PHELPS DODGE CORPORATION AND SUBSIDIARIES

                                  Exhibit 10.12

                             STOCK OPTION AGREEMENT

                  (1998 Stock Option and Restricted Stock Plan)


STOCK OPTION AGREEMENT, dated _______________, between PHELPS DODGE CORPORATION,
a New York corporation (the  "Corporation"),  and  _______________________  (the
"Employee").

The Compensation and Management  Development Committee of the Board of Directors
of the Corporation (such Committee, and any successor committee appointed by the
Board of Directors of the Corporation to administer the Corporation's 1998 Stock
Option and Restricted Stock Plan (the "Plan"), is hereinafter referred to as the
"Committee")  has granted to the  Employee an option  under the Plan to purchase
Common Shares of the  Corporation on the terms set forth below.  To evidence the
option so granted,  and to set forth their terms and  conditions  as provided in
the  Plan,  the  Corporation  and the  Employee  hereby  agree  as  follows:  

1.  Confirmation of Grant of Option; Option Price.

The Corporation  hereby  evidences and confirms its grant to the Employee of (i)
an option (the "Option") to purchase  ____________ of the  Corporation's  Common
Shares at an option price of $_________  per share.  The Option  granted  hereby
shall be subject to the  provisions of the Plan.  Capitalized  terms used herein
that are not defined in this Agreement shall have the meanings  assigned to such
terms in the Plan.

2.  Term for Exercise.

(a) The Option  shall  become  exercisable,  subject to the  provisions  of this
Section 2 and Sections 3 and 4 hereof, in installments of _____ Common Shares on
the first  anniversary of the date of grant of the Option,  ______ Common Shares
on the second  anniversary  and ______ Common  Shares on the third  anniversary.
Unless an  earlier  expiration  date is  specified  by this  Agreement  (or,  if
applicable,  in  Supplement  A), the Option shall  expire at 5:00 P.M.,  Arizona
Mountain  time  (such  time  shall  hereinafter  be  referred  to as the "End of
Business"),  on the day  after the  tenth  anniversary  of the date on which the
Option was granted (the "Termination Date").

(b) Without limiting the generality of the foregoing, in the event:

(i) 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  approve any
merger,  consolidation,  sale of assets,  liquidation or reorganization in which
the Corporation will not survive as a publicly owned  corporation (such approval
hereinafter   referred  to  as  a  "Merger  Approval");   or  (ii)  any  of  the
Corporation's Common Shares are purchased pursuant to a tender or exchange offer
other than an offer by the  Corporation,  any Subsidiary of the  Corporation (as
defined  in the Plan and  hereinafter  referred  to as a  "Subsidiary"),  or any
employee  benefit plan  maintained  by the  Corporation  or a  Subsidiary  (such
purchase hereinafter referred to as a "Tender Purchase");

then the Option shall become exercisable during the period beginning on the date
of the Merger Approval or Tender Purchase, as the case may be, and ending on the
thirtieth  day  following  such date (but in no event  shall the  Option  become
exercisable  under this paragraph earlier than six months from the date on which
the Option was granted (the "Grant  Date")).  If any portion of the Option shall
be exercised,  the Option shall thereafter remain exercisable,  according to its
terms,  only with respect to the number of Common  Shares as to which the Option
would otherwise be exercisable  less the number of Common Shares with respect to
which the Option has previously been exercised.

3.  Who May Exercise.

During the  Employee's  lifetime the Option may be exercised only by him. If the
Employee dies while in the employ of the Corporation or one of its Subsidiaries,
the Option may be exercised  for the full number of Common  Shares  specified in
Section 1 hereof  less the  number of Common  Shares  with  respect to which the
Option  has  previously  been  exercised,  by the  Employee's  estate,  personal
representative  or beneficiary  who acquired the right to exercise the Option by
will or by the laws of descent and distribution, at any time prior to the End of
Business on the earlier of the Termination Date or the fifth  anniversary of the
Employee's  death.  If the Employee  dies while he is no longer  employed by the
Corporation or a Subsidiary, his Options may be exercised for the full number of
Common Shares as to which he could have exercised them on the date of his death,
by his estate,  personal representative or beneficiary who acquired the right to
exercise the Option by will or by the laws of descent and  distribution,  at any
time prior to the termination  date provided by Section 4 hereof.  Following the
End of Business on the earlier of the Termination Date, the fifth anniversary of
the Employee's  death or the termination date provided by Section 4, as the case
may be, the Option shall expire.

4. Exercise after Termination of Employment.

If the Employee  shall cease to be employed by the  Corporation  or a Subsidiary
other than by reason of death,  Disability (as defined in the Plan),  Retirement
(as defined in the Plan) or the Employee's  termination for Cause (as defined in
the Plan), the Option shall remain exercisable, to the extent exercisable on the
date of such  termination,  until  the End of  Business  on the  earlier  of the
Termination  Date or the date  which is one month  after the day his  employment
ends.  If  the  Employee's  employment  shall  terminate  due to  Disability  or
Retirement,  the Option shall remain  exercisable,  to the extent exercisable on
the date of the Employee's termination of employment,  until the End of Business
on the earlier of the Termination  Date or the fifth  anniversary of the date of
such  termination  of  employment;  provided,  however,  that,  in the event the
Employee's  employment  with the  Corporation  terminates  not earlier  than six
months  from  the  Grant  Date  as a  result  of the  Employee's  Disability  or
retirement on or after the Employee's normal retirement date,  immediately prior
to the End of  Business on the date the  Employee's  employment  terminates  the
Option  shall become  exercisable  for the purchase of the full number of Common
Shares  specified in Section 1 of the Agreement less the number of Common Shares
with  respect  to  which  the  Option  has  previously  been  exercised.  If the
Employee's  employment  is  terminated  for Cause,  all  Options  granted to the
Employee which are then outstanding  shall be forfeited as of the effective time
of such  termination  but in no event  later  than the End of  Business  on such
termination date. Any portion of the Option which is not exercisable on the date
the  Employee's   employment   terminates  for  any  reason  other  than  death,
Disability,  or retirement on or after the  Employee's  normal  retirement  date
shall expire at the End of Business on such termination date. Any portion of the
Option which did not expire on the date the Employee's employment terminates and
which is not exercised within the period  established under this Section 4 shall
expire  following  the End of Business on the last day on which the Option could
have been exercised.

5.  Restrictions on Exercise.

The  Option  may be  exercised  only with  respect  to full  Common  Shares.  No
fractional  shares shall be issued.  The Option may not be exercised in whole or
part:

(a) if any requisite  approval or consent of any  governmental  authority of any
kind  having  jurisdiction  over the  exercise  of  options  shall not have been
secured; or

(b) unless the Common Shares subject to the Option shall be  effectively  listed
on the New York Stock Exchange and registered under the Securities  Exchange Act
of 1934, as amended (the "Exchange Act"),  which listing and registration may be
upon official notice of issuance of such Common Shares.

The  Corporation may require that, as a condition to any exercise of the Option,
the Employee  represent to the  Corporation  in writing that he is acquiring the
Common Shares subject to such exercise for his own account for  investment  only
and not with a view to the distribution thereof.

6.  Manner of Exercise.

To the extent the  Option  shall be  exercisable  in  accordance  with the terms
hereof, and subject to such administrative regulations as the Committee may have
adopted,  the Option may be  exercised  in whole or from time to time in part by
written notice to the Committee,  (i)  identifying the Option by Grant Date, the
option  price and  whether  or not the  Agreement  includes  Supplement  A, (ii)
specifying the number of Common Shares with respect to which the Option is being
exercised,  and (iii)  accompanied  by full payment of the option price for such
Common Shares (1) in United States dollars by personal check or cash,  including
an assignment of the right to receive cash proceeds of the sale of Common Shares
subject to the  Option,  (2) in Common  Shares of the  Corporation  owned by the
Employee for at least three months prior to the day of exercise,  represented by
certificates  duly endorsed to the Corporation or its nominee with any requisite
transfer  tax stamps  attached,  the market value of which shall be equal to the
option  price for the Common  Shares  with  respect to which the Option is being
exercised, or (3) in a combination of (1) and (2) above. The market value of any
Common Shares delivered pursuant to the immediately  preceding sentence shall be
the mean of the high and low prices of such  Common  Shares on the  Consolidated
Trading  Tape on the day of exercise  or, if there was no such sale on such day,
on the day next preceding the day of exercise on which there was a sale.

For valuation purposes,  the day of exercise of the Option shall be deemed to be
the day on which  notice,  addressed  to the  Committee,  either to exercise the
Option in whole or in part by the payment of Common Shares  (together  with duly
endorsed  certificates  as  provided  above and any other  required  payment) is
received  at the  Corporation's  principal  office,  except  that if such notice
(together  with  certificates  and other  payment if  required) is received on a
Saturday  or Sunday  or on a holiday  observed  by the  Corporation's  principal
office, or after the End of Business on any other day, the day of exercise shall
be deemed to be the next business day.  "Written notice" shall include,  without
limitation, notice by telegram, telex, cable or telecopy facsimile.

In the event  that the  Option  shall be  exercised  by a person  other than the
Employee in  accordance  with the  provisions  of Section 3 hereof,  such person
shall furnish the  Corporation  with evidence  satisfactory  to it of his or her
right to  exercise  the same and of  payment  or  provision  for  payment of any
estate, transfer,  inheritance or death taxes payable with respect to the Option
or with respect to any related  Common Shares or payment.  The  Corporation  may
require the Employee or other person exercising the Option to furnish or execute
such  documents  as the  Corporation  shall  deem  necessary  to  evidence  such
exercise,   to  determine  whether  registration  is  then  required  under  the
Securities  Act  of  1933,  as  amended,  or  to  comply  with  or  satisfy  the
requirements of the Exchange Act, or any other law.

7.  Nonassignability.

Unless  the  Committee  shall  otherwise  so  specify  by a  supplement  to this
Agreement  approved in  connection  with the award  hereof or at any  subsequent
time,  the Option shall not be assignable or  transferable  except by will or by
the laws of descent and  distribution  to the extent  contemplated  by Section 3
hereof.  At the request of the Employee,  Common Shares purchased on exercise of
the Option may be issued or  transferred in the name of the Employee and another
person  jointly  with the  right of  survivorship,  or in the name of a trust or
other legal entity  established to held property for the benefit of the Employee
or members of his immediate family.

8.  Rights as Stockholder.

The Employee  shall have no rights as a  stockholder  with respect to any Common
Shares covered by the Option until the issuance of a certificate or certificates
to him for such Common  Shares.  No  adjustment  shall be made for  dividends or
other  rights  for  which  the  record  date is  prior to the  issuance  of such
certificate or certificates.

9.  Capital Adjustments.

The  number  and price of the  Common  Shares  covered  by the  Option  shall be
proportionately  adjusted to reflect, as deemed equitable and appropriate by the
Committee,  any  stock  dividend,  stock  split  or  share  combination  of,  or
extraordinary  cash  dividend  on,  the  Corporation's   Common  Shares  or  any
recapitalization  of  the  Corporation.  To  the  extent  deemed  equitable  and
appropriate by the Committee, subject to any required action by the stockholders
of the Corporation, in any merger, consolidation,  reorganization,  liquidation,
dissolution,  or other  similar  transaction,  the Option  shall  pertain to the
securities  and other  property,  if any, which a holder of the number of Common
Shares  covered by the Option would have been  entitled to receive in connection
with such event.

10.      Withholding.

(a) The  Corporation's  obligation to deliver Common Shares upon the exercise of
the Option shall be subject to payment by the Employee of any amount required to
be withheld with respect to such exercise  pursuant to any  applicable  federal,
state or local tax withholding requirements.

(b) Unless this Agreement  includes  Supplement A (making it an incentive  stock
option), the Employee may elect to satisfy all or any part of his federal, state
and local tax obligations (including,  without limitation, FICA) with respect to
such  exercise  by  having  the  Corporation  withhold  from any  Common  Shares
otherwise  deliverable  to him in  connection  with the exercise of the Option a
number of Common  Shares,  or by delivering  Common Shares  already owned by the
Employee,  having a market  value  equal in amount to the  obligations  to be so
satisfied.  The market value of Common Shares withheld or delivered shall be the
mean of the  high and low  prices  of such  Common  Shares  on the  Consolidated
Trading  Tape on the day of exercise  or, if there was no such sale on such day,
on the next preceding day on which there was a sale.

11.  Governing Law.

This Agreement shall be construed and enforced in accordance  with, and governed
by, the laws of the State of New York.

12.  Supplements.

Attached hereto are the following supplements:

Supplement A - Incentive Stock Options

Supplement B -- Change of Control

Supplement D -- Reload Option
Any such supplements so attached are  incorporated  herein and constitute a part
of this Agreement as though set forth in full herein. Additional supplements may
be added to this  Agreement at a later date by the Committee;  provided  however
that if any such  additional  supplement  adversely  affects  the  rights of the
Employee under this Agreement,  such supplement shall not be or become effective
unless  and  until  the  Employee  consents  to its  addition  in  writing.  All
capitalized  terms used in such  supplements  without  definition shall have the
meaning determined under this Agreement.

13.  Predecessor Plans.

The  Employee  hereby  acknowledges  and  agrees  that  all  of  the  Employee's
outstanding  options that were  granted  pursuant to the  Predecessor  Plans (as
defined  in the  Plan)  shall  hereafter  become  subject  to the  terms of this
Agreement.

IN WITNESS  WHEREOF,  the  Corporation  and the Employee have duly executed this
Agreement as of the date set forth above.

                                     PHELPS DODGE CORPORATION


                                     By 
                                       ----------------------------
                                     Senior Vice President


                                     ------------------------------
                                     Employee

Supplement A
[Incentive Stock Option --
1998 Stock Option Plan]

Supplement   A  to  the  Stock  Option   Agreement   (the   "Agreement")   dated
___________________  between Phelps Dodge  Corporation (the  "Corporation")  and
____________________ (the "Employee").

1. Term of the Option.  Each  incentive  stock  option shall expire on the tenth
anniversary of the date of its grant.

2. Disposition of Shares. If the Employee disposes of any Common Shares received
upon exercise of the Option within two years after the Option was granted to him
or within one year after the Common Shares were transferred to him upon exercise
of the Option,  whether by sale,  gift, or otherwise,  the Employee shall notify
the Secretary of the  Corporation  of the number of such Common Shares  disposed
of, the date on which disposed of, the manner of disposition and the amount,  if
any, realized upon such  disposition,  and shall promptly pay to the Corporation
the amount,  if any, that the  Corporation  specifies in a written notice to the
Employee  as  required  to  be  withheld  with  respect  to  such  exercise  and
disposition  pursuant to any applicable federal,  state or local tax withholding
requirements.

3. Interpretation of Agreement.  The Option is intended to be an incentive stock
option  within the meaning of Section 422 of the Internal  Revenue Code of 1986,
as amended.

Supplement B
[Change of Control --
1998 Stock Option Plan]

Supplement   B  to  the  Stock  Option   Agreement   (the   "Agreement")   dated
____________________,  between Phelps Dodge Corporation (the  "Corporation") and
___________________, (the "Employee").

1. Additional Trigger Event For Exercisability. In addition to the provisions of
Section 2 of the  Agreement,  in the event the  Employee's  employment  with the
Corporation or any Subsidiary  terminates by reason of a Qualifying  Termination
(as defined below) not earlier than six months from the date on which the Option
was  granted  and within two years  after a Change of Control (as defined in the
Plan) of the Corporation, the Option shall become exercisable, no later than the
date of such  termination,  for the purchase of the full number of Common Shares
specified in Section 1 of the Agreement.

2. Qualifying  Termination.  For the purpose of this  Supplement,  a "Qualifying
Termination"  means  a  termination  of  the  Employee's   employment  with  the
Corporation  or any  Subsidiary  (under  circumstances  where the Employee is no
longer employed by the Corporation or any Subsidiary) for any reason other than

(i)  death;

(ii)  Disability;

(iii)  willful  misconduct in the  performance  of the  Employee's  duties as an
employee  which  results in a material  detriment  to the  Corporation,  and its
Subsidiaries, taken as a whole;

(iv)  Retirement; or

(v)  a termination by the Employee unless

(1) 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 of Directors of the  Corporation as constituted
immediately prior to such Change of Control or

(2) the Employee  terminates  his  employment  for one or more of the  following
reasons (and the Employee has not agreed thereto in writing):

(x)  the  assignment  to the  Employee  of  any  duties  inconsistent,  in a way
materially adverse to the Employee, with his positions, duties, responsibilities
and status with the Corporation and its Subsidiaries  immediately  prior to such
Change of Control,  or a material  reduction in the duties and  responsibilities
held by the Employee  immediately  prior to such Change of Control;  a change in
the  Employee's  reporting  responsibilities,  titles  or  offices  as in effect
immediately prior to such Change of Control; or any removal of the Employee from
or any failure to re-elect the Employee to any position with the  Corporation or
any  Subsidiary  that the  Employee  held  immediately  prior to such  Change of
Control except in connection with the Employee's promotion or the termination of
his employment  for any of the reasons  specified in paragraphs (i) through (iv)
above; or

(y) a reduction by the  Corporation  or any  Subsidiary in the  Employee's  base
salary as in effect immediately prior to such Change of Control;  the failure by
the  Corporation  or any  Subsidiary to continue in effect any employee  benefit
plan or  compensation  plan in which the Employee is  participating  immediately
prior to such Change of Control  unless the Employee is permitted to participate
in other plans  providing him with  substantially  comparable  benefits;  or the
taking of any action by the Corporation or any Subsidiary  which would adversely
affect the Employee's  participation in or materially  reduce his benefits under
such plan; or

(z) the  Corporation's  or any  Subsidiary's  requiring the Employee to be based
anywhere other than his location  immediately prior to such Change of Control or
a location within 50 miles of his location  immediately  prior to such Change of
Control;  or the  Corporation's  or any  Subsidiary's  requiring the Employee to
travel  on  the  Corporation's  or  any  Subsidiary's   business  to  an  extent
substantially more burdensome than his travel  obligations  immediately prior to
such Change of Control.

Supplement D
[Reload Option -- 1998 Plan]

Supplement   D  to  the  Stock  Option   Agreement   (the   "Agreement")   dated
_________________  between  Phelps Dodge  Corporation  (the  "Corporation")  and
_____________________ (the "Employee").

1.  Issuance of Reload  Option.  In the event that the Employee  exercises  this
Option (a) at least six months prior to the expiration date of this Option,  (b)
while  still  employed  by the  Corporation  or a  Subsidiary,  (c) prior to the
expiration date of the Plan and (d) prior to any  determination by the Committee
to  terminate  the right of the  Employee  (including,  without  limitation,  by
terminating  such  rights  for all  employees  or all  employees  of a class  of
employees  which  includes  the  Employee)  to receive upon the exercise of this
Option an  additional  Option in accordance  with the terms of this  Supplement,
using,  in whole or in part,  Common  Shares  owned by the Employee for at least
three months prior to the day of exercise (the  "Exercise  Date"),  the Employee
shall be  granted  a new  option  (the  "Reload  Option")  under the Plan on the
Exercise  Date for the number of Common Shares of the  Corporation  equal to the
number of Common Shares  exchanged by the Employee to exercise  this Option.  No
Reload  Option shall be granted if the Exercise Date is (a) within six months of
the expiration date of the Option,  (b) a date when the Employee is not employed
by the Corporation or a Subsidiary, (c) after the expiration date of the Plan or
(d) after the date, if any, the Committee  decides to terminate the right of the
Employee  (including,  without limitation,  by terminating such rights as to all
employees or all employees of a class of employees  which includes the Employee)
to receive upon the exercise of this Option an  additional  Option in accordance
with the terms of this Supplement.

2. Terms of Reload  Option.  The Reload Option shall be  exercisable on the same
terms and  conditions  as apply to the  Option  as set  forth in this  Agreement
(including,  without  limitation,  the terms  and  conditions  providing  to the
Employee  certain  additional  benefits in the event of a Change of Control,  as
defined in Supplement B hereto),  except that (a) the Reload Option shall become
exercisable  in full on the day which is six months after the Exercise Date, (b)
the option  price per share shall be the fair market  value of a Common Share on
the  Exercise  Date,  which  shall be the mean of the high and low  prices  of a
Common  Share on the  Consolidated  Trading  Tape on that day, or, if no sale of
Common Shares is recorded on such tape on that day,  then on the next  preceding
day on which  there was such a sale and (c) the  expiration  date of the  Reload
Option shall be the date of expiration of the Option under this  Agreement.  The
Corporation  may issue a new  agreement to evidence the Reload Option and, if it
does, that agreement  shall supersede this Agreement in all respects  insofar as
the Reload Option is concerned.
<PAGE>
                             RELOAD OPTION AGREEMENT

                  (1998 Stock Option and Restricted Stock Plan)

RELOAD OPTION AGREEMENT, dated ____________, between PHELPS DODGE CORPORATION, a
New  York  corporation  (the   "Corporation"),   and   __________________   (the
"Employee").

The Compensation and Management  Development Committee of the Board of Directors
of the Corporation (such Committee, and any successor committee appointed by the
Board of Directors of the Corporation to administer the Corporation's 1998 Stock
Option and Restricted Stock Plan (the "Plan"), is hereinafter referred to as the
"Committee")  has granted to the  Employee an option  under the Plan to purchase
Common Shares of the  Corporation  on the terms set forth below.  Such grant was
made on  _____________________  in connection  with the exercise on that date by
the  Employee  of an  option  (the  "Original  Option")  issued  under the Plan,
evidenced  by  a  Stock  Option  Agreement  dated  _______________________.   In
connection  with such  exercise,  the Employee  delivered to the  Corporation in
payment of part or all of the exercise  price of the Original  Option  _________
Common  Shares  that he owned  for at least  three  months  prior to the date of
exercise.

To evidence the option so granted,  and to set forth their terms and  conditions
as  provided in the Plan,  the  Corporation  and the  Employee  hereby  agree as
follows:

1.  Confirmation of Grant of Reload Option; Reload Option Price.

The Corporation  hereby  evidences and confirms its grant to the Employee of (i)
an option  (the  "Reload  Option") to purchase  _________  of the  Corporation's
Common  Shares at `an option price of  $________  per share.  The Reload  Option
granted hereby shall be subject to the provisions of the Plan. Capitalized terms
used  herein  that are not  defined in this  Agreement  shall have the  meanings
assigned to such terms in the Plan.

2.  Term for Exercise.

The  Reload  Option  shall  become  exercisable,  subject to the  provisions  of
Sections 3 and 4 hereof, on  ______________,  which is the date six months after
the grant date specified in Section 1 hereof.  Unless an earlier expiration date
is specified  by this  Agreement,  the Reload  Option shall expire at 5:00 P.M.,
Arizona Mountain time (such time shall hereinafter be referred to as the "End of
Business"),  on  ________________,  which is the expiration date of the Original
Option (the "Termination Date").

3.  Who May Exercise.

During the  Employee's  lifetime the Reload Option may be exercised only by him.
If the  Employee  dies  while in the  employ  of the  Corporation  or one of its
Subsidiaries,  the Reload  Option may be exercised for the full number of Common
Shares  specified  in  Section 1 hereof  less the number of Common  Shares  with
respect  to which the  Reload  Option  has  previously  been  exercised,  by the
Employee's estate, personal representative or beneficiary who acquired the right
to  exercise  the  Reload  Option  by  will  or  by  the  laws  of  descent  and
distribution,  at any time prior to the End of  Business  on the  earlier of the
Termination  Date or the  fifth  anniversary  of the  Employee's  death.  If the
Employee dies while he is no longer employed by the Corporation or a Subsidiary,
his Reload  Options may be exercised  for the full number of Common Shares as to
which he could  have  exercised  them on the date of his death,  by his  estate,
personal  representative  or beneficiary  who acquired the right to exercise the
Reload  Option by will or by the laws of descent and  distribution,  at any time
prior to the termination date provided by Section 4 hereof. Following the End of
Business on the earlier of the  Termination  Date, the fifth  anniversary of the
Employee's  death or the termination date provided by Section 4, as the case may
be, the Reload Option shall expire.

4. Exercise after  Termination of Employment.  If the Employee shall cease to be
employed  by the  Corporation  or a  Subsidiary  other  than by reason of death,
Disability (as defined in the Plan),  Retirement (as defined in the Plan) or the
Employee's  termination  for Cause (as defined in the Plan),  the Reload  Option
shall  remain  exercisable,  to the  extent  exercisable  on the  date  of  such
termination, until the End of Business on the earlier of the Termination Date or
the date which is one month after the day his employment ends. If the Employee's
employment  shall  terminate due to Disability or Retirement,  the Reload Option
shall  remain  exercisable,  to  the  extent  exercisable  on  the  date  of the
Employee's  termination of employment,  until the End of Business on the earlier
of the Termination Date or the fifth anniversary of the date of such termination
of employment.  If the Employee's employment is terminated for Cause, all Reload
Options granted to the Employee which are then outstanding shall be forfeited as
of the effective time of such  termination but in no event later than the End of
Business on such termination date. Any portion of the Reload Option which is not
exercisable  on the date the  Employee's  employment  terminates  for any reason
other than death,  Disability,  or retirement on or after the Employee's  normal
retirement  date shall expire at the End of Business on such  termination  date.
Any portion of the Reload Option which did not expire on the date the Employee's
employment  terminates and which is not exercised within the period  established
under this Section 4 shall expire  following the End of Business on the last day
on which the Reload Option could have been exercised.

5.  Restrictions on Exercise.

The Reload Option may be exercised only with respect to full Common  Shares.  No
fractional  shares  shall be issued.  The Reload  Option may not be exercised in
whole or part:

(a) if any requisite  approval or consent of any  governmental  authority of any
kind  having  jurisdiction  over the  exercise  of  options  shall not have been
secured; or

(b) unless the Common Shares  subject to the Reload Option shall be  effectively
listed on the New York  Stock  Exchange  and  registered  under  the  Securities
Exchange  Act of 1934,  as amended  (the  "Exchange  Act"),  which  listing  and
registration may be upon official notice of issuance of such Common Shares.  

The  Corporation  may require that, as a condition to any exercise of the Reload
Option,  the  Employee  represent  to the  Corporation  in  writing  that  he is
acquiring  the Common  Shares  subject to such  exercise for his own account for
investment  only  and not with a view to the  distribution  thereof.  

6. Manner of Exercise.

To the extent the Reload  Option shall be  exercisable  in  accordance  with the
terms hereof,  and subject to such  administrative  regulations as the Committee
may have  adopted,  the Reload  Option may be exercised in whole or from time to
time in part by written  notice to the  Committee,  (i)  identifying  the Reload
Option by Grant Date and the option price,  (ii) specifying the number of Common
Shares with  respect to which the Reload  Option is being  exercised,  and (iii)
accompanied  by full payment of the option  price for such Common  Shares (1) in
United States dollars by personal check or cash,  including an assignment of the
right to  receive  cash  proceeds  of the sale of Common  Shares  subject to the
Reload Option, (2) in Common Shares of the Corporation owned by the Employee for
at least three months prior to the day of exercise,  represented by certificates
duly endorsed to the Corporation or its nominee with any requisite  transfer tax
stamps  attached,  the market  value of which shall be equal to the option price
for the  Common  Shares  with  respect  to  which  the  Reload  Option  is being
exercised, or (3) in a combination of (1) and (2) above. The market value of any
Common Shares delivered pursuant to the immediately  preceding sentence shall be
the mean of the high and low prices of such  Common  Shares on the  Consolidated
Trading  Tape on the day of exercise  or, if there was no such sale on such day,
on the day next preceding the day of exercise on which there was a sale.

For valuation purposes, the day of exercise of the Reload Option shall be deemed
to be the day on which notice,  addressed to the  Committee,  either to exercise
the Reload Option in whole or in part by the payment of Common Shares  (together
with duly  endorsed  certificates  as  provided  above  and any  other  required
payment) is received at the Corporation's  principal office, except that if such
notice (together with certificates and other payment if required) is received on
a Saturday  or Sunday or on a holiday  observed by the  Corporation's  principal
office, or after the End of Business on any other day, the day of exercise shall
be deemed to be the next business day.  "Written notice" shall include,  without
limitation, notice by telegram, telex, cable or telecopy facsimile.

In the event that the Reload  Option  shall be  exercised by a person other than
the Employee in accordance with the provisions of Section 3 hereof,  such person
shall furnish the  Corporation  with evidence  satisfactory  to it of his or her
right to  exercise  the same and of  payment  or  provision  for  payment of any
estate, transfer,  inheritance or death taxes payable with respect to the Reload
Option or with respect to any related Common Shares or payment.  The Corporation
may require the Employee or other person exercising the Reload Option to furnish
or execute such  documents as the  Corporation  shall deem necessary to evidence
such  exercise,  to determine  whether  registration  is then required under the
Securities  Act  of  1933,  as  amended,  or  to  comply  with  or  satisfy  the
requirements of the Exchange Act, or any other law.

7.  Nonassignability.

Unless  the  Committee  shall  otherwise  so  specify  by a  supplement  to this
Agreement  approved in  connection  with the award  hereof or at any  subsequent
time, the Reload Option shall not be assignable or  transferable  except by will
or by the laws of descent and distribution to the extent contemplated by Section
3 hereof. At the request of the Employee, Common Shares purchased on exercise of
the Reload Option may be issued or  transferred  in the name of the Employee and
another person jointly with the right of survivorship, or in the name of a trust
or other  legal  entity  established  to held  property  for the  benefit of the
Employee or members of his immediate family.

8.  Rights as Stockholder.

The Employee  shall have no rights as a  stockholder  with respect to any Common
Shares  covered by the Reload  Option  until the  issuance of a  certificate  or
certificates  to him for such Common  Shares.  No  adjustment  shall be made for
dividends  or other rights for which the record date is prior to the issuance of
such certificate or certificates.

9.  Capital Adjustments.

The number and price of the Common Shares  covered by the Reload Option shall be
proportionately  adjusted to reflect, as deemed equitable and appropriate by the
Committee,  any  stock  dividend,  stock  split  or  share  combination  of,  or
extraordinary  cash  dividend  on,  the  Corporation's   Common  Shares  or  any
recapitalization  of  the  Corporation.  To  the  extent  deemed  equitable  and
appropriate by the Committee, subject to any required action by the stockholders
of the Corporation, in any merger, consolidation,  reorganization,  liquidation,
dissolution,  or other similar  transaction,  the Reload Option shall pertain to
the  securities  and other  property,  if any,  which a holder of the  number of
Common  Shares  covered by the Reload Option would have been entitled to receive
in connection with such event.

10.  Withholding.

(a) The  Corporation's  obligation to deliver Common Shares upon the exercise of
the Reload  Option  shall be subject  to payment by the  Employee  of any amount
required to be withheld with respect to such exercise pursuant to any applicable
federal, state or local tax withholding requirements.

(b) The Employee may elect to satisfy all or any part of his federal,  state and
local tax obligations (including, without limitation, FICA) with respect to such
exercise by having the  Corporation  withhold from any Common  Shares  otherwise
deliverable to him in connection with the exercise of the Reload Option a number
of Common Shares,  or by delivering Common Shares already owned by the Employee,
having a market value equal in amount to the obligations to be so satisfied. The
market value of Common  Shares  withheld or  delivered  shall be the mean of the
high and low prices of such Common  Shares on the  Consolidated  Trading Tape on
the day of  exercise  or, if there  was no such  sale on such  day,  on the next
preceding day on which there was a sale.

11.  Governing Law.

This Agreement shall be construed and enforced in accordance  with, and governed
by, the laws of the State of New York.

12.  Supplements.

Attached hereto is a supplement titled "Supplement D -- New Reload Option".  Any
such  supplements so attached are  incorporated  herein and constitute a part of
this Agreement as though set forth in full herein. Additional supplements may be
added to this Agreement at a later date by the Committee;  provided however that
if any such additional  supplement  adversely affects the rights of the Employee
under this Agreement,  such supplement  shall not be or become  effective unless
and until the  Employee  consents to its  addition in writing.  All  capitalized
terms  used in such  supplements  without  definition  shall  nave  the  meaning
determined under this Agreement.

IN WITNESS  WHEREOF,  the  Corporation  and the Employee have duly executed this
Agreement as of the date set forth above.

PHELPS DODGE CORPORATION


By 
  -----------------------
Vice President


-------------------------
Employee


Supplement D
[New Reload Option -- 1998 Plan]

Supplement  D to the Stock  Reload  Option  Agreement  (the  "Agreement")  dated
between Phelps Dodge Corporation (the "Corporation") and (the "Employee").

1. Issuance of New Reload Option. In the event that the Employee  exercises this
Reload  Option  (a) at least six  months  prior to the  expiration  date of this
Reload Option,  (b) while still employed by the  Corporation or a Subsidiary and
(c) prior to the expiration date of the Plan, using, in whole or in part, Common
Shares  owned by the  Employee  for at least  three  months  prior to the day of
exercise (the "Exercise Date"),  the Employee shall be granted a new option (the
"New  Reload  Option")  under the Plan on the  Exercise  Date for the  number of
Common Shares of the Corporation  equal to the number of Common Shares exchanged
by the  Employee to  exercise  this Reload  Option;  provided  that a New Reload
Option shall not be granted if the Exercise Date is (a) within six months of the
expiration  date of the  Reload  Option,  (b) a date  when the  Employee  is not
employed by the  Corporation or a Subsidiary,  (c) after the expiration  date of
the Plan or (d) after the date, if any, the  Committee  decides to terminate the
right of the Employee (including, without limitation, by terminating such rights
as to all employees or all employees of a class of employees  which includes the
Employee) to receive upon the exercise of this Reload Option an  additional  New
Reload Option in accordance with the terms of this Supplement.

2. Terms of New Reload Option. The New Reload Option shall be exercisable on the
same terms and  conditions  as apply to the  Reload  Option as set forth in this
Agreement,  except that (a) the New Reload  Option shall become  exercisable  in
full on the day which is six  months  after the  Exercise  Date,  (b) the option
price per share shall be the fair market value of a Common Share on the Exercise
Date,  which  shall be the mean of the high and low prices of a Common  Share on
the  Consolidated  Trading Tape on that day, or, if no sale of Common  Shares is
recorded on such tape on that day, then on the next preceding day on which there
was such a sale and (c) the  expiration  date of the New Reload  Option shall be
the  date  of  expiration  of  the  Reload  Option  under  this  Agreement.  The
Corporation  may issue a new agreement to evidence the New Reload Option and, if
it does, that agreement  shall supersede this Agreement in all respects  insofar
as the New Reload Option is concerned.

3. Right of Committee  to  Disapprove  New Reload  Option.  Notwithstanding  the
foregoing,  the  continuance  of a New Reload  Option  granted  pursuant to this
Supplement  shall be subject to the  disapproval  of the  Committee  in its sole
discretion  exercised at the meeting of the  Committee  next  following the date
such New Reload Option is granted.  Any New Reload Options so disapproved by the
Committee shall terminate upon such disapproval.


DATE


NAME
ADDRESS
ADDRESS

                            Award of Restricted Stock

Dear NAME:

Phelps Dodge  Corporation (the "Company") is pleased to confirm to you that at a
meeting held on  ______________,  the  Compensation  and Management  Development
Committee  of  the  Board  of  Directors  of  Phelps  Dodge   Corporation   (the
"Committee")  awarded  you  _____  shares  of  Restricted  Stock of the  Company
pursuant to the 1998 Stock Option and Restricted Stock Plan (the "Plan").

This letter will  confirm the  following  agreement  between you and the Company
pursuant to the Plan.  Capitalized  words used in this letter and defined in the
Plan are used as so defined.  This award of  Restricted  Stock is subject to the
terms and conditions of the Plan, as supplemented by this letter.

1. Restriction on Transfer.  Except as provided in paragraphs 3 and 4 below, the
shares of Restricted  Stock awarded to you hereunder may not be sold,  assigned,
transferred,    pledged,    hypothecated   or   otherwise    encumbered    until
_____________________ (the "Restricted Period").

2. Forfeiture of Restricted  Stock.  Except as provided in paragraph 3 below, if
your employment with the Company and its  Subsidiaries  terminates  prior to the
end of the Restricted  Period for any reason  including  without  limitation any
termination by you or by the Company in its absolute discretion,  your shares of
Restricted Stock shall revert back to the Company without any payment to you and
you shall  cease to have any rights with  respect to such  shares of  Restricted
Stock. In the case of such reversion,  such shares shall be retransferred to the
Company by means of the stock power referred to in paragraph 5 below.

3. Death, Disability or Retirement.  If your employment with the Company and its
Subsidiaries  terminates  by  reason  of your  Death,  your  Disability  or your
Retirement (except for a termination  occurring within six months of the date of
the grant of your shares of  Restricted  Stock on account of your  Disability or
Retirement),  the  Restricted  Period  shall  lapse  upon  your  termination  of
employment.

4. Change of Control. The Restricted Period shall lapse in the event that, on or
after  the date  six  months  after  the date of the  grant  of your  shares  of
Restricted Stock, a Change of Control occurs.

5. Rights as a Shareholder.  Subject to the provisions of paragraph 7 below, you
shall  have all the  rights of a holder of Common  Shares  with  respect to your
Restricted  Stock,  including  the  right  to vote  the  shares  and to  receive
dividends. Notwithstanding the foregoing, your Restricted Stock shall be held by
the Company prior to the lapse of the Restricted Period and you shall deliver to
the  Company a stock power  executed in blank in such form as the Company  shall
determine.

6.   Administration.   The  Plan  is  administered  by  the  Committee  and  any
interpretation or construction of the Plan or this letter by the Committee,  and
any  determination  made by the  Committee  pursuant to the Plan or this letter,
shall be  conclusive  and binding on the Company,  you and any other  interested
party.

7. Conversions and Property Distributions. In the event your Restricted Stock is
exchanged for or converted  into  securities  other than Common Shares or in the
event that any distribution is made with respect to such Restricted Stock either
in  Common  Shares  or in  other  property  or by way of an  extraordinary  cash
dividend,  the  securities  or other  property or cash that you receive shall be
subject to the same  restrictions as apply to your Restricted  Stock,  including
those provided by the last sentence of paragraph 5 above.

8.  Withholding.  You shall be required to pay,  as a condition  of  receiving a
share certificate  without legend,  any applicable  federal,  state or local tax
withholding requirements, which, if the Committee shall permit, may be satisfied
by the  withholding  of shares of  Restricted  Stock  with  respect to which the
Restricted  Period  has  lapsed,  subject to such  terms and  conditions  as the
Committee shall impose.

9. Governing  Law. This Agreement  shall be construed and enforced in accordance
with, and governed by, the laws of the State of New York.

Please sign one of the two copies of this letter where  indicated  below and the
attached Stock Power and return them to me at your earliest convenience.  Please
retain the other copy of this letter for your records.

PHELPS DODGE CORPORATION


By:
  -----------------------
Ramiro G. Peru
Senior Vice President

ACCEPTED AND AGREED TO:



Date: