<PAGE>
                                                                  EXHIBIT 10-a-2

            [TERMS AND CONDITIONS -- NON-COMPETE, ISOS, PRIORITY, NQ]

                             ROCKWELL COLLINS, INC.
                         2001 LONG-TERM INCENTIVES PLAN
                             STOCK OPTION AGREEMENT
                        STOCK OPTION TERMS AND CONDITIONS


1.    Definitions

      As used in these Stock Option Terms and Conditions, the following words
      and phrases shall have the respective meanings ascribed to them below
      unless the context in which any of them is used clearly indicates a
      contrary meaning:

      (a)   Cashless Exercise: Cashless Exercise shall have the meaning set
            forth in Section 3(a)(ii) herein.

      (b)   Change of Control: Change of Control shall have the same meaning as
            such term has in Section 2(d) of the Plan.

      (c)   Charles Schwab: Charles Schwab & Co., Inc., the Stock Option
            Administrator whom Rockwell Collins has engaged to administer and
            process all Option exercises.

      (d)   Committee: The Compensation and Management Development Committee of
            the Board of Directors of Rockwell Collins.

      (e)   Corporation: Rockwell Collins and its Subsidiaries (as such term is
            defined in the Plan).

      (f)   Customer Service Center: Charles Schwab's Customer Service Center
            that is used to facilitate Option transactions. Contact Charles
            Schwab at (888) 852-2135.

      (g)   Employee: Employee shall have the same meaning as such term has in
            Section 2(j) of the Plan.

      (h)   Exercise Request and Attestation Form: The form attached as Exhibit
            1 or any other form accepted by Charles Schwab in connection with
            the use of already-owned Shares to pay all or part of the exercise
            price for the Option Shares to be purchased on exercise of any of
            the Options.

      (i)   Options: The stock options listed in the first paragraph of the
            letter dated [ ], to which these Stock Option Terms and Conditions
            are attached and which together with these Stock Option Terms and
            Conditions constitute the Stock Option Agreement.
<PAGE>
      (j)   Option Shares: The shares of Rockwell Collins Common Stock issuable
            or transferable on exercise of the Options.

      (k)   Plan: Rockwell Collins 2001 Long-Term Incentives Plan, as such Plan
            may be amended and in effect at the relevant time.

      (l)   Rockwell Collins: Rockwell Collins, Inc., a Delaware corporation,
            and any successor thereto.

      (m)   Schwab OptionCenter(R) : Charles Schwab's stock option management
            website which you can use to access your stock option account and to
            facilitate stock option transactions securely on the web at
            www.schwab.com/optioncenter.

      (n)   Shares: Shares of Rockwell Collins Common Stock.

      (o)   Stock Option Agreement: These Stock Option Terms and Conditions
            together with the letter dated [ ], to which they are attached.

2.    When Options May be Exercised

      The Options may be exercised, in whole or in part (but only for a whole
      number of shares) and at one time or from time to time, as to one-third
      (rounded to the nearest whole number) of the Option Shares granted
      pursuant to nonqualified stock options (NQs) and incentive stock options
      (ISOs) during the period beginning on [ ] and ending on [ ], as to an
      additional one-third (rounded to the nearest whole number) of the Option
      Shares granted pursuant to NQs and ISOs during the period beginning on [ ]
      and ending on [ ] and as to the balance of the Option Shares granted
      pursuant to NQs and ISOs during the period beginning on [ ] and ending on
      [ ], and only during those periods, and provided that:

      (a)   if you die while an Employee, any person who holds the Options as
            permitted by Section 4 herein may exercise all the Options not
            theretofore exercised within (and only within) the period beginning
            on your date of death (even if you die before you have become
            entitled to exercise all or any part of the Options) and ending
            three years thereafter; and

      (b)   if your employment by the Corporation terminates other than by
            death, then:

            (i)   if your retirement or other termination date is before [ ],
                  the Options shall lapse on your retirement or other
                  termination and may not be exercised at any time;

                                      -2-
<PAGE>
            (ii)  if your employment by the Corporation is terminated for cause,
                  as determined by the Committee, the Options shall expire
                  forthwith upon your termination and may not be exercised
                  thereafter;

            (iii) if your employment by Rockwell Collins terminates on or after
                  [ ] by reason of your retirement under a retirement plan of
                  Rockwell Collins, or under a retirement plan of a subsidiary
                  or affiliate of Rockwell Collins, you (or any person who holds
                  the Options as permitted by Section 4 herein) may thereafter
                  exercise Options which are exercisable prior to the date of
                  your retirement or that will become exercisable within (and
                  only within) the period between the date of your retirement
                  and ending on the fifth anniversary of your retirement date;
                  or if you retire prior to age 62, the earlier of (x) the fifth
                  anniversary of your retirement date or (y) such earlier date
                  as the Committee shall determine by action taken not later
                  than 60 days after your retirement date; and

            (iv)  if your employment by the Corporation terminates on or after
                  [ ] for any reason not specified in subparagraph (a) or in
                  clauses (ii) or (iii) of this subparagraph (b), you (or any
                  person who holds the Options as permitted by Section 4 herein)
                  may thereafter exercise the Options within (and only within)
                  the period ending three months after your termination date but
                  only to the extent such Options were exercisable on your
                  termination date.

            In no event shall the provisions of the foregoing subparagraphs (a)
            and (b) extend to a date after [ ], the period during which the
            Options may be exercised.

            Notwithstanding any other provision of this Agreement, if a Change
            of Control shall occur, then all Options then outstanding pursuant
            to this Agreement shall forthwith become fully exercisable whether
            or not then otherwise exercisable in accordance with their terms.

3.    Exercise Procedure

      (a)   To exercise all or any part of the Options, you (or any person who
            holds the Options as permitted by Section 4 herein) must contact the
            Stock Option Administrator, Charles Schwab, by using the Customer
            Service Center or Schwab OptionCenter(R), as follows:

            (i)   contact the Customer Service Center by calling (888) 852-2135
                  Monday through Friday, 9:00 a.m. to 9:00 p.m. Eastern Time and
                  follow the instructions provided, or exercise via the Web
                  through the Schwab OptionCenter(R) at www.schwab.com/
                  optioncenter;
                                      -3-
<PAGE>
            (ii)  confirm the Option transaction through the Customer Service
                  Center or Schwab OptionCenter(R);

            (iii) at any time you may speak to a Customer Service Representative
                  for assistance by calling 888-852-2135;

            (iv)  full payment of the exercise price for the Option Shares to be
                  purchased on exercise of the Options may be made by:

                        -     check (wire) to your Charles Schwab account; or

                        -     in already-owned Shares; or

                        -     by authorizing Charles Schwab or a third party
                              approved by Rockwell Collins to sell the Shares
                              (or a sufficient portion of the Shares) acquired
                              upon exercise of the Option ("Cashless Exercise");
                              or

                        -     in a combination of check (wire) to your Charles
                              Schwab account and Shares (whether already-owned
                              Shares or Shares issued and subsequently sold in
                              connection with a Cashless Exercise); and

            (v)   in the case of an exercise of the Options by any person other
                  than you seeking to exercise the Options, such documents as
                  Charles Schwab or the Secretary of Rockwell Collins shall
                  require to establish to their satisfaction that the person
                  seeking to exercise the Options is entitled to do so.

      (b)   An exercise of the whole or any part of the Options shall be
            effective:

            (i)   if you elect (or any person who holds the Options as permitted
                  by Section 4 herein elects) to pay the exercise price for the
                  Option Shares entirely by check (wire), upon (A) completion of
                  your transaction by using the Customer Service Center or
                  Schwab OptionCenter(R) and full payment of the exercise price
                  and withholding taxes (if applicable) are received by Charles
                  Schwab within three business days following the exercise; and
                  (B) receipt of any documents required pursuant to Section
                  3(a)(v) herein; and

            (ii)  if you elect (or any person who holds the Options as permitted
                  by Section 4 herein elects) to pay the exercise price of the
                  Option Shares in Shares (whether already-owned Shares or
                  Shares issued and subsequently sold in connection with a
                  Cashless Exercise) or in a combination of Shares (whether
                  already-owned Shares or Shares issued and subsequently sold in
                  connection with a Cashless Exercise) and check, upon (A)
                  completion of your transaction by

                                      -4-
<PAGE>
                  using the Customer Service Center or Schwab OptionCenter(R)
                  and full payment of the exercise price (as described in
                  Section 3(d)(i) herein) and withholding taxes (if applicable)
                  are received by Charles Schwab within three business days
                  following the exercise; and (B) receipt of any documents
                  required pursuant to Section 3(a)(v) herein.

      (c)   If you choose (or any person who holds the Options as permitted by
            Section 4 herein chooses) to pay the exercise price for the Option
            Shares to be purchased on exercise of any of the Options entirely by
            check, payment must be made by:

                  -     delivering to Charles Schwab a check (wire) in the full
                        amount of the exercise price for those Option Shares; or

                  -     arranging with a stockbroker, bank or other financial
                        institution to deliver to Charles Schwab full payment,
                        by check or (if prior arrangements are made with Charles
                        Schwab) by wire transfer, of the exercise price of those
                        Option Shares.

            In either event, in accordance with Section 3(e) herein, full
            payment of the exercise price for the Option Shares purchased must
            be made within three business days after the exercise has been
            completed through the Customer Service Center or Schwab
            OptionCenter(R).

      (d)   (i)   If you choose (or any person who holds the Options as
                  permitted by Section 4 herein chooses) to use already-owned
                  Shares to pay all or part of the exercise price for the Option
                  Shares to be purchased on exercise of any of the Options, you
                  (or any person who holds the Options as permitted by Section 4
                  herein) must deliver to Charles Schwab an Exercise Request and
                  Attestation Form and cash to cover the purchase of one Option
                  Share as specified in such form. To perform such a
                  transaction, the Exercise Request and Attestation Form must be
                  submitted via fax ((720) 785-8874) by 4:00 p.m. Eastern Time
                  on the date of exercise and any questions concerning this type
                  of transaction should be referred to (877) 636-7551 (Stock
                  Option Administration Group Hotline). The Exercise Request and
                  Attestation Form must attest to your ownership of Shares
                  representing:

                        -     at least the number of Shares whose value, based
                              on the closing price of Common Stock of Rockwell
                              Collins on the New York Stock Exchange --
                              Composite Transactions on the day you have
                              exercised your Options through the Customer
                              Service Center or Schwab OptionCenter(R), equals
                              the exercise price for the Option Shares; or

                                      -5-
<PAGE>
                        -     any lesser number of Shares you desire (or any
                              person who holds the Options as permitted by
                              Section 4 herein desires) to use to pay the
                              exercise price for those Option Shares and a check
                              in the amount of such exercise price less the
                              value of the Shares delivered, based on the
                              closing price of Common Stock of Rockwell Collins
                              on the New York Stock Exchange -- Composite
                              Transactions on the day you have exercised your
                              Options through the Customer Service Center or
                              Schwab OptionCenter(R).

            (ii)  If you choose (or any person who holds the Options as
                  permitted by Section 4 herein chooses) to use Option Shares
                  obtained by Cashless Exercise to pay all or part of the
                  exercise price for the remaining Option Shares to be purchased
                  on exercise of any of the Options, you (or any person who
                  holds the Options as permitted by Section 4 herein) must
                  contact the Customer Service Center at (888) 852-2135 or
                  Schwab OptionCenter(R).

            (iii) Charles Schwab will advise you (or any other person who, being
                  entitled to do so, exercises the Options) of the exact number
                  of Shares, valued at the closing price on the New York Stock
                  Exchange -- Composite Transactions on the effective date of
                  exercise under Section 3(b)(ii) herein, and any funds required
                  to pay in full the exercise price for the Option Shares
                  purchased. In accordance with Section 3(e) herein, you (or
                  such other person) must pay, by check, in Shares or in a
                  combination of check and Shares, any balance required to pay
                  in full the exercise price of the Option Shares purchased
                  within three business days following the effective date of
                  such exercise of the Options under Section 3(b)(ii) herein.

            (iv)  Notwithstanding any other provision of this Stock Option
                  Agreement, the Secretary of Rockwell Collins may limit the
                  number, frequency or volume of successive exercises of any of
                  the Options in which payment is made, in whole or in part, by
                  delivery of Shares pursuant to this subparagraph (d) to
                  prevent unreasonable pyramiding of such exercises.

      (e)   An exercise completed through the Customer Service Center or
            Schwab OptionCenter(R), whether or not full payment of the
            exercise price for the Option Shares is received by Charles
            Schwab, shall constitute a binding contractual obligation by
            you (or the other person entitled to exercise the Options) to
            proceed with and complete that exercise of the Options (but
            only so long as you continue, or the other person entitled to
            exercise the Options continues, to be entitled to exercise
            the Options on that date). By your acceptance of this Stock
            Option Agreement, you agree (for yourself

                                      -6-

<PAGE>
            and on behalf of any other person who becomes entitled to exercise
            the Options) to pay to Charles Schwab in full the exercise price for
            those Option Shares, that payment being by check, wire transfer, in
            Shares or in a combination of check and Shares, on or before the
            third business day after the date on which you complete the
            transaction through the Customer Service Center. If such payment is
            not made, you (for yourself and on behalf of any other person who
            becomes entitled to exercise the Options) authorize Rockwell
            Collins, in its discretion, to set off against salary payments or
            other amounts due or which may become due you (or the other person
            entitled to exercise the Options) any balance of the exercise price
            for those Option Shares remaining unpaid thereafter.

      (f)   An Exercise Confirmation representing the number of Option Shares
            purchased will be issued the third business day (trade date plus
            three business days) (i) after Charles Schwab has received full
            payment therefor or (ii) at Rockwell Collins' or Charles Schwab's
            election in their sole discretion, after Rockwell Collins or Charles
            Schwab has received (x) full payment of the exercise price of those
            Option Shares and (y) any reimbursement in respect of withholding
            taxes due pursuant to Section 5 herein.

4.    Transferability; Nonassignability

      You are not entitled to transfer the Options except by will or by the laws
      of descent and distribution.

5.    Withholding

      Rockwell Collins or Charles Schwab shall have the right, in connection
      with the exercise of the Options, in whole or in part, to deduct from any
      payment to be made by Rockwell Collins or Charles Schwab an amount equal
      to the taxes required to be withheld by law with respect to such exercise
      or to require you (or any other person entitled to exercise the Options)
      to pay to it an amount sufficient to provide for any such taxes so
      required to be withheld. By your acceptance of this Stock Option
      Agreement, you agree (for yourself and on behalf of any other person who
      becomes entitled to exercise the Options) that if Rockwell Collins or
      Charles Schwab elects to require you (or such other person) to remit an
      amount sufficient to pay such withholding taxes, you (or such other
      person) must remit that amount within three business days after the
      completion of the Option exercise as provided in Section 3(a)(ii) herein.
      If such payment is not made, Rockwell Collins, in its discretion, shall
      have the same right of set-off as provided under Section 3(e) herein with
      respect to payment of the exercise price for Option Shares.


                                      -7-
<PAGE>
6.    Headings

      The section headings contained in these Stock Option Terms and Conditions
      are solely for the purpose of reference, are not part of the agreement of
      the parties and shall in no way affect the meaning or interpretation of
      this Stock Option Agreement.

7.    References

      All references in these Stock Option Terms and Conditions to Sections,
      paragraphs, subparagraphs or clauses shall be deemed to be references to
      Sections, paragraphs, subparagraphs and clauses of these Stock Option
      Terms and Conditions unless otherwise specifically provided.

8.    Entire Agreement

      This Stock Option Agreement and the other terms applicable to Stock
      Options granted under the Plan embody the entire agreement and
      understanding between Rockwell Collins and you with respect to the
      Options, and there are no representations, promises, covenants, agreements
      or understandings with respect to the Options other than those expressly
      set forth in this Stock Option Agreement and the Plan.

9.    Applicable Laws and Regulations

      This Stock Option Agreement and Rockwell Collins obligation to issue
      Option Shares hereunder are subject to applicable laws and regulations.



Exhibit 1   Exercise Request and Attestation Form (For Use With Already-
            Owned Shares)
                                      -8-
<PAGE>
                         2001 LONG-TERM INCENTIVES PLAN
                            FORM OF OPTION AGREEMENT
                        [EXISTING ARBITRATION AGREEMENT]


[Grant Date]

To:


Social Security/Account Number:

Dear Optionee:

We are pleased to notify you that you have been granted the following stock
options under the 2001 Long-Term Incentives Plan (the "Plan"):

<TABLE>
<CAPTION>
  Date of Grant      Type of Grant         Number of Shares      Option Price
  -------------      -------------         ----------------      ------------
<S>                  <C>                   <C>                   <C>
</TABLE>

These stock options (the "Options") have been granted under and may be exercised
only upon the terms and conditions of this Stock Option Agreement, subject in
all respects to the provisions of the Plan, as it may be amended. The enclosed
Stock Option Terms and Conditions are incorporated in and are part of this Stock
Option Agreement.

A copy of the Plan and Plan Prospectus are enclosed. Please carefully read the
enclosed documents and retain them for future reference.


                                            ROCKWELL COLLINS, INC.

                                            By:
<PAGE>
                         2001 LONG-TERM INCENTIVES PLAN
                            FORM OF OPTION AGREEMENT
                    [NON-COMPETE, NEW ARBITRATION AGREEMENT]

[Grant Date]

To:


Social Security/Account Number:


Dear Optionee:

We are pleased to notify you that you have been granted the following stock
options under the 2001 Long-Term Incentives Plan (the "Plan"):

<TABLE>
<CAPTION>
  Date of Grant      Type of Grant         Number of Shares      Option Price
  -------------      -------------         ----------------      ------------
<S>                  <C>                   <C>                   <C>
</TABLE>


These stock options (the "Options") have been granted under and may be exercised
only upon the terms and conditions of this Stock Option Agreement, subject in
all respects to the provisions of the Plan, as it may be amended. The enclosed
Stock Option Terms and Conditions are incorporated in and are part of this Stock
Option Agreement.

In partial consideration for the grant of the Options to you, you undertake and
agree by your acceptance of this Stock Option Agreement that

      (a)   during your employment with the Corporation (as defined in the Plan)
            and for two years after the date of your retirement or other
            termination of such employment, you shall not (i) directly or
            indirectly, except with the approval of the Corporation, engage or
            otherwise participate in any business which is competitive with any
            significant line of business of the Corporation or any of its
            affiliates (otherwise than through ownership of not more than 5% of
            the voting securities of any such competitive business) or (ii)
            solicit or induce any employee of the Corporation or any of its
            affiliates to leave his or her employment with the Corporation or
            any of its affiliates to accept employment or other engagement with
            any such competitive business; and

      (b)   in the event that you breach this undertaking, in addition to any
            and all other remedies the Corporation may have, (i) the Corporation
            shall have the right to determine by written notice to you that any
            of the Options then outstanding shall immediately lapse and cease to
            be exercisable; and (ii) you agree to pay the Corporation upon
            written demand the amount of the excess
<PAGE>
            of the Fair Market Value (as defined in the Plan) of any shares of
            the Corporation's Common Stock you acquired upon exercise of any of
            the Options (other than Options exercised more than two years before
            the date of your retirement or other termination of employment) over
            the exercise price for those Shares.

If a Change of Control (as defined in the Plan) shall occur, however, the
foregoing provisions (a) and (b) shall immediately terminate as of, and shall
not limit your activities after, the date of such Change of Control.

This stock option grant is also subject to the condition that you sign and
return one copy of the Mutual Agreement to Arbitrate Claims to:

                             Rockwell Collins, Inc.
                             Office of the Secretary
                             400 Collins Road NE
                             Cedar Rapids, IA 52398

A copy of the Plan and Plan Prospectus are enclosed. Please carefully read the
enclosed documents and retain them for future reference.

The Options will lapse and be of no effect if a copy of this Stock Option
Agreement and a copy of the Mutual Agreement to Arbitrate Claims, each properly
signed by you, are not received by the Secretary of Rockwell Collins, Inc. at
the above address on or before November 30, 2001, unless Rockwell Collins, Inc.
(in its sole discretion) elects in writing to extend that date.


Agreed to:                               ROCKWELL COLLINS, INC.
Date:______________________

___________________________              By:
Employee Signature
[Social Security No.]

                                      -2-

<PAGE>
              [TERMS AND CONDITIONS -- INSIDER, ISOS, PRIORITY, NQ]

                             ROCKWELL COLLINS, INC.
                         2001 LONG-TERM INCENTIVES PLAN
                             STOCK OPTION AGREEMENT
                        STOCK OPTION TERMS AND CONDITIONS


1.    Definitions

      As used in these Stock Option Terms and Conditions, the following words
      and phrases shall have the respective meanings ascribed to them below
      unless the context in which any of them is used clearly indicates a
      contrary meaning:

      (a)   Cashless Exercise: Cashless Exercise shall have the meaning set
            forth in Section 3(a)(ii) herein.

      (b)   Change of Control: Change of Control shall have the same meaning as
            such term has in Section 2(d) of the Plan.

      (c)   Charles Schwab: Charles Schwab & Co., Inc., the Stock Option
            Administrator whom Rockwell Collins has engaged to administer and
            process all Option exercises.

      (d)   Committee: The Compensation and Management Development Committee of
            the Board of Directors of Rockwell Collins.

      (e)   Corporation: Rockwell Collins and its Subsidiaries (as such term is
            defined in the Plan).

      (f)   Customer Service Center: Charles Schwab's Customer Service Center
            that is used to facilitate Option transactions. Contact Charles
            Schwab at (888) 852-2135.

      (g)   Employee: Employee shall have the same meaning as such term has in
            Section 2(j) of the Plan.

      (h)   Exercise Request and Attestation Form: The form attached as Exhibit
            2 or any other form accepted by Charles Schwab in connection with
            the use of already-owned Shares to pay all or part of the exercise
            price for the Option Shares to be purchased on exercise of any of
            the Options.

      (i)   Notice of Exercise Form: The form attached as Exhibit 1 or any other
            form accepted by the Secretary of Rockwell Collins in his sole
            discretion.
<PAGE>
      (j)   Options: The stock options listed in the first paragraph of the
            letter dated [ ], to which these Stock Option Terms and Conditions
            are attached and which together with these Stock Option Terms and
            Conditions constitute the Stock Option Agreement.

      (k)   Option Shares: The shares of Rockwell Collins Common Stock issuable
            or transferable on exercise of the Options.

      (l)   Plan: Rockwell Collins 2001 Long-Term Incentives Plan, as such Plan
            may be amended and in effect at the relevant time.

      (m)   Rockwell Collins: Rockwell Collins, Inc., a Delaware corporation,
            and any successor thereto.

      (n)   Shares: Shares of Rockwell Collins Common Stock.

      (o)   Stock Option Agreement: These Stock Option Terms and Conditions
            together with the letter dated [ ], to which they are attached.

2.    When Options May be Exercised

      The Options may be exercised, in whole or in part (but only for a whole
      number of shares) and at one time or from time to time, as to one-third
      (rounded to the nearest whole number) of the Option Shares granted
      pursuant to nonqualified stock options (NQs) and incentive stock options
      (ISOs) during the period beginning on [ ] and ending on [ ], as to an
      additional one-third (rounded to the nearest whole number) of the Option
      Shares granted pursuant to NQs and ISOs during the period beginning on [ ]
      and ending on [ ] and as to the balance of the Option Shares granted
      pursuant to NQs and ISOs during the period beginning on [ ] and ending on
      [ ], and only during those periods, and provided that:

      (a)   if you die while an Employee, any person who holds the Options as
            permitted by Section 4 herein may exercise all the Options not
            theretofore exercised within (and only within) the period beginning
            on your date of death (even if you die before you have become
            entitled to exercise all or any part of the Options) and ending
            three years thereafter; and

      (b)   if your employment by the Corporation terminates other than by
            death, then:

            (i)   if your retirement or other termination date is before [ ],
                  the Options shall lapse on your retirement or other
                  termination and may not be exercised at any time;

                                      -2-

<PAGE>
            (ii)  if your employment by the Corporation is terminated for cause,
                  as determined by the Committee, the Options shall expire
                  forthwith upon your termination and may not be exercised
                  thereafter;

            (iii) if your employment by Rockwell Collins terminates on or after
                  [ ] by reason of your retirement under a retirement plan of
                  Rockwell Collins, or under a retirement plan of a subsidiary
                  or affiliate of Rockwell Collins, you (or any person who holds
                  the Options as permitted by Section 4 herein) may thereafter
                  exercise Options which are exercisable prior to the date of
                  your retirement or that will become exercisable within (and
                  only within) the period between the date of your retirement
                  and ending on the fifth anniversary of your retirement date;
                  or if you retire prior to age 62, the earlier of (x) the fifth
                  anniversary of your retirement date or (y) such earlier date
                  as the Committee shall determine by action taken not later
                  than 60 days after your retirement date; and

            (iv)  if your employment by the Corporation terminates on or after
                  [  ] for any reason not specified in subparagraph (a) or in
                  clauses (ii) or (iii) of this subparagraph (b), you (or any
                  person who holds the Options as permitted by Section 4 herein)
                  may thereafter exercise the Options within (and only within)
                  the period ending three months after your termination date but
                  only to the extent such Options were exercisable on your
                  termination date.

            In no event shall the provisions of the foregoing subparagraphs (a)
            and (b) extend to a date after [ ], the period during which the
            Options may be exercised.

            Notwithstanding any other provision of this Agreement, if a Change
            of Control shall occur, then all Options then outstanding pursuant
            to this Agreement shall forthwith become fully exercisable whether
            or not then otherwise exercisable in accordance with their terms.

3.    Exercise Procedure

      (a)   To exercise all or any part of the Options, you (or any person who
            holds the Options as permitted by Section 4 herein) must first
            obtain authorization from Rockwell Collins' Office of the Secretary
            by submitting a Notice of Exercise Form to Rockwell Collins' Office
            of the Secretary (Attention: Stock Option Administration; facsimile
            number (319) 295-3599) or by other means acceptable to the Secretary
            of Rockwell Collins and then contact the Stock Option Administrator,
            Charles Schwab, by using the Customer Service Center, as follows:

                                      -3-

<PAGE>
            (i)   contact the Customer Service Center by calling (888) 852-2135
                  Monday through Friday, 9:00 a.m. to 9:00 p.m. Eastern Time and
                  follow the instructions provided;

            (ii)  full payment of the exercise price for the Option Shares to be
                  purchased on exercise of the Options may be made by:

                        -     check (wire) to your Charles Schwab account; or

                        -     in already-owned Shares; or

                        -     by authorizing Charles Schwab or a third party
                              approved by Rockwell Collins to sell the Shares
                              (or a sufficient portion of the Shares) acquired
                              upon exercise of the Option ("Cashless Exercise");
                              or

                        -     in a combination of check (wire) to your Charles
                              Schwab account and Shares (whether already-owned
                              Shares or Shares issued and subsequently sold in
                              connection with a Cashless Exercise); and

            (iii) in the case of an exercise of the Options by any person other
                  than you seeking to exercise the Options, such documents as
                  Charles Schwab or the Secretary of Rockwell Collins shall
                  require to establish to their satisfaction that the person
                  seeking to exercise the Options is entitled to do so.

      (b)   An exercise of the whole or any part of the Options shall be
            effective:

            (i)   if you elect (or any person who holds the Options as permitted
                  by Section 4 herein elects) to pay the exercise price for the
                  Option Shares entirely by check (wire), upon (A) completion of
                  your transaction by using the Customer Service Center and full
                  payment of the exercise price and withholding taxes (if
                  applicable) are received by Charles Schwab within three
                  business days following the exercise; and (B) receipt of any
                  documents required pursuant to Section 3(a)(iii) herein; and

            (ii)  if you elect (or any person who holds the Options as permitted
                  by Section 4 herein elects) to pay the exercise price of the
                  Option Shares in Shares (whether already-owned Shares or
                  Shares issued and subsequently sold in connection with a
                  Cashless Exercise) or in a combination of Shares (whether
                  already-owned Shares or Shares issued and subsequently sold in
                  connection with a Cashless Exercise) and check, upon (A)
                  completion of your transaction by using the Customer Service
                  Center and full payment of the exercise price (as described in
                  Section 3(d)(i) herein) and withholding taxes (if

                                      -4-
<PAGE>
                  applicable) are received by Charles Schwab within three
                  business days following the exercise; and (B) receipt of any
                  documents required pursuant to Section 3(a)(iii) herein.

      (c)   If you choose (or any person who holds the Options as permitted by
            Section 4 herein chooses) to pay the exercise price for the Option
            Shares to be purchased on exercise of any of the Options entirely by
            check, payment must be made by:

                  -     delivering to Charles Schwab a check (wire) in the full
                        amount of the exercise price for those Option Shares; or

                  -     arranging with a stockbroker, bank or other financial
                        institution to deliver to Charles Schwab full payment,
                        by check or (if prior arrangements are made with Charles
                        Schwab) by wire transfer, of the exercise price of those
                        Option Shares.

            In either event, in accordance with Section 3(e) herein, full
            payment of the exercise price for the Option Shares purchased must
            be made within three business days after the exercise has been
            completed through the Customer Service Center.

      (d)   (i)   If you choose (or any person who holds the Options as
                  permitted by Section 4 herein chooses) to use already-owned
                  Shares to pay all or part of the exercise price for the Option
                  Shares to be purchased on exercise of any of the Options, you
                  (or any person who holds the Options as permitted by Section 4
                  herein) must deliver to Charles Schwab an Exercise Request and
                  Attestation Form and cash to cover the purchase of one Option
                  Share as specified in such form. To perform such a
                  transaction, the Exercise Request and Attestation Form must be
                  submitted via fax ((720) 785-8874) by 4:00 p.m. Eastern Time
                  on the date of exercise and any questions concerning this type
                  of transaction should be referred to (877) 636-7551 (Stock
                  Option Administration Group Hotline). The Exercise Request and
                  Attestation Form must attest to your ownership of Shares
                  representing:

                        -     at least the number of Shares whose value, based
                              on the closing price of Common Stock of Rockwell
                              Collins on the New York Stock Exchange --
                              Composite Transactions on the day you have
                              exercised your Options through the Customer
                              Service Center, equals the exercise price for the
                              Option Shares; or

                        -     any lesser number of Shares you desire (or any
                              person who holds the Options as permitted by
                              Section 4 herein desires) to

                                      -5-
<PAGE>
                              use to pay the exercise price for those Option
                              Shares and a check in the amount of such exercise
                              price less the value of the Shares delivered,
                              based on the closing price of Common Stock of
                              Rockwell Collins on the New York Stock Exchange --
                              Composite Transactions on the day you have
                              exercised your Options through the Customer
                              Service Center.

            (ii)  If you choose (or any person who holds the Options as
                  permitted by Section 4 herein chooses) to use Option Shares
                  obtained by Cashless Exercise to pay all or part of the
                  exercise price for the remaining Option Shares to be purchased
                  on exercise of any of the Options, you (or any person who
                  holds the Options as permitted by Section 4 herein) must
                  contact the Customer Service Center at (888) 852-2135.

            (iii) Charles Schwab will advise you (or any other person who, being
                  entitled to do so, exercises the Options) of the exact number
                  of Shares, valued at the closing price on the New York Stock
                  Exchange -- Composite Transactions on the effective date of
                  exercise under Section 3(b)(ii) herein, and any funds required
                  to pay in full the exercise price for the Option Shares
                  purchased. In accordance with Section 3(e) herein, you (or
                  such other person) must pay, by check, in Shares or in a
                  combination of check and Shares, any balance required to pay
                  in full the exercise price of the Option Shares purchased
                  within three business days following the effective date of
                  such exercise of the Options under Section 3(b)(ii) herein.

            (iv)  Notwithstanding any other provision of this Stock Option
                  Agreement, the Secretary of Rockwell Collins may limit the
                  number, frequency or volume of successive exercises of any of
                  the Options in which payment is made, in whole or in part, by
                  delivery of Shares pursuant to this subparagraph (d) to
                  prevent unreasonable pyramiding of such exercises.

      (e)   An exercise completed through the Customer Service Center, whether
            or not full payment of the exercise price for the Option Shares is
            received by Charles Schwab, shall constitute a binding contractual
            obligation by you (or the other person entitled to exercise the
            Options) to proceed with and complete that exercise of the Options
            (but only so long as you continue, or the other person entitled to
            exercise the Options continues, to be entitled to exercise the
            Options on that date). By your acceptance of this Stock Option
            Agreement, you agree (for yourself and on behalf of any other person
            who becomes entitled to exercise the Options) to pay to Charles
            Schwab in full the exercise price for those Option Shares, that
            payment being by check, wire transfer, in Shares or in a combination
            of check and Shares, on or before the third business day after the
            date on which you complete the

                                      -6-
<PAGE>
            transaction through the Customer Service Center. If such payment is
            not made, you (for yourself and on behalf of any other person who
            becomes entitled to exercise the Options) authorize Rockwell
            Collins, in its discretion, to set off against salary payments or
            other amounts due or which may become due you (or the other person
            entitled to exercise the Options) any balance of the exercise price
            for those Option Shares remaining unpaid thereafter.

      (f)   An Exercise Confirmation representing the number of Option Shares
            purchased will be issued the third business day (trade date plus
            three business days) (i) after Charles Schwab has received full
            payment therefor or (ii) at Rockwell Collins' or Charles Schwab's
            election in their sole discretion, after Rockwell Collins or Charles
            Schwab has received (x) full payment of the exercise price of those
            Option Shares and (y) any reimbursement in respect of withholding
            taxes due pursuant to Section 5 herein.

4.    Transferability; Nonassignability

      You are not entitled to transfer the Options except by will or by the laws
      of descent and distribution.

5.    Withholding

      Rockwell Collins or Charles Schwab shall have the right, in connection
      with the exercise of the Options, in whole or in part, to deduct from any
      payment to be made by Rockwell Collins or Charles Schwab an amount equal
      to the taxes required to be withheld by law with respect to such exercise
      or to require you (or any other person entitled to exercise the Options)
      to pay to it an amount sufficient to provide for any such taxes so
      required to be withheld. By your acceptance of this Stock Option
      Agreement, you agree (for yourself and on behalf of any other person who
      becomes entitled to exercise the Options) that if Rockwell Collins or
      Charles Schwab elects to require you (or such other person) to remit an
      amount sufficient to pay such withholding taxes, you (or such other
      person) must remit that amount within three business days after the
      completion of the Option exercise as provided in Section 3(a)(ii) herein.
      If such payment is not made, Rockwell Collins, in its discretion, shall
      have the same right of set-off as provided under Section 3(e) herein with
      respect to payment of the exercise price for Option Shares.

6.    Headings

      The section headings contained in these Stock Option Terms and Conditions
      are solely for the purpose of reference, are not part of the agreement of
      the parties and shall in no way affect the meaning or interpretation of
      this Stock Option Agreement.

                                      -7-
<PAGE>
7.    References

      All references in these Stock Option Terms and Conditions to Sections,
      paragraphs, subparagraphs or clauses shall be deemed to be references to
      Sections, paragraphs, subparagraphs and clauses of these Stock Option
      Terms and Conditions unless otherwise specifically provided.

8.    Entire Agreement

      This Stock Option Agreement and the other terms applicable to Stock
      Options granted under the Plan embody the entire agreement and
      understanding between Rockwell Collins and you with respect to the
      Options, and there are no representations, promises, covenants, agreements
      or understandings with respect to the Options other than those expressly
      set forth in this Stock Option Agreement and the Plan.

9.    Applicable Laws and Regulations

      This Stock Option Agreement and Rockwell Collins obligation to issue
      Option Shares hereunder are subject to applicable laws and regulations.



Exhibit 1   Notice of Exercise Form
Exhibit 2   Exercise Request and Attestation Form (For Use With Already-
            Owned Shares)

                                      -8-
<PAGE>
                                                                       EXHIBIT 1

                             NOTICE OF EXERCISE FORM



To:   Rockwell Collins, Inc.
      Office of the Secretary
      400 Collins Road NE
      Cedar Rapids, IA  52398

      Fax No. (319) 295-3599



1.    OPTIONS EXERCISED: Subject to the terms and conditions of the Stock Option
Agreement dated [ ] with Rockwell Collins, Inc. (Rockwell Collins) thereunder, I
hereby exercise the following stock option(s):

<TABLE>
<CAPTION>
      Date of          Number of           Exercise           Total
      Grant            Shares              Price              Purchase Price
      -------          ----------          ----------         --------------
<S>                    <C>                 <C>                <C>
                                           $                  $
      -------          ----------          ----------         --------------

                                           $                  $
      -------          ----------          ----------         --------------

                                           $                  $
      -------          ----------          ----------         --------------

</TABLE>

      2.    PAYMENT: The following must be received by Charles Schwab & Co.,
Inc. (Charles Schwab) within three business days following the date of exercise:

      -     A check payable to Rockwell Collins Employee Stock Option Program or
            a wire transfer to Charles Schwab for credit to the Rockwell Collins
            Employee Stock Option Program in the amount of the Total Purchase
            Price of the above-itemized stock option(s); or

      -     A number of shares of Rockwell Collins Common Stock surrendered or
            sold to pay the Total Purchase Price of the above-itemized stock
            option(s); or

      -     A combination of (i) check payable to Rockwell Collins Employee
            Stock Option Program or a wire transfer to Charles Schwab for credit
            to the Rockwell Collins Employee Stock Option Program, and (ii) a
            number of Shares surrendered or sold, which together amount to the
            Total Purchase Price of the above-itemized stock option(s).
<PAGE>
                                                         Notice of Exercise Form
                                                 For Officers and Directors Only
                                                                          Page 2


            If full payment of the Total Purchase Price of the stock option(s)
listed in Item 1 is not delivered within three (3) business days after the
exercise date, Rockwell Collins is authorized forthwith to set off the balance
due against any amounts due or which may become due me to satisfy my obligation
to pay the Total Purchase Price.

This Stock Option Exercise may not be revoked or changed after delivery of this
form, properly completed, dated and signed, to Rockwell Collins whether or not
payment accompanies this form and whether this form is dated before, on or after
the date of such receipt.



___________________________________
            (Signature)

Printed Name_____________________________

Dated:___________________________________
<PAGE>
               [TERMS AND CONDITIONS -- NON-COMPETE, PRIORITY, NQ]

                             ROCKWELL COLLINS, INC.
                         2001 LONG-TERM INCENTIVES PLAN
                             STOCK OPTION AGREEMENT
                        STOCK OPTION TERMS AND CONDITIONS


1.    Definitions

      As used in these Stock Option Terms and Conditions, the following words
      and phrases shall have the respective meanings ascribed to them below
      unless the context in which any of them is used clearly indicates a
      contrary meaning:

      (a)   Cashless Exercise: Cashless Exercise shall have the meaning set
            forth in Section 3(a)(ii) herein.

      (b)   Change of Control: Change of Control shall have the same meaning as
            such term has in Section 2(d) of the Plan.

      (c)   Charles Schwab: Charles Schwab & Co., Inc., the Stock Option
            Administrator whom Rockwell Collins has engaged to administer and
            process all Option exercises.

      (d)   Committee: The Compensation and Management Development Committee of
            the Board of Directors of Rockwell Collins.

      (e)   Corporation: Rockwell Collins and its Subsidiaries (as such term is
            defined in the Plan).

      (f)   Customer Service Center: Charles Schwab's Customer Service Center
            that is used to facilitate Option transactions. Contact Charles
            Schwab at (888) 852-2135.

      (g)   Employee: Employee shall have the same meaning as such term has in
            Section 2(j) of the Plan.

      (h)   Exercise Request and Attestation Form: The form attached as Exhibit
            1 or any other form accepted by Charles Schwab in connection with
            the use of already-owned Shares to pay all or part of the exercise
            price for the Option Shares to be purchased on exercise of any of
            the Options.

      (i)   Options: The stock options listed in the first paragraph of the
            letter dated [ ], to which these Stock Option Terms and Conditions
            are attached and which together with these Stock Option Terms and
            Conditions constitute the Stock Option Agreement.
<PAGE>
      (j)   Option Shares: The shares of Rockwell Collins Common Stock issuable
            or transferable on exercise of the Options.

      (k)   Plan: Rockwell Collins 2001 Long-Term Incentives Plan, as such Plan
            may be amended and in effect at the relevant time.

      (l)   Rockwell Collins: Rockwell Collins, Inc., a Delaware corporation,
            and any successor thereto.

      (m)   Schwab OptionCenter(R) : Charles Schwab's stock option management
            website which you can use to access your stock option account and to
            facilitate stock option transactions securely on the web at
            www.schwab.com/optioncenter.

      (n)   Shares: Shares of Rockwell Collins Common Stock.

      (o)   Stock Option Agreement: These Stock Option Terms and Conditions
            together with the letter dated [ ], to which they are attached.

2.    When Options May be Exercised

      The Options may be exercised, in whole or in part (but only for a whole
      number of shares) and at one time or from time to time, as to one-third
      (rounded to the nearest whole number) of the Option Shares during the
      period beginning on [ ] and ending on [ ], as to an additional one-third
      (rounded to the nearest whole number) of the Option Shares during the
      period beginning on [ ] and ending on [ ] and as to the balance of the
      Option Shares during the period beginning on [ ] and ending on [ ], and
      only during those periods, and provided that:

      (a)   if you die while an Employee, any person who holds the Options as
            permitted by Section 4 herein may exercise all the Options not
            theretofore exercised within (and only within) the period beginning
            on your date of death (even if you die before you have become
            entitled to exercise all or any part of the Options) and ending
            three years thereafter; and

      (b)   if your employment by the Corporation terminates other than by
            death, then:

            (i)   if your retirement or other termination date is before [ ],
                  the Options shall lapse on your retirement or other
                  termination and may not be exercised at any time;

            (ii)  if your employment by the Corporation is terminated for cause,
                  as determined by the Committee, the Options shall expire
                  forthwith upon your termination and may not be exercised
                  thereafter;

                                      -2-
<PAGE>
            (iii) if your employment by Rockwell Collins terminates on or after
                  [ ] by reason of your retirement under a retirement plan of
                  Rockwell Collins, or under a retirement plan of a subsidiary
                  or affiliate of Rockwell Collins, you (or any person who holds
                  the Options as permitted by Section 4 herein) may thereafter
                  exercise Options which are exercisable prior to the date of
                  your retirement or that will become exercisable within (and
                  only within) the period between the date of your retirement
                  and ending on the fifth anniversary of your retirement date;
                  or if you retire prior to age 62, the earlier of (x) the fifth
                  anniversary of your retirement date or (y) such earlier date
                  as the Committee shall determine by action taken not later
                  than 60 days after your retirement date; and

            (iv)  if your employment by the Corporation terminates on or after
                  [ ] for any reason not specified in subparagraph (a) or in
                  clauses (ii) or (iii) of this subparagraph (b), you (or any
                  person who holds the Options as permitted by Section 4 herein)
                  may thereafter exercise the Options within (and only within)
                  the period ending three months after your termination date but
                  only to the extent such Options were exercisable on your
                  termination date.

            In no event shall the provisions of the foregoing subparagraphs (a)
            and (b) extend to a date after [ ], the period during which the
            Options may be exercised.

            Notwithstanding any other provision of this Agreement, if a Change
            of Control shall occur, then all Options then outstanding pursuant
            to this Agreement shall forthwith become fully exercisable whether
            or not then otherwise exercisable in accordance with their terms.

3.    Exercise Procedure

      (a)   To exercise all or any part of the Options, you (or any person who
            holds the Options as permitted by Section 4 herein) must contact the
            Stock Option Administrator, Charles Schwab, by using the Customer
            Service Center or Schwab OptionCenter(R), as follows:

            (i)   contact the Customer Service Center by calling (888) 852-2135
                  Monday through Friday, 9:00 a.m. to 9:00 p.m. Eastern Time and
                  follow the instructions provided, or exercise via the Web
                  through the Schwab OptionCenter(R) at www.schwab.com/
                  optioncenter;

            (ii)  confirm the Option transaction through the Customer Service
                  Center or Schwab OptionCenter(R);

                                      -3-
<PAGE>
            (iii) at any time you may speak to a Customer Service Representative
                  for assistance by calling 888-852-2135;

            (iv)  full payment of the exercise price for the Option Shares to be
                  purchased on exercise of the Options may be made by:

                        -     check (wire) to your Charles Schwab account; or

                        -     in already-owned Shares; or

                        -     by authorizing Charles Schwab or a third party
                              approved by Rockwell Collins to sell the Shares
                              (or a sufficient portion of the Shares) acquired
                              upon exercise of the Option ("Cashless Exercise");
                              or

                        -     in a combination of check (wire) to your Charles
                              Schwab account and Shares (whether already-owned
                              Shares or Shares issued and subsequently sold in
                              connection with a Cashless Exercise); and

            (v)   in the case of an exercise of the Options by any person other
                  than you seeking to exercise the Options, such documents as
                  Charles Schwab or the Secretary of Rockwell Collins shall
                  require to establish to their satisfaction that the person
                  seeking to exercise the Options is entitled to do so.

      (b)   An exercise of the whole or any part of the Options shall be
            effective:

            (i)   if you elect (or any person who holds the Options as permitted
                  by Section 4 herein elects) to pay the exercise price for the
                  Option Shares entirely by check (wire), upon (A) completion of
                  your transaction by using the Customer Service Center or
                  Schwab OptionCenter(R) and full payment of the exercise price
                  and withholding taxes (if applicable) are received by Charles
                  Schwab within three business days following the exercise; and
                  (B) receipt of any documents required pursuant to Section
                  3(a)(v) herein; and

            (ii)  if you elect (or any person who holds the Options as permitted
                  by Section 4 herein elects) to pay the exercise price of the
                  Option Shares in Shares (whether already-owned Shares or
                  Shares issued and subsequently sold in connection with a
                  Cashless Exercise) or in a combination of Shares (whether
                  already-owned Shares or Shares issued and subsequently sold in
                  connection with a Cashless Exercise) and check, upon (A)
                  completion of your transaction by using the Customer Service
                  Center or Schwab OptionCenter(R) and full payment of the
                  exercise price (as described in Section 3(d)(i) herein) and
                  withholding taxes (if applicable) are received by Charles

                                      -4-

<PAGE>
                  Schwab within three business days following the exercise; and
                  (B) receipt of any documents required pursuant to Section
                  3(a)(v) herein.

      (c)   If you choose (or any person who holds the Options as permitted by
            Section 4 herein chooses) to pay the exercise price for the Option
            Shares to be purchased on exercise of any of the Options entirely by
            check, payment must be made by:

                  -     delivering to Charles Schwab a check (wire) in the full
                        amount of the exercise price for those Option Shares; or

                  -     arranging with a stockbroker, bank or other financial
                        institution to deliver to Charles Schwab full payment,
                        by check or (if prior arrangements are made with Charles
                        Schwab) by wire transfer, of the exercise price of those
                        Option Shares.

            In either event, in accordance with Section 3(e) herein, full
            payment of the exercise price for the Option Shares purchased must
            be made within three business days after the exercise has been
            completed through the Customer Service Center or Schwab
            OptionCenter(R).

      (d)   (i)   If you choose (or any person who holds the Options as
                  permitted by Section 4 herein chooses) to use already-owned
                  Shares to pay all or part of the exercise price for the Option
                  Shares to be purchased on exercise of any of the Options, you
                  (or any person who holds the Options as permitted by Section 4
                  herein) must deliver to Charles Schwab an Exercise Request and
                  Attestation Form and cash to cover the purchase of one Option
                  Share as specified in such form. To perform such a
                  transaction, the Exercise Request and Attestation Form must be
                  submitted via fax ((720) 785-8874) by 4:00 p.m. Eastern Time
                  on the date of exercise and any questions concerning this type
                  of transaction should be referred to (877) 636-7551 (Stock
                  Option Administration Group Hotline). The Exercise Request and
                  Attestation Form must attest to your ownership of Shares
                  representing:

                        -     at least the number of Shares whose value, based
                              on the closing price of Common Stock of Rockwell
                              Collins on the New York Stock Exchange --
                              Composite Transactions on the day you have
                              exercised your Options through the Customer
                              Service Center or Schwab OptionCenter(R), equals
                              the exercise price for the Option Shares; or

                        -     any lesser number of Shares you desire (or any
                              person who holds the Options as permitted by
                              Section 4 herein desires) to


                                      -5-
<PAGE>
                              use to pay the exercise price for those Option
                              Shares and a check in the amount of such exercise
                              price less the value of the Shares delivered,
                              based on the closing price of Common Stock of
                              Rockwell Collins on the New York Stock Exchange --
                              Composite Transactions on the day you have
                              exercised your Options through the Customer
                              Service Center or Schwab OptionCenter(R).

            (ii)  If you choose (or any person who holds the Options as
                  permitted by Section 4 herein chooses) to use Option Shares
                  obtained by Cashless Exercise to pay all or part of the
                  exercise price for the remaining Option Shares to be purchased
                  on exercise of any of the Options, you (or any person who
                  holds the Options as permitted by Section 4 herein) must
                  contact the Customer Service Center at (888) 852-2135 or
                  Schwab OptionCenter(R).

            (iii) Charles Schwab will advise you (or any other person who, being
                  entitled to do so, exercises the Options) of the exact number
                  of Shares, valued at the closing price on the New York Stock
                  Exchange -- Composite Transactions on the effective date of
                  exercise under Section 3(b)(ii) herein, and any funds required
                  to pay in full the exercise price for the Option Shares
                  purchased. In accordance with Section 3(e) herein, you (or
                  such other person) must pay, by check, in Shares or in a
                  combination of check and Shares, any balance required to pay
                  in full the exercise price of the Option Shares purchased
                  within three business days following the effective date of
                  such exercise of the Options under Section 3(b)(ii) herein.

            (iv)  Notwithstanding any other provision of this Stock Option
                  Agreement, the Secretary of Rockwell Collins may limit the
                  number, frequency or volume of successive exercises of any of
                  the Options in which payment is made, in whole or in part, by
                  delivery of Shares pursuant to this subparagraph (d) to
                  prevent unreasonable pyramiding of such exercises.

      (e)   An exercise completed through the Customer Service Center or
            Schwab OptionCenter(R), whether or not full payment of the
            exercise price for the Option Shares is received by Charles
            Schwab, shall constitute a binding contractual obligation by
            you (or the other person entitled to exercise the Options) to
            proceed with and complete that exercise of the Options (but
            only so long as you continue, or the other person entitled to
            exercise the Options continues, to be entitled to exercise
            the Options on that date). By your acceptance of this Stock
            Option Agreement, you agree (for yourself and on behalf of
            any other person who becomes entitled to exercise the
            Options) to pay to Charles Schwab in full the exercise price
            for those Option Shares, that payment being by check, wire
            transfer, in Shares or in a

                                      -6-


<PAGE>
            combination of check and Shares, on or before the third business day
            after the date on which you complete the transaction through the
            Customer Service Center. If such payment is not made, you (for
            yourself and on behalf of any other person who becomes entitled to
            exercise the Options) authorize Rockwell Collins, in its discretion,
            to set off against salary payments or other amounts due or which may
            become due you (or the other person entitled to exercise the
            Options) any balance of the exercise price for those Option Shares
            remaining unpaid thereafter.

      (f)   An Exercise Confirmation representing the number of Option Shares
            purchased will be issued the third business day (trade date plus
            three business days) (i) after Charles Schwab has received full
            payment therefor or (ii) at Rockwell Collins' or Charles Schwab's
            election in their sole discretion, after Rockwell Collins or Charles
            Schwab has received (x) full payment of the exercise price of those
            Option Shares and (y) any reimbursement in respect of withholding
            taxes due pursuant to Section 5 herein.

4.    Transferability; Nonassignability

      You are not entitled to transfer the Options except by will or by the laws
      of descent and distribution.

5.    Withholding

      Rockwell Collins or Charles Schwab shall have the right, in connection
      with the exercise of the Options, in whole or in part, to deduct from any
      payment to be made by Rockwell Collins or Charles Schwab an amount equal
      to the taxes required to be withheld by law with respect to such exercise
      or to require you (or any other person entitled to exercise the Options)
      to pay to it an amount sufficient to provide for any such taxes so
      required to be withheld. By your acceptance of this Stock Option
      Agreement, you agree (for yourself and on behalf of any other person who
      becomes entitled to exercise the Options) that if Rockwell Collins or
      Charles Schwab elects to require you (or such other person) to remit an
      amount sufficient to pay such withholding taxes, you (or such other
      person) must remit that amount within three business days after the
      completion of the Option exercise as provided in Section 3(a)(ii) herein.
      If such payment is not made, Rockwell Collins, in its discretion, shall
      have the same right of set-off as provided under Section 3(e) herein with
      respect to payment of the exercise price for Option Shares.

6.    Headings

      The section headings contained in these Stock Option Terms and Conditions
      are solely for the purpose of reference, are not part of the agreement of
      the parties and shall in no way affect the meaning or interpretation of
      this Stock Option Agreement.

                                      -7-

<PAGE>
7.    References

      All references in these Stock Option Terms and Conditions to Sections,
      paragraphs, subparagraphs or clauses shall be deemed to be references to
      Sections, paragraphs, subparagraphs and clauses of these Stock Option
      Terms and Conditions unless otherwise specifically provided.

8.    Entire Agreement

      This Stock Option Agreement and the other terms applicable to Stock
      Options granted under the Plan embody the entire agreement and
      understanding between Rockwell Collins and you with respect to the
      Options, and there are no representations, promises, covenants, agreements
      or understandings with respect to the Options other than those expressly
      set forth in this Stock Option Agreement and the Plan.

9.    Applicable Laws and Regulations

      This Stock Option Agreement and Rockwell Collins obligation to issue
      Option Shares hereunder are subject to applicable laws and regulations.



Exhibit 1   Exercise Request and Attestation Form (For Use With Already-
            Owned Shares)

                                      -8-
<PAGE>
                         2001 LONG-TERM INCENTIVES PLAN
                            FORM OF OPTION AGREEMENT
                           [NEW ARBITRATION AGREEMENT]

[Grant Date]

To:


Social Security/Account Number:

Dear Optionee:

We are pleased to notify you that you have been granted the following stock
options under the 2001 Long-Term Incentives Plan (the "Plan"):

<TABLE>
<CAPTION>
   Date of Grant     Type of Grant      Number of Shares     Option Price
   -------------     -------------      ----------------     ------------
<S>                  <C>                <C>                  <C>
</TABLE>


These stock options (the "Options") have been granted under and may be exercised
only upon the terms and conditions of this Stock Option Agreement, subject in
all respects to the provisions of the Plan, as it may be amended. The enclosed
Stock Option Terms and Conditions are incorporated in and are part of this Stock
Option Agreement.

This stock option grant is also subject to the condition that you sign and
return one copy of the Mutual Agreement to Arbitrate Claims to:

                             Rockwell Collins, Inc.
                             Office of the Secretary
                             400 Collins Road NE
                             Cedar Rapids, IA 52498

These stock option(s) will be of no effect if the copy of the Mutual Agreement
to Arbitrate Claims, properly signed by you, is not received by the Secretary of
Rockwell Collins, Inc. on or before [ ], unless Rockwell Collins, Inc. (in its
sole discretion) elects in writing to extend that date.

A copy of the Plan and Plan Prospectus are enclosed. Please carefully read the
enclosed documents and retain them for future reference.


                                         ROCKWELL COLLINS, INC.


                                         By:
<PAGE>
                     [TERMS AND CONDITIONS -- STANDARD, NQ]

                             ROCKWELL COLLINS, INC.
                         2001 LONG-TERM INCENTIVES PLAN
                             STOCK OPTION AGREEMENT
                        STOCK OPTION TERMS AND CONDITIONS


1.    Definitions

      As used in these Stock Option Terms and Conditions, the following words
      and phrases shall have the respective meanings ascribed to them below
      unless the context in which any of them is used clearly indicates a
      contrary meaning:

      (a)   Cashless Exercise: Cashless Exercise shall have the meaning set
            forth in Section 3(a)(ii) herein.

      (b)   Change of Control: Change of Control shall have the same meaning as
            such term has in Section 2(d) of the Plan.

      (c)   Charles Schwab: Charles Schwab & Co., Inc., the Stock Option
            Administrator whom Rockwell Collins has engaged to administer and
            process all Option exercises.

      (d)   Committee: The Compensation and Management Development Committee of
            the Board of Directors of Rockwell Collins.

      (e)   Corporation: Rockwell Collins and its Subsidiaries (as such term is
            defined in the Plan).

      (f)   Customer Service Center: Charles Schwab's Customer Service Center
            that is used to facilitate Option transactions. Contact Charles
            Schwab at (800) 654-2593.

      (g)   Employee: Employee shall have the same meaning as such term has in
            Section 2(j) of the Plan.

      (h)   Exercise Request and Attestation Form: The form attached as Exhibit
            1 or any other form accepted by Charles Schwab in connection with
            the use of already-owned Shares to pay all or part of the exercise
            price for the Option Shares to be purchased on exercise of any of
            the Options.

      (i)   Options: The stock options listed in the first paragraph of the
            letter dated [ ], to which these Stock Option Terms and Conditions
            are attached and which together with these Stock Option Terms and
            Conditions constitute the Stock Option Agreement.
<PAGE>
      (j)   Option Shares: The shares of Rockwell Collins Common Stock issuable
            or transferable on exercise of the Options.

      (k)   Plan: Rockwell Collins 2001 Long-Term Incentives Plan, as such Plan
            may be amended and in effect at the relevant time.

      (l)   Rockwell Collins: Rockwell Collins, Inc., a Delaware corporation,
            and any successor thereto.

      (m)   Schwab OptionCenter(R) : Charles Schwab's stock option management
            website which you can use to access your stock option account and to
            facilitate stock option transactions securely on the web at
            www.schwab.com/optioncenter.

      (n)   Shares: Shares of Rockwell Collins Common Stock.

      (o)   Stock Option Agreement: These Stock Option Terms and Conditions
            together with the letter dated [ ], to which they are attached.

2.    When Options May be Exercised

      The Options may be exercised, in whole or in part (but only for a whole
      number of shares) and at one time or from time to time, as to one-third
      (rounded to the nearest whole number) of the Option Shares during the
      period beginning on [ ] and ending on [ ], as to an additional one-third
      (rounded to the nearest whole number) of the Option Shares during the
      period beginning on [ ] and ending on [ ] and as to the balance of the
      Option Shares during the period beginning on [ ] and ending on [ ], and
      only during those periods, and provided that:

      (a)   if you die while an Employee, any person who holds the Options as
            permitted by Section 4 herein may exercise all the Options not
            theretofore exercised within (and only within) the period beginning
            on your date of death (even if you die before you have become
            entitled to exercise all or any part of the Options) and ending
            three years thereafter; and

      (b)   if your employment by the Corporation terminates other than by
            death, then:

            (i)   if your retirement or other termination date is before [ ],
                  the Options shall lapse on your retirement or other
                  termination and may not be exercised at any time;

            (ii)  if your employment by the Corporation is terminated for cause,
                  as determined by the Committee, the Options shall expire
                  forthwith upon your termination and may not be exercised
                  thereafter;

                                      -2-

<PAGE>
            (iii) if your employment by Rockwell Collins terminates on or after
                  [ ] by reason of your retirement under a retirement plan of
                  Rockwell Collins, or under a retirement plan of a subsidiary
                  or affiliate of Rockwell Collins, you (or any person who holds
                  the Options as permitted by Section 4 herein) may thereafter
                  exercise Options which are exercisable prior to the date of
                  your retirement or that will become exercisable within (and
                  only within) the period between the date of your retirement
                  and ending on the fifth anniversary of your retirement date;
                  or if you retire prior to age 62, the earlier of (x) the fifth
                  anniversary of your retirement date or (y) such earlier date
                  as the Committee shall determine by action taken not later
                  than 60 days after your retirement date; and

            (iv)  if your employment by the Corporation terminates on or after
                  [ ] for any reason not specified in subparagraph (a) or in
                  clauses (ii) or (iii) of this subparagraph (b), you (or any
                  person who holds the Options as permitted by Section 4 herein)
                  may thereafter exercise the Options within (and only within)
                  the period ending three months after your termination date but
                  only to the extent such Options were exercisable on your
                  termination date.

            In no event shall the provisions of the foregoing subparagraphs (a)
            and (b) extend to a date after [ ], the period during which the
            Options may be exercised.

            Notwithstanding any other provision of this Agreement, if a Change
            of Control shall occur, then all Options then outstanding pursuant
            to this Agreement shall forthwith become fully exercisable whether
            or not then otherwise exercisable in accordance with their terms.

3.    Exercise Procedure

      (a)   To exercise all or any part of the Options, you (or any person who
            holds the Options as permitted by Section 4 herein) must contact the
            Stock Option Administrator, Charles Schwab, by using the Customer
            Service Center or Schwab OptionCenter(R), as follows:

            (i)   contact the Customer Service Center by calling (800) 654-2593
                  Monday through Friday, 9:00 a.m. to 9:00 p.m. Eastern Time and
                  follow the instructions provided, or exercise via the Web
                  through the Schwab OptionCenter(R) at www.schwab.com/
                  optioncenter;

            (ii)  confirm the Option transaction through the Customer Service
                  Center or Schwab OptionCenter(R);

                                      -3-

<PAGE>
            (iii) at any time you may speak to a Customer Service Representative
                  for assistance by calling (800) 654-2593;

            (iv)  full payment of the exercise price for the Option Shares to be
                  purchased on exercise of the Options may be made by:

                        -     check (wire) to your Charles Schwab account; or

                        -     in already-owned Shares; or

                        -     by authorizing Charles Schwab or a third party
                              approved by Rockwell Collins to sell the Shares
                              (or a sufficient portion of the Shares) acquired
                              upon exercise of the Option ("Cashless Exercise");
                              or

                        -     in a combination of check (wire) to your Charles
                              Schwab account and Shares (whether already-owned
                              Shares or Shares issued and subsequently sold in
                              connection with a Cashless Exercise); and

            (v)   in the case of an exercise of the Options by any person other
                  than you seeking to exercise the Options, such documents as
                  Charles Schwab or the Secretary of Rockwell Collins shall
                  require to establish to their satisfaction that the person
                  seeking to exercise the Options is entitled to do so.

      (b)   An exercise of the whole or any part of the Options shall be
            effective:

            (i)   if you elect (or any person who holds the Options as permitted
                  by Section 4 herein elects) to pay the exercise price for the
                  Option Shares entirely by check (wire), upon (A) completion of
                  your transaction by using the Customer Service Center or
                  Schwab OptionCenter(R) and full payment of the exercise price
                  and withholding taxes (if applicable) are received by Charles
                  Schwab within three business days following the exercise; and
                  (B) receipt of any documents required pursuant to Section
                  3(a)(v) herein; and

            (ii)  if you elect (or any person who holds the Options as permitted
                  by Section 4 herein elects) to pay the exercise price of the
                  Option Shares in Shares (whether already-owned Shares or
                  Shares issued and subsequently sold in connection with a
                  Cashless Exercise) or in a combination of Shares (whether
                  already-owned Shares or Shares issued and subsequently sold in
                  connection with a Cashless Exercise) and check, upon (A)
                  completion of your transaction by using the Customer Service
                  Center or Schwab OptionCenter(R) and full payment of the
                  exercise price (as described in Section 3(d)(i) herein) and
                  withholding taxes (if applicable) are received by Charles


                                      -4-

<PAGE>
                  Schwab within three business days following the exercise; and
                  (B) receipt of any documents required pursuant to Section
                  3(a)(v) herein.

      (c)   If you choose (or any person who holds the Options as permitted by
            Section 4 herein chooses) to pay the exercise price for the Option
            Shares to be purchased on exercise of any of the Options entirely by
            check, payment must be made by:

                  -     delivering to Charles Schwab a check (wire) in the full
                        amount of the exercise price for those Option Shares; or

                  -     arranging with a stockbroker, bank or other financial
                        institution to deliver to Charles Schwab full payment,
                        by check or (if prior arrangements are made with Charles
                        Schwab) by wire transfer, of the exercise price of those
                        Option Shares.

            In either event, in accordance with Section 3(e) herein, full
            payment of the exercise price for the Option Shares purchased must
            be made within three business days after the exercise has been
            completed through the Customer Service Center or Schwab
            OptionCenter(R).

      (d)   (i)   If you choose (or any person who holds the Options as
                  permitted by Section 4 herein chooses) to use already-owned
                  Shares to pay all or part of the exercise price for the Option
                  Shares to be purchased on exercise of any of the Options, you
                  (or any person who holds the Options as permitted by Section 4
                  herein) must deliver to Charles Schwab an Exercise Request and
                  Attestation Form and cash to cover the purchase of one Option
                  Share as specified in such form. To perform such a
                  transaction, the Exercise Request and Attestation Form must be
                  submitted via fax ((720) 785-8874) by 4:00 p.m. Eastern Time
                  on the date of exercise and any questions concerning this type
                  of transaction should be referred to (877) 636-7551 (Stock
                  Option Administration Group Hotline). The Exercise Request and
                  Attestation Form must attest to your ownership of Shares
                  representing:

                        -     at least the number of Shares whose value, based
                              on the closing price of Common Stock of Rockwell
                              Collins on the New York Stock Exchange --
                              Composite Transactions on the day you have
                              exercised your Options through the Customer
                              Service Center or Schwab OptionCenter(R), equals
                              the exercise price for the Option Shares; or

                        -     any lesser number of Shares you desire (or any
                              person who holds the Options as permitted by
                              Section 4 herein desires) to

                                      -5-

<PAGE>
                              use to pay the exercise price for those Option
                              Shares and a check in the amount of such exercise
                              price less the value of the Shares delivered,
                              based on the closing price of Common Stock of
                              Rockwell Collins on the New York Stock Exchange --
                              Composite Transactions on the day you have
                              exercised your Options through the Customer
                              Service Center or Schwab OptionCenter(R).

            (ii)  If you choose (or any person who holds the Options as
                  permitted by Section 4 herein chooses) to use Option Shares
                  obtained by Cashless Exercise to pay all or part of the
                  exercise price for the remaining Option Shares to be purchased
                  on exercise of any of the Options, you (or any person who
                  holds the Options as permitted by Section 4 herein) must
                  contact the Customer Service Center at (800) 654-2593 or
                  Schwab OptionCenter(R).

            (iii) Charles Schwab will advise you (or any other person who, being
                  entitled to do so, exercises the Options) of the exact number
                  of Shares, valued at the closing price on the New York Stock
                  Exchange -- Composite Transactions on the effective date of
                  exercise under Section 3(b)(ii) herein, and any funds required
                  to pay in full the exercise price for the Option Shares
                  purchased. In accordance with Section 3(e) herein, you (or
                  such other person) must pay, by check, in Shares or in a
                  combination of check and Shares, any balance required to pay
                  in full the exercise price of the Option Shares purchased
                  within three business days following the effective date of
                  such exercise of the Options under Section 3(b)(ii) herein.

            (iv)  Notwithstanding any other provision of this Stock Option
                  Agreement, the Secretary of Rockwell Collins may limit the
                  number, frequency or volume of successive exercises of any of
                  the Options in which payment is made, in whole or in part, by
                  delivery of Shares pursuant to this subparagraph (d) to
                  prevent unreasonable pyramiding of such exercises.

      (e)   An exercise completed through the Customer Service Center or Schwab
            OptionCenter(R), whether or not full payment of the exercise price
            for the Option Shares is received by Charles Schwab, shall
            constitute a binding contractual obligation by you (or the other
            person entitled to exercise the Options) to proceed with and
            complete that exercise of the Options (but only so long as you
            continue, or the other person entitled to exercise the Options
            continues, to be entitled to exercise the Options on that date). By
            your acceptance of this Stock Option Agreement, you agree (for
            yourself and on behalf of any other person who becomes entitled to
            exercise the Options) to pay to Charles Schwab in full the exercise
            price for those Option Shares, that payment being by check, wire
            transfer, in Shares or in a

                                      -6-

<PAGE>
            combination of check and Shares, on or before the third business day
            after the date on which you complete the transaction through the
            Customer Service Center. If such payment is not made, you (for
            yourself and on behalf of any other person who becomes entitled to
            exercise the Options) authorize Rockwell Collins, in its discretion,
            to set off against salary payments or other amounts due or which may
            become due you (or the other person entitled to exercise the
            Options) any balance of the exercise price for those Option Shares
            remaining unpaid thereafter.

      (f)   An Exercise Confirmation representing the number of Option Shares
            purchased will be issued the third business day (trade date plus
            three business days) (i) after Charles Schwab has received full
            payment therefor or (ii) at Rockwell Collins' or Charles Schwab's
            election in their sole discretion, after Rockwell Collins or Charles
            Schwab has received (x) full payment of the exercise price of those
            Option Shares and (y) any reimbursement in respect of withholding
            taxes due pursuant to Section 5 herein.

4.    Transferability; Nonassignability

      You are not entitled to transfer the Options except by will or by the laws
      of descent and distribution.

5.    Withholding

      Rockwell Collins or Charles Schwab shall have the right, in connection
      with the exercise of the Options, in whole or in part, to deduct from any
      payment to be made by Rockwell Collins or Charles Schwab an amount equal
      to the taxes required to be withheld by law with respect to such exercise
      or to require you (or any other person entitled to exercise the Options)
      to pay to it an amount sufficient to provide for any such taxes so
      required to be withheld. By your acceptance of this Stock Option
      Agreement, you agree (for yourself and on behalf of any other person who
      becomes entitled to exercise the Options) that if Rockwell Collins or
      Charles Schwab elects to require you (or such other person) to remit an
      amount sufficient to pay such withholding taxes, you (or such other
      person) must remit that amount within three business days after the
      completion of the Option exercise as provided in Section 3(a)(ii) herein.
      If such payment is not made, Rockwell Collins, in its discretion, shall
      have the same right of set-off as provided under Section 3(e) herein with
      respect to payment of the exercise price for Option Shares.

6.    Headings

      The section headings contained in these Stock Option Terms and Conditions
      are solely for the purpose of reference, are not part of the agreement of
      the parties and shall in no way affect the meaning or interpretation of
      this Stock Option Agreement.


                                      -7-
<PAGE>
7.    References

      All references in these Stock Option Terms and Conditions to Sections,
      paragraphs, subparagraphs or clauses shall be deemed to be references to
      Sections, paragraphs, subparagraphs and clauses of these Stock Option
      Terms and Conditions unless otherwise specifically provided.

8.    Entire Agreement

      This Stock Option Agreement and the other terms applicable to Stock
      Options granted under the Plan embody the entire agreement and
      understanding between Rockwell Collins and you with respect to the
      Options, and there are no representations, promises, covenants, agreements
      or understandings with respect to the Options other than those expressly
      set forth in this Stock Option Agreement and the Plan.

9.    Applicable Laws and Regulations

      This Stock Option Agreement and Rockwell Collins obligation to issue
      Option Shares hereunder are subject to applicable laws and regulations.


Exhibit 1   Exercise Request and Attestation Form (For Use With Already-
            Owned Shares)


                                      -8-