Document:

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EXHIBIT 4.7

(Multicurrency—Cross Border)

ISDA®

International Swap Dealers Association, Inc.

MASTER AGREEMENT

dated as of                     

[[Cap] [Swap] Counterparty] and Nissan Auto Receivables [ ]-[ ] Owner Trust have
entered and/or anticipate entering into one or more transactions (each a “Transaction”) that are or
will be governed by this Master Agreement, which includes the schedule (the “Schedule”), and the
documents and other confirming evidence (each a “Confirmation”) exchanged between the parties
confirming those Transactions.

Accordingly, the parties agree as follows:

1. Interpretation

(a) Definitions. The terms defined in Section 14 and in the Schedule will have the meanings
therein specified for the purpose of this Master Agreement.

(b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and
the other provisions of this Master Agreement, the Schedule will prevail. In the event of any
inconsistency between the provisions of any Confirmation and this Master Agreement (including the
Schedule), such Confirmation will prevail for the purpose of the relevant Transaction.

(c) Single Agreement. All Transactions are entered into in reliance on the fact that this Master
Agreement and all Confirmations form a single agreement between the parties (collectively referred
to as this “Agreement”), and the parties would not otherwise enter into any Transactions.

2. Obligations

(a) General Conditions.

(i) Each party will make each payment or delivery specified in each Confirmation to be made
by it, subject to the other provisions of this Agreement.

(ii) Payments under this Agreement will be made on the due date for value on that date in
the place of the account specified in the relevant Confirmation or otherwise pursuant to
this Agreement, in freely transferable funds and in the manner customary for payments in the
required currency. Where settlement is by delivery (that is, other than by payment), such
delivery will be made for receipt on the due date in the manner customary

Copyright© 1992 by International Swap Dealers Association, Inc.

 

 

for the relevant obligation unless otherwise specified in the relevant Confirmation or
elsewhere in this Agreement.

(iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition
precedent that no Event of Default or Potential Event of Default with respect to the other
party has occurred and is continuing, (2) the condition precedent that no Early Termination
Date in respect of the relevant Transaction has occurred or been effectively designated and
(3) each other applicable condition precedent specified in this Agreement.

(b) Change of Account. Either party may change its account for receiving a payment or delivery by
giving notice to the other party at least five Local Business Days prior to the scheduled date for
the payment or delivery to which such change applies unless such other party gives timely notice of
a reasonable objection to such change.

(c) Netting. If on any date amounts would otherwise be payable:

	 	(i)	 	in the same currency; and
	 
	 	(ii)	 	in respect of the same Transaction,

by each party to the other, then, on such date, each party’s obligation to make payment of any such
amount will be automatically satisfied and discharged and, if the aggregate amount that would
otherwise have been payable by one party exceeds the aggregate amount that would otherwise have
been payable by the other party, replaced by an obligation upon the party by whom the larger
aggregate amount would have been payable to pay to the other party the excess of the larger
aggregate amount over the smaller aggregate amount.

The parties may elect in respect of two or more Transactions that a net amount will be determined
in respect of all amounts payable on the same date in the same currency in respect of such
Transactions, regardless of whether such amounts are payable in respect of the same Transaction.
The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii)
above will not apply to the Transactions identified as being subject to the election, together with
the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such
Transactions from such date). This election may be made separately for different groups of
Transactions and will apply separately to each pairing of Offices through which the parties make
and receive payments or deliveries.

(d) Deduction or Withholding for Tax.

(i) Gross-Up. All payments under this Agreement will be made without any deduction or
withholding for or on account of any Tax unless such deduction or withholding is required by
any applicable law, as modified by the practice of any relevant governmental revenue
authority, then in effect. If a party is so required to deduct or withhold, then that party
(“X”) will:

(1) promptly notify the other party (“Y”) of such requirement;

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(2) pay to the relevant authorities the full amount required to be deducted or
withheld (including the full amount required to be deducted or withheld from any
additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier
of determining that such deduction or withholding is required or receiving notice
that such amount has been assessed against Y;

(3) promptly forward to Y an official receipt (or a certified copy), or other
documentation reasonably acceptable to Y, evidencing such payment to such
authorities; and

(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to
which Y is otherwise entitled under this Agreement, such additional amount as is
necessary to ensure that the net amount actually received by Y (free and clear of
Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y
would have received had no such deduction or withholding been required. However, X
will not be required to pay any additional amount to Y to the extent that it would
not be required to be paid but for:

(A) the failure by Y to comply with or perform any agreement contained in
Section 4(a)(i), 4(a)(iii) or 4(d); or

(B) the failure of a representation made by Y pursuant to Section 3(f) to be
accurate and true unless such failure would not have occurred but for (I)
any action taken by a taxing authority, or brought in a court of competent
jurisdiction, on or after the date on which a Transaction is entered into
(regardless of whether such action is taken or brought with respect to a
party to this Agreement) or (II) a Change in Tax Law.

(ii) Liability. If:

(1) X is required by any applicable law, as modified by the practice of any relevant
governmental revenue authority, to make any deduction or withholding in respect of
which X would not be required to pay an additional amount to Y under Section
2(d)(i)(4);

(2) X does not so deduct or withhold; and

(3) a liability resulting from such Tax is assessed directly against X,

then, except to the extent Y has satisfied or then satisfies the liability resulting from
such Tax, Y will promptly pay to X the amount of such liability (including any related
liability for interest, but including any related liability for penalties only if Y has
failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or
4(d)).

(e) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early
Termination Date in respect of the relevant Transaction, a party that defaults in the performance
of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be
required to pay interest (before as well as after judgment) on the overdue amount

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to the other party on demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of actual payment, at the
Default Rate. Such interest will be calculated on the basis of daily compounding and the actual
number of days elapsed. If, prior to the occurrence or effective designation of an Early
Termination Date in respect of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other party on demand if and
to the extent provided for in the relevant Confirmation or elsewhere in this Agreement.

3. Representations

Each party represents to the other party (which representations will be deemed to be repeated by
each party on each date on which a Transaction is entered into and, in the case of the
representations in Section 3(f), at all times until the termination of this Agreement) that:

(a) Basic Representations.

(i) Status. It is duly organized and validly existing under the laws of the jurisdiction of
its organization or incorporation and, if relevant under such laws, in good standing;

(ii) Powers. It has the power to execute this Agreement and any other documentation
relating to this Agreement to which it is a party, to deliver this Agreement and any other
documentation relating to this Agreement that it is required by this Agreement to deliver
and to perform its obligations under this Agreement and any obligations it has under any
Credit Support Document to which it is a party and has taken all necessary action to
authorize such execution, delivery and performance;

(iii) No Violation or Conflict. Such execution, delivery and performance do not violate or
conflict with any law applicable to it, any provision of its constitutional documents, any
order or judgment of any court or other agency of government applicable to it or any of its
assets or any contractual restriction binding on or affecting it or any of its assets;

(iv) Consents. All governmental and other consents that are required to have been obtained
by it with respect to this Agreement or any Credit Support Document to which it is a party
have been obtained and are in full force and effect and all conditions of any such consents
have been complied with; and

(v) Obligations Binding. Its obligations under this Agreement and any Credit Support
Document to which it is a party constitute its legal, valid and binding obligations,
enforceable in accordance with their respective terms (subject to applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally
and subject, as to enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding in equity or at law)).

(b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its
knowledge, Termination Event with respect to it has occurred and is continuing and no such event or
circumstance would occur as a result of its entering into or performing its obligations under this
Agreement or any Credit Support Document to which it is a party.

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(c) Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any
of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal,
governmental body, agency or official or any arbitrator that is likely to affect the legality,
validity or enforceability against it of this Agreement or any Credit Support Document to which it
is a party or its ability to perform its obligations under this Agreement or such Credit Support
Document.

(d) Accuracy of Specified Information. All applicable information that is furnished in writing by
or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the
Schedule is, as of the date of the information, true, accurate and complete in every material
respect.

(e) Payer Tax Representation. Each representation specified in the Schedule as being made by it for
the purpose of this Section 3(e) is accurate and true.

(f) Payee Tax Representations. Each representation specified in the Schedule as being made by it
for the purpose of this Section 3(f) is accurate and true.

4. Agreements

Each party agrees with the other that, so long as either party has or may have any obligation under
this Agreement or under any Credit Support Document to which it is a party:

(a) Furnish Specified Information. It will deliver to the other party or, in certain cases under
subparagraph (iii) below, to such government or taxing authority as the other party reasonably
directs:

(i) any forms, documents or certificates relating to taxation specified in the Schedule or
any Confirmation;

(ii) any other documents specified in the Schedule or any Confirmation; and

(iii) upon reasonable demand by such other party, any form or document that may be required
or reasonably requested in writing in order to allow such other party or its Credit Support
Provider to make a payment under this Agreement or any applicable Credit Support Document
without any deduction or withholding for or on account of any Tax or with such deduction or
withholding at a reduced rate (so long as the completion, execution or submission of such
form or document would not materially prejudice the legal or commercial position of the
party in receipt of such demand), with any such form or document to be accurate and
completed in a manner reasonably satisfactory to such other party and to be executed and to
be delivered with any reasonably required certification,

in each case by the date specified in the Schedule or such Confirmation or, if none is specified,
as soon as reasonably practicable.

(b) Maintain Authorizations. It will use all reasonable efforts to maintain in full force and
effect all consents of any governmental or other authority that are required to be obtained by it

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with respect to this Agreement or any Credit Support Document to which it is a party and will use
all reasonable efforts to obtain any that may become necessary in the future.

(c) Comply with Laws. It will comply in all material respects with all applicable laws and orders
to which it may be subject if failure so to comply would materially impair its ability to perform
its obligations under this Agreement or any Credit Support Document to which it is a party.

(d) Tax Agreement. It will give notice of any failure of a representation made by it under Section
3(f) to be accurate and true promptly upon learning of such failure.

(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon
it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is
incorporated, organized, managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this Agreement is located (“Stamp
Tax Jurisdiction”) and will indemnify the other party against any Stamp Tax levied or imposed upon
the other party or in respect of the other party’s execution or performance of this Agreement by
any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.

5. Events of Default and Termination Events

(a) Events of Default. The occurrence at any time with respect to a party or, if applicable, any
Credit Support Provider of such party or any Specified Entity of such party of any of the following
events constitutes an event of default (an “Event of Default”) with respect to such party:

(i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under
this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such
failure is not remedied on or before the third Local Business Day after notice of such
failure is given to the party;

(ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or
obligation (other than an obligation to make any payment under this Agreement or delivery
under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or
obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the
party in accordance with this Agreement if such failure is not remedied on or before the
thirtieth day after notice of such failure is given to the party;

(iii) Credit Support Default.

(1) Failure by the party or any Credit Support Provider of such party to comply with
or perform any agreement or obligation to be complied with or performed by it in
accordance with any Credit Support Document if such failure is continuing after any
applicable grace period has elapsed;

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(2) the expiration or termination of such Credit Support Document or the failing or
ceasing of such Credit Support Document to be in full force and effect for the
purpose of this Agreement (in either case other than in accordance with its terms)
prior to the satisfaction of all obligations of such party under each Transaction to
which such Credit Support Document relates without the written consent of the other
party; or

(3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or
rejects, in whole or in part, or challenges the validity of, such Credit Support
Document;

(iv) Misrepresentation. A representation (other than a representation under Section 3(e) or
(f)) made or repeated or deemed to have been made or repeated by the party or any Credit
Support Provider of such party in this Agreement or any Credit Support Document proves to
have been incorrect or misleading in any material respect when made or repeated or deemed to
have been made or repeated;

(v) Default under Specified Transaction. The party, any Credit Support Provider of such
party or any applicable Specified Entity of such party (1) defaults under a Specified
Transaction and, after giving effect to any applicable notice requirement or grace period,
there occurs a liquidation of, an acceleration of obligations under, or an early termination
of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice
requirement or grace period, in making any payment or delivery due on the last payment,
delivery or exchange date of, or any payment on early termination of, a Specified
Transaction (or such default continues for at least three Local Business Days if there is no
applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or
rejects, in whole or in part, a Specified Transaction (or such action is taken by any person
or entity appointed or empowered to operate it or act on its behalf);

(vi) Cross Default. If “Cross Default” is specified in the Schedule as applying to the
party, the occurrence or existence of (1) a default, event of default or other similar
condition or event (however described) in respect of such party, any Credit Support Provider
of such party or any applicable Specified Entity of such party under one or more agreements
or instruments relating to Specified Indebtedness of any of them (individually or
collectively) in an aggregate amount of not less than the applicable Threshold Amount (as
specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or
becoming capable at such time of being declared, due and payable under such agreements or
instruments, before it would otherwise have been due and payable or (2) a default by such
party, such Credit Support Provider or such Specified Entity (individually or collectively)
in making one or more payments on the due date thereof in an aggregate amount of not less
than the applicable Threshold Amount under such agreements or instruments (after giving
effect to any applicable notice requirement or grace period);

(vii) Bankruptcy. The party, any Credit Support Provider of such party or any applicable
Specified Entity of such party:

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

(viii) Merger Without Assumption. The party or any Credit Support Provider of such party
consolidates or amalgamates with, or merges with or into, or transfers all or substantially
all its assets to, another entity and, at the time of such consolidation, amalgamation,
merger or transfer:

(1) the resulting, surviving or transferee entity fails to assume all the
obligations of such party or such Credit Support Provider under this Agreement or
any Credit Support Document to which it or its predecessor was a party by operation
of law or pursuant to an agreement reasonably satisfactory to the other party to
this Agreement; or

(2) the benefits of any Credit Support Document fail to extend (without the consent
of the other party) to the performance by such resulting, surviving or transferee
entity of its obligations under this Agreement.

(b) Termination Events. The occurrence at any time with respect to a party or, if applicable, any
Credit Support Provider of such party or any Specified Entity of such party of any event specified
below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is
specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event Upon Merger if the event is specified

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pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v)
below:

(i) Illegality. Due to the adoption of, or any change in, any applicable law after the date
on which a Transaction is entered into, or due to the promulgation of, or any change in, the
interpretation by any court, tribunal or regulatory authority with competent jurisdiction of
any applicable law after such date, it becomes unlawful (other than as a result of a breach
by the party of Section 4(b)) for such party (which will be the Affected Party):

(1) to perform any absolute or contingent obligation to make a payment or delivery
or to receive a payment or delivery in respect of such Transaction or to comply with
any other material provision of this Agreement relating to such Transaction; or

(2) to perform, or for any Credit Support Provider of such party to perform, any
contingent or other obligation which the party (or such Credit Support Provider) has
under any Credit Support Document relating to such Transaction;

(ii) Tax Event. Due to (x) any action taken by a taxing authority, or brought in a court of
competent jurisdiction, on or after the date on which a Transaction is entered into
(regardless of whether such action is taken or brought with respect to a party to this
Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or
there is a substantial likelihood that it will, on the next succeeding Scheduled Payment
Date (1) be required to pay to the other party an additional amount in respect of an
Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section
2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be
deducted or withheld for or on account of a Tax (except in respect of interest under Section
2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such
Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B));

(iii) Tax Event Upon Merger. The party (the “Burdened Party”) on the next succeeding
Scheduled Payment Date will either (1) be required to pay an additional amount in respect of
an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section
2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or
withheld for or on account of any Indemnifiable Tax in respect of which the other party is
not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or
(B)), in either case as a result of a party consolidating or amalgamating with, or merging
with or into, or transferring all or substantially all its assets to, another entity (which
will be the Affected Party) where such action does not constitute an event described in
Section 5(a)(viii);

(iv) Credit Event Upon Merger. If “Credit Event Upon Merger” is specified in the Schedule
as applying to the party, such party (“X”), any Credit Support Provider of X or any
applicable Specified Entity of X consolidates or amalgamates with, or merges with or into,
or transfers all or substantially all its assets, to, another entity and such action does
not constitute an event described in Section 5(a)(viii) but the creditworthiness of the

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resulting, surviving or transferee entity is materially weaker than that of X, such Credit
Support Provider or such Specified Entity, as the case may be, immediately prior to such
action (and, in such event, X or its successor or transferee, as appropriate, will be the
Affected Party); or

(v) Additional Termination Event. If any “Additional Termination Event” is specified in the
Schedule or any Confirmation as applying, the occurrence of such event (and, in such event,
the Affected Party or Affected Parties shall be as specified for such Additional Termination
Event in the Schedule or such Confirmation).

(c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute
or give rise to an Event of Default also constitutes an Illegality, it will be treated as an
Illegality and will not constitute an Event of Default.

6. Early Termination

(a) Right to Terminate Following Event of Default. If at any time an Event of Default with respect
to a party (the “Defaulting Party”) has occurred and is then continuing, the other party (the
“Non-defaulting Party”) may, by not more than 20 days notice to the Defaulting Party specifying the
relevant Event of Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however, “Automatic Early
Termination” is specified in the Schedule as applying to a party, then an Early Termination Date in
respect of all outstanding Transactions will occur immediately upon the occurrence with respect to
such party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the institution of the
relevant proceeding or the presentation of the relevant petition upon the occurrence with respect
to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous
thereto, (8).

(b) Right to Terminate Following Termination Event.

(i) Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming
aware of it, notify the other party, specifying the nature of that Termination Event and
each Affected Transaction and will also give such other information about that Termination
Event as the other party may reasonably require.

(ii) Transfer to Avoid Termination Event. If either an Illegality under Section 5(b)(i)(1)
or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger
occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition
to its right to designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss, excluding immaterial,
incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i)
all its rights and obligations under this Agreement in respect of the Affected Transactions
to another of its Offices or Affiliates so that such Termination Event ceases to exist.

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If the Affected Party is not able to make such a transfer it will give notice to the other
party to that effect within such 20 day period, whereupon the other party may effect such a
transfer within 30 days after the notice is given under Section 6(b)(i).

Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional
upon the prior written consent of the other party, which consent will not be withheld if
such other party’s policies in effect at such time would permit it to enter into
transactions with the transferee on the terms proposed.

(iii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or a Tax Event occurs
and there are two Affected Parties, each party will use all reasonable efforts to reach
agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to
avoid that Termination Event.

(iv) Right to Terminate. If:

(1) a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as
the case may be, has not been effected with respect to all Affected Transactions
within 30 days after an Affected Party gives notice under Section 6(b)(i); or

(2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an
Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the
Burdened Party is not the Affected Party,

either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon
Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if
there is more than one Affected Party, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger or an Additional Termination Event if there is only one
Affected Party may, by not more than 20 days notice to the other party and provided that
the relevant Termination Event is then continuing, designate a day not earlier than the day
such notice is effective as an Early Termination Date in respect of all Affected
Transactions.

(c) Effect of Designation.

(i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the
Early Termination Date will occur on the date so designated, whether or not the relevant
Event of Default or Termination Event is then continuing.

(ii) Upon the occurrence or effective designation of an Early Termination Date, no further
payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated
Transactions will be required to be made, but without prejudice to the other provisions of
this Agreement. The amount, if any, payable in respect of an Early Termination Date shall
be determined pursuant to Section 6(e).

(d) Calculations.

(i) Statement. On or as soon as reasonably practicable following the occurrence of an Early
Termination Date, each party will make the calculations on its part, if any,

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contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in
reasonable detail, such calculations (including all relevant quotations and specifying any
amount payable under Section 6(e)) and (2) giving details of the relevant account to which
any amount payable to it is to be paid. In the absence of written confirmation from the
source of a quotation obtained in determining a Market Quotation, the records of the party
obtaining such quotation will be conclusive evidence of the existence and accuracy of such
quotation.

(ii) Payment Date. An amount calculated as being due in respect of any Early Termination
Date under Section 6(e) will be payable on the day that notice of the amount payable is
effective (in the case of an Early Termination Date which is designated or occurs as a
result of an Event of Default) and on the day which is two Local Business Days after the day
on which notice of the amount payable is effective (in the case of an Early Termination Date
which is designated as a result of a Termination Event). Such amount will be paid together
with (to the extent permitted under applicable law) interest thereon (before as well as
after judgment) in the Termination Currency, from (and including) the relevant Early
Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate.
Such interest will be calculated on the basis of daily compounding and the actual number of
days elapsed.

(e) Payments on Early Termination. If an Early Termination Date occurs, the following provisions
shall apply based on the parties’ election in the Schedule of a payment measure, either “Market
Quotation” or “Loss”, and a payment method, either the “First Method” or the “Second Method”. If
the parties fail to designate a payment measure or payment method in the Schedule, it will be
deemed that “Market Quotation” or the “Second Method”, as the case may be, shall apply. The
amount, if any, payable in respect of an Early Termination Date and determined pursuant to this
Section will be subject to any Set-off.

(i) Events of Default. If the Early Termination Date results from an Event of Default:

(1) First Method and Market Quotation. If the First Method and Market Quotation
apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a
positive number, of (A) the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated Transactions and the Termination
Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B)
the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting
Party.

(2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party
will pay to the Non-defaulting Party, if a positive number, the Non-defaulting
Party’s Loss in respect of this Agreement.

(3) Second Method and Market Quotation. If the Second Method and Market Quotation
apply, an amount will be payable equal to (A) the sum of the Settlement Amount
(determined by the Non-defaulting Party) in respect of the Terminated Transactions
and the Termination Currency Equivalent of the Unpaid

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Amounts owing to the Non-defaulting Party less (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a
positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it
is a negative number, the Non-defaulting Party will pay the absolute value of that
amount to the Defaulting Party.

(4) Second Method and Loss. If the Second Method and Loss apply, an amount will be
payable equal to the Non-defaulting Party’s Loss in respect of this Agreement. If
that amount is a positive number, the Defaulting Party will pay it to the
Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay
the absolute value of that amount to the Defaulting Party.

(ii) Termination Events. If the Early Termination Date results from a Termination Event:

(1) One Affected Party. If there is one Affected Party, the amount payable will be
determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or
Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the
Defaulting Party and to the Non-defaulting Party will be deemed to be references to
the Affected Party and the party which is not the Affected Party, respectively, and,
if Loss applies and fewer than all the Transactions are being terminated, Loss shall
be calculated in respect of all Terminated Transactions.

(2) Two Affected Parties. If there are two Affected Parties:

(A) if Market Quotation applies, each party will determine a Settlement
Amount in respect of the Terminated Transactions, and an amount will be
payable equal to (I) the sum of (a) one-half of the difference between the
Settlement Amount of the party with the higher Settlement Amount (“X”) and
the Settlement Amount of the party with the lower Settlement Amount (“Y”)
and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X
less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to
Y; and

(B) if Loss applies, each party will determine its Loss in respect of this
Agreement (or, if fewer than all the Transactions are being terminated, in
respect of all Terminated Transactions) and an amount will be payable equal
to one-half of the difference between the Loss of the party with the higher
Loss (“X”) and the Loss of the party with the lower Loss (“Y”).

If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will
pay the absolute value of that amount to Y.

(iii) Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs
because “Automatic Early Termination” applies in respect of a party, the amount determined
under this Section 6(e) will be subject to such adjustments as are appropriate and permitted
by law to reflect any payments or deliveries made by one party to the other under this
Agreement (and retained by such other party) during the period from the

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relevant Early Termination Date to the date for payment determined under Section 6(d)(ii).

(iv) Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable
under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount
is payable for the loss of bargain and the loss of protection against future risks and
except as otherwise provided in this Agreement neither party will be entitled to recover any
additional damages as a consequence of such losses.

7. Transfer

Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this
Agreement may be transferred (whether by way of security or otherwise) by either party without the
prior written consent of the other party, except that:

(a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation
with, or merger with or into, or transfer of all or substantially all its assets to, another entity
(but without prejudice to any other right or remedy under this Agreement); and

(b) a party may make such a transfer of all or any part of its interest in any amount payable to it
from a Defaulting Party under Section 6(e).

Any purported transfer that is not in compliance with this Section will be void.

8. Contractual Currency

(a) Payment in the Contractual Currency. Each payment under this Agreement will be made in the
relevant currency specified in this Agreement for that payment (the “Contractual Currency”). To
the extent permitted by applicable law, any obligation to make payments under this Agreement in the
Contractual Currency will not be discharged or satisfied by any tender in any currency other than
the Contractual Currency, except to the extent such tender results in the actual receipt by the
party to which payment is owed, acting in a reasonable manner and in good faith in converting the
currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency
of all amounts payable in respect of this Agreement. If for any reason the amount in the
Contractual Currency so received falls short of the amount in the Contractual Currency payable in
respect of this Agreement, the party required to make the payment will, to the extent permitted by
applicable law, immediately pay such additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall. If for any reason the amount in the Contractual
Currency so received exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of such excess.

(b) Judgments. To the extent permitted by applicable law, if any judgment or order expressed in a
currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in
respect of this Agreement, (ii) for the payment of any amount relating to any early termination in
respect of this Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in
full of the aggregate amount to which such party is entitled pursuant

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to the judgment or order, will be entitled to receive immediately from the other party the amount
of any shortfall of the Contractual Currency received by such party as a consequence of sums paid
in such other currency and will refund promptly to the other party any excess of the Contractual
Currency received by such party as a consequence of sums paid in such other currency if such
shortfall or such excess arises or results from any variation between the rate of exchange at which
the Contractual Currency is converted into the currency of the judgment or order for the purposes
of such judgment or order and the rate of exchange at which such party is able, acting in a
reasonable manner and in good faith in converting the currency received into the Contractual
Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or
order actually received by such party. The term “rate of exchange” includes, without limitation,
any premiums and costs of exchange payable in connection with the purchase of or conversion into
the Contractual Currency.

(c) Separate Indemnities. To the extent permitted by applicable law, these indemnities constitute
separate and independent obligations from the other obligations in this Agreement, will be
enforceable as separate and independent causes of action, will apply notwithstanding any indulgence
granted by the party to which any payment is owed and will not be affected by judgment being
obtained or claim or proof being made for any other sums payable in respect of this Agreement.

(d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient for a party to
demonstrate that it would have suffered a loss had an actual exchange or purchase been made.

9. Miscellaneous

(a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the
parties with respect to its subject matter and supersedes all oral communication and prior writings
with respect thereto.

(b) Amendments. No amendment, modification or waiver in respect of this Agreement will be
effective unless in writing (including a writing evidenced by a facsimile transmission) and
executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an
electronic messaging system.

(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations
of the parties under this Agreement will survive the termination of any Transaction.

(d) Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and
privileges provided in this Agreement are cumulative and not exclusive of any rights, powers,
remedies and privileges provided by law.

(e) Counterparts and Confirmations.

(i) This Agreement (and each amendment, modification and waiver in respect of it) may be
executed and delivered in counterparts (including by facsimile transmission), each of which
will be deemed an original.

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(ii) The parties intend that they are legally bound by the terms of each Transaction from
the moment they agree to those terms (whether orally or otherwise). A Confirmation shall be
entered into as soon as practicable and may be executed and delivered in counterparts
(including by facsimile transmission) or be created by an exchange of telexes or by an
exchange of electronic messages on an electronic messaging system, which in each case will
be sufficient for all purposes to evidence a binding supplement to this Agreement. The
parties will specify therein or through another effective means that any such counterpart,
telex or electronic message constitutes a Confirmation.

(f) No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect
of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of
any right, power or privilege will not be presumed to preclude any subsequent or further exercise,
of that right, power or privilege or the exercise of any other right, power or privilege.

(g) Headings. The headings used in this Agreement are for convenience of reference only and are
not to affect the construction of or to be taken into consideration in interpreting this Agreement.

10. Offices; Multibranch Parties

(a) If Section 10(a) is specified in the Schedule as applying, each party that enters into a
Transaction through an Office other than its head or home office represents to the other party
that, notwithstanding the place of booking office or jurisdiction of incorporation or organization
of such party, the obligations of such party are the same as if it had entered into the Transaction
through its head or home office. This representation will be deemed to be repeated by such party
on each date on which a Transaction is entered into.

(b) Neither party may change the Office through which it makes and receives payments or deliveries
for the purpose of a Transaction without the prior written consent of the other party.

(c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make
and receive payments or deliveries under any Transaction through any Office listed in the Schedule,
and the Office through which it makes and receives payments or deliveries with respect to a
Transaction will be specified in the relevant Confirmation.

11. Expenses

A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all
reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party
by reason of the enforcement and protection of its rights under this Agreement or any Credit
Support Document to which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.

12. Notices

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(a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in
any manner set forth below (except that a notice or other communication under Section 5 or 6 may
not be given by facsimile transmission or electronic messaging system) to the address or number or
in accordance with the electronic messaging system details provided (see the Schedule) and will be
deemed effective as indicated:

(i) if in writing and delivered in person or by courier, on the date it is delivered;

(ii) if sent by telex, on the date the recipient’s answerback is received;

(iii) if sent by facsimile transmission, on the date that transmission is received by a
responsible employee of the recipient in legible form (it being agreed that the burden of
proving receipt will be on the sender and will not be met by a transmission report generated
by the sender’s facsimile machine);

(iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent
(return receipt requested), on the date that mail is delivered or its delivery is attempted;
or

(v) if sent by electronic messaging system, on the date that electronic message is received,

unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a
Local Business Day or that communication is delivered (or attempted) or received, as applicable,
after the close of business on a Local Business Day, in which case that communication shall be
deemed given and effective on the first following day that is a Local Business Day.

(b) Change of Addresses. Either party may by notice to the other change the address, telex or
facsimile number or electronic messaging system details at which notices or other communications
are to be given to it.

13. Governing Law and Jurisdiction

(a) Governing Law. This Agreement will be governed by and construed in accordance with the law
specified in the Schedule.

(b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement
(“Proceedings”), each party irrevocably:

(i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be
governed by English law, or to the non-exclusive jurisdiction of the courts of the State of
New York and the United States District Court located in the Borough of Manhattan in New
York City, if this Agreement is expressed to be governed by the laws of the State of New
York; and

(ii) waives any objection which it may have at any time to the laying of venue of any
Proceedings brought in any such court, waives any claim that such Proceedings have been
brought in an inconvenient forum and further waives the right to object, with respect to
such Proceedings, that such court does not have any jurisdiction over such party.

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Nothing in this Agreement precludes either party from bringing Proceedings in any other
jurisdiction (outside, if this Agreement is expressed to be governed by English law, the
Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or
any modification, extension or re-enactment thereof for the time being in force) nor will the
bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in
any other jurisdiction.

(c) Service of Process. Each party irrevocably appoints the Process Agent (if any) specified
opposite its name in the Schedule to receive, for it and on its behalf, service of process in any
Proceedings. If for any reason any party’s Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process agent acceptable to
the other party. The parties irrevocably consent to service of process given in the manner
provided for notices in Section 12. Nothing in this Agreement will affect the right of either
party to serve process in any other manner permitted by law.

(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by
applicable law, with respect to itself and its revenues and assets (irrespective of their use or
intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit,
(ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance
or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and
(v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise
be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the
extent permitted by applicable law, that it will not claim any such immunity in any Proceedings.

14. Definitions

As used in this Agreement:

“Additional Termination Event” has the meaning specified in Section 5(b).

“Affected Party” has the meaning specified in Section 5(b).

“Affected Transactions” means (a) with respect to any Termination Event consisting of an
Illegality, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such
Termination Event and (b) with respect to any other Termination Event, all Transactions.

“Affiliate” means, subject to the Schedule, in relation to any person, any entity controlled,
directly or indirectly, by the person, any entity that controls, directly or indirectly, the person
or any entity directly or indirectly under common control with the person. For this purpose,
“control” of any entity or person means ownership of a majority of the voting power of the entity
or person.

“Applicable Rate” means:

(a) in respect of obligations payable or deliverable (or which would have been but for Section
2(a)(iii)) by a Defaulting Party, the Default Rate;

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(b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after
the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the
Default Rate;

(c) in respect of all other obligations payable or deliverable (or which would have been but for
Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and

(d) in all other cases, the Termination Rate.

“Burdened Party” has the meaning specified in Section 5(b).

“Change in Tax Law” means the enactment, promulgation, execution or ratification of, or any change
in or amendment to, any law (or in the application or official interpretation of any law) that
occurs on or after the date on which the relevant Transaction is entered into.

“consent” includes a consent, approval, action, authorization, exemption, notice, filing,
registration or exchange control consent.

“Credit Event Upon Merger” has the meaning specified in Section 5(b).

“Credit Support Document” means any agreement or instrument that is specified as such in this
Agreement.

“Credit Support Provider” has the meaning specified in the Schedule.

“Default Rate” means a rate per annum equal to the cost (without proof or evidence of any actual
cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant
amount plus 1% per annum.

“Defaulting Party” has the meaning specified in Section 6(a).

“Early Termination Date” means the date determined in accordance with Section 6(a) or 6(b)(iv).

“Event of Default” has the meaning specified in Section 5(a) and, if applicable, in the Schedule.

“Illegality” has the meaning specified in Section 5(b).

“Indemnifiable Tax” means any Tax other than a Tax that would not be imposed in respect of a
payment under this Agreement but for a present or former connection between the jurisdiction of the
government or taxation authority imposing such Tax and the recipient of such payment or a person
related to such recipient (including, without limitation, a connection arising from such recipient
or related person being or having been a citizen or resident of such jurisdiction, or being or
having been organized, present or engaged in a trade or business in such jurisdiction, or having or
having had a permanent establishment or fixed place of business in such jurisdiction, but excluding
a connection arising solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this Agreement or a Credit
Support Document).

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“law” includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the
practice of any relevant governmental revenue authority) and “lawful” and “unlawful” will be
construed accordingly.

“Local Business Day” means, subject to the Schedule, a day on which commercial banks are open for
business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to
any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if
not so specified, as otherwise agreed by the parties in writing or determined pursuant to
provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other
payment, in the place where the relevant account is located and, if different, in the principal
financial centre, if any, of the currency of such payment, (c) in relation to any notice or other
communication, including notice contemplated under Section 5(a)(i), in the city specified in the
address for notice provided by the recipient and, in the case of a notice contemplated by Section
2(b), in the place where the relevant new account is to be located and (d) in relation to Section
5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction.

“Loss” means, with respect to this Agreement or one or more Terminated Transactions, as the case
may be, and a party, the Termination Currency Equivalent of an amount that party reasonably
determines in good faith to be its total losses and costs (or gain, in which case expressed as a
negative number) in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at
the election of such party but without duplication, loss or cost incurred as a result of its
terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any
gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each applicable condition
precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid
duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a
party’s legal fees and out-of-pocket expenses referred to under Section 11. A party will determine
its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as
of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine
its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in
the relevant markets.

“Market Quotation” means, with respect to one or more Terminated Transactions and a party making
the determination, an amount determined on the basis of quotations from Reference Market-makers.
Each quotation will be for an amount, if any, that would be paid to such party (expressed as a
negative number) or by such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document with respect to the
obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the
“Replacement Transaction”) that would have the effect of preserving for such party the economic
equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent
and assuming the satisfaction of each applicable condition precedent) by the parties under Section
2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would,
but for the occurrence of the relevant Early Termination Date, have been required after that date.
For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated
Transactions are to be

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excluded but, without limitation, any payment or delivery that would, but for the relevant Early
Termination Date, have been required (assuming satisfaction of each applicable condition precedent)
after that Early Termination Date is to be included. The Replacement Transaction would be subject
to such documentation as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference Market-maker to provide
its quotation to the extent reasonably practicable as of the same day and time (without regard to
different time zones) on or as soon as reasonably practicable after the relevant Early Termination
Date. The day and time as of which those quotations are to be obtained will be selected in good
faith by the party obliged to make a determination under Section 6(e), and, if each party is so
obliged, after consultation with the other. If more than three quotations are provided, the Market
Quotation will be the arithmetic mean of the quotations, without regard to the quotations having
the highest and lowest values. If exactly three such quotations are provided, the Market Quotation
will be the quotation remaining after disregarding the highest and lowest quotations. For this
purpose, if more than one quotation has the same highest value or lowest value, then one of such
quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed
that the Market Quotation in respect of such Terminated Transaction or group of Terminated
Transactions cannot be determined.

“Non-default Rate” means a rate per annum equal to the cost (without proof or evidence of any
actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant
amount.

“Non-defaulting Party” has the meaning specified in Section 6(a).

“Office” means a branch or office of a party, which may be such party’s head or home office.

“Potential Event of Default” means any event which, with the giving of notice or the lapse of time
or both, would constitute an Event of Default.

“Reference Market-makers” means four leading dealers in the relevant market selected by the party
determining a Market Quotation in good faith (a) from among dealers of the highest credit standing
which satisfy all the criteria that such party applies generally at the time in deciding whether to
offer or to make an extension of credit and (b) to the extent practicable, from among such dealers
having an office in the same city.

“Relevant Jurisdiction” means, with respect to a party, the jurisdictions (a) in which the party is
incorporated, organized, managed and controlled or considered to have its seat, (b) where an Office
through which the party is acting for purposes of this Agreement is located, (c) in which the party
executes this Agreement and (d) in relation to any payment, from or through which such payment is
made.

“Scheduled Payment Date” means a date on which a payment or delivery is to be made under Section
2(a)(i) with respect to a Transaction.

“Set-off” means set-off, offset, combination of accounts, right of retention or withholding or
similar right or requirement to which the payer of an amount under Section 6 is entitled or subject
(whether arising under this Agreement, another contract, applicable law or otherwise) that is
exercised by, or imposed on, such payer.

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“Settlement Amount” means, with respect to a party and any Early Termination Date, the sum of:

(a) the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for
each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is
determined; and

(b) such party’s Loss (whether positive or negative and without reference to any Unpaid Amounts)
for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation
cannot be determined or would not (in the reasonable belief of the party making the determination)
produce a commercially reasonable result.

“Specified Entity” has the meaning specified in the Schedule.

“Specified Indebtedness” means, subject to the Schedule, any obligation (whether present or future,
contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money.

“Specified Transaction” means, subject to the Schedule, (a) any transaction (including an agreement
with respect thereto) now existing or hereafter entered into between one party to this Agreement
(or any Credit Support Provider of such party or any applicable Specified Entity of such party) and
the other party to this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap transaction, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or
equity index option, bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including any option with
respect to any of these transactions), (b) any combination of these transactions and (c) any other
transaction identified as a Specified Transaction in this Agreement or the relevant confirmation.

“Stamp Tax” means any stamp, registration, documentation or similar tax.

“Tax” means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature
(including interest, penalties and additions thereto) that is imposed by any government or other
taxing authority in respect of any payment under this Agreement other than a stamp, registration,
documentation or similar tax.

“Tax Event” has the meaning specified in Section 5(b).

“Tax Event Upon Merger” has the meaning specified in Section 5(b).

“Terminated Transactions” means with respect to any Early Termination Date (a) if resulting from a
Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all
Transactions (in either case) in effect immediately before the effectiveness of the notice
designating that Early Termination Date (or, if “Automatic Early Termination” applies, immediately
before that Early Termination Date).

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“Termination Currency” has the meaning specified in the Schedule.

“Termination Currency Equivalent” means, in respect of any amount denominated in the Termination
Currency, such Termination Currency amount and, in respect of any amount denominated in a currency
other than the Termination Currency (the “Other Currency”), the amount in the Termination Currency
determined by the party making the relevant determination as being required to purchase such amount
of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market
Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the
Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent
(selected as provided below) for the purchase of such Other Currency with the Termination Currency
at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) on such date
as would be customary for the determination of such a rate for the purchase of such Other Currency
for value on the relevant Early Termination Date or that later date. The foreign exchange agent
will, if only one party is obliged to make a determination under Section 6(e), be selected in good
faith by that party and otherwise will be agreed by the parties.

“Termination Event” means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to
be applicable, a Credit Event Upon Merger or an Additional Termination Event.

“Termination Rate” means a rate per annum equal to the arithmetic mean of the cost (without proof
or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of
funding such amounts.

“Unpaid Amounts” owing to any party means, with respect to an Early Termination Date, the aggregate
of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would
have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to
such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in
respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or
would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or
prior to such Early Termination Date and which has not been so settled as at such Early Termination
Date, an amount equal to the fair market value of that which was (or would have been) required to
be delivered as of the originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such amounts, from (and
including) the date such amounts or obligations were or would have been required to have been paid
or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts
of interest will be calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above shall be
reasonably determined by the party obliged to make the determination under Section 6(e) or, if each
party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair
market values reasonably determined by both parties.

ISDA® 1992

23

 

IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below
with effect from the date specified on the first page of this document.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	          (Name of Party)	 	 	 	          (Name of Party)
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:	 	 
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Title:	 	 
	 

	 	 
	 	 	 	 	 	 
	Date:

	 	 	 	 	 	Date:	 	 
	 

	 	 
	 	 	 	 	 	 

ISDA® 1992

24

 

ISDA

International Swap Dealers Association, Inc.

SCHEDULE

to the

Master Agreement

dated as of                     

	 	 	 	 	 
	between
	 	 	 	 
	 

	 	 

(“Party A”)
	 	 

and

	 	 	 	 	 
	 	 	NISSAN AUTO RECEIVABLES                      OWNER TRUST
	 

	 	(“Party B”)	 	 

Part 1. Termination Provisions.

	(a)	 	The following shall apply:

	 
	(i)	 	Termination by Party A — Events of Default Notwithstanding the provisions of Section
5(a), the only events which will constitute Events of Default when they occur in relation
to Party B will be those events specified in Sections 5(a)(i) (Failure To Pay Or Deliver)
and Section 5(a)(vii) (Bankruptcy), other than the events specified in Section
5(a)(vii)(2).
	 
	 	 	Accordingly, the provisions of Section 5(a)(ii) (Breach Of Agreement), the provisions of
Section 5(a)(iii) (Credit Support Default), the provisions of Section 5(a)(iv)
(Misrepresentation), the provisions of Section 5(a)(v) (Default Under Specified
Transaction), the provisions of Section 5(a)(vi) (Cross Default), the provisions of
Section 5(a)(vii)(2) (insolvency) and the provisions of Section 5(a)(viii) (Merger Without
Assumption) will in no circumstances be regarded as having given rise to an Event of
Default with respect to Party B.
	 
	(ii)	 	Termination by Party A — Termination Events Notwithstanding the provisions of
Section 5(b), and save as otherwise provided herein, the only events which will constitute
Termination Events when they occur in relation to Party B will be those

ISDA Schedule

 

events specified in Section 5(b)(i) (Illegality) and Section 5(b)(v) (Additional
Termination Event). Accordingly, the provisions of Section 5(b)(iv) (Credit Event Upon
Merger) will not be regarded as having given rise to a Termination Event with respect to
Party B and Party A may not designate an Early Termination Date related to the provisions
of Section 5(b)(ii) (Tax Event) or the provisions of Section 5(iii) (Tax Event Upon
Merger).

(iii) Termination by Party B - Events of Default and Termination Events. Save as otherwise
provided herein, the provisions of Section 5 will apply with respect to Party A without
amendment save for the provisions of Section 5(b)(iii) will apply to Party A provided that
Party A shall not be entitled to designate an Early Termination Date by reason of a Tax
Event Upon Merger in respect of which it is the Affected Party. For purposes of Section
5(a)(vi) (Cross Default), the Threshold Amount applicable to Party A shall be [___]% of
Shareholders equity (excluding deposits).

	(b)	 	“Specified Entity” none specified in relation to either Party A or Party B.
	 
	(c)	 	“Specified Transaction” will have the meaning specified in Section 14 of this Agreement.
	 
	(d)	 	The “Automatic Early Termination” provision of Section 6(a) of this Agreement will not apply
to Party A and will not apply to Party B.
	 
	(e)	 	Payments on Early Termination. For the purpose of Section 6(e) of this Agreement:
	 
	 	 	Market Quotation will apply and the Second Method will apply; provided,
however, with respect to an early termination in which Party A is the Defaulting
Party or sole Affected Party in respect of an Additional Termination Event or Tax Event
Upon Merger, notwithstanding Section 6 of this Agreement, the following amendment to this
Agreement set forth in paragraphs (i) to (ix) below shall apply:
	 
	 	 	The definition of “Market Quotation” shall be deleted in its entirety and replaced with the
following:
	 
	 	 	“Market Quotation” means, with respect to one or more Terminated Transactions, a Firm Offer
which is (1) made by a Reference Market-maker that is an Eligible Replacement with Rated
Debt, (2) for an amount that would be paid to Party B (expressed as a negative number) or by
Party B (expressed as a positive number) in

ISDA Schedule

2

 

	 	 	consideration of an agreement between Party B and such Reference Market-maker to enter into
a transaction (the “Replacement Transaction”) that would have the effect of preserving for
such party the economic equivalent of any payment or delivery (whether the underlying
obligation was absolute or contingent and assuming the satisfaction of each applicable
condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated
Transactions or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that Date, (3) made on the basis
that Unpaid Amounts in respect of the Terminated Transaction or group of Transactions are to
be excluded but, without limitation, any payment or delivery that would, but for the
relevant Early Termination Date, have been required (assuming satisfaction of each
applicable condition precedent) after that Early Termination Date is to be included and (4)
made in respect of a Replacement Transaction with commercial terms substantially the same as
those of this Agreement (save for the exclusion of provisions relating to Transactions that
are not Terminated Transactions).”
	 
	(iii)	 	The definition of “Settlement Amount” shall be deleted in its entirety and replaced
with the following:
	 
	 	 	“Settlement Amount” means, with respect to any Early Termination Date, an amount (as
determined by Party B) equal to:

	 	(a)	 	If a Market Quotation for the relevant Terminated Transaction or group of
Terminated Transactions is accepted by Party B so as to become legally binding on or
before the day falling ten Local Business Days after the day on which the Early
Termination Date is designated (or such later day as Party B may specify in writing to
Party A, which in any event will not be later than the Early Termination Date) (such
day, the “Latest Settlement Amount Determination Day”), the Termination Currency
Equivalent of the amount (whether positive or negative) of such Market Quotation; or
	 
	 	(b)	 	If no Market Quotation for the relevant Terminated Transaction or group of
Terminated Transactions is accepted by Party B so as to become legally binding on or
before the Latest Settlement Amount Determination Day, Party B’s Loss (whether positive
or negative and without reference to any Unpaid Amounts) for the relevant Terminated
Transaction or group of Terminated Transactions.

ISDA Schedule

3

 

(iv) For the purpose of clause (4) of the definition of Market Quotation, Party B shall
determine in its sole discretion, acting in a commercially reasonable manner, whether a Firm
Offer is made in respect of a Replacement Transaction with commercial terms substantially
the same as those of this Agreement (save for the exclusion of provisions relating to
Transactions that are not Terminated Transactions).

(v) Party B undertakes to use its reasonable efforts to obtain at least one Market Quotation
before the Latest Settlement Amount Determination Day.

(vi) Party B will be deemed to have discharged its obligations under (v) above if it
requests Party A to obtain Market Quotations, where such request is made in writing within
two Local Business Days after the day on which the Early Termination Date is designated.

(vii) if Party B requests Party A in writing to obtain Market Quotations, Party A shall use
its reasonable efforts to do so before the Latest Settlement Amount Determination Day.

(viii) Any amount calculated as being due in respect of an Early Termination Date will be
payable in accordance with Section 6(d)(ii), provided that if such payment is owed to Party
B, it will be payable on the day that notice of the amount payable is given to Party A.

(ix) If the Settlement Amount is a negative number, Section 6(e)(i)(3) of this Agreement
shall be deleted in its entirety and replaced with the following:

“Second Method and Market Quotation. If Second Method and Market Quotation apply, (1) Party
B shall pay to Party A an amount equal to the absolute value of the Settlement Amount in
respect of the Terminated Transactions, (2) Party B shall pay to Party A the Termination
Currency Equivalent of the Unpaid Amounts owing to Party A and (3) Party A shall pay to
Party B the Termination Currency Equivalent of the Unpaid Amounts owing to Party B, Provided
that, (i) the amounts payable under (2) and (3) shall be subject to netting in accordance
with Section 2(c) of this Agreement and (ii) notwithstanding any other provision of this
Agreement, any amount payable by Party A under (3) shall not be netted-off against any
amount payable by Party B under (1).”.

	(f)	 	“Termination Currency” means U.S. Dollars.

ISDA Schedule

4

 

	(g)	 	Additional Termination Event will apply. Each of the following events shall constitute an
Additional Termination Event hereunder:

(i) Acceleration of the Notes. The following shall constitute an Additional
Termination Event in which Party B shall be the sole Affected Party: Any
acceleration of the Notes outstanding occurs following an event of default under the
Indenture.

(ii) Regulation AB Financial Disclosure. The following shall constitute an
Additional Termination Event in which Party A shall be the sole Affected Party:
The failure of Party A to materially comply with or materially perform any agreement
or undertaking to be complied with or performed by Party A under Part 5(t).

(iii) S&P Downgrade of Party A. The failure by Party A to post Eligible Collateral
in accordance with the terms of the Credit Support Annex or to obtain a guarantee in
accordance with Part 5(q) or to transfer its rights and obligations hereunder to a
Qualified Counterparty in accordance with Part 5(q) shall constitute an Additional
Termination Event for which Party A shall be the sole Affected Party.

(iv) Moody’s First Rating Trigger Collateral. The following shall constitute an
Additional Termination Event in which Party A is the sole Affected Party: Party A
has failed to comply with or perform any obligation to be complied with or performed
by Party A in accordance with the Credit Support Annex from time to time entered
into between Party A and Party B in relation to this Agreement and either (x) the
Moody’s Second Rating Trigger Requirements do not apply or (y) less than 30 Local
Business Days have elapsed since the last time the Moody’s Second Rating Trigger
Requirements did not apply.

(v) Moody’s Second Rating Trigger Replacement. The following shall constitute an
Additional Termination Event in which Party A is the sole Affected Party: (x) The
Moody’s Second Rating Trigger Requirements apply and 30 or more Local Business Days
have elapsed since the last time the Moody’s Second Rating Trigger Requirements did
not apply and (y) (A) at least one Eligible Replacement has made a Firm Offer (which
remains capable of becoming legally binding upon acceptance) to be the transferee of
a transfer to be made in

ISDA Schedule

5

 

accordance with Part 5(e) below and/or (B) at least one entity with the Moody’s
First Trigger Required Ratings and/or the Moody’s Second Trigger Required Ratings
has made a Firm Offer (which remains capable of becoming legally binding upon
acceptance by the offeree) to provide an Eligible Guarantee in respect of all of
Party A’s present and future obligations under this Agreement.

For the purpose of Part 1(e) and sub-paragraphs (iv) and (v) above:

“Eligible Guarantee” means an unconditional and irrevocable guarantee that is
provided by a guarantor as principal debtor rather than surety and is directly
enforceable by Party B, where either (A) a law firm has given a legal opinion
confirming that none of the guarantor’s payments to Party B under such guarantee
will be subject to withholding for tax or (B) such guarantee provides that, in the
event that any of such guarantor’s payments to Party B are subject to withholding
for tax, such guarantor is required to pay such additional amount as is necessary to
ensure that the net amount actually received by Party B (free and clear of any
withholding tax) will equal the full amount Party B would have received had no such
withholding been required.

“Eligible Replacement” means an entity (A) with the Moody’s First Trigger Required
Ratings and/or the Moody’s Second Trigger Required Ratings that is the subject of a
legal opinion given by a law firm confirming that none of its payments to Party B
will be subject to withholding for tax or (B) whose present and future obligations
owing to Party B are guaranteed pursuant to an Eligible Guarantee provided by a
guarantor with the Moody’s First Trigger Required Ratings and/or the Moody’s Second
Trigger Required Ratings.

“Firm Offer” means an offer which, when made, was capable of becoming legally
binding upon acceptance.

“Moody’s Short-term Rating” means a rating assigned by Moody’s under its short-term
rating scale in respect of an entity’s short-term, unsecured and unsubordinated debt
obligations

ISDA Schedule

6

 

“Relevant Entities” means Party A and any guarantor under an Eligible Guarantee in
respect of all of Party A’s present and future obligations under this Agreement.

(A) The “Moody’s First Rating Trigger Requirements” shall apply so long as no
Relevant Entity has the Moody’s First Trigger Required Ratings. An entity shall
have the “Moody’s First Trigger Required Ratings” (x) where such entity is the
subject of a Moody’s Short-term Rating, if such rating is “Prime-1” and its
long-term, unsecured and unsubordinated debt obligations are rated “A2” or above by
Moody’s and (y) where such entity is not the subject of a Moody’s Short-term Rating,
if its long-term, unsecured and unsubordinated debt obligations are rated “A1” or
above by Moody’s.

(B) So long as the Moody’s First Rating Trigger Requirements apply, Party A will at
its own cost use commercially reasonable efforts to, as soon as reasonably
practicable, (x) procure an Eligible Guarantee in respect of all of Party A’s
present and future obligations under this Agreement to be provided by a guarantor
with the Moody’s First Trigger Required Ratings, (y) transfer to Party B the amount
of Eligible Collateral required under the Credit Support Annex or (y) transfer this
Agreement in accordance with Part 5(e) below.

(C) The “Moody’s Second Rating Trigger Requirements” shall apply so long as no
Relevant Entity has the Moody’s Second Trigger Required Ratings. An entity shall
have the “Moody’s Second Trigger Required Ratings” (x) where such entity is the
subject of a Moody’s Short-term Rating, if such rating is “Prime-2” or above and its
long-term, unsecured and unsubordinated debt obligations are rated “A3” or above by
Moody’s and (y) where such entity is not the subject of a Moody’s Short-term Rating,
if its long-term, unsecured and unsubordinated debt obligations are rated “A3” or
above by Moody’s.

(D) So long as the Moody’s Second Rating Trigger Requirements apply, Party A will at
its own cost use commercially reasonable efforts to, as soon as reasonably
practicable, either (x) procure an Eligible Guarantee in respect of all of Party A’s
present and future obligations under this Agreement to be provided by a guarantor
with the Moody’s First Trigger Required Ratings and/or the Moody’s Second Trigger
Required Ratings or (y) transfer this Agreement in accordance

ISDA Schedule

7

 

with Part 5(e) below, and in both the case of (x) and (y), transfer to Party B the
amount of Eligible Collateral required under the Credit Support Annex.

In the event of an Early Termination Date in respect of a Party A Rating Downgrade,
a Moody’s First Rating Trigger Replacement or a Moody’s Second Rating Trigger
Replacement and the entering into by Party B of alternative swap arrangements, Party
A shall pay all reasonable out-of-pocket expenses, including legal fees and stamp
taxes, relating to the entering into of such alternative swap arrangements.

Part 2. Tax Representations

	(a)	 	Payer Representations. For the purpose of Section 3(e) of this Agreement, Party A will make
the following representation and Party B will make the following representation:
	 
	 	 	It is not required by any applicable law, as modified by the practice of any relevant
governmental revenue authority, of any Relevant Jurisdiction to make any deduction or
withholding for or on account of any Tax from any payment (other than interest under
Section 2(e), 6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party
under this Agreement. In making this representation, it may rely on (i) the accuracy of
any representations made by the other party pursuant to Section 3(f) of this Agreement,
(ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this
Agreement and the accuracy and effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement and (iii) the satisfaction of
the agreement of the other party contained in Section 4(d) of this Agreement, provided
that it shall not be a breach of this representation where reliance is placed on clause
(ii) and the other party does not deliver a form or document under Section 4(a)(iii) of
this Agreement by reason of material prejudice to its legal or commercial position.
	 
	(b)	 	Payee Representations. For the purpose of Section 3(f) of this Agreement, Party A and Party B
will make the representations in (i) and (ii) below.

	 	(i)	 	Party A represents that it is a [type of entity] organized under the
laws of                                         .

ISDA Schedule

8

 

	 	(ii)	 	Party B represents that it is a Delaware statutory trust organized or formed
under the laws of the State of Delaware.

Part 3. Agreement to Deliver Documents.

For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the
following documents, as applicable:

	(a)	 	Tax forms, documents or certificates to be delivered are:
	 
	 	 	Party A and Party B shall promptly deliver to the other party (or as directed) any form or
document accurately completed and in a manner reasonably satisfactory to the other party
that may be required or reasonably requested in order to allow the other party to make a
payment under a Transaction without any deduction or withholding for or on account of any
Tax or with such deduction or withholding at a reduced rate, promptly upon reasonable demand
by the other party.

	 	(b)	 	Other documents to be delivered are:

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Covered by Section
	Party required to	 	Form/Document/	 	Date by which to be	 	3(d) Representation
	deliver document	 	Certificate	 	delivered	 	of this Agreement
	Party A and Party B

	 	Evidence of the
authority of the
signatories of this
Agreement including
specimen signatures
of such
signatories.
	 	Upon execution of
this Agreement.
	 	Yes
	 
	 	 	 	 	 	 
	Party A

	 	An opinion of
counsel addressed
to Party B in form
and substance
reasonably
acceptable to Party
B.
	 	Upon execution of
this Agreement.
	 	No
	 
	 	 	 	 	 	 

ISDA Schedule

9

 

	 	 	 	 	 	 	 
	 	 	 	 	 	 	Covered by Section
	Party required to	 	Form/Document/	 	Date by which to be	 	3(d) Representation
	deliver document	 	Certificate	 	delivered	 	of this Agreement
	Party B

	 	An opinion of Party
B’s counsel
addressed to Party
A in form and
substance
reasonably
acceptable to Party
A.
	 	Upon execution of
this Agreement.
	 	No
	 
	 	 	 	 	 	 
	Party B

	 	A duly executed
certificate of the
secretary or
assistant secretary
of the Owner
Trustee of Party B
certifying the name
and true signature
of each person
authorized to
execute this
Agreement and enter
into Transactions
for Party B.
	 	Upon execution of
this Agreement.
	 	Yes
	 
	 	 	 	 	 	 
	Party B

	 	Copies of executed
Indenture and Sale
and Servicing
Agreement.
	 	Upon execution of
such Agreements
	 	Yes
	 
	 	 	 	 	 	 
	Party A

	 	Financial data
relating to Party
A, as required
pursuant to Part
5(t) of this
Schedule.
	 	As required
pursuant to Part
5(t) of this
Schedule.
	 	Yes

ISDA Schedule

10

 

Part 4. Miscellaneous.

	(a)	 	Addresses for Notices. For the purpose of Section 12(a) of this Agreement:
	 
	 	 	Address for notices or communications to Party A:
	 
	 	 	Address:                                                                                 
	 
	 	 	Attention:                                                                                 
	 
	 	 	Telex No.: Not applicable      Answerback: Not applicable
	 
	 	 	Facsimile No.:                      Telephone No.:                     
	 
	 	 	Electronic Messaging System Details: Not applicable
	 
	 	 	Address for notices or communications to Party B:

	 	 	 	 	 	 	 
	 

	Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 

Attention: Nissan Auto Receivables                      Owner Trust

Telex No.:       Not applicable       Answerback:       Not applicable

Facsimile No.:                      Telephone No.:                     

Electronic Messaging System Details: Not applicable

With a copy to:

Nissan Motor Acceptance Corporation

BellSouth Tower

333 Commerce Street, 10th Floor, B-10-C

Nashville, Tennessee 37201-1800

Attention:                     

Telephone No.:                     

Facsimile No.:                     

ISDA Schedule

11

 

With a copy to the Indenture Trustee at:

	 	 	 	 	 	 	 
	 

	Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	Attention:	 	 	 	 
	 

	 	 	 	 

	 	 

Telex No.:       Not applicable       Answerback:       Not applicable

Facsimile No.:                      Telephone No.:                     

Electronic Messaging System Details: Not applicable

	(b)	 	Process Agent. For the purpose of Section 13(c) of this Agreement:
	 
	 	 	Party A appoints as its Process Agent                           
	 
	 	 	Party B appoints as its Process Agent       Not applicable
	 
	(c)	 	Notices. Section 12(a) of the Agreement is amended by adding the words in the third line
thereof after the phrase “messaging system” and before the “)” the words “; provided,
however, any such notice or other communication may be given by facsimile transmission if
telex is unavailable, no telex number is supplied by the party providing notice, or if answer
back confirmation is not received from the party to whom the telex is sent.”
	 
	(d)	 	Offices. The provisions of Section 10(a) of this Agreement will apply to this Agreement.
	 
	(e)	 	Multibranch Party. For the purpose of Section 10(c) of this Agreement:
	 
	 	 	Party A [is] [is not] a Multibranch Party [and if so, may act through the following
offices: [PLEASE SPECIFY]].
	 
	 	 	Party B is not a Multibranch Party.
	 
	(f)	 	Calculation Agent. The Calculation Agent is Party B, unless otherwise specified in a
Confirmation in relation to the relevant Transaction.

ISDA Schedule

12

 

	(g)	 	Credit Support Document. Details of any Credit Support Document:

	 	 	 	 	 
	 

	 	With respect to Party A:
	 	The Credit Support Annex and any guarantee in support
of Party A’s obligation under this Agreement
	 
	 

	 	With respect to Party B:
	 	Not applicable

	(h)	 	Credit Support Provider. Credit Support Provider means in relation to

	 	 	 	 	 
	 

	 	Party A:
	 	The guarantor under any guarantee in
support of Party A’s obligations under this Agreement
	 
	 

	 	Party B:
	 	Not applicable.

	(i)	 	Governing Law. This Agreement will be governed by and construed in accordance with the laws
of the State of New York (without reference to choice of laws doctrine except Section 5-1401
and Section 5-1402 of the New York General Obligation Law).
	 
	(j)	 	Netting of Payments. The limitation set forth in Section 2(c)(ii) of this Agreement will
apply and therefore the netting in Section 2(c) of this Agreement will be limited to the same
Transaction.
	 
	(k)	 	“Affiliate” will have the meaning specified in Section 14 of this Agreement.
	 
	(l)	 	No Gross Up by Party B. Section 2(d)(i)(4) is hereby deleted and replaced by the following:

“(4) (A) If Party A is the party so required to deduct or withhold, then Party A shall
make such additional payment as is necessary to ensure that the net amount actually
received by Party B (free and clear of all Taxes, whether assessed against it or Party B)
will equal the full amount Party B would have received had no such deduction or
withholding been required; and

(B) if Party B is the party so required to deduct or withhold, then Party B shall make
the relevant payment subject to such deduction or withholding and Party B will not be
required to gross up.

For the avoidance of doubt, the fact that any payment is made by Party B subject to the
provisions of (B) above shall at no time affect the obligations of Party A under (A)
above.”

ISDA Schedule

13

 

Part 5. Other Provisions.

	(a)	 	ISDA Definitions

The definitions and provisions contained in the 2000 ISDA Definitions (the “2000
Definitions”) as published by the International Swaps and Derivatives Association, Inc.,
are incorporated by reference into this Agreement. The Agreement and each Transaction
will be governed by the 2000 Definitions as they may be officially amended and
supplemented from time to time by ISDA.

For the sake of clarity, unless otherwise specified in this Agreement, the following
documents shall govern in the order in which they are listed in the event of any
inconsistency between any of the documents:

	 	(i)	 	the Confirmation;
	 
	 	(ii)	 	the Schedule;
	 
	 	(iii)	 	the 2000 Definitions; and
	 
	 	(v)	 	the printed form of ISDA Master Agreement.

	(b)	 	Relationship Between Parties

Each party will be deemed to represent to the other party on the date on which it enters
into a Transaction that (absent a written agreement between the parties that expressly
imposes affirmative obligations to the contrary for the Transaction):

(i) Non-Reliance. It is acting for its own account, and it has made its own independent
decisions to enter into that Transaction and as to whether that Transaction is appropriate
or proper for it based upon its own judgement and upon advice from such advisors as it has
deemed necessary. It is not relying on any communication (written or oral) of the other
party as investment advice or as a recommendation to enter into that Transaction; it being
understood that information and explanations related to the terms and conditions of a
Transaction shall not be considered investment advice or a recommendation to enter into
that Transaction. It has not received from the other party any assurance or guarantee as
to the expected results of that Transaction.

ISDA Schedule

14

 

(ii) Assessment and Understanding. It is capable of assessing the merits of and
understanding (on its own behalf or through independent professional advice), and
understands and accepts, the terms, conditions and risks of that Transaction. It is also
capable of assuming, and assumes, the risks of that Transaction.

(iii) Status of Parties. Each party is acting as principal and not as agent and the other
party is not acting as a fiduciary for or as an advisor to it in respect of that
Transaction.

(iv) Eligible Contract Participant. It is an “eligible contract participant” as
defined in Section 1a(12) of the U.S. Commodity Exchange Act, 7 U.S.C. Section 1a(12).

(v) FDIC Requirements. If it is a bank subject to the requirements of 12 U.S.C. §
1823(e), the necessary action to authorize referred to in the representation in Section
3(a)(ii) includes all authorizations required under the Federal Deposit Insurance Act as
amended, including amendments effected by the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, and under any agreement, writ, decree, or order entered into with
such party’s supervisory authorities. At all times during the term of this Agreement,
such party will continuously include and maintain as part of its official written books
and records this Agreement, this Schedule and all other exhibits, supplements, and
attachments hereto and documents incorporated by reference herein, all Confirmations, and
evidence of all necessary authorizations.

(vi) ERISA. It continuously represents that it is not (i) an employee benefit plan (an
“ERISA Plan”) as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ERISA”), subject to Title 1 of ERISA or Section 4975 of the Internal
Revenue Code of 1986, as amended, (ii) a person or entity acting on behalf of an ERISA
Plan or (iii) a person or entity the assets of which constitute assets of an ERISA Plan.”
It will provide notice to the other party in the event that it is aware that it is in
breach of any aspect of this representation or is aware that with the passing of time,
giving of notice or expiry of any applicable grace period, it will breach this
representation.

	(c)	 	Waiver of Jury Trial. Each party hereby irrevocably waives any and all rights to trial by
jury with respect to any legal proceeding arising out of or relating to this Agreement or any
Transaction contemplated hereby.

ISDA Schedule

15

 

	(d)	 	Severability. Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of the Agreement or
affecting the validity or enforceability of such provision in any other jurisdiction unless
such severance shall substantially impair the benefits of the remaining portions of this
Agreement or changes the reciprocal obligations of the parties. The parties hereto shall
endeavour in good faith negotiations to replace the prohibited or unenforceable provision with
a valid provision, the economic effect of which comes as close as possible to that of the
prohibited or unenforceable provision.
	 
	(e)	 	Transfers. Notwithstanding the provisions of Section 7:-

(i) No transfer by Party A of this Agreement or any interest or obligation in or of Party
A under this Agreement shall be effective unless:

	 	(A)	 	Party B consents to such transferee;
	 
	 	(B)	 	The Rating Agency Condition shall have been satisfied;
	 
	 	(C)	 	Party A shall have given Party B, the Servicer and the
Indenture Trustee at least twenty days prior written notice of the proposed
transfer; and
	 
	 	(D)	 	such transfer otherwise complies with the terms of the
Indenture and the other Transaction Agreements.

     Upon the effectiveness of any transfer, each of Party A and Party B shall be released
(in each case to the extent of the obligations so transferred) from its obligations as a
party to this Agreement without any further notification or other action.

(ii) Except to the extent contemplated by the Indenture, neither this Agreement nor any
interest in or under this Agreement may be transferred by Party B to any other entity save
with Party A’s prior written consent (such consent not to be unreasonably withheld or
delayed).

	(f)	 	Permitted Security Interest. For purposes of Section 7 of this Agreement, Party A hereby
consents to the Permitted Security Interest.

ISDA Schedule

16

 

	 	 	“Permitted Security Interest” means the pledge and assignment by Party B of the Swap
Collateral to the Indenture Trustee pursuant to the Indenture, and the granting to the
Indenture Trustee of a security interest in the Swap Collateral pursuant to the Indenture.
	 
	 	 	“Swap Collateral” means all right, title and interest of Party B in this Agreement, each
Transaction hereunder, and all present and future amounts payable by Party A to Party B
under or in connection with this Agreement or any Transaction governed by this Agreement,
including, without limitation, any transfer or termination of any such Transaction.
	 
	 	 	“Indenture Trustee” means                                          or any successor, acting as
Indenture Trustee pursuant to the Indenture.
	 
	(g)	 	Absence of Certain Events. Section 3(b) of this Agreement is hereby amended by inserting the
parenthetical “(with respect to Party A only)” immediately after the phrase “No Event of
Default or”.
	 
	(h)	 	Events of Default. Section 5(a)(i) of this Agreement is hereby amended by changing the word
“third” to “first” in the phrase “if such failure is not remedied on or before the third Local
Business Day after notice of such failure is given to the party” and the addition of the
following at the end thereof:
	 
	 	 	“, it being understood that amounts payable by Party B are not due except to the extent
set forth in Section 5.06 of the Sale and Servicing Agreement.”
	 
	(i)	 	Payment on Early Termination. If an Early Termination Date occurs in respect of which Party
A is the Defaulting Party or the sole Affected Party with respect to an Additional Termination
Event, Party B will not be required to pay any amounts payable to Party A under Section 6(e)
in respect of such Early Termination Date, and Party A will not be permitted to set-off in
respect of such amounts, until payment in full of all amounts outstanding under the Notes.
	 
	(j)	 	No Set-Off. Party A and Party B hereby waive any and all right of set-off with respect to
any amounts due under this Agreement or any Transaction, provided that nothing herein shall be
construed to waive or otherwise limit the netting provisions contained in Sections 2(c) of
this Agreement.

ISDA Schedule

17

 

	(k)	 	Indenture. Party B hereby acknowledges that Party A is a secured party under the Indenture
with respect to this Agreement, and Party B agrees for the benefit of Party A that it will not
amend the Indenture in a manner which materially and adversely affects the rights or
obligations of Party A under the Indenture unless Party A shall have consented in writing to
such action (and such consent shall be deemed to have been given if Party A does not object in
writing within ten (10) business days after receipt of a written request for such consent).
	 
	(l)	 	No Recourse. The liability of Party B to Party A hereunder is limited in recourse solely to
the amounts payable to Party A from the Available Amounts, Advances made on such Distribution
Date and the amounts withdrawn from the Reserve Account in accordance with the priority of
payments set forth in Section 5.06 of the Sale and Servicing Agreement.
	 
	(m)	 	No Petition. Party A hereby covenants and agrees that
prior to the date which is one year (or, if longer, the applicable
preference period) and one day after payment in full of all
obligations of each Bankruptcy Remote Party in respect of all
securities issued by any Bankruptcy Remote Party (i) it shall not
authorize any Bankruptcy Remote Party to commence a voluntary
winding-up or other voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to such
Bankruptcy Remote Party or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect in any jurisdiction or
seeking the appointment of an administrator, a trustee, receiver,
liquidator, custodian or other similar official with respect to such
Bankruptcy Remote Party or any substantial part of its property or to
consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against such Bankruptcy Remote Party, or to make
a general assignment for the benefit of any party hereto or any other
creditor of such Bankruptcy Remote Party, and (ii) it shall not
commence or join with any other Person in commencing any proceeding
against such Bankruptcy Remote Party under any bankruptcy,
reorganization, liquidation or insolvency law or statute now or
hereafter in effect in any jurisdiction. This section shall survive
the termination of this Agreement.
	 
	 	 	As used above, “Bankruptcy Remote Party” means any of Nissan Auto
Receivables Corporation II and Party B.
	 
	(n)	 	Confirmation. Each party acknowledges and agrees that the Confirmation executed as of the
date hereof and designated as Party A Global ID No.                      shall be the

ISDA Schedule

18

 

	 	 	only Transaction governed by this Agreement (it being understood that, in the event
such Confirmation shall be amended (in any respect), such amendment shall not constitute
(for purposes of this paragraph) a separate Transaction or a separate Confirmation).
Party A and Party B shall not enter into any additional Confirmations or Transactions
hereunder.
	 
	(o)	 	Potential Events of Default. Section 2(a)(iii) is amended by the deletion of the words “or
Potential Event of Default”.
	 
	(p)	 	Limitation of Liability. Notwithstanding anything contained herein to the contrary, in
executing this Agreement (including the Schedule, Credit Support Annex and each Confirmation)
on behalf of Party B,                      (the “Owner Trustee”) and the Indenture Trustee are
acting solely in its capacity as owner trustee of Party B and indenture trustee, respectively,
and not in its individual capacity, and in no event shall either one of them, in their
individual capacity, have any liability for the representations, warranties, covenants,
agreements or other obligations of Party B hereunder, for which recourse shall be had solely
to the assets of Party B, except to the extent of its fraud, breach of trust or willful
misconduct.
	 
	(q)	 	S&P Downgrade of Party A. In the event (i) S&P assigns a short-term debt rating lower than
“A-1” to Party A or (ii) S&P assigns a long-term debt rating lower than “A+” to Party A (if
Party A only has a long-term debt rating) (each such event, a “Party A Rating Downgrade”),
Party A shall (A) promptly, but in no event later than two (2) Local Business Days following
the date of such Party A Rating Downgrade, give Party B, the Servicer and the Indenture
Trustee written notice of the occurrence of such Party A Rating Downgrade, and (B) use
commercially reasonable efforts to find a Qualified Counterparty promptly and transfer, in
accordance with and subject to the limitations of Part 5(e), its rights and obligations to
Qualified Counterparty. Party A shall continue to perform its obligations and use
commercially reasonable efforts to find a Qualified Counterparty until a Qualified
Counterparty is in place. The cost of finding and putting into place a Qualified Counterparty
shall be borne by Party A. Not later than thirty (30) calendar days after such Party A Rating
Downgrade, if Party A has not transferred its obligations to a Qualified Counterparty in
accordance with the foregoing provisions, Party A shall either (i) obtain (at Party A’s
expense) an unconditional guarantee or other similar assurance in respect of Party A’s
obligations under this Agreement from a guarantor that has Rated Debt and which guarantee and
guarantor satisfy the Rating Agency Condition; or (ii) transfer within thirty (30) days of
such downgrade and from time to time thereafter to

ISDA Schedule

19

 

	 	 	Party B under the Credit Support Annex the amount of Eligible Collateral required under the
Credit Support Annex. In the event Party A complies with the requirements set forth in the
preceding sentence and the Party A Rating Downgrade relates only to an action taken by S&P,
Party A shall not be required to find a replacement counterparty until the time at which (i)
S&P assigns a long-term senior unsecured debt rating lower than BBB+ to Party A or (ii) S&P
withdraws its ratings assigned to Party A (each such event, a “Level Two S&P Party A
Downgrade”), at which time Party A must (i) transfer within one Local Business Day of such
downgrade and from time to time thereafter to Party B under the Credit Support Annex the
amount of Eligible Collateral required under the Credit Support Annex and (ii) immediately
(but in no event later than thirty (30) calendar days of such downgrade) find and put into
place a Qualified Counterparty. The cost of finding and putting into place a Qualified
Counterparty shall be borne by Party A. Once a Qualified Counterparty is in place, Party B
shall return any such Eligible Collateral to Party A pursuant to the terms of the Credit
Support Annex and to the extent such Eligible Collateral has not already been applied in
accordance with this Agreement or the Credit Support Annex. Party B shall have the right to
terminate this Agreement if at any time Party A fails to comply with any of its obligations
under this paragraph in full and in a timely manner.

	(r)	 	Definitions.
	 
	 	 	(i) As used herein:
	 
	 	 	“Credit Support Annex” means the 1994 ISDA Credit Support Annex between Party A and Party
B dated as of                     .
	 
	 	 	“Depositor” means Nissan Auto Receivables Corporation II.
	 
	 	 	“Eligible Collateral” has the meaning set forth in the Credit Support Annex.
	 
	 	 	“Free Writing Prospectus” means any free writing prospectus prepared in connection with
the public offering of the Notes.
	 
	 	 	“Preliminary Prospectus Supplement” means any preliminary prospectus supplement prepared
in connection with the public offering and sale of the Notes.
	 
	 	 	“Prospectus Supplement” means any preliminary prospectus supplement prepared in connection
with the public offering and sale of the Notes.

ISDA Schedule

20

 

	 	 	“Qualified Counterparty” means a counterparty that (a) has Rated Debt and (b) becomes a
party to this Agreement (or party to an agreement in form and substance satisfactory to
Party B, the Servicer and the Indenture Trustee) in accordance with Part 5(e) of this
Schedule and pursuant to documentation which is not less favorable to Party B than this
Agreement.
	 
	 	 	“Moody’s” means Moody’s Investors Service, Inc. or its successor.
	 
	 	 	“Notes” mean the asset-backed notes issued by Party B under the Indenture.
	 
	 	 	“Rated Debt” means, with respect to a counterparty, (1) in the case of S&P, (i) S&P
assigns (x) a long-term debt rating equal to or higher than “A” to the counterparty, and
(y) assigns a short-term debt rating equal to or higher than “A-1” to the counterparty (if
the counterparty has both long-term and short-term debt ratings), or (ii) S&P assigns a
long-term debt rating equal to or higher than “A+” to the counterparty (if the
counterparty only has a long-term debt rating), and (2) in the case of Moody’s (i) Moody’s
assigns (x) a long-term debt rating equal to or higher than “A2” to the counterparty, and
(y) a short-term debt rating equal to or higher than “P1” to the counterparty (if the
counterparty has both long-term and short-term debt ratings), or (ii) Moody’s assigns a
long-term debt rating equal to or higher than “A1” to the counterparty (if the
counterparty only has a long-term debt rating).
	 
	 	 	“Rating Agencies” means S&P and Moody’s.
	 
	 	 	“Rating Agency Condition” means, with respect to any event or circumstance and each Rating
Agency, prior written confirmation by such Rating Agency that the occurrence of such event
or circumstance will not cause it to downgrade, qualify or withdraw its rating assigned to
any of the Notes.
	 
	 	 	“S&P” means Standard & Poor’s, a division of the McGraw-Hill Companies Inc. or its
successor.
	 
	 	 	“Servicer” means Nissan Motor Acceptance Corporation or its successor.

	 	 	Reference is made to that certain Indenture dated as of                      (the “Indenture”) among
Party B as the Issuer thereunder and                     , as Indenture Trustee and the
Sale and Servicing Agreement dated as of                      (the “Sale and Servicing
Agreement“) among Party B as the Issuer, Nissan Auto Receivables

ISDA Schedule

21

 

	 	 	Corporation II and Nissan Motor Acceptance Corporation. Capitalized terms used but not
defined in this Agreement or this Schedule will have the meanings ascribed to them in the
Indenture or Sale and Servicing Agreement.

	(s)	 	Amendments. Section 9(b) of this Agreement is hereby amended by inserting the following at
the end thereof:
	 
	 	 	it being a further condition to any such amendment or modification that the Rating Agency
Condition shall have been satisfied.
	 
	(t)	 	Regulation AB Financial Disclosure.
	 
	 	 	Subject to the last two paragraphs of this clause (t), so long as Party B, the Depositor
or any of such parties’ Affiliates (collectively, “Nissan”) shall file reports in respect
of the Notes with the Securities and Exchange Commission (the “SEC“) pursuant to Sections
13(a) or 15(d) of the the Securities Exchange Act of 1934, as amended (the “Exchange
Act“), Party A agrees to Deliver within ten (10) calendar days of receipt of a written
request therefor by Party B or the Depositor, such information relating to Party A as may
be necessary to enable Nissan to comply with any SEC disclosure requirements, including
without limitation information concerning Party A required by Items 1115 of Regulation AB
and Forms 8-K, 10-D and 10-K. To the extent necessary to comply with Regulation AB, Party
A shall obtain any necessary auditor’s consents related to any financial statements of
Party A required to be incorporated by reference into any report filed by Nissan with the
SEC and promptly to forward to the Depositor any such auditor consents obtained. The
information provided, or authorized to be incorporated by reference, by Party A pursuant
to this Part 5(t) is referred to as the “Additional Information.”
	 
	 	 	For the purpose of this Part 5(t):
	 
	 	 	“Deliver“ includes actual delivery or transmission of information in an EDGAR-compatible
format or, in the case of any financial information required to be delivered pursuant to
Item 1115 of Regulation AB and Forms 8-K, 10-D and 10-K, making such financial information
available in an EDGAR-compatible format for incorporation by reference to the extent
permitted by Regulation AB, together with actual delivery of all necessary auditor’s
consents.
	 
	 	 	“EDGAR“ means the SEC’s Electronic Data Gathering, Analysis and Retrieval system.

ISDA Schedule

22

 

	 	 	“Regulation AB“ means Subpart 229.1100 — Asset Backed Securities (Regulation AB), 17
C.F.R. §§229.1100-229.1123, as such may be amended from time to time, and subject to such
clarification and interpretation as have been provided by the SEC in the adopting release
(Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531
(Jan. 7, 2005)) or by the staff of the SEC, or as may be provided by the SEC or its staff
from time to time.
	 
	 	 	If at any time during a period that reports are being filed with respect to Party B and
the Notes in accordance with the Exchange Act and the rules and regulations of the SEC, as
reasonably calculated by the Depositor, the “significance percentage” of this Agreement
for any class of the Notes is 10% or more, Party A shall within five (5) Local Business
Days following receipt of request therefor provide the Additional Information required
under Item 1115(b)(1) of Regulation AB for Party A. If Party A is unable to provide such
information, Party A shall within five (5) Local Business Days following receipt of
request therefor, at the sole expense of Party A, without any expense or liability to the
Depositor or Party B, either (i) post Eligible Collateral, in form, substance and amount
satisfactory to the Depositor, or (ii) cause a Qualified Counterparty (which satisfies the
Rating Agency Condition and any other requirements of this Agreement) to replace Party A
as party to this Agreement that has agreed to Deliver any information, report,
certification or accountants’ consent when and as required under this Part 5(t)
hereof. 
	 
	 	 	If at any time during a period that reports are being filed with respect to Party B and
the Notes in accordance with the Exchange Act and the rules and regulations of the SEC, as
reasonably calculated by the Depositor, the “significance percentage” of this Agreement
for any class of the Notes is 20% or more, Party A shall within five (5) Local Business
Days following receipt of request therefor provide the Additional Information required
under Item 1115(b)(2) of Regulation AB for Party A. If Party A is unable to provide such
information, Party A shall within five (5) Local Business Days following receipt of
request therefor, at the sole expense of Party A, without any expense or liability to the
Depositor or Party B, cause a Qualified Counterparty (which satisfies the Rating Agency
Condition and any other requirements of this Agreement to replace Party A as party to this
Agreement that has agreed to Deliver any information, report, certification or
accountants’ consent when and as required under this Part 5(t) hereof. 

ISDA Schedule

23

 

	 	 	Party A represents and warrants that the statements appearing in the Preliminary
Prospectus Supplement relating to Party B and the Notes, dated                      and the
Prospectus Supplement relating to Party B and the Notes, dated                     , under the
heading the captions “Summary — Swap Counterparty” and “The Swap Counterparty”.
(collectively, “Prospectus Information”) are true and correct in all material respects and
do not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not misleading.

(A) Party A shall indemnify and hold harmless Nissan and its directors or officers and
any person controlling Nissan, from and against any and all losses, claims, damages and
liabilities (including legal fees and expenses) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus Information or
in any Additional Information or caused by any omission or alleged omission to state in
the Prospectus Information or any Additional Information, as applicable, a material fact
required to be stated therein or necessary to make the statements therein not
misleading.

(B) Nissan Motor Acceptance Corporation, as Sponsor (“Sponsor”), shall indemnify and
hold harmless Party A, and its directors or officers and any person controlling Party A,
from and against any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Prospectus Supplement and the Prospectus, dated                     , relating
to the Notes, and the Prospectus Supplement, dated                      relating to the
Notes (together with the accompanying base prospectus) (collectively, the “Prospectus
Disclosure”) or caused by any omission or alleged omission to state in the Prospectus
Disclosure a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the Sponsor shall not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is based upon
any such untrue statement or alleged untrue statement in or omission or alleged omission
made in any such Prospectus Disclosure in the Prospectus Information or the Additional
Information.

	 	 	Promptly after the indemnified party under this Part 5(t) receives notice of the
commencement of any such action, the indemnified party will, if a claim in respect thereof
is to be made pursuant to this Part 5(t), promptly notify the indemnifying party

ISDA Schedule

24

 

	 	 	in writing of the commencement thereof. In case any such action is brought against the
indemnified party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice
at the indemnifying party’s expense to represent the indemnified party in any action for
which indemnification is sought (in which case the indemnifying party shall not thereafter
be responsible for the fees and expenses of any separate counsel retained by the
indemnified party except as set forth below); provided, however, that such counsel shall
be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying
party’s election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including local
counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) such indemnified party shall have been advised by such
counsel that there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party and in the reasonable
judgment of such counsel it is advisable for such indemnified party to employ separate
counsel, (ii) a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party, (iii) the
indemnifying party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable time after notice
of the institution of such action or (iv) the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense of the indemnifying party.
The indemnifying party will not, without the prior written consent of the indemnified
party, settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the indemnified
party is an actual or potential party to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding. No indemnified party
will settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be

ISDA Schedule

25

 

	 	 	sought hereunder without the consent of the indemnifying party, which consent shall not be
unreasonably withheld.

	 	 	 	 	 	 	 
	 	 	NISSAN AUTO RECEIVABLES
	 	 	______ OWNER TRUST
	 
	 	 	 	 	 	 
	 	 	By:                     , not in its individual

capacity but solely as owner trustee
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	[                                                                 
               ]
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	and, for purposes of Part 5(t) only:
	 
	 	 	 	 	 	 
	 	 	NISSAN MOTOR ACCEPTANCE CORPORATION
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	Title:	 	 	 	 

ISDA Schedule

26

 

ISDA ®

International Swaps and Derivatives Association, Inc.

CREDIT SUPPORT ANNEX

to the Schedule to the

ISDA MASTER AGREEMENT

dated as of                                         

between

                                                             (“Party A”)

and

Nissan Auto Receivables ___Owner Trust (“Party B”)

This Annex supplements, forms part of, and is subject to, the ISDA
Master Agreement referred to above (this “Agreement”), is part of
its Schedule and is a Credit Support Document under this Agreement
with respect to Party A.

Accordingly, the parties agree as follows:

Paragraphs 1 — 12. Incorporation

Paragraphs 1 through 12 inclusive of the ISDA Credit Support Annex
(Bilateral Form) (ISDA Agreements Subject to New York Law Only) published
in 1994 by the International Swaps and Derivatives Association, Inc. are
incorporated herein by reference and made a part hereof:

Paragraph 13. Elections and Variables

	(a)	 	Security Interest for “Obligations”. The term “Obligations” as used in this Annex includes
no additional obligations of Secured Party and, for purposes of the definition of Obligations
in Paragraph 12, includes no additional obligations of Pledgor.
	 
	(b)	 	Credit Support Obligations.

	 	(i)	 	“Delivery Amount” will have the meanings specified in Paragraph 3(a) except that
the words “upon a demand made by the Secured Party on or promptly following a Valuation
Date” shall be deleted and replaced by the words “on each Valuation Date”.

ISDA Credit Support Annex

 

 

	 	(ii)	 	“Credit Support Amount” (x) means the Credit Support Amount required under
Paragraph 13(n) (in the case of a Party A Rating Downgrade or Level Two S&P Party A
Downgrade relating to an action taken by S&P); or (y) has the meaning specified under the
relevant definition of Ratings Criteria (in the case of Moody’s First Trigger Event or
Moody’s Second Trigger Event); in each case as calculated on a daily basis by the
Valuation Agent. The Credit Support Amount shall be calculated by reference to the
provisions set forth in this Annex which would result in Party A transferring the
greatest amount of Eligible Credit Support to Party B or, if applicable, which would
result in Party B returning the least amount of Posted Credit Support. In circumstances
where more than one of the Ratings Criteria or Party A Rating Downgrade or Level Two S&P
Party A Downgrade apply, the Credit Support Amount shall be calculated by reference to
the Ratings Criteria or Party A Rating Downgrade or Level Two S&P Party A Downgrade which
would result in Party A transferring the greatest amount of Eligible Credit Support or,
if applicable, which would result in Party B returning the least amount of Posted Credit
Support.
	 
	 	(iii)	 	Eligible Collateral. The following items will qualify as “Eligible Collateral”:

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Valuation	 	Moody’s First	 	Moody’s Second	 	 
	 	 	 	 	Percentage:*	 	Ratings Trigger	 	Ratings Trigger**	 	S&P**
	(A)
	 	Cash: US Dollars

	 	 	 	___%
	 	___%
	 	___%
	 	 	 
	 	 	 	 	 	 	 	 
	(B)
	 	U.S. Treasury
Securities: negotiable
debt
obligations issued
by the U.S.
Treasury Department
(“Treasuries”)
having a remaining
maturity of up to
and not more than 1
year.

	 	 	 	___%
	 	___%
	 	___%

ISDA Credit Support Annex

2

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Valuation	 	Moody’s First	 	Moody’s Second	 	 
	 	 	 	 	Percentage:*	 	Ratings Trigger	 	Ratings Trigger**	 	S&P**
	(C)
	 	Treasuries having a
remaining maturity
of greater than 1
year but not more
than 10 years.

	 	 	 	___%
	 	___% (___)
___% (___)
	 	___% (___)

___% (___)
	 	 	 
	 	 	 	 	 	 	 	 
	(D)
	 	Treasuries having a
remaining maturity
of greater than 10
years.

	 	 	 	___%
	 	___% (___)
___% (___)
	 	___% (___)

___% (___)
	 	 	 
	 	 	 	 	 	 	 	 
	(E)
	 	Agency
Securities: Debenture
obligations of the
Federal National
Mortgage
Association (FNMA),
Federal Home Loan
Mortgage
Corporation (FHLMC)
(collectively,
“Agency
Securities”) having
a remaining
maturity of not
more than 1 year.

	 	 	 	___%
	 	___%
	 	___%
	 	 	 
	 	 	 	 	 	 	 	 
	(F)
	 	Agency Securities
having a remaining
maturity of greater
than 1 year but not
more than 5 years.

	 	 	 	___%
	 	___% (___)
	 	___% (___)

ISDA Credit Support Annex

3

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Valuation	 	Moody’s First	 	Moody’s Second	 	 
	 	 	 	 	Percentage:*	 	Ratings Trigger	 	Ratings Trigger**	 	S&P**
	(G)
	 	Agency Securities
having a remaining
maturity of greater
than 5 years but
not more than 10
years.

	 	 	 	___%
	 	___% (___)
	 	___% (___)
	 	 	 
	 	 	 	 	 	 	 	 
	(H)
	 	Agency Securities
having a remaining
maturity of greater
than 10 years but
not more than 20
years.

	 	 	 	___%
	 	___%
	 	___%
	 	 	 
	 	 	 	 	 	 	 	 
	(I)
	 	Agency Securities
having a remaining
maturity of greater
than 20 years but
not more than 30
years.

	 	 	 	___%
	 	___%
	 	___%
	 	 	 
	 	 	 	 	 	 	 	 
	(J)
	 	FHLMC Certificates.
Mortgage
participation
certificates issued
by FHLMC evidencing
undivided interests
or participations
in pools of first
lien conventional
or FHA/VA
residential
mortgages or deeds
of trust,
guaranteed by
FHLMC, and having a
remaining

	 	 	 	% to be determined
	 	% to be
determined
	 	___%

ISDA Credit Support Annex

4

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Valuation	 	Moody’s First	 	Moody’s Second	 	 
	 	 	 	 	Percentage:*	 	Ratings Trigger	 	Ratings Trigger**	 	S&P**
	 	 	maturity
of not more than 30
years.
	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 
	(K)
	 	FNMA Certificates.
Mortgage-backed
pass-through
certificates issued
by FNMA evidencing
undivided interests
in pools of first
lien mortgages or
deeds of trust on
residential
properties,
guaranteed by FNMA,
having a remaining
maturity of not
more than 30 years.

	 	 	 	% to be determined
	 	% to be
determined
	 	___%
	 	 	 
	 	 	 	 	 	 	 	 
	(L)
	 	GNMA Certificates.
Mortgage-backed
pass-through
certificates issued
by private
entities,
evidencing
undivided interests
in pools of first
lien mortgages or
deeds of trust on
single family
residences,
guaranteed by the
Government National
Mortgage
Association (GNMA)
with the full faith
and

	 	 	 	% to be determined
	 	% to be
determined
	 	___%

ISDA Credit Support Annex

5

 

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Valuation	 	Moody’s First	 	Moody’s Second	 	 
	 	 	 	 	Percentage:*	 	Ratings Trigger	 	Ratings Trigger**	 	S&P**
	 	 	credit of the
United States, and
having a remaining
maturity of not
more than 30 years.
	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 
	(M)
	 	Commercial Paper.
Commercial Paper
with a rating of at
least P-1 by
Moody’s and at
least A-1+ by S&P
and having a
remaining maturity
of not more than 30
days.

	 	 	 	% to be determined
	 	% to be
determined
	 	___%
	 	 	 
	 	 	 	 	 	 	 	 
	(N)
	 	Other. Other items
of Credit Support
approved in writing
by each applicable
rating agency with
such valuation
percentages as
determined by each
applicable rating
agency.

	 	 	 	% to be determined
	 	% to be
determined
	 	% to be determined

 

			
	*	 	The Valuation Percentage shall equal the percentage specified under such Rating Agency’s name
above. If Party A is rated by more than one Rating Agency specified above, the Valuation
Percentage shall equal the lowest of the applicable percentages specified above.
	 
	**	 	A parenthetical in the form of (a-b yr) means a security having a remaining maturity greater
than or equal to a years and less than b years.

	 	(iv)	 	There shall be no “Other Eligible Support” for Party A for purposes of this Annex.

ISDA Credit Support Annex

6

 

	 	(v)	 	Thresholds.

	 	(A)	 	“Independent Amount” means with respect to Party A: Not
Applicable.
	 
	 	 	 	“Independent Amount” means with respect to Party B: Not Applicable.
	 
	 	(B)	 	“Threshold” means with respect to Party A: Infinity; provided
that for so long as (i) Party A is not above the Moody’s First Trigger Required
Ratings and either (x) Party A had been below the Moody’s First Trigger
Required Ratings since this Annex was executed or (y) at least 30 Local
Business Days have elapsed since the last time Party A had been below the
Moody’s First Trigger Required Ratings, or (ii) (x) a Party A Rating Downgrade
has occurred and has been continuing for at least 30 days, or (y) a Level Two
S&P Party A Downgrade has occurred and is continuing, the Threshold with
respect to Party A shall be zero; further, provided, if a Moody’s Second Rating
Trigger Requirement has occurred and is continuing pursuant to the Agreement,
the Threshold shall be zero in the event Party A fails to assign all of its
rights and obligations under the Agreement on or before the 20th day after the
date of a Moody’s Second Rating Trigger Requirement (as described in Part 1(g)
of the Schedule) continues to exist. Party A will post Eligible Collateral on
or prior to the 20th day following a Moody’s Second Rating Trigger
Requirement.
	 
	 	 	 	“Threshold” means with respect to Party B: Not Applicable.
	 
	 	(C)	 	“Minimum Transfer Amount” means with respect to Party A:
$                    .
	 
	 	 	 	“Minimum Transfer Amount” means with respect to Party B: $                    .
	 
	 	(D)	 	Rounding. The Delivery Amount will be rounded up and the
Return Amount will be rounded down to the nearest integral multiple of
$10,000.00, respectively.

	(c)	 	Valuation and Timing.

	 	(i)	 	“Valuation Agent” means Party A; provided, however, that if an Event of Default
shall have occurred with respect to which Party A is the Defaulting Party, Party B
shall have the right to designate as Valuation Agent an independent party,

ISDA Credit Support Annex

7

 

	 	 	 	reasonably acceptable to Party A, the cost for which shall be borne by Party A. All
calculations by the Valuation Agent must be made in accordance with standard market
practice, including, in the event of a dispute as to the Value of any Eligible
Credit Support or Posted Credit Support, by making reference to quotations received
by the Valuaton Agent from one or more pricing sources.
	 
	 	(ii)	 	“Valuation Date” means: each Local Business Day on which the Credit Support
Amount would be greater than zero.
	 
	 	(iii)	 	“Valuation Time” means:
	 
	 	 	 	o the close of business in the city of the Valuation Agent
on the Valuation Date or date of calculation, as applicable;
	 
	 	 	 	þ the close of business on the Local Business Day before the
Valuation Date or date of calculation, as applicable;

	 	 	provided that the calculations of Value and Exposure will be made as of approximately the
same time on the same date.
	 
	 	 	(iv) “Notification Time” means 1:00 p.m., New York time, on a Local Business Day.
	 
	 	 	(v) Notwithstanding the definition of Valuation Agent and Valuation Date, at any time while
the long-term unsecured debt or counterparty rating of Party A’s Credit Support Provider is
not above “BBB”, the calculations of Exposure and the Value of any Eligible Credit Support
or Posted Credit Support must be verified by an external mark monthly. The external mark
must be obtained by an independent third party, and cannot be verified by the same entity
more than four times in any 12-month period. In addition, the external mark-to-market
valuations should reflect the higher of two bids from counterparties that would be eligible
and willing to provide the swap in the absence of the current provider. The Value of any
Eligible Credit Support or Posted Credit Support and Exposure should be based on the greater
of the calculations of the Valuation Agent and the external marks, and any deficiencies in
Value and Exposure must be cured within three days.
	 
	 	 	(vi) Notice to S&P. At any time at which Party A (or, to the extent applicable, its Credit
Support Provider) does not have a long-term unsubordinated and unsecured debt rating of at
least “BBB+” from S&P, the Valuation Agent shall provide to S&P not later than the
Notification Time on the Local Business Day following each Valuation Date its

ISDA Credit Support Annex

8

 

	 	 	calculations of the Secured Party’s Exposure and the S&P Value of any Eligible Credit
Support or Posted Credit Support for that Valuation Date. The Valuation Agent shall also
provide to S&P any external marks received pursuant to the preceding paragraph.
	 
	(d)	 	Conditions Precedent. No event shall constitute a “Specified Condition”.
	 
	(e)	 	Substitution.

	 	(i)	 	“Substitution Date” means the Local Business Day in New York on which the
Secured Party is able to confirm irrevocable receipt of the Substitute Credit Support,
provided that (x) such receipt is confirmed before 3:00 p.m. (New York time) on such
Local Business Day in New York and (y) the Secured Party has received, before 1:00 p.m.
(New York time) on the immediately preceding Local Business Day in New York, the notice
of substitution described in Paragraph 4(d)(i).
	 
	 	(ii)	 	Consent. The Pledgor is not required to obtain the Secured Party’s consent for any
substitution pursuant to Paragraph 4(d).

	(f)	 	Dispute Resolution.

	 	(i)	 	“Resolution Time” means 1:00 p.m., New York time, on the Local Business Day
following the date on which a notice is given that gives rise to a dispute under
Paragraph 5.
	 
	 	(ii)	 	Value. For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value of Posted Credit
Support will be calculated as follows: for Cash, the U.S. dollar value thereof, and for
each item of Eligible Collateral (except for Cash), an amount in U.S. dollars equal to
the product of (i) either (A) the bid price for such security quoted on such day by a
principal market-maker for such security selected in good faith by the Secured Party or
(B) the most recent publicly available bid price for such security as reported by a
quotation service or in a medium selected in good faith and in a commercially reasonable
manner by Secured Party, multiplied by (ii) the percentage figure listed in Paragraph
13(b)(ii) hereof with respect to such security.
	 
	 	(iii)	 	Alternative. The provisions of Paragraph 5 will apply.

	(g)	 	Holding and Using Posted Collateral.

ISDA Credit Support Annex

9

 

	 	(i)	 	Eligibility to Hold Posted Collateral; Custodians. Secured Party will not be
entitled to hold Posted Collateral itself, and instead the Secured Party will be entitled
to hold Posted Collateral through the Indenture Trustee which Posted Collateral (i) shall
not be commingled or used with any other asset held by the Indenture Trustee but shall be
held in a separate trust account for this purpose only and (ii) shall not be transferred
to any other person or entity but Party A pursuant to the provisions herein except (x) in
any case contemplated by Paragraph 8(a) of this Annex with respect to Party A or (y) as
directed by Party A; provided, however, that if the Indenture Trustee does not have a
short-term debt rating of at least “A-1“ by S&P, then a third party custodian with a
short-term debt rating of at least “A-1“ by S&P must hold such Posted Collateral.
	 
	 	(ii)	 	Use of Posted Collateral. The provisions of Paragraph 6(c) will not apply to
Secured Party and without prejudice to Secured Party’s rights under Paragraph 8 of the
Credit Support Annex, Secured Party will not take any action specified in such Section
6(c).

	(h)	 	Distributions and Interest Amount.

	 	(i)	 	The “Interest Rate”, with respect to Eligible Collateral in the form of Cash,
for any day, will be the lesser of (x) the rate opposite the caption “Federal funds
(effective)” for such day as published by the Federal Reserve Publication H.15 (519) or
any successor publication as published by the Board of Governors of the Federal Reserve
System and (y) the rate of interest actually received on such Cash.
	 
	 	(ii)	 	The “Transfer of Interest Amount” will be made within 3 Local Business Days
after the last Local Business Day of each calendar month in an amount not to exceed the
interest actually received.
	 
	 	(iii)	 	Alternative Interest Amount. The provisions of Paragraph 6(d)(ii) will apply.

	(i)	 	Additional Representations. None.
	 
	(j)	 	Other Eligible Support and Other Posted Support. Not Applicable.
	 
	(k)	 	Demands and Notices. All demands, specifications and notices made by a party to this Annex
will be made to the following:

ISDA Credit Support Annex

10

 

	 	 	 	 	 	 	 
	 

	 	Party A:
	 	As set forth in the Schedule.	 	 
	 

	 	 	 	 	 	 
	 

	 	Party B:
	 	As set forth in the Schedule.	 	 
	 

	 	 	 	 	 	 
	(l)	 	Addresses for Transfers.
	 

	 	 	 	 	 	 
	 

	 	Party A:
	 	Cash/Interest Payments: (USD Only):	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Eligible Collateral (other than cash):	 	 
	 

	 	 	 	 	 	 
	 

	 	Party B:
	 	Nissan Auto Receivables ___Owner Trust	 	 
	 

	 	 	 	c/o                                                                            
                         	 	 
	 

	 	 	 	                                                                  
                                  	 	 
	 

	 	 	 	                                                                 
                                   	 	 
	 

	 	 	 	                           
                                     
                                    	 	 
	 

	 	 	 	Attention: Nissan Auto Receivables ___Owner Trust	 	 
	 

	 	 	 	Telephone:                                                             	 	 
	 

	 	 	 	Facsimile:                                                             	 	 

	(m)	 	Other Provisions.

	 	(i)	 	This Credit Support Annex is a Security Agreement under the New York UCC.
	 
	 	(ii)	 	Paragraph 1(b) of this Annex is amended by deleting it and restating it in full as
follows:
	 
	 	 	 	“(b) Secured Party and Pledgor. All references in this Annex to the “Secured
Party” mean Party B, and all references in this Annex to the “Pledgor” mean Party A;
provided, however, that if Other Posted Support is held by Party B, all references
herein to the Secured Party with respect to that Other Posted Support will be to
Party B as the beneficiary thereof and will not subject that support or Party B as
the beneficiary thereof to provisions of law generally relating to security
interests and secured parties.”

ISDA Credit Support Annex

11

 

	 	(iii)	 	Paragraph 2 of this Annex is amended by deleting the first sentence thereof
and restating that sentence in full as follows:
	 
	 	 	 	“Party A, as the Pledgor, hereby pledges to Party B, as the Secured Party, as
security for the Pledgor’s Obligations, and grants to the Secured Party a first
priority continuing security interest in, lien on and right of Set-off against all
Posted Collateral Transferred to or received by the Secured Party hereunder.”
	 
	 	(iv)	 	Only Party A makes the representations contained in Paragraph 9 of this Annex.
	 
	 	(v)	 	Paragraph 12 of this Annex is amended by deleting the definitions of “Pledgor”
and “Secured Party” and replacing them with the following:”
	 
	 	 	 	“ ‘Secured Party’ means Party B.
	 
	 	 	 	‘Pledgor’ means Party A.”
	 
	 	(vi)	 	Paragraph 12 is hereby amended by adding, in alphabetical order, the following:
	 
	 	 	 	“Moody’s” means Moody’s Investor Services, Inc., or any successor to the rating
business of such entity.”
	 
	 	 	 	“S&P” means Standard and Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., or any successor to the rating business of such entity.”
	 
	 	(vii)	 	Notwithstanding anything to the contrary in Paragraph 10, the Pledgor will be
responsible for, and will reimburse the Secured Party for all transfer and other taxes
and other costs involved in any Transfer of Eligible Collateral.

	(n)	 	S&P Criteria
	 
	 	 	“S&P Credit Support Amount” means, for any Valuation Date, the excess, if any, of (I) (A)
for any Valuation Date on which (i) a Party A Rating Downgrade has occurred and been
continuing for at least 30 days, or (ii) a Level Two S&P Party A Downgrade has occurred and
is continuing, an amount equal to the sum of (1) 100% of the Secured Party’s Exposure for
such Valuation Date and (2) the VB for such Transaction, or (B) for any other Valuation
Date, zero, over (II) the Threshold for Party A for such Valuation Date.

ISDA Credit Support Annex

12

 

	 	 	“VB” means the Notional Amount (as defined in the Confirmation for each outstanding
Transaction under this Agreement) times the relevant percentage set out in Table A below:
	 
	 	 	TABLE A

Volatility Buffer

	 	 	 	 	 	 	 
	Counterparty

	 	Less than 5 years
to Termination Date
of the Transaction.
	 	Less than 10 years,
but more than 5
years to
Termination Date of
the Transaction.
	 	Greater than 10
years to
Termination Date of
the Transaction.
	 
	 	 	 	 	 	 
	The rating by S&P
of Party A’s
short-term
unsecured,
unsubordinated
obligations is at
least equal to
“A-2”

	 	___%
	 	___%
	 	___%
	 
	 	 	 	 	 	 
	The rating by S&P
of Party A’s
short-term
unsecured,
unsubordinated
obligations is
equal to “A-3”

	 	___%
	 	___%
	 	___%
	 
	 	 	 	 	 	 
	The rating by S&P
of Party A’s
long-term
unsecured,
unsubordinated
obligations is
equal to or less
than “BB+”

	 	___%
	 	___%
	 	___%

	(o)	 	Moody’s Criteria
	 
	 	 	“Moody’s First Trigger Event” means that no Relevant Entity has credit ratings from Moody’s
at least equal to the Moody’s First Trigger Ratings Threshold.
	 
	 	 	“Moody’s First Trigger Ratings Threshold” means, with respect to Party A, the guarantor
under an Eligible Guarantee or an Eligible Replacement, (i) if such entity has a short-

ISDA Credit Support Annex

13

 

	 	 	term unsecured and unsubordinated debt rating from Moody’s, a long-term unsecured and
unsubordinated debt rating or counterparty rating from Moody’s of “A2” and a short-term
unsecured and unsubordinated debt rating from Moody’s of “Prime-1”, or (ii) if such entity
does not have a short-term unsecured and unsubordinated debt rating or counterparty rating
from Moody’s, a long-term unsecured and unsubordinated debt rating or counterparty rating
from Moody’s of “A1”.
	 
	 	 	“Moody’s Second Trigger Event” means that no Relevant Entity has credit ratings from Moody’s
at least equal to the Moody’s Second Trigger Ratings Threshold.
	 
	 	 	“Moody’s Second Trigger Ratings Threshold” means, with respect to Party A, the guarantor
under an Eligible Guarantee or an Eligible Replacement, (i) if such entity has a short-term
unsecured and unsubordinated debt rating from Moody’s, a long-term unsecured and
unsubordinated debt rating or counterparty rating from Moody’s of “A3” and a short-term
unsecured and unsubordinated debt rating from Moody’s of “Prime-2”, or (ii) if such entity
does not have a short-term unsecured and unsubordinated debt rating from Moody’s, a
long-term unsecured and unsubordinated debt rating or counterparty rating from Moody’s of
“A3”.
	 
	 	 	Moody’s Credit Support Amount.* With respect to a Moody’s First Trigger Event or a Moody’s
Second Trigger Event relating to an action taken by Moody’s, the “Credit Support Amount”
shall mean with respect to a Pledgor on a Valuation Date the sum of:

	 	(i)	 	With respect to a Moody’s First Trigger Event:
	 
	 	(A)	 	the greater of the Secured Party’s Exposure and $0, plus
	 
	 	(B)	 	Notional Amount times the relevant percentage set out in Table B below.
	 
	 	(ii)	 	With respect to a Moody’s Second Trigger Event:

(A) the greater of the Secured Party’s Exposure, $0 or the amount owed by Party A on
the next Payment Date (as such term is defined in the Confirmation for each
outstanding Transaction under this Agreement), plus

(B) Notional Amount times the relevant percentage set out in Table B below.

ISDA Credit Support Annex

14

 

* To the extent that both the Moody’s Credit Support Amount and the S&P Credit Support
Amount apply, the greater of the two amounts shall be the Credit Support Amount.

TABLE B

	 	 	 	 	 
	Weighted	 	 	 	 
	Average Life of	 	Moody’s First Trigger	 	Moody’s Second Trigger
	Hedge in Years	 	Event has Occurred	 	Event has Occurred
	1

	 	___%
	 	___%
	 
	 	 	 	 
	2

	 	___%
	 	___%
	 
	 	 	 	 
	3

	 	___%
	 	___%
	 
	 	 	 	 
	4

	 	___%
	 	___%
	 
	 	 	 	 
	5

	 	___%
	 	___%
	 
	 	 	 	 
	6

	 	___%
	 	___%
	 
	 	 	 	 
	7

	 	___%
	 	___%
	 
	 	 	 	 
	8

	 	___%
	 	___%
	 
	 	 	 	 
	9

	 	___%
	 	___%
	 
	 	 	 	 
	10

	 	___%
	 	___%
	 
	 	 	 	 
	11

	 	___%
	 	___%
	 
	 	 	 	 
	12

	 	___%
	 	___%
	 
	 	 	 	 
	13

	 	___%
	 	___%
	 
	 	 	 	 
	14

	 	___%
	 	___%
	 
	 	 	 	 
	15

	 	___%
	 	___%
	 
	 	 	 	 
	16

	 	___%
	 	___%

ISDA Credit Support Annex

15

 

	 	 	 	 	 
	Weighted	 	 	 	 
	Average Life of	 	Moody’s First Trigger	 	Moody’s Second Trigger
	Hedge in Years	 	Event has Occurred	 	Event has Occurred
	17
	 	—%	 	—%
	 
	 	 	 	 
	18
	 	—%	 	—%
	 
	 	 	 	 
	19
	 	—%	 	—%
	 
	 	 	 	 
	20
	 	—%	 	—%
	 
	 	 	 	 
	21
	 	—%	 	—%
	 
	 	 	 	 
	22
	 	—%	 	—%
	 
	 	 	 	 
	23
	 	—%	 	—%
	 
	 	 	 	 
	24
	 	—%	 	—%
	 
	 	 	 	 
	25
	 	—%	 	—%
	 
	 	 	 	 
	26
	 	—%	 	—%
	 
	 	 	 	 
	27
	 	—%	 	—%
	 
	 	 	 	 
	28
	 	—%	 	—%
	 
	 	 	 	 
	29
	 	—%	 	—%
	 
	 	 	 	 
	30
	 	—%	 	—%

ISDA Credit Support Annex

16

 

Accepted and agreed:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	NISSAN AUTO RECEIVABLES ______
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	OWNER TRUST
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	 	 	 	 	By:
	 	 	,	 	 	 
	 

	 	Title:
	 	 	 	 	 	 	 	not in its individual capacity	 	 	 	 
	 

	 	Date:
	 	 	 	 	 	 	 	but solely as owner trustee	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	                                                                                                                                                                                                                                                                                 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	Date:	 	 	 	 

ISDA Credit Support Annex

17

 

SWAP TRANSACTION CONFIRMATION

	 	 	 	 	 
	Date:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	To:

	 	Nissan Auto Receivables ___Owner Trust
	 	(“Party B”)
	 

	 	c/o                     , as Owner Trustee	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Attention:                                                                          
                          	 	 
	 
	 	 	 	 
	 

	 	With a copy to:                                        	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Attention:                                                                 
                                    	 	 
	 

	 	Telephone:                                                                       
                              	 	 
	 

	 	Facsimile:                                                                   
                                  	 	 
	 
	 	 	 	 
	From:

	 	 	 	(“Party A”)
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Attention:     
              
              
              
            
             
              
   
            	 	 
	 

	 	Telephone:                                                                    
                                 	 	 
	 

	 	Facsimile:                                                                    
                                 	 	 
	 
	 	 	 	 
	Ref. No.
	 	 	 	 
	 

	 	 	 	 

Dear Sir or Madam:

The purpose of this letter (this “Confirmation”) is to confirm the terms and conditions of the
Transaction entered into between us on the Trade Date specified below (the “Transaction”). This
Confirmation constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified
below.

1. The definitions and provisions contained in (i) the 2000 ISDA Definitions (the “ISDA
Definitions”), as published by the International Swaps and Derivatives Association, Inc, and (ii)
the Indenture dated as of                      (the “Indenture”) between Party B and
                                        , as indenture trustee relating to the issuance by Party B of
certain debt obligations, are incorporated into this Confirmation. In the event of any
inconsistency between the ISDA Definitions and this Confirmation, this Confirmation will govern.
References herein to a “Transaction” shall be deemed to be references to a “Swap Transaction” for
purposes of the ISDA Definitions. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Indenture.

Swap Confirmation

1

 

	2.	 	The terms of the particular Transaction to which the Confirmation relates are as follows:

	 	 	 	 	 	 	 
	Transaction Type:	 	Interest Rate Swap
	 
	 	 	 	 	 	 
	Currency for Payments:
	 	U.S. Dollars	 	 	 	 
	 
	 	 	 	 	 	 
	Notional Amount:	 	For the Initial Calculation Period, the
Notional Amount shall be equal to USD
$                    . For each subsequent
Calculation Period, the Notional Amount shall
be equal to the aggregate note balance of the
Class A-[  ] Notes on the first day of such
Calculation Period. With respect to any
Payment Date, the aggregate note balance of
the Class A-[  ] Notes will be determined
using the Servicer’s Certificate issued on
the Determination Date immediately preceding
the Payment Date (giving effect to any
reductions of the note balance of the Class
A-[  ] Notes reflected in such Servicer’s
Certificate).
	 
	 	 	 	 	 	 
	Initial Calculation Period:	 	                     to but excluding                     .
	 
	 	 	 	 	 	 
	Term:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Trade Date:
	 	                    	 	 	 	 
	 
	 	 	 	 	 	 
	Effective Date:
	 	                    	 	 	 	 
	 
	 	 	 	 	 	 
	Termination
Date:
	 	The earlier of (i)                      and (ii)
the date on which the note balance of the
Class A-[  ] Notes is reduced to zero.
	 
	 	 	 	 	 	 
	Fixed Amounts:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Fixed Rate Payer:
	 	Party B	 	 	 	 
	 
	 	 	 	 	 	 
	Calculation Period End Dates:
	 	Monthly on the 15th of each month,
commencing                     , through and
including the Termination
Date;          No          Adjustment.
	 
	 	 	 	 	 	 
	Payment
Dates:
	 	Monthly on the 15th of each month,
commencing                     , through and
including the Termination Date.
	 
	 	 	 	 	 	 
	Business Day Convention:
	 	Following	 	 	 	 

Swap Confirmation

2

 

	 	 	 	 	 	 	 
	Business Day:
	 	Principal place of business of Party A, New
York, Delaware, Minnesota, Tennessee and
Texas
	 
	 	 	 	 	 	 
	Fixed Rate:
	 	—%	 	 	 	 
	 
	 	 	 	 	 	 
	Fixed Rate Day Count
Basis:
	 	30/360	 	 	 	 
	 
	 	 	 	 	 	 
	Floating Amounts:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Floating Rate Payer:
	 	Party A	 	 	 	 
	 
	 	 	 	 	 	 
	Calculation Period End Dates:
	 	Monthly on the 15th of each month,
commencing                     , through and
including the Termination Date, subject to
adjustment in accordance with the Following
Business Day Convention.
	 
	 	 	 	 	 	 
	Payment Dates:
	 	Monthly on the 15th of each month,
commencing                     , through and
including the Termination Date.
	 
	 	 	 	 	 	 
	Business Day Convention:
	 	Following	 	 	 	 
	 
	 	 	 	 	 	 
	Business Day:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	For Payment Dates:
	 	Principal place of business of Party A, New
York, Delaware, Minnesota, Tennessee and Texas
	 
	 	 	 	 	 	 
	For the
determination of
the Floating Rate:
	 	London	 	 	 	 
	 
	 	 	 	 	 	 
	Floating Rate Option:
	 	USD-LIBOR-BBA	 	 	 	 
	 
	 	 	 	 	 	 
	Designated Maturity:
	 	1 Month	 	 	 	 
	 
	 	 	 	 	 	 
	Spread:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Floating Rate Day Count:
	 	None	 	 	 	 
	 
	 	 	 	 	 	 
	Count: Basis:
	 	Actual/360	 	 	 	 
	 
	 	 	 	 	 	 
	Reset Dates:
	 	The first day of each Calculation Period.	 	 	 	 
	 
	 	 	 	 	 	 
	Compounding:
	 	Inapplicable	 	 	 	 

Swap Confirmation

3

 

	3.	 	The additional provisions of this Confirmation are as follows:

	 	 	 	 	 
	Calculation Agent:

	 	As set forth in the Agreement.	 	 
	 
	 	 	 	 
	Payments to Party A:
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Payments to Party B:
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

	4.	 	Documentation

This Confirmation supplements, forms a part of, and is subject to, the 1992 ISDA Master Agreement
dated as of                      (including the Schedule thereto) as amended and supplemented from time
to time (the “Agreement”) between you and us. All provisions contained in the Agreement govern
this Confirmation except as expressly modified herein. Unless otherwise provided in the Agreement,
this Confirmation is governed by the laws of the State of New York.

The remainder of this page intentionally left blank.

Swap Confirmation

4

 

Please confirm that the foregoing correctly sets forth the terms of our agreement by executing a
copy of this Confirmation and returning it to us.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Very truly yours,
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	[                                                            ]
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	Title	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Accepted and confirmed as of the date first above written	 	:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	NISSAN AUTO RECEIVABLES                      OWNER TRUST	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	                                        ,	 	 	 	 	 	 	 	 
	 	 	not in its individual

capacity but solely

as owner trustee	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Name:
	 	 	 	 	 	 	 	 	 	 
	Title:
	 	 	 	 	 	 	 	 	 	 

Swap Confirmation

5exv10w1

 

Exhibit 10.1

	 	 	 
	

	 	One N. Central Avenue, Phoenix, AZ 85004 (602) 366-8100

DATE

 

Dear :

FORM OF

CHANGE OF CONTROL AGREEMENT

(Amended and Restated Effective January 1, 2005)

     Phelps Dodge Corporation (the “Corporation”) considers the maintenance of a sound and vital
senior management organization to be essential to protecting and enhancing the best interests of
the Corporation and to providing value to its shareholders. The Corporation recognizes that, as is
the case with many publicly held corporations, the continuing possibility of an unsolicited tender
offer or other takeover bid for the Corporation is unsettling to you and other senior executives of
the Corporation and its principal subsidiaries, and may result in the departure or distraction of
key management personnel to the detriment of the Corporation and its shareholders. The Board of
Directors of the Corporation (the “Board”) and the Compensation and Management Development
Committee (the “Committee”) of the Board have previously determined that it is in the best
interests of the Corporation and its shareholders for the Corporation to minimize these concerns by
entering into an agreement (a “Change of Control Agreement”) which would provide you with certain
benefits in the event your employment with the Corporation terminates under certain limited
circumstances related to a Change of Control. The Corporation has had in place for certain
individuals similar agreements that expire on December 31, 2002. Accordingly, the Corporation has
determined that it is appropriate to replace those expiring agreements with the arrangements set
forth in this Change of Control Agreement.

     These arrangements are being made and entered into to help assure a continuing dedication by
you to your duties to the Corporation, notwithstanding the occurrence of a tender offer or other
takeover bid. In particular, the Board and the Committee believe it important, should the
Corporation receive proposals from third parties with respect to its future, to enable you, without
being influenced or distracted by the uncertainties of your own situation, to assess and advise the
Board whether such proposals would be in the best interests of the Corporation and its
shareholders, and to take such other action regarding such proposals as the Board might determine
to be appropriate. The Board and the Committee understand that in the event of a tender offer or
other takeover bid that certain senior managers are at risk with respect to continuing employment
opportunities with the Corporation. In recognition of that, the Board and the Committee wish to
demonstrate to the senior executives that it is the intent of the Board and Committee, in the event
of a Change of Control, to assure that senior executives are treated fairly in those circumstances.

 

 

     In view of the foregoing, in order to induce you to remain in the employ of the Corporation or
one of its principal subsidiaries and in further consideration of your continued employment with
the Corporation, the Corporation and you agree to a Change of Control Agreement as follows:

     1. TERMINATION BENEFITS.

     In the event your employment with the Corporation or any subsidiary of the Corporation
terminates by reason of a “Qualifying Termination” (as the term “Qualifying Termination” is defined
below) within two years after a “Change of Control” of the Corporation (as “Change of Control” is
defined below), you shall receive the benefits set forth in this Change of Control Agreement
(“Change of Control Benefits”). In addition, if you have not experienced a Qualifying Termination
prior to the first anniversary date of the Change of Control (“Anniversary Date”), then for a
period of thirty (30) days beginning immediately after the Anniversary Date (the “Anniversary
Window Period”), you will have a one time opportunity to elect to voluntarily terminate your
employment with the Corporation (or any subsidiary of the Corporation) and be eligible to receive
your Change of Control Benefits. Should you make an election to voluntarily terminate your
employment during the Anniversary Window Period, your date of termination must be within that same
thirty (30) day time period. If you fail to make an election to voluntarily terminate your
employment during the Anniversary Window Period, you will have forfeited any right to such an
election for purposes of this Change of Control Agreement. You will continue to be eligible to
receive your Change of Control Benefits only if a Qualifying Termination otherwise occurs within
two years after a Change of Control.

          (a) TERMINATION PAYMENTS. The Corporation will pay you as termination compensation a
lump sum amount equal to the sum of: (i) three times your highest annual base salary (not including
any bonuses under the Corporation’s Annual Incentive Compensation Plan) paid or payable by the
Corporation or any subsidiary of the Corporation to you during the three calendar years ending with
the year your employment with the Corporation terminates; plus (ii) three times your Target Bonus;
less (iii) any severance, termination, or other cash compensation payable to you under your
Severance Agreement with the Corporation or pursuant to any severance policy, plan, or program
sponsored by the Corporation or any subsidiary of the Corporation. Any lump sum termination payment
due to you pursuant to this Section 1(a) shall be paid to you on the date of your termination of
employment with the Corporation, except that, if you are a “specified employee” within the meaning
of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and you are
terminated on or after March 1, 2008, then such payment shall be made on the first business day
after the six month anniversary of your termination date. For purposes of the calculation set
forth in this Section 1(a), Target Bonus shall mean your highest annual base salary during the
twelve (12) months immediately preceding your termination of employment times the highest target
bonus percentage assigned by the Corporation’s Annual Incentive Compensation Plan to any position
you held during the twelve (12) months immediately preceding your termination of employment.

     If after the effective date of this Change of Control Agreement, the Corporation’s Annual
Incentive Compensation Plan is replaced by another incentive compensation or bonus program, your
Target Bonus for purposes of this Section 1, will be the greater of (i) the Target Bonus as
determined under Section 1(a) as of the date of the Change of Control; (ii) the Target Bonus as
determined under Section 1(a) as of your termination date; or (iii) the Target Bonus as determined
under Section 1(a) except that your Target Bonus will be calculated using the highest target bonus
percentage assigned by the replacement program to any position you held during the twelve (12)
months immediately preceding your termination of employment.

 

 

          (b) BENEFITS CONTINUATION. You will continue to receive medical, dental, vision,
long-term disability, and life insurance benefits as described in this Section 1(b).

               (i) Group Medical, Dental, and Vision. You will receive group medical, dental, and
vision coverage in accordance with the terms and conditions of the special insured group medical,
dental, and vision plans sponsored by the Corporation for certain senior executives (collectively,
the “Insured Plans”). The Insured Plans are designed to be similar to the Corporation’s then in
effect self-insured active group medical, dental, and vision plans. You will be eligible to
participate in the respective Insured Plans until the earlier of (1) December 31 of the second
calendar year commencing after the date of your termination (the “Continuation Period”) or (2) the
day on which you become eligible to receive any group medical, dental, and vision care benefits, as
the case may be, under any plan or program of any other employer for active employees or the
Retiree Insured Plan. You will be responsible to contribute to the cost of the Insured Plans at the
same level, if any, you were required to contribute to receive the similar benefits under the
Corporation’s group medical, dental, and vision plans as of your termination date. In lieu of the
benefits provided above, you may elect to receive eighteen (18) months of Corporation paid
continuation of coverage under the Corporation’s group medical, dental, and vision plans pursuant
to Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as it may be amended
or replaced from time to time. In addition, if on December 1 of the second calendar year
commencing after the date of your termination you are still receiving group medical, dental, or
vision coverage under the Insured Plans in accordance with this Section 1(b)(i), you will receive a
cash payment equal to the product of (i) the monthly cost of such coverage under the Insured Plans
for a similarly situated Corporation employee, multiplied by (ii) the number of months that, taken
together with the number of months in your Continuation Period, would equal a total of thirty-six
(36) months. Such cash payment will be payable in a lump sum amount on December 15 of that date.

               (ii) Retiree Medical Insurance. If during the two year period after the date of the
Change of Control, but after the date of your termination of employment (which entitles you to
benefits under this Change of Control Agreement), you would have been eligible for early or normal
retirement under the terms and conditions of any pension or retirement plan sponsored by the
Corporation (or any subsidiary of the Corporation) in which you participate, then you will be
eligible to participate in any insured medical plan (the “Retiree Insured Plan”) that the
Corporation has in place to provide medical benefits similar to those provided by the Corporation’s
retiree medical plan. You will be eligible to participate in the Retiree Insured Plan beginning on
the date you would have been eligible for an early or normal retirement had your employment not
been terminated and continuing until such time (if any) as the Corporation ceases to provide
retiree medical insurance, or the insurance available under the Retiree Insured Plan is no longer
available. Until the end of the thirty-six (36) month period following your termination date, the
Corporation will pay your full cost of the Retiree Insured Plan. If as of your employment
termination date (either because of your Qualifying Termination within the required time period or
your voluntary termination during the Anniversary Window Period), you are eligible to participate
in the Corporation’s retiree medical plan, if any, the cost of your participation in the applicable
retiree medical plan will be paid by the Corporation for the thirty-six (36) month period following
your termination date. After the end of this thirty-six (36) month period, you will be responsible
to pay the applicable retiree contribution percentage to participate in the Corporation’s retiree
medical plan. Similarly, if you are participating in the Retiree Insured Plan, you will be required
to pay the equivalent contribution as if you had been eligible to participate in the Corporation’s
retiree medical plan. The Corporation reserves the right to amend or terminate its retiree medical
plan at any time. Any such amendment or

 

 

termination that applies equally to all covered individuals also will apply to you. The
Corporation also reserves the right to amend or terminate any Retiree Insured Plan as long as a
comparable amendment or termination is being made at the same time to the Corporation’s retiree
medical plan. A Retiree Insured Plan also may be amended if such amendment is required by the
insurer and a Retiree Insured Plan may be terminated if the underlying insurance cannot be obtained
from a reputable insurer.

               (iii) Long-Term Disability. With respect to your long-term disability insurance
coverage, you will be eligible to purchase an individual long-term disability conversion policy
directly from the insurer providing the group benefits under the Corporation’s Long-Term Disability
Plan as of your termination date. To be eligible for this coverage, you must satisfy the insurer’s
requirements for coverage in effect on your termination date, and any such conversion coverage is
subject to coverage and other limitations imposed by the insurer. The disability benefits and
amount of coverage under the conversion policy may be different than those provided to you under
the Corporation’s Long-Term Disability Plan in effect on your termination date. The Corporation
will pay the cost to continue any long-term disability conversion coverage for a period ending on
December 31 of the second calendar year commencing after the date of your termination (the “LTD
Continuation Period”). You will be responsible for the cost of any long-term disability conversion
coverage after this period. In addition, the Corporation will pay to you a cash amount equal to
the product of (i) the monthly cost of your long-term disability conversion coverage as of your
termination date, multiplied by (ii) the number of months that, taken together with the number of
months in the LTD Continuation Period, would equal a total of thirty-six (36) months. Any such
cash payment shall be paid to you in a lump sum amount on the same date as the termination payment
is paid under Section 1(a) of this Change of Control Agreement.

               (iv) Life Insurance. The disposition of your life insurance policy or policies (the
“Policies”) issued under the Corporation’s Executive Life Insurance Plan (“ELIP”) will be in
accordance with the terms and conditions of the ELIP. The Corporation, on the date your employment
with the Corporation (or any subsidiary) terminates, will pay the insurer of the Policies an amount
sufficient to fund the Policies for a period of thirty-six (36) months after your termination date.
The Corporation will fund the Policies for this thirty-six (36) month period in a manner similar to
the funding level before the Change of Control such that the Policies are funded for the Policies’
death benefit and the contribution towards the retiree life insurance portion of the Policies. At
the end of this thirty-six (36) month period any additional funding required by the Policies will
be your obligation. In lieu of the payment method described above, you may elect, prior to any
payment being made, to have the Corporation fund the Policies to the same level with annual
installment payments over a three (3) year period, provided that such election shall be valid only
if: (a) such election must be made prior to the earlier of your termination of employment and
December 31, 2007, and (b) you are not terminated prior to December 31, 2007. To the extent that
any of your life insurance coverage under the ELIP is insured under the Corporation’s group term
life insurance plan, in accordance with the terms and conditions of that insurance coverage you
will be eligible to convert this coverage to individual non-term conversion coverage as of your
termination date. To be eligible to receive this conversion coverage you must submit an application
to the insurer. Any available conversion coverage is subject to such limitations as may be imposed
by the insurer. Should you elect this individual conversion coverage, the Corporation will pay the
cost to continue your conversion coverage for a period of thirty-six (36) months following your
termination date. You will be responsible for the cost of any conversion coverage in excess of
thirty-six (36) months. Notwithstanding the foregoing, if any of the Policies or conversion
coverage described in this Section 1(b)(iv) provides a benefit other than a death benefit to you,
and you are terminated on

 

 

or after March 1 in the calendar year following the year in which the Change of Control
occurs, then any applicable lump sum payment shall be made (or, in the case of a qualifying
installment election, the first annual installment payment shall be made) by the Corporation on the
first business day after the six month anniversary of your termination date.

     2. OTHER BENEFITS; LOANS.

          (a) INCENTIVE COMPENSATION PLAN. Generally, your participation in the Corporation’s
Annual Incentive Compensation Plan (“AICP”), and any right that you may have to receive a bonus
thereunder for the year in which your employment with the Corporation or any subsidiary of the
Corporation terminates or any prior year shall be governed by the terms of the AICP. If you were a
participant in the AICP at any time during the calendar year in which a Change of Control occurs,
however, you will receive at least a pro rated incentive compensation payment for the year in which
the Change of Control occurs. Your pro rated incentive compensation payment will be calculated in
two steps. The first step will be to calculate the incentive compensation to which you would be
entitled under the AICP, calculated on the basis of the following assumptions: (i) the annual
performance period ends on the date of the Change of Control; (ii) the financial performance of the
Corporation or any of its subsidiaries for the relevant performance period will be equal to the
financial performance measured as of the date of the Change of Control, annualized; and (iii) you
satisfy all individual subjective performance goals or measures set for you under the AICP at the
“target” performance level. The second step will be to multiply the amount determined pursuant to
the first step by a fraction, the numerator of which is the number of days that have elapsed in the
calendar year prior to the day of the Change of Control and the denominator of which is 365. Any
bonus due under this Section 2(a) shall be paid to you on the same date as the termination payment
is paid under Section 1(a) of this Change of Control Agreement.

          (b) RETIREMENT AND SAVINGS PLANS. Any participation by you in, and any terminating
distributions and vested rights under, the Phelps Dodge Retirement Plan, the Phelps Dodge Employee
Savings Plan, the Phelps Dodge Corporation Supplemental Retirement Plan, and the Phelps Dodge
Corporation Supplemental Savings Plan, or any other retirement or savings plan sponsored by the
Corporation, regardless of whether such plan qualifies for favorable tax treatment, shall be
governed by the terms and conditions of those respective plans, as they may be amended from time to
time.

          (c) LOANS. Any permitted indebtedness owed by you to the Corporation or any subsidiary
of the Corporation on account of advances or loans shall become due and payable and may be deducted
from the payment referred to in Section 1 above.

          (d) OUTPLACEMENT SERVICES. You will be eligible to receive outplacement services for a
period of up to one year after your termination date at an outplacement firm selected by the
Corporation. The cost of these outplacement services will be paid by the Corporation directly to
the outplacement firm selected, up to a maximum amount of fifteen percent (15%) of your highest
annual base salary in effect during the twelve (12) months immediately preceding your termination
date.

          (e) EXECUTIVE PHYSICALS. You shall receive a lump sum payment equivalent to the cost
of coverage under the Corporation’s Executive Physical program for the thirty-six (36) month period
after your termination date. The benefits to which you will be eligible, will be the executive
physical benefits that were in effect on the date of the Change of Control and any executive
physical benefits received will be subject to the terms and conditions of the Executive

 

 

Physical program as in effect on the date of the Change of Control. Any lump sum payment due
under this Section 2(e) shall be paid to you on the same date as the termination payment is paid
under Section 1(a) of this Change of Control Agreement.

          (f) FINANCIAL COUNSELING. To the extent you were eligible for financial counseling
paid by the Corporation on the date of the Change of Control, you shall receive a lump sum payment
equivalent to the cost of such services for an additional thirty-six (36) month period after your
termination date (as determined by the Corporation in good faith). Any lump sum payment due under
this Section 2(f) shall be paid to you on the same date as the termination payment is paid under
Section 1(a) of this Change of Control Agreement.

     3. CONFIDENTIALITY.

     In the event your employment with the Corporation or any subsidiary of the Corporation
terminates under the circumstances specified in Section 1, you shall retain in confidence any
confidential, proprietary, or trade secret information known to you concerning the Corporation and
its subsidiaries and their businesses so long as such information is not publicly disclosed by the
Corporation or any subsidiary of the Corporation.

     4. CHANGE OF CONTROL DEFINED.

          For purposes of this Change of Control Agreement, a “Change of Control” shall be deemed to
have taken place at the time:

          (a) when any “person” or “group” of persons (as such terms are used in Section 13 and 14 of
the Securities Exchange Act of 1934, as amended from time to time (the “Exchange Act”)), other than
the Corporation or any employee benefit plan sponsored by the Corporation, becomes the “beneficial
owner” (as such term is used in Section 13 of the Exchange Act) of 25% or more of the total number
of the Corporation’s common shares at the time outstanding; or

          (b) of the approval by the vote of the Corporation’s stockholders holding at least 50% (or
such greater percentage as may be required by the Certificate of Incorporation or By-Laws of the
Corporation or by law) of the voting stock of the Corporation of any merger or consolidation with
any other corporation (other than a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the entity surviving such
merger or consolidation (the “Surviving Entity”) or its direct or indirect parent (the “Survivor
Parent”)), at least 80% of the combined voting power of the securities of the Corporation or the
Surviving Entity or Survivor Parent outstanding immediately after such merger or consolidation);
sale of assets; liquidation; or reorganization in which the Corporation will not survive as a
publicly owned corporation (the transactions described above being collectively referred to as the
“Transaction”); provided that a Change of Control will occur in the circumstances described above
only if the Transaction is ultimately consummated; or

          (c) when the individuals who, at the beginning of any period of two years or less, constituted
the Board of Directors of the Corporation cease, for any reason, to constitute at least a majority
thereof, unless the election or nomination for election of each new director was approved by the
vote of at least two-thirds of the directors then still in office who were directors at the
beginning of such period.

 

 

     5. QUALIFYING TERMINATION DEFINED.

          (a) QUALIFYING TERMINATION. For purposes of this Change of Control Agreement, the term
“Qualifying Termination” means a termination of your employment with the Corporation or any
subsidiary of the Corporation (under circumstances where you are no longer employed by the
Corporation or any such subsidiary) (i) by you for Good Reason, or (ii) by the Corporation or a
subsidiary without Cause, and (iii) prior to your death or Disability.

          (b) CAUSE. “Cause” means willful misconduct in the performance of your duties as an
employee which results in a material detriment to the Corporation, and its subsidiaries, taken as a
whole.

          (c) DISABILITY. For purposes of this Change of Control Agreement, the term
“Disability” shall have the meaning given to that term in the Phelps Dodge Corporation Long-Term
Disability Plan.

          (d) GOOD REASON. For purposes of this Change of Control Agreement, the term “Good
Reason” means that you have terminated your employment with the Corporation and all subsidiaries of
the Corporation under any of the following circumstances:

(i) such termination occurs more than 180 days following the time when a
Change of Control takes place and such Change of Control has not been
approved by a resolution adopted by the Board as constituted immediately
prior to such Change of Control; or

(ii) you terminate your employment on account of one or more of the
following events (and you have not agreed to such event in writing):

(A) the assignment to you of any duties inconsistent, in a way
materially adverse to you, with your positions, duties,
responsibilities and status with the Corporation and its subsidiaries
immediately prior to a Change of Control, or a material reduction in
the duties and responsibilities you held immediately prior to such
Change of Control; or a change in your reporting responsibilities,
titles or offices as in effect immediately prior to such Change of
Control; or any removal of you from or any failure to re-elect you to
any position with the Corporation or any subsidiary that you held
immediately prior to such Change of Control except in connection with
your promotion or the termination of your employment; or

(B) a reduction by the Corporation or any subsidiary of the
Corporation in your base salary as in effect immediately prior to
such Change of Control; the failure by the Corporation or any such
subsidiary to continue in effect any employee benefit plan or
compensation plan (including any incentive compensation or bonus
programs) in which you are participating immediately prior to such
Change of Control unless you are permitted to participate in other
plans providing you with substantially comparable benefits; or the
taking of any action by the Corporation or any such subsidiary which
would adversely affect your participation in

 

 

or materially reduce your benefits under any such employee benefit or
compensation plan; or

(C) the Corporation’s or any subsidiary’s requiring you to be based
anywhere other than a location within 50 miles of your location
immediately prior to such Change of Control; or the Corporation’s or
any subsidiary’s requiring you to travel on the Corporation’s or any
subsidiary’s business to an extent substantially more burdensome than
your travel obligations immediately prior to such Change of Control.

          (e) EMPLOYMENT BY SUCCESSORS. For purposes of this Change of Control Agreement,
employment by a successor of the Corporation, or a successor of any subsidiary of the Corporation,
that has assumed this Change of Control Agreement pursuant to Section 9 shall be considered to be
employment by the Corporation or one of its subsidiaries. As a result, if you are employed by such
a successor following a Change of Control, you will not be entitled to receive the benefits
provided by Sections 1 and 2 unless your employment with the successor is subsequently terminated
in a Qualifying Termination within two (2) years after a Change of Control or as a result of your
timely election to voluntarily terminate your employment during the Anniversary Window Period as
described in Section 1. Solely for purposes of applying the provisions of Sections 1 and 2 and the
definitions set forth in Section 5, the successor shall be deemed to be a subsidiary of the
Corporation.

     6. TAX GROSS-UP.

          (a) GROSS-UP PAYMENT. In the event that the “Total Payments” made under this Change of
Control Agreement or otherwise result in an excise tax being imposed on you pursuant to Section
4999 of the Code, the Corporation will provide you with a “Gross-Up Payment,” calculated in
accordance with the provisions of this Section 6. “Total Payments” as used in this Section 6, means
any payments in the nature of compensation (as defined in Code Section 280G and the regulations
adopted thereunder), made pursuant to this Change of Control Agreement or otherwise, to or for your
benefit, the receipt of which is contingent on a “change in the ownership or effective control” of
the Corporation, or a “change in the ownership of a substantial portion of the assets of the
Corporation” (as these phrases are defined in Code Section 280G and the regulations adopted
thereunder) and to which Code Section 280G applies. This Gross-Up Payment will be paid to you as
and when payments are made to you which are subject to the excise tax imposed under Section 4999,
and in relation to the excise taxes payable with respect to each such payment, but in no event
later than two and one-half months following the end of the taxable year in which the corresponding
amount payable as a Gross-Up Payment is no longer subject to a “substantial risk of forfeiture” (as
such term is defined for purposes of Section 409A of the Code). This lump sum payment will be in
such an amount that after you have paid (i) the “total presumed federal and state taxes;” and (ii)
the excise taxes imposed by Code Section 4999 with respect to the Gross-Up Payment (and any
interest or penalties actually imposed), you retain an amount of the Gross-Up Payment equal to the
remaining excise taxes imposed by Code Section 4999 on your Total Payments (calculated before the
Gross-Up Payment). For purposes of calculating your Gross-Up Payment, your actual federal and state
income taxes will not be used. Instead, we will use your “total presumed federal and state taxes.”
For purposes of this Change of Control Agreement, your “total presumed federal and state taxes”
shall be conclusively calculated using a combined tax rate equal to the sum of the maximum marginal
federal and applicable state income tax rates and the hospital insurance (or “HI”) portion of
F.I.C.A. Based on the rates in effect for 2002 for an

 

 

Arizona resident, the “total presumed federal and state tax rate” is 45.09% (38.6% federal
income tax rate plus 5.04% Arizona state income tax rate plus 1.45% HI tax rate). The state tax
rate for your actual principal place of residence will be used and no adjustments will be made for
the deduction of state taxes on the federal return, any deduction of federal taxes on a state
return, the loss of itemized deductions or exemptions, or for any other purpose.

          (b) CALCULATIONS. The Corporation, at the Corporation’s sole expense, will retain a
“Consultant” to advise the Corporation with respect to the applicability of any Code Section 4999
excise tax with respect to your Total Payments. The Consultant shall be a law firm, a certified
public accounting firm, and/or a firm nationally recognized as providing executive compensation
consulting services. All determinations concerning whether a Gross-Up Payment is required pursuant
to Section 6 (a) and the amount of any Gross-Up Payment (as well as any assumptions to be used in
making such determinations) shall be made by the Consultant selected pursuant to this Section. The
Consultant shall provide you and the Corporation with a written notice of the amount of the excise
taxes that you are required to pay and the amount of the Gross-Up Payment. The notice from the
Consultant shall include any necessary calculations in support of its conclusions. All fees and
expenses of the Consultant shall be borne by the Corporation. Any Gross-Up Payment shall be made by
the Corporation fifteen (15) business days after the mailing of such notice.

     As a general rule, the Consultant’s determination shall be binding on you and the Corporation.
The application of the excise tax rules of Code Section 4999, however, is complex and uncertain
and, as a result, the Internal Revenue Service may disagree with the Consultant concerning the
amount, if any, of the excise taxes that are due. If the Internal Revenue Service determines that
excise taxes are due, or that the amount of the excise taxes that are due is greater than the
amount determined by the Consultant, the Gross-Up Payment will be recalculated by the Consultant to
reflect the actual excise taxes that you are required to pay (and any related interest and
penalties). Any deficiency will then be paid to you by the Corporation fifteen (15) business days
after the receipt of the revised calculations from the Consultant. If the Internal Revenue Service
determines that the amount of excise taxes that you paid exceeds the amount due, you shall return
the excess to the Corporation (along with any interest paid to you on the overpayment) immediately
upon receipt from the Internal Revenue Service or other taxing authority.

     The Corporation has the right to challenge any excise tax determinations made by the Internal
Revenue Service. If the Corporation agrees to indemnify you from any taxes, interest and penalties
that may be imposed upon you (including any taxes, interest and penalties on the amounts paid
pursuant to the Corporation’s indemnification agreement), you must cooperate fully with the
Corporation in connection with any such challenge. The Corporation shall bear all costs associated
with the challenge of any determination made by the Internal Revenue Service and the Corporation
shall control all such challenges. The additional Gross-Up Payments called for by the preceding
paragraph shall not be made until the Corporation has either exhausted its (or your) rights to
challenge the determination or indicated that it intends to concede or settle the excise tax
determination.

     You must notify the Corporation in writing of any claim or determination by the Internal
Revenue Service that, if upheld, would result in the payment of excise taxes in amounts different
from the amount initially specified by the Consultant. Such notice shall be given as soon as
possible but in no event later than fifteen (15) calendar days following your receipt of notice of
the Internal Revenue Service’s position.

 

 

     7. TERM OF AGREEMENT.

     This Change of Control Agreement, as amended and restated, is effective as of January 1, 2005
and shall constitute the only Change of Control Agreement between you and the Corporation, and it
will and will continue in effect until the later of (a) December 31, 2007 or (b) two years
following a Change of Control that occurs prior to December 31, 2007.

     8. TERMINATION NOTICE AND PROCEDURE.

     Any termination of your employment by the Corporation or you within two (2) years after a
Change of Control shall be communicated by written notice of termination, all in accordance with
the following procedures:

          (a) The notice of termination shall indicate the specific termination provision in this Change
of Control Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances alleged to provide a basis for termination.

          (b) If the Corporation notifies you of your termination for Cause and you in good faith notify
the Corporation that a dispute exists concerning such termination within fifteen (15) calendar days
following your receipt of such notice, you may elect to continue your employment during such
dispute. If it is thereafter determined that Cause did exist, your termination date shall be the
earlier of (i) the date on which the dispute is finally determined, either by mutual written
agreement of the parties or pursuant to the arbitration provisions set out below, or (ii) the date
of your death. If it is determined that Cause did not exist, your employment shall continue as if
the Corporation had not delivered its notice of termination.

          (c) If the Corporation notifies you of your termination by reason of Disability and you in
good faith notify the Corporation that a dispute exists concerning such termination within fifteen
(15) calendar days following your receipt of such notice, you also may elect to continue your
employment during such dispute. The dispute relating to the existence of a Disability shall be
resolved by the opinion of the licensed physician selected by the Corporation; provided, however,
that if you do not accept the opinion of the licensed physician selected by the Corporation, the
dispute shall be resolved by the opinion of a licensed physician who shall be selected by you;
provided further, however, that if the Corporation does not accept the opinion of the licensed
physician selected by you, the dispute shall be finally resolved by the opinion of a licensed
physician selected by the licensed physicians selected by the Corporation and you, respectively. If
it is thereafter determined that a Disability did exist, your termination date shall be the earlier
of (i) the date on which the dispute is resolved or (ii) the date of your death. If it is
determined that a Disability did not exist, your employment shall continue as if the Corporation
had not delivered its notice of termination.

          (d) If you in good faith notify the Corporation of your termination for Good Reason and the
Corporation notifies you that a dispute exists concerning the termination within fifteen (15)
calendar days following the Corporation’s receipt of such notice, you may elect to continue your
employment during such dispute. If it is thereafter determined that Good Reason did exist, your
termination date shall be the earlier of (i) the date on which the dispute is finally determined,
either by mutual written agreement of the parties or pursuant to the arbitration provisions set out
below, (ii) the date of your death, or (iii) one day prior to the second anniversary of a Change of
Control, and your payments hereunder shall reflect events occurring after you delivered notice of
termination. If it is determined that Good Reason did not exist, your

 

 

employment shall continue after such determination as if you had not delivered the notice of
termination asserting Good Reason.

          (e) If you do not elect to continue employment pending resolution of a dispute regarding a
notice of termination, and it is finally determined that the reason for termination set forth in
such notice of termination did not exist, if such notice was delivered by you, you shall be deemed
to have voluntarily terminated your employment other than for Good Reason and if delivered by the
Corporation, the Corporation will be deemed to have terminated you without Cause.

          (f) For purposes of this Change of Control Agreement, a transfer from the Corporation to one
of its subsidiaries or a transfer from a subsidiary to the Corporation or another subsidiary shall
not be treated as a termination of employment.

          (g) If you elect to continue your employment pending the resolution of a dispute pursuant to
Sections 8(b), (c), or (d), the Corporation, in its discretion, may place you on a paid
administrative leave until the dispute is resolved.

     9. ASSUMPTION BY SUCCESSORS.

     The Corporation will require any successor (whether direct or indirect, by purchase, merger,
consolidation, acquisition, or otherwise) to all or substantially all of the business and/or assets
of the Corporation or any of its subsidiaries to expressly assume and agree to perform this Change
of Control Agreement in the same manner and to the same extent that the Corporation or any
subsidiary would be required to perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Change of Control Agreement and shall entitle you to
compensation from the Corporation in the same amount and on the same terms to which you would be
entitled hereunder if you terminate your employment for either Good Reason following a Change of
Control, or voluntarily during the Anniversary Window Period, except that for purposes of
implementing the foregoing, the date on which any such succession becomes effective shall be deemed
your termination date.

     10. MISCELLANEOUS.

          (a) ARBITRATION; RELATED EXPENSES. Any dispute or controversy arising under or in
connection with this Change of Control Agreement shall be settled exclusively by arbitration held
in accordance with the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator’s award in any court having jurisdiction. The Corporation shall pay
on a current basis all legal expenses (including attorney’s fees) incurred by you in connection
with such arbitration and the entering of such award if you prevail, or substantially prevail, in
such proceeding. Any reimbursement to you of such legal expenses shall be paid by the Corporation
no later than March 15th of the calendar year following the year in which such legal
expenses were incurred.

          (b) REPLACEMENT OF OTHER AGREEMENTS. This Change of Control Agreement replaces and
supersedes any agreement previously entered into between you and the Corporation regarding the
payment of compensation or benefits following a Change of Control. This Change of Control Agreement
does not replace or supersede your Severance Agreement with the Corporation or any provision in any
stock option or restricted stock plan or agreement or any plan or program to provide retirement or
savings benefits.

 

 

          (c) EMPLOYMENT AT WILL. This Change of Control Agreement shall neither obligate the
Corporation or any subsidiary of the Corporation to continue you in its employ (or to employ you in
any particular office or to perform any specified responsibility) nor obligate you to continue in
the employ of the Corporation or any subsidiary of the Corporation.

          (d) SUCCESSORS. This Change of Control Agreement shall be binding upon and inure to
the benefit of you, your estate and the Corporation and any successor of the Corporation, but
neither this Change of Control Agreement nor any rights arising hereunder may be assigned or
pledged by you.

          (e) GOVERNING LAW. This Change of Control Agreement shall be governed by the laws of
the State of New York.

          (f) SEVERABILITY. If any provision of this Change of Control Agreement as applied to
either party or to any circumstances shall be adjudged by a court of competent jurisdiction to be
void or unenforceable, the same shall in no way affect any other provision of this Change of
Control Agreement or the validity or enforceability of this Change of Control Agreement.

          (g) AMENDMENT OR WAIVER. Except as otherwise provided in Section 10(j) of this Change
of Control Agreement, no provision of this Change of Control Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in a writing signed by you
and such officer as may be designated by the Board or a duly authorized Committee thereof. No
waiver by either party hereto at any time of any breach by the other party hereto of any condition
or provision of this Change of Control Agreement to be performed by such other party shall be
deemed a waiver of any other condition or provision at any time.

          (h) NO DUTY TO MITIGATE. For purposes of receiving payments under this Change of
Control Agreement, you are not under any duty to mitigate the damages resulting from your
termination of employment. As a result, you will receive the payments and other benefits provided
by this Change of Control Agreement regardless of whether you search for or obtain other work. As
provided in Section 1(b), however, your right to receive continued group medical, dental, and
vision insurance benefits will terminate if you become eligible to receive any such medical,
dental, or vision benefits under any other plan or program of any subsequent employer.

          (i) FUNDING. The Corporation shall establish a trust to provide for the funding of the
Corporation’s obligations under this and similar agreements with other executives. The trustee of
the trust shall be chosen by the Corporation or any individual or committee to whom the Corporation
delegates that responsibility, but the trustee must be a national or state bank or trust company.
Prior to the day on which a Change of Control occurs, the Corporation shall transfer to the trustee
of the trust an amount equal to the Corporation’s total potential liability to you pursuant to
Sections 1(a), 2(a), 2(d), 2(e), 2(f), 6 and 10(a). Such amount shall be determined by the
Corporation acting in good faith. If it is discovered at any time that the amount initially
transferred is less than the total amount called for by the preceding sentence, the shortfall shall
be transferred to the trustee immediately upon the discovery of such error. Under the terms of the
trust, the trustee shall be obligated to pay to you the amount to which you are entitled pursuant
to Sections 1(a), 2(a), 2(d), 2(e), 2(f), 6, and 10(a) unless such amounts are paid in a timely
manner by the Corporation or its successors. The other terms and provisions of the trust agreement
shall be determined by the Corporation and the trustee.

 

 

          (j) EFFECT OF CHANGE OF LAW. If at any time during the term of this Change of Control
Agreement any federal or state law or regulation is adopted or modified in any way that will
increase the cost of this Change of Control Agreement to the Corporation, the Corporation reserves
the right to unilaterally modify any provision of the Agreement in any manner which it deems
appropriate to eliminate the cost increase to the Corporation, including but not limited to
eliminating the offending provision or provisions in their entirety.

          (k) AMERICAN JOBS CREATION ACT OF 2004. The Corporation and you acknowledge and agree
that all payments under this Change of Control Agreement will be made in compliance with and
subject to the applicable requirements of Section 409A of the Internal Revenue Code and the
regulations and guidance of the Department of the Treasury interpreting and implementing Section
409A. All payments made under this Change of Control Agreement (including but not limited to
termination payments, Gross-Up Payments and legal expenses) will, to the extent subject to such
Section, be made in compliance with Section 409A.

          (l) PRIOR AMENDMENTS, WAIVERS. For the avoidance of doubt, this Change of Control
Agreement, as amended and restated, is not intended to override any amendments or waivers
previously entered into between you and the Corporation with respect to this Change of Control
Agreement, or any benefits provided herein.

 

 

     If you are in agreement with the foregoing, please so indicate by signing and returning to the
Corporation the enclosed copy of this letter, whereupon this letter shall constitute a binding
agreement between you and the Corporation.

	 	 	 
	 

	 	Very truly yours,
	 
	 	 
	 

	 	PHELPS DODGE CORPORATION
	 
	 	 
	 

	 	 
	 

	 	Senior Vice President-Human Resources
	 
	 	 
	Agreed:
	 	 
	 
	 	 
	 

	 	 
	 

	 	Date

 

 

	 	 	 
	

	 	One N. Central Avenue, Phoenix, AZ 85004 (602) 366-8100

DATE

 

Dear :

FORM OF

CHANGE OF CONTROL AGREEMENT

(Amended and Restated Effective January 1, 2005)

     Phelps Dodge Corporation (the “Corporation”) considers the maintenance of a sound and vital
senior management organization to be essential to protecting and enhancing the best interests of
the Corporation and to providing value to its shareholders. The Corporation recognizes that, as is
the case with many publicly held corporations, the continuing possibility of an unsolicited tender
offer or other takeover bid for the Corporation is unsettling to you and other senior executives of
the Corporation and its principal subsidiaries, and may result in the departure or distraction of
key management personnel to the detriment of the Corporation and its shareholders. The Board of
Directors of the Corporation (the “Board”) and the Compensation and Management Development
Committee (the “Committee”) of the Board have previously determined that it is in the best
interests of the Corporation and its shareholders for the Corporation to minimize these concerns by
entering into an agreement (a “Change of Control Agreement”) which would provide you with certain
benefits in the event your employment with the Corporation terminates under certain limited
circumstances related to a Change of Control. The Corporation has had in place for certain
individuals similar agreements that expire on December 31, 2002. Accordingly, the Corporation has
determined that it is appropriate to replace those expiring agreements with the arrangements set
forth in this Change of Control Agreement.

     These arrangements are being made and entered into to help assure a continuing dedication by
you to your duties to the Corporation, notwithstanding the occurrence of a tender offer or other
takeover bid. In particular, the Board and the Committee believe it important, should the
Corporation receive proposals from third parties with respect to its future, to enable you, without
being influenced or distracted by the uncertainties of your own situation, to assess and advise the
Board whether such proposals would be in the best interests of the Corporation and its
shareholders, and to take such other action regarding such proposals as the Board might determine
to be appropriate. The Board and the Committee understand that in the event of a tender offer or
other takeover bid that certain senior managers are at risk with respect to continuing employment
opportunities with the Corporation. In recognition of that, the Board and the Committee wish to
demonstrate to the senior executives that it is the intent of the Board and Committee, in the event
of a Change of Control, to assure that senior executives are treated fairly in those circumstances.

 

 

     In view of the foregoing, in order to induce you to remain in the employ of the Corporation or
one of its principal subsidiaries and in further consideration of your continued employment with
the Corporation, the Corporation and you agree to a Change of Control Agreement as follows:

     1. Termination Benefits.

     In the event your employment with the Corporation or any subsidiary of the Corporation
terminates by reason of a “Qualifying Termination” (as the term “Qualifying Termination” is defined
below) within two years after a “Change of Control” of the Corporation (as “Change of Control” is
defined below), you shall receive the benefits set forth in this Change of Control Agreement
(“Change of Control Benefits”). In addition, if you have not experienced a Qualifying Termination
prior to the first anniversary date of the Change of Control (“Anniversary Date”), then for a
period of thirty (30) days beginning immediately after the Anniversary Date (the “Anniversary
Window Period”), you will have a one time opportunity to elect to voluntarily terminate your
employment with the Corporation (or any subsidiary of the Corporation) and be eligible to receive
your Change of Control Benefits. Should you make an election to voluntarily terminate your
employment during the Anniversary Window Period, your date of termination must be within that same
thirty (30) day time period. If you fail to make an election to voluntarily terminate your
employment during the Anniversary Window Period, you will have forfeited any right to such an
election for purposes of this Change of Control Agreement. You will continue to be eligible to
receive your Change of Control Benefits only if a Qualifying Termination otherwise occurs within
two years after a Change of Control.

          (a) Termination Payments. The Corporation will pay you as termination compensation a
lump sum amount equal to the sum of: (i) three times your highest annual base salary (not including
any bonuses under the Corporation’s Annual Incentive Compensation Plan) paid or payable by the
Corporation or any subsidiary of the Corporation to you during the three calendar years ending with
the year your employment with the Corporation terminates; plus (ii) three times your Target Bonus;
less (iii) any severance, termination, or other cash compensation payable to you under your
Severance Agreement with the Corporation or pursuant to any severance policy, plan, or program
sponsored by the Corporation or any subsidiary of the Corporation. Any lump sum termination payment
due to you pursuant to this Section 1(a) shall be paid to you ten (10) business days after your
termination of employment with the Corporation, except that, if you are a “specified employee”
within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”),
and you are terminated on or after March 1, 2008, then such payment shall be made on the first
business day after the six month anniversary of your termination date. For purposes of the
calculation set forth in this Section 1(a), Target Bonus shall mean your highest annual base salary
during the twelve (12) months immediately preceding your termination of employment times the
highest target bonus percentage assigned by the Corporation’s Annual Incentive Compensation Plan to
any position you held during the twelve (12) months immediately preceding your termination of
employment.

     If after the effective date of this Change of Control Agreement, the Corporation’s Annual
Incentive Compensation Plan is replaced by another incentive compensation or bonus program, your
Target Bonus for purposes of this Section 1, will be the greater of (i) the Target Bonus as
determined under Section 1(a) as of the date of the Change of Control; (ii) the Target Bonus as
determined under Section 1(a) as of your termination date; or (iii) the Target Bonus as determined
under Section 1(a) except that your Target Bonus will be calculated using the

 

 

highest target bonus percentage assigned by the replacement program to any position you held
during the twelve (12) months immediately preceding your termination of employment.

          (b) Benefits Continuation. You will continue to receive medical, dental, vision,
long-term disability, and life insurance benefits as described in this Section 1(b).

               (i) Group Medical, Dental, and Vision. You will receive group medical, dental, and
vision coverage in accordance with the terms and conditions of the special insured group medical,
dental, and vision plans sponsored by the Corporation for certain senior executives (collectively,
the “Insured Plans”). The Insured Plans are designed to be similar to the Corporation’s then in
effect self-insured active group medical, dental, and vision plans. You will be eligible to
participate in the respective Insured Plans until the earlier of (1) December 31 of the second
calendar year commencing after the date of your termination (the “Continuation Period”) or (2) the
day on which you become eligible to receive any group medical, dental, and vision care benefits, as
the case may be, under any plan or program of any other employer for active employees or the
Retiree Insured Plan. You will be responsible to contribute to the cost of the Insured Plans at the
same level, if any, you were required to contribute to receive the similar benefits under the
Corporation’s group medical, dental, and vision plans as of your termination date. In lieu of the
benefits provided above, you may elect to receive eighteen (18) months of Corporation paid
continuation of coverage under the Corporation’s group medical, dental, and vision plans pursuant
to Section 601 et seq. of the Employee Retirement Income Security Act of 1974, as it may be amended
or replaced from time to time. In addition, if on December 1 of the second calendar year
commencing after the date of your termination you are still receiving group medical, dental, or
vision coverage under the Insured Plans in accordance with this Section 1(b)(i), you will receive a
cash payment equal to the product of (i) the monthly cost of such coverage under the Insured Plans
for a similarly situated Corporation employee, multiplied by (ii) the number of months that, taken
together with the number of months in your Continuation Period, would equal a total of thirty-six
(36) months. Such cash payment will be payable in a lump sum amount on December 15 of that date.

               (ii) Retiree Medical Insurance. If during the two year period after the date of the
Change of Control, but after the date of your termination of employment (which entitles you to
benefits under this Change of Control Agreement), you would have been eligible for early or normal
retirement under the terms and conditions of any pension or retirement plan sponsored by the
Corporation (or any subsidiary of the Corporation) in which you participate, then you will be
eligible to participate in any insured medical plan (the “Retiree Insured Plan”) that the
Corporation has in place to provide medical benefits similar to those provided by the Corporation’s
retiree medical plan. You will be eligible to participate in the Retiree Insured Plan beginning on
the date you would have been eligible for an early or normal retirement had your employment not
been terminated and continuing until such time (if any) as the Corporation ceases to provide
retiree medical insurance, or the insurance available under the Retiree Insured Plan is no longer
available. Until the end of the thirty-six (36) month period following your termination date, the
Corporation will pay your full cost of the Retiree Insured Plan. If as of your employment
termination date (either because of your Qualifying Termination within the required time period or
your voluntary termination during the Anniversary Window Period), you are eligible to participate
in the Corporation’s retiree medical plan, if any, the cost of your participation in the applicable
retiree medical plan will be paid by the Corporation for the thirty-six (36) month period following
your termination date. After the end of this thirty-six (36) month period, you will be responsible
to pay the applicable retiree contribution percentage to participate in the Corporation’s retiree
medical plan. Similarly, if you are participating in the Retiree Insured Plan, you will be required
to pay the equivalent contribution as if you had been

 

 

eligible to participate in the Corporation’s retiree medical plan. The Corporation reserves
the right to amend or terminate its retiree medical plan at any time. Any such amendment or
termination that applies equally to all covered individuals also will apply to you. The Corporation
also reserves the right to amend or terminate any Retiree Insured Plan as long as a comparable
amendment or termination is being made at the same time to the Corporation’s retiree medical plan.
A Retiree Insured Plan also may be amended if such amendment is required by the insurer and a
Retiree Insured Plan may be terminated if the underlying insurance cannot be obtained from a
reputable insurer.

               (iii) Long-Term Disability. With respect to your long-term disability insurance
coverage, you will be eligible to purchase an individual long-term disability conversion policy
directly from the insurer providing the group benefits under the Corporation’s Long-Term Disability
Plan as of your termination date. To be eligible for this coverage, you must satisfy the insurer’s
requirements for coverage in effect on your termination date, and any such conversion coverage is
subject to coverage and other limitations imposed by the insurer. The disability benefits and
amount of coverage under the conversion policy may be different than those provided to you under
the Corporation’s Long-Term Disability Plan in effect on your termination date. The Corporation
will pay the cost to continue any long-term disability conversion coverage for a period ending on
December 31 of the second calendar year commencing after the date of your termination (the “LTD
Continuation Period”). You will be responsible for the cost of any long-term disability conversion
coverage after this period. In addition, the Corporation will pay to you a cash amount equal to
the product of (i) the monthly cost of your long-term disability conversion coverage as of your
termination date, multiplied by (ii) the number of months that, taken together with the number of
months in the LTD Continuation Period, would equal a total of thirty-six (36) months. Any such
cash payment shall be paid to you in a lump sum amount on the same date as the termination payment
is paid under Section 1(a) of this Change of Control Agreement.

               (iv) Life Insurance. The disposition of your life insurance policy or policies (the
“Policies”) issued under the Corporation’s Executive Life Insurance Plan (“ELIP”) will be in
accordance with the terms and conditions of the ELIP. The Corporation, ten (10) business days after
the date your employment with the Corporation (or any subsidiary) terminates, will pay the insurer
of the Policies an amount sufficient to fund the Policies for a period of thirty-six (36) months
after your termination date. The Corporation will fund the Policies for this thirty-six (36) month
period in a manner similar to the funding level before the Change of Control such that the Policies
are funded for the Policies’ death benefit and the contribution towards the retiree life insurance
portion of the Policies. At the end of this thirty-six (36) month period any additional funding
required by the Policies will be your obligation. In lieu of the payment method described above,
you may elect, prior to any payment being made, to have the Corporation fund the Policies to the
same level with annual installment payments over a three (3) year period, provided that such
election shall be valid only if: (a) such election must be made prior to the earlier of your
termination of employment and December 31, 2007, and (b) you are not terminated prior to December
31, 2007. To the extent that any of your life insurance coverage under the ELIP is insured under
the Corporation’s group term life insurance plan, in accordance with the terms and conditions of
that insurance coverage you will be eligible to convert this coverage to individual non-term
conversion coverage as of your termination date. To be eligible to receive this conversion coverage
you must submit an application to the insurer. Any available conversion coverage is subject to such
limitations as may be imposed by the insurer. Should you elect this individual conversion coverage,
the Corporation will pay the cost to continue your conversion coverage for a period of thirty-six
(36) months following your termination date. You will be responsible for the cost of any conversion
coverage in excess of thirty-six (36) months.

 

 

Notwithstanding the foregoing, if any of the Policies or conversion coverage described in this
Section 1(b)(iv) provides a benefit other than a death benefit to you, and you are terminated on or
after March 1 in the calendar year following the year in which the Change of Control occurs, then
any applicable lump sum payment shall be made (or, in the case of a qualifying installment
election, the first annual installment payment shall be made) by the Corporation on the first
business day after the six month anniversary of your termination date.

     2. Other Benefits; Loans.

          (a) Incentive Compensation Plan. Generally, your participation in the Corporation’s
Annual Incentive Compensation Plan (“AICP”), and any right that you may have to receive a bonus
thereunder for the year in which your employment with the Corporation or any subsidiary of the
Corporation terminates or any prior year shall be governed by the terms of the AICP. If you were a
participant in the AICP at any time during the calendar year in which a Change of Control occurs,
however, you will receive at least a pro rated incentive compensation payment for the year in which
the Change of Control occurs. Your pro rated incentive compensation payment will be calculated in
two steps. The first step will be to calculate the incentive compensation to which you would be
entitled under the AICP, calculated on the basis of the following assumptions: (i) the annual
performance period ends on the date of the Change of Control; (ii) the financial performance of the
Corporation or any of its subsidiaries for the relevant performance period will be equal to the
financial performance measured as of the date of the Change of Control, annualized; and (iii) you
satisfy all individual subjective performance goals or measures set for you under the AICP at the
“target” performance level. The second step will be to multiply the amount determined pursuant to
the first step by a fraction, the numerator of which is the number of days that have elapsed in the
calendar year prior to the day of the Change of Control and the denominator of which is 365. Any
bonus due under this Section 2(a) shall be paid to you on the same date as the termination payment
is paid under Section 1(a) of this Change of Control Agreement.

          (b) Retirement and Savings Plans. Any participation by you in, and any terminating
distributions and vested rights under, the Phelps Dodge Retirement Plan, the Phelps Dodge Employee
Savings Plan, the Phelps Dodge Corporation Supplemental Retirement Plan, and the Phelps Dodge
Corporation Supplemental Savings Plan, or any other retirement or savings plan sponsored by the
Corporation, regardless of whether such plan qualifies for favorable tax treatment, shall be
governed by the terms and conditions of those respective plans, as they may be amended from time to
time.

          (c) Loans. Any permitted indebtedness owed by you to the Corporation or any subsidiary
of the Corporation on account of advances or loans shall become due and payable and may be deducted
from the payment referred to in Section 1 above.

          (d) Outplacement Services. You will be eligible to receive outplacement services for a
period of up to one year after your termination date at an outplacement firm selected by the
Corporation. The cost of these outplacement services will be paid by the Corporation directly to
the outplacement firm selected, up to a maximum amount of fifteen percent (15%) of your highest
annual base salary in effect during the twelve (12) months immediately preceding your termination
date.

          (e) Executive Physicals. You shall receive a lump sum payment equivalent to the cost
of coverage under the Corporation’s Executive Physical program for the thirty-six (36) month period
after your termination date. The benefits to which you will be eligible, will be the

 

 

executive physical benefits that were in effect on the date of the Change of Control and any
executive physical benefits received will be subject to the terms and conditions of the Executive
Physical program as in effect on the date of the Change of Control. Any lump sum payment due under
this Section 2(e) shall be paid to you on the same date as the termination payment is paid under
Section 1(a) of this Change of Control Agreement.

          (f) Financial Counseling. To the extent you were eligible for financial counseling
paid by the Corporation on the date of the Change of Control, you shall receive a lump sum payment
equivalent to the cost of such services for an additional thirty-six (36) month period after your
termination date (as determined by the Corporation in good faith). Any lump sum payment due under
this Section 2(f) shall be paid to you on the same date as the termination payment is paid under
Section 1(a) of this Change of Control Agreement.

     3. Confidentiality.

     In the event your employment with the Corporation or any subsidiary of the Corporation
terminates under the circumstances specified in Section 1, you shall retain in confidence any
confidential, proprietary, or trade secret information known to you concerning the Corporation and
its subsidiaries and their businesses so long as such information is not publicly disclosed by the
Corporation or any subsidiary of the Corporation.

     4. Change of Control Defined.

          For purposes of this Change of Control Agreement, a “Change of Control” shall be deemed to
have taken place at the time:

          (a) when any “person” or “group” of persons (as such terms are used in Section 13 and 14 of
the Securities Exchange Act of 1934, as amended from time to time (the “Exchange Act”)), other than
the Corporation or any employee benefit plan sponsored by the Corporation, becomes the “beneficial
owner” (as such term is used in Section 13 of the Exchange Act) of 25% or more of the total number
of the Corporation’s common shares at the time outstanding; or

          (b) of the approval by the vote of the Corporation’s stockholders holding at least 50% (or
such greater percentage as may be required by the Certificate of Incorporation or By-Laws of the
Corporation or by law) of the voting stock of the Corporation of any merger or consolidation with
any other corporation (other than a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the entity surviving such
merger or consolidation (the “Surviving Entity”) or its direct or indirect parent (the “Survivor
Parent”)), at least 80% of the combined voting power of the securities of the Corporation or the
Surviving Entity or Survivor Parent outstanding immediately after such merger or consolidation);
sale of assets; liquidation; or reorganization in which the Corporation will not survive as a
publicly owned corporation (the transactions described above being collectively referred to as the
“Transaction”); provided that a Change of Control will occur in the circumstances described above
only if the Transaction is ultimately consummated; or

          (c) when the individuals who, at the beginning of any period of two years or less, constituted
the Board of Directors of the Corporation cease, for any reason, to constitute at least a majority
thereof, unless the election or nomination for election of each new director was

 

 

approved by the vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period.

     5. Qualifying Termination Defined.

          (a) Qualifying Termination. For purposes of this Change of Control Agreement, the term
“Qualifying Termination” means a termination of your employment with the Corporation or any
subsidiary of the Corporation (under circumstances where you are no longer employed by the
Corporation or any such subsidiary) (i) by you for Good Reason, or (ii) by the Corporation or a
subsidiary without Cause, and (iii) prior to your death or Disability.

          (b) Cause. “Cause” means willful misconduct in the performance of your duties as an
employee which results in a material detriment to the Corporation, and its subsidiaries, taken as a
whole.

          (c) Disability. For purposes of this Change of Control Agreement, the term
“Disability” shall have the meaning given to that term in the Phelps Dodge Corporation Long-Term
Disability Plan.

          (d) Good Reason. For purposes of this Change of Control Agreement, the term “Good
Reason” means that you have terminated your employment with the Corporation and all subsidiaries of
the Corporation under any of the following circumstances:

(i) such termination occurs more than 180 days following the time when a
Change of Control takes place and such Change of Control has not been
approved by a resolution adopted by the Board as constituted immediately
prior to such Change of Control; or

(ii) you terminate your employment on account of one or more of the
following events (and you have not agreed to such event in writing):

(A) the assignment to you of any duties inconsistent, in a way
materially adverse to you, with your positions, duties,
responsibilities and status with the Corporation and its subsidiaries
immediately prior to a Change of Control, or a material reduction in
the duties and responsibilities you held immediately prior to such
Change of Control; or a change in your reporting responsibilities,
titles or offices as in effect immediately prior to such Change of
Control; or any removal of you from or any failure to re-elect you to
any position with the Corporation or any subsidiary that you held
immediately prior to such Change of Control except in connection with
your promotion or the termination of your employment; or

(B) a reduction by the Corporation or any subsidiary of the
Corporation in your base salary as in effect immediately prior to
such Change of Control; the failure by the Corporation or any such
subsidiary to continue in effect any employee benefit plan or
compensation plan (including any incentive compensation or bonus
programs) in which you are participating immediately prior to such
Change of Control unless you are permitted to participate in other
plans providing you with substantially comparable

 

 

benefits; or the taking of any action by the Corporation or any such
subsidiary which would adversely affect your participation in or
materially reduce your benefits under any such employee benefit or
compensation plan; or

(C) the Corporation’s or any subsidiary’s requiring you to be based
anywhere other than a location within 50 miles of your location
immediately prior to such Change of Control; or the Corporation’s or
any subsidiary’s requiring you to travel on the Corporation’s or any
subsidiary’s business to an extent substantially more burdensome than
your travel obligations immediately prior to such Change of Control.

          (e) Employment by Successors. For purposes of this Change of Control Agreement,
employment by a successor of the Corporation, or a successor of any subsidiary of the Corporation,
that has assumed this Change of Control Agreement pursuant to Section 9 shall be considered to be
employment by the Corporation or one of its subsidiaries. As a result, if you are employed by such
a successor following a Change of Control, you will not be entitled to receive the benefits
provided by Sections 1 and 2 unless your employment with the successor is subsequently terminated
in a Qualifying Termination within two (2) years after a Change of Control or as a result of your
timely election to voluntarily terminate your employment during the Anniversary Window Period as
described in Section 1. Solely for purposes of applying the provisions of Sections 1 and 2 and the
definitions set forth in Section 5, the successor shall be deemed to be a subsidiary of the
Corporation.

     6. Tax Gross-Up.

          (a) Gross-Up Payment. In the event that the “Total Payments” made under this Change of
Control Agreement or otherwise result in an excise tax being imposed on you pursuant to Section
4999 of the Code, the Corporation will provide you with a “Gross-Up Payment,” calculated in
accordance with the provisions of this Section 6. “Total Payments” as used in this Section 6, means
any payments in the nature of compensation (as defined in Code Section 280G and the regulations
adopted thereunder), made pursuant to this Change of Control Agreement or otherwise, to or for your
benefit, the receipt of which is contingent on a “change in the ownership or effective control” of
the Corporation, or a “change in the ownership of a substantial portion of the assets of the
Corporation” (as these phrases are defined in Code Section 280G and the regulations adopted
thereunder) and to which Code Section 280G applies. This Gross-Up Payment will be paid to you as
and when payments are made to you which are subject to the excise tax imposed under Section 4999,
and in relation to the excise taxes payable with respect to each such payment, but in no event
later than two and one-half months following the end of the taxable year in which the corresponding
amount payable as a Gross-Up Payment is no longer subject to a “substantial risk of forfeiture” (as
such term is defined for purposes of Section 409A of the Code). This lump sum payment will be in
such an amount that after you have paid (i) the “total presumed federal and state taxes;” and (ii)
the excise taxes imposed by Code Section 4999 with respect to the Gross-Up Payment (and any
interest or penalties actually imposed), you retain an amount of the Gross-Up Payment equal to the
remaining excise taxes imposed by Code Section 4999 on your Total Payments (calculated before the
Gross-Up Payment). For purposes of calculating your Gross-Up Payment, your actual federal and state
income taxes will not be used. Instead, we will use your “total presumed federal and state taxes.”
For purposes of this Change of Control Agreement, your “total presumed federal and state taxes”
shall be conclusively calculated using a combined tax rate

 

 

equal to the sum of the maximum marginal federal and applicable state income tax rates and the
hospital insurance (or “HI”) portion of F.I.C.A. Based on the rates in effect for 2002 for an
Arizona resident, the “total presumed federal and state tax rate” is 45.09% (38.6% federal income
tax rate plus 5.04% Arizona state income tax rate plus 1.45% HI tax rate). The state tax rate for
your actual principal place of residence will be used and no adjustments will be made for the
deduction of state taxes on the federal return, any deduction of federal taxes on a state return,
the loss of itemized deductions or exemptions, or for any other purpose.

          (b) Calculations. The Corporation, at the Corporation’s sole expense, will retain a
“Consultant” to advise the Corporation with respect to the applicability of any Code Section 4999
excise tax with respect to your Total Payments. The Consultant shall be a law firm, a certified
public accounting firm, and/or a firm nationally recognized as providing executive compensation
consulting services. All determinations concerning whether a Gross-Up Payment is required pursuant
to Section 6 (a) and the amount of any Gross-Up Payment (as well as any assumptions to be used in
making such determinations) shall be made by the Consultant selected pursuant to this Section. The
Consultant shall provide you and the Corporation with a written notice of the amount of the excise
taxes that you are required to pay and the amount of the Gross-Up Payment. The notice from the
Consultant shall include any necessary calculations in support of its conclusions. All fees and
expenses of the Consultant shall be borne by the Corporation. Any Gross-Up Payment shall be made by
the Corporation fifteen (15) business days after the mailing of such notice.

     As a general rule, the Consultant’s determination shall be binding on you and the Corporation.
The application of the excise tax rules of Code Section 4999, however, is complex and uncertain
and, as a result, the Internal Revenue Service may disagree with the Consultant concerning the
amount, if any, of the excise taxes that are due. If the Internal Revenue Service determines that
excise taxes are due, or that the amount of the excise taxes that are due is greater than the
amount determined by the Consultant, the Gross-Up Payment will be recalculated by the Consultant to
reflect the actual excise taxes that you are required to pay (and any related interest and
penalties). Any deficiency will then be paid to you by the Corporation fifteen (15) business days
after the receipt of the revised calculations from the Consultant. If the Internal Revenue Service
determines that the amount of excise taxes that you paid exceeds the amount due, you shall return
the excess to the Corporation (along with any interest paid to you on the overpayment) immediately
upon receipt from the Internal Revenue Service or other taxing authority.

     The Corporation has the right to challenge any excise tax determinations made by the Internal
Revenue Service. If the Corporation agrees to indemnify you from any taxes, interest and penalties
that may be imposed upon you (including any taxes, interest and penalties on the amounts paid
pursuant to the Corporation’s indemnification agreement), you must cooperate fully with the
Corporation in connection with any such challenge. The Corporation shall bear all costs associated
with the challenge of any determination made by the Internal Revenue Service and the Corporation
shall control all such challenges. The additional Gross-Up Payments called for by the preceding
paragraph shall not be made until the Corporation has either exhausted its (or your) rights to
challenge the determination or indicated that it intends to concede or settle the excise tax
determination.

     You must notify the Corporation in writing of any claim or determination by the Internal
Revenue Service that, if upheld, would result in the payment of excise taxes in amounts different
from the amount initially specified by the Consultant. Such notice shall be given as

 

 

soon as possible but in no event later than fifteen (15) calendar days following your receipt
of notice of the Internal Revenue Service’s position.

     7. Term of Agreement.

     This Change of Control Agreement, as amended and restated, is effective as of January 1, 2005
and shall constitute the only Change of Control Agreement between you and the Corporation, and it
will and will continue in effect until the later of (a) December 31, 2007 or (b) two years
following a Change of Control that occurs prior to December 31, 2007.

     8. Termination Notice and Procedure.

     Any termination of your employment by the Corporation or you within two (2) years after a
Change of Control shall be communicated by written notice of termination, all in accordance with
the following procedures:

          (a) The notice of termination shall indicate the specific termination provision in this Change
of Control Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances alleged to provide a basis for termination.

          (b) If the Corporation notifies you of your termination for Cause and you in good faith notify
the Corporation that a dispute exists concerning such termination within fifteen (15) calendar days
following your receipt of such notice, you may elect to continue your employment during such
dispute. If it is thereafter determined that Cause did exist, your termination date shall be the
earlier of (i) the date on which the dispute is finally determined, either by mutual written
agreement of the parties or pursuant to the arbitration provisions set out below, or (ii) the date
of your death. If it is determined that Cause did not exist, your employment shall continue as if
the Corporation had not delivered its notice of termination.

          (c) If the Corporation notifies you of your termination by reason of Disability and you in
good faith notify the Corporation that a dispute exists concerning such termination within fifteen
(15) calendar days following your receipt of such notice, you also may elect to continue your
employment during such dispute. The dispute relating to the existence of a Disability shall be
resolved by the opinion of the licensed physician selected by the Corporation; provided, however,
that if you do not accept the opinion of the licensed physician selected by the Corporation, the
dispute shall be resolved by the opinion of a licensed physician who shall be selected by you;
provided further, however, that if the Corporation does not accept the opinion of the licensed
physician selected by you, the dispute shall be finally resolved by the opinion of a licensed
physician selected by the licensed physicians selected by the Corporation and you, respectively. If
it is thereafter determined that a Disability did exist, your termination date shall be the earlier
of (i) the date on which the dispute is resolved or (ii) the date of your death. If it is
determined that a Disability did not exist, your employment shall continue as if the Corporation
had not delivered its notice of termination.

          (d) If you in good faith notify the Corporation of your termination for Good Reason and the
Corporation notifies you that a dispute exists concerning the termination within fifteen (15)
calendar days following the Corporation’s receipt of such notice, you may elect to continue your
employment during such dispute. If it is thereafter determined that Good Reason did exist, your
termination date shall be the earlier of (i) the date on which the dispute is finally determined,
either by mutual written agreement of the parties or pursuant to the arbitration

 

 

provisions set out below, (ii) the date of your death, or (iii) one day prior to the second
anniversary of a Change of Control, and your payments hereunder shall reflect events occurring
after you delivered notice of termination. If it is determined that Good Reason did not exist, your
employment shall continue after such determination as if you had not delivered the notice of
termination asserting Good Reason.

          (e) If you do not elect to continue employment pending resolution of a dispute regarding a
notice of termination, and it is finally determined that the reason for termination set forth in
such notice of termination did not exist, if such notice was delivered by you, you shall be deemed
to have voluntarily terminated your employment other than for Good Reason and if delivered by the
Corporation, the Corporation will be deemed to have terminated you without Cause.

          (f) For purposes of this Change of Control Agreement, a transfer from the Corporation to one
of its subsidiaries or a transfer from a subsidiary to the Corporation or another subsidiary shall
not be treated as a termination of employment.

          (g) If you elect to continue your employment pending the resolution of a dispute pursuant to
Sections 8(b), (c), or (d), the Corporation, in its discretion, may place you on a paid
administrative leave until the dispute is resolved.

     9. Assumption by Successors.

     The Corporation will require any successor (whether direct or indirect, by purchase, merger,
consolidation, acquisition, or otherwise) to all or substantially all of the business and/or assets
of the Corporation or any of its subsidiaries to expressly assume and agree to perform this Change
of Control Agreement in the same manner and to the same extent that the Corporation or any
subsidiary would be required to perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Change of Control Agreement and shall entitle you to
compensation from the Corporation in the same amount and on the same terms to which you would be
entitled hereunder if you terminate your employment for either Good Reason following a Change of
Control, or voluntarily during the Anniversary Window Period, except that for purposes of
implementing the foregoing, the date on which any such succession becomes effective shall be deemed
your termination date.

     10. Miscellaneous.

          (a) Arbitration; Related Expenses. Any dispute or controversy arising under or in
connection with this Change of Control Agreement shall be settled exclusively by arbitration held
in accordance with the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator’s award in any court having jurisdiction. The Corporation shall pay
on a current basis all legal expenses (including attorney’s fees) incurred by you in connection
with such arbitration and the entering of such award if you prevail, or substantially prevail, in
such proceeding. Any reimbursement to you of such legal expenses shall be paid by the Corporation
no later than March 15th of the calendar year following the year in which such legal
expenses were incurred.

          (b) Replacement of Other Agreements. This Change of Control Agreement replaces and
supersedes any agreement previously entered into between you and the Corporation regarding the
payment of compensation or benefits following a Change of Control.

 

 

This Change of Control Agreement does not replace or supersede your Severance Agreement with
the Corporation or any provision in any stock option or restricted stock plan or agreement or any
plan or program to provide retirement or savings benefits.

          (c) Employment at Will. This Change of Control Agreement shall neither obligate the
Corporation or any subsidiary of the Corporation to continue you in its employ (or to employ you in
any particular office or to perform any specified responsibility) nor obligate you to continue in
the employ of the Corporation or any subsidiary of the Corporation.

          (d) Successors. This Change of Control Agreement shall be binding upon and inure to
the benefit of you, your estate and the Corporation and any successor of the Corporation, but
neither this Change of Control Agreement nor any rights arising hereunder may be assigned or
pledged by you.

          (e) Governing Law. This Change of Control Agreement shall be governed by the laws of
the State of New York.

          (f) Severability. If any provision of this Change of Control Agreement as applied to
either party or to any circumstances shall be adjudged by a court of competent jurisdiction to be
void or unenforceable, the same shall in no way affect any other provision of this Change of
Control Agreement or the validity or enforceability of this Change of Control Agreement.

          (g) Amendment or Waiver. Except as otherwise provided in Section 10(j) of this Change
of Control Agreement, no provision of this Change of Control Agreement may be modified, waived or
discharged unless such modification, waiver or discharge is agreed to in a writing signed by you
and such officer as may be designated by the Board or a duly authorized Committee thereof. No
waiver by either party hereto at any time of any breach by the other party hereto of any condition
or provision of this Change of Control Agreement to be performed by such other party shall be
deemed a waiver of any other condition or provision at any time.

          (h) No Duty to Mitigate. For purposes of receiving payments under this Change of
Control Agreement, you are not under any duty to mitigate the damages resulting from your
termination of employment. As a result, you will receive the payments and other benefits provided
by this Change of Control Agreement regardless of whether you search for or obtain other work. As
provided in Section 1(b), however, your right to receive continued group medical, dental, and
vision insurance benefits will terminate if you become eligible to receive any such medical,
dental, or vision benefits under any other plan or program of any subsequent employer.

          (i) Funding. The Corporation shall establish a trust to provide for the funding of the
Corporation’s obligations under this and similar agreements with other executives. The trustee of
the trust shall be chosen by the Corporation or any individual or committee to whom the Corporation
delegates that responsibility, but the trustee must be a national or state bank or trust company.
Prior to the day on which a Change of Control occurs, the Corporation shall transfer to the trustee
of the trust an amount equal to the Corporation’s total potential liability to you pursuant to
Sections 1(a), 2(a), 2(d), 2(e), 2(f), 6 and 10(a). Such amount shall be determined by the
Corporation acting in good faith. If it is discovered at any time that the amount initially
transferred is less than the total amount called for by the preceding sentence, the shortfall shall
be transferred to the trustee immediately upon the discovery of such error. Under the terms of the
trust, the trustee shall be obligated to pay to you the amount to which you are entitled pursuant
to Sections 1(a), 2(a), 2(d), 2(e), 2(f), 6, and 10(a) unless such

 

 

amounts are paid in a timely manner by the Corporation or its successors. The other terms and
provisions of the trust agreement shall be determined by the Corporation and the trustee.

          (j) Effect of Change of Law. If at any time during the term of this Change of Control
Agreement any federal or state law or regulation is adopted or modified in any way that will
increase the cost of this Change of Control Agreement to the Corporation, the Corporation reserves
the right to unilaterally modify any provision of the Agreement in any manner which it deems
appropriate to eliminate the cost increase to the Corporation, including but not limited to
eliminating the offending provision or provisions in their entirety.

          (k) American Jobs Creation Act of 2004. The Corporation and you acknowledge and agree
that all payments under this Change of Control Agreement will be made in compliance with and
subject to the applicable requirements of Section 409A of the Internal Revenue Code and the
regulations and guidance of the Department of the Treasury interpreting and implementing Section
409A. All payments made under this Change of Control Agreement (including but not limited to
termination payments, Gross-Up Payments and legal expenses) will, to the extent subject to such
Section, be made in compliance with Section 409A.

          (l) Prior Amendments, Waivers. For the avoidance of doubt, this Change of Control
Agreement, as amended and restated, is not intended to override any amendments or waivers
previously entered into between you and the Corporation with respect to this Change of Control
Agreement, or any benefits provided herein.

 

 

     If you are in agreement with the foregoing, please so indicate by signing and returning to the
Corporation the enclosed copy of this letter, whereupon this letter shall constitute a binding
agreement between you and the Corporation.

	 	 	 
	 

	 	Very truly yours,
	 
	 	 
	 

	 	PHELPS DODGE CORPORATION
	 
	 	 
	 

	 	 
	 

	 	Senior Vice President-Human Resources
	 
	 	 
	Agreed:
	 	 
	 
	 	 
	 

	 	 
	 

	 	Date

 

 

	 	 	 
	

	 	One N. Central Avenue, Phoenix, AZ 85004 (602) 366-8100

DATE

 

Dear :

FORM OF

CHANGE OF CONTROL AGREEMENT

(Amended and Restated Effective January 1, 2005)

     Phelps Dodge Corporation (the “Corporation”) considers the maintenance of a sound and
vital senior management organization to be essential to protecting and enhancing the best interests
of the Corporation and to providing value to its shareholders. The Corporation recognizes that, as
is the case with many publicly held corporations, the continuing possibility of an unsolicited
tender offer or other takeover bid for the Corporation is unsettling to you and other senior
executives of the Corporation and its principal subsidiaries, and may result in the departure or
distraction of key management personnel to the detriment of the Corporation and its shareholders.
The Board of Directors of the Corporation (the “Board”) and the Compensation and Management
Development Committee (the “Committee”) of the Board have previously determined that it is
in the best interests of the Corporation and its shareholders for the Corporation to minimize these
concerns by entering into an agreement (a “Change of Control Agreement”) which would
provide you with certain benefits in the event your employment with the Corporation terminates
under certain limited circumstances related to a Change of Control. The Corporation has had in
place for certain individuals similar agreements that expire on December 31, 2002. Accordingly,
the Corporation has determined that it is appropriate to replace those expiring agreements with the
arrangements set forth in this Change of Control Agreement.

     These arrangements are being made and entered into to help assure a continuing dedication by
you to your duties to the Corporation, notwithstanding the occurrence of a tender offer or other
takeover bid. In particular, the Board and the Committee believe it important, should the
Corporation receive proposals from third parties with respect to its future, to enable you, without
being influenced or distracted by the uncertainties of your own situation, to assess and advise the
Board whether such proposals would be in the best interests of the Corporation and its
shareholders, and to take such other action regarding such proposals as the Board might determine
to be appropriate. The Board and the Committee understand that in the event of a tender offer or
other takeover bid that certain senior managers are at risk with respect to continuing employment
opportunities with the Corporation. In recognition of that, the Board and the Committee wish to
demonstrate to the senior executives that it is the intent of the Board and

 

 

Committee, in the event of a Change of Control, to assure that senior executives are treated
fairly in those circumstances.

     In view of the foregoing, in order to induce you to remain in the employ of the Corporation or
one of its principal subsidiaries and in further consideration of your continued employment with
the Corporation, the Corporation and you agree to a Change of Control Agreement as follows:

     1. Termination Benefits.

     In the event your employment with the Corporation or any subsidiary of the Corporation
terminates by reason of a “Qualifying Termination” (as the term “Qualifying Termination” is defined
below) within two years after a “Change of Control” of the Corporation (as “Change of Control” is
defined below), you shall receive the benefits set forth in this Change of Control Agreement,
subject to the “Cap” described in Section 6 below.

          (a) Termination Payments. The Corporation will pay you as termination
compensation a lump sum amount equal to the sum of: (i) two times your highest annual base
salary (not including any bonuses under the Corporation’s Annual Incentive Compensation Plan) paid
or payable by the Corporation or any subsidiary of the Corporation to you during the three calendar
years ending with the year your employment with the Corporation terminates; plus
(ii) two times your Target Bonus; less (iii) any severance, termination, or
other cash compensation payable to you under your Severance Agreement with the Corporation or
pursuant to any severance policy, plan, or program sponsored by the Corporation or any subsidiary
of the Corporation. Any lump sum termination payment due to you pursuant to this Section 1(a)
shall be paid to you ten (10) business days after your termination of employment with the
Corporation, except that, if you are a “specified employee” within the meaning of Section 409A of
the Internal Revenue Code of 1986, as amended (the “Code”), and you are terminated on or after
March 1, 2008, then such payment shall be made on the first business day after the six month
anniversary of your termination date. For purposes of the calculation set forth in this Section
1(a), Target Bonus shall mean your highest annual base salary during the twelve (12) months
immediately preceding your termination of employment times the highest target bonus percentage
assigned by the Corporation’s Annual Incentive Compensation Plan to any position you held during
the twelve (12) months immediately preceding your termination of employment.

     If after the effective date of this Change of Control Agreement, the Corporation’s Annual
Incentive Compensation Plan is replaced by another incentive compensation or bonus program, your
Target Bonus for purposes of this Section 1, will be the greater of (i) the Target Bonus as
determined under Section 1(a) as of the date of the Change of Control; (ii) the Target
Bonus as determined under Section 1(a) as of your termination date; or (iii) the Target
Bonus as determined under Section 1(a) except that your Target Bonus will be calculated using the
highest target bonus percentage assigned by the replacement program to any position you held during
the twelve (12) months immediately preceding your termination of employment.

          (b) Benefits Continuation. You will continue to receive medical, dental,
vision, long-term disability, and life insurance benefits as described in this Section 1(b).

               (i) Group Medical, Dental, and Vision. You will receive group medical,
dental, and vision coverage in accordance with the terms and conditions of the special insured
group medical, dental, and vision plans sponsored by the Corporation for certain senior

 

 

executives (collectively, the “Insured Plans”). The Insured Plans are designed to be
similar to the Corporation’s then in effect self-insured active group medical, dental, and vision
plans. You will be eligible to participate in the Insured Plans until the earlier of (i)
the end of the period of twenty-four (24) months following your termination of employment or
(ii) the day on which you become eligible to receive any group medical, dental, and vision
care benefits, as the case may be, under any plan or program of any other employer for active
employees. The twenty-four (24) month period referred to above shall run concurrently with the
number of months, if any, for which you are entitled to receive continued benefits under your
Severance Agreement with the Corporation or pursuant to any severance policy, plan, or program
sponsored by the Corporation or any subsidiary of the Corporation. You will be responsible to
contribute to the cost of the Insured Plans at the same level, if any, you were required to
contribute to receive the similar benefits under the Corporation’s group medical, dental, and
vision plans as of your termination date. In lieu of the benefits provided above, you may elect to
receive eighteen (18) months of Corporation paid continuation of coverage under the Corporation’s
group medical, dental, and vision plans pursuant to Section 601 et seq. of the
Employee Retirement Income Security Act of 1974, as it may be amended or replaced from time to
time.

               (ii) Retiree Medical Insurance. If during the two year period after the
date of the Change of Control, but after the date of your termination of employment (which entitles
you to benefits under this Change of Control Agreement), you would have been eligible for early or
normal retirement under the terms and conditions of any pension or retirement plan sponsored by the
Corporation (or any subsidiary of the Corporation) in which you participate, then you will be
eligible to participate in any insured medical plan that the Corporation has in place to provide
medical benefits similar to those provided by the Corporation’s retiree medical plan. You will be
eligible to participate in the Retiree Insured Plan beginning on the date you would have been
eligible for an early or normal retirement had your employment not been terminated and continuing
until such time (if any) as the Corporation ceases to provide retiree medical insurance, or the
insurance available under the Retiree Insured Plan is no longer available. Until the end of the
twenty-four (24) month period following your termination date, the Corporation will pay your full
cost of the Retiree Insured Plan. If as of your employment termination date (because of your
Qualifying Termination within the required time period), you are eligible to participate in the
Corporation’s retiree medical plan, if any, the cost of your participation in the applicable
retiree medical plan will be paid by the Corporation for the twenty-four (24) month period
following your termination date. After the end of this twenty-four (24) month period, you will be
responsible to pay the applicable retiree contribution percentage to participate in the
Corporation’s retiree medical plan. Similarly, if you are participating in the Retiree Insured
Plan, you will be required to pay the equivalent contribution as if you had been eligible to
participate in the Corporation’s retiree medical plan. The Corporation reserves the right to amend
or terminate its retiree medical plan at any time. Any such amendment or termination that applies
equally to all covered individuals also will apply to you. The Corporation also reserves the right
to amend or terminate any Retiree Insured Plan as long as a comparable amendment or termination is
being made at the same time to the Corporation’s retiree medical plan. A Retiree Insured Plan also
may be amended if such amendment is required by the insurer and a Retiree Insured Plan may be
terminated if the underlying insurance cannot be obtained from a reputable insurer.

               (iii) Long-Term Disability. With respect to your long-term disability
insurance coverage, you will be eligible to purchase an individual long-term disability conversion
policy directly from the insurer providing the group benefits under the Corporation’s Long-Term
Disability Plan as of your termination date. To be eligible for this coverage, you must satisfy
the insurer’s requirements for coverage, in effect on your termination date, and any such
conversion

 

 

coverage is subject to coverage and other limitations imposed by the insurer. The disability
benefits and amount of coverage under the conversion policy may be different than those provided to
you under the Corporation’s Long-Term Disability Plan in effect on your termination date. The
Corporation will pay the cost to continue any long-term disability conversion coverage for a period
of twenty-four (24) months following your termination date. You will be responsible for the cost
of any long-term disability conversion coverage in excess of twenty-four (24) months.

               (iv) Life Insurance. The disposition of your life insurance policy or
policies (the “Policies”) issued under the Corporation’s Executive Life Insurance Plan
(“ELIP”) will be in accordance with the terms and conditions of the ELIP. The Corporation,
ten business days after the date your employment with the Corporation (or any subsidiary)
terminates, will pay the insurer of the Policies an amount sufficient to fund the Policies for a
period of twenty-four (24) months after your termination date. The Corporation will fund the
Policies for this twenty-four (24) month period in a manner similar to the funding level before the
Change of Control such that the Policies are funded for the Policies’ death benefit and the
contribution towards the retiree life insurance portion of the Policies. At the end of this
twenty-four (24) month period any additional funding required by the Policies will be your
obligation. In lieu of the payment method described above, you may elect, prior to any payment
being made, to have the Corporation fund the Policies to the same level with annual installment
payments over a two (2) year period, provided that such election shall be valid only if: (a) such
election must be made prior to the earlier of your termination of employment and December 31, 2007,
and (b) you are not terminated prior to December 31, 2007. To the extent that any of your life
insurance coverage under the ELIP is insured under the Corporation’s group term life insurance
plan, in accordance with the terms and conditions of that insurance coverage you will be eligible
to convert this coverage to individual non-term conversion coverage as of your termination date.
To be eligible to receive this conversion coverage you must submit an application to the insurer.
Any available conversion coverage is subject to such limitations as may be imposed by the insurer.
Should you elect this individual conversion coverage, the Corporation will pay the cost to continue
your conversion coverage for a period of twenty-four (24) months following your termination date.
You will be responsible for the cost of any conversion coverage in excess of twenty-four (24)
months. Notwithstanding the foregoing, if any of the Policies or conversion coverage described in
this Section 1(b)(iv) provides a benefit other than a death benefit to you, and you are terminated
on or after March 1 in the calendar year following the year in which the Change of Control occurs,
then any applicable lump sum payment shall be made (or, in the case of a qualifying installment
election, the first annual installment payment shall be made) by the Corporation on the first
business day after the six month anniversary of your termination date.

     2. Other Benefits; Loans.

          (a) Incentive Compensation Plan. Generally, your participation in the
Corporation’s Annual Incentive Compensation Plan (“AICP”), and any right that you may have
to receive a bonus thereunder for the year in which your employment with the Corporation or any
subsidiary of the Corporation terminates or any prior year shall be governed by the terms of the
AICP. If you were a participant in the AICP at any time during the calendar year in which a Change
of Control occurs, however, you will receive at least a pro rated incentive compensation payment
for the year in which the Change of Control occurs. Your pro rated incentive compensation payment
will be calculated in two steps. The first step will be to calculate the incentive compensation to
which you would be entitled under the AICP, calculated on the basis of the following assumptions:
(i) the annual performance period ends on the date of the Change

 

 

of Control; (ii) the financial performance of the Corporation or any of its
subsidiaries for the relevant performance period will be equal to the financial performance
measured as of the date of the Change of Control, annualized; and (iii) you satisfy all
individual subjective performance goals or measures set for you under the AICP at the “target”
performance level. The second step will be to multiply the amount determined pursuant to the first
step by a fraction, the numerator of which is the number of days that have elapsed in the calendar
year prior to the day of the Change of Control and the denominator of which is 365. Any bonus due
under this Section 2(a) shall be paid to you on the same date as the termination payment is paid
under Section 1(a) of this Change of Control Agreement.

          (b) Retirement and Savings Plans. Any participation by you in, and any
terminating distributions and vested rights under, the Phelps Dodge Retirement Plan, the Phelps
Dodge Employee Savings Plan, the Phelps Dodge Corporation Supplemental Retirement Plan, and the
Phelps Dodge Corporation Supplemental Savings Plan, or any other retirement or savings plan
sponsored by the Corporation, regardless of whether such plan qualifies for favorable tax
treatment, shall be governed by the terms and conditions of those respective plans, as they may be
amended from time to time.

          (c) Loans. Any permitted indebtedness owed by you to the Corporation or any
subsidiary of the Corporation on account of advances or loans shall become due and payable and may
be deducted from the payment referred to in Section 1 above.

          (d) Outplacement Services. You will be eligible to receive outplacement
services for a period of up to one year after your termination date at an outplacement firm
selected by the Corporation. The cost of these outplacement services will be paid by the
Corporation directly to the outplacement firm selected, up to a maximum amount of fifteen percent
(15%) of your highest annual base salary in effect during the twelve (12) months immediately
preceding your termination date.

          (e) Executive Physicals. You shall receive a lump sum payment equivalent to
the cost of coverage under the Corporation’s Executive Physical program for the twenty-four (24)
month period after your termination date. The benefits to which you will be eligible, will be the
executive physical benefits that were in effect on the date of the Change of Control and any
executive physical benefits received will be subject to the terms and conditions of the Executive
Physical program as in effect on the date of the Change of Control. Any lump sum payment due under
this Section 2(e) shall be paid to you on the same date as the termination payment is paid under
Section 1(a) of this Change of Control Agreement.

          (f) Financial Counseling. To the extent you were eligible for financial
counseling paid by the Corporation on the date of the Change of Control, you shall receive a lump
sum payment equivalent to the cost of such services for an additional twenty-four (24) month period
after your termination date (as determined by the Corporation in good faith). Any lump sum
payment due under this Section 2(f) shall be paid to you on the same date as the termination
payment is paid under Section 1(a) of this Change of Control Agreement.

     3. Confidentiality.

     In the event your employment with the Corporation or any subsidiary of the Corporation
terminates under the circumstances specified in Section 1, you shall retain in confidence any
confidential, proprietary, or trade secret information known to you concerning the Corporation

 

 

and its subsidiaries and their businesses so long as such information is not publicly
disclosed by the Corporation or any subsidiary of the Corporation.

     4. Change of Control Defined.

     For purposes of this Change of Control Agreement, a “Change of Control” shall be deemed to
have taken place at the time:

          (a) when any “person” or “group” of persons (as such terms are used in Section 13
and 14 of the Securities Exchange Act of 1934, as amended from time to time (the “Exchange
Act”)), other than the Corporation or any employee benefit plan sponsored by the Corporation,
becomes the “beneficial owner” (as such term is used in Section 13 of the Exchange Act) of 25% or
more of the total number of the Corporation common shares at the time outstanding; or

          (b) of the approval by the vote of the Corporation’s stockholders holding at least
50% (or such greater percentage as may be required by the Certificate of Incorporation or By-Laws
of the Corporation or by law) of the voting stock of the Corporation of any merger or consolidation
with any other corporation (other than a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the entity surviving such
merger or consolidation (the “Surviving Entity”) or its direct or indirect parent (the
“Survivor Parent”) at least 80% of the combined voting power of the securities of the
Corporation or the Surviving Entity or Survivor Parent outstanding immediately after such merger or
consolidation); sale of assets; liquidation; or reorganization in which the Corporation will not
survive as a publicly owned corporation (the transactions described above being collectively
referred to as the “Transaction”); provided that a Change of Control will occur in the
circumstances described above only if the Transaction is ultimately consummated; or

          (c) when the individuals who, at the beginning of any period of two years or less,
constituted the Board of Directors of the Corporation cease, for any reason, to constitute at least
a majority thereof, unless the election or nomination for election of each new director was
approved by the vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period.

     5. Qualifying Termination Defined.

          (a) Qualifying Termination. For purposes of this Change of Control
Agreement, the term “Qualifying Termination” means a termination of your employment with the
Corporation or any subsidiary of the Corporation (under circumstances where you are no longer
employed by the Corporation or any such subsidiary) (i) by you for Good Reason, or
(ii) by the Corporation or a subsidiary without Cause, and (iii) prior to your
death or Disability.

          (b) Cause. “Cause” means willful misconduct in the performance of your
duties as an employee which results in a material detriment to the Corporation, and its
subsidiaries, taken as a whole.

          (c) Disability. For purposes of this Change of Control Agreement, the term
“Disability” shall have the meaning given to that term in the Phelps Dodge Corporation Long-Term
Disability Plan.

 

 

          (d) Good Reason. For purposes of this Change of Control Agreement, the term
“Good Reason” means that you have terminated your employment with the Corporation and all
subsidiaries of the Corporation under any of the following circumstances:

(i) such termination occurs more than 180 days following the time
when a Change of Control takes place and such Change of Control has not been
approved by a resolution adopted by the Board as constituted immediately
prior to such Change of Control; or

(ii) you terminate your employment on account of one or more of
the following events (and you have not agreed to such event in writing):

(A) the assignment to you of any duties inconsistent, in a
way materially adverse to you, with your positions, duties,
responsibilities and status with the Corporation and its subsidiaries
immediately prior to a Change of Control, or a material reduction in
the duties and responsibilities you held immediately prior to such
Change of Control; or a change in your reporting responsibilities,
titles or offices as in effect immediately prior to such Change of
Control; or any removal of you from or any failure to re-elect you to
any position with the Corporation or any subsidiary that you held
immediately prior to such Change of Control except in connection with
your promotion or the termination of your employment; or

(B) a reduction by the Corporation or any subsidiary of the
Corporation in your base salary as in effect immediately prior to
such Change of Control; the failure by the Corporation or any such
subsidiary to continue in effect any employee benefit plan or
compensation plan (including any incentive compensation or bonus
programs) in which you are participating immediately prior to such
Change of Control unless you are permitted to participate in other
plans providing you with substantially comparable benefits; or the
taking of any action by the Corporation or any such subsidiary which
would adversely affect your participation in or materially reduce
your benefits under any such employee benefit or compensation plan;
or

(C) the Corporation’s or any subsidiary’s requiring you to
be based anywhere other than a location within 50 miles of your
location immediately prior to such Change of Control; or the
Corporation’s or any subsidiary’s requiring you to travel on the
Corporation’s or any subsidiary’s business to an extent substantially
more burdensome than your travel obligations immediately prior to
such Change of Control.

          (e) Employment by Successors. For purposes of this Change of Control
Agreement, employment by a successor of the Corporation, or a successor of any subsidiary of the
Corporation, that has assumed this Change of Control Agreement pursuant to Section 10 shall be
considered to be employment by the Corporation or one of its subsidiaries. As a result, if you are
employed by such a successor following a Change of Control, you will not be entitled

 

 

to receive the benefits provided by Sections 1 and 2 unless your employment with the successor
is subsequently terminated in a Qualifying Termination within two (2) years after a Change of
Control. Solely for purposes of applying the provisions of Sections 1 and 2 and the definitions
set forth in Section 5, the successor shall be deemed to be a subsidiary of the Corporation.

     6. Cap on Payments.

          (a) General Rules. The Internal Revenue Code (the “Code”) places
significant tax burdens on you and the Corporation if the total payments made to you due to a
Change of Control exceed prescribed limits. For example, if your “Base Period Income” (as defined
below) is $100,000, your limit or “Cap” is $299,999. If your “Total Payments” exceed the Cap by
even $1.00, you are subject to an excise tax under Section 4999 of the Code of 20% of all amounts
paid to you in excess of $100,000. In other words, if your Cap is $299,999, you will not be
subject to an excise tax if you receive exactly $299,999. If you receive $300,000, you will be
subject to an excise tax of $40,000 (20% of $200,000). In order to avoid this excise tax and the
related adverse tax consequences for the Corporation, by signing this Agreement, you will be
agreeing that, subject to the exception noted below, the present value (determined in accordance
with the applicable regulations) of your Total Payments will not exceed an amount equal to your
Cap.

          (b) Special Definitions. For purposes of this Section, the following
specialized terms will have the following meanings:

               (i) “Base Period Income”. “Base Period Income” is an amount equal to your
“annualized includable compensation” for the “base period” as defined in Sections 280G(d)(1) and
(2) of the Code and the regulations adopted thereunder. Generally, your “annualized includable
compensation” is the average of your annual taxable income from the Corporation for the “base
period”, which generally is the five calendar years prior to the year in which the Change of
Control occurs. These concepts are complicated and technical and all of the rules set forth in
Section 280G of the Code and the applicable regulations apply for purposes of this Agreement.

               (ii) “Cap” or “280G Cap”. “Cap” or “280G Cap” shall mean an amount equal to
$1.00 less than three times your “Base Period Income.” This is the maximum amount which you may
receive without becoming subject to the excise tax imposed by Section 4999 of the Code or which the
Corporation may pay without loss of deduction under Section 280G of the Code.

               (iii) “Total Payments”. The “Total Payments” include any “payments in the
nature of compensation” (as defined in Section 280G of the Code and the regulations adopted
thereunder), made pursuant to this Agreement or otherwise, to or for your benefit, the receipt of
which is contingent on a “change in ownership or effective control” of the Corporation or a “change
in the ownership of a substantial portion of the assets of the Corporation” (as those phrases are
defined in Code Section 280G and the regulations adopted thereunder) and to which Section 280G of
the Code applies.

          (c) Calculating the Cap. If the Corporation believes that these rules will
result in a reduction of the payments to which you are entitled under this Agreement, it will so
notify you as soon as possible. The Corporation will then, at its expense, retain a “Consultant”
(which shall be a law firm, a certified public accounting firm, and/or a firm nationally recognized

 

 

as providing executive compensation consulting services) to provide an opinion or opinions
concerning whether your Total Payments exceed the limit discussed above. The Corporation will
select the Consultant.

          At a minimum, the opinions required by this Section must set forth the amount of your Base
Period Income, the items included in the calculation of the Total Payments, the present value of
the Total Payments, and the amount and present value of any excess parachute payments.

          If the opinions state that there would be an excess parachute payment, your payments under
this Agreement will be reduced to the extent necessary to eliminate the excess. You will be
allowed to choose the payment that should be reduced or eliminated, but the payment you choose to
reduce or eliminate must be a payment determined by such Consultant to be includable in Total
Payments. You will make your decision in writing and deliver it to the Corporation within 30 days
of your receipt of such opinions. If you fail to so notify the Corporation, it will decide which
payments to reduce or eliminate.

          If the Consultant selected to provide the opinions referred to above so requests in connection
with the opinion required by this Section, a firm of recognized executive compensation consultants
selected by the Corporation shall provide an opinion, upon which such Consultant may rely, as to
the reasonableness of any item of compensation as reasonable compensation for services rendered
before or after the Change of Control.

          If the Corporation believes that your Total Payments will exceed the limitations of this
Section, it will nonetheless make payments to you, at the times stated above, in the maximum amount
that it believes may be paid without exceeding such limitations. The balance, if any, will then be
paid after the opinions called for above have been received.

          If the amount paid to you by the Corporation is ultimately determined, pursuant to the opinion
referred to above or by the Internal Revenue Service, to have exceeded the limitation of this
Section, the excess will be treated as a loan to you by the Corporation and shall be repayable on
the 90th day following demand by the Corporation, together with interest at the lowest “applicable
federal rate” provided in Section 1274(d) of the Code. If it is ultimately determined, pursuant to
the opinion referred to above or by the Internal Revenue Service, that a greater payment should
have been made to you, the Corporation shall pay you the amount of the deficiency, together with
interest thereon from the date such amount should have been paid to the date of such payment, at
the interest rate set forth above, so that you will have received or be entitled to receive the
maximum amount to which you are entitled under this Agreement.

          (d) Effect of Repeal. In the event that the provisions of Sections 280G and
4999 of the Code are repealed without succession, this Section shall be of no further force or
effect.

          (e) Exception. The Consultant selected pursuant to Section 6(c) will
calculate your “Uncapped Benefit” and your “Capped Benefit”. The limitations of Section 6(a) will
not apply to you if your Uncapped Benefit is at least 120% of your Capped Benefit. For this
purpose, your “Uncapped Benefit” is the amount to which you will be entitled pursuant to Sections 1
and 2, as applicable, without regard to the limitations of Section 6(a). Your “Capped Benefit” is
the amount to which you will be entitled pursuant to Sections 1 and 2, as applicable, after the
application of the limitations of Section 6(a).

 

 

     7. Tax Gross-Up.

          (a) Gross-Up Payment. If the Cap imposed by Section 6(a) does not apply to
you because of the exception provided by Section 6(e), the Corporation will provide you with a
“Gross-Up Payment” if an excise tax is imposed on you pursuant to Section 4999 of the Code. This
Gross-Up Payment will be calculated in accordance with the provisions of this Section 7. This
Gross-Up Payment will be paid to you as and when payments are made to you which are subject to the
excise tax imposed under Section 4999, and in relation to the excise taxes payable with respect to
each such payment, but in no event later than two and one-half months following the end of the
taxable year in which the corresponding amount payable as a Gross-Up Payment no longer subject to a
“substantial risk of forfeiture” (as such term is defined for purposes of Section 409A of the
Code). This lump sum payment will be in such an amount that after you have paid (i) the
“total presumed federal and state taxes;” and (ii) the excise taxes imposed by Code Section
4999 with respect to the Gross-Up Payment (and any interest or penalties actually imposed), you
retain an amount of the Gross-Up Payment equal to the remaining excise taxes imposed by Code
Section 4999 on your Total Payments (calculated before the Gross-Up Payment). For purposes of
calculating your Gross-Up Payment, your actual federal and state income taxes will not be used.
Instead, we will use your “total presumed federal and state taxes.” For purposes of this Change of
Control Agreement, your “total presumed federal and state taxes” shall be conclusively calculated
using a combined tax rate equal to the sum of the maximum marginal federal and applicable state
income tax rates and the hospital insurance (or “HI”) portion of F.I.C.A. Based on the
rates in effect for 2002 for an Arizona resident, the “total presumed federal and state tax rate”
is 45.09% (38.6% federal income tax rate plus 5.04% Arizona state income tax rate plus 1.45% HI tax
rate). The state tax rate for your actual principal place of residence will be used and no
adjustments will be made for the deduction of state taxes on the federal return, any deduction of
federal taxes on a state return, the loss of itemized deductions or exemptions, or for any other
purpose.

          (b) Calculations. All determinations concerning whether a Gross-Up Payment
is required pursuant to this Change of Control Agreement and the amount of any Gross-Up Payment (as
well as any assumptions to be used in making such determinations) shall be made by the Consultant
selected pursuant to Section 6(c). The Consultant shall provide you and the Corporation with a
written notice of the amount of the excise taxes that you are required to pay and the amount of the
Gross-Up Payment. The notice from the Consultant shall include any necessary calculations in
support of its conclusions. All fees and expenses of the Consultant shall be borne by the
Corporation. Any Gross-Up Payment shall be made by the Corporation fifteen (15) business days
after the mailing of such notice.

     As a general rule, the Consultant’s determination shall be binding on you and the Corporation.
The application of the excise tax rules of Code Section 4999, however, is complex and uncertain
and, as a result, the Internal Revenue Service may disagree with the Consultant concerning the
amount, if any, of the excise taxes that are due. If the Internal Revenue Service determines that
excise taxes are due, or that the amount of the excise taxes that are due is greater than the
amount determined by the Consultant, the Gross-Up Payment will be recalculated by the Consultant to
reflect the actual excise taxes that you are required to pay (and any related interest and
penalties). Any deficiency will then be paid to you by the Corporation fifteen (15) business days
of the receipt of the revised calculations from the Consultant. If the Internal Revenue Service
determines that the amount of excise taxes that you paid exceeds the amount due, you shall return
the excess to the Corporation (along with any interest paid to you on the overpayment) immediately
upon receipt from the Internal Revenue Service or other taxing authority.

 

 

     The Corporation has the right to challenge any excise tax determinations made by the Internal
Revenue Service. If the Corporation agrees to indemnify you from any taxes, interest and penalties
that may be imposed upon you (including any taxes, interest and penalties on the amounts paid
pursuant to the Corporation’s indemnification agreement), you must cooperate fully with the
Corporation in connection with any such challenge. The Corporation shall bear all costs associated
with the challenge of any determination made by the Internal Revenue Service and the Corporation
shall control all such challenges. The additional Gross-Up Payments called for by the preceding
paragraph shall not be made until the Corporation has either exhausted its (or your) rights to
challenge the determination or indicated that it intends to concede or settle the excise tax
determination.

     You must notify the Corporation in writing of any claim or determination by the Internal
Revenue Service that, if upheld, would result in the payment of excise taxes in amounts different
from the amount initially specified by the Consultant. Such notice shall be given as soon as
possible but in no event later than fifteen (15) calendar days following your receipt of notice of
the Internal Revenue Service’s position.

          (c) Discretionary Gross-Ups. The Corporation also may provide you with a
tax gross-up, at the Corporation’s sole discretion, covering income and/or excise taxes in other
situations (“Discretionary Gross-Up”). The Corporation, however, is not obligated to do so and may
only do so pursuant to a resolution duly adopted by the Board or the Committee. The payment of a
Discretionary Gross-Up to any other individual having a Change of Control Agreement with the
Corporation shall not entitle you to receive a Discretionary Gross-Up.

     8. Term of Agreement.

     This Change of Control Agreement, as amended and restated, is effective as of January 1, 2005
and shall constitute the only Change of Control Agreement between you and the Corporation, and it
will and will continue in effect until the later of (a) December 31, 2007 or (b) two years
following a Change of Control that occurs prior to December 31, 2007.

     9. Termination Notice and Procedure.

     Any termination of your employment by the Corporation or you within two (2) years after a
Change of Control shall be communicated by written notice of termination, all in accordance with
the following procedures:

          (a) The notice of termination shall indicate the specific termination provision in
this Change of Control Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances alleged to provide a basis for termination.

          (b) If the Corporation notifies you of your termination for Cause and you in good
faith notify the Corporation that a dispute exists concerning such termination within fifteen (15)
calendar days following your receipt of such notice, you may elect to continue your employment
during such dispute. If it is thereafter determined that Cause did exist, your termination date
shall be the earlier of (i) the date on which the dispute is finally determined, either by
mutual written agreement of the parties or pursuant to the arbitration provisions set out below, or
(ii) the date of your death. If it is determined that Cause did not exist, your employment
shall continue as if the Corporation had not delivered its notice of termination.

 

 

          (c) If the Corporation notifies you of your termination by reason of Disability and
you in good faith notify the Corporation that a dispute exists concerning such termination within
fifteen (15) calendar days following your receipt of such notice, you also may elect to continue
your employment during such dispute. The dispute relating to the existence of a Disability shall
be resolved by the opinion of the licensed physician selected by the Corporation; provided,
however, that if you do not accept the opinion of the licensed physician selected by the
Corporation, the dispute shall be resolved by the opinion of a licensed physician who shall be
selected by you; provided further, however, that if the Corporation does not accept the opinion of
the licensed physician selected by you, the dispute shall be finally resolved by the opinion of a
licensed physician selected by the licensed physicians selected by the Corporation and you,
respectively. If it is thereafter determined that a Disability did exist, your termination date
shall be the earlier of (i) the date on which the dispute is resolved or (ii) the
date of your death. If it is determined that a Disability did not exist, your employment shall
continue as if the Corporation had not delivered its notice of termination.

          (d) If you in good faith notify the Corporation of your termination for Good Reason
and the Corporation notifies you that a dispute exists concerning the termination within fifteen
(15) calendar days following the Corporation’s receipt of such notice, you may elect to continue
your employment during such dispute. If it is thereafter determined that Good Reason did exist,
your termination date shall be the earlier of (i) the date on which the dispute is finally
determined, either by mutual written agreement of the parties or pursuant to the arbitration
provisions set out below, (ii) the date of your death, or (iii) one day prior to
the second anniversary of a Change of Control, and your payments hereunder shall reflect events
occurring after you delivered notice of termination. If it is determined that Good Reason did not
exist, your employment shall continue after such determination as if you had not delivered the
notice of termination asserting Good Reason.

          (e) If you do not elect to continue employment pending resolution of a dispute
regarding a notice of termination, and it is finally determined that the reason for termination set
forth in such notice of termination did not exist, if such notice was delivered by you, you shall
be deemed to have voluntarily terminated your employment other than for Good Reason and if
delivered by the Corporation, the Corporation will be deemed to have terminated you without Cause.

          (f) For purposes of this Change of Control Agreement, a transfer from the
Corporation to one of its subsidiaries or a transfer from a subsidiary to the Corporation or
another subsidiary shall not be treated as a termination of employment.

          (g) If you elect to continue your employment pending the resolution of a dispute
pursuant to Sections 9 (b), (c), or (d), the Corporation, in its discretion, may place you on a
paid administrative leave until the dispute is resolved.

     10. Assumption by Successors.

     The Corporation will require any successor (whether direct or indirect, by purchase, merger,
consolidation, acquisition, or otherwise) to all or substantially all of the business and/or assets
of the Corporation or any of its subsidiaries to expressly assume and agree to perform this Change
of Control Agreement in the same manner and to the same extent that the Corporation or any
subsidiary would be required to perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Change of Control Agreement

 

 

and shall entitle you to compensation from the Corporation in the same amount and on the same
terms to which you would be entitled hereunder if you terminate your employment for Good Reason
following a Change of Control, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed your termination date.

     11. Miscellaneous.

          (a) Arbitration; Related Expenses. Any dispute or controversy arising under
or in connection with this Change of Control Agreement shall be settled exclusively by arbitration
held in accordance with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator’s award in any court having jurisdiction. The Corporation shall
pay on a current basis all legal expenses (including attorney’s fees) incurred by you in connection
with such arbitration and the entering of such award if you prevail, or substantially prevail, in
such proceeding. Any reimbursement to you of such legal expenses shall be paid by the Corporation
no later than March 15th of the calendar year following the year in which such legal
expenses were incurred.

          (b) Replacement of Other Agreements. This Change of Control Agreement
replaces and supersedes any agreement previously entered into between you and the Corporation
regarding the payment of compensation or benefits following a Change of Control. This Change of
Control Agreement does not replace or supersede your Severance Agreement with the Corporation or
any provision in any stock option or restricted stock plan or agreement or any plan or program to
provide retirement or savings benefits.

          (c) Employment at Will. This Change of Control Agreement shall neither
obligate the Corporation or any subsidiary of the Corporation to continue you in its employ (or to
employ you in any particular office or to perform any specified responsibility) nor obligate you to
continue in the employ of the Corporation or any subsidiary of the Corporation.

          (d) Successors. This Change of Control Agreement shall be binding upon and
inure to the benefit of you, your estate and the Corporation and any successor of the Corporation,
but neither this Change of Control Agreement nor any rights arising hereunder may be assigned or
pledged by you.

          (e) Governing Law. This Change of Control Agreement shall be governed by
the laws of the State of New York.

          (f) Severability. If any provision of this Change of Control Agreement as
applied to either party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any other provision of
this Change of Control Agreement or the validity or enforceability of this Change of Control
Agreement.

          (g) Amendment or Waiver. Except as otherwise provided in Section 11(j) of
this Change of Control Agreement, no provision of this Change of Control Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed
by you and such officer as may be designated by the Board or a duly authorized Committee thereof.
No waiver by either party hereto at any time of any breach by the other party hereto of any
condition or provision of this Change of Control Agreement to be performed by such other party
shall be deemed a waiver of any other condition or provision at any time.

 

 

          (h) No Duty to Mitigate. For purposes of receiving payments under this
Change of Control Agreement, you are not under any duty to mitigate the damages resulting from your
termination of employment. As a result, you will receive the payments and other benefits provided
by this Change of Control Agreement regardless of whether you search for or obtain other work. As
provided in Section 1(b), however, your right to receive continued group medical, dental, and
vision insurance benefits will terminate if you become eligible to receive any such medical,
dental, or vision benefits under any other plan or program of any subsequent employer.

          (i) Funding. The Corporation shall establish a trust to provide for the
funding of the Corporation’s obligations under this and similar agreements with other executives.
The trustee of the trust shall be chosen by the Corporation or any individual or committee to whom
the Corporation delegates that responsibility, but the trustee must be a national or state bank or
trust company. Prior to the day on which a Change of Control occurs, the Corporation shall
transfer to the trustee of the trust an amount equal to the Corporation’s total potential liability
to you pursuant to Sections 1(a), 2(a), 2(d), 2(e), 2(f), 7, and 11(a). Such amount shall be
determined by the Corporation acting in good faith. If it is discovered at any time that the
amount initially transferred is less than the total amount called for by the preceding sentence,
the shortfall shall be transferred to the trustee immediately upon the discovery of such error.
Under the terms of the trust, the trustee shall be obligated to pay to you the amount to which you
are entitled pursuant to Sections 1(a), 2(a), 2(d), 2(e), 2(f), 7, and 11(a) unless such amounts
are paid in a timely manner by the Corporation or its successors. The other terms and provisions
of the trust agreement shall be determined by the Corporation and the trustee.

          (j) Effect of Change of Law. If at any time during the term of this Change
of Control Agreement any federal or state law or regulation is adopted or modified in any way that
will increase the cost of this Change of Control Agreement to the Corporation, the Corporation
reserves the right to unilaterally modify any provision of the Agreement in any manner which it
deems appropriate to eliminate the cost increase to the Corporation, including but not limited to
eliminating the offending provision or provisions in their entirety.

          (k) American Jobs Creation Act of 2004. The Corporation and you acknowledge
and agree that all payments under this Change of Control Agreement will be made in compliance with
and subject to the applicable requirements of Section 409A of the Internal Revenue Code and the
regulations and guidance of the Department of the Treasury interpreting and implementing Section
409A. All payments made under this Change of Control Agreement (including but not limited to
termination payments, Gross-Up Payments and legal expenses) will, to the extent subject to such
Section, be made in compliance with Section 409A.

          (l) Prior Amendments, Waivers. For the avoidance of doubt, this Change of
Control Agreement, as amended and restated, is not intended to override any amendments or waivers
previously entered into between you and the Corporation with respect to this Change of Control
Agreement, or any benefits provided herein.

 

 

     If you are in agreement with the foregoing, please so indicate by signing and returning to the
Corporation the enclosed copy of this letter, whereupon this letter shall constitute a binding
agreement between you and the Corporation.

	 	 	 	 	 
	 	 	PHELPS DODGE CORPORATION
	 
	 	 	 	 
	 

	 	By	 	 
	 

	 	 	 	 
	 

	 	 	 	Senior Vice President, Human Resources
	 
	 	 	 	 
	Agreed:
	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	 	 	Date

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