Exhibit 10.7

                                                              October 27, 1997


Dear :

                               Severance Agreement

                  Phelps Dodge  Corporation  (the  "Corporation")  realizes that
every  employee  has worried  about the  possible  loss of his job. For a senior
executive,  the limited  number of  comparable  positions  that are likely to be
available should the executive's employment be involuntarily  terminated adds to
this  concern.  While  the  Corporation  does  not  expect  that  you  would  be
involuntarily terminated, it wants to assure you that if, after one full year of
service,  your employment is involuntarily  terminated  under the  circumstances
described  below you would  receive a  meaningful  severance  benefit.  For that
reason, in consideration of your continued employment with the Corporation,  the
Corporation agrees with you as follows:

                  1.  Severance  Payment.  If, after you have completed one full
year of continuous  service,  the Corporation  terminates your employment  other
than for Cause or on account of Mandatory  Retirement (as such terms are defined
below) or you  voluntarily  terminate your  employment on account of Good Reason
(as defined below),  the Corporation will pay you in a single lump sum within 10
business days following the date your  employment  terminates an amount equal to
the higher of your annual base salary in effect (i) on the date your  employment
terminates  or (ii) if  applicable,  immediately  prior to the  occurrence of an
action or event  which  results in your having  Good  Reason to  terminate  your
employment.

                  2. Outplacement  Services.  If you are entitled to receive the
basic  benefit  under this  Agreement,  the  Corporation  will pay an additional
amount up to a maximum of 15% of the amount payable under paragraph 1 to provide
you  with  outplacement  services  from  any  agency  of your  choice  which  is
reasonably acceptable to the Corporation.

                  3. Benefits  Continuation.  If you are entitled to receive the
basic benefit under this  Agreement,  the  Corporation  will pay the cost of any
continuation  coverage  available  to you under the  Corporation's  group health
plans for the  lesser of 12 months or the  period  during  which you (and any of
your dependents) are eligible for such coverage  pursuant to Section 601 et seq.
of the  Employee  Retirement  Income  Security  Act of  1974,  as  amended  (the
"Continued Coverage Period").  The Continued Coverage Period begins,  generally,
on the day your employment terminates. If the Corporation has agreed to continue
your coverage pursuant to any other written  agreement,  however,  the Continued
Coverage Period will not begin until your coverage  terminates  pursuant to that
agreement.  During the period  beginning on your  termination  of employment and
ending on the last day of the Continued  Coverage Period,  the Corporation shall
also  reimburse  you for any premiums you pay to continue any life or disability
insurance coverage that the Corporation maintained for your benefit prior to the
date your employment with the Corporation terminated.

                  4. Definitions.  For purposes of this Agreement, the following
terms shall have the meanings set forth below:

         (a) "Cause"  shall mean (i) any willful  violation or any gross neglect
of your duties and responsibilities which results in a material detriment to the
Corporation and its subsidiaries, taken as a whole, or (ii) any repeated willful
violations or gross neglect of your duties and  responsibilities,  regardless of
whether such  violations  result in a material  detriment to the Corporation and
its  subsidiaries,  taken as a whole,  after the  Corporation  provides you with
notice of such violations.

         (b) "Good  Reason"  shall mean the  occurrence  of any of the following
events,  unless you shall have given your written  consent to the  occurrence of
such event:

                           (i)  a  material   reduction   in  your  base  salary
                  unrelated to the  financial  results or financial  position of
                  the Corporation; or

                           (ii) a material  reduction in your  position,  duties
                  and responsibilities.

         Notwithstanding  the foregoing,  no  termination of employment  will be
treated as being on account of Good Reason  unless you  provide the  Corporation
with a written notice of your termination, setting forth the basis for asserting
a Good Reason termination,  within 90 days of the occurrence of the event giving
rise to a Good Reason termination.

         (c)  "Mandatory  Retirement"  shall mean your  retirement  at age 65 or
later at the direction of the Company, provided that such involuntary retirement
shall not violate the Age  Discrimination in Employment Act of 1967, as amended,
or any other applicable Federal or state law.

                  5.  Cause and  Voluntary  Termination.  No  benefits  shall be
payable under this Agreement in the event that the  Corporation  terminates your
employment for Cause or on account of Mandatory Retirement or you terminate your
employment  without  Good  Reason  (including  your  voluntary  early or  normal
retirement).

                  6. Other Severance Benefits.  Except as otherwise specifically
provided in any other plan,  policy or agreement  primarily  intended to provide
severance  benefits,  the  Corporation's  sole obligation to you on account of a
termination of your employment is for the benefits,  if any,  payable under this
Agreement.  Without  limiting the foregoing,  nothing in this Agreement shall be
construed  to limit,  reduce or restrict any right or  entitlement  you may have
under the terms of any employee benefit plan, policy or arrangement which is not
primarily intended to provide severance benefits.

                  7. Employment at Will.  This 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.

                  8. Successors.  This 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 Agreement nor any rights arising hereunder may be
assigned or pledged by you.

                  9. Governing Law. This Agreement shall be governed by the laws
of the State of New York.

                  10. No Duty to Mitigate.  For  purposes of receiving  payments
under  this  Agreement,  you are not  under  any duty to  mitigate  the  damages
resulting from your termination of employment. As a result, you will receive the
payment and the benefits  provided by Sections 1, 2 and 3 regardless  of whether
you search for or obtain  other  work.  Under the law,  though,  your  Continued
Coverage Period for purposes of Section 3 may terminate when you become eligible
for certain other health care coverage.

                  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


                                                      By________________________
                                                            Vice President

Agreed:


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