SCHEDULE 14A

(Rule 14a-101)

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  x

☒                            Filed by a Party other than the Registrant  ¨☐

Check the appropriate box:

Jacobs Engineering Group Inc.

JACOBS ENGINEERING GROUP INC.

(Name of Registrant as Specified in Its Charter)

N/A

N/A

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of FIlingFiling Fee (Check the appropriate box):

x    No fee required.

¨    Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

Notice of 20142017

Annual Meeting of

Shareholders

and

Proxy Statement

Jacobs Engineering Group Inc.

JACOBS ENGINEERING GROUP INC.

155 North Lake Avenue1999 Bryan Street, Suite 1200

Pasadena, California 91101Dallas, Texas 75201

December 16, 20139, 2016

To Our Shareholders:

You are cordially invited to attend the 20142017 Annual Meeting of Shareholders of Jacobs Engineering Group Inc. The Annual Meeting will be held on Thursday, January 23, 2014,19, 2017, at 12:00 p.m., local time, at our headquarters located at 155 North Lake Avenue, Pasadena, California 91101.1999 Bryan Street, 1^st Floor, Dallas, Texas 75201.

We describe in detail the actions we expect to take at our Annual Meeting in the attached Notice of 20142017 Annual Meeting of Shareholders and Proxy Statement.

In addition to the Proxy Statement you should have also received aA copy of our Annual Report on Form 10-K for fiscal year 2013, which we encourage2016 is being made available to you to read. Itat the same time as the Proxy Statement. The 2016 Annual Report on Form 10-K includes information about our operations as well as our audited, consolidated financial statements. You can also access a copy of our 20132016 Annual Report on Form 10-K on the secure website disclosed in both the Notice of Internet Availability of Proxy Materials and in the Proxy Statement as well as on the Company’s website atwww.jacobs.com. www.jacobs.com.

Please use this opportunity to take part in the affairs of our company by voting on the business to come before the Annual Meeting. Whether or not you plan to attend the Annual Meeting, please complete, sign, date, and return the accompanying proxy card or voting instruction card mailed to you or vote electronically on the Internet or by telephone. See “About the Annual Meeting—Meeting — How Do I Vote by Proxy?” in the Proxy Statement for more details. Returning the proxy card or voting instruction card or voting electronically doesnot deprive you of your right to attend the Annual Meeting and to vote your shares in person for the matters to be acted upon at the Annual Meeting.

We look forward to seeing you at the Annual Meeting.

JACOBS ENGINEERING GROUP INC.

155 North Lake Avenue1999 Bryan Street, Suite 1200

Pasadena, California 91101Dallas, Texas 75201

NOTICE OF 20142017 ANNUAL MEETING OF SHAREHOLDERS

Important Notice Regarding the Availability of Proxy Materials for the Shareholder

Meeting to be Held on January 23, 201419, 2017

The Proxy Statement and accompanying Annual Report to Shareholders

are available athttp://materials.proxyvote.com/469814

JACOBS ENGINEERING GROUP INC.

155 North Lake Avenue1999 Bryan Street, Suite 1200

Pasadena, California 91101Dallas, Texas 75201

PROXY STATEMENT

We are providing these proxy materials in connection with the 20142017 Annual Meeting of Shareholders of Jacobs Engineering Group Inc. (the “Company”). This Proxy Statement and the accompanyingCompany’s 2016 Annual Report on Form 10-K were first made available to shareholders and the Notice of Internet Availability of Proxy Materials, proxy card or voting instruction card and the Company’s 2013 Annual Report on Form 10-K were first mailed to shareholders on or about December 16, 2013.9, 2016. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters to be brought before the Annual Meeting. Please read it carefully.

ABOUT THE ANNUAL MEETING

Who is soliciting my vote?

The Board of Directors of the Company is soliciting your vote in connection with the 20142017 Annual Meeting of Shareholders.

What is the purpose of the Annual Meeting?

The meetingAnnual Meeting will be the Company’s regular, Annual Meetingannual meeting of Shareholders.shareholders. You will be voting on the following matters at the Annual Meeting:

How does the Board of Directors recommend I vote?

The Board of Directors recommends a vote:

Who is entitled to vote at the Annual Meeting?

The Board of Directors set December 2, 2013November 23, 2016 as the record date for the Annual Meeting (the “Record Date”). All shareholders who owned common stock of the Company at the close of business on the Record Date may attend and vote at the Annual Meeting.

How many votes can be cast by shareholders?

Each share of common stock is entitled to one vote. There is no cumulative voting. There were 131,761,924120,830,099 shares of common stock outstanding and entitled to vote on the Record Date.

How many votes must be present to hold the Annual Meeting?

A majority of the outstanding shares of common stock as of the Record Date must be present at the Annual Meeting in order to hold the Annual Meeting and conduct business. This is called a “quorum.” Your shares are counted as present at the Annual Meeting if you are present at the Annual Meeting and vote in person, a proxy card or voting instruction card has been properly submitted by you or on your behalf, or you have voted electronically on the Internet or by telephone. Both abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum. A “broker non-vote” is a share of common stock that is beneficially owned by a person or entity and held by a broker or other nominee, but for which the broker or other nominee (1) lacks the discretionary authority to vote on certain matters, and (2) has not received voting instructions from the beneficial owner in respect of those specific matters.

How many votes are required to elect directors and approve the other proposals?

Directors areEach director is elected by a majority of the votes cast with respect to such directornominee in uncontested elections (the number of shares voted “for” a director nominee must exceed the number of shares voted “against” that nominee). Abstentions and broker non-votes are not counted for purposes of the election of directors and, therefore, will have no effect on the outcome of such election.

The approval of the amendmentamendments to and restatementrestatements of the 1999 Stock Incentive PlanESPP and Global ESPP requires the affirmative vote of a majority of the shares of common stock present, in person or by proxy, at the Annual Meeting and entitled to vote, provided that the total votes cast on the proposal, whether in favor, against, or in abstention, represent a majority of the shares entitled to vote. Abstentions have the same effect as a vote against the proposal. Broker non-votes will have no effect on the outcome of the proposal.

The ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm requires the affirmative vote of a majority of the shares of common stock present, in person or by proxy, at the Annual Meeting and entitled to vote. Abstentions have the same effect as a vote against the proposal.

The approval of the advisory resolution on the Company’s executive compensation and the advisory resolution on the frequency of advisory votes on the Company’s executive compensation requires the affirmative vote of a majority of the shares of common stock present, in person or by proxy, at the Annual Meeting and entitled to vote. Abstentions have the same effect as a vote against the advisory resolution. Broker non-votes will have no effect on the outcome of the advisory vote.votes. The results of this voteadvisory votes are not binding on the Board of Directors.

The approval of the proposal to declassify the Board of Directors must be approved by the affirmative vote of holders of not less than two-thirds of the total voting power of all outstanding securities entitled to vote in the ordinary election of directors of the Company voting together as a single class. Accordingly, this proposal must be approved by the affirmative vote of the holders of two-thirds of our outstanding common stock. Abstentions and broker non-votes will have the same effect as a vote against the proposal.

How do I vote by proxy?

You can vote your shares by completing and returning the proxy card or voting instruction card accompanying this Proxy Statement. You also have the option ofthat was sent to you or by voting your shares electronically on the Internet or by telephone. Your Internet or telephone

vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, and returned your proxy card or voting instruction card. Please seeVoting instructions are printed on your proxy card, or voting instruction card for more information on how to vote by proxy.

2

What if I don’t vote foron some of the items listed on my proxy card or voting instruction card?proposals?

If you return your signed proxy card or voting instruction card in the enclosed envelope provided to you but do not mark selections, ityour shares will be voted in accordance with the recommendations of the Board of Directors.Directors with respect to such selections. Similarly, when you vote electronically on the Internet and do not vote on all matters, your shares will be voted in accordance with the recommendations of the Board of Directors.Directors with respect to the matters on which you did not vote. Shareholders that vote by telephone must vote on each matter. In connection therewith, the Board of Directors has designated Craig L. MartinMr. Steve Demetriou and John W. Prosser, Jr.Mr. Kevin Berryman as proxies. If you indicate a choice with respect to any matter to be acted upon on your proxy card or voting instruction card, your shares will be voted in accordance with your instructions.

If you are a beneficial owner and hold your shares in street name through a broker or other nominee and do not return the voting instruction card, the broker or other nominee will vote your shares on each matter at the Annual Meeting for which he or she has the requisite discretionary authority. Under applicable rules, brokers have the discretion to vote on routine matters, such as the ratification of the selection of independent registered public accounting firms. Because of changes to these rules, the uncontested election of directors at a shareholder meeting is no longer considered a routine matter. Similarly, these rules have been changed to prohibit broker discretionary authority with respect to votes on executive compensation. Therefore, brokersfirms, but do not have the discretion to vote on the uncontested election of directors, the approval of employee stock purchase plans, or on any advisory vote regarding the Company’s executive compensation or frequency of advisory votes on executive compensation.

Who pays for the proxy solicitation and how will the Company solicit votes?

The Company bears the expense of printing and mailing proxy materials.materials and soliciting proxies. In addition to this solicitation of proxies by mail, the Company’s directors, officers, and other employees may solicit proxies by personal interview, telephone, facsimile, or email. These individuals will not be paid any additional compensation for any such solicitation. The Company will request brokers and other nominees who hold shares of common stock in their names to furnish proxy materials to the beneficial owners of such shares. The Company will reimburse such brokers and other nominees for their reasonable expenses incurred in forwarding solicitation materials to such beneficial owners. In addition, we have retained MacKenzie Partners, Inc. to assist in the solicitation of proxies for a total fee of up to $30,000$20,000 plus reimbursement of expenses.

Can I change or revoke my vote after I return my proxy card or voting instruction card?vote?

Yes. Even if you sign and return the proxy card or voting instruction card in the form accompanying this Proxy Statement,provided to you, vote by telephone, or vote electronically on the Internet, you retain the power to revoke your proxy or change your vote.vote at any time before it is exercised at the Annual Meeting. You can revoke your proxy or change your vote at any time before it is exercised at the Annual Meetingthat deadline by giving written notice to the Secretary of the Company, specifying such revocation. You may also change your vote by timely delivering a valid, later-dated proxy or voting instruction card or by submitting a later-dated vote by telephone or electronically on the Internet or by voting in person at the Annual Meeting. However, please note that if you would like to vote at the Annual Meeting and you are not the shareholder of record, you must request, complete, and deliver a proxy from your broker or other nominee.

Whom can I contact if I have questions or need assistance in voting my shares?

Please callcontact MacKenzie Partners, Inc., the firm assisting us in the solicitation of proxies, at:

MacKenzie Partners, Inc.

105 Madison Avenue

New York, New York 10016

proxy@mackenziepartners.com

Call Collect: (212) 929-5500

or

Toll-FreeToll-Free: (800) 322-2885

TABLE OF CONTENTS

DISCUSSION OF THE VARIOUS PROPOSALS

PROPOSAL NO. 1 — ELECTION OF DIRECTORS

At the Annual Meeting, shareholders will be asked to elect fivenine directors to serve on the Board of Directors. The Company’s Bylaws currently provide for eleven directors. The Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) divides the Board of Directors into three classes with thehas nominated Joseph R. Bronson, Juan José Suárez Coppel, Robert C. Davidson, Jr., Steven J. Demetriou, Ralph E. Eberhart, Dawne S. Hickton, Linda Fayne Levinson, Peter J. Robertson, and Christopher M.T. Thompson for election as directors for one-year terms of office of the directors of each Class ending in different years. The terms of directors in Classes I, II, and III presently endexpiring at the 2018 annual meetings in 2015, 2016, and 2014, respectively. Classes I and III currently have four directors and Class II has three directors.

Four of the nominees to be voted upon at the Annual Meeting are in Class III. A fifth nominee, who is in Class I, will also be voted upon at this Annual Meeting in accordance with the Company’s Certificate of Incorporation as he was elected after the 2013 annual meeting by the Board of Directors to fill a newly created vacancy.meeting. When elected, the directors serve until their successors have been duly elected and qualified or until any such director’s earlier resignation or removal.

Mr. Noel G. Watson and Mr. John F. Coyne, both of whom are currently directors whose terms are expiring on the date of the Annual Meeting, are not standing for re-election at the Annual Meeting. It is expected that, following the Annual Meeting, the size of the Board of Directors will be reduced from eleven to nine directors.

Proxies cannot be voted for a greater number of persons than the number of nominees named. If you sign and return the accompanying proxy card or voting instruction card provided to you or vote electronically, your shares will be voted for the election of the five nominees recommended by the Board of Directors unless you choose to abstain or vote against any of the nominees. If any nominee for any reason is unable to serve or will not serve, proxies may be voted for such substitute nominee as the proxy holder may determine. The Company is not aware of any nominee who will be unable to or will not serve as a director.

The Board of Directors has nominated John F. Coyne, Linda Fayne Levinson, Craig L. Martin, and Christopher M.T. Thompson for election as Class III directors for three-year terms expiring at the 2017 annual meeting, and Juan José Suárez Coppel for election as a Class I director for a one-year term expiring at the 2015 annual meeting.

Please see “The Board of Directors and Its Committees” below for information about the nominees for election as directors and the current members of the Board of Directors who will continue serving following the Annual Meeting,director, their business experience, and other pertinent information.

Directors areEach director is elected by a majority of the votes cast with respect to such director in uncontested elections (the number of shares voted “for” a director nominee must exceed the number of shares voted “against” that nominee). The Company did not receive any shareholder nominations for director and thus the election of directors at the Annual Meeting will be an uncontested election. Abstentions and broker non-votes are not counted for purposes of the election of directors and, therefore, will have no effect on the outcome of the election.

The Board of Directors unanimously recommends that you voteFOR the election of all Nominees.nominees.

4

PROPOSAL NO. 2 — APPROVAL OF AMENDMENT TO AND RESTATEMENT OF THE JACOBS ENGINEERING GROUP INC. 19991989 EMPLOYEE STOCK INCENTIVEPURCHASE PLAN

At the Annual Meeting, shareholders will be presented with a proposal to approve an amendment to and restatement of the Jacobs Engineering Group Inc. 19991989 Employee Stock IncentivePurchase Plan, as amended and restated to date (the “Stock Incentive Plan”“ESPP”), to effect the following changes:

On November 21, 2013,17, 2016, the Board of Directors unanimously approved the amendment to and restatement of the Stock Incentive Plan,ESPP, subject to the approval by the Company’s shareholders at the Annual Meeting. In order for the amendment to and restatement of the Stock Incentive PlanESPP to take effect, it must be approved by the Company’s shareholders. If this amendment and restatement is not approved by the Company’s shareholders, the version

As of the Stock Incentive Plan as in effect immediately prior to November 21, 2013 will continue to operate according to its terms.

The following table sets forth certain information about the Stock Incentive Plan together with the 1999 Outside Director Stock Plan, as amended (the “1999 Outside Director Plan”). No amendments to the 1999 Outside Director Plan have been proposed or will be voted upon at the Annual Meeting.

The closing priceend of thefiscal 2016, 26,627,108 shares of common stock onwere authorized for issuance, and approximately 600,000 shares of common stock remained available for issuance, under the New York Stock Exchange (“NYSE”) on December 2, 2013 was $59.47 per share.

ESPP. The potential dilution from the 4,250,000 shareproposed increase requested to be approved by stockholders is 2.9% as of September 27, 2013. If the potential share request is approved, the Company’s total potential dilution would increase from 8.7% as of September 27, 2013 to 11.6%. The Human Resource & Compensation Committee (the “HR&C Committee”) has considered this potential dilution level in the context of competitive data from its peer group, and believes that the resulting dilution levels would be within normal competitive ranges.

The Company manages its long-term dilution goal by limiting the number of shares subject to equity awards that it grants annually, commonly referred to as burn rate. Burn rate shows how rapidly a company is depleting its shares reserved for equity compensation plans, and is defined as the number of shares granted under the Company’s equity incentive plans divided by total common shares outstanding at the end of the year. Over the

5

past three fiscal years, the Company’s annual burn rate has averaged 0.85% (1.02% in fiscal 2013). The HR&C Committee believes that this burn rate has been within the range granted by its peer companies and is reasonable from a competitive standpoint.

When considering the number of additional shares to add to Stock Incentive Plan, the HR&C Committee also reviewed, among other things, projected future share usage and projected future forfeitures. The projected future usage of shares for long-term incentive awards under the Stock Incentive Plan was reviewed under scenarios based on a variety of assumptions. Depending on assumptions, the 4,250,000 shares to be added to the Stock Incentive Plan, in combination with the remaining authorized shares and shares added back to the plan from forfeitures of awards granted under the Stock Incentive Plan, is expected to satisfy, assuming no significant acquisitions of other companies, the Company’s equity compensation needs for two years of similar levels of awards. The HR&C Committee is committed to effectively managing the number of shares reserved for issuance under the Stock Incentive Plan while minimizing shareholder dilution.

The Board of Directors believes that it is in the best interests of the Company and its shareholders to provide for an equity incentive plan under which compensation awards made to the Company’s executive officers are eligible to qualify for deductibility by the Company for federal income tax purposes. Accordingly, the Stock Incentive Plan is designed to permit the grant of awards that are intended to qualify as “performance-based compensation” not subject to the $1,000,000 deductibility cap under Section 162(m) of the Internal Revenue Code of 1986, as amended (such Section “Section 162(m)”), and such Code, the “Code”). There can be no guarantee, however, that amounts payable under the Stock Incentive Plan will be treated as qualified “performance-based compensation” under Section 162(m). In general, under Section 162(m), in order for the Company to be able to deduct compensation in excess of $1,000,000 paid in any one year to the Company’s chief executive officer or anyESPP represents less than four percent of the Company’s three other most highly compensated executive officers (other than the Company’s chief financial officer), such compensation must qualifyoutstanding common stock as “performance-based.” One of the requirements of “performance-based” compensation for purposes of Section 162(m) is that the material terms of the performance goals under which compensation may be paid be disclosed to and approved by the Company’s shareholders at least once every five years. For purposes of Section 162(m), the material terms include (i) the employees eligible to receive compensation, (ii) a description of the business criteria on which the performance goal is based and (iii) the maximum amount of compensation that can be paid to an employee under the performance goal. With respect to the various types of awards under the Stock Incentive Plan, each of these aspects is discussed below, and approval of the Stock Incentive Plan itself will constitute approval of each of these aspects of the Stock Incentive Plan for purposes of the approval requirements of Section 162(m).Record Date.

The complete text of the Stock Incentive PlanESPP reflecting all amendments approved by the Board of Directors is attached hereto asAnnex Ato this Proxy Statement. The following discussion is qualified in all respects by reference toAnnex A.A.

Purpose of the Stock Incentive PlanESPP

The purposeBoard of Directors believes that the Stock Incentive Plan isopportunity for all eligible, full-time employees to advance the long-term objectivesacquire shares of common stock of the Company and its Related Companies (defined below) by encouraging and enabling the acquisition of a financial interestthrough participation in the ESPP encourages stock ownership and provides an important incentive to employees of the Company. The ESPP also assists the Company in attracting new employees. The ESPP is intended to qualify as an “employee stock purchase plan” as defined in Section 423 of the Internal Revenue Code of 1986, as amended, and the regulations and interpretations promulgated thereunder (the “Code”). See discussion of “U.S. Federal Income Tax Consequences” below. As part of the amendment and restatement, we have proposed adding a non-Section 423 component to the ESPP to facilitate potential participation by certain employee groups based outside the United States.

Administration

The ESPP is administered by the Human Resource and Compensation Committee of the Board of Directors (the “Compensation Committee”). The Compensation Committee is authorized to construe and interpret the ESPP, to prescribe rules and regulations for its administration, and to take any other necessary action in relation to the ESPP.

Eligibility

All employees of the Company and its Related Companies. In addition,certain subsidiaries and affiliates designated from time to time by the Stock Incentive Plan is intendedCompensation Committee are eligible to attract and retain employees and to align and strengthen their interests with those ofparticipate in the Company’s shareholders.

AssumingESPP unless they are excluded from participation by the levels of awards granted in fiscal 2013 continued into the future and based on the current terms of the Stock Incentive Plan, the Company would expect to have sufficient shares available under the Stock Incentive Plan for two years of similar levels of awards. If additional shares are not reserved for issuance under the Stock Incentive Plan, it would be more difficult for the Company to effectively attract and retain employees.

6

Administrationprovisions summarized below.

The Stock Incentive Plan is administeredfollowing employees are not eligible to participate in the ESPP: (i) employees who normally work fewer than 20 hours each week or five or fewer months during any fiscal year; (ii) employees who have

completed less than one year of service with the Company or a participating subsidiary or who are not employed by the HR&C Committee,Company at the beginning of the Offering Period; (iii) certain employees who are members of a collective bargaining unit that has not agreed to participate in the ESPP; and (iv) employees who would own five percent or more of the common stock immediately after a purchase right is granted to any committee appointedsuch employee.

Unless otherwise determined by the Board of Directors, employees of corporations that is composed solely of directors who are both non-employee directors within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and “Outside Directors” as defined in IRS guidance issued under Section 162(m) (the “Administering Committee”). The Administering Committee is authorized to approve all awards under the Stock Incentive Plan, to interpret the Stock Incentive Plan and the specific conditions and provisions of awards thereunder, to fix the forms and terms of incentive awards and times of issuance, to establish rules and regulations as it deems appropriate for the proper administration of the Stock Incentive Plan, including addressing unanticipated events (including any temporary closure of the stock exchange on whichacquired by the Company is listed, disruption of communicationsand become 50% or natural catastrophe). None of the members of the Administering Committeemore owned subsidiaries are eligible to receive awards underparticipate in the Stock Incentive Plan. It is the policy of the Board of Directors that the composition of the Administering Committee be identical to that of the HR&C Committee.

Notwithstanding the foregoing, with respect to any award that is not intended to satisfy the conditions of Rule 16b-3 under the 1934 Act or Section 162(m) of the Code, andESPP, subject to the extent not inconsistent with applicable law or the rules and regulations of the principal U.S. national securities exchange on which the Company’s common stock is traded, the Administering Committee may appoint one or more separate committees (any such committee, a “Subcommittee”) to approve certain awards under the Stock Incentive Plan. Any such Subcommittee would have the full authority of the Administering Committee pursuant to the terms of the Stock Incentive Plan and would operate within guidelines and limitations established by the Administering Committee, including an express limitation on the total number of shares subject to awards that the Subcommittee may award. Under no circumstances may any such Subcommittee grant awards on terms more favorable than awards granted by the Administering Committee and no officer may designate himself or herself as the recipient of an award. Actions by any such Subcommittee within the scope of delegation shall be deemed for all purposes to have been taken by the Administering Committee, and all actions by any such Subcommittee are reported to the Administering Committee on a regular basis.

Eligibility for Awards

aforementioned conditions. In the discretion of the AdministeringCompensation Committee, an awardsuch employees may be granted or awardedreceive credit for time worked for the acquired corporation for the purpose of determining eligibility.

The Company estimates that, at November 23, 2016, there were approximately 22,348 employees eligible to any employeeparticipate in the ESPP.

Purchase Rights

The ESPP permits eligible employees of the Company or a Related Company. The Company has about 66,000 employees, approximately 690to purchase shares of whom received awards under the Stock Incentive Plan during fiscal 2013. A “Related Company” is any corporation or other business organization in whichcommon stock from the Company owns, directly or indirectly, 50% or more (or,by electing to the extent permitted by Section 409A of the Code, 20% or more) of the voting power of all classes of stock entitled to vote or the value ofexercise purchase rights on shares of all classes ofcommon stock at the timeend of each month. Employees may exercise a purchase right in amounts based upon a percentage of their salary or wages (up to 15% of base compensation). An employee may elect to participate or not to participate on each January 1 and July 1 commencement date of a six-month offering period (each, an “offering period”). The Company will deduct contributions from the award is made. Inemployee’s salary or wages during the courseoffering period, and the employee’s purchases 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. Asshares are effected at each month-end within each six-month offering period without any further action on the part of these strategic alliances the Company frequently furnishes some of its own employees to the Related Company. The purpose of granting equity awards to such employees is to retain their loyalty to the Company.employee.

Plan LimitationsPurchase Price

The price at which shares may be purchased is 95% of the fair market value of the common stock on the date of purchase (the last day of each month). The Compensation Committee may adjust the price for future Offering Periods but such price needs to comply with the pricing requirements set forth in Section 423 of the Code. The fair market value for this purpose is the closing price of the common stock as reported in the New York Stock Exchange Composite Transactions report for the relevant date. On November 23, 2016, the closing price for the Company’s common stock was $61.69 per share.

Maximum Amount of Stock

The maximum fair market value of common stock that an employee may purchase under the ESPP (or any other employee stock purchase plan intended to meet the requirements of Section 423 of the Code) in any calendar year is $25,000 (based on the fair market value of the common stock on the first day of the six-month offering period). The maximum number of shares that a participant may purchase during any six-month offering period is 2,400 shares.

Cessation of Employment

If an employee ceases to be an employee for any reason during any offering period then that employee’s purchase rights will immediately terminate, and the Company will refund to the employee, or the employee’s designated beneficiary in the case of the employee’s death, the full amount of all withholdings without interest. An employee may not transfer a purchase right other than by will or the laws of descent and distribution, and during an employee’s lifetime, a purchase right is exercisable only by the employee.

Amendment and Termination

If this proposal is approved by the shareholders at the Annual Meeting, subject to adjustment as provided in this paragraph and “Adjustment of Awards Below,” the total number of shares that may be issued or transferred under the Stock Incentive Plan pursuant to awards may not exceed 29,850,000 shares. For this purpose, every share transferred pursuant to an award granted after September 28, 2012 (i) that is an option or SAR will count as one share and (ii) that is other than an option or SAR will count as 1.92 shares. The maximum number of shares that may be issued pursuant to incentive stock options under the Stock Incentive Plan is 29,850,000 (subject to adjustment as provided in “Adjustment of Awards Below”). In no event may an employee be granted awards that are intended to be “performance-based compensation” under Section 162(m) covering more than 1,000,000 shares in a single calendar year (subject to adjustment as provided in “Adjustment of Awards Below”) or that are

7

denominated in cash under which more than $5,000,000 may be earned for each 12 months in the performance period. Shares available for issuance under the Stock Incentive Plan may come from authorized but unissued shares, the Company’s treasury shares, or shares subject to an award that is forfeited, expired or settled for cash (in whole or part) to the extent of such forfeiture, expiration or cash settlement. If any awards granted prior to September 29, 2012 are forfeited, in whole or in part, new awards may be issued with respect to the shares covered by such prior awards. For purposes of determining the amount of shares that may be issued pursuant to such new awards, (1) forfeited options and SARs will be counted as one share per each share covered and awards other than options and SARs will be counted as 1.92 shares per each share covered, and (2) shares issued pursuant to such new award will count as either one share (if the award is an option or SAR) or 1.92 shares (if the award is other than an option or SAR). In the event that withholding tax liabilities arising from an award other than an option or SAR are satisfied by the withholding of shares by the Company, then the shares so withheld will again be available for awards under the Plan and will count as 1.92 shares for each share so tendered or withheld. The following shares will not be added to the shares authorized for issuance or transfer under the Stock Incentive Plan: (i) shares tendered by a participant in payment of the purchase price of an option; (ii) shares tendered by a participant or withheld by the Company to satisfy any tax withholding obligation with respect to options or SARs; (iii) shares subject to a SAR (that is, each SAR that is exercised shall reduce the number of shares available by one share); and (iv) shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of options.

Forms of Awards

The Stock Incentive Plan provides for the grant of the following types of awards:

Stock Options — The Company may grant nonqualified stock options and incentive stock options (“ISOs”) under the Stock Incentive Plan. The option price per share may not be less than 100% of the fair market value of one share on the date the option is granted; provided that in the case of ISOs granted to an employee who owns stock representing more than 10% of the voting power of all classes of stock of the Company or any subsidiary of the Company, the option price per share may be no less than 110% of the fair market value of one share on the date the option is granted. In addition, the total fair market value, determined on the date the ISO is granted, of shares for which ISOs first become exercisable by an optionee during any calendar year may not exceed $100,000.

The duration of an option will be determined by the Administering Committee, but may not exceed ten years from the date of its grant; provided that the term of an ISO granted to an employee who owns stock representing more than 10% of the voting power of all classes of stock of the Company or any subsidiary of the Company may not exceed five years from the date of its grant. ISOs must also comply with all other requirements of Section 422 of the Code.

In the event that on the last business day of the term of an option either (i) the exercise of the option (other than an ISO) is prohibited by applicable law, or (ii) shares may not be purchased or sold by certain participants due to a “black-out period” or a “lock-up” agreement, such term shall be extended for a period of 30 days following the end of the legal prohibition, black-out period, or lock-up agreement.

The purchase price payable upon the exercise of an option is payable in full in cash or its equivalent, by tendering previously acquired shares, in the discretion of the Administering Committee, through any other method specified in an award agreement, or through any combination of the foregoing. In addition, withholding taxes due upon the exercise of nonqualified options may be satisfied in whole or in part by withholding shares of common stock otherwise issuable to the optionee. In no event may an option be exercised in a manner that would result in fractional shares of stock being issued.

Unless otherwise determined by the Administering Committee, upon a termination of employment: (i) due to retirement, Disability, or death, unvested options are forfeited and vested options may be exercised through the date specified in the employee’s award agreement; (ii) within two years following a Change in Control due to

8

termination by the Company for any reason other than cause, death or Disability or by the employee for good reason, all options become immediately vested and exercisable through the earlier of the date specified in the employee’s award agreement or two years following the date of termination; and (iii) for reasons other than retirement, Disability, death or within two years following a Change in Control, including being employed at a Related Company in which the Company’s investment falls below 20%, or being transferred to a company in which the Company’s investment is less than 20%, unvested options are forfeited and vested options may be exercised through the earlier of the date specified in the employee’s award agreement or three months following the date of termination of employment. Capitalized terms are defined in the Stock Incentive Plan and those definitions are included under “Executive Compensation—Compensation under Various Termination Scenarios” below. “Change in Control” is also defined under “—Change in Control of the Company” below. If a participant dies after termination of employment, but before the expiration date specified in his or her award agreement, vested options must be exercised by the earlier of the date specified in the employee’s award agreement or the expiration date that applied to such participant immediately prior to his or her death. In the event a Change in Control occurs and options are not assumed and continued by the acquiring or surviving corporation in the transaction, all options become immediately vested and exercisable through the date of the Change in Control, provided that the employee is given at least 15 days’ notice of such termination and the opportunity to exercise outstanding options during such period.

Except as determined by the Administering Committee, options are not assignable or transferable other than by will or by the laws of descent and distribution, and during an optionee’s lifetime an option is only exercisable by such optionee of by his or her legal representative.

Stock Appreciation Rights — Under the Stock Incentive Plan, as amended and restated, the Company may grant SARs independent of or in connection with any award. The grant price per share may not be less than 100% of the fair market value of one share on the date of grant, or, if applicable, on the date the option is granted with respect to a SAR granted in tandem with an option.

The term of a SAR will be determined by the Administering Committee, but may not exceed ten years from the date of its grant. However, in the event that on the last business day of the term of a SAR either (i) the exercise of the SAR is prohibited by applicable law or (ii) shares may not be purchased or sold by certain participants due a “black-out period” or a “lock-up” agreement, such term shall be extended for a period of 30 days following the end of the legal prohibition, black-out period or lock-up agreement.

SARs will become exercisable in such amounts and during such time periods as the Administering Committee in its sole discretion determines and provides in the award agreement that the Company enters into with the participant. Each SAR entitles the holder to exercise the SAR in whole or in part and, upon such exercise, to receive from the Company an amount equal to the excess of the fair market value on the exercise date of one share over the grant price of the SAR, times the number of shares covered by the portion of the SAR so exercised. Unless otherwise provided in the award agreement, the Administering Committee will determine in its sole discretion whether payment will be made in cash, shares, or any combination thereof.

Unless otherwise determined by the Administering Committee, upon a termination of employment: (i) due to retirement, Disability, or death, unvested SARs are forfeited and vested SARs may be exercised through the date specified in the employee’s award agreement; (ii) within two years following a Change in Control due to termination by the Company for any reason other than cause, death or Disability or by the employee for good reason, all SARs become immediately vested and exercisable through the earlier of the date specified in the employee’s award agreement or two years following the date of termination; and (iii) for reasons other than retirement, Disability, death or within two years following a Change in Control, including being employed at a Related Company in which the Company’s investment falls below 20%, or being transferred to a company in which the Company’s investment is less than 20%, unvested SARs are forfeited and vested SARs may be exercised through the earlier of the date specified in the employee’s award agreement or three months following the date of termination of employment. If a participant dies after termination of employment, but before the expiration date specified in his or her award agreement, vested SARs must be exercised by the earlier of the date

9

specified in the employee’s award agreement or the expiration date that applied to such participant immediately prior to his or her death. In the event a Change in Control occurs and SARs are not assumed and continued by the acquiring or surviving corporation in the transaction, all SARs become immediately vested and exercisable through the date of the Change in Control, provided that the employee is given at least 15 days’ notice of such termination and the opportunity to exercise outstanding SARs during such period.

Except as determined by the Administering Committee, SARs are not assignable or transferable other than by will or by the laws of descent and distribution.

Restricted Stock and Restricted Stock Units — The Company may award and issue restricted stock and/or restricted stock units to an employee. Restricted stock is common stock of the Company subject to certain restrictions on transfer. Restricted stock units are awards denominated in units of common stock which, subject to satisfaction of any vesting and/or other terms and conditions, entitle a recipient to the issuance of one share of common stock (or such equivalent value in cash) in settlement of the award.

Awards of restricted stock and/or restricted stock units may be subject to time-based and/or performance-based vesting conditions. Performance-based awards may be based on Qualifying Performance Criteria (as defined below) or any other criteria determined by the Administering Committee in its sole discretion. Unless otherwise provided in the award agreement, holders of restricted stock shall become shareholders of the Company and have all rights as shareholders from the date of grant, including the right to vote such shares and receive all distributions made with respect to such shares. Holders of restricted stock units shall have no voting rights with respect to such award, but shall otherwise have the rights specifically provided for in the award agreement with respect to such award. Dividends or other distributions that relate to a restricted stock or restricted stock unit award subject to performance-based vesting criteria will be subject to the same performance criteria as the underlying award.

Restricted stock and restricted stock unit awards have a minimum vesting period of not less than three years from the date of grant if subject only to time-based vesting conditions and not less than one year from the date of grant if subject to performance-based vesting conditions, subject in either case, at the Administering Committee’s discretion, to accelerated vesting in the event of death, Disability, retirement, or a Change in Control; provided, however, that these minimum vesting requirements will not be applicable to grants of up to 5% of the number of shares available for issuance on November 21, 2013.

Unless otherwise determined by the Administering Committee, upon a termination of employment: (i) due to retirement, unvested restricted stock and restricted stock units will be forfeited; (ii) due to Disability or death, the restrictions on unvested restricted stock and restricted stock units that are subject to time-based vesting conditions shall immediately lapse and such unvested restricted stock and restricted stock units shall become immediately vested; however, the restrictions on unvested restricted stock and restricted stock units that are subject to performance-based vesting conditions shall remain outstanding and such awards will continue to vest or become earned based upon the Company’s actual performance through the end of the applicable performance period; (iii) within two years following a Change in Control due to termination by the Company for any reason other than cause, death or Disability or by the employee for good reason, the restrictions on all unvested restricted stock and restricted stock units shall immediately lapse and such unvested restricted stock and restricted stock units shall become immediately vested; provided, that any awards of restricted stock and/or restricted stock units that are subject to performance-based vesting criteria will be paid at a level based upon the Company’s actual performance as of the applicable termination; and (iv) for reasons other than retirement, Disability, death or within two years following a Change in Control, including being employed at a Related Company in which the Company’s investment falls below 20%, or being transferred to a company in which the Company’s investment is less than 20%, unvested restricted stock and restricted stock units are forfeited. In the event a Change in Control occurs and restricted stock and/or restricted stock units are not assumed and continued by the acquiring or surviving corporation in the transaction, the restrictions on all unvested restricted stock and restricted stock units shall immediately lapse and such unvested restricted stock and restricted stock units shall become immediately vested; provided, that any awards of restricted stock and/or restricted stock units that are

10

subject to performance-based vesting criteria will be paid at a level based upon the Company’s actual performance as of the applicable Change in Control.

Except as determined by the Administering Committee, awards of restricted stock and/or restricted stock units are not assignable or transferable other than by will or by the laws of descent and distribution.

Incentive Bonus Awards — The Company may award incentive bonuses either alone or in addition to other awards. Incentive bonuses may be payable pursuant to one or more sub-plans or programs. Each incentive bonus will entitle the recipient to a future cash payment based on the achievement of one or more objectively-determined performance goals or criteria established for a performance period determined by the Administering Committee, which criteria may be based on financial performance and/or personal performance evaluations. The Administering Committee may specify to what extent an incentive bonus is intended to satisfy the requirements for “performance-based compensation” under Section 162(m), in which case such incentive bonus must be based on one or more Qualifying Performance Criteria (as defined below) selected by the Administering Committee and specified upon or prior to the grant of the incentive bonus. The effects of a termination of employment and/or a Change in Control with respect to incentive bonuses will be set forth in the applicable award agreement.

Qualifying Performance-Based Awards

The Administering Committee may specify that an award or a portion of an award is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) provided that, other than with respect to options or SARs, the performance criteria for an award or portion of an award that is intended by the Administering Committee to satisfy the requirements for “performance-based compensation” under Section 162(m) shall be a measure based on one or more qualifying performance criteria selected by the Administering Committee and specified at the time the award is granted. The performance criteria for any award that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) (“Qualifying Performance Criteria”) will be any one or more of the following performance criteria, or derivations of such performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole, or to a business unit or group of business units, or Related Company, measured either annually, at a single point in time in a performance period, as an average of values determined at various point in time during a performance period, or cumulatively over a period of years, on an absolute basis or relative to a pre-established target to previous years’ (or period’s) results or to a designated comparison group, or as a change in values during or between performance periods, in each case as specified by the Administering Committee: (i) revenues; (ii) earnings from operations, earnings before or after income taxes, earnings before or after interest, depreciation, amortization, or earnings before extraordinary or special items, earnings before income taxes and any provision for incentive bonuses; (iii) net earnings or net earnings per share of common stock (basic or diluted); (iv) return on assets (gross or net), return on investment, return on capital, or return on beginning, ending or average equity; (v) cash flow, cash flow from operations, free cash flow, cash flow return on investment (discounted or otherwise), net cash provided by operations, or cash flow in excess of cost of capital; (vi) interest expense after taxes; (vii) economic value added or created; (viii) operating margin or profit margin; (ix) stock price or total shareholder return; (x) average cash balance, net cash or cash position; and (xi) strategic business criteria, consisting of one or more objectives based on meeting specified development, strategic partnering, licensing, research and development, market penetration, geographic business expansion goals, cost targets, customer satisfaction, employee satisfaction, management of employment practices and employee benefits, supervision of litigation and information technology, and goals relating to acquisitions or divestitures of subsidiaries, affiliates or joint ventures.

To the extent consistent with Section 162(m), the Administering Committee may appropriately adjust any evaluation of performance under a Qualifying Performance Criteria to eliminate the effects of charges for restructurings, discontinued operations, unusual or nonrecurring or extraordinary items and all items of gain, loss or expense determined to be extraordinary or unusual in nature or related to the disposal of a segment of a business or related to a change in accounting principle all as determined in accordance with United States generally accepted accounting principles, as well as the cumulative effect of accounting changes, in each case as

11

determined in accordance with United States generally accepted accounting principles or identified in the Company’s financial statements or notes to the financial statements. The Administering Committee may also appropriately adjust any evaluation of performance under a Qualifying Performance Criteria to exclude the effects of any of the following events that occurs during a performance period: (1) asset write-downs, (2) litigation, claims, judgments or settlements, (3) changes in tax law or other such laws or provisions affecting reported results, (4) reorganization and restructuring programs and (5) payments made or due under the Stock Incentive Plan or any other compensation arrangement maintained by the Company.

Awards for Employees Outside the U.S.

Employees of the Company and its Related Companies located outside the United States are eligible to receive awards under the Stock Incentive Plan. 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 Stock Incentive Plan gives the Administering Committee the power to adopt special terms and conditions for awards being granted to employees outside the United States in order to comply with the laws, policies and customs of the countries involved. These special terms and conditions may be set forth in the award agreements with such employees, and the Administering Committee may approve, among other things, sub-plans or amendments, restatements or alternative versions of the Stock Incentive Plan as it deems appropriate to implement the special terms. However, the Stock Incentive Plan does not permit the Administering Committee to approve terms and conditions for awards that are inconsistent with the terms and conditions of the Stock Incentive Plan as then in effect.

Amendment of the Stock Incentive Plan

The Board of Directors may terminate, suspend, alter or amend the Stock Incentive Plan at any time subject to any requirement for shareholderamend or terminate the ESPP, except that no such amendment may be made without the approval imposed byof the

shareholders where such approval is required under Section 423 of the Code or other applicable law,laws or regulations, including the rules and regulations of any applicable securities exchange. No amendment or termination may affect any outstanding purchase right without the principal U.S. national securities exchangeconsent of the participant unless the Compensation Committee finds that it is in the best interests of the affected participants.

If this proposal is approved by the shareholders at the Annual Meeting, the ESPP will terminate on which the Company’s common stock is traded; provided thatJanuary 19, 2027, unless the Board of Directors may not amendterminates the Stock Incentive Plan in any manner that would violate Rule 16b-3 of the 1934 Act. The Board of Directors may not (except as described below under “Adjustment of Awards” or in connection with a Change in Control) without shareholder approval, cancelESPP at an option or SAR in exchange for cash when the exercise or grant price per share exceeds the fair market value of one share or take any action with respect to an option or SAR that would be treated as a repricing under the rules and regulations of the principal securities exchange on which the Company’s common stock is traded, including a reduction of the exercise price of an optionearlier date or the grant price of a SAR orshares reserved for the exchange of an option or SARESPP are exhausted, and the shareholders do not vote to reserve additional shares for another award. In addition, except as expressly authorized under the Stock Incentive Plan, the Board of Directors may not amend or terminate the Stock Incentive Plan in a manner that would impair the rights of a participant in any material respect under any award previously granted without such participant’s consent.it.

AdjustmentAdjustments of AwardsPurchase Rights

In the event of anya stock split, stock dividend, merger, reorganization,recapitalization, consolidation, combination of shares or spin-offs, recapitalization, dividend or distribution (whether in cash, sharesreorganization or other property, other than a regular cash dividend), stock split, reverse stock split, or other change in corporate structure affectingsimilar event, the shares or the value thereof or otherwise, the Administering Committee or Board of Directors shallis required to make appropriate adjustments and other substitutions, if any, as it deems equitable and appropriate,proportionate adjustments, including adjustments in the number, class and kind of securities that may be delivered under the Stock Incentive Plan, themaximum number of shares subject to any outstanding awardthe ESPP and the option or exercise price if any, thereof. Adjustments may provide for the elimination of fractional shares (that would otherwise becomeper share subject to outstanding purchase rights, or, in the award) without payment.event of a merger or reorganization, the substitution of shares in any successor corporation for common stock of the Company.

Change inof Control of the Company

A “Change in Control” for purposesIf the Company were to be acquired by merger or sale of all or substantially all of its assets or outstanding voting stock (a “change of control”), then all outstanding purchase rights under the Stock Incentive Plan means a change in control of such a nature that itESPP would be required to be reported to the Securities and Exchange Commission (the “SEC”), and in any event will be deemed to have occurred if (i) any person is or becomes the beneficial owner, directly or indirectly,

12

of securities representing 35% 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 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 consummation of any merger or consolidation 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 consummation of a merger or consolidation to which the Company is a party as a result of which persons who were shareholders of the Companyautomatically exercised immediately prior to the merger or consolidation will have beneficial ownership of less than 50%effective date of the combined voting power for the electionchange of directorscontrol. All of the surviving corporation followingcontributions of participants who had exercised purchase rights under the merger or consolidation. However, in no such event willESPP would be used to purchase shares of common stock at a Change in Control be deemedprice equal 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.

In the event an award is subject to Section 409A95% of the Code and a Change in Control would accelerate the timinglower of payment thereunder, then a “Change in Control” for purposes of that award shall mean a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company as defined in Section 409A and the authoritative guidance issued thereunder, but only to the extent inconsistent with the above definition, and only to the minimum extent necessary to comply with Section 409A as determined by the Administering Committee.

Stock Incentive Plan Benefits

Because benefits under the Stock Incentive Plan will depend on the Administering Committee’s actions (including a determination of who will receive future awards and the terms of those awards) and(i) the fair market value of a sharethe shares on the first day of the Company’s common stock at various future dates, itoffering period during which the change of control occurs or (ii) the fair market value of the shares immediately prior to the effective date of the change of control.

ESPP Benefits

Participation in the ESPP is voluntary. Each eligible employee elects whether to participate in the ESPP and the extent to which he or she will participate. It is, therefore, not possible to determine the benefitsbenefit or amounts that will be received in the future by executive officers and otherindividual employees ifor groups of employees under the amendment to and restatement of the Stock Incentive Plan is approved by the shareholders.ESPP.

Effectiveness; Termination of PlanU.S. Federal Income Tax Consequences

The Stock Incentive Plan,ESPP is intended to be an “employee stock purchase plan” as amended and restated, shall become effective upon its approval by the shareholders at the Annual Meeting, and shall terminate on November 15, 2023. If, however, the Stock Incentive Plan is not approved by shareholders at the Annual Meeting, then the Stock Incentive Plan, asdefined in effect immediately prior to the Board of Director’s adoptionSection 423 of the amendedCode, which provides that an employee does not have to pay any federal income tax either when he or she elects to exercise a purchase right under such a stock purchase plan, or when the six-month offering period ends and restated version on November 21, 2013, shall continue to exist and operate according to allthe employee receives shares of common stock of the terms and conditionsCompany. The employee is, however, required to pay federal income tax on any gain realized on the sale of such prior version.

U. S. Federal Income Tax Consequencesthe shares, as described below.

The following discussion summarizes the material U.S. federal income tax consequences to the Company and the participating employees in connection with the Stock Incentive PlanESPP under existing applicable provisions of the Code and the accompanying regulations. The discussion is general in nature and does not address issues relating to the income tax circumstances of any individual employee. The discussion is based on federal income tax laws in effect on the date of this Proxy Statement and is, therefore, subject to possible future changes in the law. The discussion does not address the consequences of state, local or foreign tax laws.

Nonqualified Stock Options — AnIf an employee has owned shares purchased through the ESPP for more than one year and disposes of them at least two years after the commencement date of the six-month offering period of the purchase rights pursuant to which they were purchased, then the employee will notbe taxed as follows:

If the sale price is greater than the price paid under the ESPP, then the employee will recognize anyordinary income upon receiptin an amount equal to the lesser of (i) the excess of the market price of the shares on the date the offering

commenced over the price paid or (ii) the excess of the sale price over the price paid. Any further gain is treated as a nonqualified stock option,long-term capital gain. If the market price of the shares on the date they are sold is less than the price paid for the shares under the ESPP, then the employee will incur a long-term capital loss in the amount equal to the price paid over the sale price.

If an employee sells the shares before he has owned them for more than one year or before the expiration of the two-year period commencing on the date the offering period commenced, then the employee will recognize ordinary income on the amount of the difference between the actual purchase price and the market price of the shares on the date of purchase, and the Company will not be entitled toreceive a deduction for federal income tax purposes for the same amount. The employee will recognize a long-term capital gain or loss on the difference between the sale price and the fair market value on the date of purchase.

If an employee still owns shares purchased under the ESPP at the time of death, the employee’s estate will recognize ordinary income 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 transferreddeath equal to the employee. Thelower of the amount of such taxable income, in the case of a nonqualified stock option, will be the difference, if any, between the option price andby which (i) the fair market value of the shares on the date of exercise.

13

Incentive Stock Options — An employee who receives an ISO will not recognize any income for federal income tax purposes upon receipt ofdeath exceeds the ISO, and the Company will not realize a deduction for federal income tax purposes. However, the difference between the fair market value of a share 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 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 length of 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.

With respect to both nonqualified stock options and ISOs, special rules apply if an employee uses shares already held by the employee to pay the exercisepurchase price, or if the shares received upon exercise of the option are subject to a substantial risk of forfeiture by the employee.

Stock Appreciation Rights — An employee will not recognize any income upon receipt of a SAR, 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 SAR is exercised and cash or shares are transferred to the employee. The amount of such taxable income, in the case of a SAR, will be the difference, if any, between the grant price and the fair market value of the Company’s common stock on the date of exercise.

Restricted Stock — Employees receiving restricted stock 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(ii) the fair market value of the shares on the commencement date that the restrictions on transfer are removed or have expired. 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. However, no later than 30 days after an employee receives the restricted stock, the employee may elect to recognize taxable ordinary income in an amount equal to the fair market value of the shares at the time of receipt. Provided that the election is made in a proper and timely manner, when the restrictions onsix-month Offering Period during which the shares lapse,were acquired exceeds the employee will not recognize any additional income. If the employee forfeits the shares to the Company (e.g., upon the participant’s termination prior to expiration of the restriction period), the employee may not claim a deduction with respect to the income recognized as a result of the election.purchase price.

Generally, when an employee disposes of shares acquired under the Stock Incentive 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.

Restricted Stock Units — Employees who are granted restricted stock units do not recognize income at the time of the grant. When the award vests or is paid, participants generally recognize ordinary income in an amount equal to the fair market value of the units at such time, and the Company will receive a corresponding deduction.

Incentive Bonus — Employees who are granted incentive bonus awards recognize taxable ordinary income at the time the award is paid in an amount equal to the amount so paid, and the Company will receive a corresponding deduction.

Potential Limitation on Deductions — As described above, special rules limit the deductibility of compensation paid to the chief executive officer and to each of the next three most highly compensated executive

14

officers, other than the chief financial officer. Under Section 162(m), unless various conditions are met that enable compensation to qualify as “performance-based,” the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, the rules and regulations promulgated under Section 162(m) are complicated and subject to change from time to time, sometimes with retroactive effect. In addition, a number of requirements must be met in order for particular compensation to so qualify. As such, there can be no assurance that any compensation awarded or paid under the Stock Incentive Plan will be deductible under all circumstances.

Federal Income Tax Consequences to the Company — To the extent that a recipient recognizes ordinary income in the circumstances described above, the Company will be entitled to a corresponding deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code and is not disallowed by the $1,000,000 limitation on certain executive compensation under Section 162(m).

Equity Compensation Plans of the Company

The following table presents certain information about the Company’s equity compensation plans as of September 27, 2013:

The last reported sale of the common stock on the NYSE on December 2, 2013 was $59.47 per share.

15

Vote Required; Recommendation of the Board of Directors

The affirmative vote of a majority of the shares of common stock present, in person or by proxy, at the Annual Meeting and entitled to vote is necessary to approve the amendment to and restatement of the Stock Incentive Plan, provided that the total votes cast on the proposal, whether in favor, against, or in abstention, represent a majority of the shares entitled to vote.ESPP. Abstentions have the same effect as a vote against the proposal. Broker non-votes will have no effect on the outcome of the proposal.

The Board of Directors unanimously recommends that you voteFOR the approval of the amendment to and restatement of the 1989 Employee Stock IncentivePurchase Plan.

16

PROPOSAL NO. 3 — APPROVAL OF AMENDMENT TO AND RESTATEMENT OF THE GLOBAL EMPLOYEE STOCK PURCHASE PLAN

At the Annual Meeting, shareholders will be presented with a proposal to approve an amendment to and restatement of the Company’s Global Employee Stock Purchase Plan, as amended and restated to date (the “Global ESPP”), to effect the following changes:

On November 17, 2016, the Board of Directors unanimously approved the amendment to and restatement of the Global ESPP, subject to the approval by the Company’s shareholders at the Annual Meeting. In order for the amendment to and restatement of the Global ESPP to take effect, it must be approved by the Company’s shareholders. As of the end of fiscal 2016, 1,200,000 shares of common stock were authorized for issuance, and approximately 65,000 shares of common stock remained available for issuance, under the Global ESPP.

The complete text of the Global ESPP reflecting all amendments approved by the Board of Directors is attached hereto as Annex B to this Proxy Statement. The following discussion is qualified in all respects by reference to Annex B.

Purpose of the Global ESPP

The purpose of the Global ESPP is to advance the interests of the Company by encouraging stock ownership by employees of the Company and certain designated foreign subsidiaries. The Board of Directors believes that the opportunity for employees of the Company to acquire an equity interest in the Company through participation in broad-based employee stock purchase plans such as the Global ESPP is beneficial to both the Company and its employees. Such plans provide an important incentive to the employees of the Company as well as assist the Company in attracting new employees.

Employees of the Company within the United States are eligible, subject to certain requirements, to participate in the ESPP. For more information regarding the ESPP, please see “Proposal No. 2 — Approval of Amendment to and Restatement of The 1989 Employee Stock Purchase Plan” above. The Global ESPP, on the other hand, provides employees of certain designated subsidiaries of the Company organized in countries outside the United States with a similar approach to acquire an equity interest in the Company as is currently enjoyed by the Company’s U.S. employees. The Global ESPP is not intended to be an “employee stock purchase plan” as defined in Section 423 of the Code. Following shareholder approval of the amendment of the ESPP (as provided in Proposal No. 2 above), the Company may transition some or all of the Global ESPP participants into the non-Section 423 component of the ESPP during the next few years.

Administration

The Global ESPP is administered by the Compensation Committee. The Compensation Committee is authorized to construe and interpret the Global ESPP, to prescribe rules and regulations for its administration, and to take any other necessary action in relation to the Global ESPP.

Eligibility

In general, and subject to local law, all employees of those subsidiaries of the Company designated by the Board of Directors to participate in the Global ESPP (a “Designated Subsidiary”) are eligible to participate in the

Global ESPP provided they have completed one (1) year of service as of the relevant enrollment date. However, the Compensation Committee in its sole discretion may determine that the following employees shall not be eligible to participate:

The Company estimates that, at November 23, 2016, there were approximately 12,691 employees eligible to receive purchase rights under the Global ESPP.

Exercise of Purchase Right

Participation in the Global ESPP is completely voluntary. The Global ESPP permits participants to purchase shares of common stock from the Company by electing to exercise purchase rights to purchase common stock. These purchase rights are granted to eligible employees at the beginning of each election period, the duration of which is designated by the Compensation Committee. In order to exercise a purchase right and purchase shares of the common stock of the Company, participants must elect to contribute amounts ranging from 2% to 15% of their “compensation” (as defined in the Global ESPP). Such contributions generally occur through payroll deductions from the participant’s salary or wages (although alternative methods of contribution may be permitted by the Compensation Committee). An eligible employee may elect to participate by enrolling in the Global ESPP in accordance with procedures established by the Compensation Committee during an enrollment period. Once an eligible employee is enrolled in the Global ESPP, such eligible employee will continue to participate in the Global ESPP for each successive election period until such eligible employee terminates his or her participation. Purchases of common stock by participants are affected without any further action on the part of the participant.

Purchase Price

The price at which shares may be purchased is generally equal to 95% of the closing value of a share of common stock of the Company on the last trading day in a purchase period. The closing value of a share of common stock of the Company for this purpose is equal to the closing sale price for such a share as quoted on the New York Stock Exchange or such other established stock exchange or national market system on which the share is listed or traded for the day for which the closing value is to be determined. On November 23, 2016, the closing price for the Company’s common stock was $61.69 per share.

Maximum Amount of Stock

The maximum fair market value of common stock that a participant may purchase under the Global ESPP, in any calendar year is $25,000 (based on the fair market value of the common stock when the purchase right is granted). Local tax laws and regulations may also further limit the maximum number or value of shares that may be purchased.

Cessation of Employment

If a participant ceases to be employed by the Company or a designated subsidiary for any reason or ceases to be an eligible employee, then the participant’s rights under the Global ESPP shall, subject to local law, immediately terminate, and the Company will refund to the employee, or the employee’s personal representative, the full amount of all contributions without interest or with interest where required by law. A participant may not transfer a purchase right other than by will or the laws of descent and distribution, and during a Participant’s lifetime, a purchase right is exercisable only by the participant.

Amendment, Modification and Termination

If this proposal is approved by the shareholders at the Annual Meeting, the Board of Directors may at any time amend, modify or terminate the Global ESPP; provided, however, that no participant’s existing rights may be adversely affected by any such amendment, modification or termination, except to comply with law, stock exchange rules or accounting rules.

If this proposal is approved by the shareholders at the Annual Meeting, the Global ESPP will terminate on January 19, 2020, unless the Board of Directors terminates the Global ESPP at an earlier date or the shares reserved for the Global ESPP are exhausted, and the shareholders do not vote to reserve additional shares for it.

Adjustments of Shares; Change of Control

In the event that the Company shall subdivide or reclassify the shares of common stock of the Company with respect to which a purchase right has been or may be granted under the Global ESPP, or shall declare thereon any stock split or dividend, or shall alter the capital structure of the shares or the Company in any similar manner, then the number and class of shares held in the Global ESPP and which may thereafter be subject to the share purchase right granted under the Global ESPP shall be adjusted accordingly, and in the case of each right outstanding at the time of any such action, the number and class of shares which may thereafter be purchased pursuant to such right and the purchase price shall be adjusted accordingly, as necessary to preserve the rights of the holder(s) of such purchase rights. If the Company is acquired by merger, or if substantially all of its assets or outstanding voting stock is acquired, then immediately prior to the effective date of the corporate transaction, each outstanding purchase right will be automatically exercised by applying all amounts contributed by each participant during the election period to the purchase of whole shares at the purchase price for such election period by treating the day immediately prior to the effective date of any such corporate transaction as the last trading day of the election period, unless the Board of Directors determines in its sole discretion to establish an earlier date as the last trading day of the election period, or to provide that purchase rights will be assumed by a successor entity that is a party to the corporate transaction or terminate the Global ESPP.

Global ESPP Benefits

Each eligible employee elects whether to participate in the Global ESPP and the extent to which he or she will participate. It is, therefore, not possible to determine the benefit or amounts that will be received in the future by individual employees or groups of employees under the Global ESPP.

No Other Rights Conferred to Employees or Participants

Nothing in the Global ESPP shall be construed to be a contract of employment between the Company or any subsidiary of the Company and any employee or any group or category of employee (whether for a definite or

specific duration or otherwise), or to prevent the Company or the employer of any Participant from terminating any employee’s employment at any time, in accordance with applicable local law. Nothing in the Global ESPP shall be construed as conferring to any employee any right to participate in any other benefit plan sponsored by the Company or any subsidiary of the Company, or to any compensation in the event the Global ESPP ends or the Company terminates the Global ESPP.

Income Tax Consequences

The income tax implications of participation in the Global ESPP differ depending on the particular laws applicable in the country in which a Designated Subsidiary is located and the country in which the participant is located. Each participant in the Global ESPP should consult a tax advisor regarding the tax consequences of participating in the Global ESPP. The Global ESPP is not intended to be an “employee stock purchase plan” as defined in Section 423 of the Code.

Vote Required; Recommendation of the Board of Directors

The affirmative vote of a majority of the shares of common stock present, in person or by proxy, at the Annual Meeting is necessary to approve the amendment to and restatement of the Global ESPP. Abstentions have the same effect as a vote against the proposal. Broker non-votes will have no effect on the outcome of the proposal

The Board of Directors unanimously recommends that you vote FOR the approval of the amendment to and restatement of the Global Employee Stock Purchase Plan.

PROPOSAL NO. 4 — RATIFICATION OF THE APPOINTMENT OF

ERNST & YOUNG LLP

The Audit Committee has selectedappointed Ernst & Young LLP (“Ernst & Young”) to audit the consolidated financial statements of the Company as of September 26, 2014,29, 2017, and for the fiscal year then ending. At the Annual Meeting, shareholders will be asked to ratify the selectionappointment of Ernst & Young.

The Company has been advised by Ernst & Young that the firm has no relationship with the Company or its subsidiaries other than that arising from the firm’s engagement as auditors and tax advisors, and consultants.advisors.

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

The Company is not required to submit the selection of the independent registered public accounting firm to the shareholders for approval, but is doing so as a matter of good corporate governance. If the selectionappointment of Ernst & Young is not ratified by a majority of the shares of common stock present, in person or by proxy, at the Annual Meeting, then the Audit Committee will consider the appointment of other independent auditors whose selection for any period subsequent to the Annual Meeting will be subject to ratification by the shareholders at the 20152018 annual meeting.

The affirmative vote of a majority of the shares of common stock present, in person or by proxy, at the Annual Meeting and entitled to vote is necessary to ratify the appointment of Ernst & Young as the Company’s independent registered public accounting firm for the fiscal year ending September 26, 2014.29, 2017. Abstentions have the same effect as a vote against the proposal.

The Board of Directors unanimously recommends that you voteFOR the ratification of the appointment of Ernst & Young as the Company’s independent registered public accounting firm for the fiscal year ending September 26, 2014.29, 2017.

17

PROPOSAL NO. 45 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

The Board of Directors of the Company is committed to excellence in governance. As part of that commitment, and as required by Section 14A(a)(1) of the 1934Exchange Act, the Board of Directors is providing the Company’s shareholders with an opportunity to provide an advisory vote related to executive compensation.

The HR&CCompensation Committee establishes, recommends and governs all of the compensation and benefits policies and actions for the Company’s named executive officers (or NEOs), as identified below under “Compensation Discussion and Analysis—Executive Summary.Analysis.” Additional information regarding the HR&CCompensation Committee and its role is described below inunder the “The Board of Directors and its Committees” and the “Compensation Discussion and Analysis” sections of this Proxy Statement and the related tables and narrative disclosure.Statement.

The Company’s executive compensation program is intended to promote recruitmentprovide superior customer value through a long-term, relationship-based approach and retention of key employees with exceptional abilities, and motivate performance criticalsolid returns to the success of the Company. Because of the importance of long-term customer relationships to the Company, retention of key executives is considered particularly important. In this regard, because significant differences in compensation between executives can negatively affect retention, the Company limits the variability of compensation and provides retention-enhancing features in its programs.

our shareholders through growth. The HR&C Committee’sCompensation Committee has a compensation philosophy isthat drives this vision by attracting and retaining highly qualified employees and motivating them to provide adeliver value to our customers and shareholders. Accordingly, our executive compensation program for executives that:is intended to:

The Company continued its strong performance during fiscal 2013. The Company posted an 11.6% increase in earnings to $423.1 million on revenues of $11.8 billion (an 8.5% increase in revenues over the prior year). Cash flow from operations was $448.5 million (a 49.6% increase over the previous year) and the Company’s year-end backlog was $17.2 billion (an 8.2% increase over the previous year). The Company’s financial condition at September 27, 2013 was also strong, as evidenced by cash of $1.3 billion, working capital of $2.2 billion, and a very low debt-to-equity ratio of 0.10-to-1. These positive developments were reflected in the Company’s one-year total shareholder return (“TSR”) as of September 30, 2013, which was 44% and the 54th percentile comparedrespect to the Company’s industry peer group (described in “Compensation Discussion and Analysis”), and the three-year TSRcompensation of our NEOs, as of September 30, 2013, which was 15% and the 69th percentile compared to that peer group.set forth below:

The Company’sA significant majority of our executives’ target compensation actions relating to fiscal 2013 were consistent with its philosophy of attracting, motivating,is performance based and retaining highly qualified executives in the competitive engineering and construction industry and maintaining a pay for performance culture in which incentives are tied to the Company’spre-established performance goals aligned with our short- and long-term performance. During 2013, the HR&C Committee evaluated alternative forms of incentive awards to support its compensation philosophy and, consistent with 2012, decided to use a mix of short- and long-term incentives tied to Company performance. The long-term incentive awards were split between options and

18

---

performance share unit awards (“PSUs”). These PSUs use two metrics to determine payout: the Company’s TSR compared to that of an industry peer group; and the Company’s net earnings growth. The structure and terms of these awards are described in “Compensation Discussion and Analysis” below. In addition, as described in “Compensation Discussion and Analysis”, during 2013, the Company evaluated the composition of its comparator peer group that is used for analyzing executive compensation and for computing relative TSR for the PSUs, which resulted in the peer group being expanded by adding several companies and deleting one company that was acquired.

Other significant elements of the Company’s compensation program that continue to reinforce shareholder alignment, its long-term retention strategy and what the HR&C Committee considers best practices are the following:

The Company’s annual incentive compensation plan continues to provide for payout of earned bonuses over a three-year period, subject to a requirement of continued employment;

The Company does not grant and does not maintain any of the following for named executive officers:

severance or employment agreements,

tax reimbursements or gross-ups (other than tax equalization for expatriates or normal relocation expenses),

supplemental retirement plans, or

executive perquisites such as personal use of airplanes, Company-provided autos and/or auto allowances (except for expatriates), or club dues;objectives;

 

The Company has a clawback policy that applies when inaccurate financial statements have affected incentive award payments to executive officers;

 

The Company’s securities tradingOur Board has established robust stock ownership guidelines preclude the named executive officers from transactions involving puts or calls, short sales, and margin purchases or pledges of Company stock;applicable to our executives;

 

The ratio of the CEO’s totalCompensation Committee reviews publicly available information to evaluate how our NEOs’ compensation (base pay, bonus, and long-term incentives)compares to that of the next highest paid named executive officer is not disproportionate (the ratio was approximately 2.7 to 1 for fiscal 2013); andexecutives in comparable positions at other companies;

 

The HR&C Committee’sCompensation Committee benefits from its use of an independent compensation consultant, which performs no services for the Company other than those that support the needs of the HR&C Committee.Compensation Committee;

With the help of its independent compensation consultant, the Compensation Committee annually analyzes the difficulty of meeting our performance goals and the alignment of realizable pay and performance to ensure that our incentive programs are working as intended;

The Company does not maintain any of the following for NEOs:

tax reimbursements or gross-ups (other than for tax equalization for expatriates, normal relocation expenses or spousal travel for approved business purposes),

pension plans or supplemental retirement plans, or

executive perquisite programs such as Company-provided autos or auto allowances (except for expatriates), or payment of club dues;

Executive officers are prohibited from short-selling our stock, and buying or selling puts and calls of our stock;

Executive officers are prohibited from engaging in hedging transactions that could eliminate or limit the risks and rewards of owning our stock; and

Executive officers are prohibited from using our stock as collateral for any margin loan.

 

The HR&C Committee believes thatOur relationships with our shareholders are an important part of the 2013Company’s success. In addition to our regular investor relations engagements, we regularly meet with many of our institutional stockholders to discuss our corporate strategy, executive compensation program has been appropriately designedprograms, corporate governance and other topics of interest to advance shareholder interests through effective performance-based incentivesour shareholders. These engagement efforts allow us to better understand our shareholders’ priorities and perspectives, and provide us with multi-year retention features.useful input concerning our corporate strategy and our compensation and corporate governance practices. At the 2012 and 2013our 2016 annual meetings,meeting of shareholders, over 96%80% of the shares voted were in favor of the advisory resolution concerning executive compensation.

After carefully considering input from our meetings with shareholders and the voting results from recent shareholder meetings, the Compensation Committee decided on the executive compensation program described under “Compensation Discussion and Analysis” below. The Company will continue to engage in dialogue with shareholders and take into account the results of the CEO and other named executive officers, as describedCompany’s say-on-pay votes when making compensation decisions with respect to our NEOs in the Compensation Discussion and Analysis, the compensation tables, and the accompanying narrative disclosure contained in the Proxy Statements for those meetings. The HR&C Committee carefully considered these results and input received from shareholders and decided to continue with the same overall compensation program for fiscal 2013.future.

 

For these reasons and the othersother reasons discussed inunder “Compensation DiscussionsDiscussion and Analysis” below, the Board of Directors unanimously recommends that shareholders vote in favor of the following resolution:

 

“Resolved, that the shareholders approve, on an advisory basis, the compensation ofpaid to the NEOs, as describeddisclosed in this Proxy Statement pursuant to the SEC’s executive compensation disclosure rules (which includes the Compensation Discussion and Analysis, the Summary Compensation Table, and the related compensation tables and narrative disclosure in this proxy statement.disclosures).”

 

WhileAs an advisory vote, this proposal is not binding on the resolution is non-binding,Company, the Board of Directors, or the Compensation Committee, and will not be construed as overruling a decision by the Company, the Board, or the Compensation Committee or creating or implying any additional fiduciary duty for the Company, the Board, or the Compensation Committee. However, the Board of Directors values the opinions that shareholders express in their votes and in any additional dialogue. It will consider the outcome of the vote and those opinions when making future compensation decisions.

 

19

---

The approval of the advisory resolution on the Company’s executive compensation requires the affirmative vote of a majority of shares of common stock present, in person or by proxy, at the Annual Meeting and entitled to vote. Abstentions have the same effect as a vote against the advisory resolution. Broker non-votes will have no effect of the outcome of the advisory vote.

 

The Board of Directors unanimously recommends that you voteFOR

the advisory resolution approving the Company’s executive compensation.

20

---

PROPOSAL NO. 56 — APPROVALADVISORY VOTE ON THE FREQUENCY OF AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY TO DECLASSIFY THE BOARDADVISORY VOTES ON

EXECUTIVE COMPENSATION

 

AtWe are providing shareholders with the Annual Meeting, shareholders will be presented with a proposalopportunity to approvecast an amendment to Article 8advisory vote regarding the frequency of advisory votes on executive compensation, commonly known as “say-on-pay” votes. Shareholders may vote on whether the Company’s Certificate of Incorporation to phase out the present three-year, staggered terms of our directors and instead provide for the annual election of directors. Currently, the Board is divided intoadvisory vote on executive compensation should occur every one, two or three classes, with directors elected to staggered three-year terms. Approximately one-third of our directors stand for election each year.years.

 

We are required to hold an advisory vote regarding the frequency of “say-on-pay” votes every six years. The Board considered arguments in favor of and against continuation ofCompany’s shareholders were provided with the classified board and decidedopportunity to propose declassification. In its review, the Board considered the advantages of maintaining the classified Board structure in light of our current circumstances, including, among other things, that a classified Board structure promotes continuity of leadership, ensuring that, at all times, a majority of our Company’s directors have prior experience with, and knowledge of, the Company’s strategy, management and operations. The Board also assessed other benefits including the enhanced ability of the Company to recruit strong director candidates prepared to make a long-term commitment to the Company and its shareholders, and that classified boards provide protection against certain abusive takeover tactics allowing more time to solicit higher bids in a hostile takeover situation because it is more difficult to change a majority of directorsvote on the boardfrequency of “say-on-pay” votes in a single year. While the Board continues to believe that these are important considerations, the Board also considered potential advantages of declassification in light of our current circumstances, including the ability of shareholders to evaluate directors annually. Annually elected boards are perceived by many institutional shareholders as increasing the accountability of directors to shareholders, and a majority of the Company’s2011. The shareholders voted in favor of a precatory declassification proposal submitted by a shareholder at the 2013 annual meeting. After carefully weighing all of these considerations, the Board approved the proposed Amendedholding “say-on-pay” votes annually and Restated Certificate of Incorporation attached to this Proxy Statement asAnnex B, and recommended that the shareholders adopt this amendment by voting in favor of this proposal.

If the proposed amendment to the Certificate of Incorporation is approved, directors will be elected to one-year terms of office beginning at the Company’s 2015 annual meeting. Directors who have been elected to three-year terms prior to the effectiveness of the amendment, including directors elected at the Annual Meeting, would complete those three-year terms, and thereafter would be eligible for annual re-election. If the proposed measure is approved, following the 2017 annual meeting, the Board will be completely declassified and all directors will be subject to annual election to one-year terms. In addition, until the Board is completely declassified, any director appointed to fill a vacancy on the Board (other than a vacancy resulting from an increase in the size of the Board) will hold office until the next election of the class for which such director is chosen; thereafter, any director so appointed will hold office until the next annual meeting.

Under Delaware law, shareholders may remove directors of corporations with classified boards for cause. However, in Delaware, directors of corporations without classified boards may be removed with or without cause. In conjunction with the proposal to declassify our Board, the Company is also proposing to amend Article 8 of the Certificate of Incorporation to provide that any director or the entire Board may be removed with or without cause only after the Board is fully declassified. Prior to such time, removal of any director or the entire Board will continue to require cause.

The above description is qualified in its entirety by the actual text of the proposed Amended and Restated Certificate of Incorporation, which is set forth inAnnex B.

Vote Required; Recommendation of the Board of Directors adopted this standard.

 

UnderAlthough we recognize the Certificatepotential benefits of Incorporation,having less frequent advisory votes on executive compensation (including allowing the proposed amendmentCompany additional time to conduct a more detailed review of its pay practices in response to the Certificateoutcome of Incorporation must be approved byshareholder advisory votes), we recognize that the affirmativewidely adopted standard, both among Jacobs’ peer companies as well as outside our industry, is to hold “say-on-pay” votes annually. We also acknowledge current shareholder expectations regarding having the opportunity to express their views on the Company’s compensation of its executive officers on an annual basis. In light of investor expectations and prevailing market practice, the Board of Directors recommends that the advisory vote of holders of not less than two-thirds of the total voting power of all outstanding securitieson executive compensation occur every year.

The proxy card provides for four choices and shareholders are entitled to vote inon whether the ordinary election of directors of the Company voting together as a single class. Accordingly, the approval of this proposal requires the affirmativeadvisory vote of two-thirds of the outstanding shares of

on executive compensation should be held every year, every two years or every three years, or to abstain from voting.

 

21

---

common stock. Abstentions and broker non-votes will haveThe result of this advisory vote on the same effect as a vote against the proposal. If this proposal is approved, the proposed amendment will become effective upon filing of an appropriate certificate with the Secretary of Statefrequency of the Statevote on executive compensation is not binding on the Company, the Board of DelawareDirectors or the Compensation Committee, and will not be construed as overruling a decision by the Company, the Board of Directors or the Compensation Committee or creating or implying any additional fiduciary duty for the Company, the Board of Directors or the Compensation Committee. However, the Board of Directors values the opinions that shareholders express in their votes and in dialogue that the Company has with its shareholders. The Board of Directors will consider the outcome of the vote and shareholder feedback when deciding how frequently to conduct the advisory vote on executive compensation. Notwithstanding the Board’s recommendation and the outcome of the shareholder vote, the Board will also amendmay in the Company’s Bylawsfuture decide to conformconduct “say-on-pay” votes on a more or less frequent basis and may vary its practice based on factors such as discussions with shareholders and the adoption of material changes to the amendment to the Certificate of Incorporation.its executive compensation programs.

 

The Board of Directors unanimously recommends that you vote

to hold the advisory vote on executive compensationFOREVERY YEAR the approval of the amendment to the Certificate of Incorporation to declassify the Board..

22

---

CORPORATE GOVERNANCE

 

Corporate Governance Guidelines

 

The Company monitors developments in the area of corporate governance and routinely reviews its processes and procedures in light of such developments. Accordingly, the Company reviews federal laws affecting corporate governance, such as the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act as well as various rules promulgated by the Securities and Exchange Commission (the “SEC”) and the New York Stock Exchange (the “NYSE”). The Company believes that it has procedures and practices in place which are designed to enhance and protect the interests of its shareholders.

 

The Board of Directors has approved Corporate Governance Guidelines for the Company. The Corporate Governance Guidelines address the following matters:

 

The mission of the Board of Directors;

 

The size of the Board of Directors;

 

Frequency of meetings of the Board of Directors;

 

Committees of the Board of Directors;

 

The requirement that the Board of Directors be comprised of a majority of independent directors;

 

The requirement that the Audit, HR&C,Compensation, and Nominating and Corporate Governance Committees of the Board of Directors be comprised entirely of independent directors;

 

Guidelines for determining director independence;

 

Majority voting in uncontested elections of directors;

 

Limits on the number of other public company boards on which non-management directors (i.e., a director who is not employed by the Company) may serve;

 

Executive sessions of the Board of Directors wherein non-management directors meet as a group without the presence of management directors;

 

Conflicts of interests;

 

The roleroles and responsibilities of the presiding director;Chairman and Chief Executive Officer and the Lead Independent Director;

 

The requirement that the performance of the Chairman and Chief Executive Officer be evaluated annually and reviewed by the non-management directors;

 

Significant change in professional occupation or employment of a director;

 

Review of the performance of individual directors; and

 

Other matters uniquely germane to the work and responsibilities of the Board of Directors.

 

Director Education

 

Also pursuantThe Board recognizes the importance of director continuing education and is committed to provide such education in order to enhance both Board and committee performance. Accordingly, as noted in the Company’s Corporate Governance Guidelines, the Company regularly provides the Board with education programs, presentations and briefings on topics relevant to the Company, its business and risk profile. In addition, each year the Board schedules a third-party provided educational program to be provided to the Board on matters relevant to the Company or relating to duties and responsibilities of directors. Directors is provided with, andare also encouraged to participate in, continuing education.attend at least one outside educational program every other year on any subjects pertaining to the Directors’ responsibilities such as “directors’ colleges”.

Codes of Ethics

 

In addition to the Corporate Governance Guidelines, the Board of Directors has adopted the following other codes, guidelines, and policies:

 

Code of Business Conduct and Ethics for Members of the Board of Directors;

 

Code of Ethics for the Chief Executive Officer and Senior Financial Officers; and

 

Code of Conduct.

 

23

---

These documents, along with the Corporate Governance Guidelines, serve as the foundation for the Company’s system of corporate governance. They provide guidance for maintaining ethical behavior, require that directors and employees comply with applicable laws and regulations, prohibit conflicts of interest, and provide mechanisms for reporting violations of the Company’s policies and procedures.

 

In the event the Company makes any amendment to, or grants any waiver from, a provision of the Codecode of Ethicsethics that applies to the principal executive officer, principal financial officer, or principal accounting officer that requires disclosure under applicable SEC rules, the Company will disclose such amendment or waiver and the reasons therefore on its website atwww.jacobs.com.

 

Stock Ownership Guidelines

 

In an effort to more closely align the Company’s non-management directors’ financial interests with those of theour shareholders, the Board of Directors has established stock ownership guidelines for non-management directors. Under these guidelines, the Company’s non-management directors are expected to own common stockequity in the Company valued at a minimum of three times their annual cash retainer. Non-management directors are expected to meet or exceed these guidelines within five years of joining the Board of Directors.

 

Similarly, the Company has established stock ownership guidelines forunder which the Company’s senior management. Under these guidelines, members of senior management areis expected to own Company common stock valued at between two to six times their base salary, depending upon their position in the Company. The guideline for the Chief Executive Officer is six times base salary. The guideline for Executive Vice Presidents is three times base salary, and the guideline for all other membersas follows:

Position		Multiple of Salary
Chairman and CEO			6x
EVP/Presidents of Lines of Business			3x
Other Senior Management			2x

As of the senior management team is two times base salary. The membersRecord Date, the NEOs either exceeded their respective guidelines or were within the five-year period from their hire or promotion date at the end of senior management subject to these guidelineswhich they are expected to meet or exceed these guidelines within three to five years of entering their respective positions. As of the end of fiscal 2013, the CEO’s stock ownership significantly exceeded the six times-base-salary multiple and the other named executive officers significantly exceeded their guideline of a three times-base-salary multiple.guidelines.

 

Committee Charters

 

The Board of Directors has adopted formal charters for each of the following standing Committees:

 

The Audit Committee;

 

The HR&CCompensation Committee; and

 

The Nominating and Corporate Governance Committee.

 

These charters establish the missions of the respective Committees as well as Committee membership guidelines. They also define the purpose, duties, and responsibilities of each Committee in relation to the Committee’s role in supporting the Board of Directors, and assisting the Board in discharging its duties in supervising and governing the Company.

Availability of Documents

 

The full text of the Corporate Governance Guidelines, the Code of Business Conduct and Ethics for Members of the Board of Directors, the Code of Ethics for the Chief Executive Officer and Senior Financial Officers, the Code of Conduct, the Committee Charters, the Board of Directors Guidelines for Determining the Independence of its Members, and the other corporate governance materials described in this Proxy Statement are accessible by following the link to “Corporate Governance” on the Company’s website atwww.jacobs.com.

 

The Company will furnish without charge a copy of any of the foregoing documents to any person making such a request in writing and stating that he or she is a beneficial owner of common stock of the Company. Requests should be addressed to: Jacobs Engineering Group Inc., 155 North Lake Avenue, Pasadena, California 91101,1999 Bryan Street, Suite 1200, Dallas Texas 75201, Attention: Corporate Secretary.

24

---

THE BOARD OF DIRECTORS AND ITS COMMITTEES

 

The Board of Directors believes the Board, as a whole, should possess the requisite combination of skills, professional experience, and diversity of backgrounds to oversee the Company’s business. The Board of Directors also believes there are certain attributes each individual director should possess, as reflected in the Board of Directors’ membership criteria. Accordingly, the Board of Directors and the Nominating and Corporate Governance Committee consider the qualifications of directors and director candidates individually as well as in the broader context of the Board’s overall composition and the Company’s current and future needs.

The Nominating and Corporate Governance Committee is responsible for reviewing with the Board on an annual basis the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board. This annual assessment enables the Board to update the skills and experience it seeks in the Board as a whole, and in individual directors, as the Company’s needs evolve. This assessment takes into consideration all factors deemed relevant by the Nominating and Corporate Governance Committee, including the matters described under “—Committees of the Board of Directors—Directors — Nominating and Corporate Governance Committee.” For incumbent directors, the factors also include past performance on the Board of Directors and its Committees.Committees is also a factor taken into consideration.

 

The following table sets forth the names, ages and background information of the nominees for election as directors, and the current members of the Board of Directors who will continue serving following the Annual Meeting, as well as each individual’s specific experience, qualifications and skills that led the Board of Directors to conclude that each such nominee/directorperson should serve on the Board of Directors. The persons who have been nominated for election and are to be voted upon at the Annual Meeting are listed first, with continuing directors following thereafter. Please refer to the Company’s 2013 Annual Report on Form 10-K for information pertaining to the Company’s executive officers.

NOMINEES

 

Name and Experience		Class				Director Since
John F. CoyneSteven J. Demetriou, Director. Mr. Coyne, retiredChairman and aged 63, was Chief Executive Officer, a member of the Board of Directors and Chair of the Executive Committee of Western Digital Corporation (“WD”), a global S&P 500 company, from January 2007 to January 2013. WD designs, develops, manufactures, and sells hard drives and solid state drives. Mr. Coyne joined WD in 1983 and has dedicated the majority of his career to WD, serving the company in many capacities around the globe. He had served as CEO of WD since January 2007 until his retirement in January 2013, and President from May 2006 to March 2012. From November 2002 until June 2005, Mr. Coyne served as Senior Vice President, Worldwide Operations, from June 2005 until November 2005, he served as Executive Vice President, Worldwide Operations, and from November 2005 until June 2006, he served as Executive Vice President and Chief Operations Officer. A native of Dublin, Ireland, Mr. Coyne received his bachelor’s degree in mechanical engineering from the University College Dublin in 1971. Mr. Coyne has over 30 years of experience in global high tech industry, including more than five years as President and CEO of WD. He has an extensive background in many parts of the globe in executive capacities in engineering, operations, sales and business management. He also has extensive experience overseeing talent acquisition, retention and development programs and identifying, overseeing and integrating merger and acquisition transactions. These skills, attributes and experiences qualify Mr. Coyne to add perspective and make a valuable contribution to the work of the Board of Directors			III				2008

25

---

Name and Experience		Class				Director Since
Linda Fayne Levinson, Director. Ms. Fayne Levinson, age 71, is an experienced executive and corporate director. From 1997 until 2004, Ms. Fayne Levinson was a Partner of GRP Partners, a venture capital firm that invests in early stage technology companies. Prior to that, Ms. Fayne Levinson was an executive at Creative Artists Agency, Inc.; a Partner at Wings Partners, a Los Angeles based private equity firm; President of Fayne Levinson Associates, an independent consulting firm; a Senior Vice President of American Express Travel Related Services Co., Inc.; and a Partner of McKinsey & Company, where she became the first woman partner in 1979. Ms. Fayne Levinson also serves as a member of the Boards of Hertz, Ingram Micro, Inc., NCR Corporation and The Western Union Company. Ms. Levinson’s executive, consulting and investment career brings in-depth knowledge of business operations, strategy and technology to the Board of Directors. Her service on the boards of a number of global companies, including her service both as lead director, in one instance, and as chair of compensation committees, provides the Board insight regarding compensation strategies and other corporate governance matters, both of which are key areas of focus in today’s corporate environment			III				1996
Craig L. Martin, President, Chief Executive Officer and Director. Mr. Martin,Demetriou, age 64, has served in various senior and executive positions with the Company since joining it in 1994. Mr. Martin was promoted to President of58, joined the Company in July 2002, and became Chief Executive Officer in April 2006. Mr. Martin brings a deep understanding of the Company’s business, industry, operations and strategic planningAugust 2015. Prior to the Board from his more than 15 years of experience withjoining the Company, and rolehe served as President and Chief Executive Officer. Having Mr. Martin serve on the Board also provides an open channel of communication between the Board and senior management			III				2002
Christopher M.T. Thompson, Director. Mr. Thompson, age 65, was Chairman and Chief Executive Officer of Gold Fields Ltd., an international goldAleris Corporation, a global downstream aluminum producer with over 50,000 employees and operations on five continents from 1998 to 2002. He was also Chairman of the World Gold Council from 2002 to 2005 and Chairman of Ram Power, a geothermal company with operationsbased in California and Nicaragua, from October 2009 through November 2010. He founded andCleveland, Ohio. Mr. Demetriou was Chief Executive Officer of Castle Group Ltd., an international investment companyAleris when it filed for Chapter 11 in 2009 and when it successfully emerged from Chapter 11 in June 2010. Mr. Demetriou was appointed President and Chief Executive Officer of Commonwealth Industries, Inc. (a predecessor by merger to Aleris) in June 2004, after serving as a member of that helped support the developmentcompany’s board of new mines. Hedirectors from 2002. Before joining Commonwealth in 2004, Mr. Demetriou was Chief Executive Officer of Noveon, Inc. Prior to that, from 1999 to 2001, he was Executive Vice President of IMC Global Inc. and, from 1981 to 1999, he held various management positions with Cytec Industries Inc. and ExxonMobil Corporation. Mr. Demetriou currently serves as a director on the boardsboard of Golden Star Resources Ltd., Teck Resources LimitedKraton Performance Polymers and is the chair of its Compensation Committee and a privately-held biotechnology company basedmember of its Nominating and Corporate Governance Committee. Mr. Demetriou previously served on the board of Foster-Wheeler AG starting in 2008 and was Non-Executive Chairman of Foster-Wheeler from 2011 to 2014. Mr. Demetriou also previously served on the U.S. Mr. Thompson holds a master’s degree in management studies from Bradford University, U.K.,board of OM Group where he served as chair of the Compensation Committee and a bachelor’s degree in law and economics from Rhodes University, South Africa. He is a member of the BoardNominating / Corporate Governance Committee. Mr. Demetriou holds a Bachelor of Governors of the Colorado School of Mines.Science degree in chemical engineering from Tufts University.   Mr. ThompsonDemetriou, who has an extensive backgroundbeen a Director of the Company since 2015, brings international business perspectives and more than 30 years of experience in leadership and senior management roles to the Board, including 15 years in the mining industry, providing strong knowledgerole of and management and operationalchief executive officer. In addition, he brings experience in this area toa variety of industries, including metals, specialty chemicals, oil & gas, manufacturing and fertilizers, which he has gained over the Board,course of his career, which is particularly valuable given the variety of industries in which the Company’s clients operate.

Joseph R. Bronson, Director. Mr. Bronson, age 68, is the Principal and CEO of The Bronson Group, LLC, a consulting firm primarily engaged in the area of financial and operational consulting. In March 2014, he started serving as Strategic Advisor to Cowen and Company, a New York-based investment bank. In May 2011, he was appointed an Advisory Director to GCA/Savvian, LLC, a financial advisory firm based in San Francisco, California. From January 2009 to March 2010, he was the Chief Executive Officer of SVTC (Silicon Valley Technology Corporation), a provider of semiconductor wafer fabrication services to customers requiring product development manufacturing services. From August 2007 to October 2008, he was the

President and Chief Operating Officer of Sanmina-SCI, a global electronics manufacturer. From 2004 to 2007, he was the co-Chief Executive Officer and Director of Form Factor, a global leader in this industry.advanced semiconductor wafer probe card technology for semiconductor product testing. Mr. ThompsonBronson was previously the Executive Vice President and Chief Financial Officer of Applied Materials, Inc., the global leader in semiconductor capital equipment. Mr. Bronson had a number of general management and executive positions with Applied Materials spanning a career of 22 years. Mr. Bronson also provides knowledgecurrently serves on the board of directors of Maxim Integrated Products, Inc., a leading supplier of analog devices to the semiconductor industry, and PDF Solutions, Inc., a company involved in the semiconductor diagnostic business. He is a Certified Public Accountant and a member of the biotechnology industry, whichAmerican Institute of CPAs, serves as Trustee of Fairfield University and is Chairman of the Leavey School of Business Advisory Board, Santa Clara University, California. He is also important givena director of two private companies. Mr. Bronson, who has been a Director of the Company’s customers in that industry.Company since 2003, brings accounting expertise and familiarity with financial statements, financial disclosures, auditing and internal controls to the Board from his prior service as Chief Financial Officer. His senior management level experience at large publicly traded companies also brings to the Board additional perspective regarding the day to dayday-to-day operations of large organizations as well as corporate best practices			III				2012

practices.

 

26

---

Name and Experience		Class				Director Since
Juan José Suárez Coppel, Director. Mr. Suárez, age 53,57, was General Director (Chief Executive Officer) of PEMEX,Petróleos Mexicanos (“PEMEX”), the national oil company of Mexico, from 2009 to 2012. Prior to his tenure as General Director, Mr. Suárez held other positions at PEMEX, including Chief Financial Officer from 2001 to 2006. He also served as Chief of Staff of Mexico’s Secretary of Finance and Public Credit in 2000 and 2001. In the private sector, Mr. Suárez was Co-Head of Equity Derivative Trading at Banamex from 1991 to 1995 and has held senior leadership positions at Grupo Televisa and Grupo Modelo; Mexico’s largest media company and largest brewer, respectively. Mr. Suárez also taught economics at several leading universities in Mexico, Europe and the United States. He currently serves as a consultant for Petroleos Ebano, a pre-operational oil and gas start up in Mexico. He is a graduate of the Instituto Tecnológico Autónomo in Mexico City, and earned his Ph.D. in economics from the University of Chicago.   Mr. Suárez, who has been a Director of the Company since 2013, provides strong expertise in the oil and gas industry, which is particularly valuable given the Company’s customers in this industry. He also brings extensive knowledge and experience in finance matters and his experience as an executive brings perspective on management and operational matters to the Board. His background in international operations also assists the Board in light of our of growing international presence			I				2013

CONTINUING DIRECTORSpresence.

 

Name and Experience		Class				Director Since
Joseph R. Bronson, Director. Mr. Bronson, age 65, is the Principal and CEO of The Bronson Group, LLC, a consulting firm primarily engaged in the area of financial and operational consulting. In May 2011, he was appointed an Advisory Director to GCA/Savvian, LLC, a financial advisory firm based in San Francisco, California. From January 2009 to March 2010, he was the Chief Executive Officer of SVTC (Silicon Valley Technology Corporation), a provider of semiconductor wafer fabrication services to customers requiring product development manufacturing services. From August 2007 to October 2008, he was the President and Chief Operating Officer of Sanmina-SCI, a global electronics manufacturer. From 2004 to 2007, he was the co-Chief Executive Officer and Director of Form Factor, a global leader in advanced semiconductor wafer probe card technology for semiconductor product testing. Mr. Bronson was previously the Executive Vice President and Chief Financial Officer of Applied Materials, Inc., the global leader in semiconductor capital equipment. Mr. Bronson had a number of general management and executive positions with Applied spanning a career of 22 years. Mr. Bronson also currently serves on the Board of Directors of Maxim Integrated Products, Inc., a leading supplier of analog devices to semiconductor industry. He is a Certified Public Accountant and a member of the American Institute of CPA’s and serves as Trustee of Fairfield University and is Chairman of the Leavey School of Business Advisory Board, Santa Clara University, California. He is also a director of two private companies. Mr. Bronson brings accounting expertise and familiarity with financial statements, financial disclosures, auditing and internal controls to the Board from his prior service as Chief Financial Officer. His senior management level experience at large publicly traded companies also brings to the Board additional perspective regarding the day to day operations of large organizations as well as corporate best practices			I				2003

27

---

Name and Experience		Class				Director Since
Robert C. Davidson, Jr., Jr., Director. Mr. Davidson, age 68,71, is retired. Mr. Davidson served as the Chairman and Chief Executive Officer of Surface Protection Industries, Inc., a company that provided surface protection products and services worldwide from 1978 to October 2007. He serves as a member of the Boardsboards of Morehouse College (Chairman), Art Center College of Design (Chairman), Cedars-Sinai Medical Center (Vice Chair of Audit Committee), Broadway Federal Bank, f.s.b. (Chairman of Compensation Committee and Internal Asset Review Committee), and the University of Chicago Graduate School of Business Advisory Council. He received a Bachelor of Arts degree from Morehouse College and an MBA in Marketing and Finance from the University of Chicago.   Mr. Davidson, who has been a Director of the Company since 2001, brings strong leadership and knowledge and experience of strategic and financial matters to the Board from his experience founding and building private companies serving national and international markets, his almost 30-year career at Surface Protection Industries, Inc., and his prior service as a chief executive officer and chairman. He also brings to the Board important knowledge of public company governance through his service on multiple public company boards, including service on compensation committeescommittees.			II				2001
Ralph E. Eberhart, Director. General Eberhart, age 66,69, currently serves as Chairman and President of the Armed Forces Benefit Association, a 400,000 member organization. He is a former General Officer of the United States Air Force. A graduate of the United States Air Force Academy, General Eberhart held numerous high-level command and staff positions within the Air Force over his 36-year career. He served as Commander

of the North American Aerospace Defense Command (NORAD) on 9/11, and in the aftermath of 9/11, he was selected as the first Commander of the U.S. Northern Command. He also served as Commander of Air Combat Command and U.S. Space Command. He serves on the boards of Rockwell Collins, Triumph Group, Inc. and VSE Corporation.   General Eberhart, who has been a Director of the Company since 2012, brings valuable leadership and management skills developed through his military service. His36-year military career provides the Board with valuable experience and knowledge of government and the military, which is particularly valuable given the Company’s government and military contractscontracts.			II				2012

Edward V. FritzkyDawne S. Hickton, Director. Mr. Fritzky,Ms. Hickton, age 63,59, was Vice Chair, President and Chief Executive Officer of RTI International Metals, Inc. (“RTI”) from 2007 until RTI’s acquisition by Alcoa in July 2015. Under her leadership, Ms. Hickton guided RTI’s transformation and expansion from a titanium mill products producer to a fully integrated specialty metals manufacturer of integrated titanium and aluminum fabricated structures and components for the aerospace, defense, energy and medical industries. Ms. Hickton is retired. Mr. Fritzkycurrently President of Cumberland Highstreet Partners, a strategic consulting business founded in October 2016. She also serves as a director of the Federal Reserve Bank of Cleveland. Additionally, she serves on the board of Triumph Group, and the Audit Committee, Nominating & Corporate Governance Committee and Compensation & Management Development Committee of that board. She also serves on the board of Norsk Titanium, AS. She is on the board of directors of the Smithsonian’s National Air and Space Museum, serves on the board of The Wings Club, and is a Director of Corporate Angel Network. In addition, she is a member of the University of Pittsburgh’s Board of Trustees, serving on the Student Affairs and Property and Facilities Committees. Prior to beginning her career at RTI in 1997, Ms. Hickton was employed at USX Corporation, where she worked with the parent organization and its subsidiaries: U.S. Steel, American Bridge Company and U.S. Steel Mining Company. She also previously served onas a public company director of FNB Corporation from 2006 until 2013. Ms. Hickton is a graduate of the University of Rochester and earned a J.D. degree from the University of Pittsburgh School of Law. Ms. Hickton, who has been a Director of the Company since 2015, provides a wealth of proven business leadership experience with a CEO’s perspective, and advanced strengths in project management and engineering expertise. Her background as a senior officer in a publicly traded company for nearly two decades is particularly valuable to the Board, as it lends a contemporary understanding of how to engage with the Company’s stakeholders, in addition to driving a strong growth agenda.
Linda Fayne Levinson, Lead Independent Director. Ms. Fayne Levinson, age 74, is an experienced executive and corporate director. From 1997 until 2004, Ms. Fayne Levinson was a Partner of GRP Partners, a venture capital firm that invests in early stage technology companies. Prior to that, Ms. Fayne Levinson was an executive at Creative Artists Agency, Inc.; a Partner at Wings Partners, a Los Angeles based private equity firm; President of Fayne Levinson Associates, an independent consulting firm; a Senior Vice President of American Express Travel Related Services Co., Inc.; and a Partner of McKinsey & Company, where she became the first woman partner in 1978. Ms. Fayne Levinson also serves as a member of the boards of Hertz, Ingram Micro, Inc. and NCR Corporation. At Hertz, Ms. Fayne Levinson is the Chair of the Board and previously served as Chair of its Nominating and Governance Committee, and at NCR is Chair of the Compensation Committee. Ms. Fayne Levinson is also a member of the U.S. Advisory Board of CVC Capital Partners and a trustee at Barnard College, where she chairs the Investment Committee. Ms. Fayne Levinson has been a Director of the Company since 1996. Her executive, consulting and investment career brings in-depth knowledge of business operations, strategy and technology to the Board of Amgen, Inc.,Directors. Her service on the boards of a number of global biotechnology company that discovers, develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology, from July 2002 to May 2005 and also served as a special advisor to Amgen until July 2004. From January 1994 to July 2002, Mr. Fritzky served as Chief Executive Officer, President and Chairman of the Board of Immunex Corporation, a biotechnology company. From March 1989 to January 1994, he was President and Vice President of Lederle Laboratories, a division of American Cyanamid Company, a pharmaceutical company. Mr. Fritzky provides strong knowledge of and management and operational experience in the biotechnology and pharmaceutical industries to the Board, which is particularly valuable given the Company’s customers in these industries. He also brings to the Board important knowledge of public company governance through his pastcompanies, including her service as a Chair of a board, a lead director and as chair of compensation and nominating and governance committees, provides the Board memberinsight regarding compensation strategies and other corporate governance matters, both of Immunex, Amgen, SonoSite, and Geron Corporationwhich are key areas of focus in today’s corporate environment.			II				2004

28

---

Name and Experience		Class				Director Since
Peter J. Robertson, Director. Mr. Robertson, age 66,68, is retired. Mr. Robertson was Vice Chairman of the Board for Chevron Corporation, one of the world’s largest energy companies, until April 1, 2009. He joined Chevron in 1973 and over his 36 year36-year career he had a wide variety of responsibilities including directing Chevron’s worldwide exploration and production and global gas businesses, corporate strategic planning, policy, government and public affairs. He was also Chief Financial Officer of Chevron USA. He is an independent senior adviser with Deloitte LLP, a non executivenon-executive director of SASOL Limited and an advisory director of Campbell-Lutyens. He is co-chairman of the US Saudi Arabian Business Council and chairman of the World Affairs Council of Northern California. He is a past chairman of the US Energy Association. A native of Edinburgh, Scotland, he holds a Bachelor of Science degree in Mechanical Engineering from the University of Edinburgh and an MBA from the University of Pennsylvania, Wharton School, where he was a Thouron Scholar.   Mr. Robertson, who has been a Director of the Company since 2009, brings vital knowledge and experience to the Board in the oil and gas industry from his over 36-year career at Chevron Corporation, which is particularly important given the number of Company customers in the energy and refining sector. He also brings valuable international experience in developed and developing countries, including interactions with governments at the highest levels, from his executive experience and the multiple chairmanship and director positions he has held and currently holds. Mr. Robertson also has extensive experience on the boards of not-for-profit entities with global reach and public company boards as well as important accounting know-how and experience with public company financial statements, disclosures and accounting rules from his service as Chief Financial Officer of Chevron USAUSA.			I				2009

Noel G. WatsonChristopher M.T. Thompson, non-executiveDirector. Mr. Thompson, age 68, was Chairman and Chief Executive Officer of Gold Fields Ltd., an international gold producer with over 50,000 employees and operations on five continents from 1998 to 2002, and continued as Chairman of that company through 2005. He was also Chairman of the Board and Director. Mr. Watson, age 77, has been with the Company since 1965World Gold Council from 2002 to 2005. He founded and was Chief Executive Officer of Castle Group Ltd., an international investment company that helped support the Companydevelopment of new mines. He served on the board of Teck Resources Limited from November 19922003 to April 2006.2015 and on the board of Golden Star Resources Ltd. from 2010 to 2015. He was also the President of the Company from 1987 until July 2002. Mr. Watsoncurrently serves on the Boardboard of DirectorsRoyal Gold, Inc., a company that acquires and manages precious metal royalties and streams. Mr. Thompson holds a master’s degree in management studies from Bradford University, U.K., and a bachelor’s degree in law and economics from Rhodes University, South Africa. He is a member of GT Solar International Inc.the The Colorado School of Mines Foundation Board.   Mr. Watson bringsThompson, who has been a deep understandingDirector of the Company’s business,Company since 2012, has an extensive background in the mining industry, providing strong knowledge of and operationsmanagement and operational experience in this area to the Board, from his over 40-year career atwhich is particularly valuable given the Company. In addition,Company’s customers in this industry. Mr. Thompson also provides knowledge of the biotechnology industry, which is also important given the Company’s customers in that industry. His senior management level experience also brings to the Board additional perspective regarding the day to day operations of large organizations as the longest-tenured Board member, he serveswell as a valuable resource of institutional knowledgecorporate best practices.			I				1986

 

Meetings of the Board of Directors

 

The Board of Directors holds sixheld seven regularly scheduled meetings each year and may hold additional meetings from time to time as the Board of Directors deems necessary or desirable. The Board of Directors held seven meetings duringin fiscal 2013.2016. All directors attended at least 75% of all meetings of the Board of Directors and of the Committees thereof on which they served during the year.fiscal 2016. The Board of Directors has a policy that directors are expected to attend the annual meetings of shareholders. All directors then on the Board of Directors attended the 20132016 annual meeting of shareholders.

 

During fiscal 2013,2016, the non-management members of the Board of Directors met in executive sessions without management present at all of its regularly held meetings. The Board of Directors expects to continue this practice in fiscal 2014.2017. The director serving as the presiding director atLead Independent Director, currently Ms. Levinson, chairs these executive sessions rotates onsessions. See “— Board Leadership Structure” for a bi-annual basis among the chairsfurther discussion of the various Committeesresponsibilities of the Board of Directors. It previously rotated on an annual basis. No director may serve as the presiding director for more than two consecutive years. Currently, Mr. Fritzky, the Chair of the Nominating and Corporate Governance Committee, is the presiding director. Following the annual meeting in 2015, it is expected that the Chair of the Audit Committee will begin serving as the presiding director and, following the annual meeting in 2017, the Chair of HR&C Committee will begin serving as the presiding director.Lead Independent Director.

29

---

Compensation of Directors for Fiscal 20132016

 

The Company payspaid non-management directors a cash retainer in the amount of $88,000 per year. Each non-management director also receivesyear through April 2016 and $100,000 per year thereafter. In an effort to align the Company’s compensation practices with those of its peers, during fiscal 2016 the Company moved from granting annual awardawards of 1,500a fixed number of restricted stock units and options to a value-based approach. Jacobs also eliminated the appointment grant awarded to new directors. For fiscal 2016, the Board set the annual equity value to be awarded to non-management directors at approximately $135,000 and, accordingly, granted each non-management director an annual award of 2,309 restricted stock units and an option to purchase 3,500 shares of the Company’s common stock on the first day of March of each year (the “annual grant”), and, upon his or her election to the Board of Directors, an option to purchase 4,000 shares of the Company’s common stock on the first day of the month following the date he or she is first elected to the Board of Directors (the “appointment grant”). Directors who are also members of management are not separately compensated for their services as a director.stock.

 

Each of the equity awardsgrants described above is made pursuant to the Jacobs Engineering Group Inc. 1999 Outside Director Plan.Stock Plan, as amended and restated (the “1999 Outside Director Plan”). Each director option grant vests and becomes exercisable in four equal annual installments commencing on the first anniversary of the grant date. Each director restricted stock unit grant vests in full six months after the grant date; however the award is not settled by issuance of the underlying shares until the director’s retirement from the Board of Directors. In accordance with the terms and conditions of the 1999 Outside Director Plan, the option prices for both the annual grants and the appointment grants are equal to the average of the Fair Market Values (as defined in the 1999 Outside Director Plan) of a share of common stock for the ten trading days ending on the second trading day prior to the date for which the grant price is being determined, but in no event less than eighty-five percent (85%) of the Fair Market Value of a share of common stock on the date the grant price is being determined.

The table below sets forth the compensation paid (or credited) to each of the Company’s non-management directors during fiscal 2013.2016.

 

Name				Fees Earned or Paid in Cash ($) (1)				Stock Awards ($) (2)				Option Awards ($) (3)				Change in Pension Value and Non- qualified Deferred Compensation Earnings ($) (4)				All Other Compensation ($)				Total ($)				Fees Earned or Paid in Cash ($) (1)				Stock Awards ($) (3)				Option Awards ($) (4)				Total ($)
Joseph R. Bronson					88,000				72,000				62,912				—				—				222,912				93,000				94,495				42,482				229,977
Juan José Suárez Coppel					49,900				—				79,703	(5)			—				—				129,603				93,000				94,495				42,482				229,977
John F. Coyne					88,000				72,000				62,912				—				—				222,912				93,000				94,495				42,482				229,977
Robert C. Davidson, Jr.					88,000				72,000				62,912				—				—				222,912				93,000				94,495				42,482				229,977
Ralph E. Eberhart					95,333	(6)			72,000				125,210	(7)			—				—				292,543				93,000				94,495				42,482				229,977
Edward V. Fritzky					88,000				72,000				62,912				—				—				222,912				36,828	(2)			—				—				36,828
Dawne S. Hickton																													93,000				94,495				42,482				229,977
Linda Fayne Levinson					88,000				72,000				62,912				—				—				222,912				93,000				94,495				42,482				229,977
Benjamin F. Montoya		(8)			22,000				—				—				—				—				22,000
Peter J. Robertson					88,000				72,000				62,912				—				—				222,912				93,000				94,495				42,482				229,977
Christopher M.T. Thompson					84,333				72,000				124,307	(9)			—				—				280,640				93,000				94,495				42,482				229,977
Noel G. Watson					88,000				72,000				62,912				127,303				300,000	(10)			650,215
Noel Watson																													63,667				94,495				42,482				200,644

 

(1)

Represents fees earned during fiscal 2013.2016.

(2)

Mr. Fritzky did not stand for re-election at the 2016 annual meeting of shareholders.

(3)

Represents the grant date fair value of the grants of restricted stock units under the 1999 Outside Director Plan during the fiscal year in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718,Stock Compensation (“FASB ASC Topic 718”). A grant of restricted stock units relating to 1,500 shares and 809 shares of common stock was made to each then-sitting non-management director on March 1, 20132016 and wasMarch 24, 2016 respectively, which were based on a grant date fair value of $48.00$39.66 and $43.27, respectively, per share (market price on the date of grant)grant of March 1, 2016 and March 24, 2016, respectively), with a total fair value of $72,000.$94,495. The aggregate number of shares of restricted stock and restricted stock units outstanding at September 27, 201330, 2016 for each non-management director was as follows: J. Bronson—15,500;Bronson — 20,809; J. Suárez—0,rez — 5,309, J. Coyne—6,500;Coyne — 11,809; R. Davidson—19,500;Davidson — 24,809; R. Eberhart—1,500; E. Fritzky—13,500;Eberhart — 6,809; D. Hickton — 2,309; L. Levinson—21,500;Levinson — 26,809; P. Robertson—4,500;Robertson — 9,809; C. Thompson—1,500;Thompson —6,809; and N. Watson—3,500.Watson — 7,309.

30

---

(3)(4)

Represents the grant date fair value of options granted under the 1999 Outside Director Plan during the fiscal year2016 in accordance with FASB ASC Topic 718. Please refer to Note 2, Significant Accounting Policies, of Notes to Consolidated Financial Statements included in the Company’s 20132016 Annual Report on Form 10-K for a discussion of the assumptions used to calculate these amounts. A grant of options relating to 3,500 shares of common stock was made to each then-sitting non-management director on March 1, 20132016 and was based on a grant date fair value of $17.9749$12.1376 per share, with a total fair value of $62,912.$42,482. The aggregate number of options outstanding at September 27, 201330, 2016 for each non-management director was as follows: J. Bronson—27,125;Bronson — 31,000; J. Suárez—4,000;rez — 14,500; J. Coyne—23,000;Coyne — 33,500; R. Davidson—34,000;Davidson — 32,000; R. Eberhart—Eberhart —18,000; D. Hickton — 7,500; E. Fritzky—42,000; L. Levinson—39,000; B. Montoya—7,000;Levinson — 34,500; P. Robertson 18,000;28,500; C. Thompson—7,500;Thompson — 18,000; and N. Watson—10,500.

(4)

Represents interest credited under the Company’s deferral plans in excess of 120% of the applicable federal long-term rate (“AFR”).

(5)

In accordance with the terms of the 1999 Outside Director Plan, Mr. Suárez received an appointment grant on April 1, 2013 of options to purchase 4,000 shares of common stock. The grant was based on a grant date fair value of $19.9257 per share, with a total fair value of $79,703. The assumptions used in the Black-Scholes option-pricing model were: 0% dividend yield, 36.84% expected volatility, 0.95% risk-free interest rate, and 5.82 years of expected term of options.

(6)

Of this amount, $7,333 was paid for service on the Board for fiscal 2012.

(7)

In addition to the grant of options received on March 1, 2013, Mr. Eberhart also received an appointment grant on October 1, 2012 of options to purchase 4,000 shares of common stock in accordance with the terms of the 1999 Outside Director Plan. The October 1, 2012 option grant was based on a grant date fair value of $15.5745 per share, with a total fair value of $62,298. The assumptions used in the Black-Scholes option-pricing model were: 0% dividend yield, 39.83% expected volatility, 0.79% risk-free interest rate, and 5.82 years of expected term of options.

(8)

Admiral Benjamin F. Montoya did not stand for re-election at the 2013 annual meeting of shareholders.

(9)

In addition to the grant of options received on March 1, 2013, Mr. Thompson received an appointment grant on December 1, 2012 of options to purchase 4,000 shares of common stock in accordance with the terms of the 1999 Outside Director Plan. The December 1, 2013 grant was based on a grant date fair value of $15.3488 per share, with a total fair value of $61,395. The assumptions used in the Black-Scholes option-pricing model were: 0% dividend yield, 38.80% expected volatility, 0.79% risk-free interest rate, and 5.82 years of expected term of options.

(10)

Represents consulting fees earned during fiscal 2013.Watson — 17,500.

 

Independence of Directors

 

The Board of Directors has adopted Board of Directors Guidelines for Determining the Independence of its Members, which are accessible by following the link to “Corporate Governance” on the Company’s website atwww.jacobs.com. The Board of Directors has affirmatively determined that each of Ms.Mesdames Fayne Levinson and Hickton, Messrs. Bronson, Coyne, Davidson, Fritzky, Robertson, Suárez and Thompson, and General Eberhart is and Admiral Montoya was, independent under Section 303A.02 of the NYSE listed company manual and the Company’s Independence Guidelines. The NYSE’s independence definition also includes a series of objective tests, such as that the director is not an employee of the Company and has not engaged in various types of business dealings involving the Company, which would prevent a director from being independent. None of the Company’s independent directors had any relationship that violated the NYSE’s tests.

 

In addition, as further required by the NYSE’s listed company manual and the Company’s independence guidelines, the Board of Directors has made an affirmative determination that other than in respect of their positions as directors and as described below for Messrs. Coyne, Robertson and Suárez, no relationship, whether immaterial or material, exists between any independent director and the Company that would prevent a director from being independent. Until January 2013, Mr. Coyne wasIn making this determination, the President and Chief Executive Officer of Western Digital Corporation, which is one ofBoard considered the Company’s clients. The payments by Western Digital Corporation to the Company for any fiscal year have been and are expected to continue to be substantially less

31

---

than one percent of the consolidated gross revenues of Western Digital Corporation and have been and will largely consist of pass through costs relating to subcontract labor or third-party materials and equipment.facts described below. Mr. Robertson is on the board of directors of the US-Saudi Arabian Business Council, an organization of business leaders to which the Company has made an aggregate of approximately $8,000 incurrently makes annual cash contributions over the past five years. Prior to his joining the Board, Mr Suárez was employed by Petróleos Mexicanosof $15,000. During fiscal 2015, Ms. Hickton served as Vice Chair, President, Chief Executive Officer and a director of RTI International Metals, Inc. (“PEMEX”RTI”), onewhich has been a client of the Company’s clients. He served most recently as the General Director (chief executive officer) of PEMEX until his retirement effective in December 2012 which was prior to joining the Board of Directors.Company. The payments by PEMEXRTI to the Company for any fiscal year have been and are expected to continue to be substantially less than one percent of the consolidated gross revenues of PEMEX. During his time with PEMEX, Mr. Suárez had no involvement in PEMEX’s business relationship with the Company.RTI. After a review of the facts, using its business judgment, the Board of Directors determined that these relationships did not compromise Mr. Coyne’s, Mr. Robertson’s or Mr. Suárez’sMs. Hickton’s independence.

 

Board Leadership Structure

 

The Company’s Corporate Governance Guidelines provide that the Board is free to select its Chairman and Chief Executive Officer in any manner after consideration of relevant factors at the time of the decision. Currently, the Board is led by Mr. Demetriou as Chairman, a non-executive Chairman, Mr. Watson, the former Chief Executive Officer of the Company. position he has held since July 2016, and Ms. Levinson as Lead Independent Director.

The Board has determined that having Mr. WatsonDemetriou serve as Chairman provides significant advantages to the Board, as it allows the Board to benefit from his prior experience and knowledge of the Company’s business and affairsmarket opportunities and risks and also facilitates communications and relations between the Board, the Chief Executive Officer andwith other senior management.

Because the Board also believes that strong independent Board leadership is a critical aspect of effective corporate governance, the Board has established the position of presiding director. As discussed above,Lead Independent Director. The Board also believes that a Lead Independent Director who has the presiding director rotates onresponsibilities set forth in the Corporate Governance Guidelines provides comparable independent leadership, oversight and benefits for the Company and Board that would be provided by an bi-annual basis among the chairsindependent Chairman. Some of the various committees,specific responsibilities of the Lead Independent Director when acting as such include the following:

Serving as the independent directors’ central point of communication with no director servingthe Chairman and Chief Executive Officer and working with the Chairman and Chief Executive Officer to support appropriate compliance with Board policies;

Proactively engaging with the Chairman and Chief Executive Officer as presiding director for more than two consecutive years. The presiding director chairsa key advisor on emerging issues and alternative courses of action;

Setting and approving the schedule of Board meetings, meeting agendas and the information sent to the Board, while keeping the Chairman and Chief Executive Officer advised;

Calling meetings during all executive sessions.of the independent directors; and

Meeting with various Company constituencies on behalf of the Board.

 

The Board’s Role in Risk Oversight

 

The Board of Directors oversees the Company’s risk management process. The Board oversees a Company-wide approach to risk management, designed to enhance shareholder value, support the achievement of strategic objectives and improve long-term organizational performance. The Board determines the appropriate level of risk for the Company generally, assesses the specific risks faced by the Company and reviews the steps taken by management to manage those risks. The Board’s involvement in setting the Company’s business strategy facilitates these assessments and reviews, culminating in the development of a strategy that reflects both the Board’s and management’s consensus as to appropriate levels of risk and the appropriate measures to manage those risks. Pursuant to this structure, risk is assessed throughout the enterprise, focusing on risks arising out of various aspects of the Company’s strategy and the implementation of that strategy, including financial, legal/compliance, operational/strategic, health and safety, and compensation risks. The Board also considers risk when evaluating proposed transactions and other matters presented to the Board, including acquisitions and financial matters. In addition, the independent directors discuss risk management during executive sessions without management present.

 

While the Board maintains the ultimate oversight responsibility for the risk management process, its committees oversee risk in certain specified areas. In particular, the Audit Committee focuses on financial risk, including internal controls, and discusses the Company’s risk profile with the Company’s independent registered public accounting firm. The Audit Committee also reviews potential violations of the Company’s various codes of ethics and related corporate policies. The HR&CCompensation Committee periodically reviews compensation practices and policies to determine whether they encourage excessive risk taking, including an annual review of management’s assessment of the risk associated with the Company’s compensation programs covering its employees, including executives, and discusses the concept of risk as it relates to the Company’s compensation programs, as discussed in greater detail under “Compensation Discussion and Analysis—Analysis — Compensation Risk Assessment” below.

32

---

Finally, the Nominating and Corporate Governance Committee managesoversees risks associated with the independence of directors and Board nominees.nominees and assists the Board in overseeing the activities with respect to compliance and business practice matters. Pursuant to the Board’s instruction, management regularly reports on applicable risks to the relevant Committee or the Board, as appropriate, including monthlyregular reports on significant Company projects, with additional review or reporting on risks being conducted as needed or as requested by the Board and its Committees.

Committees of the Board of Directors

 

Audit Committee — The Audit Committee advises the Board of Directors on internal and external audit matters affecting the Company and is responsible for the appointment of the independent auditors of the Company. In addition, the Audit Committee reviews with such auditors the scope and results of their examination of the financial statements of the Company and any investigations by such auditors, and reviews and approves the worldwide audit fee and all non-audit services.

 

The Audit Committee is governed by a charter which is available by following the links to “Corporate Governance” on the Company’s website atwww.jacobs.com or upon written request, as described above under “Corporate Governance—Governance — Availability of Documents.” The members of the Audit Committee are Messrs.Mr. Bronson (Chair), RobertsonMs. Hickton and Mr. Thompson. Mr. FritzkyRobertson served on the Audit Committee until January 24, 2013.July 2016. The Board of Directors has affirmatively determined that all of the members of the Audit Committee meet or met the Company’s Independence Guidelines, the independence standards of Section 303A.02 of the NYSE listed company manual and Rule 10A-3 under the 1934 Act and are or(or were during their term of service) “financially literate” as required by Section 303A.07(a) of the NYSE listed company manual, as such qualification is interpreted by the Company’s Board of Directors in its business judgment. In addition, the Board of Directors has affirmatively determined that all of the members of the Audit Committee are or(or were during their term of service) “audit committee financial experts” under Item 407(d)(5) of Regulation S-K. The Board of Directors made this determination based on the respective qualifications and business experience of each of the members, as briefly described above. During fiscal 2013,2016, the Audit Committee held eightnine meetings. Further information regarding the Audit Committee is set out in the “Report of the Audit Committee” below.

 

Human Resource and Compensation Committee — The HR&CCompensation Committee establishes, recommends, and governs all compensation and benefits policies for executive officers, including individual components of total remuneration, goals, and performance criteria for incentive compensation plans, short- and long-term incentive plan design, and key benefit plans established for employees. The HR&CCompensation Committee is responsible for the policy and protocol involved in the granting of all equity compensation and approves directly or through its subcommittee all equity-based grants made to employees. The HR&CCompensation Committee also oversees the administration of employee benefit plans for the Company.

 

The HR&CCompensation Committee is governed by a charter which is available by following the link to “Corporate Governance” on the Company’s website atwww.jacobs.com or upon written request, as described above under “Corporate Governance—Governance — Availability of Documents.” The members of the HR&CCompensation Committee are Ms. LevinsonMr. Robertson (Chair), Mr. Coyne, and General Eberhart. Admiral MontoyaMs. Levinson served onas Chair of the HR&CCompensation Committee until January 24, 2013.July 2016. The Board of Directors has affirmatively determined that all of the members of the HR&CCompensation Committee meet or(or met during their term of service) the Company’s Independence Guidelines and the independence standards of Section 303A.02 of the NYSE listed company manual. During fiscal 2013,2016, the HR&CCompensation Committee held fiveseven meetings.

 

Compensation Committee Interlocks and Insider Participation — During the last completed fiscal year, no member of the HR&CCompensation Committee was an officer or employee of the Company, was a former officer of the Company, nor had a relationship with the Company requiring disclosure as a related party transaction under Item 404 of Regulation S-K. None of the Company’s executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a director onmember of the Company’s Board of Directors or on the HR&CCompensation Committee.

 

33

---

Nominating and Corporate Governance Committee — The Nominating and Corporate Governance Committee assists the Board of Directors in identifying, screening and recommending qualified candidates to serve as directors of the Company and for considering and making recommendations to the Board concerning the Company’s corporate governance policies, principles, and guidelines, including, but not limited to, the appropriate size, function, and needs of the Board. The qualifications that the Nominating and Corporate

Governance Committee and Board of Directors consider in identifying qualified candidates to serve as directors include age, skills, such as financial background, and skills, international background, education, professional and academic affiliations, industries served, length of service, positions held, and geographies served. While

The Company’s Corporate Governance Guidelines provide that the Board should encompass individuals with diverse backgrounds and perspectives. In accordance with this guideline, the Nominating and Corporate Governance Committee does not have a formalCommittee’s policy with respectis to diversity, it also considersconsider the diversity of viewpoints, backgrounds, experience and other demographics in evaluating director candidates. The ChairDiversity is a significant consideration in the director nomination process because the Board believes that men and women of different ages, races and ethnic backgrounds can contribute different, useful perspectives, and can work effectively together to further the Company’s mission. The Nominating and Corporate Governance Committee may also consult with outside advisors or retain search firms to assist in the search for qualified candidates. During fiscal 2013, the Nominating and Corporate Governance Committee engaged a third-party search firm to assist in identifying potential directors. That firm recommended Mr. Suárez as a new director. Once potential candidates are identified, including those candidates nominated by shareholders, the Chair of the Nominating and Corporate Governance Committee, the non-executiveLead Independent Director and the Chairman of the Board, and the CEO review the backgrounds of those candidates with the Nominating and Corporate Governance Committee. Final candidates are then chosen and then interviewed by non-management directors and executive management of the Company. Based on the interviews, the Nominating and Corporate Governance Committee then makes its recommendation to the Board of Directors. If the Board of Directors approves the recommendation, the candidate is nominated for election. With regard to procedures for shareholder nominations of directors for election, please see the requirements described below under “Shareholders’ Proposals.” The Nominating and Corporate Governance Committee will consider director candidates recommended by shareholders in accordance with these procedures.

 

The Nominating and Corporate Governance Committee is governed by a charter which is available by following the link to “Corporate Governance” on the Company’s website atwww.jacobs.com or upon written request, as described above under “Corporate Governance—Governance — Availability of Documents.”Documents”. The current members of the Nominating and Corporate Governance Committee are Mr. FritzkyDavidson (Chair), Mr. Davidson,Ms. Hickton and Mr. Suárez. Ms. Levinson and Mr. RobertsonFritzky served on the Nominating and Corporate Governance Committee until he left the Board in January 24, 2013.2016. The Board of Directors has affirmatively determined that all of the members of the Nominating and Corporate Governance Committee meet (or met during fiscal 2013 meet or mettheir term of service) the Company’s Independence Guidelines and the independence standards of Section 303A.02 of the NYSE listed company manual. During fiscal 2013,2016, the Nominating and Corporate Governance Committee held fivesix meetings.

 

Annual Performance Evaluations

 

The Nominating and Corporate Governance Committee conductscoordinates annual Board self-evaluations and periodic individual director performance reviews, in particular where a director is standing for re-election. In addition, thereviews. The Chairs of each of the committees coordinate regularannual self-evaluations of their respective committees.

 

Contacting the Board of Directors

 

Generally — All communications required by law or regulation to be relayed to the Board of Directors are relayed immediately after receipt. Any communications received by management from shareholders which have not also been sent directly to the Board of Directors will be processed as follows: (1) if the shareholder specifically requests that the communication be sent to the Board, the communication will then be promptly relayed to the Board of Directors; and (2) if the shareholder does not request that the communication be sent to the Board of Directors, then management will promptly relay to the Board all communications that the management of the Company, using its best business judgment, determines should be relayed to the Board.

 

Contacting the Full Board of Directors — Any shareholder, employee or interested party who desires to communicate with the Board of Directors may do so by writing to The Board of Directors, c/o Corporate Secretary, Jacobs Engineering Group Inc., 155 North Lake Avenue, Pasadena,600 Wilshire Boulevard, Suite 1000, Los Angeles, California, 91101,90017, in an envelope marked confidential.

34

---

Contacting Non-Management Directors — Any shareholder, employee or interested party who desires to communicate with the Company’s non-management directors may do so as follows:

 

Confidentially or anonymously through the Company’s Integrity Hotline, 1 (877) 522-6272;

 

By writing to PresidingLead Independent Director, c/o Corporate Secretary, Jacobs Engineering Group Inc., 155 North Lake Avenue, Pasadena,600 Wilshire Boulevard, Suite 1000, Los Angeles, California, 91101,90017, in an envelope marked confidential; or

 

By sending an email to Presiding.Director@Jacobs.com.LeadIndependent.Director@Jacobs.com.

 

Contacting the Audit Committee — Any shareholder, employee or interested party may submit at any time a good faith complaint regarding any questionable accounting, internal accounting controls, or auditing matters concerning the Company without fear of dismissal or retaliation of any kind. Employees are encouraged to report their concerns and complaints to the Company’s senior management, to the Vice President, Internal Audit, or to the Audit Committee of the Board of Directors. Confidential, anonymous reports may be made as follows:

 

Through the Company’s Integrity Hotline, 1 (877) 522-6272;

 

By writing to the Chair of the Audit Committee, c/o Corporate Secretary, Jacobs Engineering Group Inc., 155 North Lake Avenue, Pasadena,600 Wilshire Boulevard, Suite 1000, Los Angeles, California, 91101,90017, in an envelope marked confidential; or

 

By sending an email to Audit.Committee@Jacobs.com.

Forward-Looking Statements

 

35This Proxy Statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that do not directly relate to any historical or current fact. When used herein, words such as “estimates”, “intends”, and “will” and similar words are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Although such statements are based on management’s current estimates and expectations and/or currently available data, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause our actual results to differ materially from what may be inferred from the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those listed in Item 1A — Risk Factors in the Company’s 2016 Annual Report on Form 10-K. The Company does not undertake any obligation to release publicly any revisions or updates to any forward-looking statements.

---

REPORT OF THE AUDIT COMMITTEE

 

The Audit Committee hereby reports as follows:

 

1.

Management has primary responsibility for the accuracy and fairness of the Company’s consolidated financial statements as well as the processes employed to prepare the financial statements, and the system of internal control over financial reporting.

 

2.

The Audit Committee represents the Board of Directors in discharging its responsibilities relating to the Company’s accounting, financial reporting, financial practices, and system of internal controls. As part of its oversight role, the Audit Committee has reviewed and discussed with Company’s management the Company’s audited consolidated financial statements included in its 20132016 Annual Report on Form 10-K.

 

3.

The Audit Committee has discussed with the Company’s internal auditors and the Company’s independent registered public accounting firm, Ernst & Young, the overall scope of and plans for their respective audits. The Audit Committee has met with the internal auditors and Ernst & Young, separately and together, with and without management present, to discuss the Company’s financial reporting processes and system of internal control over financial reporting in addition to those matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA,Professional Standards, Vol. 1. AU section 380), aswith the independent auditors under the rules adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T.

 

4.

The Audit Committee has received the written disclosures and the letter from Ernst & Young required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with Ernst & Young their independence.

 

5.

The Audit Committee has adopted pre-approval policies and procedures for certain audit and non-audit services which Ernst & Young provides. In developing these policies and procedures, the Audit Committee considered the need to ensure the independence of Ernst & Young while recognizing that in certain situations Ernst & Young may possess both the technical expertise and knowledge of the Company to best advise the Company on issues and matters in addition to accounting and auditing. The policies and procedures adopted by the Audit Committee allow the general pre-approval by the Audit Committee of certain services, such as audit-related services (which include providing accounting and auditing consultation and due diligence services), and tax services (which include general tax compliance, tax research, and planning services), without a specific, case-by-case consideration of each of the services to be performed by Ernst & Young. The policies and procedures require that any other service, including the annual audit services and any other attestation service, be expressly and specifically approved by the Audit Committee prior to such services being performed by Ernst & Young. In addition, any proposed services exceeding the general pre-approved cost levels or budgeted amounts require specific pre-approval by the Audit Committee. The Audit Committee considers whether all pre-approved services are consistent with the SEC’s rules and regulations on auditor independence.

 

6.

Based on the review and discussions referred to in paragraphs (1) through (5) above, the Audit Committee recommended to the Board of Directors and the Board of Directors has approved the inclusion of the audited financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended September 27, 201330, 2016 for filing with the SEC.

 

Joseph R. Bronson, Chair

 

Peter J. RobertsonDawne S. Hickton

 

Christopher M.T. Thompson

36

---

AUDIT AND NON-AUDIT FEES

 

Set forth below are the fees billed byto the Company toby its independent registered public accounting firm, Ernst & Young, for the fiscal periods indicated, all of which were approved by the Audit Committee pursuant to the approval policies described above.

 

		2013				2012				2016				2015
Audit fees		$	6,098,700			$	5,899,700
Audit Fees										$	6,977,300			$	6,796,700
Audit-related fees			4,521,500				877,800				460,030				592,000
Tax fees			840,600				591,500				1,659,700				1,389,000
Total		$	11,460,800			$	7,369,000			$	9,097,030			$	8,777,700

 

Audit Fees — Consist of fees for professional services provided in connection with the annual audit of the Company’s consolidated financial statements; the reviews of the Company’s quarterly results of operations and reports on Form 10-Q; the rendering of an opinion pursuant to Section 404 of the Sarbanes-Oxley Act of 2002; and the services that an independent auditor would customarily provide in connection with audits of the Company’s subsidiaries, other regulatory filings, and similar engagements for each fiscal year shown, such as attest services, consents, and reviews of documents filed with the SEC.

 

Audit-Related Fees — Consist of fees for services that are reasonably related to the performance of the audit or review of the Company’s financial statements, including fees for the performance of audits and attest services not required by statute or regulations; audits of the Company’s employee benefit plans; due diligence activities related to mergers, acquisitions, and investments; contractor’s license compliance procedures; and accounting consultations about the application of generally accepted accounting principles to proposed transactions.

 

Tax Fees — Consist of fees for tax compliance, tax planning, and tax advice. Corporate tax services encompass a variety of permissible services, including technical tax advice related to U.S. and international tax matters; assistance with foreign income and withholding tax matters; assistance with sales tax, value added tax, and equivalent tax related matters in local jurisdictions; preparation of reports to comply with local tax authority transfer pricing documentation requirements; and assistance with tax audits.

37

---

COMPENSATION COMMITTEE REPORT

 

The HR&CCompensation Committee of the Board of Directors reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with the Company’s management. Based on such review and discussion, the HR&CCompensation Committee recommended to the Board of Directors that thisthe Compensation Discussion and Analysis be included in the Proxy Statement. The Board has approved that recommendation.

 

Linda Fayne Levinson,Peter J. Robertson, Chair

John F. Coyne

Ralph E. Eberhart

 

COMPENSATION DISCUSSION AND ANALYSIS (“CD&A”)

 

Executive Summary

 

The Company continued its strong performance during fiscal 2013. The Company posted an 11.6% increase in earnings to $423.1 million on revenues of $11.8 billion (an 8.5% increase in revenues over the prior year). Cash flow from operations was $448.5 million (a 49.6% increase over the previous year) and the Company’s year-end backlog was $17.2 billion (an 8.2% increase over the previous year). The Company’s financial condition at September 27, 2013 was also strong, as evidenced by cash of $1.3 billion, working capital of $2.2 billion, and a very low debt-to-equity ratio of 0.10-to-1. These positive developments were reflected in the Company’s one-year total shareholder return (“TSR”) as of September 30, 2013, which was 44% and the 54th percentile compared to the Company’s industry peer group (described below), and the three-year TSR as of September 30, 2013, which was 15% and the 69th percentile compared to that peer group.Introduction

 

This Compensation Discussion and Analysis (“CD&A”) describes the compensation of our named executive officers (“NEOs”) during fiscal 2016. Our NEOs for fiscal 2016 were:

Mr. Steven J. Demetriou, Chairman and Chief Executive Officer (“CEO”)

Mr. Kevin C. Berryman, Executive Vice President and Chief Financial Officer (“CFO”)

Mr. Joseph G. (“Gary”) Mandel, President, Petroleum & Chemicals

Mr. Terence D. Hagen, President, Aerospace & Technology

Mr. Robert V. Pragada, President, Buildings & Infrastructure

Fiscal 2016 Highlights

As one of the world’s largest and most diverse providers of technical professional and construction services, we operate with a pay-for-performance philosophy in a challenging, highly competitive, and rapidly evolving global environment. During fiscal 2016, we continued to implement our initiatives intended to improve operational efficiency and reduce costs, which are expected to result in savings of approximately $260 million to $270 million per year. The Company’s compensation actions relatingCompany also continued to deliver strong cash flow, which allowed us to repurchase $153 million of shares during fiscal 2013 were2016.

For fiscal 2016, we redesigned our short-term incentive plan to reinforce our commitment to profitable growth and effective cash management with specific measures and targets assigned to each participant based on their respective role in the organization. In line with our financial results for fiscal 2016 and consistent with itsour pay-for-performance philosophy, payouts to the NEOs under our Management Incentive Plan ranged from 47.5% of target to 102.5% of target depending on the participant’s role in the Company.

Our Executive Compensation Philosophy

Our vision is to provide superior customer value through a long-term, relationship-based approach and solid returns to our shareholders through growth. The Compensation Committee has a compensation philosophy that drives this vision by attracting motivating, and retaining highly qualified employees and motivating them to deliver value to our customers and shareholders. Accordingly, our executive compensation program is intended to:

Reward executives for superior annual Company performance through a short-term cash incentive program that places a substantial component of pay at risk;

Retain senior management through the use of long-term equity-based and other incentives; and

Encourage executives to have an equity stake in the Company.

Our Executive Compensation Program and Practices

Our Compensation Committee believes that our executive compensation program is appropriately designed to advance shareholder interests through effective performance-based incentives with retention features. The key components and associated purposes of our compensation program are as follows:

Base Salary — Provides the security of a competitive engineeringfixed cash payment for services rendered.

Short-Term Incentives — Motivate superior annual performance by tying payout to achievement against pre-established goals.

Long-Term Equity Incentives — Retain executives and construction industrymotivate them to build shareholder value over the life of the grants.

We remain committed to executive compensation practices that drive performance and maintainingthat align the interests of our leadership team with the interests of our shareholders. Below is a pay for performance culture in which incentives are tiedsummary of best practices that we have implemented and practices we avoid with respect to the Company’s short- and long-term performance. During 2013, the HR&C Committee evaluated alternative formscompensation of incentive awards to support its compensation philosophy and, consistent with 2012, decided to use a mix of short- and long-term incentives tied to Company performance. The long-term incentive awards were split between options and performance share units (“PSUs”). These PSUs use two metrics to determine payout: the Company’s TSR compared to that of an industry peer group; and the Company’s net earnings growth. The structure and terms of these awardsour NEOs because we believe they are described below. In addition, as described below, during 2013, the Company evaluated the composition of its comparator peer group, which is used for analyzing executive compensation and for computing relative TSR for the PSUs, which resultednot in the peer group being expanded by adding several companies and deleting one company that was acquired.best interests of our Company or our shareholders.

WHAT WE DO		WHAT WE DO NOT DO
Pay for Performance— A significant majority of our executives’ target compensation is performance based on and tied to pre-established performance goals aligned with our short- and long-term objectives.		No Tax Gross-Ups— We do not have tax reimbursements or gross-ups (other than for tax equalization for expatriates, normal relocation expenses or spousal travel for approved business purposes). See “— Other Benefits and Policies —Perquisites” below.
Compensation Recoupment Policies— We have a clawback policy that applies when inaccurate financial statements have affected incentive award payments to executive officers. This policy is further described under “— Clawback Policy” below.		No Pension Plans or Special Retirement Programs for Executive Officers— We do not have a pension plan or supplemental retirement plan for executive officers.
Stock Ownership Guidelines— Our Board has established robust stock ownership guidelines applicable to our Board members and executives as described under “— Stock Ownership Guidelines” below.		No Perquisite Programs— We do not offer executive perquisite programs such as Company-provided autos or auto allowances (except for expatriates), or payment of club dues.
Thorough Compensation Benchmarking— The Compensation Committee reviews publicly available information to evaluate how our NEOs’ compensation compares to that of executives in comparable positions at other companies as described under “—Assessing Compensation Competitiveness” below.		No Speculative Trading— Board members and executive officers are prohibited from short-selling our stock and buying or selling puts and calls of our stock.
Independent Compensation Consultant— The Compensation Committee benefits from its use of an independent compensation consulting firm, which provides no other services to the Company.		No Hedging— Board members and executive officers are prohibited from engaging in hedging transactions that could eliminate or limit the risks and rewards of owning our stock.

WHAT WE DO		WHAT WE DO NOT DO
Annual Pay for Performance Review— With the help of its independent compensation consultant, the Compensation Committee annually analyzes the difficulty of meeting our performance goals and the alignment of realizable pay and performance to ensure that our incentive programs are working as intended.		No Use of Jacobs Stock as Collateral for Margin Loans— Board members and executive officers are prohibited from using our stock as collateral for any margin loan.

Our Compensation Program Emphasizes Long-Term Incentives

 

As reflected in the charts below, performance-based equity continues to represent the majority of the total direct compensation earned by our CEO and other named executive officers’ totalNEOs. Total direct compensation (base,refers to base salary, short-term incentive compensation (measured by actualexpected bonus earnedopportunity for the fiscal year), and equity).long-term equity incentive compensation.

 

Shareholder Engagement and Say-on-Pay

 

38

---

Other significant elementsOur relationship with our shareholders is an important part of the Company’s success. In addition to our regular investor relations engagements, we meet with many of our institutional stockholders to discuss our corporate strategy, executive compensation program that continueprograms, corporate governance and other topics of interest to reinforce shareholder alignment, its long-term retentionour shareholders. These engagement efforts allow us to better understand our shareholders’ priorities and perspectives, and provide us with useful input concerning our corporate strategy and what the HR&C Committee considers best practices are the following:

The Company’sour compensation and corporate governance practices. At our 2016 annual incentive compensation plan continues to provide for payoutmeeting of earned bonusesshareholders, over a three-year period, subject to a requirement of continued employment;

The Company does not grant and does not maintain any80% of the following for named executive officers:

severance or employment agreements,

tax reimbursements or gross-ups (other than tax equalization for expatriates or normal relocation expenses),

supplemental retirement plans, or

executive perquisites such as personal use of airplanes, Company-provided autos and/or auto allowances (except for expatriates), or club dues;

The Company has a clawback policy that applies when inaccurate financial statements have affected incentive award payments to executive officers (the policy is described below);

The Company’s securities trading guidelines preclude the named executive officers from transactions involving puts or calls, short sales, and margin purchases or pledges of Company stock;

The ratio of the CEO’s total compensation (base pay, bonus, and long-term incentives) to that of the next highest paid named executive officer is not disproportionate (the ratio was approximately 2.7 to 1 for fiscal 2013); and

The HR&C Committee’s independent compensation consultant performs no services for the Company other than those that support the needs of the HR&C Committee.

The HR&C Committee believes that the fiscal 2013 executive compensation program has been appropriately designed to advance shareholder interests through effective performance-based incentives with multi-year retention features. At the 2012 and 2013 annual meetings, over 96% of shares voted were in favor of the advisory resolution concerning the compensation of the CEO and other named executive officers, as described in the Compensation Discussion and Analysis, the compensation tables, and the accompanying narrative disclosure contained in the Proxy Statement for those meetings. The HR&C Committee carefully considered these results and input received from shareholders and decided to continue with the same overall compensation program for fiscal 2013.

The HR&C Committee has authority for all compensation decisions for the executive officers of the Company. This CD&A discusses and analyzes compensation decisions for fiscal 2013 for the named executive officers identified below. Additional information regarding the compensation of these officers is found in the Executive Compensation tables below. The fiscal 2013 named executive officers are:

Craig L. Martin, President and Chief Executive Officer;

John W. Prosser, Jr, Executive Vice President, Finance and Administration;

Thomas R. Hammond, Executive Vice President, Operations;

George A. Kunberger, Executive Vice President, Global Sales and Marketing; and

Gregory J. Landry, Executive Vice President, Operations.

On November 21, 2013, the Company reassigned the operational duties of Mr. Landry at his request. Those duties have been assigned to other Executive Vice Presidents—Operations within the Company. As a result of this reassignment, the Board determined that, effective as of November 21, 2013, Mr. Landry is no longer one of the Company’s executive officers.

39

---

The key components of the Company’s compensation strategy can be summarized as follows:

Component of Compensation		Primary Purpose
Base Salary		Provides the security of a competitive fixed cash payment for services rendered.
Annual Incentive Compensation		Motivates superior annual performance by tying payout to achievement against pre-established annual financial goals. The award also promotes retention as it is paid in three annual installments and is contingent on continued service through each payment date.
Long-Term Equity Incentives •  Performance Share Units •  Stock Options (time-based vesting)		Retains and motivates executives to build shareholder value over the life of the grants. •  The number of Company shares, if any, ultimately delivered depends on the Company’s TSR compared to its industry peer group and on the Company’s net earnings growth. •  Options have value only if Jacobs’ stock price appreciates.
Other Benefits		Provides basic benefits generally consistent with those offered to all employees.

Compensation Philosophy, Objectives, and Processcompensation.

 

Philosophy and Objectives — The Company delivers engineering, design, architecture, scientific and system consulting, operations, maintenance, and construction services to customers located throughout the world. The Company employs approximately 66,000 people located in 25 countries. The Company’s vision is to provide superior customer value through a long-term, relationship-based approach. The Company in turn strives to provide superior returns to its shareholders through growth in earnings per share and by attracting, motivating, and retaining highly qualified employees and developing relationships with its employees to motivate them to deliver value to customers and shareholders. Because of the importance of long-term customer relationships to the Company, retention of key executives is considered particularly important. In this regard, because significant differences in compensation between executives can negatively affect retention, the Company limits the variability of compensation and provides retention-enhancing features in its programs.Compensation Decision Process

 

The HR&C Committee’s compensation philosophy is to provide a compensation program for executives that:

Enables the Company to attract, motivate, and retain highly qualified executives by offering competitive compensation;

Rewards executives for superior annual performance through a performance-based cash incentive bonus program that, as further described below, places a substantial component of pay at risk by providing that no bonus is payable until a predetermined financial return is met;

Delivers the majority of compensation through long-term, performance-based equity awards;

Provides retention and future performance incentives through the deferral of a portion of the annual incentive plan payouts and the use of long-term equity-based incentives;

Encourages executives to have an equity stake in the Company; and

Aligns the interests of the Company’s executives with shareholders’ interests.

40

---

Applying its philosophy, the HR&CCompensation Committee has established executive compensation programs that reward superior performance, have consequences for underperformance, and are competitive when compared to competing companies. The HR&C Committee does not set predetermined targets for compensation compared to the industry peer group it uses to assess compensation levels in external markets, but uses the industry peer group data as a reference point. The HR&C Committee believes that a mix of both cash and equity incentives is appropriate, as cash incentives reward executives for near term results, while equity incentives motivate executives to increase shareholder value over the long term. The intent is to provide a strong link between pay and the Company’s performance, while attracting and retaining key executives.

A significant portion of executive compensation is tied directly to the value of the Company’s common stock. In addition, executives are expected to have a meaningful ownership interest in the Company, and the HR&C Committee regularly reviews their holdings against pre-established executive ownership guidelines. The HR&C Committee carefully manages equity compensation to provide competitive rewards that are commensurate with long-term results, while limiting dilution to shareholders.

The Compensation Decision Process — The HR&C Committee may, from time to time, directly retainretains the services of independent consultants and other experts to assist in fulfilling its responsibilities. The HR&CCompensation Committee currently engages the services of Frederic W. Cook & Co., IncInc. (the “Independent Consultant”), a national executive compensation consulting firm, to review and provide recommendations concerning all of the components of the Company’s executive compensation program.programs. The Independent Consultant performs services solely on behalf of the HR&CCompensation Committee and has no relationship with the Company or management except as it may relate to performing such services. The HR&CCompensation Committee has assessed the independence of the Independent Consultant pursuant to the rules of the U.S. Securities and Exchange Commission (the “SEC”)SEC and the New York Stock ExchangeNYSE and concluded that the Independent Consultant is independent and no conflict of interest exists that would preventwith respect to the services provided by the Independent Consultant from independently representingto the HR&CCompensation Committee.

 

The Company’sDuring fiscal 2016, our executive team, including Steve Demetriou, Kevin Berryman, and Lori Sundberg, our CEO, worksCFO and Senior Vice President, Global Human Resources, respectively, worked with the HR&CCompensation Committee to help ensure that the design of executive compensation is conservative, competitive, ethical, and

aligned with the Company’s values. HeThe executive team also regularly reviewsreviewed the compensation of the most highly compensated employees across the Company, excluding himself,except as to their own compensation, with the Compensation Committee to help ensure consistency of compensation, for all key employees, and providesprovide information and makes recommendations regarding these other executives. Compensationmake recommendations. For fiscal 2016, compensation decisions for the named executive officers for fiscal 2013NEOs (other than our CEO) were made by the HR&CCompensation Committee after consultation with the CEO. DecisionsCEO, and the compensation decision with respect to our CEO pay werewas approved by the full Board upon recommendation from the HR&CCompensation Committee.

 

Assessing Compensation Competitiveness —

The HR&CCompensation Committee, with the help of the Independent Consultant, annually compares each element of compensation to that of an industry peer group. In previous years, the criteria for inclusion in the industry peer group were (1) companies that are generally construction and engineering firms that are direct competitors with the Company for business and executive management talent and (2) companies that are generally one-half to two times the size of the Company in revenues and market capitalization. These selection criteria took into account both financial characteristics as well as industry and complexity of operations.

For fiscal 2013,2016, as part of its annual review, the review by the HR&C Committee of the composition of the industry peer group, the HR&CCompensation Committee determined that the utility of this analysis would be enhanced if the number of peer group companies was expanded. In order to achieve this objective, the HR&C Committee expanded the criteria for consideration for inclusion in the peer group to includeshould be comprised of (1) construction and engineering firms that are direct competitors with the Company for business and executive management talent or (2) companies that provide consulting or technical services to government and large commercial clients. In addition, to be included, a company would need to be generally within one-third to three times the size of the Company in terms of revenue and market capitalization at the time of their original selection. As a result, four companies were added to the peer group—Northrop Grumman, Raytheon, EMCOR, and Quanta Services. In addition, the Shaw Group was removed from the group due to its acquisition by Chicago Bridge & Iron.

 

41

---

Similar to prior years, in order to assess compensation competitiveness as compared to the expanded peer group, the Independent Consultant utilized comparative data disclosed in publicly available proxy statements, other documents filed with the SEC, and data from a comprehensive database of pay information developed by Willis Towers Watson regarding the industry specific and general industry group in which the Company competes for talent.

 

The following chart shows the current industry peer group used for benchmarking in fiscal 2016, including relevant size and performance data to illustrate the Company’s relative position. The Company is at the 64th percentile measured by revenue, the 64th percentile measured by market capitalization, and the 79th percentile measured by number of employees. The Company’s net income for fiscal 2013 was also above the median of the industry group at the 64th percentile.

 

Most Recently Available Four Quarters ($M)	Most Recently Available Four Quarters ($M)																	Market Capitalization as of 9/30/13 ($M)					Most Recently Available Four Quarters ($M)																	Market Capitalization
Revenues	Revenues					Net Income						Employees											Revenues					Net Income						Employees						as of 9/30/16 ($M)
Raytheon																									$23,909			Raytheon			$2,156			AECOM Tech			92,000			Raytheon			$40,171
Northrop Grumman																									$23,629			Northrop Grumman			$2,048			Northrop Grumman			65,000			Northrop Grumman			$38,206
Fluor		$	28,083			Northrop Grumman		$	2,007			Computer Sciences			90,000			Raytheon		$	24,854				$18,035			Fluor			$   326			Raytheon			61,000			L-3 Communications			$11,642
Northrop Grumman		$	24,980			Raytheon		$	1,934			Northrop Grumman			68,100			Northrop Grumman		$	21,986
Raytheon		$	24,275			Computer Sciences		$	1,150			Raytheon			67,800			Fluor		$	11,569
AECOM Tech																									$17,811			Leidos			$   280			Computer Sciences			59,000			Computer Sciences			$  7,332
Chicago Bridge & Iron																									$11,960			Quanta Services			$   248			Jacobs			54,900			Fluor			$  7,146
Jacobs																									$10,964			Jacobs			$   210			Chicago Bridge & Iron			42,000			Leidos			$  6,482
L-3 Communications																									$10,452			KBR			$   186			Fluor			38,758			Jacobs			$  6,256
Quanta Services																									$  7,345			EMCOR			$   182			L-3 Communications			38,000			AECOM Tech			$  4,569
Computer Sciences		$	13,787			L-3 Communications		$	794			Jacobs			66,500			L-3 Communications		$	8,466				$  7,232			AECOM Tech			$     90			EMCOR			29,000			Quanta Services			$  4,228
L-3 Communications		$	12,903			Fluor		$	541			URS			54,000			Computer Sciences		$	7,656
Jacobs		$	11,818			Jacobs		$	423			L-3 Communications			51,000			Jacobs		$	7,649
URS		$	11,303			Leidos*		$	421			AECOM Tech			46,800			Chicago Bridge & Iron		$	7,273
Leidos*		$	10,761			Chicago Bridge & Iron		$	347			Fluor			41,193			Quanta Services		$	5,859
Chicago Bridge & Iron		$	9,632			Quanta Services		$	334			Leidos*			40,000			Leidos*		$	5,556
AECOM Tech		$	8,153			URS		$	299			CH2M Hill			30,000			KBR		$	4,831
EMCOR																									$  7,155			Computer Sciences			$     67			Quanta Services			24,500			EMCOR			$  3,625
CH2M Hill*																									$  5,367			CH2M Hill*			$       3			CH2M Hill*			22,000			Chicago Bridge & Iron			$  2,892
Leidos																									$  5,237			L-3 Communications			$  (91	)		KBR			22,000			KBR			$  2,156
KBR		$	7,418			AECOM Tech		$	239			KBR			27,000			URS		$	4,026				$  4,284			Chicago Bridge & Iron			$(575	)		Leidos			19,000			CH2M Hill*			$1,994
Quanta Services		$	6,379			KBR		$	232			Chicago Bridge & Iron			26,800			AECOM Tech		$	3,152
EMCOR		$	6,366			Foster Wheeler		$	141			EMCOR			26,000			EMCOR		$	2,625
CH2M Hill		$	6,048			EMCOR		$	124			Quanta Services			17,800			Foster Wheeler		$	2,585
Foster Wheeler		$	3,185			CH2M Hill		$	99			Foster Wheeler			12,893			CH2M Hill		$	1,786
75th Percentile		$	13,566					$	731						53,250					$	8,263				$17,867						$   292						59,500						$  8,409
Median		$	10,196					$	341						40,597					$	5,707				$  8,898						$   184						38,379						$  5,525
25th Percentile		$	6,638					$	234						26,850					$	3,371				$  6,708						$     51						23,875						$  3,442
Jacobs Percentile**			64	%					64	%					79	%					64	%			58%						58%						67%						50%

 

Source: Standard & Poor’s Compustat

*

In September 2013, SAIC Inc. (theCH2M Hill’s equity is not publicly traded. Represents internal company that was partvaluation as of the original fiscal 2013 peer group) changed its name to Leidos Holdings, Inc. and spun-off a portion of its business into a new publicly traded entity called Science Applications International Corporation. The revenue, net income, employees and market capitalizaiton data for Leidos represents combined data for Leidos and Science Applications International Corporation.2/28/16.

**

Jacobs’ percentile rankingPercentile rank calculation includes the Company as part of the industry peer group.Jacobs.

Source:

Standard & Poor’s Capital IQ.

For fiscal 2017, as part of its annual review, the Compensation Committee, in consultation with the Independent Consultant, determined to maintain the current peer selection criteria as used in fiscal 2016 and, based on that criteria, added the following companies to the peer group: Booz Allen Hamilton, SNC-Lavalin and Textron.

 

Compensation Elements

 

InDuring fiscal 2013,2016, the HR&CCompensation Committee utilized findings by the Independent Consultant to determine that the Company’s executive compensation program continued to be both reasonable in relation to competitive pay levels and appropriate in supporting business objectives and a positive performance-based culture.

 

As part of the review process supporting determination of fiscal 20132016 compensation, the HR&CCompensation Committee reviewed data with respect to the position of the Company’s fiscal 20132016 compensation program for its named executive officersNEOs against the industry peer group described above and survey data.data described above. In addition, in order to evaluate the value of compensation and benefits received by the named executive officers,NEOs, the HR&CCompensation Committee’s evaluation took into account the aggregate equity holdings of each named executive officer.NEO. This review indicated that the CEO’s and the othereach of our NEO’s total direct compensation was within the ranges offered byrelative to our industry peers and was commensurate with the Company’s relative scope and complexity versus the peer group.

 

Base Salary — In setting executive officer base salaries for fiscal 2013, the HR&C Committee considered the CEO’s recommendations as to each executive officer except himself. The HR&C Committee utilized

 

42

---

In setting the base salaries of our NEOs, the Compensation Committee utilizes information provided by its Independent Consultant to determine the competitiveness of base salaries compared to the industry peer group and generalmarket survey data. Given the HR&C Committee’s conclusion that the performance of the CEO and the other named executive officers was uniformly good, pay differences were based largely on relative levels of responsibility and tenure in each officer’s respective role. The salaries of the four named executive officers other than the CEO are relatively consistent, reflecting the HR&C Committee’s conclusion that the named executive officers had relatively comparable responsibilities and skills and contributed equally to the success of the Company.

 

An additional factor considered by the HR&CThe Compensation Committee in determining base pay levels for the named executive officers isalso considers the fact that the Company continues to provide fewer ancillary benefits and other perquisites as compared to the Company’s industry peer group. This stems from the HR&CCompensation Committee’s belief that focusing on the three core elements of compensation (base salary incentive compensation, and equity-basedshort- and long-term incentive compensation) results in a more transparent and easier- to-administereasier-to-administer pay system, and is more consistent with the Company’s culture.

For example, the Company’s currently available retirement program in the U.S. consists solely of a tax-qualified 401(k) plan, with matching contributions, and a non-qualified salary deferral plan that provides non-enhanced market returns. More than 60%half of the industry peer group provides additional retirement programs. Similarly, while most of the industry peer group provides some form of auto benefits, aircraft benefits, and/or club dues benefits, the Company provides none (except for an auto allowance as part of an expatriate expense allowance). The value of these additional benefits provided by industry peer group companies is significant. Excluding relocation and expatriate expenses for international assignments, the average total annual reported cost by industry peer group companies for these benefits* is approximately $823,000 and the median is approximately $245,000 per named executive officer. The Company’s average and median levels are $24,149 and $21,208 per named executive officer. Consistent with this approach, base pay levels for named executive officersour NEOs have generally been higher than the median.

 

* Values areAfter considering market data from our peer group and from other market survey information, and in light of the SummaryCompany’s fiscal 2015 financial performance, the Compensation TablesCommittee determined that the base salaries of our NEOs (other than Mr. Pragada who joined the Company in recent proxy filings underFebruary 2016) for fiscal 2016 would remain at the columns for “Change in Pension Value and Non-Qualified Deferred Compensation Earnings” and “All Other Compensation”.same levels as fiscal 2015.

The following table shows salary decisions for the named executive officers, reflecting increases ranging from 0% to approximately 3.57%.

Officer		2012				2013				Percent Change
Craig L. Martin		$	1,250,000			$	1,250,000				—	%
Thomas R. Hammond		$	735,000			$	740,000				0.68	%
George A. Kunberger		$	720,000			$	740,000				2.78	%
Gregory J. Landry		$	710,000			$	725,000				2.11	%
John W. Prosser, Jr.		$	700,000			$	725,000				3.57	%

 

Short-Term Incentives

For fiscal 2016, we redesigned our short-term incentive plan to reinforce our commitment to profitable growth and effective cash management with specific measures and targets assigned to each participant based on their respective role in the organization. This new Management Incentive Compensation — The named executive officers, all the other executive officers,Plan provides for payouts to eligible employees when certain Company-wide and selected otherbusiness unit-specific target goals are achieved. For fiscal 2016, select officers and managers of the Company, including the NEOs, were eligible to participate in the Management Incentive Bonus Plan, (the “Bonus Plan”), which currently covers over 475covered approximately 360 employees. There are several key differences between

The performance goals that apply to each NEO and the Bonus Plan and typical bonus plans for senior executives at other companies:

No bonuses are payable unlessrelated payouts vary depending on the participant’s role within the Company generates a minimum returnand which line of business or business units the participant led throughout the performance year. For example, if an NEO takes on equity; the size of the bonus pool increases as the return in excess of the minimum increases;

Because an acceptable return on equity is a precondition to any bonus award, the “target bonus” percentage for a senior executive is not set at a percentage of base salary based on general market data. Instead, the potential bonus is derived from forecasted earnings for the year and the Bonus Plan participants receive a portion of those earnings above the minimum return;

The bonus pool payout mechanism reinforces the Company’s focus on growing the Company as a whole by minimizing bonus distinctions among persons at similar levels of responsibility. Generally senior

43

---

management, other than the CEO, have the same bonus sharing percentage (as a percentage of base pay) and participants below the senior level receive bonuses that are generally 80%, 60%, 40% or 20% of the senior management bonus percentage (other than that of the CEO); and

Unlike the majority of annual incentive plans, the Bonus Plan contains a retention element because bonuses are paid in three equal annual installments commencing after the close of the plan year. A participant must generally work for an additional two years from the initial payment date to receive the full bonus awarded.

The following discussion summarizes the terms of the Bonus Plan, as they applied in fiscal 2013 and the preceding years.

The Bonus Plan is funded through a bonus pool that is based on the degree to which the Company’s consolidated pre-tax, pre-bonus earnings (“Earnings”) exceed a threshold earning amount. Specifically, within 90 days after the beginning ofdifferent management responsibilities during the fiscal year, the HR&Cestablished line of business and business unit goals for those new responsibilities are aligned accordingly on a pro-rata basis to align with the time period the executive led that business. The bonus targets, weighting factors, payout amounts and actual results for the Management Incentive Plan for fiscal 2016 are shown in the following charts, as are the minimum thresholds and maximum payout amounts for each of these goals:

Named Executive Officer		MIP Target as a % of Salary				MIP Target Amount
Steven J. Demetriou			150	%		$	1,950,000
Kevin C. Berryman			100	%		$	750,000
Joseph G. Mandel			100	%		$	699,996
Terence D. Hagen			100	%		$	600,000
Robert V. Pragada			100	%		$	675,000

For fiscal 2016, the Compensation Committee approves a specific percentage calledestablished the “Hurdle Rate.” This Hurdle Rate is then multiplied by the Company’s consolidated shareholders’ equity in its mid-year financial statements, resulting in an Earnings floor (“Floor”). No amount is accrued into the bonus pool unlessfollowing relative weighting and until Earnings exceed the Floor. When Earnings exceed the Floor, a portionperformance metrics,which reflect Mr. Pragada taking on additional leadership responsibilities of the excess is set aside to fund the bonus pool pursuant to an accrual rate approved by the HR&C Committee. As seen below, the accrual rate has been 15% to 20%Building and Infrastructure business and Mr. Mandel taking on additional leadership responsibilities for the last five years.Mining and Minerals business beginning July 1, 2016.

 

In addition to the first accrual rate, the HR&C Committee also establishes a secondary, higher accrual rate that applies to Earnings that exceed the Floor by a specified amount. Generally, the higher accrual percentage is triggered when Earnings are twice the Floor.

As may be seen from this description, a critical component of the Bonus Plan is the yearly determination of the Hurdle Rate, which determines the amount of Earnings the Company must earn before any bonus is payable. As in prior years, the HR&C Committee’s determination for fiscal 2013 of the Hurdle Rate focused on what it considered a reasonable base pre-tax, pre-bonus return on equity, taking into account economic and market conditions and the fact that the Bonus Plan is the funding vehicle for bonuses for the Company. These factors have led the HR&C Committee to historically choose Hurdle Rates that avoid extremely high payouts, even in exceptionally good years, and to provide for some payouts in years that are expected to be challenging, provided the Hurdle Rate return is met.

The table below shows the Hurdle Rates and accrual rates set for the past five years.

		2009				2010				2011				2012				2013
Return on equity (Hurdle Rate) before any Bonus Plan funding			16.0	%			10.0	%			12.0	%			10.0	%			10.0	%
Sharing ratio with respect to Earnings above Floor (Hurdle Rate times stockholders’ equity)			15.0	%			20.0	%			15.0	%			20.0	%			20.0	%
Higher Hurdle Rate that must be met before higher sharing ratio applies			32.0	%			20.0	%			16.8	%			20.0	%			20.0	%
Sharing ratio with respect to Earnings in excess of Floor using higher Hurdle Rate (higher Hurdle Rate times shareholders equity)			25.0	%			25.0	%			33.0	%			30.0	%			30.0	%

At the end of the fiscal year and after the bonus pool has been determined, a portion of the bonus pool is set-aside to fund bonus payments to non-Bonus Plan participants. Over the past five years, the portion of the bonus pool that has been set aside for employees who are not Bonus Plan participants has been 25% of the total bonus pool. Individuals who receive “discretionary” bonuses from these funds are employees who have been recommended by senior management for recognition of exemplary performance during the fiscal year.

44

---

Finally, the portion of the bonus pool remaining after the allocation to other employees is distributed among the Bonus Plan participants using the weighting formula described in the next paragraph. The Bonus Plan provides that, as to each participant, amounts in excess of 50% of the bonus amount produced by this formula can be allocated on a discretionary basis; however, other than as noted below for fiscal 2010, for over a decade the pool has been allocated entirely by this weighting formula.

The weighting mechanism takes each participant’s salary for the year and multiplies it by a factor ranging from 0.5 to 6.0. A participant’s share of the bonus pool is then equal to the percentage that his or her weighted salary bears to the total weighted salaries of all participants. So, for example, a participant whose salary is weighted by a factor of four will receive a bonus percentage that is four times more than the percentage of a participant with a weighting factor of one. The salary of the CEO received a weighting factor of six and the other named executive officers all receive a weighting factor of five.

The actual Bonus Plan awards to the named executive officers in fiscal 2013 were as follows:

		2012 Award				2013 Projected Award*				2013 Actual Award
Named Executive Officer
Craig L. Martin		$	1,443,136			$	1,562,500			$	1,457,264
Thomas R. Hammond		$	700,476			$	764,400			$	715,740
George A. Kunberger		$	679,384			$	748,800			$	706,218
Gregory J. Landry		$	669,764			$	738,400			$	694,810
John W. Prosser, Jr.		$	660,144			$	728,000			$	688,460

Performance Measure		Steven J. Demetriou				Kevin C. Berryman				Joseph G. Mandel				Terence D. Hagen				Robert V. Pragada
Consolidated Operating Profit1			80	%			80	%			50	%			50	%			50	%
Average Operational Working Capital2			20	%			20	%
Aerospace & Technology
Operating Profit3															30	%
DSO4															20	%
Buildings & Infrastructure
Operating Profit3																			2.50	%
DSO4																			1.70	%
Petroleum & Chemicals
Operating Profit3											26.30	%
DSO4											17.50	%
Industrial
Operating Profit3																			22.50	%
DSO4																			15	%
Industrial Field Services
Operating Profit3																			2.50	%
DSO4																			1.70	%
Life Sciences
Operating Profit3																			2.50	%
DSO4																			1.60	%
Mining and Minerals
Operating Profit3											3.70	%
DSO4											2.50	%

 

*

(1)

Based on internal plan atConsolidated operating profit means total gross margin less selling, general and administrative expenses (“SG&A”), as adjusted for acquisitions and special items as approved by the startCompensation Committee.

(2)

Average operational working capital is calculated by dividing (i) the average of the year.Company’s operational working capital for five quarters ended September 30, 2016 (as of the end of each quarter) by (ii) fiscal 2016 revenues. Operational working capital is defined as operational current assets less operational current liabilities. For these purposes, (i) operational current assets means total current

assets, less cash and cash equivalents and (ii) operational current liabilities means total current liabilities, less notes payable and the current portion of long-term debt.

(3)

Line of business operating profit means total gross margin earned by the respective line of business less the SG&A for that line of business and less allocated corporate SG&A expenses, including cash and equity incentive compensation.

(4)

The line of business DSO means, for each line of business, the average accounts receivable for the five quarters ended September 30, 2016 (as of the end of each quarter) divided by its 12-month trailing revenues multiplied by 365 days.

 

The following chart listsare the bonus pool sharing and awardperformance levels forachieved in fiscal 2016 against the CEO and named executive officers overperformance criteria established by the past five years:Compensation Committee:

 

		2009				2010				2011				2012				2013
Actual pre-tax pre-bonus return on average equity			27.3	%			15.9	%			17.8	%			18.0	%			17.8	%
Pool in millions		$	40.3			$	43.1	(1)		$	43.1			$	56.4			$	62.3
Actual incentive—percent of base pay—CEO			85.1	%			57.8	%			53.2	%			115.5	%			116.6	%
Actual incentive—percent of base pay—other NEOs			85.1	%			57.8	%			53.2	%			96.2	%			97.2	%

						Performance Levels 5
						Minimum				Target				Maximum
Performance Measure		2016 Actual Results				(25% Payout)				(100% Payout)				(200% Payout)
Consolidated Operating Profit1		$	516.9M			$	448.0M			$	560.0M			$	728.0M
Average Operational Working Capital2			7.06	%			7.60	%			7.10	%			6.10	%
Aerospace & Technology
Operating Profit3		$	205.4M			$	149.3M			$	186.6M			$	242.6M
DSO4			56				62				58				50
Buildings & Infrastructure
Operating Profit3		$	170.2M			$	133.9M			$	167.4M			$	217.6M
DSO4			64				62				58				50
Petroleum & Chemicals
Operating Profit3		$	124.3M			$	121.0M			$	151.3M			$	196.6M
DSO4			77				73				68				58
Industrial
Operating Profit3		$	55.6M			$	47.4M			$	59.2M			$	77.0M
DSO4			59				62				58				50
Industrial Field Services
Operating Profit3		$	53.3M			$	34.4M			$	43.0M			$	55.9M
DSO4			59				62				58				50
Life Sciences
Operating Profit3		$	34.4M			$	19.6M			$	24.5M			$	31.9M
DSO4			42				52				49				42
Mining and Minerals
Operating Profit3		$	6.6M			$	19.3M			$	24.2M			$	31.4M
DSO4			59				62				58				50

 

(1)

As describedRefer to footnote 1 in the 2010 CD&A, the bonus computation for the CEO and the other named executive officers fully took into account a pre-tax charge to earnings relating to an unfavorable court judgment with respect to a contract entered into by one of the Company’s subsidiaries prior to its acquisition by the Company. A portion of that charge was excluded for other participants.immediately preceding table.

 

(2)

Refer to footnote 2 in immediately preceding table.

As previously noted, unlike most annual incentive plans,

(3)

Refer to footnote 3 in immediately preceding table.

(4)

Refer to footnote 4 in immediately preceding table.

(5)

Minimum pays out at 25% of target, Target pays out at 100% of target, and Maximum pays out at 200% of target, with the actual bonus payment being calculated by linear interpolation for achievement of goals other than those specified.

Based on our actual performance and applying the bonus targets, weighting factors, and performance metrics established by the Compensation Committee, the actual Management Incentive Plan awards made pursuant to the BonusNEOs for fiscal 2016 were as follows:

		2016 Target MIP Award				2016 Actual MIP Award
Named Executive Officer
Steven J. Demetriou		$	1,950,000			$	1,575,600
Kevin C. Berryman		$	750,000			$	606,351
Joseph G. Mandel		$	699,996			$	337,891
Terence D. Hagen		$	600,000			$	615,290
Robert V. Pragada		$	675,000			$	566,743

Award amounts under the Management Incentive Plan are paid in three annual installments, contingent upon continued employment withcalculated by taking the Company. Atemployee’s eligible earnings for the discretionfiscal year times their target under the Management Incentive Plan times the payout factor of the HR&C Committee, there is a potential exception toperformance group associated with their role. As an example, the continued service requirement inamount of Mr. Berryman’s award ($606,351) was determined by taking his annual earnings of $750,000 times his Management Incentive Plan target of 100% times the case of participants who retire from the Company on good terms (as discussed under “Executive Compensation-Compensation under Various Termination Scenarios”payout factor for his performance group (Corporate), below)which was 80.8%.

Equity-Based Compensation

 

The HR&C Committee took certain steps in fiscal 2013 in order to ensure that the bonus payments to the named executive officers were fully deductible as performance-based compensation under Section 162(m). The payment of bonuses to named executive officers was conditioned upon the Company’s achieving a performance goal of $100 million of net earnings. If this goal was met, the named executive officers became entitled to a bonus of twice base salary, subject to the complete discretion of the HR&C Committee to reduce the bonus to a lesser amount. The performance goal was met and the HR&C Committee exercised its discretion to compute the actual bonus payout to the named executive officers in accordance with the methodology described above.

45

---

Equity-Based Compensation — The HR&C Committee believes that long-term equity incentives should comprise the majority of compensation for the Company’s senior management. In deciding upon the design and magnitude of long-term incentives, the HR&CCompensation Committee is guided by several factors: (1) the design must be alignedalignment with shareholder value;interests; (2) the design must be readily understoodease of understanding by participants; and (3) the design must be retentive.retentiveness. In applying these criteria, the HR&CCompensation Committee takes into account market data, information and recommendations from its Independent Consultant, and information provided by management, including recommendations by the CEO with respect to the magnitude of equity incentives for executive officers other than himself. Other than off-cycle awards for new hires, promotions or promotions,retention grants, the HR&CCompensation Committee historically has awardedawards equity incentives in May or June. This year, equity incentives were awarded at a regular meetingNovember of the HR&C Committee held on May 23, 2013.each year.

 

20132016 Equity Awards — Similar

The Compensation Committee approved fiscal 2016 awards of performance share units (“PSUs”), stock options, and restricted stock to prior years, for 2013,our NEOs constituting 60%, 20% and 20%, respectively, of each NEO’s award. The fiscal 2016 grants were made by the HR&CCompensation Committee after considering emergingits consideration of what the committee believed to be best practices, competitive market data, results of the successfulCompany’s recent say-on-pay votes, and discussions with shareholders, decided that approximately 40% ofshareholders.

Stock options vest ratably over a four-year period. Restricted stock are subject to certain restrictions on transfer and obligations to surrender the value ofrestricted stock to the long-term incentives would continue to be deliveredCompany, as set forth in the form of time-vested stock options and the remaining approximately 60% would be delivered in the form of PSUs.applicable award agreement (collectively, “forfeiture restrictions”). These forfeiture restrictions lapse ratably over a four-year period.

 

The PSUs are performance-based restricted stock units that are earned if the executive remains employed over thea three-year performance period andif the specified performance metrics are met. The HR&CFor fiscal 2016, the Compensation Committee chose to useused two different performance metrics, which are equally weighted and correlate executive performance with increases in shareholder value. The vesting of one-halffirst half of the PSUs isvest based on the Company’s TSRtotal shareholder return (“TSR”) compared to that of its industry peer group (described below) over a three-year period starting on November 19, 2015 (the “TSR Based Award”). The vesting ofStarting in fiscal 2016, the other one-halfsecond half of the PSUs isvest based on the Company’s net earnings per share (“EPS”) growth over a three-year period (starting on the first day of the Company’s third quarter of fiscal 20132016 and ending on the last day of fiscal 2018) (the “EPS Based Award”). Previously, the second half of the PSUs had vested based on the Company’s second quarternet earnings growth. Earnings per share is a key indicator of fiscal 2016),a company’s performance for stockholders and the “Net Earnings Based Award”.predominant metric used in equity awards of the Company’s peers and its use is intended to improve the focus on profitability and financial discipline.

For the TSR Based Award,Awards issued in fiscal 2016, the number of restricted stock units to be issued on the maturity date of May 23, 2016 (the “Maturity Date”)November 19, 2018 is equal to the target number of restricted stock units multiplied by a TSR Performance Multiplier. TSR is a measure of athe Company’s share price appreciation, withtaking into account reinvestment of any dividends.dividends paid during the performance period. The TSR“TSR Performance MultiplierMultiplier” is calculated based upon the Company’s TSR over thea three-year period immediately following the TSR award date of May 23, 2013 (the “TSR Performance Period”) when ranked against the TSR of theother companies in the industry peer group over the same period based on the following chart:

 

Company TSR Rank		TSR Performance Multiplier
Below 30th percentile		0%	0	%
30th percentile		50%	50	%
50th percentile		100%	100	%
70th percentile or above		150%	150	%

For example, if the target number of shares of restricted stock to be issued as a TSR Based Award is 50,000 and the Company’s TSR ranked at the 50th percentile compared to the industry peer group over the TSR Performance Period, then 50,000 restricted stock units would vest on the Maturity Date.

 

The TSR Performance Multiplier will be determined by linear interpolation for percentile rankings other than those listed in the chart.

The industry peer group used for purposes of the TSR Based Awards consists of the Company’s peer companies as described earlier (other than CH2M Hill as it does not have publicly traded equity securities). While SAIC Inc. was originally part of this peer group, during fiscal 2013, SAIC Inc. changed its name to Leidos Holdings, Inc. and spun-off a portion of its business (treated as a cash dividend that was reinvested in Leidos Holdings Inc.) into a new publicly traded entity called Science Applications International Corporation. For purposes of computing TSR, the TSRbeginning stock price is the average stock price over the 30 calendar day period ending on the award calculations are being made with reference to Leidos Holdings, Inc.

date, and the ending stock price is the average stock price over the 30 calendar day period ending on the last day of the performance period.

 

46

---

For the Net EarningsEPS Based Award,Awards issued in fiscal 2016, the number of restricted stock units to be issued on the Maturity Datematurity date of November 19, 2018 is based on the Company’s net earningsEPS growth over three fiscal periods, consisting2016, 2017 and 2018. The number of (1)restricted stock units to be issued equals the period from the third quarter of fiscal 2013 through the second quarter of fiscal 2014, (2) the period from the third quarter of fiscal 2013 through the second quarter of fiscal 2015, and (3) the period from the third quarter of fiscal 2013 through the second quarter of fiscal 2016. For the first fiscal period,sum of: (i) an amount, not less than zero, equal to one-third of the target number of restricted stock units is multiplied by a Net Earnings Growthan EPS Performance Multiplier for that period. Forperiod determined based upon the secondgrowth in the Company’s EPS (“EPS Growth Rate”) from fiscal period,2015 to fiscal 2016; (ii) an amount, not less than zero, equal to two-thirds of the target number of restricted stock units is multiplied by a Net Earnings Growthan EPS Performance Multiplier determined based upon the Compound Annual EPS Growth Rate for that period, andfiscal 2017 as compared to fiscal 2015, minus the numberamount of additional shares to be awarded (if any) is determined by subtracting any shares earned in the first fiscal period. For the third fiscal period,pursuant to clause (i); and (iii) an amount, not less than zero, equal to the target number of restricted stock units is multiplied by a Net Earnings Growthan EPS Performance Multiplier determined based upon the Compound Annual EPS Growth Rate for that period andfiscal 2018 as compared to fiscal 2015, minus the numberamount of additional shares to be awarded (if any) is determined by subtracting any shares earned pursuant to clauses (i) and (ii).

The “Compound Annual EPS Growth Rate” for purposes of clauses (ii) and (iii) above means the EPS Growth Rate which when multiplied twice times fiscal 2015 EPS (in the case of clause (ii)) or three times fiscal 2015 EPS (in the case of clause (iii)) results in the previous twoa number equal to fiscal periods.2017 EPS and fiscal 2018 EPS, respectively. The Net Earnings Growth Multiplier“EPS Performance Multiplier” is determined by reference to the following table based upon the average growth in the Company’s Net Earnings (defined below)EPS Growth Rate or Compound Annual EPS Growth Rate over the relevant fiscal periods:

Average Net Earnings Growth		Net Earnings Growth Performance Multiplier
Less than 5%				0%
5%				50%
10%				100%
15%				150%
20% or greater				200%

For example, ifperiods. The Compensation Committee set these metrics based on the target number sharesCompany’s plan at the start of restricted stock to be issued as a Net Earnings Based Award is 50,000the fiscal year, which reflected the headwinds in client end markets, and the Company’s average Net Earnings growth over each of the three fiscal periods is 15%, then 75,000 restricted stock units would vest on the Maturity Date. This amount is calculated by adding the result for the first fiscal period (50,000 x 1/3 x 150% = 25,000), the result for the second fiscal period (50,000 x 2/3 x 150% - 25,000 = 25,000),pro-active efforts to align its operations and the result for the third fiscal period (50,000 x 150% - 25,000 - 25,000 = 25,000).reduce costs.

EPS Growth Rate or Compound Annual EPS Growth Rate		EPS Performance Multiplier
Less than 4%			0	%
4%			50	%
7.5%			100	%
15%			150	%
20% or greater			200	%

 

The Net Earnings GrowthEPS Performance Multiplier will be determined by linear interpolation for growth ratesEPS Growth Rates or Compound Annual EPS Growth Rates other than those listed in the chart.

 

For example, if the target number of shares of restricted stock to be issued as an EPS Based Award is 50,000 and the EPS Growth Rate from fiscal 2015 to fiscal 2016, and the Compound Annual EPS Growth Rate for fiscal 2017 as compared to fiscal 2015 and for fiscal 2018 as compared to fiscal 2015, are each 7.5%, then 50,000 restricted stock units would vest on the maturity date. This amount is calculated by adding the result of the calculation described in clause (i) above (50,000 shares x 1/3 x 100% = 16,666 shares), the result of the

calculation described in clause (ii) above (50,000 shares x 2/3 x 100% — 16,666 shares = 16,667 shares), and the result of the calculation described in clause (iii) above (50,000 shares x 100% — 16,666 shares — 16,667 shares = 16,667 shares).

“Net Earnings”EPS” for any fiscal period is computed by dividing Net Earnings by the weighted average number of shares of the Company’s common stock outstanding during the period. “Net Earnings” means the net earnings attributable to the Company as reported in its consolidated financial statements for such period determined in accordance with accounting principles generally accepted in the United States (“GAAP”) (A) as may be adjusted in the Committee’s sole discretion, to eliminate the effects of charges for restructurings,(i) costs associated with restructuring activities, as determined in accordance with GAAP, regardless of whether the Company discloses publicly the amount of such restructuring costs or the fact that the Company engaged in restructuring activities during the periods restructuring costs were incurred; and (ii) gains or losses associated with discontinued operations, unusual, nonrecurring or extraordinary items and all items of gain, loss or expenseas determined in accordance with GAAP, but limited to the first reporting period an operation is determined to be unusual, nonrecurringdiscontinued and all subsequent periods (i.e., there will be no retroactive application of the adjustment); and (B) as adjusted for all gains or extraordinarylosses associated with events or transactions that the Compensation Committee has made a finding are unusual in nature, infrequently occurring and otherwise not indicative of the Company’s normal operations, and therefore, not indicative of the underlying Company performance. For these purposes, such events or related to the disposaltransactions could include: (i) settlements of claims and litigation; (ii) disposals of operations including a disposition of a segmentsignificant amount of a business the Company’s assets, (iii) losses on sales of investments, and (iv) changes in laws and/or related to a change in accounting principle. However, if the named executive officer is, at the relevant time, a “covered employee” (as defined under Section 162(m)), such adjustments shall be made by the HR&C Committee but only to the extent consistent with Section 162(m).

regulations.

 

47

---

To determine the dollar value of awards to be granted to the named executive officersNEOs and consistent with its prior process for determining the magnitude of awards, the HR&CCompensation Committee examined data with respect to grant values at the 25^th, 50^th,25th, 50th, and, 75^th75th percentiles among industry peer group companies. It also considered the size of the awards previously granted to the named executive officers,NEOs, which reflected the HR&CCompensation Committee’s previous evaluation of the magnitude of awards considered necessary in order to align with competitive levels. The determination of award levels in fiscal 20132016 also took into account the HR&CCompensation Committee’s review of the CEO’s performance and that of the other named executive officersNEOs (and the CEO’s recommendations with respect to the other named executive officers)NEOs), as well as the Company’s overall performance in what continues to be challenging economic circumstances. Taking all these factors into account,

A summary of the HR&C Committee determined that the following grants should be awarded.equity awards granted in fiscal 2016 is provided below:

Named Executive Officer		Grant Date				Performance Share Units (2)				Stock Options				Restricted Stock (3)
Steven J. Demetriou			11/19/2015				89,846				98,739				29,949
Kevin C. Berryman			11/19/2015				22,462				24,685				7,488
Joseph G. Mandel			11/19/2015				22,462				24,685				7,488
Terence D. Hagen			11/19/2015				17,548				19,285				5,850
Robert V. Pragada			2/1/2016	(1)			19,934				21,387				32,201

 

(1)		2013
CEO Stock Options			118,000
CEO Performance Share Units*			79,000
Other NEO Stock Options			36,000
Other NEO Performance Share Units*			24,000	Mr. Pragada received these awards in connection with his joining the Company on February 1, 2016.

*(2)

Represents the target payout shares as described inunder “Executive Compensation—2013Compensation — 2016 Grants of Plan Based Awards” below.

(3)

Represents the time-vested restricted stock granted under the Company’s 1999 Stock Incentive Plan, as amended and restated (the “Stock Incentive Plan”).

 

Grant Process —

As in previous years, the exercise price of stock option grants was set at 100% of the closing market price of a share of the Company’s common stock on the date the HR&CCompensation Committee met and determined the

grants. New hire awards and relocation and retention grants made to executive officers at other times are determined at the closest pre-established meeting date of the HR&CCompensation Committee. Additionally, the HR&CCompensation Committee has delegated certain limited authority to the CEO to make equity grants in accordance with the rules established by the HR&CCompensation Committee for non-executive officers throughout the year. As soon as administratively practicable after a new hire, promotion, or retention warrants an equity grant, the CEO reviews and approves the award. All awards are granted on the date the CEO takes action and, if in the form of stock options, awards are priced based upon the closing market price of a share of common stock on that date. The HR&CCompensation Committee periodically receives a reportreports of the CEO’s actions each year.actions. In fiscal 2013,2016, no awards were made on a date other than when the HR&CCompensation Committee met or on the date the CEO approved an award.

 

Summary of Compensation Decisions — The following table summarizes the results of the HR&C Committee’s compensation actions for fiscal 2013. The HR&C Committee believes that its actions are appropriate, taking into account its uniformly favorable evaluation of the performance of the named executive officers, the desire to retain executive talent, and the external competitive compensation data. The values shown below for equity awards (which are calculated accounting values) will only represent realized value in the event the Company meets its’ success metrics.

		2013 Total Compensation		2013 Total Compensation		2013 Total Compensation
		% Change from 2012(1)		vs Median(1)		vs 75th Percentile
CEO		19%		11%		(37)%
Other NEOs		15%		35%		2%

(1)

Total compensation is based on values as reported in the Summary Compensation Table (salary, actual bonus, grant date value of long-term incentives, Pension/Deferred Compensation, and All Other Compensation values). It excludes relocation/expatriate allowances. As noted below, Mr. Hammond’s relocation/expatriate allowance has been terminated in connection with his relocation to the United States.

Several factors account for the relative positions shown in the table. The CEO’s position is a result of a multi-year effort by the Board of Directors to ensure the CEO’s total compensation is competitive with the industry peer group. Substantially all of the year over year increase for the CEO was in the form of incentive pay or performance-based equity awards which further align his outcomes to Company performance and shareholder

48

---

interests. Increases and market position for the named executive officers reflect the scope and complexity of their roles, the competitive environment for talent and Company performance. Similar to the CEO, the majority of the increase was in the form of incentive pay or performance-based equity compensation.

Other Benefits and Policies

 

Benefits Programs —

With the exception of its executive deferral plans, which are generally available to most of the Company’s senior management, and certain expatriate arrangements, the Company provides executives with the same benefit plans offered to staff employees. During fiscal 2013,2016, the CEO and other named executive officersNEOs were eligible forto participate in the Company’s 401(k) plan. The plan provides maximum contributions within legal guidelines and a match equal to 50% of the first 6% of eligible pay (currently $255,000)$265,000). This is the same plan the Company offers to all full-time employees in the United States. NeitherNone of the CEO nor the other named executive officersNEOs participated in any defined benefit retirement or supplemental retirement benefit plan.

 

The Company has qualified employee stock purchase plans in which all employees meeting certain minimum eligibility requirements in certain countries are eligible for participation.to participate. The Company adopted a safe-harbor plan design in 2006 that provides for a 5% discount from the closing price of a share of common stock at the end of each purchase period. The safe-harbor plan results in no accounting cost to the Company. Several executive officers participate in the employee stock purchase plans. The employee stock purchase plans offered by the Company are open to most employees in North America and Europe.

 

Employees,Select employees, including named executive officers,NEOs, meeting certain compensation minimums may elect to participate in the Company’s Executive Deferral Plansexecutive deferral plans (“EDPs”) whereby a portion of salary and bonus is deferred and paid to the employee at some future date. The EDPs 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. Participant contributions are credited with earnings and losses based upon the actual experience of the deemed investments selected by Participants, except in the case of certain EDPs that no longer accept participant deferrals.participants. See “Executive Compensation-NonqualifiedCompensation —Nonqualified Deferred Compensation” below for further description of the EDPs.

 

Perquisites — The CEO and other named executive officers

Our NEOs are eligible to participate in the same benefits as those offered to staff employees and, exceptincluding relocation benefits. Executives may have spousal travel paid for requirements uniqueby the Company only when it is for an approved business purpose, in which case a related tax gross-up is provided.

In connection with the Company’s decision to expatriate assignments andmove its corporate headquarters to Dallas, Texas, the Company provided relocation benefits generallyto employees, including Mr. Demetriou and Mr. Berryman, who have no special executive perquisites.relocated to Dallas. Mr. Hagen relocated to Tullahoma, Tennessee, where his key Aerospace and Technology leadership team is located. The terms and conditions of each expatriate assignment are determined utilizing data provided by outside consultants. The assignment package is designedstandard relocation benefits include reimbursement for house-hunting trips, various expenses related to coverinterim-living arrangements, the cost of moving household goods as well as home-sale and home-buying assistance, tax assistance, and relocation housing, and the differential in the cost of goods and services in the host country. The Company also provides tax equalization and compensation for hardship conditions. During fiscal 2010 and fiscal 2011, the Company had one NEO, Mr. Hammond, with an international assignment agreement approved by the HR&C Committee that is described more fully under “Executive Compensation-Narrative Disclosureallowances to Summary Compensation Table and Grants of Plan Based Awards Table” below. Mr. Hammond’s assignment conditions were standard for employees on assignment with accompanying family members. As of September 1, 2011, Mr. Hammond’s international assignment package ended as a result of his relocation back to corporate headquarters in Pasadena, California.cover miscellaneous expenses.

 

Payments atUpon Termination or Change in Control —

Pursuant to Mr. Demetriou’s offer letter, upon a termination by the Company without “cause” or Mr. Demetriou’s resignation for “good reason,” in each case, during his first two years of employment, Mr. Demetriou is entitled to receive a lump-sum payment equal to 12 months of base salary and his target annual

bonus. Mr. Demetriou’s rights to receive severance payments cease after the second anniversary of his start date. If Mr. Demetriou is terminated by the Company without “cause” or Mr. Demetriou resigns for “good reason” during his first three years of employment, certain restricted stock units granted to Mr. Demetriou pursuant to his offer letter, to the extent unvested, will become subject to accelerated vesting.

Pursuant to the terms of Mr. Pragada’s offer letter, upon a termination by the Company without “cause” or Mr. Pragada’s resignation from the Company for “good reason”, in each case during the first year of his employment, Mr. Pragada is entitled to receive a lump-sum payment equal to 12 months of base salary. Mr. Pragada’s rights to receive severance payments cease after February 1, 2017, the first anniversary of his start date with the Company.

The Company does not haveis also party to an employment agreementsagreement with its named executive officers. Mr. Mandel, which was entered into in connection with the completion of a transaction pursuant to which the Company acquired Mr. Mandel’s former employer, pursuant to which he may become entitled to a severance payment equal to 12 months of base salary and the continuation costs of 12 months of COBRA premiums upon a termination by the Company without “cause,” conditioned upon his execution and non-revocation of a general release in favor of the Company.

The only other benefits that named executive officersNEOs may be entitled to upon termination of their employment, consistent with those offered to all participants, are a potential payout under the BonusManagement Incentive Plan upon retirement whichand prorated vesting at retirement of PSU awards granted during fiscal 2014 and thereafter. In the case of a participant whose employment is at the HR&C Committee’s discretion, and a potential benefit with respect to awards under the Stock Incentive Plan. The terms of stock options and Market Stock Units (“MSUs”) awarded to the named executive officers in fiscal 2011 and the PSUs awarded to the named executive officers in fiscal 2012 and fiscal 2013 provide for accelerated vestingterminated in the event of death or Disability (as defined in the Stock Incentive Plan.). ThePlan), the terms of our stock options and restricted stock grants provide for accelerated vesting while PSU awards would remain outstanding, with the final determination of the payout, if any, with respect to the restricted stock units isgenerally determined at the end of the three-year performance period.

period as described in more detail below.

 

49

---

In addition to these provisions, the terms of stock options, and MSUsrestricted stock and PSUs provide for potential double trigger equity acceleration upon certain terminations following a Change in Control (as defined in the Stock Incentive Plan). The Company provides for this type of equity acceleration as a means of focusing executive officers on shareholder interests when considering strategic alternatives. These provisions only apply in the event a Change in Control is consummated, the equity is assumed by the acquiror and then only if the employee incurs a Qualifying Termination (as defined in the Stock Incentive Plan), generally a termination by the employee for good reason“good reason” or by the Company other than for cause“cause” within two years of the Change in Control.

 

Further explanation of the terminationthese provisions may be found in the text accompanying “Executive Compensation-Compensationunder “Compensation Under Various Termination Scenarios” below.

 

Stock Ownership Guidelines

 

The Company has established stock ownership guidelines for its executive officers. The HR&CCompensation Committee reviews each executive’s holdings with respect to these ownership guidelines each year. As of the Record Date, the NEOs either exceeded their respective guidelines or were within the five-year period from their hire or promotion date at the end of fiscal 2013,which they are expected to meet the CEO’s stock ownership significantly exceededguidelines. See the six times-base-salary multiple and the other named executive officers significantly exceeded their guideline of a three times-base-salary multiple.discussion under “Corporate Governance — Stock Ownership Guidelines” above for further information.

 

Company Policy on Hedging or Pledge of Stock

 

The Company’s trading policies contain stringent restrictions on transactions in Company stock by executive officers.officers and directors. All trades by executive officers and directors must be pre-cleared. The executive officers and directors are prohibited from any trading in puts or calls of Company stock, from engaging in short sales of Company stock, and from hedging or pledging Company stock or using it as loan collateral or as part of a margin account.

Clawback Policy

 

At its September 2011 meeting, the HR&CThe Compensation Committee adoptedhas approved a clawback policy with respect to incentive awards to executive officers awarded subsequent to fiscal 2011.officers. The Company is authorized to recover a portion of incentive awards paid within three years of a financial statement that is inaccurate due to material noncompliance with any financial reporting requirement under the securities laws. Recovery applies to the extent a lesser amount would have been paid under the restated financial statement.

 

Tax Considerations

 

Section 162(m) of the Internal Revenue Code limits deductions for certain executive compensation in excess of $1,000,000 in any fiscal year.year, excluding from this limit compensation that qualifies as “performance-based compensation” under Section 162(m). Section 162(m) provides that performance-based compensation that meets the requirements of Section 162(m) is not subject to the deductibility limits described in the preceding sentence. The Company attempts to structure its compensation arrangements to permit deductibility under Section 162(m), unless the benefit of such deductibility is outweighed by the need for flexibility or the attainment of other corporate objectives. Since corporate objectives may not always be consistent with the requirements for full deductibility, the HR&CCompensation Committee is prepared, if it deems appropriate, to enter into compensation arrangements under which payments may not be deductible under Section 162(m). Thus, deductibility is not the sole factor used by the HR&CCompensation Committee in ascertaining appropriate levels or modes of compensation. Section 162(m) provides that performance-based compensation is not subject to the deductibility limits described in the preceding paragraph.

 

Compensation Risk Assessment

 

As part of its oversight, the HR&CCompensation Committee considers the impact of the Company’s executive compensation program, and the incentives created by the compensation awards that it administers, on the Company’s risk profile. The HR&CCompensation Committee also retained the Independent Consultant to conduct a risk assessment of the Company’s compensation policies and practices.

 

50

---

In addition, the Company reviews all of its compensation policies and practices, including the incentives that they createincentive plan design and factors that may affect the likelihood of excessive risk taking, to determine whether they present a significant risk to the Company. The Company’s pay philosophy provides an effective balance in cash and equity mix, short- and longer-term performance periods, financial and non-financial performance, and allows for the HR&CCompensation Committee’s discretion. Further, policies to mitigate compensation-related risk include ownership guidelines, vesting periods on cash and equity, insider-trading prohibitions, and independent HR&CCompensation Committee oversight.

 

Based on this review, both for our executive officers and all other employees, the Company and the Independent Consultant concluded that the risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company, and the HR&CCompany. The Compensation Committee reviewed and approved this conclusion.

51

---

EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The table below summarizes the total compensation earned in fiscal 2011, 2012,2016, 2015 and 20132014 for the Company’s Principal Executive Officer, Principal Financial Officer and three other most highly compensatednamed executive officers (collectively, the “NEOs”)(or NEOs).

 

Name and Principal Position		Fiscal Year				Salary ($) (1)				Stock Awards ($) (2)				Option Awards ($) (3)				Non- Equity Incentive Plan Compen- sation ($)				Change in Pension Value and Non- qualified Deferred Compensation Earnings ($) (4)				All Other Compen- sation ($)				Total ($)
Craig L. Martin			2013				1,263,221				4,482,065	(5)			2,448,830				1,457,264				5,728				7,500	(6)			9,664,608
President and Chief Executive Officer			2012				1,260,216				3,882,500				1,536,550				1,443,136				3,418				7,500				8,133,320
			2011				1,222,960				3,131,150				847,575				646,186				5,110				7,350				5,860,331
John W. Prosser, Jr.			2013				708,650				1,361,640	(5)			747,101				688,460				37,550				7,500	(6)			3,550,901
Executive Vice President Finance and Administration			2012				686,539				1,164,750				553,158				660,144				22,410				7,500				3,094,501
			2011				652,308				1,081,670				282,525				346,814				33,500				7,350				2,404,167
Thomas R. Hammond			2013				756,165				1,361,640	(5)			747,101				715,740				13,708				16,164	(7)			3,610,518
Executive Vice President - Operations			2012				762,428				1,164,750				553,158				700,476				8,181				133,894				3,322,887
			2011				729,067				1,081,670				282,525				378,100				12,229				259,154				2,742,745
George A. Kunberger			2013				740,775				1,361,640	(5)			747,101				706,218				—				7,500	(6)			3,563,234
Executive Vice President - Global Sales and Marketing			2012				735,144				1,164,750				553,158				679,384				—				7,500				3,139,936
			2011				685,873				1,081,670				282,525				357,446				—				7,350				2,414,864
Gregory J. Landry			2013				724,061				1,361,640	(5)			747,101				694,810				26,260				7,500	(6)			3,561,372
Executive Vice President - Operations			2012				715,115				1,164,750				553,158				669,764				16,072				7,500				3,126,359
			2011				662,308				1,081,670				282,525				352,130				24,663				7,350				2,410,646

Name and Principal Position		Fiscal Year				Salary ($) (1)				Bonus ($) (2)				Stock Awards ($) (3)				Option Awards ($) (4)				Non- Equity Incentive Plan Compen- sation ($) (5)				Change in Pension  Value and  Non- qualified Deferred Compen- sation Earnings ($)				All Other Compen- sation ($) (6)				Total ($)
Steven J. Demetriou(7)			2016				1,300,000								5,252,561				1,274,661				1,575,600				—				94,591				9,497,413
Chairman and Chief Executive Officer			2015				125,000				5,650,000				5,022,034				1,328,068				—				—				41,506				12,166,608
Kevin C. Berryman(7)			2016				750,000				875,000				1,313,194				318,669				606,351				—				165,831				4,029,045
Executive Vice President and Chief Financial Officer			2015				544,832				1,500,000				6,239,286				922,213				174,816				—				46,112				9,427,259
Joseph G. Mandel			2016				699,996				375,000				1,313,194				318,669				337,891				—				35,507				3,080,257
President, Petroleum and Chemicals			2015				699,996				—				405,175				591,720				224,604				—				7,950				1,929,445
			2014				699,996				—				830,820				454,296				118,244				—				7,950				2,111,306
Terence D. Hagen(7)			2016				620,414				425,000				1,025,914				248,958				615,290				—				68,941				3,004,517
President — Aerospace and Technology
Robert V. Pragada(7)			2016				428,365				500,000				2,068,349				260,000				566,743				—				—				3,823,457
President — Building and Infrastructure

 

(1)

Consists of base salary earned during the fiscal year including any time off with pay and cash-pay-out of accrued time off in excess of the Company’s limit. Mr. Pragada began employment with the Company on February 1, 2016 with a starting annual salary of $675,000. In fiscal 2016, Mr. Pragada earned a pro-rata portion of his salary based on his start date.

(2)

In fiscal 2016, Messrs. Berryman, Mandel and Hagen received cash transition bonuses of $375,000, $375,000 and $425,000, respectively, to ensure ongoing stability and continuity of leadership during the CEO transition period that began in fiscal 2015. For Mr. Berryman, the $875,000 also consists of a $500,000 hiring bonus necessary to recruit him from his prior employer. For Mr. Pragada, the $500,000 represents a hiring bonus he received upon starting with the Company in February 2016.

(3)

Represents the grant date fair value of stock awards granted under the Stock Incentive Plan in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718,Stock Compensation (“FASB ASC Topic 718”). Please refer to Note 2, Significant Accounting Policies, of Notes to Consolidated Financial Statements included in the Company’s 20132016 Annual Report on Form 10-K for a discussion of the assumptions used to calculate these amounts.

(3)(4)

Represents the grant date fair value of options granted (adjusted, however, to exclude the effects of estimated forfeitures) under the Stock Incentive Plan in accordance with FASB ASC Topic 718. Please refer to Note 2, Significant Accounting Policies, of Notes to Consolidated Financial Statements included in the Company’s 20132016 Annual Report on Form 10-K for a discussion of the assumptions used to calculate these amounts.

(4)

Consists of interest credited under the Company’s nonqualified Executive Deferral Plans in excess of 120% of the AFR.

(5)

The value ofRepresents the performance share unitannual incentive awards (“PSUs”) atearned in fiscal 2016 as determined by the grant date assuming the highest level of performance conditions are achieved is $7,809,348 for Mr. Martin and $2,372,460 each for Messrs. Prosser, Hammond, Kunberger, and Landry.Compensation Committee.

(6)

Consists solelyIn fiscal 2016, Mr. Berryman received $7,950 and Messrs. Mandel and Hagen received $8,100 in 401(k) company matching contributions. Some of Company contributions to the 401(k) Plan.NEOs also received relocation assistance in connection with various moves on behalf of the Company. For Mr. Demetriou, the relocation assistance totaled $93,661 in fiscal 2016 and totaled

$41,506 in fiscal 2015. The 2016 relocation expenses consist of $62,367 of non-taxable relocation items (e.g., movement of household goods, lodging, home sale), $17,288 for house hunting trips and interim living, $600 for miscellaneous relocation expenses and $13,406 for associated gross-up payments. The 2015 relocation expenses consist of $3,010 for movement of household goods, $12,951 for house hunting trips, $9,750 for miscellaneous relocation expenses and $15,795 for associated gross-up payments. Additionally, $930 was included for Mr. Demetriou’s spouse’s travel for business purposes in fiscal 2016. For fiscal 2016, Mr. Berryman received relocation assistance which totaled $157,474, including $141,994 for home purchase, $10,225 for house hunting trips and $5,255 for associated gross-up payments; and totaled $46,112 for fiscal 2015, consisting of $28,491 of non-taxable relocation items (e.g., movement of household goods, final move expenses), $3,569 for miscellaneous relocation expenses, $9,281 for home purchase assistance and $4,771 for an associated gross-up payment. Additionally, $407 was included for Mr. Berryman’s spouse’s travel for business purposes in fiscal 2016. For Mr. Mandel, $27,407 was included for company provided travel assistance for him and his family in connection with a family emergency. For Mr. Hagen, the relocation assistance totaled $60,841, which consisted of $10,568 for miscellaneous relocation expenses, $33,455 of non-taxable relocation items (e.g., movement of household goods, final move expenses), $8,922 for house hunting trips and interim living, and $7,896 for associated gross-up payments.

(7)

Consists of $7,500 Company contributions to the 401(k) Plan as well as $8,664Messrs. Demetriou and Berryman were named executive officers beginning in relocation costs. The relocation costs were paidfiscal 2015. Messrs. Hagen and Pragada first became named executive officers in connection with Mr. Hammond’s repatriation from England effective September 1, 2011 pursuant to the Relocation/Repatriation Agreement dated September 29, 2011.fiscal 2016.

52

---

Amounts listed under the column “Non-Equity Incentive Plan Compensation” represent the annual incentive awards earned in fiscal 2011, 2012, and 2013 as determined by the HR&C Committee at its November 17, 2011, November 15, 2012 and November 20, 2013 meetings, respectively. As noted above under “Compensation Discussion and Analysis—Compensation Elements—Incentive Compensation,” the amount paid for 2013 consists of one third of the award earned in fiscal 2013, one third of the award earned in 2012, and one third of the award earned in 2011. Similarly, the amount paid in 2012 consists of one third of the award earned in fiscal 2012, one third of the award earned in 2011, and one third of the award earned in 2010. The amount paid in 2011 consists of one third of the award earned in fiscal 2011, one third of the award earned in 2010, and one third of the award earned in 2009.

 

20132016 Grants of Plan Based Awards

 

The table below summarizes all grants of plan based awards to the NEOs in fiscal 2013:2016:

 

						Estimated Future Payouts Under Non-equity Incentive Plan Awards (1)								Estimated Future Payouts Under Equity Incentive Plan Awards (2)												All Other Option Awards: Number of Shares of Stock or Units (#) (3)				Exercise or Base Price of Option Awards ($/Sh)(3)				Grant Date Fair Value of Stock and Option Awards ($) (4)
Name		Grant Date				Threshold ($)		Target ($)				Maximum ($)		Threshold (#)				Target (#)				Maximum (#)
Craig L. Martin			05/23/13																								118,000				55.00				2,448,830
			05/23/13												—				39,500	(5)			79,000	(5)											2,172,500
			05/23/13												—				39,500	(6)			59,250	(6)											2,309,565
									1,562,500
John W. Prosser, Jr.			05/23/13																								36,000				55.00				747,101
			05/23/13												—				12,000	(5)			24,000	(5)											660,000
			05/23/13												—				12,000	(6)			18,000	(6)											701,640
									728,000
Thomas R. Hammond			05/23/13																								36,000				55.00				747,101
			05/23/13												—				12,000	(5)			24,000	(5)											660,000
			05/23/13												—				12,000	(6)			18,000	(6)											701,640
									764,400
George A. Kunberger			05/23/13																								36,000				55.00				747,101
			05/23/13												—				12,000	(5)			24,000	(5)											660,000
			05/23/13												—				12,000	(6)			18,000	(6)											701,640
									748,800
Gregory J. Landry			05/23/13																								36,000				55.00				747,101
			05/23/13												—				12,000	(5)			24,000	(5)											660,000
			05/23/13												—				12,000	(6)			18,000	(6)											701,640
									738,400

Name		Grant Date				Estimated Future Payouts Under Non-equity Incentive Plan Awards (1)												Estimated Future Payouts Under Equity Incentive Plan Awards (2)												All Other Stock Awards: Number of Shares of Stock or Units (#) (3)				All Other Option Awards: Number of Securities Underlying Options (#) (4)				Exercise or Base Price of Option Awards ($)				Grant Date Fair Value of Stock and Option Awards ($) (5)
						Thres- hold ($)				Target ($)				Max- imum (#)				Thres- hold ($)				Target (#)				Max- imum (#)
Steven J. Demetriou			11/19/2015																																98,739				42.74				1,274,661
			11/19/2015																												29,949												1,280,020
			11/19/2015																				44,923	(6)			89,846	(6)															1,920,009
			11/19/2015																				44,923	(7)			67,385	(7)															2,052,532
											1,950,000				3,900,000
Kevin C. Berryman			11/19/2015																																24,685				42.74				318,669
			11/19/2015																												7,488												320,037
			11/19/2015																				11,231	(6)			22,462	(6)															480,013
			11/19/2015																				11,231	(7)			16,847	(7)															513,144
											750,000				1,500,000
Joseph G. Mandel			11/19/2015																																24,685				42.74				318,669
			11/19/2015																												7,488												320,037
			11/19/2015																				11,231	(6)			22,462	(6)															480,013
			11/19/2015																				11,231	(7)			16,847	(7)															513,144
											699,996				1,399,992
Terence D. Hagen			11/19/2015																																19,285				42.74				248,958
			11/19/2015																												5,850												250,029
			11/19/2015																				8,774	(6)			17,548	(6)															375,001
			11/19/2015																				8,774	(7)			13,161	(7)															400,884
											600,000				1,200,000
Robert V. Pragada			02/01/2016																																21,387				39.13				260,000
			02/01/2016																												6,645												260,019
			02/01/2016																												25,556												1,000,006
			02/01/2016																				9,967	(6)			19,934	(6)															390,009
			02/01/2016																				9,967	(7)			14,951	(7)															418,315
											675,000				1,350,000

 

(1)

This amount representsAmounts represent the 20132016 projected award under the Management Incentive Bonus Plan based on the Company’s internal plan at the start of fiscal 2013.2016. See “Compensation Discussion and Analysis — Compensation—Compensation Elements — Incentive Compensation”Short-Term Incentives” above for a description of the Incentive Bonus Plan and the manner in which bonuses are computed.

(2)

RepresentsAmounts represent the target and maximum payout shares of awards of PSUs granted under the Stock Incentive Plan.

(3)

Represents the restricted stock granted under the Stock Incentive Plan. The November 19, 2015 award was based on a grant date fair value of $42.74 and the February 1, 2016 award was based on a grant date fair value of $39.13 (closing price of a share of the Company’s common stock as quoted by the NYSE Composite Transaction Report on the grant date).

(4)

Represents options granted under the Stock Incentive Plan. The exercise price is equal to the closing price of a share of the Company’s common stock as quoted by the NYSE Composite Price History on the grant date. The award was based on a grant date fair value of $20.7528 per share.for the November 19, 2015 award and the February 1, 2016 award were $12.9094 and $12.1569, respectively.

(4)(5)

Represents the grant date fair value of options, restricted stock and PSUs granted (Target Shares)(target shares) under the Stock Incentive Plan computed in accordance with FASB ASC Topic 718. Please refer to Note 2, Significant Accounting Policies, of Notes to Consolidated Financial Statements included in the Company’s 20132016 Annual Report on Form 10-K for a discussion of the assumptions used to calculate these amounts.

(5)(6)

Represents the target and maximum payout shares of the grants of the Net EarningsEPS Based Award (as defined below)above) that each NEO could earn under the Stock Incentive Plan. The award was based on a grant date fair value of $55.00.for the November 19, 2015 award and the February 1, 2016 award were $42.74 and $39.13, respectively. The number of shares ultimately issued, which could be greater or less than target, will be based on achieving specific performance conditions. Please refer to “Compensation Discussion and

53

---

Analysis— Analysis — Compensation Elements—Elements — Equity Based Compensation—2013Compensation —2016 Awards” for a discussion of how the number of shares ultimately issued will be determined.

(6)(7)

Represents the target and maximum payout shares of the grants of the TSR Based Award (as defined below)above) that each NEO could earn under the Stock Incentive Plan. The award was based on a grant date fair value for the November 19, 2015 award and the February 1, 2016 award were $45.69 and $41.97 respectively. The number of $58.47.shares ultimately issued, which could be greater or less than target, will be based on achieving specific performance conditions. Please refer to “Compensation Discussion and Analysis—Analysis — Compensation Elements—Elements — Equity Based Compensation—2013Compensation —2016 Awards” for a discussion of how the number of shares ultimately issued will be determined.

 

Narrative Disclosure to Summary Compensation Table and Grants of Plan Based Awards Table

 

Employment Agreements — The Company has no employment agreements with the NEOs. As described below, however, the Company has entered into agreements with Thomas R. Hammond relating to his assignment and relocation.

 

The Company entered into an Assignment Letter Agreement dated February 16, 2005offer letter with Thomas R. Hammond, an Executive Vice President, which was designed to maintain Mr. Hammond’s level of income and benefits through the duration of his transfer to our Reading, England office, taking into consideration the additional costs anticipatedDemetriou in connection with that transfer. Amonghim joining the Company, pursuant to which he received (i) a cash payment of $5,650,000 which must be repaid to the Company if Mr. Demetriou resigns without “good reason” or is terminated for “cause” prior to the second anniversary of his start date and (ii) a grant of RSUs with a grant value of $2,700,000, which vest in equal installments on each of the first three anniversaries of his start date, subject to Mr. Demetriou’s continued employment on the relevant vesting date and to accelerated vesting if Mr. Demetriou resigns with “good reason” or is terminated other things,than for “cause” prior to the third anniversary of his start date. In addition, if Mr. Demetriou is terminated by the Company without “cause” or he resigns for “good reason,” in each case, within two years following the Effective Date, he will be entitled to receive a lump sum payment equal to one year’s base salary and target bonus. For a description of “cause” and “good reason,” see “Compensation Under Various Termination Scenarios” below.

In addition, the Company entered into an employment agreement includedwith Mr. Mandel in connection with the completion of a goods and services differential of £2,759 per month (subjecttransaction pursuant to adjustment), housing and relocation expenses, tax equalization benefits and certain other benefits. The foregoing benefits are reflected as “All Other Compensation”which the Company acquired the executive’s former employer. Mr. Mandel’s employment agreement entitles him to a base salary, eligibility to participate in the Summary Compensation Table.Management Incentive Plan and other benefits generally made available to the Company’s employees. In addition, if Mr. Mandel’s employment is terminated by the Company without Cause, the Company will pay Mr. Mandel a severance payment equal to 12

months of base salary and the continuation cost of 12 months of COBRA premiums, subject to his execution and non-revocation of a general release in favor of the Company. For a description of “Cause,” see “Compensation Under Various Termination Scenarios” below.

 

On September 29, 2011, theThe Company and Mr. Hammond entered into an offer letter with Mr. Pragada in connection with him joining the Company. His offer letter provides for him to receive an annual base salary of $675,000 and entitles him to participate in the Management Incentive Plan with a bonus target of 100% of his base salary. In addition, pursuant to his offer letter, agreement detailingMr. Pragada received an equity award for fiscal year 2016 having an aggregate grant value equal to $1,300,000 (delivered in the termsform of 20% stock options, 20% restricted stock and 60% PSUs). To make Mr. Hammond’s relocationPragada whole for compensation that he forfeited from his prior employer, he received a cash bonus of $500,000 and repatriation from England.$1,000,000 of RSUs and will receive an additional cash bonus of $350,000 following the first anniversary of his start date. If Mr. Pragada leaves without “good reason” or is terminated for “cause,” in each case within two years following his start date, Mr. Pragada must return the total amount of the cash bonus received to the Company. For a description of “cause” and “good reason” see “Compensation Under Various Termination Scenarios” below. Mr. Pragada is also entitled to severance benefits under certain circumstances if his employment terminates in the first year after his start date. See “Compensation Under Various Termination Scenarios.” Pursuant to the terms of the agreement, any allowances and differentials provided underoffer letter, Mr. Hammond’s agreement with respect to his foreign assignment,Pragada is eligible for other benefits including his goods and services differential, automobile allowance and housing provisions, ceased on September 1, 2011. Under the Agreement, Mr. Hammond was eligible to receiveparticipation in Jacobs’ Executive Deferral Plan, relocation assistance, five weeks of paid time off and tax equalization assistance consistent with the Company’s relocation policy and his position, which amount is reflected as “All Other Compensation” in the Summary Compensation table.healthcare benefits.

54

---

Outstanding Equity Awards at 20132016 Fiscal Year End

 

The following table provides a summary of equity awards outstanding for the NEOs as of the end of fiscal 2013:

Name		Grant Date				Option Awards																Stock Awards
						Number of Securities Underlying Unexercised Options (1)								Option Exercise Price ($) (2)				Option Expiration Date				Number of Shares or Units of Stocks that Have Not Vested (#)(3)				Market Value of Shares or Units of Stocks that Have Not Vested ($) (4)				Equity Incentive Plan Awards: Number  of Unearned Shares, Units, or Other Rights that Have Not Vested (#)(5)				Equity Incentive Plan Awards: Value of Unearned Shares, Units, or Other Rights that Have Not Vested ($) (6)
						Exercisable				Unexercisable
						(#)				(#)
Craig L. Martin			6/28/07				100,000				—				56.95				6/28/14
			5/22/08				125,000				—				92.52				5/22/15
			5/28/09				125,000				—				41.18				5/28/19
			5/27/10				93,750				31,250				42.43				5/27/20				50,000				2,889,500
			5/26/11				22,500				22,500				44.91				5/26/21												55,000				3,178,450
			5/24/12				25,000				75,000				37.03				5/24/22												50,000				2,889,500
			5/24/12																												50,000				2,889,500
			5/23/13				—				118,000				55.00				5/23/23												39,500				2,282,705
			5/23/13																												39,500				2,282,705
John W. Prosser, Jr.			6/28/07				50,000				—				56.95				6/28/14
			5/22/08				50,000				—				92.52				5/22/15
			5/28/09				40,000				—				41.18				5/28/19
			5/27/10				30,000				10,000				42.43				5/27/20				6,000				346,740
			5/26/11				7,500				7,500				44.91				5/26/21												19,000				1,098,010
			5/24/12				9,000				27,000				37.03				5/24/22												15,000				866,850
			5/24/12																												15,000				866,850
			5/23/13				—				36,000				55.00				5/23/23												12,000				693,480
			5/23/13																												12,000				693,480
Thomas R. Hammond			6/28/07				40,000				—				56.95				6/28/14
			5/22/08				40,000				—				92.52				5/22/15
			5/28/09				40,000				—				41.18				5/28/19
			5/27/10				30,000				10,000				42.43				5/27/20				15,000				866,850
			5/26/11				7,500				7,500				44.91				5/26/21												19,000				1,098,010
			5/24/12				9,000				27,000				37.03				5/24/22												15,000				866,850
			5/24/12																												15,000				866,850
			5/23/13				—				36,000				55.00				5/23/23												12,000				693,480
			5/23/13																												12,000				693,480
George A. Kunberger			6/28/07				40,000				—				56.95				6/28/14
			5/22/08				40,000				—				92.52				5/22/15
			5/28/09				40,000				—				41.18				5/28/19
			5/27/10				30,000				10,000				42.43				5/27/20				15,000				866,850
			5/26/11				7,500				7,500				44.91				5/26/21												19,000				1,098,010
			5/24/12				9,000				27,000				37.03				5/24/22												15,000				866,850
			5/24/12																												15,000				866,850
			5/23/13				—				36,000				55.00				5/23/23												12,000				693,480
			5/23/13																												12,000				693,480
Gregory J. Landry			2/22/07				60,000				—				46.86				2/22/14
			6/28/07				40,000				—				56.95				6/28/14
			5/22/08				40,000				—				92.52				5/22/15
			5/28/09				40,000				—				41.18				5/28/19
			5/27/10				30,000				10,000				42.43				5/27/20				7,500				433,425
			5/26/11				7,500				7,500				44.91				5/26/21												19,000				1,098,010
			5/24/12				9,000				27,000				37.03				5/24/22												15,000				866,850
			5/24/12																												15,000				866,850
			5/23/13				—				36,000				55.00				5/23/23												12,000				693,480
			5/23/13																												12,000				693,480

Name		Grant Date				Option Awards																Stock Awards
						Number of Securities Underlying Unexercised Options (1)								Option Exercise Price ($) (2)				Option Expiration Date				Number Of Shares Or Units Of Stock That Have Not Vested (#) (3)				Market Value of Shares or Units of Stock That Have Not Vested ($) (4)				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (5)				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) (6)
						Exercisable				Unexercisable
						#				#
Steven J. Demetriou			8/17/2015				25,564				76,695				43.94				8/17/2025				75,638				3,911,997				16,065				—
			11/19/2015				—				98,739				42.74				11/19/2025				29,949				1,548,962				44,923				2,323,418
			11/19/2015																												44,923				3,485,126
Kevin C. Berryman			12/30/2014				14,333				34,667				45.16				12/30/2024				69,753				3,607,625				8,000				413,760
			12/30/2014																												8,000				413,760
			5/28/2015				4,250				12,750				43.34				5/28/2025
			6/8/2015																												9,500				0
			11/19/2015				—				24,685				42.74				11/19/2025				7,488				387,279				11,231				580,867
			11/19/2015																												11,231				871,301
Joseph G. Mandel			3/24/2011				40,000				—				48.56				3/24/2021
			5/24/2012				36,000				—				37.03				5/24/2022
			5/23/2013				27,000				9,000				55.00				5/23/2023
			5/22/2014				12,000				12,000				53.17				5/22/2024												8,000				413,760
			5/22/2014																												8,000				413,760
			12/19/2014				8,333				16,667				43.25				12/19/2024
			5/28/2015				4,250				12,750				43.34				5/28/2025
			6/8/2015																												9,500				—
			11/19/2015				—				24,685				42.74				11/19/2025				7,488				387,279				11,231				580,867
																															11,231				871,301
Terence D. Hagen			5/23/2013				9,000				3,000				55.00				5/23/2023								—
			5/22/2014				4,500				4,500				53.17				5/22/2024												3,000				155,160
			5/22/2014																												3,000				155,160
			6/8/2015				4,250				12,750				42.65				6/8/2025												9,500				—
			11/19/2015				—				19,285				42.74				11/19/2025				5,850				302,562				8,774				453,791
			11/19/2015																												8,774				680,687
Robert V. Pragada			2/1/2016				—				21,387				39.13				2/1/2026				32,201				1,665,436				9,967				515,493
			2/1/2016																												9,967				773,240

 

(1)

All stock options vest or have vested at the rate of 25% per year beginning on the first anniversary of the grant date, with the exception of the 25,000 options granted on December 19, 2014 to Mr. Mandel and 25,000 options granted on December 30, 2014 to Mr. Berryman that vest in three equal installments beginning on the grant date.

(2)

All outstanding stock options were granted under the Stock Incentive Plan and were made with an exercise price equal to the closing price of a share of the Company’s common stock as quoted by the NYSE Composite Price History on the grant date. The awards have a total term of either seven or ten years.

55

---

(3)

Represents the number of unvested shares of restricted stock granted under the Stock Incentive Plan. The awards of restricted stock vest at the expiration of fivefour years from the grant date, with the exception of (i) stock grants to Mr. LandryBerryman on May 27, 2010December 30, 2014 that vest 25% per year starting atin 40%, 40% and 20% increments on the endfirst, second and third anniversary of the second year after the award date, respectively, and (ii) stock grants to Mr. ProsserDemetriou on May 27, 2010August 17, 2015 that 67,772 shares vest 20% per yearin three equal installments beginning on the first anniversary of the grant date and the other 30,456 shares vest at the expiration of three years from the grant date.

(4)

The market value of outstanding awards of restricted stock is computed by using the closing price of a share of the Company’s common stock as quoted by the NYSE Composite Price History at September 27, 2013,30, 2016, which was $57.79.$51.72.

(5)

Represents the target number of unvested target shares of MSUs and PSUs (TSR Based Awards, EPS Based Awards and PSUs that vest based on the Company’s net earnings growth (“Net Earnings Based Awards)Awards”)) granted under the Stock Incentive Plan. The awards of MSU and PSUs vest at the expiration of three years from the grant date.

(6)

The market value of outstanding target shares of MSUs and PSUs (TSR Based Awards, EPS Based Awards and Net Earnings Based Awards) is computed by using the closing price of a share of the Company’s common stock as quoted by the NYSE Composite Price History at September 27, 2013,30, 2016, which was $57.79.$51.72. For those awards where performance is currently forecasted to be below threshold, the associated multiplier of 0% has been applied. For those awards where performance is currently forecasted to be above threshold but below target, the target value is represented. For those awards where performance is currently forecasted to payout above target, the maximum multiplier, 150% for TSR Based Awards and 200% for EPS Based Awards, has been applied.

 

Option Exercises and Stock Vested in Fiscal 20132016

 

The following table provides information on stock options that were exercised and on restricted stock that vested in fiscal 2013:2016:

 

		Option Awards								Stock Awards
Name		Number of Shares Acquired on Exercise (#)				Value Realized on Exercise ($) (1)				Number of Shares Acquired on Vesting (#)				Value Realized on Vesting ($) (2)
Craig L Martin			250,000				2,832,750				—				—
John W. Prosser, Jr.			100,000				1,642,800				3,000				164,970
Thomas R. Hammond			45,000				520,200				—				—
George A. Kunberger			120,000				887,175				—				—
Gregory J. Landry			15,000				300,750				3,750				206,213

		Option Awards								Stock Awards
Name		Number of Shares Acquired on Exercise (#)				Value Realized on Exercise ($) (1)				Number of Shares Acquired on Vesting (#)				Value Realized on Vesting ($) (2)
Stephen J. Demetriou			—				—				22,590				1,203,595
Kevin C. Berryman			—				—				46,501				1,972,572
Joseph G. Mandel			—				—				16,264				746,025
Terence D. Hagen			22,000				294,940				2,088				104,442
Robert V. Pragada			—				—				—				—

 

(1)

Value is based on the closing price of a share of the Company’s common stock as quoted by the NYSE Composite Price History on the exercise date, minus the cost of the option (i.e., the exercise price).

(2)

Value is based on the closing price of a share of the Company’s common stock as quoted by the NYSE Composite Price History on the vesting date.

 

Equity Compensation Plan Information

The following table presents certain information about our equity compensation plans as of September 30, 2016:

		Column A				Column B				Column C
Plan Category		Number of securities to be issued upon exercise of outstanding options, warrants, and rights				Weighted- average exercise price of outstanding options, warrants, and rights				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column A)
Equity compensation plans approved by shareholders(1)			3,577,512			$	45.70				7,552,708
Equity compensation plans not approved by shareholders			—				—				—
Total			3,577,512			$	45.70				7,552,708

(1)

The number in Column A excludes purchase rights accruing under our two, broad-based, shareholder-approved employee stock purchase plans: the ESPP and the Global ESPP. These plans give employees the right to purchase shares at an amount and price that are not determinable until the end of the specified purchase periods, which occur monthly. Our shareholders have authorized a total of 27.8 million shares of common stock to be issued through the ESPP and the Global ESPP. From the inception of the ESPP and the Global ESPP through September 30, 2016, a total of 27.2 million shares have been issued, leaving 0.6 million shares of common stock available for future issuance at that date.

Nonqualified Deferred Compensation

 

As described above, employees, including named executive officers,NEOs, meeting certain compensation minimums may elect to participate in the Company’s Executive Deferral Plansexecutive deferral plans (“EDPs”) whereby a portion of salary and bonus is deferred and paid to the employee at some future date. The EDPs are nonqualified deferred compensation programs that provide benefits payable to directors, officers, and certain key employees or their designated beneficiaries at specified future dates, and upon retirement, or death. Participant contributions are credited with earnings and losses based upon the actual experience of the investments selected by Participants, except in the case of certain EDPs that no longer accept participant deferrals.participants.

 

For certainthe EDPs (the “Moody’s Plans”),in which no longer accept additional deferrals, the accounts (represented by bookkeeping entries only) of participants are credited with interest equal to 125% of the “seasoned corporate bond rate” as announced by Moody’s Investors Services and as declared by the Company. For the other EDPsNEOs participate (the “Variable Plans”), accounts are credited (or debited) based on the actual earnings (or losses) of the deemed investments selected by the individual participants. Participation in the EDPs is voluntary. All EDPs operate under a single trust. Although there are certain change-in-control features within the EDPs, no

56

---

benefit enhancements occur upon a change-in-control. Amounts deferred into the Variable Plans are credited or charged with the performance of investment options selected by the participants. The investment options are notional, and are used for measurement purposes only. The NEOs do not own any units in the actual funds. In general, the investment options consist of a number of mutual and index funds comprising stocks, bonds, and money market accounts.

 

The following table shows the executive deferral plan account activity during fiscal 20132016 for the NEOs:

 

Name		Deferred Compensation  Plan ($)		Executive Contributions During Last Fiscal Year ($) (1)				Aggregate Earnings During Last Fiscal Year ($) (2)				Aggregate Withdrawals / Distributions During Last Fiscal Year ($)				Aggregate Balance at Last Fiscal Year End ($) (3)
Craig L. Martin		Moody’s Plans			—				11,566				—				234,397
		Variable Plans			—				65,903								365,831
John W. Prosser, Jr.		Moody’s Plans			—				75,825				—				1,536,702
		Variable Plans			—				399,122				—				2,125,110
Thomas R. Hammond		Moody’s Plans			—				27,680				—				560,972
		Variable Plans			—				47,971				—				250,443
George A. Kunberger		Variable Plans			499,923				—				—				2,092,656
Gregory J. Landry		Moody’s Plans			—				53,028				—				1,074,689
		Variable Plans			165,402				18,648				—				184,050

Name		Deferred Compensation  Plan ($)		Executive Contributions During Last Fiscal Year ($) (1)				Aggregate Earnings During Last Fiscal Year ($) (2)				Aggregate Withdrawals  / Distributions During Last Fiscal Year ($)				Aggregate Balance at Last Fiscal Year End ($) (3)
Demetriou, Steven J		Variable Plans			95,000				5,639				—				100,639
Berryman, Kevin C		Variable Plans			158,942				20,600				—				271,922
Mandel, Joseph G		Variable Plans			287,371				212,785				—				2,305,117
Hagen, Terence D		Variable Plans			—				2,301				—				21,758
Pragada, Robert V		Variable Plans			—				—				—				—

 

(1)

ExecutiveAll executive contributions for fiscal 2016 are included in the Summary Compensation Table under the “Salary” and “Non Equity Incentive Plan Compensation” columns for 2013 in the Summary Compensation Table.columns.

(2)

Earnings are included in the Summary Compensation Table to the extent they exceed 120% of the AFR.

(3)

Balances at the end of the fiscal year consist of (i) salary and bonus deferrals made by the executive over time, beginning when the executive first joined the plan, plus (ii) all earnings and losses credited on all deferrals, less (iii) all pre-retirement distributions, if any, taken by the executive since the executive first joined the plan.

57

---

COMPENSATION UNDER VARIOUS TERMINATION SCENARIOS

 

Mr. Demetriou’s offer letter provides that, if he is terminated by the Company without “Cause” or he resigns for “Good Reason” (each as defined in his offer letter and set forth below) during the two years following his hire date, he is entitled to receive 12-months base salary and an annual bonus paid at target. Mr. Mandel has an employment agreement that provides severance benefits including one year base salary and the cost of COBRA coverage for a period of 12 months. Mr. Pragada’s offer letter provides that, if he is terminated by the Company without “Cause” or he resigns for “Good Reason” (each as defined in his offer letter and set forth below) during the one year following his hire date, he is entitled to receive 12-months base salary. No other NEO has an employment agreement that provides for termination, severance or change-in-control benefits.

 

Some elements of executive compensation are affected either by an approved retirement, death or Disability or by a Change in Control (as these terms are defined in the Stock Incentive Plan). Pursuant to the Stock Incentive Plan:

 

(1)

in the case of options, if employment terminates (i) upon, or within two years following a Change in Control in a Qualifying Termination (as defined in the Stock Incentive Plan) or (ii) upon death or Disability, unless otherwise provided in the award agreement, all options are immediately vested;

(2)

in the case of options, if employment terminates (i) upon, or within two years following a Change in Control in a Qualifying Termination (as defined in the Stock Incentive Plan), or (ii) upon death or Disability, unless otherwise provided in the award agreement, all options are immediately vested; in the case of restricted stock and restricted stock units granted on or after May 26, 2011, if employment terminates upon death or Disability, unless otherwise provided in the award agreement, all restricted stock and restricted stock units are immediately vested; provided, however, that any awards of restricted stock and/or restricted stock units that are subject to performance-based vesting criteria shall remain outstanding and continue to vest or become earned based upon the Company’s actual performance through the end of the applicable performance period; in the case of restricted stock and restricted stock units, if employment terminates upon, or within two years following a Change in Control in a Qualifying Termination, all restricted stock and restricted stock units are immediately vested; provided, however, that any awards of restricted stock and/or restricted stock units that are subject to performance-based vesting criteria shall be paid at a level based upon the Company’s actual performance as of the Qualifying Termination, except with respect to the PSUs, where the following performance criteria apply: in the case of Net Earnings Based Awards granted prior to fiscal 2016, the number of earned Net Earnings Based Awards will be determined based upon performance through the March 31 immediately preceding or coinciding with the date of the Change in Control, plus an additional number of shares, not less than zero, equal to (A) the target shares awarded multiplied by the Net Earnings Growth Performance Multiplier determined based upon the average annual growth in the Company’s Net Earnings through the end of the last fiscal quarter completed on or prior to the date of the Change in Control, minus (B) the amount determined based upon performance through the March 31 immediately preceding or coinciding with the date of the Change in Control; in the case of TSR Based Awards granted prior to fiscal 2016, the TSR Performance Multiplier shall be determined based upon the Company’s TSR and the TSR of each of the companies in the industry peer group through the date of the Change in Control (and, with respect to performance-based vesting criteria shall remain outstanding and continue to vest or become earned based upon the Company’s actual performance through the end of the applicable performance period;

(3)

in the case of restricted stock and restricted stock units (including MSUs and PSUs), if employment terminates upon, or within two years following a Change in Control in a Qualifying Termination, all restricted stock and restricted stock units (including MSUs and PSUs) are immediately vested; provided, however, that any awards of restricted stock and/or restricted stock units that are subject to performance-based vesting criteria shall be paid at a level based upon the Company’s actual performance as of the Qualifying Termination; and

(4)

in the case of options, restricted stock and restricted stock units (including MSUs and PSUs), if a Change in Control occurs and the awards are not assumed and continued by the acquiring or surviving corporation in the transaction (or a parent corporation thereof), all awards are immediately vested; provided, however, that any awards of restricted stock and/or restricted stock units that are subject to performance-based vesting criteria shall be paid at a level based upon the Company’s actual performance as of the Change in Control.

Upon retirement from the Company, taking into account the consideration per share to be paid in the Change in Control transaction);