Under the terms of the new agreement, Xstrata shareholders who back the takeover have two options, and can vote for either or both. These are: to support the deal on condition that about £144 million of retention bonuses for senior Xstrata executives are also approved; and to back the deal on the condition that the retention bonuses are voted down. Shareholders will then be asked to vote separately on the retention packages.

The unusual structure allows Xstrata shareholders who favor the deal regardless of the fate of the bonuses to vote in support of both resolutions. That avoids splitting their votes from shareholders whose decision rests on their support or opposition to the retention packages. It also decouples the vote on the deal from the vote on the retention packages, allowing Xstrata to lower the threshold for approval of the retention packages to 50% of votes. Glencore's offer is structured as a scheme of arrangement, meaning it requires 75% approval from shareholders, excluding Glencore, which is blocked from voting its stake.

Zug, Switzerland-based Xstrata's board said it recommends that shareholders back the version of the deal that is dependent on the approval of the retention bonuses.

"Without the ability to retain key Xstrata managers to run the combined group's mining operations through the revised management incentive arrangements, the independent Xstrata nonexecutive directors believe that the value proposition of the combined entity is at risk," Xstrata chairman John Bond said in a statement. "This view was reaffirmed by major shareholders, in particular in the light of the change of CEO, and remains the rationale for retention arrangements. Nonetheless, some other shareholders remain opposed either to the principle of retention payments or to the originally proposed inter-conditional nature of the merger resolutions."

Baar, Switzerland-based Glencore is offering 3.05 of its shares for each Xstrata share, or about £21 billion for the 66% of Xstrata it doesn't already own. Glencore had initially pitched its bid at 2.8 shares but was forced to increase the terms after Xstrata shareholders, led by the target's No. 2 shareholder, Qatar Holding LLC, threatened to vote the offer down on Sept. 7.

Based on Glencore's closing price of 343.10 pence on Friday, the bid values Xstrata shares at 1,046.46 pence, equivalent to about £31.9 billion. That represents a premium of about 18% to Xstrata's per share value on Feb. 1, the day before Glencore made its initial offer.

Glencore's price for increasing its offer was to demand that its own CEO, Ivan Glasenberg, take control of the combined group, a position that had been reserved for Xstrata's Mick Davis. Davis will now remain at the combined group for six months before relinquishing his post to Glasenberg.

Glasenberg said he backed the payment of the retention bonuses as Xstrata's management "commitment is vital as we look to capture the full synergy and value creation benefits of the transaction and realize the potential of both companies' strong long-term organic growth plans."

The terms of the retention bonuses for the Xstrata executives will be "amended to reflect the fact that Mick Davis will cease to be a director," the company said, without giving further details. An Xstrata source said that the terms of the retention bonuses would be fundamentally the same as those in the proposed deal terms that were due to be voted on Sept. 7.

Davis was originally due to hold a seat on the combined company's board and Xstrata's initial opposition to the revised Glencore bid was largely a result of the implication that the seat would be held by a Glencore appointee. Under the terms of the deal announced Monday, that seat will remain with an Xstrata appointee, leaving Xstrata with six of the 11 seats on the board.

Glencore has structured its bid as a scheme of arrangement, meaning that it can't vote its own shares in support of a deal that needs the backing of 75% of the remaining shareholder base. That means that owners of just 16.5% of the share capital could halt the deal.

Qatar Holding had said it would wait until Xstrata makes its recommendation to announce how it will vote its stake, but the sovereign wealth fund is expected to now back the bid.

"We continue to expect this mega-merger to be completed, especially in light of these important changes to the deal structure," wrote Jefferies & Co.'s London-based analysts Christopher LaFemina and Seth Rosenfeld.

They noted that based on current spot commodity prices, the pro forma merged entity is trading on a forecast 2013 price/earnings multiple of 10 times, with an enterprise value of 6.8 times forecast 2013 Ebitda.

Mining companies BHP Billiton plc and Rio Tinto Group are trading at price/earnings ratios of 11.2 times and 11.4 times, respectively, and enterprise value-to-Ebitda ratios of 5.4 times and 4.8 times.

Xstrata expects to send its revised offer documents to shareholders within three weeks and hold its shareholder votes on the deal before the end of November.

Shares in Glencore traded Monday morning at 346.1 pence, up 3 pence, or just under 1%, on their previous close. Xstrata shares traded at 989 pence, up 31.5 pence, or 3.3%, leaving them at a discount to their value of 1,055.6 pence under the Glencore offer.