<PAGE>

                                                                  Exhibit 10-b-2


                             ROCKWELL COLLINS, INC.
                              DIRECTORS STOCK 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 Article III, Section 13(I)(1) of Rockwell Collins'
            By-laws.

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

      (f)   Director: A member of the Board of Directors of Rockwell Collins.

      (g)   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.

      (h)   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.

      (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.

      (j)   Option Shares: The shares of Rockwell Collins Common Stock issuable
            or transferable on exercise of the Options.
<PAGE>
      (k)   Plan: Rockwell Collins Directors Stock Plan, as such Plan may be
            amended and in effect at the relevant time.

      (l)   Rockwell Collins: Rockwell Collins, Inc., a Delaware corporation.

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

      (n)   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, provided that:

      (a)   if you die while a Director, 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 or on [ ], if earlier;

      (b)   if you retire as a Director after attaining age 70 or at an earlier
            age but after completing at least 5 years of service as a Director,
            you (or any person who holds the Options as permitted by Section 4
            herein) may thereafter exercise all the Options not theretofore
            exercised within (and only within) the period beginning on your
            retirement date (even if you retire before you have become entitled
            to exercise all or any part of the Options) and ending five years
            thereafter or on [ ], if earlier;

      (c)   if your service as a Director terminates as a result of your
            disability or as a result of your resignation for reasons of the
            antitrust laws, compliance with Rockwell Collins' conflict of
            interest policies or other circumstances that the Committee may
            determine as serving the best interests of Rockwell Collins, you (or
            any person who holds the Options as permitted by Section 4 herein)
            may thereafter exercise all the Options not theretofore exercised
            within (and only within) the period beginning on your termination
            date (even if the Options were not exercisable at such termination
            date) and ending one year thereafter or until [ ], if earlier,
            unless otherwise determined by the Committee;



                                      -2-
<PAGE>
      (d)   if your service as a Director terminates for any reason not
            specified above, the Options shall be void on the date of
            termination of your service as a Director and shall not be exercised
            thereafter; and

provided, further, that notwithstanding any other provision of the Stock Option
Agreement, if a Change of Control shall occur, then all outstanding Options
shall become fully exercisable whether or not otherwise then exercisable and
shall be and remain exercisable for the applicable period hereinabove provided
in this Section 2.

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 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, 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;

            (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) 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.


                                      -3-
<PAGE>
      (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, 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 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.

      (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



                                      -4-
<PAGE>
            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 (888) 852-2135 (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 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, 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



                                      -5-
<PAGE>
                  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.

      (d)   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 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 retainer 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.

      (e)   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 (i) by will or by the
      laws of descent and distribution; or (ii) by gift to any member of your
      immediate family or to a trust for the benefit of one or more members of
      your immediate family or to a family charitable trust established by you
      or a member of your family; provided, however, that no transfer pursuant
      to this clause (ii) shall be effective unless you



                                      -6-
<PAGE>
      have notified Rockwell Collins' Office of the Secretary (Attention: Stock
      Option Administration) in writing specifying the Option or Options
      transferred, the date of the gift or transfer and the name and Social
      Security or other Taxpayer Identification Number of the donee or
      transferee. During your lifetime, only you are entitled to exercise the
      Options unless you have transferred any Option in accordance with this
      paragraph to a member of your immediate family, a trust for the benefit of
      one or more members of your immediate family, or a family charitable trust
      established by you or a member of your family, in which case only that
      transferee (or the legal representative of the estate or the heirs or
      legatees of that transferee) shall be entitled to exercise that Option.
      For purposes of this paragraph, your "immediate family" shall mean your
      spouse and natural, adopted or step-children and grandchildren.

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 date
      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.    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.




                                      -7-
<PAGE>
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
                           FOR NON-EMPLOYEE DIRECTORS


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) 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 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: