Document:

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

J-3

 

	 	 	 	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

J-6

 

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.

J-7

 

	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,

J-8

 

	 	 	 	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.

J-9

 

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

J-10

 

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:  	 	 
	 

J-11

 

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

J-12

 

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.

J-14EX-10.16

 

Exhibit 10.16

This document constitutes part of a prospectus covering securities

that have been registered under the Securities Act of 1933.

DEFERRED COMPENSATION PROGRAM

FOR DIRECTORS

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page

	Deferred Compensation Program for Directors
	 	 	1	 
	General
	 	 	1	 
	Term
	 	 	1	 
	Participants
	 	 	1	 
	Mandatory Deferrals
	 	 	2	 
	Elective Deferrals
	 	 	2	 
	Earnings on Accounts
	 	 	3	 
	Time and Manner of Making Elective Deferrals
	 	 	3	 
	Timing of Payment of Mandatory Deferrals
	 	 	4	 
	Payment of Deferred Compensation
	 	 	4	 
	Changes in Election of Timing of Payment
	 	 	4	 
	Payment Following Termination of Service
	 	 	5	 
	Accelerated Payment
	 	 	5	 
	Payment on Death
	 	 	5	 
	Change in Legal Circumstances
	 	 	6	 
	Change in Control
	 	 	6	 
	Miscellaneous Provisions
	 	 	7	 
	Withholding of Taxes
	 	 	7	 
	Rights as to Common Stock
	 	 	8	 
	Adjustments to Avoid Dilution
	 	 	8	 
	Participant’s Rights Unsecured
	 	 	8	 
	Nonassignability
	 	 	8	 
	Statement of Account
	 	 	9	 
	Administration
	 	 	9	 
	Business Days
	 	 	9	 
	Amendment and Termination
	 	 	9	 
	Notices
	 	 	9	 
	Governing Law
	 	 	10	 
	Election Form
	 	 	11	 
	Administrative Procedures Regarding Transfer of the Right to Payment
of Deferred Compensation
	 	 	14	 
	Tax Consequences to Participants
	 	 	18	 

 

 

DEFERRED COMPENSATION PROGRAM

FOR DIRECTORS

	1.	 	General
	 
	 	 	The Deferred Compensation Program for Directors (the “Program”) is
provided to:

	 	(a)	 	Provide compensation for directors in the form of Company equity
securities to align the interests of directors with those of the
Company’s shareholders (“Mandatory Deferrals”); and
	 
	 	(b)	 	Provide directors the opportunity to defer compensation earned as a
director or otherwise in connection with his or her services in
connection with the business of the Company and its subsidiaries
(“Elective Deferrals”).

	 	 	The Program is provided under the Air Products and Chemicals, Inc.
Long-Term Incentive Plan and is subject to the terms thereof.
	 
	2.	 	Term
	 
	 	 	The Air Products and Chemicals, Inc. Deferred Compensation Plan for
Directors was adopted effective as of 1 January 1980. Section 9 was
revised effective as of 25 January 1990. Section 8 and Section 9 were
revised effective as of 15 October 1992. Sections 4, 6, 8, and 9 were
revised effective as of 19 October 1995. Sections 1, 4, 5, 7, 8, and 9
were amended effective 21 November 1996. Sections 2, 7, 8, 9(a), 9(b), 17,
the first paragraph of 9(c), and the Election Form (Exhibit A) were
amended effective 19 May 1998. Section 11 was amended effective 20
September 2001. Section 5(b) was revised effective as of 1 October 2002.
Effective 23 January 2003, the Plan was combined with the Long-Term
Incentive Plan and offered as a program thereunder.
	 
	3.	 	Participants
	 
	 	 	Any director of the Company who is not an employee of the Company or of a
subsidiary of the Company is eligible to participate in the Program.

I-1

 

	4.	 	Mandatory Deferrals
	 
	 	 	There shall be established for each participant, an Air Products Stock
Account described under section 5(b) below to which shall be credited all
compensation which is to be paid by the Company in the form of deferred
stock units in accordance with the Compensation Program for Nonemployee
Directors applicable for calendar year 1997 and later periods; and for
each participant who had not served as a director for at least six years
as of January 1, 1997, the actuarial present value of his or her prorated
accrued pension (the “Pension Amount”) under the Pension Plan for
Directors (the “Pension Plan”) as determined in connection with the
termination of said Pension Plan.
	 
	 	 	Dollar amounts to be so credited shall be converted into deferred stock
units in the manner described under Section 5(b) below on the quarterly or
other specified crediting date for such 1997 and later compensation, and
on 21 November 1996, as to the Pension Amount.
	 
	5.	 	Elective Deferrals
	 
	 	 	Participants may elect to defer receipt of all or a specified portion of
the compensation (exclusive of expense reimbursements) otherwise payable
to him or her in cash for serving on the Board of Directors of the
Company, attending meetings or committee meetings thereof or performing
other services in connection with the business of the Company and its
subsidiaries. Such compensation will be credited on the date the
compensation is otherwise payable, to one or both of the following
hypothetical investment accounts (“Accounts”) as directed by the
participant:

	 	(a)	 	An account deemed to earn interest at rates established on the first
business day of each calendar quarter based upon the published
average long-term yields of corporate bonds of “A” rated Industrial
Companies appearing in Moody’s Bond Survey or an equivalent Bond
Rating Service on such day (the “Interest Account”); and
	 
	 	(b)	 	An account (the “Air Products Stock Account”) deemed to be invested
in Air Products and Chemicals, Inc. common stock, par value $1.00
(“common stock”). The Company shall credit the Air Products Stock
Account with that number of units (including fractions) obtained by
dividing the amount of such deferred compensation by the Fair Market
Value of a share of common stock (i) on the second business day
before the date credited to the Air Products Stock Account for
retainer and meeting fees, and (ii) on the effective date specified
in the Compensation Program for Non-employee Directors for crediting
Directors with initial and annual deferred stock awards. For
purposes of the Plan, Fair Market Value of a share of common stock
on any date (the “valuation date”) shall be equal to

I-2

 

	 	 	 	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, or, if no sales were quoted on such date, on the most recent
preceding date on which sales were quoted. The units thus calculated
are herein referred to as “deferred stock units.”

	 	 	Nonemployee directors who had served for six years or more within the
meaning of the Pension Plan as of January 1, 1997, may elect to have the
actuarial present value of his or her accrued pension benefit under the
Pension Plan credited to the Air Products Stock Account on or before
December 31, 1996. Such Pension Amount shall be credited and converted to
deferred stock units in the manner described in Section 5(b) above, as of
the business day the Company’s Corporate Secretary’s Office receives an
Election Form therefor (by mail or fax); and using such date as the
valuation date for determining Fair Market Value.
	 
	6.	 	Earnings on Accounts
	 
	 	 	Each participant’s Accounts will be credited on behalf of such participant
with interest on deferred compensation credited to the Interest Account,
and with dividend equivalents on deferred compensation credited to the Air
Products Stock Account on behalf of such participant, as provided below,
from the date credited until 31 December of the year preceding payment
unless payment is made because of death or a Change in Control, in which
event interest will be credited until the date of death or the date of
termination of service as a director following the Change in Control,
respectively.

	 	(a)	 	Earnings on Interest Account. Interest shall be compounded
quarterly.
	 
	 	(b)	 	Earnings on Air Products Stock Account. Earnings shall be credited
quarterly in an amount equal to the dividends payable during the
quarter just ended with respect to that number of shares of Air
Products Stock equal to the number of deferred stock units credited
to the Air Products Stock Account as of the end of the prior
quarter. The amount so credited shall then be converted into
deferred stock units in the manner described under Section 5(b)
above using the quarterly crediting date as the valuation date for
determining Fair Market Value.

	7.	 	Time and Manner of Making Elective Deferrals
	 
	 	 	An election to defer compensation must be made by a director prior to the
time such compensation is earned. An election shall continue in effect
until the end of the participant’s service to the Company as a director or
until the Company is notified in writing of the revocation or modification
of the election, whichever shall occur first.

I-3

 

	 	 	A participant may elect, modify or revoke a prior election to defer
compensation by giving written notice to the Company in a form
substantially similar to the Election Form attached hereto as Exhibit A
(the “Election Form”). Such Election Form shall specify:

	 	(a)	 	The amount or percentage of compensation to be deferred beginning on
a future date specified in the notice until such notice is revoked
or modified as to future compensation (the “Elective Deferred
Compensation Amount”);
	 
	 	(b)	 	The percentage of the Elective Deferred Compensation Amount to be
credited to the Interest Account and the percentage to be credited
to the Air Products Stock Account; and
	 
	 	(c)	 	The timing of payment, i.e., either a lump-sum payment or a
specified number of consecutive annual installment payments (not to
exceed ten) of all Elective Deferred Compensation Amounts, and the
year in which the lump-sum payment is to be received or the first
annual installment payment is to commence.

	 	 	Any modification or revocation of a prior election described in Section
7(a) or 7(b) above shall relate only to future compensation, and shall not
apply to any amounts previously credited to the participant’s account.
	 
	8.	 	Timing of Payment of Mandatory Deferrals
	 
	 	 	The amount of each Mandatory Deferral (the “Mandatory Deferred
Compensation Amount”) will be paid as a lump sum in the first year after
the year in which service as a director ends unless the participant has an
Elective Deferral in effect at the time of crediting the Mandatory
Deferral, in which case the participant’s election as to time of payment
of the Elective Deferral will also govern the time of payment of the
Mandatory Deferral.
	 
	9.	 	Payment of Deferred Compensation
	 
	 	 	No payment may be made from the participant’s Accounts in respect of
Elective Deferred Compensation Amounts or Mandatory Deferred Compensation
Amounts (together, “Deferred Compensation Amount”) except as provided
below.

	 	(a)	 	Changes in Election of Timing of Payment. A participant may change
his or her election in regard to the timing of payment of his or her
Deferred Compensation Amount as described in Section 7(c) above, by
so specifying in an Election Form. Such a change in election of
timing of payment will

I-4

 

	 	 	 	become effective one year from the date the Election Form is
received by the Company unless payments under a prior election
commence before such effective date, in which case the new election
will expire and the prior election will control the timing of
payment of all Deferred Compensation Amounts. Such a change in
election of timing of payment, when effective, shall supersede all
prior elections and shall apply to all of the participant’s prior
and future Deferred Compensation Amounts, until a later election
becomes effective.
	 
	 	(b)	 	Payment Following Termination of Service. The value of each Deferred
Compensation Amount credited to the Interest Account of a
participant’s Plan account is payable in cash, and the value of each
Deferred Compensation Amount credited to the Air Products Stock
Account is payable by delivery of a share of common stock for each
deferred stock unit credited to the participant’s Account, in either
case in a lump sum or in annual installments, in accordance with the
participant’s election.
	 
	 	 	 	All payments from a participant’s Accounts must be completed by the
tenth year after the year in which service as a director terminates.
All payments will be made in January of the applicable year or as
soon thereafter as reasonably possible. If annual installments are
to be paid, the amount of the first payment shall be a fraction of
the value of the participant’s Accounts attributable to the
particular Deferred Compensation Amount as of the 31 December
preceding payment, the numerator of which is one and the denominator
of which is the total number of such installments elected. The
amount of each subsequent payment shall be a fraction of the value
as of the 31 December preceding each subsequent payment, the
numerator of which is one and the denominator of which is the total
number of installments elected minus the number of installments
previously paid as to such Deferred Compensation Amount. The number
of shares of common stock to be delivered in payment from the Air
Products Stock Account shall be equal to the number of deferred
stock units represented by the payment owed, calculated as
aforesaid, rounded up to the next whole share of common stock.
	 
	 	(c)	 	Accelerated Payment. Notwithstanding the deferral period and timing
of payment determined in accordance with Sections 9(a) and (b)
above, the participant’s Accounts shall be paid on an accelerated
basis as follows under the circumstances described below (including,
under the circumstances described in Section 9(c)(i) or (iii) below,
any deferred stock units which may not yet have vested).

	 	(i)	 	Payment on Death. In the event of a participant’s death, the
value of his or her Accounts (including interest and dividend
equivalents)

I-5

 

	 	 	 	determined as of the date of death shall be paid in a single
cash lump sum to the participant’s estate or designated
beneficiary on the earlier of the January 15 or July 15
following such date or as soon thereafter as reasonably
possible. The amount of any cash payment in respect of
deferred stock units in the Air Products Stock Account shall
be determined by multiplying the number of such units,
including fractional units, by the Fair Market Value of a
share of common stock as of the date of death.
	 
	 	(ii)	 	Change in Legal Circumstances. In the event of a Change in
Legal Circumstance, the Nominating and Corporate Governance
Committee of the Board of Directors may, in its sole
discretion, authorize the immediate distribution of the
participant’s Accounts or appropriate modification to the
terms of deferral of a participant domiciled outside of the
United States. A Change in Legal Circumstances shall be deemed
to occur when, due to a change in the laws or regulations of
the United States or the country of domicile, the terms of
deferral operate as a disincentive to service on the Board or
otherwise become inconsistent with the purpose of the Program.
	 
	 	(iii)	 	Change in Control. In the event of a “Change in Control” of
the Company followed by a participant’s termination of service
as a Director of the Company, the value of his or her Accounts
(including interest and dividend equivalents) determined as of
the date of termination of service as a Director following or
in connection with the Change in Control, shall be immediately
due and payable to the participant in a single cash lump sum.
The amount of any cash payment in respect of deferred stock
units in the Air Products Stock Account shall be determined by
multiplying the number of such units, including fractional
units, by the Fair Market Value of a share of common stock as
of such date of termination of service.
	 
	 	 	 	The term “Change in Control” shall mean the first to occur of
any one of the events described below:

	 	(x)	 	Stock Acquisition. Any “person” (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934 (the “Act”)), other than the Company or a
corporation, a majority of whose outstanding stock
entitled to vote is owned, directly or indirectly, by
the Company, or a trustee of an employee benefit plan
sponsored solely by the Company and/or such a
corporation, is or becomes, other than by purchase from
the Company or such a corporation, the “beneficial
owner” (as such term is defined in Rule 13d-3 under the
Act), directly or

I-6

 

	 	 	 	indirectly, of securities of the Company representing
20% or more of the combined voting power of the
Company’s then outstanding voting securities. Such a
Change in Control shall be deemed to have occurred on
the first to occur of the date securities are first
purchased by a tender or exchange offeror, the date on
which the Company first learns of acquisition of 20% of
such securities, or the later of the effective date of
any agreement for the merger, consolidation or other
reorganization of the Company or the date of approval
thereof by a majority of the Company shareholders, as
the case may be.
	 
	 	(y)	 	Change in Board. During any period of two consecutive
years, individuals who at the beginning of such period
were members of the Board of Directors cease for any
reason to constitute at least a majority of the Board of
Directors, unless the election or nomination for
election by the Company’s shareholders of each new
director was approved by a vote of at least two-thirds
of the directors then still in office who were directors
at the beginning of the period. Such a Change in Control
shall be deemed to have occurred on the date upon which
the requisite majority of directors fails to be elected
by the shareholders of the Company.
	 
	 	(z)	 	Other Events. Any other event or series of events which,
notwithstanding any other provision of this definition,
is determined, by a majority of the outside members of
the Board of Directors of the Company serving in office
at the time such event or events occur, to constitute a
change in control of the Company for purposes of this
Program. Such a Change in Control shall be deemed to
have occurred on the date of such determination or on
such other date as such majority of outside members of
the Board shall specify.

	 	(d)	 	Miscellaneous Provisions.

	 	(i)	 	Withholding of Taxes. The rights of a participant to payments
under this Program shall be subject to the Company’s
obligations at any time to withhold income or other taxes from
such payments including, without limitation, by reducing the
number of shares of common stock to be distributed in payment
of deferred stock units by the number of shares equal in value
to the amount of such taxes required to be withheld, using the
date of issuance of the shares as the valuation date for
determining Fair Market Value.
	 
	 	(ii)	 	Rights as to Common Stock. No participant with deferred
compensation credited to the Air Products Stock Account shall
have

I-7

 

	 	 	 	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 payment of such deferred
compensation. No shares of common stock shall be issued and
delivered 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 Act and of the
Securities Act of 1993, as amended, and the applicable
requirements of the exchanges on which the Company’s common
stock may, at the time, be listed. Distributions of shares of
common stock in payment 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,
or pursuant to delegations from, the Board of Directors.
	 
	 	(iii)	 	Adjustments to Avoid Dilution. In the event of any change in
the common stock of the Company by reason of any stock
dividend or split, recapitalization, merger, consolidation,
combination or exchange of shares, or a rights offering to
purchase common stock at a price substantially below fair
market value, or other similar corporate change, including
without limitation in connection with a Change in Control of
the Company, the value and attributes of each deferred stock
unit shall be appropriately adjusted consistent with such
change to the same extent as if such deferred stock units were
issued and outstanding shares of common stock of the Company,
so as to preserve, without increasing, the value of deferred
compensation credited to each participant’s Air Products Stock
Account. Such adjustments shall be made by the Board of
Directors and shall be conclusive and binding for all purposes
of the Program.

	10.	 	Participant’s Rights Unsecured
	 
	 	 	The right of any participant to the payment of deferred compensation and
earnings thereon under the Program shall be an unsecured and unfunded
claim against the general assets of the Company.
	 
	11.	 	Nonassignability
	 
	 	 	The right of a participant to the payment of deferred compensation and
earnings thereon under the Program shall not be assigned, transferred,
pledged or encumbered or be subject in any manner to alienation or
anticipation, except by gift to the participant’s family member(s) or to
trust(s) of which such family member(s) are beneficiaries and subject to
the

I-8

 

	 	 	administrative procedures and conditions set forth in the “Administrative
Procedures Regarding Transfers of the Right to Payment of Deferred
Compensation attached hereto as Exhibit B; to his or her designated
beneficiary; or by will or the laws of descent and distribution.
	 
	12.	 	Statement of Account
	 
	 	 	Statements will be sent to participants during February as to the value of
their Accounts as of the end of December of the previous year.
	 
	13.	 	Administration
	 
	 	 	The Administrator of this Program shall be the Corporate Secretary of the
Company. The Administrator shall have authority to adopt rules and
regulations for carrying out the Program and to interpret, construe, and
implement the provisions thereof.
	 
	14.	 	Business Days
	 
	 	 	If any date specified herein falls on a Saturday, Sunday or legal holiday,
such date shall be deemed to refer to the next business day thereafter.
	 
	15.	 	Amendment and Termination
	 
	 	 	This Program may at any time be amended, modified or terminated by the
Board of Directors of the Company. No amendment, modification, or
termination shall, without the consent of a participant, adversely affect
such participant’s rights with respect to amounts theretofore accrued in
his or her deferred compensation account.
	 
	16.	 	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

Allentown, PA 18195-1501

	17.	 	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 state without giving effect to principles of conflicts of
laws.

I-9

 

EXHIBIT A

AIR PRODUCTS AND CHEMICALS, INC. (THE “COMPANY”)

DEFERRED COMPENSATION PROGRAM FOR DIRECTORS (THE “PROGRAM”)

ELECTION FORM

		
	To: 	Corporate Secretary

Air Products and Chemicals, Inc.

	I.	 	ELECTIVE DEFERRED COMPENSATION AMOUNT
	 
	 	 	In accordance with the provisions of the Program, I hereby (check one):

	 	•	 	Elect (or modify my prior election) to defer receipt of compensation
otherwise payable to me in cash for services as a Director of the
Company in the manner described below (fill in one):

$___________________(amount per quarter)

or

___________________ (percentage per quarter)

	 	•	 	Revoke my election to defer.

This election, modification, or revocation shall take effect beginning on
                             to affect only compensation earned on and after such
date.
(Must be a date after the date this Election Form is received by the
Company.)

	II.	 	INVESTMENT ACCOUNT FOR ELECTIVE DEFERRED COMPENSATION AMOUNT.
	 
	 	 	The Elective Deferred Compensation Amount is to be deemed invested in the
following account(s) (enter a whole percentage from 1% to 100% in each
blank, with the two percentages totaling 100%):
	 
	      	% 	in the Interest Account to be paid out in the form of cash.
	 
	      	% 	in the Air Products Stock Account to be distributed in the form of Air
Products and Chemicals, Inc. Common Stock. NOTES
         CONCERNING COMPLIANCE
WITH THE FEDERAL SECURITIES LAW:

	 	(1)	 	AN ELECTION TO INVEST OR TO CEASE INVESTING, OR TO CHANGE THE LEVEL
OF INVESTING, IN THE AIR PRODUCTS STOCK ACCOUNT WILL ONLY BE
EFFECTIVE IF RECEIVED BY THE COMPANY DURING A 30-DAY WINDOW PERIOD
DURING WHICH THERE IS NO MATERIAL NON-PUBLIC INFORMATION. Such
window periods generally occur during the period commencing after
the annual report has been mailed to the shareholders, which usually
occurs during the first or second week in December, and the 30-day
periods starting on the second trading day after the day when
quarterly or annual earnings releases have been issued with
commentary, which usually occur in the third or fourth weeks of
January, April, July, and October. The Corporate Secretary can
advise you as to the precise timing of window periods.
	 
	 	(2)	 	Under current federal securities law, it is necessary to report to
the Securities and Exchange Commission the number of units credited
to the Air Products Stock Account at the end of each fiscal year, on
a Form 5 Report for the year.

I-10

 

EXHIBIT A

AIR PRODUCTS AND CHEMICALS, INC.

DEFERRED COMPENSATION PROGRAM FOR DIRECTORS (THE “PROGRAM”)

ELECTION FORM

(continued)

	III.	 	TIMING OF PAYMENT OF DEFERRED COMPENSATION AMOUNTS (ELECTIVE AND
MANDATORY)
	 
	 	 	COMPLETE A OR B, BUT NOT BOTH

	 	A.	 	Lump Sum Election
	 
	 	 	 	Mandatory Deferred Compensation Amounts and the Elective Deferred
Compensation Amount (if any) are to be paid to me in a lump sum
(check one):

	 	•	 	In the year my service as a Director ends.
	 
	 	•	 	In the    year after the year in which my service as a
Director ends (not to exceed tenth).

	 	B.	 	Installment Election
	 
	 	 	 	Mandatory Deferred Compensation Amounts and the Elective Deferred
Compensation Amount (if any) are to be paid to me in    (up
to 10) consecutive annual installments, the first of which is to be
paid in (check one):

	 	•	 	The year in which my service ends.
	 
	 	•	 	   year after the year in which my service ends (the last
installment must be paid no later than 10 years after the year
in which service ends).

	 	 	 	I understand that this payout election, when effective, will apply
to all my Deferred Compensation Amounts (Elective and Mandatory) for
this and any prior or future year, and will supersede any prior
payout election made by me with respect to my Deferred Compensation
Amounts.
	 
	 	 	 	I understand that this election will become effective one year from
the date received by the Corporate Secretary’s Office unless payouts
under a prior election commence before the effective date; in which
case this election will expire and the prior election will control.
	 
	 	 	 	Note: Since elections do not take effect for one year, a payment
scheduled on or before the first anniversary of the date your
service for Air Products ends may prevent a future election made in
your last year of service from becoming effective. You should not
elect a payment schedule beginning before the second year following
termination of your service if you want to preserve maximum
flexibility to make future changes in your payment schedule during
your last year of service.

I-11

 

EXHIBIT A

AIR PRODUCTS AND CHEMICALS, INC.

DEFERRED COMPENSATION PROGRAM FOR DIRECTORS (THE “PROGRAM”)

ELECTION FORM

(continued)

	IV.	 	BENEFICIARY DESIGNATION
	 
	 	 	If I die before receiving all the deferred payments due me under the
Program, I understand the value of my Mandatory and Elective Deferred
Compensation Amounts will be paid to my estate or designated beneficiary,
in a single lump sum cash payment on the earlier of the January 15 or July
15 following the date of my death or as soon thereafter as reasonably
possible. (A beneficiary may be designated by delivering written notice of
designation to the Corporate Secretary of the Company.)

     This Election is subject to the terms of Air Products and Chemicals, Inc.
Deferred Compensation Program for Directors, as amended from time to time.

	 	 	 	 	 	 	 
	 	 	 	 	
 
	Received on the                    day of on behalf of the Company.	 	Signature of Director

	 
	 	 	 	 	 	 
	By

	 	 	 	Date:	 	 
	

	 	
 
	 	 	 	
 
	

	 	(Assistant) Corporate Secretary	 	 	 	 

I-12

 

EXHIBIT B

ADMINISTRATIVE PROCEDURES REGARDING TRANSFER OF THE RIGHT

TO PAYMENT OF DEFERRED COMPENSATION

The right to receive payment of deferred compensation and earnings thereon under
the Program (a “Payment Right”) is transferable by the director participant (the
“director”) only in accordance with these Procedures. DIRECTORS ARE ENCOURAGED
TO SEEK FINANCIAL AND TAX PLANNING ADVICE PRIOR TO TRANSFERRING A PAYMENT RIGHT.

	1.	 	Payment Rights may be transferred by directors 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 Payment Rights 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 written notice of designation of beneficiary
previously filed by the director relating to the Payment Right is void and
of no further force and effect; and the transferred Payment Right 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 a
Payment Right to the transferee also transfers the ancillary rights
associated with the Payment Right under the terms of the Program
(references herein to “Payment Right” to include both the Payment Right
and such ancillary rights); and following transfer, the Payment Right will
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer under the Plan.
	 
	5.	 	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 the
director’s Payment Right (or altering the terms of any trust to
which the Payment Right has been transferred) to enable the Company
to assist the director in complying

I-13

 

	 	 	 	with the securities laws, including preparing any required reports
for filing with the Securities and Exchange Commission and the New
York Stock Exchange. Transfer of the Payment Right must be reported
as a gift transaction on the director’s Form 5 (or voluntarily on an
earlier Form 4).

I-14

 

Air Products and Chemicals, Inc.

(the “Company”)

ELECTION TO TRANSFER PAYMENT RIGHTS

Under The Deferred Compensation Program for Directors (the “Program”)

	 	 	 
	Printed name of director or former director:

	 	 

	 	 	 
	Social Security Number of director:

	 	 

	 	 	 
	Address of director:

	 	 

	 
	 

	 	 	 
	Telephone number of director:

	 	 

I, THE DIRECTOR, HEREBY ELECT TO MAKE A TRANSFER OF MY PAYMENT RIGHT 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:	 
	 
	 

	 
	 

	 
	 

	 	 	 
	Dollar amount and/or number of deferred stock units
accrued under the director’s
Accounts as of the end of the most recent calendar quarter:

	 

BY SIGNING BELOW, I, THE DIRECTOR, ACKNOWLEDGE receipt of a copy of the
“Administrative Procedures Regarding Transfers of Payment Rights” (the
“Procedures”). I further acknowledge that upon payment of my Accounts to 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 such payment.

	 	 	 
	
 
	 	
 
	Signature of director
	 	Date

I-15

 

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
of the Plan (as modified by the Procedures), and agree not to further transfer
the Payment Right.

	 	 	 
	
 
	 	
 
	Signature of director
	 	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:	 	 
	

	 	 	 	 	 	
 

I-16

 

TAX CONSEQUENCES TO PARTICIPANTS

     The following is a general summary under current law of the U.S. tax
consequences of participation in the Program. The tax laws could change prior to
your retirement or other termination of your service as a director in a way that
accelerates taxation of deferred amounts. Legislation proposed by the
Administration and others would impose or authorize the U.S. Treasury to impose
current taxation on deferred compensation arrangements deemed to be abusive.

Income Taxes

	 	1.	 	Deferred amounts and earnings thereon including any appreciation in
value of deferred stock units, are not subject to income tax until
distributed.
	 
	 	2.	 	When distributed, the full amount of any cash distributed and the
fair market value of any shares distributed will be taxable at the
income tax rates then in effect.
	 
	 	3.	 	Depending on the laws in your state of residency, payments may be
nontaxable retirement benefits for state and local income tax
purposes.
	 
	 	4.	 	Deferred amounts remaining unpaid at your death constitute income in
respect of a decedent and will be subject to income tax. Any estate
or inheritance tax attributable to the deferred amounts will be
deductible by your estate or beneficiaries in computing the income
tax.

Estate Tax

Deferred amounts remaining unpaid at your death will be includable in your
estate for federal estate tax purposes. An unlimited marital deduction is
allowed for property passing to your spouse, which has the effect of removing
deferred amounts from your federal taxable estate if you predecease your spouse.
Congress enacted legislation in 2001 that phases out the estate tax in
2002-2009. This legislation sunsets in 2011, however, potentially restoring the
tax at its 2001 level.

Self-Employment Tax

Self-employment tax will apply to cash and deferred stock units, and earnings
thereon including appreciation, in the year payout is received. Self-employment
tax does not apply to nonresident aliens. Self-employment tax is imposed
currently at a maximum rate of 15.3% on earned income up to the Social Security
Wage Base for the particular year ($87,900 for 2004), and 2.9% on earned income
in excess of the wage base. Wages received as an employee are taken into account
first in determining whether the Social Security Wage Base has been exceeded.
Thus, the

I-17

 

15.3% Social Security element of self-employment tax will apply only if you do
not have wages or other earned income in excess of the Wage Base. One-half of
your self-employment tax liability can be deducted from your adjusted gross
income for federal income tax purposes.

Lump-Sum vs. Installment Payout

	 	1.	 	Election of installment payments or a later year lump sum will allow
you to defer income taxes on the cash or deferred stock units and
earnings and appreciation thereon, as compared to a lump sum payout
soon after retirement.
	 
	 	2.	 	Election of a lump-sum payment may reduce your self-employment tax
if you do not expect to have other income up to or in excess of the
Social Security Wage Base following your retirement from the Board
of Directors because the amount of a lump-sum payment in excess of
the Social Security Wage Base will escape the Social Security
portion of self-employment tax.

I-18

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00075-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00075-of-00352.parquet"}]]