-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MKQWhyiQq6mxMoF665VrpLF2NU9Uyk1Xu2s94EEhU4MhV80dlT9B2WHVNkFBDGje Tz9HDTWBrcRc6Kubewqyww== 0000909567-06-001767.txt : 20061109 0000909567-06-001767.hdr.sgml : 20061109 20061109115623 ACCESSION NUMBER: 0000909567-06-001767 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20060930 FILED AS OF DATE: 20061109 DATE AS OF CHANGE: 20061109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COTT CORP /CN/ CENTRAL INDEX KEY: 0000884713 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-31410 FILM NUMBER: 061200343 BUSINESS ADDRESS: STREET 1: 207 QUEENS QUAY W STREET 2: SUITE 340 CITY: TORONTO ONTARIO CANA STATE: A6 ZIP: 00000 BUSINESS PHONE: 4162033898 MAIL ADDRESS: STREET 1: 207 QUEENS QUAY W STREET 2: SUITE 340 CITY: TORONTO ONTARIO STATE: A6 ZIP: 00000 10-Q 1 o33695e10vq.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: September 30, 2006 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to ________ Commission File Number: 000-19914 COTT CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) CANADA NONE ------------------------------- ------------------- (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.)
207 QUEEN'S QUAY WEST, SUITE 340, TORONTO, ONTARIO M5J 1A7 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (416) 203-3898 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.: Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at November 3, 2006 ----- ------------------------------- Common Stock, no par value per share 71,748,630 shares
1 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Statements of Income for the three and nine month periods ended September 30, 2006 and October 1, 2005........................................... Page 3 Consolidated Balance Sheets as of September 30, 2006 and December 31, 2005......................................... Page 4 Consolidated Statements of Shareowners' Equity as of September 30, 2006 and October 1, 2005.................... Page 5 Consolidated Statements of Cash Flows for the three and nine month periods ended September 30, 2006 and October 1, 2005........................................... Page 6 Notes to Consolidated Financial Statements .................. Page 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ................................ Page 26 Item 3. Quantitative and Qualitative Disclosures about Market Risk .. Page 31 Item 4. Controls and Procedures ..................................... Page 32 PART II - OTHER INFORMATION Item 1. Legal Proceedings ........................................... Page 33 Item 1A. Risk Factors ................................................ Page 33 Item 5. Other Information ........................................... Page 33 Item 6. Financial Statement Schedules and Exhibits .................. Page 34 Signatures ........................................................... Page 36
2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS COTT CORPORATION CONSOLIDATED STATEMENTS OF INCOME (LOSS) (in millions of U.S. dollars, except per share amounts) Unaudited
For the three months ended For the nine months ended -------------------------- -------------------------- SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1, 2006 2005 2006 2005 ------------- ---------- ------------- ---------- REVENUE $475.5 $469.9 $1,371.7 $1,358.1 Cost of sales 413.5 404.5 1,184.7 1,156.0 ------ ------ -------- -------- GROSS PROFIT 62.0 65.4 187.0 202.1 Selling, general and administrative expenses 40.8 34.2 129.4 106.6 Gain on disposal of property, plant and equipment -- -- -- (0.2) Unusual items - note 2 Restructuring 9.4 2.0 11.2 2.0 Asset (recovery) impairments (0.1) 23.7 1.2 23.5 Other -- -- 2.6 -- ------ ------ -------- -------- OPERATING INCOME 11.9 5.5 42.6 70.2 Other income, net (0.2) (0.4) (0.4) (0.4) Interest expense, net 7.8 7.7 23.5 20.8 Minority interest 0.9 1.1 3.0 3.4 ------ ------ -------- -------- INCOME (LOSS) BEFORE INCOME TAXES 3.4 (2.9) 16.5 46.4 Income tax (recovery) expense - note 4 (3.2) (1.1) 4.4 14.9 ------ ------ -------- -------- NET INCOME (LOSS) - note 5 $ 6.6 $ (1.8) $ 12.1 $ 31.5 ====== ====== ======== ======== PER SHARE DATA - note 6 INCOME (LOSS) PER COMMON SHARE Basic $ 0.09 $(0.03) $ 0.17 $ 0.44 Diluted $ 0.09 $(0.03) $ 0.17 $ 0.44
The accompanying notes are an integral part of these consolidated financial statements. 3 COTT CORPORATION CONSOLIDATED BALANCE SHEETS (in millions of U.S. dollars) Unaudited
SEPTEMBER 30, DECEMBER 31, 2006 2005 ------------- ------------ ASSETS CURRENT ASSETS Cash $ 29.7 $ 21.7 Accounts receivable 192.4 191.1 Inventories - note 7 157.8 144.2 Prepaid expenses and other assets - note 8 14.6 9.5 Deferred income taxes 8.3 7.3 -------- -------- 402.8 373.8 PROPERTY, PLANT AND EQUIPMENT - note 9 378.2 394.2 GOODWILL 156.3 150.3 INTANGIBLES AND OTHER ASSETS - note 10 251.1 260.4 DEFERRED INCOME TAXES -- 0.4 -------- -------- $1,188.4 $1,179.1 ======== ======== LIABILITIES CURRENT LIABILITIES Short-term borrowings - note 11 $ 125.4 $ 157.9 Current maturities of long-term debt 1.0 0.8 Accounts payable and accrued liabilities 191.0 182.5 Deferred income taxes -- 0.2 -------- -------- 317.4 341.4 LONG-TERM DEBT 272.1 272.3 DEFERRED INCOME TAXES 64.0 61.0 -------- -------- 653.5 674.7 -------- -------- MINORITY INTEREST 21.9 22.5 SHAREOWNERS' EQUITY CAPITAL STOCK Common shares - 71,738,630 shares issued (December 31, 2005 - 71,711,630 shares) 273.3 273.0 RESTRICTED SHARES - note 13 (0.8) -- ADDITIONAL PAID-IN-CAPITAL 25.8 18.4 RETAINED EARNINGS 198.3 186.2 ACCUMULATED OTHER COMPREHENSIVE INCOME 16.4 4.3 -------- -------- 513.0 481.9 -------- -------- $1,188.4 $1,179.1 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 4 COTT CORPORATION CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY (in millions of U.S. dollars) Unaudited
NUMBER OF COMMON ACCUMULATED SHARES ADDITIONAL OTHER (in COMMON RESTRICTED PAID-IN- RETAINED COMPREHENSIVE TOTAL thousands) SHARES SHARES CAPITAL EARNINGS INCOME EQUITY --------------------------------------------------------------------------------- Balance at January 1, 2005 71,440 $269.4 $ -- $17.6 $161.6 $ 8.7 $457.3 Options exercised, including tax benefit of $0.9 million 270 3.5 -- 0.9 -- -- 4.4 Comprehensive income - note 5 Currency translation adjustment -- -- -- -- -- (2.7) (2.7) Unrealized gains on cash flow hedges - note 8 -- -- -- -- -- 0.2 0.2 Net income -- -- -- -- 31.5 -- 31.5 ------------------------------------------------------------------------------- Balance at October 1, 2005 71,710 $272.9 $ -- $18.5 $193.1 $ 6.2 $490.7 =============================================================================== Balance at December 31, 2005 71,712 $273.0 $ -- $18.4 $186.2 $ 4.3 $481.9 Options exercised, including tax benefit 27 0.3 -- -- -- -- 0.3 Restricted shares - note 13 -- -- (0.8) -- -- -- (0.8) Share based compensation -- -- -- 7.4 -- -- 7.4 Comprehensive income - note 5 Currency translation adjustment -- -- -- -- -- 11.8 11.8 Unrealized gains on cash flow hedges - note 8 -- -- -- -- -- 0.3 0.3 Net income -- -- -- -- 12.1 -- 12.1 ------------------------------------------------------------------------------- Balance at September 30, 2006 71,739 $273.3 $(0.8) $25.8 $198.3 $16.4 $513.0 ===============================================================================
The accompanying notes are an integral part of these consolidated financial statements. 5 COTT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions of U.S. dollars) Unaudited
For the three months ended For the nine months ended -------------------------- -------------------------- SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1, 2006 2005 2006 2005 ------------- ---------- ------------- ---------- OPERATING ACTIVITIES Net income (loss) $ 6.6 $ (1.8) $ 12.1 $ 31.5 Depreciation and amortization 19.0 18.3 57.4 51.0 Amortization of financing fees 0.3 0.2 0.8 0.5 Share based compensation - note 13 2.8 -- 7.4 -- Deferred income taxes (3.4) -- 3.2 3.3 Minority interest 0.9 1.1 3.0 3.4 Gain on disposal of property, plant and equipment -- -- -- (0.2) Asset (recovery) impairments (0.1) 23.7 1.2 23.5 Other non-cash items 6.2 0.3 6.7 1.2 Net change in non-cash working capital - note 12 23.3 13.9 (8.1) (3.6) ------ ------- ------ ------- Cash provided by operating activities 55.6 55.7 83.7 110.6 ------ ------- ------ ------- INVESTING ACTIVITIES Additions to property, plant and equipment (6.8) (14.1) (23.5) (68.9) Proceeds from disposition of property, plant and equipment 0.4 0.1 1.9 2.1 Business acquisitions -- (135.1) -- (135.1) Other investing activities (1.3) (2.1) (7.0) (6.2) ------ ------- ------ ------- Cash used in investing activities (7.7) (151.2) (28.6) (208.1) ------ ------- ------ ------- FINANCING ACTIVITIES Payments of long-term debt (0.3) (0.3) (0.8) (0.7) Short-term borrowings (26.3) 91.0 (43.0) 85.5 Distributions to subsidiary minority shareowner (1.8) (2.0) (3.6) (3.9) Issue of common shares 0.3 1.1 0.3 3.5 Financing costs -- (1.2) -- (3.8) Other financing activities -- (0.1) (0.1) (0.3) ------ ------- ------ ------- Cash (used in) provided by financing activities (28.1) 88.5 (47.2) 80.3 ------ ------- ------ ------- Effect of exchange rate changes on cash 0.1 (0.1) 0.1 (0.6) ------ ------- ------ ------- NET INCREASE (DECREASE) IN CASH 19.9 (7.1) 8.0 (17.8) CASH, BEGINNING OF PERIOD 9.8 15.9 21.7 26.6 ------ ------- ------ ------- CASH, END OF PERIOD $ 29.7 $ 8.8 $ 29.7 $ 8.8 ====== ======= ====== =======
The accompanying notes are an integral part of these consolidated financial statements. 6 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited NOTE 1 Summary of Significant Accounting Policies BASIS OF PRESENTATION The interim consolidated financial statements have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") for interim financial information. Accordingly, they do not include all information and notes presented in the annual consolidated financial statements in conformity with U.S. GAAP. In our opinion, the financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the most recent annual consolidated financial statements. The accounting policies used in these interim consolidated financial statements are consistent with those used in the annual consolidated financial statements, except for the share based compensation as outlined below. The presentation of these interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Determining whether an impairment has occurred requires various estimates and assumptions including evaluating the lowest level of cash flows associated with groups of assets as well as estimates of cash flows that are directly related to the potentially impaired asset or groups of assets, the useful life over which cash flows will occur and their amounts. The measurement of an impairment loss requires an estimate of fair value, which is also based on estimates of future cash flows. These estimates could change in the near term and any such changes could be material. Material recognition, measurement, and presentation differences between U.S. GAAP and Canadian GAAP are disclosed in note 16. Share Based Compensation Effective January 1, 2006, we adopted Statement of Financial Accounting Standard ("SFAS") 123R, Share-Based Payments, using the modified prospective approach and therefore have not restated results for prior periods. Under this prospective approach, share based compensation expense for the nine months ended September 30, 2006 includes compensation expense for all share based compensation awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provision of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Share based compensation expense for all share based compensation awards granted after January 1, 2006 is based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. We recognize these compensation costs net of a forfeiture rate on a straight-line basis over the requisite service period of the award, which is generally the option vesting term of three years. We estimated the forfeiture rate for the first nine months of fiscal 2006 based on our historical experience with forfeitures during the preceding three fiscal years. For the nine month period ended September 30, 2006, net income includes compensation expense of $7.4 million, or $5.6 million net of tax recovery of $1.8 million. As reported for the nine month period ended October 1, 2005 under FAS123, income before taxes was $39.0 million, income tax expense was $13.0 million and net income was $26.0 million or $0.36 per basic and diluted share as described in note 13. Inventory Costs Effective January 1, 2006, we also adopted SFAS 151, Inventory Costs. The statement requires that the allocation of fixed production overheads to inventory be based on the normal capacity of the production facilities; unallocated overheads resulting from abnormally low production and certain other costs are to be recognized as an expense in the period in which they are incurred. There was no material impact from the adoption of this standard. 7 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited Income Taxes In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes". FIN 48 is an interpretation of FASB Statement No. 109 "Accounting for Income Taxes" and must be adopted by us no later than December 31, 2006. FIN 48 prescribes a comprehensive model for recognizing, measuring, presenting, and disclosing in the financial statements uncertain tax positions that we have taken or expect to take in our tax returns. We are evaluating the impact of adopting FIN 48, and it may result in differences between Canadian and United States accounting standards on uncertain income tax positions. Adjustments, if necessary will be recorded in retained earnings. NOTE 2 Unusual Items
For the three months ended For the nine months ended ----------------------------- ----------------------------- SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1, 2006 2005 2006 2005 ------------- ---------- ------------- ---------- (in millions of U.S. dollars) (in millions of U.S. dollars) Restructuring $ 9.4 $ 2.0 $11.2 $ 2.0 Asset (recovery) impairments (0.1) 23.7 1.2 23.5 Other -- -- 2.6 -- ----- ----- ----- ----- $ 9.3 $25.7 $15.0 $25.5 ===== ===== ===== =====
In September 2005 we announced our plan to realign the management of our Canadian and U.S. businesses to a North American basis, rationalize product offerings, eliminate underperforming assets and increase our focus on high potential accounts. In conjunction with this plan, we closed our Lachine, Quebec juice plant in February 2006 and in March 2006 we closed our Columbus, Ohio soft drink plant to bring production capacity in line with the needs of our customers. In addition, on October 26, 2006, we announced the closures of our manufacturing plant in Elizabethtown, Kentucky and our manufacturing plant and warehousing in Wyomissing, Pennsylvania. We intend to cease production at both plants by December 31, 2006, and reallocate production volume to other manufacturing sites in North America. Restructuring We recorded restructuring charges of $11.2 million including $5.8 million for severance and contract termination costs relating to the closures of our Columbus, Ohio soft drink plant and our Lachine, Quebec juice plant, $0.9 million of other severance costs relating to sales and marketing employees and $3.8 million for severance relating to organizational streamlining. The remaining restructuring cost of $0.7 million relates to consulting fees incurred in connection with restructuring activities. The following table is a summary of our restructuring charges for the nine months ended September 30, 2006 and the year ended December 31, 2005: 8 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited
Charged to Costs Payments Balance at and Expenses made during Balance at January 1, 2006 during the period the period September 30, 2006 --------------- ----------------- ----------- ------------------ Cash Employees Severance $1.0 $ 5.6 $(5.8) $0.8 Contract Settlement -- 4.9 (0.5) 4.4 Other 0.5 0.7 (1.2) -- ---- ----- ----- ---- Total $1.5 $11.2 $(7.5) $5.2 ==== ===== ===== ====
Payments Balance at Charged to Costs made during Balance at January 2, 2005 and Expenses the year December 31, 2005 --------------- ----------------- ----------- ------------------ Cash Employees Severance $-- $2.6 $(1.6) $1.0 Contract Settlement -- 0.6 (0.6) -- Other -- 0.8 (0.3) 0.5 --- ---- ----- ---- Total $-- $4.0 $(2.5) $1.5 === ==== ===== ====
Asset impairments We recorded an impairment loss of $1.2 million, which is comprised of charges of $1.6 million for the writedown of property, plant and equipment, customer list and information technology software related to the closure of our Columbus, Ohio soft drink plant and $0.1 million for the writedown of property, plant and equipment relating to our Lachine, Quebec juice plant, net of a $0.5 million recovery from the sale of other assets. Other Other unusual items are primarily legal and other fees relating to the United Kingdom ("U.K.") Competition Commission review of our acquisition of 100% of the shares of Macaw (Holdings) Limited (now known as Cott Nelson (Holdings) Limited), the parent company of Macaw (Soft Drinks) Limited (now known as Cott (Nelson) Limited) (the "Macaw Acquisition") in the U.K. We are currently evaluating various actions to reduce costs and are developing detailed plans which may result in additional exit and other costs being incurred. In the near term, we expect to incur additional charges relating to contract termination costs associated with the closure of our Columbus, Ohio soft drink plant, our manufacturing plant in Elizabethtown, Kentucky and our manufacturing plant and warehousing in Wyomissing, Pennsylvania. Since September 29, 2005 through the end of the third quarter of 2006, we have recorded pre-tax charges of $49.3 million relating to our previously announced North American realignment plan and other asset impairments, of which $20 million was recorded in 2005 relating to customer relationship impairment. In connection with the plant and warehouse closures announced on October 26, 2006, we expect to record approximately $40 to $45 million in pre-tax charges, of which $23 million relates to accelerated depreciation and amortization and impairment charges relating to property, plant and equipment and intangible assets, and the remainder relates to contract termination costs and severance costs for the termination of approximately 350 employees. These charges are expected to be taken in the fourth quarter of 2006 and the first half of 2007. These amounts are part of the estimated $115 to $125 million in charges for cost reduction programs including additional plant closures, office consolidation and organizational streamlining. This range has been revised from the previously announced $60 to $80 million in charges associated with the North American realignment plan and other asset impairments. 9 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited The breakdown of the charges discussed above is as follows:
UNUSUAL ITEMS ------------------------------------------------- For the nine months ended September 30, 2006 ------------------------------------------------- North America International Corporate Total ------------- ------------- --------- ----- (in millions of U.S. dollars) Restructuring $6.7 $0.5 $4.0 $11.2 Asset impairments 1.1 -- 0.1 1.2 Other -- 2.6 -- 2.6 ---- ---- ---- ----- $7.8 $3.1 $4.1 $15.0 ==== ==== ==== =====
UNUSUAL ITEMS ------------------------------------------------- For the year ended December 31, 2005 ------------------------------------------------- North America International Corporate Total ------------- ------------- --------- ----- (in millions of U.S. dollars) Restructuring $ 3.0 $ -- $ 0.2 $ 3.2 Asset impairments 33.0 (0.2) 0.7 33.5 Other -- 0.8 -- 0.8 ----- ----- ----- ----- $36.0 $ 0.6 $ 0.9 $37.5 ===== ===== ===== =====
Restructuring charges for the year ended December 31, 2005 are comprised of severance and contract termination costs in connection with the closure of our Lachine, Quebec juice plant and our Columbus, Ohio soft drink plant and severances relating to the North American realignment plan. Asset impairments for the year ended December 31, 2005 are comprised of writedown of customer relationship of $20 million and writedown of property, plant and equipment of $7.1 million and goodwill of $5.9 million in connection with the closure of our Lachine, Quebec juice plant and our Columbus, Ohio soft drink plant. We may also rationalize products and production capacity further but have not yet completed our analysis nor have we completed our detailed plans. Accordingly, the ultimate amount of any asset impairment charges or change in useful lives of assets that may result is uncertain. It is reasonably possible that our estimates of future cash flows or the useful lives, or both, related to certain equipment and intangibles will be significantly reduced in the near term. As a result, the carrying value of the related assets may also be reduced materially in the near term. NOTE 3 Business Seasonality Our net income for the three and nine month periods ended September 30, 2006 is not necessarily indicative of the results that may be expected for the full year due to business seasonality. Operating results are impacted by business seasonality, which normally leads to higher sales in the second and third quarters versus the first and fourth quarters of the year. Conversely, fixed costs such as depreciation, amortization and interest, are not impacted by seasonal trends. 10 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited NOTE 4 Income Taxes The following table reconciles income taxes calculated at the basic Canadian corporate rates with the income tax provision:
For the three months ended For the nine months ended ----------------------------- ----------------------------- SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1, 2006 2005 2006 2005 ------------- ---------- ------------- ---------- (in millions of U.S. dollars) (in millions of U.S. dollars) Income tax provision (recovery) based on Canadian statutory rates $ 1.1 $(1.0) $ 5.6 $16.0 Foreign tax rate differential (1.6) (1.6) (4.0) (2.5) Non-deductible expenses and other items 0.6 1.5 6.2 1.4 Decrease in valuation allowance (3.3) -- (3.4) -- ----- ----- ----- ----- $(3.2) $(1.1) $ 4.4 $14.9 ===== ===== ===== =====
NOTE 5 Comprehensive Income
For the three months ended For the nine months ended ----------------------------- ----------------------------- SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1, 2006 2005 2006 2005 ------------- ---------- ------------- ---------- (in millions of U.S. dollars) (in millions of U.S. dollars) Net income (loss) $6.6 $(1.8) $12.1 $31.5 Foreign currency translation 1.7 5.1 11.8 (2.7) Unrealized gains (losses) on cash flow hedges - note 8 0.1 (0.5) 0.3 0.2 ---- ----- ----- ----- $8.4 $ 2.8 $24.2 $29.0 ==== ===== ===== =====
11 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited NOTE 6 Income (Loss) Per Common Share Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is calculated using the weighted average number of common shares outstanding adjusted to include the effect that would occur if in-the-money stock options were exercised. The following table reconciles the basic weighted average number of shares outstanding to the diluted weighted average number of shares outstanding:
For the three months ended For the nine months ended -------------------------- -------------------------- SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1, 2006 2005 2006 2005 ------------- ---------- ------------- ---------- (in thousands) (in thousands) Weighted average number of shares outstanding - basic 71,731 71,703 71,719 71,600 Dilutive effect of stock options 51 -- 47 341 ------ ------ ------ ------ Adjusted weighted average number of shares outstanding - diluted 71,782 71,703 71,766 71,941 ====== ====== ====== ======
At September 30, 2006, options to purchase 2,485,664 shares (3,693,650 - October 1, 2005) of common shares at a weighted average exercise price of C$31.84 per share (C$33.94 - October 1, 2005) were outstanding, but were not included in the computation of diluted net income per share because the options' exercise price was greater than the average market price of our common shares during the period. As of September 30, 2006, we had 71,738,630 common shares and 2,858,955 common share options outstanding. Of our common share options outstanding, 2,081,154 options were exercisable as of September 30, 2006. During the nine months ended September 30, 2006, no common share options were issued and 27,000 common share options were exercised at a weighted average exercise price of C$15.99. NOTE 7 Inventories
SEPTEMBER 30, DECEMBER 31, 2006 2005 ------------- ------------- (in millions of U.S. dollars) Raw materials $ 66.3 $ 63.9 Finished goods 71.8 62.9 Other 19.7 17.4 ------ ------ $157.8 $144.2 ====== ======
12 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited NOTE 8 Derivative Financial Instruments We enter into cash flow hedges to mitigate exposure to declines in the value of the Canadian dollar attributable to certain forecasted U.S. dollar raw material purchases of the Canadian business. The hedges consist of monthly foreign exchange options to buy U.S. dollars at fixed rates per Canadian dollar and mature at various dates through December 28, 2006. In fiscal 2005, we also entered into cash flow hedges to mitigate exposure to declines in the value of pound sterling attributable to certain forecasted U.S. dollar raw material purchases of the U.K. and European business segments. The fair market value of the foreign exchange options is included in prepaid expenses and other assets. At September 30, 2006, the hedges consisted of foreign exchange options to buy U.S. dollars at fixed rates per Canadian dollar at a cost of $0.1 million (October 1, 2005 - $0.7 million). The fair value of the options of nil ($0.7 million - October 1, 2005) has been included in prepaid expenses and other assets and the change in the unrealized gain of $0.1 million for the third quarter ended September 30, 2006 ($0.5 million unrealized loss - October 1, 2005) and $0.3 million for the nine months ended September 30, 2006 ($0.2 million unrealized gain - October 1, 2005) was recorded in other comprehensive income, reflecting a $0.3 million ($0.2 million - October 1, 2005) change in the unrealized gain in comprehensive income for the period ending September 30, 2006. NOTE 9 Property, Plant and Equipment
SEPTEMBER 30, DECEMBER 31, 2006 2005 ------------- ------------- (in millions of U.S. dollars) Cost $702.3 $680.8 Accumulated depreciation (324.1) (286.6) ------ ------ $378.2 $394.2 ====== ======
In connection with the closures of our manufacturing plant in Elizabethtown, Kentucky and our manufacturing plant and warehousing in Wyomissing, Pennsylvania, we expect to record $20.6 million relating to accelerated depreciation and impairment charges relating to property, plant and equipment. These charges are expected to be taken in the fourth quarter of 2006 and the first half of 2007. 13 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited NOTE 10 Intangibles and Other Assets
SEPTEMBER 30, 2006 DECEMBER 31, 2005 ------------------------------ ------------------------------ ACCUMULATED ACCUMULATED COST AMORTIZATION NET COST AMORTIZATION NET ------ ------------ ------ ------ ------------ ------ (in millions of U.S. dollars) (in millions of U.S. dollars) INTANGIBLES Not subject to amortization Rights $ 80.4 $ -- $ 80.4 $ 80.4 $ -- $ 80.4 ------ ----- ------ ------ ----- ------ Subject to amortization Customer relationships 168.6 48.8 119.8 166.7 40.1 126.6 Trademarks 29.3 10.9 18.4 29.0 9.3 19.7 Information technology 55.1 30.7 24.4 49.1 24.1 25.0 Other 3.6 1.2 2.4 3.6 1.0 2.6 ------ ----- ------ ------ ----- ------ 256.6 91.6 165.0 248.4 74.5 173.9 ------ ----- ------ ------ ----- ------ 337.0 91.6 245.4 328.8 74.5 254.3 ------ ----- ------ ------ ----- ------ OTHER ASSETS Financing costs 4.7 2.0 2.7 4.6 1.2 3.4 Other 6.5 3.5 3.0 5.4 2.7 2.7 ------ ----- ------ ------ ----- ------ 11.2 5.5 5.7 10.0 3.9 6.1 ------ ----- ------ ------ ----- ------ $348.2 $97.1 $251.1 $338.8 $78.4 $260.4 ====== ===== ====== ====== ===== ======
Amortization expense of intangible assets was $5.8 million for the third quarter ended September 30, 2006 ($5.6 million - October 1, 2005). Amortization expense of intangible assets was $17.4 million for the nine months ended September 30, 2006 ($16.1 million - October 1, 2005). In connection with the closures of our manufacturing plant in Elizabethtown, Kentucky and our manufacturing plant and warehousing in Wyomissing, Pennsylvania, we expect to record $2.4 million relating to accelerated amortization and impairment charges relating to customer relationships. These charges are expected to be taken in the fourth quarter of 2006 and the first half of 2007. NOTE 11 Short-Term Borrowings Short-term borrowings include bank overdrafts, and borrowings under our credit facilities and receivables securitization facility. The credit facilities are collateralized by substantially all our personal property with certain exceptions including the receivables sold as part of our receivables securitization facility discussed below. In general, borrowings under the credit facilities bear interest at either a floating or fixed rate for the applicable currency plus a margin based on our consolidated total leverage ratio. A facility fee of between 0.15% and 0.375% per annum is payable on the entire line of credit. The level of the facility fee is dependent on financial covenants. As at September 30, 2006, credit of $94.4 million was available after borrowings of $125.4 million and standby letters of credit of $5.2 million. The weighted average interest rate was 6.38% on these facilities as of September 30, 2006. The amount of funds available under the receivables securitization facility is based upon the amount of eligible receivables and various reserves required by the facility. Accordingly, availability may fluctuate over time given changes in eligible receivables balances and calculation of reserves, but will not exceed the $75.0 million program limit. This 14 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited facility bears interest at a variable rate, based on the cost of borrowing of an unaffiliated entity, Park Avenue Receivables Company, LLC and certain other financial institutions (the "Purchasers"). A fee of between 0.20% and 0.40% per annum is currently payable on the unused portion of the facility. The level of the facility fee is dependent on financial covenants. As of September 30, 2006, $63.5 million of eligible receivables, net of reserves, were available for purchase under this facility with no balance outstanding. NOTE 12 Net Change in Non-Cash Working Capital The changes in non-cash working capital components, net of effects of unrealized foreign exchange gains and losses, are as follows:
For the three months ended For the nine months ended -------------------------- -------------------------- SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1, 2006 2005 2006 2005 ------------- ---------- ------------- ---------- (in millions of (in millions of U.S. dollars) U.S. dollars) Increase (decrease) in accounts receivable $48.6 $23.4 $ 8.3 $(24.1) Increase (decrease) in inventories 3.5 6.8 (10.6) (10.6) Increase (decrease) in prepaid and other expenses 3.5 (1.4) (4.2) (3.7) (Decrease) increase in accounts payable and accrued liabilities (32.3) (14.9) (1.6) 34.8 ----- ----- ----- ----- $23.3 $13.9 $(8.1) $(3.6) ===== ===== ===== =====
NOTE 13 Share Based Compensation Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS 123R, using the modified prospective approach and therefore have not restated prior periods' results. Under this prospective approach, share based compensation expense for the nine months ended September 30, 2006 includes compensation expense for all share based compensation awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provision of SFAS 123. Share based compensation expense for all share based compensation awards granted after January 1, 2006 is based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. We recognize these compensation costs net of a forfeiture rate on a straight-line basis over the requisite service period of the award, which is generally the option vesting term of three years. We estimated the forfeiture rate for the first nine months of fiscal 2006 based on our historical experience with forfeitures during the preceding three fiscal years. For the interim period ending September 30, 2006, net income includes compensation expense of $7.4 million, or $5.6 million net of tax recovery of $1.8 million. The pro forma table below reflects net earnings and basic and diluted net earnings per share for fiscal 2005, had we applied the fair value recognition provisions of SFAS 123, as follows: 15 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited
For the three months ended For the nine months ended ---------------------------- ---------------------------- OCTOBER 1, 2005 OCTOBER 1, 2005 ---------------------------- ---------------------------- (in millions of U.S dollars, (in millions of U.S dollars, except per share amounts) except per share amounts) NET (LOSS) INCOME As reported $ (1.8) $31.5 Compensation expense (2.0) (5.5) ------ ----- Pro forma $ (3.8) $26.0 ====== ===== NET (LOSS) INCOME PER SHARE - BASIC As reported $(0.03) $0.44 Pro forma $(0.05) $0.36 NET (LOSS) INCOME PER SHARE - DILUTED As reported $(0.03) $0.44 Pro forma $(0.05) $0.36
The pro forma compensation expense has been tax effected to the extent it relates to stock options granted in jurisdictions where the related benefits are deductible for income tax purposes. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
OCTOBER 1, 2005 ---------------- Risk-free interest rate 3.3% - 3.7% Average expected life (years) 4 Expected volatility 40.0% Expected dividend yield --
There were no options granted during the first nine months of fiscal 2006. 16 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited Option activity was as follows:
WEIGHTED WEIGHTED AVERAGE SHARES AVERAGE EXERCISE REMAINING CONTRACTUAL SUBJECT TO OPTIONS PRICE (C$) TERM (IN YEARS) ------------------ ---------------- --------------------- Balance at January 1, 2005 4,205,965 $30.90 Granted 1,174,250 29.08 Exercised (269,610) 15.71 Forfeited (562,800) 33.30 ---------- ------ --- Outstanding at October 1, 2005 4,547,805 31.05 5.0 ========== ====== === Exercisable at October 1, 2005 2,349,294 28.10 ========== ====== Balance at December 31, 2005 4,604,655 $30.69 Granted -- -- Exercised (27,000) 15.99 Forfeited (1,718,700) 17.55 ---------- ------ --- Outstanding at September 30, 2006 2,858,955 29.57 3.9 ========== ====== === Exercisable at September 30, 2006 2,081,154 28.58 ========== ======
Outstanding options at September 30, 2006 are as follows:
Options Outstanding Options Exercisable -------------------------------------- ------------------------ Weighted Remaining Average Number Contractual Life Weighted Average Number Exercise Range of Exercise Prices (C$) Outstanding (Years) Exercise Price (C$) Exercisable Price (C$) - ----------------------------- ----------- ---------------- ------------------- ----------- ---------- $7.70 - $16.10 123,291 1.4 $ 9.87 123,291 $ 9.87 $16.68 - $24.25 496,914 2.5 $18.08 416,388 $17.77 $26.00 - $33.30 1,566,000 4.3 $29.90 1,133,625 $30.15 $35.21 - $43.64 672,750 4.6 $40.90 407,850 $40.91 --------- --- ------ --------- ------ 2,858,955 3.9 $29.57 2,081,154 $28.58 ========= === ====== ========= ======
Total compensation expense related to non-vested options not yet recognized is expected to be $8.0 million. The weighted average period over which this is expected to be recognized is 14 months. During the second quarter of 2006, Brent Willis, our President and Chief Executive Officer, received a net cash award of $0.9 million at commencement of employment to purchase common shares of the Company. As of September 30, 2006, Mr. Willis purchased a total of 62,484 common shares of the Company with the net cash award received. The purchased shares must be held for a minimum of three years and must be transferred to the Company (or as the Company may otherwise direct) for no additional consideration on a prorated basis if the service condition of three years is not met. This award is recognized as compensation expense over the vesting period. As of September 30, 2006, $0.1 million was expensed as compensation expense and the remaining balance is classified as restricted shares which is a reduction in shareowners' equity. In addition, 204,000 common shares with a fair value of $3.2 million, which vest over three years, have been granted to Mr. Willis. Compensation costs of $0.4 million were recognized in selling, general and administrative expenses in the period ended September 30, 2006. As of September 30, 2006 there was $2.8 million of unearned compensation relating to the grant that is expected to be recognized on a straight-line basis over a period of three years. 17 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited NEW LONG-TERM INCENTIVE PLANS During the second quarter of 2006, our shareowners approved and adopted two new long-term incentive plans for 2006 and future periods, the Performance Share Unit Plan ("PSU Plan") and the Share Appreciation Rights Plan ("SAR Plan"). PSU Plan Under the PSU Plan, performance share units ("PSUs") may be granted to employees of our Company and its subsidiaries. The value of an employee's award under our PSU Plan will depend on (i) our performance over a three-year performance cycle; and (ii) the market price of our common shares at the time of vesting. Performance targets will be established annually by the Human Resources and Compensation Committee of the Board of Directors. PSUs granted will vest over a term not to exceed three fiscal years. At the start of each performance cycle, we will establish three tiers of performance goals for our Company to achieve over the three-year period: a minimum threshold level, a target level and an outstanding performance level. A target number of PSUs for each participant will be established at the beginning of each three-year performance cycle. Each PSU represents the right, on vesting, to receive one Company common share. If performance over the three-year performance cycle falls below the threshold level, no PSUs will vest. Throughout the performance cycle, there are no dividends paid to participants on the PSUs, and holders do not have the right to vote the common shares represented by their PSUs. Following the vesting of a participant's PSUs, we will contribute cash to an independent trust to be used for the purpose of purchasing an equivalent number of our common shares on the New York Stock Exchange at the prevailing market price. The common shares purchased by the trustee will then be registered in the name of the participant and delivered to the participant upon his or her request. No shares are issued from treasury and the PSU Plan is not dilutive to our shareowners. SAR Plan Under the SAR Plan, share appreciation rights ("SARs") may be granted to employees and directors of our Company and its subsidiaries. SARs will typically vest on the third anniversary of the grant date. On vesting, each SAR will represent the right to be paid the difference, if any, between the price of our common shares on the date of grant and their price on the SAR's vesting date. Payments in respect of vested in-the-money SARs will be made in the form of our common shares purchased on the open market by an independent trust with cash contributed by us. If our share price on the date of vesting is lower than on the date of grant, no payment will be made in respect of those vested SARs. Prior to vesting, there are no dividends paid on the share appreciation rights, and holders do not have the right to vote the common shares represented by their SARs. No shares are issued from treasury and the SAR Plan is not dilutive to our shareowners. We recognize the compensation cost of the PSUs and SARs based on the fair value of the grant. We recognize these compensation costs net of a forfeiture rate on a straight-line basis over the requisite service period of the award, which is generally the vesting term of three years. Compensation cost of the PSUs may vary depending on management's estimates of the probability of the performance measures being achieved and the number of PSUs expected to vest. During the period ended September 30, 2006, the PSUs granted were as follows:
GRANT DATE NUMBER OF PSUS GRANTED TARGET VALUE PER PSU (C$) TOTAL VALUE (C$) - ---------- ---------------------- ------------------------ ---------------- August 1, 2006 37,740 $14.98 $ 565,345 July 26, 2006 437,576 14.21 6,217,949 May 16, 2006 97,469 17.05 1,661,846 ------- ---------- Total 572,785 $8,445,140 ======= ==========
18 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited The number of PSUs granted and target values per PSU noted above are based on an assumption that our performance target will be achieved. The number of units and target values can vary from 0 to 150% of the respective target values noted above depending on the level of performance achieved relative to the performance target. Subject to the terms of the PSU plan, the vesting date for the above PSUs granted will be December 27, 2008. The target value per PSU noted above was determined based on the closing market price of our common shares on the Toronto Stock Exchange on the last trading day prior to the grant date. Compensation costs of $0.6 million were recognized in selling, general and administrative expenses in the period ended September 30, 2006. As of September 30, 2006 there was approximately $7.0 million of unearned compensation relating to the grant that is expected to be recognized on a straight-line basis over a period of 29 months. On July 26, 2006, we granted 458,050 units of SARs at a fair value of $1,658,127 to our employees. Subject to the terms of the SAR plan, the vesting date for these units will be July 26, 2009. Compensation costs of $0.1 million were recognized in selling, general and administrative expenses in the period ended September 30, 2006. As of September 30, 2006 there was $1.6 million of unearned compensation relating to the grant that is expected to be recognized on a straight-line basis over a period of three years. The fair value of the SARs grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
SEPTEMBER 30, 2006 ------------------ Risk-free interest rate 5.05% Average expected life (years) 3 Expected volatility 33.9% Expected dividend yield --
NOTE 14 Contingencies We are subject to various claims and legal proceedings with respect to matters such as governmental regulations, income taxes, and other actions arising out of the normal course of business. Management believes that the resolution of these matters will not have a material adverse effect on our financial position or results from operations. In January 2005, we were named as one of many defendants in a class action suit alleging the unauthorized use by the defendants of container deposits and the imposition of recycling fees on customers. On June 2, 2006, the British Columbia Supreme Court granted the summary trial application, which resulted in the dismissal of the plaintiffs' action against us and the other defendants. The plaintiffs appealed the dismissal, and we and the other defendants are defending the appeal, which we expect to be heard in the next eight to twelve months. It is too early to assess the chances of success of the appeal. In February 2005 similar class action claims were filed in a number of other Canadian provinces. The litigation is at a very preliminary stage and the merits of these cases have not been determined. However, we recently received notice that the plaintiffs in the class action in Quebec have moved for the litigation to be discontinued, which motion will be heard on November 20, 2006. NOTE 15 Segment Reporting We produce, package and distribute retailer brand and branded bottled and canned beverages to regional and national grocery, mass-merchandise and wholesale chains in our North America and International business segments. The International segment includes our United Kingdom business, our Europe business, our Mexican business, our Royal Crown International business and our business in Asia. The Other in the Corporate & Other segment represents the concentrate manufacturing plant assets, sales and related expenses. For comparative purposes, segmented information has been restated to conform to the way we manage our beverage business. 19 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited BUSINESS SEGMENTS
NORTH CORPORATE AMERICA INTERNATIONAL & OTHER TOTAL ------- ------------- --------- -------- (in millions of U.S. dollars) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 External revenue $356.3 $118.0 $ 1.2 $ 475.5 Depreciation and amortization 13.2 4.4 1.4 19.0 Operating income (loss) before unusual items 17.7 11.7 (8.2) 21.2 Unusual items - note 2 Restructuring 5.8 0.5 3.1 9.4 Asset recovery -- -- (0.1) (0.1) Other -- -- -- -- Additions to property, plant and equipment 4.9 1.8 0.1 6.8 AS OF SEPTEMBER 30, 2006 Property, plant and equipment 248.4 122.5 7.3 378.2 Goodwill 75.1 76.0 5.2 156.3 Intangibles and other assets 125.0 27.5 99.4 251.9 Total assets 676.1 409.6 102.7 1,188.4 ------ ------ ------ --------
20 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited
NORTH CORPORATE AMERICA INTERNATIONAL & OTHER TOTAL ------- ------------- --------- -------- (in millions of U.S. dollars) FOR THE THREE MONTHS ENDED OCTOBER 1, 2005 External revenue $376.6 $ 92.2 $ 1.1 $ 469.9 Depreciation and amortization 13.8 3.8 0.7 18.3 Operating income (loss) before unusual items 26.8 6.9 (2.5) 31.2 Unusual items - note 2 Restructuring 2.0 -- -- 2.0 Asset impairments 23.7 -- -- 23.7 Other -- -- -- -- Additions to property, plant and equipment 11.8 1.9 0.4 14.1 AS OF DECEMBER 31, 2005 Property, plant and equipment 266.2 119.7 8.3 394.2 Goodwill 74.1 71.1 5.1 150.3 Intangibles and other assets 136.0 27.4 97.0 260.4 Total assets 710.5 390.8 77.8 1,179.1 ------ ------ ----- --------
NORTH CORPORATE AMERICA INTERNATIONAL & OTHER TOTAL -------- ------------- --------- -------- (in millions of U.S. dollars) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 External revenue $1,049.1 $318.3 $ 4.3 $1,371.7 Depreciation and amortization 40.4 13.2 3.8 57.4 Operating income (loss) before unusual items 59.8 27.6 (29.8) 57.6 Unusual items - note 2 Restructuring 6.7 0.5 4.0 11.2 Asset impairments 1.1 -- 0.1 1.2 Other -- 2.6 -- 2.6 Additions to property, plant and equipment 17.0 5.9 0.6 23.5 -------- ------ ------ --------
21 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited
NORTH CORPORATE AMERICA INTERNATIONAL & OTHER TOTAL -------- ------------- --------- -------- (in millions of U.S. dollars) FOR THE NINE MONTHS ENDED OCTOBER 1, 2005 External revenue $1,126.1 $229.4 $ 2.6 $1,358.1 Depreciation and amortization 40.1 8.8 2.1 51.0 Operating income (loss) before unusual items 87.9 17.0 (9.2) 95.7 Unusual items - note 2 Restructuring 2.0 -- -- 2.0 Asset impairments (recovery) 23.7 (0.2) -- 23.5 Other -- -- -- -- Additions to property, plant and equipment 57.7 10.2 1.0 68.9 -------- ------ ----- --------
Total assets under the Corporate & Other heading include the elimination of intersegment receivables and investments. Credit risk arises from the potential default of a customer in meeting its financial obligations with us. Concentrations of credit exposure may arise with a group of customers which have similar economic characteristics or that are located in the same geographic region. The ability of such customers to meet obligations would be similarly affected by changing economic, political or other conditions. Revenue attributable to our top customer (Wal-Mart Stores, Inc.) in the first nine months of 2006 and 2005 accounted for 38% and 41%, respectively, of our total revenue. Revenue attributable to the top ten customers in the first nine months of 2006 and 2005 accounted for 61% and 67%, respectively, of our total revenue. The loss of any significant customer, or customers which in the aggregate represent a significant portion of our revenue, could have a material adverse effect on our operating results and cash flows. Revenues by geographic area are as follows:
For the three months ended For the nine months ended -------------------------- -------------------------- SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1, 2006 2005 2006 2005 ------------- ---------- ------------- ---------- (in millions of (in millions of U.S. dollars) U.S. dollars) United States $305.4 $327.5 $ 909.5 $ 988.2 Canada 56.9 56.3 162.2 157.2 United Kingdom 94.8 71.8 248.4 169.5 Other Countries 18.4 14.3 51.6 43.2 ------ ------ -------- -------- $475.5 $469.9 $1,371.7 $1,358.1 ====== ====== ======== ========
Revenues are attributed to countries based on the location of the plant. Property, plant and equipment, goodwill, and intangibles and other assets by geographic area are as follows: 22 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited
SEPTEMBER 30, 2006 DECEMBER 31, 2005 ------------------ ----------------- (in millions of U.S. dollars) United States $465.0 $491.7 Canada 98.0 98.2 United Kingdom 210.6 202.3 Other countries 12.0 12.7 ------ ------ $785.6 $804.9 ------ ------
NOTE 16 Differences Between United States and Canadian Accounting Principles and Practices These consolidated financial statements have been prepared in accordance with U.S. GAAP which differs in certain respects from those principles and practices that we would have followed had our consolidated financial statements been prepared in accordance with Canadian GAAP. (a) In fiscal 2005, under U.S. GAAP, we elected not to record compensation expense for options issued to employees with an exercise price equal to the market value of the options. Effective January 1, 2006, we adopted SFAS 123R, Share-Based Payments, which requires us to recognize compensation expense for all types of stock options, using the modified prospective approach. As a result, there was no difference in compensation expense recorded for Canadian GAAP in the first nine months of 2006. Compensation expense of $7.4 million, $5.5 million net of tax of $1.9 million, was recorded in the first nine months of 2005. We recognize these compensation costs net of a forfeiture rate on a straight-line basis over the requisite service period of the award, which is generally the option vesting term of three years. We estimated the forfeiture rate for the first nine months of fiscal 2006 based on our historical experience with forfeitures during the preceding three fiscal years. As a result, compensation expense of $7.4 million ($7.4 million - October 1, 2005), $5.6 million ($5.5 million - October 1, 2005) net of tax of $1.8 million ($1.9 million - October 1, 2005) was recorded in the first nine months of 2006. (b) Under U.S. GAAP, costs of start-up activities and organization costs are expensed as incurred. Under Canadian GAAP these costs, if they meet certain criteria, can be capitalized and amortized over the future benefit period. (c) Under U.S. GAAP, the adoption of the U.S. dollar in 1998 as the presentation and reporting currency was implemented retroactively, such that prior period financial statements are translated under the current rate method using the foreign exchange rates in effect on those dates. Under Canadian GAAP, the change in presentation and reporting currency was implemented by translating all prior year financial statement amounts at the foreign exchange rate on January 31, 1998. As a result, there is a difference in the share capital, retained earnings and cumulative translation adjustment amounts under Canadian GAAP as compared to U.S. GAAP. Under Canadian GAAP, these differences would have been reported in the consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows as follows: 23 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2006 DECEMBER 31, 2005 ------------------------- ------------------------- U.S. GAAP CANADIAN GAAP U.S. GAAP CANADIAN GAAP --------- ------------- --------- ------------- (in millions of (in millions of U.S. dollars) U.S. dollars) Deferred income taxes - net (a),(b) 55.7 49.2 53.5 47.0 Total liabilities 653.5 647.0 674.7 668.2 Capital stock (a),(c) 273.3 264.2 273.0 263.9 Additional paid-in-capital (a) 25.8 32.6 18.4 25.2 Retained earnings (a), (b), (c) 198.3 165.2 186.2 153.1 Accumulated other comprehensive income (c) 16.4 58.8 4.3 46.7 Total shareowners' equity 513.0 520.0 481.9 488.9
RECONCILIATION OF CONSOLIDATED STATEMENTS OF INCOME (LOSS)
For the three months ended For the nine months ended -------------------------- -------------------------- SEPTEMBER 30, OCTOBER 1, SEPTEMBER 30, OCTOBER 1, 2006 2005 2006 2005 ------------- ---------- ------------- ---------- (in millions of (in millions of U.S. dollars) U.S. dollars) Net income (loss) under U.S. GAAP $ 6.6 $ (1.8) $12.1 $31.5 Cost of sales (b) -- (0.1) -- (0.3) Share base compensation (a) -- (2.2) -- (7.4) Recovery of income taxes (a),(b) -- 0.6 -- 2.0 ----- ------ ----- ----- Net income (loss) under Canadian GAAP $ 6.6 $ (3.5) $12.1 $25.8 ===== ====== ===== ===== Net income (loss) per common share, Canadian GAAP Basic $0.09 $(0.05) $0.17 $0.36 Diluted $0.09 $(0.05) $0.17 $0.36
24 COTT CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Unaudited RECONCILIATION OF CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended For the nine months ended ------------------------------------ ------------------------------------ SEPTEMBER 30, 2006 OCTOBER 1, 2005 SEPTEMBER 30, 2006 OCTOBER 1, 2005 ------------------ --------------- ------------------ --------------- (in millions of U.S. dollars) (in millions of U.S. dollars) Cash provided by operating activities U.S. GAAP $55.6 $55.7 $83.7 $110.6 Net loss (a),(b) -- (1.7) -- (5.7) Depreciation & amortization (b) -- 0.1 -- 0.3 Deferred income taxes (a),(b) -- (0.6) -- (2.0) Share based compensation (a) -- 2.2 -- 7.4 ----- ----- ----- ------ Cash provided by operating activities Canadian GAAP $55.6 $55.7 $83.7 $110.6 ===== ===== ===== ======
NOTE 17 Certain of the comparative figures have been reclassified to conform to the current period's presentation. NOTE 18 Subsequent Events On October 26, 2006, we announced the closures of our manufacturing plant in Elizabethtown, Kentucky and our manufacturing plant and warehousing in Wyomissing, Pennsylvania. We intend to cease production at both plants by December 31, 2006, and reallocate production volume to other manufacturing sites in North America. In connection with the plant and warehouse closures, we expect to record approximately $40 to $45 million in pre-tax charges, of which approximately $23 million relates to accelerated depreciation and amortization and impairment charges relating to property, plant and equipment and intangible assets, and the remainder to contract termination costs and severance costs for the termination of approximately 350 employees. These charges are expected to be taken in the fourth quarter of 2006 and the first half of 2007. 25 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW We are one of the world's largest non-alcoholic beverage companies and the world's largest retailer brand soft drink provider. RESULTS OF OPERATIONS
For the three months ended For the nine months ended --------------------------------------- --------------------------------------- SEPTEMBER 30, 2006 OCTOBER 1, 2005 SEPTEMBER 30, 2006 OCTOBER 1, 2005 ------------------ ------------------ ------------------ ------------------ Millions Percent Millions Percent Millions Percent Millions Percent of of of of of of of of Dollars Revenue Dollars Revenue Dollars Revenue Dollars Revenue -------- ------- -------- ------- -------- ------- -------- ------- Revenue $475.5 100.0% $469.9 100.0% $1,371.7 100.0% $1,358.1 100.0% Cost of sales 413.5 87.0% 404.5 86.1% 1,184.7 86.4% 1,156.0 85.1% ------ ----- ------ ----- -------- ----- -------- ----- Gross margin 62.0 13.0% 65.4 13.9% 187.0 13.6% 202.1 14.9% SG&A 40.8 8.6% 34.2 7.3% 129.4 9.4% 106.6 7.8% Gain on disposal of property, plant and equipment -- -- -- -- -- -- (0.2) -- Unusual items 9.3 2.0% 25.7 5.5% 15.0 1.1% 25.5 1.9% ------ ----- ------ ----- -------- ----- -------- ----- Operating income 11.9 2.5% 5.5 1.2% 42.6 3.1% 70.2 5.2% Other income, net (0.2) -- (0.4) -- (0.4) -- (0.4) -- Interest expense 7.8 1.6% 7.7 1.6% 23.5 1.7% 20.8 1.5% Minority interest 0.9 0.2% 1.1 0.2% 3.0 0.2% 3.4 0.3% Income taxes (3.2) 0.7% (1.1) 0.2% 4.4 0.3% 14.9 1.1% ------ ----- ------ ----- -------- ----- -------- ----- Net income (loss) $ 6.6 1.4% $ (1.8) 0.4% $ 12.1 0.9% $ 31.5 2.3% ------ ----- ------ ----- -------- ----- -------- ----- Depreciation & amortization $ 19.0 4.0% $ 18.3 3.9% $ 57.4 4.2% $ 51.0 3.8% ------ ----- ------ ----- -------- ----- -------- -----
We reported a net income of $6.6 million or $0.09 per diluted share for the third quarter ended September 30, 2006, as compared with a net loss of $1.8 million, or $0.03 per diluted share for the third quarter of 2005. For the first nine months of 2006, net income decreased 62% to $12.1 million or $0.17 per diluted share, from $31.5 million or $0.44 per diluted share in the same period last year. The decrease was primarily due to: - lower volume; - higher logistics costs; - increased selling, general and administrative costs due to executive transition costs, higher incentive compensation expense and share based compensation expense; and - increased interest expense due to our August 2005 acquisition of 100% of the outstanding shares of Macaw (Holdings) Limited (now known as Cott Nelson (Holdings) Limited, the parent company of Macaw (Soft Drinks) Limited (now known as Cott (Nelson) Limited) (the "Macaw Acquisition"). The decrease in net income was partially offset by a reduction in tax valuation allowances and a cumulative income tax benefit of $3.3 million that we recognized in the period ended September 30, 2006 due to a more favorable geographic mix of earnings. REVENUE -Revenue in the third quarter of 2006 was $475.5 million, an increase of 1% from $469.9 million in the third quarter of 2005. Revenue decreased 4% compared to the third quarter of 2005 when excluding the impact of foreign exchange and the Macaw Acquisition. The impact of foreign exchange on this decrease was 2%. Total eight-ounce equivalent case volume was 307.6 million cases in the third quarter of 2006, a decrease of 7% compared to the third quarter of 2005. The volume decline was due to continued softness in the North American carbonated soft drink ("CSD") category, the timing of concentrate shipments, lower bottled water shipments and product and customer rationalization. These factors were partially offset by strong International filled beverage volume growth of 30% in the quarter ended September 30, 2006 as compared to the same period in 26 2005, driven by Mexico. Excluding the impact of the Macaw Acquisition, filled beverage volume growth for International was 10% in the quarter ended September 30, 2006 as compared to the same period in 2005. Revenue for the first nine months of 2006 increased to $1,371.7 million, which is 1% higher than the same period last year but 5% lower when the impact of acquisition and foreign exchange are excluded. Total eight-ounce equivalent case volume was 966.2 million cases for the first nine months of 2006 compared to 927.6 million cases for the first nine months of 2005. The increase was due to the Macaw Acquisition, U.K. base business growth, as well as strong growth in Mexico and concentrate sales.
For the three months ended For the nine months ended -------------------------------- -------------------------------- SEPTEMBER 30, 2006 SEPTEMBER 30, 2006 -------------------------------- -------------------------------- North North Cott America International Cott America International ------ ------- ------------- ------ ------- ------------- Change in revenue $ 5.6 $(20.3) $ 25.8 $ 13.6 $(77.0) $ 88.9 Impact of acquisitions (16.6) -- (16.6) (65.8) -- (65.8) Impact of foreign exchange (7.5) (3.9) (3.4) (13.0) (13.2) 0.3 ------ ------ ------ ------ ------ ------ Change excluding acquisitions & foreign exchange $(18.5) $(24.2) $ 5.8 $(65.2) $(90.2) $ 23.4 ------ ------ ------ ------ ------ ------ Percentage change excluding acquisitions & foreign exchange (4%) (6%) 7% (5%) (8%) 11% ------ ------ ------ ------ ------ ------
In North America, revenue was $356.3 million in the third quarter of 2006, a decrease of 5% from the third quarter of 2005. Excluding the impact of foreign exchange, revenue decreased by 6%. The decline was due to continued softness in the CSD category, the timing of concentrate shipments, lower bottled water shipments and product and customer rationalization. The decrease was also due to a structural change in our business arrangement with one of our self-manufacturing customers. The related revenues are now in the form of concentrates rather than filled beverages, which lowers our revenue but has minimal earnings impact. In the first nine months of 2006, revenue was $1,049.1 million, a decrease of 7% from the first nine months of 2005. Excluding the impact of foreign exchange, revenue decreased by 8%. The International segment includes our U.K. and Europe business, our Mexican business, our Royal Crown International business and our business in Asia. Revenue in this segment was $118.0 million in the third quarter of 2006, an increase of 28% when compared with the third quarter of 2005. The growth was due to contributions resulting from the Macaw Acquisition, as well as strong base business growth in the U.K. which was up 11% year-over-year. Mexico also reported strong growth of 32% in the third quarter as compared to the same period in 2005, largely as a result of broadening distribution to non-supermarket channels. Excluding the impact of the Macaw Acquisition, revenue increased 12%. Excluding the impact of the Macaw Acquisition and foreign exchange, revenue increased 7%. GROSS PROFIT - Gross profit for the third quarter of 2006 was $62.0 million, or 13.0% of revenue, down from $65.4 million, or 13.9% of revenue in the third quarter of 2005, mainly due to the impact of lower volume and higher logistics costs. Gross profit in the first nine months of 2006 was $187.0 million, or 13.6% of revenue, compared to gross profit of $202.1 million, or 14.9% of revenue, in the first nine months of 2005. The decline was due primarily to the impact of lower volume and higher logistics costs. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") - SG&A was $40.8 million in the third quarter of 2006, an increase of $6.6 million from the third quarter of 2005, largely due to $2.8 million of share based compensation, increased incentive compensation costs of $2.0 million and $1.0 million of foreign exchange. SG&A was $129.4 million in the first nine months of 2006, an increase of $22.8 million from the first nine months of 2005, largely due to $7.4 million of share based compensation $6.6 million of executive transition costs and increased incentive compensation costs. As a percentage of revenue, SG&A increased to 8.6% during the third quarter of 2006, up from 7.3% for the same period last year and to 9.4% for the first nine months of 2006, up from 7.8% for the same period last year. 27 SHARE BASED COMPENSATION - Effective January 1, 2006, we adopted Statement of Financial Accounting Standard ("SFAS 123R"), Share-Based Payments, using the modified prospective approach and therefore have not restated results for prior periods. Under this prospective approach, share based compensation expense for the nine months ended September 30, 2006 includes compensation expense for all share based compensation awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provision of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Share based compensation expense for all share based compensation awards granted after January 1, 2006 is based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. We recognize these compensation costs net of a forfeiture rate on a straight-line basis over the requisite service period of the award, which is generally the option vesting term of three years. We estimated the forfeiture rate for the first nine months of fiscal 2006 based on our historical experience with forfeitures during the preceding three fiscal years. For the interim period ending September 30, 2006, net income includes compensation expense of $7.4 million, or $5.6 million net of tax of $1.8 million. As reported for the nine month period ended October 1, 2005 under FAS123, income before taxes was $39.0 million, income tax expense was $13.0 million and net income was $26.0 million or $0.36 per basic and diluted share. During the second quarter of 2006, our shareowners approved and adopted two new compensation plans for 2006 and future periods, the Performance Share Unit Plan and the Share Appreciation Rights Plan. These plans are designed to attract, maintain and motivate key employees while promoting the long-term financial success of our business. During the nine months ended September 30, 2006, a total of 572,785 PSUs at a fair value of C$8,445,140 were granted to employees of our Company and its subsidiaries. These are the number of units and value that are expected to be issued based on an assumption that certain performance targets will be achieved. The number of units and value can vary from 0 to 150% of the expected numbers noted above depending on meeting the performance target. Subject to the terms of the PSU plan, these units will vest on December 27, 2008. Compensation costs of $0.6 million were recognized in selling, general and administrative expenses in the period ended September 30, 2006. As of September 30, 2006 there was approximately $7.0 million of unearned compensation costs relating to the grant that is expected to be recognized on a straight-line basis over a period of 29 months. During the nine months ended September 30, 2006, a total of 458,050 SARs at a fair value of $1,658,127 were granted to employees of our Company and its subsidiaries. The fair value of the SARs grant is estimated on the date of grant using the Black-Scholes option pricing model. Subject to the terms of the SAR plan, these units will vest on July 26, 2009. Compensation costs of $0.1 million were recognized in selling, general and administrative expenses in the period ended September 30, 2006. As of September 30, 2006 there was $1.6 million of unearned compensation costs relating to the grant that is expected to be recognized on a straight-line basis over a period of three years. UNUSUAL ITEMS - In the third quarter of 2006, we recorded charges for unusual items of $9.3 million on a pre-tax basis compared to $25.7 million on a pre-tax basis for the same period last year. For the first nine months of 2006, we recorded charges for unusual items of $15.0 million on a pre-tax basis compared to $25.5 million on a pre-tax basis for the same period last year. The $9.3 million of unusual items recorded in the third quarter of 2006 consists of $9.4 million of restructuring charges, partially offset by a $0.1 million gain related to a recovery from a note receivable. Of the $15.0 million of unusual items recorded in the first nine months of 2006, $11.2 million relates to restructuring charges, $1.2 million relates to asset impairments net of a recovery from the sale of other assets and note receivable and $2.6 million relates to legal and other fees relating to the U.K Competition Commission review of the Macaw Acquisition. Restructuring charges of $9.4 million recorded in the third quarter consist of $4.9 million for severance and contract termination costs relating to the closures of our Columbus, Ohio soft drink plant and our Lachine, Quebec juice plant, $0.9 million of other severance costs relating to sales and marketing employees and $3.8 million for severance costs relating to the North American realignment plan, partially offset by a $0.2 million recovery relating to consulting fees. Restructuring charges of $11.2 million recorded in the first nine months of 2006 include $5.8 million for severance and contract termination costs relating to the closures of our Columbus, Ohio soft drink plant and our Lachine, Quebec juice plant, $0.9 million of other severance costs relating to sales and marketing employees and $3.8 million for severance costs relating to organizational streamlining. The remaining restructuring costs of $0.7 million consist of consulting fees relating to the North American realignment. Recoveries of $0.1 million recorded in the third quarter of 2006 related to collections of a previously impaired note receivable. Asset impairments of $1.2 million recorded in the first nine months of 2006 consist of $1.6 million related to the closure of our Columbus, Ohio soft drink plant (relating to the writedown of property, plant and equipment, customer list and information technology software) and $0.1 million related to the closure of our Lachine, Quebec juice plant (relating to the writedown of 28 property, plant and equipment), partially offset by a recovery of $0.4 million from the sale of other assets and a recovery of $0.1 million from a note receivable. On July 27, 2006, we announced changes to our senior management structure, roles and responsibilities. In connection with those changes, we recognized a previously reported estimate of $3.8 million of severance and associated costs during the three months ended September 30, 2006. OPERATING INCOME - Operating income was $11.9 million in the third quarter of 2006 including unusual items of $9.3 million, as compared with $5.5 million in the third quarter of 2005 which included unusual items of $25.7 million. Operating income was $42.6 million for the first nine months of 2006 including unusual items of $15.0 million, as compared with $70.2 million in the first nine months of 2005 which included unusual items of $25.5 million. INTEREST EXPENSE - Net interest expense was $7.8 million in the third quarter of 2006, up from $7.7 million in the third quarter of 2005. Net interest expense was $23.5 million in the first nine months of 2006, up from $20.8 million in the first nine months of 2005, primarily resulting from the Macaw Acquisition. INCOME TAXES - We recorded an income tax recovery of $3.2 million for the third quarter related to reduced tax valuation allowances and an income tax provision of $4.4 million for the first nine months of 2006, as compared with $1.1 million and $14.9 million, respectively, for the same periods last year. FINANCIAL CONDITION OPERATING ACTIVITIES - Cash provided by operating activities in the first nine months of 2006 was $83.7 million as compared to $110.6 million for the first nine months of 2005. Capital expenditures for the first nine months of 2006 were $23.5 million as compared to $68.9 million for the first nine months of 2005. Cash increased from $21.7 million to $29.7 million in the first nine months of 2006. CAPITAL RESOURCES AND LONG-TERM DEBT - Our sources of capital include operating cash flows, short term borrowings under current credit and receivables securitization facilities, issuance of public and private debt and issuance of equity securities. We believe we have adequate financial resources to meet our ongoing cash requirements for operations and capital expenditures, as well as our other financial obligations based on our operating cash flows and currently available credit. Our senior secured credit facilities allow for revolving credit borrowings of up to $225.0 million provided we are in compliance with the covenants and conditions of the agreement. As of September 30, 2006 credit of $94.4 million was available after borrowings of $125.4 million and standby letters of credit of $5.2 million. The weighted average interest rate was 6.38% on these facilities as of September 30, 2006. Our receivables securitization facility allows for borrowing up to $75.0 million based on the amount of eligible receivables and various reserves required by the facility. As of September 30, 2006, $63.5 million of eligible receivables, net of reserves, were available for purchase under this facility with no balance outstanding. As of September 30, 2006, long-term debt including the current portion totaled $273.1 million, which is consistent with the balance at the end of 2005. At the end of the first nine months of 2006, long-term debt consisted of $272.0 million in 8% senior subordinated notes with a face value of $275.0 million and $1.1 million of other debt. CANADIAN GAAP - There were no material U.S./Canadian GAAP differences in the first nine months of 2006. OUTLOOK We continue to expect the remainder of 2006 to be challenging. Sales of carbonated soft drinks are expected to remain under pressure in North America in the near term. We continue to expect strong growth in the bottled water and non-carbonated beverages segments. 29 Since September 29, 2005 through the end of the third quarter of 2006, we have recorded pretax charges of $49.3 million relating to unusual items including impairment and restructuring charges. These amounts are part of our estimated $115 to $125 million in total charges related to cost reduction. This range has been revised from the previously announced range of $60 to $80 million, as a result of additional plant closures, office consolidation and organizational streamlining. We continue to expect net income, excluding unusual items, share based compensation expense and charges related to executive transitions, to be substantially lower in 2006 than in 2005. We also expect fourth quarter of 2006 net income to be below the prior year fourth quarter due to continuing volume softness, planned curtailment in production to reduce inventories, the inclusion of share based compensation expense and aggressive actions to position the Company for improved performance in 2007. To build long-term success and profitability, we are focused on three key priorities: 1) reducing costs; 2) becoming the best partner to our retailer customers; and 3) building and sustaining a pipeline of innovation and new product development. Our cost reduction program includes initiatives to optimize assets, reduce fixed costs and implement world-class efficiencies, the adoption of a sub-zero-based budgeting system, optimization of selling, general and administrative expenses, further centralization of procurement and suppliers, and ongoing SKU rationalization. In addition, we intend to drive top-line growth by focusing on in-store execution, penetration of new, high-margin beverage segments, expansion of our business to new, high-margin channels, and expansion to new global customers and geographies. To support the Company's long-term growth, we have restructured our organization under two business units responsible for North America and International. These two business units are focused on customer management, channel development, sales and marketing and are supported by four centralized functions: 1) People; 2) Supply/Manufacturing; 3) Finance and 4) Legal / Corporate Development. The new organizational structure is designed to leverage our strengths in addressing growth opportunities while driving efficiencies throughout the Company. Our business strategy also involves continued expansion of our business outside North America. We continue to view Mexico as a strong long-term growth opportunity and are working closely with our customers to grow the retailer brand beverage segment in this market and expand into new channels and product segments. Our U.K. division intends to continue to enhance its performance through product innovation and expansion in aseptic products with the installation of second aseptic production line in our Nelson facility. We also continue to explore arrangements with bottlers in China to help meet the needs of major customers expanding in that market. FORWARD-LOOKING STATEMENTS - In addition to historical information, this report and the reports and documents incorporated by reference in this report contain statements relating to future events and our future results. These statements are "forward-looking" within the meaning of the Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation and include, but are not limited to, statements that relate to projections of sales, earnings, earnings per share, cash flows, capital expenditures or other financial items, discussions of estimated future revenue enhancements and cost savings. These statements also relate to our business strategy, goals and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. Generally, words such as "anticipate", "believe", "continue", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project", "should" and similar terms and phrases are used to identify forward-looking statements in this report and in the documents incorporated in this report by reference. These forward-looking statements are made as of the date of this report. Although we believe the assumptions underlying these forward-looking statements are reasonable, any of these assumptions could prove to be inaccurate and, as a result, the forward-looking statements based on those assumptions could be incorrect. Our operations involve risks and uncertainties, many of which are outside of our control, and any one or any combination of these risks and uncertainties could also affect whether the forward-looking statements ultimately prove to be correct. The following are some of the factors that could affect our financial performance, including but not limited to sales, earnings and cash flows, or could cause actual results to differ materially from estimates contained in or underlying the forward-looking statements: - changing nature of the North American business; - our ability to successfully implement our realignment plan; - our ability to grow business outside of North America, including in new geographic areas; - our ability to expand our business to new channels and products; - our ability to integrate new management and a new management structure; 30 - loss of key customers, particularly Wal-Mart, and the commitment of retailer brand beverage customers to their own retailer brand beverage programs; - increases in competitor consolidations and other market-place competition, particularly among branded beverage products; - our ability to identify acquisition and alliance candidates and to integrate into our operations the businesses and product lines that we acquire or become allied with; - our ability to secure additional production capacity either through acquisitions, or third party manufacturing arrangements; - increase in interest rates; - our ability to restore plant efficiencies and lower logistics costs; - fluctuations in the cost and availability of beverage ingredients and packaging supplies, and our ability to maintain favorable arrangements and relationships with our suppliers; - our ability to pass on increased costs to our customers and if successful the impact those increased prices could have on our volumes; - unseasonably cold or wet weather, which could reduce demand for our beverages; - our ability to protect the intellectual property inherent in new and existing products; - adverse rulings, judgments or settlements in our existing litigation and regulatory reviews, and the possibility that additional litigation or regulatory reviews will be brought against us; - product recalls or changes in or increased enforcement of the laws and regulations that affect our business; - currency fluctuations that adversely affect the exchange between the U.S. dollar on one hand and the pound sterling, the Canadian dollar and other currencies on the other; - changes in tax laws and interpretations of tax laws; - changes in consumer tastes and preferences and market demand for new and existing products and our ability to satisfy them; - interruption in transportation systems, labor strikes, work stoppages and other interruptions or difficulties in the employment of labor or transportation in our markets; and - changes in general economic and business conditions. Many of these factors are described in greater detail in this report and in other filings that we make with the U.S. Securities and Exchange Commission ("SEC") and Canadian securities regulatory authorities. We undertake no obligation to update any information contained in this report or to publicly release the results of any revisions to forward-looking statements to reflect events or circumstances of which we may become aware of after the date of this report. Undue reliance should not be placed on forward-looking statements. All future written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to Item 7A: Quantitative and Qualitative Disclosures about Market Risk described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005. In the first nine months of 2006, we entered into cash flow hedges to mitigate exposure to declines in the value of the Canadian dollar attributable to certain forecasted U.S. dollar raw material purchases of the Canadian business segment. The hedges consist of monthly foreign exchange options to buy U.S. dollars at fixed rates per Canadian dollar and mature at various dates through December 28, 2006. In fiscal 2005, we also entered into cash flow hedges to mitigate exposure to declines in the value of pound sterling attributable to certain forecasted U.S. dollar raw material purchases of the United Kingdom ("U.K.") and European business segments. The fair market value of the foreign exchange options is included in prepaid expenses and other assets. Changes in the fair value of the cash flow hedge instruments are recognized in accumulated other comprehensive income. Amounts recognized in accumulated other comprehensive income and prepaid expenses and other assets are recorded in earnings in the same periods in which the forecasted purchases or payments affect earnings. At September 30, 2006, the fair value of the 31 options was nil ($0.7 million - October 1, 2005) and we recorded $0.3 million unrealized gain in comprehensive income in the first nine months of 2006. See "Note 8 Derivative Financial Instruments." Our revenues outside the U.S. are concentrated principally in the U.K. and Canada. We believe that our foreign currency exchange rate risk has been immaterial given the historic stability of the U.S. dollar with respect to the foreign currencies to which we have our principal exposure. However, there can be no assurance that these exchange rates will remain stable or that our exposure to foreign currency exchange rate risk will not increase in the future. ITEM 4. CONTROLS AND PROCEDURES Our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) are effective, based on their evaluation of these controls and procedures as of the end of the period covered by this report. There have been no changes in our internal control over financial reporting or in other factors during the quarter ended September 30, 2006 that could materially affect, or are likely to materially affect, our internal control over financial reporting. 32 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to the legal proceedings described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005 and to our Quarterly Reports on Form 10-Q for the three-month periods ended April 1, 2006 and July 1, 2006. In addition, in reference to the action styled the Consumers' Association of Canada and Bruce Cran v. Coca-Cola Bottling Ltd. et al., on June 2, 2006, the British Columbia Supreme Court granted the summary trial application, which resulted in the dismissal of the plaintiffs' action against us and the other defendants. On June 26, 2006, the plaintiffs' appealed the dismissal of their action to the British Columbia Court of Appeal. We, together with the other defendants, are defending the appeal, which we expect will be heard in the next eight to twelve months. It is too early to assess the chances of success of the appeal. Furthermore, in reference to the action styled Kruger et al. v. Pepsi-Cola Beverage Ltd., et al. filed in Superior Court in Quebec, District of Hull, we received notice by letter dated October 13, 2006, that the plaintiffs have moved for the litigation to be discontinued. The plaintiffs' motion is scheduled to be heard on November 20, 2006. ITEM 1A. RISK FACTORS Reference is made to the detailed description of risk factors our Annual Report on Form 10-K for the fiscal year ended December 31, 2005. Risks and uncertainties include national brand pricing strategies, commitment of major customers to retailer brand programs, stability of procurement costs for items such as sweetener, packaging materials and other ingredients, the successful integration of new acquisitions, the ability to protect intellectual property and fluctuations in interest rates and foreign currencies versus the U.S. dollar. The Risk Factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005 have not changed materially other than as set forth below: IF THE COMPETITION COMMISSION IN THE U.K. DOES NOT APPROVE THE MACAW ACQUISITION, WE MIGHT BE REQUIRED TO SELL ALL OR PART OF THIS BUSINESS AND MAY NOT RECOVER OUR FULL COST. This Risk Factor is no longer applicable as the U.K. Competition Commission approved the Macaw Acquisition on April 28, 2006. ITEM 5. OTHER INFORMATION TERMINATION AGREEMENT WITH ANDREW MURFIN On August 2, 2006, our subsidiary, Cott Beverages Ltd. ("Cott Beverages") entered into an agreement with Andrew Murfin (the "Murfin Termination Agreement") in connection with the termination of Mr. Murfin's employment as Cott Beverages' Managing Director effective August 1, 2006 (the "Murfin Termination Date"). Mr. Murfin also resigned as a director, officer, and company secretary of each of Cott Beverages' direct and indirect affiliates, subsidiaries and associated companies in which he held such a position, including as our Senior Vice President & Managing Director U.K./Europe, with such resignation being effective August 1, 2006. Pursuant to the Murfin Termination Agreement, Cott Beverages paid Mr. Murfin (pounds)117,000 as compensation for loss of employment, less applicable withholdings and deductions, except that the first (pounds)30,000 was paid without deduction of taxes. Under the terms of the Murfin Termination Agreement, Mr. Murfin was afforded 60 days to exercise all of his currently vested stock options in accordance with our Common Share Option Plan, or such vested stock options would lapse. Any stock options granted to Mr. Murfin that were not vested at the Murfin Termination Date automatically lapsed on such date. We also agreed to accelerate the vesting of certain shares held by Mr. Murfin under our Executive Incentive Share Purchase Plan. 33 Pursuant to the Murfin Termination Agreement, Mr. Murfin agreed to release us from any liability arising from or related to his employment with us or the termination thereof. Mr. Murfin's non-competition and non-solicitation covenants to us will apply for 12 months following the termination of his employment and he has agreed to be bound by confidentiality covenants. EMPLOYMENT AGREEMENT WITH ABILIO GONZALEZ On July 27, 2006, we announced that we had hired Abilio Gonzalez to serve as our Chief People Officer. Subsequently, on August 1, 2006, we executed an Employment Agreement (the "Gonzalez Employment Agreement"), effective immediately. Under the Gonzalez Employment Agreement, we will pay Mr. Gonzalez a base salary of not less than $325,000 per year, reviewed at least annually for increases at the discretion of our Chief Executive Officer and/or our Board of Directors. Mr. Gonzalez is also entitled to an annual car allowance of $13,500. Mr. Gonzalez is entitled to an annual performance-based bonus of an amount equal to up to 100% of his base salary for achievement of specified target goals, and up to an additional 100% of his base salary for achievement of performance goals in excess of the target goals. His bonus for 2006 is guaranteed to be a minimum of 100% of his base salary prorated for actual employment during 2006, and any excess bonus earned will also be prorated for actual service during 2006. Mr. Gonzalez is eligible to participate in all of our benefit plans made available to our employees and senior executives, including the executive incentive share purchase and long-term incentive plans. As an inducement to enter into employment with us, Mr. Gonzalez received a one-time cash award of $200,000, as well as a grant of performance share units equal to $200,000. Mr. Gonzalez is also entitled to reimbursement for relocation expenses and temporary housing. If we terminate Mr. Gonzalez's employment for cause or he resigns, we will pay him an amount equal to his accrued base salary and any accrued but unpaid vacation entitlements. If we terminate him without cause or he resigns for good reason, he will be entitled to a (i) his accrued base salary through the date of termination, (ii) his target bonus, prorated through the termination date based on the achievement of specified target goals to such date, (iii) a lump-sum payment equal to the sum of (a) his annual base salary at the time of termination and (b) a target bonus in an amount equal to the average of the target bonus payments for the two most recently completed fiscal years, and (iv) continuation of insurance benefits for 12 months or until such benefits are replaced by a new employer, subject to eligibility under the applicable plans. All such payments will be made less applicable statutory withholdings and deductions. Mr. Gonzalez's participation in all bonus plans will terminate immediately on the date of termination of employment. Mr. Gonzalez has agreed to be subject to standard confidentiality undertakings and will also be subject to non-competition, non-solicitation, and non-disparagement restrictions during the term of employment and for a period of 12 months following termination. ITEM 6. FINANCIAL STATEMENT SCHEDULES AND EXHIBITS 1. Financial Statement Schedules Schedule III - Consolidating Financial Statements 2. Exhibits 34
Number Description - ------ ----------- 3.1 Articles of Incorporation of Cott (incorporated by reference to Exhibit 3.1 to our Form 10-K dated March 31, 2000). 3.2 By-laws of Cott (incorporated by reference to Exhibit 3.2 to our Form 10-K dated March 8, 2002). 10.1 Termination Letter Agreement between Cott Corporation and Mark Benadiba dated August 2, 2006 (filed herewith). 10.2 Termination Letter Agreement between Cott Corporation and Andrew J. Murfin dated August 2, 2006 (filed herewith). 10.3 Termination Letter Agreement between Cott Corporation and Colin Walker dated August 8, 2006 (filed herewith). 10.4 Employment Agreement between Cott Corporation and Wynn A. Willard dated August 23, 2006 (filed herewith). 10.5 Employment Agreement between Cott Corporation and John Dennehy dated September 12, 2006 (filed herewith). 10.6 Employment Offer Letter between Cott Corporation and Rick Dobry dated September 21, 2006 and modification dated October 24, 2006 (filed herewith). 10.7 Employment Agreement between Cott Corporation and Abilio Gonzales dated August 1, 2006 (filed herewith). 31.1 Certification of the President and Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2006 (filed herewith). 31.2 Certification of the Executive Vice President & Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2006 (filed herewith). 32.1 Certification of the President and Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2006 (furnished herewith). 32.2 Certification of the Executive Vice President & Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended September 30, 2006 (furnished herewith).
In accordance with SEC Release No. 33-8238, Exhibits 32.1 and 32.2 are to be treated as "accompanying" this report rather than "filed" as part of the report. 35 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COTT CORPORATION (Registrant) Date: November 7, 2006 /s/ B. Clyde Preslar ---------------------------------------- B. Clyde Preslar Executive Vice President & Chief Financial Officer (On behalf of the Company) Date: November 7, 2006 /s/ Tina Dell'Aquila ---------------------------------------- Tina Dell'Aquila Vice President, Controller & Assistant Secretary (Principal accounting officer) 36 SCHEDULE III - CONSOLIDATING FINANCIAL STATEMENTS Cott Beverages Inc., a wholly owned subsidiary of Cott Corporation, has entered into financing arrangements that are guaranteed by Cott Corporation and certain other wholly owned subsidiaries of Cott Corporation (the "Guarantor Subsidiaries"). Such guarantees are full, unconditional and joint and several. The following supplemental financial information sets forth on an unconsolidated basis, balance sheets, statements of income and cash flows for Cott Corporation, Cott Beverages Inc., Guarantor Subsidiaries and Cott Corporation's other subsidiaries (the "Non-guarantor Subsidiaries"). The supplemental financial information reflects the investments of Cott Corporation and Cott Beverages Inc. in their respective subsidiaries using the equity method of accounting. COTT CORPORATION CONSOLIDATING STATEMENTS OF INCOME (LOSS) (in millions of U.S. dollars, unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 ---------------------------------------------------------------------------------------- COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ----------- -------------- ------------ ------------- ----------- ------------ REVENUE $63.7 $286.4 $111.4 $33.9 $(19.9) $475.5 Cost of sales 52.2 257.0 94.9 29.3 (19.9) 413.5 ----- ------ ------ ----- ------ ------ GROSS PROFIT 11.5 29.4 16.5 4.6 -- 62.0 Selling, general and administrative expenses 1.4 23.8 12.1 3.5 -- 40.8 Unusual items Restructuring 1.4 6.3 1.5 0.2 9.4 Asset (recovery) impairments (0.3) 0.2 -- -- -- (0.1) ----- ------ ------ ----- ------ ------ OPERATING INCOME (LOSS) 9.0 (0.9) 2.9 0.9 -- 11.9 Other (income) expense, net (0.2) 2.6 (1.0) (2.7) 1.1 (0.2) Interest expense, net -- 7.7 0.1 -- -- 7.8 Minority interest -- -- -- 0.9 -- 0.9 ----- ------ ------ ----- ------ ------ INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY INCOME (LOSS) 9.2 (11.2) 3.8 2.7 (1.1) 3.4 Income taxes (recovery) -- (4.2) 0.9 0.1 -- (3.2) Equity (loss) income (2.6) 0.4 (4.8) -- 7.0 -- ----- ------ ------ ----- ------ ------ NET INCOME (LOSS) $ 6.6 $ (6.6) $ (1.9) $ 2.6 $ 5.9 $ 6.6 ===== ====== ====== ===== ====== ======
37 COTT CORPORATION CONSOLIDATING STATEMENTS OF INCOME (LOSS) (in millions of U.S. dollars, unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 ---------------------------------------------------------------------------------------- COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ----------- -------------- ------------ ------------- ----------- ------------ REVENUE $177.6 $857.8 $296.8 $96.3 $(56.8) $1,371.7 Cost of sales 145.6 756.1 257.6 82.2 (56.8) 1,184.7 ------ ------ ------ ----- ------ -------- GROSS PROFIT 32.0 101.7 39.2 14.1 -- 187.0 Selling, general and administrative expenses 23.9 69.6 28.5 7.4 -- 129.4 (Gain) loss on disposal of property, plant and equipment (0.5) 0.5 -- -- -- -- Unusual items Restructuring 1.6 7.9 1.5 0.2 -- 11.2 Asset (recovery) impairments (0.4) 1.6 -- -- -- 1.2 Other -- -- 2.6 -- -- 2.6 ------ ------ ------ ----- ------ -------- OPERATING INCOME 7.4 22.1 6.6 6.5 -- 42.6 Other (income) expense, net (0.3) 7.2 (1.8) (3.6) (1.9) (0.4) Interest (income) expense, net (0.1) 23.7 0.2 (0.3) -- 23.5 Minority interest -- -- -- 3.0 -- 3.0 ------ ------ ------ ----- ------ -------- INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY INCOME (LOSS) 7.8 (8.8) 8.2 7.4 1.9 16.5 Income taxes (recovery) 0.1 (3.1) 2.8 4.6 -- 4.4 Equity income (loss) 4.4 0.1 2.8 -- (7.3) -- ------ ------ ------ ----- ------ -------- NET INCOME (LOSS) $ 12.1 $ (5.6) $ 8.2 $ 2.8 $ (5.4) $ 12.1 ====== ====== ====== ===== ====== ========
38 COTT CORPORATION CONSOLIDATING BALANCE SHEETS (in millions of U.S. dollars, unaudited)
AS OF SEPTEMBER 30, 2006 ---------------------------------------------------------------------------------------- COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ----------- -------------- ------------ ------------- ----------- ------------ ASSETS Current assets Cash $ 2.7 $ 20.3 $ 3.0 $ 3.7 $ -- $ 29.7 Accounts receivable 45.3 30.1 79.0 92.2 (54.2) 192.4 Inventories 22.4 85.4 43.8 6.2 -- 157.8 Prepaid expenses and other assets 1.6 3.2 6.9 2.9 -- 14.6 Deferred income taxes -- 7.5 0.7 0.1 -- 8.3 ------ ------- ------- ------ --------- -------- 72.0 146.5 133.4 105.1 (54.2) 402.8 Property, plant and equipment 51.8 179.7 136.5 10.2 -- 378.2 Goodwill 24.6 46.0 85.7 -- -- 156.3 Intangibles and other assets 16.3 159.8 37.4 37.6 -- 251.1 Due from affiliates 72.5 47.8 177.6 41.9 (339.8) -- Investments in subsidiaries 405.6 70.5 65.5 143.8 (685.4) -- ------ ------- ------- ------ --------- -------- $642.8 $ 650.3 $ 636.1 $338.6 $(1,079.4) $1,188.4 ====== ======= ======= ====== ========= ======== LIABILITIES Current liabilities Short-term borrowings $ -- $ -- $ 125.4 $ -- $ -- $ 125.4 Current maturities of long-term debt -- 1.0 -- -- -- 1.0 Accounts payable and accrued liabilities 32.7 119.8 73.7 20.9 (56.1) 191.0 ------ ------- ------- ------ --------- -------- 32.7 120.8 199.1 20.9 (56.1) 317.4 Long-term debt -- 272.1 -- -- -- 272.1 Due to affiliates 97.1 122.5 70.0 50.2 (339.8) -- Deferred income taxes -- 35.3 19.5 9.2 -- 64.0 ------ ------- ------- ------ --------- -------- 129.8 550.7 288.6 80.3 (395.9) 653.5 ------ ------- ------- ------ --------- -------- Minority interest -- -- -- 21.9 -- 21.9 SHAREOWNERS' EQUITY Capital stock Common shares 273.3 275.8 623.0 175.0 (1,073.8) 273.3 Restricted shares (0.8) -- -- -- -- (0.8) Additional paid-in-capital 25.8 -- -- -- -- 25.8 Retained earnings (deficit) 198.3 (176.2) (173.2) (4.1) 353.5 198.3 Accumulated other comprehensive income (loss) 16.4 -- (102.3) 65.5 36.8 16.4 ------ ------- ------- ------ --------- -------- 513.0 99.6 347.5 236.4 (683.5) 513.0 ------ ------- ------- ------ --------- -------- $642.8 $ 650.3 $ 636.1 $338.6 $(1,079.4) $1,188.4 ====== ======= ======= ====== ========= ========
39 COTT CORPORATION CONSOLIDATING STATEMENTS OF CASH FLOWS (in millions of U.S. dollars, unaudited)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 ---------------------------------------------------------------------------------------- COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ----------- -------------- ------------ ------------- ----------- ------------ OPERATING ACTIVITIES Net income (loss) $ 6.6 $(6.6) $(1.9) $ 2.6 $ 5.9 $ 6.6 Depreciation and amortization 3.1 9.1 5.5 1.3 -- 19.0 Amortization of financing fees -- 0.1 0.2 -- -- 0.3 Share based compensation 2.8 -- -- -- -- 2.8 Deferred income taxes -- (3.5) -- 0.1 -- (3.4) Minority interest -- -- -- 0.9 -- 0.9 Equity income (loss), net of distributions 2.6 1.5 4.8 -- (8.9) -- (Gain) loss on disposal of property, plant and equipment (0.1) 0.1 -- -- -- -- Asset recovery (0.1) -- -- -- -- (0.1) Other non-cash items -- 5.8 0.4 -- -- 6.2 Net change in non-cash working capital (7.6) 24.8 7.9 (2.9) 1.1 23.3 ----- ----- ----- ----- ----- ----- Cash provided by (used in) operating activities 7.3 31.3 16.9 2.0 (1.9) 55.6 ----- ----- ----- ----- ----- ----- INVESTING ACTIVITIES Additions to property, plant and equipment (0.7) (3.3) (2.1) (0.7) -- (6.8) Proceeds from disposal of property, plant and equipment -- 0.4 -- -- -- 0.4 Advances to affiliates (6.6) -- (2.2) -- 8.8 -- Other investing activities (1.6) 0.3 -- -- -- (1.3) ----- ----- ----- ----- ----- ----- Cash (used in) provided by investing activities (8.9) (2.6) (4.3) (0.7) 8.8 (7.7) ----- ----- ----- ----- ----- ----- FINANCING ACTIVITIES Payments of long-term debt -- (0.3) -- -- -- (0.3) Short-term borrowings -- (10.6) (15.7) -- -- (26.3) Advances from affiliates -- 2.4 6.5 (0.1) (8.8) -- Distributions to subsidiary minority shareowner -- -- -- (1.8) -- (1.8) Issue of common shares 0.3 -- -- -- -- 0.3 Dividends paid -- -- -- (1.9) 1.9 -- Other 0.1 -- (0.1) -- -- -- ----- ----- ----- ----- ----- ----- Cash provided by (used in) financing activities 0.4 (8.5) (9.3) (3.8) (6.9) (28.1) ----- ----- ----- ----- ----- ----- Effect of exchange rate changes on cash 0.1 -- -- -- -- 0.1 ----- ----- ----- ----- ----- ----- NET (DECREASE) INCREASE IN CASH (1.1) 20.2 3.3 (2.5) -- 19.9 CASH, BEGINNING OF PERIOD 3.8 0.1 (0.3) 6.2 -- 9.8 ----- ----- ----- ----- ----- ----- CASH, END OF PERIOD $ 2.7 $20.3 $ 3.0 $ 3.7 $ -- $29.7 ===== ===== ===== ===== ===== =====
40 COTT CORPORATION CONSOLIDATING STATEMENTS OF CASH FLOWS (in millions of U.S. dollars, unaudited)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 ---------------------------------------------------------------------------------------- COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ----------- -------------- ------------ ------------- ----------- ------------ OPERATING ACTIVITIES Net income (loss) $ 12.1 $ (5.6) $ 8.2 $ 2.8 $ (5.4) $ 12.1 Depreciation and amortization 9.1 27.8 16.6 3.9 -- 57.4 Amortization of financing fees -- 0.2 0.4 0.2 -- 0.8 Share based compensation 7.4 -- -- -- -- 7.4 Deferred income taxes -- (0.8) -- 4.0 -- 3.2 Minority interest -- -- -- 3.0 -- 3.0 Equity (loss) income, net of distributions (4.4) 3.6 (2.8) -- 3.6 -- (Gain) loss on disposal of property, plant and equipment (0.5) 0.6 (0.1) -- -- -- Asset (recovery) impairments (0.2) 1.4 -- -- -- 1.2 Other non-cash items (0.1) 6.4 0.4 -- -- 6.7 Net change in non-cash working capital (16.7) 7.2 1.8 1.5 (1.9) (8.1) ------ ------ ------ ------ ------ ------ Cash provided by (used in) operating activities 6.7 40.8 24.5 15.4 (3.7) 83.7 ------ ------ ------ ------ ------ ------ INVESTING ACTIVITIES Additions to property, plant and equipment (2.0) (13.5) (7.2) (0.8) -- (23.5) Proceeds from disposal of property, plant and equipment 1.0 0.6 0.3 -- -- 1.9 Advances to affiliates (8.4) 0.1 (6.5) -- 14.8 -- Other investing activities (4.0) (3.0) -- -- -- (7.0) ------ ------ ------ ------ ------ ------ Cash (used in) provided by investing activities (13.4) (15.8) (13.4) (0.8) 14.8 (28.6) ------ ------ ------ ------ ------ ------ FINANCING ACTIVITIES Payments of long-term debt -- (0.8) -- -- -- (0.8) Short-term borrowings -- (10.4) (22.6) (10.0) -- (43.0) Advances from affiliates -- 6.6 8.3 (0.1) (14.8) -- Distributions to subsidiary minority shareowner -- -- -- (3.6) -- (3.6) Issue of common shares 0.3 -- -- -- -- 0.3 Dividends paid -- -- -- (3.7) 3.7 -- Other financing activities 0.1 (0.1) (0.1) -- -- (0.1) ------ ------ ------ ------ ------ ------ Cash provided by (used in) financing activities 0.4 (4.7) (14.4) (17.4) (11.1) (47.2) ------ ------ ------ ------ ------ ------ Effect of exchange rate changes on cash 0.2 -- -- (0.1) -- 0.1 ------ ------ ------ ------ ------ ------ NET (DECREASE) INCREASE IN CASH (6.1) 20.3 (3.3) (2.9) -- 8.0 CASH, BEGINNING OF PERIOD 8.8 -- 6.3 6.6 -- 21.7 ------ ------ ------ ------ ------ ------ CASH, END OF PERIOD $ 2.7 $ 20.3 $ 3.0 $ 3.7 $ -- $ 29.7 ====== ====== ====== ====== ====== ======
41 COTT CORPORATION CONSOLIDATING STATEMENTS OF INCOME (in millions of U.S. dollars, unaudited)
FOR THE THREE MONTHS ENDED OCTOBER 1, 2005 ---------------------------------------------------------------------------------------- COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ----------- -------------- ------------ ------------- ----------- ------------ REVENUE $60.4 $293.8 $94.9 $29.9 $ (9.1) $469.9 Cost of sales 51.7 252.8 83.5 25.6 (9.1) 404.5 ----- ------ ----- ----- ------ ------ GROSS PROFIT 8.7 41.0 11.4 4.3 -- 65.4 Selling, general and administrative expenses 9.6 17.3 5.2 2.1 -- 34.2 Unusual items Restructuring 0.2 1.8 -- -- -- 2.0 Asset impairments 3.7 20.0 -- -- -- 23.7 ----- ------ ----- ----- ------ ------ OPERATING (LOSS) INCOME (4.8) 1.9 6.2 2.2 -- 5.5 Other (income) expense, net (0.2) (6.9) (0.9) 6.8 0.8 (0.4) Interest expense (income), net -- 8.1 (1.1) 0.7 -- 7.7 Minority interest -- -- -- 1.1 -- 1.1 ----- ------ ----- ----- ------ ------ INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY INCOME (LOSS) (4.6) 0.7 8.2 (6.4) (0.8) (2.9) Income tax expense (recovery) 0.6 1.7 (0.8) (0.4) -- (1.1) Equity income (loss) 2.4 (1.3) 24.9 -- (26.0) -- ----- ------ ----- ----- ------ ------ NET (LOSS) INCOME $(1.6) $ 1.1 $32.3 $(6.8) $(26.8) $ (1.8) ===== ====== ===== ===== ====== ======
FOR THE NINE MONTHS ENDED OCTOBER 1, 2005 ---------------------------------------------------------------------------------------- COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ----------- -------------- ------------ ------------- ----------- ------------ REVENUE $167.3 $900.3 $221.7 $ 91.3 $(22.5) $1,358.1 Cost of sales 141.9 765.8 193.2 77.6 (22.5) 1,156.0 ------ ------ ------ ------ ------ -------- GROSS PROFIT 25.4 134.5 28.5 13.7 -- 202.1 Selling, general and administrative expenses 28.9 56.2 15.9 5.6 -- 106.6 Loss (gain) on disposal of property, plant and equipment -- 0.7 (0.9) -- -- (0.2) Unusual items Restructuring 0.2 1.8 -- -- -- 2.0 Asset impairments (recovery) 3.7 20.0 (0.2) -- -- 23.5 ------ ------ ------ ------ ------ -------- OPERATING (LOSS) INCOME (7.4) 55.8 13.7 8.1 -- 70.2 Other (income) expense, net (0.3) (26.0) (0.4) 28.5 (2.2) (0.4) Interest (income) expense, net (0.1) 24.7 (5.0) 1.2 -- 20.8 Minority interest -- -- -- 3.4 -- 3.4 ------ ------ ------ ------ ------ -------- INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY INCOME (LOSS) (7.0) 57.1 19.1 (25.0) 2.2 46.4 Income tax (recovery) expense (1.1) 12.8 2.5 0.7 -- 14.9 Equity income (loss) 37.5 3.4 51.7 -- (92.6) -- ------ ------ ------ ------ ------ -------- NET INCOME $ 31.6 $ 47.7 $ 68.3 $(25.7) $(90.4) $ 31.5 ====== ====== ====== ====== ====== ========
42 COTT CORPORATION CONSOLIDATING BALANCE SHEETS (in millions of U.S. dollars)
AS OF DECEMBER 31, 2005 ---------------------------------------------------------------------------------------- COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ----------- -------------- ------------ ------------- ----------- ------------ ASSETS Current assets Cash $ 8.8 $ -- $ 6.3 $ 6.6 $ -- $ 21.7 Accounts receivable 35.6 26.5 70.2 103.2 (44.4) 191.1 Inventories 18.8 76.6 43.6 5.2 -- 144.2 Prepaid expenses and other 1.3 2.2 4.7 1.3 -- 9.5 Deferred income taxes -- 7.2 0.1 -- -- 7.3 ------ ------- ------- ------ --------- -------- 64.5 112.5 124.9 116.3 (44.4) 373.8 Property, plant and equipment 53.0 195.6 135.1 10.5 -- 394.2 Goodwill 23.5 46.0 80.8 -- -- 150.3 Intangibles and other assets 17.0 164.1 38.4 40.9 -- 260.4 Due from affiliates 60.8 60.0 168.8 41.9 (331.5) -- Investments in subsidiaries 395.2 75.4 62.6 137.8 (671.0) -- Deferred income taxes -- -- 0.4 -- -- 0.4 ------ ------- ------- ------ --------- -------- $614.0 $ 653.6 $ 611.0 $347.4 $(1,046.9) $1,179.1 ====== ======= ======= ====== ========= ======== LIABILITIES Current liabilities Short-term borrowings $ -- $ 10.4 $ 137.5 $ 10.0 $ -- $ 157.9 Current maturities of long-term debt -- 0.8 -- -- -- 0.8 Accounts payable and accrued liabilities 36.7 109.6 63.6 17.0 (44.4) 182.5 Deferred income taxes -- -- 0.2 -- -- 0.2 ------ ------- ------- ------ --------- -------- 36.7 120.8 201.3 27.0 (44.4) 341.4 Long-term debt -- 272.3 -- -- -- 272.3 Due to affiliates 95.4 115.8 58.1 62.2 (331.5) -- Deferred income taxes -- 38.2 17.7 5.1 -- 61.0 ------ ------- ------- ------ --------- -------- 132.1 547.1 277.1 94.3 (375.9) 674.7 ------ ------- ------- ------ --------- -------- Minority interest -- -- -- 22.5 -- 22.5 SHAREOWNERS' EQUITY Capital stock Common shares 273.0 275.8 599.5 175.0 (1,050.3) 273.0 Additional paid-in-capital 18.4 -- -- -- -- 18.4 Retained earnings (deficit) 186.2 (169.3) (181.4) (3.4) 354.1 186.2 Accumulated other comprehensive income (loss) 4.3 -- (84.2) 59.0 25.2 4.3 ------ ------- ------- ------ --------- -------- 481.9 106.5 333.9 230.6 (671.0) 481.9 ------ ------- ------- ------ --------- -------- $614.0 $ 653.6 $ 611.0 $347.4 $(1,046.9) $1,179.1 ====== ======= ======= ====== ========= ========
43 COTT CORPORATION CONSOLIDATING STATEMENTS OF CASH FLOWS (in millions of U.S. dollars, unaudited)
FOR THE THREE MONTHS ENDED OCTOBER 1, 2005 ---------------------------------------------------------------------------------------- COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ----------- -------------- ------------ ------------- ----------- ------------ OPERATING ACTIVITIES Net (loss) income $(1.6) $ 1.1 $ 32.3 $ (6.8) $(26.8) $ (1.8) Depreciation and amortization 2.7 10.0 4.3 1.3 -- 18.3 Amortization of financing fees -- -- 0.1 0.1 -- 0.2 Deferred income taxes (0.6) 1.6 (0.4) (0.6) -- -- Minority interest -- -- -- 1.1 -- 1.1 Equity (loss) income, net of distributions (2.4) 3.5 (24.9) -- 23.8 -- Asset impairments 3.7 20.0 -- -- -- 23.7 Other non-cash items (0.2) 0.7 (1.2) 1.0 -- 0.3 Net change in non-cash working capital 1.6 (54.4) 25.7 40.2 0.8 13.9 ----- ------ ------- ------ ------ ------- Cash provided by (used in) operating activities 3.2 (17.5) 35.9 36.3 (2.2) 55.7 ----- ------ ------- ------ ------ ------- INVESTING ACTIVITIES Additions to property, plant and equipment (1.3) (9.5) (3.3) -- -- (14.1) Acquisitions -- -- (135.1) -- -- (135.1) Proceeds from disposal of property, plant and equipment 0.1 -- -- -- -- 0.1 Advances to affiliates (2.1) 5.1 2.8 -- (5.8) -- Other investing activities (2.1) 30.8 (30.7) (0.1) -- (2.1) ----- ------ ------- ------ ------ ------- Cash (used in) provided by investing activities (5.4) 26.4 (166.3) (0.1) (5.8) (151.2) ----- ------ ------- ------ ------ ------- FINANCING ACTIVITIES Payments of long-term debt -- (0.3) -- -- -- (0.3) Short-term borrowings (0.5) (4.4) 130.6 (34.7) -- 91.0 Advances from affiliates -- (2.8) (2.9) (0.1) 5.8 -- Distributions to subsidiary minority shareowner -- -- -- (2.0) -- (2.0) Issue of common shares 1.1 -- -- -- -- 1.1 Financing costs -- (1.2) -- -- -- (1.2) Dividends paid -- -- -- (2.2) 2.2 -- Other financing activities -- -- (0.1) -- -- (0.1) ----- ------ ------- ------ ------ ------- Cash provided by (used in) financing activities 0.6 (8.7) 127.6 (39.0) 8.0 88.5 ----- ------ ------- ------ ------ ------- Effect of exchange rate changes on cash 0.2 -- (0.3) -- -- (0.1) ----- ------ ------- ------ ------ ------- NET (DECREASE) INCREASE IN CASH (1.4) 0.2 (3.1) (2.8) -- (7.1) CASH, BEGINNING OF PERIOD 5.5 (0.4) 6.7 4.1 -- 15.9 ----- ------ ------- ------ ------ ------- CASH, END OF PERIOD $ 4.1 $ (0.2) $ 3.6 $ 1.3 $ -- $ 8.8 ===== ====== ======= ====== ====== =======
44 COTT CORPORATION CONSOLIDATING STATEMENTS OF CASH FLOWS (in millions of U.S. dollars, unaudited)
FOR THE NINE MONTHS ENDED OCTOBER 1, 2005 ---------------------------------------------------------------------------------------- COTT COTT GUARANTOR NON-GUARANTOR ELIMINATION CORPORATION BEVERAGES INC. SUBSIDIARIES SUBSIDIARIES ENTRIES CONSOLIDATED ----------- -------------- ------------ ------------- ----------- ------------ OPERATING ACTIVITIES Net income (loss) $ 31.6 $ 47.7 $ 68.3 $(25.7) $(90.4) $ 31.5 Depreciation and amortization 8.8 28.1 10.2 3.9 -- 51.0 Amortization of financing fees -- 0.2 0.1 0.2 -- 0.5 Deferred income taxes (1.2) 5.3 (0.4) (0.4) -- 3.3 Minority interest -- -- -- 3.4 -- 3.4 Equity (loss) income, net of distributions (37.5) 1.0 (51.7) -- 88.2 -- Loss (gain) on disposal of property, plant and equipment -- 0.7 (0.9) -- -- (0.2) Asset impairments (recovery) 3.7 20.0 (0.2) -- -- 23.5 Other non-cash items (0.2) 1.3 (1.0) 1.1 -- 1.2 Net change in non-cash working capital 18.7 (4.7) (12.1) (3.3) (2.2) (3.6) ------ ------ ------- ------ ------ ------- Cash provided by (used in) operating activities 23.9 99.6 12.3 (20.8) (4.4) 110.6 ------ ------ ------- ------ ------ ------- INVESTING ACTIVITIES Additions to property, plant and equipment (8.4) (47.1) (12.8) (0.6) -- (68.9) Acquisitions -- -- (135.1) -- -- (135.1) Proceeds from disposal of property, plant and equipment 0.1 0.7 1.3 -- -- 2.1 Advances to affiliates (11.9) 0.1 (1.2) -- 13.0 -- Investment in subsidiary (15.0) -- (15.0) -- 30.0 -- Other investing activities (6.2) 0.7 0.2 (0.9) -- (6.2) ------ ------ ------- ------ ------ ------- Cash (used in) provided by investing activities (41.4) (45.6) (162.6) (1.5) 43.0 (208.1) ------ ------ ------- ------ ------ ------- FINANCING ACTIVITIES Payments of long-term debt -- (0.7) -- -- -- (0.7) Short-term borrowings 3.3 (52.7) 129.7 5.2 -- 85.5 Advances from affiliates -- 1.2 11.9 (0.1) (13.0) -- Distributions to subsidiary minority shareowner -- -- -- (3.9) -- (3.9) Issue of common shares 3.5 -- 15.0 15.0 (30.0) 3.5 Financing costs -- (3.8) -- -- -- (3.8) Dividends paid -- -- -- (4.4) 4.4 -- Other financing activities -- 1.8 (2.1) -- -- (0.3) ------ ------ ------- ------ ------ ------- Cash provided by (used in) financing activities 6.8 (54.2) 154.5 11.8 (38.6) 80.3 ------ ------ ------- ------ ------ ------- Effect of exchange rate changes on cash 0.1 -- (0.6) (0.1) -- (0.6) ------ ------ ------- ------ ------ ------- NET (DECREASE) INCREASE IN CASH (10.6) (0.2) 3.6 (10.6) -- (17.8) CASH, BEGINNING OF PERIOD 14.7 -- -- 11.9 -- 26.6 ------ ------ ------- ------ ------ ------- CASH, END OF PERIOD $ 4.1 $ (0.2) $ 3.6 $ 1.3 $ -- $ 8.8 ====== ====== ======= ====== ====== =======
45 EX-10.1 2 o33695exv10w1.txt EX-10.1 EXHIBIT 10.1 WITHOUT PREJUDICE Private and Confidential- Hand Delivered Thursday July 27th, 2006 Mark Benadiba c/o Cott Canada Dear Mark, This letter confirms our discussion that your employment with Cott Corporation ("Cott") is hereby terminated without cause effective August 1, 2006. Cott appreciates your 'contribution to the business over the years and has. summarised the severance arrangements which are detailed in your Executive Employment Agreement which was effective as of the 28th day of September, 2005 (the "EMPLOYMENT AGREEMENT"). 1. DATE OF TERMINATION The effective date of termination will be August 1,2006 (the "TERMINATION DATE"). 2. ACCRUED SALARY AND VACATION You will be paid your salary, car allowance and accrued vacation to the Termination Date. These payments Will be less applicable statutory withholdings and deductions and paid in a lump sum payment during the next pay period immediately following the Termination Date. 3. SEVERANCE a) Severance - we have agreed to pay you a lump sum payment within ten (10) business days following the Termination Date equal to two (2) times your base salary, car allowance and bonus. This is equal to $2,190,000.00 (Two Million, One Hundred and Ninety Thousand Dollars) (Per Year-Car Allowance $20,000, Base Salary $500,000, Bonus at 100% $575,000) b) Pro-Rated Bonus - You shall also receive a pro-rated bonus for the period up to Termination Date based on the achievement of 150% of the annual bonus incentive target to such date (i.e. 7/12ths of 150% of $575,000 = $503,125), which will be paid within ten (10) business days following the Termination Date. 4. BENEFITS You will continue to receive all of the following benefits for a 24 month period as per your current participation: all health and dental benefits, life insurance (including dependent life insurance and accidental death and dismemberment insurance), short term disability, annual health spending account and annual executive medical assessment costs. Mark Benadiba. July 27, 2006 Page 2 In addition, you shall receive a lump sum payment within ten (10) business day following the Termination Date equal to $16,497.48 on account of and in lieu of participation in the executive disability top up insurance program. Cott shall also agree to reimburse you for your car insurance on your Mercedes Benz automobile for 24 months following the Termination Date in accordance with the terms of insurance in effect on the Termination Date. 5. OPTIONS You will have sixty (60) days from the Termination Date to exercise any of your currently vested stock options in accordance with the terms of Cott Corporation's Common Share Option Plan. The balance of the stock options that are not vested automatically expire upon the Termination Date. 6. EXECUTIVE INVESTMENT SHARE PURCHASE PLAN The Human Resources and Compensation Committee has confirmed that the vesting of the 'unvested shares (4,359) in the Executive Investment Share Purchase Plan registered in your name be accelerated. 7. RETURN OF PROPERTY It shall be a condition of this offer that you shall immediately return to Cott all company property in your possession, power or control, including, but hot limited to: computers, passes, credit cards, manuals, keys and proprietary information and all records or files, pertaining to the affairs of the Company, stored in any form whatsoever; (including. any electronic copies) together with any copies or transcriptions thereof, in whole or part to Sandra Sterman by no later than your last date of employment. 8. NO OTHER PAYMENTS The payments, benefits and other entitlements set out in this letter constitute your complete entitlement and Cott's complete obligations whatsoever, including with respect to the cessation of your employment, whether at common law, statute or contract. For greater certainty, we confirm. that you are not entitled to any further payment (including any bonus payments), benefits; perquisites, allowances or entitlements earned or owing to you from Cott pursuant to any employment or any other agreement, whether written or oral, whatsoever, all having ceased on the Termination Date without further obligation from Cott. All amounts paid or benefits provided to you pursuant to this letter shall be deemed to include all amounts owing pursuant to the Employment Standards Act. 2000, and such payments and benefits represent a greater right or benefit than that required under the Employment Standards Act, 2000. 9. RESIGNATION & RELEASE You will resign as an officer and director of Cott (and all direct and indirect affiliates, subsidiaries and associated companies) with effect as of the Termination Date. In this respect, you agree to execute and deliver the Resignation Notice attached hereto as Schedule "l" and such further documentation as may be required by Cott, in its' sale discretion, in order to effect this resignation. You agree to sign the Release in the form attached as Schedule "2" to this letter. Mark Benadiba July 27, 2006 Page 3 10. YOUR CONTINUING OBLIGATIONS a) You will continue to abide by all of the applicable provisions of your Employment Agreement, as amended which are intended to continue following the cessation of your employment, including but not limited to the Confidentiality (Section 7.1), Non-Solicitation, and Non-Competition (Article IX) covenants and, which in the case of the Confidentiality covenant continues forever, and in the case of the Non-So1icitation and Non-Competition covenants, will apply for a period of twenty-four (24) months from the Termination Date. You agree that in the event of a breach of any these covenants, Cott will be entitled to, in addition to any of the remedies set out in the Employment Agreement for the breach of these covenants, discontinue any and all payments, benefits, and other entitlements as set out in this letter, and you will forfeit any and all claims; actions, demands, or payments whatsoever. b) You will agree to cooperate reasonably with Cott, and its legal advisors, in connection with: (i) any business matters in which you were involved; or (ii) any existing or potential claims, investigations, administrative proceedings, lawsuits and other legal and business matters which arose during your employment or involving Cott; (iii) effecting compliance with respect to any regulatory requirements; and (iv) completing any further documents required to give effect to the terms set out in this letter with respect to which you have knowledge of the underlying facts. Cott shall pay you a consulting fee equal to $256.00 per hour, plus applicable GST, for the services provided to Cott at its request hereunder. In addition, you will not voluntarily aid, assist or cooperate with any claimants or plaintiffs or their attorneys or agents in any claims or lawsuits commenced in the future against Cott, provided, however, that nothing in this letter wilt be construed to prevent you from testifying at an administrative hearing, a deposition/discovery, or in court in response to a lawful subpoena in any litigation or proceedings involving Cott. 11. GENERAL a) Entire Agreement: The agreement confirmed by this letter constitutes the entire agreement between you and Cott with reference to any of the matters herein provided or with reference to your employment or office with Cott, or the cessation thereof. All promises, representations, collateral agreements, offers and understandings not expressly incorporated in this letter agreement are hereby superseded and have no further effect. b) Severability: The provisions of this letter agreement shall be deemed severable and the invalidity or unenforceability of any provision set out herein shall not affect the validity or enforceability of the other provisions hereof, all of which shall continue in accordance with their terms. c) Full Understanding: By signing this letter, you confirm that: (i) you have had an adequate opportunity to read and consider the terms set out herein, including the Release attached, and that you fully understand them and their consequences; (ii) you have been advised, through this paragraph, to consult with legal counsel and have obtained such legal or other advice as you consider advisable with respect to this letter agreement, including attachments; and (iii) you are signing this letter voluntarily, without coercion, and without reliance on any representation, express or implied, by Cott, or by any director, trustee, officer, shareholder, employee or other representative of Cott. Mark Benadiba July 27, 2006 Page 4 d) Currency: All dollar amounts set forth or referred to in this letter refer to Canadian currency. e) Governing Law: The agreement confirmed by this letter shall be governed by the laws of the Province of Ontario, Canada. f) Payment: All payments made to you will be less applicable statutory withholdings and deductions. Mark, if you have any questions please feel tree to contact me. I am also attaching a copy of the Executive Employment Agreement dated 28th day September, 2005. Yours very truly, /s/ Brent D. Willis - ------------------------------------- Brent D. Willis President and Chief Executive Officer Attachment Acknowledged, Agreed and Accepted this 2nd day of August, 2006 /s/ Mark Benadiba - ------------------------------------- Mark Benadiba SCHEDULE "1" RESIGNATION NOTICE TO: COTT CORPORATION AND TO: ALL DIRECT AND INDIRECT AFF1LIATES, SUBSIDIARIES AND ASSOCIATED CORPORATIONS THEREOF AND TO: ALL DIRECTORS THEREOF I MARK BENADIBA confirm my resignation as director and from all offices held by me of COTT CORPORATION, including all direct and indirect affiliates, subsidiaries, and associated corporations, with effect as of August 1,. 2006. /s/ Mark Benadiba ---------------------------------------- MARK BENADIBA SCHEDULE "2" RELEASE FROM: MARK BENADIBA ("BENADIBA") TO: COTT CORPORATION ("COTT"), ITS DIRECT ,AND INDIRECT RESPECTIVE AFFILIATES, ASSOCIATES, SUBSIDIARIES, PARENTS AND RELATED ORGANIZATIONS AND ALL OF THEIR RESPECTIVE PAST AND PRESENT SHAREHOLDERS, PARTNERS, DIRECTORS, OFFICERS, EMPLOYEES, CONTACTORS, CONSULTANTS, AGENTS, REPRESENTATIVES; TRUSTEES, ADMINISTRATORS, ATTORNEYS AND INSURERS (ALL COLLECTIVELY REFERRED TO AS "RELEASEES") 1. In consideration of the terms as set out in the letter from Cott to Benadiba dated July 27, 2006 (the "Agreement"), the receipt and sufficiency of which consideration are hereby acknowledged, and except for the obligations owed to Benadiba, and referred to in the Agreement, Benadiba hereby remises, releases and forever discharges Cott and the other Re1easees of and from all manner of actions, causes of action, suits, debts, dues, accounts, bonds, contacts, 1iens, claims and demands whatsoever which against the Releasees he now has, ever had or hereafter can, shall or may have for or by reason of any cause, matter or thing whatsoever existing to the present time, ,and particularly and without limiting the generality of the foregoing, of and from all claims and demands of every nature and kind in any way related to or arising from Benadiba's employment or other engagement with Cott or the termination of such employment, engagement or other agreements, including all damages, salary, remuneration, commission, vacation pay, overtime pay, termination pay, severance pay, notice of termination, profit-sharing, stock options or other equity, bonuses, proceeds of any insurance or disability plans, pension or retirement benefits or any other fringe benefit or perquisite of any kind whatsoever and including any claims Benadiba may have; uncle!: any United States, Canada, or other statute, law or ordinance; any contract or agreement (except the Agreement); and any common law principle. The payments, 'benefits, and other entitlements referred to in the Agreement are deemed to satisfy all requirements or money owing under all applicable laws including without limitation, any and a1l wages, vacation pay, termination and severance pay under the Employment Standards Act, 2000. 2. Benadiba confirms that the Agreement has been entered into by the parties for the purposes off fully and finally settling and compromising all possible claims that Benadiba might have against the Releasees and, therefore, in this respect, Benadiba covenants and agrees not to file any complaint or initiate any proceeding under the Employment Standards Act, 2000, under 'the. Ontario Human Rights Code, under the, Workplace Safety and Insurance Act, under the Labour Relations Act, under the Pay Equity Act, or pursuant to any other applicable law or legislation, including the statutes and laws set forth and/or referenced in the preceding paragraph, in any jurisdiction governing or related to Benadiba 's employment or other engagement with Cott. In the event that Benadiba hereafter makes any claim or demand or commences or threatens to commence any action, claim or proceeding or to make any complaint against Cott in this respect, this Release may be raised as an estoppel and complete bar to any such action, claim or proceeding. Benadiba confirms that he has no right to reinstatement, re-call or re-employment with any of the Releasees, and Benadiba waives and releases all rights he had or may have had in this regard. This paragraph shall not release any rights that may not legally be waived. 3. Benadiba further agrees not to make or assist in the commencement of any claims (expressly including any cross-claim, counterclaim, third party action or application) against any other person or corporation who might claim contribution or indemnity against the persons or corporations discharged by this Release. 4. With the exception of disclosure to immediate family or to his legal or professional advisors (but provided any such person agrees not to disclose such information to any other person), Benadiba agrees that the terms and contents of this Release, the consideration included in the Agreement, the contents of the negotiations and discussions resulting .in this Release, and any dispute resolved by this Release, shall all remain privileged and confidential and shall not be disclosed except to the extent required by law or as otherwise agreed to in writing by Cott. 5. This Release shall be binding upon his heirs, executors, administrators, successors and assigns and shall enure to the benefit of Cott and to the benefit of all of the Cott's successors- and assigns. 6. Benadiba acknowledges that he has been advised to and has in fact obtained Independent legal advice and that the only consideration for this Release is as referred to above. Benadiba further confirms that no other promises or representations of any kind have been made to Benadiba to cause him to sign this Release. 7. Benadiba acknowledges that this Release, the settlement of any dispute between Benadiba and Cott, or the payment of any monies to Benadiba, shall not constitute an admission of liability on the part of Cott, which liability is denied. 8. Benadiba agrees that he alone shall be responsible for all tax liability resulting from his receipt of the payments referred to in the Agreement, except to the extent that Cott has withheld funds for remittance to statutory authorities. Benadiba agrees to indemnify and save Cott harmless from any and all amounts payable or incurred by Cott (save and except any penalties and interest that are attributable to Cott's not having deducted sufficient funds by its own direction) if it is subsequently determined that any greater amount should have been withheld in respect of income tax or any other statutory withholding. SIGNED, SEALED AND DELIVERED THIS 2ND DAY OF AUGUST, 2006 /s/ Ines Marra /s/ Mark Benadiba - ------------------------------------- ---------------------------------------- WITNESS MARK BENADIBA EX-10.2 3 o33695exv10w2.txt EX-10.2 (BEACHCROFT LOGO) EXHIBIT 10.2 Dated August 2 2006 (1) COTT BEVERAGES LTD - and - (2) ANDREW JAMES MURFIN ---------- COMPROMISE AGREEMENT ---------- STRICTLY CONFIDENTIAL WITHOUT PREJUDICE AND SUBJECT TO CONTRACT (C) Beachcroft LLP 2006 Beachcroft LLP Compromise Agreement TABLE OF CONTENTS 1. TERMINATION........................................................... 1 2. COMPENSATION.......................................................... 1 3. BENEFITS.............................................................. 1 4. PENSIONS.............................................................. 2 5. RESIGNATION AS A DIRECTOR............................................. 2 6. RETURN OF PROPERTY.................................................... 2 7. CONFIDENTIALITY OF AGREEMENT.......................................... 2 8. CONFIDENTIAL INFORMATION.............................................. 3 9. TAX INDEMNITY......................................................... 3 10. STOCK OPTIONS......................................................... 4 11. INVESTMENT SHARE PURCHASE PLAN........................................ 4 12. RESTRICTIVE COVENANTS................................................. 4 13. FUTURE ASSISTANCE TO THE EMPLOYER..................................... 4 14. WARRANTIES............................................................ 5 15. FULL AND FINAL SETTLEMENT............................................. 5 16. COMPROMISE AGREEMENT.................................................. 6 17. INDEPENDENT ADVICE.................................................... 6 18. AGREEMENT............................................................. 7 19. DEFINITIONS........................................................... 7 APPENDIX 1................................................................ 150 APPENDIX 2................................................................ 161 TEXT OF RESIGNATION LETTER................................................ 161
Table of contents Page (1) Draft: [Insert date] Beachcroft LLP Compromise Agreement THIS AGREEMENT IS MADE ON AUGUST 2, 2006 ("THE AGREEMENT DATE") BETWEEN: 1) COTT BEVERAGES LTD (COMPANY NUMBER 283071) OF CITRUS GROVE, SIDE LEY, KEGWORTH, DERBYSHIRE, DE74 2FJ("THE EMPLOYER"); AND 2) ANDREW JAMES MURFIN OF 48 HAWTHORNE WAY, SHELLY, HUDDERSFIELD, HD8 8JX ("THE EMPLOYEE"). BACKGROUND The Employer and the Employee have agreed that the Employee's employment will terminate by reason of a restructure of the Employer's business. IT IS AGREED AS FOLLOWS: 1. TERMINATION 1.1 The Employee's employment with the Employer terminated on 1 August 2006 ("the Termination Date"). His full remuneration will be paid up to the Termination Date, such payments being subject to deductions of tax and National Insurance contributions in the normal way. 1.2 Within 14 days of the Agreement Date the Employer will pay to the Employee the sum of (pounds)110,000 as payment in lieu of notice, subject to deductions of tax and National Insurance contributions in the normal way. 2. COMPENSATION 2.1 The Employer will pay to the Employee the sum of (pounds)117,000 (ONE HUNDRED AND SEVENTEEN THOUSAND POUNDS)] ("the Compensation Payment") as compensation for loss of his employment, following the issue of a form P45 to him and within 14 days of the Agreement Date. The first (pounds)30,000(THIRTY THOUSAND POUNDS) of the Compensation Payment will be paid without deduction of tax at source. Income tax at basic rate will be deducted in respect of the balance of the Compensation Payment prior to payment to the Employee. 2.2 The Compensation Payment is made in reliance on the warranties contained in clause 14 below and subject to the terms of that clause. Page 1 Draft: 24 July 2006 Beachcroft LLP Compromise Agreement 3. BENEFITS With effect from the Termination Date and save as provided in this Agreement the Employer shall cease to provide all other benefits, whether contractual or otherwise, to or for the benefit of the Employee. 4. PENSIONS The Employee will be separately notified by the trustees of the Pension Scheme of his entitlements under the rules of that scheme and of the options available to him for dealing with that entitlement. 5. RESIGNATION AS A DIRECTOR The Employee will resign from his directorships and other offices of the Employer and all Associated Companies by delivering to Mark Halperin, Chief Legal and Corporate Development Officer, Cott Corporation letters of resignation in the form attached at Appendix 2 within seven days of the Termination Date. The Employee also agrees to execute any further documentation required by the Employer to effect this resignation. 6. RETURN OF PROPERTY 6.1 On, or before, the Termination Date, the Employee will return to the Employer all books, files, documents, papers, materials, computer equipment, disks, mobile telephones, security cards, credit cards, keys and other property belonging to or relating to the business of the Employer or that of its clients, customers and/or suppliers. The Employee undertakes that he will not make or retain copies of any of the same and further undertakes that he will immediately return any such property which subsequently comes into his possession or control in the future. 6.2 On request by the Employer the Employee undertakes to disclose to the Employer all passwords to all password protected files, software and hardware which have been created or protected by him and which are on the Employer's computers. 7. CONFIDENTIALITY OF AGREEMENT The Employee warrants that, he has not divulged to any person whatsoever (other than his immediate family in confidence or to his professional advisers/solicitors in connection with the conclusion of this Agreement) the fact of, negotiation and/or terms of this Agreement. The Page 2 Draft: 24 July 2006 Beachcroft LLP Compromise Agreement Employer and the Employee agree that they will not divulge in the future to any person whatsoever the fact of, negotiation and/or terms of this Agreement (except in the case of the Employee, to his immediate family in confidence and in both cases to their respective professional advisers/solicitors in connection with the conclusion of this Agreement or where required by any competent authority or by a Court of law or Her Majesty's Revenue and Customs and in the case of the Employer as required for any internal reporting purposes within the Employer and its Associated Companies or for the purposes of ensuring compliance with or enforcing the terms of this Agreement or as may be required by law or securities regulatory authorities governing the Employer or any of its Associated Companies). 8. CONFIDENTIAL INFORMATION 8.1 The Employee confirms that he will continue to abide by his obligations of confidence set out in Section 15 of his contract of employment with the Employer dated 2 February 2004. 8.2 In accordance with his common law duties the Employee agrees that he will not disclose to any person any Confidential Information concerning any matter relating to the business or affairs of the Employer or any Associated Company or /their Associated Persons, suppliers and clients/customer which Confidential Information has been acquired by the Employee in the course of his employment. 8.3 Nothing in this Agreement shall prevent disclosure by the Employee of: 8.3.1 information disclosed pursuant to any order of any Court of competent jurisdiction; or 8.3.2 information disclosed for the purpose of making a protected disclosure within the meaning of Part IV A of the Employment Rights Act 1996; or 8.3.3 information which has come into the public domain otherwise than by a breach of confidence on behalf of the Employee. 9. TAX INDEMNITY It is both parties' understanding that the first (pounds)30,000 of the Compensation Payment may not be subject to income tax pursuant to the provisions of Section 403 of the Income Tax (Earnings and Pensions) Act 2003. Accordingly, the first (pounds)30,000 of the Compensation Payment will be paid without deduction of tax at source pursuant to those provisions. Save for any deductions made prior to payment, the Employee accepts that he will be responsible for the payment of any tax or Page 3 Draft: 24 July 2006 Beachcroft LLP Compromise Agreement Employee's National Insurance contributions (including, without limitation, any interest, penalties or fines in connection therewith) imposed by any competent authority in respect of any payment or provision of any benefit as set out in this Agreement ("the Liabilities") and he agrees to indemnify the Employer or any Associated Company on a continuing basis against any of the Liabilities. 10. STOCK OPTIONS The Employee acknowledges that, he has 60 days from the Termination Date to exercise his currently vested stock options in accordance with the Employer's Common Share Option Plan. If the Employee does not exercise his vested stock options they will lapse. The Employee acknowledges that any stock options granted to him under the Share Plan that are not vested at the Termination Date, will automatically lapse on the Termination Date. 11. INVESTMENT SHARE PURCHASE PLAN The Compensation committee has confirmed the accelerated vesting of 2,217 whole shares in the Share Purchase Plan. In order to facilitate the vesting and release of these shares to the Employee, the Employee will complete a withdrawal form and will send this form to Sher Zaman Once approved by the Employer the withdrawal form will be sent to the Trustees with a request that these shares be transferred into the Employee's C.I.B.C Wood Gundy account number 311-15302 in the name of account holder Andrew Murfin. 12. RESTRICTIVE COVENANTS The Employee confirms that he will abide by the post termination covenants contained at clause 17 (Non Solicitation and Non Competition) of his contract of employment dated 2 February 2004 and he accepts that this clause will continue to apply for 12 months after the termination of his employment. The Employee and the Employer agree that in the event of a breach of any of these covenants, the Employer will be entitled to, in addition to any of the remedies set out in the contract of employment for the breach of these covenants, to discontinue any and all payments, benefits, and other entitlements as set out in this Agreement, and the Employee will forfeit any and all claims, actions, demands, or payments whatsoever. 13. FUTURE ASSISTANCE TO THE EMPLOYER 13.1 The Employee agrees that, upon the Employer giving him reasonable notice, he will provide such assistance and information to the Employer and its legal advisor(s) as may be required in connection with: 13.1.1 any existing or potential claims, investigations, administrative proceedings, Page 4 Draft: 24 July 2006 Beachcroft LLP Compromise Agreement lawsuits and other legal and business matters which arose during the Employee's employment or involving the Employee; or 13.1.2 any matters affecting compliance with respect to any regulatory requirements; or 13.1.3 the completion of any further documents required to give effect to the terms of this Agreement with respect to which the Employee has knowledge of the underlying facts. 13.2 In addition, the Employee agrees that he will not voluntarily aid, assist or cooperate with any claimants or plaintiffs or their attorneys or agents in any claims or lawsuits commenced in the future against the Employer, provided, however, that nothing in this letter will be construed to prevent the Employee from testifying at an administrative hearing, a deposition/discovery, or in court in response to a lawful subpoena in any litigation or proceedings involving the Employer. 14. WARRANTIES The Employee agrees and warrants that:- 14.1 he has taken advice, as confirmed at clause 17 below; 14.2 he has discussed with the Adviser all of the Relevant Legislation and the rights and obligations arising from his contract of employment ("the Law") and all issues regarding his employment and its termination which may be relevant to the Law; 14.3 the claims listed at clause 15.1.1 below amount to the entirety of the claims which he believes he has against the Employer or any Associated Company or their Associated Persons, arising out of or in connection with his employment including its termination 14.4 this Agreement is intended to settle any actual or potential disputes or proceedings between the parties (whether known or not, whether existing in fact or law or not, whether the claim be statutory or contractual or of any other nature). 15. FULL AND FINAL SETTLEMENT 15.1 The Employee agrees to accept the Compensation Payment in full and final settlement of any claims he has or may have in the future against the Employer or any Associated Page 5 Draft: 24 July 2006 Beachcroft LLP Compromise Agreement Company or their Associated Persons (whether known or not, whether existing in fact or law or not, whether the claim be statutory or contractual or of any other nature):- 15.1.1 for unfair dismissal, wrongful dismissal, a statutory redundancy payment, sex, race, disability or age discrimination, sexual orientation discrimination, discrimination on grounds of religion or belief, equal pay, unlawful deduction from wages or detriment on the grounds of having made a public interest disclosure. 15.1.2 relating to his employment or its termination including, without limitation, any claims under the provisions of any of the Relevant Legislation; 15.1.3 howsoever arising, out of or in connection with the Employee's contract of employment, including the termination thereof; and 15.1.4 in tort arising out of or in connection with his employment with the Employer. 15.2 The Employer enters into this Agreement and makes the Compensation Payment in reliance upon the warranties given by the Employee at clause 15 above. In the event that the Employee is in breach of clause 15 or issues a claim relating to his employment or its termination against the Employer or any Associated Company or their Associated Persons, whether in the Employment Tribunal, the High Court, the County Court or otherwise, the Employee agrees that the Employer or any Associated Company their Associated Persons may offset the Compensation Payment against any remedy due to the Employee from any such proceedings. However this clause shall not adversely affect the Employee's right to bring an claim in respect of personal injury (although in signing this Agreement, the Employee confirms that as at the Agreement Date he is not aware of any illness or injury, or the symptoms of such illness or injury, which could lead to such a personal injury claim). 16. COMPROMISE AGREEMENT The parties agree that the conditions regulating compromise agreements contained in the Relevant Acts are intended to be and have been satisfied by the terms of this Agreement. 17. INDEPENDENT ADVICE The Employee warrants that:- Page 6 Draft: 24 July 2006 Beachcroft LLP Compromise Agreement 17.1 he has received independent advice from Joan Pettingill of the Solicitors ("the Adviser") as to the terms and effect of this Agreement and, in particular, its effect on his ability to pursue his rights before an Employment Tribunal. The Adviser is a Solicitor of the Supreme Court and has produced a letter on the Adviser's headed paper addressed to the Employer in the form attached at Appendix 1 of this Agreement; and 17.2 the Employee is advised by the Adviser that there is in force, and was at the time he received the advice referred to above, a contract of insurance or an indemnity provided for members of a profession or professional body covering the risk of a claim by him in respect of loss arising in consequence of that advice. 18. AGREEMENT 18.1 The Agreement is made without any admission of liability whatsoever by the Employer. 18.2 This Agreement constitutes the entire agreement and understanding between the parties and supersedes all or any previous contracts, agreements or arrangements, whether written or verbal between the parties (other than any provision in the Employee's contract of employment which is expressed to survive termination of the contract of employment and which has not been varied by any provision in this agreement). 18.3 The terms of this Agreement shall be governed by and construed in accordance with English law and the parties agree to submit to the exclusive jurisdiction of the English Courts in relation to any claims or any matter arising. 18.4 Notwithstanding that this Agreement is marked "without prejudice and subject to contract", it will, when signed by both parties, become open and binding. 18.5 If any part of this Agreement shall be, or become, void or unenforceable for any reason, this shall not affect any of the remaining provisions of this Agreement and, in the event that part of any provision shall be held to be void or unenforceable but would be valid and enforceable if some part thereof were deleted, such provision shall apply with such modification as may be necessary to make it valid and enforceable. 19. DEFINITIONS In this Agreement: Page 7 Draft: 24 July 2006 Beachcroft LLP Compromise Agreement 19.1 "Associated Company" includes all subsidiary companies and holding companies of the Employer and any subsidiary or holding companies of such holding companies, in the meanings attributed to those expressions by Section 736 of the Companies Act 1985 as amended. 19.2 "Associated Persons" means any current or former shareholders, directors, officers, agents or employees of the Employer or any Associated Company. 19.3 "Confidential Information" means any information of a confidential or secret nature relating to any and all aspects of the business of the Employer and/or its Associated Companies and/or its or their Associated Persons, clients, customers and suppliers including but not limited to personnel data, financial information, budgets, reports, business plans, strategies, know-how, formulae, designs, data, specifications, research, processes, procedures and programs, pricing, sales and marketing plans and details of past or proposed transactions whether or not written or computer generated or expressed in material form. 19.4 "Pension Scheme" means that pension scheme operated for employees of the Employer of which the Employee is a member. 19.5 "person" includes references to an individual, company, firm or association. 19.6 "Relevant Acts" means the Sex Discrimination Act 1975, the Race Relations Act 1976, the Trade Union and Labour Relations (Consolidation) Act 1992, the Disability Discrimination Act 1995, the Employment Rights Act 1996, the National Minimum Wage Act 1998, the Working Time Regulations 1998, the Employment Equality (Sexual Orientation) Regulations 2003, the Employment Equality (Religion or Belief) Regulations 2003, the Information and Consultation of Employees Regulations 2004, the Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendment) Regulations 2006 and the Employment Equality (Age Discrimination) Regulations 2006. 19.7 "Relevant Legislation" means the Equal Pay Act 1970, the Protection from Harassment Act 1997, the Data Protection Act 1998, the Human Rights Act 1998, the Employment Relations Act 1999, the Working Time Regulations 1999, the Maternity and Parental Leave Regulations 1999, the Part Time Workers (Prevention of Less Favourable Treatment) Regulations 2000, the Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002, the Employment Act 2002, the Transfer of Undertaking Page 8 Draft: 24 July 2006 Beachcroft LLP Compromise Agreement (Protection of Employment) Regulations 1987 and 2006, the Relevant Acts and European Community legislation. 19.8 "Share Plan" means the Employer's Common Share Option Plan. 19.9 "Share Purchase Plan" means the Employer's Executive Investment Share Purchase Plan. SIGNED BY /s/ Andrew Murfin --------------------------- MR ANDREW MURFIN DATED AUGUST 2, 2006 SIGNED BY /S/ BRENT WILLIS --------------------------- FOR AND ON BEHALF OF THE EMPLOYER AND ITS ASSOCIATED COMPANIES AND THEIR ASSOCIATED PERSONS DATED AUGUST 2, 2006 Page 9 Draft: 24 July 2006 Beachcroft LLP Compromise Agreement APPENDIX 1 THIS IS TO BE TYPED ON TO THE HEADED NOTEPAPER OF THE ADVISER - GORDONS LLP STRICTLY PRIVATE AND CONFIDENTIAL TO BE OPENED BY ADDRESSEE ONLY BEACHCROFT LLP 7, PARK SQUARE EAST LEEDS WEST YORKSHIRE LS1 2LW Dear Sirs, I, Joan Pettingill of Gordons LLP Riverside West, Whitehall Road, Leeds, LS1 4AW confirm that I have given independent advice to Mr Andrew James Murfin ("the Employee") as to the terms and effect of the agreement to be entered into between you and him and in particular its effect on his ability to pursue his rights before an Employment Tribunal in relation to the termination of his employment. I confirm that I am a Solicitor of the Supreme Court holding a current Practising Certificate and that there is, and was at the time I gave the advice referred to above, in force a contract of insurance or an indemnity provided for members of a profession or a professional body covering the risk of a claim by the Employee in respect of any loss arising out of that advice. Yours faithfully, /s/ Gordons LLP Beachcroft LLP Compromise Agreement APPENDIX 2 TEXT OF RESIGNATION LETTER To: Cott Beverages Ltd I hereby resign from my offices as director, officer and, if applicable, company secretary of the Company and all of its Associated Companies, including without limitation those listed below, with immediate effect from 1 August 2006 COTT CORPORATION COTT RETAIL BRANDS LIMITED COTT LTD, COTT EUROPE TRADING LIMITED COTT PRIVATE LABEL LIMITED COTT NELSON (HOLDINGS) LIMITED COTT (NELSON) LIMITED. SIGNED BY /S/ ANDREW MURFIN --------------------------- MR ANDREW MURFIN DATED AUGUST 1, 2006 EX-10.3 4 o33695exv10w3.txt EX-10.3 EXHIBIT 10.3 WITHOUT PREJUDICE PRIVATE AND CONFIDENTIAL- HAND DELIVERED Thursday July 27th, 2006 Colin Walker c/o Cott Canada Dear Colin, This letter confirms our discussion that your employment with Cott is hereby terminated without cause effective August 1, 2006. Cart appreciates your contribution to the business over the years and have summarised the severance arrangements which are detailed in your Offer of Employment which was effective as of the 20th August, 1998 (the "Employment Agreement"). 1. DATE OF TERMINATION The effective date of termination will be August 1, 2006 (the "TERMINATION DATE"). 2. ACCRUED SALARY AND VACATION You will be paid your salary, car allowance and accrued vacation to the Termination Date. These payments will be less applicable statutory withholdings and deductions and paid in a lump sum payment during the next pay period immediately following the Termination Date. 3. SEVERANCE Severance - we have agreed to pay you a lump sum payment within ten (10) business days following the Termination Date equal to two (2) times your base salary, car allowance and target bonus. This is equal to 1,468,000.00 (One Million, four hundred and sixty eight thousand Dollars). 4. BENEFITS You will continue to receive all of the following benefits (or Cott shall reimburse you for all expenses incurred by you to replace such benefits) for a 24 month period as per your current participation: all health (excluding, for greater certainty, long and short term disability coverage and out of country benefits) and dental benefits, life insurance (excluding executive supplemental life and disability insurance), annual health spending account, executive medical, dependant life insurance and accidental death and dismemberment insurance. In addition, you shall receive a lump sum payment within ten (10) business days following the Termination Date equal to: (i) $32,727 (thirty two thousand, seven hundred and twenty seven Dollars) (less applicable withholdings and deductions) on account of and in lieu of participation in Cott's group RRSP/DPSP and, employee share purchase plan for a 24 month period; and (ii) $12,367 (twelve thousand, three hundred and thirty seven Dollars) (grossed-up for taxes) on account of and in lieu of executive supplemental life and disability insurance premiums for a 24 month period Colin Walker July 27, 2006 Page 2 5. OPTIONS AND EISPP SHARES (a) You will have sixty (60) days from the Termination Date to exercise any of your currently vested stock options in accordance with the terms of Cott Corporation's Common Share Option Plan. The balances of the stock options that are not vested automatically expire upon the Termination Date. (b) The Human Resources and Compensation Committee has confirmed that the vesting of unvested shares (2909) in the Executive Investment Share Purchase Plan registered in your name shall be accelerated. 6. RETURN OF PROPERTY It shall be a condition of this offer that you shall immediately return to Cott all company property in your possession, power or control, including, but not limited to: computers, passes, credit cards, manuals, keys and proprietary information and all records or files pertaining to the affairs of the Company, stored in any form whatsoever, (including any electronic copies) together with any copies or transcriptions thereof, in whole or part to Sher Zaman by no later than your last date of employment. 7. NO OTHER PAYMENT The payments, benefits and other entitlements set out in this letter constitute your complete entitlement and Cott's complete obligations whatsoever, including with respect to the cessation of your employment, whether at common law, statute or contract. For greater certainty, we confirm that you are not entitled to any further payment (including any bonus payments), benefits, perquisites, allowances or entitlements earned or owing to you from Cott pursuant to any employment or any other agreement, whether written or oral, whatsoever, all having ceased on the Termination Date without further obligation from Cott. All amounts paid or benefits provided to you pursuant to this letter shall be deemed to include all amounts owing pursuant to the Employment Standards Act, 2000, and such payments and benefits represent a greater right or benefit than that required under the Employment Standards Act, 2000. 8. RESIGNATION & RELEASE You will resign as an officer and director of Cott (and all direct and indirect affiliates, subsidiaries and associated companies) with effect as of the Termination Date. In this respect, you agree to execute and deliver the Resignation Notice attached hereto as Schedule "1" and such further documentation as may be required by Cott, in its sale discretion, in order to effect this resignation. You agree to sign the Release in the form attached as Schedule "2" to this letter. Notwithstanding anything in the Release to the contrary, any rights to indemnification that you have or had as a director, officer and/or employee of Cott (and all indirect and direct affiliates, subsidiaries and associated companies) in respect of any acts or commissions by you in such capacity will continue in accordance with the terms of such indemnification and, for greater certainty, nothing in the Release shall in any way detract or derogate from such indemnification rights. 9. YOUR CONTINUING OBLIGATIONS (a) You will continue to abide by all of the applicable provisions of your Employment Agreement, as amended which are intended to continue following the cessation of your employment, including but not limited to the Confidentiality, Non-Solicitation, and Non-Competition covenants provided in Article 4 of the covenants schedule in your Colin Walker July 27, 2006 Page 3 Employment Agreement, which in the case of the Confidentiality covenant continues forever, and in the case of the Non-Solicitation and Non-Competition covenants, will apply for a period of twenty-four (24) months from the Termination Date. You agree that in the event of a breach of any these covenants, Cott will be entitled to, in addition to any of the remedies set out in the Employment Agreement for the breach of these covenants, discontinue any and all payments, benefits, and other entitlements as set out in this letter, and you will forfeit any and all claims, actions, demands, or payments whatsoever. (b) You will agree to cooperate reasonably with Cott, and its legal advisors, in connection with: (i) any business matters in which you were involved; or (ii) any existing or potential claims, investigations, administrative proceedings, lawsuits and other legal and business matters which arose during your employment or involving Cott; (iii) effecting compliance with respect to any regulatory requirements; and (iv) completing any further documents required to give effect to the terms set out in this letter with respect to which you have knowledge of the underlying facts. In addition, you will not voluntarily aid, assist or cooperate with any claimants or plaintiffs or their attorneys or agents in any claims or lawsuits commenced in the future against Cott, provided, however, that nothing in this letter will be construed to prevent you from testifying at an administrative hearing, a deposition/discovery, or in court in response to a lawful subpoena in any litigation or proceedings involving Cott. 10. GENERAL (a) Entire Agreement: The agreement confirmed by this letter constitutes the entire agreement between you and Cott with reference to any of the matters herein provided or with reference to your employment or office with Cott, or the cessation thereof. All promises, representations, collateral agreements, offers and understandings not expressly incorporated in this letter agreement are hereby superseded and have no further effect. (b) Severabilitv: The provisions of this letter agreement shall be deemed severable, and the invalidity or unenforceability of any provision set out herein shall not affect the validity or enforceability of the other provisions hereof, all of which shall continue in accordance with their terms. (c) Full Understanding: By signing this letter, you confirm that: (i) you have had an adequate opportunity to read and consider the terms set out herein, including the Release attached, and that you fully understand them and their consequences; (ii) you have been advised, through this paragraph, to consult with legal counsel and have obtained such legal or other advice as you consider advisable with respect to this letter agreement, including attachments; and (iii) you are signing this letter voluntarily, without coercion, and without reliance on any representation, express or implied, by Cott, or by any director, trustee, officer, shareholder, employee or other representative of Cott. (d) Currencv: All dollar amounts set forth or referred to in this letter refer to Canadian currency. (e) Governing Law: The agreement confirmed by this letter shall be governed by the laws of the Province of Ontario, Canada. (f) Payment: All payments made to you, unless otherwise expressly stated, will be less applicable statutory withholdings and deductions. Colin Walker July 27, 2006 Page 4 Colin if you have any questions please feel free to contact me. I am also attaching a copy of the Offer of Employment dated 20th day August, 1998. Yours very truly, Brent D. Willis President and Chief Executive Officer /s/ Mark Halperin - ------------------------------------- Mark Halperin Chief Legal & Corporate Development Officer I have authority to bind the Corporation Attachment Acknowledged, Agreed and Accepted this 8th day of August, 2006 /s/ Colin Walker - ------------------------------------- Colin Walker SCHEDULE "1" RESIGNATION NOTICE TO: COTT CORPORATION AND TO: ALL DIRECT AND INDIRECT AFFILIATES, SUBSIDIARIES AND ASSOCIATED CORPORATION THEREOF AND TO: ALL DIRECTORS THEREOF I COLIN WALKER confirm my resignation as director and from all offices held by me of COTT CORPORATION, including all direct and indirect affiliates, subsidiaries, and associated corporations, with effect as of August 1, 2006. /s/ Colin Walker ---------------------------------------- Colin Walker SCHEDULE "2" RELEASE FROM: COLIN WALKER ("WALKER") TO: COTT CORPORATION ("COTT"), ITS DIRECT AND INDIRECT AFFILIATES, ASSOCIATES, SUBSIDIARIES, PARENTS AND RELATED ORGANIZATIONS AND ALL OF THEIR RESPECTIVE PAST AND PRESENT SHAREHOLDERS, PARTNERS, DIRECTORS, OFFICERS, EMPLOYEES, CONTRACTORS, CONSULTANTS, AGENTS, REPRESENTATIVES, TRUSTEES, ADMINISTRATORS AND ATTORNEYS (ALL COLLECTIVELY REFERRED TO AS "RELEASEES") 1. In consideration of the terms as set out in the letter from Cott to Walker dated July 27, 2006 (the "Agreement"), the receipt and sufficiency of which consideration are hereby acknowledged, and except for the obligations owed to Walker and referred to in the Agreement, Walker hereby remises, releases and forever discharges Cott and the other Releasees of and from all manner of actions, causes of action, suits, debts, dues, accounts, bonds, contracts, liens, claims and demands whatsoever which against the Releasees he now has, ever had or hereafter can, shall or may have for or by reason of any cause, matter or thing whatsoever existing to the present time, and particularly and without limiting the generality of the foregoing, of and from all claims and demands of every nature and kind in any way related to or arising from Walker's employment or other engagement with Cott or the termination of such employment, engagement or other agreements, including all damages, salary, remuneration, commission, vacation pay, overtime pay, termination pay, severance pay, notice of termination, profit-sharing, stock options or other equity, bonuses, proceeds of any insurance or disability plans, pension or retirement benefits, or any other fringe benefit or perquisite of any kind whatsoever and including any claims Walker may have under any United States, Canada or other law, statute or ordinance; any contract or agreement (except the Agreement); and any common law principle. The payments, benefits, and other entitlements referred to in the Agreement are deemed to satisfy all requirements or money owing under all applicable laws including without limitation, any and all wages, vacation pay, termination and severance pay under the Emplqymet1t Standards Act, 2000. 2. Walker confirms that the Agreement has been entered into by the parties for the purposes of fully and finally settling and compromising all possible claims that Walker might have against the Releasees and, therefore, in this respect, Walker covenants and agrees not to file any complaint or initiate any proceeding under the Employment Standards Act, 2000, under the Ontario Human Rights Code, under the Workplace Safety and Insurance Act, under the Occupational Health & Safety Act, under the Labour Relations Act, under the Pay Equity Act, or pursuant to any other applicable law or legislation, including the statutes and laws set forth and/or referenced in the preceding paragraph, in any jurisdiction governing or related to Walker's employment or other engagement with Cott. In the event that Walker hereafter makes any claim or demand or commences or threatens to commence any action, claim or proceeding or to make any complaint against Cott in this respect, this Release may be raised as an estoppel and complete bar to any such action, claim or proceeding. Walker confirms that he has no right to re-instatement, re-call or re-employment with any of the Releasees, and Walker waives and releases all rights he had or may have had in this regard. This paragraph shall not release any rights that may not legally be waived. 3. Walker further agrees not to make or assist in the commencement of any claims (expressly including any cross-claim, counterclaim, third party action or application) against any other person or corporation who might claim contribution or indemnity against the persons or corporations discharged by this Release. 4. With the exception of disclosure to immediate family or to his legal or professional advisors (but provided any such person agrees not to disclose such information to any other person), Walker agrees that the terms and contents of this Release, the consideration included in the Agreement, the contents of the negotiations and discussions resulting in this Release, and any dispute resolved by this Release, shall all remain privileged and confidential and shall not be disclosed except to the extent required by law or as otherwise agreed to in writing by Cott. 5. This Release shall be binding upon his heirs, executors, administrators, successors and assigns and shall enure to the benefit of Cott and to the benefit of all of the Cott's successors and assigns. 6. Walker acknowledges that he has been advised to and has in fact obtained independent legal advice and that the only consideration for this Release is as referred to above. Walker further confirms that no other promises or representations of any kind have been made to Walker to cause him to sign this Release. 7. Walker acknowledges that this Release, the settlement of any dispute between Walker and Cott, or the payment of any monies to Walker, shall not constitute an admission of liability on the part of Cott, which liability is denied. 8. Walker agrees that he alone shall be responsible for all tax liability resulting from his receipt of the payments referred to in the Agreement, except to the extent that Cott has withheld funds for remittance to statutory authorities. Walker agrees to indemnify and save Cott harmless from any and all amounts payable or incurred by Cott (save and except any penalties and interest that are attributable to Cott's not having deducted sufficient funds by its own direction) if it is subsequently determined that any greater amount should have been withheld in respect of income tax or any other statutory withholding. SIGNED, SEALED and DELIVERED this 8th day of August, 2006 "[Signature illegible]" /s/ Colin Walker - ----------------------- ---------------------------------------- Witness Colin Walker EX-10.4 5 o33695exv10w4.txt EX-10.4 EXHIBIT 10.4 EMPLOYMENT AGREEMENT THIS AGREEMENT made as of this 1st day of August, 2006 BETWEEN: COTT CORPORATION, a corporation incorporated under the laws of Canada (hereinafter referred to as the "Corporation") OF THE FIRST PART - and - WYNN WILLARD (hereinafter referred to as the "Executive") OF THE SECOND PART WHEREAS the Executive commenced employment with the Corporation on this 1st day of August 2006 as President, International of the Corporation; AND WHEREAS the Corporation and the Executive have agreed to enter into this Employment Agreement to formalize in writing the terms and conditions reached between them governing the Executive's employment; NOW THEREFORE in consideration of the covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto agree as follows: ARTICLE 1 - COMMENCEMENT AND TERM 1.1 TERM. Subject to earlier termination in accordance with this Section 1.1 or Article 5 hereof, the term of the Executive's employment under this Agreement commences on August 1, 2006 (the "Hire Date") and shall continue for an indefinite term (the "Term") until one party gives notice to the other that he or it wishes to terminate the Executive's employment (a "Notice of Termination"). In the event that a Notice of Termination is delivered, the employment of the Executive shall end at the date specified in the Notice of Termination. ARTICLE 2 - EMPLOYMENT 2.1 POSITION. Subject to the terms and conditions hereof, the Executive shall be employed by the Corporation in the office of President, International of the Corporation effective as of August 1, 2006 and shall perform such duties and exercise such powers and responsibilities of such office. The position will be based in Tampa, Florida, USA, and the Executive shall report to the President and Chief Executive Officer of the Corporation. 2.2 RESPONSIBILITIES. The Executive agrees to devote substantially all of his business time and attention to the business and affairs of the Corporation, to discharge the responsibilities assigned to the Executive, and to use the Executive's best efforts to perform faithfully and efficiently such responsibilities. The Executive shall be entitled to serve as a director on external boards of directors only upon the prior written approval of the Corporation, provided that such approval shall not be unreasonably withheld for any request to serve on up to two (2) external boards of directors. Anything herein to the contrary notwithstanding, nothing shall preclude the Executive from (i) serving on the boards of directors of a reasonable number of trade associations and/or charitable organisations, (ii) engaging in charitable activities and community affairs, and (iii) managing his personal investments and affairs, provided that any or all of the foregoing activities do not materially interfere with the proper performance of his duties and responsibilities as the Corporation's President, International. 2.3 NO EMPLOYMENT RESTRICTION. The Executive hereby represents and confirms that he is not bound by any restrictive covenants that would prevent his employment by the Corporation. ARTICLE 3 - REMUNERATION 3.1 SALARY. During the Term, the Corporation shall pay the Executive a base salary (the "Base Salary") payable bi-monthly. The Base Salary shall not be less than $375,000 per annum (pro-rated for any period of employment less than a full calendar year) and shall be reviewed no less frequently than annually for increases at the discretion of the President and Chief Executive Officer and/or Board of Directors. Such reviews will take into account the current remuneration policy of the Corporation and should not be construed as an automatic increase. 3.2 INCENTIVES. (a) ANNUAL BONUSES. Subject to the provisions of this Section 3.2, the Executive shall be entitled to an annual performance-based bonus (the "Bonus") of an amount equal to up to one hundred percent (100%) of Base Salary for achievement of specified target goals (the "Target Bonus") and up to an additional one hundred percent (100%) of Base Salary for achievement of performance goals in excess of the target goals (the "Excess Bonus"). The performance goals and measures shall be established by the Human Resources and Compensation Committee of the Board of Directors, subject to approval by the Board of Directors each year. The goals shall be set forth in writing and achievement of the specified target goals and of specified performance goals in excess of target goals shall be determined by the Board in its sole discretion. Bonuses shall be earned and payable for fiscal years beginning after December 30, 2006 only upon completion of the relevant fiscal year and provided the Executive is actively and continuously employed for the full duration thereof, unless otherwise provided in Article 5. Any bonus paid to the Executive is entirely discretionary and there is no contractual entitlement to receive it nor shall it be deemed to become part of the contractual employment relationship. The Corporation reserves in its absolute discretion the right to terminate or amend any bonus scheme without notice to the Executive. Receipt of bonus one year creates neither right to, nor expectation of, any bonus in the next year. For the year 2006 only, the Executive shall be guaranteed a Target Bonus equal to 100% of Base Salary as prorated -2- for time actually worked in 2006; any earned Excess Bonus for 2006 shall also be prorated to reflect the partial year of employment. The Bonus, if earned with respect to a fiscal year, shall be paid no later than the last day of the month of February following the end of the fiscal year. (b) EXECUTIVE INCENTIVE PLAN. The Executive shall be entitled to participate each year in the Corporation's Executive Incentive Share Purchase Plan or any successor plan thereto (all such plans referred to in the aggregate as the "EISPP") to the extent that the Executive's performance exceeds 100% of the annual performance objectives established for him. Any award earned for 2006 shall be prorated to reflect employment in 2006 following the Hire Date. The EISPP is governed by its terms and is subject to amendment to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"). (c) LONG-TERM INCENTIVES. The Executive shall be entitled to participate in the long-term incentive plans and programs of the Corporation as made available from time to time to executives of a similar level in the organisation. For the year 2006 only, the Executive will receive within the later of: (i) thirty (30) days following the Hire Date; and (ii) seven (7) days following the execution of this Agreement by the Executive, a PSU Grant (Performance Share Unit Grant) Award equal to a current value of $300,000 as a sign-on award. Such Grant shall be subject to the provisions of the Performance Share Unit Plan. (d) SIGN ON - CASH AWARD. The Executive shall be entitled to receive a one-time Sign On - Cash Award of $100,000 payable within the later of: (i) fourteen (14) days following the Hire Date; and (ii) seven (7) days following the execution of this Agreement by the Executive. 3.3 BENEFITS AND PERQUISITES. (a) The Executive shall be entitled to participate in all of the Corporation's group insurance benefit plans, currently including medical, dental, vision, prescription drugs, short term and long term disability, travel, life, and accident insurance as provided to executives of a similar level in the organization. All plans are governed by their terms. (b) The Executive shall receive an annual automobile allowance of $16,000 per year payable on a bi-weekly basis through payroll. (c) The Executive is not entitled to any other benefit or perquisite other than as specifically set out in this Agreement or agreed to in writing by the Corporation. (d) The Executive will be entitled to participate in an executive annual health assessment subject to a financial reimbursement capped at $5,000 per calendar year. The Executive understands and acknowledges that the perquisites contemplated by this Section 3.3 shall be recorded as taxable benefits within the meaning of the Income Tax Act (Canada) and may have comparable treatment under the United States Internal Revenue Code. 3.4 VACATION. The Executive shall be entitled to four (4) weeks' vacation with pay annually. Such vacation shall be taken at a time or times acceptable to the Corporation having -3- regard to its operations. Accumulated vacation may be not carried forward except with the written approval of the President and Chief Executive Officer. 3.5 EXPENSES. (a) Consistent with its corporate policies as established from time-to-time, the Corporation agrees to reimburse the Executive for all expenses reasonably incurred in connection with the performance of his duties upon being provided with proper vouchers or receipts. (b) The Executive shall relocate his personal residence to the Tampa, Florida area. The Corporation shall provide relocation assistance as referred to in Schedule A. ARTICLE 4 - COVENANTS OF THE PARTIES 4.1 CONFIDENTIALITY. (a) The Executive acknowledges that in the course of carrying out, performing and fulfilling his obligations to the Corporation hereunder, the Executive will have access to and will be entrusted with information that would reasonably be considered confidential to the Corporation or its Affiliates, the disclosure of which to competitors of the Corporation or its Affiliates or to the general public, will be highly detrimental to the best interests of the Corporation or its Affiliates. Such information includes, without limitation, trade secrets, know-how, marketing plans and techniques, cost figures, client lists, software, and information relating to employees, suppliers, customers and persons in contractual relationship with the Corporation. Except as may be required in the course of carrying our his duties hereunder, the Executive covenants and agrees that he will not disclose, for the duration of this Agreement or at any time thereafter, any such information to any person, other than to the directors, officers, employees or agents of the Corporation that have a need to know such information, nor shall the Executive use or exploit, directly or indirectly, such information for any purpose other than for the purposes of the Corporation nor will he disclose nor use for any purpose, other than for those of the Corporation or its Affiliates or any other information which he may acquire during his employment with respect to the business and affairs of the Corporation or its Affiliates. Notwithstanding all of the foregoing, the Executive shall be entitled to disclose such information if required pursuant to a subpoena or order issued by a court, arbitrator or governmental body, agency or official, provided that the Executive shall first have: (i) notified the Corporation; (ii) consulted with the Corporation on the advisability of taking steps to resist such requirements; (iii) if the disclosure is required or deemed advisable, cooperate with the Corporation in an attempt to obtain an order or other assurance (at the Corporation's expense) that such information will be accorded confidential treatment. -4- (b) For the purposes of this Agreement, "Affiliate" shall mean, with respect to any person or entity (herein the "first party"), any other person or entity that directs or indirectly controls, or is controlled by, or is under common control with, such first party. The term "control" as used herein (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to: (i) vote fifty percent (50%) or more of the outstanding voting securities of such person or entity, or (ii) otherwise direct or significantly influence the management or policies of such person or entity by contract or otherwise. 4.2 INVENTIONS. (a) The Executive acknowledges and agrees that all right, title and interest in and to any information, trade secrets, advances, discoveries, improvements, research materials and data bases (collectively, "discoveries") made or conceived by the Executive prior to or during his employment relating to the business or affairs of the Corporation, shall belong to the Corporation. In connection with the foregoing, the Executive agrees to execute any assignments and/or acknowledgements as may be requested by the Board of Directors from time to time. (b) Notwithstanding Section 4.2(a), the Executive shall retain all right, title and interest in and to the Executive's as yet un-named business management text on which he is currently working, provided however this shall not grant or transfer to the Executive any right, title or interest in or to any discoveries that otherwise belong to the Corporation or negate or limit Executive's obligations under Section 4.1 of this Agreement. 4.3 CORPORATE OPPORTUNITIES. Any business opportunities related to the business of the Corporation which become known to the Executive during his employment hereunder must be fully disclosed and made available to the Corporation by the Executive, and the Executive agrees not to take or attempt to take any action if the result would be to divert from the Corporation any opportunity which is within the scope of its business. 4.4 RESTRICTIVE COVENANTS. (a) The Executive will not at any time, without the prior written consent of the Corporation, during the Term of this Agreement or for a period of eighteen (18) months after the termination of the Executive's employment (regardless of the reason for such termination), either individually or in partnership, jointly or in conjunction with any person or persons, firm, association, syndicate, company or corporation, whether as agent, shareholder, employee, consultant, or in any manner whatsoever, directly or indirectly: (i) anywhere in the Territory, engage in, carry on or otherwise have any interest in, advise, lend money to, guarantee the debts or obligations of, permit the Executive's name to be used in connection with any business which is competitive to the Business or which provides the same or substantially similar services as the Business; and/or (ii) for the purpose of competing with any business of the Corporation, solicit, interfere with, accept any business from or render any -5- services to anyone who is a client or a prospective client of the Corporation or any Affiliate at the time the Executive ceased to be employed by the Corporation or who was a client during the twelve (12) months immediately preceding such time; and/or (iii) solicit or offer employment to any person employed or engaged by the Corporation or any Affiliate at the time the Executive ceased to be employed by the Corporation or who was an employee or during the twelve (12) month period immediately preceding such time. (b) For the purposes of the Agreement: (i) "Territory" shall mean the countries in which the Corporation and its subsidiaries conduct the Business; (ii) "Business" shall mean the business of manufacturing, selling or distributing carbonated soft drinks, juices, water and other non-alcoholic beverages to the extent such other non-alcoholic beverages contribute, or are contemplated or projected to contribute, materially to the profits of the Corporation at the time of the Executive's termination of employment. (c) Nothing in this Agreement shall prohibit or restrict the Executive from holding or becoming beneficially interested in up to one percent (1%) of any class of securities in any corporation provided that such class of securities are listed on a recognized stock exchange. 4.5 INSIDER POLICIES. The Executive will comply with all applicable securities laws and the Corporation's Insider Trading Policy and Insider Reporting Procedures (copies of which have been provided to the Executive) in respect of securities of the Corporation issued or acquired by the Executive. 4.6 NONDISPARAGEMENT. The Executive shall not disparage the Corporation or any of its affiliates, directors, officers, employees, or other representatives in any manner and shall in all respects avoid any negative criticism of the Corporation, provided that nothing herein shall be construed to prevent or restrict the Executive from making any truthful statements in response to comments about the Executive made by the Corporation and provided further that nothing contained in this Section 4.6 shall in any way derogate from the Executive's obligation of confidentiality owed to the Corporation under Section 4.1 hereof or otherwise. 4.7 GENERAL PROVISIONS. (a) The Executive acknowledges and agrees that in the event of a breach of the covenants, provisions and restrictions in this Article 4, the Corporation's remedy in the form of monetary damages will be inadequate and that the Corporation shall be and is hereby authorized and entitled, in addition to all other rights and remedies available to it, to apply for and obtain from a court of competent jurisdiction interim and permanent injunctive relief and an accounting of all profits and benefits arising out of such breach. -6- (b) The parties acknowledge that the restrictions in this Article 4 are reasonable in all of the circumstances and the Executive acknowledges that the operation of restrictions contained in this Article 4 may seriously constrain his freedom to seek other remunerative employment. If any of the restrictions are determined to be unenforceable as going beyond what is reasonable in the circumstances for the protection of the interests of the Corporation but would be valid, for example, if the scope of their time periods or geographic areas were limited, the parties consent to the court making such modifications as may be required and such restrictions shall apply with such modifications as may be necessary to make them valid and effective. (c) Each and every provision of these Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, and 4.7 hereunder shall survive the termination of this Agreement or the Executive's employment hereunder (regardless of the reason or such termination). ARTICLE 5 - TERMINATION OF EMPLOYMENT 5.1 TERMINATION BY THE CORPORATION FOR JUST CAUSE, DISABILITY OR DEATH OR NOTICE OF TERMINATION. (a) The Corporation may terminate this Agreement and the Executive's employment hereunder without payment of any compensation either by way of anticipated earnings or damages of any kind at any time for Just Cause, Disability or death of the Executive, or by delivery of a Notice of Termination by the Executive. (b) For purposes of this Agreement, "Just Cause" shall mean: (i) the Executive pleads guilty or no contest to, or is convicted of, any act which is defined as a felony under federal or state law; and/or (ii) the Executive, in carrying out his duties, engages in conduct that constitutes willful gross neglect or willful gross misconduct (including willful breach of fiduciary duties) resulting in either case, in material economic harm to the Corporation; and/or (iii) the Executive commits a willful and material breach of this Agreement or commits a willful act of misappropriation or fraud against the Corporation or its property. There shall be no termination for Just Cause without the Executive first being given written notice of the basis for termination for Just Cause and an opportunity to be heard by the Board of Directors and the President and Chief Executive Officer of the Corporation. (c) For the purposes of this Agreement, "Disability" shall have occurred if the Executive has been unable due to illness, disease, or mental or physical disability (in the opinion of a qualified medical practitioner who is satisfactory to the Executive and the Corporation acting reasonably), to substantially perform the duties and responsibilities of his employment with the Corporation for any consecutive six (6) month period or for any period of nine (9) months (whether or not consecutive) in any consecutive twelve (12) month period, or the -7- Executive has been declared by a court of competent jurisdiction to be mentally incompetent or incapable of managing his affairs. If the Executive and the Corporation cannot agree on a qualified medical practitioner, each party shall select a medical practitioner, and the two practitioners shall select a third who shall be the approved medical practitioner for this purpose. In the event of a termination of the Executive's employment on account of death or Disability, the Executive will receive that portion of his Base Salary which is payable to date of death or Disability. Participation in all bonus plans (specifically including all short term and long term incentive plans) or other stock option, equity or profit participation plans terminates immediately upon the date of death or Disability (provided that, for greater certainty, any unvested rights pursuant to such plans shall immediately vest in accordance with such plans). The Corporation shall, however, pay to the Executive, if entitled thereto, a Target Bonus based on achievement of the specified target goals to such date and calculated pro rata for such year for the period up to the date of death or Disability. The final portion of his Base Salary shall be paid on the regularly scheduled pay date coincident with or next following the date of termination of employment. The pro-rata Target Bonus, if any, shall be paid as soon as practicable and in any event no later than the last day of the month of February following the end of the fiscal year in which such death or Disability occurred. 5.2 TERMINATION BY THE EMPLOYER WITHOUT CAUSE. (a) If the Executive's employment is terminated by the Corporation, including delivery by the Corporation of a Notice of Termination, for any reason other than for Just Cause, Disability, death of the Executive, then the Corporation shall pay to the Executive within thirty (30) days of the date of his termination of employment, or if a six (6) month delay is required to comply with Code section 409A, on the first business day following such delay period, a lump sum amount equal to the sum of: (i) 1.5 times his Base Salary at the time of his termination of employment; and (ii) 1.5 times the average of the aggregate of: (A) the Target Bonus, and (B) the Excess Bonus, actually achieved by and awarded to the Executive for the most recent two (2) completed fiscal years. The Executive shall also receive that portion of his Base Salary which is payable to the date of termination of employment. Participation in all bonus plans (specifically including all short term and long term incentive plans) or other stock option, equity or profit participation plans terminates immediately on such date of termination (provided that the Executive's right to receive any unvested Performance Share Units pursuant to the Performance Share Unit Plan of -8- the Corporation in effect on the date hereof (or any successor thereto) shall, subject to the approval of the Human Resources and Compensation Committee of the Board of Directors of the Corporation, immediately vest). The Corporation shall, however, pay to the Executive, if entitled thereto, a Target Bonus based on achievement of the specified target goals to such date of termination and calculated pro rata for such year for the period prior to his date of termination. The final portion of such Base Salary payable for services performed to the date of termination shall be paid on the regularly scheduled pay date coincident with or next following the date of termination of employment. The pro-rata Target Bonus, if any, shall be paid no later than the last day of the month of February following the end of the fiscal year, or if a six-month delay is required to comply with Code section 409A, on the first business day following such delay period. (b) In the event of the termination of the Executive's employment under this Section 5.2, the Corporation shall, to the extent it may do so legally and in compliance with the Corporation's benefit plans in existence from time to time, continue medical and dental group insurance benefits (which for greater certainty does not include short-term disability, long-term disability, long-term care, life insurance or any other benefits) at a level equivalent to those provided to the Executive immediately prior to the termination for a period until the date which is eighteen (18) months following the date of termination, provided that, the benefits contemplated by this sub-paragraph shall terminate on the date the Executive obtains alternate employment providing comparable benefits. Such coverage shall be applied toward the obligation to provide continuation coverage under applicable law. 5.3 TERMINATION BY THE EXECUTIVE FOR GOOD REASON. (a) The Executive may terminate his employment at any time for Good Reason upon the occurrence, without the express written consent of the Executive, of any of the following: (i) a material diminution in the Executive's title or duties or assignment to the Executive of materially inconsistent duties; and/or (ii) a reduction in the Executive's then current Base Salary or Target Bonus opportunity as a percentage of Base Salary except for reductions applicable to all senior management; and/or (iii) a change in the reporting structure so that the Executive no longer reports directly to the President and Chief Executive Officer; and/or (iv) relocation of the Executive's principal place of employment to a location other than the Tampa, Florida, area unless such relocation is effected at the request of the Executive or with the Executive's approval; and/or -9- (v) a material breach by the Corporation of any provisions of this Agreement; and/or (vi) the failure of the Corporation to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the business or assets of the Corporation within fifteen (15) days after a merger, consolidation, sale, or similar transaction unless the Executive shall have personally received the opinion of counsel to the Corporation that such transaction does not have an adverse legal effect on the rights of the Executive hereunder. There shall be no termination for Good Reason without written notice from Executive describing the basis for the termination and the Corporation's having a reasonable period to cure. (b) In the event the Executive terminates this Agreement for Good Reason, he shall be entitled to the same payments and benefits provided in Section 5.2 above. 5.4 VOLUNTARY RESIGNATION; RETIREMENT. In the event the Executive wishes to resign his employment voluntarily, he shall provide at least thirty (30) days' notice in writing to the Corporation. The Corporation may waive such notice in whole or in part by paying the Executive's Base Salary and continuing his group benefits and perquisites to the effective date of resignation. 5.5 TERMINATION UPON A CHANGE OF CONTROL. (a) If, upon a Change of Control, or as a consequence of the Change of Control prior to the Change of Control, or within twelve (12) months following a Change of Control, the Executive's employment is terminated without Just Cause or if the Executive terminates his employment for Good Reason, the Executive shall be entitled to the payments and benefits provided in Section 5.2 plus shall be entitled to have all unvested rights and entitlements under the Corporation's Performance Share Unit Plan, Executive Incentive Share Purchase Plan and Stock Appreciation Rights Plan, accelerated under such plans such that such rights and entitlements shall fully vest to the maximum extent permitted under such plans. (b) For the purposes of this Agreement, a "Change of Control" shall mean the occurrence of anyone or more of the following: (i) a take-over bid (within the meaning of the Securities Act (Ontario)), other than a take-over bid exempt from the requirements of Part XX of such Act, pursuant to subsections 93(1)(b) or (c) thereof, is completed in respect of more than twenty percent (20%) of the Corporation's common shares and the majority of the members who were members of the Board of Directors of the Corporation prior to completion of such take-over bid are replaced within sixty (60) days following the completion of such take-over bid; -10- (ii) any of the following occur: (A) any consolidation, merger or amalgamation of the Corporation with or into any other corporation whereby the voting shareholders of the Corporation immediately prior to such event receive less than fifty percent (50%) of the voting shares of the consolidated, merged or amalgamated corporation; (B) a sale by the Corporation of all or substantially all of the Corporation's undertakings or assets; (C) a proposal by or with respect to the Corporation being made in connection with a liquidation, dissolution or winding up of the Corporation; (D) any reorganization, reverse stocle split or recapitalization of the Corporation that would result in a Change of Control as otherwise defmed herein; or (E) any transaction or series of related transactions having, directly or indirectly, the same effect as any of the foregoing. (c) Notwithstanding the foregoing, if payment is to be made under this Section 5.5 within the first three years of the Executive's employment and if the payment provided for under this Section 5.5, alone or together with any other payments and/or benefits to be made to or for the benefit of the Executive, whether pursuant to this Agreement or otherwise, would constitute a parachute payment, as defined in Code section 280G(b)(2), such payments shall be reduced so that the present value of the aggregate payments shall be 299.99% of the Executive's base amount, as defined in Code section 280G, if such reduction would result in the Executive retaining on an after-tax basis, an amount equal to or greater than the Executive would retain after payment of all taxes, including the parachute excise tax, if such payments were not reduced. Following the third anniversary of the Executive's employment, if any amount becomes payable under this Section 5.5 and if such payment, alone or together with any other payment and/or benefits to be made to or for the benefit of the Executive, whether pursuant to this Agreement or otherwise, would constitute a parachute payment, as defined in Code section 280G(b)(2), such payments shall be reduced so that the present value of the aggregate payments shall be 299.99% of the Executive's base amount so that no portion of the amounts received by the Executive will be subject to the excise tax imposed by Code section 4999. In either case if such reduction occurs, the Executive may designate the payment or portion thereof to be reduced. (d) The determination of whether payments made upon a Change of Control constitute a parachute payment, as provided in (i) above, and, if so, the amount to be paid to the Executive shall be made by an independent auditor (the "Auditor") jointly selected by the Corporation and the Executive and paid by the Corporation. The Auditor shall be a nationally recognized United States public accounting firm. If the Executive and the Corporation cannot agree on the firm to serve as the Auditor, then the Executive and the Corporation shall each select one accounting firm and those two firms shall jointly select the accounting firm to serve as the Auditor. Notwithstanding anything to the contrary, however, in the event that the foregoing parachute payment determination shall be challenged by the Internal Revenue Service, the final resolution of such challenge (by way of settlement or court decision) shall govern for purposes of computing any applicable limitation under (i) above, and the Executive shall repay to the Corporation any adjustment amount that results from such recomputation, -11- together with interest on such adjustment amount computed at the applicable Federal rate as of the date of the original payment to the Executive under (i) above. 5.6 PAYMENT TO DATE OF TERMINATION. Regardless of the reasons for the termination, the Corporation shall make payment to the Executive to the effective date of termination for all Base Salary, any accrued but unpaid vacation entitlements, and, other than in the event of a termination for Just Cause, any other amounts earned and owing to the Executive but not yet paid as well as other or additional benefits in accordance with applicable plans or programs of the Corporation. 5.7 RETURN OF PROPERTY. Upon any termination of his employment, the Executive shall forthwith deliver or cause to be delivered to the Corporation all books, documents, computer disks, and diskettes and other electronic data, effects, money, securities, or other property belonging to the Corporation or for which the Corporation is liable to others, which are in the possession, charge, control or custody of the Executive. 5.8 RELEASE. The Executive acknowledges and agrees that the payments pursuant to this Article shall be in full satisfaction of all terms of termination of his employment, including termination pay and severance pay pursuant to the applicable employment standards or other legislation as amended from time to time. Except as otherwise provided in this Article, the Executive shall not be entitled to any further termination payments, damages or compensation whatsoever. As condition precedent to any payment pursuant to this Article, the Executive agrees to deliver to the Corporation prior to any such payment, a full and final release from all actions or claims in connection therewith in favour of the Corporation, its affiliates, subsidiaries, directors, officers, employees and agents, in the form attached hereto as Schedule B Schedule A. 5.9 NO MITIGATION; SET-OFF; NATURE OF PAYMENTS. In the event of any termination of employment under this Article 5, the Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due to the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that he may obtain except as specifically provided in this Agreement; provided, however, the Executive authorizes the Corporation to deduct from any payment due to him pursuant to this Agreement, any amounts owed by him to the Corporation by reason of purchases, advances, loans, or other similar contractual obligations to pay money. This provision shall be applied so as not to conflict with any applicable legislation. Any amounts due under this Article 5 are in the nature of severance payments considered to be reasonable by the Corporation and are not in the nature of a penalty. ARTICLE 6 - DIRECTORS AND OFFICERS 6.1 RESIGNATION. If the Executive is a director or officer at the relevant time, the Executive agrees that after termination of his employment with the Corporation he will tender his -12- resignation from any position he may hold as an officer or director of the Corporation or any of its affiliated or related companies. 6.2 INSURANCE. The Corporation shall maintain such directors' and officers' liability insurance for the benefit of the Executive in accordance with corporate policies and as generally provided to the directors of the Corporation. 6.3 INDEMNIFICATION. The Corporation agrees that, if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member employee or agent, the Executive shall be indemnified and held harmless by the Corporation to the fullest extent legally permitted or authorized by the Corporation's certificate bylaws or resolutions of the Corporation's Board of Directors, against all cost, expense, liability, and loss reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Corporation or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Corporation shall advance to the Executive all reasonable costs and expenses incurred by him in connection with a Proceeding within twenty (20) days after receipt by the Corporation of a written request for such advance. Such request shall include an undertaking by the Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such cost and expenses. ARTICLE 7 - ARBITRATION 7.1 All matters in difference between the parties in relation to this Agreement, shall be referred to the arbitration of a single arbitrator, if the parties agree upon one, otherwise to three arbitrators, one to be appointed by the Corporation and one to be appointed by the Executive and a third to be chosen by the first two arbitrators named before they enter upon the business of arbitration. The arbitration shall be conducted in Tampa, Florida, in accordance with the rules of the American Arbitration Association as it may from time to time be amended, and each party shall be responsible for its own expenses related to the arbitration. The award and determination of the arbitrator or arbitrators or any of two of three arbitrators shall be binding upon the parties and their respective heirs, executors, administrators and assigns. ARTICLE 8 - AMENDMENT 8.1 The Corporation and Executive recognize that certain amounts which may become payable under this Agreement are or may be subject to Code section 409A, that final guidance under Code section 409A has not been issued but is anticipated in the near future, and that failure to comply with Code section 409A will result in adverse tax consequences to the Executive. Therefore, Corporation and Executive agree to the amendment of this Agreement following the issuance of such final guidance to the extent necessary with respect to amounts which may become payable hereunder either to provide for the exemption of such amounts from the requirements of Code section 409A or to comply with the requirements of Code section -13- 409A, provided that no such amendment shall have any materially adverse economic impact on the Executive. ARTICLE 9 - CONTRACT PROVISIONS 9.1 HEADINGS. The headings of the Articles and paragraphs herein are inserted for convenience of reference only and shall not affect the meaning or construction hereof. 9.2 INDEPENDENT ADVICE. The Corporation and the Executive acknowledge and agree that they have each obtained independent legal advice in connection with this Agreement and they further acknowledge and agree that they have read, understand and agree with all of the terms hereof and that they are executing this Agreement voluntarily and in good faith. 9.3 GENDER. Words denoting any gender include both genders. 9.4 GOVERNING LAW. This Agreement shall be construed and interpreted in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. Each of the parties hereby irrevocably attorns to the jurisdiction of the court of the Province of Ontario with respect to any matters arising out of this Agreement. 9.5 ENTIRE AGREEMENT. This Agreement, together with the plans and documents referred to herein, constitutes and expresses the whole agreement of the parties hereto with reference to any of the matters or things herein provided for or herein before discussed or mentioned with reference to such employments for the Executive and supersedes and replaces all prior agreements between the parties hereto in respect of the matters or things herein provided for. All promises, representation, collateral agreements and undertakings not expressly incorporated in this Agreement are hereby superseded by this Agreement. 9.6 SEVERABILITY. If any provision contained herein is determined to be void or unenforceable in whole or in part, it shall not be deemed to affect or impair the validity of any other provision herein and each such provision is deemed to be separate and distinct. 9.7 NOTICE. Any notice required or permitted to be given under this Agreement shall be in writing and shall be properly given if personally delivered, delivered by facsimile transmission (with confirmation of receipt) or mailed by prepaid registered mail addressed as follows: -14- (a) in the case of the Corporation: Cott Corporation 207 Queen's Quay West Suite 340 Toronto, Ontario M5J 1A7 Facsimile: (416) 203-6207 Attention: Chief Executive Officer -and- Attention: Chief Legal Officer (b) in the case of the Executive: to the last address of the Executive in the records of the Corporation and its subsidiaries or to such other address as the parties may from time to time specify by notice given in accordance herewith. Any notice so given shall be conclusively deemed to have been given or made on the day of delivery, if personally delivered, or if delivered by facsimile transmission or mailed as aforesaid, upon the date shown on the facsimile confirmation of receipt or on the postal return receipt as the date upon which the envelope containing such notice was actually received by the addressee. 9.8 SUCCESSORS. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective personal or legal representatives, heirs, executors, administrators, successors and assigns. 9.9 SURVIVORSHIP. Upon the termination of Executive's employment, the respective rights and obligations of the parties shall survive such termination to the extent necessary to carry out the intended preservation of such rights and obligations. 9.10 TAXES. All payments under this Agreement shall be subject to withholding of such amounts, if any, relating to tax or other payroll deductions as the Corporation may reasonably determine and should withhold pursuant to any applicable law or regulation. 9.11 CURRENCY. All dollar amounts set forth or referred to in this Agreement refer to U.S. currency. 9.12 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. -15- IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. COTT CORPORATION Per: /s/ Brent Willis ----------------------------------- Brent Willis I have authority to bind the Corporation SIGNED, SEALED & DELIVERED ) in the presence of ) ) ) ) /s/ Wynn Willard ---------------------------------------- WYNN WILLARD -16- SCHEDULE A RELOCATION DETAILS Please find details about the relocation assistance available as part of this offer of employment. HOME FINDING TRIP Employees will be reimbursed for reasonable expenses, submitted on an approved expense report including receipts for those expenses incurred during a 2 x 5-day home finding trip. All travel must be booked through the company travel agency. These expenses may include: - - Round trip economy class (coach fare) airfare by commercial travel for employee and spouse. Other family members may be included with prior approval from the employee's Manager. - - Car rental, parking and toll charges (if applicable). - - Lodging, meals, telephone, laundry charges, Hotel and meal expenses should be consistent with Cott's travel and expense policy. IN-TRANSIT TRAVEL Reimbursement will be made for reasonable one-way travel. If upon arrival in the new location you are required to spend a night in a hotel reimbursement of one night's lodging plus meal expenses for the employee and family will be reimbursed. HOME SELLING EXPENSES: In the event that the employee owns a property that is not a vacation or income producing property, and it is deemed to be the employee's principal residence, Cott will reimburse for the customary, non recurring, legally required selling costs incurred for those items that would normally be paid by the seller. Specifically these are: - - Real Estate commission (not to exceed 6% unless the rate is customarily higher in the employee's area). - - Attorney's fees related to the closing or escrow. - - Land transfer taxes. - - Mortgage loan pre-payment penalty fees to a maximum of three months. - - Recording and processing fees - - Title insurance fees - - Inspection fees (termite, well/water, structural) up to $500.00 - - Up to $250.00 for professional services associated with the sale including additional required surveys. HOME PURCHASE EXPENSES The following are the customary, non-recurring, and legally required purchase costs you will be reimbursed for related to the purchase of a home at the new location. This reimbursement applies to employees who were homeowners at the prior location. Cott will reimburse the following customary closing costs incurred for those items that are normally paid by the buyer: - - Appraisal and/or Title insurance fees - - Document preparation fees - - Recording fees - - Real estate transfer tax - - Survey fees - - Inspection fees (termite, well/water, structural) up to $500.00 - - All mortgage application fees - - Land transfer taxes - - Loan origination fee up to 1%. - - Notary fees The closing expenses which are not eligible for reimbursement by Cott include: interest buy down points, hazard, fire, flood or any other type of homeowner insurance premiums, prorated interest on mortgage, prorated rent, prorated utility billings, home warranties, mortgage finder's fee, closing costs on construction loans, building permits and/or inspections required by governmental agencies. DUPLICATE CARRYING COSTS In the event the new property closes before the sale of the principal residence, Cott will reimburse duplicate carrying costs, specifically, mortgage, interest and property taxes for a period of up to 90 days. You are strongly encouraged to coordinate the closing and purchase dates. Duplicate carrying costs will be reimbursed on the lesser of the two properties. PHYSICAL GOODS MOVE Cott has contracted with several professional moving carriers to transport personal and household goods to the new home. Human Resources can assist with organizing the moving carrier service for employees. Two estimates should be obtained from professional moving -2- carriers to transport personal and household goods to the new home. The following services will be covered: - - Packing, loading and shipment of your personal and household belongings from your principal residence to your new residence or to storage. - - Insurance required to protect the household and personal belongings during the move. This will be arranged through the moving company. The following items are NOT covered: - - Boats, trailers, recreational vehicles, mobile homes, pets, satellite dishes, large gym or fitness equipment, workshop equipment, large machinery, live plants, perishable items, chemicals, lumber, firewood, paint, playground equipment, hot tubs, storage sheds, disassembly or assembly of equipment/items, crating (unless prior approval granted) and special services e.g., piano tuning. SHIPMENT OF VEHICLES Transportation of up to a maximum of two (2) family automobiles to the new location by the most economical means available are included, however, if relocation is to another continent, this provision may not apply. STORAGE Through our moving carriers, Cott will pay for the cost of storing household goods for a period not to exceed sixty (60) days. Cott will pay for the movement of goods out of storage and into a permanent residence. This includes warehouse-handling costs in and out of storage and delivery out of storage. INSURANCE Insurance for your household goods while in transit will be provided through a designated insurance provider or directly through the moving carrier. This insurance covers your household goods through packing, transit, storage in-transit and unloading. All claims should be filed directly with the moving carrier and/or insurance provider. TEMPORARY LIVING EXPENSES Temporary living expenses may be reimbursed if you are required to report to your new assignment, or to vacate your former residence before your new residence is available. You may be reimbursed for: - - Reasonable and actual lodging/rent, meals, laundry and telephone charges for a period not to exceed ninety (90) days. - - For temporary housing, other than hotels, you are encouraged to submit grocery bills instead of restaurant receipts. -3- In the event the employee's family must remain at the old location, the employee will be reimbursed for coach airfare visits to his/her family for up to a maximum of three visits. LEASE CANCELLATION EXPENSES Before approving any lease cancellation reimbursement for either accommodation or vehicles, the hiring Manager and the Chief People Officer must agree upon and approve the reasonableness of the expenses. Settlement of a leased home or apartment or vehicle may be based on one of the following: - - The amount to be paid to the landlord/leasing company for cancellation of the lease. - - Such other equitable arrangements as agreed to by Cott. RELOCATION ALLOWANCE Cott will provide a relocation allowance of the equivalent of 2 months base salary (net) payable after the move has been completed. This allowance is generally used to cover the incidental costs incurred during a relocation for which the employee is not required to retain receipts. This allowance may be used for such things as: - - Utilities hook-up and connection charges. - - Appliance hook-up. - - Drivers' licensing when relocating to a different province/state/country. - - Transportation of pets. - - Installation/removal or cleaning of drapes and/or carpeting. - - Extra labour such as maid service. - - Shipment of other personal vehicles not included with the personal belongings, such as boats, recreational vehicles. TERMINATION OF EMPLOYMENT In the event that your employment is terminated whether voluntarily or involuntarily with Cott within 12 months of your start date you will forfeit any remaining Relocation Policy benefits as of the date of termination. If Cott terminates you within 12 months of joining, Cott will provide you with an option to transfer back to your place of origin. Your relocation will include those items listed above (but will exclude the relocation allowance) that are in keeping with your original relocation assistance. -4- EXPENSE REPORT During your relocation you will be required to track your expenses for those items other than those covered by the relocation allowance. Such expenses as the house-hunting trip, temporary housing, family travel, etc., will be submitted for reimbursement on a Relocation Expense Report. This is the only expense report that will be approved for relocation expenses. Relocation expenses must never be mixed with regular business expenses. Completed expense reports should be signed by your manager and then submitted to Human Resources, Corporate. -5- SCHEDULE A RELEASE FROM: WYNN WILLARD (THE "EXECUTIVE") TO: COTT CORPORATION ("COTT") , ITS RESPECTIVE DIRECT AND INDIRECT AFFILIATES, ASSOCIATES, SUBSIDIARIES, PARENTS AND RELATED ORGANIZATIONS AND ALL OF THEIR RESPECTIVE PAST AND PRESENT SHAREHOLDERS, PARTNERS, DIRECTORS, OFFICERS, EMPLOYEES, CONTRACTORS, CONSULTANTS, AGENTS, REPRESENTATIVES, TRUSTEES, ADMINISTRATORS, ATTORNEYS AND INSURERS (ALL COLLECTIVELY REFERRED TO AS "RELEASEES") 1. In consideration of the terms as set out in the agreement from Cott to the Executive dated _____ (the "Agreement"), the receipt and sufficiency of which consideration are hereby acknowledged, and except for the obligations owed to the Executive and referred to in the Agreement, the Executive hereby remises, releases and forever discharges Cott and the other Releasees of and from all manner of actions, causes of action, suits, debts, dues, accounts, bonds, contracts, liens, claims and demands whatsoever which against the Releasees he now has, ever had or hereafter can, shall or may have for or by reason of any cause, matter or thing whatsoever existing to the present time, and particularly and without limiting the generality of the foregoing, of and from all claims and demands of every nature and kind in any way related to or arising from the Executive's employment or other engagement with Cott or the termination of such employment, engagement or other agreements, including all damages, salary, remuneration, commission, vacation pay, overtime pay, termination pay, severance pay, notice of termination, profit-sharing, stock options or other equity, bonuses, proceeds of any insurance or disability plans, pension or retirement benefits, or any other fringe benefit or perquisite of any kind whatsoever and including any claims the Executive may have under any United States, Canada, state, province, or local statute or ordinance, including without limitation the U.S. Age Discrimination in Employment Act, the U.S. Civil Rights Acts of 1964 and 1991, the U.S. Family and Medical Leave Act, the U.S. Employee Retirement Income Security Act ("ERISA"); the Florida Civil Rights Act of 1992; any contract or agreement (except the Agreement); and any common law principle. The payments, benefits, and other entitlements referred to in the Agreement are deemed to satisfy all requirements or money owing under all applicable laws including without limitation, any and all wages, vacation pay, termination and severance pay under the Employment Standards Act, 2000. Notwithstanding anything herein to the contrary, in no event shall this Release apply to (i) the Executive's rights as a holder of common shares of Cott; (ii) the enforcement of the obligations of Cott or any Releasee under the Agreement; (iii) the Executive's right to indemnification under the Agreement or otherwise in effect on the date of this Release; and (iv) any claims for workers' compensation benefits or vested retirement or welfare benefits to which the Executive is entitled, if any, under the terms of Cott's retirement and welfare benefit plans, as in effect from time to time, determined in accordance with the terms of those plans. -6- 2. The Executive confirms that the Agreement has been entered into by the parties for the purposes of fully and finally settling and compromising all possible claims that the Executive might have against the Releasees and, therefore, in this respect, the Executive covenants and agrees not to file any complaint or initiate any proceeding under the Employment Standards Act, 2000, under the Ontario Human Rights Code, under the Workplace Safety and Insurance Act, under the Occupational Health & Safety Act, under the Labour Relations Act, under the Pay Equity Act, or pursuant to any other applicable law or legislation, including the statutes and laws set forth and/or referenced in the preceding paragraph, in any jurisdiction governing or related to the Executive's employment or other engagement with Cott. In the event that the Executive hereafter makes any claim or demand or commences or threatens to commence any action, claim or proceeding or to make any complaint against Cott in this respect, this Release may be raised as an estoppel and complete bar to any such action, claim or proceeding. The Executive confirms that he has no right to re-instatement, re-call or re-employment with any of the Releasees, and the Executive waives and releases all rights he had or may have had in this regard. This paragraph shall not release any rights that may not legally be waived. 3. The Executive further agrees not to make or voluntarily assist in the commencement of any claims (expressly including any cross-claim, counterclaim, third party action or application) against any other person or corporation who might claim contribution or indemnity against the persons or corporations discharged by this Release, including under the provisions of the Negligence Act or any other statute. 4. With the exception of disclosure to the Executive's immediate family or to his legal or professional advisors (but provided any such person agrees not to disclose such information to any other person), the Executive agrees that the terms and contents of this Release, the consideration included in the Agreement, the contents of the negotiations and discussions resulting in this Release, and any dispute resolved by this Release, shall all remain privileged and confidential and shall not be disclosed except to the extent required by law or as otherwise agreed to in writing by Cott. 5. This Release shall be binding upon the Executive and his heirs, executors, administrators, successors and assigns and shall enure to the benefit of the Releasees and to the benefit of all of the Releasees' heirs, executors, administrators, successors and assigns. 6. The Executive acknowledges that he has had an opportunity to review this Release for no less than twenty-one (21) days and the right to revoke his acceptance of the Release for a period of seven (7) days after his execution of the Release. The Executive also acknowledges that he has been advised to and has in fact obtained independent legal advice and that the only consideration for this Release is as referred to above. The Executive further confirms that no other promises or representations of any kind have been made to the Executive to cause him to sign this Release. 7. The Executive acknowledges that this Release, the settlement of any dispute between the Executive and Cott, or the payment of any monies to the Executive, shall not constitute an admission of liability on the part of Cott, which liability is denied. -7- 8. The Executive agrees that he alone shall be responsible for all tax liability resulting from his receipt of the payments referred to in the Agreement, except to the extent that Cott has withheld funds for remittance to statutory authorities. The Executive agrees to indemnify and save Cott harmless from any and all amounts payable or incurred by Cott (save and except any penalties and interest that are attributable to Cott's not having deducted sufficient funds by its own direction) if it is subsequently determined that any greater amount should have been withheld in respect of income tax or any other statutory withholding. SIGNED, SEALED AND DELIVERED THIS DAY OF ________________, ______________. - ------------------------------------- ---------------------------------------- Witness WYNN WILLARD -8- EX-10.5 6 o33695exv10w5.txt EX-10.5 EXHIBIT 10.5 EMPLOYMENT AGREEMENT THIS AGREEMENT made as of this 1st day of August, 2006 BETWEEN: COTT CORPORATION, a corporation incorporated under the laws of Canada (hereinafter referred to as the "Corporation") OF THE FIRST PART - and - JOHN DENNEHY (hereinafter referred to as the "Executive") OF THE SECOND PART WHEREAS the Executive is promoted within the Corporation on this 1st day of August 2006 to President, North America of the Corporation; AND WHEREAS the Corporation and the Executive have agreed to enter into this Employment Agreement to formalize in writing the terms and conditions reached between them governing the Executive's employment; NOW THEREFORE in consideration of the covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto agree as follows: ARTICLE 1 - COMMENCEMENT AND TERM 1.1 TERM. Subject to earlier termination in accordance with this Section 1.1 or Article 5 hereof, the term of the Executive's employment under this Agreement commences on August 1, 2006 (the "Promotion Date") and shall continue for an indefinite term (the "Term") until one party gives notice to the other that he or it wishes to terminate the Executive's employment (a "Notice of Termination"). In the event that a Notice of Termination is delivered, the employment of the Executive shall end at the date specified in the Notice of Termination This Agreement supersedes any and all oral or written communications between Executive and Company regarding the subject matter of this Agreement and replaces any other existing contracts (oral or written) which were in place previously. This Agreement contains the entire agreement of these parties. ARTICLE 2 - EMPLOYMENT 2.1 POSITION. Subject to the terms and conditions hereof, the Executive shall now be employed by the Corporation in the office of President, North America of the Corporation effective as of August 1, 2006 and shall perform such duties and exercise such powers and responsibilities of such office. The position will be based in Tampa, Florida, USA, and the Executive shall report to the Chief Executive Officer of the Corporation. The Executive is expected to relocate to Tampa Florida no later than December 31 2006. 2.2 RESPONSIBILITIES. The Executive agrees to devote substantially all of his business time and attention to the business and affairs of the Corporation, to discharge the responsibilities assigned to the Executive, and to use the Executive's best efforts to perform faithfully and efficiently such responsibilities. The Executive shall be entitled to serve as a director on external boards of directors only upon the prior written approval of the Corporation, provided that such approval shall not be unreasonably withheld for any request to serve on up to two (2) external boards of directors. Anything herein to the contrary notwithstanding, nothing shall preclude the Executive from (i) serving on the boards of directors of a reasonable number of trade associations and/or charitable organizations, (ii) engaging in charitable activities and community affairs, and (iii) managing his personal investments and affairs, provided that any or all of the foregoing activities do not materially interfere with the proper performance of his duties and responsibilities as the President, North America. 2.3 NO EMPLOYMENT RESTRICTION. The Executive hereby represents and confirms that he is not bound by any restrictive covenants that would prevent his employment by the Corporation. ARTICLE 3 - REMUNERATION 3.1 SALARY. During the Term, the Corporation shall pay the Executive a base salary (the "Base Salary") payable bi-monthly. The Base Salary shall not be less than $375,000 per annum (pro-rated for any period of employment less than a full calendar year) and shall be reviewed no less frequently than annually for increases at the discretion of the Chief Executive Officer and/or Board of Directors. Such reviews will take into account the current remuneration policy of the Corporation and should not be construed as an automatic increase. 3.2 INCENTIVES. (a) ANNUAL BONUSES. Subject to the provisions of this Section 3.2, the Executive shall be entitled to an annual performance-based bonus (the "Bonus") of an amount equal to up to one hundred percent (100%) of Base Salary for achievement of specified target goals (the "Target Bonus") and up to an additional one hundred percent (100%) of Base Salary for achievement of performance goals in excess of the target goals (the "Excess Bonus"). For bonus year 2006 the payment will be prorated as of August 1st 2006 on the Executives new salary. The performance goals and measures shall be established by the Human Resources and Compensation Committee of the Board of Directors, subject to approval by the Board of Directors each year. The goals shall be set forth in writing and achievement of the specified target goals and of specified performance goals in excess of target goals shall be determined by the Board in its sole discretion. Bonuses shall be earned and payable for fiscal years beginning after December 30, 2006 only upon completion of the relevant fiscal year and provided the Executive is actively and continuously employed for the full duration thereof, unless otherwise provided in Article 5. Any bonus paid to the Executive is entirely discretionary and there is no -2- contractual entitlement to receive it nor shall it be deemed to become part of the contractual employment relationship. The Corporation reserves in its absolute discretion the right to terminate or amend any bonus scheme without notice to the Executive. Receipt of bonus one year creates neither right to, nor expectation of, any bonus in the next year. The Bonus, if earned with respect to a fiscal year, shall be paid no later than the last day of the month of February following the end of the fiscal year. (b) EXECUTIVE INCENTIVE PLAN. The Executive shall be entitled to participate each year in the Corporation's Executive Incentive Share Purchase Plan or any successor plan thereto (all such plans referred to in the aggregate as the "EISPP") to the extent that the Executive's performance exceeds 100% of the annual performance objectives established for him. The EISPP is governed by its terms and is subject to amendment to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"). (c) LONG-TERM INCENTIVES. The Executive shall be entitled to participate in the long-term incentive plans and programs of the Corporation as made available from time to time to executives of a similar level in the organization. For 2007 and subsequent years, in accordance with current practices, PSU Grants to the Executive are currently projected (without any guarantees or commitment) to be based on an award amount equal to two times the Executive's Base Salary, provided that, for greater certainty, such PSU Grants shall be subject to the discretion and approval of the Human Resources and Compensation Committee, which discretion shall in no way be fettered by the provisions of this Agreement. 3.3 BENEFITS AND PERQUISITES. (a) The Executive shall be entitled to participate in all of the Corporation's group insurance benefit plans, currently including medical, dental, vision, prescription drugs, short term and long term disability, travel, life, and accident insurance as provided to executives of a similar level in the organization. All plans are governed by their terms. (b) The Executive shall receive an annual automobile allowance of $14,500 per year payable on a bi-weekly basis through payroll. (c) The Executive is not entitled to any other benefit or perquisite other than as specifically set out in this Agreement or agreed to in writing by the Corporation. (d) The Executive will be entitled to participate in an executive annual health assessment subject to a financial reimbursement capped at $5,000 per calendar year. The Executive understands and acknowledges that the perquisites contemplated by this Section 3.3 shall be recorded as taxable benefits within the meaning of the Income Tax Act (Canada) and may have comparable treatment under the United States Internal Revenue Code. 3.4 VACATION. The Executive shall be entitled to four (4) weeks' vacation with pay annually. Such vacation shall be taken at a time or times acceptable to the Corporation having regard to its operations. Accumulated vacation may be not carried forward except with the written approval of the Chief Executive Officer. -3- 3.5 EXPENSES. (a) Consistent with its corporate policies as established from time-to-time, the Corporation agrees to reimburse the Executive for all expenses reasonably incurred in connection with the performance of his duties upon being provided with proper vouchers or receipts. (b) The Executive shall relocate his personal residence to the Tampa, Florida area. The Corporation shall provide relocation assistance as referred to in Schedule A. ARTICLE 4 - COVENANTS OF THE PARTIES 4.1 CONFIDENTIALITY. (a) The Executive acknowledges that in the course of carrying out, performing and fulfilling his obligations to the Corporation hereunder, the Executive will have access to and will be entrusted with information that would reasonably be considered confidential to the Corporation or its Affiliates, the disclosure of which to competitors of the Corporation or its Affiliates or to the general public, will be highly detrimental to the best interests of the Corporation or its Affiliates. Such information includes, without limitation, trade secrets, know-how, marketing plans and techniques, cost figures, client lists, software, and information relating to employees, suppliers, customers and persons in contractual relationship with the Corporation. Except as may be required in the course of carrying out his duties hereunder, the Executive covenants and agrees that he will not disclose, for the duration of this Agreement or at any time thereafter, any such information to any person, other than to the directors, officers, employees or agents of the Corporation that have a need to know such information, nor shall the Executive use or exploit, directly or indirectly, such information for any purpose other than for the purposes of the Corporation nor will he disclose nor use for any purpose, other than for those of the Corporation or its Affiliates or any other information which he may acquire during his employment with respect to the business and affairs of the Corporation or its Affiliates. Notwithstanding all of the foregoing, the Executive shall be entitled to disclose such information if required pursuant to a subpoena or order issued by a court, arbitrator or governmental body, agency or official, provided that the Executive shall first have: (i) notified the Corporation; (ii) consulted with the Corporation on the advisability of taking steps to resist such requirements; (iii) if the disclosure is required or deemed advisable, cooperate with the Corporation in an attempt to obtain an order or other assurance (at the Corporation's expense) that such information will be accorded confidential treatment. (b) For the purposes of this Agreement, "Affiliate" shall mean, with respect to any person or entity (herein the "first party"), any other person or entity that directs or indirectly controls, or is controlled by, or is under common control with, such first party. The term "control" as used herein (including the terms "controlled by" and "under common control with") -4- means the possession, directly or indirectly, of the power to: (i) vote fifty percent (50%) or more of the outstanding voting securities of such person or entity, or (ii) otherwise direct or significantly influence the management or policies of such person or entity by contract or otherwise. 4.2 INVENTIONS. The Executive acknowledges and agrees that all right, title and interest in and to any information, trade secrets, advances, discoveries, improvements, research materials and data bases made or conceived by the Executive prior to or during his employment relating to the business or affairs of the Corporation, shall belong to the Corporation. In connection with the foregoing, the Executive agrees to execute any assignments and/or acknowledgements as may be requested by the Board of Directors from time to time. 4.3 CORPORATE OPPORTUNITIES. Any business opportunities related to the business of the Corporation which become known to the Executive during his employment hereunder must be fully disclosed and made available to the Corporation by the Executive, and the Executive agrees not to take or attempt to take any action if the result would be to divert from the Corporation any opportunity which is within the scope of its business. 4.4 RESTRICTIVE COVENANTS. (a) The Executive will not at any time, without the prior written consent of the Corporation, during the Term of this Agreement or for a period of twenty four (24) months after the termination of the Executive's employment (regardless of the reason for such termination), either individually or in partnership, jointly or in conjunction with any person or persons, firm, association, syndicate, company or corporation, whether as agent, shareholder, employee, consultant, or in any manner whatsoever, directly or indirectly: (i) anywhere in the Territory, engage in, carry on or otherwise have any interest in, advise, lend money to, guarantee the debts or obligations of, permit the Executive's name to be used in connection with any business which is competitive to the Business or which provides the same or substantially similar services as the Business; (ii) for the purpose of competing with any business of the Corporation, solicit, interfere with, accept any business from or render any services to anyone who is a client or a prospective client of the Corporation or any Affiliate at the time the Executive ceased to be employed by the Corporation or who was a client during the twelve (12) months immediately preceding such time; (iii) solicit or offer employment to any person employed or engaged by the Corporation or any Affiliate at the time the Executive ceased to be employed or engaged by the Corporation or who was an employee or engaged during the twelve (12) month period immediately preceding such time. (b) For the purposes of the Agreement: -5- (i) "Territory" shall mean the countries in which the Corporation and its subsidiaries conduct the Business; (ii) "Business" shall mean the business of manufacturing, selling or distributing carbonated soft drinks, juices, water and other non-alcoholic beverages to the extent such other non-alcoholic beverages contribute, or are contemplated or projected to contribute, materially to the profits of the Corporation at the time of the Executive's termination of employment. (c) Nothing in this Agreement shall prohibit or restrict the Executive from holding or becoming beneficially interested in up to one percent (1%) of any class of securities in any corporation provided that such class of securities are listed on a recognized stock exchange. 4.5 INSIDER POLICIES. The Executive will comply with all applicable securities laws and the Corporation's Insider Trading Policy and Insider Reporting Procedures (copies of which have been provided to the Executive) in respect of securities of the Corporation issued or acquired by the Executive. 4.6 NONDISPARAGEMENT. The Executive shall not disparage the Corporation or any of its affiliates, directors, officers, employees, or other representatives in any manner and shall in all respects avoid any negative criticism of the Corporation, provided that nothing herein shall be construed to prevent or restrict the Executive from making any truthful statements in response to comments about the Executive made by the Corporation and provided further that nothing contained in this Section 4.6 shall in any way derogate from the Executive's obligation of confidentiality owed to the Corporation under Section 4.1 hereof or otherwise. 4.7 GENERAL PROVISIONS. (a) The Executive acknowledges and agrees that in the event of a breach of the covenants, provisions and restrictions in this Article 4, the Corporation's remedy in the form of monetary damages will be inadequate and that the Corporation shall be and is hereby authorized and entitled, in addition to all other rights and remedies available to it, to apply for and obtain from a court of competent jurisdiction interim and permanent injunctive relief and an accounting of all profits and benefits arising out of such breach. (b) The parties acknowledge that the restrictions in this Article 4 are reasonable in all of the circumstances and the Executive acknowledges that the operation of restrictions contained in this Article 4 may seriously constrain his freedom to seek other remunerative employment. If any of the restrictions are determined to be unenforceable as going beyond what is reasonable in the circumstances for the protection of the interests of the Corporation but would be valid, for example, if the scope of their time periods or geographic areas were limited, the parties consent to the court making such modifications as may be required and such restrictions shall apply with such modifications as may be necessary to make them valid and effective. -6- (c) Each and every provision of these Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 and 4.7 hereunder shall survive the termination of this Agreement or the Executive's employment hereunder (regardless of the reason or such termination). ARTICLE 5 - TERMINATION OF EMPLOYMENT 5.1 TERMINATION BY THE CORPORATION FOR JUST CAUSE, DISABILITY OR DEATH OR NOTICE OF TERMINATION. (a) The Corporation may terminate this Agreement and the Executive's employment hereunder without payment of any compensation either by way of anticipated earnings or damages of any kind at any time for Just Cause, Disability or death of the Executive, or by delivery of a Notice of Termination by the Executive. (b) For purposes of this Agreement, "Just Cause" shall mean: (i) the Executive pleads guilty or no contest to, or is convicted of, any act which is defined as a felony under federal or state law; (ii) the Executive's ability to perform his duties is impaired by alcoholism or drug addiction; (iii) the Executive commits theft, misappropriation or fraud against the Corporation or its property; (iv) the Executive, in carrying out his duties, engages in conduct that constitutes gross neglect or gross misconduct or dishonesty; (v) the Executive commits a willfull breach of fiduciary duties; or (iv) the Executive commits a willful and material breach of this Agreement. There shall be no termination for Just Cause without the Executive first being given written notice of the basis for termination for Just Cause and an opportunity to be heard by the Chief Executive Officer of the Corporation. (c) For the purposes of this Agreement, "Disability" shall have occurred if the Executive has been unable due to illness, disease, or mental or physical disability (in the opinion of a qualified medical practitioner who is satisfactory to the Executive and the Corporation acting reasonably), to substantially perform the duties and responsibilities of his employment with the Corporation for any consecutive six (6) month period or for any period of nine (9) months (whether or not consecutive) in any consecutive twelve (12) month period, or the Executive has been declared by a court of competent jurisdiction to be mentally incompetent or incapable of managing his affairs. -7- If the Executive and the Corporation cannot agree on a qualified medical practitioner, each party shall select a medical practitioner, and the two practitioners shall select a third who shall be the approved medical practitioner for this purpose. In the event of a termination of the Executive's employment on account of death or Disability, the Executive (if living) will receive that portion of his Base Salary which is payable to date of death or Disability. Participation in all bonus plans (specifically including all short term and long term incentive plans) or other stock option, equity or profit participation plans terminates immediately upon the date of death or Disability (provided that, for greater certainty, any unvested rights pursuant to such plans shall immediately vest in accordance with such plans). The Corporation shall, however, pay to the Executive, if entitled thereto, a Target Bonus based on achievement of the specified target goals to such date and calculated pro rata for such year for the period up to the date of death or Disability. The final portion of his Base Salary shall be paid on the regularly scheduled pay date coincident with or next following the date of termination of employment. The pro- rata Target Bonus, if any, shall be paid as soon as practicable and in any event no later than the last day of the month of February following the end of the fiscal year in which such death or Disability occurred. 5.2 TERMINATION BY THE EMPLOYER WITHOUT CAUSE. (a) If the Executive's employment is terminated by the Corporation, including delivery by the Corporation of a Notice of Termination, for any reason other than for Just Cause, Disability, death of the Executive, then the Corporation shall pay to the Executive within thirty (30) days of the date of his termination of employment, or if a six (6) month delay is required to comply with Code section 409A, on the first business day following such delay period, a lump sum amount equal to the sum of: (i) 2 times his annual Base Salary and Car Allowance at the time of his termination of employment; and an amount equal to the company contributions towards the 401k plan and the annual Cott cost of life insurance (ii) Replacement cobra costs for an 18 month period. (iii) 2 times his Target Bonus (capped at 100% of his target payout) (iv) Bonus for the current year (if any) calculated pro rata for the period up to the date of termination based on achievement of the annual bonus incentive target to such date, such payment(s) being made immediately if the amount can be readily determined but, in any event, not later than thirty (30) days following the completion of the audited financial statements for the fiscal year in which the date of termination occurs. The Executive shall also receive that portion of his Base Salary which is payable to the date of termination of employment. Participation in all bonus plans (specifically including all short term and long term incentive plans) or other stock option, equity or profit participation -8- plans terminates immediately on such date of termination (provided that the Executive's right to receive any unvested Performance Share Units pursuant to the Performance Share Unit Plan of the Corporation in effect on the date hereof (or any successor thereto,) shall, subject to the approval of the Human Resources and Compensation Committee of the Board of Directors of the Corporation, immediately vest). The final portion of such Base Salary payable for services performed to the date of termination shall be paid on the regularly scheduled pay date coincident with or next following the date of termination of employment. The pro-rata Target Bonus, if any, shall be paid no later than the last day of the month of February following the end of the fiscal year, or if a six-month delay is required to comply with Code section 409A, on the first business day following such delay period. 5.3 TERMINATION BY THE EXECUTIVE FOR GOOD REASON. (a) The Executive may terminate his employment at any time for Good Reason upon the occurrence, without the express written consent of the Executive, of any of the following: (i) a material diminution in the Executive's title or duties or assignment to the Executive of materially inconsistent duties; (ii) a reduction in the Executive's then current Base Salary or Target Bonus opportunity as a percentage of Base Salary except for reductions applicable to all senior management; (iii) a change in the reporting structure so that the Executive no longer reports directly to the Chief Executive Officer; (iv) relocation of the Executive's principal place of employment to a location other than the Tampa, Florida, area unless such relocation is effected at the request of the Executive or with the Executive's approval; (v) a material breach by the Corporation of any provisions of this Agreement; or (vi) the failure of the Corporation to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the business or assets of the Corporation within fifteen (15) days after a merger, consolidation, sale, or similar transaction unless the Executive shall have personally received the opinion of counsel to the Corporation that such transaction does not have an adverse legal effect on the rights of the Executive hereunder. There shall be no termination for Good Reason without written notice from Executive describing the basis for the termination and the Corporation's having a reasonable period to cure. -9- (b) In the event the Executive terminates this Agreement for Good Reason, he shall be entitled to the same payments and benefits provided in Section 5.2 above. 5.4 VOLUNTARY RESIGNATION; RETIREMENT. In the event the Executive wishes to resign his employment voluntarily, he shall provide at least thirty (30) days' notice in writing to the Corporation. The Corporation may waive such notice in whole or in part by paying the Executive's Base Salary and continuing his group benefits and perquisites to the effective date of resignation. 5.5 TERMINATION UPON A CHANGE OF CONTROL. (a) If, upon a Change of Control, or as a consequence of the Change of Control prior to the Change of Control, or within twelve (12) months following a Change of Control, the Executive's employment is terminated without Just Cause or if the Executive terminates his employment for Good Reason, the Executive shall be entitled to the payments and benefits provided in Section 5.2 plus shall be entitled to have all unvested rights and entitlements under the Corporation's Performance Share Unit Plan, Executive Incentive Share Purchase Plan and Stock Appreciation Rights Plan, accelerated under such plans such that such rights and entitlements shall fully vest to the maximum extent permitted under such plans. (b) For the purposes of this Agreement, a "Change of Control" shall mean the occurrence of any one or more of the following: (i) a take-over bid (within the meaning of the Securities Act (Ontario)), other than a take-over bid exempt from the requirements of Part XX of such Act, pursuant to subsections 93(1)(b) or (c) thereof, is completed in respect of more than twenty percent (20%) of the Corporation's common shares and the majority of the members who were members of the Board of Directors of the Corporation prior to completion of such take-over bid are replaced within sixty (60) days following the completion of such take-over bid; (ii) any of the following occur: (A) any consolidation, merger or amalgamation of the Corporation with or into any other corporation whereby the voting shareholders of the Corporation immediately prior to such event receive less than fifty percent (50%) of the voting shares of the consolidated, merged or amalgamated corporation; (B) a sale by the Corporation of all or substantially all of the Corporation's undertakings or assets; (C) a proposal by or with respect to the Corporation being made in connection with a liquidation, dissolution or winding up of the Corporation; (D) any reorganization, reverse stock split or recapitalization of the Corporation that would result in a Change of Control as otherwise defined herein; or (E) any transaction or series of related transactions having, directly or indirectly, the same effect as any of the foregoing. -10- (c) The determination of whether payments made upon a Change of Control constitute a parachute payment, as provided in (i) above, and, if so, the amount to be paid to the Executive shall be made by an independent auditor (the "Auditor") jointly selected by the Corporation and the Executive and paid by the Corporation. The Auditor shall be a nationally recognized United States public accounting firm. If the Executive and the Corporation cannot agree on the firm to serve as the Auditor, then the Executive and the Corporation shall each select one accounting firm and those two firms shall jointly select the accounting firm to serve as the Auditor. Notwithstanding anything to the contrary, however, in the event that the foregoing parachute payment determination shall be challenged by the Internal Revenue Service, the final resolution of such challenge (by way of settlement or court decision) shall govern for purposes of computing any applicable limitation under (i) above, and the Executive shall repay to the Corporation any adjustment amount that results from such recomputation, together with interest on such adjustment amount computed at the applicable Federal rate as of the date of the original payment to the Executive under (i) above. 5.6 PAYMENT TO DATE OF TERMINATION. Regardless of the reasons for the termination, the Corporation shall make payment to the Executive to the effective date of termination for all Base Salary, any accrued but unpaid vacation entitlements, and, other than in the event of a termination for Just Cause, any other amounts earned and owing to the Executive but not yet paid as well as other or additional benefits in accordance with applicable plans or programs of the Corporation. 5.7 RETURN OF PROPERTY. Upon any termination of his employment, the Executive shall forthwith deliver or cause to be delivered to the Corporation all books, documents, computer disks, and diskettes and other electronic data, effects, money, securities, or other property belonging to the Corporation or for which the Corporation is liable to others, which are in the possession, charge, control or custody of the Executive. 5.8 RELEASE. The Executive acknowledges and agrees that the payments pursuant to this Article shall be in full satisfaction of all terms of termination of his employment, including termination pay and severance pay pursuant to the applicable employment standards or other legislation as amended from time to time. Except as otherwise provided in this Article, the Executive shall not be entitled to any further termination payments, damages or compensation whatsoever. As condition precedent to any payment pursuant to this Article, the Executive agrees to deliver to the Corporation prior to any such payment, a full and final release from all actions or claims in connection therewith in favour of the Corporation, its affiliates, subsidiaries, directors, officers, employees and agents. 5.9 NO MITIGATION; SET-OFF; NATURE OF PAYMENTS. In the event of any termination of employment under this Article 5, the Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due to the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that he -11- may obtain except as specifically provided in this Agreement; provided, however, the Executive authorizes the Corporation to deduct from any payment due to him pursuant to this Agreement, any amounts owed by him to the Corporation by reason of purchases, advances, loans, or other similar contractual obligations to pay money. This provision shall be applied so as not to conflict with any applicable legislation. Any amounts due under this Article 5 are in the nature of severance payments considered to be reasonable by the Corporation and are not in the nature of a penalty. ARTICLE 6 - DIRECTORS AND OFFICERS 6.1 RESIGNATION. If the Executive is a director or officer at the relevant time, the Executive agrees that after termination of his employment with the Corporation he will tender his resignation from any position he may hold as an officer or director of the Corporation or any of its affiliated or related companies. 6.2 INSURANCE. The Corporation shall maintain such directors' and officers' liability insurance for the benefit of the Executive in accordance with corporate policies and as generally provided to the directors of the Corporation. 6.3 INDEMNIFICATION. The Corporation agrees that, if the Executive is made a party, or is threatened to be made a party, to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, member, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether or not the basis of such Proceeding is the Executive's alleged action in an official capacity while serving as a director, officer, member employee or agent, the Executive shall be indemnified and held harmless by the Corporation to the fullest extent legally permitted or authorized by the Corporation's certificate bylaws or resolutions of the Corporation's Board of Directors, against all cost, expense, liability, and loss reasonably incurred or suffered by the Executive in connection therewith, and such indemnification shall continue as to the Executive even if he has ceased to be a director, member, employee or agent of the Corporation or other entity and shall inure to the benefit of the Executive's heirs, executors and administrators. The Corporation shall advance to the Executive all reasonable costs and expenses incurred by him in connection with a Proceeding within twenty (20) days after receipt by the Corporation of a written request for such advance. Such request shall include an undertaking by the Executive to repay the amount of such advance if it shall ultimately be determined that he is not entitled to be indemnified against such cost and expenses. ARTICLE 7 - ARBITRATION 7.1 All matters in difference between the parties in relation to this Agreement, shall be referred to the arbitration of a single arbitrator, if the parties agree upon one, otherwise to three arbitrators, one to be appointed by the Corporation and one to be appointed by the Executive and a third to be chosen by the first two arbitrators named before they enter upon the business of arbitration. The arbitration shall be conducted in Tampa, Florida, in accordance with the rules of the American Arbitration Association as it may from time to time be amended, and each party -12- shall be responsible for its own expenses related to the arbitration. The award and determination of the arbitrator or arbitrators or any of two of three arbitrators shall be binding upon the parties and their respective heirs, executors, administrators and assigns. ARTICLE 8 - AMENDMENT 8.1 The Corporation and Executive recognize that certain amounts which may become payable under this Agreement are or may be subject to Code section 409A, that final guidance under Code section 409A has not been issued but is anticipated in the near future, and that failure to comply with Code section 409A will result in adverse tax consequences to the Executive. Therefore, Corporation and Executive agree to the amendment of this Agreement following the issuance of such final guidance to the extent necessary with respect to amounts which may become payable hereunder either to provide for the exemption of such amounts from the requirements of Code section 409A or to comply with the requirements of Code section 409A. ARTICLE 9 - CONTRACT PROVISIONS 9.1 HEADINGS. The headings of the Articles and paragraphs herein are inserted for convenience of reference only and shall not affect the meaning or construction hereof. 9.2 INDEPENDENT ADVICE. The Corporation and the Executive acknowledge and agree that they have each obtained independent legal advice in connection with this Agreement and they further acknowledge and agree that they have read, understand and agree with all of the terms hereof and that they are executing this Agreement voluntarily and in good faith. 9.3 GENDER. Words denoting any gender include both genders. 9.4 GOVERNING LAW. This Agreement shall be construed and interpreted in accordance with the laws of the State of Florida and the federal laws of the United States of America applicable therein. Each of the parties hereby irrevocably attorns to the jurisdiction of the court of the State of Florida with respect to any matters arising out of this Agreement. 9.5 ENTIRE AGREEMENT. This Agreement, together with the plans and documents referred to herein, constitutes and expresses the whole agreement of the parties hereto with reference to any of the matters or things herein provided for or herein before discussed or mentioned with reference to such employments for the Executive and supersedes and replaces all prior agreements between the parties hereto in respect of the matters or things herein provided for. All promises, representation, collateral agreements and undertakings not expressly incorporated in this Agreement are hereby superseded by this Agreement. 9.6 SEVERABILITY. If any provision contained herein is determined to be void or unenforceable in whole or in part, it shall not be deemed to affect or impair the validity of any other provision herein and each such provision is deemed to be separate and distinct. 9.7 NOTICE. Any notice required or permitted to be given under this Agreement shall be in writing and shall be properly given if personally delivered, delivered by facsimile transmission (with confirmation of receipt) or mailed by prepaid registered mail addressed as follows: -13- (a) in the case of the Corporation: Cott Corporation 207 Queen's Quay West Suite 800 Toronto, Ontario M5J 1A7 Facsimile: (416) 203-5609 Attention: Chief Executive Officer -and- Attention: Chief Legal & Corporate Development Officer (b) in the case of the Executive: to the last address of the Executive in the records of the Corporation and its subsidiaries or to such other address as the parties may from time to time specify by notice given in accordance herewith. Any notice so given shall be conclusively deemed to have been given or made on the day of delivery, if personally delivered, or if delivered by facsimile transmission or mailed as aforesaid, upon the date shown on the facsimile confirmation of receipt or on the postal return receipt as the date upon which the envelope containing such notice was actually received by the addressee. 9.8 SUCCESSORS. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective personal or legal representatives, heirs, executors, administrators, successors and assigns. 9.9 SURVIVORSHIP. Upon the termination of Executive's employment, the respective rights and obligations of the parties shall survive such termination to the extent necessary to carry out the intended preservation of such rights and obligations. 9.10 TAXES. All payments under this Agreement shall be subject to withholding of such amounts, if any, relating to tax or other payroll deductions as the Corporation may reasonably determine and should withhold pursuant to any applicable law or regulation. 9.11 CURRENCY. All dollar amounts set forth or referred to in this Agreement refer to U.S. currency. 9.12 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. -14- IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. COTT CORPORATION Per: /s/ Brent Willis ----------------------------------- BRENT WILLIS I have authority to bind the Corporation Per: /s/ Abilio Gonzalez ----------------------------------- ABILIO GONZALEZ I have authority to bind the Corporation SIGNED, SEALED & DELIVERED ) in the presence of ) ) ) /s/ John Dennehy ---------------------------------------- JOHN DENNEHY -15- SCHEDULE A RELOCATION DETAILS Please find details about the relocation assistance available as part of this offer of employment. HOME FINDING TRIP Employees will be reimbursed for reasonable expenses, submitted on an approved expense report including receipts for those expenses incurred during a 2 x 5-day home finding trip. All travel must be booked through the company travel agency. These expenses may include: - Round trip economy class (coach fare) airfare by commercial travel for employee and spouse. Other family members may be included with prior approval from the employee's Manager. - Car rental, parking and toll charges (if applicable). - Lodging, meals, telephone, laundry charges, Hotel and meal expenses should be consistent with Cott's travel and expense policy. IN-TRANSIT TRAVEL Reimbursement will be made for reasonable one-way travel. If upon arrival in the new location you are required to spend a night in a hotel reimbursement of one night's lodging plus meal expenses for the employee and family will be reimbursed. HOME SELLING EXPENSES: In the event that the employee owns a property that is not a vacation or income producing property, and it is deemed to be the employee's principal residence, Cott will reimburse for the customary, non recurring, legally required selling costs incurred for those items that would normally be paid by the seller. Specifically these are: - Real Estate commission (not to exceed 6% unless the rate is customarily higher in the employee's area). - Attorney's fees related to the closing or escrow. - Land transfer taxes. - Mortgage loan pre-payment penalty fees to a maximum of three months. - Recording and processing fees - Title insurance fees - Inspection fees (termite, well/water, structural) up to $500.00 - Up to $250.00 for professional services associated with the sale including additional required surveys. HOME PURCHASE EXPENSES The following are the customary, non-recurring, and legally required purchase costs you will be reimbursed for related to the purchase of a home at the new location. This reimbursement applies to employees who were homeowners at the prior location. Cott will reimburse the following customary closing costs incurred for those items that are normally paid by the buyer: - Appraisal and/or Title insurance fees - Document preparation fees - Recording fees - Real estate transfer tax - Survey fees - Inspection fees (termite, well/water, structural) up to $500.00 - All mortgage application fees - Land transfer taxes - Loan origination fee up to 1%. - Notary fees The closing expenses which are not eligible for reimbursement by Cott include: interest buy down points, hazard, fire, flood or any other type of homeowner insurance premiums, prorated interest on mortgage, prorated rent, prorated utility billings, home warranties, mortgage finder's fee, closing costs on construction loans, building permits and/or inspections required by governmental agencies. DUPLICATE CARRYING COSTS In the event the new property closes before the sale of the principal residence, Cott will reimburse duplicate carrying costs, specifically, mortgage, interest and property taxes for a period of up to 90 days. You are strongly encouraged to coordinate the closing and purchase dates. Duplicate carrying costs will be reimbursed on the lesser of the two properties. John Dennehy Employment Agreement PHYSICAL GOODS MOVE Cott has contracted with several professional moving carriers to transport personal and household goods to the new home. Human Resources can assist with organizing the moving carrier service for employees. Two estimates should be obtained from professional moving carriers to transport personal and household goods to the new home. The following services will be covered: - Packing, loading and shipment of your personal and household belongings from your principal residence to your new residence or to storage. - Insurance required to protect the household and personal belongings during the move. This will be arranged through the moving company. - The following items are not covered: - Boats, trailers, recreational vehicles, mobile homes, pets, satellite dishes, large gym or fitness equipment, workshop equipment, large machinery, live plants, perishable items, chemicals, lumber, firewood, paint, playground equipment, hot tubs, storage sheds, disassembly or assembly of equipment/items, crating (unless prior approval granted) and special services e.g., piano tuning. SHIPMENT OF VEHICLES Transportation of up to a maximum of two (2) family automobiles to the new location by the most economical means available are included, however, if relocation is to another continent, this provision may not apply. STORAGE Through our moving carriers, Cott will pay for the cost of storing household goods for a period not to exceed sixty (60) days. Cott will pay for the movement of goods out of storage and into a permanent residence. This includes warehouse-handling costs in and out of storage and delivery out of storage. INSURANCE Insurance for your household goods while in transit will be provided through a designated insurance provider or directly through the moving carrier. This insurance covers your household goods through packing, transit, storage in-transit and unloading. All claims should be filed directly with the moving carrier and/or insurance provider. TEMPORARY LIVING EXPENSES Temporary living expenses may be reimbursed if you are required to report to your new assignment, or to vacate your former residence before your new residence is available. You may be reimbursed for: John Dennehy Employment Agreement - Reasonable and actual lodging/rent, meals, laundry and telephone charges for a period not to exceed ninety (90) days. - For temporary housing, other than hotels, you are encouraged to submit grocery bills instead of restaurant receipts. In the event the employee's family must remain at the old location, the employee will be reimbursed for coach airfare visits to his/her family for up to a maximum of three visits. LEASE CANCELLATION EXPENSES Before approving any lease cancellation reimbursement for either accommodation or vehicles, the hiring Manager and the Chief People Officer must agree upon and approve the reasonableness of the expenses. Settlement of a leased home or apartment or vehicle may be based on one of the following: - The amount to be paid to the landlord/leasing company for cancellation of the lease. - Such other equitable arrangements as agreed to by Cott. RELOCATION ALLOWANCE Cott will provide a relocation allowance of the equivalent of 2 months base salary (net) payable after the move has been completed. This allowance is generally used to cover the incidental costs incurred during a relocation for which the employee is not required to retain receipts. This allowance may be used for such things as: - Utilities hook-up and connection charges. - Appliance hook-up. - Drivers' licensing when relocating to a different province/state/country. - Transportation of pets. - Installation/removal or cleaning of drapes and/or carpeting. - Extra labour such as maid service. - Shipment of other personal vehicles not included with the personal belongings, such as boats, recreational vehicles. TERMINATION OF EMPLOYMENT In the event that your employment is terminated by you voluntarily or by Cott with cause within 12 months of your start date you will forfeit any remaining Relocation Policy benefits as of the date of termination. If Cott terminates you without cause within 36 months of moving to Tampa, John Dennehy Employment Agreement Cott will provide you with an option to transfer back to your place of origin. Your relocation back to your home base will include those items listed above (but will exclude the relocation allowance) that are in keeping with your original relocation assistance. EXPENSE REPORT During your relocation you will be required to track your expenses for those items other than those covered by the relocation allowance. Such expenses as the house-hunting trip, temporary housing, family travel, etc., will be submitted for reimbursement on a Relocation Expense Report. This is the only expense report that will be approved for relocation expenses. Relocation expenses must never be mixed with regular business expenses. Completed expense reports should be signed by your manager and then submitted to Human Resources, Corporate. All relocation expenses outlined above that are deemed taxable will be grossed up and the taxes paid for by the company. John Dennehy Employment Agreement EX-10.6 7 o33695exv10w6.txt EX-10.6 EXHIBIT 10.6 Thursday, September 21, 2006 Rick Dobry Electronic Copy Dear Rick: I am very pleased to offer you the position of Chief Supply and Manufacturing Officer based in Tampa, Florida. This position will report to the Chief Executive Officer, and your hire date will be effective October 23rd, 2006 or any earlier date mutually agreed. This letter will outline some of the terms and conditions of your employment with Cott Corporation. (the "Company"). Please note that this is not a contract of employment or a promise of employment for any specific term. Your base salary will be $350,000 per year paid on a semi-monthly basis; you will also receive an annual cash car allowance of $16,000 per year which is also paid on a semi-monthly basis. Your performance evaluations and salary reviews will generally be conducted on an annual basis and any increase would be a part of the annual review process. You are eligible to participate in the annual bonus plan to an amount equal to 100% (target level) of your base salary based upon the achievement of specified goals. For 2006 the bonus will be pro-rated based on actual employment service. The Maximum Payout under the bonus plan is two (2) times your base salary for achievement of performance goals in excess of the target goals. Such performance goals shall be established annually. However please note that the bonus plan is entirely discretionary and the Company reserves in its absolute discretion the right to terminate or amend any bonus scheme. We will guarantee the 2006 pro-rated bonus payment and 2007 full year payment at a minimum of 100% of Target provided you are employed by the Company on December 31, 2007. You shall be entitled to participate in the long-term incentive plans and programs as made available from time to time to employees of a similar level within the organization. For 2007 and subsequent years, in accordance with current practices, PSU Grants to you are projected (without any guarantees or commitment) to be based on an award amount equal to two times your base salary, provided that, for greater certainty, such PSU Grants shall be subject to the discretion and approval of the Human Resources and Compensation Committee of the Board of Directors, which discretion shall in no way be fettered by the provisions of this offer letter. No later than 5th January 2007 you will be entitled to receive a Cash Award of $650,000 (less appropriate withholdings) Upon receipt of this amount you will be required to purchase Cott stock with a minimum of 50% of your net amount (i.e. the amount you receive after tax and other applicable withholdings). Such stock must be purchased within 30 calendar days of you receiving the cash award. We are providing you with a 30 day window so that you can decide on your purchase strategy. Please note that as a senior employee we will be required to know the dates, amounts, values of such purchases immediately to ensure that we can meet and file our insider reporting requirements. A member of the Legal Dept can advise you as to the correct procedures to follow. You will be required to hold the purchased stock until at least 31st June 2007 or until such date as you receive your 2007 long term incentive program grant. You will be eligible for Cott's Benefit Program. Our Benefit Program includes health, disability and life insurance benefits. You should note that our health insurance plan does have a pre-existing illness provision, which limits the amount payable for pre-existing illnesses for 12 consecutive months beginning on your enrollment date. However, if you have been covered for health insurance by your prior employer, you may have creditable prior coverage. In order to help determine that please provide a HIPAA certificate from your prior employer. Employee contributions are required for our Program. Once you are eligible to participate in the Cott Cafeteria Plan (discussed below), your contributions will be deducted from your paycheck on a pre-tax basis. On the first day of the month following your completion of 90 days of employment, you will be eligible to participate in Cott's Cafeteria Plan. Benefits provided under our Cafeteria Plan are pre-tax deductions for medical premiums, a Health Care Reimbursement Account and a Dependent Care Reimbursement Account. If you participate in the Cafeteria Plan, payroll deductions for the benefits you select under the plan are made on a pre-tax basis. Please review the Summary Plan Description for additional information. Charlotte Pope (Benefits Manager) will contact you to enroll you in the programs. You will be entitled to participate in an executive annual health assessment subject to a financial reimbursement capped at $5,000 per calendar year. In addition, on the first day of a quarter following at least six months of employment, you will be eligible for Cott's 401 (K) Savings and Retirement Plan. You will also be eligible to participate in the Employee Share Purchase Plan after completing ninety (90) days of employment. You are entitled to four (4) weeks vacation. Vacation earned for 2006 will be prorated based on your date of hire. You are encouraged to take your vacation time in the calendar year it is earned. All earned vacation must be taken by March 31st of the year following the one, which it is earned; otherwise it may be forfeited. If you should leave the Company, the value of any unearned vacation taken by you will be considered a debt to the Company. All vacation periods require the approval of your Manager. If your employment is terminated for any reason other than for Just Cause, disability or death then the Company shall pay to you within 30 days of the date of termination of employment, or if a six month delay is required to comply with Code section 409A, on the first business day of the seventh month following the month in which termination of employment occurred, a lump sum amount equal to the sum of: - An amount equal to 18 months of your annual base salary at the time of termination of employment; and - A Bonus payment equivalent to a twelve month period. Calculated as an amount equal to the average of the Bonus payment for the most recent two (2) completed fiscal years (Cap at your current Target amount) - To the extent we may do so legally and in compliance with the organizations benefit plans in existence from time to time, continue medical and dental group insurance benefits (which for greater certainty DOES NOT include short-term disability, long-term disability, long-term care, life insurance or any other benefits) at a level equivalent to those provided to you immediately prior to the termination for a period of up to 18 months or until you have secured alternative employment. Please refer to the attached sheet for details on change of control details. By accepting and signing this offer letter you agree that the payments outlined above shall be in full satisfaction of all terms of termination of your employment, including termination pay and severance pay pursuant to the applicable employment standards or other legislation as amended from time to time and that you shall not be entitled to any further termination payments, damages or compensation whatsoever. As condition precedent to any termination payment outlined above you agree to deliver to the Company prior to any such payment, a full and final release from all actions or claims in connection therewith in favor of the Company, its affiliates, subsidiaries, directors, officers, employees and agents, in the form satisfactory to the Company, acting reasonably. Lastly Cott will provide you with relocation assistance to Tampa, Florida. The attached document outlines the relocation package provided to you by Cott and will also include property management services for your current home for a period of no more than 3 months. Prior to employment Cott requires successful completion of our pre-employment processing. This includes a background investigation of your qualifications and references. PLEASE SEE THE ENCLOSED CHECKLIST OF FORMS AND DATES THE FORMS ARE DUE TO BE TURNED IN TO OUR CHIEF PEOPLE OFFICER. To comply with the Immigration Reform and Control Act of 1986, the Company must verify your identity and authorization to work in the United States. Therefore, please bring with you on your first day, either one original document from the list A or one original document from the list B and one original document from the list C. Acceptable documents are listed on the backside of the enclosed INS Form I-9. If you have any difficulty in this regard, please call me immediately. Upon acceptance of this offer, you acknowledge and agree that Cott Corporation has the right to disclose confidential information regarding you to any third party as required by law. Rick, I am excited about having you join us. You have a lot to contribute to our company. I know that you can look forward to joining a dynamic and challenging organization with rewarding career opportunities. PLEASE INDICATE YOUR ACCEPTANCE OF THIS OFFER BY RETURNING ONE SIGNED ORIGINAL OF BOTH THE OFFER LETTER AND CONFIDENTIALITY AGREEMENT TO COTT BEVERAGES, ATTN: BEVERLY WEAVER, HR ASSISTANT, 4211 W. BOY SCOUT BLVD., SUITE 290, TAMPA, FL 33607. Yours truly, Abilio Gonzalez Chief People Officer Copy to: Sher Zaman Charlotte Pope I accept this offer of employment and the terms identified herein. /s/ Rick Dobry September 22, 2006 - ------------------------------------- DATE RICK DOBRY TERMINATION UPON A CHANGE OF CONTROL. If, upon a Change of Control, or as a consequence of the Change of Control prior to the Change of Control, or within twelve (12) months following a Change of Control, your employment is terminated without Just Cause or if you terminate your employment for Good Reason, you shall be entitled to the following payments; - An amount equal to twenty four (24) months of your annual base salary at the time of termination of employment; and - A Bonus payment equivalent to a twenty four (24) month period. Calculated as an amount equal to the average of the Bonus payment for the most recent two (2) completed fiscal years. Plus you shall be entitled to have all unvested rights and entitlements under the Corporation's Performance Share Unit Plan, Executive Incentive Share Purchase Plan and Stock Appreciation Rights Plan, accelerated under such plans such that such rights and entitlements shall fully vest to the maximum extent permitted under such plans. For the purposes of this Agreement, a "Change of Control" shall mean the occurrence of any one or more of the following: (i) a take-over bid (within the meaning of the Securities Act (Ontario)), other than a take-over bid exempt from the requirements of Part XX of such Act, pursuant to subsections 93(1)(b) or (c) thereof, is completed in respect of more than twenty percent (20%) of the Corporation's common shares and the majority of the members who were members of the Board of Directors of the Corporation prior to completion of such take-over bid are replaced within sixty (60) days following the completion of such take-over bid; (ii) any of the following occur: (A) any consolidation, merger or amalgamation of the Corporation with or into any other corporation whereby the voting shareholders of the Corporation immediately prior to such event receive less than fifty percent (50%) of the voting shares of the consolidated, merged or amalgamated corporation; (B) a sale by the Corporation of all or substantially all of the Corporation's undertakings or assets; (C) a proposal by or with respect to the Corporation being made in connection with a liquidation, dissolution or winding up of the Corporation; (D) any reorganization, reverse stock split or recapitalization of the Corporation that would result in a Change of Control as otherwise defined herein; or (E) any transaction or series of related transactions having, directly or indirectly, the same effect as any of the foregoing. The determination of whether payments made upon a Change of Control constitute a parachute payment, as provided in (i) above, and, if so, the amount to be paid to you shall be made by an independent auditor (the "Auditor") jointly selected by the Corporation and the Executive and paid by the Corporation. The Auditor shall be a nationally recognized United States public accounting firm. If you and the Corporation cannot agree on the firm to serve as the Auditor, then you and the Corporation shall each select one accounting firm and those two firms shall jointly select the accounting firm to serve as the Auditor. Notwithstanding anything to the contrary, however, in the event that the foregoing parachute payment determination shall be challenged by the Internal Revenue Service, the final resolution of such challenge (by way of settlement or court decision) shall govern for purposes of computing any applicable limitation under (i) above, and you shall repay to the Corporation any adjustment amount that results from such recomputation, together with interest on such adjustment amount computed at the applicable Federal rate as of the date of the original payment to the you under (i) above. Termination for Good Reason after a Change of Control You may terminate your employment at any time for Good Reason upon the occurrence of any of the following; i. A material diminution in your title or duties or assignment to you of materially inconsistent duties; ii. A reduction in your current base salary or target bonus opportunity as a percentage of base salary except for reductions applicable to all senior management; iii. A change in the reporting structure so that you no longer report directly to the CEO iv. Relocation of your principal place of employment to a location other than Tampa, Florida area unless such relocation is effected at the request or approval of yourself v. A material breach by Cott of any provisions of the offer letter; or vi. The failure of Cott to obtain the assumption in writing of its obligation to perform this offer letter by any successor to all or substantially all of the business or assets of the company within fifteen (15) days after a merger, consolidation, sale, or similar transaction unless you have personally received the opinion of counsel to Cott that such transaction does not have an adverse legal effect on the your rights hereunder. There shall be no termination for Good Reason without written notice from you describing the basis for the termination and the company having a reasonable period to cure. Tuesday, October 24, 2006 FOR THE ATTENTION OF: Rick Dobry Dear Rick: As I have discussed with you we need you to sign our Confidentiality / Non Compete Agreement which we have in place for all C-Executives. In addition I need to reconfirm that we use the title of Chief Manufacturing and Supply Chain Officer instead of Chief Supply and Manufacturing Officer which was stated in your offer letter. Please sign below to indicate that you have received this letter and also initial each page of the attachment and return it to Sher Zaman at Queens Quay as soon as possible. If you have any questions or concerns, by all means please give me a call. Yours truly, /s/ Abilio Gonzalez - ------------------------------------- Abilio Gonzalez Chief People Officer AGREED: /s/ Rick Dobry October 26, 2006 - ------------------------------------- DATE RICK DOBRY APPENDIX 1. CONFIDENTIALITY. (a) The Executive acknowledges that in the course of carrying out, performing and fulfilling his obligations to the Corporation, the Executive will have access to and will be entrusted with information that would reasonably be considered confidential to the Corporation or its Affiliates, the disclosure of which to competitors of the Corporation or its Affiliates or to the general public, will be highly detrimental to the best interests of the Corporation or its Affiliates. Such information includes, without limitation, trade secrets, know-how, marketing plans and techniques, cost figures, client lists, software, and information relating to employees, suppliers, customers and persons in contractual relationship with the Corporation. Except as may be required in the course of carrying out his duties hereunder, the Executive covenants and agrees that he will not disclose, for so long as he is employed by the Corporation or its Affiliates or at any time thereafter, any such information to any person or entity, other than to the directors, officers, employees or agents of the Corporation that have a need to know such information, nor shall the Executive use or exploit, directly or indirectly, such information for any purpose other than for the purposes of the Corporation nor will he disclose nor use for any purpose, other than for those of the Corporation or its Affiliates any other information which he may acquire during his employment with respect to the business and affairs of the Corporation or its Affiliates. Notwithstanding all of the foregoing, the Executive shall be entitled to disclose such information if required pursuant to a subpoena or order issued by a court, arbitrator or governmental body, agency or official, provided that the Executive shall first have: (i) notified the Corporation; (ii) consulted with the Corporation on the advisability of taking steps to resist such requirements; and (iii) if the disclosure is required or deemed advisable, cooperated with the Corporation in an attempt to obtain an order or other assurance (at the Corporation's expense) that such information will be accorded confidential treatment. (b) For the purposes of this Agreement, (i) "Affiliate" shall mean, with respect to any person or entity (herein the "first party"), any other person or entity that directs or indirectly controls, or is controlled by, or is under common control with, such first party. The term "control" as used herein (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to: (A) vote fifty percent (50%) or more of the outstanding voting securities of such person or entity, or (B) otherwise direct or significantly influence the management or policies of such person or entity by contract or otherwise; (ii) "Executive" shall mean Rick Dobry; and (C) "Corporation" shall mean Cott Corporation. 2. INVENTIONS. The Executive acknowledges and agrees that all right, title and interest in and to any information, trade secrets, advances, discoveries, improvements, research materials and data bases (collectively, "discoveries") made or conceived by the Executive prior to or during his employment relating to the business or affairs of the Corporation, shall belong to the Corporation. In connection with the foregoing, the Executive agrees to execute any assignments and/or acknowledgements as may be requested by the Corporation from time to time. 3. CORPORATE OPPORTUNITIES. Any business opportunities related to the business of the Corporation which become known to the Executive during his employment hereunder must be fully disclosed and made available to the Corporation by the Executive, and the Executive agrees not to take or attempt to take any action if the result would be to divert from the Corporation any opportunity which is within the scope of its business. 4. RESTRICTIVE COVENANTS. (a) The Executive will not at any time, without the prior written consent of the Corporation, during the term of the Executive's employment by the Corporation or its Affiliates and for a period of eighteen (18) months after the termination of the Executive's employment (regardless of the reason for such termination), either individually or in partnership, jointly or in conjunction with any person or persons, firm, association, syndicate, company or corporation, whether as agent, shareholder, employee, consultant, or in any manner whatsoever, directly or indirectly: (i) anywhere in the Territory, engage in, carry on or otherwise have any interest in, advise, lend money to, guarantee the debts or obligations of, permit the Executive's name to be used in connection with any business which is competitive to the Business or which provides the same or substantially similar services as the Business; and/or (ii) for the purpose of competing with any business of the Corporation, solicit, interfere with, accept any business from or render any services to anyone who is a client or a prospective client of the Corporation or any Affiliate at the time the Executive ceased to be employed by the Corporation or who was a client during the twelve (12) months immediately preceding such time; and/or (iii) solicit or offer employment to any person employed or engaged by the Corporation or any Affiliate at the time the Executive ceased to be employed or engaged by the Corporation or who was an employee or engaged during the twelve (12) month period immediately preceding such time. (b) For the purposes of the Agreement: (i) "Territory" shall mean the countries in which the Corporation and its subsidiaries conduct the Business; (ii) "Business" shall mean the business of manufacturing, selling or distributing carbonated carbonated soft drinks, juices, water and other non-alcoholic beverages to the extent such other non-alcoholic beverages contribute, or are contemplated or projected to contribute, materially to the profits of the Corporation at the time of the Executive's termination of employment. (c) Nothing in this Agreement shall prohibit or restrict the Executive from holding or becoming beneficially interested in up to one percent (1%) of any class of securities in any corporation provided that such class of securities are listed on a recognized stock exchange. 4. INSIDER POLICIES. The Executive will comply with all applicable securities laws and the Corporation's Insider Trading Policy and Insider Reporting Procedures (copies of which have been provided to the Executive) in respect of securities of the Corporation issued or acquired by the Executive. 6. NON-DISPARAGEMENT. The Executive shall not disparage the Corporation or any of its affiliates, directors, officers, employees, or other representatives in any manner and shall in all respects avoid any negative criticism of the Corporation, provided that nothing herein shall be construed to prevent or restrict the Executive from making any truthful statements in response to comments about the Executive made by the Corporation and provided further that nothing contained in this Section 6 shall in any way derogate from the Executive's obligation of confidentiality owed to the Corporation under Section 1 hereof or otherwise. 7. GENERAL PROVISIONS. (a) The Executive acknowledges and agrees that in the event of a breach of the covenants, provisions and restrictions in this Appendix, the Corporation's remedy in the form of monetary damages will be inadequate and that the Corporation shall be and is hereby authorized and entitled, in addition to all other rights and remedies available to it, to apply for and obtain from a court of competent jurisdiction interim and permanent injunctive relief and an accounting of all profits and benefits arising out of such breach. (b) The parties acknowledge that the restrictions in this Appendix are reasonable in all of the circumstances and the Executive acknowledges that the operation of restrictions contained in this Appendix may seriously constrain his freedom to seek other remunerative employment. If any of the restrictions are determined to be unenforceable as going beyond what is reasonable in the circumstances for the protection of the interests of the Corporation but would be valid, for example, if the scope of their time periods or geographic areas were limited, the parties consent to the court making such modifications as may be required and such restrictions shall apply with such modifications as may be necessary to make them valid and effective. (c) Each and every provision of Sections 1 through 7 of this Appendix shall survive the termination of the Executive's employment (regardless of the reason or such termination). EX-10.7 8 o33695exv10w7.txt EX-10.7 EXHIBIT 10.7 EMPLOYMENT AGREEMENT THIS AGREEMENT made as of this -1st day of August, 2006 BETWEEN: COTT CORPORATION, a corporation incorporated under the laws of Canada (hereinafter referred to as the "Corporation") OF THE FIRST PART - and - ALBILIO GONZALEZ (hereinafter referred to as the "Executive") OF THE SECOND PART WHEREAS the Executive commenced employment with the Corporation on this 1st day of August 2006 as Chief People Officer of the Corporation; AND WHEREAS the Corporation and the Executive have agreed to enter into this Employment Agreement to formalize in writing the terms and conditions reached between them governing the Executive's employment; NOW THEREFORE in consideration of the covenants and agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto agree as follows: ARTICLE 1 - COMMENCEMENT AND TERM 1.1 TERM. Subject to earlier termination in accordance with this Section 1.1 or Article 5 hereof, the term of the Executive's employment under this Agreement commences on August 1, 2006 (the "Hire Date") and shall continue for an indefinite term (the "Term") until one party gives notice to the other that he or it wishes to terminate the Executive's employment (a "Notice of Termination"). In the event that a Notice of Termination is delivered, the employment of the Executive shall end at the date specified in the Notice of Termination. ARTICLE 2 - EMPLOYMENT 2.1 POSITION. Subject to the terms and conditions hereof, the Executive shall be employed by the Corporation in the office of Chief People Officer of the Corporation effective as of August 1, 2006 and shall perform such duties and exercise such powers and responsibilities of such office. The position will be based in Tampa, Florida, USA, and the Executive shall report to the President and Chief Executive Officer of the Corporation. 2.2 RESPONSIBILITIES. The Executive agrees to devote substantially all of his business time and attention to the business and affairs of the Corporation, to discharge the responsibilities assigned to the Executive, and to use the Executive's best efforts to perform faithfully and efficiently such responsibilities. The Executive shall be entitled to serve as a director on external boards of directors only upon the prior written approval of the Corporation. Anything herein to the contrary notwithstanding, nothing shall preclude the Executive from (i) serving on the boards of directors of a reasonable number of trade associations and/or charitable organisations, (ii) engaging in charitable activities and community affairs, and (iii) managing his personal investments and affairs, provided that any or all of the foregoing activities do not materially interfere with the proper performance of his duties and responsibilities as the Corporation's Chief People Officer. 2.3 NO EMPLOYMENT RESTRICTION. The Executive hereby represents and confirms that he is not bound by any restrictive covenants that would prevent his employment by the Corporation. ARTICLE 3 - REMUNERATION 3.1 SALARY. During the Term, the Corporation shall pay the Executive a base salary (the "Base Salary") payable bi-monthly. The Base Salary shall not be less than $325,000 per annum (pro-rated for any period of employment less than a full calendar year) and shall be reviewed no less frequently than annually for increases at the discretion of the President and Chief Executive Officer and/or Board of Directors. Such reviews will take into account the current remuneration policy of the Corporation and should not be construed as an automatic increase. 3.2 INCENTIVES. (a) ANNUAL BONUSES. Subject to the provisions of this Section 3.2, the Executive shall be entitled to an annual performance-based bonus (the "Bonus") of an amount equal to up to one hundred percent (100%) of Base Salary for achievement of specified target goals (the "Target Bonus") and up to an additional one hundred percent (100%) of Base Salary for achievement of performance goals in excess of the target goals (the "Excess Bonus"). The performance goals and measures shall be established by the Human Resources and Compensation Committee of the Board of Directors, subject to approval by the Board of Directors each year. The goals shall be set forth in writing and achievement of the specified target goals and of specified performance goals in excess of target goals shall be determined by the Board in its sole discretion. Bonuses shall be earned and payable for fiscal years beginning after December 23, 2006 only upon completion of the relevant fiscal year and provided the Executive is actively and continuously employed for the full duration thereof, unless otherwise provided in Article 5. Any bonus paid to the Executive is entirely discretionary and there is no contractual entitlement to receive it nor shall it be deemed to become part of the contractual employment relationship. The Corporation reserves in its absolute discretion the right to terminate or amend any bonus scheme without notice to the Executive. Receipt of bonus one year creates neither right to, nor expectation of, any bonus in the next year. For the year 2006 only, the Executive shall be guaranteed a Target Bonus equal to 100% of Base Salary as prorated for time actually worked in 2006; any earned Excess Bonus for 2006 shall also be prorated to -2- reflect the partial year of employment. The Bonus, if earned with respect to a fiscal year, shall be paid no later than the last day of the month of February following the end of the fiscal year. (b) EXECUTIVE INCENTIVE PLAN. The Executive shall be entitled to participate each year in the Corporation's Executive Incentive Share Purchase Plan or any successor plan thereto (all such plans referred to in the aggregate as the "EISPP") to the extent that the Executive's performance exceeds 100% of the annual performance objectives established for him. Any award earned for 2006 shall be prorated to reflect employment in 2006 following the Hire Date. The EISPP is governed by its terms and is subject to amendment to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"). (c) LONG-TERM INCENTIVES. The Executive shall be entitled to participate in the long-term incentive plans and programs of the Corporation as made available from time to time to executives of a similar level in the organisation. For the year 2006 only, the Executive will receive within 30 days of the Hire Date a PSU Grant (Performance Share Unit Grant) Award equal to a current value of $200,000 as a sign-on award. Such Grant shall be subject to the provisions of the Performance Share Unit Plan. For subsequent years, in accordance with current practices, PSU Grants to the Executive are currently projected (without any guarantees or commitment) to be based on an award amount equal to two times the Executive's Base Salary, provided that, for greater certainty, such PSU Grants shall be subject to the discretion and approval of the Human Resources and Compensation Committee, which discretion shall in no way be fettered by the provisions of this Agreement. (d) SIGN ON - CASH AWARD. The Executive shall be entitled to receive a one-time Sign On - Cash Award of $200,000 payable within 14 days of the Hire Date. 3.3 BENEFITS AND PERQUISITES. (a) The Executive shall be entitled to participate in all of the Corporation's group insurance benefit plans, currently including medical, dental, vision, prescription drugs, short term and long term disability, travel, life, and accident insurance as provided to executives of a similar level in the organisation. All plans are governed by their terms. (b) The Executive shall receive an annual automobile allowance of $13,500 per year payable on a bi-weekly basis through payroll.. (c) The Executive is not entitled to any other benefit or perquisite other than as specifically set out in this Agreement or agreed to in writing by the Corporation. (d) The Executive will be entitled to participate in an executive annual health assessment subject to a financial reimbursement capped at $5,000 per calendar year. The Executive understands and acknowledges that the perquisites contemplated by this Section 3.3 shall be recorded as taxable benefits within the meaning of the Income Tax Act (Canada) and may have comparable treatment under the United States Internal Revenue Code. 3.4 VACATION. The Executive shall be entitled to four (4) weeks' vacation with pay annually. Such vacation shall be taken at a time or times acceptable to the Corporation having -3- regard to its operations. Accumulated vacation may be not carried forward except with the written approval of the President and Chief Executive Officer. 3.5 EXPENSES. (a) Consistent with its corporate policies as established from time-to-time, the Corporation agrees to reimburse the Executive for all expenses reasonably incurred in connection with the performance of his duties upon being provided with proper vouchers or receipts. (b) The Executive shall relocate his personal residence to the Tampa, Florida area. The Corporation shall provide relocation assistance as referred to in Schedule One. ARTICLE 4 - COVENANTS OF THE PARTIES 4.1 CONFIDENTIALITY. (a) The Executive acknowledges that in the course of carrying out, performing and fulfilling his obligations to the Corporation hereunder, the Executive will have access to and will be entrusted with information that would reasonably be considered confidential to the Corporation or its Affiliates, the disclosure of which to competitors of the Corporation or its Affiliates or to the general public, will be highly detrimental to the best interests of the Corporation or its Affiliates. Such information includes, without limitation, trade secrets, know-how, marketing plans and techniques, cost figures, client lists, software, and information relating to employees, suppliers, customers and persons in contractual relationship with the Corporation. Except as may be required in the course of carrying our his duties hereunder, the Executive covenants and agrees that he will not disclose, for the duration of this Agreement or at any time thereafter, any such information to any person, other than to the directors, officers, employees or agents of the Corporation that have a need to know such information, nor shall the Executive use or exploit, directly or indirectly, such information for any purpose other than for the purposes of the Corporation nor will he disclose nor use for any purpose, other than for those of the Corporation or its Affiliates or any other information which he may acquire during his employment with respect to the business and affairs of the Corporation or its Affiliates. Notwithstanding all of the foregoing, the Executive shall be entitled to disclose such information if required pursuant to a subpoena or order issued by a court, arbitrator or governmental body, agency or official, provided that the Executive shall first have: (i) notified the Corporation; (ii) consulted with the Corporation on the advisability of taking steps to resist such requirements; (iii) if the disclosure is required or deemed advisable, cooperate with the Corporation in an attempt to obtain an order or other assurance that such information will be accorded confidential treatment. (b) For the purposes of this Agreement, "Affiliate" shall mean, with respect to any person or entity (herein the "first party"), any other person or entity that directs or indirectly -4- controls, or is controlled by, or is under common control with, such first party. The term "control" as used herein (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to: (i) vote 50% or more of the outstanding voting securities of such person or entity, or (ii) otherwise direct or significantly influence the management or policies of such person or entity by contract or otherwise. 4.2 INVENTIONS. The Executive acknowledges and agrees that all right, title and interest in and to any information, trade secrets, advances, discoveries, improvements, research materials and data bases made or conceived by the Executive prior to or during his employment relating to the business or affairs of the Corporation, shall belong to the Corporation. In connection with the foregoing, the Executive agrees to execute any assignments and/or acknowledgements as may be requested by the Board of Directors from time to time. 4.3 CORPORATE OPPORTUNITIES. Any business opportunities related to the business of the Corporation which become known to the Executive during his employment hereunder must be fully disclosed and made available to the Corporation by the Executive, and the Executive agrees not to take or attempt to take any action if the result would be to divert from the Corporation any opportunity which is within the scope of its business. 4.4 RESTRICTIVE COVENANTS. (a) The Executive will not at any time, without the prior written consent of the Corporation, during the Term of this Agreement or for a period of 12 months after the termination of the Executive's employment (regardless of the reason for such termination), either individually or in partnership, jointly or in conjunction with any person or persons, firm, association, syndicate, company or corporation, whether as agent, shareholder, employee, consultant, or in any manner whatsoever, directly or indirectly: (i) anywhere in the Territory, engage in, carry on or otherwise have any interest in, advise, lend money to, guarantee the debts or obligations of, permit the Executive's name to be used in connection with any business which is competitive to the Business or which provides the same or substantially similar services as the Business; (ii) for the purpose of competing with any business of the Corporation, solicit, interfere with, accept any business from or render any services to anyone who is a client or a prospective client of the Corporation or any Affiliate at the time the Executive ceased to be employed by the Corporation or who was a client during the 12 months immediately preceding such time; (iii) solicit or offer employment to any person employed or engaged by the Corporation or any Affiliate at the time the Executive ceased to be employed by the Corporation or who was an employee or during the 12 month period immediately preceding such time. (b) For the purposes of the Agreement: -5- (i) "Territory" shall mean the countries in which the Corporation and its subsidiaries conduct the Business; (ii) "Business" shall mean the business of manufacturing, selling or distributing carbonated soft drinks, juices, water and other non-alcoholic beverages to the extent such other non-alcoholic beverages contribute, or are contemplated or projected to contribute, materially to the profits of the Corporation at the time of the Executive's termination of employment. (c) Nothing in this Agreement shall prohibit or restrict the Executive from holding or becoming beneficially interested in up to one (1%) percent of any class of securities in any corporation provided that such class of securities are listed on a recognized stock exchange in Canada or the United States or on the NASDAQ. 4.5 INSIDER POLICIES. The Executive will comply with all applicable securities laws and the Corporation's Insider Trading Policy and Insider Reporting Procedures (copies of which have been provided to the Executive) in respect of shares issued to the Executive and other shares of the Corporation acquired by the Executive. 4.6 NONDISPARAGEMENT. The Executive shall not disparage the Corporation or any of its affiliates, directors, officers, employees, or other representatives in any manner and shall in all respects avoid any negative criticism of the Corporation. 4.7 GENERAL PROVISIONS. (a) The Executive acknowledges and agrees that in the event of a breach of the covenants, provisions and restrictions in this Article 4, the Corporation's remedy in the form of monetary damages will be inadequate and that the Corporation shall be and is hereby authorized and entitled, in addition to all other rights and remedies available to it, to apply for and obtain from a court of competent jurisdiction interim and permanent injunctive relief and an accounting of all profits and benefits arising out of such breach. (b) The parties acknowledge that the restrictions in this Article 4 are reasonable in all of the circumstances and the Executive acknowledges that the operation of restrictions contained in this Article 4 may seriously constrain his freedom to seek other remunerative employment. If any of the restrictions are determined to be unenforceable as going beyond what is reasonable in the circumstances for the protection of the interests of the Corporation but would be valid, for example, if the scope of their time periods or geographic areas were limited, the parties consent to the court making such modifications as may be required and such restrictions shall apply with such modifications as may be necessary to make them valid and effective. (c) Each and every provision of these Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, and 4.7 hereunder shall survive the termination of this Agreement or the Executive's employment hereunder (regardless of the reason or such termination). -6- ARTICLE 5 - TERMINATION OF EMPLOYMENT 5.1 TERMINATION BY THE CORPORATION FOR JUST CAUSE, DISABILITY OR DEATH OR NOTICE OF TERMINATION. (a) The Corporation may terminate this Agreement and the Executive's employment hereunder without payment of any compensation either by way of anticipated earnings or damages of any kind at any time for Just Cause, Disability or death of the Executive, or by delivery of a Notice of Termination by the Executive. (b) For purposes of this Agreement, "Just Cause" shall mean: (i) the Executive pleads guilty or no contest to, or is convicted of, any act which is defined as a felony under federal or state law; (ii) the Executive's ability to perform his duties is impaired by alcoholism or drug addiction; (iii) the Executive commits theft, misappropriation or fraud against the Corporation or its property; (iv) the Executive, in carrying out his duties, engages in conduct that constitutes gross neglect or gross misconduct or dishonesty; (v) the Executive commits a willful breach of fiduciary duties; or (vi) the Executive commits a willful and material breach of this Agreement. There shall be no termination for Just Cause without the Executive first being given written notice of the basis for termination for Just Cause and an opportunity to be heard by the President and Chief Executive Officer. (c) For the purposes of this Agreement, "Disability" shall have occurred if the Executive has been unable due to illness, disease, or mental or physical disability (in the opinion of a qualified medical practitioner who is satisfactory to the Executive and the Corporation acting reasonably), to substantially perform the duties and responsibilities of his employment with the Corporation for any consecutive six (6) month period or for any period of nine (9) months (whether or not consecutive) in any consecutive 12 month period, or the Executive has been declared by a court of competent jurisdiction to be mentally incompetent or incapable of managing his affairs. If the Executive and the Corporation cannot agree on a qualified medical practitioner, each party shall select a medical practitioner, and the two practitioners shall select a third who shall be the approved medical practitioner for this purpose. In the event of a termination of the Executive's employment on account of death or Disability, the Executive (if living) will receive that portion of his Base Salary which is payable -7- to date of death or Disability. Participation in all bonus plans (specifically including all short term and long term incentive plans) or other stock option, equity or profit participation plans terminates immediately upon the date of death or Disability. The Corporation shall, however, pay to the Executive, if entitled thereto, a Target Bonus based on achievement of the specified target goals to such date and calculated pro rata for such year for the period up to the date of death or Disability. The final portion of his Base Salary shall be paid on the regularly scheduled pay date coincident with or next following the date of termination of employment. The pro-rata Target Bonus, if any, shall be paid no later than the last day of the month of February following the end of the fiscal year in which such death or Disability occurred. 5.2 TERMINATION BY THE EMPLOYER WITHOUT CAUSE. (a) If the Executive's employment is terminated by the Corporation, including delivery by the Corporation of a Notice of Termination, for any reason other than for Just Cause, Disability, death of the Executive, then the Corporation shall pay to the Executive within 30 days of the date of his termination of employment, or if a six month delay is required to comply with Code section 409A, on the first business day of the seventh month following the month in which termination of employment occurred, a lump sum amount equal to the sum of: (i) an amount equal to his annual Base Salary at the time of his termination of employment; and (ii) a Target Bonus in an amount equal to the average of the Target Bonus payment for the most recent two (2) completed fiscal years. The Executive shall also receive that portion of his Base Salary which is payable to the date of termination of employment. Participation in all bonus plans (specifically including all short term and long term incentive plans) or other stock option, equity or profit participation plans terminates immediately on such date of termination. The Corporation shall, however, pay to the Executive, if entitled thereto, a Target Bonus based on achievement of the specified target goals to such date of termination and calculated pro rata for such year for the period prior to his date of termination. The final portion of such Base Salary payable for services performed to the date of termination shall be paid on the regularly scheduled pay date coincident with or next following the date of termination of employment. The pro-rata Target Bonus, if any, shall be paid no later than the last day of the month of February following the end of the fiscal year, or if a six-month delay is required to comply with Code section 409A, and if later, on the first business day of the seventh month following the month in which termination of employment occurred. (b) In the event of the termination of the Executive's employment under this Section 5.2, the Corporation shall, to the extent it may do so legally and in compliance with the Corporation's benefit plans in existence from time to time, continue medical and dental group insurance benefits (which for greater certainty does not include short-term disability, long-term disability, long-term care, life insurance or any other benefits) at a level equivalent to those provided to the Executive immediately prior to the termination for a period until the date which is 12 months following the date of termination, provided that, the benefits contemplated by this sub-paragraph shall terminate on the date the Executive obtains alternate employment providing -8- comparable benefits. Such coverage shall be applied toward the obligation to provide continuation coverage under applicable law. 5.3 TERMINATION BY THE EXECUTIVE FOR GOOD REASON. (a) The Executive may terminate his employment at any time for Good Reason upon the occurrence, without the express written consent of the Executive, of any of the following: (i) a material diminution in the Executive's title or duties or assignment to the Executive of materially inconsistent duties; (ii) a reduction in the Executive's then current Base Salary or Target Bonus opportunity as a percentage of Base Salary except for reductions applicable to all senior management; (iii) a change in the reporting structure so that the Executive no longer reports directly to the President and Chief Executive Officer; (iv) relocation of the Executive's principal place of employment to a location other than the Tampa, Florida, or Toronto, Ontario, areas unless such relocation is effected at the request of the Executive or with the Executive's approval; (v) a material breach by the Corporation of any provisions of this Agreement; or (vi) the failure of the Corporation to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the business or assets of the Corporation within fifteen (15) days after a merger, consolidation, sale, or similar transaction unless the Executive shall have personally received the opinion of counsel to the Corporation that such transaction does not have an adverse legal effect on the rights of the Executive hereunder. There shall be no termination for Good Reason without written notice from Executive describing the basis for the termination and the Corporation's having a reasonable period to cure. (b) In the event the Executive terminates this Agreement for Good Reason, he shall be entitled to the same payments and benefits provided in Section 5.2 above. 5.4 VOLUNTARY RESIGNATION; RETIREMENT. In the event the Executive wishes to resign his employment voluntarily, he shall provide at least thirty (30) days' notice in writing to the Corporation. The Corporation may waive such notice in whole or in part by paying the Executive's Base Salary and continuing his group benefits and perquisites to the effective date of resignation. -9- 5.5 PAYMENT TO DATE OF TERMINATION. Regardless of the reasons for the termination, the Corporation shall make payment to the Executive to the effective date of termination for all Base Salary, any accrued but unpaid vacation entitlements, and, other than in the event of a termination for Just Cause, any other amounts earned and owing to the Executive but not yet paid as well as other or additional benefits in accordance with applicable plans or programs of the Corporation. 5.6 RETURN OF PROPERTY. Upon any termination of his employment, the Executive shall forthwith deliver or cause to be delivered to the Corporation all books, documents, computer disks, and diskettes and other electronic data, effects, money, securities, or other property belonging to the Corporation or for which the Corporation is liable to others, which are in the possession, charge, control or custody of the Executive. 5.7 RELEASE. The Executive acknowledges and agrees that the payments pursuant to this Article shall be in full satisfaction of all terms of termination of his employment, including termination pay and severance pay pursuant to the applicable employment standards or other legislation as amended from time to time. Except as otherwise provided in this Article, the Executive shall not be entitled to any further termination payments, damages or compensation whatsoever. As condition precedent to any payment pursuant to this Article, the Executive agrees to deliver to the Corporation prior to any such payment, a full and final release from all actions or claims in connection therewith in favour of the Corporation, its affiliates, subsidiaries, directors, officers, employees and agents, in the form satisfactory to the Corporation, acting reasonably. 5.8 NO MITIGATION; SET-OFF; NATURE OF PAYMENTS. In the event of any termination of employment under this Article 5, the Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due to the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that he may obtain except as specifically provided in this Agreement; provided, however, the Executive authorizes the Corporation to deduct from any payment due to him pursuant to this Agreement, any amounts owed by him to the Corporation by reason of purchases, advances, loans, or other similar contractual obligations to pay money. This provision shall be applied so as not to conflict with any applicable legislation. Any amounts due under this Article 5 are in the nature of severance payments considered to be reasonable by the Corporation and are not in the nature of a penalty. ARTICLE 6 - DIRECTORS AND OFFICERS 6.1 RESIGNATION. If the Executive is a director or officer at the relevant time, the Executive agrees that after termination of his employment with the Corporation he will tender his resignation from any position he may hold as an officer or director of the Corporation or any of its affiliated or related companies. 6.2 INSURANCE. The Corporation shall maintain such directors' and officers' liability insurance for the benefit of the Executive in accordance with corporate policies and as generally provided to the directors of the Corporation. -10- ARTICLE 7 - ARBITRATION 7.1 All matters in difference between the parties in relation to this Agreement, shall be referred to the arbitration of a single arbitrator, if the parties agree upon one, otherwise to three arbitrators, one to be appointed by the Corporation and one to be appointed by the Executive and a third to be chosen by the first two arbitrators named before they enter upon the business of arbitration. The arbitration shall be conducted in Tampa, Florida, in accordance with the Arbitrations Act (Ontario) as it may from time to time be amended, and each party shall be responsible for its own expenses related to the arbitration. The award and determination of the arbitrator or arbitrators or any of two of three arbitrators shall be binding upon the parties and their respective heirs, executors, administrators and assigns. ARTICLE 8 - AMENDMENT 8.1 The Corporation and Executive recognize that certain amounts which may become payable under this Agreement are or may be subject to Code section 409A, that final guidance under Code section 409A has not been issued but is anticipated in the near future, and that failure to comply with Code section 409A will result in adverse tax consequences to the Executive. Therefore, Corporation and Executive agree to the amendment of this Agreement following the issuance of such final guidance to the extent necessary with respect to amounts which may become payable hereunder either to provide for the exemption of such amounts from the requirements of Code section 409A or to comply with the requirements of Code section 409A. ARTICLE 9 - CONTRACT PROVISIONS 9.1 HEADINGS. The headings of the Articles and paragraphs herein are inserted for convenience of reference only and shall not affect the meaning or construction hereof. 9.2 INDEPENDENT ADVICE. The Corporation and the Executive acknowledge and agree that they have each obtained independent legal advice in connection with this Agreement and they further acknowledge and agree that they have read, understand and agree with all of the terms hereof and that they are executing this Agreement voluntarily and in good faith. 9.3 GENDER. Words denoting any gender include both genders. 9.4 GOVERNING LAW. This Agreement shall be construed and interpreted in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. Each of the parties hereby irrevocably attorns to the jurisdiction of the court of the Province of Ontario with respect to any matters arising out of this Agreement. 9.5 ENTIRE AGREEMENT. This Agreement, together with the plans and documents referred to herein, constitutes and expresses the whole agreement of the parties hereto with reference to any of the matters or things herein provided for or herein before discussed or mentioned with reference to such employments for the Executive and supersedes and replaces all prior agreements between the parties hereto in respect of the matters or things herein provided for. All promises, representation, collateral agreements and undertakings not expressly incorporated in this Agreement are hereby superseded by this Agreement. -11- 9.6 SEVERABILITY. If any provision contained herein is determined to be void or unenforceable in whole or in part, it shall not be deemed to affect or impair the validity of any other provision herein and each such provision is deemed to be separate and distinct. 9.7 NOTICE. Any notice required or permitted to be given under this Agreement shall be in writing and shall be properly given if personally delivered, delivered by facsimile transmission (with confirmation of receipt) or mailed by prepaid registered mail addressed as follows: (a) in the case of the Corporation: Cott Corporation 207 Queen's Quay West Suite 800 Toronto, Ontario M5J 1A7 Facsimile: (416) 203-5609 Attention: President and Chief Executive Officer -and- Attention: General Counsel (b) in the case of the Executive: to the last address of the Executive in the records of the Corporation and its subsidiaries or to such other address as the parties may from time to time specify by notice given in accordance herewith. Any notice so given shall be conclusively deemed to have been given or made on the day of delivery, if personally delivered, or if delivered by facsimile transmission or mailed as aforesaid, upon the date shown on the facsimile confirmation of receipt or on the postal return receipt as the date upon which the envelope containing such notice was actually received by the addressee. 9.8 SUCCESSORS. This Agreement shall enure to the benefit of and be binding upon the parties hereto and their respective personal or legal representatives, heirs, executors, administrators, successors and assigns. 9.9 SURVIVORSHIP. Upon the termination of Executive's employment, the respective rights and obligations of the parties shall survive such termination to the extent necessary to carry out the intended preservation of such rights and obligations. -12- 9.10 TAXES. All payments under this Agreement shall be subject to withholding of such amounts, if any, relating to tax or other payroll deductions as the Corporation may reasonably determine and should withhold pursuant to any applicable law or regulation. 9.11 CURRENCY. All dollar amounts set forth or referred to in this Agreement refer to U.S. currency. 9.12 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. COTT CORPORATION Per: /s/ Brent Willis ----------------------------------- Brent Willis I have authority to bind the Corporation Per: /s/ Mark Halperin ----------------------------------- Mark Halperin I have authority to bind the Corporation SIGNED, SEALED & DELIVERED) in the presence of ) ) ) ) /s/ Abilio Gonzalez ---------------------------------------- ABILIO GONZALEZ -13- COTT CORPORATION SCHEDULE ONE: RELOCATION DETAILS Please find details about the relocation assistance available as part of this offer of employment. HOME SELLING COSTS You will be eligible to receive a cash payment of no more than $100,000.00 (One Hundred Thousand Dollars) and grossed up for taxes to offset the potential difference in purchase and selling price of your current property in Seattle. Such payment will be made on the satisfactory receipt of appropriate back up documentation. HOME FINDING TRIP Employees will be reimbursed for reasonable expenses, submitted on an approved expense report including receipts for those expenses incurred during a 2 x 5-day home finding trip. All travel must be booked through the company travel agency. These expenses may include: - - Round trip economy class (coach fare) airfare by commercial travel for employee and spouse. Other family members may be included with prior approval from the employee's Manager. - - Car rental, parking and toll charges (if applicable). - - Lodging, meals, telephone, laundry charges, Hotel and meal expenses should be consistent with Cott's travel and expense policy. IN-TRANSIT TRAVEL Reimbursement will be made for reasonable one-way travel. If upon arrival in the new location you are required to spend a night in a hotel reimbursement of one night's lodging plus meal expenses for the employee and family will be reimbursed. HOME SELLING EXPENSES: In the event that the employee owns a property that is not a vacation or income producing property, and it is deemed to be the employee's principal residence, Cott will reimburse for the customary, non recurring, legally required selling costs incurred for those items that would normally be paid by the seller. Specifically these are: - - Real Estate commission (not to exceed 6% unless the rate is customarily higher in the employee's area). - - Attorney's fees related to the closing or escrow. - - Land transfer taxes. - - Mortgage loan pre-payment penalty fees to a maximum of three months. - - Recording and processing fees - - Title insurance fees - - Inspection fees (termite, well/water, structural) up to $500.00 - - Up to $250.00 for professional services associated with the sale including additional required surveys. HOME PURCHASE EXPENSES The following are the customary, non-recurring, and legally required purchase costs you will be reimbursed for related to the purchase of a home at the new location. This reimbursement applies to employees who were homeowners at the prior location. Cott will reimburse the following customary closing costs incurred for those items that are normally paid by the buyer: - - Appraisal and/or Title insurance fees - - Document preparation fees - - Recording fees - - Real estate transfer tax - - Survey fees - - Inspection fees (termite, well/water, structural) up to $500.00 - - All mortgage application fees - - Land transfer taxes - - Loan origination fee up to 1%. - - Notary fees The closing expenses which are not eligible for reimbursement by Cott include: interest buy down points, hazard, fire, flood or any other type of homeowner insurance premiums, prorated interest on mortgage, prorated rent, prorated utility billings, home warranties, mortgage finder's fee, closing costs on construction loans, building permits and/or inspections required by governmental agencies. DUPLICATE CARRYING COSTS In the event the new property closes before the sale of the principal residence, Cott will reimburse duplicate carrying costs, specifically, mortgage, interest and property taxes for a -2- period of up to 90 days. You are strongly encouraged to coordinate the closing and purchase dates. Duplicate carrying costs will be reimbursed on the lesser of the two properties. PHYSICAL GOODS MOVE Cott has contracted with several professional moving carriers to transport personal and household goods to the new home. Human Resources can assist with organizing the moving carrier service for employees. Two estimates should be obtained from professional moving carriers to transport personal and household goods to the new home. The following services will be covered: - - Packing, loading and shipment of your personal and household belongings from your principal residence to your new residence or to storage. - - Insurance required to protect the household and personal belongings during the move. This will be arranged through the moving company. The following items are NOT covered: - - Boats, trailers, recreational vehicles, mobile homes, pets, satellite dishes, large gym or fitness equipment, workshop equipment, large machinery, live plants, perishable items, chemicals, lumber, firewood, paint, playground equipment, hot tubs, storage sheds, disassembly or assembly of equipment/items, crating (unless prior approval granted) and special services e.g., piano tuning. SHIPMENT OF VEHICLES Transportation of up to a maximum of two (2) family automobiles to the new location by the most economical means available are included, however, if relocation is to another continent, this provision may not apply. STORAGE Through our moving carriers, Cott will pay for the cost of storing household goods for a period not to exceed sixty (90) days. Cott will pay for the movement of goods out of storage and into a permanent residence. This includes warehouse-handling costs in and out of storage and delivery out of storage. INSURANCE Insurance for your household goods while in transit will be provided through a designated insurance provider or directly through the moving carrier. This insurance covers your household goods through packing, transit, storage in-transit and unloading. All claims should be filed directly with the moving carrier and/or insurance provider. -3- TEMPORARY LIVING EXPENSES Temporary living expenses may be reimbursed if you are required to report to your new assignment, or to vacate your former residence before your new residence is available. You may be reimbursed for: - - Reasonable and actual lodging/rent, meals, laundry and telephone charges for a period not to exceed ninety (90) days. - - For temporary housing, other than hotels, you are encouraged to submit grocery bills instead of restaurant receipts. In the event the employee's family must remain at the old location, the employee will be reimbursed for coach airfare visits to his/her family for up to a maximum of three visits. LEASE CANCELLATION EXPENSES Before approving any lease cancellation reimbursement for either accommodation or vehicles, the hiring Manager and the Senior Vice President, Corporate Resources must agree upon and approve the reasonableness of the expenses. Settlement of a leased home or apartment or vehicle may be based on one of the following: - - The amount to be paid to the landlord/leasing company for cancellation of the lease. - - Such other equitable arrangements as agreed to by Cott. RELOCATION ALLOWANCE Cott will provide a relocation allowance of the equivalent of 2 months base salary (net) payable after the move has been completed. This allowance is generally used to cover the incidental costs incurred during a relocation for which the employee is not required to retain receipts. This allowance may be used for such things as: - - Utilities hook-up and connection charges. - - Appliance hook-up. - - Drivers' licensing when relocating to a different province/state/country. - - Transportation of pets. - - Installation/removal or cleaning of drapes and/or carpeting. - - Extra labour such as maid service. - - Shipment of other personal vehicles not included with the personal belongings, such as boats, recreational vehicles. -4- TERMINATION OF EMPLOYMENT In the event that your employment is terminated whether voluntarily or involuntarily with Cott within 12 months of your start date you will forfeit any remaining Relocation Policy benefits as of the date of termination. If Cott terminates you within 12 months of joining, Cott will provide you with an option to transfer back to your place of origin. Your relocation will include those items listed above (but will exclude the relocation allowance) that are in keeping with your original relocation assistance. EXPENSE REPORT During your relocation you will be required to track your expenses for those items other than those covered by the relocation allowance. Such expenses as the house-hunting trip, temporary housing, family travel, etc., will be submitted for reimbursement on a Relocation Expense Report. This is the only expense report that will be approved for relocation expenses. Relocation expenses must never be mixed with regular business expenses. Completed expense reports should be signed by your manager and then submitted to Human Resources, Corporate. -5- EX-31.1 9 o33695exv31w1.txt EX-31.1 EXHIBIT 31.1 CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. I, Brent D. Willis, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Cott Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. November 7, 2006 /s/ Brent D. Willis ---------------------------------------- Brent D. Willis President & Chief Executive Officer 46 EX-31.2 10 o33695exv31w2.txt EX-31.2 EXHIBIT 31.2 CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. I, B. Clyde Preslar, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Cott Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. November 7, 2006 /s/ B. Clyde Preslar ---------------------------------------- B. Clyde Preslar Executive Vice President & Chief Financial Officer 47 EX-32.1 11 o33695exv32w1.txt EX-32.1 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. The undersigned, Brent D. Willis, Chairman and Chief Executive Officer of Cott Corporation (the "Company"), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (the "Report"). The undersigned hereby certifies that to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. IN WITNESS WHEREOF, the undersigned has executed this certification as of the 7th day of November, 2006. /s/ Brent D. Willis - ------------------------------------- Brent D. Willis President & Chief Executive Officer 48 EX-32.2 12 o33695exv32w2.txt EX-32.2 EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. The undersigned, B. Clyde Preslar Executive Vice President & Chief Financial Officer of Cott Corporation (the "Company"), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (the "Report"). The undersigned hereby certifies that to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. IN WITNESS WHEREOF, the undersigned has executed this certification as of the 7th day of November, 2006. /s/ B. Clyde Preslar - ------------------------------------- B. Clyde Preslar Executive Vice President & Chief Financial Officer 49 -----END PRIVACY-ENHANCED MESSAGE-----