Several shareholders have advised the Company that they intend to present the following resolution at the Annual Meeting. In accordance with applicable proxy regulations, the proposed resolution and supporting statement, for which the Board of Directors and the Company accept no responsibility, are set forth below. Approval of this proposal would require the affirmative vote of a majority of the outstanding shares of Boeing stock present in person or by proxy and entitled to vote at the Annual Meeting.

Shareholder Resolution

RESOLVED: Shareholders request the Company to disclose all significant promises (including technology transfers), made to foreign governments or foreign firms in connection with foreign military sales, intended to offset their US dollar cost of weapons purchased by foreign nations.

Proponents' Supporting Statement

OFFSETS?

Offsets are agreements by U.S. weapons manufacturers and the U.S. government to direct some benefits--usually jobs or technology--back to the purchasing country as a condition of sale.

Direct offsets transfer purchasing dollars and/or work and military technology (often through licensing or joint production) to recipient countries to produce a U.S. weapon system, or its components.

Indirect offsets may involve investments in the purchasing country, counter-trade agreements, or transfers of commercial technology.

U.S. taxpayers finance offsets by (1) paying for the research and development of weapons and (2) providing grants, loans and loan guarantees for the sale. Offsets also lead to U.S. job loss.

PROPRIETARY?

The U.S. arms industry guards offsets information, claiming "proprietary privilege." However, purchasing countries often disclose such information, e.g., to convince citizens of tangible benefits of millions of dollars spent on arms.

The proponents believe that insofar as U.S. arms manufacturers (1) engage in foreign policy by negotiating private offset agreements with foreign governments, and (2) export jobs while claiming that foreign military sales create jobs, they forfeit their proprietary claims. Sound public policy demands transparency and public debate on these matters.

EXAMPLES

In 1999, Boeing offered lucrative production-sharing contracts with Israeli military manufacturers, in connection with bidding on a contract with Israel. The NY Times reported that Boeing promised Israel $500 million in production-sharing business in Israel, and then raised the amount to $1 billion in local investments.

1997 data shows that 13 U.S. prime military contractors reported 58 new offset agreements valued at $3.85 billion in support of $5.84 billion in export contracts. Aerospace is the sector most impacted by offsets. Between 1993 and 1997, about 90% of offset agreements and transactions were associated with aerospace exports. In the case of offset transactions, however, not all the products were actually themselves aerospace-related. Of the $11.8 billion in offset transactions, only 54% ($6.4 billion) were identified as aerospace products. (This may be understated because of difficulty in properly identifying a large number of products listed as indirect offsets.) Between 1993 and 1997 U.S. defense companies entered into new offset agreements valued at $19 billion in support of $35 billion worth of defense contracts. For every dollar a U.S. company received from an arms sale associated with offsets, it returned 54 cents worth of offset obligations to the purchasing country ("Offsets in Defense Trade 1999," Commerce Department).

That Report concludes: "offsets provide substantial benefits to foreign firms, and in the process deny business to otherwise competitive U.S. firms."

ARMS EXPORTS DON'T CREATE JOBS

The faith-based proponents submit this resolution for Board consideration because arms exports do not create jobs. Weapons proliferation and the export of jobs and technology through offsets raise profound moral and ethical, as well as fiscal, questions that shareholders should address.

Board of Directors' Response

Boeing is a global company conducting business in the international marketplace. A portion of the Company's international business consists of the sale of military equipment. These sales of military equipment and services require compliance with strict U.S. government regulations that control where products may be sold overseas and what products may be exported. The Department of Defense administers a rigorous regime of approval for the sale of military equipment and permits only those sales that are consistent with U.S. interests and policy objectives. Government regulations also impose strict licensing controls on the export of equipment and technology to protect the long-term economic and national security interests of the United States.

Contractual agreements for offset transactions, such as technology licensing, production sharing or co-marketing, are commonplace in international sales for both commercial and military products. To the extent the Company engages in such transactions, it does so only in compliance with U.S. government regulations and as negotiated with the customer. Failure to enter into such arrangements could result in the loss of customers, and could translate into lost jobs and diminished shareholder value.

The Company's offset arrangements provide the means for the Company to create new jobs and maintain its current labor force. The Company believes that robust and bilateral trading leads to job creation at both ends of international transactions and is beneficial to international economic stability and growth.

The Company understands that some shareholders may wish to know details of the Company's military sales contracts with respect to offset transactions. However, much of the information requested is competitively sensitive. In addition, many offset arrangements are subject to confidentiality agreements with the customer that prohibit the Company from making such disclosures. U.S. law recognizes this fact and affords confidential treatment to information that is reported to the government regarding offset transactions. Publication of such information would put Boeing at a disadvantage in its business, may breach contractual arrangements and would not be in the best interest of the Company or its shareholders.

U.S. government regulations require the Company to report to the Department of State extensive information regarding export of military products, including specific information with respect to offset transactions. This government regulation is evidenced by the Defense Offsets Disclosure Act of 1999 (the "1999 Act"), which requires a description of any offset agreements with respect to foreign military sales or direct commercial sales. Such reporting requirements ensure that the Company's offset transactions are conducted in strict compliance with U.S. government regulations.

The 1999 Act also establishes a National Commission on the Use of Offsets in Defense Trade. The National Commission, of which Mr. Condit is a member, is comprised of representatives from government and the private sector, including industry (both defense and nondefense), labor and academia. The National Commission's charge is to review and prepare a report for appropriate congressional committees on all aspects of the use of offsets in the international defense trade, including:

• current practices by foreign governments in requiring offsets in purchasing agreements,
• the extent and nature of offsets offered by U.S. and foreign defense contractors,
• the impact of the use of offsets on defense subcontractors and nondefense industrial sectors affected by indirect offsets, and
• the role of offsets, both direct and indirect, on domestic industry stability, U.S. competitiveness, and national security.

The Company believes the work of the National Commission will address many of the proponents' concerns, and is the proper forum for a review of and report on the issue of offsets in foreign military sales.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE AGAINST PROPOSAL 2.

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