Note 7—Share based Compensation

Each of our share-based compensation plans has been approved by our shareowners, except for our 1986 Common Share Option Plan, as amended (the “Option Plan”), which was adopted prior to our initial public offering, and a stock option award granted to our Chief Executive Officer, which was an inducement grant made to attract and retain that executive. Subsequent amendments to the Option Plan that required shareowner approval have been approved.

The table below summarizes the share-based compensation expense for the years ended December 28, 2013, December 29, 2012, and December 31, 2011. This share-based compensation expense was recorded in selling, general, and administrative expenses in our Consolidated Statements of Operations. As used below: (i) “Performance-based RSUs” mean restricted share units with performance-based vesting granted under the Company’s 2010 Equity Incentive Plan (the “2010 Equity Incentive Plan”) or Amended and Restated Equity Plan (as defined below), as the case may be, (ii) “Time-based RSUs” mean restricted share units with time-based vesting granted under the 2010 Equity Incentive Plan or Amended and Restated Equity Plan, as the case may be, (iii) “Stock options” mean non-qualified stock options granted under the Amended and Restated Equity Plan, the 2010 Equity Incentive Plan, or the Option Plan, as the case may be, and (iv) “Directors’ share awards” mean common shares issued in consideration of the annual board retainer fee to non-management members of our board of directors under the 2010 Equity Incentive Plan or Amended and Restated Equity Plan, as the case may be.


	For the Year Ended
(in millions of U.S. dollars)	December 28, 2013		December 29, 2012		December 31, 2011
Stock options	$	0.8	$	0.4	$	—
Performance-based RSUs		0.2		0.7		(1.2	)
Time-based RSUs		2.2		3.1		3.4
Directors’ share awards		0.8		0.7		0.7

Total	$	4.0	$	4.9	$	2.9

During the third quarter of 2011, we concluded that it was no longer probable that the targets established for the Performance-based RSUs awarded in 2011 would be met, and we no longer expect these awards to ultimately vest. Accordingly, we recorded an adjustment to reverse $3.3 million in compensation costs that had been recorded to date for the Performance-based RSUs awarded in 2010 and 2011. During the fourth quarter of 2013, we concluded that it was no longer probable that the targets established for the Performance-based RSUs awarded in 2013 would be met, and we no longer expect these awards to ultimately vest. We continue to accrue the compensation expense for the Performance-based RSUs awarded in 2012.

As of December 28, 2013, the unrecognized share-based compensation expense and years we expect to recognize it as compensation expense were as follows:


(in millions of U.S. dollars, except years)	Unrecognized share-based compensation expense as of December 28, 2013		Weighted average years expected to recognize compensation

Stock options	$	1.7		1.7
Performance-based RSUs		0.5		1.0
Time-based RSUs		3.4		1.8

Total	$	5.6

Stock Options

Subsequent to the adoption of the 2010 Equity Incentive Plan, which was amended and restated by the Amended and Restated Equity Plan (as defined below), the Human Resources and Compensation Committee of the board of directors (“HRCC”) determined that certain of Cott’s long-term incentive plans were no longer needed and terminated the Option Plan. In connection with the termination of the Option Plan, outstanding options will continue in accordance with the terms of the Option Plan until vested, paid out, forfeited or terminated, as applicable. No further awards have been granted under the Option Plan. Future awards, including any awards of options, are expected to be governed by the terms of the Company’s Amended and Restated Equity Plan.

On February 14, 2013, our board of directors adopted an amendment and restatement of the 2010 Equity Incentive Plan (the “Amended and Restated Equity Plan”), pursuant to which the 2010 Equity Incentive Plan was amended and restated to, among other things, increase the number of shares that may be issued under the plan to 12,000,000 shares and to provide that the number of shares available for issuance will be reduced 2.0 shares for each share issued pursuant to a “full-value” award (i.e., an award other than an option or stock appreciation right) after the effective date of the amendment and restatement. The Amended and Restated Equity Plan was approved by Cott’s shareowners on April 30, 2013. Awards made in 2011 and 2012 prior to the amendment and restatement are generally governed by the 2010 Equity Incentive Plan.

During 2013, approximately 392,000 options were granted to certain of our employees under the Amended and Restated Equity Plan at an exercise price of $9.29 per share (C$9.36 at date of issuance). The fair value of the option grant was estimated to be $4.10 using the Black-Scholes option pricing model. During 2012, approximately 385,000 options were granted to certain of our employees under the 2010 Equity Incentive Plan at an exercise price of $6.58 per share (C$6.47 at date of issuance). The fair value of the option grant was estimated to be $4.04 using the Black-Scholes option pricing model.

No options were granted during the year ended December 31, 2011. The fair value of each option granted during the years ended December 28, 2013 and December 29, 2012 was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:


	For the Year Ended
	December 28, 2013			December 29, 2012			December 31, 2011
Risk-free interest rate		1.7	%		2.4	%		n/a
Average expected life (years)		10.0			6.5			n/a
Expected volatility		32.3	%		66.4	%		n/a
Expected dividend yield		—			—			n/a

Stock option activity was as follows:


	Shares (in thousands)			Weighted average exercise price (C$)		Weighted average remaining contractual term (years)		Aggregate intrinsic value (C$) (in thousands)
Balance at January 1, 2011		704		$	16.67		4.2	$	625.0

Exercised		(275	)		1.32
Forfeited or expired		(145	)		38.27

Balance at December 31, 2011		284		$	20.47		1.7	$	263.0

Granted		385			6.47
Forfeited or expired		(201	)		24.40

Balance at December 29, 2012		468		$	7.28		7.3	$	819.9

Granted		392			9.36
Forfeited or expired		(30	)		6.47

Balance at December 28, 2013		830		$	8.29		7.6	$	1,068.7

Vested at December 28, 2013		125		$	9.49		1.1	$	386.3

Exercisable at December 28, 2013		125		$	9.49		1.1	$	386.3

The aggregate intrinsic value amounts in the table above represent the difference between the closing price of our common stock on the Toronto Stock Exchange on December 28, 2013, which was C$8.65 (December 29, 2012— C$7.90; December 31, 2011—C$6.40), and the exercise price, multiplied by the number of in-the-money stock options as of the same date. There were no stock options exercised during the years ended December 28, 2013 and December 29, 2012. The total intrinsic value of stock options exercised during the year ended December 31, 2011 was $0.4 million.

Total compensation cost related to unvested awards under the option plan not yet recognized is $1.7 million. The total fair value of shares that vested during the year ended December 28, 2013 was nil.

Outstanding options at December 28, 2013 were as follows:


		Options Outstanding						Options Exercisable
Exercise Prices (C$)		Number Exercisable (in thousands)		Remaining Contractual Life (Years)		Weighted Average Exercise Price (C$)		Number Exercisable (in thousands)		Weighted Average Exercise Price (C$)
$	3.50		75		1.6	$	3.50		75	$	3.50
$	6.47		313		8.2	$	6.47		—	$	—
$	9.36		392		9.3	$	9.36		—	$	—
$	18.48		50		0.3	$	18.48		50	$	18.48

			830		7.6	$	8.29		125	$	9.49

Long-Term Incentive Plans

Amended and Restated Equity Plan

Our shareowners approved our 2010 Equity Incentive Plan at the Annual and Special Meeting of Shareowners held on May 4, 2010. Awards under the 2010 Equity Incentive Plan may be in the form of incentive stock options, non-qualified stock options, restricted shares, restricted share units, performance shares, performance units, stock appreciation rights, and stock payments to employees, directors and outside consultants. The 2010 Equity Incentive Plan is administered by the HRCC or any other board committee as may be designated by the board from time to time. At the inception of the 2010 Equity Incentive Plan, 4,000,000 shares were reserved for future issuance, subject to adjustment upon a share split, share dividend, recapitalization, and other similar transactions and events.

On February 14, 2013, our board of directors adopted the Amended and Restated Equity Plan, pursuant to which the 2010 Equity Incentive Plan was amended and restated to, among other things, increase the number of shares that may be issued under the plan to 12,000,000 shares and to provide that the number of shares available for issuance will be reduced 2.0 shares for each share issued pursuant to a “full-value” award (i.e., an award other than an option or stock appreciation right) after the effective date of the amendment and restatement. The Amended and Restated Equity Plan was approved by Cott’s shareowners on April 30, 2013.

Awards under the Amended and Restated Equity Plan may be in the form of incentive stock options, non-qualified stock options, restricted shares, restricted share units, performance shares, performance units, stock appreciation rights, and stock payments to employees, directors and outside consultants. The Amended and Restated Equity Plan is administered by the HRCC or any other board committee as may be designated by the board from time to time.

On May 2, 2013, we granted 87,190 common shares to the non-management members of our board of directors under the Amended and Restated Equity Plan with a grant date fair value of approximately $0.8 million. The common shares were issued in consideration of the directors’ annual board retainer fee and were vested upon issuance.

In 2013, we granted 247,181 Performance-based RSUs, 382,452 Time-based RSUs and 392,131 stock options to certain of our employees. The Performance-based RSUs vest based on the achievement of a specified target level of pre-tax income for the period beginning on December 30, 2012 and ending on the last day of our 2015 fiscal year. The amount of Performance-based RSUs that may vest and the related unrecognized compensation cost is subject to change based on the level of targeted pre-tax income that is achieved during the period beginning on December 30, 2012 and ending on the last day of our 2015 fiscal year. The Time-based RSUs and the stock options vest on the last day of our 2015 fiscal year.

On May 3, 2012, we granted 96,010 common shares to the non-management members of our board of directors under the 2010 Equity Incentive Plan with a grant date fair value of approximately $0.7 million. The common shares were issued in consideration of the directors’ annual board retainer fee and were vested upon issuance.

In 2012, we granted 330,969 Performance-based RSUs, 441,996 Time-based RSUs and 384,546 stock options to certain of our employees. The Performance-based RSUs vest based on the achievement of a specified target level of pre-tax income for the period beginning on January 1, 2012 and ending on the last day of our 2014 fiscal year. The amount of Performance-based RSUs that may vest and the related unrecognized compensation cost is subject to change based on the level of targeted pre-tax income that is achieved during the period beginning on January 1, 2012 and ending on the last day of our 2014 fiscal year. The Time-based RSUs and the stock options vest on the last day of our 2014 fiscal year.

On May 6, 2011, we granted 76,110 common shares to the non-management members of our board of directors under the 2010 Equity Incentive Plan with a grant date fair value of approximately $0.7 million. The common shares were issued in consideration of the directors’ annual board retainer fee and were vested upon issuance.

In 2011, we granted 592,163 Performance-based RSUs and 151,545 Time-based RSUs to certain of our employees. The Performance-based RSUs vest based on the achievement of a specified target level of pre-tax income for the period beginning on January 2, 2011 and ending on the last day of our 2013 fiscal year. The performance targets established for these Performance-based RSUs were not met, and as a result, such awards did not vest. The Time-based RSUs vested on the last day of our 2013 fiscal year and during January 2014 we issued 71,204 shares, net of shares withheld to satisfy the employees’ tax obligations.

During the year ended December 28, 2013, Performance-based RSU and Time-based RSU activity was as follows:


(in thousands)	Number of Performance- based RSUs			Weighted Average Grant-Date Fair Value		Number of Time-based RSUs			Weighted Average Grant-Date Fair Value

Balance at December 29, 2012		825		$	7.82		529		$	7.20
Awarded		247			9.29		382			9.29
Issued		—			—		(32	)		7.40
Cancelled		(508	)		8.54		—			—
Forfeited		(30	)		7.87		(48	)		7.30

Outstanding at December 28, 2013		534		$	7.81		831		$	8.04

Shares to be issued pursuant to Time-based RSUs, Performance-based RSUs, or stock options that are forfeited, expired, or are cancelled or settled without the issuance of shares return to the pool of shares available for issuance under the Amended and Restated Equity Plan. As of December 28, 2013, there were 7,619,472 shares available for future issuance under the Amended and Restated Equity Plan.

Average Canadian—U.S. Dollar Exchange Rates for 2013, 2012 and 2011

The weighted average exercise prices for options in this Note are disclosed in Canadian dollars. The table below represents the average Canadian dollar to U.S. dollar exchange rate for the fiscal years ended 2013, 2012 and 2011.


	For the Year Ended
	December 28, 2013		December 29, 2012		December 31, 2011
Average exchange rate	$	0.973	$	1.000	$	1.012