Exhibit 10.5

This document constitutes part of a prospectus covering securities
that have been registered under the Securities Act of 1933.

STOCK OPTION PROGRAM FOR DIRECTORS
(THE “PROGRAM”)

TABLE OF CONTENTS

              Page

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Stock Option Program for Directors
    1  
Purposes of the Program
    1  
Eligibility and Administration
    1  
Awards
    1  
Dilution Adjustments
    3  
Miscellaneous Provisions
    3  
Amendment and Discontinuance; No Discretion
    5  
Notice of Exercise of Stock Option
    6  
Administrative Procedures Regarding Transfer of Stock Option Awards (the
“Procedures”)
    7  
Discussion of Tax and Social Security Consequences of the Stock Option Program
for Directors
    12  

 

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STOCK OPTION PROGRAM FOR DIRECTORS
( THE “PROGRAM”)*

1. PURPOSES OF THE PROGRAM

     The purposes of this Program are (i) to assist Air Products and Chemicals,
Inc. (the “Company”) in attracting and retaining individuals of superior talent,
experience, and achievement as directors of the Company and (ii) to associate
more closely the interests of such directors with those of the Company’s
shareholders by encouraging and enabling directors to acquire a financial
interest in the Company through ownership in equity securities of the Company.
The Program is provided under the Air Products and Chemicals, Inc. Long Term
Incentive Plan (the “Plan”) and is subject to the terms thereof. Certain
capitalized terms used herein have the meanings set forth in Section 6(i)
hereof.

2. ELIGIBILITY AND ADMINISTRATION

     Participation in the Program is limited to directors of the Company who
have not ever been employees of the Company or any of its subsidiaries or their
respective predecessors. The Program is administered by the Corporate Governance
and Nominating Committee of the Board of Directors (the “Committee”).

3. AWARDS

     Two thousand (2,000) stock options (“Options” or “Stock Options”) shall
automatically be granted to each eligible director who is serving as a director
of the Company immediately following each annual organizational meeting of the
Board of Directors. Each such director shall receive an option agreement dated
as of the date of each such organizational meeting of the Board of Directors,
which shall be the date of grant of each such award, evidencing the automatic
annual award of such Stock Options pursuant to this Program. Stock Options are
rights to purchase shares of common stock of the Company, par value $1.00
(“Common Stock”).(1)/

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(*)   The Air Products and Chemicals, Inc. Stock Option Plan for Directors was
adopted by Board resolution on 21 October 1993; effective 27 January 1994;
amended effective 15 October 1998 and 21 October 1999. Effective 23 January 2003
this Plan was combined with the Long Term Incentive Plan and offered as a
program thereunder.   (1)/   Amended and approved by the Board of Directors on
15 October 1998; effective 15 October 1998.

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     All Stock Options granted under the Program shall be granted on the
following terms and conditions:

  (a)   Price. The purchase price per share of Common Stock covered by each
Stock Option shall be 100% of the Fair Market Value of a share of Common Stock
on the date of grant of such Option.     (b)   Term and Exercisability. Stock
Options shall become exercisable six (6) months from date of grant, and shall
remain exercisable until the earlier of:

  (i)   ten (10) years and one (1) day from the date of grant, and

  (ii)   the date as of which the director ceases to serve as a member of the
Board of Directors.

      Notwithstanding the foregoing, the director (in the case he or she ceases
to serve on the Board of Directors of the Company by reason of retirement or
disability) or, the director’s Designated Beneficiary or, if none, his or her
legal representative (in the case of the director’s death before or after
retirement or disability), shall continue to have the same rights to exercise
any unexercised portion of the director’s Stock Option which is exercisable at
the time of such termination or death, as the director would have had if he or
she had continued to be an active director of the Company.     (c)   Exercise. A
director wishing to exercise his or her Stock Option, in whole or in part, shall
give written notice of such exercise to the Company, accompanied by full payment
of the purchase price. The date of receipt of such notice and payment shall be
the “Exercise Date” for such Stock Option or portion thereof.     (d)   Payment.
The purchase price of shares of Common Stock purchased upon exercise of any
Stock Option shall be paid in full in cash at the time of exercise of the
Option. Subject to any administrative rules from time to time adopted by the
Committee, payment of the purchase price may also be made by delivery of an
irrevocable exercise notice coupled with irrevocable instructions to a
designated broker to simultaneously sell the underlying shares of Common Stock
and deliver to the Company on the settlement date the portion of the proceeds
representing the purchase price.

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4. DILUTION ADJUSTMENTS

     Notwithstanding any other provision of the Plan, in the event of any change
in the outstanding shares of Common Stock by reason of any stock dividend or
split, recapitalization, merger, consolidation, combination or exchange of
shares or other similar corporate change, an equitable adjustment shall be made,
as determined by the Board of Directors (but subject to the first paragraph of
Section 6), in (i) the kind of shares subject to Stock Options, (ii) the number
or kind of shares or purchase price per share subject to outstanding Stock
Options, (iii) any other aspect or aspects of the Program or outstanding awards
made thereunder as specified by the Board of Directors, or (iv) any combination
of the foregoing, as shall be necessary to maintain the proportionate interest
of the optionees and to preserve, without increasing, the value of outstanding
awards. Such adjustments shall be made by the Board of Directors and shall be
conclusive and binding for all purposes of the Program and Plan.

5. MISCELLANEOUS PROVISIONS

  (a)   The holder of a Stock Option shall have no rights as a Company
shareholder with respect thereto unless, and until the date as of which,
certificates for shares of Common Stock are issued upon exercise or payment in
respect of such award.     (b)   No Stock Option or any rights or interests
therein of the recipient thereof shall be assignable or transferable by such
recipient except by gift to his or her family member(s) or to trust(s) of which
such family member(s) are beneficiaries (but only on and after the date upon
which, and to the extent such Stock Options have become exercisable in
accordance with their terms, and subject to the administrative procedures and
conditions set forth in the “Administrative Procedures Regarding Transfers of
Stock Option Awards dated 21 October 1999” attached as Exhibit A); to his or her
Designated Beneficiary; or by will or the laws of descent and distribution.    
(c)   All Stock Options granted under the Program shall be evidenced by
agreements in such form and containing and/or incorporating such terms and
conditions as are set forth in this Program.     (d)   No shares of Common Stock
shall be issued, delivered or transferred upon exercise of any Stock Options
granted hereunder unless and until all legal requirements applicable to the
issuance, delivery or transfer of such shares have been complied with including,
without limitation, compliance with the provisions of the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, and the
applicable requirements of the exchanges on which the Company’s Common Stock
may, at the time, be listed.     (e)   The Company shall require, as a condition
of delivery of shares of Common Stock upon the exercise of a Stock Option, that
the director or other person receiving such Common Stock pay to the Company at
the time of distribution thereof the amount

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      of any taxes which the Company is required to withhold with respect to
such exercise. The obligation of the Company to make delivery of Common Stock
shall be subject to currency or other restrictions imposed by any government.

  (f)   Distributions of shares of Common Stock upon exercise, in payment or in
respect of awards made under this Program, may be made either from shares of
authorized but unissued Common Stock reserved for such purpose by the Board of
Directors or from shares of authorized and issued Common Stock reacquired by the
Company and held in its treasury, as from time to time determined by the Board
of Directors.     (g)   The costs and expenses of administering this Program
shall be borne by the Company and not charged to any award nor to any director
receiving an award.     (h)   This Program shall be unfunded. The Company shall
not be required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any award under this Program and
payment of awards shall be subordinate to the claims of the Company’s general
creditors.     (i)   In addition to the terms defined elsewhere herein, the
following terms as used in this Program description shall have the following
meanings:         “Designated Beneficiary” shall mean the person or persons last
designated as such by the Participant on a form filed by him or her with the
Company.         “Fair Market Value” of a share of Common Stock of the Company
on any date set forth herein shall mean an amount equal to the mean of the high
and low sale prices on the New York Stock Exchange, as reported on the composite
transaction tape, for such date.         “Retirement” shall mean (i) resigning
from serving as a director, failing to stand for re-election as a director or
failing to be re-elected as a director after being duly nominated, and (ii) in
any such case having the right to immediate or deferred pension benefits under
the Company’s Pension Plan for Directors as then in effect or, in the absence of
such Pension Plan or another pension plan being applicable to any director,
after at least six (6) full years of service as a director of the Company. More
than six (6) months’ service during any twelve (12) month period after a
director’s first election by the shareholders to the Board shall be considered
as a full year’s service for this purpose.     (j)   Notices. All notices to the
Company under this Program shall be in writing and shall be given as follows:

 
Corporate Secretary
Air Products and Chemicals, Inc.
7201 Hamilton Boulevard

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Allentown, PA 18195-1501

  (k)   Governing Law. This Program shall be governed by the laws of the
Commonwealth of Pennsylvania and shall be construed for all purposes in
accordance with the laws of said Commonwealth except as may be required by the
General Corporation Law of Delaware or by applicable federal law.

6. AMENDMENT AND DISCONTINUANCE; NO DISCRETION

     The Board of Directors of the Company may amend or modify this Program;
provided, however, that no amendment may affect a director’s rights under any
award of Stock Options under this Program made prior to such amendment without
such director’s consent. The Board of Directors of the Company may suspend or
discontinue this Program in whole or in part at any time, but any such
suspension or discontinuance shall not affect awards of Stock Options granted
under this Program prior thereto.

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NOTICE OF
EXERCISE OF STOCK OPTION
GRANTED UNDER THE AIR PRODUCTS AND CHEMICALS, INC. (THE “COMPANY”)
STOCK OPTION PROGRAM FOR DIRECTORS (THE “PROGRAM”)

To:  The Corporate Secretary
Air Products and Chemicals, Inc.

On                     the Company granted me options under the Program to
purchase shares of its Common Stock at a price of $                    per
share.

I hereby give notice of exercise of my options to purchase                    
of such shares by payment to the Company of $                   , the aggregate
option exercise price for such shares. My payment is made by a CHECK enclosed
herewith and/or WIRE TRANSFER of immediately available funds payable to the
Company.

DELIVERY INSTRUCTIONS

          Please register the shares in the
following manner:   Delivery Instructions:          
Director’s Name
           

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Address
       

 

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Soc. Sec. #
       

 

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Signature of Director   Acknowledgment and Receipt of Completed Option Exercise
Notice Form and Payment of Option Exercise Price:      

     

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Corporate Secretary’s Office

       

     

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Exercise Date

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ADMINISTRATIVE PROCEDURES REGARDING TRANSFERS OF STOCK
OPTION AWARDS (THE “PROCEDURES”)

Stock option awards granted under the Program are transferable by the recipient
of the award (the “director”) on and after the date upon which, and to the
extent, the option has become exercisable. Options may be transferred only in
accordance with these Procedures. DIRECTORS ARE ENCOURAGED TO SEEK FINANCIAL AND
TAX PLANNING ADVICE PRIOR TO TRANSFERRING AN OPTION.

1.   Exercisable options may be transferred by the director only by gift and
only to the director’s family members or to trusts of which such family members
are beneficiaries. Family members include any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships.

2.   Prior to making any transfer, the director and transferee must complete and
sign the attached Election to Transfer Stock Options form and return it to the
Corporate Secretary’s Office. Transfers will not be effective until the form is
received, acknowledged and accepted by the Secretary or an Assistant Corporate
Secretary.

3.   Following transfer, any Designation of Beneficiary previously filed by the
director relating to transferred options is void and of no further force and
effect as to the transferred options; and the transferred options may not be
subsequently transferred by the transferee except by will or the laws of descent
and distribution.

4.   Except as otherwise provided in these Procedures, the transfer of options
to the transferee also transfers the ancillary rights associated with the
options under the applicable award agreement and the Program (references herein
to “options” to include both the stock options and such ancillary rights); and
following transfer, the options will continue to be subject to the same terms
and conditions as were applicable immediately prior to transfer under the
applicable award agreement and the Program.

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5.   Certain U.S. Tax Considerations

     U.S. Resident Directors

     Upon Transfer:

  •   A director will incur gift taxes (including the generation skipping
transfer tax, if applicable) on the transfer on the value of the option at the
time of transfer unless the gift is incomplete, (e.g. if the director retained
the power to determine when the options were exercised or to prevent sale of the
optioned shares, the gift may not be complete for gift tax purposes). The
Internal Revenue Service will respect the value placed on an option for gift tax
purposes if the value is determined using a generally recognized option pricing
model that takes into account exercise price, expected term, current trading
price, expected volatility, expected dividends, and risk-free interest rates
during the option’s term. Neither the option nor the optioned shares will be
included in the director’s estate.

     Upon Exercise:

  •   When the transferee exercises, income is imputed to the director and will
be reflected on the director’s Form 1099.

     Nonresident Directors

  •   Nonresident directors will not be subject to gift tax on transfer of stock
options. Neither the option nor the optioned shares will be included in the
director’s estate. Stock options will be subject to U.S. income tax upon the
transferee’s exercise unless exempted by treaty. The Company is required to
withhold U.S. income taxes upon exercises by a nonresident where the income
arising therefrom is not exempt by treaty.

6.   Certain U.S. Securities Laws Considerations for Active Directors.

  •   We strongly recommend that while engaged in service to the Company,
directors discuss in advance with the Corporate Secretary or his or her designee
the possible implications of transferring options to enable the Company to
assist the director in complying with the securities laws, including preparing
any required reports for filing with the Securities and Exchange Commission and
the New York Stock Exchange. The transfer of an option must be reported as a
gift transaction on the director’s Form 5 (or voluntarily on an earlier Form 4).

  •   If the transferee is a family member sharing the director’s household or
for whom the director is financially responsible, option exercise transactions
by the transferee would also (a) need to be reported by the director on a Form 4
or 5, and any sale of the shares could be matched against non-exempt purchases
made by the director,

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      resulting in short-swing profit liability to the director; and (b) be
limited to quarterly window periods for trading in Company stock.

  •   With regard to transfer to trusts for family members, if the director does
not have the power to revoke the trust (without the consent of another person)
and does not have investment or voting power over the options (or shares
obtained upon exercise) held by the trust, neither the trust nor the trustee
will generally be subject to Section 16 nor will trust transactions be
attributed to the director or subject to window periods. If the trustee is a
Section 16 insider with regard to the Company with no pecuniary interest in, but
with investment power over the trust assets, the trustee would be limited to
selling the shares obtained by exercising the options only during quarterly
window periods.

  •   A transferee of a director may be subject to certain limitations under
Rule 144 concerning, among other things, the number of shares of Company stock
which may be sold during any three-month period and satisfaction of a holding
period before shares purchased by exercising an Option may be sold.

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Air Products and Chemicals, Inc.
(the “Company”)

ELECTION TO TRANSFER STOCK OPTION
Granted Under The Stock Option Program for Directors

      Printed name of director or former director to whom options were granted
(the “director”):        

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      Social Security Number of director:        

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      Address of director:        

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      Telephone number of director:        

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I, THE DIRECTOR, HEREBY ELECT TO MAKE A TRANSFER OF A STOCK OPTION GRANTED TO ME
AS FOLLOWS:

      Printed name of transferee:        

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      Social Security Number or Tax Identification Number of transferee:        

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      Address of transferee:        

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      Telephone number of transferee:        

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      Relationship of transferee to director:        

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      If transferee is a trust, list names of trustee and beneficiary(s) and
relationship of beneficiary(s) to director:        

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      Number of shares covered by option to be transferred:        

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      Date option was awarded to director:        

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BY SIGNING BELOW, I, THE DIRECTOR, ACKNOWLEDGE receipt of a copy of the
“Administrative Procedures Regarding Transfers of Stock Option Awards” (the
“Procedures”). I further acknowledge that upon exercise of the option by the
transferee, taxable income will be imputed to me, the director, and reported to
the appropriate tax authorities. I understand that I am responsible for any
taxes payable as a result of the exercise.

     

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  Signature of director   Date

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BY SIGNING BELOW, THE TRANSFEREE ACKNOWLEDGES receipt of a copy of the
Procedures and agrees to comply with and be subject to the terms and conditions
pursuant to which the option was granted (as modified by the Procedures), and
agree not to further transfer the option.

     

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  Signature of transferee   Date

Receipt of this executed Election form is hereby acknowledged and accepted, and
the requested transfer of stock option will be effective this           day
of                          ,           .

            AIR PRODUCTS AND CHEMICALS, INC.
      By:           Name:           Title:        

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DISCUSSION OF TAX AND SOCIAL SECURITY CONSEQUENCES
OF THE STOCK OPTION PROGRAM FOR DIRECTORS

     The following is a summary of the U.S. tax and Social Security consequences
of the Air Products and Chemicals, Inc. Stock Option Program for Directors
(“Program”). This is a general summary under current law. You should consult
with your personal tax advisor before exercising any Program options. Foreign
tax rules are not discussed in this summary and also should be reviewed with
your personal tax advisor.

U.S. INCOME TAXES — RESIDENTS

     No U.S. income taxation occurs upon the grant of a stock option under the
Program. Receipt of Shares upon the exercise of a Program option is subject to
federal, state and local income taxes. The Company will report taxable income on
a Form 1099. No U.S. tax will be withheld by the Company. As a result you may
have to make estimated tax payments in order to avoid penalties for underpayment
of estimated tax. In the event of your death prior to exercise of your Program
options, your estate or designated beneficiary will be subject to income taxes
in the same manner as you would have been with respect to exercise of the
Program options. (State or local rules may vary.)

Amount of Income

     The amount of taxable income you will recognize with respect to receipt of
Shares will be the option spread; i.e., the difference between your exercise
price and the fair market value of the Shares, on the date such value is
includable in your income for tax purposes (“date of taxation”). “Fair market
value” for this purpose is the mean of the NYSE high and low for the date of
taxation.

Date of Taxation

     The date of taxation generally will be the date of exercise. However, if
the optioned stock is subject to Section 16(b) restrictions because you or
someone whose transactions are attributed to you made a nonexempt purchase
during the six months preceding the exercise, the date of taxation will be
deferred until the restrictions lapse.

Basis and Subsequent Sale of Shares

     The fair market value of the Shares on the date of taxation will be your
basis in the Shares. Any subsequent appreciation or depreciation in the Shares
will result in a capital gain or loss if you dispose of the Shares in a taxable
transaction. Your holding period will begin on the date of taxation for tax
purposes. The gain or loss on a disposition will be deemed to be long-term
capital gain or loss, subject to a reduced maximum tax rate, once the Shares
have been held

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for more than twelve months and an even lower tax rate if the Shares are held
for at least five years.

SELF-EMPLOYMENT TAX

     The amount of taxable income realized upon exercise of a Plan option for
federal income tax purposes is self-employment income subject to self-employment
tax at a maximum rate of 15.3%. Self-employment tax generally applies at the
same time federal income taxes apply. The Social Security portion of the tax
(12.4%) will not apply to income recognized with respect to a Plan option to the
extent you already have self-employment income or wages from employment for the
year in excess of the Social Security Wage Base ($87,900 in 2004). Gain from the
disposition of the Shares will not be subject to self-employment tax. Upon your
death, your estate or designated beneficiary is not subject to self-employment
tax.

ESTATE TAXES

     The fair market value of options that can be exercised by your estate or a
designated beneficiary must be included in your gross estate. An estate tax
deduction is allowed for items passing to your spouse. An income tax deduction
is allowed for any estate tax attributable to an item generating taxable income.
Congress enacted legislation that phases out the estate tax in 2002-2009. This
legislation sunsets in 2011, however, potentially restoring the tax at its 2001
level.

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SOCIAL SECURITY BENEFITS

     Director fees are considered earnings for purposes of reducing Social
Security benefits in the year earned rather than the year paid. Self-employment
income realized upon exercise of a stock option under the Plan will not reduce
your Social Security benefits payable in the year of exercise if you have
attained age 65 at the time of exercise. If you pay self-employment tax with
respect to option exercises under the Plan, your future Social Security benefits
may increase.

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