exv10wqw5



 





Exhibit 10-q-5




For Persons With a Change of Control Agreement




ROCKWELL COLLINS, INC.




PERFORMANCE SHARE AGREEMENT




[Date]




     Target Performance Shares:                           shares of Company Common Stock



PERSONAL AND CONFIDENTIAL




[Name]




Personnel Number:                     




Dear                     :



We are pleased to confirm that, as a key employee of Rockwell Collins, Inc. and its subsidiaries
(“Rockwell Collins” or the “Company”), you have been granted performance shares denominated in
shares of Common Stock of the Company and based on the target shares stated above (the “Performance
Shares”) pursuant to this agreement (this “Agreement”) and under the Rockwell Collins 2006
Long-Term Incentives Plan, as amended (the “Plan”).



Any payout of your Performance Shares is based on the achievement by Rockwell Collins of the goals
for Cumulative Sales and Return on Sales for its fiscal years of                      through                      [covering
three fiscal years] (the “Performance Period”) as set forth in the matrix attached as Exhibit A
(the “Matrix”). Any payout based on performance pursuant to the Matrix is to be further adjusted
based on Shareowners Return as specified below. The terms and conditions of these Performance
Shares are as set forth in more detail below.




          1. Confirmation of Award. Together with any letter transmitting this document to
you, this Agreement confirms your award in accordance with the terms as set forth herein.




          2. Amount Payable Pursuant to Awards. Subject to the provisions of this Agreement,
the share amounts payable to you pursuant to your Performance Shares shall be determined as
follows:





     (a) The percentage of target awards earned will be the percentage found at the
intersection in the Matrix of the final results achieved for Cumulative Sales and for Return
on Sales for the Performance Period (as determined pursuant to paragraph 3).



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     (b) If the final results achieved for the Performance Period fall between the levels
of performance specified in the Matrix, the percentage of target awards payable will be
interpolated consistent with the range in which the Cumulative Sales and Return on Sales
falls as conclusively determined by the Committee (as defined below).




     (c) No amount shall be payable for the Performance Period if the Cumulative Sales or
Return on Sales (as determined pursuant to paragraph 3) for the Performance Period is less
than the minimum level for the Performance Period as indicated in the Matrix.




     (d) The payments as determined for achievement against goals for Cumulative Sales and
for Return on Sales for the Performance Period will be further adjusted for the Company’s
Total Shareowner Return (TSR) performance (as determined pursuant to paragraph 3) relative
to the 10 peer companies listed on Exhibit B. If relative performance is among the top 3 of
the peer companies, the payments will be adjusted upward by 20%. If relative performance is
among the lowest 3 of the peer companies, the payments will be reduced by 20%. If the
relative performance is not one of the top 3 companies or one of the lowest 3 companies, it
will be deemed to be in the middle group of companies and there will be no adjustment.



          Subject to the provisions of this Agreement, including your ability to defer payment under
this Agreement in accordance with paragraph 15, the amount payable to you pursuant to the
Performance Shares with respect to the Performance Period shall be paid in Common Stock, less
applicable taxes, by Rockwell Collins as soon as practicable after the end of the Performance
Period and after receipt of the accountant’s letter for the Performance Period pursuant to
paragraph 13, and in any event within the calendar year within which the Performance Period ends.
The Performance Shares represent the Company’s unfunded and unsecured promise to issue shares of
Common Stock at a future date, subject to the terms of this Agreement and the Plan. You have no
rights under the Performance Shares or this Agreement other than the rights of a general unsecured
creditor of the Company. Until the distribution of any Common Stock after vesting is evidenced in
book entry form at the transfer agent, is placed into a brokerage account or a stock certificate is
issued, you shall not have, with respect to the Performance Shares, rights to vote or receive
dividends or any other rights as a shareowner.




          3. Definitions and Determination of Financial Performance. “Cumulative Sales” means,
for the Performance Period, the total Sales as reported by the Company in its audited financial
statements. “Return on Sales” means, for the Performance Period, the rate determined by dividing
Net Income by Sales. Both Net Income and Sales will be the three year cumulative values as
reported in the Company’s audited financial statements after adjusting for extraordinary income and
expense items. The foregoing definitions and measures will exclude the base sales and net income
for all divestitures and for acquisitions with sales for the acquired business’ last twelve
completed months that comprise up to 10% of Rockwell Collins base sales for its last twelve
completed months at the time of acquisition. Such definitions and measures will




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include post-acquisition growth related to these acquisitions. With respect to acquisitions
with sales that comprise up to 10% of total Rockwell Collins’ base sales revenue at the time of
divestiture or acquisition, Net Income will also be adjusted for “fair value” expenses of the
transaction including investment banker charges, amortization of intangibles, physical property
step-ups, and imputed interest on the acquisition value. The Committee reserves its discretion
pursuant to paragraph 10 below to make necessary or appropriate adjustments to the definitions and
measures or otherwise for acquisitions, divestitures and other matters referenced in paragraph 10.




     “Total Shareowner Return” or “TSR” is measured by adding (i) the total stock price growth for
the Performance Period, measured by comparing the average stock price during October ___ [the
first year of the Performance Period] to the average stock price during September ___ [the last
year of the Performance Period], and (ii) dividends paid, measured as if reinvested in stock at the
payment date. In the event of substantial changes causing an inability to calculate Shareowners
Return for one or more of the peer companies listed on Exhibit B (or in the event of spinoffs or
similar transactions causing a peer company to split into two or more peer companies), the list of
peer companies shall be adjusted accordingly to take such events into account and the new group of
peer companies shall for purposes of paragraph 2(d) be divided into a top, middle and lowest third;
provided, however, that if such new group of peer companies is not equally divisible into three
parts, then the excess number of peer companies shall be assigned to the middle third.



     In connection with the receipt of the accountant’s letter for the Performance Period pursuant
to paragraph 13, the committee of the Board of Directors of Rockwell Collins administering the Plan
(which committee is herein called the “Committee” and which, on the date hereof, is the
Compensation Committee) shall determine the Cumulative Sales, Return on Sales and the Shareowners
Return results and ranking for the Performance Period after taking into account any adjustment as
contemplated in paragraph 10.



          4. Payment of Performance Shares Denominated in Shares of Common Stock. The
Performance Shares denominated in shares of Common Stock are payable in shares of the Company’s
Common Stock; provided, however, that the Committee may, in its sole discretion, make a cash
payment equal to the Fair Market Value of shares of Common Stock otherwise required to be issued.
The Company may issue shares of Common Stock in book entry form in connection with the payout of
Performance Shares. In lieu of fractional shares the Company may determine, in its sole
discretion, to pay cash or to round such shares to the closest whole number. The future value of
the shares of Common Stock underlying the Performance Award is unknown and cannot be predicted with
certainty.




          5. Transferability of Award. The Performance Shares shall not be transferable by you
except by will or by the laws of descent and distribution.




          6. Termination of Employment for Death or Disability. If your employment by the
Company terminates during the Performance Period by reason of your death, disability or retirement
under a retirement plan of the Company, you will continue to be




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eligible to receive a payment, if any, that would otherwise be payable pursuant to paragraph
2, but any such amount shall be pro rated for the portion of the Performance Period that elapsed
prior to this termination of employment and shall be paid at the time such amount would otherwise
be payable as specified in Section 2.




          7. Termination of Employment for Other Reasons. Except as otherwise provided in
paragraphs 9 through 12, if your employment by the Company terminates during the Performance Period
other than by reason of your death, disability, or retirement under a retirement plan of the
Company, you will not be entitled to any payment pursuant to paragraph 2 with respect to the
Performance Period.




          8. Forfeiture of Award for Detrimental Activity. If you engage in detrimental
activity (as defined in this paragraph 8) at any time (whether before or after termination of your
employment), you will not be entitled to any payment hereunder and you will forfeit all rights with
respect to the Performance Shares under this Agreement. For purposes of this paragraph 8,
“detrimental activity” shall mean willful, reckless or grossly negligent activity that is
determined by the Committee to be detrimental to or destructive of the business or property of the
Company. Any such determination of the Committee shall be final and binding for all purposes.
Notwithstanding the foregoing, no payment hereunder shall be forfeited or become not payable by
virtue of this paragraph 8 on or after the date of a Change of Control (as defined in the Plan)
unless the “Cause” standard set forth in paragraph 11(b) is satisfied.




          9. Transfer of Employment; Leave of Absence. Except as otherwise required by
Internal Revenue Code Section 409A, for the purposes of this Agreement, (a) a transfer of your
employment from Rockwell Collins to a subsidiary or vice versa, or from one subsidiary of Rockwell
Collins to another, without an intervening period, shall not be deemed a termination of employment,
and (b) if you are granted in writing a leave of absence, you shall be deemed to have remained in
the employ of Rockwell Collins or a subsidiary of Rockwell Collins during such leave of absence.
If your level of employment changes, the Company may adjust your target payment hereunder to pro
rate the portion of the Performance Period that elapses (i) prior to the change in employment
status at the old target payment level and (ii) after the change at the new target payment level,
if any. Any promotion to the ranks of “Designated Senior Executive” requires Committee action to
adjust the target payment hereunder. If you are entitled to payment under this Agreement upon a
termination of employment, Section 409A’s definition of “separation of service,” including its
rules on leaves of absences, will be used to determine the date on which you actually terminate
employment.




          10. Adjustments. (a) Adjustments (which may be increases or decreases) may be made
by the Committee in the Cumulative Sales and Return on Sales as well as in the Shareowners Return
and list of peer companies, to take into account changes in law and accounting and tax rules and to
make such adjustments as the Committee deems necessary or appropriate to reflect the inclusion or
exclusion of the impact of extraordinary or unusual items, events or circumstances, including,
without limitation, acquisitions or divestitures by or other material changes in the Company or
peer companies, provided that no adjustment shall be made which would




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result in an increase in your compensation if your compensation is subject to the limitation
on deductibility under Section 162(m) of the Internal Revenue Code, as amended, or any successor
provision, for the year with respect to which the adjustment occurs.




          (b) In the event of any change in or affecting the outstanding shares of Common Stock of the
Company by reason of a stock dividend or split, merger or consolidation, or various other events,
adjustments will be made as appropriate in connection with the Performance Shares as contemplated
in the Plan.




          (c) Subject to the provisions of paragraph 11, the determination of the Committee as to the
terms of any adjustment made pursuant to this paragraph 10 shall be binding and conclusive upon you
and any other person or persons who are at any time entitled to receipt of any payment pursuant to
the award.




          11. Change of Control. (a) Notwithstanding any other provision of this Agreement to
the contrary, in the event that during the Performance Period your employment is terminated on or
after a Change of Control (as defined in the Plan) (i) by the Company other than for Cause (as
defined in paragraph 11(b)) or (ii) by you for Good Reason (as defined in paragraph 11(c)), your
award shall become nonforfeitable and shall be paid out on the date of your “separation from
service” within the meaning of Section 409A, but subject to your ability to defer payment under
this Agreement in accordance with paragraph 15, as if the Performance Period hereunder had been
completed or satisfied and as if the Cumulative Sales and Return on Sales as well as TSR for the
Company for the Performance Period were sufficient to enable a payment to you pursuant to paragraph
2 of the amount that is equal to your target performance shares set forth on the first page of this
letter multiplied by the greater of (Y) 100% and (Z) the average actual percentage payout for the
Company’s long-term incentive performance shares for the prior three completed performance periods,
not to exceed the maximum allowed in the cycle being paid.




          (b) For purposes of paragraphs 8 and 11(a), termination for “Cause” shall mean:




          (i) your willful and continued failure to perform substantially your duties with the Company
or one of its affiliates (other than any such failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial performance is delivered to you by the
Board or the Chief Executive Officer of the Company which specifically identifies the manner in
which the Board or the Chief Executive Officer of the Company believes that you have not
substantially performed your duties, or




          (ii) your willful engaging in illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company.




          For purposes of this provision, no act or failure to act, on the part of you, shall be
considered “willful” unless it is done, or omitted to be done, by you in bad faith or without
reasonable belief that your action or omission was in the best interests of the Company. Any




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act, or failure to act, based upon authority given pursuant to a resolution duly adopted by
the Board or upon the instructions of the Chief Executive Officer or a senior officer of the
Company or based upon the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by you in good faith and in the best interests of the Company. The
cessation of your employment shall not be deemed to be for Cause unless and until there shall have
been delivered to you a copy of the resolution duly adopted by the affirmative vote of not less
than three-quarters of the entire membership of the Board at the meeting of the Board called and
held for such purpose (after reasonable notice is provided to you and you are given an opportunity,
together with counsel, to be heard before the Board), finding that, in the good faith opinion of
the Board, you are guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.




          (c) For purposes of this Agreement, “Good Reason” shall mean:




          (i) the assignment to you of any duties inconsistent in any respect with your position
(including status, offices, titles and reporting requirements), authority, duties or
responsibilities generally in effect prior to any Change of Control, or any other action by the
Company which results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of notice thereof given by you;




          (ii) any failure by the Company to maintain your compensation at a level consistent with that
generally in effect prior to any Change of Control, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by you;




          (iii) the Company’s requiring you to be based at any office or location other than as provided
on the day preceding the Change of Control hereof or the Company’s requiring you to travel on
Company business to a substantially greater extent than required immediately prior to the Change of
Control;




          (iv) any purported termination by the Company of your employment otherwise than for Cause; or




          (v) any failure by the Company to comply with and satisfy Section 19(b) of this Agreement.




          For purposes of this paragraph 11(c), any good faith determination of “Good Reason” made by
you shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination
by you for any reason during the 30-day period immediately following the first anniversary of the
Change of Control (the “Thirteenth Month Election”) shall be deemed to be a termination for Good
Reason for all purposes of this Agreement. Notwithstanding the provisions of Section 11(a) to the
contrary, you shall be entitled to only 50% of the amount otherwise provided in Section 11(a) in
the event you terminate employment for Good Reason based on the Thirteenth Month Election.




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          (d) Notwithstanding any other provision of this Agreement to the contrary, if a Change of
Control (as defined in the Plan) occurs during the Performance Period the Cumulative Sales and
Return on Sales for the Company for the Performance Period shall be deemed to be not less than the
100% level set forth in the attached Matrix and the Company’s Total Shareowner Return shall be
deemed to rank among the top 3 of the peer companies. Notwithstanding anything to the contrary in
this Agreement (except to the extent that paragraph 11(a) provides for an earlier payment upon a
termination of employment or you defer payment under this Agreement in accordance with paragraph
15), if a Change of Control occurs during the Performance Period, the payment date for your
Performance Shares will be deemed to be November 2010.




          12. Divestiture. In the event that your principal employer is a subsidiary of
Rockwell Collins, it is possible that your principal employer may cease to be a subsidiary of
Rockwell Collins during the Performance Period (the date of such cessation is herein called the
Divestiture Date). If your Performance Shares are nonforfeitable at the time of the Divestiture
Date and the divestiture of your principal employer at that time constitutes a “change in control
event” that meets the requirements of Section 409A, then your Performance Shares shall become
nonforfeitable (to the extent not already nonforfeitable) and shall be paid out on the Divestiture
Date (x) as if the Performance Period hereunder had been completed or satisfied and as if the
Cumulative Sales and Return on Sales as well as TSR for the Company for the Performance Period were
sufficient to enable a payment to you pursuant to paragraph 2 of the amount that is equal to 100%
of your target performance shares set forth on the first page of this letter, but (y) pro rated for
the portion of the Performance Period that elapsed prior to the Divestiture Date, all as
conclusively determined by the Committee. If the divestiture of your principal employer at that
time does not meet the requirements of a “change in control event” under Section 409A, then your
Performance Shares shall become nonforfeitable (to the extent not already nonforfeitable) on the
Divestiture Date and shall be paid out in November 2010 (x) as if the Cumulative Sales and Return
on Sales as well as Shareowners Return for the Company for the Performance Period were sufficient
to enable a payment to you pursuant to paragraph 2 of the amount that is equal to 100% of your
target performance shares set forth on the first page of this letter, but (y) pro rated for the
portion of the Performance Period that elapsed prior to the Divestiture Date, all as conclusively
determined by the Committee.




          13. Accountant’s Letter. As soon as practicable after the end of the Performance
Period, the Committee shall obtain a letter or other communication from the Company’s Senior Vice
President and Chief Financial Officer or the Vice President, Finance and Controller, or one of
their successors or designees, to the effect that such person has reviewed the determination for
the Performance Period of the Cumulative Sales and Return on Sales as well as Total Shareowner
Return results and ranking of the Company and that in such person’s opinion such determinations
have been made in accordance with paragraph 3.




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          14. Employment Rights. You shall not have any rights of continued employment with
the Company as a result of the Performance Shares, other than the payment rights expressly
contemplated herein.




          15. Deferrals. You shall be permitted to defer any payment due to you under this
Agreement in accordance with the terms of the Company’s 2005 Deferred Compensation Plan (the
“DCP”), as amended from time to time, including to comply with Section 409A. Any such deferral
will only be permitted to the extent that your election to defer payment complies with Section
409A. The Company will provide you with the appropriate deferral election form pursuant to which
you may make your deferral election. Once you have deferred your payment into the DCP, the
deferred amounts, including your ability to make a change to that deferral and your right to
receive payment of any deferred amounts, will be subject in all regards to the terms and conditions
of the DCP and the requirements of Section 409A.




          16. Section 409A.




          (a) Notwithstanding any other provision of this Agreement to the contrary, the Company makes
no representation that any amount payable under this Agreement will be exempt from or comply with
Section 409A and makes no undertaking to preclude Section 409A from applying to such amount.




          (b) To the extent that any amount payable under this Agreement is paid upon a “separation from
service” (within the meaning of Section 409A) to a “specified employee” (within the meaning of
Section 409A), then such amount will not be paid during the six (6) month period following such
separation from service.




          17. Tax Withholding. Upon any payment to you of cash and/or Common Stock of the
Company hereunder, Federal income and other tax withholding (and state and local income tax
withholding, if applicable) may be required by the Company in respect of taxes on income realized
by you. The Company will withhold such required amounts from your payments, unless the Company has
made other arrangements with you for you to promptly remit an amount sufficient to pay such
withholding taxes.




          18. Governing Law. This Agreement and the awards provided for hereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.




          19. Successors. (a) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.




          (b) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any




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successor to its business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.




          20. Administration. Consistent with Section 8 of the Plan, the Committee shall
interpret and administer the Plan, this Agreement and the Performance Shares. The actions and
determinations of the Committee on all matters relating to the Plan, this Agreement and the
Performance Shares will be final and conclusive.




          21. Entire Agreement. This Agreement and the other terms applicable to Performance
Shares granted under the Plan embody the entire agreement and understanding between Rockwell
Collins and you with respect to the Performance Shares, and there are no representations, promises,
covenants, agreements or understandings with respect to the Performance Shares other than those
expressly set forth in this Agreement and the Plan. Notwithstanding anything in this Agreement to
the contrary, the terms of this Agreement shall be subject to the terms of the Plan, a copy of
which may be obtained from the office of the Secretary of the Company.




	 	 	 
	 

	 	Sincerely yours,
	 
	 	 
	 

	 	ROCKWELL COLLINS, INC.
	 
	 	 
	 

	 	Gary R. Chadick
	 

	 	Senior Vice President,
	 

	 	General Counsel and Secretary
	 
	 	 
	 

	 	Rockwell Collins, Inc.
	 

	 	400 Collins Road NE, M/S 124-323
	 

	 	Cedar Rapids, IA 52498-0001







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