Document:

Exhibit 10-q-1

 

For Persons With a Change of Control Agreement

 

ROCKWELL COLLINS, INC.

 

 

PERFORMANCE UNIT AGREEMENT

             ,

2002

 

	

  Target Payment:

  	

  $           

  
	

   

  	

   

  
	

  As Revised after

  September 11th events:

  	

   

  
	

  Cash Payout at

  Minimum Level:

  	

  $           

  
	

  Cash Payout at

  Goal Level:

  	

  $           

  
	

  Cash Payout at

  Maximum Level:

  	

  $           

  

 

(PERSONAL AND

CONFIDENTIAL)

 

(Name and Address)

 

Dear (Salutation):

 

We are pleased to

confirm that, as a key employee of Rockwell Collins, Inc. and its subsidiaries

(“Rockwell Collins” or the “Company”), you have been granted a performance unit

award payable in a lump sum cash amount under the Rockwell Collins 2001

Long-Term Incentives Plan (the “Plan”). 

Any payout of your performance unit is based on the achievement by Rockwell

Collins of the goals for “Cumulative Free Cash Flow” for its fiscal years of

2002 and 2003 (the “Performance Period”) as set forth in the attached matrix

(the “Matrix”).  The terms and

conditions of your award are as set forth in more detail below.  Note that the cash payouts shown above for

the minimum, goal and maximum levels are 75% of the amounts contemplated prior

to September 11, 2001 and such amounts now reflect the 50% reduction in

incentive opportunities relating to FY 2002 and no reduction for FY 2003.

 

1.             Confirmation of Award.  This performance unit agreement (this

“Agreement”) confirms your award in accordance with the terms as set forth

herein.  There is no need on your part

to sign or return any documentation to confirm your acceptance of this

award.  If you send any correspondence

to the Company in connection with this Agreement, please direct it to Rockwell

Collins, 400 Collins Road, N.E., M/S 124-323, Cedar Rapids, Iowa 52498,

Attention:  Corporate Secretary.

 

2.             Amount of Cash Payable Pursuant

to Award.  Subject to the provisions

of paragraphs 5 through 11, the amount of cash payable to you pursuant to your

award shall be determined as follows:

 

(a)           If the Cumulative Free Cash Flow (as

determined pursuant to paragraph 3) of the Company for the Performance Period

equals the minimum level for the Performance Period as set forth in the

attached Matrix, the amount of

 

 

cash payable to you will be your “Cash Payout at

Minimum Level” set forth on the first page of this letter.

 

(b)           If the Cumulative Free Cash Flow (as

determined pursuant to paragraph 3) of the Company for the Performance Period

equals or exceeds the maximum level for the Performance Period as set forth in

the attached Matrix, the amount of cash payable to you will be your “Cash

Payout at Maximum Level” set forth on the first page of this letter.

 

(c)           If the Cumulative Free Cash Flow (as

determined pursuant to paragraph 3) of the Company for the Performance Period

equals the goal level for the Performance Period as set forth in the attached

Matrix, the amount of cash payable to you will be your “Cash Payout at Goal

Level”  set forth on the first page of

this letter.

 

(d)           If the Cumulative Free Cash Flow (as

determined pursuant to paragraph 3) of the Company for the Performance Period

exceeds the minimum level for the Performance Period, but is less than the goal

level for the Performance Period, the amount of cash payable to you will be

interpolated between your “Cash Payout at Minimum Level” and “Cash Payout at

Goal Level” consistent with the range in which the Cumulative Free Cash Flow

falls, as conclusively determined by the Committee (as defined below).

 

(e)           If the Cumulative Free Cash Flow (as

determined pursuant to paragraph 3) of the Company for the Performance Period exceeds

the goal level for the Performance Period, but is less than the maximum level

for the Performance Period, the amount of cash payable to you will be

interpolated your “Cash Payout at Goal Level” and “Cash Payout at Maximum

Level” consistent with the range in which the Cumulative Free Cash Flow falls,

as conclusively determined by the Committee (as defined below).

 

(f)            No cash shall be payable for any

Performance Period if the Cumulative Free Cash Flow (as determined pursuant to

paragraph 3) for the Performance Period is less than the minimum level for the

Performance Period.

 

Subject

to the provisions of paragraphs 5 through 11, the cash payable to you pursuant

to this performance award with respect to the Performance Period shall be paid

in a lump sum, less applicable taxes, by Rockwell Collins as soon as

practicable after the end of the Performance Period and after receipt of the

accountants’ letter for the Performance Period pursuant to paragraph 12.

 

3.             Determination of Cumulative Free

Cash Flow.  “Cumulative Free Cash

Flow” means, for the Performance Period, the total cash provided by operating

activities of Rockwell Collins, less capital expenditures and plus proceeds

from the sale of property; provided, however, that the total cash provided by operating

activities shall be increased by the one-time pension contribution of $37.9

million related to the spin-off

 

2

 

(net of related

tax benefits).  Cumulative Free Cash

Flow also excludes divestitures, acquisitions, dividends, debt activity and

stock issuances/repurchases.  In

connection with the receipt of the accountants’ letter for the Performance

Period pursuant to paragraph 12, the committee of the Board of Directors of

Rockwell Collins administering the Plan (which committee is herein called the

“Committee” and which, on the date hereof, is the Compensation Committee) shall

determine the Cumulative Free Cash Flow amount for the Performance Period after

taking into account any adjustment as contemplated in paragraph 9.

 

4.             Transferability of Award.  This performance award shall not be

transferable by you except by will or by the laws of descent and distribution.

 

5.             Termination of Employment for

Death, Disability, Retirement or Elimination of Position.  If your employment by the Company terminates

during the Performance Period by reason of your death, disability, retirement

under a retirement plan of the Company or the elimination of your position, you

will be entitled to receive as soon as practicable after the end of the

Performance Period and after receipt of the accountants’ letter for the

Performance Period pursuant to paragraph 12 a payment of cash, if any, that

would otherwise be payable pursuant to paragraph 2, but such amount shall be

pro rated for the portion of the Performance Period that elapsed prior to this

termination of employment.  For the

avoidance of doubt, it is understood that in determining the proration for

these purposes the Company will take into account the 50% reduction in incentive

opportunities relating to FY 2002.

 

6.             Termination of Employment for

Other Reasons.  Except as otherwise

provided in paragraphs 8 through 11, if your employment by the Company

terminates during the Performance Period other than by reason of your death,

disability, retirement under a retirement plan of the Company or the

elimination of your position, you will not be entitled to any payment of cash

pursuant to paragraph 2 with respect to the Performance Period.

 

7.             Forfeiture of Award for

Detrimental Activity.  If you engage

in detrimental activity (as defined in this paragraph 7) at any time (whether

before or after termination of your employment), you will not be entitled to

any payment of cash hereunder and you will forfeit all rights with respect to

the performance award under this Agreement. 

For purposes of this paragraph 7, “detrimental activity” shall mean

willful, reckless or grossly negligent activity that is determined by the

Committee to be detrimental to or destructive of the business or property of

the Company.  Any such determination of

the Committee shall be final and binding for all purposes.  Notwithstanding the foregoing, no payment

hereunder shall be forfeited or become not payable by virtue of this paragraph

7 on or after the date of a Change of Control (as defined in the Plan) unless

the “Cause” standard set forth in paragraph 10(b) is satisfied.

 

8.             Transfer of Employment; Leave of

Absence.  For the purposes of this

Agreement, (a) a transfer of your employment from Rockwell Collins to a

subsidiary or vice versa, or from one subsidiary of Rockwell Collins to

another, without an

 

3

 

intervening

period, shall not be deemed a termination of employment, and (b) if you are

granted in writing a leave of absence, you shall be deemed to have remained in

the employ of Rockwell Collins or a subsidiary of Rockwell Collins during such

leave of absence.

 

9.             Adjustments.  (a) 

Adjustments (which may be increases or decreases) may be made by the

Committee in the Cumulative Free Cash Flow targets to take into account changes

in law and accounting and tax rules and to make such adjustments as the

Committee deems necessary or appropriate to reflect the inclusion or exclusion

of the impact of extraordinary or unusual items, events or circumstances,

including, without limitation, acquisitions or divestitures by or other

material changes in the Company, provided that no adjustment shall be made

which would result in an increase in your compensation if your compensation is

subject to the limitation on deductibility under Section 162(m) of the Internal

Revenue Code, as amended, or any successor provision, for the year with respect

to which the adjustment occurs.

 

(b)           Subject to the provisions of

paragraph 10, the determination of the Committee as to the terms of any

adjustment made pursuant to this paragraph 9 shall be binding and conclusive

upon you and any other person or persons who are at any time entitled to

receipt of any payment pursuant to the award.

 

10.           Change of Control.  (a)    

Notwithstanding any other provision, in the event that during the

Performance Period your employment is terminated on or after a Change of

Control (as defined in the Plan) (i) by the Company other than for Cause (as

defined in paragraph 10(b)) or (ii) by you for Good Reason (as defined in

paragraph 10(c)), your award shall become nonforfeitable and shall be paid out

on the date your employment is so terminated as if the Performance Period

hereunder had been completed or satisfied and as if the Cumulative Free Cash

Flow for the Company for the Performance Period were sufficient to enable a

payment to you pursuant to paragraph 2(c) of the cash that is equal to your

“Cash Payout at Maximum Level” set forth on the first page of this letter.

 

(b)           For purposes of paragraphs 7 and

10(a), termination for “Cause” shall mean:

 

(i)            your willful and continued failure

to perform substantially your duties with the Company or one of its affiliates

(other than any such failure resulting from incapacity due to physical or

mental illness), after a written demand for substantial performance is

delivered to you by the Company which specifically identifies the manner in

which the Company believes that you have not substantially performed your

duties, or

 

(ii)           your willful engaging in illegal

conduct or gross misconduct which is materially and demonstrably injurious to

the Company.

 

4

 

For purposes of this provision, no act or failure to

act, on the part of you, shall be considered “willful” unless it is done, or

omitted to be done, by you in bad faith or without reasonable belief that your

action or omission was in the best interests of the Company.  Any act, or failure to act, based upon

authority given pursuant to a resolution duly adopted by the Board or upon the

instructions of the Chief Executive Officer or a senior officer of the Company

or based upon the advice of counsel for the Company shall be conclusively

presumed to be done, or omitted to be done, by you in good faith and in the

best interests of the Company.  The

cessation of employment of you shall not be deemed to be for Cause unless and

until there shall have been delivered to you a copy of a resolution duluy

adopted by the affirmative vote of not less than three-quarters of the entire

membership of the Board at a meeting of the Board called and held for such

purpose (after reasonable notice is provided to you and you are given an

opportunity, together with counsel, to be heard before the Board), finding

that, in the good faith opinion of the Board, you are guilty of the conduct

described in subparagraph (i) or (ii) above, and specifying the particulars

thereof in detail.

 

(c)           For purposes of this Agreement, “Good

Reason” shall mean:

 

(i)            the assignment to you of any duties

inconsistent in any respect with your position (including status, offices,

titles and reporting requirements), authority, duties or responsibilities

generally in effect prior to any Change of Control, or any other action by the

Company which results in a diminution in such position, authority, duties or

responsibilities, excluding for this purpose an isolated, insubstantial and

inadvertent action not taken in bad faith and which is remedied by the Company

promptly after receipt of notice thereof given by you;

 

(ii)           any failure by the Company to

maintain your compensation at a level consistent with that generally in effect

prior to any Change of Control, other than an isolated, insubstantial and

inadvertent failure not occurring in bad faith and which is remedied by the

Company promptly after receipt of notice thereof given by you;

 

(iii)          the Company’s requiring you to be

based at any office or location other than as provided on the day preceding the

Change of Control hereof or the Company’s requiring you to travel on Company

business to a substantially greater extent than required immediately prior to

the Change of Control;

 

(iv)          any purported termination by the

Company of your employment otherwise than for Cause; or

 

(v)           any failure by the Company to comply

with and satisfy Section 16(b) of this Agreement.

 

For

purposes of this paragraph 10(c), any good faith determination of “Good Reason”

made by you shall be conclusive. 

Anything in this Agreement to the contrary notwithstanding, a

termination by you for any reason during the 30-day period immediately

following the first anniversary of the Change of Control shall be deemed to be

a termination for Good Reason for all puposes of this Agreement.

 

5

 

(d)           Notwithstanding any other provision,

if a Change of Control (as defined in the Plan) occurs during the Performance

Period the Cumulative Free Cash Flow for the Company for the Performance Period

shall be deemed to be not less than the “goal” level set forth in the attached

Matrix.

 

11.           Divestiture.  In the event that your principal employer is

a subsidiary of Rockwell Collins that ceases to be such, then your employment

shall be deemed to be terminated for all purposes as of the date on which your

principal employer ceases to be a subsidiary of Rockwell Collins (herein called

the Divestiture Date) and your award shall become nonforfeitable and shall be

paid out on the Divestiture Date (x) as if the Performance Period hereunder had

been completed or satisfied and as if the Cumulative Free Cash Flow for the

Company for the Performance Period were sufficient to enable a payment to you

pursuant to paragraph 2(c) of the cash that is equal to your “Cash Payout at

Goal Level” set forth on the first page of this letter, but (y) pro rated for

the portion of the Performance Period that elapsed prior to the Divestiture

Date, all as conclusively determined by the Committee.  For the avoidance of doubt, it is understood

that in determining the proration for these purposes the Company will take into

account the 50% reduction in incentive opportunities relating to FY 2002.

 

12.           Accountants’ Letter.  As soon as practicable after the end of the

Performance Period, the Committee shall obtain a letter or other communication

from the Company’s Senior Vice President and Chief Financial Officer or the

Vice President, Finance and Treasurer, or one of their successors or designees,

to the effect that such person has reviewed the determination for the

Performance Period of the Cumulative Free Cash Flow of the Company and that in

such person’s opinion such determination has been made in accordance with

paragraph 3.

 

13.           Employment Rights.  You shall not have any rights of continued

employment with the Company as a result of this award, other than the payment

rights expressly contemplated herein.

 

14.           Tax Withholding.  Upon any payment to you of cash hereunder,

Federal income and other tax withholding (and state and local income tax

withholding, if applicable) may be required by the Company in respect of taxes

on income realized by you.  The Company

may withhold such required amounts from your payments.

 

15.           Governing Law.  This Agreement and the award provided for

hereunder shall be governed by and construed in accordance with the laws of  the

State of  Iowa.

 

6

 

16.           Successors.

 

(a)           This Agreement shall inure to the benefit of and be

binding upon the Company and its successors and assigns.

 

(b)           The Company will require any successor (whether direct or

indirect, by purchase, merger, consolidation or otherwise) to all or

substantially all of the business and/or assets of the Company to assume

expressly and agree to perform this Agreement in the same manner and to the

same extent that the Company would be required to perform it if no such

succession had taken place.  As used in

this Agreement, “Company” shall mean the Company as hereinbefore defined and

any successor to its business and/or assets as aforesaid which assumes and agrees

to perform this Agreement by operation of law, or otherwise.

 

17.           Entire

Agreement.  This Agreement and the other terms

applicable to performance units granted under the Plan embody the entire

agreement and understanding between Rockwell Collins and you with respect to

the performance units, and there are no representations, promises, covenants,

agreements or understandings with respect to the performance units other than

those expressly set forth in this Agreement and the Plan.

 

	

   

  	

  Sincerely yours,

  
	

   

  	

   

  
	

   

  	

  ROCKWELL

  COLLINS, INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

  Gary R. Chadick,

  Senior Vice President,

  General Counsel and Secretary

  

 

7Exhibit 10-q-2

 

For Persons Not With a Change of Control Agreement

 

ROCKWELL COLLINS, INC.

 

 

PERFORMANCE UNIT AGREEMENT

 

             ,

2002

 

	

  Target Payment:

  	

  $             

  
	

   

  	

   

  
	

  As Revised after

  September 11th events:

  	

   

  
	

  Cash Payout at

  Minimum Level:

  	

  $             

  
	

  Cash Payout at

  Goal Level:

  	

  $             

  
	

  Cash Payout at

  Maximum Level:

  	

  $             

  

 

(PERSONAL AND

CONFIDENTIAL)

 

(Name and Address)

 

Dear (Salutation):

 

We are pleased to

confirm that, as a key employee of Rockwell Collins, Inc. and its subsidiaries

(“Rockwell Collins” or the “Company”), you have been granted a performance unit

award payable in a lump sum cash amount under the Rockwell Collins 2001

Long-Term Incentives Plan (the “Plan”). 

Any payout of your performance unit is based on the achievement by

Rockwell Collins of the goals for “Cumulative Free Cash Flow” for its fiscal

years of 2002 and 2003 (the “Performance Period”) as set forth in the attached

matrix (the “Matrix”).  The terms and

conditions of your award are as set forth in more detail below.  Note that the cash payouts shown above for

the minimum, goal and maximum levels are 75% of the amounts contemplated prior

to September 11, 2001 and such amounts now reflect the 50% reduction in incentive

opportunities relating to FY 2002 and no reduction for FY 2003.

 

1.  Confirmation of Award.  This performance unit agreement (this

“Agreement”) confirms your award in accordance with the terms as set forth

herein.  There is no need on your part

to sign or return any documentation to confirm your acceptance of this

award.  If you send any correspondence

to the Company in connection with this Agreement, please direct it to Rockwell

Collins, 400 Collins Road, N.E., M/S 124-323, Cedar Rapids, Iowa 52498, Attention:  Corporate Secretary.

 

2.  Amount of Cash Payable Pursuant to Award.  Subject to the provisions of paragraphs 5

through 11, the amount of cash payable to you pursuant to your award shall be

determined as follows:

 

(a)           If the Cumulative Free Cash Flow (as

determined pursuant to paragraph 3) of the Company for the Performance Period

equals the minimum

 

 

level for the Performance Period as set forth in the

attached Matrix, the amount of cash payable to you will be your “Cash Payout at

Minimum Level” set forth on the first page of this letter.

 

(b)           If the Cumulative Free Cash Flow (as

determined pursuant to paragraph 3) of the Company for the Performance Period

equals or exceeds the maximum level for the Performance Period as set forth in

the attached Matrix, the amount of cash payable to you will be your “Cash

Payout at Maximum Level” set forth on the first page of this letter.

 

(c)           If the Cumulative Free Cash Flow (as

determined pursuant to paragraph 3) of the Company for the Performance Period

equals the goal level for the Performance Period as set forth in the attached

Matrix, the amount of cash payable to you will be your “Cash Payout at Goal

Level”  set forth on the first page of

this letter.

 

(d)           If the Cumulative Free Cash Flow (as

determined pursuant to paragraph 3) of the Company for the Performance Period

exceeds the minimum level for the Performance Period, but is less than the goal

level for the Performance Period, the amount of cash payable to you will be

interpolated between your “Cash Payout at Minimum Level” and “Cash Payout at

Goal Level” consistent with the range in which the Cumulative Free Cash Flow

falls, as conclusively determined by the Committee (as defined below).

 

(e)           If the Cumulative Free Cash Flow (as

determined pursuant to paragraph 3) of the Company for the Performance Period

exceeds the goal level for the Performance Period, but is less than the maximum

level for the Performance Period, the amount of cash payable to you will be

interpolated your “Cash Payout at Goal Level” and “Cash Payout at Maximum

Level” consistent with the range in which the Cumulative Free Cash Flow falls,

as conclusively determined by the Committee (as defined below).

 

(f)            No cash shall be payable for any

Performance Period if the Cumulative Free Cash Flow (as determined pursuant to

paragraph 3) for the Performance Period is less than the minimum level for the

Performance Period.

 

Subject

to the provisions of paragraphs 5 through 11, the cash payable to you pursuant

to this performance award with respect to the Performance Period shall be paid

in a lump sum, less applicable taxes, by Rockwell Collins as soon as

practicable after the end of the Performance Period and after receipt of the

accountants’ letter for the Performance Period pursuant to paragraph 12.

 

3.  Determination of Cumulative Free Cash

Flow.  “Cumulative Free Cash Flow”

means, for the Performance Period, the total cash provided by operating

activities of Rockwell Collins, less capital expenditures and plus proceeds

from the sale of property; provided, however, that the total cash provided by

operating activities shall be 

 

2

 

increased by the

one-time pension contribution of $37.9 million related to the spin-off (net of

related tax benefits).  Cumulative Free

Cash Flow also excludes divestitures, acquisitions, dividends, debt activity

and stock issuances/repurchases.  In

connection with the receipt of the accountants’ letter for the Performance

Period pursuant to paragraph 12, the committee of the Board of Directors of

Rockwell Collins administering the Plan (which committee is herein called the

“Committee” and which, on the date hereof, is the Compensation Committee) shall

determine the Cumulative Free Cash Flow amount for the Performance Period after

taking into account any adjustment as contemplated in paragraph 9.

 

4.  Transferability of Award.  This performance award shall not be

transferable by you except by will or by the laws of descent and distribution.

 

5.  Termination of Employment for Death,

Disability, Retirement or Elimination of Position.  If your employment by the Company terminates

during the Performance Period by reason of your death, disability, retirement

under a retirement plan of the Company or the elimination of your position, you

will be entitled to receive as soon as practicable after the end of the

Performance Period and after receipt of the accountants’ letter for the

Performance Period pursuant to paragraph 12 a payment of cash, if any, that

would otherwise be payable pursuant to paragraph 2, but such amount shall be

pro rated for the portion of the Performance Period that elapsed prior to this

termination of employment.  For the

avoidance of doubt, it is understood that in determining the proration for

these purposes the Company will take into account the 50% reduction in

incentive opportunities relating to FY 2002.

 

6.  Termination of Employment for Other

Reasons.  Except as otherwise

provided in paragraphs 8 through 11, if your employment by the Company

terminates during the Performance Period other than by reason of your death,

disability, retirement under a retirement plan of the Company or the

elimination of your position, you will not be entitled to any payment of cash

pursuant to paragraph 2 with respect to the Performance Period.

 

7.  Forfeiture of Award for Detrimental

Activity.  If you engage in

detrimental activity (as defined in this paragraph 7) at any time (whether

before or after termination of your employment), you will not be entitled to

any payment of cash hereunder and you will forfeit all rights with respect to

the performance award under this Agreement. 

For purposes of this paragraph 7, “detrimental activity” shall mean

willful, reckless or grossly negligent activity that is determined by the Committee

to be detrimental to or destructive of the business or property of the

Company.  Any such determination of the

Committee shall be final and binding for all purposes.  Notwithstanding the foregoing, no payment

hereunder shall be forfeited or become not payable by virtue of this paragraph

7 on or after the date of a Change of Control (as defined in the Plan) unless

the “Cause” standard set forth in paragraph 10(b) is satisfied.

 

8.  Transfer of Employment; Leave of Absence.  For the purposes of this Agreement, (a) a

transfer of your employment from Rockwell Collins to a subsidiary or

 

3

 

vice versa, or

from one subsidiary of Rockwell Collins to another, without an intervening

period, shall not be deemed a termination of employment, and (b) if you are

granted in writing a leave of absence, you shall be deemed to have remained in

the employ of Rockwell Collins or a subsidiary of Rockwell Collins during such

leave of absence.

 

9.  Adjustments.  (a) 

Adjustments (which may be increases or decreases) may be made by the

Committee in the Cumulative Free Cash Flow targets to take into account changes

in law and accounting and tax rules and to make such adjustments as the

Committee deems necessary or appropriate to reflect the inclusion or exclusion

of the impact of extraordinary or unusual items, events or circumstances,

including, without limitation, acquisitions or divestitures by or other

material changes in the Company, provided that no adjustment shall be made

which would result in an increase in your compensation if your compensation is

subject to the limitation on deductibility under Section 162(m) of the Internal

Revenue Code, as amended, or any successor provision, for the year with respect

to which the adjustment occurs.

 

(b)           Subject to the provisions of

paragraph 10, the determination of the Committee as to the terms of any

adjustment made pursuant to this paragraph 9 shall be binding and conclusive

upon you and any other person or persons who are at any time entitled to

receipt of any payment pursuant to the award.

 

10.  Change of Control.  (a) 

Notwithstanding any other provision, in the event that during the

Performance Period your employment is terminated on or after a Change of

Control (as defined in the Plan) (i) by the Company other than for Cause (as

defined in paragraph 10(b)) or (ii) by you for Good Reason (as defined in

paragraph 10(c)), your award shall become nonforfeitable and shall be paid out

on the date your employment is so terminated as if the Performance Period

hereunder had been completed or satisfied and as if the Cumulative Free Cash

Flow for the Company for the Performance Period were sufficient to enable a

payment to you pursuant to paragraph 2(c) of the cash that is equal to your

“Cash Payout at Maximum Level” set forth on the first page of this letter.

 

(b)           For purposes of paragraphs 7 and

10(a), termination for “Cause” shall mean:

 

(i)            your willful and continued failure

to perform substantially your duties with the Company or one of its affiliates

(other than any such failure resulting from incapacity due to physical or

mental illness), after a written demand for substantial performance is

delivered to you by the Company which specifically identifies the manner in

which the Company believes that you have not substantially performed your

duties, or

 

(ii)           your willful engaging in illegal

conduct or gross misconduct which is materially and demonstrably injurious to

the Company.

 

For purposes of this provision, no act or failure to

act, on the part of you, shall be considered “willful” unless it is done, or

omitted to be done, by you in bad faith or without

 

4

 

reasonable belief

that your action or omission was in the best interests of the Company.  Any act, or failure to act, based upon

authority given pursuant to a resolution duly adopted by the Board or upon the

instructions of the Chief Executive Officer or a senior officer of the Company

or based upon the advice of counsel for the Company shall be conclusively

presumed to be done, or omitted to be done, by you in good faith and in the

best interests of the Company.

 

(c)           For purposes of this Agreement, “Good

Reason” shall mean:

 

(i)            the assignment to you of any duties

inconsistent in any respect with your position (including status, offices,

titles and reporting requirements), authority, duties or responsibilities

generally in effect prior to any Change of Control, or any other action by the

Company which results in a diminution in such position, authority, duties or

responsibilities, excluding for this purpose an isolated, insubstantial and

inadvertent action not taken in bad faith and which is remedied by the Company

promptly after receipt of notice thereof given by you;

 

(ii)           any failure by the Company to

maintain your compensation at a level consistent with that generally in effect

prior to any Change of Control, other than an isolated, insubstantial and

inadvertent failure not occurring in bad faith and which is remedied by the

Company promptly after receipt of notice thereof given by you;

 

(iii)          the Company’s requiring you to be

based at any office or location other than as provided on the day preceding the

Change of Control hereof or the Company’s requiring you to travel on Company

business to a substantially greater extent than required immediately prior to

the Change of Control;

 

(iv)          any purported termination by the

Company of your employment otherwise than for Cause; or

 

(v)           any failure by the Company to comply

with and satisfy Section 16(b) of this Agreement.

 

For

purposes of this paragraph 10(c), any good faith determination of “Good Reason”

made by you shall be conclusive.

 

(d)           Notwithstanding any other provision,

if a Change of Control (as defined in the Plan) occurs during the Performance

Period the Cumulative Free Cash Flow for the Company for the Performance Period

shall be deemed to be not less than the “goal” level set forth in the attached

Matrix.

 

11.  Divestiture.  In the event that your principal employer is

a subsidiary of Rockwell Collins that ceases to be such, then your employment

shall be deemed to be terminated for all purposes as of the date on which your

principal employer ceases to be a subsidiary of Rockwell Collins (herein called

the Divestiture Date) and your award shall become nonforfeitable and shall be

paid out on the Divestiture Date (x) as if the Performance Period hereunder had

been completed or satisfied and as if the Cumulative Free Cash Flow for the

Company for the Performance Period were sufficient to enable a

 

5

 

payment to you

pursuant to paragraph 2(c) of the cash that is equal to your “Cash Payout at

Goal Level” set forth on the first page of this letter, but (y) pro rated for

the portion of the Performance Period that elapsed prior to the Divestiture

Date, all as conclusively determined by the Committee.  For the avoidance of doubt, it is understood

that in determining the proration for these purposes the Company will take into

account the 50% reduction in incentive opportunities relating to FY 2002.

 

12.  Accountants’ Letter.  As soon as practicable after the end of the

Performance Period, the Committee shall obtain a letter or other communication

from the Company’s Senior Vice President and Chief Financial Officer or the

Vice President, Finance and Treasurer, or one of their successors or designees,

to the effect that such person has reviewed the determination for the

Performance Period of the Cumulative Free Cash Flow of the Company and that in

such person’s opinion such determination has been made in accordance with

paragraph 3.

 

13.  Employment Rights.  You shall not have any rights of continued

employment with the Company as a result of this award, other than the payment

rights expressly contemplated herein.

 

14.  Tax Withholding.  Upon any payment to you of cash hereunder,

Federal income and other tax withholding (and state and local income tax

withholding, if applicable) may be required by the Company in respect of taxes

on income realized by you.  The Company

may withhold such required amounts from your payments.

 

15.  Governing Law.  This Agreement and the award provided for

hereunder shall be governed by and construed in accordance with the laws of  the

State of  Iowa.

 

16.  Successors.

 

(a)           This Agreement shall inure to the

benefit of and be binding upon the Company and its successors and assigns.

 

(b)           The Company will require any

successor (whether direct or indirect, by purchase, merger, consolidation or

otherwise) to all or substantially all of the business and/or assets of the

Company to assume expressly and agree to perform this Agreement in the same

manner and to the same extent that the Company would be required to perform it

if no such succession had taken place. 

As used in this Agreement, “Company” shall mean the Company as hereinbefore

defined and any successor to its business and/or assets as aforesaid which

assumes and agrees to perform this Agreement by operation of law, or otherwise.

 

6

 

17.  Entire

Agreement.  This Agreement and the other terms

applicable to performance units granted under the Plan embody the entire

agreement and understanding between Rockwell Collins and you with respect to

the performance units, and there are no representations, promises, covenants,

agreements or understandings with respect to the performance units other than

those expressly set forth in this Agreement and the Plan.

 

	

   

  	

  Sincerely yours,

  
	

   

  	

   

  
	

   

  	

  ROCKWELL

  COLLINS, INC.

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  	

   

  
	

   

  	

  Gary R. Chadick,

  Senior Vice President,

  General Counsel and Secretary

  

 

7

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