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.

In 2010, 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. As of January 2, 2016, no options were outstanding under the Option 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 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 2012 prior to the amendment and restatement are generally governed by the 2010 Equity Incentive Plan.

On February 18, 2015, 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 20,000,000 shares, increase the limitations of issuance of common shares to non-employee directors without further shareholder approval equal to the lesser of (i) 3% of Cott’s issued and outstanding shares, and (ii) an annual equity award of $500,000, expands the list of situations in which the Company may accelerate the exercisability or vesting or otherwise terminate restrictions relating to an award, and decreases the minimum vesting for restricted shares and restricted share units that vest solely as a result of the passage of time and continued service by the participant (to not less than one year from the date of grant). Additionally, the amended Plan will provide a minimum vesting period for option and stock appreciation right awards that vest solely as a result of the passage of time and continued service by the participant (not less than one year from the date of grant). The Amended and Restated Equity Plan was approved by Cott’s shareowners on May 5, 2015.

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.

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 January 2, 2016, there were 9,880,672 shares available for future issuance under the Amended and Restated Equity Plan.

The table below summarizes the share-based compensation expense for the years ended January 2, 2016, January 3, 2015, and December 28, 2013. This share-based compensation expense was recorded in SG&A 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, (iv) “Director 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, and (v) “ESPP” means the Cott Corporation Employee Share Purchase Plan, under which common shares are issued to eligible employees at a discount through payroll deductions.


	For the Year Ended
	January 2,		January 3,		December 28,
(in millions of U.S. dollars)	2016		2015		2013
Stock options	$	1.9	$	1.6	$	0.8
Performance-based RSUs		4.9		0.6		0.2
Time-based RSUs		2.4		2.8		2.2
Director share awards		1.0		0.8		0.8
Employee Share Purchase Plan		0.1		—		—

Total	$	10.3	$	5.8	$	4.0

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 2014 and 2015.

The tax benefit recognized related to share-based compensation expense for the fiscal year ended January 2, 2016 was $2.7 million (January 3, 2015 — $1.3 million; December 28, 2013 — $1.0 million).

As of January 2, 2016, the unrecognized share-based compensation expense and weighted average years over which 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 January 2, 2016		Weighted average years expected to recognize compensation
Stock options	$	2.6		1.8
Performance-based RSUs		7.9		1.9
Time-based RSUs		2.3		1.6

Total	$	12.8

Stock Options

During 2015, 2014 and 2013 approximately 684,000, 441,000 and 392,000 options were granted to certain of our employees under the Amended and Restated Equity Plan at a weighted-average exercise price of $9.22, $8.00 and $9.29 per share, respectively. The weighted-average grant date fair value of the options was estimated to be $4.31, $3.84 and $4.10 per share in 2015, 2014 and 2013, respectively, using the Black-Scholes option pricing model.

The grant date fair value of each option granted during the years ended January 2, 2016, January 3, 2015 and December 28, 2013 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:


	For the Year Ended
	January 2,			January 3,			December 28,
	2016			2015			2013
Risk-free interest rate		2.0	%		2.7	%		1.7	%
Average expected life (years)		10.0			10.0			10.0
Expected volatility		58.7	%		58.5	%		32.3	%
Expected dividend yield		3.0	%		2.9	%		—

The following table summarizes the activity for Company stock options:


	Stock Options (in thousands)			Weighted average exercise price		Weighted average remaining contractual term (years)		Aggregate intrinsic value (in thousands)
Outstanding at December 29, 2012		468		$	7.13		7.3	$	788.8

Granted		392			9.29
Forfeited or expired		(30	)		6.58

Outstanding at December 28, 2013		830			8.17		7.6		811.9

Granted		441			8.00
Forfeited or expired		(50	)		16.45

Outstanding at January 3, 2015		1,221			7.77		7.6		400.7

Granted		684			9.22
Exercised		(113	)		4.94				637.4
Forfeited or expired		(35	)		8.56

Outstanding at January 2, 2016		1,757		$	8.50		8.0	$	4,373.8

Exercisable at January 2, 2016		670		$	8.10		6.8	$	1,929.0

Vested or expected to vest at January 2, 2016		1,757		$	8.50		8.0	$	4,373.8

The aggregate intrinsic value amounts in the table above represent the difference between the closing price of our common stock on the New York Stock Exchange on December 31, 2015, which was $10.99 (January 2, 2015—$7.00; December 27, 2013— $8.06), and the exercise price, multiplied by the number of in-the-money stock options as of the same date.

The total amount of cash received from the exercise of stock options was $0.5 million during the fiscal year ended January 2, 2016 with no associated tax benefit realized. There were no stock options exercised during the years ended January 3, 2015 and December 28, 2013. The total fair value of options that vested during the year ended January 2, 2016 was $1.5 million (January 3, 2015 — $1.3 million; December 28, 2013 — nil).

Outstanding options at January 2, 2016 were as follows:


	Options Outstanding						Options Exercisable
Exercise Price	Number of Options (in thousands)		Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number of Options (in thousands)		Weighted Average Exercise Price
$6.58		294		6.1	$	6.58		294	$	6.58
$8.00		421		8.1	$	8.00		3	$	8.00
$9.00		86		9.2	$	9.00		—	$	—
$9.25		583		9.2	$	9.25		—	$	—
$9.29		373		7.3	$	9.29		373	$	9.29

		1,757		8.0	$	8.50		670	$	8.10

Other Awards

On May 29, 2015, we granted 110,000 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 $1.0 million. The common shares were issued in consideration of the directors’ annual board retainer fee and were vested upon issuance.

In 2015, we granted 320,180 Performance-based RSUs and 213,453 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 4, 2015 and ending on the last day of our 2017 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 4, 2015 and ending on the last day of our 2017 fiscal year. The Time-based RSUs and the stock options vest on the last day of our 2017 fiscal year.

In 2014, we granted 111,880 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 2014, we granted 273,906 Performance-based RSUs and 368,125 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 December 29, 2013 and ending on the last day of our 2016 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 29, 2013 and ending on the last day of our 2016 fiscal year. The Time-based RSUs and the stock options vest on the last day of our 2016 fiscal year.

In 2014, we granted 1,082,348 Performance-based RSUs to certain of our employees in connection with the DSS Acquisition. The Performance-based RSUs vest based upon the achievement of specified level of DSS EBITDA (weighted 60%), revenue (weighted 20%) and “net cooler rental activity” (which is net new cooler rental customers, or total cooler rental customer additions for the year less total cooler rental customers who terminated service in the year) (weighted 20%) over the three-year period ending at the end of fiscal 2017. The amount of Performance-based RSUs that may vest and the related unrecognized compensation cost is subject to change based on the level of performance objectives that are achieved during the period beginning on December 28, 2014 and ending on the last day of DSS’s 2017 fiscal year.

In 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 and 382,452 Time-based RSUs to certain of our employees. The Performance-based RSUs were to 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 performance targets established for the Performance-based RSUs were not met at the end of our 2015 fiscal year, and as a result, those awards dis not vest. The Time-based RSUs and the stock options granted in 2013 vested on the last day of our 2015 fiscal year.

During the year ended January 2, 2016, Performance-based RSU and Time-based RSU activity was as follows:


	Number of Performance- based RSUs (in thousands)			Weighted Average Grant-Date Fair Value		Number of Time-based RSUs (in thousands)			Weighted Average Grant-Date Fair Value
	Number of Performance- based RSUs (in thousands)			Weighted Average Grant-Date Fair Value		Number of Time-based RSUs (in thousands)			Weighted Average Grant-Date Fair Value
Balance at January 3, 2015		1,782		$	7.01		664		$	8.63
Awarded		320			9.22		213			9.22
Awarded in connection with modification		55			7.90		—			—
Issued		(255	)		6.87		(10	)		8.60
Forfeited		(24	)		8.61		(40	)		8.67

Outstanding at January 2, 2016		1,878		$	7.41		827		$	8.78

Vested or expected to vest at January 2, 2016		1,878		$	7.41		827		$	8.78

Employee Share Purchase Plan

On March 9, 2015, the Company’s Board of Directors authorized and approved the Cott Corporation Employee Share Purchase Plan (the “ESPP”), which was approved by Cott’s shareowners on May 5, 2015. The ESPP was effective October 1, 2015 and qualifies as an “employee share purchase plan” under Section 423 of the Internal Revenue Code of 1986 (“IRC”), as amended. Substantially all employees are eligible to participate in the ESPP and may elect to participate at the beginning of any quarterly offering period. The ESPP authorizes the issuance, and the purchase by eligible employees, of up to 3,000,000 shares of Cott common shares through payroll deductions. Eligible employees who choose to participate may purchase Cott common shares at 90% of market value on the first or last day of the quarterly offering period, whichever is lower. The minimum contribution which an eligible employee may make under the ESPP is 1% of the employee’s eligible compensation, with the maximum contribution limited to 15% of the employee’s eligible compensation. At the end of each quarterly offering period for which the employee participates, the total amount of each employee’s payroll deduction for that offering period will be used to purchase Cott common shares. The Company recognized $0.1 million of share-based compensation expense in SG&A expenses in our Consolidated Statement of Operations for the year ended January 2, 2016. At January 2, 2016, 2,970,838 shares remained available for issuance under the ESPP.