Purchase Order

Phelps Dodge is a
Freeport-McMoRan Company

1. Definitions.

“Approved Amount” means the maximum estimated cost of any Change Order (as specified in this Order).

“Buyer” means the Phelps Dodge Corporation-related entity identified in this Order.

“Conforming Goods” means Goods that conform in all respects to all of the warranties in Section 4.

“Delivery Date” means the date on or before which Seller must deliver the Goods, as specified in this Order or in any subsequent writing from Buyer to Seller.

“Goods” means the items described in this Order that Seller is to deliver to Buyer pursuant to this Order.

“Law” means any federal, state or local law, rule, code, ordinance or regulation or any court order.

“Loss” means any liability, claim, demand, damage, loss, cost or expense, of any kind or description, including, without limitation, attorneys’ fees, caused by, arising out of, resulting from, attributable to or in any way incidental to Buyer’s enforcement of this Order, Seller’s performance under this Order or any breach of Seller’s representations or warranties under this Order.

“Nonconforming Goods” means any Goods that fail to conform in any respect to any of the warranties in Section 4.

“Order” means this purchase order.

“Price” means the amount set forth in this Order, including authorized adjustments, and is the total amount payable by Buyer to Seller for the Goods.

“Seller” means the person or entity identified in this Order.

2. Time of the Essence.  Time is of the essence with regard to the performance of Seller’s obligations under this Order.  If the Delivery Date is not met, Buyer may, in addition to any other rights and remedies Buyer may have under this Order, at law or in equity, terminate or suspend all or any part of this Order.

3. Delivery; Payment.  Unless otherwise specified in this Order or in any subsequent writing from Buyer to Seller, (i) all Goods will be shipped as a single lot and delivered on or before the Delivery Date, F.O.B. Destination, Freight Terms Collect, and (ii) payment will be due for all Conforming Goods within 30 days after the later of (a) the date as of which all Conforming Goods have been delivered in accordance with this Order, and (b) the date of Buyer’s receipt from Seller of an accurate invoice for the Goods.  Seller will promptly notify Buyer if it reasonably believes that any of the Goods will be delivered to Buyer before the Delivery Date.

4. Warranties.  Seller represents and warrants as follows:

(a) All Goods will conform to (i) the specifications, drawings, samples, models and other descriptions furnished to or by Buyer; and (ii) the promises and affirmations, oral or written, made to Buyer by or on behalf of Seller.  All Goods will be merchantable, new, of good workmanship and quality and free from defects in design, function or performance.  Seller acknowledges that it is fully aware of the purposes for which Buyer intends to use the Goods and therefore further represents and warrants that all Goods will be suitable for, and will accomplish, such purposes.  These representations and warranties will also run in favor of any person or entity using or affected by such Goods.  Seller will assign to Buyer any manufacturer’s or other warranties applicable to the Goods and will cooperate with Buyer in enforcing such warranties.

(b) Upon delivery, Buyer’s title to the Goods will be free and clear of any and all (i) security interests, liens and encumbrances whatsoever, and (ii) rightful claims that may be asserted by any party other than Buyer including, without limitation, any claim that such delivery constitutes tortious interference, unfair competition or infringement (including infringement of patent, trademark, copyright, trade secret or other proprietary interest), regardless of whether Buyer has furnished to Seller specifications for the Goods.  In the event that Buyer is in any way enjoined from using any Goods, or any portion of such Goods, Seller will promptly, at its expense (including, without limitation, the payment of any royalties occasioned by the following) either (i) provide to Buyer noninfringing means of using such Goods, or (ii) negotiate and procure for Buyer the right to use such Goods without restriction.

(c) The manufacture, production, sale, use, delivery and disposal of all Goods and Seller’s performance of its obligations under this Order will be performed and completed in compliance with all applicable Laws, technical codes and standards.

5. Risk of Loss.  Risk of loss or damage to the Goods will remain Seller’s until Buyer accepts Conforming Goods, regardless of any F.O.B. or F.A.S. term

6. Expediting; Reports; Delays; Slippage.  All Goods, including all warranty work with respect to any Goods, will be subject to expediting by Buyer.  Seller will, and will cause each of its vendors to, afford Buyer’s representatives free access during working hours to their respective plants to review the production and testing of the Goods.  If requested by Buyer, Seller will supply schedules, progress reports and copies of Seller’s purchase orders and contracts with vendors for Buyer’s use.  Seller will notify Buyer in writing of any actual or anticipated delays in production or delivery of the Goods immediately upon discovery.  Each such notice will include an estimated period of delay and identify the cause of such delay and the corrective actions being taken.  Slippage in Seller’s schedule may be deemed reasonable grounds for Buyer’s insecurity pursuant to which Buyer may demand that Seller provide adequate assurance of due performance.  Slippage in schedule will not be deemed to be Buyer’s sole reasonable grounds for insecurity under this Order, and under no circumstances will Buyer’s rights under this Section 7 in any way relieve or diminish Seller’s obligations under this Order, including those set forth in Section 2.

7. Inspection; Rejection; Revocation.  If and to the extent designated by Buyer in this Order, delivery of the Goods will be deemed to be a “sale on approval.”  Regardless of whether this Order is deemed to be a “sale on approval,” however, (i) Buyer will have the right, for 90 days after delivery, to inspect the Goods at any reasonable place and in any reasonable manner and, if such inspection reveals that any Goods are Nonconforming Goods, Buyer may reject any or all of the Goods and Seller will reimburse Buyer for all expenses incurred by Buyer in connection with such inspection, and (ii) if Buyer discovers grounds for revocation of acceptance of any of the Goods during the Warranty Period, Buyer will have the right, for 120 days after such discovery, to revoke acceptance of any or all Goods.  “Warranty Period” means the period beginning on the Acceptance Date and ending on the later of (i) one year after the Acceptance Date, and (ii) one year after the discovery of Nonconforming Goods, in the event that such nonconformity is not reasonably discoverable within one year of the Acceptance Date.  “Acceptance Date” means the date 90 days after delivery of the Goods.  The parties agree that the time periods for inspection and rejection, discovery of Nonconforming Goods and revocation of acceptance set forth in this Section 8 are all reasonable.  Buyer’s revocation of acceptance will not be deemed improper for failure to give Seller the opportunity to cure any improper tender of delivery of, or nonconformity in, the Goods.  In any dispute regarding rejection or revocation of acceptance, Seller will bear the burden of establishing the wrongfulness of any such rejection or revocation.

8. Change Orders.  Buyer may, from time to time, make changes by issuing to Seller a written notice (each, a “Change Order”) altering, adding to or deducting from the Goods, but otherwise subject to the terms and conditions of this Order, including changes:  (i) to the drawings or specifications; (ii) in quantities ordered; (iii) in the Delivery Date or place of delivery; (iv) changes in the Price; and (v) in the method of shipment or packing.  Each Change Order will be signed by Buyer and Seller.  Change Orders estimated at or below the Approved Amount must be approved by the Buyer Representative identified in this Order.  Any Change Order estimated at more than the Approved Amount may be issued only by the Authorized Person identified in this Order.  Seller agrees that it will deliver no goods other than the Goods described in this Order or a Change Order.  Seller understands and agrees that it will not be paid for any additional goods unless such goods are authorized by a written Change Order issued before they are delivered.  Any unauthorized goods will be at Seller’s sole risk and Seller will be responsible for any and all Losses arising from any unauthorized goods.  Seller expressly waives any claim to payment for any goods delivered in violation of this Section 9.

9. Termination.  In addition to exercising any other rights and remedies available to Buyer at law or in equity, Buyer may immediately terminate all or any part of this Order, regardless of whether Seller is in default, by giving Seller a written notice of termination (a “Termination Notice”) specifying the date and extent to which this Order is to be terminated.  A termination of this Order by Buyer will be deemed a termination for convenience unless Buyer terminates this Order pursuant to Section 2 or 19 or in the event of:  (i) any breach or repudiation by Seller of all or any part of this Order; (ii) the filing by or against Seller of a petition in bankruptcy; (iii) the appointment of a receiver on account of Seller’s insolvency; or (iv) a general assignment by Seller for the benefit of its creditors.

10. Parties’ Obligations Upon Termination.  Upon receipt of a Termination Notice, Seller will discontinue its performance under this Order on the date and to the extent specified in the Termination Notice and, unless otherwise required by the Termination Notice:  (i) place no further orders for materials other than as may be necessary to complete any part of this Order that is not terminated; (ii) promptly make every reasonable effort either to obtain cancellation on terms satisfactory to Buyer of all orders to vendors or to assign such orders to Buyer; and (iii) upon Buyer’s request, assist Buyer in the maintenance, protection and disposition of property acquired by Buyer under this Order.  If Buyer terminates this Order for convenience, Buyer will pay to Seller an equitable adjustment to include (i) amounts owing to Seller for Conforming Goods delivered prior to delivery of the Termination Notice and for Seller’s performance under this Order thereafter if so directed in the Termination Notice, and (ii) reasonable costs arising solely as a result of the termination of this Order; provided that Seller submits to Buyer invoices for such amounts claimed within 30 days after delivery of the Termination Notice.  Seller acknowledges that 30 days is a reasonable time for Seller to submit such invoices and agrees that its failure to submit such invoices within 30 days after delivery of the Termination Notice will constitute a waiver of such claim.  Except in the event of a termination for convenience, the total amount to be paid to Seller in connection with any termination will not exceed the Price, as reduced by (1) the amount of payments made to Seller, and (2) the price for goods cancelled pursuant to such termination.  Seller (1) expressly waives any and all claims for additional compensation of any kind as a result of any termination of this Order, and (2) agrees that its sole remedy in the event of any such termination will be to receive compensation in accordance with this Section 11.  Buyer may, at its expense, audit Seller’s records with respect to any claim for payment submitted by Seller.  If Buyer has overpaid any amounts to Seller, as determined in accordance with this Section 11, Seller will promptly reimburse such amount to Buyer.

11. Suspension  Notwithstanding any other provision of this Order, Buyer may, in its sole discretion, suspend or extend the time for Seller’s performance, at any time by giving written notice to Seller.  During such suspension or extension, Seller will take all reasonable steps necessary to minimize the incurrence of costs in connection with such suspension or extension.  After any such suspension, Seller will resume performance as directed by Buyer.  Subject to Buyer’s approval, which will not be unreasonably withheld, Seller will be entitled to reimbursement from Buyer for additional costs reasonably and actually incurred by Seller in connection with such suspension or extension, provided that Seller claims such reimbursement within 30 days after Seller’s resumption of performance.

12. Liability for Injuries and Damage; Indemnification

(a) Seller will be liable for any and all injuries to agents and employees of Buyer, Seller and third parties, and damage to the property of Buyer, Seller and third parties, arising in connection with Seller’s performance under this Order, except to the extent that such injuries and damage are directly caused by the negligent acts or willful misconduct of Buyer.

(b) Seller will defend, protect, indemnify and hold harmless Buyer, its officers, directors, agents and employees, and each of them, from and against any and all Losses except to the extent that any such Loss is caused by Buyer’s negligent acts or willful misconduct.

13. Taxes  The Price includes all applicable federal, state and local taxes, duties, tariffs, assessments and other charges applicable to the purchase and delivery of the Goods, except any applicable transaction privilege (sales) or use taxes, of which Seller will separately notify Buyer.  If Buyer delivers written notice to Seller that any Goods are exempt from otherwise applicable taxes, Seller will not charge such taxes to Buyer and Buyer will defend, protect, indemnify and hold harmless Seller from and against any claim or liability for such tax, provided that Seller promptly notifies Buyer of any such claim and, at Buyer’s expense and direction, takes all steps necessary to contest such claim.

14. Notices and Payments  All notices and payments under this Order must be delivered personally, mailed or sent via express delivery service to the addresses set forth in this Order.  All such payments and notices will be deemed given when received.  Either party may, from time to time and in accordance with the procedures set forth in this Section 15, specify a different address for receipt of payments and notices.

15. Integration  This Order, together with:  (i) any specifications, drawings, samples, models and other descriptions furnished to Buyer; (ii) any promises and affirmations, oral or written, made to Buyer by or on behalf of Seller; and (iii) any Change Orders, constitutes the entire agreement between the parties relating to its subject matter, and there are no agreements or understandings, express or implied, except as are explicitly set forth in this Order.

16. No Varying Acceptance  Seller’s acceptance of this Order is expressly limited to the terms and conditions of this Order.  No quotation, acknowledgement or other document from Seller may add to or vary any term or condition of this Order.  Any such modification will be of no effect unless expressly agreed to in writing by Buyer.  Performance by Seller of all or any part of this Order will constitute Seller’s acceptance of all the terms of this Order, notwithstanding the terms of any quotation, acknowledgement or other document of Seller to the contrary.  Seller may accept this Order by delivering to Buyer a written, signed acceptance, but if such writing contains additional terms or terms that vary from the terms of this Order, such additional or varied terms will be deemed rejected.  In the event that this Order is construed to be an acceptance by Buyer of an offer by Seller, Buyer expressly limits such acceptance to the explicit terms of this Order and rejects any additional or varied terms set forth in Seller’s offer.  Nothing in this Order will indicate that this Order is an acceptance, but rather, it will be construed to be an offer to the extent possible.  Buyer hereby objects to any attempt by Seller to add to or vary any term of this Order and expressly rejects all such modifications unless agreed to in writing by Buyer.

17. Governing Law; Jurisdiction  This Order will be governed by and construed in accordance with the laws of Arizona.  At Buyer’s election, all actions and proceedings arising from or related to this Order will be litigated in courts in Phoenix, Arizona, and Seller consents and submits to the jurisdiction and venue of any local, state or federal court located in Phoenix, Arizona.

18. Excuse by Failure of Presupposed Condition  If and to the extent Seller’s delivery of all or any portion of the Goods is made impracticable by (i) the occurrence of a Contingency not attributable to Seller’s fault or negligence, or (ii) Seller’s compliance in good faith with any applicable Law, Seller will promptly provide to Buyer written notice of such delay or non-delivery including a description of the reason(s) for such delay or non-delivery (each, a “Non-Delivery Notice”).  “Contingency” means (i) the occurrence of any event, the non-occurrence of which is a basic assumption on which this Order is placed including, without limitation, acts of God, fires, floods, riots, labor difficulties, embargoes and civil commotion, or (ii) any non-occurrence of an event, the occurrence of which was a basic assumption on which this Order is placed.  Upon receipt of any Non-Delivery Notice from Seller, Buyer may, at its sole option and discretion, exercise any one or more of the following remedies:  (i) terminate or modify this Order with respect to all or any portion of the Goods; (ii) if Seller’s capacity to deliver the Goods is only partly affected, direct Seller to allocate production and delivery resources among its customers, including Buyer, in a fair and reasonable manner; (iii) if a commercially reasonable substitute manner of delivery is available, direct Seller to deliver the Goods to Buyer in such manner; and (iv) exercise any other right or remedy available to Buyer under this Order, at law or in equity.  Seller will promptly comply with any instructions given by Buyer in accordance with this Section 19.

19. Binding Agreement; Assignment  This Order will be binding upon and enforceable by the parties and their respective successors and assigns.  Seller may not assign, transfer or subcontract any interest in or obligation under this Order without the prior written consent of Buyer.

20. Remedies  Notwithstanding anything to the contrary contained in this Order, if Seller breaches any term or condition of this Order, Buyer may, at its option, immediately exercise any one or more of the following remedies:  (i) terminate this Order in accordance with Section 10; (ii) withhold any further payments otherwise due to Seller under this Order; (iii) purchase substitute goods from another source, offset against the Price the cost of such goods and recover from Seller any Losses incurred by Buyer as a result of, or arising from, such purchase; (iv) exercise its right of specific performance against Seller; and (v) exercise any other right or remedy available to Buyer under this Order, at law or in equity.  Notwithstanding anything to the contrary contained in this Order, Buyer will be entitled to recover from Seller any and all attorneys’ fees incurred in connection with the enforcement of this Order, in addition to any other rights and remedies Buyer may have under this Order at law or in equity.

21. Waiver  No waiver of any provision of or default under this Order or failure to insist on strict performance under this Order will affect the right of Buyer thereafter to enforce such provision or to exercise any right or remedy in the event of any other default, whether or not similar.

22. Unenforceability  If any portion of this Order is declared to be invalid or unenforceable, such declaration will not affect the validity or enforceability of the remainder of this Order, which is to be construed as nearly as possible as if such invalidity or unenforceability had not been declared.  If the scope of any restriction or obligation is too broad to permit enforcement to its full extent, then such restriction or obligation is to be enforced to the maximum extent permitted by applicable Law, and Seller consents and agrees that the scope and reach of such restrictions and obligations may be judicially modified in any proceedings brought to enforce them.

23. Survival The provisions of Sections 2, 4, 8, 11, 13, 14, 15, 18, 21, 24, 25 and 26 will survive any termination or suspension of this Order, Seller’s delivery of the Goods to Buyer and Buyer’s inspection, test and acceptance of the Goods.

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