EXHIBIT 10.5

Severance Plan for Executive Employees

of PepsiCo, Inc. and Affiliates

(Effective September 24, 1998, as amended effective January 1, 2005)

SECTION 1. Purpose

The Compensation Committee (the “Committee”) of the Board of Directors of
PepsiCo, Inc. (the “Company”) has adopted the Severance Plan for Executive
Employees of PepsiCo, Inc. and Affiliates (the “Plan”) effective September 24,
1998, to encourage Participants to remain with the Company in the event of a
threatened or actual change in control of the Company. The terms of the Plan as
set forth below include all amendments adopted by the Committee through
September 11, 2008.

SECTION 2. Definitions

For purposes of the Plan only, the following terms shall have the following
meanings:

2.1 “Affiliate” means an entity listed on Schedule A to this Plan. Prior to a
Change in Control, entities may from time to time be added to, or deleted from
Schedule A as determined by the Company’s Chief Executive Officer.

2.2 “Base Salary” means a Participant’s annual rate of salary in effect on
(a) the date on which a Change in Control occurs, or (b) the Termination Date,
whichever is higher.

2.3 “Cause” means any of the following:

 

 

a.

willful misconduct;

 

 

b.

refusal to carry out job duties or resignation, in each case other than for Good
Reason;

 

 

c.

conviction of a felony, or commission of any act which is a crime;

 

 

d.

refusal of a comparable position (in terms of pay, benefits and status)
following a Change of Control, which position would not require Relocation.

2.4 “Change in Control” means the occurrence of any of the following events:

 

 

a.

Acquisition of 20% or more of the outstanding voting securities of the Company
by another entity or group; excluding, however, the following: (i) any
acquisition by the Company, or (ii) any acquisition by an employee benefit plan
or related trust sponsored or maintained by the Company;

 

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b.

During any consecutive two-year period, persons who constitute the Company’s
Board of Directors at the beginning of the period cease to constitute at least
50% of the Board (unless the election of each new Board member was approved by a
majority of directors who began the two-year period);

 

 

c.

Consummation of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting shares of the surviving entity) more than 50% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;

 

 

d.

Company shareholders approve a plan of complete liquidation of the Company or
the sale or disposition of all or substantially all of the Company’s assets; or

 

 

e.

Any other event, circumstance, offer or proposal occurs or is made, which is
intended to effect a change in the control of the Company, and which results in
the occurrence of one or more of the events set forth in subsections a. through
d. of this Section 2.4.

2.5 “Code” means the Intemal Revenue Code of 1986, as amended.

2.6 “Company” means PepsiCo, Inc. and, after a Change in Control, any successor
thereto.

2.7 “Competing Business” means a business entity that markets, sells,
distributes or produces any product, other than those of the Company, which
competes with a snack or beverage product produced, marketed, sold or
distributed by the Company.

2.8 “Confidential Information” means confidential proprietary information about
the Company and its worldwide business, whether or not in writing, including but
not limited to information about costs, profits, sales, marketing or business
plans, existing or prospective customers, suppliers, possible acquisitions or
divestitures, new products or markets, personnel, know- how, formulae, recipes,
processes, equipment, discoveries, inventions, research, technical or scientific
information and other data not accessible to the public, none of which is
general industry knowledge.

2.9 “Effective Date” means September 24, 1998.

2.10 “Good Reason” means, with respect to any Participant without the
Participant’s written consent, any of the following:

 

a.

the Company’s requiring a material change in the Participant’s principal place
of employment as it existed immediately prior to the Change in Control, except
for

 

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reasonably required travel on the Company’s business that is not materially
greater than such travel requirements prior to the Change in Control (for this
purpose, a change of 35 or fewer miles shall not be considered a material change
in the Participant’s principal place of employment);

 

 

b.

a material reduction in the Participant’s base compensation (within the meaning
of Treasury Regulation § 1.409A-1(n)(2)(ii)(A)(2)) as in effect immediately
prior to the Change in Control; or

 

 

c.

a material reduction in the Participant’s job responsibilities, authority or
duties with the Company as in effect immediately prior to the Change in Control.

A termination for Good Reason must be communicated by the Participant to the
Company by written notice that specifies the event or events claimed to provide
a basis for termination for Good Reason; provided that the Participant’s written
notice must be tendered within ninety (90) days of the occurrence of such event
or events and provided further that the Company shall have failed to remedy such
act or omission within thirty (30) days following its receipt of such notice. A
Participant’s continued employment shall not constitute consent to, or a waiver
of rights with respect to, any act or failure to act constituting Good Reason
hereunder if the Participant actually terminates employment within fourteen
(14) days after the Company’s failure to timely remedy or, if earlier, prior to
the second anniversary of the Change in Control.

2.11 “Key Employee” shall have the meaning ascribed to such term in the
Company’s Executive Income Deferral Program. A Participant’s status as a Key
Employee shall be determined as of the Participant’s Termination Date.

2.12 “Participant” shall have the meaning ascribed to such term in Section 3.2
hereof.

2.13 “Relocation” means the Company’s requiring a material change in the
Participant’s principal place of employment as it existed immediately prior to
the Change in Control, except for reasonably required travel on the Company’s
business that is not materially greater than such travel requirements prior to
the Change in Control (for this purpose, a change of 35 or fewer miles shall not
be considered a material change in the Participant’s principal place of
employment) .

2.14 “Target Bonus” means the annual incentive payable to a Participant under
the Company’s or an Affiliate’s Executive Incentive Compensation Plan (or
equivalent plan) for the performance period in progress when the Termination
Date occurs, calculated on the assumption that the Company (or Affiliate)
achieved 100% of the performance goals for such period.

2.15 “Termination” means (a) involuntary dismissal of a Participant from
employment with the Company or with an Affiliate, or (b) resignation from
employment for Good Reason, in each case within two years after a Change in
Control.

 

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2.16 “Termination Date” means the effective date of a Termination. The effective
date of a Participant’s Termination shall be the same as the date the
Participant separates from service within the meaning of
Section 409A(a)(2)(a)(i) of the Code as a result of the Termination.

2.17 “Total Disability” means total disability as set forth in the Company’s
Long-Term Disability Plan.

SECTION 3. Effective Date; Participation

3.1 Effective Date. This Plan is effective as of September 24, 1998, the date of
its adoption by the Committee.

3.2 Participation. Participants shall be those executives of the Company or of
an Affiliate who satisfy the criteria established from time to time by the
Committee. The current criteria are set forth on Schedule B hereto. No Executive
whose compensation is disclosed in the Company’s proxy statement for a
particular year may be a Participant in the Plan for such year unless and until
the Committee determines otherwise.

SECTION 4. Severance Benefits

4.1 Benefits. If there is a Termination of a Participant’s employment with the
Company or an Affiliate without Cause (other than by reason of death or Total
Disability) during the two-year period following a Change in Control, such
Participant shall be entitled to the benefits provided in this Section 4.

 

 

a.

Lump Sum Payment. Subject to Section 4.2, following the Termination Date, the
Company shall promptly pay such Participant a cash lump sum equal to two times
the total of the Participant’s Base Salary and Target Bonus.

 

 

b.

Bonus Payment. Following the Termination Date, the Company shall also promptly
pay such Participant a cash lump sum equal to the Participant’s Target Bonus for
the year in which the Termination Date occurs.

 

 

c.

Deferred Compensation Plan Payment. Subject to any restrictions that are
applicable to ensure continued compliance under Section 409A of the Code, the
Company intends to have the maximum discretionary authority to terminate the
Company’s Executive Income Deferral Program and make distributions in connection
with a change in control (as defined in Section 409A), and the maximum
flexibility with respect to how and to what extent to carry this out following a
change in control (as defined in Section 409A) as is permissible under
Section 409A.

 

 

d.

Continued Health and Welfare Benefits. For two years following Termination, the
Company or an Affiliate shall provide such Participant with

 

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medical, dental, vision/hearing, accident, life, and short-term and long-term
disability insurance coverages at the level provided to the Participant
immediately prior to the Termination Date; provided, however, that if the
Participant becomes employed by a new employer, the Participant’s coverage under
the applicable Company or Affiliate plans shall continue, but the Participant’s
coverage thereunder shall be secondary to (i.e., reduced by) any benefits
provided under like plans of such new employer and, provided further that all
claims must be submitted not later than six months after the underlying expense
is incurred, and all reimbursements must be made not later than the year
following when the expense is incurred. The Participant shall pay any employee
contribution required for active employees as in effect from time to time at and
after the Termination Date.

 

 

e.

Payment of Earned but Unpaid Amounts. After the Termination Date, the Company
shall promptly pay the Participant earned but unpaid compensation in accordance
with the applicable terms of the plans or programs governing such compensation.

4.2 Offset of Severance Payments. Notwithstanding the foregoing but subject to
the following two sentences, if a Participant is entitled to receive severance
benefits from the Company or an Affiliate under any other agreement (including
offer letters), plan or statute, any payments that are payable under this
Section 4 will be offset by any payments due under such agreement, plan or
statute. To the extent that compliance with Section 409A of the Code would
require that payments payable under this Section 4 cause an offset against such
other payment, then such other payment shall be offset instead. Such other
payment shall also be offset to the extent that the availability of an exception
from 409A would require this result, provided that doing so does not result in
non-compliance with section 409A.

4.3 Parachute Limitation. If payments or distributions by the Company to or for
the benefit of a Participant, whether or not paid or distributed pursuant to
this Plan or otherwise (the “Total Payments”), would subject the Participant to
an excise tax under Section 4999 of the Code (such excise tax, together with any
interest and penalties thereon, being referred to as the Excise Tax”) on “excess
parachute payments” (as defined in Section 280G of the Code and the regulations
related thereto (“Section 280G”)), then the Participant shall be entitled to an
additional payment (the “Gross-Up Payment”) in an amount such that, after
payment by the Participant of all taxes, including any Excise Tax, imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed on the Total Payments; provided, however, that
if the amount of the Total Payments that exceeds three times the Participant’s
“base amount” (as defined in Section 280G) is less than $25,000, then the Total
Payments shall be reduced to the extent necessary so that the Total Payments
would not subject the Participant to any Excise Tax. Subject to the next
sentence, in the event such reduction is necessary with respect to a
Participant, the Company shall reduce the Participant’s Total Payments by first
reducing the Participant’s Total Payments that are not payable in such case.
However, compensation that is covered by Code Section 409A,

 

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and to which the Participant has a legally binding right within the meaning of
Section 409A, shall not be reduced pursuant to the preceding sentence. Any
calculation required by this Section 4.3 shall utilize tax rates reasonably
related to a Participant’s anticipated total tax liabilities. Each Gross-Up
Payment required to be made by the Company to a Participant hereunder shall be
paid no later than the end of the calendar year next following the calendar year
in which the Participant remits the corresponding taxes to the Internal Revenue
Service.

4.4 Pension and 401(k) Plans. A Participant will continue to accrue pension
benefits under the Company’s or an Affiliate’s tax qualified and non-qualified
defined benefit pension plans for a period of one year from the Termination
Date, provided that any such accruals, which would be for a period after the
Participant has separated from service within the meaning of Code
Section 401(a), shall only be made under a non-qualified defined benefit pension
plan. After the Participant’s Termination Date, such Participant may not
continue contributions to the Company’s or an Affiliate’s 401(k) Plan.

SECTION 5 Mitigation

A Participant shall not be required to mitigate the amount of any payment
provided for under this Plan by seeking other employment or otherwise, and
compensation earned from such employment or otherwise shall not reduce the
amounts payable under this Plan. Benefits under the Plan (other than benefits
that are covered by Code Section 409A) shall be offset by any amounts owed by
the Participant to the Company or an Affiliate, such as expense advances or the
value of property which has not been returned.

SECTION 6 Misconduct

If the Committee or its delegate determines that a Participant has at any time
prior to the Participant’s Termination Date:

 

 

a.

accepted employment with a Competing Business;

 

 

b.

recruited or hired away employees of the Company;

 

 

c.

disclosed to an unauthorized person or misused Confidential Information of the
Company,

then the Company may, in its sole discretion, withhold payments to a Participant
under this Plan. In the case of compensation covered by Code Section 409A, the
Company shall act in compliance with Section 409A when withholding payments to a
Participant.

SECTION 7 Source and Payment of Benefits

This Plan is unfunded and benefits hereunder shall be paid by the Company from
its general assets.

 

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SECTION 8 Disputes

Any dispute or controversy arising under or in connection with this Plan, or a
final denial of a claim hereunder, shall be settled exclusively by arbitration
in the state of the Company’s headquarters, in accordance with the Rules of the
American Arbitration Association then in effect.

SECTION 9 Withholding

The Company will, to the extent required by law, withhold applicable federal,
state and local income and other taxes from any payments due to the Participant
hereunder.

SECTION 10 Amendment and Termination of Plan

10.1 The Committee may at any time terminate, or from time to time amend the
Plan; provided, however, that the Plan may not be terminated or amended after a
Change in Control.

10.2 No amendment of the Plan shall, without a Participant’s express written
consent, impair any of the benefits accrued or payable to a Participant under
the Plan.

SECTION 11 Miscellaneous Provisions

11.1 Governing Law. This Plan shall be governed by and construed in accordance
with the laws of North Carolina without giving effect to the principles of
choice of law thereof.

11.2 Successors and Assigns. Except as otherwise provided herein, this Plan
shall be binding upon and shall inure to the benefit of and be enforceable by
the Company and the Participant and their respective heirs, legal
representatives, successors and assigns. If the Company shall be merged into or
consolidated with another entity, the provisions of this Plan shall be binding
upon and inure to the benefit of the entity surviving such merger or resulting
from such consolidation. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to expressly assume
and agree to perform the Company’s obligations under this Plan in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. The provisions of this Section 11.2 shall
continue to apply to each subsequent employer of the Participant hereunder in
the event of any subsequent merger, consolidation or transfer of assets of such
subsequent employer.

11.3 No Implied Employment. Nothing contained in this Plan, nor any decision as
to the eligibility for severance pay or the determination of the amount of any
benefits hereunder, shall be construed to confer upon any Participant, or any
other individual, any right to be retained in the employ of the Company or to be
rehired, and the right and power of the Company to dismiss or discharge any
Participant or any other individual for any reason is specifically reserved.

 

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11.4 No Assignment or Alienation of Benefits. The benefits payable under this
Plan shall not be subject to assignment or alienation by the Participant or his
or her beneficiaries, nor shall the benefits be subject to attachment. Any
attempt to assign, alienate, transfer, pledge, encumber, commute or anticipate
Plan benefits shall be void; no such interest shall be in any manner subject to
levy, attachment or other legal process to enforce payment of any claim against
a Participant, except to the extent required by law.

11.5 Invalidity. In the event of any provision of this Plan is held to be
illegal or invalid, the remaining provisions of this Plan shall not be affected
thereby.

11.6 Section 409A. The following provisions are intended to apply
notwithstanding other provisions of this Plan.

 

 

a.

If any compensation or benefits provided by this Plan may result in the
application of Section 409A of the Code, the Company shall modify the Plan in
the least restrictive manner necessary in order to exclude such compensation
from the definition of “deferred compensation” within the meaning of such
Section 409A or in order to comply with the provisions of Section 409A, other
applicable provision(s) of the Code and/or any rules, regulations or other
regulatory guidance issued under such statutory provisions and without any
diminution in the value of the payments to the Participants.

 

 

b.

To ensure the exemption from Section 409A of potentially exempt benefits and the
compliance with Section 409A of other benefits, any payment that under the terms
of the Plan is to be made promptly shall be made not later than 60 days after
the Participant’s Termination Date and the Participant may not determine the
time of payment (except that any compensation that is payable to a Key Employee
and covered by Section 409A shall be paid six months after the Key Employee’s
Termination Date).

 

 

c.

The lump sum payment provided by Section 4.1a and the Target Bonus payment
provided by Section 4.1b are intended to be exempt from Section 409A under the
exception for short-term deferrals. The first 18 months of medical, dental and
vision/hearing continuation under Section 4.1d are intended to be exempt from
Section 409A under the exception for health coverage continued in connection
with employment termination. Benefits related to coverage for the period in
excess of 18 months are intended to comply with Section 409A (and so, as a
matter of caution, it is noted that these payments may not be provided to a Key
Employee within six months of the Key Employee’s Termination Date). Continued
accident insurance coverage is intended to be exempt from Section 409A as a
tax-exempt welfare benefit. Continued life and disability coverage are intended
to be exempt from Section 409A as exempt death benefits and

 

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disability pay. The terms of this Plan shall be interpreted to permit categories
of compensation that are intended to be exempt from Section 409A to be exempt in
practice. With respect to other compensation provided under the Plan that is
covered by Section 409A, the terms of this Plan shall be interpreted to permit
such compensation to comply with Section 409A.

 

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