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OMB APPROVAL |
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OMB Number:
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3235-0059 |
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Expires:
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant o |
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
ROCKWELL COLLINS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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o No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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SEC 1913 (02-02) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
December 17, 2007
Dear Shareowner:
You are cordially invited to attend the 2008 Annual Meeting of
Shareowners of the Corporation.
The meeting will be held at The Cedar Rapids Marriott, 1200
Collins Road NE, Cedar Rapids, Iowa, on Tuesday,
February 12, 2008, at 10:00 a.m. (Central Standard
Time). At the meeting we will present a current report of the
activities of the Corporation followed by discussion and action
on the matters described in the Proxy Statement. Shareowners
will have an opportunity to comment on or inquire about the
affairs of the Corporation that may be of interest to
shareowners generally.
If you plan to attend the meeting, please indicate your desire
in one of the ways described in the box on the last page of the
Proxy Statement.
We sincerely hope that as many shareowners as can conveniently
attend will do so.
Sincerely yours,
Clayton M. Jones
Chairman, President and Chief Executive Officer
ROCKWELL COLLINS,
INC.
400 Collins Road NE, Cedar Rapids, Iowa 52498
Notice of 2008 Annual Meeting
of Shareowners
To the Shareowners of
ROCKWELL COLLINS, INC.:
Notice Is Hereby Given that the 2008 Annual Meeting of
Shareowners of Rockwell Collins, Inc. will be held at The Cedar
Rapids Marriott, 1200 Collins Road NE, Cedar Rapids, Iowa, on
Tuesday, February 12, 2008, at 10:00 a.m. (Central
Standard Time) for the following purposes:
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(1)
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to elect two members of the Board of Directors of the
Corporation with terms expiring at the Annual Meeting in 2011;
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(2)
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to consider and vote upon a proposal to approve the selection by
the Audit Committee of the Board of Directors of the firm of
Deloitte & Touche LLP as auditors of the Corporation
for fiscal year 2008; and
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(3)
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to transact such other business as may properly come before the
meeting.
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Only shareowners of record at the close of business on
December 14, 2007 will be entitled to notice of, and to
vote at, the meeting.
By order of the Board of Directors.
Gary R. Chadick
Secretary
December 17, 2007
Note: The Board of Directors solicits votes by the execution
and prompt return of the
accompanying proxy in the enclosed return envelope or by use
of our
telephone or Internet voting procedures.
ROCKWELL
COLLINS, INC. PROXY STATEMENT
Table of
Contents
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The 2008 Annual Meeting of Shareowners of Rockwell Collins, Inc.
will be held on February 12, 2008, for the purposes set
forth in the accompanying Notice of 2008 Annual Meeting of
Shareowners.
This statement and the accompanying proxy, that are first being
sent to shareowners on or about December 26, 2007, are
furnished in connection with the solicitation by the Board of
Directors of proxies to be used at the meeting and at any
adjournment thereof. If a shareowner duly executes and returns a
proxy in the accompanying form or uses our telephone or Internet
voting procedures to authorize the named proxies to vote the
shareowners shares, those shares will be voted as
specified, and if no specification is made, the shares will be
voted in accordance with the recommendations of the Board of
Directors. The proxy and any votes cast using our telephone or
Internet voting procedures may be revoked prior to exercise at
the meeting by delivering written notice of revocation to the
Secretary of the Corporation, by executing a later dated proxy,
by casting a later vote using the telephone or Internet voting
procedures or by attending the meeting and voting in person.
Only shareowners of record at the close of business on
December 14, 2007, the record date for the meeting, are
entitled to notice of, and to vote at, the meeting. On
December 14, 2007, we had outstanding
163,140,766 shares of our Common Stock, par value $0.01 per
share (Common Stock). Each holder of Common Stock is entitled to
one vote for each share held. We have no class or series of
shares currently outstanding other than our Common Stock.
Our Board of Directors currently consists of ten members. This
number is expected to be reduced to eight at the 2008 Annual
Meeting of Shareowners because Mr. Carns and Mr. Toot
will retire from our Board when their terms expire at the Annual
Meeting consistent with the Boards retirement age policy
in our Corporate Governance Guidelines. That retirement age
policy requires each nominee for director to be under
age 70 as of the meeting of shareowners for which he or she
will stand for election. Mr. Carns currently serves as
Chairman of our Board Nominating and Governance Committee and is
a member of our Technology Committee. Mr. Toot currently
serves as Chairman of our Audit Committee and is a member of our
Compensation Committee.
Our Restated Certificate of Incorporation provides that the
Board of Directors shall consist of three classes of directors
with overlapping three-year terms. One class of directors is to
be elected each year with terms extending to the third
succeeding Annual Meeting after election. The Restated
Certificate of Incorporation provides that the Board of
Directors shall maintain the three classes so as to be as nearly
equal in number as the then total number of directors permits.
The two directors in Class I who are elected at the 2008
Annual Meeting will serve for a term expiring at our Annual
Meeting in the year 2011. The three directors in Class II
and the three directors in Class III are serving terms
expiring at our Annual Meetings in 2009 and 2010, respectively.
It is intended that proxies in the accompanying form properly
executed and returned to our proxy tabulator or shares properly
authorized to be voted in accordance with our telephone or
Internet voting procedures will be voted at the meeting, unless
authority to do so is withheld, for the election as directors of
the two nominees specified in Class I Nominees
for Directors with Terms Expiring in 2011 (Chris A. Davis and
Ralph E. Eberhart), each of whom now serves as a director with a
term extending to the 2008 Annual Meeting and until a successor
is elected and qualified. If for any reason any of the nominees
is not a candidate (which is not expected) when the election
occurs, it is expected that proxies in the accompanying form or
shares properly authorized to be voted in accordance with our
telephone or Internet voting procedures will be voted at the
meeting for the election of a substitute nominee or, in lieu
thereof, the Board of Directors may reduce the number of
directors.
-1-
INFORMATION
AS TO NOMINEES FOR DIRECTORS AND CONTINUING DIRECTORS
There is shown below for each nominee for director and each
continuing director, as reported to us as of December 1,
2007, the nominees or continuing directors name, age
and principal occupation; the position, if any, with us; the
period of service as a director of our company; other public
company directorships held; and the committees of the Board of
Directors on which the nominee or continuing director serves.
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CLASS I
NOMINEES FOR DIRECTORS WITH TERMS EXPIRING IN 2011
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Chris A. Davis
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Age 57
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General Partner, Forstmann Little & Co.
Ms. Davis has been a director of our company since February
2002 and is a member of the Audit Committee. Ms. Davis
became a General Partner with Forstmann Little & Co.
(private equity firm) in October 2005 after having served them
as a Special Limited Partner since August 2001. She served as
Chairman of McLeodUSA Incorporated (telecommunications) from
August 2005 to January 2006, Chairman and Chief Executive Office
of McLeodUSA from April 2002 to August 2005 and Chief Operating
and Financial Officer of McLeodUSA from August 2001 to April
2002. She served as Executive Vice President, Chief Financial
and Administrative Officer of ONI Systems (telecommunications)
from May 2000 to August 2001. She served as Executive Vice
President, Chief Financial and Administrative Officer and
director of Gulfstream Aerospace Corporation (business aircraft)
from July 1993 to April 2000. She is a member of the board of
directors of Cytec Industries, Inc., IMG Worldwide, 24 Hour
Fitness Worldwide and ENK International, and is a former
director of Aviall, Inc. and Wolverine Tube, Inc.
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Ralph E. Eberhart
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Age 60
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President, Armed Forces Benefit Association. General
Eberhart has been a director of our company since November 2007.
General Eberhart has been President of the Armed Forces Benefit
Association since December 2004. He served as Commander of the
North American Aerospace Defense Command (NORAD) and U.S.
Northern Command from October 2002 to January 2005. His active
military career spanned 36 years. He is a member of the
board of directors of VSE Corporation and is a director of
several private companies.
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CLASS II
CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2009
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Anthony J. Carbone
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Age 66
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Retired Vice Chairman of the Board and Senior Consultant, The
Dow Chemical Company. Mr. Carbone has been a director
of our company since June 2001. He is the Chairman of the
Compensation Committee and a member of the Executive Committee.
Mr. Carbone served as Vice Chairman of the Board of
Directors of The Dow Chemical Company (chemical, plastic and
agricultural products) from February 2000 to October 2005 and
Senior Consultant of Dow from November 2000 to October 2005. He
served as Executive Vice President of Dow from November 1996 to
November 2000. He is a former director of Dow. He is a member of
the American Chemical Society and former board member and
Chairman of the American Plastics Council and the Society of
Plastics Industries. Mr. Carbone has served on the Advisory
Council of the Heritage Foundation.
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Clayton M. Jones
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Age 58
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Chairman, President and Chief Executive Officer of the
Corporation. Mr. Jones has been a director of our
company since March 2001. He has been our Chairman of the Board
since June 2002 and President and Chief Executive Officer since
June 2001. Mr. Jones is a member of the Executive
Committee. He serves as a director of the Unisys Corporation and
Deere & Company. He also serves as a director or
member of a number of professional and civic organizations.
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Cheryl L. Shavers
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Age 53
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Chairman and Chief Executive Officer, Global Smarts, Inc.
Dr. Shavers has been a director of our company since
September 2002. She is Chairman of the Technology Committee and
a member of the Board Nominating and Governance Committee.
Dr. Shavers has been the Chairman and Chief Executive
Officer of Global Smarts, Inc. (business advisory services)
since February 2001. She also serves as a director of ATMI, Inc.
(semiconductor materials and packaging) and serves on the
Advisory Board for E.W. Scripps Company (media). She served as
Under Secretary of Commerce for Technology for the United States
Department of Commerce from November 1999 to February 2001 after
having served as its Under Secretary Designate from April 1999
to November 1999. She served as Sector Manager, Microprocessor
Products Group for Intel Corporation (chip maker) prior to April
1999. She served as non-executive chairman of BitArts Ltd.
(software development) from 2001 to December 2003.
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CLASS III
CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2010
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Donald R. Beall
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Age 69
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Chairman Emeritus, Rockwell. Mr. Beall has been a
director of our company since June 2001 and served as
non-executive Chairman of the Board from June 2001 to June 2002.
He is the Chairman of the Executive Committee and a member of
the Technology Committee. Mr. Beall is the retired Chairman
and CEO of Rockwell and was a director of Rockwell from 1978 to
February 2001. He served as Chairman/CEO of Rockwell from 1988
to February 1998 and President from 1979 to 1988. Mr. Beall
serves on the boards of Conexant Systems, Mindspeed Technologies
and CT Realty. He is a former director of Jazz Semiconductor,
Skyworks Solutions, Procter & Gamble, Times Mirror,
Amoco and ArvinMeritor. He is a member of various University of
California Irvine supporting organizations, an
Overseer of the Hoover Institute at Stanford and a former
trustee of California Institute of Technology. He is an advisor
to the San Jose State University School of Engineering and
a trustee and Presidents Circle member of the Naval
Postgraduate School Foundation. He is an investor, director
and/or advisor with several private companies and investment
partnerships.
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Mark Donegan
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Age 51
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Chairman and Chief Executive Officer of Precision Castparts
Corp. Mr. Donegan has been a director of our company
since June 2006. He is a member of the Compensation Committee.
Mr. Donegan has been Chairman and Chief Executive Officer
of Precision Castparts Corp. (metal components, investment
castings, forgings and fasteners) since August 2003. He served
as President, Chief Executive Officer and Chief Operating
Officer of Precision Castparts from August 2002 to August 2003,
and as President and Chief Operating Officer from August 2001 to
August 2002. He served as President of Wyman-Gordon Company
(complex metal components and products) and as President of the
Structural Division of Precision Castparts from December 1999 to
July 2001. He joined Precision Castparts in 1985 and prior
thereto was with the General Electric Company.
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Andrew J. Policano
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Age 58
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Dean, The Paul Merage School of Business, University of
California, Irvine. Dr. Policano has been a director of
our company since April 2006. He is a member of the Audit
Committee and a member of the Board Nominating and Governance
Committee. Dr. Policano has been the Dean of The Paul
Merage School of Business, University of California
Irvine since August 2004. Prior thereto, he served on the
faculty and as Dean at the School of Business, University of
Wisconsin-Madison. Dr. Policano is a director of Badger
Meter, Inc. and a former director of Physicians Insurance
Company of Wisconsin. He is a member of the board of other
professional and civic organizations.
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The Board of Directors recommends that you vote
FOR the election as directors of the two
Class I nominees named above, that is presented as item
(1) on the accompanying proxy card.
-4-
CORPORATE
GOVERNANCE;
BOARD OF DIRECTORS AND COMMITTEES
Our business is managed through the oversight and direction of
the Board of Directors. Our Board seeks to maintain high
corporate governance standards.
The directors regularly keep informed about our business at
meetings of the Board and its Committees and through various
supplemental reports and communications between meetings. Our
non-employee directors meet regularly in executive sessions
without the presence of any corporate officers. These executive
sessions are chaired by the Chair of the Executive Committee or
a director, designated by the independent directors, who has the
relevant background to lead the discussion of a particular
matter.
We continue to enhance our corporate governance structure from
time to time in light of regulatory activity and based upon a
review of recommended best practices. Our corporate governance
documents are available free of charge on our website at
www.rockwellcollins.com. We will provide, without charge,
upon written request, copies of our corporate governance
information. These documents include our Restated Certificate of
Incorporation, By-Laws, Board of Directors Guidelines on
Corporate Governance, Committee Charters, Board Membership
Criteria, Code of Ethics, Categorical Standards and Policy for
Director Independence, and Related Person Transaction Policy.
Board
Independence
The Board of Directors has determined that no director other
than Messrs. Jones and Beall has a material relationship
with the Corporation. Accordingly, eight of our ten directors
are independent directors based on an affirmative
determination by our Board of Directors in accordance with the
listing standards of the New York Stock Exchange
(NYSE) and Securities and Exchange Commission
(SEC) rules.
The standards relied upon by the Board in affirmatively
determining whether a director is independent are comprised, in
part, of those objective standards set forth in the NYSE and SEC
rules. The Corporations Categorical Standards and Policy
for Director Independence have been adopted by the Board to
assist it in making determinations regarding the independence of
its members.
The Board evaluated for Mr. Donegan the annual amount of
purchases by us in the ordinary course of business from a
subsidiary of the company where he serves as an executive
officer and determined that the amount of such purchases was
below the greater of $1,000,000 or 2% of the other
companys consolidated gross annual revenues pursuant to
the Commercial Relationship categorical standard set forth in
the Categorical Standards and Policy for Director Independence.
A copy of the Categorical Standards and Policy for Director
Independence is available on Rockwell Collins, Inc.s
website at www.rockwellcollins.com.
Board
Meetings and Attendance
In fiscal year 2007, the Board of Directors held eight meetings
and acted on three occasions by unanimous written consent in
lieu of a meeting. All of the directors attended at least 75% of
the meetings of the Board and the Committees on which they
served, and most of the directors attended 100% of such
meetings. Directors are expected to attend the Annual Meeting of
Shareowners unless they have a valid reason such as a schedule
conflict. Last year, all ten directors attended our 2007 Annual
Meeting of Shareowners.
Board
Committees
The Board has established five committees whose principal
functions are briefly described below.
The Audit Committee has three independent
directors. It assists the Board in overseeing (i) our
accounting and financial reporting processes; (ii) the
integrity and audits of our financial statements; (iii) our
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compliance with legal and regulatory requirements; (iv) the
qualifications and independence of our independent auditors; and
(v) the performance of our internal and independent
auditors. The Audit Committee also:
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has sole authority to appoint or replace our independent
auditors, with that appointment being subject to shareowner
approval;
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has sole authority to approve in advance the fees, scope and
terms of all audit and non-audit engagements with our
independent auditors;
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monitors compliance of our employees with our standards of
business conduct and conflict of interest policies; and
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meets at least quarterly with our senior executive officers,
head of internal audit and our independent auditors in separate
executive sessions.
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The specific functions and responsibilities of the Audit
Committee are set forth in the Audit Committee Charter, which is
available on our website at www.rockwellcollins.com. The
Committee met six times during fiscal year 2007.
The Board Nominating and Governance Committee,
which is comprised of three independent directors, has as part
of its principal functions seeking, considering and recommending
to the Board qualified candidates for election as directors and
recommending a slate of nominees for election as directors at
the Annual Meeting. It also periodically prepares and submits to
the Board for adoption the Committees selection criteria
for director nominees (Board Membership Criteria).
It reviews and makes recommendations on matters involving
general operation of the Board and our corporate governance, and
it annually recommends to the Board nominees for each committee
of the Board. In addition, the Committee annually facilitates
the assessment of the Board of Directors performance as a
whole and of the individual directors and reports thereon to the
Board. The Committee has the sole authority to retain and
terminate any search firm to be used to identify director
candidates. For more information regarding the Committees
role in director nominations, see Director
Nominations below. The Committee members met four times
during fiscal year 2007.
The Compensation Committee has three independent
directors. The principal functions of the Compensation Committee
are to evaluate the performance of our senior executives; review
and approve senior executive compensation plans, policies and
programs; consider the design and competitiveness of our
compensation plans; administer and review changes to our
incentive, deferred compensation, stock option and long-term
incentives plans pursuant to the terms of the respective plans;
and review and discuss the Compensation Discussion and Analysis
for inclusion in our proxy statement. The Committee also reviews
and approves corporate goals and objectives relevant to CEO
compensation, evaluates the CEOs performance in light of
those goals and objectives, and after receiving input from the
Board, determines the CEOs compensation. The Committee has
the sole authority to retain and terminate any compensation
consultant to be used to assist in the evaluation of CEO or
senior executive compensation. The Committee met four times
during fiscal year 2007.
The Executive Committee is comprised of
Mr. Jones and two non-employee directors. The principal
function of the Executive Committee is to discharge certain
responsibilities of the Board of Directors between meetings of
the Board of Directors. The Committee may exercise all of the
powers of the Board of Directors, except it has no power or
authority to adopt, amend or repeal any sections or articles of
our By-Laws or Restated Certificate of Incorporation; elect or
remove officers, or fill vacancies in the Board of Directors or
in committees; fix compensation for officers, directors or
committee members; amend or rescind prior resolutions of the
Board; make recommendations to shareowners or approve
transactions that require shareowner approval; issue additional
stock of the Corporation or fix or determine the designations
and any of the rights and preferences of any series of stock or
take certain other actions specifically reserved for the Board.
The Committee met once during fiscal year 2007.
The Technology Committee has three non-employee
directors. The principal functions of the Technology Committee
are to review and provide guidance on important
technology-related issues, including the assessment of
(i) our technology competitiveness; (ii) the strength
and competitiveness of our engineering processes and
disciplines; (iii) our technology planning processes to
support our growth objectives; and (iv) our focus on
-6-
engineering leadership and critical technologist development and
replacement planning. The Committee met two times during fiscal
year 2007.
Director
Nominations
The Board Nominating and Governance Committee is responsible for
identifying individuals who meet the Boards membership
criteria, and recommending to the Board the election of such
individuals. The Committee identifies qualified candidates in
many ways including utilizing outside search firms and by
receiving suggestions from directors, management and
shareowners. An outside search firm recommended current nominee
Ralph E. Eberhart for consideration by the Board Nominating and
Governance Committee. Shareowners wishing to recommend director
candidates for consideration by the Committee can do so by
writing to the Board Nominating and Governance Committee,
c/o the
Secretary of the Corporation at our corporate headquarters in
Cedar Rapids, Iowa, giving the candidates name,
biographical data and qualifications. Any such recommendation
must be accompanied by a written statement from the individual
of his or her consent to be named as a candidate and, if
nominated and elected, to serve as a director. In addition to
recommending nominees to the Committee, shareowners may also
propose nominees for consideration at shareowner meetings. These
nominee proposals must be provided timely and otherwise meet the
requirements set forth in our By-Laws. See Shareowner
Proposals for Annual Meeting in 2009 set forth later in
this proxy statement.
The Committee evaluates the qualifications of candidates
properly submitted by shareowners under the same criteria and in
the same manner as potential nominees identified by the
Corporation. Director candidates are reviewed by the Committee
as part of the Committees Charter against various general
guidelines set forth in the Board Membership Criteria, a copy
which can be found at www.rockwellcollins.com under the
Investor Relations tab. In addition to the general guidelines,
the Committee has identified the following minimum
qualifications for Board membership: each nominee for director
should be an individual of the highest character and integrity,
have solid leadership skills, have experience at strategy/policy
setting, have good communication skills, have a reputation for
working constructively with others, have sufficient time
available to devote to the affairs of the Corporation, be free
of any conflict of interest that would interfere with the proper
performance of the responsibilities of a director, and be under
the age of 70 as of the meeting of shareowners for which he or
she will stand for election.
Communicating
With Board Members
As discussed above, the Chair of the Executive Committee
generally presides at regular executive sessions of our
non-employee directors. Any shareowner or other interested party
may communicate directly with this presiding director by sending
an email to presidingdirector@rockwellcollins.com or writing to:
Presiding Director, Rockwell Collins, Inc., 400 Collins Road NE,
Cedar Rapids, IA 52498. Communications by shareowners or other
interested parties may also be sent to non-employee directors,
as a group or individually, by sending an email to
boardofdirectors@rockwellcollins.com or by writing to Board of
Directors (or one or more directors by name), Attn: Corporate
Secretary, Rockwell Collins, Inc., 400 Collins Road NE, Cedar
Rapids, IA 52498. Upon receipt of any communication, the
Corporate Secretary will determine the nature of the
communication and, as appropriate, facilitate direct
communication with the appropriate director.
CERTAIN
TRANSACTIONS AND OTHER RELATIONSHIPS
The Board has adopted the Related Person Transaction Policy
providing for the review and approval or ratification by the
Audit Committee of certain transactions or relationships
involving Rockwell Collins and its directors, executive
officers, certain shareowners and their affiliates. The Audit
Committee is responsible for reviewing these transactions and
takes into account the pertinent facts and circumstances
presented, and any other information they deem appropriate, to
determine the disposition action that is in the best interests
of the Corporation. A copy of the Related Person Transaction
Policy is available on our website at
www.rockwellcollins.com.
This written policy sets forth procedures for the review,
approval or ratification and monitoring of transactions
involving Rockwell Collins and related persons. For
the purposes of the policy, related persons
-7-
include executive officers, directors and director nominees or
their immediate family members, or shareowners owning five
percent or greater of Rockwell Collins outstanding stock.
The Related Person Transaction Policy defines related
person transactions in accordance with applicable SEC
rules as any transaction in which the Corporation was or is to
be a participant, a related person has a material direct or
indirect interest and that exceeds $120,000. The policy requires
these related person transactions to be reviewed and approved or
ratified by the Audit Committee. In addition, this policy
requires related persons to disclose to the Audit Committee the
material terms of the related person transaction, including the
approximate dollar value of the amount involved in the
transaction and the related persons direct or indirect
material interest in, or relationship to, the related person
transaction.
The Corporation employs in non-executive positions the spouses
of two executives and those spouses receive in excess of
$120,000 in total employee compensation each. The compensation
of these family members was established in accordance with the
Corporations employment and compensation practices
applicable to employees with equivalent qualifications,
experience and responsibilities. These two employment
relationships were approved by the Board.
The Corporation purchases goods and services in the ordinary
course of business from a subsidiary of a company where
Mr. Donegan, a director of ours, serves as an executive
officer. This relationship is further discussed above under
Corporate Governance; Board of Directors and
Committees Board Independence. This relationship has
been approved by the Board.
In addition, Mr. Bealls Rockwell benefits assumed by
us, as described below under the heading Compensation of
Directors have been ratified and approved pursuant to the
Related Person Transaction Policy.
-8-
The Audit Committee of the Board of Directors consists entirely
of directors who meet the independence and other requirements of
the New York Stock Exchange and applicable law. Two of its three
members have been deemed audit committee financial
experts (as defined by applicable Securities and Exchange
Commission rules) by our Board. The Committee has furnished the
following report:
We assist the Board of Directors in overseeing and monitoring
the integrity of the Corporations financial reporting
process, compliance with legal and regulatory requirements and
the quality of the internal and external audit processes. Our
roles and responsibilities are set forth in a written Charter
adopted by the Board of Directors. We review and reassess the
Charter periodically and recommend any changes to the Board for
approval.
We are responsible for overseeing the Corporations overall
financial reporting process. In fulfilling our responsibilities
for the financial statements for fiscal year 2007, we:
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Reviewed and discussed the audited financial statements for
fiscal year 2007 with management and Deloitte & Touche
LLP (Deloitte), the Corporations independent
auditors;
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Reviewed and discussed managements report and
Deloittes report and attestation on internal control over
financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act;
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Discussed with Deloitte the matters required to be discussed by
Statement on Auditing Standards No. 61 relating to the
conduct of the audit; and
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Received written disclosures and the letter from Deloitte
regarding its independence as required by Independence Standards
Board Standard No. 1. We discussed with Deloitte its
independence, and considered whether the provision of non-audit
services by Deloitte is compatible with maintaining its
independence. All audit and non-audit services provided by
Deloitte to the Corporation in fiscal year 2007 were
pre-approved by us.
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Based on our review of the audited financial statements and
discussions with management and Deloitte, we recommended to the
Board of Directors that the audited financial statements be
included in the Corporations Annual Report on
Form 10-K
for fiscal year 2007 for filing with the SEC. The Audit
Committee also has reviewed the performance and independence of
Deloitte and recommends that shareowners approve the selection
of Deloitte as the Corporations independent auditors for
fiscal year 2008.
Audit Committee
Joseph F. Toot, Jr., Chairman
Chris A. Davis
Andrew J. Policano
-9-
EQUITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal
Shareowners
There is no shareowner known to us that beneficially owns more
than 5% of the outstanding shares of our Common Stock as of
September 30, 2007.
Management
Equity Ownership
The following table shows the beneficial ownership, reported to
us as of December 1, 2007, of our Common Stock, including
shares as to which a right to acquire ownership within
60 days exists (for example, through the exercise of stock
options or through various trust arrangements) within the
meaning of
Rule 13d-3(d)(1)
under the Securities Exchange Act of 1934, as amended, of each
director, each executive officer listed in the table and of such
persons and other executive officers as a group.
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Beneficial Ownership on
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December 1, 2007
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Percent of
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Name
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Shares(1)
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Class(2)
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Clayton M. Jones
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1,435,002
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(3,4)
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*
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Donald R. Beall
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372,916
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(4,5,6,7)
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*
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Anthony J. Carbone
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40,371
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(4,5,6)
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*
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Michael P.C. Carns**
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37,299
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(4,5,6)
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*
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Chris A. Davis
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34,875
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(4,5,6)
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*
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Mark Donegan
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3,038
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(6)
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*
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Ralph E. Eberhart
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3,000
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(6)
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*
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Andrew J. Policano
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5,133
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(6)
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*
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Cheryl L. Shavers
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24,503
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(4,5,6)
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*
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Joseph F. Toot, Jr.**
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44,888
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(4,5,6)
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*
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Robert M. Chiusano
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77,224
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(3,4,8)
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*
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Gregory S. Churchill
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284,270
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(3,4)
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*
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Patrick E. Allen
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176,898
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(3,4)
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*
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Gary R. Chadick
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120,187
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(3,4)
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*
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Robert K. Ortberg
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89,350
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(3,4)
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*
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All of the above and other executive officers as a group
(23 persons)
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3,200,797
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(3,4,5,6,7,8,9,10)
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2
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*
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Less than 1%
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**
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General Carns and Mr. Toot
will retire when their terms expire at the 2008 Annual Meeting.
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(1)
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Each person has sole voting and
investment power with respect to the shares listed unless
otherwise indicated.
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(2)
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The shares owned by each person,
and by the group, and the shares included in the number of
shares outstanding have been adjusted, and the percentage of
shares owned has been computed, in accordance with
Rule 13d-3(d)(1)
under the Securities Exchange Act of 1934.
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(3)
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Includes shares held under our
Retirement Savings Plan as of December 1, 2007. Does not
include 8,022 share equivalents for Mr. Jones,
2,818 share equivalents for Mr. Chiusano,
1,082 share equivalents for Mr. Churchill,
459 share equivalents for Mr. Allen, 813 share
equivalents for Mr. Chadick, 240 share equivalents for
Mr. Ortberg and 16,300 share equivalents for the
group, held under our Non-Qualified Savings Plan as of
December 1, 2007. These share equivalents under the
Non-Qualified Savings Plan are settled in cash in connection
with retirement or termination of employment and may not be
voted or transferred.
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(4)
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Includes shares that may be
acquired upon the exercise of outstanding stock options that are
or will become exercisable within 60 days as follows:
1,356,143 for Mr. Jones, 166,040 for Mr. Beall, 23,333
for Mr. Carbone, 23,333 for Mr. Carns, 23,333 for
Ms. Davis, 16,833 for Dr. Shavers, 20,607 for
Mr. Toot, 66,647 for Mr. Chiusano, 266,951 for
Mr. Churchill, 163,962 for Mr. Allen, 105,366 for
Mr. Chadick, 86,075 for Mr. Ortberg and 2,684,512 for
the group.
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-10-
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(5)
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Includes 21,381 shares for
Mr. Beall, 11,984 shares for Mr. Carbone,
8,912 shares for Mr. Carns, 6,413 shares for
Ms. Davis, 4,632 shares for Dr. Shavers and
6,625 shares for Mr. Toot granted as restricted stock
as compensation for services as directors.
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(6)
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Includes 5,054 shares for
Mr. Beall, 5,054 shares for Mr. Carbone,
5,054 shares for Mr. Carns, 5,129 shares for
Ms. Davis, 3,038 shares for Mr. Donegan,
3,000 shares for Mr. Eberhart, 5,133 shares for
Dr. Policano, 3,038 shares for Dr. Shavers and
3,038 shares for Mr. Toot granted as restricted stock
units as compensation for services as directors.
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(7)
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Includes 180,441 shares that
are held by a family trust. These shares in the family trust,
along with other assets, are pledged as collateral for a loan.
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(8)
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Includes 10,154 shares held by
the trust of Mr. Chiusanos spouse.
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(9)
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Includes 4,838 shares under
our Savings Plan held by executive officers spouses,
1,547 shares held in an IRA by an executive officers
spouse and 766 shares acquired by an executive
officers spouse under our Employee Stock Purchase Plan as
of December 1, 2007.
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(10)
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Does not include performance shares
held by such persons for which shares of our Common Stock may be
issued upon a change of control or following each three-year
performance period depending on the level of achievement of our
performance goals.
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COMPENSATION
OF DIRECTORS
2007
DIRECTOR COMPENSATION TABLE
The following table sets forth information regarding
compensation for each of our non-employee directors for 2007.
Our non-employee director compensation program is comprised of
cash (board and committee annual retainer fees) and equity
(restricted stock unit awards). Mr. Jones, who is a
director and an employee, does not participate in this
compensation program for non-employee directors.
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Change
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in Pension
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Value
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Non-Equity
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and
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Fees
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Incentive
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Non-Qualified
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Earned or
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Stock
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Plan
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Deferred
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All Other
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Paid in
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Awards
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Option
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Compensation
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Compensation
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Compensation
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Total
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Name
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Cash($)(1)(2)
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($)(3)(4)
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Awards($)(4)
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($)
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Earnings ($)
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($)(5)(6)
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($)
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Donald R.
Beall(7)
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$
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85,000
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$
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105,008
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$
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18,684
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$
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208,692
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Anthony J. Carbone
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$
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85,000
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$
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105,008
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|
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$
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7,670
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$
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197,678
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Michael P.C. Carns
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$
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85,000
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$
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105,008
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|
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|
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|
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$
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5,704
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$
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195,712
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Chris A. Davis
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$
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90,000
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$
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105,026
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$
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4,104
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$
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199,130
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Mark
Donegan(8)
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$
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85,000
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$
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1,933
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|
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|
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$
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86,933
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Ralph E.
Eberhart(9)
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|
|
|
|
|
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|
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|
|
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Richard J.
Ferris(10)
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$
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45,000
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$
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242
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|
|
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|
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$
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3,472
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$
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48,714
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Andrew J.
Policano(8)
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$
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90,000
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$
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2,759
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|
|
|
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|
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|
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$
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2,900
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$
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95,659
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Cheryl L. Shavers
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$
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85,000
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$
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104,204
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|
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$
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2,964
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$
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192,168
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Joseph F. Toot
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$
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95,000
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|
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$
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104,204
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|
|
|
|
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|
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|
|
|
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$
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9,240
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$
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208,444
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(1)
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Non-employee directors receive an
annual retainer fee of $85,000 that they may elect to receive in
cash or a stock award in lieu of cash. Each of
Messrs. Beall, Carbone, Carns, Policano and Ms. Davis
elected in 2006 to defer 100% of their cash retainer in 2007
into restricted stock units (RSUs).
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(2)
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Audit Committee members receive an
annual fee of $5,000 and the Audit Committee chair receives an
annual fee of $10,000. These fees may be paid in cash or in RSUs
in lieu of cash, at the election of the Audit Committee member.
Ms. Davis and Mr. Policano elected in 2006 to defer
100% of their 2007 Audit Committee fees into RSUs.
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(3)
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Under the 2006 Long-Term Incentives
Plan, non-employee directors during 2007 received an annual
grant of 1,500 RSUs. Each non-employee director appointed in
2007 was granted 3,000 RSUs upon election as a director. RSU
dividend equivalents payable quarterly are also included in this
column. The values set forth in this column are equal to the
compensation cost recognized in fiscal year 2007 for such items
in accordance with Statement of Financial Accounting Standards
No. 123 (revised 2004), Share-Based Payment
(SFAS 123R).
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-11-
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(4)
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No options were awarded to
directors in fiscal year 2007. The non-employee directors have
outstanding equity awards as of September 30, 2007 as
follows:
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Restricted
|
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Option
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Restricted
|
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Stock Unit
|
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Name
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Awards
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Stock Awards
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|
Awards
|
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|
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Donald R. Beall
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167,707
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21,381
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4,769
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|
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Anthony J. Carbone
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25,000
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11,984
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4,769
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Michael P.C. Carns
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25,000
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8,912
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4,769
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Chris A. Davis
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25,000
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6,413
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4,826
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Mark Donegan
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3,038
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Richard J.
Ferris(10)
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25,000
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Andrew J. Policano
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4,831
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|
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Cheryl L. Shavers
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18,500
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4,632
|
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3,037
|
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Joseph F. Toot
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22,274
|
|
|
|
6,625
|
|
|
|
3,037
|
|
|
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(5)
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Includes cash dividends paid on
restricted stock.
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(6)
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|
Messrs. Beall, Policano and
Toot take advantage of the opportunity to have us match their
gifts up to $5,000 under our Matching Gift Program. Our matching
gifts are included in this column.
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(7)
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|
Mr. Beall also receives
benefits related to his prior service as an executive of a
predecessor company. These additional benefits are disclosed
further in the narrative below.
|
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(8)
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|
Messrs. Donegan and Policano
joined as directors in 2006. They received their initial award
of 3,000 RSUs prior to the commencement of the 2007 fiscal year
and they are not entitled to an annual grant of RSUs until the
2008 annual meeting.
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(9)
|
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Mr. Eberhart joined the Board
of Directors on November 5, 2007 (after the end of the 2007
fiscal year).
|
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(10)
|
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Mr. Ferris retired from the
Board of Directors effective February 13, 2007, and all
restricted stock and RSUs previously held by him were vested at
retirement.
|
Cash
Compensation
All non-employee directors receive a retainer fee of $85,000 per
year for service on the Board of Directors, payable in advance
in equal quarterly installments. An additional $10,000 annual
retainer fee is paid to the Audit Committee chair. An additional
$5,000 annual retainer fee is paid to each of the other Audit
Committee members. No additional retainer is paid for service on
committees other than the Audit Committee. Under the 2006
Long-Term Incentives Plan (2006 LTIP), each director has the
option each year to determine whether to defer all or any part
of his or her retainer fees by electing to receive restricted
stock units of our Common Stock valued at the closing price of
our Common Stock on the New York Stock Exchange Composite
Transactions reporting system on the date the cash retainer
payment would otherwise be paid. Directors are reimbursed for
all reasonable expenses associated with attending board and
committee meetings and otherwise relating to their director
duties. Directors are eligible to obtain up to $5,000 in
matching charitable gifts under our Matching Gift Program.
Stock-Based
Compensation
In addition to the retainer fees described above, each
non-employee director is granted 3,000 restricted stock units of
our Common Stock under the 2006 LTIP effective concurrently with
the directors election to our Board. Following the
completion of one year of service on the Board, each
non-employee director was granted 1,500 restricted stock units
of our Common Stock immediately after every Annual Meeting of
Shareowners of the Corporation. Pursuant to the terms of the
directors restricted stock units, dividend equivalents in
the form of additional restricted stock units accumulate on the
date we otherwise pay dividends on our Common Stock and
directors receive unrestricted shares of our Common Stock in
payment for restricted stock units upon termination of service
on the Board of Directors. A director has no voting rights on
the restricted stock units prior to the issuance of unrestricted
shares upon termination of service.
-12-
Director
Compensation for 2008
In November 2007, the Board of Directors amended the
compensation plans for non-employee directors in 2008.
Non-employee directors will be provided a retainer fee of
$100,000 per year for service on the Board of Directors, payable
in advance in equal quarterly installments. Following the
completion of one year of service on the Board, each
non-employee director will receive an equity grant based on a
$100,000 value of restricted stock units of our Common Stock
immediately after every Annual Meeting of Shareowners of the
Corporation. Each non-employee directors initial equity
grant will be based on a $200,000 value for the restricted stock
units of our Common Stock effective concurrently with the
directors election to our Board. Directors will continue
to be reimbursed expenses, be eligible for matching gifts and
have the option to defer retainer fees by electing to receive
restricted stock units of our Common Stock.
Other
Mr. Beall receives, in addition to the standard
non-employee director compensation described above, directly or
indirectly approximately $20,000 per month for office,
telecommunication and administrative services. Payment for these
office, telecommunication and administrative services are
benefits granted by Rockwell International Corporation (now
known as Rockwell Automation, Inc.) (Rockwell) that
were assumed by us in our spin-off from Rockwell (the
Distribution) and are not compensation for services
provided to us as a director. Mr. Beall also receives
various retirement benefits (principally defined benefit
pension, 401(k) savings plan distributions and deferred
compensation payouts) associated with his years of service with
Rockwell that were assumed by us in the Distribution.
Director
Stock Ownership Guidelines
Each non-employee director is required to own shares of our
Common Stock with a market value of at least three times the
annual retainer amount within four years of joining the Board of
Directors.
EXECUTIVE
COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
This Compensation Discussion and Analysis (CD&A) provides
detailed information about the compensation program for the
Corporations named executive officers. It includes the
Compensation Committees philosophy and objectives, roles
and responsibilities, descriptions of each of the elements of
compensation and the basis for compensation adjustments,
incentive payments and long-term incentive grants made for 2007.
Unless otherwise noted, references to years in this CD&A
are to Rockwell Collins fiscal year which commences in
October.
Compensation
Philosophy and Objectives
The Compensation Committee (Committee) has developed
and implemented compensation policies, plans and programs to
provide competitive compensation opportunities with actual
payments highly dependent on the Corporations performance
results and enhancements to shareowner value, consistent with a
pay-for-performance philosophy. Base salaries and target
incentive compensation are set around the median compensation
levels of other major U.S. Industrial and Aerospace peer
companies, adjusted for size. The Committee considers the total
compensation package (earned or potentially available, including
benefits) in establishing each element of compensation.
The policies, plans and programs are designed to meet the
following objectives:
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Support the Corporations vision roadmap
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Attract and retain highly qualified executives
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-13-
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Be competitive with other major U.S. industrial and peer
companies
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Reward corporate, business unit and individual performance
(pay for performance)
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Align the interests of executives and shareowners
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Promote the balance of annual and long-term results
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What
Compensation is Intended to Reward
A significant amount of the named executive officers
compensation is variable, tied to performance as measured by
specific goals for both the annual and long-term incentive
plans. To support the pay-for-performance philosophy,
performance is evaluated as follows:
Corporate Performance. The annual
incentive plan is designed to reward the achievement of annual
financial goals and key business goals that are important to the
current and future success of the Corporation. These goals are
included in the Corporations annual operating plan that is
prepared by management and approved by the Board of Directors.
The same annual incentive plan design and performance metrics
apply to all named executive officers and most employees of the
Corporation worldwide.
The long-term incentives plan has been established to reward the
achievement of long-term financial goals and increased
shareowner value. This plan applies generally to about
130 employees of the Corporation including the named
executive officers. These long-term incentives include
three-year performance awards and stock options.
Business Unit Performance. The Chief
Executive Officer (CEO) reviews the performance of
each business unit and shared service based on the achievement
of goals included in the Corporations annual operating
plan consisting of both financial and non-financial measures.
Based on this overall assessment, the CEO has the discretion to
adjust the annual incentive pool upward or downward to reflect
the business units or shared services performance.
The Committee has delegated within limits to the CEO certain
discretion to increase or decrease the annual incentive pool to
allow for these adjustments.
Individual Performance. The Corporation
has a formal performance management program called Performance
Review and Development Plan that applies to all salaried
employees including the named executive officers. Individual
performance goals are established at the beginning of each year
and are aligned with the annual operating plan. Performance
against these goals is evaluated at the mid-year point and at
the end of the year. The CEOs personal goals are approved
by the Compensation Committee each year in September for the
next year. Following the end of the year at their November
meeting, the Committee, with input from the other directors,
formally evaluates the CEOs performance during its
executive session. The CEO approves the individual performance
goals of the other named executive officers at the beginning of
each year, evaluates their performance at the end of the year
and recommends to the Committee any resulting performance
adjustments to their salaries and annual incentive payments.
Roles and
Responsibilities
Compensation Committee. The Board of
Directors has delegated to the Committee responsibility for the
development and oversight of the Corporations executive
compensation programs. The Committee consists entirely of
independent directors. The Committee reports back to the Board
of Directors the results of its review and specific proposals
regarding changes to compensation programs and actions regarding
the CEO. In accordance with its charter (available at
www.rockwellcollins.com) and its operating procedures and
guidelines, the Committee is responsible for the following:
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Evaluates and approves executive compensation plans and policies
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Reviews design and competitiveness of compensation plans
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Reviews and approves corporate financial and key business goals
used for the annual and long-term incentive plans
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-14-
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Sets salaries and annual and long-term incentive targets for the
CEO, other named executive officers, other executive officers
and vice-president/general managers in the businesses
(designated senior executives)
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Oversees annual incentive, long-term incentive and deferred
compensation plans and approves payouts for annual and long-term
incentives for the designated senior executives
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Reviews the design and competitiveness of executive benefits and
perquisites
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Evaluates the CEOs performance, sets all elements of the
CEOs compensation and approves his annual and long-term
incentive plan payouts
|
The Committee has established a recurring agenda that ensures a
consistent and timely review of those areas under its
responsibility.
Independent consultant. The Committee
selects and retains the services of an independent consultant to
provide professional advice related to the Corporations
executive compensation plans. The independent consultant, Semler
Brossy Consulting Group, LLC (independent
consultant), is retained by the Committee and provides no
other service to the Corporation. The independent consultant has
direct interaction with the Committees chairman, attends
Committee meetings and provides independent benchmarking of peer
companies and general industry compensation and practices. The
independent consultant meets with new Committee members to
orient them to the various policies, programs and processes
managed by the Committee. The independent consultant meets with
management to collect information, to solicit managements
input and to fully understand the Corporations plans,
goals and actual performance. The consulting relationship is
reviewed by the Committee annually to determine its satisfaction
with the services and advice provided by the independent
consultant.
Management. The CEO reports to the
Committee about the Corporations performance, business
unit performance and individual performance of the other named
executive officers. He also discusses the operational and
financial plans for future performance periods (annual and
long-term) as they relate to compensation decisions. The CEO
provides input on the design of compensation programs and
policies. He also makes recommendations for compensation changes
for the other named executive officers. The Senior Vice
President, Human Resources provides additional support, analysis
and counsel, including execution of the programs under the
supervision of the Committee. Certain members of management,
including the CEO, regularly attend Committee meetings. The CEO
is delegated authority for the compensation arrangements for
executives below the designated senior executive positions in
the Corporation, with limitations that are established by the
Committee. The Committee typically meets for a portion of its
meetings in executive session, with its independent consultant
but without the CEO or other members of management. The
Committees deliberations on CEO compensation are held
during a non-management executive session that typically
includes all board members.
Market
Benchmarking
Prior to the beginning of each year, the Committee considers
benchmark market data for total direct compensation (base salary
plus annual and long-term incentives) for the CEO, named
executive officers and other designated senior executives based
on the research done by the independent consultant. The
Committee utilizes this market data to assess the
competitiveness of the Corporations executive compensation
and the mix of fixed (base salary) and variable (annual and
long-term incentives) compensation.
The Committee utilizes two sources of information to benchmark
executive compensation a general industry peer group
with revenues similar to the Corporation and a peer group of
companies in the aerospace industry.
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General industry peer group: The Corporations senior
executives have skills that are in demand outside of the
aerospace industry. The independent consultant conducts analysis
using salary information from a widely utilized executive
compensation resource the Towers Perrin Compensation
Data Bank. The independent consultant reviews the compensation
levels of industrial companies with similar revenues.
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-15-
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Peer group of ten companies in the aerospace industry:
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AAR Corporation
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Alliant Techsystems, Inc.
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General Dynamics
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Goodrich Corporation
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Harris Corporation
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L-3 Communications
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Northrop Grumman Corporation
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PerkinElmer, Inc.
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Raytheon Company
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Teledyne Technologies, Inc.
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These companies were selected because they are representative of
companies that compete with us for business and executive
talent. The peer group is reviewed periodically to assure that
it continues to meet the needs of the Committee.
Each year the independent consultant collects compensation data
from public filings for each of these companies. Rockwell
Collins revenue is around the median of the peer group;
however, because some companies are larger and some are smaller,
the data is size-adjusted to obtain a more accurate view of the
market. This data is also interpreted giving consideration to
year-over-year variability and the impact of changes of any
individual named executive officer among the peer group
companies.
The Committee generally sets target total direct compensation
(base salary and annual and long-term incentives) around the
median of the benchmark data. Each executive can be paid above
or below that amount based on years in the position, prior
experience, individual performance and corporate performance.
Comprehensive
Compensation Review
In the course of reviewing benchmark information from external
sources and making decisions about the CEOs compensation
or considering the CEOs recommendations for the other
named executive officers, the Committee also reviews
comprehensive compensation portfolios for each named executive
officer. This portfolio information includes detailed modeling
of the current dollar value of all aspects of compensation,
including base salary, annual and long-term incentives,
perquisites, pension and savings plans, and health and welfare
benefits. The Committee reviews this information to ensure that
the total compensation awarded to each named executive officer
is reasonable and consistent with the compensation philosophy
and objectives discussed above.
Elements
of the Compensation Program
The elements of the Corporations executive compensation
program are as follows: base salary, annual incentive, long-term
incentives, perquisites and benefits. Each year the Committee
approves the design and performance goals for both the annual
and long-term incentives consistent with the Committees
compensation philosophy and objectives.
Allocation among the elements of direct
compensation. The mix of base salary, annual
and long-term incentives varies by position. To support the
pay-for-performance philosophy and consistent with external
benchmark information, the higher the level of responsibilities
and accountability, the more compensation is at risk
for achieving the Corporations annual and long-term
performance goals. For the CEO, other named
-16-
executive officers and other executive officers, the mix of the
elements of total direct compensation at target levels is
generally the following:
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Base
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Annual
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Long-Term
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Position
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Salary
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Incentives
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Incentives
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Chairman, President & CEO
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20
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%
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20
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%
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60
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%
|
Other named executive officers
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30
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%
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20
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%
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50
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%
|
Other reports to the CEO
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40
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%
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20
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%
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|
40
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%
|
Base Salary. Each of the named
executive officers, including the CEO, is paid a base salary for
performance of
his/her job
duties and responsibilities. Base salary targets are generally
set around the median of the competitive data; however, actual
salaries can be below, at or above the median depending on
performance and past experience. Newly promoted named executive
officers are typically paid below the median of the competitive
data with salary increases over time designed to move them to
the median subject to meeting or exceeding their performance
objectives.
Base salary is reviewed annually and consideration is given for
base salary adjustments based on individual performance and
available competitive data that is presented by the independent
consultant. Salaries are reviewed after the end of the fiscal
year and any adjustments go into effect on January 1 each year,
consistent with practices for all salaried employees. The
salaries of the CEO and the other named executive officers are
decided by the Committee after considering input from the CEO
regarding salaries of the other named executive officers and
consulting with the independent consultant and the Board of
Directors.
Annual Incentives. The Incentive
Compensation Plan is an annual incentive plan with payouts based
on the achievement of specific financial goals and key business
goals that are included in the Corporations annual
operating plan as approved by the Board of Directors. The annual
operating plan reflects the Corporations performance
commitments to its key constituents shareowners,
customers and employees for the upcoming year. The
Incentive Compensation Plan includes specific goals for sales,
earnings per share and working capital as a percentage of sales,
and non-financial goals (key business goals) in the
categories of growth/program pursuits, operational excellence
and people goals. The philosophy is to provide competitive
annual incentive payouts when financial and non-financial goals
are met, to provide above-target payouts when these goals are
exceeded, and to provide below target or no payouts when these
goals are not met.
The Committee establishes the annual performance target goals
and sets each named executive officers annual target bonus
as a percentage of salary based upon the median of the
competitive benchmark data for each position. Annual incentive
payments can range from 0% to 200% of the annual incentive
target based on the performance achieved against the financial
and key business goals. Each named executive officers
payout may also be adjusted based upon the individuals and
his or her business units performance during that fiscal
year.
The annual incentive pool is the sum of all target bonuses for
the named executive officers and other executives who
participate in the annual incentive plan multiplied by the
annual incentive payout percent based on the performance of the
Corporation against the goals that were established for the
year. The incentive pool is subject to business unit, as well as
individual, adjustments in accordance with recommendations from
the CEO to the Committee. Individual performance adjustments can
be made to the resulting incentive payments; however, they
cannot in the aggregate increase the size of the incentive pool
unless the CEO exercises the discretion delegated to him by the
Committee to increase the pool by up to 5%.
The 2006 Annual Incentive Compensation Plan for Senior Executive
Officers, approved by shareowners at the 2006 Annual Meeting,
provides for performance-based annual incentive compensation
that is in compliance with Internal Revenue Code
Section 162(m) allowing for the full tax deduction for the
annual incentive payment. This plan defines a maximum amount for
the awards that can be allocated each year to the CEO and to the
other named executive officers. The annual incentive awards
actually paid based on the annual Incentive Compensation Plan
described above have been well below the maximum allowed by the
Senior Executive Incentive Compensation Plan.
-17-
Annual Incentive Plan Performance
Results. A disciplined performance philosophy
has been applied to the annual incentive plan. When results did
not fully meet pre-established goals in 2002 and 2003 due to
various factors including the effects of
September 11th on the Commercial Systems business,
annual incentives were paid at 84% and 75% of target amounts,
respectively. For 2004 through 2006, the Corporations
performance has been outstanding and has exceeded
pre-established targets each year and, as a result, annual
incentives were paid well above target levels (191%, 200% and
143%, respectively). These payouts were the result of exceeding
demanding performance objectives, as the earnings per share
(total earnings after taxes divided by total diluted shares
outstanding) goals clearly illustrate. The goal for a target
payout each year for
2004-2006
represented a substantial increase over the prior year actual
earnings per share about 13% per year increase on
average during
2004-2006.
However, actual growth well exceeded even these targets, with
earnings per share gains adjusted for acquisitions and
non-recurring items of 23%, 32% and 23% each year for
2004-2006.
Sales growth goals and working capital goals generally had
similar patterns with performance exceeding demanding goals.
Long-Term Incentives. The 2006
Long-Term Incentives Plan, approved by the Corporations
shareowners, provides the Committee with the flexibility to
grant long-term incentive awards in a variety of forms including
equity and multi-year performance awards. The purpose of
long-term incentive compensation is to align an executives
performance to the long-term success of the Corporation and to
the creation of shareowner value. As a result, a significant
portion of the compensation of the CEO and other named executive
officers is at risk for achieving the strategic financial
performance targets set by the Committee in these long-term
incentive awards and for growing the Corporations stock
price. These awards also serve as an important retention tool
because they vest over multiple years.
Each year the Committee reviews the competitive market data and
analysis for long-term incentive grants provided by the
independent consultant. This review includes the amount of
compensation awarded and the design of a long-term incentive
plan that will support the Committees pay-for-performance
philosophy. The target long-term incentive compensation for the
CEO and other named executive officers is set around the median
of the competitive market. The Committee sets the long-term
incentive target compensation in dollars. This dollar target is
converted to a mix of stock options and multi-year performance
awards with overlapping performance cycles. This approach allows
the Committee to establish goals for each cycle that reflect the
current strategic business plan.
Stock options are granted with an exercise price equal to the
fair market value on the date of grant and provide compensation
value that is dependent on growth in the Corporations
stock price. The performance award payouts in cash and stock can
range from 0% to 200% of the target amount and the payouts are
determined after the three-year results are evaluated against
financial goals. A peer performance modifier, based on total
return to shareowners over the three-year period, can drive an
adjustment up or down by 20% of the amount otherwise payable
under the performance awards. For further details on these
long-term incentives, see 2007 Compensation, Long-Term
Incentives below.
Long-Term Incentives Performance
Results. The long-term performance awards
have been strongly linked to performance results. The Committee
has chosen to use a combination of stock options and performance
cash or shares with multi-year performance cycles. The 2003
through 2006 awards were driven by organic sales growth and by
return on sales (profit after tax divided by total sales) to
encourage profitable growth. The return on sales goals for the
2003-2005
and
2004-2006
cycles reflected high historical margins with 9% or more return
on sales and 8% per year organic sales growth. The Corporation
not only exceeded these goals, but also exceeded the maximum
return on sales goal for those cycles. As a result, the
long-term incentive awards resulted in payments of 162% and 300%
in 2005 and 2006, respectively, reflecting the
Corporations strong performance. For the same cycles the
Corporations total return to shareowners was over 100%
(2003-2005
was 125%;
2004-2006
was 110%).
Due to the performance achievements by the Corporation, the
Committee raised the return on sales goals higher for each cycle
from 2004 through 2006 and starting with the 2006 through 2008
cycle also lowered the maximum payout available to participants
from 300% of target to 200% of target.
Equity grant practices. The Committee
has a practice of approving long-term incentives (including
stock options) at its November meeting each year. The meeting
date is scheduled at least one year in advance. Stock options
are granted with an exercise price equal to the closing price of
the Corporations Common Stock on the date of the meeting
that is the date of grant. This meeting follows the public
release of annual earnings typically by one to
-18-
two weeks. The Corporation intends for the market to absorb the
impact of its public release of year-end financial results
before making the grant. The Committee on occasion will make
grants at other regularly scheduled meetings when a new
executive is named either as a result of an internal promotion
or hiring. The Committee has delegated to the CEO the authority
to make individual equity grants to positions below the
designated senior executives. These grants are approved by the
CEO on the date of a regularly scheduled meeting of the Board of
Directors. The Committee reviews the use of this delegation at
its November meeting each year.
Benefits. The CEO and other named
executive officers generally are covered by the same broad range
of benefit programs available to other U.S. salaried
employees of the Corporation. These benefits include medical,
prescription drug, dental, vision, flexible spending accounts,
pension and savings plans, employee stock purchase plan, life
insurance, disability payments and vacation. The Corporation
provides a broad array of benefit programs to attract and retain
a skilled and highly talented workforce and to provide employees
with choice to meet their personal needs. These benefits are
compared to external benchmarks periodically to assure that they
remain competitive and cost effective. It is the
Corporations intention to provide a comprehensive benefits
program that in total value is around the median of competitive
practice.
Effective October 1, 2006 the Corporation froze its defined
benefit pension plan applicable to the named executive officers
and other salaried employees and shifted its emphasis to a
defined contribution plan. The qualified and non-qualified
defined benefit pension plans no longer accrue benefits for
salary increases and service rendered by the named executive
officers and other salaried employees after September 30,
2006. The pension plan was frozen to reduce the volatility of
expense inherent in defined benefit pension plans. Effective
October 1, 2006 the defined contribution savings plan was
amended to include an additional corporate contribution using a
percent of eligible earnings ranging from 0.5% to 6% based on
age and service. No additional or special retirement benefits
are provided to the CEO or other named executive officers after
the pension freeze. For more information about the CEO and other
named executive officers pension and savings plan
benefits, see the Pension Benefits and the Non-Qualified
Deferred Compensation Tables.
Deferral Plans. To provide a
tax-effective opportunity to save for retirement or other future
needs, the Board of Directors has authorized compensation plans
that allow for the elective deferral of the receipt of base
salary and performance-based awards (annual incentive and
long-term performance awards) when earned and otherwise payable
to eligible employees. Eligible employees include the CEO, other
named executive officers and a select group of other management
and professional employees. Amounts deferred into the plan
accrue earnings based on each participants selection of
investment choices (tracking funds) that are
generally similar to the core funds provided in the
Corporations qualified savings plan.
Perquisites. As part of a comprehensive
executive compensation program, the Committee has provided the
CEO and named executive officers certain annual perquisites,
such as:
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Car Allowance
|
|
|
|
Financial Planning Allowance
|
|
|
|
Reimbursement for an Executive Physical Exam
|
These perquisites are designed to be competitive within the
industry that the Corporation competes for executive talent.
They are reviewed annually by the Committee to assure that they
continue to be competitive and consistent with the overall
compensation philosophy. Details about the perquisites provided
to the CEO and other named executive officers are included in
the Summary Compensation Table and its footnotes.
2007
Compensation
At its November 2006 meeting, the Committee approved base salary
and annual incentive targets for 2007. Long-term incentive
grants in the form of stock options and performance awards for
the period 2007 through 2009 were also made. At its November
2007 meeting the Committee approved annual incentive payments
for 2007 and long-term incentive payments for the performance
period 2005 through 2007. These actions are outlined below.
The alignment of pay with performance continued to show results
in 2007. The performance of the Corporation for 2007 was strong
in both the Commercial and Government Systems business units,
exceeding the
-19-
long-term targets for both growth and financial performance.
Earnings per share were 26% above the prior year while sales
increased by 14%. Working capital as a percentage of sales
decreased in 2007 to 8.1%. As a result, payouts for 2007 to the
named executive officers for their annual and long-term
incentives significantly exceeded their targets.
Base
Salary
The Committee approved a base salary increase for the CEO
effective on January 1, 2007 of 6.7% to bring his salary to
$960,000, around the median for similar-sized companies in the
general industry and peer group and to recognize the continuing
strong performance by the Corporation and his achievements
against his personal goals. The CEO recommended to the Committee
base salary adjustments for the other named executive officers
ranging from 6% to 15% using the same criteria
market position and performance as for all other
salaried employees.
Annual
Incentives
Target Awards for 2007. Target annual
incentive amounts for the CEO and other named executive officers
are reviewed annually by the Committee using the competitive
information provided by the independent consultant. Target
awards are set around the median of the competitive data for
each position. The target awards are expressed as a percentage
of annual salary. For 2007, the target annual incentive (as a
percentage of base salary) for each named executive officer was
as follows:
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|
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|
|
Chief Executive Officer
|
|
|
100
|
%
|
Chief Operating Officers
|
|
|
65
|
%
|
Chief Financial Officer
|
|
|
60
|
%
|
General Counsel
|
|
|
55
|
%
|
Performance Measures for 2007. Prior to
the beginning of each year, the CEO recommends to the Committee
performance measures based on the annual operating plan that are
most important to achieving the Corporations goals. For
2007, the Committee selected earnings per share, sales and
working capital (defined as current assets excluding cash and
deferred taxes, minus current liabilities excluding debt) as a
percentage of sales. The working capital measure is based on an
average of the measurement taken at the beginning of the year
and the end of each quarter of the year.
Beginning in 2006, the Committee added key business goals as a
fourth measure. These goals allow the Committee to consider
non-financial performance that contributes to or detracts from
the future success of the Corporation. These non-financial goals
for 2007 (weighted 20% of the target award) included program
wins, product deliveries, facility consolidation and enterprise
diversity goals.
The weighting of these measures is evaluated each year. By
weighting earnings per share and sales most heavily and equally
at 35% each, the desired balance of sales growth and profit are
reflected. In the early years after the spin-off of the
Corporation from Rockwell, working capital management was
weighted more heavily to encourage enhancement of performance in
that key measure of success; due to significant improvements
from 12.5% of sales in 2004 to a goal of 8.6% for 2007, that
measure now represents a smaller portion of the total award at
10%.
Performance Goals for 2007. For each of
these measures, the Committee sets specific target goals based
on the Corporations annual operating plan approved by the
Board of Directors. A minimum threshold below which no payment
will be made and stretch goals are set for each
measure to establish the maximum payout range for the year.
Significant improvements in company performance over what was
achieved in 2006, adjusted for acquisitions and non-recurring
items, were required to earn target awards in 2007 as evidenced
by the % Change column below:
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Measure
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|
2007 Target
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|
|
2006 Actual
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|
|
% Change
|
|
|
Sales ($ in billions)
|
|
$
|
4.250
|
|
|
$
|
3.843
|
|
|
|
10.6
|
%
|
Earnings per share
|
|
$
|
3.15
|
|
|
$
|
2.71
|
|
|
|
16.2
|
%
|
Working capital as % of sales
|
|
|
8.6
|
%
|
|
|
9.1
|
%
|
|
|
5.5
|
%
|
-20-
Actual Performance and Payments for
2007. The financial performance for 2007 and
the Committees assessment of key business goals resulted
in a payout of 171% of the target award before any adjustments
for business unit and individual performance. The maximum payout
was achieved for earnings per share and above target amounts
were realized for sales, working capital and key business goals.
The Corporations 2007 actual performance, adjusted for
acquisitions and certain other non-recurring items, on these
financial goals, adjusted for acquisitions and non-recurring
items, exceeded 2006 actual performance as shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Measure
|
|
2007 Actual
|
|
|
2006 Actual
|
|
|
% Change
|
|
|
Sales ($ in billions)
|
|
$
|
4.413
|
|
|
$
|
3.843
|
|
|
|
14.8
|
%
|
Earnings per share
|
|
$
|
3.45
|
|
|
$
|
2.71
|
|
|
|
27.3
|
%
|
Working capital as % of sales
|
|
|
8.1
|
%
|
|
|
9.1
|
%
|
|
|
11.0
|
%
|
The Committee determined the specific achievements during the
year for each of the key business goals. The Committee
considered the assessment of performance on each goal
individually and overall. Using their discretion and qualitative
judgment, they assessed the overall performance as having
exceeded the goals set by the Committee resulting in an
above-target payout of 30% for the key business goals.
Payment to the CEO The annual incentive
payment to the CEO for 2007 that was determined by the Committee
in executive session was $1,616,000 or 171% of his target award
for 2007. No additional adjustment was made to the formula award.
Payments to the Named Executive Officers The
Committee reviewed and considered the CEOs recommendations
in approving annual incentive awards to the other named
executive officers and other designated senior executives. Minor
adjustments were made to the named executive officers
incentives based on individual performance.
Long-Term
Incentives
2007 Grant. At its November 2006
meeting, the Committee provided for grants of stock options and
three-year performance awards (for years 2007 through
2009) to the CEO, the other named executive officers and
certain other employees under the 2006 Long-Term Incentives Plan
after consultation with the independent consultant. The target
awards in dollars for the CEO and other named executive officers
were set after taking into account levels of responsibility,
competitive market data and the relative contribution of each
position to the business (i.e., internal equity or consistency
between positions).
At its April 2007 meeting, the Committee reviewed trends in the
forms of awards used by peer companies and the design of the
long-term incentive plans with the independent consultant. Since
2006, the Committee has granted long-term incentives as stock
options (50% of the target dollar value) and a multi-year
performance award (50% of the target dollar value with half in
cash and half in performance shares) to provide balance to
encourage achievement of multi-year financial goals and
increased shareowner value. To further strengthen the emphasis
on balancing these key success factors and to align with
enhancing shareowner value, the Committee determined that it
would, beginning in November 2007, provide the long-term
incentives grant as 50% stock options and 50% performance shares
for performance over a three-year period. The cash portion of
the performance award will be eliminated.
Stock Options 50% of the 2007 target dollar
value for each named executive officers long-term
incentive award was granted as stock options. The exercise price
of the options is the fair market value defined as the closing
sale price of the stock as reported in the New York Stock
Exchange-Composite Transactions on the date of grant and the
options vest in three equal amounts on the first, second and
third anniversary of the grant. The number of stock options is
determined on the date of grant by dividing the target stock
option compensation in dollars by the fair market value of one
stock option (using an option pricing model for valuation) and
rounded up to the nearest 100 shares.
Performance Awards 50% of the 2007 target
dollar value for each named executive officers long-term
incentive award was granted by the Committee in the form of a
three-year performance award (denominated half in
-21-
cash and half in performance shares) for achievement of
pre-established financial goals for the years 2007 through 2009.
The financial goals, based on the strategic plan approved by the
Board of Directors, focus on long-term profitable growth of the
Corporation measured by return on sales and
cumulative sales and total return to shareowners
relative to peer companies. These measures reflect the
importance of long-term financial performance balanced by its
impact on total return to shareowners.
Financial goals:
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Return on sales is determined by taking the net income divided
by the total sales for the years 2007 through 2009. The goal was
set at 11%. The goal was increased from 10.5% set for the prior
cycle; this is the third consecutive grant where the goal to
achieve a target award has been increased. The return on sales
goal significantly exceeds the return on sales achieved by the
peer companies.
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Cumulative sales reflects an average annual organic growth rate
of 8% per year for the years 2007 through 2009. The three-year
cumulative sales goal of $13.8 billion was increased by
14.2% over the previous three-year cycle (years 2006 through
2008).
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Peer performance modifier:
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The modifier is a potential adjustment to the award (otherwise
determined based on return on sales and cumulative sales) up or
down by 20% depending on the Corporations total return to
shareowners (share price growth plus dividend yield) measured
against a group of peer companies.
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The peer performance adjustment will be made as follows:
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If performance is among the top three peer companies, the award
based on achievements for return on sales and cumulative sales
will be adjusted upward by 20%.
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If performance is among the middle four companies, no adjustment
will be made.
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If performance is among the bottom three peer companies, a
reduction of 20% will be made to the final award.
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The peer companies are AAR Corporation, Alliant Techsystems,
Inc., The Boeing Company, General Dynamics, Goodrich
Corporation, L-3 Communications, Lockheed Martin Corporation,
Northrop Grumman Corporation, Raytheon Company and Teledyne
Technologies, Inc. This peer group differs slightly from the
compensation peers listed earlier because it more accurately
reflects the relative differences between the Corporations
stock performance and market conditions within the industry and
alternative investments for shareowners irrespective of the size
of the company. The compensation peer group is more balanced as
to size (a few larger and a few smaller companies) to allow for
appropriate compensation comparisons.
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The total shares awarded in November 2006 for stock options and
performance shares at target payout represent 0.3% of total
shares outstanding as of the date of grant.
The Committee will review managements achievement of the
pre-established financial goals at its November 2009 meeting and
determine the payment, if any, earned by participants under the
2007 performance awards.
Cash Performance Unit Payment for the period ending in
2007. In November 2007, the Committee
determined the payments to participants for the three-year cash
performance unit granted in November 2004 covering the years
2005 through 2007. The pre-established goals for the three-year
period were for cumulative sales and return on sales.
Performance for the three-year performance period is summarized
below:
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Return on Sales, after adjustment for acquisitions and
non-recurring items, was 12.8%, substantially exceeding the
target of 10%. This compares to a median return on sales of 5.2%
among the peer companies over the same period.
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Cumulative sales, after adjustment for acquisitions, was
$11.4 billion compared to a goal of $10.2 billion.
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-22-
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Total return to shareowners was among the middle 4 of the 10
peer companies so there was no adjustment for this measure.
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Based on the Corporations strong performance during the
three-year period for cumulative sales growth and return on
sales against the pre-established performance goals, payment of
300% of target awards was made to 113 executives of the
Corporation, including the CEO and other named executive
officers, based on the formula established for the awards. The
Committee made no other adjustments to the final award. The CEO
received a payment in November 2007 of $1.8 million
resulting from the three-year performance at 300% of his target
award. This performance award payout represented the last cycle
that included maximum payouts up to 300% of the target. All
subsequent awards include maximum payouts at 200%, subject to
any peer performance modifier.
Compensation
for 2008
At the November 2007 meeting of the Committee, the independent
consultant presented competitive benchmark data for named
executive officers compensation and the CEO reviewed the
performance of the other named executive officers and designated
senior executives. In addition, based on the competitive report
provided by the independent consultant, the Committee considered
the CEOs recommendation in approving target annual
incentives for 2008 and long-term incentive grants made up of
stock options and three-year performance share awards that are
dependent on the Corporations performance for the years
2008 through 2010 for cumulative sales, return on sales and
total shareowner return. For the other named executive officers,
the annual incentive targets were increased five percentage
points for the chief operating officers and general counsel and
ten percentage points for the chief financial officer. The
long-term incentive target values were increased by $50,000 for
two of the named executive officers who are relatively new to
their positions. These adjustments were made to remain
competitive with the median of the benchmark data. The
performance goals for 2008 through 2010 were increased over
prior cycles for the fourth consecutive cycle.
The Committee met in executive session with the CEO to discuss
his performance for 2007. The Committee then met in executive
session with the independent consultant and without the CEO
present to discuss CEO compensation. They reviewed the
Corporations results for 2007 and established the
CEOs annual incentive payment (as outlined above) and 2005
through 2007 cash performance unit payment according to the
pre-established formula approved in 2004. Based on the input of
the independent consultant and after consulting with the other
members of the Board of Directors, the Committee approved a base
salary increase for the CEO of 4% to $1 million annually to
be effective January 1, 2008, the 2008 target annual
incentive at 100% of base earnings and a long-term incentive
target award of $3 million made up of stock options and a
three-year performance share award payable for achievement of
pre-established goals for return on sales, cumulative sales and
total return to shareowners for the performance period of fiscal
years 2008 through 2010. The long-term incentive target for the
CEO was increased by 25% over prior years to remain competitive
with the median of the benchmark compensation data reported by
the independent consultant.
Stock
Ownership Guidelines
The Committee believes that senior executives should have a
significant equity interest in the Corporation. To promote
equity ownership and further align the interests of senior
executives with the Corporations shareowners, the
Committee increased ownership guidelines for senior executives
in 2006.
These guidelines require that each executive officer own shares
of the Corporations common stock with a market value of at
least a specified multiple of their salary within a
predetermined time period. At the Committees April 2006
meeting, the guidelines were increased to six times salary for
the CEO, three times salary for the other named executive
officers and two times salary for certain other executive
officers. Progress toward meeting the higher guidelines was
reviewed by the Committee at its April 2007 meeting and it is
expected that the ownership guidelines will be met by
January 1, 2012, the time period established by the
Committee in 2006.
The Corporation considers all shares held as follows toward
meeting the ownership requirements: shares owned outright
(including in trusts and those held by a spouse), shares in the
qualified savings plan, share equivalents held in the
non-qualified savings plan, and shares in the employee stock
purchase plan. Unexercised stock options and unearned
performance shares are not included toward meeting the target.
-23-
Employment,
Severance and Change of Control Agreements
The Committee does not generally enter into employment contracts
with the executive officers, including severance arrangements.
The executives serve at the will of the Board. This approach
allows for removal of an executive officer prior to retirement
whenever it is in the best interest of the Corporation to do so,
with discretion on whether to provide any severance package
(excluding vested benefits). On the rare occasion when an
executive officer is removed, the Committee exercises its
business judgment in approving any appropriate separation
agreement in light of all relevant circumstances, including the
individuals term of employment, past accomplishments and
reasons for separation.
The Committee has approved change of control employment
agreements with each of the named executive officers and with
certain other executives. The current agreements were approved
after reviewing the competitive benchmark data for similar
arrangements with the independent consultant. The Committee has
adopted these agreements to provide executive officers with a
strong incentive to remain with the Corporation if there is a
change of control, or the threat of such a transaction, and to
maintain a competitive total compensation program. These change
of control employment agreements also protect executives if they
are terminated by the acquirer following the change of control.
The payments are subject to a double trigger
requiring that a change of control occur and a termination, or
constructive termination, of employment also occur. Since
constructive termination can be open to interpretation, the
agreements also provide a
30-day
period one year after the change of control during which the
executive can exercise the right to leave the Corporation and
collect the severance benefits (however, the benefits in these
circumstances are reduced by 50% except long-term incentive
awards paid under the terms of a separate shareowner approved
plan). These agreements are set to be re-evaluated on or before
June 2009.
The Committee has provided for special treatment of long-term
incentive awards upon death, disability and retirement, as well
as change of control. The Committee evaluates these provisions
from time to time and believes they are appropriate as part of a
competitive total compensation program. For additional details
about the terms and potential payments in the event of change of
control and other separations, see the discussion of
Potential Payments upon Termination or Change in
Control.
Payment
Recovery Provisions
Executive officers are subject to certain restrictive agreements
that could be relevant upon a termination of employment,
including confidentiality restrictions, mutual arbitration
agreements, non-competition covenants and employee
non-solicitation arrangements. An executive could lose all
outstanding long-term incentives
and/or be
required to refund various long-term incentive benefits realized
in the prior two-year period for breaching the non-compete or
non-solicitation restrictions.
The CEO and CFO could also be required by law to reimburse the
Corporation for certain incentive compensation amounts received
associated with misconduct leading to an accounting restatement.
Tax
Deductibility of Executive Compensation
Under Internal Revenue Code Section 162(m), a publicly held
Corporation may not deduct in any taxable year compensation in
excess of one million dollars paid in that year to its CEO and
its other named executive officers unless the compensation is
performance based. Awards under the Senior Executive
Incentive Compensation Plan, grants of stock options and grants
of performance awards are designed to be performance
based compensation. Since the Committee retains discretion
with respect to base salaries and certain other compensation
awards, those elements would not qualify as performance
based compensation for these purposes. For year 2007, the
Committee believes that all of the compensation for the named
executive officers is deductible under this tax code provision.
-24-
COMPENSATION
COMMITTEE REPORT
The Compensation Committee of the Board of Directors acts on
behalf of the Board to establish and oversee the executive
compensation program in a manner that serves the interests of
the Corporation and its shareowners. For a discussion of the
policies and procedures, see Corporate Governance; Board of
Directors and Committees Compensation Committee.
Management of the Corporation prepared the Compensation
Discussion and Analysis of the compensation program for named
executive officers. We reviewed and discussed the Compensation
Discussion and Analysis for fiscal year 2007 (included in this
proxy statement) with management. Based on this review and
discussion, we recommended to the Board of Directors that the
Compensation Discussion and Analysis be included in this proxy
statement and incorporated by reference in the 2007
Form 10-K
for the year ended September 30, 2007, for filing with the
Securities and Exchange Commission. The Board has approved that
recommendation.
Compensation Committee
Anthony J. Carbone, Chairman
Mark Donegan
Joseph F. Toot, Jr.
SUMMARY
COMPENSATION TABLE FOR 2007
The following table sets forth information concerning
compensation, from all sources, paid to or earned by our chief
executive officer, chief financial officer and our other three
most highly compensated executive officers at September 30,
2007, plus one other person who was an executive officer during
2007 and would have been included as one of our other three most
highly compensated executive officers if he had remained an
executive officer at September 30, 2007 (the named
executive officers), for services rendered in all
capacities to us and our subsidiaries for the 2007 fiscal year.
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Non-Equity
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Change in
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Stock
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Option
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Incentive Plan
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Pension
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All Other
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Name and
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Value
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Compensation
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Principal Position
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Year
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($)(1)
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($)(2)
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($)(3)
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($)(3)
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($)(4)
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($)(5)
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($)(6)
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Total ($)
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Clayton M. Jones Chairman, President
and CEO
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2007
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$
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945,000
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$
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720,486
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$
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1,926,428
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$
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3,416,000
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$
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1,021,347
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$
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167,709
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$
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8,196,970
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Gregory S. Churchill
EVP and COO, Government Systems
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2007
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$
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480,000
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$
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290,340
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$
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598,900
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$
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1,283,600
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$
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115,398
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$
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92,257
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$
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2,860,495
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Patrick E. Allen
SVP and CFO
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2007
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$
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420,750
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$
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191,905
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$
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384,883
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$
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919,200
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$
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23,338
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$
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63,139
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$
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2,003,215
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Gary R. Chadick SVP, General Counsel
and Secretary
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2007
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$
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364,700
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$
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145,015
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$
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301,728
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$
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733,000
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$
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18,638
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$
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59,705
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$
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1,622,786
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Robert K. Ortberg
EVP and COO, Commercial Systems
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2007
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$
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400,000
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$
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145,465
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$
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211,111
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$
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564,600
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$
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32,228
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$
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70,135
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$
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1,423,539
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Robert M.
Chiusano(7)
Former EVP and COO, Commercial Systems
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2007
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$
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216,148
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$
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78,786
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$
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317,252
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$
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865,249
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$
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1,328,258
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$
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36,969
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$
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2,842,662
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(1)
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Includes amounts deferred by the
executives. Each of the executives also contributed a portion of
his salary to the companys qualified and non-qualified
savings plans. Mr. Chiusanos salary also includes the
final payout of earned but unused vacation paid at retirement.
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(2)
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No discretionary bonus was paid to
any named executive officer in this table.
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(3)
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The dollar values set forth in this
column are equal to the compensation cost recognized in 2007 for
financial statement purposes in accordance with
SFAS 123(R), but do not reflect a reduction for possible
forfeitures. A discussion of the assumptions used in recording
compensation cost for stock options and performance shares is
set forth in Note 13 of the Notes to Consolidated Financial
Statements of our 2007 Annual Report to Shareowners.
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-25-
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(4)
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The dollar values set forth in this
column represents the sum of performance unit payouts
denominated in cash (long-term incentives) for the
2005-2007
performance period and annual incentive compensation plan
payments for service in 2007 as follows: Mr. Jones
$1,800,000 for long-term incentives and $1,616,000 for annual
incentive. Mr. Churchill $750,000 for long-term incentives
and $533,600 for annual incentive. Mr. Allen $487,500 for
long-term incentives and $431,700 for annual incentive.
Mr. Chadick $375,000 for long-term incentives and $358,000
for annual incentive. Mr. Ortberg $120,000 for long-term
incentives and $444,600 for annual incentive. Mr. Chiusano
$625,000 for long-term incentives and $240,249 for annual
incentive.
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(5)
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The amounts displayed are the sum
of the increase (decrease) in the annualized present values
(discounted at 6.6%) of qualified and non-qualified pension plan
benefits for each named executive officer as follows:
Mr. Jones $19,517 in the qualified plan and $1,001,830 in
the non-qualified plan. Mr. Churchill ($4,323) in the
qualified plan and $119,721 in the non-qualified plan.
Mr. Allen ($3,573) in the qualified plan and $26,911 in the
non-qualified plan. Mr. Chadick ($310) in the qualified
plan and $18,948 in the non-qualified plan. Mr. Ortberg
($5,266) in the qualified plan and $37,494 in the non-qualified
plan. Mr. Chiusano $298,609 in the qualified plan and
$1,029,649 in the non-qualified plan. On October 1, 2006,
the Company adopted the measurement date provisions of
SFAS 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans, an amendment of FASB
Statements No. 87, 88, 106, and 132(R), by changing the
measurement date to match the end of the fiscal year. Because
the change occurred after the 2006 annual report, the values in
the table are prorated to show the annualized change rather than
the 15 months between June 30, 2006 and
September 30, 2007. The actual sum of increased present
values of qualified and non-qualified pension plan benefits for
each named executive officer for the 15 month measurement
date period are as follows: Mr. Jones $24,396 in the
qualified plan and $1,252,288 in the non-qualified plan.
Mr. Churchill ($5,404) in the qualified plan and $149,651
in the non-qualified plan. Mr. Allen ($4,466) in the
qualified plan and $33,639 in the non-qualified plan.
Mr. Chadick ($388) in the qualified plan and $23,685 in the
non-qualified plan. Mr. Ortberg ($6,583) in the qualified
plan and $46,867 in the non-qualified plan. Mr. Chiusano
$373,261 in the qualified plan and $1,287,061 in the
non-qualified plan. For more information about these plans see
the Pension Benefits section. None of the named executive
officers had above-market earnings in the non-qualified deferred
compensation plan.
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(6)
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For Mr. Jones the amount in
this column represents the sum of the following components:
$25,200 for automobile allowance, contributions to the
companys qualified and non-qualified savings plans made up
of $56,700 in company matching contributions and $57,738 for
retirement contributions, plus other items totaling $28,071,
which includes the incremental value of the executive long-term
disability benefit, personal use of the company aircraft,
financial planning, executive physical, incidental costs from
offsite Board of Directors meetings, discounted sale of unused
vacation time, and a tax
gross-up on
non-qualified savings and deferred compensation.
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For Mr. Churchill the amount
in this column represents the sum of the following components:
$20,400 for automobile allowance, contributions to the
companys qualified and non-qualified savings plans made up
of $28,800 in company matching contributions and $29,319 for
retirement contributions, plus other items totaling $13,738,
which includes the incremental value of the executive long-term
disability benefit, financial planning, airline club
memberships, incidental costs from offsite Board of Directors
meetings, discounted sale of unused vacation time, event tickets
and a tax
gross-up on
non-qualified savings and deferred compensation.
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For Mr. Allen the amount in
this column represents the sum of the following components:
$20,400 for automobile allowance, contributions to the
companys qualified and non-qualified savings plans made up
of $25,245 in company matching contributions and $11,678 for
retirement contributions, plus other items totaling $5,816,
which includes the incremental value of the executive long-term
disability benefit, financial planning, incidental costs from
offsite Board of Directors meetings, event tickets and a tax
gross-up on
non-qualified savings and deferred compensation.
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For Mr. Chadick the amount in
this column represents the sum of the following
components:$20,400 for automobile allowance, contributions to
the companys qualified and non-qualified savings plans
made up of $21,882 in company matching contributions and $7,294
for retirement contributions, plus other items totaling $10,129,
which includes the incremental value of the executive long-term
disability benefit, financial planning, airline club
memberships, incidental costs from offsite Board of Directors
meetings, event tickets and a tax
gross-up on
non-qualified savings and deferred compensation.
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For Mr. Ortberg the amount in
this column represents the sum of the following components:
$20,400 for automobile allowance, contributions to the
companys qualified and non-qualified savings plans made up
of $24,000 in company matching contributions and $20,001 for
retirement contributions, plus other items totaling $5,734,
which includes the incremental value of the executive long-term
disability benefit, financial planning, airline club
memberships, incidental costs from offsite Board of Directors
meetings, event tickets and a tax
gross-up on
non-qualified savings and deferred compensation.
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For Mr. Chiusano the amount in
this column represents the sum of the following components:
$8,500 for automobile allowance, contributions to the
companys qualified and non-qualified savings plans made up
of $11,500 in company matching contributions and $12,969 for
retirement contributions, plus other items totaling $4,000,
which includes the incremental value of the executive long-term
disability benefit, financial planning, and a tax
gross-up on
non-qualified savings and deferred compensation.
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(7)
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Mr. Chiusano retired on
March 31, 2007.
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-26-
GRANTS
OF PLAN-BASED AWARDS
Shown below is information on grants to the Named Executive
Officers of plan-based awards during fiscal year 2007.
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All Other
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All Other
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Option
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Awards:
|
|
|
Exercise
|
|
|
Grant Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Number of
|
|
|
or Base
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Number of
|
|
|
Securities
|
|
|
Price of
|
|
|
Value of
|
|
|
|
|
|
|
|
|
Estimated Future Payouts
|
|
|
Under Equity Incentive
|
|
|
Shares of
|
|
|
Under-lying
|
|
|
Option
|
|
|
Stock and
|
|
|
|
|
|
|
|
|
Under Non-Equity Incentive Plan Awards
|
|
|
Plan Awards
|
|
|
Stock or
|
|
|
Options
|
|
|
Awards
|
|
|
Option
|
|
Name
|
|
|
|
|
Grant Date and Type
|
|
Target ($)
|
|
|
Maximum ($)
|
|
|
Target (#)
|
|
|
Maximum (#)
|
|
|
Units (#)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
Awards ($)
|
|
|
Jones
|
|
|
10/1/2006
|
|
|
ICP(1)
|
|
$
|
945,000
|
|
|
$
|
1,890,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006
|
|
|
Performance
Units(2)
|
|
$
|
600,000
|
|
|
$
|
1,440,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006
|
|
|
Performance
Shares(3)
|
|
|
|
|
|
|
|
|
|
|
10,360
|
|
|
|
24,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
600,051
|
|
|
|
|
11/9/2006
|
|
|
Stock
Options(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,700
|
|
|
$
|
57.92
|
|
|
$
|
1,237,779
|
|
Churchill
|
|
|
10/1/2006
|
|
|
ICP(1)
|
|
$
|
312,000
|
|
|
$
|
624,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006
|
|
|
Performance
Units(2)
|
|
$
|
250,000
|
|
|
$
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006
|
|
|
Performance
Shares(3)
|
|
|
|
|
|
|
|
|
|
|
4,317
|
|
|
|
10,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
250,041
|
|
|
|
|
11/9/2006
|
|
|
Stock
Options(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,300
|
|
|
$
|
57.92
|
|
|
$
|
485,501
|
|
Allen
|
|
|
10/1/2006
|
|
|
ICP(1)
|
|
$
|
252,450
|
|
|
$
|
504,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006
|
|
|
Performance
Units(2)
|
|
$
|
162,500
|
|
|
$
|
390,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006
|
|
|
Performance
Shares(3)
|
|
|
|
|
|
|
|
|
|
|
2,806
|
|
|
|
6,734
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
162,524
|
|
|
|
|
11/9/2006
|
|
|
Stock
Options(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,700
|
|
|
$
|
57.92
|
|
|
$
|
326,429
|
|
Chadick
|
|
|
10/1/2006
|
|
|
ICP(1)
|
|
$
|
200,585
|
|
|
$
|
401,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006
|
|
|
Performance
Units(2)
|
|
$
|
125,000
|
|
|
$
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006
|
|
|
Performance
Shares(3)
|
|
|
|
|
|
|
|
|
|
|
2,159
|
|
|
|
5,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
125,049
|
|
|
|
|
11/9/2006
|
|
|
Stock
Options(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,100
|
|
|
$
|
57.92
|
|
|
$
|
250,207
|
|
Ortberg
|
|
|
10/1/2006
|
|
|
ICP(1)
|
|
$
|
260,000
|
|
|
$
|
520,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006
|
|
|
Performance
Units(2)
|
|
$
|
225,000
|
|
|
$
|
540,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006
|
|
|
Performance
Shares(3)
|
|
|
|
|
|
|
|
|
|
|
3,885
|
|
|
|
9,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
225,019
|
|
|
|
|
11/9/2006
|
|
|
Stock
Options(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,200
|
|
|
$
|
57.92
|
|
|
$
|
450,704
|
|
Chiusano
|
|
|
10/1/2006
|
|
|
ICP(1)
|
|
$
|
124,583
|
(5)
|
|
$
|
249,167
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The amounts set forth in this row
represent the 2007 annual incentive established for each named
executive officer under the Annual Incentive Compensation Plan
(ICP), which is an incentive program designed to reward for the
achievement of annual performance goals. The performance
measures and methodology for calculating payouts is described in
the CD&A section. Payouts can range from 0% to 200% of
target.
|
|
(2)
|
|
The amounts set forth in this row
represent performance unit awards in 2007 under our 2006
Long-Term Incentives Plan denominated in cash, which are
performance based long-term incentives that are designed to
reward for the achievement of specified goals over a three-year
performance period. Payouts can range from 0% to 200% of target
and are also eligible for a potential adjustment that is based
on our total shareowner return for the performance period as
measured against a group of peer companies. This adjustment is a
multiplier of plus or minus 20 percent. The performance
goals for the FY07-FY09 performance period are cumulative sales
growth and return on sales. See the CD&A section for more
information. Named executive officers must remain employed
through the performance period to earn an award, although
pro-rata vesting results if employment terminates earlier due to
retirement, death or disability. See the Estimated
Payments on Termination or Change in Control section for
treatment of performance units in these situations.
|
|
(3)
|
|
Similar to performance unit awards,
the amounts set forth in this row represent performance share
awards in 2007 under our 2006 Long-Term Incentives Plan, which
are also performance based long-term incentive grants that are
designed to reward the achievement of specified goals over a
three-year performance period. The payout range, goals and
potential adjustment are the same as listed above for
performance units. See the CD&A section for more
information. The grant date fair values were derived by
multiplying the grant date per share price times the target
number of shares. Until the distribution of any Common Stock
after the performance period is complete, executives do not have
rights to vote the shares, receive dividends or any other rights
as a shareowner. Similar to the treatment of performance units,
named executive officers must remain employed through the
performance period to earn an award, although pro-rata vesting
results if employment terminates earlier due to retirement,
death or disability. See the Potential Payments Upon
Termination or Change in Control section for treatment of
Performance Shares in these situations.
|
|
(4)
|
|
The amounts set forth in this row
are the number of stock options granted to each named executive
officer in 2007 under our 2006 Long-Term Incentives Plan. Stock
options are exercisable in three equal annual installments
beginning on the first anniversary of the date of grant. Stock
options may also vest upon a change in control under certain
circumstances, and a
|
-27-
|
|
|
|
|
portion of the stock options may
vest upon termination due to retirement, death or disability.
See the Potential Payments Upon Termination Change in
Control section for a discussion of treatment of stock
options in these situations. Stock options expire ten years from
the date of the grant. No dividends or dividend equivalents are
payable with respect to stock options. Per our 2006 Long-Term
Incentives Plan, the exercise price for these grants was equal
to our closing share price on the New York Stock Exchange on the
date of the grant.
|
|
(5)
|
|
These amounts have been prorated
based on Mr. Chiusanos retirement on March 31,
2007.
|
Annual
Incentive Compensation Plan
The Annual Incentive Compensation Plan is an incentive plan with
payouts based on the achievement of specific financial goals and
key business goals that are aligned with our annual operating
plan as approved by the Board of Directors. It includes specific
goals for sales, earnings per share and working capital as a
percentage of sales and non-financial goals (key business
goals) in the categories of growth/program pursuits,
operational excellence and people goals. Annual incentive
payments can range from 0% to 200% of the incentive target based
on our performance achieved against the financial and key
business goals. Individual performance adjustments can be made
to the incentive payments. The 2006 Annual Incentive
Compensation Plan for Senior Executive Officers (Senior
Executive Plan), approved by shareowners at the 2006 Annual
Meeting, provides for an IRS Section 162(m) compliant
maximum amount for the incentive awards that can be allocated
each year to the named executive officers based on a percentage
of pre-tax segment operating earnings. The Senior Executive Plan
generally yields a potential incentive payout to the named
executive officers that is significantly higher than the
incentive payout to the named executive officers calculated in
accordance with the incentive plan applicable to a broader group
of executives. The Compensation Committee regularly exercises
its discretion under the Senior Executive Plan to reduce and
more closely align the actual payout to the named executive
officers with the more broadly applicable incentive plan.
Performance
Units and Performance Shares
Performance awards are based on three-year performance periods
tied to established targets for cumulative sales and return on
sales. Payouts can range from 0% to 200%. In addition, the
awards include a potential multiplier adjustment up or down by
20 percent depending on the Corporations total return
to shareowners (share price growth plus dividend yield) measured
against a group of ten peer companies. If performance is with
the top three peer companies, 20 percent of the amount
otherwise payable will be added to the award. If performance is
with the middle four companies, no adjustment will be made. If
performance is with the bottom three peer companies, a reduction
of 20 percent of the amount otherwise payable will be made
to the final award. The actual cash or share amount, to the
extent earned, will be determined after the applicable
three-year period is complete. The performance units are payable
in cash while the performance shares are payable in shares of
Common Stock.
Stock
Options
The provisions of the stock option grants are as follows:
|
|
|
|
|
Ten-year term.
|
|
|
|
The exercise price is the fair market value defined as the
closing sale price of the stock as reported in the New York
Stock Exchange-Composite Transactions on the date of grant.
|
|
|
|
Vest in three equal amounts on the first, second and third
anniversary of the grant.
|
|
|
|
Continue to vest upon retirement under one of our retirement
plans (eligibility is currently as early as
age 55) provided the retirement occurs on or after the
first anniversary of the grant.
|
|
|
|
Upon death, the stock options become fully exercisable.
|
|
|
|
In the event of a change in control, all stock options then
outstanding become fully exercisable.
|
|
|
|
Incentive stock options are utilized for a portion of the grant
to the named executive officers.
|
-28-
General
For further information about these plan-based awards, see the
Compensation Discussion and Analysis.
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The following table provides outstanding stock options and
unvested stock awards information for the named executive
officers as of September 30, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Market
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
of Unearned
|
|
|
or Payout
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Shares,
|
|
|
Value of
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Units or Other
|
|
|
Unearned Shares,
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Rights That
|
|
|
Units or Other
|
|
|
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Rights That Have
|
|
Name
|
|
Grant Date
|
|
|
Exercisable
|
|
|
Unexercisable(1)
|
|
|
Price ($)(2)
|
|
|
Date
|
|
|
Vested
(#)(3)
|
|
|
Not Vested
($)(4)
|
|
|
Jones
|
|
|
10/4/99
|
|
|
|
144,900
|
|
|
|
|
|
|
$
|
32.61
|
|
|
|
10/4/09
|
|
|
|
|
|
|
|
|
|
|
|
|
7/5/01
|
|
|
|
437,067
|
|
|
|
|
|
|
$
|
22.35
|
|
|
|
7/5/11
|
|
|
|
|
|
|
|
|
|
|
|
|
9/11/02
|
|
|
|
248,411
|
|
|
|
|
|
|
$
|
20.97
|
|
|
|
9/11/12
|
|
|
|
|
|
|
|
|
|
|
|
|
11/6/03
|
|
|
|
250,000
|
|
|
|
|
|
|
$
|
27.97
|
|
|
|
11/6/13
|
|
|
|
|
|
|
|
|
|
|
|
|
11/2/04
|
|
|
|
123,333
|
|
|
|
61,667
|
|
|
$
|
36.55
|
|
|
|
11/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
11/17/05
|
|
|
|
32,933
|
|
|
|
65,867
|
|
|
$
|
44.85
|
|
|
|
11/17/15
|
|
|
|
27,582
|
|
|
$
|
2,014,589
|
|
|
|
|
11/9/06
|
|
|
|
|
|
|
|
74,700
|
|
|
$
|
57.92
|
|
|
|
11/9/16
|
|
|
|
20,720
|
|
|
$
|
1,513,389
|
|
Churchill
|
|
|
10/4/99
|
|
|
|
10,143
|
|
|
|
|
|
|
$
|
32.61
|
|
|
|
10/4/09
|
|
|
|
|
|
|
|
|
|
|
|
|
7/5/01
|
|
|
|
14,000
|
|
|
|
|
|
|
$
|
22.35
|
|
|
|
7/5/11
|
|
|
|
|
|
|
|
|
|
|
|
|
6/12/02
|
|
|
|
15,000
|
|
|
|
|
|
|
$
|
24.86
|
|
|
|
6/12/12
|
|
|
|
|
|
|
|
|
|
|
|
|
9/11/02
|
|
|
|
38,032
|
|
|
|
|
|
|
$
|
20.97
|
|
|
|
9/11/12
|
|
|
|
|
|
|
|
|
|
|
|
|
11/6/03
|
|
|
|
100,000
|
|
|
|
|
|
|
$
|
27.97
|
|
|
|
11/6/13
|
|
|
|
|
|
|
|
|
|
|
|
|
11/2/04
|
|
|
|
49,333
|
|
|
|
24,667
|
|
|
$
|
36.55
|
|
|
|
11/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
11/17/05
|
|
|
|
13,333
|
|
|
|
26,667
|
|
|
$
|
44.85
|
|
|
|
11/17/15
|
|
|
|
10,814
|
|
|
$
|
789,855
|
|
|
|
|
11/9/06
|
|
|
|
|
|
|
|
29,300
|
|
|
$
|
57.92
|
|
|
|
11/9/16
|
|
|
|
8,634
|
|
|
$
|
630,627
|
|
Allen
|
|
|
10/2/00
|
|
|
|
14,796
|
|
|
|
|
|
|
$
|
18.60
|
|
|
|
10/2/10
|
|
|
|
|
|
|
|
|
|
|
|
|
7/5/01
|
|
|
|
38,000
|
|
|
|
|
|
|
$
|
22.35
|
|
|
|
7/5/11
|
|
|
|
|
|
|
|
|
|
|
|
|
9/11/02
|
|
|
|
19,000
|
|
|
|
|
|
|
$
|
20.97
|
|
|
|
9/11/12
|
|
|
|
|
|
|
|
|
|
|
|
|
11/6/03
|
|
|
|
19,000
|
|
|
|
|
|
|
$
|
27.97
|
|
|
|
11/6/13
|
|
|
|
|
|
|
|
|
|
|
|
|
11/2/04
|
|
|
|
32,666
|
|
|
|
16,334
|
|
|
$
|
36.55
|
|
|
|
11/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
11/17/05
|
|
|
|
8,800
|
|
|
|
17,600
|
|
|
$
|
44.85
|
|
|
|
11/17/15
|
|
|
|
7,248
|
|
|
$
|
529,394
|
|
|
|
|
11/9/06
|
|
|
|
|
|
|
|
19,700
|
|
|
$
|
57.92
|
|
|
|
11/9/16
|
|
|
|
5,612
|
|
|
$
|
409,900
|
|
Chadick
|
|
|
11/6/03
|
|
|
|
50,000
|
|
|
|
|
|
|
$
|
27.97
|
|
|
|
11/6/13
|
|
|
|
|
|
|
|
|
|
|
|
|
11/2/04
|
|
|
|
24,666
|
|
|
|
12,334
|
|
|
$
|
36.55
|
|
|
|
11/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
11/17/05
|
|
|
|
6,666
|
|
|
|
13,334
|
|
|
$
|
44.85
|
|
|
|
11/17/15
|
|
|
|
5,396
|
|
|
$
|
394,124
|
|
|
|
|
11/9/06
|
|
|
|
|
|
|
|
15,100
|
|
|
$
|
57.92
|
|
|
|
11/9/16
|
|
|
|
4,318
|
|
|
$
|
315,387
|
|
Ortberg
|
|
|
10/4/99
|
|
|
|
2,576
|
|
|
|
|
|
|
$
|
32.61
|
|
|
|
10/4/09
|
|
|
|
|
|
|
|
|
|
|
|
|
7/5/01
|
|
|
|
26,000
|
|
|
|
|
|
|
$
|
22.35
|
|
|
|
7/5/11
|
|
|
|
|
|
|
|
|
|
|
|
|
9/11/02
|
|
|
|
16,000
|
|
|
|
|
|
|
$
|
20.97
|
|
|
|
9/11/12
|
|
|
|
|
|
|
|
|
|
|
|
|
11/6/03
|
|
|
|
16,000
|
|
|
|
|
|
|
$
|
27.97
|
|
|
|
11/6/13
|
|
|
|
|
|
|
|
|
|
|
|
|
11/2/04
|
|
|
|
8,066
|
|
|
|
4,034
|
|
|
$
|
36.55
|
|
|
|
11/2/14
|
|
|
|
|
|
|
|
|
|
|
|
|
11/17/05
|
|
|
|
2,166
|
|
|
|
4,334
|
|
|
$
|
44.85
|
|
|
|
11/17/15
|
|
|
|
1,784
|
|
|
$
|
130,303
|
|
|
|
|
11/9/06
|
|
|
|
|
|
|
|
27,200
|
|
|
$
|
57.92
|
|
|
|
11/9/16
|
|
|
|
7,770
|
|
|
$
|
567,521
|
|
Chiusano
|
|
|
11/2/04
|
|
|
|
15,314
|
|
|
|
24,667
|
|
|
$
|
36.55
|
|
|
|
3/31/12
|
|
|
|
|
|
|
|
|
|
|
|
|
11/17/05
|
|
|
|
13,333
|
|
|
|
26,667
|
|
|
$
|
44.85
|
|
|
|
3/31/12
|
|
|
|
5,407
|
|
|
$
|
394,927
|
|
-29-
|
|
|
(1)
|
|
Stock options are exercisable in
three equal annual installments beginning on the first
anniversary of the date of grant.
|
|
(2)
|
|
The option exercise price for these
grants was equal to our closing share price on the New York
Stock Exchange on the date of the grant.
|
|
(3)
|
|
The amounts set forth in this
column were derived by multiplying each named executive
officers target performance shares by the maximum payout
percent assuming no adjustment for the Total Shareowner Return
multiplier. The actual number of shares that will be granted, to
the extent earned, will be determined after the applicable
three-year performance period is complete. Vesting and payment
of performance shares for the November 2005 grant (covering the
2006-2008
performance period) will be based on performance for the
three-year cycle ending on September 30, 2008. Vesting and
payment of performance shares for the November 2006 grant
(covering the
2007-2009
performance period) will be based on performance for the
three-year cycle ending on September 30, 2009.
|
|
(4)
|
|
The market value of performance
shares that have not vested as of our year-end 2007 was
calculated using our year-end closing share price of $73.04
multiplied by the number of shares displayed in the prior column.
|
OPTION
EXERCISES AND STOCK VESTED
The following table shows (i) exercises by the named
executive officers during 2007 of options to purchase Common
Stock granted under our equity compensation plans; and
(ii) vestings of stock, including restricted stock,
restricted stock units and similar instruments for the named
executive officers in 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
|
|
|
Number of Shares
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized on
|
|
|
Acquired on Vesting
|
|
|
Value Realized on
|
|
Name
|
|
Exercise (#)
|
|
|
Exercise
($)(1)
|
|
|
(#)
|
|
|
Vesting ($)
|
|
|
Jones
|
|
|
148,138
|
|
|
$
|
6,786,186
|
|
|
|
|
|
|
|
|
|
Churchill
|
|
|
69,168
|
|
|
$
|
3,163,270
|
|
|
|
|
|
|
|
|
|
Allen
|
|
|
24,981
|
|
|
$
|
1,107,721
|
|
|
|
|
|
|
|
|
|
Chadick
|
|
|
50,145
|
|
|
$
|
2,460,190
|
|
|
|
|
|
|
|
|
|
Ortberg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chiusano
|
|
|
240,000
|
|
|
$
|
7,781,413
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The amounts shown in this column
were calculated using the spread between the price at which the
shares were sold on the date of exercise minus the stock option
exercise (purchase) price, multiplied by the number of stock
options exercised. The stock options exercised include both
incentive stock options and non-qualified stock options.
|
-30-
The following table provides information as of
September 30, 2007 (the pension measurement date for
purposes of the Corporations financial statements) for
each named executive officer regarding retirement benefits under
our qualified and non-qualified pension plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Years
|
|
|
Present Value of
|
|
|
Payments During
|
|
Name
|
|
Plan Name
|
|
Credited Service (#)
|
|
|
Accumulated Benefit
|
|
|
Last Fiscal Year ($)
|
|
|
Jones
|
|
Rockwell Collins Pension Plan
|
|
|
26.8
|
|
|
$
|
759,838
|
|
|
|
|
|
|
|
Rockwell Collins Non-Qualified Pension Plan
|
|
|
26.8
|
|
|
$
|
6,434,968
|
|
|
|
|
|
Churchill
|
|
Rockwell Collins Pension Plan
|
|
|
26.1
|
|
|
$
|
381,100
|
|
|
|
|
|
|
|
Rockwell Collins Non-Qualified Pension Plan
|
|
|
26.1
|
|
|
$
|
878,338
|
|
|
|
|
|
Allen
|
|
Rockwell Collins Pension Plan
|
|
|
11.8
|
|
|
$
|
104,002
|
|
|
|
|
|
|
|
Rockwell Collins Non-Qualified Pension Plan
|
|
|
11.8
|
|
|
$
|
185,185
|
|
|
|
|
|
Chadick
|
|
Rockwell Collins Pension Plan
|
|
|
5.3
|
|
|
$
|
69,781
|
|
|
|
|
|
|
|
Rockwell Collins Non-Qualified Pension Plan
|
|
|
5.3
|
|
|
$
|
139,389
|
|
|
|
|
|
Ortberg
|
|
Rockwell Collins Pension Plan
|
|
|
19.2
|
|
|
$
|
253,066
|
|
|
|
|
|
|
|
Rockwell Collins Non-Qualified Pension Plan
|
|
|
19.2
|
|
|
$
|
200,297
|
|
|
|
|
|
Chiusano(1)
|
|
Rockwell Collins Pension Plan
|
|
|
28.7
|
|
|
$
|
1,014,657
|
|
|
$
|
43,610
|
|
|
|
Rockwell Collins Non-Qualified Pension Plan
|
|
|
28.7
|
|
|
$
|
2,637,846
|
|
|
$
|
108,489
|
|
|
|
|
(1)
|
|
Mr. Chiusano retired during
the fiscal year and the present value reflects his actual
benefit calculation and form of payment. The present value of
accumulated benefits is adjusted for the benefits received since
retirement.
|
In September 2006, we froze our qualified and non-qualified
defined benefit pension plans applicable to the named executive
officers and certain other salaried employees and shifted our
emphasis to a defined contribution plan. Set forth below is
further disclosure relating to these qualified and non-qualified
defined benefit pension plans that have been frozen.
We maintain qualified and non-qualified defined benefit pension
plans for our employees. As part of the 2001 spin-off from
Rockwell, all of the qualified defined benefit pension plans
were merged into one plan and renamed the Rockwell Collins
Pension Plan (Qualified Pension Plan). Effective
September 30, 2006, the plan was amended to discontinue
benefit accruals for salary increases and services rendered
after that date, other than for employees covered by collective
bargaining agreements. The annual incentive paid in December
2006 for service rendered through September 30, 2006 is
included in the defined benefit accruals. Each of the current
named executive officers is eligible for a benefit under the
Qualified Pension Plan that is included in the totals above.
Benefit calculations for each named executive officer are unique
depending on age, years of service and average annual covered
compensation. Covered compensation includes salary and annual
incentive.
We also maintain a non-qualified supplemental defined benefit
pension plan (the Rockwell Collins Non-Qualified Pension Plan
(NQ Pension Plan)) to provide eligible employees,
including the named executive officers, with supplemental
pension benefits in excess of the maximum benefit allowed under
the Qualified Pension Plan by reason of limitations of the
Internal Revenue Code. A participants supplemental
retirement benefit is generally based on a continuation of the
participants benefit calculation formula under the
Qualified Pension Plan.
Executive officers hired after January 1, 1993 are covered
by an enhanced early
build-up
retirement benefit provision broadly available to the other
salaried sub-plan participants hired before 1993. This benefit
was also frozen on September 30, 2006.
-31-
The present value of the accumulated pension benefit for each
named executive officer is calculated using a 6.6% discount rate
as of September 30, 2007, and a retirement age of 62, the
earliest age an executive can retire without a reduction in
benefits. The form of payment assumes a weighted average of a
joint and 60% survivor annuity and a single life annuity. For
further discussion related to our pension assumptions, see
Note 11 of the Notes to Consolidated Financial Statements
of our 2007 Annual Report to Shareowners.
The Qualified Pension Plan does not have a lump sum option.
Payments from the NQ Pension Plan are made in the same form and
at the same time as payments from the Qualified Pension Plan for
service prior to 2005. The Corporation adopted the 2005
Non-Qualified Pension Plan (2005 NQ Pension Plan) to
comply with the requirements of the Internal Revenue Code
Section 409A for non-qualified benefits earned after 2004.
Under the 2005 NQ Pension Plan, participants will make an
election at the end of 2007 as to the form and timing of the
payments that will be made upon separation from the Corporation.
For benefits payable under the 2005 NQ Pension Plan,
participants can elect an annuity, one lump sum or up to ten
annual installments.
We have established a master rabbi trust relating to the NQ
Pension Plan. The master rabbi trust requires that, upon a
change of control, we fund the trust in a cash amount equal to
the unfunded accrued liabilities of the NQ Pension Plan as of
such time.
NON-QUALIFIED
DEFERRED COMPENSATION
The table below provides information on the non-qualified
deferred compensation of the named executive officers in 2007,
including:
Deferred Compensation Plan. The plan allows
eligible employees to defer a portion of their income and
earnings until a future date when distributions are received
from the plan. Participation in the plan is an annual decision
that covers only the upcoming calendar year and must be made
during each years annual enrollment period. The
participants are not allowed to change their deferral election
during the year.
The named executive officers may elect to defer up to 50% of
base salary
and/or as
much as 100% of any annual incentive award. With respect to
distributions, the named executive officers may elect to receive
their balance on a future specified date, at retirement (up to
15 annual installments or as a lump sum) or upon termination
(lump sum only). All deferrals of base salary
and/or
incentive awards made in a calendar year will be subject to the
same distribution election.
The named executive officers can choose any of the measurement
funds offered by the plan and have the ability to change their
investment election at any time. The measurement fund options
are intended to mirror as closely as possible the performance of
underlying mutual funds.
Separate deferral and distribution elections are made for
performance awards (long-term incentives).
Non-Qualified Savings Plan. The primary
purpose of the Corporations non-qualified savings plan
(Non-Qualified Savings Plan) is to supplement the
Corporations qualified savings plan (Qualified
Savings Plan) by allowing employees to receive credits for
contributions that would have been made to the Qualified Savings
Plan, but could not be made due to the Internal Revenue Code
compensation limit or annual additions limit. Additionally,
employees receive similar credits for amounts that would have
been contributed to the Qualified Savings Plan as company
matching contributions and company retirement contributions.
Company contributions include credits equal to 75% of the first
8% of the executives base salary, and company retirement
credits equal to a percentage of eligible compensation, such
percentage determined based on each executives age and
length of service.
The named executive officers may defer up to 50% of base salary
to the plan. To comply with Internal Revenue Code
Section 409A regulations, the contribution percent in
effect for the Qualified Savings Plan on December 31 of the
prior year will be the contribution percent in effect for the
current year in the Non-Qualified Savings Plan. With respect to
distributions, contributions made prior to 2005 permit
participants to receive their balance upon termination of
employment either through a lump sum payment or in annual
installments up to 10 years. Contributions made in 2005
through 2007 are paid in lump sum only upon termination of
employment.
-32-
The Corporation adopted the 2005 Non-Qualified Savings Plan in
September 2007 to comply with Internal Revenue Code
Section 409A requirements.
The investment funds available for the employee and company
credits are identical to the investment funds in the Qualified
Savings Plan. Investment elections to the Non-Qualified Savings
Plan are made independently from the Qualified Savings Plan.
Contribution credits not directed to a specific investment fund
will be invested in a Fidelity Freedom Fund designed for a
target retirement date that is closest to the date that the
employee turns age 65. Employees may transfer credits to
other investment funds within the plan at any time.
Distributions for the Deferred Compensation Plan and
Non-Qualified Savings Plan are processed within the first
60 days of the calendar year following the year that an
employee terminates or retires. However, if the named executive
officer terminates or retires after June 30, the
distribution will be processed within the first 60 days
following June 30 of the following calendar year.
Non-Qualified
Deferred Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
|
|
|
Aggregate
|
|
|
|
|
|
|
contributions
|
|
|
contributions in last
|
|
|
Aggregate earnings in
|
|
|
withdrawals /
|
|
|
Aggregate balance at
|
|
Name
|
|
in last FY
($)(1)
|
|
|
FY
($)(2)
|
|
|
last FY
($)(3)
|
|
|
distributions
($)(4)
|
|
|
last FYE
($)(5)
|
|
|
Jones
|
|
$
|
1,417,385
|
|
|
$
|
88,476
|
|
|
$
|
1,235,409
|
|
|
|
|
|
|
$
|
8,861,184
|
|
Churchill
|
|
$
|
122,492
|
|
|
$
|
31,638
|
|
|
$
|
80,487
|
|
|
|
|
|
|
$
|
576,505
|
|
Allen
|
|
$
|
151,548
|
|
|
$
|
17,179
|
|
|
$
|
66,381
|
|
|
|
|
|
|
$
|
549,941
|
|
Chadick
|
|
$
|
75,145
|
|
|
$
|
11,176
|
|
|
$
|
30,519
|
|
|
|
|
|
|
$
|
213,003
|
|
Ortberg
|
|
$
|
70,322
|
|
|
$
|
16,154
|
|
|
$
|
23,477
|
|
|
|
|
|
|
$
|
184,070
|
|
Chiusano(6)
|
|
$
|
18,400
|
|
|
$
|
13,800
|
|
|
$
|
96,849
|
|
|
|
|
|
|
$
|
507,086
|
|
|
|
|
(1)
|
|
The amounts shown in this column
include elective deferrals into the Deferred Compensation Plan
from October 1, 2006 through September 30, 2007, and
contributions into the NQ Savings Plan from October 1, 2006
through September 30, 2007. This column includes amounts
for executive contributions of base salary to the Deferred
Compensation Plan and executive contributions to the NQ Savings
Plan that were also reported in the Summary Compensation Table
as salaries as follows:
|
|
|
|
|
|
|
|
|
|
Name
|
|
Deferred Compensation Plan Contribution
|
|
|
Non-Qualified Savings Plan Contribution
|
|
|
Jones
|
|
|
|
|
|
$
|
58,985
|
|
Churchill
|
|
$
|
38,400
|
|
|
$
|
21,092
|
|
Allen
|
|
$
|
58,388
|
|
|
$
|
15,660
|
|
Chadick
|
|
$
|
36,469
|
|
|
$
|
11,176
|
|
Ortberg
|
|
$
|
40,000
|
|
|
$
|
11,748
|
|
Chiusano
|
|
|
|
|
|
$
|
18,400
|
|
|
|
|
(2)
|
|
The amounts shown in this column
include company contributions credited to each executives
NQ Savings Plan account from October 1, 2006 through
September 30, 2007. Company contributions include credits
equal to 75% of the first 8% of the executives base
salary, and retirement credits equal to a percentage of eligible
compensation, such percentage determined based on each
executives age and length of service. This column includes
the amounts for registrant contributions to the NQ Savings Plan
that were also reported in the Summary Compensation Table as
other compensation.
|
|
(3)
|
|
The amounts shown in this column
include dividends and market value changes based on the
measurement or investment funds selected by the executives in
the Deferred Compensation Plan and NQ Savings Plan accounts from
October 1, 2006 through September 30, 2007.
|
|
(4)
|
|
This column represents withdrawals
or distributions from the named executive officers
Deferred Compensation Plan and NQ Savings Plan accounts during
the 2007 fiscal year. As of September 30, 2007 there had
been no withdrawals or distributions from the accounts of the
named executive officers.
|
|
(5)
|
|
This column represents the combined
balance of the Deferred Compensation Plan and NQ Savings Plan on
September 30, 2007.
|
|
(6)
|
|
Mr. Chiusano retired from
Rockwell Collins in March 2007. Distributions from his Deferred
Compensation Plan and Non-Qualified Savings Plan accounts are
scheduled to commence in February 2008.
|
-33-
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following information and table set forth the amount of
payments to each of our named executive officers in the event of
death, disability or termination of employment as a result of
certain triggering events. The table also sets forth the amount
of payments to each of our named executive officers in the event
of a change in control without a termination of employment.
Note, however, that the change in control agreements discussed
in further detail below principally provide for the payment of
benefits only in the event of a termination of employment after
a change in control and not upon the change in control itself.
We do not generally enter into employment contracts with our
executive officers nor do we have any severance plan or
arrangement for our executive officers. The executives serve at
the will of the Board. This approach allows us to remove an
executive officer prior to retirement whenever it is in the best
interest of the Corporation, with discretion on whether to
provide any severance package (excluding vested benefits). On
the rare occasion when an executive officer is removed, the
Corporation exercises its business judgment in approving any
appropriate separation agreement in light of all relevant
circumstances, including the individuals term of
employment, past accomplishments and reasons for separation.
Executive officers are subject to certain restrictive agreements
with us that could be relevant upon a termination of employment,
including confidentiality restrictions, mutual arbitration
agreements, non-competition covenants and employee
non-solicitation arrangements. An executive could lose all
outstanding long-term incentives
and/or be
required to refund various long-term incentive benefits realized
in the prior two-year period for breaching these non-compete or
non-solicitation restrictions.
Assumptions and General Principles. The
following assumptions and general principles apply with respect
to the table below and any termination of employment of a named
executive officer. The amounts shown in the table assume that
each named executive officer was terminated on
September 30, 2007. Accordingly, the table includes
estimates of amounts that would be paid to the named executive
officer upon the occurrence of a termination or change in
control. The actual amounts to be paid to a named executive
officer can only be determined at the time of the termination or
change in control.
A named executive officer is entitled to receive amounts earned
during his term of employment regardless of the manner in which
the named executive officers employment is terminated.
These amounts include base salary and unused vacation. These
amounts are not shown in the table because they are not
specifically related to the termination of employment.
Pursuant to the awards under the Long-Term Incentives Plans, a
named executive officer who terminates employment by death,
disability or retirement during the performance period under the
award is eligible to receive a pro-rata payment for the portion
of the period that elapsed prior to the termination of
employment. In the event of a voluntary termination or a
termination for cause before the end of the performance period,
no payments will be made. See the discussion of Long-Term
Incentives in the Compensation Discussion and
Analysis section earlier in this proxy statement for a
description of our long-term incentive compensation plans.
A named executive officer may exercise any stock options that
are exercisable prior to the date of termination. Any payments
related to these exercisable stock options are not included in
the table because they are not specifically related to the
termination of employment.
A named executive officer will be entitled to receive all
amounts accrued and vested under our retirement and savings
programs, pension plans and deferred compensation plans in which
the named executive officer participates. These amounts will be
determined and paid in accordance with the applicable plan and
are not included in the table because they are not specifically
related to the termination of employment. Certain of these
amounts are set forth in the Pension Benefits table
and the Non-Qualified Deferred Compensation Table.
Normal and Early Retirement. A Named Executive
Officer is eligible to elect normal retirement at age 65
and early retirement between the ages of 55 and 64. All of our
full-time salaried employees hired prior to October 1, 2006
with at least ten years of service are eligible for health care
and life insurance benefits upon normal retirement subject to
the terms of the plans. In addition, upon normal and early
retirement, all outstanding stock options will continue to vest
in accordance with their terms and be exercisable for up to five
years from retirement.
-34-
As of September 30, 2007 and apart from Mr. Chiusano,
none of the named executive officers was eligible for normal
retirement, and only Mr. Jones was eligible for early
retirement.
On October 2, 2006, Mr. Chiusano ceased serving as
Executive Vice President and Chief Operating Officer of
Commercial Systems, and was appointed Executive Vice President
and Special Assistant to the Chief Executive Officer. On
March 31, 2007, Mr. Chiusano retired as an employee of
the Corporation. The payments and benefits provided to
Mr. Chiusano in 2007 and the payments and benefits that
will be provided to him in the future are described below.
|
|
|
|
|
The prorated annual incentive compensation paid to
Mr. Chiusano for service in 2007 is $240,249.
|
|
|
|
Amounts payable to Mr. Chiusano during 2007 under the
retirement plans are disclosed in the Pension
Benefits table. Mr. Chiusano is entitled to receive
during his lifetime the following retirement benefit payments:
$7,268 per month pursuant to the Qualified Pension Plan and
$18,082 per month pursuant to the Non-Qualified Pension Plan.
Mr. Chiusanos spouse is entitled to survivor benefits
in the form of 60% of Mr. Chiusanos retirement
benefits for her lifetime.
|
|
|
|
Mr. Chiusanos balances in deferred compensation plans
are disclosed in the Non-Qualified Deferred
Compensation table. Mr. Chiusanos balances in
these plans will be paid in a lump sum in February 2008. He will
also receive his balances accumulated in our qualified savings
plan in accordance with his elections from time to time.
|
|
|
|
Mr. Chiusanos stock options will continue to vest in
accordance with their terms and be exercisable for up to five
years from his retirement.
|
|
|
|
Pursuant to long-term incentive awards other than stock options,
Mr. Chiusano is eligible to receive pro-rata payments for
the portions of the performance periods that elapsed prior to
his retirement. The maximum payment to Mr. Chiusano under
his
2006-2008
performance unit award is $250,000, and the maximum number of
shares to be issued to Mr. Chiusano under his
2006-2008
performance share award is 5,407, assuming in both cases that
there is no adjustment for the total shareowner return
multiplier.
|
Death and Disability. In the event of the
death of a named executive officer, all outstanding stock
options will immediately vest and become exercisable. The
amounts set forth in the table for stock options reflect the
difference between the closing price of our common stock on
September 30, 2007 and the exercise prices for each option
for which vesting accelerated.
In the event of the disability of a named executive officer, all
stock options will continue to vest in accordance with their
terms and the Corporations practices.
Each named executive officer is eligible for company-paid life
insurance. Under our life insurance program, the beneficiary of
a named executive officer is entitled to receive a death benefit
equal to one times his annual salary. Life insurance benefits
are not shown in the table because the one times salary amount
is based on the same formula as that generally available to all
salaried employees.
Each named executive officer also participates in our disability
insurance programs, which consist of salary continuation,
short-term disability, and long-term disability. The salary
continuation and short-term disability benefits for named
executive officers are based on the same formula as those
generally available to all salaried employees, and are not shown
in the table. For purposes of these programs,
disability is defined as a condition caused by a
non-occupational accident or sickness that results in an
inability of the employee to do his or her job, and the
inability to do any other job for which he or she is fit by
education, training, or experience. The executive long-term
disability program pays as follows: Upon the occurrence of a
disability under the program, a named executive officer will
receive a monthly benefit equal to 50% of base salary and 50% of
the monthly average of the executives last five annual
incentive pay awards until the earlier of: (a) age 65;
(b) recovery from the disability; (c) the date the
named executive officer begins receiving retirement plan
benefits; or (d) death. The amounts set forth in the table
reflect the amount of the first years payments under the
program and only reflect those amounts in excess of long-term
disability benefits that would be generally available to all
salaried employees.
-35-
Voluntary Termination and Termination for
Cause. A named executive officer is not entitled
to receive any additional forms of severance payments or
benefits upon his voluntary decision to terminate employment
with the Corporation prior to being eligible for retirement or
upon termination of employment by the Corporation for cause.
Change in Control. We have entered into change
in control employment agreements with each of the named
executive officers. Forms of these agreements have been publicly
filed as exhibits to our reports filed with the SEC. Each
employment agreement is set to expire in June 2009 and becomes
effective upon a change of control of the
Corporation during the term, as follows:
|
|
|
|
|
the acquisition by any individual, entity or group of 20% or
more of the combined voting power of our outstanding
securities; or
|
|
|
|
a change in the composition of a majority of our board of
directors that is not supported by our current board of
directors; or
|
|
|
|
a major corporate transaction, such as a reorganization, merger
or consolidation or sale or other disposition of all or
substantially all of our assets, that results in a change in the
majority of our board of directors or of more than 50% of our
shareowners; or
|
|
|
|
approval by our shareowners of the complete liquidation or
dissolution of our company.
|
Each agreement provides for the continuing employment of the
executive for three years after the change of control on terms
and conditions no less favorable than those in effect before the
change of control. Severance benefits are available after a
change of control, if a named executive officers
employment is terminated by us without cause
(termination for reasons other than willful nonperformance of
duties after written demand or willful engagement of illegal
conduct or gross misconduct) or if the executive terminates his
or her own employment for good reason (including
decrease in position, authority, duties or responsibilities,
failure to maintain compensation, change in office location by
more than 35 miles or certain breaches of the agreement)
within that three-year period. The executive is entitled to
severance benefits equal to three times his or her annual
compensation, including bonus, and other retirement, health and
welfare benefits for three years. In addition, if the executive
terminates his or her own employment for any reason during the
30-day
period beginning one year after the change of control, the
executive is entitled to 50% of these severance benefits. The
executives are entitled to an additional tax
gross-up
payment, if necessary, to make them whole as a result of any
excise tax imposed by the Internal Revenue Code on these change
of control payments, unless the safe harbor amount above which
the excise tax is imposed is not exceeded by more than ten
percent, in which event the payments will be reduced to avoid
the excise tax. The executive is required to waive any claims
based upon his termination of employment in exchange for these
benefits.
In addition to the change in control agreements, our long-term
incentive agreements also include accelerated vesting and
potentially enhanced payout provisions in the event of a loss of
employment in connection with a change in control of the
Corporation. These long-term incentive arrangements include:
|
|
|
|
|
Performance units and performance shares are paid out at the
higher of target or the prior three-year average payout
percentage; and
|
|
|
|
Stock options are fully vested automatically upon a change in
control.
|
-36-
The table below presents as of September 30, 2007 estimated
incremental payments potentially payable to the named executive
officers upon the following specified events:
Estimated
Incremental Payments on Termination or Change in
Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Event
|
|
Jones
|
|
|
Churchill
|
|
|
Allen
|
|
|
Chadick
|
|
|
Ortberg
|
|
|
Death; Normal and Early Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006-2008
Performance
Units(1)
|
|
$
|
800,000
|
|
|
$
|
333,333
|
|
|
$
|
216,667
|
|
|
$
|
166,667
|
|
|
$
|
53,333
|
|
2006-2008
Performance
Shares(2)
|
|
$
|
1,343,060
|
|
|
$
|
526,570
|
|
|
$
|
352,929
|
|
|
$
|
262,749
|
|
|
$
|
86,869
|
|
2007-2009
Performance
Units(3)
|
|
$
|
400,000
|
|
|
$
|
166,667
|
|
|
$
|
108,333
|
|
|
$
|
83,333
|
|
|
$
|
150,000
|
|
2007-2009
Performance
Shares(4)
|
|
$
|
504,463
|
|
|
$
|
210,209
|
|
|
$
|
136,633
|
|
|
$
|
105,129
|
|
|
$
|
189,174
|
|
Stock
Options(5)
|
|
$
|
5,236,484
|
|
|
$
|
2,094,858
|
|
|
$
|
1,390,036
|
|
|
$
|
1,054,265
|
|
|
$
|
680,640
|
|
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006-2008
Performance
Units(1)
|
|
$
|
800,000
|
|
|
$
|
333,333
|
|
|
$
|
216,667
|
|
|
$
|
166,667
|
|
|
$
|
53,333
|
|
2006-2008
Performance
Shares(2)
|
|
$
|
1,343,060
|
|
|
$
|
526,570
|
|
|
$
|
352,929
|
|
|
$
|
262,749
|
|
|
$
|
86,869
|
|
2007-2009
Performance
Units(3)
|
|
$
|
400,000
|
|
|
$
|
166,667
|
|
|
$
|
108,333
|
|
|
$
|
83,333
|
|
|
$
|
150,000
|
|
2007-2009
Performance
Shares(4)
|
|
$
|
504,463
|
|
|
$
|
210,209
|
|
|
$
|
136,633
|
|
|
$
|
105,129
|
|
|
$
|
189,174
|
|
Stock
Options(5)
|
|
$
|
5,236,484
|
|
|
$
|
2,094,858
|
|
|
$
|
1,390,036
|
|
|
$
|
1,054,265
|
|
|
$
|
680,640
|
|
Disability
Benefits(6)
|
|
$
|
424,925
|
|
|
$
|
161,190
|
|
|
$
|
121,540
|
|
|
$
|
111,340
|
|
|
$
|
99,288
|
|
Change In Control Without Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006-2008
Performance
Units(7)
|
|
$
|
1,200,000
|
|
|
$
|
500,000
|
|
|
$
|
325,000
|
|
|
$
|
250,000
|
|
|
$
|
80,000
|
|
2006-2008
Performance
Shares(8)
|
|
$
|
2,014,589
|
|
|
$
|
789,855
|
|
|
$
|
529,394
|
|
|
$
|
394,124
|
|
|
$
|
130,303
|
|
2007-2009
Performance
Units(7)
|
|
$
|
1,200,000
|
|
|
$
|
500,000
|
|
|
$
|
325,000
|
|
|
$
|
250,000
|
|
|
$
|
450,000
|
|
2007-2009
Performance
Shares(8)
|
|
$
|
1,513,389
|
|
|
$
|
630,627
|
|
|
$
|
409,900
|
|
|
$
|
315,387
|
|
|
$
|
567,521
|
|
Stock
Options(9)
|
|
$
|
5,236,484
|
|
|
$
|
2,094,858
|
|
|
$
|
1,390,036
|
|
|
$
|
1,054,265
|
|
|
$
|
680,640
|
|
Termination Without Cause After A Change In
Control(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
Continuation(11)
|
|
$
|
2,880,000
|
|
|
$
|
1,470,000
|
|
|
$
|
1,305,000
|
|
|
$
|
1,110,000
|
|
|
$
|
1,200,000
|
|
Annual
Bonus(12)
|
|
$
|
4,848,000
|
|
|
$
|
1,600,800
|
|
|
$
|
1,295,100
|
|
|
$
|
1,074,000
|
|
|
$
|
1,333,800
|
|
Health and Welfare Benefits
Continuation(13)
|
|
$
|
33,600
|
|
|
$
|
35,675
|
|
|
$
|
35,279
|
|
|
$
|
29,388
|
|
|
$
|
35,027
|
|
Retirement Plan
Benefits(14)
|
|
$
|
1,134,421
|
|
|
$
|
383,347
|
|
|
$
|
191,850
|
|
|
$
|
144,991
|
|
|
$
|
207,401
|
|
Outplacement
Assistance(15)
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
280G Tax
Gross-up(16)
|
|
$
|
4,821,097
|
|
|
$
|
2,002,204
|
|
|
$
|
1,666,077
|
|
|
|
(17
|
)
|
|
$
|
1,599,567
|
|
|
|
|
(1)
|
|
The dollar values set forth
represent a pro-rata value. The values were derived by
multiplying each named executive officers target
performance units times the maximum payout percent assuming no
adjustment for the Total Shareowner Return multiplier and then
pro-rating the amount for two thirds (24/36ths) participation.
|
|
(2)
|
|
The dollar values set forth
represent a pro-rata value. The values were derived by
multiplying each named executive officers target
performance shares times the maximum payout percent assuming no
adjustment for the Total Shareowner Return multiplier,
pro-rating the amount for two thirds (24/36ths) participation
and then multiplying by our fiscal year end closing share price
of $73.04.
|
|
(3)
|
|
The dollar values set forth
represent a pro-rata value. The values were derived by
multiplying each named executive officers target
performance units times the maximum payout percent assuming no
adjustment for the Total Shareowner Return multiplier and then
pro-rating the amount for one third (12/36ths) participation.
|
|
(4)
|
|
The dollar values set forth
represent a pro-rata value. The values were derived by
multiplying each named executive officers target
performance shares times the maximum payout percent assuming no
adjustment for the Total Shareowner Return multiplier,
pro-rating the amount for one third (12/36ths) participation and
then multiplying by our fiscal year end closing share price of
$73.04.
|
|
(5)
|
|
The dollar values set forth
represent the spread value or in the money value of
all outstanding unvested stock options at the end of the fiscal
year as if they otherwise had become vested at the end of the
fiscal year. For details on outstanding unvested stock options
see the Outstanding Equity Awards At Fiscal Year End
table.
|
-37-
|
|
|
(6)
|
|
The dollar values set forth
represent the incremental benefit amount for the executive
Long-Term Disability (LTD) plan. During the first 26 weeks
of disability, named executive officers receive one week of
salary continuance for each year of service (with a minimum of
2 weeks). After the expiration of salary continuation,
named executive officers receive 60% of base pay, up to a weekly
maximum of $1,385. The Short-Term Disability (STD) benefit ends
after 26 weeks of disability (salary continuation and STD
combined). While on LTD, named executive officers receive
50% of base pay, payable until age 65. In addition, named
executive officers receive an amount equal to 50% of the
monthly average of their last five annual Incentive Compensation
Plan awards. The total of LTD payments will be reduced by any
other income benefits that exceed 20% of their monthly base
salary.
|
|
(7)
|
|
The dollar values set forth are
based on full participation during the performance period. The
values were derived by multiplying each named executive
officers target performance units times the maximum payout
percent assuming no adjustment for the Total Shareowner Return
multiplier.
|
|
(8)
|
|
The dollar values set forth are
based on full participation during the performance period. The
values were derived by multiplying each named executive
officers target performance shares times the maximum
payout percent assuming no adjustment for the Total Shareowner
Return multiplier and then multiplying by our fiscal year end
closing share price of $73.04.
|
|
(9)
|
|
The dollar values set forth
represent the spread value or in the money value of
all outstanding unvested stock options at the end of the fiscal
year that would become vested in the event a change in control
were to occur. For details on outstanding unvested stock options
see the Outstanding Equity Awards At Fiscal Year End
table.
|
|
(10)
|
|
It is assumed a change in control
previously occurred for purposes of this termination event. Upon
such a termination, these amounts would be incremental to those
set forth above under Change In Control Without
Termination. The estimated potential benefit amounts set
forth under this heading would also be applicable for a
termination of employment by the executive for good reason after
a change in control, provided that such amounts would be reduced
by 50% (and the tax
gross-up
payment would be reduced significantly) if the executive
terminates employment based on the
30-day
window period beginning one year after the change in control.
|
|
(11)
|
|
The dollar values set forth
represent three times the named executive officers base
salary at the end of the fiscal year.
|
|
(12)
|
|
The dollar values set forth
represent three times the named executive officers highest
annual bonus paid in the last three fiscal years.
|
|
(13)
|
|
The dollar values set forth
represent the estimated cost to us for health and welfare
benefits for three years following a termination after a change
in control.
|
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(14)
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The dollar values set forth
represent the estimated sum of benefit amounts for providing an
additional three years of service in our defined contribution
plan and for providing an accelerated payment of accrued
non-qualified pension plan benefits.
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(15)
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The dollar values set forth
represent an estimate of Outplacement Assistance expense. In the
event Outplacement Assistance is necessary, the expense could
vary.
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(16)
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The dollar values set forth
represent estimated excise taxes and amounts to
gross-up
payments to cover named executive officers excise taxes
determined in accordance with Section 280G of the Internal
Revenue Code.
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(17)
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Mr. Chadicks estimated
incremental payments do not exceed the safe harbor amount,
therefore Mr. Chadick would not be subject to excise taxes
and no
gross-up
would be necessary.
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PROPOSAL TO
APPROVE THE SELECTION OF AUDITORS
The Audit Committee of our Board of Directors has selected the
firm of Deloitte & Touche LLP (Deloitte)
as our auditors for fiscal year 2008, subject to the approval of
our shareowners. Deloitte has acted as our auditors since our
inception as a public company in June 2001.
Before the Audit Committee selected Deloitte, it carefully
considered the qualifications of that firm, including their
prior performance and their reputation for integrity and for
competence in the fields of accounting and auditing.
Representatives of the auditors are expected to be present at
the annual meeting, will have an opportunity to make a statement
if they desire to do so and will be available to respond to
appropriate questions.
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Fees Paid
to Independent Auditors
The aggregate fees billed by Deloitte in fiscal years 2007 and
2006 were as follows (in thousands):
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2007
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2006
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Audit
Fees(1)
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$
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3,179
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$
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2,985
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Audit-Related
Fees(2)
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317
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486
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Tax
Fees(3)
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58
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290
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All Other Fees
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Total
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$
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3,554
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$
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3,761
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(1)
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For professional services performed
by Deloitte for the audit of our annual financial statements,
assessment of our internal control over financial reporting and
review of financial statements included in our quarterly reports
on
Form 10-Q
and services that are normally provided in connection with
statutory and regulatory filings or engagements.
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(2)
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For assurance and related services
performed by Deloitte that are reasonably related to the
performance of the audit or review of our financial statements.
This includes: employee benefit and compensation plan audits
(including $235,000 in 2007 and $216,000 in 2006 for services
performed for and paid by the plans); and attestations by
Deloitte that are not required by statute or regulations.
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(3)
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For tax compliance services,
including preparation of original and amended tax returns,
refund claims, tax audit assistance and tax work stemming from
audit-related items ($51,000 in 2007 and $255,000 in
2006) and tax planning services including research and
advice on federal, state and international tax matters ($7,000
in 2007 and $35,000 in 2006).
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Pre-Approval
of Audit and Non-Audit Services
The Audit Committee has adopted a pre-approval policy requiring
it to pre-approve the audit and permissible non-audit services
performed by the independent auditor in order to assure that the
provision of such services does not impair the auditors
independence. The Audit Committee pre-approved all the fiscal
year 2006 and 2007 services provided by Deloitte. The Audit
Committee also pre-approved in September 2007 certain audit and
non-audit services contemplated to be performed by Deloitte in
fiscal year 2008. The pre-approval policy requires that the
details be provided to the Audit Committee of the particular
service or category of service contemplated to be performed and
such services are generally subject to a specific budget. The
Audit Committee may also pre-approve separately services to be
performed on a
case-by-case
basis. The Audit Committee may delegate pre-approval authority
to one or more of its members, but not to management. Any
pre-approvals by a member under this delegation are to be
reported to the Audit Committee at its next scheduled meeting.
Management and Deloitte are required to periodically report to
the Audit Committee on the extent of the services provided by
Deloitte pursuant to the pre-approval, including the fees for
the services performed to date.
The Board of Directors recommends that you vote
FOR the selection of Deloitte & Touche LLP
as our auditors, which is presented as item (2) on the
accompanying proxy card.
The two nominees for election as directors to serve until the
2011 Annual Meeting of Shareowners who receive the greatest
number of votes cast for the election of directors at the
meeting by the holders of our Common Stock entitled to vote at
the meeting, a quorum being present, shall become directors at
the conclusion of the tabulation of votes. An affirmative vote
of the holders of a majority of the voting power of our Common
Stock present in person or represented by proxy and entitled to
vote on the subject matter, a quorum being present, is necessary
to approve the action proposed in item (2) of the
accompanying Notice of 2008 Annual Meeting of Shareowners. The
presence, in person or by proxy, of the holders of at least a
majority of the shares of our Common Stock issued and
outstanding on the record date set for the meeting is necessary
to have a quorum for the annual meeting.
Under Delaware law and our Restated Certificate of Incorporation
and By-Laws, the aggregate number of votes entitled to be cast
by all shareowners present in person or represented by proxy at
the meeting and entitled to
-39-
vote on the subject matter, whether those shareowners vote
for, against or abstain from voting
(which will exclude broker non-votes), will be counted for
purposes of determining the minimum number of affirmative votes
required for approval of the action proposed in item
(2) and the total number of votes cast for that
matter will be counted for purposes of determining whether
sufficient affirmative votes have been cast. The shares of a
shareowner who abstains from voting on a matter or whose shares
are not voted by reason of a broker non-vote on a particular
matter will be counted for purposes of determining whether a
quorum is present at the meeting so long as the shareowner is
present in person or represented by proxy. An abstention from
voting or a broker non-vote on a matter by a shareowner present
in person or represented by proxy at the meeting has no effect
in the election of directors (assuming a quorum is present).
Although broker non-votes would be entirely disregarded in
determining the vote on any other matter, abstentions from
voting have the same legal effect as a vote against
any other matter even though the shareowner or interested
parties analyzing the results of the voting may interpret such a
vote differently.
The Board of Directors does not know of any other matters that
may be presented at the meeting. Our By-Laws required notice by
November 16, 2007 for any matter to be brought before the
meeting by a shareowner. In the event of a vote on any matters
other than those referred to in items (1) and (2) of
the accompanying Notice of 2008 Annual Meeting of Shareowners,
it is intended that proxies in the accompanying form will be
voted thereon in accordance with the judgment of the person or
persons voting such proxies.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires our
executive officers and directors, and persons who own more than
ten percent of a registered class of our equity securities, to
file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the SEC and the New York Stock
Exchange. Officers, directors and greater than ten percent
shareowners are required by SEC regulation to furnish us with
copies of all Forms 3, 4 and 5 they file.
Based solely on our review of copies of such forms we have
received and written representations from certain reporting
persons confirming that they were not required to file
Forms 5 for fiscal year 2007, we believe that all of our
executive officers, directors and greater than ten percent
beneficial owners complied with all SEC filing requirements
applicable to them under Section 16(a) of the Securities
Exchange Act with respect to transactions during fiscal year
2007.
Our 2007 Annual Report to Shareowners, including financial
statements for fiscal year 2007 and this Proxy Statement, or a
Notice containing instructions on how to access the proxy
materials online are being mailed to shareowners.
We will provide to shareowners, without charge, upon written
request, a copy of our Annual Report on
Form 10-K
for the fiscal year 2007, as filed with the SEC (without
exhibits). Exhibits to the
Form 10-K
will be furnished upon written request and payment of a fee of
ten cents per page covering our costs. Written requests should
be directed to us at 400 Collins Road NE, Cedar Rapids, Iowa
52498, Attention: Investor Relations.
Our 2007 Annual Report to Shareowners, our
Form 10-K
for fiscal year 2007 and this Proxy Statement are also available
free of charge on our website at www.rockwellcollins.com.
All reports we file with the SEC are also available free of
charge via EDGAR through the SECs website at
www.sec.gov.
SHAREOWNER
PROPOSALS FOR ANNUAL MEETING IN 2009
To be eligible for inclusion in our proxy statement, shareowner
proposals for our 2009 Annual Meeting of Shareowners must be
received by us on or before August 20, 2008 at the Office
of the Secretary at our corporate
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headquarters, 400 Collins Road NE, Cedar Rapids, Iowa 52498. In
addition, our By-Laws require a shareowner desiring to propose
any matter for consideration of the shareowners at our 2009
Annual Meeting of Shareowners to notify our Secretary in writing
at the address listed in the preceding sentence on or after
October 16, 2008 and on or before November 15, 2008.
If the number of directors to be elected to the Board at our
2009 Annual Meeting of Shareowners is increased and there is no
public announcement by us naming all of the nominees for
director or specifying the increased size of the Board on or
before November 5, 2008, a shareowner proposal with respect
to nominees for any new position created by such increase will
be considered timely if received by our Secretary not later than
the tenth day following such public announcement by us.
The cost of the solicitation of proxies will be borne by us. In
addition to the use of the mail, proxies may be solicited
personally, or by telephone, facsimile or
e-mail, by a
few of our regular employees without additional compensation. We
will reimburse brokers and other persons holding stock in their
names, or in the names of nominees, for their expenses for
sending proxy material to principals and obtaining their proxies.
GENERAL
Q&A ABOUT THE MEETING
Why are you receiving this proxy statement? We are
furnishing this proxy statement to you in connection with the
solicitation of proxies by the Board of Directors of Rockwell
Collins, Inc. for use at the 2008 Annual Meeting of Shareowners
to be held on February 12, 2008, and at any adjournments
thereof. On or about December 26, 2007, we commenced
mailing to our shareowners: this proxy statement, the accompany
proxy card, and a copy of our 2007 Annual Report to Shareowners
or a Notice containing instructions on how to access the proxy
materials online.
What is a proxy? A proxy is your legal designation
of another person to vote the shares you own. That other person
is called a proxy. If you designate someone as your proxy in a
written document, that document is also called a proxy or a
proxy card.
What is a proxy statement? This document is a
proxy statement. It is a document that we are required by law to
give you when we ask you to name a proxy to vote your shares. We
encourage you to read this proxy statement carefully. In
addition, you may obtain information about Rockwell Collins,
Inc. from the 2007 Annual Report delivered with this proxy
statement.
Why did you receive a Notice of Electronic Availability of
Proxy Statement and Annual Report? As permitted by rules
recently adopted by the SEC, we are making this Proxy Statement
and our 2007 Annual Report available to our shareowners
electronically via the Internet. If you received a Notice by
mail, you will not receive a printed copy of the proxy materials
in the mail. Instead, the Notice instructs you how to access and
review all of the important information contained in the Proxy
Statement and 2007 Annual Report. The Notice also instructs you
how to submit your vote over the Internet. If you received a
Notice by mail and would like to receive a printed copy of our
proxy materials, you should follow the instructions for
requesting such materials included in the Notice.
What is the purpose of the meeting? The purpose of
the 2008 Annual Meeting of Shareowners is to obtain shareowner
action on the matters outlined in the notice of meeting included
with this proxy statement. These matters include the election of
two directors and approval of the selection of
Deloitte & Touche LLP as our independent auditors for
fiscal year 2008. This proxy statement provides you with
detailed information about each of these matters.
Who can vote? Shareowners of record as of the
close of business on December 14, 2007 are entitled to
vote. On that day, 163 million shares of Common Stock were
outstanding and eligible to vote. Each share is entitled to one
vote on each matter presented at the Annual Meeting.
How many shares are you entitled to vote? The
number of shares you own are entitled to vote, are reflected on
the proxy card and coded as follows: COM common
shares registered with our Transfer Agent; SAV PL
shares in the Rockwell Collins Savings Plans; or USA
ESPP shares in the United Space Alliance employee
stock purchase plan. These designations apply only if you hold
your shares through the Transfer Agent or these plans.
-41-
What is the difference between a record owner and an owner
holding shares in street name? If your
shares are registered in your name, you are a record owner. If
your shares are in the name of your broker or bank or other
nominee, your shares are held in street name.
How do you vote if your shares are held in your name as a
record owner? You have a choice of voting by:
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Internet;
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Telephone;
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Mail; or
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In person at the Annual Meeting.
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Voting on the Internet is easy and fast. Go to the website
referenced on the enclosed proxy card and follow the
instructions. Please have the proxy card in hand when going
online. This vote will be counted immediately, and there is no
need to send in the proxy card.
Voting by telephone is also simple and fast. Call the toll-free
number on the proxy card and listen for further instructions. In
order to respond to the questions, you must have a touch-tone
phone and the proxy card in hand. This vote will be counted
immediately, and there is no need to send in the proxy card.
If you are a shareowner of record, you can save us money by
voting by telephone or on the Internet. Alternatively, you can
vote by mail by completing, signing, dating and mailing the
enclosed proxy card. If you plan to attend the Annual Meeting,
you can vote in person. In order to vote in person at the Annual
Meeting, you will need to bring proper identification with you
to the meeting. As long as your shares are registered in your
name, you may revoke your proxy at any time before it is
exercised. There are several ways you can do this:
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By filing a written notice of revocation with our Corporate
Secretary;
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By duly signing and delivering a proxy that bears a later date;
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By subsequently voting by telephone or Internet as described
above; or
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By attending the Annual Meeting and voting in person.
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How do you vote if your shares are held in street
name? If your shares are registered in the name of
your broker or nominee, you should vote your shares using the
method directed by that broker or other nominee. A large number
of banks and brokerage firms are participating in the Broadridge
Financial Solutions, Inc. online program. This program provides
eligible street name shareowners the opportunity to
vote via the Internet or by telephone. Voting forms will provide
instructions for shareowners whose banks or brokerage firms are
participating in Broadridges program. If you plan to
attend the Annual Meeting and to vote in person, you should
contact your broker or nominee to obtain a brokers proxy
card and bring it, together with proper identification and your
account statement or other evidence of your share ownership,
with you to the Annual Meeting. If your shares are held in
street name, you must contact your broker or nominee to revoke
your proxy.
How do you vote if you participate in our Direct Stock
Purchase and Dividend Reinvestment Plan? Shareowners
participating in the Wells Fargo Shareowner Service Plus Plan
that allows for direct stock purchases and dividend reinvestment
are record owners, and Wells Fargo will vote the shares that it
holds for the participants account only in accordance with
the proxy returned by the participant to Wells Fargo, or in
accordance with instructions given pursuant to our telephone or
Internet voting procedures.
How do you vote shares held in the Rockwell Collins
Savings Plans? If you are a participant in the Rockwell
Collins Savings Plans, the portion of the voting card providing
directions to the trustee will serve as the voting instruction
card to the trustee of the plans for all shares of our Common
Stock that you own through the plan(s).
Will your vote be confidential? It is our policy
to keep confidential the proxy cards, ballots and voting
tabulations that identify individual shareowners, except as may
be necessary to meet any applicable legal requirements and, in
the case of any contested proxy solicitation, as may be
necessary to permit proper parties to verify the propriety of
proxies presented by any person and the results of the voting.
The judges of election and any employees associated
-42-
with processing proxy cards or ballots and tabulating the vote
are required to acknowledge their responsibility to comply with
this policy of confidentiality.
What are your voting choices and what is the required
vote? By giving us your proxy, you authorize our senior
management to vote your shares at the Annual Meeting or any
adjournments thereof in the manner you indicate.
Proposal 1: Election of Directors. With respect to
the election of nominees for director, you may:
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Vote for the election of all of the nominees for
director named in this proxy statement;
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Withhold authority to vote for all of the
nominees; or
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Withhold authority to vote for any individual nominee by writing
that nominees number in the space provided.
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If a quorum is present at the Annual Meeting, the two nominees
receiving the greatest number of votes will be elected to serve
as directors. Because of this, non-voted shares and shares whose
votes are withheld will not affect the outcome of the election
for directors. Shareowners may not vote for more than two
nominees.
Proposal 2: Approval of Selection of Auditors. With
respect to this proposal, you may:
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Vote for the proposal;
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Vote against the proposal; or
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Abstain from voting on the proposal.
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If a quorum is present at the Annual Meeting, the affirmative
vote of a majority of the shares represented at the Annual
Meeting and entitled to vote on this proposal will be required
to approve the proposal. Because of this, a vote to abstain from
voting on any of these matters will have the effect of a vote
against such matter.
What does it mean if you receive more than one proxy card?
If you receive more than one proxy card, it likely means
you have multiple accounts with brokers, our savings plans
and/or our
transfer agent. Please vote all of these shares.
Where can you find the voting results of the Annual
Meeting? We intend to announce the preliminary voting
results at the Annual Meeting and publish final results in our
quarterly report on
Form 10-Q
for the second quarter of fiscal year 2008.
December 17, 2007
-43-
If you plan to attend the Annual Meeting of Shareowners to be
held in Cedar Rapids, Iowa on February 12, 2008, be
sure to:
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mark the appropriate box on the proxy card and mail the card
using the enclosed envelope; or
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indicate your desire to attend the meeting through our telephone
or Internet voting procedures; or
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call the Corporations Shareowner Relations line at
(319) 295-4045.
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If you indicate Yes you plan to attend, your name
will be on the admittance list at the Annual Meeting
Registration Desk
ROCKWELL COLLINS, INC.
ANNUAL MEETING OF SHAREOWNERS
TUESDAY, FEBRUARY 12, 2008
10:00 A.M.
THE CEDAR RAPIDS MARRIOTT
1200 COLLINS ROAD NE
CEDAR RAPIDS, IA 52402
YOUR VOTE IS IMPORTANT!
You can vote by Internet, telephone or mail.
See the instructions on the other side of this proxy card.
Notice
of Internet Availability of Proxy Materials: You can access and
review the Annual Report and Proxy Statement on the Internet by going
to the following Rockwell Collins website:
www.shareholder.com/col/annual.cfm
ROCKWELL COLLINS, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Clayton M. Jones and Gary R. Chadick, jointly and severally, with
full power of substitution, to vote shares of capital stock which the undersigned is entitled to
vote at the Annual Meeting of Shareowners of Rockwell Collins, Inc. to be held at The Cedar Rapids
Marriott, 1200 Collins Road NE, Cedar Rapids, Iowa on February 12, 2008, or any postponement(s) or
adjournment(s) thereof. Such proxies are directed to vote as specified or, if no specification is
made, FOR proposal (1) the election of the two nominees proposed for election as directors with
terms expiring at the Annual Meeting in 2011; FOR proposal (2) the selection of auditors. The
proxies are authorized to vote in accordance with their discretion on such other matters as may
properly come before the meeting.
This card also constitutes your voting instructions for shares held of record in the savings plans
of Rockwell Collins, Inc. (the Rockwell Collins Retirement Savings Plan and the Rockwell Collins
Retirement Savings Plan for Bargaining Unit Employees (Plans)) and the undersigned hereby
authorizes the trustee of these Plans to vote the undersigneds shares held in their accounts. The
trustee is authorized under certain circumstances and in its discretion to vote upon such other
business as may properly come before the meeting or any postponement(s) or adjournment(s) thereof.
Any voting directions that are provided without specifying a particular vote will be voted FOR
proposals (1) and (2). If a participant does not provide voting directions by February 7, 2008,
the shares attributable to the participants account will be voted by the trustee in proportion to
responses received from other participants.
To vote in accordance with the Board of Directors recommendations just sign and date the other
side; no boxes need to be checked.
See reverse for voting instructions.
There are three ways to vote your Proxy
Your telephone or Internet vote authorizes the Named Proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE TOLL FREE 1-800-560-1965 QUICK ««« EASY ««« IMMEDIATE
Use any touch-tone telephone to transmit your voting instructions until 11:59 p.m. (Central Time)
on February 11, 2008. Have your proxy card and the last four digits of your Social Security Number
or Tax Identification Number available when you call and then follow the instructions.
VOTE BY INTERNET http://www.eproxy.com/col/ QUICK ««« EASY ««« IMMEDIATE
Use the Internet to transmit your voting instructions and for electronic delivery information until
11:59 p.m. (Central Time) on February 11, 2008. Have your proxy card and the last four digits of
your Social Security Number or Tax Identification Number available when you access the web site and
follow the instructions to obtain your records and create an electronic voting instruction form.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope weve provided or
return it to Rockwell Collins, Inc., c/o Shareowner ServicesSM, P.O. Box 64873, St.
Paul, MN 55164-0873.
YOUR VOTE IS IMPORTANT
Vote by Internet or Telephone or Mail 24 Hours a Day, 7 Days a Week
Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
If you vote your proxy by telephone or Internet, you do NOT need to mail back your proxy
card.
If you vote by Phone or Internet, please do not mail your Proxy Card
The Board of Directors Recommends a Vote FOR Proposals 1 and 2.
PROPOSAL 1: ELECTION OF TWO DIRECTORS:
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1.
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For the election of two directors to
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01 C.A. Davis |
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serve as Class I directors:
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02 R.E. Eberhart |
(Instructions: To withhold authority to vote for any
indicated nominee, write the number(s) of the nominee(s)
in the box provided to the right.)
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o
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Vote FOR
all nominees
(except as noted below)
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o
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Vote WITHHELD
from all nominees |
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PROPOSAL 2: SELECTION OF AUDITORS: |
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2. For the selection of Deloitte & Touche LLP as our auditors for fiscal year 2008.
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o For
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o Against
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o Abstain |
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Please indicate if you plan to attend this meeting.
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o Yes
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o No |
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If you indicated Yes you plan to attend, your name will be on the admittance list at the Annual
Meeting Registration Desk.
Address Change? Mark Box o Indicate changes below:
Signature(s) in Box
Please sign exactly as your name(s) appears on Proxy. If held
in joint tenancy, all persons must sign. Trustee, administrators,
etc., should include title and authority. Corporations should
provide full name of corporation and title of authorized officer
signing the proxy.