EXHIBIT 10.5










                           DEFERRED COMPENSATION PLAN
                              FOR THE DIRECTORS OF
                            PHELPS DODGE CORPORATION
<PAGE>
                                TABLE OF CONTENTS

                                                                  

ARTICLE I - PREAMBLE

ARTICLE II - DEFINITIONS
         2.1    DEFINITIONS
         2.2    CONSTRUCTION

ARTICLE III - ELIGIBILITY
         3.1    SELECTION OF PARTICIPANTS
         3.2    PARTICIPATION AGREEMENT
         3.3    REVISED PARTICIPATION AGREEMENTS

ARTICLE IV - CONTRIBUTIONS
         4.1    PARTICIPANT CONTRIBUTIONS

ARTICLE V - ACCELERATION OF BENEFITS
         5.1    ACCELERATION OF BENEFITS

ARTICLE VI - CREDITING OF CONTRIBUTIONS AND EARNINGS
         6.1    TRANSFER TO TRUSTEE; ALLOCATION OF CONTRIBUTIONS
         6.2    INVESTMENT EARNINGS OR LOSSES
         6.3    INVESTMENT DIRECTION
         6.4    COMPANY STOCK FUND

ARTICLE VII - VESTING
         7.1    VESTING

ARTICLE VIII - PAYMENT OF BENEFITS
         8.1    TIME OF PAYMENT
         8.2    METHOD OF PAYMENT
         8.3    BENEFICIARY DESIGNATIONS

ARTICLE IX - ADMINISTRATION OF THE PLAN
         9.1    ADOPTION OF TRUST
         9.2    POWERS OF THE PLAN ADMINISTRATOR
         9.3    CREATION OF COMMITTEE
         9.4    CHAIRMAN AND SECRETARY
         9.5    APPOINTMENT OF AGENTS
         9.6    MARJORITY VOTE AND EXECUTION OF INSTRUMENTS
         9.7    ALLOCATION OF RESPONSIBILITIES
         9.8    CONFLICT OF INTEREST
         9.9    ACTION TAKEN BY COMPANY
         9.10   DELEGATIONS OF AUTHORITY
         9.11   INDEMNIFICATION
<PAGE>
ARTICLE X - CLAIMS REVIEW PROCEDURE
         10.1   CLAIMS
         10.2   APPEALS

ARTICLE XI - LIMITATION ON ASSIGNMENT; PAYMENTS TO LEGALLY
   INCOMPETENT DISTRIBUTEE; CORRECTIONS
         11.1   ANTI-ALIENATION CLAUSE
         11.2   PERMITTED ARRANGEMENTS
         11.3   PAYMENT TO MINOR OR INCOMPETENT
         11.4   UNDERPAYMENT OR OVERPAYMENT OF BENEFITS

ARTICLE XII - AMENDMENT, MERGER AND TERMINATION
         12.1   AMENDMENT
         12.2   MERGER OR CONSOLIDATION OF COMPANY
         12.3   TERMINATION OF PLAN OR DISCONTINUANCE OF
                CONTRIBUTIONS

ARTICLE XIII - GENERAL PROVISIONS
         13.1   LIMITATION ON PARTICIPANTS' RIGHTS
         13.2   STATUS OF PARTICIPANTS AS UNSECURED CREDITORS
         13.3   STATUS OF TRUST FUND
         13.4   UNIFORM ADMINISTRATION
         13.5   HEIRS AND SUCCESSORS
         13.6   NO LIABILITY FOR ACCELERATION OF PAYMENTS
<PAGE>
                           DEFERRED COMPENSATION PLAN

                              FOR THE DIRECTORS OF
                            PHELPS DODGE CORPORATION



                                    ARTICLE I
                                    ---------

                                    PREAMBLE
                                    --------

           Phelps Dodge Corporation (the "Company"), a corporation organized and
existing  under  the  laws of the  State of New  York,  previously  adopted  the
Deferred  Compensation  Plan for the Directors of Phelps Dodge  Corporation (the
"Plan").  The  Plan was most  recently  amended  and  restated  in its  entirety
effective December 4, 1996. The Company has now decided to amend and restate the
Plan in its entirety effective September 30, 1997 (the "Effective Date").

           The purpose of this Plan is to provide non-employee  directors of the
Company with the  opportunity  to defer a portion of their annual  retainer fees
and/or  meeting  fees.  This Plan is not intended to "qualify" for favorable tax
treatment  pursuant to Section 401(a) of the Internal  Revenue Code of 1986 (the
"Code") or any successor section or statute.

                                   ARTICLE II
                                   ----------

                                  DEFINITIONS
                                  -----------

2.1        DEFINITIONS.
           ------------

           When a word or phrase  appears in this Plan with the  initial  letter
capitalized,  and the word or  phrase  does not  begin a  sentence,  the word or
phrase shall generally be a term defined in this Section 2.1 or in the Preamble.
The  following  words  and  phrases  used in the Plan  with the  initial  letter
capitalized  shall have the meanings  set forth in this  Section  2.1,  unless a
clearly different meaning is required by the context in which the word or phrase
is used:

           (a)  "Account"  or  "Accounts"   means  the  accounts  which  may  be
maintained  by the Plan  Administrator  to reflect the interest of a Participant
under the Plan.

           (b)  "Beneficiary"  means the person or trust that a Participant,  in
his most recent written  designation  filed with the Plan  Administrator,  shall
have  designated  to  receive  his  Accounts  under the Plan in the event of his
death.

           (c) "Board" means the Board of Directors of the Company.

           (d) "Company Stock Fund" means the Investment Fund established by the
Plan  Administrator  pursuant to Section 6.3(e) that will be invested in Company
securities.
<PAGE>
           (e) "Deferral Contributions" means the Deferral Contributions made by
a Participant pursuant to Section 4.1.

           (f) "Deferral  Contributions Account" means the Account maintained to
record the Deferral Contributions made by a Participant pursuant to Section 4.1.
The Deferral  Contributions Account shall be divided into as many subaccounts as
the Plan Administrator deems necessary.

           (g) "Director"  shall mean each member of the Board who is neither an
officer nor an Employee of the Company.

           (h) "Employee"  means any  individual  classified by the Company as a
common law employee of the Company. For this purpose, the classification that is
relevant is the classification in which such individual is placed by the Company
for  purposes of this Plan and the  classification  of such  individual  for any
other  purpose  (e.g.,   employment  tax  or  withholding   purposes)  shall  be
irrelevant.  If an individual is  characterized  as a common law employee of the
Company  by a  governmental  agency  or  court  but  not  by the  Company,  such
individual  shall be  treated as an  employee  who has not been  designated  for
participation in this Plan.

           (i) "Fees" means the sum of a Participant's  annual retainer fees and
meeting fees payable to the Participant as a Director.

           (j) "Investment  Fund" means the investment fund or funds established
by the Plan Administrator pursuant to Section 6.3.

           (k) "Participant" means any Director who elects to participate in the
Plan.

           (l) "Participation Agreement" means the agreement entered into by the
Company and a Participant as set forth in Section 3.2.

           (m)  "Plan  Administrator"  means  the  committee  designated  by the
Company to carry out its responsibilities under the Plan as set forth in Section
9.3.

           (n) "Plan Year" means the 12 month period beginning on each January 1
and ending on the next following December 31.

           (o)  "Termination  Date"  means  the date as of  which a  Participant
ceases to be a Director.

           (p) "Trust Agreement" means any trust agreement  established pursuant
to the Plan between the Company and the Trustee or any trust agreement hereafter
established, the provisions of which are incorporated herein by reference.

           (q) "Trustee" means the Trustee under the Trust Agreement.

           (r) "Trust Fund" means all assets of  whatsoever  kind or nature held
from  time to time by the  Trustee  pursuant  to the  Trust  Agreement,  without
distinction  as to income and  principal  and without  regard to source,  (i.e.,
Participant contributions, earnings or forfeitures).

           (s)  "Valuation  Date" means the last  business day of each  calendar
quarter and such other dates as the Plan Administrator may designate.
<PAGE>
2.2        CONSTRUCTION.
           -------------

           The masculine gender,  where appearing in the Plan, shall include the
feminine  gender (and vice versa),  and the singular  shall  include the plural,
unless the context clearly  indicates to the contrary.  Headings and subheadings
are for the  purpose  of  reference  only  and are not to be  considered  in the
construction of this Plan. If any provision of this Plan is determined to be for
any reason invalid or unenforceable,  the remaining provisions shall continue in
full force and effect. All of the provisions of this Plan shall be construed and
enforced in accordance with the laws of the State of Arizona.

                                   ARTICLE III
                                   -----------

                                   ELIGIBILITY
                                   -----------

3.1        SELECTION OF PARTICIPANTS.
           --------------------------

           (a) GENERAL. Each Director, as defined in Section 2.1(g), is eligible
to participate in the Plan.

           (b)  NO  WAITING  PERIODS.   A  Participant  need  not  complete  any
particular  period  of  service  in  order  to  be  eligible  to  make  Deferral
Contributions.

3.2        PARTICIPATION AGREEMENT.
           ------------------------

           Each Participant  shall enter into a Participation  Agreement in such
form and at such time as the Plan Administrator shall require. The Participation
Agreement shall set forth the Participant's  Deferral Contributions and indicate
the manner in which distributions are to be made from the Participant's Accounts
and when  distributions  are to  commence.  If the  Participant  elects  to make
Deferral  Contributions,  the  Participation  Agreement also shall authorize the
reduction  of  the  Participant's  Fees  in an  amount  equal  to  his  Deferral
Contributions.  The  Participation  Agreement  also  may set  forth  such  other
information as the Plan Administrator shall require. The Participation Agreement
must be executed and delivered to the Plan  Administrator  on or before December
31st of the year  preceding  the Plan Year for which the  election is made.  Any
person who  becomes a Director  during a Plan Year may,  not later than the 30th
day after his or her term begins, enter into a Participation Agreement and defer
payment of all or a part of his or her Fees payable for the portion of such Plan
Year following such election.

3.3        REVISED PARTICIPATION AGREEMENTS.
           ---------------------------------

           A  Participant  may file a new  Participation  Agreement  in order to
change an election made in a previously filed  Participation  Agreement.  If the
Participant  changes the amount or rate of his Deferral  Contributions,  the new
amount or rate of Deferral  Contributions will become effective as of the end of
the Plan Year in which such new  Participation  Agreement is filed and only with
respect  to Fees  payable  for  services  as a Director  thereafter.  If the new
Participation  Agreement changes the method and/or timing of the commencement of
distributions,  the new  election  will only be honored if at least one (1) full
calendar  year elapses  between (a) the date as of which such new  Participation
Agreement  is filed and (b) both (1) the date as of which a  distribution  would
otherwise  have  commenced and (2) the date as of which such  distribution  will
commence  under  such  election.  Notwithstanding  the  foregoing,  such  timing
restrictions  shall not apply to a  Participant's  election  to receive  cash or
Company  securities with respect to the portion of his Accounts  invested in the
Company Stock Fund.
<PAGE>
                                   ARTICLE IV
                                   ----------

                                  CONTRIBUTIONS
                                  -------------

4.1        PARTICIPANT CONTRIBUTIONS.
           --------------------------

           (a) GENERAL RULE. For any Plan Year, a Participant may elect to defer
a portion of the Fees  otherwise  payable to him.  Any such  deferrals  shall be
expressed in whole  percentages or as a specific dollar amount,  as specified in
the Participant's  Participation Agreement.  Amounts deferred by the Participant
shall  be  contributed  by  the  Company  directly  to  the  Trust,  if  one  is
established. If a Trust is not established,  such deferrals shall remain part of
the Company's general assets, but shall be accounted for separately.

           (b)  LIMITATIONS  ON  DEFERRALS.  The Plan  Administrator  may impose
limitations  on  the  amount  of  a  Participant's   Deferral  Contributions  in
accordance with such uniform rules as it may adopt from time to time.

           (c) CHANGE IN  CONTRIBUTIONS.  A Participant may change the amount or
percentage  of  Deferral  Contributions  as of the first day of any Plan Year by
filing a new  Participation  Agreement  or any other form  permitted by the Plan
Administrator. The change shall become effective as provided in Section 3.3.

           (d) SUSPENSION OF DEFERRAL  CONTRIBUTIONS.  A Participant may suspend
the Deferral  Contributions  being made from his Fees as of the first day of any
Plan Year by filing a new  Participation  Agreement on or before the last day of
the preceding Plan Year. If a Participant  suspends his Deferral  Contributions,
he or she shall be permitted  to execute a new  Participation  Agreement  and to
begin making Deferral Contributions. The Deferral Contributions made pursuant to
such new  Participation  Agreement  may then  commence  in  accordance  with the
provisions of Section 3.3.

           (f)   EFFECT  OF   TERMINATION   DATE.   A   Participant's   Deferral
Contributions   shall  be  discontinued   upon  his   Termination   Date.  If  a
Participant's  Termination Date has occurred, no Deferral  Contributions will be
withheld  from the  Participant's  final  Fees that are  payable  following  the
Participant's  Termination Date. If the Participant later becomes a Director, he
may reenter the Plan in accordance  with the  provisions of Section 3.2 that are
applicable to new Participants.
<PAGE>
                                    ARTICLE V
                                    ---------

                            ACCELERATION OF BENEFITS
                            ------------------------

5.1        ACCELERATION OF BENEFITS.
           -------------------------

           (a)  GENERAL.  A  Participant  may elect to  receive  an  accelerated
withdrawal  from his Deferral  Contributions  Account by filing an election with
the Plan  Administrator  on such forms as may be prescribed from time to time by
the Plan  Administrator.  If a  Participant  makes such an  election,  except as
otherwise  provided  below,  the  Participant  shall  receive a single  lump sum
payment  equal  to 90%  of  the  Participant's  Deferral  Contributions  Account
balance.  For  purposes  of  determining  the  amount  to  be  distributed,  the
Participant's Deferral Contributions Account shall be valued as of the Valuation
Date  immediately  preceding  the  date  of  the  withdrawal.   The  accelerated
withdrawal shall be paid as soon as reasonably  possible following the filing of
the election by the Participant.

           (b) FORFEITURE.  The  Participant  shall forfeit the remaining 10% of
his  Deferral  Contributions  Account  as of the day on  which  the  accelerated
withdrawal  is  distributed  to the  Participant.  If a  Participant's  Deferral
Contribution Account is paid from a Trust, the amount forfeited pursuant to this
Section  shall be used by the Company to reduce the  administrative  expenses of
the Trust.

           (c) SUSPENSION OF PARTICIPATION.  If a Participant  elects to receive
an   accelerated   withdrawal,   the   Participant's   right  to  make  Deferral
Contributions  shall be  suspended  for 12 months from the date the  accelerated
withdrawal  is  paid  to the  Participant.  Upon  expiration  of  the  12  month
suspension  period,  the  Participant  shall  be  permitted  to  execute  a  new
Participation Agreement and to begin making Deferral Contributions. The Deferral
Contributions  made  pursuant  to such  new  Participation  Agreement  may  then
commence in accordance with the provisions of Section 3.3.


                                   ARTICLE VI
                                   ----------

                     CREDITING OF CONTRIBUTIONS AND EARNINGS
                     ---------------------------------------

6.1        TRANSFER TO TRUSTEE; ALLOCATION OF CONTRIBUTIONS.
           -------------------------------------------------

           If a Trust  is  established,  all  Deferral  Contributions  shall  be
transmitted to the Trustee by the Company as soon as reasonably practicable.  If
a Trust is not established,  all Deferral Contributions shall be held as part of
the Company's  general assets,  but accounted for  separately.  Whether or not a
Trust is  established,  the  Deferral  Contributions  shall be  credited  to the
Deferral  Contributions  Account  maintained  for  that  Participant.  The  Plan
Administrator may maintain  subaccounts as it deems necessary or desirable.  All
payments from an Account  between  Valuation  Dates shall be charged against the
Account  as of the  preceding  Valuation  Date.  The  Accounts  are  bookkeeping
accounts  only  and  the  Plan  Administrator  is not in any  way  obligated  to
segregate assets for the benefit of any Participant.
<PAGE>
6.2        INVESTMENT EARNINGS OR LOSSES.
           ------------------------------

           As of each Valuation Date, the Plan  Administrator will calculate the
positive  or  negative  rate of  return  for  each of the  Investment  Funds  in
accordance  with Section  6.3(c),  other than the Company  Stock Fund,  which is
valued  in  accordance  with  Section  6.4.  The Plan  Administrator  then  will
determine  the portion of the  "adjusted  balance" of each of the  Participant's
Accounts that is invested in each of the Investment Funds and will multiply that
amount by the  appropriate  rate of return to arrive at the positive or negative
earnings  adjustment  for that Account and that  Investment  Fund.  The earnings
adjustments so calculated shall then be allocated to the Participant's Accounts.
For this purpose,  the  "adjusted  balance" of an Account will be the balance of
the  Account  as  of  the  preceding   Valuation  Date  less  all   withdrawals,
distributions and other amounts  chargeable  against the Account pursuant to any
other  provisions  of this Plan since the prior  Valuation  Date.  The  earnings
adjustments allocated to any Account shall be allocated among the subaccounts of
that Account in the same manner.

6.3        INVESTMENT DIRECTION.
           ---------------------

           (a) INVESTMENT FUNDS. The Plan  Administrator  shall designate one or
more Investment Funds in which each  Participant  shall direct the investment of
amounts  credited  to his  Accounts.  Unless the Plan  Administrator  designates
otherwise,  the Investment Funds available under this Plan shall include each of
the investment funds  established by the plan  administrator of the Phelps Dodge
Corporation Executive Supplemental Savings Plan and such other Investment Funds,
if any,  designated  by the Plan  Administrator.  The  Investment  Funds  may be
changed from time to time by the Plan Administrator.

           (b) PARTICIPANT DIRECTIONS.

                      (1) GENERAL. Upon becoming a Participant in the Plan, each
Participant  may direct that all of the amounts  attributable to his Accounts be
invested  in a single  investment  fund or may  direct  fractional  (percentage)
increments  of his  Accounts  to be  invested  in such fund or funds as he shall
desire, on such forms and in accordance with such procedures,  if any, as may be
established by the Plan Administrator.  As of each Valuation Date, a Participant
may change his  designations  with  respect to future  contributions  and direct
transfers  among   Investment   Funds  by  filing  an  election  with  the  Plan
Administrator,  on a form prescribed by the Plan Administrator, or in accordance
with any other procedure  designated by the Plan Administrator.  The designation
will continue until changed by the timely submission of a new form.

                      (2) DEFAULT SELECTION.  In the absence of any designation,
a Participant  will be deemed to have directed the investment of his Accounts in
such  Investment  Funds as the  Plan  Administrator,  in its  sole and  absolute
discretion,  shall determine,  or if a Trust is established,  as the Trustee, in
its sole and absolute discretion,  shall determine. Prior to the Effective Date,
the Plan only permitted  Participants to invest in two Investment Funds known as
the "interest  account" and the "stock  account".  Amounts invested in the stock
account or the interest  account as of the  Effective  Date will  continue to be
invested in those accounts (or the  Investment  Funds that are the successors to
such  accounts  in the  Plan  Administrator's  discretion)  until a  Participant
directs the Plan Administrator otherwise.

                      (3) IMPACT OF  ELECTION.  The  Participant's  selection of
Investment  Funds shall serve only as a measurement of the value of the Accounts
of a  Participant  pursuant to Section 6.2 and Section  6.3(c),  and neither the
Plan  Administrator nor the Trustee,  if a Trust is established,  is required to
invest a Participant's Accounts in accordance with the Participant's selections.
<PAGE>
           (c) RATE OF RETURN.  As soon as possible after each  Valuation  Date,
the Plan Administrator shall determine the rate of return, positive or negative,
experienced on each of the Investment Funds,  other than the Company Stock Fund,
which is valued in accordance with Section 6.4. The rate of return determined by
the Plan  Administrator  in good faith and in its  discretion  pursuant  to this
Section shall be binding and conclusive on the  Participant,  the  Participant's
Beneficiary and all parties  claiming through them. The Plan  Administrator  may
delegate  the  responsibility  for  calculating  the  rate  of  return  and  the
calculation  and  allocation  of  the  investment  earnings  adjustments  to the
Accounts to a third party.

           (d)   CHARGES.   In  the  exercise  of  its   discretion,   the  Plan
Administrator  may  charge  one or more of the  Participant's  Accounts  for the
reasonable expenses of carrying out investment  instructions directly related to
the Accounts, as the Plan Administrator deems appropriate.

6.4        COMPANY STOCK FUND.
           -------------------

           (a) ESTABLISHMENT OF COMPANY STOCK FUND. The Plan Administrator shall
direct  that  one  or  more  of  the  Investment  Funds  consist,  primarily  or
exclusively,   of  Company  securities.   A  Participant's   ability  to  direct
investments  into or out of such Fund shall be subject to such procedures as the
Plan  Administrator  may prescribe from time to time to assure  compliance  with
Rule 16b-3 of the  Securities  and Exchange Act of 1934,  as amended,  and other
applicable   requirements.   Such  procedures  also  may  limit  or  restrict  a
Participant's  ability to make (or modify previously made) elections pursuant to
Sections 3.2 or 3.3.

           (b) UNITS AND "MARKET  VALUE PER SHARE".  The Deferral  Contributions
allocated to the Company  Stock Fund  pursuant to Section 6.3 shall be deemed to
be invested in a number of notional  common  shares of the Company (the "Units")
equal to the quotient of (i) the dollar  amount of such  Deferral  Contributions
divided by (ii) the Market  Value Per Share (as  defined  below) on the date the
Deferral  Contributions  then being  allocated  to the Company  Stock Fund would
otherwise  have been paid to the  Participant.  In the case of a transfer of any
amount from another  Investment Fund to the Company Stock Fund, the amount being
transferred  shall be deemed to be  invested  in a number of Units  equal to the
quotient of (i) the dollar  amount of such  transfer  divided by (ii) the Market
Value Per Share on the effective date of such transfer.  Fractional  Units shall
be  credited,  but shall be rounded to the nearest  hundredth  percentile,  with
amounts  equal to or greater  than .005  rounded up and  amounts  less than .005
rounded down. The "Market Value Per Share" on any date shall mean the average of
the high and low prices per share for a common  share of the Company as reported
on the  Consolidated  Tape of the New York Stock  Exchange on such date. If such
date is not a business  day or if no sale occurs on such date,  Market Value Per
Share  shall be  determined,  in the  manner  described  above,  as of the first
preceding business day on which a sale occurs.  Whenever a dividend other than a
dividend  payable in the form of the  Company's  common  shares is declared with
respect to the Company's common shares, the number of Units in the Participant's
Company Stock Fund Account shall be increased by the number of Units  determined
by  dividing  (i) the  product of (A) the  number of Units in the  Participant's
Company  Stock Fund  Account on the  related  dividend  record  date and (B) the
amount of any cash  dividend  declared by the Company on a common  share (or, in
the case of any dividend distributable in property other than common shares, the
per share value of such  dividend as  determined  by the Company for purposes of
income tax reporting) by (ii) the Market Value Per Share on the related dividend
payment  date.  In the case of any  dividend  declared on the  Company's  common
shares which is payable in common shares,  the Participant's  Company Stock Fund
Account  shall be  increased  by the number of Units equal to the product of (i)
the number of Units credited to the  Participant's  Stock Account on the related
dividend  record date and (ii) the number of shares of common shares  (including
any fraction  thereof)  distributable  as a dividend on a common  share.  In the
event of any change in the number or kind of outstanding common shares by reason
of any recapitalization,  reorganization,  merger, consolidation, stock split or
any similar change  affecting the common shares,  other than a stock dividend as
provided above, the Board shall make an appropriate  adjustment in the number of
Units credited to the Participant's Company Stock Fund Account.
<PAGE>
           (c) VALUATION OF UNITS ON TRANSFER OR  DISTRIBUTION.  Any transfer or
cash distribution from the Participant's Company Stock Fund Account,  whether to
another  Investment  Fund or to the  Participant or his or her  Beneficiary  and
whether part of a lump sum  distribution  or an  installment  payment,  shall be
determined by multiplying  the number of Units then subject to  distribution  by
the  Market  Value  Per  Share  on the  date  prior  to  the  date  as of  which
distribution  is  to  be  made.  In  the  event  of  a  distribution   from  the
Participant's Company Stock Fund Account to be paid in common shares, the number
of common shares  payable shall be equal to the number of whole Units subject to
such  distribution.  Any  fractional  Units will be settled in cash based on the
Market Value Per Share on the date prior to the date as of which distribution is
to be made.

           (d)  INSTALLMENT  PAYMENTS.  If a  Participant  elects  to be paid in
substantially  equal  annual,  quarterly  or monthly  installments  pursuant  to
Section 8.2, the number of Units subject to such distribution  shall be equal to
the product of (i) the number of Units in the Company  Stock Fund Account on the
date of such distribution and (ii) a fraction, the numerator of which is one (1)
and the denominator of which is the total number of installments remaining to be
paid at that time.

                                   ARTICLE VII
                                   -----------

                                     VESTING
                                     -------

7.1        VESTING.
           --------

           A Participant shall have a fully vested,  nonforfeitable  interest in
his Accounts at all times.

                                  ARTICLE VIII
                                  ------------

                              PAYMENT OF BENEFITS
                              -------------------

8.1        TIME OF PAYMENT.
           ----------------

           Distributions  will be made to a  Participant  at the time elected by
the Participant in the Participation  Agreement.  As provided in Section 3.2 and
Section 3.3, a Participant may elect in his initial or any revised Participation
Agreement to defer the receipt of distributions  until the first business day of
any Plan Year  following  the Plan Year in which Fees are deferred but not later
than the Plan  Year in  which  occurs  the  Participant's  seventy-fifth  (75th)
birthday.  If such an election has been made (and, if the election was made in a
revised Participation  Agreement, the Participation Agreement has been in effect
for the requisite period of time provided in Section 3.3),  distributions to the
Participant  (or the  Participant's  Beneficiary  in the case of death) shall be
postponed to the extent  necessary to honor such  election.  If the  Participant
fails to  specify  the  date as of which a  distribution  is to  commence,  such
distribution  shall  commence  on  the  first  business  day of  the  Plan  Year
immediately following the Plan Year in which the Participant's  Termination Date
occurs.
<PAGE>
8.2        METHOD OF PAYMENT.
           ------------------

           Any payments from a Participant's  Accounts shall be made either in a
lump sum in cash or in cash payments in substantially  equal annual,  quarterly,
or monthly  installments  over a period  certain not  exceeding  10 years,  such
method of payment to be elected by the Participant in his initial  Participation
Agreement or in any revised Participation  Agreement that has been in effect for
the  requisite  period of time  specified  in Section 3.3.  Notwithstanding  the
foregoing,  to the extent a  Participant's  Accounts are invested in the Company
Stock Fund at the time  payment  is to be made,  payments  from a  Participant's
Accounts may be made in whole shares of Company securities if the Participant so
elects in his initial  Participation  Agreement or in any revised  Participation
Agreement. Any distribution from the Company Stock Fund Account shall be made in
accordance with Sections  6.4(c) and (d). If installment  payments are made, the
provisions  of  Sections  6.2 and 6.3  shall  continue  to apply  to the  unpaid
balance.  Unless a Participant has affirmatively  elected to receive payments in
installments  over a period of 10 years or less and to  receive  payment  of the
portion of his  Accounts  invested in the Company  Stock Fund in whole shares of
Company securities,  the Participant's Accounts shall be distributed in one cash
lump sum. If a Participant is married at the time a Participation  Agreement, or
a revised Participation  Agreement, is filed, an election to receive payments in
other  than a lump sum shall be  ineffective  unless  the  Participant's  spouse
consents to such  election on a form  prescribed  by or  acceptable  to the Plan
Administrator for that purpose.

8.3        BENEFICIARY DESIGNATIONS.
           -------------------------

           In the  event of the  death  of the  Participant,  the  Participant's
interest in his Accounts shall be paid to the  Participant's  Beneficiary.  Each
Participant  shall  have  the  right to  designate,  on  forms  supplied  by and
delivered to the Plan  Administrator,  a Beneficiary or Beneficiaries to receive
his  benefits  hereunder  in  the  event  of  the  Participant's  death.  If the
Participant is married at the time the  Beneficiary  Designation  is filed,  the
designation will be ineffective  unless the designation  names the spouse as the
Beneficiary of at least 50% of the  Participant's  Accounts or the Participant's
spouse consents to the designation.  Subject to the spousal consent requirements
noted in the preceding  sentence,  each  Participant  may change his Beneficiary
designation  from time to time in the manner  described  above.  Upon receipt of
such  designation  by the Plan  Administrator,  such  designation  or  change of
designation shall become effective as of the date of the notice,  whether or not
the Participant is living at the time the notice is received.  There shall be no
liability on the part of the Company,  the Plan Administrator or the Trustee, if
any,  with  respect  to any  payment  authorized  by the Plan  Administrator  in
accordance with the most recent valid Beneficiary designation of the Participant
in  its  possession  before  receipt  of a more  recent  and  valid  Beneficiary
designation.  If no  designated  Beneficiary  is  living  when  benefits  become
payable, or if there is no designated Beneficiary,  the Beneficiary shall be the
Participant's  spouse; or if no spouse is then living, such Participant's issue,
including  any legally  adopted  child or children,  in equal shares by right of
representation; or if no such designated Beneficiary and no such spouse or issue
is living upon the death of a  Participant,  or if all such persons die prior to
the full distribution of such Participant's benefits, then the Beneficiary shall
be the estate of the Participant.
<PAGE>
                                   ARTICLE IX
                                   ----------

                           ADMINISTRATION OF THE PLAN
                           --------------------------

9.1        ADOPTION OF TRUST.
           ------------------

           The Company may, in its discretion, enter into a Trust Agreement with
the Trustee,  which Trust Agreement shall form a part of this Plan and is hereby
incorporated herein by reference.

9.2        POWERS OF THE PLAN ADMINISTRATOR.
           ---------------------------------

           (a)  GENERAL  POWERS OF PLAN  ADMINISTRATOR.  The Plan  Administrator
shall  have the  power and  discretion  to  perform  the  administrative  duties
described  in this Plan or required  for proper  administration  of the Plan and
shall have all powers  necessary to enable it to properly carry out such duties.
Without limiting the generality of the foregoing,  the Plan Administrator  shall
have the power and  discretion to construe and interpret  this Plan, to hear and
resolve  claims  relating to the Plan and to decide all  questions  and disputes
arising  under  the  Plan.  The  Plan  Administrator  shall  determine,  in  its
discretion,  the status  and rights of a  Participant  and the  identity  of the
Beneficiary or Beneficiaries entitled to receive any benefits payable on account
of the death of a Participant.

           (b)   DISTRIBUTIONS.   If  a  Trust  is   established,   all  benefit
disbursements  by the Trustee  shall be made upon the  instructions  of the Plan
Administrator. If a Trust is not established, the Company shall make all benefit
disbursements  from  its  general  assets  upon  the  instruction  of  the  Plan
Administrator.

           (c) DECISIONS  CONCLUSIVE.  The  decisions of the Plan  Administrator
upon all  matters  within  the  scope of its  authority  shall  be  binding  and
conclusive upon all persons.

           (d)  REPORTING.  The Plan  Administrator  shall file all  reports and
forms  lawfully  required  to be  filed  by the  Plan  Administrator  and  shall
distribute any forms,  reports or statements to be  distributed to  Participants
and others.

           (e) INVESTMENTS.  If a Trust is established,  the Plan  Administrator
shall keep itself  advised with respect to the  investment of the Trust Fund and
periodically   shall  report  to  the  Company   regarding  the  investment  and
reinvestment of the Trust Fund.
<PAGE>
9.3        CREATION OF COMMITTEE.
           ----------------------

           A committee shall perform the Company's duties as Plan Administrator.
The committee shall consist of at least two members,  and they shall hold office
during the pleasure of the Board.  Unless and until the Company  appoints  other
individuals  to serve on this  committee,  the  committee  members  shall be the
members of the Company's  Benefits  Administration  Committee as they may change
from time to time. The committee  members shall serve without  compensation  but
shall be reimbursed for all expenses by the Company. The committee shall conduct
itself in accordance  with the provisions of this Article IX. The members of the
committee  may resign  with 30 days  notice in writing to the Company and may be
removed immediately at any time by written notice from the Company.

9.4        CHAIRMAN AND SECRETARY.
           -----------------------

           The committee shall elect a chairman from among its members and shall
select a secretary  who is not required to be a member of the  committee and who
may be  authorized  to  execute  any  document  or  documents  on  behalf of the
committee.  The secretary of the committee or his designee shall record all acts
and determinations of the committee and shall preserve and retain custody of all
such  records,  together  with such other  documents as may be necessary for the
administration of this Plan or as may be required by law.

9.5        APPOINTMENT OF AGENTS.
           ----------------------

           The committee may appoint such other agents,  who need not be members
of the committee,  as it may deem necessary for the effective performance of its
duties,  whether  ministerial  or  discretionary,  as  the  committee  may  deem
expedient or appropriate.  The  compensation of any agents who are not employees
of the Company shall be fixed by the committee within any limitations set by the
Board.

9.6        MAJORITY VOTE AND EXECUTION OF INSTRUMENTS.
           -------------------------------------------

           In all matters,  questions and decisions, the action of the committee
shall be determined by a majority vote of its members.  They may meet informally
or take any ordinary  action  without the  necessity of meeting as a group.  All
instruments  executed  by the  committee  shall be executed by a majority of its
members or by any member of the committee designated to act on its behalf.
<PAGE>
9.7        ALLOCATION OF RESPONSIBILITIES.
           -------------------------------

           The  committee  may  allocate  responsibilities  among its members or
designate  other persons to act on its behalf.  Any  allocation or  designation,
however,  must be set forth in writing  and must be  retained  in the  permanent
records of the committee.

9.8        CONFLICT OF INTEREST.
           ---------------------

           No member of the committee  who is a Participant  shall take any part
in any action in connection with his participation as an individual. Such action
shall be voted or decided by the remaining members of the committee.

9.9        ACTION TAKEN BY COMPANY.
           ------------------------

           Any action to be taken by the  Company  shall be taken by  resolution
adopted  by the  Board;  provided,  however,  that by  resolution  the Board may
delegate  to any  committee  of the Board,  any  committee  of officers or other
employees,  or any  officer of the  Company  the  authority  to take any actions
hereunder.

9.10       DELEGATIONS OF AUTHORITY.
           -------------------------

           All  delegations  of  responsibility   set  forth  in  this  document
regarding the  determination of benefits and the  interpretation of the terms of
the Plan confer discretionary authority upon the Plan Administrator.

9.11       INDEMNIFICATION.
           ----------------

           To the extent  permitted  by law,  the Company  shall and does hereby
jointly  and  severally  indemnify  and agree to hold  harmless  its  employees,
officers and directors who serve in fiduciary or other  capacities  with respect
to the Plan from all loss,  damage,  or liability,  joint or several,  including
payment of expenses in connection with defense against any such claim, for their
acts,  omissions  and conduct,  and for the acts,  omissions or conduct of their
duly  appointed  agents,  which acts,  omissions  or conduct  constitute  or are
alleged  to  constitute  a  breach  of  such  individual's  fiduciary  or  other
responsibilities  under  the  Act or any  other  law,  except  for  those  acts,
omissions, or conduct resulting from his own willful misconduct, willful failure
to  act,  or  gross  negligence;  provided,  however,  that if any  party  would
otherwise be entitled to  indemnification  hereunder in respect of any liability
and such party shall be insured  against  loss as a result of such  liability by
any  insurance   contract  or  contracts,   such  party  shall  be  entitled  to
indemnification  hereunder  only to the  extent  by  which  the  amount  of such
liability shall exceed the amount thereof payable under such insurance  contract
or contracts.
<PAGE>
                                    ARTICLE X
                                    ---------

                             CLAIMS REVIEW PROCEDURE
                             -----------------------

10.1       CLAIMS.
           -------

           (a)  FILING  OF CLAIM.  A  Participant  or  Beneficiary  entitled  to
benefits need not file a written claim to receive  benefits.  If a  Participant,
Beneficiary or any other person is dissatisfied  with the  determination  of his
benefits,  eligibility,  participation or any other right or interest under this
Plan,  such person may file a written  statement  setting forth the basis of the
claim  with  the  Plan   Administrator  in  a  manner  prescribed  by  the  Plan
Administrator. In connection with the determination of a claim, or in connection
with review of a denied claim,  the claimant may examine this Plan and any other
pertinent documents  generally  available to Participants  relating to the claim
and may submit comments in writing.

           (b) NOTICE OF DECISION.  A written  notice of the  disposition of any
such claim shall be furnished to the claimant  within 30 days after the claim is
filed with the Plan Administrator, provided that the Plan Administrator may have
an  additional  period to decide the claim if it advises the claimant in writing
of the need for an  extension  and the date on which it  expects  to decide  the
claim.  The notice of disposition  of a claim shall refer,  if  appropriate,  to
pertinent  provisions  of this Plan,  shall set forth in writing the reasons for
denial  of the  claim  if the  claim  is  denied  (including  references  to any
pertinent  provisions of this Plan), and where appropriate shall explain how the
claimant can perfect the claim.

10.2       APPEALS.
           --------

           (a) REVIEW. If the claim is denied, in whole or in part, the claimant
shall  also be  notified  in  writing  that a  review  procedure  is  available.
Thereafter,  within  90 days  after  receiving  the  written  notice of the Plan
Administrator's  disposition of the claim,  the claimant may request in writing,
and  shall be  entitled  to, a review  meeting  with the Plan  Administrator  to
present reasons why the claim should be allowed.  The claimant shall be entitled
to be represented by counsel at the review meeting. The claimant also may submit
a written  statement of his claim and the reasons for  granting the claim.  Such
statement  may be submitted  in addition  to, or in lieu of, the review  meeting
with the Plan  Administrator.  The Plan  Administrator  shall  have the right to
request of and receive from a claimant such additional information, documents or
other evidence as the Plan Administrator may reasonably require. If the claimant
does not request a review meeting within 90 days after receiving  written notice
of the Plan  Administrator's  disposition  of the claim,  the claimant  shall be
deemed to have accepted the Plan Administrator's written disposition, unless the
claimant shall have been physically or mentally incapacitated so as to be unable
to request review within the 90 day period.
<PAGE>
           (b) DECISION FOLLOWING REVIEW. A decision on review shall be rendered
in writing  by the Plan  Administrator  ordinarily  not later than 60 days after
review,  and a written copy of such decision shall be delivered to the claimant.
If special  circumstances  require an extension of the ordinary period, the Plan
Administrator  shall so notify the  claimant.  In any  event,  if a claim is not
determined within 120 days after submission for review, it shall be deemed to be
denied

           (c) DECISIONS FINAL; PROCEDURES MANDATORY. To the extent permitted by
law,  a  decision  on  review by the Plan  Administrator  shall be  binding  and
conclusive  upon  all  persons  whomsoever.  To the  extent  permitted  by  law,
completion  of the  claims  procedures  described  in this  Section  shall  be a
mandatory  precondition  that must be complied with prior to  commencement  of a
legal or  equitable  action  in  connection  with the Plan by a person  claiming
rights  under the Plan or by  another  person  claiming  rights  through  such a
person.  The  Plan  Administrator  may,  in its  sole  discretion,  waive  these
procedures as a mandatory precondition to such an action.

                                   ARTICLE XI
                                   ----------

                  LIMITATION ON ASSIGNMENT; PAYMENTS TO LEGALLY
                  ---------------------------------------------
                      INCOMPETENT DISTRIBUTEE; CORRECTIONS
                      ------------------------------------

11.1       ANTI-ALIENATION CLAUSE.
           -----------------------

           No benefit  which shall be payable under the Plan to any person shall
be  subject  in  any  manner  to  anticipation,   alienation,   sale,  transfer,
assignment,  pledge,  encumbrance  or charge,  and any  attempt  to  anticipate,
alienate, sell, transfer,  assign, pledge, encumber, charge or otherwise dispose
of the same  shall be void.  No  benefit  shall in any  manner be subject to the
debts, contracts, liabilities,  engagements or torts of any person, nor shall it
be subject to attachment  or legal process for or against any person,  except to
the extent as may be required by law.

11.2       PERMITTED ARRANGEMENTS.
----       -----------------------

           Section 11.1 shall not preclude  arrangements  for the withholding of
applicable taxes from benefit payments, arrangements for the recovery of benefit
overpayments,  or  arrangements  for direct  deposit of benefit  payments  to an
account in a bank,  savings and loan  association or credit union (provided that
such  arrangement  is not part of an arrangement  constituting  an assignment or
alienation).
<PAGE>
11.3       PAYMENT TO MINOR OR INCOMPETENT.
           --------------------------------

           Whenever any benefit  which shall be payable  under the Plan is to be
paid to or for the  benefit of any person who is then a minor or  determined  by
the Plan  Administrator to be incompetent by qualified medical advice,  the Plan
Administrator  need not require the appointment of a guardian or custodian,  but
shall be  authorized  to cause  the same to be paid  over to the  person  having
custody  of the  minor or  incompetent,  or to cause  the same to be paid to the
minor or incompetent without the intervention of a guardian or custodian,  or to
cause  the same to be paid to a legal  guardian  or  custodian  of the  minor or
incompetent  if one has been  appointed  or to cause the same to be used for the
benefit of the minor or incompetent.

11.4       UNDERPAYMENT OR OVERPAYMENT OF BENEFITS.
           ----------------------------------------

           In the event that, through mistake or computational  error,  benefits
are  underpaid  or overpaid,  there shall be no liability  for any more than the
correct  amount of benefits  under the Plan.  Overpayments  may be deducted from
future payments under the Plan, and underpayment may be added to future payments
under  the Plan.  In lieu of  receiving  reduced  benefits  under  the  Plan,  a
Participant  or  Beneficiary  may  elect  to make a lump  sum  repayment  of any
overpayment.

                                   ARTICLE XII
                                   -----------

                        AMENDMENT, MERGER AND TERMINATION
                        ---------------------------------

12.1       AMENDMENT.
           ----------

           The Company  shall have the right at any time,  by an  instrument  in
writing duly executed,  acknowledged and delivered to the Plan Administrator, to
modify,  alter or amend  this  Plan,  in  whole  or in  part,  prospectively  or
retroactively;  provided,  however,  that the duties and liabilities of the Plan
Administrator  and any Trustee  hereunder shall not be  substantially  increased
without their written consent; and provided further that the amendment shall not
reduce any  Participant's  interest  in the Plan,  calculated  as of the date on
which the amendment is adopted.

12.2       MERGER OR CONSOLIDATION OF COMPANY.
           -----------------------------------

           The Plan  shall  not be  automatically  terminated  by the  Company's
acquisition  by or  merger  into  any  other  employer,  but the  Plan  shall be
continued after such acquisition or merger if the successor  employer elects and
agrees to continue the Plan. All rights to amend, modify,  suspend, or terminate
the Plan shall be  transferred  to the successor  employer,  effective as of the
date of the merger.

12.3       TERMINATION OF PLAN OR DISCONTINUANCE OF CONTRIBUTIONS.
           -------------------------------------------------------

           It is the  expectation  of the Company that this Plan and the payment
of contributions hereunder will be continued indefinitely.  However, continuance
of the Plan is not assumed as a contractual  obligation of the Company,  and the
right is reserved at any time to terminate  this Plan or to reduce,  temporarily
suspend or  discontinue  contributions  hereunder.  If the Plan is terminated or
contributions are reduced, temporarily suspended, or discontinued,  the Accounts
of the affected Participants will continue to be held pursuant to the Plan until
the date or dates on which such Accounts would have become distributable had the
Plan not been  terminated or had  contributions  not been  reduced,  temporarily
suspended, or discontinued. In the exercise of its discretion, however, the Plan
Administrator  may direct that the Accounts of any  Participant  affected by the
termination  of  the  Plan,  or  the   reduction,   temporary   suspension,   or
discontinuance of contributions, be distributed as of an earlier date or dates.
<PAGE>
                                  ARTICLE XIII
                                  ------------

                               GENERAL PROVISIONS
                               ------------------

13.1       LIMITATION ON PARTICIPANTS' RIGHTS.
           -----------------------------------

           Participation in the Plan shall not give any Participant the right to
be  retained  as a Director or any right or interest in any Trust Fund or in the
general  assets of the  Company  other  than as  herein  provided.  The  Company
reserves  the right to dismiss any  Participant  without any  liability  for any
claim either against the Trust Fund,  except to the extent herein  provided,  or
against the Company.

13.2       STATUS OF PARTICIPANTS AS UNSECURED CREDITORS.
           ----------------------------------------------

           Each Participant is an unsecured  creditor of the Company and, except
for the  Deferral  Contributions  placed in any Trust Fund as  provided  in this
Plan, no assets of the Company will be segregated from the general assets of the
Company for the payment of benefits under this Plan. If the Company acquires any
insurance  policies or other investments to assist it in meeting its obligations
to Participants,  those policies or other  investments  will nonetheless  remain
part of the general assets of the Company.

13.3       STATUS OF TRUST FUND.
           ---------------------

           A Trust Fund may be  established to assist the Company in meeting its
obligations to the Participants  and to provide the Participants  with a measure
of protection in certain limited instances. In certain circumstances, the assets
of any Trust Fund may be used for the benefit of the Company's creditors and, as
a result,  any such Trust Fund is considered to be part of the Company's general
assets. Benefit payments due under this Plan shall either be paid from the Trust
Fund,  if any,  or from the  Company's  general  assets as  directed by the Plan
Administrator.  Despite the establishment of any Trust Fund, it is intended that
the Plan be considered to be "unfunded" for purposes of the Act and the Code.

13.4       UNIFORM ADMINISTRATION.
           -----------------------

           Whenever in the  administration of the Plan any action is required by
the Plan Administrator, such action shall be uniform in nature as applied to all
persons similarly situated.

13.5       HEIRS AND SUCCESSORS.
           ---------------------

           All of the  provisions of this Plan shall be binding upon all persons
who shall be  entitled  to any  benefits  hereunder,  and their  heirs and legal
representatives.
<PAGE>
13.6       NO LIABILITY FOR ACCELERATION OF PAYMENTS.
           ------------------------------------------

           Under the Plan,  Participants  are allowed,  to a certain extent,  to
designate  the  dates on which  distributions  are to be made to them.  The Plan
Administrator,  however,  also has the right, in the exercise of its discretion,
to  accelerate  payments.  By accepting the benefits  offered by the Plan,  each
Participant (and each Beneficiary  claiming through a Participant)  acknowledges
that the Plan Administrator may override the Participant's  elections and agrees
that neither the Participant  nor any  Beneficiary  shall have any claim against
the Plan Administrator, the Trustee, if any, or the Company if distributions are
made earlier than anticipated by the Participant due to the Plan Administrator's
exercise of its discretion to accelerate payments.


           To signify its adoption of this Plan document, the Company has caused
this Plan document to be executed by a duly authorized officer of the Company on
this _____ day of _________, 1997.

                                        PHELPS DODGE CORPORATION


                                        By
                                          ---------------------------------
                                           Its
                                              --------------------------------