Необходимо конвертировать прямую речь в косвенную.We lived in this town two

Необходимо конвертировать прямую речь в косвенную.
We lived in this town two years ago., Jessie said.
Какой вариант верный и почему:
1)Jessie said, they had lived in that town two years earlier.
2)Jessie said that We lived in this town two years ago.
3)Jessle said that they had lived in that town two years before.