EX-10.5



 





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

	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	 







 









 





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)/











	(*)	 	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

	 	 	 	 
	 	 	

	 	

	Address

	 	 	 	 
	

	 	

	 	

	 	 	 	 	 
	

	 	

	 	

	 	 	 	 	 
	

	 	

	 	

	Soc. Sec. #

	 	 	 	 
	

	 	

	 	

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

	 	 	 	

Corporate Secretary’s Office
	

	 	 	 	 
	

	 	 	 	

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”):	 	 
	 	 	







	 	 	 
	Social Security Number of
director:	 	 
	 	 	






	 	 	 
	Address of director:	 	 
	 	 	











	 	 	 
	Telephone number of
director:	 	 
	 	 	





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



	 	 	 
	Printed name of
transferee:	 	 
	 	 	






	 	 	 
	Social Security Number or
Tax Identification Number of
transferee:	 	 
	 	 	






	 	 	 
	Address of
transferee:	 	 
	 	 	










	 	 	 
	Telephone number of
transferee:	 	 
	 	 	






	 	 	 
	Relationship of transferee to director:	 	 
	 	 	






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














	 	 	 
	Number of shares covered by option to be transferred:	 	 
	 	 	






	 	 	 
	Date option was awarded to
director:	 	 
	 	 	






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.




	 	 	 
	
 
	 	
 
	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.




	 	 	 
	
 
	 	
 
	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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