A shareholder has advised the Company that it intends 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 common stock present in person or by proxy and entitled to vote at the Annual Meeting.

Annual election of the entire Board is widely accepted by corporate governance experts to improve corporate performance and avoid surprise reversals. Major corporations went to the brink of disaster due to lame board oversight.

This is an update of the 1997 Boeing shareholder resolution that achieved more than 48% shareholder approval. Institutional Shareholder Services, a proxy advisory firm, recommended this resolution in 1997.

The Business Week Nov. 25, 1996 Cover Story said for the best board: "Place the entire board up for election every year." Business Week said annual election was one of a number of factors for the best board.

This resolution is designed to prevent surprise reversals like Boeing's $2.6 Billion write-off plus the $1.4 Billion MD-80/MD-90 cancellation charge. The $2.6 Billion write-off sent Boeing stock tumbling and resulted in a deluge of costly lawsuits. (A portion of these $-Billions reflect a loss rather than a write-off or potential write-off).

This is a short list of the kinds of issues the entire board should answer for each year:

• Justice department accused Boeing of knowingly allowing defective parts in hundreds of Boeing helicopters — 2 crashes.
New York Times May 3, 1997
• The most intense investigation in aviation history has not yet discovered the cause of the Boeing 747 TWA Flight 800 crash.
• Top journalism prize awarded for reports on 2 unsolved Boeing 737 crashes.
Seattle Times April 24, 1997
• With the Boeing MD-80/MD-90 airliners canceled, the Airbus A320 will be the only option if 737 safety and production problems increase.
• Independent Boeing directors are short on experience in Boeing's primary business of jetliners, defense and space.
• Boeing directors sit on the Board for 35-year and 25-year stretches.
• Air Canada and Virgin place $4-Billion Airbus order. The Douglas acquisition could encourage airlines to buy planes from Boeing's only competitor — Airbus.
Los Angeles Times August 2, 1997
• A federal court lawsuit charges Boeing hid production problems to keep its stock price high.
Wall Street Journal November 3, 1997
• Boeing laid off 35% of its employees from 1990-1995, meanwhile productivity fell 6%.
Business Week February 24, 1997
• Skilled former Boeing employees are prohibited from working at any Boeing site in 26 states.

Mr. Condit, Boeing CEO, said the customer was "a key part of the process" on the new 777. Likewise, shareholders need to be "a key part of the process" at Boeing.

This proposal is substantially the same as presented last year. The Board of Directors has not changed its position. In the opinion of the Board, the claims made in the supporting statement are largely irrelevant to the issue.

Under the Company's By-Laws, as approved by Boeing shareholders, the Board of Directors is divided into three classes with directors elected to staggered three-year terms. Approximately one-third of the directors stand for election each year and the entire Board can be replaced in the course of three annual meetings, all held within approximately two years. At the same time, a majority of directors will have prior experience as directors of the Company. This is important for ensuring the Board has solid knowledge of the Company's complex products, its product strategy, its long-range plans and progress, and its evolving role in the global aerospace market.

The Board believes the classified board ensures directors' accountability to shareholders while it also ensures continuity in the composition and long-range planning of the Board. The Board believes this is particularly important for a company like Boeing that has high-technology products and programs that require major investments to be made over long periods of time.

The Board of Directors also believes that a classified board reduces the ability of a third party to effect a sudden, unsolicited change in the Company's direction. The staggered board system would permit the Company time to negotiate with the proponent of the change, permitting the Board to consider alternative proposals and seek the best results for all shareholders.

The Board believes that a classified board is appropriate for Boeing and that it ensures responsible, knowledgeable representation of the long-term interests of Boeing shareholders.

Approval of this proposal would require the affirmative vote of a majority of the outstanding shares of common stock present in person or by proxy and entitled to vote at the Annual Meeting. However, approval of the proposal would not automatically eliminate the classified board, as this proposal is only a recommendation. Eliminating the classified board would require the affirmative vote of at least 75% of the outstanding shares on a proposal to amend Article II, Section 1 of the Company's By-Laws, which provides for a classified board.

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