EX-10.2






Exhibit 10.2

TRANCHE 2




PURCHASE AGREEMENT




PURCHASE AGREEMENT, dated as of August 16, 2005 (the “Agreement”), by and between
Rockwell Collins, Inc. (the “Issuer”), and UBS AG, London Branch (“UBS”) acting
through UBS Securities LLC (“Agent”) as agent.



W I T N E S S E T H




WHEREAS, the Issuer has publicly announced its intention to repurchase shares of
its common stock, par value $.01 per share (the “Common Stock”), from time to time
(the “Repurchase Program”); and



WHEREAS, the Issuer desires to enter into the Agreement with UBS in order to
effect a portion of the Repurchase Program;



NOW, THEREFORE, in consideration of the premises, the covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as follows:



Section 1. Definitions.



As used herein the following terms shall have the meanings set forth below:



“Announcement Date” means in respect of a Merger Event, the date of the first
public announcement of a firm intention to merge or to make an offer that leads to the
Merger Event, as reasonably determined in good faith by the Calculation Agent.



“Bankruptcy” means the Issuer is dissolved (other than pursuant to a
consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its
debts or fails or admits in writing its inability generally to pay its debts as they
become due; (3) makes a general assignment, arrangement or composition with or for the
benefit of its creditors; (4) institutes or has instituted against it a proceeding
seeking a judgment of insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting creditors’ rights, or a
petition is presented for its winding-up or liquidation, and, in the case of any such
proceeding or petition instituted or presented against it, such proceeding or petition
(A) results in a judgment of insolvency or bankruptcy or the entry of an order for
relief or the making of an order for its winding-up or liquidation or (B) is not
dismissed, discharged, stayed or restrained in each case within 30 days of the
institution or presentation thereof; (5) has a resolution passed for its winding-up,
official management or liquidation (other than pursuant to a consolidation,
amalgamation or merger); (6) seeks or becomes subject to the appointment of an
administrator, provisional liquidator, conservator, receiver, trustee, custodian or
other similar official for it or for all or substantially all its assets; (7) has a
secured party take possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal process levied, enforced
or sued on or against all or substantially all its assets and such secured party
maintains possession, or any such process is not dismissed, discharged, stayed or
restrained, in each case within 30 days thereafter; (8) causes or is subject to any
event with respect to it which, under the applicable laws of any jurisdiction, has an
analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or
(9) takes any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts.



“Bloomberg Screen Volume at Price Page” shall mean the display designated as page
Volume at Price on the Bloomberg Financial Service, or such page as may replace the
Volume at Price page on that service for the purpose of displaying daily volume and
weighted trading prices of equity securities or, if such service does not then publish
daily volume and weighted trading prices of the Common Stock, such other page and
services reasonably selected in good faith by the Calculation Agent that reports daily
volume and weighted trading prices of the Common Stock.



“Borrowed Shares” means, as of any date, the number of Shares borrowed by UBS in
connection with this Transaction, as reasonably determined in good faith by the
Calculation Agent.



“Calculation Agent” shall mean UBS Securities LLC.



“Calculation Date” has the meaning ascribed to it in Section 3(a).



“Closing Price” of the Common Stock on any day shall mean the last reported sales
price regular way on such day or, in case no such sales price is reported on such day,
the average of the reported closing bid and asked prices regular way of the Common
Stock, in each case on the New York Stock Exchange, or if not then traded on the New
York Stock Exchange the principal securities exchange or quotation system on which the
Common Stock is then listed or admitted to trading, or if not then listed or admitted
to trading on a securities exchange or quotation system, the average of the closing
bid and asked prices of the Common Stock in the over-the-counter market on the day in
question as reported by the National Quotations Bureau Incorporated, or a similarly
generally accepted reporting service, or, if not so available in such manner, as
furnished by any New York Stock Exchange member firm reasonably selected in good faith
by the Calculation Agent.



“Combined Consideration” means New Shares in combination with Other
Consideration.



“Commission” means the amount per Share specified on Schedule 1 hereto.



“Cross Default” means the occurrence or existence of (1) a default, event of
default or other similar condition or event (however described) in respect of the
Issuer under one or more agreements or instruments in respect of indebtedness for
borrowed money in an aggregate amount of not less than $50 million which has resulted
in such agreement or instrument becoming due and payable before it would otherwise
have been due and payable or (2) a default by the Issuer in making one or more
payments on the due date thereof in an aggregate amount of not less than $50 million
under such agreements or instruments (after giving effect to any applicable notice
requirement or grace period).



“Determined Amount” has the meaning ascribed to it in Section 3(d).



“Discount” means the amount set forth on Schedule 1 hereto.



“Dividend Amount” shall mean, as of each of the dates set out below (each a
“Dividend Adjustment Date”), the amount set forth opposite such Dividend Adjustment
Date:



	 	 	 
	Dividend Adjustment Date	 	Dividend Amount
	The date immediately preceding the ex-dividend date

for the Issuer’s regularly scheduled fourth calendar

quarter 2005 dividend, currently anticipated to be

November 14, 2005

	 	





$0.12






“Dividend Event” means the payment of an ordinary or extraordinary dividend or
distribution by the Issuer in any of the time periods specified above with a value, as
reasonably determined by the Calculation Agent in good faith, that exceeds the amount
specified above for such period by more than $0.01.



“Excess Shares” means the number of Shares (if any) equal to (a)(i) the
Settlement Amount divided by (ii) the Reference Price minus (b) the Determined Amount.



“Execution Period” shall mean the period commencing on the First Averaging Date
and ending on the earlier of (i) the Last Averaging Date or (ii) the Termination
Event Termination Date.



“Failure to Pay or Deliver” means failure by the Issuer to make, when due, any
payment under this Agreement or any delivery of Shares under this Agreement required
to be made by it if such failure is not remedied on or before the third Trading Day
after notice of such failure is given to the Issuer by UBS.



“Final Price” means (i) the arithmetic average of daily volume-weighted average
prices of Shares on each Trading Day from the First Averaging Date up to and including
the Last Averaging Date, as listed on Bloomberg Screen Volume at Price Page, minus
(ii) the Discount.



“First Averaging Date” means the date specified as such on Schedule 1 hereto.



“First Possible Last Averaging Date” means the date specified as such on Schedule
1 hereto.



“Hedge Account Shares” means, as of any date, the Number of Shares minus the
Borrowed Shares.



“Last Averaging Date” means a trading day between and including the First
Possible Last Averaging Date and the Last Possible Last Averaging Date, as determined
by UBS. Notice of the Last Averaging Date shall be given by UBS not later than 8:00
p.m. New York time on the Last Averaging Date. Notice shall be irrevocable once
provided to Issuer. If no notice is provided, then the Last Averaging Date shall be
the Last Possible Last Averaging Date.



“Last Possible Last Averaging Date” means the date specified as such on Schedule
1 hereto.



“Merger Event” means, in respect of any relevant Shares, any (i) reclassification
or change of such Shares that results in a transfer of or an irrevocable commitment to
transfer all of such Shares outstanding, (ii) consolidation, amalgamation or merger of
the Issuer with or into another entity (other than a consolidation, amalgamation or
merger in which such Issuer is the continuing entity and which does not result in any
such reclassification or change of all of such Shares outstanding) or (iii) other
takeover offer for such Shares that results in a transfer or an irrevocable commitment
to transfer all such Shares (other than such Shares owned or controlled by the
offeror), in each case if the Merger Event is on or before the Last Averaging Date.



“Net Share Settlement” shall mean settlement by the Issuer of its obligations
hereunder in accordance with Section 3(c).



“New Shares” means shares (whether of the offeror or a third party).



“Notice Date” has the meaning ascribed to it in Section 8.



“Number of Shares” has the meaning ascribed to it in Section 2.



“Other Consideration” means cash and/or any securities (other than New Shares) or
assets (whether of the offeror or a third party).



“Payment Date” has the meaning ascribed to it in Section 3(b).



“Principal Account” means the notional principal account referred to in Section
3(a).



“Proceeding” has the meaning ascribed to it in Section 7.



“Purchase Price” has the meaning ascribed to it in Section 2(a).



“Purchasing Date” means any Trading Day during the Execution Period.



“Reference Price” means the Closing Price of the Common Stock on the last Trading
Day of the Execution Period.



“Registered Shares” has the meaning ascribed to it in Section 3(c).



“SEC” has the meaning ascribed to it in Section 3(c).



“Settlement Amount” shall mean (i) in the case of the Issuer, the amount of any
negative balance in the Principal Account as of the Calculation Date, and (ii) in the
case of UBS, the amount of any positive balance in the Principal Account as of the
Calculation Date, in each case as reasonably determined in good faith by the
Calculation Agent.



“Share-for-Combined” means, in respect of a Merger Event, that the consideration
for the relevant Shares consists of Combined Consideration.



“Share-for-Other” means, in respect of a Merger Event, that the consideration for
the relevant Shares consists solely of Other Consideration.



“Share-for-Share” means, in respect of a Merger Event, that the consideration for
the relevant Shares consists (or, at the option of the holder of such Shares, may
consist) solely of New Shares.



“Shelf Registration” means a registration statement in form and substance
reasonably acceptable to UBS for an offering to be made on a continuous basis pursuant
to Rule 415 under the Securities Act, registering UBS’s resale, in any manner or
manners designated by UBS, of all the Settlement Shares, any Make-Whole Shares, and
any other Shares held by UBS in connection with this transaction which, in the opinion
of counsel to UBS, are required to be included in the Shelf Registration to be resold
by UBS to the public.



“Short Squeeze” shall mean a situation where (i) UBS has determined in good
faith, in its reasonable judgment, that it is unable to hedge its exposure to the
transaction contemplated hereby because of the lack of sufficient shares of Common
Stock being made available for borrowing from lenders, including without limitation
UBS’ being required to redeliver shares of Common Stock to any lender at the demand of
such lender and not being able to meet such obligation in full in a timely manner by
reasonable efforts to borrow shares of Common Stock from another lender or lenders, or
(ii) UBS would incur a cost to borrow shares of Common Stock to hedge its exposure to
the transaction contemplated hereby that is greater than a rate equal to thirty (30)
basis points per annum.



“Stock Settlement Amount” shall mean (i) in the case that the Issuer is required
to pay the Settlement Amount to UBS and has elected to pay the Settlement Amount by
delivery of shares of Common Stock to UBS pursuant to Section 3(c), an amount,
reasonably determined in good faith by the Calculation Agent, equal to the Settlement
Amount to be paid by the Issuer pursuant to Section 3(b), divided by the Reference
Price, and (ii) in the case that UBS is required to pay the Settlement Amount to the
Issuer and the Issuer has elected to require UBS to satisfy the obligation by delivery
of shares of Common Stock to the Issuer pursuant to Section 3(h), an amount,
reasonably determined in good faith by the Calculation Agent, equal to the Settlement
Amount to be paid by UBS pursuant to Section 3(b), divided by the weighted average
price per share actually paid by UBS to purchase such Stock Settlement Shares.



“Stock Settlement Shares” shall mean such whole number of shares equal to the
Stock Settlement Amount.



“Termination Event” shall mean the occurrence of a (i) Bankruptcy, (ii) Cross
Default, (iii) Failure to Pay or Deliver (iv) Short Squeeze or (v) Dividend Event.



“Termination Event Termination Date” has the meaning ascribed to it in Section 8.



“Trading Day” shall mean any day on which the Common Stock is traded on the New
York Stock Exchange or, if not then traded on the New York Stock Exchange, the
principal securities exchange or quotation system on which such securities are then
traded or, if not then traded on a securities exchange or quotation system, in the
over-the-counter market.



Section 2. Purchase and Sale.



Subject to the terms and conditions set forth herein, UBS agrees to sell to the
Issuer, and the Issuer agrees to purchase from UBS, 2,000,000 shares (the “Number of
Shares”) of Common Stock (the “Shares”) at a purchase price per Share (the “Purchase
Price”) equal to the Closing Price of the Common Stock on August 16, 2005 or on such
other date and at such other time as the parties may mutually agree (the “Execution
Date”). At 4:00 p.m. on the third Trading Day after the Execution Date, UBS shall
deliver or cause to be delivered the Shares through the facilities of The Depository
Trust Company to the Issuer (the “Settlement Date”), against payment by the Issuer of
the Purchase Price by wire transfer of immediately available funds. The parties
understand and agree that the delivery of the Shares by or on behalf of UBS upon the
payment of the Purchase Price by the Issuer is irrevocable and that as of the
Settlement Date the Issuer will be the sole beneficial owner of the Shares for all
purposes.



As compensation to UBS for its commitment and services hereunder, the Issuer on
the Settlement Date will pay to UBS by wire transfer of immediately available funds an
amount per share equal to the Commission for the Shares to be delivered by UBS
hereunder on the Settlement Date. The commission payable to UBS shall not be subject
to refund.



Section 3. Settlement.



(a) On the Settlement Date, the Calculation Agent shall establish a notional
Principal Account in an amount equal to the product of (x) the Number of Shares and
(y) the Purchase Price. The Calculation Agent shall adjust the Principal Account as
follows:



(i) The Principal Account shall be reduced on each Dividend Adjustment Date in
an amount equal to the product of (x) the number of Borrowed Shares and (y) the
Dividend Amount corresponding to such Dividend Adjustment Date; and



(ii) The Principal Account shall be reduced on the third day following the Last
Averaging Date in an amount equal to the product of (x) the Number of Shares
and (y) the Final Price.



On the first Trading Day immediately following the last day of the Execution Period
(“Calculation Date”), the Calculation Agent will calculate the Settlement Amount and,
if applicable, the Stock Settlement Amount, notify (the “Settlement Amount
Notification”) the Issuer of the Settlement Amount and, if applicable, the Stock
Settlement Amount and provide a schedule of its calculations thereof. The Calculation
Agent shall respond promptly to all questions raised by the Issuer relating to such
calculations. If the Issuer objects to the calculation of the Settlement Amount or
the Stock Settlement Amount or any other determination or calculation by the
Calculation Agent hereunder, the Issuer shall promptly notify the Calculation Agent,
and the Issuer and UBS agree to use their good faith best efforts to reach an
agreement as to the Settlement Amount or the Stock Settlement Amount or such other
determination or calculation. In the further event that the Issuer and UBS are not
able to reach an agreement, the Issuer and UBS shall appoint a third party with
sufficient expertise to determine the calculation of the Settlement Amount or the
Stock Settlement Amount or such other determination or calculation, and such
determinations or calculations shall be binding on both parties.



(b) On the third Trading Day immediately following the Calculation Date (the
“Payment Date”), if the Settlement Amount is positive, UBS shall pay the Settlement
Amount to the Issuer and, if the Settlement Amount is negative, the Issuer shall pay
the absolute value of such Settlement Amount to UBS; provided, however, that to the
extent that a Last Averaging Date has not been declared by UBS pursuant to the terms
of the other agreement between the parties hereto, in substantially the form hereof,
relating to the purchase of Shares by the Issuer and dated the date hereof, on or
prior to such Payment Date, the Issuer may elect to delay the payment of such
Settlement Amount to UBS until the date that is the Payment Date with respect to such
second agreement. Except as provided in paragraphs (c), (d) and (h) of this Section,
all payments to be made under this Section 3 shall be made on the Payment Date by wire
transfer of immediately available funds.



(c) If the Issuer is required to pay the Settlement Amount to UBS pursuant to
paragraph (b) of this Section, the Issuer may, at its option, satisfy the obligation
by the delivery to UBS of a number of whole shares of Common Stock (and a payment of
cash in lieu of fractional shares, if any) equal to the Stock Settlement Amount. In
order to exercise this option, the following conditions must be satisfied (each, a
“Condition on Net Share Settlement”) (i) the Issuer must notify UBS of its election to
have any Settlement Amount payable in shares of Common Stock no later than 30 days
prior to the First Possible Last Averaging Date (the “Stock Election Notice”), (ii)
the Issuer must enter into a registration rights agreement with UBS in form and
substance reasonably acceptable to UBS (the “Registration Rights Agreement”) not later
than the 10 days prior to the First Possible Last Averaging Date , which agreement
will contain, among other things, customary representations and warranties and
indemnification and other rights, including rights to customary opinions of counsel
and accountant’s “comfort letters,” relating to the registration of the Stock
Settlement Shares, the Make-whole Shares and any additional shares of Common Stock as
to which UBS is named as a selling securityholder in the Shelf Registration (the
“Registered Shares”); (iii) the Shelf Registration shall have been declared effective
by the Securities and Exchange Commission (the “SEC”) not less than five Trading Days
prior to the First Possible Last Averaging Date; and (iv) the Issuer shall use its
reasonable best efforts to maintain the effectiveness of the Shelf Registration until
all Registered Shares have been sold by UBS. Subject to paragraph 3(g) below, if any
of the conditions in the preceding sentence are not met, the provisions of this
paragraph (c) shall be inoperative and the Issuer shall be obligated to pay any
applicable Settlement Amount by wire transfer of immediately available funds. If the
Issuer complies with all of its obligations under this paragraph (c), then at 9:30
a.m. on the Payment Date, the Issuer shall deliver to UBS (i) a certificate or
certificates representing the fully paid and nonassessable Stock Settlement Shares, in
such denominations and in such names as UBS may specify and (ii) the cash payment, if
any, in lieu of fractional shares by wire transfer of immediately available funds.
The parties understand and agree that the deliveries made pursuant to the preceding
sentence shall be irrevocable and shall satisfy in full the Issuer’s obligations under
this Section 3.



If the Issuer delivers Stock Settlement Shares to UBS pursuant to this paragraph (c)
and within ten Trading Days after the Payment Date, UBS resells all or any portion of
the Stock Settlement Shares and the net proceeds received by UBS upon resale of such
 shares exceeds the Settlement Amount (or if less than all of the Stock Settlement
Shares are resold, the applicable pro rata portion of the Settlement Amount), UBS
shall promptly refund in cash such difference to the Issuer; provided that UBS may, at
its option, satisfy its obligation under this sentence by returning to the Issuer any
portion of the Stock Settlement Shares that would, if sold, have resulted in net
proceeds in excess of the Settlement Amount. In the event that such net proceeds are
less than the Settlement Amount (or if less than all of the Stock Settlement Shares
are resold, the applicable pro rata portion of the Settlement Amount), the Issuer
shall pay in cash or additional shares of Common Stock (the “Make-Whole Shares”) such
difference (the “Make-Whole Amount”) to UBS promptly after receipt of notice thereof.
In the event that Issuer elects to pay the Make-whole Amount in additional shares of
Common Stock, the requirements set forth in this paragraph (c) with respect to payment
of the Settlement Amount in Shares, including make-whole requirements, shall apply,
such that UBS shall pay to the Issuer any such excess and the Issuer shall pay to UBS
in cash or Make-Whole Shares any additional Make-Whole Amount. In calculating the net
proceeds from the resale of any Stock Settlement Shares there shall be deducted from
such proceeds any amount equal to the customary underwriting discount or commission
for underwritten offerings of common stock by companies comparable to the Issuer
multiplied by the total number of Shares sold for the account of UBS pursuant to a
Shelf Registration.



(d) Notwithstanding any other provision in this Agreement, if Issuer exercises
its right pursuant to Section 3(c) above, Issuer shall not be obliged to deliver, in
connection with this Agreement, in excess of 15,000,000 Shares of Common Stock, as
recalculated from time to time (the “Determined Amount”). In the event that, but for
this Section 3, Issuer would be obliged to deliver a number of Shares of Common Stock
equal to the Determined Amount plus the Excess Shares, Issuer agrees to (x) satisfy
its remaining obligation by cash payment; or (y) (i) use its reasonable best efforts
to increase its number of authorized shares, thereby increasing the Determined Amount,
to the extent necessary so that, but for this Section 3, the number of Shares of
Common Stock Issuer would be obliged to deliver does not exceed the (recalculated)
Determined Amount and (ii) allocate such newly authorized shares of Common Stock in
satisfaction of Issuer’s delivery obligations under this Agreement in priority to any
other use of such Common Stock. For the avoidance of doubt, the obligation of Issuer
to so use its reasonable best efforts is an ongoing obligation.



(e) Issuer hereby represents and warrants that it will:



(i) calculate the Determined Amount based on the maximum
amount able to be calculated in accordance with EITF 00-19 or
any successor financial statement guidance; and



(ii) in respect of all equity derivative transactions in
respect of which Issuer’s equity securities constitute (all or
part of) the instruments underlying such transactions (the
“Derivative Trades”), use the same methodology to derive the
Determined Amount (howsoever described) applicable to each
Derivative Trade as is used to derive the Determined Amount
for this Agreement.



(f) UBS agrees that, in respect of any obligations Issuer has duly elected be
satisfied pursuant to Section 3(c) above, in the event of Issuer’s bankruptcy, UBS
shall not have rights in bankruptcy that rank senior to the rights in bankruptcy of
common shareholders of Issuer.



(g) If the Issuer has used its best efforts to satisfy the Conditions on Net
Share Settlement but has been unable to because the Shelf Registration is not declared
effective by the SEC within the time set out in paragraph 3(c) (or, where UBS has
previously agreed to extend such period based on a request by the Issuer pursuant to
paragraph 3(g)(ii), within such period as extended pursuant to paragraph 3(g)(ii)),
then the Issuer may elect to:




	 	(i)	 	deliver the relevant
number of Shares to UBS in which case:	 





(A) the day on which the Issuer makes such an election to receive such Shares
from Issuer is the “Issuer Election Date”, and



(B) Issuer shall withdraw any Registration Statement filed with the SEC in
connection with the Shares, and



(C) Issuer will enter into a private placement purchase agreement with UBS in
form and substance acceptable to UBS no later than the next Trading Day following the
Issuer Election Date, and



(D) Issuer shall deliver to UBS such Shares on the Settlement Date which, for the
purposes of this paragraph 3(g)(i)(D), shall be the third Trading Day following the
Issuer Election Date, and



(E) in addition to any Make-whole Amount payable by Issuer pursuant to paragraph
3(c), Issuer shall deliver to UBS such additional Shares until UBS has realized actual
net proceeds upon resale of such Shares equal to the Settlement Amount. At its
election, UBS may by a written notice to Issuer retain a number of Shares delivered by
Issuer pursuant to this paragraph 3(g)(i). If UBS so elects, UBS shall be deemed to
have sold each such retained Share for an amount equal to the price per Share obtained
by UBS in the last Share sold by UBS prior to sending written notice of its intention
to retain Shares to Issuer. In no event will UBS be obligated to exercise its right
to retain Shares; or



(ii) request UBS to extend the period within which the Registration Statement is
to be declared effective by the SEC for a further period specified in writing by UBS
at the time of such extension.



(h) If UBS is required to pay the Settlement Amount to the Issuer pursuant to
paragraph (b) of this Section, the Issuer may, at its option, elect that UBS satisfy
the obligation by the delivery to the Issuer of a number of whole shares of Common
Stock (and a payment of cash in lieu of fractional shares, if any) equal to the Stock
Settlement Amount. In order to exercise this option, the Issuer must notify UBS of
its election to have any Settlement Amount payable in shares of Common Stock no later
than 15 days prior to the Payment Date (the “Stock Election Notice”). If the
condition in the preceding sentence is not met, the provisions of this paragraph (h)
shall be inoperative and UBS shall be obligated to pay any applicable Settlement
Amount by wire transfer of immediately available funds. If the Issuer complies with
all of its obligations under this paragraph (h), then at 9:30 a.m. on the Payment
Date, UBS shall deliver to the Issuer (i) a certificate or certificates representing
the fully paid and nonassessable Stock Settlement Shares, and (ii) the cash payment,
if any, in lieu of fractional shares by wire transfer of immediately available funds.
The parties understand and agree that the deliveries made pursuant to the preceding
sentence shall be irrevocable and shall satisfy in full UBS’ obligations under this
Section 3.



Section 4. Anti-dilution Adjustments.



(a) Subdivisions and Combinations of Common Stock. In the event that the
outstanding shares of the Common Stock shall be subdivided or split into a greater
number of shares of Common Stock where the effective date of such subdivision or the
record date for such split occurs during the Execution Period, the number of shares of
Common Stock referred to herein shall be deemed to be proportionately increased and
the Final Price and Discount shall be deemed to be proportionately decreased;
conversely, in case outstanding shares of Common Stock shall each be combined into a
smaller number of shares of Common Stock through a combination of shares of Common
Stock or a reverse stock split where the effective date of such combination or the
record date for such reverse stock split occurs during the Execution Period, the
number of shares of Common Stock referred to herein shall be deemed to be
proportionately decreased and the Final Price and Discount shall be deemed to be
proportionately increased. Any adjustment pursuant to this paragraph (a) shall become
effective (i) in the case of a subdivision or combination of the Common Stock, at the
close of business on the effective date for such subdivision or combination or (ii) in
the case of a stock split or reverse stock split, at the close of business on the
record date for such stock split or reverse stock split.



(b) Merger Events. In respect of each Merger Event, UBS and the Issuer
or the person formed by such consolidation or resulting from such merger or which
acquired such assets or which acquires the Issuer’s Common Stock, as the case may be,
shall negotiate in good faith to amend this Agreement to give appropriate effect to
such transaction.



If payment is required of the Issuer in connection with a Merger Event, the
Issuer shall have the right, in its sole discretion, to elect (the “Extraordinary
Transaction Election”) to satisfy any such payment obligation by Net Share Settlement
of this Transaction; provided that, in connection with a “Share-for-Combined” Merger
Event or “Share-for-Other” Merger Event, the Extraordinary Transaction Election is
available to satisfy only the percentage of such payment obligation equal to the
percentage of the non-cash consideration over the total Combined Consideration (in the
case of a “Share-for-Combined” Merger Event) or total Other Consideration (in the case
of a “Share-for-Other” Merger Event). The remaining percentage of such payment
obligation must be satisfied in cash. The Issuer shall make any election to settle
the Transaction by way of Net Share Settlement within two Trading Days of the
Announcement Date but in any event not less than twenty Trading Days prior to the
effective date of such merger.



(c) Tender Offers. In the event an offer is made to the holders of Common
Stock to tender shares of Common Stock for cash, UBS and the Issuer shall negotiate in
good faith to amend this Agreement to give appropriate effect to such event.



(d) Adjustments. In the event that the Issuer objects to any adjustments made
pursuant to this Section 4, the Issuer shall promptly so notify UBS, and the Issuer
and UBS agree to use their good faith best efforts to reach an agreement as to the
adjustment. In the further event that the Issuer and UBS are not able to reach an
agreement in respect of any such adjustment, or any of the events contemplated by this
Section 4, the Issuer and UBS shall appoint a third party with sufficient expertise to
determine the adjustment and such adjustment shall be binding on both parties.



Section 5. Acknowledgement.



The Issuer acknowledges and agrees that it is not relying, and has not relied,
upon UBS or Agent with respect to the legal, accounting, tax or other implications of
this Agreement and that it has conducted its own analysis of the legal, accounting,
tax and other implications of this Agreement. The Issuer further acknowledges and
agrees that neither UBS nor Agent has acted as its advisor in any capacity in
connection with this Agreement or the transactions contemplated by this Agreement.
The Issuer acknowledges that neither UBS nor Agent is acting as the agent for the
Issuer in effecting any purchase of Common Stock pursuant to this Agreement. The
Issuer understands and acknowledges that UBS and its affiliates, subject to compliance
with applicable law, may from time to time effect transactions, for their own account
or the account of customers, and hold positions, in securities or options on
securities of the Issuer and that UBS and its affiliates may continue to conduct such
transactions during the Execution Period.



Section 6. Representations and Warranties.



(a) The Issuer hereby represents and warrants to UBS that:



(i) it has all power and authority to enter into this Agreement and the
Registration Rights Agreement and the transactions contemplated hereby and thereby;



(ii) this Agreement has been duly authorized, validly executed and delivered by
the Issuer and constitutes a valid and legally binding obligation of the Issuer
enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights and to general equity
principles;



(iii) the Registration Rights Agreement, when and if executed and delivered
pursuant to Section 3(c) hereof, shall have been duly authorized, validly executed and
delivered by the Issuer and shall constitute a valid and legally binding obligation of
the Issuer enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors’ rights and to
general equity principles;



(iv) if Stock Settlement Shares are delivered pursuant to Section 3(c) or
Section 3(g), as the case may be, the Stock Settlement Shares, when delivered to
UBS,will have been duly authorized and will be duly and validly issued, fully paid and
nonassessable and free of preemptive and other rights;



(v) the Issuer is not entering into this Agreement to facilitate a distribution
of the Common Stock (or any security convertible into or exchangeable for Common
Stock) or in connection with a future issuance of securities;



(vi) the Issuer is not entering into this Agreement to raise or depress the price
of the Common Stock (or any security convertible into or exchangeable for Common
Stock);



(vii) the repurchase of the Shares by the Issuer, the compliance by the Issuer
with all of the provisions of this Agreement and the consummation of the transactions
herein contemplated will not conflict with or result in a breach (each, a “Breach”) of
any of the terms or provisions of, or constitute a default (each a “Default”) under,
any indenture, mortgage, deed of trust, loan agreement or any other agreement or
instrument (collectively, “Contracts”) to which the Issuer or any of its subsidiaries
is a party or by which the Issuer or any of its subsidiaries is bound or to which any
of the property or assets of the Issuer or any of its subsidiaries is subject (except
such Breach or Default as would not reasonably be expected to materially adversely
affect the ability of the Issuer to perform its obligations under this Agreement), nor
will such action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Issuer, nor will such action result in any violation
of any statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Issuer or any of its properties; and



(viii) no consent, approval, authorization, order, registration or qualification
of or with any court or governmental agency or body having jurisdiction over the
Issuer or any of its properties is required for the repurchase of the Shares by the
Issuer, the compliance by the Issuer with all the terms of this Agreement, or the
consummation by the Issuer of the transactions contemplated by this Agreement, other
than the registration of the Stock Settlement Shares and any Make-whole Shares under
the Securities Act in accordance with the provisions of Section 3(c), and such
authorizations, orders, registrations and qualifications as may be required under
state securities or blue sky laws in connection with the resale by UBS of the
Registered Shares.



(b) UBS hereby represents and warrants to the Issuer:



(i) it has all power and authority to enter into this Agreement and the
Registration Rights Agreement and the transactions contemplated hereby and thereby;



(ii) this Agreement has been duly authorized, validly executed and delivered by
UBS and constitutes a valid and legally binding obligation of UBS enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors’ rights and to general equity
principles; and



(iii) the Registration Rights Agreement, when and if executed and delivered
pursuant to Section 3(c) hereof, shall have been duly authorized, validly executed and
delivered by UBS and shall constitute a valid and legally binding obligation of UBS
enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’ rights and to general equity
principles.



(iv) UBS is not entering into this Agreement to facilitate a distribution of the
Common Stock (or any security convertible into or exchangeable for Common Stock) or in
connection with a future issuance of securities;



(v) UBS is not entering into this Agreement to raise or depress the price of the
Common Stock (or any security convertible into or exchangeable for Common Stock);



(vi) the compliance by UBS with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not conflict with or result
in a Breach of any of the terms or provisions of, or constitute a Default under, any
Contract to which UBS or any of its subsidiaries is a party or by which UBS or any of
its subsidiaries is bound or to which any of the property or assets of UBS or any of
its subsidiaries is subject (except such Breach or Default as would not reasonably be
expected to materially adversely affect the ability of UBS to perform its obligations
under this Agreement), nor will such action result in any violation of the provisions
of the Certificate of Incorporation or By-laws or similar organizational documents of
UBS, nor will such action result in any violation of any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction over UBS or
any of its properties; and



(vii) no consent, approval, authorization, order, registration or qualification
of or with any court or governmental agency or body having jurisdiction over UBS or
any of its properties is required for the compliance by UBS with all the terms of this
Agreement, or the consummation by UBS of the transactions contemplated by this
Agreement.



Section 7. Indemnification.



In the event that UBS becomes involved in any capacity in any action, proceeding
or investigation (“Proceeding”) brought by or against any person in connection with
any matter referred to in this Agreement, the Issuer periodically will reimburse UBS
for its reasonable out-of-pocket legal and other expenses (including the reasonable
cost of any investigation and preparation) incurred in connection therewith; provided
that such expenses will be promptly refunded to the Issuer to the extent incurred in
connection with a matter as to which UBS is not entitled to indemnification under this
Section 7. The Issuer also will indemnify and hold UBS harmless against any losses,
claims, damages or liabilities to which UBS may become subject in connection with any
matter referred to in this Agreement, except to the extent that any such loss, claim,
damage or liability results from the gross negligence, bad faith or willful misconduct
of UBS. If for any reason the foregoing indemnification is unavailable to UBS or
insufficient to hold it harmless, then the Issuer shall contribute to the amount paid
or payable by UBS as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received by the
Issuer, on the one hand, and UBS, on the other hand, in the matters contemplated by
this Agreement but also the relative fault of the Issuer and UBS with respect to such
loss, claim, damage or liability and any other relevant equitable considerations. The
relative benefits to the Issuer, on the one hand, and UBS, on the other hand, shall be
in the same proportion as the Aggregate Purchase Price bears to the commissions
received by UBS pursuant to the last paragraph of Section 2. The reimbursement,
indemnity and contribution obligations of the Issuer under this Section 7 shall be in
addition to any liability which the Issuer may otherwise have, shall extend upon the
same terms and conditions to any affiliate of UBS and the partners, directors,
officers, agents, employees and controlling persons (if any), as the case may be, of
UBS and any such affiliate and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Issuer, UBS, any such
affiliate and any such person. The Issuer also agrees that UBS nor any of such
affiliates, partners, directors, officers, agents, employees or controlling persons
shall have any liability to the Issuer for or, in connection with any matter referred
to in this Agreement except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Issuer result from the gross negligence, bad
faith or willful misconduct of UBS in effecting the transactions that are the subject
of this Agreement. The foregoing provisions shall survive any termination or
completion of this Agreement. UBS promptly will notify the Issuer upon receipt of
actual notice of a Proceeding with respect to which indemnity or reimbursement of
expenses is sought hereunder. The Issuer may, at its option, assume the defense of
any such Proceeding, including the employment of counsel reasonably satisfactory to
UBS. UBS shall have the right to employ separate counsel in any such Proceeding and
to participate in the defense thereof, but the fees and expenses of such counsel shall
be at the expense of UBS, unless (i) the Issuer shall have failed in a timely manner
to assume the defense thereof and employ counsel as provided above or (ii) the named
parties to any such Proceeding include UBS and the Issuer and UBS shall have been
advised in writing by counsel that there may be one or more legal defenses available
to it that are different from or in addition to those available to the Issuer,
provided that the Issuer shall not in any event be responsible hereunder for the fees
and expenses of more than one firm of separate counsel in connection with any
Proceeding. UBS will not settle any Proceeding in respect of which indemnity or
reimbursement of expenses may be sought hereunder, whether or not the Issuer is an
actual or potential party to such Proceeding, without the Issuer’s prior written
consent.



Section 8. Termination Event.



Upon the occurrence of a Termination Event and so long as such Termination Event
shall be continuing, UBS may, in its discretion, by notice to the Issuer (the date of
such notice and the notice referred to in the succeeding clause being referred to
herein as the “Notice Date”), direct that the Execution Period shall forthwith
terminate on the date specified in such notice (the “Termination Event Termination
Date”). In such an event, (i) the Execution Period shall terminate on the Termination
Event Termination Date, (ii) the Principal Account shall be reduced on such date by an
amount equal to the sum of (A) the product of (x) the number of Hedge Account Shares
and (y) the arithmetic average of daily volume-weighted average prices of Shares in
each Trading Day from the First Averaging Date up to and excluding the Notice Date, as
listed on Bloomberg Screen Volume at Price Page and (B) the total purchase price paid
by UBS for the Shares of Common Stock that are purchased by UBS during the period
commencing on and including the Notice Date to and including the Termination Event
Termination Date in order to cover the remaining number of Borrowed Shares, (iii) the
Principal Account shall be increased to reflect an appropriate accrual of interest at
the Federal Funds Open Rate, as reasonably determined in good faith by the Calculation
Agent, to reflect interest earned by UBS in respect of the aggregate Purchase Price
received from the Issuer, (iv) the Principal Account shall be decreased to reflect
UBS’s actual cost of borrowing shares, as reasonably determined in good faith by the
Calculation Agent, of Common Stock to hedge its obligations hereunder and (v) the
Settlement Amount shall be further adjusted by the amount that UBS reasonably
determines in good faith to be its total losses and costs in connection with the early
termination of this Agreement, including any loss of bargain, cost of funding, or loss
or cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position. In the event that the Issuer
objects to any adjustments made pursuant to this Section 8, the Issuer shall promptly
so notify UBS, and the Issuer and UBS agree to use their good faith best efforts to
reach an agreement as to the adjustment. In the further event that the Issuer and UBS
are not able to reach an agreement in respect of any such adjustment, the Issuer and
UBS shall appoint a third party with sufficient expertise to determine the adjustment
and such adjustment shall be binding on both parties.



Section 9. Miscellaneous.



(a) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.



(b) Assignment. Neither the rights under this Agreement nor the
obligations created by this Agreement shall be assignable or delegable, in whole or in
part, by either party hereto without the prior written consent of the other (which
consent shall not be unreasonably withheld), and any attempt to assign or delegate any
rights or obligations arising under this Agreement without such consent shall be void.



(c) Waivers, etc. No failure or delay on the part of either party in
exercising any power or right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. No amendment,
modification or waiver of any provision of this Agreement nor consent to any departure
by either party therefrom shall in any event be effective unless the same shall be in
writing and, in the case of a waiver or consent, shall be effective only in the
specific instance and for the purpose for which given.



(d) Beneficiaries. This Agreement shall be binding upon, and inure
solely to the benefit of, the Issuer, UBS and, to the extent provided in Section 7
hereof, the affiliates, partners, directors, officers, agents, employees and
controlling persons, if any, of UBS, and their respective successors, assigns, heirs
and personal representatives, and no other person shall acquire any rights hereunder.



(e) Rights of Set-Off. In addition to any rights of set-off a party may
have as a matter of law or otherwise, upon occurrence of a failure to perform at
maturity with respect to either party (the “defaulting party”), the other party (the
“non-defaulting party”) shall have the right, without prior notice to the defaulting
party or any other person, to set off any obligation of the defaulting party owing to
the nondefaulting party in respect of this Agreement against any obligations of the
nondefaulting party owing to the defaulting party in respect of the other agreement
between the parties hereto, in substantially the form hereof, relating to the purchase
of Shares by the Issuer and dated the date hereof. Nothing in this Section 9(e) will
have the effect of creating a charge or other security interest.



(f) Changes of Law. If, due to any change in applicable law or
regulations or the interpretation thereof by any court of law or other body having
jurisdiction subsequent to the date of this Agreement, performance of any provision of
this Agreement or any transaction contemplated thereby shall become impracticable or
impossible, the parties hereto shall use their reasonable best efforts to find and
employ an alternative means to achieve the same or substantially the same result as
contemplated by such provision.



(g) Confidentiality. Subject to any contrary requirement of law and to
the right of each party to enforce its rights hereunder in any legal action, each
party shall keep strictly confidential and shall cause its employees and agents to
keep strictly confidential the terms of this Agreement and any information of or
concerning the other party which it or any of its agents or employees may acquire
pursuant to, or in the course of performing its obligations under, any provision of
this Agreement. In the event disclosure is permitted pursuant to the preceding
sentence, the disclosing party shall (i) provide prior notice of such disclosure to
the other party, (ii) use its best efforts to minimize the extent of such disclosure
and (iii) comply with all reasonable requests of the other party to minimize the
extent of such disclosure. This Section 9(g) shall not prevent either party from
disclosing information as necessary to third-party advisors in connection with the
transactions contemplated hereby provided that such advisors agree to be bound by this
Section 9(g) as if a party hereto. UBS hereby consents to the issuance of a press
release by the Issuer announcing its entry into this Agreement and the filing with the
SEC of a copy of this Agreement.



(h) Agent. UBS Securities LLC shall act as “agent” for UBS and the
Issuer within the meaning of Rule 15a-6 under the Exchange Act. As a broker-dealer
registered with the Securities and Exchange Commission, UBS Securities LLC, in its
capacity as agent, will be responsible for (i) effecting the transaction contemplated
in this Agreement, (ii) issuing all required notices, confirmations and statements to
Buyer and Seller and (iii) maintaining books and records relating to this Agreement.



(i) Headings. Descriptive headings herein are for convenience only and
shall not control or affect the meaning or construction of any provision of this
Agreement.



(j) Counterparts. This Agreement may be executed by the parties hereto
in counterparts, and each such executed counterpart shall be, and shall be deemed to
be, an original instrument and all such counterparts, taken together, shall constitute
one and the same instrument.



(k) Notices. All notices, consents, requests, instructions, approvals
and other communications provided for herein shall be validly given, made or served if
in writing and delivered personally, by telegram, by telecopy or sent by overnight
courier, postage prepaid, to:



UBS at:



c/o UBS Securities LLC


677 Washington Boulevard


Stamford, CT 06901


Attention of: Adam Frieman


Fax Number: 203-719-7031



With a copy to such address to attention of:


Legal and External Affairs



the Issuer at:



Rockwell Collins, Inc.


400 Collins Road, N.E.


Cedar Rapids, IA 52498




Attention of: Douglas E. Stenske


Fax Number: 319-295-0020




With a copy to such address to the attention of:


Gary R. Chadick, Esq.


Fax Number: 319-295-3599



or to such other address as any party may, from time to time, designate in a written
notice given in a like manner. Notice given by telegram or telecopy shall be deemed
delivered when evidence of the transmission is received by the sender and shall be
confirmed in writing by overnight courier, postage prepaid. Notice given by overnight
courier as set out above shall be deemed delivered the business day after the date the
same is mailed.



(l) Account Details.



UBS:



Cash Payments for Stock Purchase



Citibank, New York



ABA# 021 000 089



A/C# 4065 2556



UBS Securities, LLC



Cash Payments for Settlement



UBS AG Stamford



f/o UBS AG London Branch



ABA# 026-007-993



AC# 101-WA-140007-000



Issuer:



Mellon Bank



ABA No. 043-000-261



A/C No. 091-2704



 (m) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York without
reference to conflict of law principles. Each party hereto irrevocably submits to the
extent permitted under applicable law to the non-exclusive jurisdiction of the federal
and state courts located in the Borough of Manhattan, State of New York. Each party
waives, to the fullest extent permitted by applicable law, any right it may have to a
trial by jury in respect of any suit, action or proceeding relating to this Agreement.



1



IN WITNESS WHEREOF, UBS and the Issuer have caused this Agreement to be duly
authorized, executed and delivered as of the date first written above.



UBS AG, LONDON BRANCH



By:     



Name:



Title:



By:     



Name:



Title:



UBS SECURITIES LLC



By:     



Name:



Title:



ROCKWELL COLLINS, INC.



By:     



Name:



Title:




2