
Control" means a change in control of such a nature that it would be required
to be reported to the United States Securities and Exchange Commission, and in
any event will be deemed to have occurred if (i) any person is or becomes the
beneficial owner, directly or indirectly, of securities representing 25% or
more of the combined voting power for election of directors of the Company,
(ii) during any period of two consecutive years or less individuals who at the
beginning of the period constituted all of the members of the Board of
Directors of the Company fail to constitute at least a majority of the Board
of Directors, unless the election or nomination for election of each new
director was approved by a vote of at least two-thirds of the directors still
in office who were directors at the beginning of the period, (iii) the
shareholders of the Company approve any merger as a result of which the common
stock would be changed, converted or exchanged for the shares of another
corporation, any liquidation of the Company or any sale or other disposition
of 50% or more of the assets or earning power of the Company, or (iv) the
shareholders of the Company approve a merger as a result of which persons who
were shareholders of the Company immediately prior to the merger will have
beneficial ownership of less than 50% of the combined voting power for the
election of directors of the surviving corporation following the merger.
However, in no such event will a change in control be deemed to have occurred
if prior to the occurrence of any event that would otherwise cause a change in
control the Board of Directors determines that such event will not constitute
a change in control.

The last reported sale of the common stock on the New York Stock Exchange on
December 31, 1999 was at $32.50 per share.

Approval of the 1999 Employee Stock Plan requires the affirmative vote of
the holders of a majority of the shares of outstanding common stock
represented at the meeting.

The Board of Directors recommends that you vote FOR the 1999 Stock Incentive
Plan.

3. APPROVAL OF THE 1999 OUTSIDE DIRECTOR STOCK PLAN

The shareholders will be asked to approve the Jacobs Engineering Group Inc.
1999 Outside Director Stock Plan (the "Outside Director Plan") and reserve for
the Outside Director Plan 200,000 shares of the authorized but unissued common
stock of the Company. The Outside Director Plan was approved by the Board of
Directors of the Company on December 2, 1999 subject to the approval of the
shareholders at the 2000 annual meeting. The provisions for stock options in
the Outside Director Plan are substantially the same as the Outside Director
Stock Option provisions of the 1981 Plan, but the Outside Director Plan also
includes provisions for awards of common stock of the Company to Outside
Directors. The complete text of the Outside Director Plan will be found in
Exhibit II to this Proxy Statement. The following discussion is qualified in
all respects by reference to Exhibit II.

For the purpose of the Outside Director Plan, an "Outside Director" is a
director of the Company who is not currently an officer of the Company, does
not receive compensation from the Company or any subsidiary of the Company
except in an amount that would not be required to be disclosed under the rules
of the Securities and Exchange Commission and does not possess an interest in
any transaction or business relationship with the Company or a subsidiary that
would require such disclosure.

18
<PAGE>

General

The Board of Directors believes that the grant of stock options and of stock
to Outside Directors, will assist the Company in attracting and retaining
highly qualified individuals to serve as directors of the Company and will
align the Outside Directors' compensation more closely with the performance of
the Company and its common stock as well as with the interests of the
shareholders. Outside Directors are not eligible to participate in any of the
Company's other stock plans.

Grants of Options

The Outside Director Plan provides that each Outside Director will receive
an initial grant (an "Appointment Grant") of an Outside Director Option to
purchase 2,000 shares of common stock on the first day of the month following
the date upon which the Outside Director is first elected as a director.
Thereafter, all Outside Directors will also receive annually on the first day
of March an additional grant (an "Annual Grant") of an Outside Director Option
to purchase 1,000 shares of common stock. Outstanding Outside Director Options
are subject to appropriate and proportionate adjustments in the event of any
stock split, stock dividend or other like recapitalization. However, the
provision for Appointment Grants and Annual Grants of 2,000 shares and 1,000
shares, respectively, is not subject to such adjustment.

Terms of Options

The Option price for Outside Directors Options is the "Grant Price" of the
common stock at the time of grant. For this purpose "Grant Price" means the
greater of (i) the average closing price of the common stock of the Company as
reported in the composite transactions report of the New York Stock Exchange
for the ten trading days ending on the second trading day prior to the date on
which the option is granted and (ii) 85% of the closing price on the New York
Stock Exchange on the date of grant.

Outside Director Options are exercisable in four successive annual
installments of 25% of the shares covered by the Option commencing one year
following the date of grant and expire, unless sooner exercised or terminated,
ten years following the date of grant.

If an Outside Director dies or becomes disabled while in office, all
installments of the Outside Director Options held by the director at the time
of death or disability will immediately vest and will remain exercisable for
the full terms stated in the option agreements evidencing those options. If an
Outside Director retires, then no further options vest, but his or her vested
options remain exercisable during the full terms of the option agreements
evidencing those options. If the holder of an Outside Director Option resigns
or is replaced as a director for any reason other than death, retirement or
disability, while holding such an option, then no further installments of his
or her options will vest, and all options will expire on the later of three
months from the date he or she ceases to be a director or one year following
the date of death if the holder dies during the three-month period.

Except as otherwise determined by the Board of Directors, Outside Director
Options may not be transferred other than by will or the laws of descent and
distribution. After the death of the holder of an Outside Director Option the
exercisable portion may be exercised by the director's personal representative
or any person legally empowered to do so.

When exercising an Outside Director Option the holder may pay for the shares
in cash or with shares of common stock of the Company having a total Fair
Market Value equal to the total option price of the shares being purchased.
For this purpose "Fair Market Value" means the closing price of the common
stock on the New York Stock Exchange on the date of exercise.

19
<PAGE>

Awards of Stock to Outside Directors

Unlike the 1981 Plan, the Outside Director Plan permits the Board of
Directors to award common stock of the Company to the Outside Directors in the
form of direct grants of either stock or Restricted Stock. No award of stock
to an Outside Director may exceed 5,000 shares in any year. Unless otherwise
determined by the Board of Directors, stock awards may not be granted to
Outside Directors who have at any time been employed by the Company.

Restricted Stock awarded under the Outside Director Plan may not be sold,
exchanged, transferred, pledged, or otherwise disposed of during the time
period, or periods, stated in an agreement between the Outside Director and
the Company that is entered into when the Restricted Stock is awarded. If an
Outside Director holding Restricted Stock ceases to be a director of the
Company for any reason, including death or disability, then, unless the Board
of Directors otherwise determines, the director concerned, or his or her
estate, will be required to return the Restricted Stock to the Company for no
consideration. These restrictions are referred to as "Forfeiture
Restrictions". The Forfeiture Restrictions will not lapse until the expiration
of such time periods as the Board of Directors may determine at the time of
the award, but the Forfeiture Restrictions may not be for periods of less than
one year.

Federal Income Tax Consequences

The Outside Directors will not recognize any income upon the receipt of an
Outside Director Stock Option, and the Company will not be entitled to a
deduction for federal income tax purposes in the year of grant. Ordinary
income will be realized by the holder of the Option at the time the Outside
Director Stock Option is exercised and the shares delivered to the holder. The
amount of such income will be the difference, if any, between the option price
and the fair market value of the shares on the date of exercise. When the
holder of stock acquired upon the exercise of an Outside Director Stock Option
disposes of the shares, the difference between the sales price and the
holder's tax basis in such shares will be treated as long or short-term
capital gain or loss depending upon the holding period for the shares.
Generally, the holder's tax basis in shares acquired upon the exercise of an
Outside Director Stock Option will be the sum of the amount paid for the
shares plus any ordinary income recognized as a result of the exercise of the
option.

In general, there will be no federal income tax deduction allowable to the
Company upon the grant or termination of an Outside Director Stock Option or
the sale or disposition of the shares acquired upon the exercise of an Outside
Director Stock Option. However, the Company will be entitled to a deduction
for federal income tax purposes upon the exercise of an Outside Director Stock
Option equal to the amount of ordinary income that the option holder is
required to recognize as a result of the exercise, provided that the deduction
is not otherwise disallowed under the Internal Revenue Code.

Outside Directors receiving awards of common stock will be taxed as ordinary
income on the fair market value of the stock on the date of the award. Outside
Directors receiving Restricted Stock will be taxed as ordinary income on the
fair market value of the stock on the date the Forfeiture Restrictions lapse.
In each case, the Company will be entitled to a federal income tax deduction
at the same time and in the same amount.

When the holder of such stock disposes of the shares, the difference between
the sales price and the holder's tax basis in the shares will be treated as
long or short-term capital gain or loss depending on the holding period for
the shares. Generally, the holder's tax basis in shares acquired upon the
exercise of an Outside Director Stock Option will be the sum of the amount
paid for the shares plus any ordinary income recognized as a result of the
exercise of the option or release of Forfeiture Restrictions.

20
<PAGE>

Amendment or Termination of the Outside Director Plan

The Board of Directors may amend or terminate the Outside Director Plan in
whole or in part at any time, but no amendment will become effective without
the approval of the shareholders if shareholder approval is required in order
to comply with the rules of the Securities and Exchange Commission under
Section 16 of the Securities Exchange Act of 1934 relating to insider trading.
Unless the shareholders vote to extend the term of the Outside Director Plan,
it will expire when there are no longer any options or shares of Restricted
Stock awarded under the Plan outstanding.

Change in Control of the Company

The Outside Director Plan is not subject to the Change of Control provisions
described above under "2. Approval of the 1999 Stock Incentive Plan." However,
upon the dissolution or liquidation of the Company or upon a reorganization,
merger or consolidation of the Company with one or more other companies as a
result of which the Company is not the surviving corporation or upon the sale
of all or substantially all of the assets of the Company, then all Outside
Director Options and Restricted Stock outstanding become fully vested and
exercisable unless provisions are made in connection with such transaction for
the continuation of the Outside Director Plan and the assumption or
substitution of new options for stock of the successor corporation for the old
options by the successor corporation, with appropriate adjustments as to the
number and kind of shares and prices.

The Company cannot now determine the number of options or shares to be
granted in the future under the Outside Director Stock Plan to all current
Outside Directors or to each future nominee for election as an Outside
Director. During the fiscal year ended September 30, 1999 options to purchase
9,000 shares of common stock were granted to Outside Directors under the 1981
Plan.

The last reported sale of the common stock on the New York Stock Exchange on
December 31, 1999 was at $32.50 per share.

Approval of the Outside Director Stock Plan requires the affirmative vote of
the holders of a majority of the outstanding common stock represented at the
annual meeting.

The Board of Directors recommends that you vote FOR the 1999 Outside
Director Stock Plan.

Current Accounting Treatment of the 1999 Stock Incentive Plan
and the 1999 Outside Director Stock Plan

The issuance of common stock under the 1999 Plan and Outside Director Plan
may not, under current generally accepted accounting principles, result in a
direct compensation expense chargeable against the reported earnings of the
Company. However, the Company must disclose in its financial statements the
impact that the options granted under the Plans would have upon the reported
earnings of the Company if the value of the options and shares awarded under
those Plans were treated as compensation expense.

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<PAGE>

4. APPROVAL OF ERNST & YOUNG LLP AS AUDITORS

The Board of Directors, with the concurrence of the Audit Committee, has
selected Ernst & Young LLP to audit the accounts of the Company for its fiscal
year ending September 30, 2000. The Company has been advised by Ernst & Young
LLP that the firm has no relationship with the Company or its subsidiaries
other than that arising from the firm's engagement as auditors, tax advisors
and consultants.

If the selection of Ernst & Young LLP is not approved by the holders of a
majority of the shares represented at the meeting and voting on the proposal,
or if prior to the Annual Meeting to be held in February, Ernst & Young LLP
should decline to act or become incapable of acting, or if its employment
should be otherwise discontinued by the Board of Directors, then in any such
case the Board of Directors will appoint other independent auditors whose
employment for any period subsequent to the 2000 Annual Meeting will be
subject to ratification by the shareholders at the 2001 Annual Meeting.

The Company has been advised that representatives of Ernst & Young LLP will
be present at the Annual Meeting where they will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.

The Board of Directors recommends that you vote FOR the selection of Ernst &
Young LLP as auditors for the year ending September 30, 2000.

5. OTHER BUSINESS

The Board of Directors does not intend to present any other business for
action at the meeting and does not know of any business intended to be
presented by others.

SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own beneficially more than
ten percent of a registered class of the Company's equity securities to file
with the Securities and Exchange Commission ("SEC") and the New York Stock
Exchange initial reports of ownership and reports of changes in ownership of
common stock and other equity securities of the Company. Officers, directors
and greater than ten-percent shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms filed by them.

To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations from its
directors and executive officers, except for Andrew E. Carlson, who did not
file a Form 4 with respect to an option exercise but later reported the
transaction on Form 5, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were
complied with on a timely basis during the fiscal year ended September 30,
1999.

EXECUTIVE OFFICERS

For information about the Executive Officers of the Company, see Exhibit III
to this Proxy Statement.

22
<PAGE>

SHAREHOLDERS' PROPOSALS

Under the bylaws of the Company shareholders who wish to nominate persons
for election to the Board of Directors must submit their nominations to the
Company not less than 60 nor more than 90 days prior to the date of the
shareholders' meeting at which they wish a nomination to be considered.
Nominations must include certain information concerning the nominee and the
proponent's ownership of common stock of the Company. Nominations not meeting
these requirements will not be entertained at the annual meeting. The
Secretary of the Company should be contacted in writing at the address on the
first page of this proxy statement to submit a nomination or to obtain
additional information as to the proper form of a nomination.

Proposals other than nominations for consideration at the 2001 annual
meeting of shareholders must be submitted to the Company no later than
November 22, 2000. However, in order to be included in the Company's proxy
statement and proxy relating to the 2001 annual meeting, proposals of
shareholders must be received by the Secretary of the Company no later than
September 10, 2000. If timely notice is not given of a shareholder proposal,
then the proxies named on the proxy cards distributed by the Company for the
annual meeting may use the discretionary voting authority granted them by the
proxy cards if the proposal is raised at the meeting, whether or not there is
any discussion of the matter in the proxy statement.

ANNUAL REPORT AND FINANCIAL INFORMATION

Appendix A to the Notice of Annual Meeting to which this Proxy Statement is
attached contains the Annual Financial Statements and Review of Operations of
the Company. A copy of the Company's Summary Annual Report for the year ended
September 30, 1999, is being mailed concurrently with this Proxy Statement to
each shareholder of record on the Record Date.

The Company's Annual Report on Form 10-K is available from the United States
Securities and Exchange Commission at its WEB site: http://www.sec.gov/cgi-
bin/srch-edgar?0000052988. The Company will furnish without charge a copy of
the Company's report on Form 10-K, including the financial statements and
schedules thereto, to the United States Securities and Exchange Commission to
any person requesting in writing and stating that he or she was the beneficial
owner of common stock of the Company on January 3, 2000. The Company will also
furnish copies of any exhibits to the Form 10-K to eligible persons requesting
exhibits at $0.50 per page, paid in advance. The Company will indicate the
number of pages to be charged for upon written inquiry. Requests and inquiries
should be addressed to:

Investor Relations
Jacobs Engineering Group Inc.
1111 South Arroyo Parkway
Pasadena, California 91105

Neither the Summary Annual Report, Appendix A, nor the Form 10-K is to be
regarded as proxy soliciting material or as a communication by means of which
a solicitation of proxies is to be made.

By Order of the Board of Directors

WILLIAM C. MARKLEY, III
Vice President, General Counsel and
Secretary

Pasadena, California
January 3, 2000

23
<PAGE>

EXHIBIT I

JACOBS ENGINEERING GROUP INC.

1999 Stock Incentive Plan

1. Purpose.

The purpose of the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan
(the "Plan") is to advance the interests of Jacobs Engineering Group Inc. (the
"Company") and its Related Companies (as defined in Section 2) by encouraging
and enabling the acquisition of a financial interest in the Company by
officers and other employees of the Company and its Related Companies. In
addition, the Plan is intended to aid the Company and its Related Companies in
attracting and retaining employees, to stimulate the efforts of such employees
and to strengthen their desire to remain in the employ of the Company and its
Related Companies.

2. Definitions.

Unless the context clearly indicates otherwise, the following terms, when
used in this Plan, shall have the meanings set forth in this Paragraph 2.

"Board of Directors" means the Board of Directors of the Company.

"Business Day" means a day on which the New York Stock Exchange is open for
securities trading.

"Change in Control" shall mean, with respect to the Company, a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A under the Securities Exchange Act of
1934 ("1934 Act"), provided that such a change in control shall be deemed to
have occurred at such time as (i) any "person" (as that term is used in
Sections 13(d) and 14(d)(2) of the 1934 Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly,
of securities representing 25% or more of the combined voting power for
election of directors of the then outstanding securities of the Company or any
successor of the Company; (ii) during any period of two (2) consecutive years
or less, individuals who at the beginning of such period constituted the Board
of Directors of the Company cease, for any reason, to constitute at least a
majority of the Board of Directors of the Company, unless the election or
nomination for election of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors at
the beginning of the period; (iii) the shareholders of the Company approve any
merger or consolidation as a result of which the Jacobs Common Stock (as
defined below) shall be changed, converted or exchanged (other than a merger
with a wholly owned subsidiary of the Company) or any liquidation of the
Company or any sale or other disposition of 50% or more of the assets or
earning power of the Company; or (iv) the shareholders of the Company approve
any merger or consolidation to which the Company is a party as a result of
which the persons who were shareholders of the Company immediately prior to
the effective date of the merger or consolidation shall have beneficial
ownership of less than 50% of the combined voting power for election of
directors of the surviving corporation following the effective date of such
merger or consolidation; provided, however, that no Change in Control shall be
deemed to have occurred if, prior to such time as a Change in Control would
otherwise be deemed to have occurred, the Board of Directors of the Company
determines otherwise.

"Committee" means the Compensation and Benefits Committee of the Board of
Directors of the Company, or any committee appointed by the Board of Directors
of the Company in accordance with the Company's By-Laws from among its members
for the purpose of administering the Plan. Members of the Committee shall be
Non-Employee Directors within the meaning of Rule 16b-3 under the 1934 Act, as
amended.

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<PAGE>

"Disabled" or "Disability" means the employee meets the definition of
"disabled" under the terms of the long term disability plan of the Company or
Related Company by which the employee is employed in effect on the date in
question, whether or not the employee is covered by such plan.

"Employee" means an employee of the Company or a Related Company.

"Fair Market Value" means the closing price of one share of Jacobs Common
Stock as reported by the New York Stock Exchange for the day on which the
value is determined. If such day is not a Business Day, then the fair market
value shall be determined by reference to the closing price on the first
immediately preceding Business Day.

"Incentive Award" means an ISO, an NQSO or Restricted Stock granted or
awarded under this Plan.

"ISO" means an incentive stock option within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended.

"Jacobs Common Stock" means the Common Stock, par value $1.00 per share, of
the Company.

"Majority-Owned Related Company" means a Related Company in which the
Company owns, directly or indirectly, 50% or more of the voting stock on the
date an Incentive Award is granted.

"NQSO" means a stock option that does not constitute an ISO.

"Options" means ISOs and NQSOs granted under this Plan.

"Optionee" means any person to whom an Option is granted under the Plan.

"Related Company" or "Related Companies" means corporation(s) or other
business organization(s) in which the Company owns, directly or indirectly,
20% or more of the voting stock or capital at the relevant time.

"Restricted Stock" means shares of Jacobs Common Stock awarded pursuant to
Section 13 of this Plan.

"Retire" means to enter Retirement.

"Retirement" means the termination of an Optionee's employment with the
Company or a Related Company by reason of an Optionee having either (1)
attained the age of 65, or (2) attained the age of 60 and completed a total of
ten (10) or more consecutive years of employment with the Company, and/or a
Related Company.

3. Incentive Awards.

The Company may grant or award Incentive Awards to those persons meeting the
eligibility requirements in Section 6.

4. Administration.

(a) The Plan shall be administered by the Committee. No person, other than
members of the Committee, shall have any discretion concerning decisions
regarding the Plan. The Committee shall determine the employees of the Company
and its Related Companies (including officers) to whom, and the time or times
at which, Incentive Awards will be granted or awarded; the number of shares to
be subject to each Incentive Award; the duration of each Incentive Award; the
time or times within which Options may be exercised; the cancellation of the
Incentive Award (with the consent of the holder thereof); and the other terms
and conditions of the grant or award of the Incentive Award, at grant or

I-2
<PAGE>

award or while outstanding, pursuant to the terms of the Plan. The provisions
and conditions of the Incentive Awards need not be the same with respect to
each employee or with respect to each Incentive Award.

(b) The Committee may, subject to the provisions of the Plan, establish such
rules, regulations, policies and procedures as it deems necessary or advisable
for the proper administration of the Plan, and may make determinations and may
take such other action in connection with or in relation to the Plan as it
deems necessary or advisable. Each determination or other action made or taken
pursuant to the Plan, including interpretations of the Plan and the specific
conditions and provisions of the Incentive Awards granted or awarded hereunder
by the Committee, shall be final and conclusive for all purposes and upon all
persons including, but without limitation, the Company, its Related Companies,
the Committee, the Board of Directors of the Company, officers and the
affected employees of the Company and/or its Related Companies, employees and
the respective successors in interest of any of the foregoing.

5. Stock.

The Jacobs Common Stock to be issued, transferred and/or sold under the Plan
shall be made available from authorized and unissued Jacobs Common Stock or
from the Company's treasury shares. The total number of shares of Jacobs
Common Stock that may be issued or transferred under the Plan pursuant to
Incentive Awards hereunder may not exceed 3,000,000 shares (subject to
adjustment as described below). Such number of shares shall be subject to
adjustment in accordance with this Section 5 and Section 12. Jacobs Common
Stock subject to any unexercised portion of an Option that expires or is
canceled, surrendered or terminated for any reason may again be subject to
Incentive Awards granted under the Plan.

6. Eligibility.

Incentive Awards may be granted or awarded to employees of the Company and
its Related Companies.

In no event may Incentive Awards be granted or awarded to any Employee for
more than one million shares in any one calendar year, subject to the
adjustment provisions of Section 12 of the Plan.

7. Grants of Options.

Each Option grant shall be evidenced by a written instrument containing such
terms and conditions, not inconsistent with the Plan, as the Committee may
approve. Except as otherwise specifically provided in this Plan, Options
granted pursuant to the Plan shall be subject to the following terms and
conditions:

(a) Option Price. The option price of all ISOs shall be 100% of the Fair
Market Value of the Jacobs Common Stock on the date of grant. The option price
of all NQSOs shall be not less than 85% of the Fair Market Value of the Jacobs
Common Stock on the date of grant.

(b) Duration of Options. The duration of Options shall be determined by the
Committee, but in no event shall the duration exceed ten (10) years from the
date of its grant.

(c) Other Terms and Conditions. Options may contain such other provisions,
not inconsistent with the provisions of the Plan, as the Committee shall
determine appropriate from time to time, including, without limitation,
provisions for accelerated vesting of Options, and provisions relating to the
termination of Options for conduct deemed detrimental to the Company and/or
its Related Companies; provided, however, that, except in the event of a
Change in Control or the Disability or death of the employee, no Option shall
be exercisable in whole or in part for a period of twelve (12) months from

I-3
<PAGE>

the date on which the Option is granted. The grant of an Option to any
employee shall not affect in any way the right of the Company and any Related
Company to terminate the employment of the holder thereof.

(d) ISOs. The Committee, with respect to each grant of an Option to an
employee, shall determine whether such Option shall be an ISO, and, upon
determining that an Option shall be an ISO, shall designate it as such in the
written instrument evidencing such Option. Each written instrument evidencing
an ISO shall contain all terms and conditions required by Section 422 of the
Internal Revenue Code of 1986, as amended. If the written instrument
evidencing an Option does not contain a designation that it is an ISO, it
shall not be an ISO.

The Employee to whom an ISO is granted must be eligible to receive an ISO
pursuant to Section 422 of the Internal Revenue Code of 1986, as amended.

The aggregate Fair Market Value (determined in each instance on the date on
which an ISO is granted) of the Jacobs Common Stock with respect to which ISOs
are first exercisable by any employee in any calendar year shall not exceed
$100,000 for such employee. If any Majority-Owned Related Company of the
Company shall adopt a stock option plan under which options constituting ISOs
may be granted, the fair market value of the stock on which any such ISOs are
granted and the times at which such ISOs will first become exercisable shall
be taken into account in determining the maximum amount of ISOs that may be
granted to the employee under this Plan in any calendar year.

8. Exercises of Options.

(a) An exercisable Option may be exercised in whole or in part. However, an
Option may not be exercised in a manner that will result in fractional shares
of Jacobs Common Stock being issued.

(b) All, or any portion, of an exercisable Option shall be deemed exercised
upon delivery to the representative of the Company designated for such purpose
by the Committee of all of the following: (i) notice of exercise in such form
and in such manner as the Committee may authorize; (ii) payment of the
exercise price for such Options being exercised; (iii) such representations
and documents as the Committee may, in its sole discretion, deem necessary or
advisable to effect compliance with all applicable provisions of the
Securities Act of 1933, as amended, and any other federal, state, or foreign
securities laws or regulations; and (iv) in the event that the Option is being
exercised pursuant to Section 9 of the Plan by any person other than the
Employee, proof deemed appropriate by the Committee in its sole discretion of
the right of such person to exercise the Option.

(c) The option price shall be paid in full at the time of exercise. Payment
is to be made in cash or, at the discretion of the Committee and upon
conditions established by it, by the delivery or constructive exchange of
shares of Jacobs Common Stock acceptable to the Committee owned by the
Employee for such period of time as may be established by the Committee.

(d) The Committee may make such provisions as it may deem appropriate for
the withholding or payment by the Employee of any taxes which it determines
are required in connection with an exercise of an Option, and an Optionee's
rights in any Incentive Award are subject to satisfaction of such conditions.
If permitted by the Committee, the Employee may elect to satisfy all or any
portion of such taxes by instructing the Company to withhold shares of Jacobs
Common Stock that would otherwise be issuable to the employee by reason of the
exercise.

If shares of Jacobs Common Stock are delivered or constructively exchanged
to pay the option price, or if shares of Jacobs Common Stock otherwise
issuable to the employee by reason of the exercise are withheld to satisfy tax
liabilities, the value of the shares delivered or exchanged or that are
withheld shall be computed using the Fair Market Value of the Jacobs Common
Stock delivered or exchanged, or withheld, determined as of the date of
exercise.

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<PAGE>

9. Transferability of Incentive Awards.

Except as otherwise provided by the Committee:

(a) Incentive Awards granted or awarded pursuant to the Plan shall not be
transferable other than by will or by the laws of descent and distribution.

(b) During the lifetime of an employee, an Option shall be exercisable only
by the employee personally, or by the employee's legal representative.

10. Effect on Options of Termination of Employment, Other Changes of
Employment or Employer Status, Death, Retirement, or a Change in
Control.

Schedule A, attached hereto, establishes the effects on outstanding Options
of an Employee's termination of employment, other changes of employment or
employer status, death, Disability, Retirement, or a Change in Control, and is
hereby incorporated by reference. The Committee may approve grants of Options
containing terms and conditions different from, or in addition to, those set
forth in Schedule A.

Notwithstanding the provisions of the foregoing paragraph, no Option may
have a term of more than ten years.

In the case of leaves of absence, employees will not be deemed to have
terminated employment unless the Committee, in its sole discretion, determines
otherwise.

The Committee may, with the consent of the affected employee, modify the
terms and conditions pertaining to the effect of an employee's termination on
the expiration or exercisability of an Option subsequent to the date of grant.

11. No Rights as a Shareholder.

An employee or a transferee of an employee pursuant to Section 9 shall have
no rights as a shareholder with respect to any Jacobs Common Stock covered by
an Option or receivable upon the exercise of an Option until the employee or
transferee shall have become the holder of record of such Jacobs Common Stock,
and no adjustments shall be made for dividends in cash or other property or
other distributions or rights in respect to such Jacobs Common Stock for which
the record date is prior to the date on which the employee or transferee shall
have in fact become the holder of record of the share of Jacobs Common Stock
acquired pursuant to the Incentive Award.

12. Adjustment in the Number of Shares and in Option Price.

In the event there is any change in the shares of Jacobs Common Stock
through the declaration of stock dividends, or stock splits or through
recapitalization or merger or consolidation or combination of shares or spin-
offs or otherwise, the Committee or the Board of Directors of the Company
shall make such adjustment, if any, as it may deem appropriate in the number
of shares of Jacobs Common Stock available for Options as well as the number
of shares of Jacobs Common Stock subject to any outstanding Option and the
option price thereof. Any such adjustment may provide for the elimination of
any fractional shares that might otherwise become subject to any Option
without payment therefor.

13. Awards of Restricted Stock.

(a) An Incentive Award in the form of shares of Restricted Stock may be
awarded under this Section 13 as determined by the Committee. The shares of
Restricted Stock so issued shall not be sold, exchanged, transferred, pledged,
hypothecated or otherwise disposed of, and in the event of termination of the
Employee's employment with the Company for any reason (including death and
Disability unless the Committee in its sole discretion terminates the
Forfeiture Restrictions following the

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<PAGE>

death or Disability of such Employee), the Employee shall be obligated, for no
consideration, to forfeit and surrender such shares (to the extent then
subject to the Forfeiture Restrictions) to the Company. The restrictions
against disposition and the obligation to forfeit and surrender shares to the
Company are herein referred to as "Forfeiture Restrictions", and the shares
that are then subject to the Forfeiture Restrictions are herein sometimes
referred to as "Restricted Stock." Certificates representing Restricted Stock
shall be appropriately legended to reflect the Forfeiture Restrictions.

(b) The Forfeiture Restrictions with respect to Restricted Stock issued
under this Section 13 shall lapse and be of no further force and effect upon
the expiration of the period of time fixed by the Committee upon the issuance
of such Restricted Stock.

(c) Should the Employee's employment with the Company or Related Company be
terminated for any reason upon or within thirty-six (36) months following a
Change in Control, then all remaining Forfeiture Restrictions, if any, shall
be deemed to have lapsed.

(d) In order to enforce the restrictions imposed upon shares of Restricted
Stock, the Committee may require the recipient to enter into an escrow
agreement providing that the certificates representing such shares of
Restricted Stock shall remain in the physical custody of an escrow holder
until any or all of the restrictions imposed pursuant to the Plan expire or
shall have been removed.

(e) The Committee may make such provisions as it may deem appropriate for
the withholding or payment by the Employee of any taxes which it determines
are required in connection the lapse of Forfeiture Restrictions, and an
Employee's rights in any Incentive Award are subject to satisfaction of such
conditions. If permitted by the Committee, the Employee may elect to satisfy
all or any portion of such taxes by instructing the Company to withhold shares
of Jacobs Common Stock as to which the Restrictions have lapsed.

(f) If shares of Jacobs Common Stock are withheld to satisfy tax
liabilities, the value of such shares shall be computed using the Fair Market
Value of the Jacobs Common Stock on the date of Forfeiture Restrictions lapse.

(g) All of the foregoing restrictions, terms and other conditions regarding
shares of Restricted Stock shall be evidenced by a written instrument executed
by the Company and the Employee and containing such terms and conditions, not
inconsistent with the Plan, as the Committee shall approve.

14. Amendments, Modifications and Termination of the Plan.

(a) The Board of Directors of the Company or the Committee may terminate the
Plan at any time. From time to time, the Board of Directors or the Committee
may suspend the Plan, in whole or in part. From time to time, the Board of
Directors or the Committee may amend the Plan, in whole or in part, including
the adoption of amendments deemed necessary or desirable to qualify the
Incentive Awards under the laws (including tax laws) of various countries and
under rules and regulations promulgated by the Securities and Exchange
Commission with respect to employees who are subject to the provisions of
Section 16 of the 1934 Act, or to correct any defect or supply an omission or
reconcile any inconsistency in the Plan or in any Incentive Award granted
hereunder, or for any other purpose or to any effect permitted by applicable
laws and regulations, without the approval of the shareholders of the Company.
However, in no event may additional shares of Jacobs Common Stock be allocated
to the Plan, or may the minimum exercise price for Options be reduced, or may
any outstanding Option be repriced or replaced without shareholder approval.
Without limiting the foregoing, the Board of Directors or the Committee may
make amendments applicable or inapplicable only to employees who are subject
to Section 16 of the 1934 Act.

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(b) No amendment or termination or modification of the Plan shall in any
manner affect any Incentive Award theretofore granted without the consent of
the employee, except that the Committee may amend or modify the Plan in a
manner that does affect Incentive Awards theretofore granted upon a finding by
the Committee that such amendment or modification is in the best interest of
holders of outstanding Incentive Awards affected thereby.

(c) Grants of ISOs may be made under this Plan until December 2, 2009 or
such earlier date as this Plan is terminated, and grants of NQSOs and awards
of Restricted Stock may be made until all of the shares of Jacobs Common Stock
authorized for issuance hereunder (adjusted as provided in Sections 5 and 12)
have been issued or until this Plan is terminated, whichever first occurs. The
Plan shall terminate when there are no longer Options outstanding under the
Plan, or when there are no longer shares of Restricted Stock outstanding that
are subject to Forfeiture Restrictions, unless earlier terminated by the Board
or by the Committee.

15. Non-U.S. Employees.

The Committee may determine, in its sole discretion, whether it is desirable
or feasible under local law, custom or practice to grant or award Incentive
Awards to Employees in countries other than the United States. In order to
facilitate any such grants or awards, the Committee may provide for such
modifications and additional terms and conditions ("special terms") in the
grant and award agreements to Employees who are employed outside the United
States (or who are foreign nationals temporarily within the United States) as
the Committee may consider necessary, appropriate or desirable to accommodate
differences in, or otherwise comply with, local law, policy or custom or to
facilitate administration of the Plan. The Committee may adopt or approve sub-
plans, appendices or supplements to, or amendments, restatements or
alternative versions of, the Plan as it may consider necessary, appropriate or
desirable for purposes of implementing any special terms or facilitating the
grant or award of an Incentive Award, without thereby affecting the terms of
the Plan as in effect for any other purpose. The special terms and any
appendices, supplements, amendments, restatements or alternative versions,
however, shall not include any provisions that are inconsistent with the terms
of the Plan as then in effect, unless the Plan could have been amended to
eliminate such inconsistency without further approval by the Board of
Directors of the Company.

16. Governing Law.

The Plan shall be governed by and shall construed and enforced in accordance
with the laws of the State of Delaware without giving effect to its choice of
law rules.

17. Adoption of the Plan.

The Plan shall become effective upon its approval by the Board of Directors
of the Company and a majority of the shares present at a duly called meeting
of the shareholders of the Company held within twelve months of approval by
the Board. However, Incentive Awards may be granted at any time following the
approval of the Plan by the Board, but no shares may be issued pursuant to any
Incentive Awards until the Plan has been approved by the shareholders, and all
listing requirements of all securities exchanges on which the Jacobs Common
Stock is listed have been satisfied.

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SCHEDULE A
to the
JACOBS ENGINEERING GROUP INC.
1999 Stock Incentive Plan

<TABLE>
<CAPTION>
Event Impact on Vesting Impact on Exercise Period
----- ----------------- -------------------------
<S> <C> <C>
Employment terminates due to Unvested Options Option expiration date provided
Retirement are forfeited in the grant agreement continues
to apply

Employment terminates due to All Options become Option expiration date provided
Disability or death immediately vested in the grant agreement continues
to apply

Employment terminates upon, or All Options become Option expiration date provided
within 36 months following, a immediately vested in the grant agreement continues
Change in Control to apply

Employment terminates for reasons Unvested Options Expires on the earlier to occur
other than a Change in Control, are forfeited of (1) the Option expiration
Disability, Retirement, or death date provided in the grant
(for purposes of this section, agreement, or (2) three months
the receipt of severance pay or from the date of termination
similar compensation by the
Optionee does not extend his or
her termination date)

Optionee is an employee of a Unvested Options Expires on the earlier to occur
Related Company, and the are forfeited of (1) the Option expiration
Company's investment in the date provided in the grant
Related Company falls below agreement, or (2) three months
20% (this constitutes a from the date of termination
termination of employment under
the Plan)

Employee becomes an employee of Unvested Options Expires on the earlier to occur
an entity in which the Company's are forfeited of (1) the Option expiration
ownership interest is less than date provided in the grant
20% (this constitutes a agreement, or (2) three months
termination of employment under from the date of termination
the Plan)

Employment transferred to a Vesting continues Option expiration date provided
Related Company after transfer in the grant agreement continues
to apply

Death after termination of Not applicable Right of executor or
employment but before Option has administrator of estate (or
expired other transferee permitted by
Section 9) terminates on the
earlier to occur of (1) the
Option expiration date provided
in the grant agreement, or (2)
the Option expiration date that
applied immediately prior to the
death of the Optionee
</TABLE>

I-8
<PAGE>

EXHIBIT II

JACOBS ENGINEERING GROUP INC.

1999 Outside Director Stock Plan

1. Purpose. The purpose of the Jacobs Engineering Group Inc. 1999 Outside
Director Stock Plan (the "Plan") is to attract and retain the services of
experienced and knowledgeable independent directors of Jacobs Engineering
Group Inc. (the "Company") for the benefit of the Company and its stockholders
and to provide an additional incentive for such directors to continue to work
for the best interests of the Company and its stockholders through continuing
ownership of its Common Stock.

2. Definitions. Unless the context clearly indicates otherwise, the
following terms, when used in this Plan, shall have the meanings set forth in
this Paragraph 2.

"Board of Directors" shall mean the Board of Directors of the Company.

"Common Stock" shall mean the Common Stock, $1.00 par value, of the Company
or such other class of shares or other securities as may be applicable
pursuant to the provisions of Paragraph 5.

"Company" shall mean Jacobs Engineering Group Inc.

"Disabled" shall mean an Outside Director's inability to perform the duties
of a director of the Company by reason of a mental or physical impairment. The
following shall constitute conclusive proof that an Outside Director is
disabled:

(1) The appointment by a court of competent jurisdiction of a guardian or
conservator of the person or estate of an Outside Director; or

(2) An Outside Director's failure to attend any meetings of the Board
during a period of six months by reason of illness or physical injury, as
determined by the Board of Directors.

"Fair Market Value" shall mean the closing price of the Common Stock as
reported in the composite transactions report of the National Securities
Exchange on which the Common Stock is then listed ("Exchange"). If such day is
a day that the Exchange is not open, then the Fair Market Value shall be
determined by reference to the closing price of the Common Stock for the
immediately preceding trading day.

"Forfeiture". As defined in Paragraph 11.

"Grant Price" shall mean the higher of:

(1) 85% of the closing price of the Common Stock as reported in the
composite transactions report of the Exchange for the day the Grant Price
is being determined; or,

(2) The average of the closing prices of the Common Stock as reported in
the composite transactions report of the Exchange for the ten trading days
ending on the second trading day prior to the date for which the Grant
Price is being determined.

If the day for which the Grant Price is being determined is a day that the
Exchange is not open, then the Grant Price shall be determined by reference to
the relevant price or prices as of the immediately preceding trading day.

"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.

"Outside Director" shall have the meaning given the term "Non-Employee
Director" by Rule 16b-3 adopted under the 1934 Act.

II-1
<PAGE>

"Option" shall mean an Option granted pursuant to this Plan.

"Plan" shall mean this Jacobs Engineering Group Inc. 1999 Outside Director
Stock Plan as set forth herein, as the same may be amended from time to time.

"Restricted Stock". As defined in Paragraph 11.

"Retirement" shall mean resignation from or replacement on the Board of
Directors after an Outside Director has attained the age of 70 years with a
minimum of five years of service on the Board of Directors.

"Stock Award" shall mean a grant of Common Stock or Restricted Stock
pursuant to Paragraph 11 of this Plan.

"Tax Date" shall mean the date as of which any federal, state, local or
foreign tax is required to be withheld from an Outside Director in connection
with the exercise of an Option, the sale or other disposition of Common Stock
acquired upon the exercise of an Option, the receipt of a Stock Award or the
release of Restricted Stock Forfeiture Restrictions.

3. Shares of Common Stock Subject to the Plan.

(a) Subject to the provisions of Paragraph 5, the aggregate number of shares
of Common Stock upon which Options and Stock Awards may be granted under the
Plan shall not exceed 200,000 shares.

(b) The shares to be delivered under the Plan shall be made available, at
the discretion of the Board of Directors, from either authorized but unissued
shares of Common Stock or previously issued shares reacquired by the Company,
including shares purchased in the open market.

(c) If any outstanding Option granted under the Plan expires, lapses, is
terminated or is forfeited for any reason, then the unissued shares of Common
Stock that were allocable to the unexercised portion of such Option shall
again be available for issuance upon exercise of an Option granted under this
Plan.

4. Administration of the Plan.

(a) The Plan shall be administered by the Board of Directors. The Board of
Directors may authorize any officer or officers of the Company to execute and
deliver Option Agreements and Restricted Stock Agreements and other documents
on behalf of the Company.

(b) Subject to the provisions of the Plan, the Board of Directors is
authorized and directed to interpret the Plan, to establish, amend and rescind
policies relating to the Plan, to direct the Company to execute agreements and
amendments thereto setting forth the terms and conditions of grants of Outside
Director Options and Stock Grants made under the Plan and to make such other
determinations and to take such other actions as are consistent with the Plan
and are necessary or appropriate for the administration of the Plan.
Notwithstanding the foregoing, the Board of Directors shall not have the
authority to make any determination, to adopt any policy or to take any action
that would cause grants and exercises under the Plan to cease to be exempt
from Section 16(b) of the 1934 Act by virtue of Rule 16b-3, or any successor
rule, thereunder.

(c) Any determination, decision or action of the Board of Directors in
connection with the construction, interpretation, administration or
application of the Plan shall be final, binding and conclusive upon all Plan
participants and their transferees, beneficiaries, legal representatives,
executors and other successors and assigns and upon all other persons. No
member of the Board of

II-2
<PAGE>

Directors, and no other person acting upon the authorization and direction of
the Board of Directors, shall be liable for any determination, decision or
action made in good faith with respect to the Plan.

(d) The Company shall indemnify and hold harmless the members of the Board
of Directors, and other persons who are acting upon the authorization and
direction of the Board of Directors, from and against any and all liabilities,
costs and expenses incurred by such persons as a result of any act or omission
in connection with the performance of such persons' duties, responsibilities
and obligations under the Plan, other than such liabilities, costs and
expenses as may result from the bad faith, willful misconduct or criminal acts
of such persons.

5. Adjustment Provisions.

(a) Subject to the provisions of Paragraph 5(b), if the outstanding shares
of Common Stock of the Company are increased, decreased or exchanged for a
different number or kind of shares or other securities, or if additional
shares or new or different shares or other securities are distributed in
respect of such shares of Common Stock or other securities, through merger,
consolidation, sale of all or substantially all of the property of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other distribution in respect of such
shares of Common Stock or other securities, there shall be an appropriate and
proportionate adjustment in each of the following: (i) the maximum number and
kind of securities provided in Paragraph 3(a) of this Plan, (ii) the number
and kind of shares or other securities subject to then outstanding Options,
(iii) the price for each share or other unit of any other securities subject
to such Options, but without change in the aggregate purchase price as to
which such Options remain exercisable and (iv) the maximum number of shares of
to be issued pursuant to Stock Awards under Section 11 of this Plan.

(b) Upon the dissolution or liquidation of the Company or upon a
reorganization, merger or consolidation of the Company with one or more
companies as a result of which the Company is not the surviving company, or
upon the sale of all or substantially all the assets of the Company, all
Options and Restricted Stock then outstanding under the Plan shall be fully
vested and exercisable unless, in the case of Options, provisions are made in
connection with such transaction for the continuation of this Plan and the
assumption of or substitution for such Options of new Options covering the
stock of a successor company, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices.

(c) Adjustments under this Paragraph 5 shall be approved by the Board of
Directors, whose determination as to what adjustments shall be made, and the
extent thereof, shall be final, binding and conclusive. No fractional
interests shall be issued under the Plan on account of any such adjustment.

6. Grants of Options to Outside Directors.

All Outside Directors shall receive Options pursuant to this Plan, as
follows:

(a) Appointment Grants. Outside Directors who first become Directors shall
receive an Option to purchase 2,000 shares of Common Stock (an "Appointment
Grant") on the first day of the month following the date upon which they are
elected to the Board of Directors.

(b) Annual Grants. All Outside Directors shall also receive annually on each
first day of March following their receipt of their Appointment Grant an
Option to purchase 1,000 shares of Common Stock.

All Options are intended to be non-qualified (non-statutory) stock options.

II-3
<PAGE>

(c) An Outside Director may, by giving written notice to the Company not
less than thirty days prior to the date on which an Option shall be due to be
granted:

(i) Decline to accept further grants of Options under this Plan; or

(ii) Revoke a previous election to decline to accept further grants of
Options under this Plan, in which case such Outside Director shall
thereafter receive Annual Grants made after such revocation.

An Outside Director who declines to accept grants of Options under this Plan
may not receive anything of value in lieu of such grant, either at the time of
such election or at any time thereafter.

7. Terms of Outside Director Options.

(a) Option Agreement. Each Option shall be evidenced by a written agreement
containing such terms and conditions, not inconsistent with this Plan, as the
Board of Directors deems appropriate (an "Option Agreement"). An Option
Agreement shall not be effective unless and until it has been executed by a
duly authorized officer of the Company and by the Outside Director to whom the
Option is being granted.

(b) Option Price. The price of the shares of Common Stock subject to each
Outside Director Option shall be the Grant Price on the date such Option is
granted.

(i) No Option may be exercised in whole or in part until one year
following the date upon which the Option is granted;

(ii) Subject to the provisions of Paragraph 7(c)(i), which shall at all
times preempt the provisions of this Subparagraph 7(c)(ii), an installment
of 25% of each Option shall become exercisable one year following the date
of grant, with additional installments of 25% becoming exercisable on each
anniversary date of the grant, so that all Options are fully exercisable at
the end of four years from the date of grant;

(iii) Upon the death or disability of an Outside Director while in
office, all installments of all Options held by such director shall vest
and become fully exercisable; and

(iv) No installment of an Option that has not become exercisable on the
date on which the holder thereof ceases to be a director of the Company for
any reason other than the death or disability of the holder shall
thereafter become exercisable by such holder or his successors and assigns.

8. Expiration of Options. An Option may not be exercised after the first to
occur of the following events:

(a) Except in the case of an Outside Director who dies or is Disabled, or an
Outside Director's Retirement, the expiration of three months from the date of
the Outside Director's resignation from or replacement on the Board of
Directors unless the Outside Director dies within said three-month period, in
which case the expiration of one year from the date of death;

(b) In the case of the death of an Outside Director while in office, upon
the expiration of the terms stated in the Option Agreements held by such
director at the time of death;

(c) In the case of an Outside Director who is Disabled, upon the expiration
of the terms stated in the Option Agreements held by such director at the time
of the Disability; or

II-4
<PAGE>

(d) In the case of the Retirement of an Outside Director, the expiration of
the remaining term of the Option.

An Option may not be exercised to any extent by anyone after the expiration of
ten years from the date the Option was granted.

9. Exercise of Options.

(a) Following the death or disability of an Outside Director, any
exercisable portion of such Option may, prior to the time when such portion
becomes unexercisable under the provisions of Paragraph 8, above, be exercised
by the Outside Director's personal representative or by any person empowered
to do so under court order, or by will or the laws of descent and
distribution, unless otherwise determined by the Board of Directors.

(b) Manner of Exercise. An Option, or any exercisable portion thereof, may
be exercised solely by delivery to the Company of all of the following prior
to the time when such Option or portion thereof becomes unexercisable under
Paragraph 8:

(i) Notice in writing signed by the Outside Director or other person then
entitled to exercise such Option or portion, stating that such Option or
portion is exercised;

(ii) Either:

(x) Full payment (in cash or by check) for the shares with respect to
which such Option or portion is thereby exercised; or

(y) Upon conditions established by the Board of Directors, by the
delivery or constructive exchange of shares of Common Stock owned by
the Outside Director for such period of time as may be established by
the Board of Directors, such shares having a Fair Market Value equal to
the aggregate exercise price of the Options being exercised; or

(z) Any combination of the consideration provided in the foregoing
subsections (x) and (y);

(iii) In the event the Option or a portion thereof is being exercised by
any person or persons other than the Outside Director to whom it was
originally granted, appropriate proof, reasonably satisfactory to the
Company, of the authority of such person or persons to exercise the Option
or such portion thereof; and

(iv) If income tax withholding on the exercise of an Option is permitted
or required, then all or any portion of any federal, state, local or
foreign taxes required to be withheld from an Outside Director with respect
to the exercise of such Option may be satisfied by the Outside Director's
instructing the Company to withhold from the shares of Common Stock that
would otherwise be delivered upon exercise of such Option shares of Common
Stock with a Fair Market Value on the Tax Date equal to the amount of
withholding taxes so to be satisfied.

The foregoing means of satisfying an Outside Director's obligation to pay
withholding taxes are subject to the following additional rules and
restrictions:

(I) In no event may the amount of withholding taxes to be satisfied
exceed the withholding taxes payable by the Outside Director with respect
to the Option exercise, computed at the maximum withholding rates
applicable to such Outside Director at the time of such election, unless
otherwise determined by the Board of Directors.

(II) Each election to use Common Stock to satisfy a withholding tax
obligation must either (A) be in a written instrument signed by the Outside
Director and stating the number of shares to be withheld or surrendered or
a formula pursuant to which such number may be determined and be
irrevocable; or (B) otherwise be made in compliance with the Rules and
Regulations of the

II-5
<PAGE>

Securities and Exchange Commission under the 1934 Act relating to such
elections, as from time to time in effect.

In no event shall the Company be required to issue fractional shares, and an
Option may not be exercised for fewer than 100 shares.

(c) Rights as a Shareholder. A holder of an Option shall not be, and shall
not have any of the rights or privileges of, a shareholder of the Company with
respect to any shares of Common Stock purchasable upon the exercise of such
Option unless and until such Option shall have been exercised and a
certificate or certificates evidencing such shares shall have been issued by
the Company to such holder.

(d) Conditions to Issuance of Stock Certificates. The Company shall not be
required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof unless and
until all legal requirements applicable to such issuance or delivery have, in
the opinion of counsel to the Company, been complied with. In connection with
any such issuance or transfer, the person acquiring the shares shall, if
requested by the Company, give assurances satisfactory to such counsel in
respect of such matters as such counsel may deem desirable to assure
compliance with all applicable legal requirements.

10. Restrictions on Transferability.

(a) No Option or interest or right therein or part thereof shall be subject
to or liable for the debts, contracts or engagements of the Outside Director
or the Outside Director's successors in interest, as the case may be, or shall
be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including
bankruptcy), and any attempted disposition thereof shall be null and void and
of no effect; provided, however, that nothing in this Paragraph 10 shall
prevent transfers permitted by Paragraph 9(a)or Paragraph 10(b).

(b) Except as otherwise provided by the Board of Directors:

(i) Options granted or awarded pursuant to the Plan shall not be
transferable other than by will or by the laws of descent and distribution;
and

(ii) During the lifetime of an Outside Director, an Option shall be
exercisable only by the Outside Director personally, or by the Outside
Director's legal representative.

11. Stock Awards.

(a) In the discretion of the Board of Directors, the Company may make Stock
Awards to Outside Directors. Stock Awards may be in the form of stock or
Restricted Stock or any combination thereof. No Stock Award to an Outside
Director may exceed 5,000 shares of Common Stock in any year. Stock Awards may
be made no more frequently than annually. Unless otherwise determined by the
Board of Directors, Stock Awards may not be made to an individual who has at
any time been employed by the Company.

(b) Stock Awards to Outside Directors for the first year that they serve as
directors shall be in the form of Restricted Stock. Restricted Stock awarded
under this Plan may not be sold, exchanged, transferred, pledged, hypothecated
or otherwise disposed of, and in the event of the Outside Director's ceasing
to serve as a director of the Company for any reason (including death and
Disability unless the Board of Directors in its sole discretion terminates the
Forfeiture Restrictions following the death or Disability of such Outside
Director), the Outside Director shall be obligated, for no consideration, to
forfeit and surrender such shares (to the extent then subject to the
Forfeiture Restrictions) to the

II-6
<PAGE>

Company. The restrictions against disposition and the obligation to forfeit
and surrender shares to the Company are herein referred to as "Forfeiture
Restrictions", and the shares that are then subject to the Forfeiture
Restrictions are referred to as "Restricted Stock." Certificates evidencing
Restricted Stock shall be appropriately legended to reflect the Forfeiture
Restrictions.

(c) The Forfeiture Restrictions with respect to Restricted Stock awarded to
an Outside Director shall lapse and be of no further force and effect upon the
expiration of such period of time as may be fixed by the Board of Directors
prior to the issuance of such Restricted Stock. In no event shall the
restriction period be less than six months from the date the Restricted Stock
is awarded.

(d) All of the foregoing restrictions, terms and other conditions regarding
shares of Restricted Stock shall be evidenced by a written agreement between
the Company and the Outside Director containing such terms and conditions, not
inconsistent with the Plan, as the Board of Directors shall approve.

(e) The Board of Directors may make such provisions as it may deem
appropriate for the withholding or payment by the Outside Director of any
withholding taxes that it determines are required in connection with Stock
Awards and the lapse of Forfeiture Restrictions on Restricted Stock, and an
Outside Director's rights in such stock are subject to satisfaction of such
conditions. If permitted by the Board of Directors, an Outside Director may
elect to satisfy all or any portion of such taxes by instructing the Company
to withhold shares of Common Stock from a Stock Award or from Restricted Stock
as to which the Restrictions have lapsed.

(f) If shares of Common Stock are withheld to satisfy tax liabilities, the
value of such shares shall be computed using the Fair Market Value of the
Common Stock on the Tax Date.

12. Effective Date of the Plan. This Plan is conditional upon the approval
of the shareholders of the Company, and the Plan shall be null and void if it
is not approved by the shareholders within twelve months of its approval by
the Board of Directors.

13. Amendment, Suspension and Termination of Plan. Except as provided in
this Paragraph 13, the Board of Directors may amend or terminate the Plan at
any time and in any respect.

(a) No amendment of the Plan shall become effective without the approval of
the Company's shareholders if such approval is required in order to comply
with Rule 16b-3 under the Exchange Act or any other applicable law, rule or
regulation.

(b) Unless required by applicable law, rule or regulation, no amendment or
termination of the Plan shall affect in a material and adverse manner any
Option granted prior to the date of such amendment or termination without the
written consent of the Outside Director holding such affected Option.

(c) This Plan is intended to comply with all requirements for the exemption
from Section 16(b) of the 1934 Act applicable to Outside Directors provided by
Rule 16-3 or its successors under the 1934 Act. To the extent any provision of
the Plan does not so comply and cannot for any reason be amended by the Board
of Directors or the shareholders of the Company so as to comply, the provision
shall, to the extent permitted by law and deemed advisable by the Board of
Directors, be deemed null and void with respect to the holder of Options
granted under this Plan.

14. Governing Law. This Plan shall be governed by and construed and enforced
in accordance with, the laws of the State of Delaware without giving effect to
its choice of law rules.

15. Termination of the Plan. Unless previously terminated by the Board of
Directors, the Plan shall terminate when there are no longer any Options or
shares of Restricted Stock outstanding.

II-7
<PAGE>

EXHIBIT III

EXECUTIVE OFFICERS OF THE COMPANY

The following table presents the names and ages of each Executive Officer of
the Company, as well as their current position with the Company, and the year
in which they first joined the Company.

<TABLE>
<CAPTION>
Year Joined
Name Age Position with the Company the Registrant
---- --- ------------------------- --------------
<S> <C> <C> <C>
Joseph J. Jacobs.......... 83 Director and Chairman of the Board 1947
Noel G. Watson............ 63 President, Chief Executive Officer and Director 1965
Richard E. Beumer......... 61 Vice Chairman of the Board 1999
William R. Kerler......... 70 Executive Vice President, Operations and Director 1980
Thomas R. Hammond......... 48 Executive Vice President, Operations 1975
Richard J. Slater......... 53 Executive Vice President, Operations 1980
James C. Uselton.......... 60 Executive Vice President, Operations 1999
Donald J. Boutwell........ 62 Group Vice President, Field Services 1984
Andrew E. Carlson......... 66 President, Jacobs Sverdrup Constructors, 1990
Robert M. Clement......... 51 Group Vice President, Central Region 1990
Warren M. Dean............ 55 Group Vice President, Facilities 1994
Stephen K. Fritschle...... 56 Group Vice President, Southern Region 1989
George A. Kunberger, Jr... 47 Group Vice President, Northern Region 1975
Gregory J. Landry......... 51 Group Vice President, International Operations 1984
John McLachlan............ 53 Group Vice President, International Operations 1974
H. Gerard Schwartz, Jr.... 61 Group Vice President, Civil 1999
Roger L. Williams......... 61 Group Vice President, Federal Operations 1983
Michael J. Higgins........ 55 Senior Vice President, Federal Programs 1994
Craig L. Martin........... 50 Senior Vice President, General Sales and Marketing 1994
John W. Prosser, Jr....... 54 Senior Vice President, Finance and Administration and
Treasurer 1974
Laurence R. Sadoff........ 62 Senior Vice President, Quality and Safety 1993
Nazim G. Thawerbhoy....... 52 Senior Vice President and Controller 1979
William C. Markley, III... 53 Vice President, General Counsel and Secretary 1981
</TABLE>

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. Beumer, Uselton and Schwartz, have served in executive capacities
with the Company or have been part of its management for more than five years.
Prior to joining the Company in 1999, Messrs. Beumer, Uselton and Schwartz
were part of the senior management group of Sverdrup Corporation, or one of
its subsidiaries, for at least five years.

III-1
<PAGE>

APPENDIX A

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

WITH REPORT OF INDEPENDENT AUDITORS

September 30, 1999
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
SELECTED HIGHLIGHTS
For Fiscal Years Ended September 30
(Dollars in thousands, except per share information)

<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues.................................... $2,875,007 $2,101,145 $1,780,616
Net earnings................................ 65,445 54,385 46,895
---------- ---------- ----------
Per share information:
Basic EPS.................................. $ 2.54 $ 2.12 $ 1.82
Diluted EPS................................ 2.47 2.08 1.80
Net book value............................. 16.95 14.23 12.48
Closing year-end stock price............... 32.50 31.00 30.625
---------- ---------- ----------
Total assets................................ $1,220,186 $ 807,489 $ 737,643
Stockholders' equity........................ 448,717 371,405 324,308
Return on average equity.................... 15.96% 15.63% 15.43%
Stockholders of record...................... 1,208 1,352 1,592
---------- ---------- ----------
Backlog:
Professional services...................... $1,760,000 $1,004,500 $ 912,057
Total...................................... 4,448,200 3,329,500 3,050,000
---------- ---------- ----------
Permanent staff............................. 15,900 10,080 9,570
---------- ---------- ----------
</TABLE>

As disclosed last year, the Company adopted Statement of Financial
Accounting Standards No. 128 -- Earnings per Share ("SFAS 128") effective with
the first quarter of fiscal 1998 ending December 31, 1997. Earnings per share
("EPS") for prior periods have been restated to conform to the provisions of
SFAS 128.

A-1
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
For Fiscal Years Ended September 30
(In thousands, except per share information)

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenues............... $2,875,007 $2,101,145 $1,780,616 $1,798,970 $1,723,057
Net earnings........... 65,445 54,385 46,895 40,360 32,242
---------- ---------- ---------- ---------- ----------
Financial Position:
Current ratio.......... 1.25 to 1 1.54 to 1 1.56 to 1 1.68 to 1 1.44 to 1
Working capital........ $ 144,638 $ 197,659 $ 178,203 $ 155,569 $ 113,339
Current assets......... 729,620 566,007 497,361 383,644 368,614
Total assets........... 1,220,186 807,489 737,643 572,505 533,947
Long-term debt......... 135,371 26,221 54,095 36,300 17,799
Stockholders' equity... 448,717 371,405 324,308 283,387 238,761
Return on average
equity................ 15.96% 15.63% 15.43% 15.46% 14.68%
Backlog:
Professional services. $1,760,000 $1,004,500 $ 912,057 $ 845,300 $ 828,400
Total................. 4,448,200 3,329,500 3,050,000 2,750,200 2,625,000
---------- ---------- ---------- ---------- ----------
Per share Information:
Basic EPS.............. $ 2.54 $ 2.12 $ 1.82 $ 1.58 $ 1.28
Diluted EPS............ 2.47 2.08 1.80 1.56 1.27
Stockholders' equity... 16.95 14.23 12.48 10.93 9.41
---------- ---------- ---------- ---------- ----------
Average Number of
Common and Common Stock
Equivalents Outstanding
(Diluted).............. 26,478 26,096 25,989 25,921 25,384
---------- ---------- ---------- ---------- ----------
</TABLE>

A-2
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
For Fiscal Years Ended September 30
(In thousands, except per share information)

<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenues............... $1,165,754 $1,142,926 $1,106,427 $1,036,289 $ 881,757
Net earnings........... 18,767 28,670 26,605 20,385 14,390
---------- ---------- ---------- ---------- ----------
Financial Position:
Current ratio.......... 1.41 to 1 1.61 to 1 1.56 to 1 1.41 to 1 1.24 to 1
Working capital........ $ 106,058 $ 100,688 $ 92,706 $ 60,580 $ 39,544
Current assets......... 367,485 264,949 258,206 206,576 202,404
Total assets........... 504,364 351,020 316,731 260,142 253,707
Long-term debt......... 25,000 -- -- -- --
Stockholders' equity... 200,433 173,797 139,813 106,936 82,964
Return on average
equity................ 10.03% 18.28% 21.56% 21.47% 20.30%
Backlog:
Professional services. $ 793,060 $ 736,600 $ 647,100 $ 457,300 $ 329,400
Total................. 2,500,000 1,858,600 1,760,000 1,605,000 1,343,300
---------- ---------- ---------- ---------- ----------
Per share Information:
Basic EPS.............. $ 0.75 $ 1.17 $ 1.14 $ 0.89 $ 0.66
Diluted EPS............ 0.75 1.15 1.11 0.86 0.64
Stockholders' equity... 7.96 6.96 5.81 4.50 3.70
---------- ---------- ---------- ---------- ----------
Average Number of
Common and Common Stock
Equivalents Outstanding
(Diluted)............... 25,173 24,964 24,070 23,763 22,439
---------- ---------- ---------- ---------- ----------
</TABLE>

Net earnings for fiscal 1994 included special charges totaling $10,200, or
$0.40 per share.

Net earnings for fiscal 1992 included a net gain of $2,118, or $0.09 per
share, from the sale of 40% of the Company's holdings of the common stock of
Genetics Institute, Inc.

A-3
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS

Results of Operations

The following table sets forth the Company's revenues by industry group and
by market serviced for the past three fiscal years ended September 30 (in
thousands):

<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Chemicals and Polymers..................... $ 796,501 $ 785,727 $ 490,347
Buildings.................................. 454,589 314,293 169,286
Federal Programs........................... 481,302 169,474 201,643
Pharmaceuticals and Biotechnology.......... 373,520 211,501 140,545
Petroleum.................................. 243,311 255,579 248,799
Infrastructure............................. 218,828 11,278 11,748
Technology and Manufacturing............... 173,023 128,501 335,627
Pulp and Paper............................. 99,189 191,595 154,135
Other...................................... 34,744 33,197 28,486
---------- ---------- ----------
$2,875,007 $2,101,145 $1,780,616
========== ========== ==========
</TABLE>

"Other" includes projects for clients operating in a number of industries,
including food and beverage, and basic resources (mining, minerals and
fertilizers).

The following table sets forth the Company's revenues by type of service
provided, for the past three fiscal years ended September 30 (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Project Services........................... $1,318,027 $ 861,608 $ 734,619
Construction............................... 994,479 961,576 769,788
Operations and Maintenance................. 474,511 266,798 264,622
Process, Scientific and Systems Consulting. 87,990 11,163 11,587
---------- ---------- ----------
$2,875,007 $2,101,145 $1,780,616
========== ========== ==========
</TABLE>

1999 Compared to 1998

On January 14, 1999, the Company completed its merger with Sverdrup
Corporation ("Sverdrup"). Sverdrup provides engineering, architecture,
construction and scientific services for public and private sector clients in
the United States and internationally.

The Sverdrup transaction has been accounted for as a purchase. Accordingly,
the purchase price has been allocated to the assets and liabilities acquired
based on their estimated fair values. The purchase price allocation, which may
be adjusted further, resulted in goodwill of approximately $176.3 million. The
Company's consolidated results of operations include the results of Sverdrup's
operations since January 1, 1999.

The Company recorded net earnings of $65.4 million, or $2.47 per diluted
share, for the fiscal year ended September 30, 1999, compared to net earnings
of $54.4 million, or $2.08 per diluted share, for fiscal 1998.

Total revenues for fiscal 1999 increased by $773.9 million, or 36.8%, to
$2,875.0 million, compared to $2,101.1 million for fiscal 1998. Approximately
89% of the increase in total revenues was generated by Sverdrup's operations,
with the balance attributable to the Company's continuing U.S. and European
operations (that is, those offices operating during the comparable periods of
both fiscal 1999 and fiscal 1998).

A-4
<PAGE>

Revenues from project services activities, which includes design,
engineering and agency construction management services, increased by $456.4
million, or 53.0%, to $1,318.0 million during fiscal 1999, compared to $861.6
million for fiscal 1998. Approximately 40.4% of the increase in project
services revenues during the current fiscal year was generated by the
Company's continuing U.S. and European operations, with the balance
attributable to Sverdrup's operations.

Revenues from construction services increased by $32.9 million, or 3.4%, to
$994.5 million during fiscal 1999, compared to $961.6 million for fiscal 1998.

With the resources and complementary technical and professional skills that
the merger with Sverdrup added to the Company's skills base, and with the new
clients Sverdrup added to the Company's client base, the Company has expanded
its capabilities in the areas of operations and maintenance ("O&M"), and
process, scientific and systems consulting services. Revenues from O&M
activities increased by $207.7 million, or 77.9%, to $474.5 million during
fiscal 1999, compared to $266.8 million for fiscal 1998. Approximately 71.2%
of the increase in O&M revenues during the current fiscal year was generated
by Sverdrup's operations, with the balance attributable to the Company's
continuing U.S. and European operations. During fiscal 1999, the Company
realized revenues of $88.0 million from process, scientific and systems
consulting services. Prior to fiscal 1999 and the merger with Sverdrup, the
Company's revenues from process, scientific and systems consulting service
activities were minimal.

As a percentage of revenues, direct costs of contracts decreased to 86.2%
for the twelve months ended September 30, 1999, compared to 87.1% for the same
period last year. The percentage 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
services provided by the Company. The improvement in this percentage
relationship during fiscal 1999 compared to fiscal 1998 was due primarily to
the relatively higher margins on Sverdrup's project services. Also
contributing to the improvement was the favorable effect of the
proportionately higher margins earned on the higher volume of project service
activities generated, relative to construction service activities.

Selling, general and administrative ("SG & A") expenses for fiscal 1999
increased by $105.0 million, or 57.0%, to $289.0 million, compared to $184.0
million for fiscal 1998. The increase in SG & A expenses during the twelve
months ended September 30, 1999 was due almost entirely to the operations of
Sverdrup.

During fiscal 1999, the Company's operating profit (defined as revenues,
less direct costs of contracts and SG & A expenses) increased by $21.8
million, or 25.2%, to $108.3 million, compared to $86.5 million for fiscal
1998. The increase in the Company's operating profit from 1998 to 1999 was due
primarily to the increase in business volume, combined with an increase in
margin rates, as discussed above.

The Company recorded $5.7 million of net interest expense during the twelve
months ended September 30, 1999, compared to net interest income of $2.7
million last year. During fiscal 1998, the Company was a net investor of
excess cash. During fiscal 1999, however, as a result of the merger with
Sverdrup Corporation, the Company became a net borrower of cash. The Company
financed the merger price of $201.1 million (which included the associated
costs of the merger) with a new, $230.0 million revolving credit facility,
under which the Company initially borrowed $165.0 million. Outstanding
borrowings under this facility was reduced to $118.1 million at September 30,
1999. Also contributing to the increase in interest expense in fiscal 1999 as
compared to fiscal 1998 was $19.9 million of Sverdrup pre-merger indebtedness
that was assumed by the Company at closing of the merger transaction.

The Company recorded $2.0 million of net miscellaneous income during fiscal
1999, compared to net miscellaneous expense of $0.4 million for fiscal 1998.
The increase in net miscellaneous income during fiscal 1999 was due primarily
to gains realized on the sales of marketable equity securities.

A-5
<PAGE>

The Company recorded income tax expense of $39.1 million and $34.4 million
in fiscal 1999 and 1998, respectively. The Company's overall effective tax
rate was 37.4% for fiscal 1999, compared to an effective tax rate of 38.7% for
fiscal 1998. The reduction in the Company's effective tax rate was
attributable primarily to a lower effective tax rate relating to the Company's
non-U.S. operations, off-set in part by the effect of nondeductible goodwill.

1998 Compared to 1997

The Company recorded net earnings of $54.4 million, or $2.08 per diluted
share, for the fiscal year ended September 30, 1998, compared to net earnings
of $46.9 million, or $1.80 per diluted share, for the same period in fiscal
1997.

Total revenues for fiscal 1998 increased by $320.5 million, or 18.0%, to
$2,101.1 million, compared to $1,780.6 million for the same period in fiscal
1997. More than half of this increase was attributable to the Company's
continuing U.S. and European operations. The balance of the increase was
attributable to the effect of companies acquired in 1997, and in particular,
to the Serete Group.

Revenues from project services activities increased by $127.0 million, or
17.3%, to $861.6 million during fiscal 1998, compared to $734.6 million for
fiscal 1997. Project services revenues in 1998 from the Company's continuing
U.S. and European operations were approximately 8% higher that the 1997
amount, with the balance of the increase attributable to businesses the
Company acquired in 1997.

During fiscal 1998, revenues from construction services increased by $191.8
million, or 24.9%, to $961.6 million, compared to $769.8 million for fiscal
1997. This increase occurred in spite of the completion of construction on a
large semiconductor project late in fiscal 1997. Also contributing to the
overall increase in construction services revenues from fiscal 1997 to fiscal
1998 was a $96.2 million increase in subcontract and procurement activity (the
costs of which are included in both revenues and costs).

During fiscal 1998, revenues from O&M and process, scientific and systems
consulting services of $266.8 million and $11.2 million, respectively, were
relatively unchanged compared to fiscal 1997 revenues.

As a percentage of revenues, direct costs of contracts increased to 87.1%
for the twelve months ended September 30, 1998, compared to 86.9% for the same
period in fiscal 1997. The increase in the direct costs of the Company's
services as a percentage of revenues during fiscal 1998 as compared to fiscal
1997 was due primarily to a proportionally higher percentage of the Company's
total business volume coming from construction services relative to project
services. This was partially offset by an increase in the total profit margin
on the Company's construction service activities.

Selling, general and administrative expenses for fiscal 1998 increased by
$23.9 million, or 14.9%, to $184.0 million, compared to $160.2 million for
fiscal 1997. The increase in fiscal 1998 reflects the full year operating
impact of businesses acquired in fiscal 1997. The SG & A expenses incurred by
the Company's continuing U.S. and European operations during fiscal 1998 were
approximately $1.2 million lower than the corresponding 1997 amount.

During fiscal 1998, the Company's operating profit increased by $12.9
million, or 17.6%, to $86.5 million, compared to $73.6 million for fiscal
1997. The improvement in operating profit was due to the overall increase in
business volume in fiscal 1998 compared to fiscal 1997, combined with better
control of SG & A expenses throughout much of the Company's continuing U.S.
and European operations.

Net interest income decreased by 7.5%, or $0.2 million, to $2.7 million
during the twelve months ended September 30, 1998, compared to $3.0 million in
fiscal 1997. The decrease in net interest

A-6
<PAGE>

income was due primarily to a reduction of rates earned on slightly higher
levels of average cash invested during fiscal 1998 as compared to fiscal 1997,
combined with a small increase in consolidated interest expense.

The Company recorded $0.4 million of net miscellaneous expense during fiscal
1998, compared to net miscellaneous income of $0.9 million for fiscal 1997.
Included in the 1998 amount was the approximate $8.8 million gain realized by
the Company on the sale of its office building located in Dublin, Ireland (the
"Merrion House"). Merrion House was purchased in 1995, and the Company
continues to occupy a minor portion of the property under a lease agreement.
Offsetting the Merrion House gain were reserves recorded in the fourth quarter
of 1998 for certain settled and pending litigation.

Backlog

Backlog represents the total dollar amount of revenues the Company expects
to record in the future as a result of performing work under contracts that
have been awarded to it. The Company's policy with respect to operations and
maintenance ("O&M") contracts, however, is to include in backlog the amount of
revenues it expects to receive for one succeeding year, regardless of the life
of the contract. For federal programs (other than federal O&M contracts), the
Company's policy is to include in backlog the full contract award, whether
funded or unfunded, and exclude option periods.

In accordance with industry practice, substantially all of the Company's
contracts are subject to cancellation or termination at the option of the
client. However, the Company has not experienced cancellations which have had
a material effect on the reported backlog amounts. In a situation where a
client terminates a contract, the Company would ordinarily be entitled to
receive payment for work performed up to the date of termination and, in
certain instances, may be entitled to allowable termination and cancellation
costs. While management uses all information available to it to determine
backlog, the Company's 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.

The following table summarizes the Company's total backlog at September 30,
1999, 1998 and 1997 (in millions):

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Professional services............................. $1,760.0 $1,004.5 $ 912.1
Total............................................. 4,448.2 3,329.5 3,050.0
======== ======== ========
</TABLE>

Total backlog at September 30, 1999 included approximately $1.5 billion, or
34% 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 $800.0 million and $923.0 million of federal backlog at
September 30, 1998 and 1997, respectively. Most of these federal contracts
extend 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
Congress to the procuring agency, and then the agency must allot these sums to
the specific contracts).

The Company's backlog for fiscal 1999 increased by $1.1 billion, or 33.6%,
to $4.4 billion, compared to fiscal 1998, and increased in fiscal 1998 by
$279.5 million, or 9.2%, to $3.3 billion, compared to fiscal 1997. Most of the
1999 increase was attributable to the Sverdrup merger, combined with new
awards in the pharmaceuticals area of the Company's business. The 1998
increase was due to new awards in the chemicals, refining and pharmaceuticals
areas of the Company's business.

The Company estimates that approximately $2.3 billion, or 52% of total
backlog at September 30, 1999 will be realized as revenues within the next
fiscal year.

A-7
<PAGE>

Effects of Inflation

Because a significant portion of the Company's revenues over recent years
has been earned under cost-reimbursable type contracts, the effects of
inflation on the Company's financial condition and results of operations have
been generally low. However, as the Company expands its business into markets
and geographical areas where fixed-price and lump-sum work is more prevalent,
inflation may begin to have a larger impact on the Company's results of
operations. To the extent permitted by competition, the Company intends to
continue to emphasize contracts which are either cost-reimbursable or
negotiated fixed-price. For contracts the Company accepts with fixed-price or
lump-sum terms, the Company monitors closely the actual costs on the project
as they compare to the budget estimates. On these projects, the Company also
attempts to secure fixed-price commitments from key subcontractors and
vendors. However, due to the competitive nature of the Company's industry,
combined with the fluctuating demands and prices associated with personnel,
equipment and materials the Company traditionally needs to perform on its
contracts, there can be no guarantee that inflation will not effect the
Company's results of operations in the future.

Liquidity and Capital Resources

During fiscal year 1999, the Company's cash and cash equivalents decreased
by $47.8 million, to $53.5 million. This compares to a net increase of $45.3
million, to $101.3 million, during fiscal 1998, and to a net decrease of $6.9
million, to $56.0 million during fiscal 1997. During fiscal year 1999, the
Company experienced net cash outflows from investing activities and the effect
on cash of exchange rate changes, of $220.6 million and $3.3 million,
respectively, offset in part by net cash inflows from financing activities and
operating activities of $94.3 million and $81.8 million, respectively.

Operations contributed $81.8 million of cash and cash equivalents during
fiscal 1999. This compares to a net contribution of $90.5 million and $43.9
million during fiscal 1998 and fiscal 1997, respectively. The $8.7 million
decrease in cash provided by operations in fiscal 1999 as compared to fiscal
1998 was due primarily to an increase of $30.9 million in net cash outflows
relating to the timing of cash receipts and payments within the Company's
working capital accounts. This use of cash was offset in part by an increase
in net earnings of $11.1 million, and an increase of $8.4 million in
depreciation and amortization expense. Gains on sales of assets and the change
in deferred income taxes had a $2.5 million improvement in cash flows from
operating activities in 1999 as compared to 1998.

The Company's investing activities resulted in a net cash outflow of $220.6
million during fiscal 1999. This compares to net cash outflows of $9.6 million
and $69.5 million during fiscal 1998 and 1997, respectively. The $211.0
million net increase in cash used in investing activities in fiscal 1999 as
compared to fiscal 1998 was due primarily to the merger with Sverdrup,
requiring $201.1 million in cash (which included the associated costs of the
merger), combined with a $13.5 million net increase in other noncurrent
assets. Partially offsetting these cash outflows was a $12.5 million increase
from fiscal 1998 to fiscal 1999 in proceeds from sales of marketable
securities and investments. The proceeds from the sales of marketable
securities and investments in fiscal 1999 were used to partially fund the
merger with Sverdrup and pay down indebtedness relating to the merger.

The Company's financing activities generated $94.3 million in cash and cash
equivalents during fiscal 1999 compared to a net cash outflow of $35.4 million
during fiscal 1998, and a net cash inflow of $20.3 million in fiscal 1997. In
connection with the merger with Sverdrup in January 1999, the Company
terminated an existing long-term $45.0 million revolving credit agreement and
entered into a new, $230.0 million revolving credit agreement. The Company
borrowed $165.0 million under the new facility to pay the initial merger
consideration and related costs of $201.1 million, $21.0 million of Sverdrup
indebtedness existing at closing, and $5.1 million during the year for other
purposes. During fiscal 1999, the Company paid down $73.0 million of its long-
term, $230.0 million revolving credit facility relating primarily to the
Sverdrup transaction.

A-8
<PAGE>

The Company believes it has adequate capital resources to fund its
operations in fiscal 2000 and beyond. The Company's consolidated working
capital position was $144.6 million at September 30, 1999 compared to $197.7
million at September 30, 1998. And as discussed above, the Company entered
into a new, long-term $230.0 million revolving credit facility during the
second quarter of fiscal 1999, against which $118.1 million was outstanding at
September 30, 1999 in the form of direct borrowings. These borrowings relate
to the merger indebtedness, and other refinanced amounts that were outstanding
under the old $45.0 million revolving credit agreement. At September 30, 1999,
the Company had $43.6 million available through committed short-term credit
facilities, of which $19.0 million was outstanding at that date in the form of
direct borrowings and letters of credit.

The Company has filed a protective claim with the Internal Revenue Service.
The nature of the claim involves monies the Company believes it is due from
the government relating to the research and development tax credit for fiscal
years 1991 through 1998. Although the Company has been working on quantifying
the amount of the credit, the final tax refund amount has not yet been
determined. Based on a preliminary review of the information available, the
ultimate refund amount may have a significant and positive effect on the
Company's overall liquidity.

Year 2000 Readiness

The following discussion of the Year 2000 issue contains numerous "forward-
looking statements". See "Forward-Looking Statements and Other Safe Harbor
Applications", below, for a discussion of factors to be considered in reading
forward-looking statements.

This discussion of "Year 2000" (or "Y2K") relates to the possible inability
of computers, hardware or software to perform properly because they are unable
to interpret date information correctly after December 31, 1999, and includes
all of the associated consequences of such failures on the Company's
operations. If not corrected, such situations could result in computer-system
failures or miscalculations causing disruptions in the Company's operations,
including a temporary inability to process transactions, pay employees,
vendors and subcontractors, send invoices or engage in similar, normal
business activities.

The Year 2000 Task Force

The Company began its assessment of its Year 2000 readiness during fiscal
1997. In that year the Company organized a Year 2000 task force comprised
primarily of Company employees. The Company identified four information
technology ("IT") and non-IT business areas for which Y2K compliance is
critical to the normal and routine operations of the Company. These business
areas were: (1) internally developed computer software; (2) commercial off-
the-shelf software; (3) computer hardware; and (4) facilities-related
applications and processes, such as telecommunications and equipment with
embedded chips.

Financial and Accounting Systems

Also included in the Company's Year 2000 compliance program are the
hardware, software, and other applications issues relating to the Company's
financial and accounting systems. In 1997 the Company embarked upon a
completely separate initiative (referred to as the "Global Financial Systems
Project") to migrate most of its existing financial and accounting systems to
a single accounting system, which eventually will be utilized by all of the
Company's operations worldwide. Most of the Company's U.S. operations were
migrated to the Global Financial Systems Project during 1999. The Global
Financial Systems Project utilizes commercial off-the-shelf software with
internally developed program interfaces. Based on assurances from the third
party provider of the commercial off-the-shelf software, and discussions with
the third party consultants employed by the Company to

A-9
<PAGE>

assist in the system conversion, the Company believes its Global Financial
Systems Project is Y2K compliant. The critical operational elements of the
financial and accounting systems have been tested and their Y2K readiness has
been verified. The critical financial, accounting and payroll applications in
the United Kingdom, Ireland, Europe and India, have been tested and
remediated, and the Y2K compliant versions of most critical software
applications are operational.

The Year 2000 Program

The Company's systems and hardware components have been through a rigorous
process to address the Y2K problem. This process involved the following
phases: inventory, assessment, remediation, testing and implementation. In
addition, a contingency plan for critical business applications and continuing
project operations is in place. The Year 2000 program also includes a
transition plan for the rollover period from 1999 to 2000. Included in this
transition plan are data backup, shutdown and startup, and a network of
command centers, which will be operational through the year 2000.

Third Party Compliance

The Company continues to evaluate the possible effects of the Y2K issue on
its clients, suppliers, subcontractors and vendors. Although the possible
effects of the Y2K issue on these parties are beyond the control of the
Company, the Company has initiated and maintained a process to communicate
with these parties to inform them of the Company's Y2K strategy and to
determine their own Y2K strategy and progress. Third party vendors have also
been notified of their responsibility and contractual clauses incorporated in
procurement documents.

Cost of the Year 2000 Program

The Company estimates the total cost of its Y2K compliance program at
approximately $4.0 million. This estimate consists of both internal and
external costs, and includes a maximum of $2.0 million for new hardware and
software, although a substantial portion of such new hardware and software
would have been purchased by the Company through the regular and routine
upgrading of systems. Such hardware and software will be capitalized and
depreciated over the estimated useful lives of the related assets. All other
expenditures will be charged to expense. As of September 30, 1999, the Company
had spent most of its estimated budget.

Progress of the Year 2000 Program

As of September 30, 1999, the Company was actively engaged in one or more
compliance phases with respect to each of the four business areas described
above. Although there can be no guarantee of complete readiness by the Year
2000, the Company believes each of the business areas described above is
substantially Y2K compliant, such that further remediation and testing, if
any, will not be significant to its operations. However, as discussed above,
the Company is in the contingency planning phase of its Y2K compliance
program. In the event the Company does not complete its program, or fails to
properly identify and modify critical business applications, there may be an
interruption to the Company's business that may have a materially adverse
effect on its future financial condition and results of operations. In
addition, Y2K-related disruptions in the economy in general may also have a
materially adverse effect on its future financial condition and results of
operations.

Risks

The failure to identify and correct a Y2K problem could result in an
interruption in, or failure of, certain normal business activities or
operations. The Company does not expect such failures to have a materially
adverse effect on its results of operations or financial condition. However,
because

A-10
<PAGE>

of the general uncertainty about Year 2000 readiness throughout the world
economy, which results in uncertainties regarding the readiness of the
Company's vendors, contractors and clients, the Company is currently unable to
determine whether Y2K problems may have a materially adverse effect on its
results of operations or financial condition. As the Company's Y2K compliance
program progresses, the level of uncertainty about this matter is being
reduced, especially as to uncertainties about the Company's own degree of Y2K
compliance and the compliance of its suppliers, contractors and clients.

Worst Case Scenario

It is not presently possible to describe a reasonably likely "worst case
Year 2000 scenario" without making numerous assumptions. The Company presently
believes that a most likely worst case scenario would make it necessary for
the Company to replace some suppliers or contractors, rearrange some work
plans, or interrupt some office and field activities. Assuming this scenario
is correct, the Company does not believe that such circumstances would have a
materially adverse effect on its financial condition or results of operations,
even if additional costs to correct unanticipated compliance failures are
incurred.

Contingency Plans

The Company currently has contingency plans in place in the event it does
not complete all phases of its Y2K compliance program by December 31, 1999, or
in the event unidentified issues cause business disruptions. The Company has
identified the critical business areas, and specific contingency plans have
been developed. The resources, critical elements, and activating mechanisms
for the contingency plans are in place. The Company continues to monitor
carefully the progress of its Y2K program and its state of readiness on a
regular basis. The Company's contingency plans were based on its best
estimates of numerous factors, which, in turn were derived by relying on
numerous assumptions about future events. However, there can be no assurance
that these assumptions or estimates will have been correctly made, or that the
Company will have anticipated all relevant factors, or that there will not be
a delay in or increased costs associated with the Company's Y2K program. Any
delay in implementation of the Y2K program could affect the Company's Y2K
readiness. Specific factors that might cause the actual outcome to differ from
the projected outcome include, without limitation, the continued availability
of personnel and consultants trained in the computer programming skills
necessary for remediation of Y2K problems, the ability to locate and correct
all relevant computer codes and embedded software, timely responses by third
parties, including suppliers, contractors and clients, and the ability to
implement interfaces between new systems and systems not being replaced.

The foregoing discussion regarding the Y2K issue is a "Year 2000 Readiness
Disclosure" as that term is discussed in the Year 2000 Information and
Readiness Disclosure Act of 1998.

Current Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 -- Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). As amended by
Statement of Financial Accounting Standards No. 137 -- Accounting for
Derivative Instruments and Hedging Activities Deferral of the Effective Date
of FASB Statement No. 133 ("SFAS 137"), SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 2000. SFAS 133 requires
recognition of all derivative instruments as either assets or liabilities.
Gain or loss recognition is determined based on the intended use and resulting
designation of the derivative instrument.

At September 30, 1999, the Company had no significant derivative financial
instruments. Therefore, as of September 30, 1999, SFAS 133 would have had no
material impact on the Company's financial position or results of operations.

A-11
<PAGE>

Forward-Looking Statements and Other Safe Harbor Applications

Statements included in this Management's Discussion and Analysis that are
not based on historical facts are "forward-looking statements", as that term
is discussed in the Private Securities Litigation Reform Act of 1995. Such
statements are based on management's current estimates, expectations and
projections about the issues discussed, the industries in which the Company
operates and the services it provides. By their nature, such forward-looking
statements involve risks and uncertainties. The Company cautions the reader
that a variety of factors could cause business conditions and results to
differ materially from what is contained in its forward-looking statements.
These factors include, but are not necessarily limited to, the following:
increase in competition by foreign and domestic competitors; availability of
qualified engineers and other professional staff needed to execute contracts;
the timing of new awards and the funding of such awards; the ability of the
Company to meet performance or schedule guarantees; cost overruns on fixed,
maximum or unit priced contracts; the outcome of pending and future litigation
and governmental proceedings; the cyclical nature of the individual markets in
which the Company's customers operate; the successful closing and/or
subsequent integration of any merger or acquisition transaction; the amount of
any contingent consideration the Company may be required to pay in the future
in connection with the Sverdrup merger (including the availability of
financing that may be required); and the Company's success in dealing with the
Year 2000 issues discussed above under "Year 2000 Readiness". The preceding
list is not all-inclusive, and the Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. Readers of this Management's
Discussion and Analysis should also read the Company's most recent Annual
Report on Form 10-K for a further description of the Company's business, legal
proceedings and other information that describes factors that could cause
actual results to differ from such forward-looking statements.

A-12
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and 1998
(In thousands, except share information)

<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................... $ 53,482 $101,328
Marketable securities................................... -- 16,482
Receivables............................................. 586,005 394,841
Deferred income taxes................................... 76,405 45,419
Prepaid expenses and other.............................. 13,728 7,937
---------- --------
Total current assets................................... 729,620 566,007
---------- --------
Property, Equipment and Improvements, Net................ 139,653 100,565
---------- --------
Other Noncurrent Assets:
Goodwill, net........................................... 245,451 77,246
Other................................................... 105,462 63,671
---------- --------
Total other noncurrent assets.......................... 350,913 140,917
---------- --------
$1,220,186 $807,489
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable........................................... $ 9,465 $ 217
Accounts payable........................................ 186,287 101,846
Accrued liabilities..................................... 281,967 161,552
Customers' advances in excess of related revenues....... 93,303 85,049
Income taxes payable.................................... 13,960 19,684
---------- --------
Total current liabilities.............................. 584,982 368,348
---------- --------
Long-term Debt........................................... 135,371 26,221
---------- --------
Other Deferred Liabilities............................... 44,988 35,170
---------- --------
Minority Interests....................................... 6,128 6,345
---------- --------
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 -- 60,000,000
shares, issued and outstanding -- 26,142,992 shares in
1999; issued -- 25,866,798 shares in 1998............. 26,143 25,867
Additional paid-in capital.............................. 68,049 55,698
Retained earnings....................................... 358,958 300,296
Accumulated other comprehensive loss.................... (3,595) (1,800)
---------- --------
449,555 380,061
Unearned compensation................................... (838) (1,056)
Common stock in treasury, at cost (254,028 shares in
1998).................................................. -- (7,600)
---------- --------
Total stockholders' equity............................. 448,717 371,405
---------- --------
$1,220,186 $807,489
========== ========
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.

A-13
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the Years Ended September 30, 1999, 1998 and 1997
(In thousands, except per share information)

<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues................................ $ 2,875,007 $ 2,101,145 $ 1,780,616
----------- ----------- -----------
Costs and Expenses:
Direct costs of contracts.............. (2,477,678) (1,830,618) (1,546,898)
Selling, general and administrative
expenses.............................. (289,034) (184,043) (160,157)
----------- ----------- -----------
Operating Profit........................ 108,295 86,484 73,561

Other Income (Expense):
Interest income........................ 3,031 5,092 5,185
Interest expense....................... (8,767) (2,356) (2,226)
Miscellaneous income (expense), net.... 1,963 (436) 929
----------- ----------- -----------
Total other income (expense).......... (3,773) 2,300 3,888
----------- ----------- -----------
Earnings Before Taxes................... 104,522 88,784 77,449
Income Tax Expense...................... (39,077) (34,399) (30,554)
----------- ----------- -----------
Net Earnings............................ $ 65,445 $ 54,385 $ 46,895
=========== =========== ===========
Net Earnings Per Share:
Basic.................................. $ 2.54 $ 2.12 $ 1.82
Diluted................................ $ 2.47 $ 2.08 $ 1.80
=========== =========== ===========
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.

A-14
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended September 30, 1999, 1998 and 1997
(In thousands)

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net Earnings........................................ $65,445 $54,385 $46,895
------- ------- -------
Other Comprehensive Income (Loss):
Unrealized gains (losses) on securities............ 3,470 (188) (846)
Foreign currency translation adjustments........... (3,946) (9) (3,444)
------- ------- -------
Other Comprehensive Loss Before Income Taxes........ (476) (197) (4,290)
Income Tax (Expense) Benefit Relating To Other
Comprehensive Income (Loss)........................ (1,319) 75 339
------- ------- -------
Other Comprehensive Loss............................ (1,795) (122) (3,951)
------- ------- -------
Total Comprehensive Income.......................... $63,650 $54,263 $42,944
======= ======= =======
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.

A-15
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended September 30, 1999, 1998 and 1997
(In thousands)

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Common Stock:
Balance at the beginning of the year............ $ 25,867 $ 25,811 $ 25,745
Issuances from stock option exercises........... 399 103 133
Repurchases from stock option exercises......... (131) (59) (73)
Issuances of restricted stock................... 8 12 6
-------- -------- --------
Balance at the end of the year.................. 26,143 25,867 25,811
-------- -------- --------
Additional Paid-in Capital:
Balance at the beginning of the year............ 55,698 52,186 49,191
Stock option exercises, including the related
income tax benefits............................ 12,399 3,521 3,285
Repurchases of common stock from stock option
exercises...................................... (293) (353) (446)
Issuances of restricted stock................... 245 344 156
-------- -------- --------
Balance at the end of the year.................. 68,049 55,698 52,186
-------- -------- --------
Retained Earnings:
Balance at the beginning of the year............ 300,296 249,791 207,639
Net earnings.................................... 65,445 54,385 46,895
Income tax benefits related to stock option
exercises...................................... (1,618) (2,272) (2,847)
Repurchases of common stock from stock option
exercises...................................... (5,165) (1,608) (1,896)
-------- -------- --------
Balance at the end of the year.................. 358,958 300,296 249,791
-------- -------- --------
Accumulated Other Comprehensive Income (Loss):
Balance at the beginning of the year............ (1,800) (1,678) 2,273
Foreign currency translation adjustments........ (3,946) (9) (3,444)
Net unrealized gains (losses) on securities..... 2,151 (113) (507)
-------- -------- --------
Balance at the end of the year.................. (3,595) (1,800) (1,678)
-------- -------- --------
Unearned Compensation:
Balance at the beginning of the year............ (1,056) (1,066) (1,234)
Issuances of restricted stock, net of the
related amortization........................... 218 10 168
-------- -------- --------
Balance at the end of the year.................. (838) (1,056) (1,066)
-------- -------- --------
Treasury Stock, at Cost:
Balance at the beginning of the year............ (7,600) (736) (227)
Purchases of common stock for treasury.......... -- (18,046) (12,075)
Reissuances of treasury stock from stock option
exercises...................................... 7,600 11,182 11,566
-------- -------- --------
Balance at the end of the year.................. -- (7,600) (736)
-------- -------- --------
Total Stockholders' Equity....................... $448,717 $371,405 $324,308
======== ======== ========
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.

A-16
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 1999, 1998 and 1997
(In thousands)

<TABLE>
<CAPTION>
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings................................... $ 65,445 $ 54,385 $ 46,895
Adjustments to reconcile net earnings to net
cash flows from operations:
Depreciation and amortization................. 31,586 23,184 19,626
Amortization of deferred gains................ -- (205) (820)
Gains on sales of assets...................... (3,986) (8,577) (742)
Changes in assets and liabilities, excluding
the effects of businesses acquired:
Receivables.................................. (10,897) (25,135) (34,849)
Prepaid expenses and other current assets.... 476 6,010 (416)
Accounts payable............................. 17,035 10,076 783
Accrued liabilities.......................... 25,107 16,757 18,537
Customers' advances.......................... (30,879) 7,384 (1,685)
Income taxes payable......................... (5,370) 11,280 (932)
Deferred income taxes......................... (7,195) (5,067) (2,784)
Other, net.................................... 470 366 330
--------- -------- --------
Net cash provided by operating activities...... 81,792 90,458 43,943
--------- -------- --------
Cash Flows from Investing Activities:
Additions to property and equipment............ (38,970) (46,335) (28,025)
Disposals of property and equipment............ 4,926 26,766 289
Net (increase) decrease in other noncurrent
assets......................................... (4,868) 8,620 (16,780)
Purchases of marketable securities............. (1,800) (5,386) (20,000)
Proceeds from sales of marketable securities... 18,282 10,034 1,837
Purchases of investments....................... (1,442) (3,319) (4,491)
Proceeds from sales of investments............. 4,285 -- 936
Acquisitions of businesses, net of cash
acquired....................................... (201,052) -- (3,307)
--------- -------- --------
Net cash used for investing activities......... (220,639) (9,620) (69,541)
--------- -------- --------
Cash Flows from Financing Activities:
Exercises of stock options, including the
related income tax benefits.................... 14,667 11,496 10,970
Purchases of common stock for treasury......... -- (18,046) (12,075)
Proceeds from long-term borrowings............. 170,220 -- 21,415
Repayments of long-term borrowings............. (97,027) (29,264) --
Net change in short-term borrowings............ 9,141 (1,257) --
Other, net..................................... (2,652) 1,639 --
--------- -------- --------
Net cash provided (used) by financing
activities..................................... 94,349 (35,432) 20,310
--------- -------- --------
Effect of Exchange Rate Changes................. (3,348) (70) (1,585)
--------- -------- --------
(Decrease) increase in Cash and Cash
Equivalents.................................... (47,846) 45,336 (6,873)
Cash and Cash Equivalents at Beginning of
Period......................................... 101,328 55,992 62,865
--------- -------- --------
Cash and Cash Equivalents at End of Period...... $ 53,482 $101,328 $ 55,992
========= ======== ========
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.

A-17
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Jacobs
Engineering Group Inc. and its subsidiaries (the "Company"). All significant
intercompany accounts and transactions have been eliminated. Certain
reclassifications have been made to prior years' consolidated financial
statements to conform to the September 30, 1999 presentation.

Description of the Business

The Company's principal business is to provide professional engineering,
design, and architectural services, scientific and technical support services,
construction and construction management services, and plant maintenance
services to its industrial, commercial and government clients. The Company
provides its services from offices located primarily throughout the United
States, Europe, India and Australia. The Company provides its services under
cost-reimbursable, cost-reimbursable with a guaranteed maximum, and fixed-
price contracts. The percentage of revenues realized from each of these types
of contracts in each of the years ended September 30, 1999, 1998 and 1997 was
as follows:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cost-reimbursable............................................. 73% 81% 82%
Fixed-price................................................... 22 18 16
Guaranteed maximum............................................ 5 1 2
</TABLE>

Revenue Accounting for Contracts

In general, the Company recognizes revenues at the time services are
performed. On cost-reimbursable contracts, revenue is recognized as costs are
incurred, and includes applicable fees earned through the date services are
provided. On fixed-price contracts, revenues are recorded using the
percentage-of-completion method of accounting by relating contract costs
incurred to date to total estimated contract costs at completion. Contract
costs may include both direct and indirect costs. Contract losses are provided
for in their entirety in the period they become known, without regard to the
percentage-of-completion.

Some of the Company's contracts with the U.S. federal government, as well as
certain contracts with commercial clients, provide that contract costs
(including indirect costs) are subject to audit and adjustment. For all such
contracts, revenues have been recorded at the time services were performed
based upon those amounts expected to be realized upon final settlement.

As is common in the industry, the Company executes certain contracts jointly
with third parties through partnerships and joint ventures. For certain of
these contracts, the Company recognizes its proportionate share of venture
revenues, costs and operating profit in its consolidated statements of
earnings.

When the Company is directly responsible for subcontractor labor, or third-
party material and equipment, the Company reflects the costs of such items in
both revenues and costs. On other projects, where the client elects to pay for
such items directly and the Company has no associated responsibility for such
items, these amounts are not reflected in either revenues or costs.

A-18
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Cash Equivalents

The Company considers all highly liquid investments with original maturities
of less than three months as cash equivalents. Cash equivalents at September
30, 1999 and 1998 consisted primarily of time certificates of deposit.

Marketable Securities and Investments

The Company's investments in equity and debt securities are classified as
trading securities, held-to-maturity securities or available-for-sale
securities. Management determines the appropriate classification of all its
investments at the time of purchase and reviews such designations at each
balance sheet date.

Trading securities are recorded at fair value and shown as "Marketable
securities" in the consolidated balance sheets. Changes in fair value of
trading securities are recognized in earnings in the period in which the
change occurs and is included in "Miscellaneous income (expense), net" in the
accompanying consolidated statements of earnings.

Held-to-maturity securities and available-for-sale securities are included
as long-term investments in "Other noncurrent assets" in the consolidated
balance sheets. Held-to-maturity securities are carried at cost, or amortized
cost, adjusted for the amortization (accretion) of any related premiums
(discounts) over the estimated remaining period until maturity. Marketable
equity securities that are not held for trading, and debt securities that are
not classified as held-to-maturity, are classified as available-for-sale
securities. Securities designated as available-for-sale are recorded at fair
value. Changes in the fair value of securities available-for-sale are recorded
in the "Accumulated Other Comprehensive Income (Loss)" section of
stockholders' equity as unrealized gains or losses, net of the related tax
effect.

Receivables and Customers' Advances

Included in receivables at September 30, 1999 and 1998 were recoverable
amounts under contracts in progress of $240,964,600 and $106,072,200,
respectively. These represent amounts earned under contracts in progress but
not billable at the respective balance sheet dates. These 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, 1999 and 1998 were
contract retentions totaling $7,965,100 and $11,808,000, respectively. The
Company anticipates that substantially all of such unbilled amounts will be
billed and collected over the next twelve months.

Customers' advances in excess of related revenues represent cash collected
from clients on contracts in advance of revenues earned thereon, as well as
billings to clients in excess of costs and earnings on uncompleted contracts.
The Company anticipates that substantially all such amounts will be earned
over the next twelve months.

Property, Equipment and Improvements

Property, equipment and improvements are stated at cost in the accompanying
consolidated balance sheets. Depreciation and amortization of property and
equipment 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 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.

A-19
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Goodwill

Goodwill represents the excess of the purchase price paid over the fair
value of the net assets of acquired companies and is being amortized against
earnings using the straight-line method over periods not exceeding 40 years.
The carrying value of goodwill is reviewed for recoverability, and if there
are indications of impairment, the Company assesses any potential impairment
based upon undiscounted cash flow forecasts. No impairment losses have been
recognized in any of the periods presented. Goodwill is shown in the
accompanying consolidated balance sheets net of accumulated amortization of
$14,816,800 and $9,317,300 at September 30, 1999 and 1998, respectively.

Earnings Per Share

The Company adopted Statement of Financial Accounting Standards No. 128 --
Earnings per Share ("SFAS 128") effective with the first quarter of fiscal
1998 ending December 31, 1997, and accordingly restated prior period earnings
per share ("EPS") data. Basic EPS was computed by dividing net earnings by the
weighted average number of shares of common stock outstanding for the period.
Diluted EPS gives effect to all dilutive securities that were outstanding
during the period. The Company's dilutive securities consisted solely of
nonqualified stock options.

Stock-based Compensation

The Company accounts for stock issued to employees and outside directors in
accordance with APB Opinion No. 25 -- Accounting for Stock Issued to Employees
("APB 25"). Accordingly, no compensation cost has been recorded in connection
with grants of stock options. With respect to the issuance of restricted
stock, unearned compensation expense equivalent to the market value of the
stock issued on the date of grant is charged to stockholders' equity and
subsequently amortized against earnings over the periods during which the
restrictions lapse. During fiscal years 1999, 1998 and 1997, the Company
recognized compensation expense on restricted stock of $470,300, $366,300 and
$329,900, respectively.

Concentrations of Credit Risk, Uncertainties and Use of Estimates

The Company's cash balances and short-term investments are maintained in
accounts held by major banks and financial institutions located primarily in
the United States and Europe. In the normal course of its business and
consistent with industry practices, the Company grants credit to its clients
without requiring collateral. Concentrations of credit risk is the risk that,
if the Company extends a significant portion of its credit to clients in a
specific geographical area or industry, the Company 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
the Company's diverse client base, which includes the federal government and
multi-national corporations operating in a broad range of industries and
geographic areas. Additionally, in order to mitigate credit risk, the Company
continually evaluates the credit worthiness of its major commercial clients.

In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities as of the
dates of the balance sheets and revenues and expenses for the periods covered.
The more significant estimates affecting amounts reported in the consolidated
financial statements relate to revenues under long-term construction contracts
and self-insurance accruals. Actual results could differ significantly from
those estimates and assumptions.

A-20
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Earnings Per Share

The following table reconciles the denominator used to compute basic EPS to
the denominator used to compute diluted EPS (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Weighted average shares outstanding (denominator used
to compute Basic EPS)................................ 25,803 25,689 25,727
Effect of employee and outside director stock options. 675 407 262
------ ------ ------
Denominator used to compute Diluted EPS............... 26,478 26,096 25,989
====== ====== ======
</TABLE>

The weighted average number of shares outstanding for fiscal years 1998 and
1997 exclude common shares in treasury.

3. Business Combinations

On January 14, 1999, the Company completed its Agreement and Plan of Merger
with Sverdrup Corporation ("Sverdrup"). Sverdrup provides engineering,
architecture, construction and scientific and technical support services for
the development, design, construction and operation of capital facilities,
infrastructure projects and advanced technical systems for public and private
sector clients in the United States and internationally. Sverdrup employs more
than 5,600 people in 35 offices.

Under the terms of the merger agreement, at closing, a wholly-owned
subsidiary of the Company ("Merger Subsidiary") was merged with and into
Sverdrup. Thereupon, each outstanding share of common stock of Sverdrup was
converted into the right to receive a proportional share of the total amount
of initial merger consideration of $198.0 million paid at closing. Each
outstanding share of common stock of Sverdrup will also receive a proportional
amount of any additional merger consideration that may be paid in the future
("Deferred Merger Consideration"). Amounts payable as Deferred Merger
Consideration, if any, will be payable shortly after each of the first three
anniversaries of the date of the merger agreement, and is contingent upon the
Company's stock price exceeding certain price thresholds as defined in the
merger agreement. The total amount payable as Deferred Merger Consideration is
limited to a maximum of $31.0 million. After the merger and conversion, the
Merger Subsidiary ceased to exist, and Sverdrup survives as a new, wholly-
owned subsidiary of the Company. The terms of the merger were arrived at by
arms-length negotiations between the parties.

Of the total initial merger consideration of $198.0 million paid at closing,
$10.0 million was paid into an escrow account, the purpose of which will be to
settle certain claims or disputes relating to certain contracts and litigation
matters identified in the merger agreement.

The initial merger consideration was financed in part by a new, $230.0
million revolving credit facility obtained by the Company from a group of
banks. Amounts borrowed under this facility initially were used to fund that
portion of the initial merger consideration not financed using existing
internal funds, and the repayment of certain Sverdrup indebtedness existing at
closing.

The acquisition has been accounted for as a purchase. Accordingly, the
purchase price has been allocated to the assets and liabilities acquired based
on their estimated fair values. The purchase price allocation, which may be
adjusted further, resulted in goodwill of approximately $176.3 million, which
is being amortized in accordance with the Company's accounting policies.

A-21
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following unaudited pro forma financial information presents the
combined results of operations of Jacobs and Sverdrup, after giving effect to
certain adjustments, including amortization of goodwill, additional interest
expense, and related income tax effects, and assuming the acquisition occurred
at the beginning of the periods presented. The pro forma financial information
does not necessarily reflect the results of operations that would have
occurred had Jacobs and Sverdrup constituted a single entity during such
periods (in thousands, except per share data):

<TABLE>
<CAPTION>
Years Ended September
30,
---------------------
1999 1998
---------- ----------
Unaudited
<S> <C> <C>
Pro forma revenues.................................... $3,134,579 $3,097,627
Pro forma net earnings................................ $ 65,905 $ 51,278
Pro forma earnings per share:
Basic................................................ $ 2.55 $ 2.00
Diluted.............................................. $ 2.49 $ 1.96
========== ==========
</TABLE>

In February 1997, the Company acquired for cash certain physical assets and
contracts of an engineering business with operations in Denver, Colorado and
Santiago, Chile. Also in February 1997, the Company increased, in a cash
transaction, its ownership interest from 40% to 51% in an affiliated entity
headquartered in Mumbai, India (this interest was increased to 70% in a cash
transaction in September 1997). In April 1997, the Company acquired for cash
and notes certain assets and liabilities of an engineering business
headquartered in Green Bay, Wisconsin. Finally, in July 1997, the Company
completed the acquisition of the remaining interests of several engineering
and construction companies comprising the Serete Group, which is headquartered
in France. The sum of the individual purchase prices totalled $29,781,500.
Each of these acquisitions has been accounted for as a purchase, and the
results of operations of each acquired business have been included in the
Company's consolidated results of operations since the respective dates of
acquisition. The purchase price allocations resulted in goodwill of
approximately $39,036,000.

4. Marketable Securities and Investments

Included in marketable securities at September 30, 1998 was a $16,059,200
deposit with a U.S. bank made under a managed investment program. During the
first quarter of fiscal 1999, the Company liquidated this portfolio of
marketable debt securities for approximately $16,500,000.

At September 30, 1999, the Company had available-for-sale securities of
$9,716,300 which are included in "Other Noncurrent Assets", for which a net
unrealized gain of $2,151,200 was recorded in stockholders' equity. At
September 30, 1998, the Company had available-for-sale securities of $118,900
and recorded net unrealized losses of $113,100 in its stockholders' equity.

The following table summarizes certain information regarding the Company's
available-for-sale equity securities at September 30, 1999 and 1998, and for
each of the years then ended (in thousands):

<TABLE>
<CAPTION>
1999 1998
------ ----
<S> <C> <C>
Total cost (specific identification method)..................... $6,246 $117
Gross unrealized gains.......................................... 3,470 2
Estimated fair value............................................ 9,716 119
Gross realized gains............................................ 3,648 --
Gross proceeds from sales....................................... 4,285 --
</TABLE>

A-22
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Property, Equipment and Improvements, Net

Property, equipment and improvements consisted of the following at September
30, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Land................................................... $ 14,407 $ 11,416
Buildings.............................................. 47,313 33,440
Equipment.............................................. 164,538 133,379
Leasehold improvements................................. 18,913 10,642
Construction in progress............................... 10,419 12,595
--------- ---------
255,590 201,472
Accumulated depreciation and amortization.............. (115,937) (100,907)
--------- ---------
$ 139,653 $ 100,565
========= =========
</TABLE>

Operating expenses include provisions for depreciation and amortization of
$26,259,500, $20,847,500 and $18,217,100 for fiscal 1999, 1998 and 1997,
respectively.

6. Borrowings

Short-term Credit Arrangements

At September 30, 1999, the Company had approximately $43,558,000 available
through multiple bank lines of credit, under which the Company may borrow on
an overdraft or short-term basis. Interest under these lines is determined at
the time of borrowing based on the banks' prime or base rates, rates paid on
certificates of deposit, the banks' actual costs of funds or other variable
rates. Most of the agreements require the payment of a fee based on the amount
of the facility. The Company is also required to maintain certain minimum
levels of working capital and net worth. Three of the agreements limit
borrowings by the amount of letters of credit outstanding under the respective
agreements. Borrowings under the lines are generally unsecured, and the lines
extend through the second and third fiscal quarters of 2000.

Other information regarding the lines of credit for the years ended
September 30, 1999, 1998 and 1997 follows (dollars in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Amount outstanding at year end..................... $ 6,868 $ 217 $1,317
Weighted average interest rate at year end......... 6.5% 24.6% 8.23%
Weighted average borrowings outstanding during the
year.............................................. $ 2,295 $ 537 $ 183
Weighted average interest rate during the year..... 6.02% 11.54% 9.48%
Maximum amount outstanding during the year......... $14,210 $3,313 $1,368
</TABLE>

The amount outstanding and the weighted average interest rate at September
30, 1998 related entirely to Chilean peso borrowings by the Company's
subsidiary in Chile.

A-23
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Long-term Debt and Credit Arrangements

Long-term debt consisted of the following at September 30, 1999 and 1998 (in
thousands):

<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Borrowings under long-term, revolving credit agreements:
$230.0 Million agreement................................. $118,051 $ --
$45.0 Million agreement.................................. -- 26,221
Mortgage loans payable..................................... 17,158 --
Other...................................................... 2,759 --
-------- -------
137,968
Less--current maturities (included in "Notes payable" in
the accompanying consolidated balance sheet).............. 2,597 --
-------- -------
$135,371 $26,221
======== =======
</TABLE>

Borrowings under the $230,000,000 long-term, revolving credit agreement are
unsecured, and bear interest at either fixed rates offered by the banks at the
time of borrowing, or at variable rates based on the agent bank's base rate,
LIBOR or the latest federal funds rate. The agreement requires the Company to
maintain certain minimum levels of net worth, a minimum coverage ratio of
certain fixed charges, and a minimum leverage ratio of earnings before
interest, taxes, depreciation and amortization to funded debt (all as defined
in the agreement). The agreement also restricts the payment of cash dividends
and requires the Company to pay a facility fee based on the total amount of
the commitment. The agreement expires in March 2004.

The scheduled maturities of the Company's long-term debt at September 30,
1999 were as follows (in thousands):

<TABLE>
<CAPTION>
Year ending September 30,
<S> <C>
2000............................................................. $ 2,597
2001............................................................. 596
2002............................................................. 557
2003............................................................. 592
2004............................................................. 118,543
Thereafter....................................................... 15,083
--------
$137,968
========
</TABLE>

The Company's $45,000,000 long-term, revolving credit agreement was also
unsecured. It was terminated in January 1999 and replaced by the $230,000,000
long-term, revolving credit agreement discussed above.

The mortgage loans were assumed as a result of the merger with Sverdrup.
These mortgage loans relate to, and are secured by, certain real property
owned in St. Louis, Missouri, with a weighted average interest rate of 7.76%
at September 30, 1999. The properties have a combined net book value of
approximately $19,457,000 at September 30, 1999.

Interest expense for the years ended September 30, 1999, 1998 and 1997 was
$8,767,000, $2,356,400 and $2,226,100, respectively. Interest payments made
during fiscal 1999, 1998 and 1997 totalled $8,959,500, $2,517,100 and
$1,801,500, respectively.

A-24
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. Pension Plans

Effective September 30, 1999, the Company adopted Statement of Financial
Accounting Standards No. 132 -- Employees' Disclosure about Pensions and Other
Postretirement Benefits ("SFAS 132"). SFAS 132 amends existing disclosure
requirements, but does not change measurement standards, of pension and other
postretirement benefit plans. SFAS 132 standardizes the disclosure
requirements for such plans to the extent practicable, and requires
disclosures of additional information on changes in benefit obligations and
fair values of plan assets.

Company-only Sponsored Plans

The Company sponsors various pension plans covering employees of certain
U.S. domestic and international subsidiaries. These plans provide pension
benefits that are based on the employee's compensation and years of service.
The Company's 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' net benefit
obligation for each of the years ended September 30, 1999 and 1998 (in
thousands):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Net benefit obligation at the beginning of the year...... $105,857 $ 78,972
Effect of Sverdrup merger................................ 241,749 --
Service cost............................................. 8,828 2,451
Interest cost............................................ 18,833 6,468
Participants' contributions.............................. 2,449 817
Actuarial (gains) losses................................. (13,228) 12,943
Benefits paid............................................ (13,076) (4,966)
Effects of plan amendments............................... (2,680) --
Special termination benefits............................. 592 --
Settlements.............................................. (23,449) --
Other.................................................... (9,000) 9,172
-------- --------
Net benefit obligation at the end of the year............ $316,875 $105,857
======== ========
</TABLE>

The following table sets forth the change in the plans' assets for each of
the years ended September 30, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Fair value of plan
assets at the beginning
of the year............ $122,449 $ 97,979
Effect of Sverdrup
merger................. 220,411 --
Actual return on plan
assets................. 13,016 17,893
Employer contributions.. 10,675 --
Participants'
contributions.......... 2,449 817
Customer note payment... (2,000) --
Gross benefits paid..... (36,524) (4,966)
Other................... (9,556) 10,726
-------- --------
Fair value of plan
assets at the end of
the year............... $320,920 $122,449
======== ========
</TABLE>

A-25
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In both of the preceding tables, "Other" consists primarily of the effects
of exchange rate fluctuations used to translate the information disclosed
therein.

The following table reconciles the funded status of the plans, as well as
amounts recognized and not recognized in the accompanying consolidated balance
sheets at September 30, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
1999 1998
------ -------
<S> <C> <C>
Funded status at the end of the year........................ $4,045 $16,592
Unrecognized actuarial (gains) losses....................... 1,246 (4,320)
Other....................................................... (75) (343)
------ -------
Net amount recognized at end of the year.................... $5,216 $11,929
====== =======
</TABLE>

Amounts recognized in the accompanying consolidated balance sheets at
September 30, 1999 and 1998 consisted of the following (in thousands):

<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Prepaid pension asset....................................... $18,704 $11,929
Accrued benefit liability................................... 13,488 --
------- -------
Net amount recognized at the end of the year................ $ 5,216 $11,929
======= =======
</TABLE>

The pension plans have a total, net over-funded status of approximately
$4,045,000 and $16,592,000 at September 30, 1999 and 1998, respectively. The
1999 amount is net of two pension plans under operating contracts with the
United States government which were under funded by a total of approximately
$14,865,000. Included in other assets at September 30, 1999 is $11,059,000
representing the accumulated excess funding of benefits over the amounts
reimbursed by the U.S. government in connection with an operating contract.

The components of net periodic pension cost for each of the years ended
September 30, 1999, 1998 and 1997 were as follows (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Service costs................................... $ 8,857 $ 2,451 $ 1,258
Interest cost................................... 18,899 6,468 5,624
Expected return on plan assets.................. (24,957) (8,259) (6,824)
-------- ------- -------
Net periodic costs, before the effects of
special termination............................ 2,799 660 58
Special termination............................. 820 -- --
-------- ------- -------
Total net periodic pension cost................. $ 3,619 $ 660 $ 58
======== ======= =======
</TABLE>

The significant actuarial assumptions used in determining the funded status
of the plans were as follows:

<TABLE>
<CAPTION>
1999 1998 1997
------------- ---- ----
<S> <C> <C> <C>
Weighted average discount rate..................... 6.5% to 7.75% 6.5% 8.0%
Rate of compensation increases..................... 4.0% to 4.5% 4.5% 6.0%
Expected return on plan assets..................... 7.3% to 9.5% 7.0% 8.5%
============= === ===
</TABLE>

A-26
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Multiemployer Plans

In the United States, the Company contributes to various trusteed pension
plans covering hourly construction employees under industry-wide agreements.
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 the
Company to determine its share of unfunded benefits, if any. Company
contributions to these plans totalled $3,835,300, $4,025,300 and $2,694,700
for the years ended September 30, 1999, 1998 and 1997, respectively.

8. Savings and Deferred Compensation Plans

Savings Plans

The Company maintains savings plans for substantially all of its domestic,
nonunion employees, which allow participants to make contributions by salary
deduction pursuant to section 401(k) of the Internal Revenue Code. The
Company's contributions to these plans totalled $16,044,700, $9,568,700 and
$8,710,500, for fiscal 1999, 1998 and 1997, respectively. Company
contributions are generally voluntary, and represent a partial matching of
employee contributions.

Deferred Compensation Plans

The Company's 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 the years ended September
30, 1999, 1998 and 1997 were $2,394,900, $1,588,800 and $1,672,600,
respectively. Included in other deferred liabilities in the accompanying
consolidated balance sheets at September 30, 1999 and 1998 was $22,778,800 and
$22,847,700, respectively, relating to the ESP and EDP plans.

9. Stock Purchase and Stock Option Plans

Stock Purchase Plan

The Company's 1989 Employee Stock Purchase Plan (the "1989 ESPP") provides
for the granting of options to participating employees to purchase shares of
the Company's common stock. The participants' purchase price is the lower of
90% of the common stock's closing market price on either the first or last day
of the option period (as defined). A summary of shares issued through the 1989
ESPP for the years ended September 30, 1999, 1998 and 1997 follows:

<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Aggregate purchase price.................. $10,306,530 $7,495,590 $7,067,700
Shares purchased.......................... 385,017 302,514 325,110
----------- ---------- ----------
</TABLE>

At September 30, 1999, there were 807,949 shares reserved for issuance under
the 1989 ESPP.

A-27
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stock Option Plan

The Company has an incentive stock plan (the "1981 Plan") which provides for
the issuance of shares of common stock to employees and outside directors. The
Company may grant four types of incentive awards under the 1981 Plan:
incentive stock options, nonqualified stock options, stock appreciation rights
and restricted stock. At September 30, 1999, there were 2,651,481 shares of
common stock reserved for issuance under the 1981 Plan.

The following is a summary of the transactions under the 1981 Plan for each
of the years ended September 30, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Options Price
--------- --------
<S> <C> <C>
Outstanding at September 30, 1996........................ 1,789,323 $21.69
Granted.................................................. 472,000 22.66
Exercised................................................ (270,969) 15.35
Cancelled or expired..................................... (61,520) 20.46
--------- ------
Outstanding at September 30, 1997........................ 1,928,834 22.85
Granted.................................................. 577,500 28.80
Exercised................................................ (216,904) 18.78
Cancelled or expired..................................... (74,980) 23.50
--------- ------
Outstanding at September 30, 1998........................ 2,214,450 24.79
Granted.................................................. 611,000 34.62
Exercised................................................ (306,819) 23.55
Cancelled or expired..................................... (18,400) 26.31
--------- ------
Outstanding at September 30, 1999........................ 2,500,231 27.33
========= ======
</TABLE>

Certain other information regarding the Company's stock options follows:

<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- --------------
<S> <C> <C> <C>
At September 30:
Range of exercise prices for
options outstanding........... $16.58 - $37.36 $16.58 - $31.94 $5.31 - $28.56
Options exercisable............ 994,681 907,900 807,034
Options available for grant.... 151,250 748,850 1,266,370
For the fiscal year ended:
Range of prices for options
exercised..................... $16.58 - $28.79 $ 5.31 - $27.88 $7.94 - $27.88
Weighted average fair value of
options granted............... $17.33 $13.79 $10.83
--------------- --------------- --------------
</TABLE>

A-28
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents information regarding options outstanding and
exercisable at September 30, 1999:

<TABLE>
<CAPTION>
Options
Options Outstanding Exercisable
------------------------------ ----------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Range of Life Exercise Exercise
Exercise Prices Number (in years) Price Number Price
--------------- --------- ----------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
$16.58 - $20.61.............. 386,831 4.4 $19.52 242,931 $19.13
$20.72 - $25.84.............. 712,300 5.2 $23.43 417,600 $23.27
$26.88 - $28.79.............. 577,600 6.8 $27.89 286,100 $27.94
$29.38 - $37.36.............. 823,500 9.2 $33.99 48,050 $31.83
--------- --- ------ ------- ------
2,500,231 6.8 $27.33 994,681 $24.01
========= === ====== ======= ======
</TABLE>

Options outstanding at September 30, 1999 consisted entirely of nonqualified
stock options. The 1981 Plan allows participants to satisfy the exercise price
on exercises of stock options by tendering to the Company shares of the
Company's common stock already owned by the participants. Shares so tendered
are retired and canceled by the Company and are shown as repurchases of common
stock in the accompanying consolidated statements of stockholders' equity.

During the years ended September 30, 1999, 1998 and 1997, the Company issued
8,000, 12,000 and 5,500 shares, respectively, of restricted stock under the
1981 Plan. 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. The restrictions lapse over five years.

Pro Forma Disclosures

As discussed in Note 1, the Company accounts for stock issued to employees
and outside directors in accordance with APB 25. Statement of Financial
Accounting Standards No. 123 -- Accounting for Stock-Based Compensation ("SFAS
123") prescribes an optional, fair-value based method of accounting for stock
issued to employees and others. Had the Company determined compensation cost
under SFAS 123, the Company's net earnings and earnings per share would have
been reduced to the pro forma amounts as follows (in thousands, except per
share data):

<TABLE>
<CAPTION>
For the Years Ended
September 30,
-----------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net earnings:
As reported......................................... $65,445 $54,385 $46,895
Pro forma........................................... 57,976 50,418 43,022
Earnings per share:
Basic:
As reported........................................ $ 2.54 $ 2.12 $ 1.82
Pro forma.......................................... 2.25 1.96 1.67
Diluted:
As reported........................................ 2.47 2.08 1.80
Pro forma.......................................... 2.19 1.93 1.66
======= ======= =======
</TABLE>

A-29
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Dividend yield.......................................... 0% 0% 0%
Expected volatility..................................... 25.30% 24.22% 21.57%
Risk-free interest rate................................. 5.40% 5.62% 6.50%
Expected life of options (in years)..................... 6.76 7.40 6.25
----- ----- -----
</TABLE>

The Black-Scholes option-pricing 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 the expected
volatility of the underlying stock price. Since the Company's stock options
possess characteristics significantly different from those of traded options,
changes in the subjective input assumptions can materially affect the fair
value estimates of the Company's options. The Company believes that existing
models do not necessarily provide a reliable single measure of the fair value
of its stock options.

The effects of applying SFAS 123 for these pro forma disclosures are not
likely to be representative of the effects on reported earnings for future
years as options vest over several years and additional awards are generally
made each year.

10. Income Taxes

The following is a summary of the Company's consolidated income tax expense
(in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Current taxes:
Federal.......................................... $31,603 $25,873 $23,255
State............................................ 5,137 4,729 4,515
Foreign.......................................... 4,053 6,528 4,519
------- ------- -------
40,793 37,130 32,289
------- ------- -------
Deferred taxes:
Federal.......................................... (1,263) (2,340) (1,563)
State............................................ (453) (391) (172)
------- ------- -------
(1,716) (2,731) (1,735)
------- ------- -------
Consolidated income tax expense................... $39,077 $34,399 $30,554
======= ======= =======
</TABLE>

A-30
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Deferred taxes reflect the tax effects of differences between the amounts
recorded as assets and liabilities for financial reporting purposes and the
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 components of the Company's net
deferred tax asset at September 30, 1999 and 1998 were as follows (in
thousands):

<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Deferred tax assets:
Liabilities relating to employee benefit plans........... $ 34,250 $27,177
Self-insurance reserves.................................. 19,851 8,838
Contract revenues and costs.............................. 22,625 10,481
Accrual for office consolidations........................ 1,660 161
Other, net............................................... -- 150
-------- -------
Gross deferred tax assets................................ 78,386 46,807
-------- -------
Deferred tax liabilities:
Depreciation and amortization............................ (4,977) (4,805)
Settlement of pension obligations........................ (4,367) --
Unremitted foreign earnings.............................. (2,709) (2,458)
State income and franchise taxes......................... (1,534) (1,732)
Unrealized gain on securities available-for-sale......... (1,599) --
Other, net............................................... (447) --
-------- -------
Gross deferred tax liabilities........................... (15,633) (8,995)
-------- -------
Net deferred tax asset.................................... $ 62,753 $37,812
======== =======
</TABLE>

Included in other deferred liabilities in the consolidated balance sheets at
September 30, 1999 and 1998 are deferred tax liabilities of $13,652,300 and
$7,606,700, respectively.

The reconciliations from the statutory federal income tax expense to the
consolidated effective income tax expense for each of the years ended
September 30, 1999, 1998 and 1997 follows (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Statutory amount.................................. $36,583 $31,075 $27,107
State taxes, net of the federal benefit........... 3,045 2,819 2,824
Other, net........................................ (551) 505 623
------- ------- -------
$39,077 $34,399 $30,554
======= ======= =======
Rate used to compute statutory amount............. 35.0% 35.0% 35.0%
======= ======= =======
Consolidated effective income tax rate............ 37.4% 38.7% 39.5%
======= ======= =======
</TABLE>

During fiscal 1999, 1998 and 1997, the Company paid approximately
$45,459,800, $26,240,900 and $32,038,000, respectively, in income taxes.

A-31
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the years ended September 30, 1999, 1998 and 1997, consolidated earnings
before taxes consisted of the following (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
United States earnings............................. $ 87,247 $62,193 $61,420
Foreign earnings................................... 17,275 26,591 16,029
-------- ------- -------
$104,522 $88,784 $77,449
======== ======= =======
</TABLE>

United States income taxes, net of applicable credits, have been provided on
the undistributed earnings of foreign subsidiaries, except in those instances
where the earnings are expected to be permanently reinvested. At September 30,
1999, $7,830,800 of such undistributed earnings were expected to be
permanently reinvested. Should these earnings be repatriated, approximately
$2,070,700 of income taxes would be payable.

11. Commitments and Contingencies

The Company leases certain of its facilities and equipment under operating
leases with net aggregate future lease payments of approximately $123,669,800
at September 30, 1999 payable as follows (in thousands):

<TABLE>
<CAPTION>
Year ending September 30,
<S> <C>
2000............................................................. $ 37,657
2001............................................................. 28,650
2002............................................................. 21,028
2003............................................................. 15,320
2004............................................................. 11,916
Thereafter....................................................... 33,468
--------
148,039
Less -- amounts representing sublease income....................... (24,369)
--------
$123,670
========
</TABLE>

Rent expense for fiscal years 1999, 1998 and 1997 amounted to $47,382,500,
$29,393,000 and $29,978,000, respectively, and was offset by sublease income
of approximately $3,716,300, $4,112,000 and $2,780,000, respectively.

Letters of credit outstanding at September 30, 1999 totalled $68,397,300.

The Company maintains insurance coverage for various aspects of its business
and operations. The Company has elected, however, to retain a portion of
losses that occur through the use of various deductibles, limits and
retentions under its insurance programs. This situation may subject the
Company to some future liability for which it is only partially insured, or
completely uninsured. The Company intends to mitigate any such future
liability by continuing to exercise prudent business judgment in negotiating
the terms and conditions of its contracts.

The Company has entered into an employment agreement expiring September 30,
2004 with the Chairman of its Board of Directors. The agreement provides for
annual base payments of $432,000 to either the Chairman or, in the event of
his death, his beneficiary. The agreement also provides that the Chairman may
participate in any bonus plan sponsored by the Company, specifies certain
promotional and other activities to be performed by the Chairman in the event
he leaves employment with the Company and contains other provisions, including
some intended to prevent the Chairman from entering into any form of
competition with the Company.

A-32
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In the normal course of business, the Company is subject to certain
contractual guarantees and litigation. Generally, such guarantees relate to
project schedules and plant performance. Most of the litigation involves the
Company as a defendant in workers' compensation, personal injury and other
similar lawsuits. In addition, as a contractor for many agencies of the United
States Government, the Company is subject to many levels of audits,
investigations and claims by, or on behalf of, the Government with respect to
its contract performance, pricing, costs, cost allocations and procurement
practices. Management believes, after consultation with counsel, that such
guarantees, litigation, and United States Government contract-related audits,
investigations and claims should not have any material adverse effect on the
Company's consolidated financial statements.

In 1998, the Company was notified by the U.S. Department of Justice that was
intervening in a lawsuit filed against the Company by a former employee under
the False Claims Act (the "Act"). The lawsuit alleges that the Company
overbilled the U.S. government for lease costs paid by the Company and
relating to its former headquarters building located in Pasadena, California.
The lawsuit seeks actual damages of approximately $17.0 million, which, if a
violation of the Act is found, would be trebled. Additional remedies available
to the government include the possible imposition of civil penalties for each
billing. Although the number of billings is contested, if a violation of the
Act is found, such penalties would be at least $10.0 million. The Company has
denied any wrongdoing in the method it used to account for the lease costs in
question and has denied that it acted with the intent required for liability
under the Act. The Company contends that all of the facts regarding the 1982
transaction-in-question were disclosed to the government, which repeatedly
approved the Company's lease charges after conducting annual audits. The
Company intends to continue to vigorously defend itself against the lawsuit.

12. Common and Preferred Stock

The Company is authorized to issue two classes of capital stock: common
stock and preferred stock (each have 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 the Company's Board of
Directors at the time such series are 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 the Company's common stock have the exclusive right
to vote for the election of Directors and all other matters requiring
stockholder action. The holders of the Company's common stock are entitled to
dividends if and when declared by the Board of Directors from whatever assets
are legally available for that purpose.

Pursuant to the Company's 1990 Stockholder Rights Plan, 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 the Company, one
two-hundredth of a share of the Company's Series A Junior Participating
Cumulative Preferred Stock, par value $1.00 per share (the "Series A Preferred
Stock") at the exercise price of $90 per share, subject to adjustment.
Alternatively, the Right holder may purchase common stock of the Company
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. The rights may be redeemed at

A-33
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

$0.01 per right by the Company in accordance with the Rights Plan. The rights
will expire on December 20, 2000, unless earlier exchanged or redeemed.

13. Other Financial Information

Other noncurrent assets consisted of the following at September 30, 1999 and
1998 (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Prepaid pension costs...................................... $ 18,704 $11,929
Reimbursable pension costs................................. 11,059 --
Cash surrender value of life insurance policies............ 30,228 26,920
Investments................................................ 32,024 20,277
Notes receivable........................................... 6,597 1,785
Miscellaneous.............................................. 6,850 2,760
-------- -------
$105,462 $63,671
======== =======
</TABLE>

Accrued liabilities consisted of the following at September 30, 1999 and
1998 (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Accrued payroll and related liabilities................... $143,110 $103,626
Reserves.................................................. 53,440 14,430
Insurance liabilities..................................... 48,406 23,154
Other..................................................... 37,011 20,342
-------- --------
$281,967 $161,552
======== ========
</TABLE>

The increase of $39,010,000 in reserves was due primarily to the merger with
Sverdrup, and related to accruals for various litigation exposures, costs of
consolidating offices, and costs to complete planned workforce reductions.

14. Comprehensive Income

Effective with the first quarter of fiscal 1999 ending December 31, 1998,
the Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes reporting
and disclosure standards for comprehensive income and its components.
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources.

The Company has disclosed the components of comprehensive income in the
Statements of Consolidated Comprehensive Income and the Statements of Changes
in Stockholders' Equity. SFAS 130 does not have any effect on the amounts
previously reported for net earnings or stockholders' equity.

A-34
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The accumulated balances related to each component of other comprehensive
income (loss), net of related income tax, are as follows (in thousands):

<TABLE>
<CAPTION>
Total
Unrealized Foreign Accumulated
Gains Currency Other
(Losses) on Translation Comprehensive
Securities Adjustments Income (Loss)
----------- ----------- -------------
<S> <C> <C> <C>
Balances at September 30, 1996......... $ 621 $ 1,652 $ 2,273
Changes during the year................ (507) (3,444) (3,951)
------ ------- -------
Balances at September 30, 1997......... 114 (1,792) (1,678)
Changes during the year................ (113) (9) (122)
------ ------- -------
Balances at September 30, 1998......... 1 (1,801) (1,800)
Changes during the year................ 2,151 (3,946) (1,795)
------ ------- -------
Balances at September 30, 1999......... $2,152 $(5,747) $(3,595)
====== ======= =======
</TABLE>

15. Segment Information

Effective September 30, 1999, the Company adopted Statement of Financial
Accounting Standards No. 131 -- Disclosure About Segments of an Enterprise and
Related Information ("SFAS 131"). SFAS 131 supercedes Statement of Financial
Accounting Standards No. 14 -- Financial Reporting for Segments of a Business
Enterprise ("SFAS 14"). SFAS 131 replaces the "industry approach" definition
of "segment" that was promulgated by SFAS 14 with the "management approach" to
identify an entity's reportable segments. Under the management approach, an
entity's reportable segments are determined by the internal organization used
by the entity's management for making operating decisions and assessing
performance.

The Company's principal business is to provide professional and technical
services. The Company provides its services from offices located primarily
throughout the United States, Europe, India and Australia.

All of the Company's operations share similar economic characteristics. For
example, all of the Company's operations are highly influenced by the general
availability of qualified engineers and other professional staff. They also
provide similar services, as well as share similar processes for delivering
the Company's services. In addition, the use of technology among the Company's
performance units is highly similar and consistent throughout the Company's
organization, as is the Company's customer base (although the Company's
operations outside the United States do very little work with the U.S. federal
government), and the Company's quality assurance and safety programs.
Accordingly, based on these similarities, the Company has concluded that its
operations may be aggregated into one reportable segment for purposes of this
disclosure.

A-35
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents information by geographic area:

<TABLE>
<CAPTION>
Long-
Total lived
Revenues Assets
---------- --------
<S> <C> <C>
1999:
United States........................................... $2,421,871 $116,984
Europe.................................................. 440,545 10,376
Asia.................................................... 12,591 12,293
---------- --------
Total.................................................. $2,875,007 139,653
---------- --------
1998:
United States........................................... $1,676,997 $ 78,742
Europe.................................................. 410,944 11,032
Asia.................................................... 13,204 10,791
---------- --------
Total.................................................. $2,101,145 $100,565
---------- --------
1997:
United States........................................... $1,363,016 $ 59,758
Europe.................................................. 412,298 23,667
Asia.................................................... 5,302 9,976
---------- --------
Total.................................................. $1,780,616 $ 93,401
---------- --------
</TABLE>

Asia consists primarily of the Company's operations in India. Revenues were
earned from unaffiliated customers located primarily within the respective
geographic areas. Long-lived assets consist of property and equipment, net of
accumulated depreciation and amortization. The results of the Company's
operations in Mexico, Chile and Australia, and the Company's investment in
long-lived assets in those geographic areas were not material.

For the years ended September 30, 1999, 1998 and 1997, projects with or for
the benefit of agencies of the U.S. federal government accounted for 17.4%,
12.1% and 12.0%, respectively, of total revenues. Within the private sector,
no single client accounted for 10% or more of total revenues in either 1999 or
1998. One private-sector client accounted for 15.3% of total revenues in 1997.

A-36
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

16. Quarterly Data -- Unaudited

Summarized quarterly financial information for the years ended September 30,
1999, 1998 and 1997 is presented below (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
1999
Revenues......................... $555,172 $779,874 $771,905 $768,056 $2,875,007
Operating profit................. 23,165 28,142 28,515 28,473 108,295
Earnings before taxes............ 24,054 25,872 26,818 27,778 104,522
Net earnings..................... 15,155 16,170 16,760 17,360 65,445
Earnings per share:
Basic........................... 0.59 0.63 0.65 0.67 2.54
Diluted......................... 0.58 0.61 0.63 0.65 2.47
Stock price:
High............................ 40.750 42.750 42.688 38.563 42.750
Low............................. 26.938 35.250 35.563 32.125 26.938
-------- -------- -------- -------- ----------
1998
Revenues......................... $506,359 $524,776 $525,034 $544,976 $2,101,145
Operating profit................. 20,250 21,717 22,474 22,043 86,484
Earnings before taxes............ 21,001 21,838 22,753 23,192 88,784
Net earnings..................... 12,810 13,320 13,880 14,375 54,385
Earnings per share:
Basic........................... 0.50 0.52 0.54 0.56 2.12
Diluted......................... 0.49 0.51 0.53 0.55 2.08
Stock price:
High............................ 31.000 32.375 34.250 33.250 34.250
Low............................. 24.688 24.750 29.500 25.125 24.688
-------- -------- -------- -------- ----------
1997
Revenues......................... $433,649 $437,735 $430,177 $479,055 $1,780,616
Operating profit................. 16,989 17,761 18,596 20,215 73,561
Earnings before taxes............ 17,997 18,907 19,818 20,727 77,449
Net earnings..................... 10,870 11,420 11,970 12,635 46,895
Earnings per share:
Basic........................... 0.42 0.44 0.47 0.49 1.82
Diluted......................... 0.42 0.44 0.46 0.48 1.80
Stock price:
High............................ 25.000 28.500 27.875 32.563 32.563
Low............................. 21.250 23.500 23.250 26.250 21.250
-------- -------- -------- -------- ----------
</TABLE>

As disclosed last year, the Company adopted SFAS 128 -- Earnings per Share
effective with the first quarter of fiscal 1998 ending December 31, 1997, and
accordingly restated prior period EPS data.

The Company's common stock is listed on the New York Stock Exchange. At
September 30, 1999, there were 1,208 stockholders of record.

A-37
<PAGE>

REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS

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, 1999 and 1998, and
the related consolidated statements of earnings, comprehensive income, changes
in stockholders' equity, and cash flows for each of the three years in the
period ended September 30, 1999. 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 generally accepted auditing
standards. 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, 1999 and 1998, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended September 30, 1999, in conformity with
generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
November 3, 1999

A-38
<PAGE>

MANAGEMENT'S RESPONSIBILITIES FOR FINANCIAL REPORTING

The consolidated financial statements and other information included in this
appendix to this proxy statement have been prepared by management, which is
responsible for their fairness, integrity, and objectivity. The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior years and
contain some amounts that are based upon management's best estimates and
judgment. The other financial information contained in this appendix has been
prepared in a manner consistent with the preparation of the financial
statements.

In meeting its responsibility for the fair presentation of the Company's
financial statements, management necessarily relies on the Company's system of
internal accounting controls. This system is designed to provide reasonable,
but not absolute, assurance that assets are safeguarded and that transactions
are executed in accordance with management's instructions and are properly
recorded in the Company's books and records. The concept of reasonable
assurance is based on the recognition that in any system of internal controls,
there are certain inherent limitations and that the cost of such systems
should not exceed the benefits to be derived. We believe the Company's system
of internal accounting controls is cost-effective and provides reasonable
assurance that material errors and irregularities will be prevented, or
detected and corrected on a timely basis.

The Company's consolidated financial statements have been audited by
independent auditors, whose report thereon was based on examinations conducted
in accordance with generally accepted auditing standards and is presented on
the preceding page. As part of their audit, the independent auditors perform a
review of the Company's system of internal accounting controls for the purpose
of determining the amount of reliance to place on those controls relative to
the audit tests they perform.

The Company's Board of Directors, through its Audit Committee which is
composed entirely of nonemployee directors, meets regularly with both
management and the independent auditors to review the Company's financial
results and to ensure that both management and the independent auditors are
properly performing their respective functions.

A-39
<PAGE>

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

PROXY

SOLICITED BY THE BOARD OF DIRECTORS OF JACOBS ENGINEERING GROUP INC.

ANNUAL MEETING OF SHAREHOLDERS--Tuesday February 8, 2000

JACOBS ENGINEERING GROUP INC.

THE UNDERSIGNED hereby appoints Joseph J. Jacobs, Noel G. Watson and John W.
Prosser, Jr. his true and lawful proxies (with full power of substitution) to
vote in his name, place and stead all shares in Jacobs Engineering Group Inc.
that the undersigned owns or is entitled to vote at the Annual Meeting of
Shareholders to be held February 8, 2000, and at any adjournment thereof, upon
the matters listed below in accordance with the following instructions:

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. Please specify choices,
date, sign and return the proxy in the enclosed envelope. No postage is
required if returned in the enclosed envelope and mailed in the United States.

(Continued, and to be marked, dated and signed, on the other side)

- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Please mark
your votes as [X]
indicated in
this example

If any of the following boxes are checked, the shares covered by this proxy will be voted in accordance therewith. If no box is
checked under any of the following, the shares will be voted for the persons nominated as directors by the Board of Directors and
for the approval of items 2, 3 and 4. On other matters presented, the shares will be voted in accordance with the proxies' best
judgment.

WITHHELD
FOR FOR ALL FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. To elect Noel G. Watson, [_] [_] 2. To approve the 1999 [_] [_] [_] 3. To approve the [_] [_] [_]
Dr. James Clayburn LaForce, Stock Incentive Plan. 1999 Outside
David M. Petrone and Director Stock
James L. Rainey, Jr. as Plan.
directors. FOR AGAINST ABSTAIN
4. To approve [_] [_] [_]
Ernst & Young
LLP as auditors.

(To withhold authority to vote for any individual nominee
write that nominee's name in the space provided below.)

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

Receipt of the Jacobs Engineering Group Inc.
Proxy Statement dated January 3, 2000,
including Appendix A thereto, is hereby
acknowledged. Please vote my (our) shares as
indicated above.

Signature(s) __________________________________________________________________ Date ______________________________, 2000
NOTE: Attorneys, executors, trustees, etc. should show such capacity when signing and unless the certificate(s) is (are)
registered in their names, should submit a Proxy from the record owner. Evidence of their authority should accompany
the Proxy. Joint owners should each sign individually.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>