THE BOEING COMPANY PERFORMANCE AWARD NOTICE

 

To: Boeing Executive

 

BEMS ID: [XXXXXXX]

 

Performance Awards are units that will be paid in either cash or Boeing stock,
subject to the Compensation Committee’s (the “Committee”) discretion, if earned
at the end of a three-year performance period. Your Performance Awards are
awarded pursuant to The Boeing Company’s 2003 Incentive Stock Plan (the “Plan”),
including any amendments approved by shareholders at the May 1, 2006
shareholder’s meeting, and the award is subject to the terms and conditions of
the Plan. If there is any inconsistency between the terms of this notice and the
terms of the Plan, the Plan’s terms shall control. A copy of the Plan Summary
has been included with this notice.

 

Overview of Your 2006 Performance Award Grant

 

Grant Date: February 27, 2006

 

Number of Units Granted: [X,XXX]

 

Performance Period: January 1, 2006 – December 31, 2008

 

1.   Target Value of Performance Awards. The Performance Award target value (or
“initial value”) will be based on a multiple of 12/31 salary, with the multiples
determined by executive grade. The target value will be expressed as a number of
units (rounded to the nearest unit). Each unit will have an initial value equal
to $100.

 

2.   Performance Measure. For the 2006-2008 Performance Period, the performance
measure will be three-year cumulative Economic Profit. The Compensation
Committee retains discretion in calculating actual performance to exclude the
impact of extraordinary and/or non-recurring items deemed not reflective of the
Company’s core operating performance. Such non-recurring items may include, but
are not limited to, exogenous events, acquisitions, divestitures, changes in
accounting principles, or “extraordinary items” determined under generally
accepted accounting principles (GAAP).

 

3.   Final Award Determination. Final awards will be determined following the
end of the Performance Period. The amount payable may be anywhere from $0 to
$200 per unit, depending on the Company’s performance against plan for the
period ending on December 31, 2008. In order for any payments to be made, a
threshold level of performance must be achieved. As a result, the final award
will range from 0% to a maximum of 200% of the Performance Award target value,
as outlined below. There will be straight-line interpolation to determine
payouts between threshold and target, and target and maximum.

 

Level of

Performance

   Final Performance
Award Unit Value    EP Achievement
(% of Plan)    Payout Factor
(% of Target Award)

Maximum

   $200    125%    200%

Target

   $100    Plan    100%

Threshold

   $25    75%    25%

Below Threshold

   $0    <75%    0%

 

4.  

Rights to Continued Employment. Subject to the terms and conditions outlined
under section 5, Performance Awards are awarded on the condition that you remain
employed by the Company from the date of grant through the entire performance
period. You will not have any right to any

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award unless and until all terms, conditions, and provisions of the Performance
Award program that affect you have been complied with as specified herein. Your
Performance Awards, however, shall not impose upon the Company any obligation to
retain you in its employ for any given period or upon any specific terms
of employment.

 

5.   Termination due to Retirement, Layoff, Disability, or Death. In the event
your employment is terminated by reason of retirement, layoff, disability, or
death, you shall continue to be eligible to participate in the performance
period; provided you were on the active executive payroll on the grant date.
Your Performance Award payout will be prorated based on the number of full
calendar quarters spent on the active executive payroll during the three-year
performance period (you must be on the active payroll on the last day of the
calendar quarter to receive full credit for that quarter). Payment for such
awards will be made at the same time as payment would have been made had you not
had a termination of employment.

 

6.   Other Terminations. In the event your employment is terminated for reasons
other than those described in section 5, all Performance Awards granted
hereunder shall immediately be forfeited by you and canceled. This includes
termination for cause and resignation.

 

7.   Leave of Absence. Unless otherwise required by law, in the event you have
an authorized leave of absence at any time during the performance period which
absence extends beyond three full calendar months (including any absence that
began before the grant date), your Performance Award payout will be prorated
based on the number of full and partial months spent on the active payroll.

 

8.   Form and Timing of Payment of Performance Awards. Any payment of the
Performance Awards shall be made in either cash or shares of Boeing stock, at
the Compensation Committee’s discretion. The Performance Award payment shall be
made within a reasonable time following the end of the performance period. For
certain eligible participants, amounts to be paid in connection with Performance
Awards may be deferred in accordance with the Company’s deferred compensation
plan then in place.

 

     The Company will deduct from your Performance Award distribution any
withholding or other taxes required by law and may deduct any amounts due from
you to the Company or to any Company subsidiary. In the event of a stock
distribution, shares will be in a number equal to the whole number of shares
that could be purchased with the total Performance Award cash payout, based on
the average of the high and low per share trading prices for the common stock of
the Company as reported for the “New York Stock Exchange – Composite
Transactions” on the date of distribution, after reduction to pay the applicable
withholding amounts. Fractional share values will be applied to Federal tax
withholding.

 

9.   Beneficiaries. A participant may designate one or more beneficiaries to
receive Performance Award distributions upon the death of the participant. If no
beneficiary has been designated, all such amounts shall be paid to the personal
representative of the participant. The form of beneficiary designation shall be
determined by the Committee.

 

10.   Transferability. These Performance Awards are not transferable by you,
whether voluntarily or involuntarily, by operation of law or otherwise, except
as provided in the Plan. If any assignment, pledge, transfer, or other
disposition, voluntary or involuntary, of these Performance Awards shall be
made, or if any attachment, execution, garnishment, or lien shall be issued
against or placed upon the Performance Awards, then your right to the
Performance Awards shall immediately cease and terminate and you shall promptly
forfeit to the Company all Performance Awards awarded under this notice.

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11.   Successors. All obligations of the Company under the Performance Award
program shall be binding on any successor to the Company, whether the existence
of such successor is the result of a direct or indirect purchase, merger, or
consolidation, or otherwise, of all or substantially all the business and/or
assets of the Company.

 

12.   Amendment, Modification and Termination. The Board of Directors (or its
delegate) has the authority to amend, modify, or terminate the Performance Award
program. No termination, amendment, or modification may adversely affect in any
material way any Performance Award previously granted without the written
consent of the participant involved.