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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

HELEN OF TROY LIMITED

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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HELEN OF TROY LIMITED

Clarendon House

Church Street

Hamilton, Bermuda

July 6, 2012

Dear Shareholders:

It is my pleasure to invite you to the 2012 Annual General Meeting of the Shareholders of Helen of Troy Limited. The meeting will be held at 1:00 p.m., Mountain Daylight Time, on Tuesday, August 28, 2012, at the Camino Real Hotel, 101 S. El Paso Street, El Paso, Texas. In addition to the business to be transacted at the meeting, members of management will present information about the Company’s operations and will be available to respond to your questions.

We encourage you to help us reduce printing and mailing costs, and conserve natural resources by signing up for electronic delivery of our shareholder communications. For more information, see “Electronic Delivery of Shareholder Communications” in the enclosed proxy statement.

At our meeting, we will vote on proposals (1) to set the number of Director positions at seven (or such lower number as shall equal the number of nominees elected as Directors) and elect the seven nominees to our Board of Directors, (2) to provide advisory approval of the Company’s executive compensation,  (3) to appoint Grant Thornton LLP as the Company’s auditor and independent registered public accounting firm and to authorize the Audit Committee of the Board of Directors to set the auditor’s remuneration, and (4) to transact such other business as may properly come before the meeting.  The accompanying Notice of Annual General Meeting of Shareholders and proxy statement contains information that you should consider when you vote your shares.  Also, for your convenience, you can appoint your proxy via touch-tone telephone at 1-800-690-6903 or via the Internet at WWW.PROXYVOTE.COM.

It is important that you vote your shares whether or not you plan to attend the meeting. Please complete, sign, date and return the enclosed proxy card in the accompanying envelope as soon as possible, or appoint your proxy by telephone or on the Internet as set forth above. If you plan to attend the meeting and wish to vote in person, you may revoke your proxy and vote in person at that time.  I look forward to seeing you at the meeting. On behalf of the management and directors of Helen of Troy Limited, I want to thank you for your continued support and confidence.

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HELEN OF TROY LIMITED

Clarendon House

Church Street

Hamilton, Bermuda

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS

TO BE HELD AUGUST 28, 2012

Notice is hereby given that the 2012 Annual General Meeting of the Shareholders (the “Annual Meeting”) of Helen of Troy Limited, a Bermuda company (the “Company”), will be held at the Camino Real Hotel, 101 S. El Paso Street, El Paso, Texas, on Tuesday, August 28, 2012, at 1:00 p.m., Mountain Daylight Time, for the following purposes:

1.              To set the number of Director positions at seven (or such lower number as shall equal the number of nominees elected as Directors) and elect the seven nominees to our Board of Directors;

2.              To provide advisory approval of the Company’s executive compensation;

3.              To appoint Grant Thornton LLP as the Company’s auditor and independent registered public accounting firm and to authorize the Audit Committee of the Board of Directors to set the auditor’s remuneration; and

4.              To transact such other business as may properly come before the Annual Meeting or any adjournment thereof.

The record date for determining shareholders entitled to receive notice of and to vote at the Annual Meeting is June 26, 2012. You are urged to read carefully the attached proxy statement for additional information concerning the matters to be considered at the Annual Meeting.

If you do not expect to be present in person at the Annual Meeting, please complete, sign and date the enclosed proxy and return it promptly in the enclosed postage-paid envelope that has been provided for your convenience. The prompt return of proxies will help ensure the presence of a quorum and save the Company the expense of further solicitation. Also, for your convenience, you can appoint your proxy via touch-tone telephone at 1-800-690-6903 or via the Internet at WWW.PROXYVOTE.COM.

The proxy statement and the Company’s 2012 Annual Report to Shareholders are also available on our hosted website at HTTP://MATERIALS.PROXYVOTE.COM/G4388N. For additional related information, please refer to the “Important Notice Regarding Internet Availability of Proxy Materials” in the enclosed proxy statement.

You are cordially invited and encouraged to attend the Annual Meeting in person.

El Paso, Texas
July 6, 2012

IMPORTANT

WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE SUBMIT YOUR PROXY AS SOON AS POSSIBLE.   IF YOU DO ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.  MOST SHAREHOLDERS HAVE THREE OPTIONS FOR SUBMITTING THEIR PROXIES PRIOR TO THE ANNUAL MEETING: (1) VIA THE INTERNET, (2) BY PHONE OR (3) BY MARKING, DATING AND SIGNING THE ENCLOSED PROXY AND RETURNING IT IN THE ENVELOPE PROVIDED.  IF YOU HAVE INTERNET ACCESS, WE ENCOURAGE YOU TO APPOINT YOUR PROXY ON THE INTERNET. IT IS CONVENIENT, AND IT SAVES THE COMPANY SIGNIFICANT POSTAGE AND PROCESSING COSTS.

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HELEN OF TROY LIMITED

Clarendon House

Church Street

Hamilton, Bermuda

PROXY STATEMENT

FOR

ANNUAL GENERAL MEETING OF SHAREHOLDERS

August 28, 2012

SOLICITATION OF PROXIES

The accompanying proxy is solicited by the Board of Directors of Helen of Troy Limited (the “Company”) for use at its Annual General Meeting of Shareholders (the “Annual Meeting”) to be held at the Camino Real Hotel, 101 S. El Paso Street, El Paso, Texas, on Tuesday, August 28, 2012, at 1:00 p.m., Mountain Daylight Time, and at any adjournment thereof, for the purposes set forth in the accompanying Notice of Annual General Meeting of Shareholders. A proxy may be revoked by filing a written notice of revocation or an executed proxy bearing a later date with the Secretary of our Company any time before exercise of the proxy or by attending the Annual Meeting and voting in person. The proxy statements and form of proxy cards are to be distributed to shareholders on or about July 6, 2012.

If you complete and submit your proxy, the persons named as proxies will vote the shares represented by your proxy in accordance with your instructions. If you submit a proxy card but do not fill out the voting instructions on the proxy card, the persons named as proxies will vote the shares represented by your proxy as follows:

·                                    FOR setting the number of Director positions at seven (or such lower number as shall equal the number of nominees elected as Directors) and electing the seven nominees to the Board of Directors, as set forth in Proposal 1.

·                                    FOR the advisory approval of the Company’s executive compensation, as set forth in Proposal 2.

·                                  FOR the appointment of Grant Thornton LLP as the auditor and independent registered public accounting firm of the Company and to authorize the Audit Committee of the Board of Directors to set the auditor’s remuneration, as set forth in Proposal 3.

In addition, if other matters are properly presented for voting at the Annual Meeting, the persons named as proxies will vote on such matters in accordance with their judgment. We have not received notice of other matters that may properly be presented for voting at the Annual Meeting. Your vote is important. If you do not vote your shares, you will not have a say in the important issues to be voted upon at the Annual Meeting.  To pass, each proposal included in this year’s proxy statement requires an affirmative vote of a majority of the votes cast on such proposal at the Annual Meeting. To ensure that your vote is recorded promptly, please submit your proxy as soon as possible, even if you plan to attend the Annual Meeting in person.

The Annual Report to Shareholders for the year ended February 29, 2012 (“fiscal 2012”), including financial statements, is enclosed. It does not form any part of the material provided for the solicitation of proxies.

The cost of solicitation of proxies will be borne by the Company. In addition to solicitation by mail, officers and employees of the Company may solicit the return of proxies by telephone and personal interview, or hire an outside proxy solicitor. Forms of proxy and proxy materials may also be distributed through brokers, custodians and like parties to beneficial owners of our common shares, par value $.10 per share (the “Common Stock”), for which we will, upon request, reimburse the forwarding expense.

VOTING SECURITIES AND RECORD DATE

The close of business on June 26, 2012, is the record date for determination of shareholders entitled to notice of, and to vote at, the Annual Meeting. As of June 26, 2012, there were 31,736,065 shares of Common Stock issued and outstanding, each entitled to one vote per share.

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QUORUM; VOTING

Shareholders may hold their shares either as a “shareholder of record” or as a “street name” holder.   If your shares are registered directly in your name with our transfer agent, you are considered the shareholder of record with respect to those shares and this proxy statement is being sent directly to you by the Company.  If your shares are held in a brokerage account or by another nominee, you are considered to be the beneficial owner of shares held in “street name,” and these proxy materials, together with a voting instruction card, are being forwarded to you by your broker, trustee or other nominee. As the beneficial owner of the shares, you have the right to direct your broker, trustee or other nominee how to vote.

The presence in person of two or more persons, representing throughout the Annual Meeting, in person or by proxy, at least a majority of the issued shares of Common Stock entitled to vote is necessary to constitute a quorum at the Annual Meeting. Proxies marked as “Withhold Authority” on the election of Directors will be treated as present at the Annual Meeting for purposes of determining the quorum.

Abstentions and broker non-votes are also counted for purposes of determining whether a quorum is present. “Broker non-votes” occur when shares held in street name by a broker or nominee are represented at the Annual Meeting, but such broker or nominee is not empowered to vote those shares on a particular proposal because the broker has not received voting instructions from the beneficial owner.

Under the rules that govern brokers who are voting with respect to shares held by them in a street name, if the broker has not been furnished with voting instructions by its client at least ten days before the meeting, those brokers have the discretion to vote such shares on routine matters, but not on non-routine matters.  Routine matters include the appointment of auditors, submitted to the shareholders in Proposal 3. Non-routine matters include the election of Directors, submitted to shareholders in Proposal 1, and the advisory approval of the Company’s executive compensation, submitted to shareholders in Proposal 2. As a result, with regard to Proposals 1 and 2, brokers have no discretion to vote shares where no voting instructions are received, and no vote will be cast if you do not vote on that proposal.  We therefore urge you to vote on ALL voting items.

If a quorum is present, each nominee for Director receiving a majority of the votes cast (the number of shares voted “for” a director nominee must exceed the number of votes cast “against” that nominee) at the Annual Meeting in person or by proxy shall be elected.  The affirmative vote of the majority of the votes cast at the Annual Meeting in person or by proxy shall also be the act of the shareholders with respect to Proposal 2.  Abstentions and broker non-votes are not counted in determining the total number of votes cast and will have no effect with respect to any of the proposals because abstentions and broker non-votes are not considered to be votes cast under the applicable laws of Bermuda.

The advisory vote on executive compensation is non-binding. Although the vote is non-binding, the Compensation Committee and the Board of Directors will review and carefully consider the outcome of the advisory vote to approve the Company’s executive compensation and those opinions when making future decisions regarding executive compensation programs.  Notwithstanding the advisory nature of the vote, the resolution will be considered passed with the affirmative vote of a majority of the votes cast at the Annual Meeting in person or by proxy.

If within half an hour from the time appointed for the Annual Meeting a quorum is not present in person or by proxy, the Annual Meeting shall stand adjourned to the same day one week later, at the same time and place or to such other day, time or place the Board of Directors may determine, provided that at least two persons are present at such adjourned meeting, representing throughout the meeting, in person or by proxy, at least a majority of the issued shares of Common Stock entitled to vote. At any such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the Annual Meeting as originally called.

ATTENDING THE ANNUAL MEETING

A person is entitled to attend the Annual Meeting only if that person was a shareholder or joint shareholder as of the close of business on the record date or that person holds a valid proxy for the Annual Meeting.  If you hold your shares in street name and desire to vote your shares at the Annual Meeting, you must provide a signed proxy directly from the holder of record giving you the right to vote the shares or a letter from the broker or nominee appointing you as their proxy.  The proxy card enclosed with this proxy statement is not sufficient to satisfy this requirement.   If you hold your shares in street name and desire to attend the Annual Meeting, you must also provide proof of beneficial ownership on the record date, such as your most recent account statement prior to the record date or other similar evidence of ownership.  If you are the shareholder of record or hold a valid proxy for the Annual Meeting, your name or the name of the person on whose behalf you are proxy must be verified against the list of shareholders of record on the record date as shown on the list of shareholders of the Company prior to being admitted to and prior to voting at the Annual Meeting.  All shareholders must, if requested by representatives of the Company, present photo identification for admittance.  If you do not provide photo

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identification or comply with the other procedures outlined above upon request, you will not be admitted to the Annual Meeting and/or will not be permitted to vote, as applicable.

PROPOSAL 1: ELECTION OF DIRECTORS

The bye-laws of the Company state that the number of our Directors shall be established by the shareholders from time to time but shall not be less than two. The Company currently has seven members who serve on the Board of Directors.  The Nominating Committee has nominated seven candidates for election to the Board of Directors.  Accordingly, the Board of Directors recommends that the number of Director positions be set at seven.  In the event that less than seven Directors are elected, then the number of Director positions set shall not be seven, but instead shall equal the number of Directors actually elected.

The seven persons named below are the nominees for election as Directors. Each nominee has consented to serve as a Director if elected. One of the seven candidates, Mr. Gerald J. Rubin, is a member of the Company’s senior management. Under Mr. Rubin’s employment agreement, the Company agreed to use its best efforts to cause Mr. Rubin to be nominated for election to the Board of Directors and elected by the Board of Directors as Chairman of the Board. The Board of Directors has determined that the remaining six candidates, Gary B. Abromovitz, John B. Butterworth, Timothy F. Meeker, William F. Susetka, Adolpho R. Telles and Darren G. Woody are independent Directors as defined in the applicable listing standards for companies traded on the NASDAQ Stock Market LLC (“NASDAQ”).  Therefore, the majority of persons nominated to serve on our Board of Directors are independent as so defined.  Each Director elected shall serve as a Director until the next annual general meeting of shareholders, or until his or her successor is elected or appointed.

Nominees for the Election of Directors

Set forth below are descriptions of the business experience of the nominees for election to our Board of Directors as well as their qualifications:

GARY B. ABROMOVITZ, age 69, has been a Director of the Company since 1990.  He is Deputy Chairman of the Board, Lead Independent Director and Chairman of both the Compensation Committee and the Nominating Committee.  He also chairs the executive sessions of the independent Directors and serves as a member of the Audit Committee and the Corporate Governance Committee.  Mr. Abromovitz is an attorney and has acted as a consultant to several law firms in business related matters, including trade secrets, unfair competition and commercial litigation. He also has been active for more than thirty years in various real estate development and acquisition transactions involving industrial buildings, medical offices and commercial, residential and historic properties.  Mr. Abromovitz is a Director of CardioVascular BioTherapeutics, Inc., a biopharmaceutical company, where he serves as Lead Independent Director and Chairman of the Compensation, Audit and Corporate Governance Committees, as well as chairs the executive sessions of independent Directors.

Mr. Abromovitz possesses an in-depth knowledge of the history and operations of the Company and provides the Board with a significant leadership role as Deputy Chairman, as well as Chairman of the Compensation Committee and the Nominating Committee.  He also has a significant understanding of corporate governance and compensation guidelines, as well as experience managing board affairs. Further, Mr. Abromovitz’s background as an attorney and his practical business experience provides a unique perspective to the Board.

JOHN B. BUTTERWORTH, age 60, has been a Director of the Company since 2002. Mr. Butterworth is a Certified Public Accountant and a shareholder in the public accounting firm of Weatherley, Butterworth, Macias & Graves P.C. located in El Paso, Texas.   Mr. Butterworth has thirty-three years of certified public accounting experience and has been a member of the Company’s Audit Committee for the last ten years.

Mr. Butterworth has valuable accounting and tax expertise.  Additionally, Mr. Butterworth has gained a deep understanding of the Company’s business that enables him to provide significant insights regarding the Company’s financial and accounting related matters.  He brings strategic focus to our Board of Directors and has provided leadership and guidance that have helped drive the Company’s growth.

TIMOTHY F. MEEKER, age 65, has been a Director of the Company since 2004, and chairs the Corporate Governance Committee.  He also serves as a member of the Compensation Committee and the Nominating Committee.  Since 2002, Mr. Meeker has served as President and principal in Meeker and Associates, a privately-held management consulting firm.  Mr. Meeker served as Senior Vice President, Sales & Customer Development for Bristol-Myers Squibb, a consumer products and pharmaceutical company, from 1996 through 2002.  From 1989 to 1996, Mr. Meeker served as Vice President of Sales for Bristol-Myers’ Clairol Division.

Mr. Meeker has over thirty-four years experience in the consumer products industry resulting in extensive general management experience with responsibilities for sales, distribution, finance, human resources, customer service and facilities.

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In addition, he has a valued perspective on operational matters that is an asset to the Board of Directors.  Mr. Meeker has served as a chairman of the National Association of Chain Drug Stores advisory committee, which allows him to bring an extensive understanding of retail mass market sales and marketing to our Board of Directors.

GERALD J. RUBIN, age 68, a co-founder of the Company, has been the Chairman of the Board, Chief Executive Officer and President of the Company since June 2000.  From 1984 to June 2000, Mr. Rubin was Chairman of the Board and Chief Executive Officer of the Company. Mr. Rubin has been a Director of the Company since 1968. Mr. Rubin also served on the Board of Directors of the El Paso Branch, Federal Reserve Bank of Dallas, Texas from March 2003 to December 2009, and now serves as a member of the Federal Reserve Bank of Dallas Advisory Board.  Mr. Rubin serves on the Board of Directors of the Breast Cancer Charity Foundation of the International Housewares Association and is a member of the Paso del Norte Group, a local civic organization that promotes economic, social and cultural vitality in the region.

Since co-founding the Company in 1968, Mr. Rubin has served as the Company’s senior executive.  Mr. Rubin has a widely regarded business acumen and an intimate knowledge of virtually every aspect of the Company’s operations, its customers and the competitive landscape it operates within.  Additionally, Mr. Rubin has been instrumental in establishing the global scope of the Company’s operations, has significant acquisitions experience and provides significant leadership in establishing the strategic direction for the Company.

WILLIAM F. SUSETKA, age 59, has been a Director of the Company since 2009, and serves as a member of the Compensation Committee.  Mr. Susetka spent thirty years in marketing and senior management for Clairol, Inc. and Avon Products, Inc.  From 1999 to 2001, Mr. Susetka was President of the Clairol U.S. Retail Division, with additional responsibility for worldwide research and development and manufacturing.  From 2002 through 2005, Mr. Susetka was President of Global Marketing at Avon Products, Inc. where he led worldwide marketing, advertising and research and development and served on Avon’s Executive Committee.  Prior to 2001, he held positions as President of the Clairol International Division and Vice President/General Manager for the Clairol Professional Products Division.  He served as a Board Member of the Cosmetics, Toiletry and Fragrance Association from 1999 to 2005 and as a member of the Avon Foundation Board from 2004 to 2005.  From October 2005 to January 2006, Mr. Susetka was Chief Operating Officer of Nice Pak Products, Inc., a manufacturer of consumer products that private labeled pre-moistened wipes and other antiseptic wipes.  From 2007 through May 2009, he served as Chief Marketing Officer for the LPGA (Ladies Professional Golf Association).  Mr. Susetka currently serves on the LPGA Board of Directors.

Mr. Susetka provides a wealth of global consumer products industry experience and valuable insight to the Board of Directors.  Mr. Susetka is also instrumental in helping to monitor and adjust the strategic direction of Idelle Labs, the Company’s Grooming, Skin Care, and Hair Care Products division, and continues to provide related advice to senior management of the Company.

ADOLPHO R. TELLES, age 62, has been a Director of the Company since 2005 and chairs the Audit Committee. Mr. Telles is a Certified Public Accountant.  Since January 2004, Mr. Telles has been a business consultant providing advisory services covering a number of areas, including corporate governance, internal auditing, and compliance with the Sarbanes-Oxley Act of 2002.  From December 2010 to April 2011, these advisory services included serving as President and Chief Executive Officer of Mount Franklin Foods, an international nut processing and candy manufacturing/packaging company. He also served as Vice President of Finance and Chief Financial Officer of Mount Franklin Foods from February 2010 to November 2010.  Mr. Telles manages personal investments, including an operating company and is participating in a start-up technology company as a managing member.   Mr. Telles is on the Texas Comptroller’s Advisory Board for the Texas Treasury Safekeeping Trust Company.  Previously, Mr. Telles was with the accounting firm of KPMG LLP, and its predecessors, for twenty-seven years, including over sixteen years as a partner.

Mr. Telles, during his tenure with KPMG, worked on numerous foreign work assignments which have provided him a valuable global operating perspective.  In addition, Mr. Telles has extensive experience with accounting principles, financial reporting rules and regulations, evaluation of financial results and generally overseeing the financial reporting processes of multi-national public companies from an independent auditor’s perspective.  These qualifications, together with his consulting and advisory experience with national and international companies, makes him well suited to serve as Chairman of the Company’s Audit Committee.

DARREN G. WOODY, age 52, has been a Director of the Company since 2004, and serves as a member of the Compensation Committee, the Corporate Governance Committee and the Nominating Committee.  Mr. Woody is President and Chief Executive Officer of C.F. Jordan Investments L.L.P. and C.F. Jordan Construction LLC, an investment entity and a construction firm with offices in Austin, Dallas, El Paso, Houston, and San Antonio, Texas and field operations throughout the United States. The firm specializes in military, commercial, multi-family and highway construction. He has served in this capacity since August of 2000. Previously, Mr. Woody was a partner in the law firm of Krafsur, Gordon, Mott, Davis and Woody P.C., where he specialized in real estate, business acquisitions and complex financing arrangements.

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Mr. Woody brings a multi-disciplined perspective to our Board of Directors given his executive leadership and legal experience.  This background enables him to provide oversight with regard to many of the Company’s legal matters, significant transactional negotiations and the management of challenging complex projects.

The receipt of a majority of the votes cast (the number of shares voted “for” a director nominee exceeding the number of votes cast “against” that nominee) at the Annual Meeting is required to set the number of Director positions at seven (or such lower number as shall equal the number of nominees elected as Directors) and to elect each of the seven nominees for Director.  In the event that any of the Company’s nominees are unable to serve, proxies will be voted for the substitute nominee or nominees designated by our Board of Directors, or will be voted to fix the number of Directors at fewer than seven and for fewer than seven nominees, as the Board may deem advisable in its discretion.

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE “FOR” EACH OF THE SEVEN NOMINEES NAMED ABOVE.

CORPORATE GOVERNANCE

Corporate Governance. Corporate governance is typically defined as the system that allocates duties and authority among a company’s shareholders, Board of Directors and management. The shareholders elect the Board and vote on extraordinary matters.

Our Corporate Governance Guidelines, as well as our Code of Ethics, and the charters of the Audit Committee, Compensation Committee, Nominating Committee and Corporate Governance Committee are available under the “Corporate Governance” heading of the investor relations page of our website at the following address: http://www.hotus.com.

Our Company believes that it is in compliance with the corporate governance requirements of the NASDAQ listing standards.  The principal elements of these governance requirements as implemented by our Company are:

·                                 affirmative determination by the Board of Directors that a majority of the Directors are independent;

·                                 regularly scheduled executive sessions of independent Directors;

·                                  Audit Committee, Nominating Committee and Compensation Committee comprised of independent Directors and having the purposes and charters described below under the separate committee headings; and

·                                 specific Audit Committee responsibility, authority and procedures outlined in the charter of the Audit Committee.

Independence. The Board of Directors has determined that the following six nominees for election at the Annual Meeting are independent Directors as defined in the NASDAQ listing standards: Gary B. Abromovitz, John B. Butterworth, Timothy F. Meeker, William F. Susetka, Adolpho R. Telles, and Darren G. Woody.  Therefore, 86 percent of the persons nominated to serve on our Company’s Board of Directors are independent as so defined. The foregoing independence determination of our Board of Directors included the determination that each of these six nominated Board members, if elected and appointed to the Audit Committee, Compensation Committee or Nominating Committee, or as discussed above, respectively, is:

·                                 independent for purposes of membership on the Audit Committee under Rule 5605(c)(2) of the NASDAQ listing standards, that includes the independence requirements of Rule 5605(a)(2) and additional independence requirements under SEC Rule 10A-3(b);

·                                 independent under the NASDAQ listing standards for purposes of membership on the Nominating Committee; and

·                                 independent under the NASDAQ listing standards for purposes of membership on the Compensation Committee, as a “non-employee director” under SEC Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and an “outside director” as defined in regulations under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

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BOARD LEADERSHIP AND THE BOARD’S ROLE IN RISK OVERSIGHT

Board Leadership

The Board currently combines the role of Chairman of the Board with the role of Chief Executive Officer, coupled with a lead Director position to further strengthen the governance structure.  The Board believes this provides an efficient and effective leadership model for the Company, as the Company’s Chief Executive Officer is the Director most familiar with the Company’s business and industry and the Director most capable of effectively identifying strategic priorities and leading the discussion and execution of strategy.  Additionally, combining the Chairman and Chief Executive Officer roles fosters clear accountability and effective decision-making.   To ensure effective independent oversight, the Board has adopted a number of governance practices, including:

·                                 a strong, independent, clearly-defined lead Director role (see below for a full description of the role);

·                                 holding executive sessions of the independent Directors regularly; and

·                                 annual performance evaluation of the Chairman and Chief Executive Officer by the independent Directors.

The Board retains the authority to modify this structure to best address the Company’s circumstances, and so advance the best interests of all shareholders, as and when appropriate.  The Board also has designated Gary B. Abromovitz, an independent Director, as the Deputy Chairman and lead Director.  The Deputy Chairman’s authority and responsibilities include:

·                                 presiding at all meetings of the Board when the Chairman is not present and over executive sessions;

·                                 serving as a liaison between the Chairman and the independent Directors; and

·                                 calling meetings of the independent Directors.

Our Board and its committees meet throughout the year on a set schedule, and hold special meetings and act by written consent from time to time, as appropriate.  Independent Directors regularly meet without management present, and the Board’s lead Director conducts those sessions.   The Corporate Governance Committee works with the Compensation Committee to identify, develop and recommend succession plans for all of the Company’s senior management, including the Chairman and Chief Executive Officer, to the Board of Directors.

The Board’s Role on Risk Oversight

The Company’s management is responsible for the ongoing assessment and management of the risks the Company faces, including risks relating to capital structure, strategy, liquidity and credit, financial reporting and public disclosure, operations, and governance. The Board oversees management’s policies and procedures in addressing these and other risks.  Additionally, each of the Board’s four committees (the Audit Committee, Compensation Committee, Nominating Committee, and Corporate Governance Committee) monitor and report to the Board those risks that fall within the scope of such committees’ area of oversight responsibility.  For example, the full Board directly oversees strategic risks.  The Nominating Committee directly oversees risk management relating to Director nomination and independence.  The Corporate Governance Committee directly oversees risk management regarding corporate governance.  The Compensation Committee directly oversees risk management relating to employee compensation, including any risks of compensation programs encouraging excessive risk-taking.  Finally, the Audit Committee directly oversees risk management relating to financial reporting, public disclosure and legal and regulatory compliance.  The Audit Committee is also responsible for assessing the steps management has taken to monitor and control these risks and exposures and discussing guidelines and policies with respect to the Company’s risk assessment and risk management.

Management has identified risks, designated associated “risk owners” within the organization and receives appropriate reports from the various risk owners as conditions change. Management works with the Board to communicate risk factors to the Board and to enable the Board to understand the Company’s risk identification, risk management and risk mitigation measures relating to strategic matters.  Additional review or reporting of risks is conducted by management as needed or when requested by the Board or a committee.  Additionally, each fiscal year, the lead independent Director, working with the other independent Directors, assesses corporate governance practices and risks using the National Association of Corporate Directors Key Agreed Principles.  These principles were created to provide a framework for the corporate governance of public entities, giving boards of Directors the flexibility to make decisions at the practice level within this framework to tailor the principles as needed to address the governance issues facing their entities.   The independent Directors annually report their findings to the Board regarding their assessment of the Company’s risks relating to corporate governance.

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BOARD COMMITTEES AND MEETINGS

Our Board of Directors has four committees: the Audit Committee, the Nominating Committee, the Corporate Governance Committee and the Compensation Committee.  The following table shows the composition of these committees as of February 29, 2012 and the number of meetings held during fiscal 2012:

M = Current Member during the 2012 fiscal year

Audit Committee. Our Audit Committee is established in accordance with Section 3(a)(58)(A) of the Exchange Act.  The Audit Committee operates under a written charter that has been adopted by the Board of Directors.  The primary purposes of this committee are to oversee, on behalf of the Company’s Board of Directors: (1) the accounting and financial reporting processes and integrity of our Company’s financial statements, (2) the audits of our Company’s financial statements and the appointment, compensation, qualifications, independence and performance of our independent registered public accounting firm, (3) our compliance with legal and regulatory requirements, and (4) the staffing and ongoing operation of our internal audit function.  The Audit Committee meets periodically with our Chief Financial Officer and other appropriate officers in the discharge of its duties.  The Audit Committee also reviews the content and enforcement of the Company’s Code of Ethics, consults with legal counsel on various legal compliance matters and on other legal matters if those matters could materially affect our financial statements.

The Board of Directors has determined that each of the members of the Audit Committee is independent as previously described.  In addition, the Board of Directors determined that Mr. Telles qualifies as an “audit committee financial expert” as defined by the SEC in Item 407(d)(5) of Regulation S-K promulgated by the SEC. The Board of Directors also determined that all of the members of the Audit Committee meet the requirement of the NASDAQ listing standards that each member be able to read and understand fundamental financial statements, including a company’s balance sheet, income statement, and cash flow statement.

Compensation Committee. The Compensation Committee operates under a written charter that has been adopted by the Board of Directors.  The primary purposes of the committee are to (1) evaluate and approve the corporate goals and objectives set by the Chief Executive Officer (the “CEO”), (2) evaluate the CEO’s performance in light of those goals and objectives, (3) make recommendations to the Board of Directors with respect to non-CEO compensation, incentive compensation plans and equity-based plans, (4) oversee the administration of our incentive compensation plans and equity-based plans, and (5) produce an annual report on executive compensation for inclusion in the Company’s proxy statement.  The Board of Directors has determined that the members of this committee are independent as previously described.   In addition to formal meetings, the committee also conducted numerous informal telephonic discussions and consulted its legal advisors throughout the year.

The Compensation Committee has the independent authority to hire compensation, accounting, legal, or other advisors.  In fiscal 2012, the Compensation Committee directly engaged Pearl Meyer & Partners (“Pearl Meyer”) as its independent compensation consultant.  During fiscal 2012, Pearl Meyer assisted the Compensation Committee with respect to Mr. Rubin’s compensation program by:

·              Assisting in the design and negotiation of his revised compensation and employment agreement;

·              Advising on appropriate executive performance goals and metrics for Mr. Rubin;

·              Reviewing and recommending adjustments to Mr. Rubin’s pay structure;

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·              Advising on market trends and developments; and

·              Advising on Mr. Rubin’s severance benefits.

See “Executive Compensation—Employment Contract for Chairman of the Board, Chief Executive Officer and President” for a detailed description of the revised employment agreement with Mr. Rubin.  Pearl Meyer worked directly with the Compensation Committee (and not on behalf of management) to assist the Compensation Committee in meeting its responsibilities.  Pearl Meyer performed no other services for the Company and, to date, has not undertaken any projects on behalf of management. For additional information regarding the operation and authority of the Compensation Committee, see “Compensation Discussion and Analysis.”

Nominating Committee.  The Nominating Committee operates under a written charter that has been adopted by the Board of Directors.  The primary purposes of the committee are to (1) recommend to our Board of Directors individuals qualified to serve on our Board of Directors for election by shareholders at each annual general meeting of shareholders and to fill vacancies on the Board of Directors, (2) implement the Board’s criteria for selecting new Directors, and (3) oversee the evaluation of our Board.  The Nominating Committee receives recommendations from its members or other members of the Board of Directors for candidates to be appointed to the Board or committee positions, reviews and evaluates such candidates and makes recommendations to the Board of Directors for nominations to fill Board and committee positions.

The committee’s current process for identifying and evaluating nominees for Director consists of general periodic evaluations of the size and composition of the Board of Directors, applicable listing standards and laws, and other appropriate factors with a goal of maintaining continuity of appropriate industry expertise and knowledge of our Company. The committee looks for a number of personal attributes in selecting candidates as specified in the Company’s Corporate Governance Guidelines including: sound reputation and ethical conduct; business and professional activities that are complementary to those of the Company; the availability of time and a willingness to carry out their duties and responsibilities effectively; an active awareness of changes in the social, political and economic landscape; an absence of any conflicts of interest; a level of health that allows for attendance and active contribution to most Board and committee meetings; limited service on other boards; and a commitment to contribute to the Company’s overall performance, placing it above personal interests. The committee does not have a diversity policy regarding its selection criteria for determining Director nominees.  However, as specified in the Company’s Corporate Governance Guidelines, the committee makes efforts to maintain members on the Board who have substantial and direct experience in areas of importance to the Company.  Additionally, the committee seeks independent Directors who represent a mix of backgrounds and experiences that will enhance the quality of the Board’s deliberations and decisions.  The committee considers all attributes, business diversity, professional qualifications, and experience of all candidates the committee believes will benefit the Company and increase shareholder value, without regard to gender, race or ethnic background.  The committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applicable to all prospective nominees.

The Nominating Committee will consider candidates recommended by shareholders. Any candidate recommended by shareholders must meet the same general requirements outlined in the previous paragraph to be considered for election.  Any shareholder who intends to present a Director nomination proposal for consideration at the 2013 annual general meeting of shareholders and intends to have that proposal included in the proxy statement and related materials for the 2013 annual general meeting, must deliver a written copy of the proposal to our Company’s principal executive offices no later than the deadline, and in accordance with the notice procedures, specified under “Shareholder Proposals” in this proxy statement and in accordance with the applicable requirements of SEC Rule 14a-8.

If a shareholder does not comply with the Rule 14a-8 procedures, the Company would not be required to include the nomination proposal as a proposal in the proxy statement and proxy card mailed to shareholders. For a shareholder’s nominee to be considered for nomination as a Director, the shareholder should give timely notice of their nomination in writing to the Secretary of our Company.  To be timely, written suggestions for candidates should be delivered for consideration by the Nominating Committee prior to the next annual general meeting to the Secretary of the Company, Clarendon House, Church Street, Hamilton, Bermuda no later than 45 calendar days before the first anniversary of the date on which the Company sent its proxy statement to shareholders in connection with the previous year’s annual general meeting.  Written suggestions for candidates should be accompanied by a written consent of the proposed candidate to serve as a Director if nominated and elected, a description of his or her qualifications and other relevant biographical information. The Nominating Committee may request that the shareholder submitting the proposed nominee furnish additional information to determine the eligibility and qualifications of such candidate.

Under SEC Rule 14a-8 (and assuming consent to disclosure is given by the proponents and nominee), our Company must disclose any nominations for Director made by any person or group beneficially owning more than five percent of our outstanding Common Stock by May 19, 2012.  Our Company did not receive any such nominations for the Annual Meeting.

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Corporate Governance Committee.  The primary purposes of the committee are to (1) develop, recommend to the Board and assess our corporate governance policies, and (2) evaluate, develop and recommend to the Board succession plans for all of the Company’s senior management. The Corporate Governance Committee works with the Compensation Committee to develop and recommend succession plans to the Board of Directors.

Meetings of Board of Directors and its Committees.  The Board of Directors held four regularly scheduled meetings and four telephonic meetings during fiscal 2012.  Each member of the Board of Directors attended at least 75% of the meetings of our Board of Directors and the committees of which he was a member.  We encourage, but do not require, the members of the Board of Directors to attend annual general meetings. Last year, all of our current Directors attended the annual general meeting of shareholders.  We expect that all Board members will attend the Annual Meeting.

SHAREHOLDER COMMUNICATIONS TO THE BOARD OF DIRECTORS

Any record or beneficial owner of our shares of Common Stock who has concerns about accounting, internal accounting controls or auditing matters relating to our Company may contact the Audit Committee directly.  Any record or beneficial owner of our Common Stock who wishes to communicate with the Board of Directors on any other matter should also contact the Audit Committee.  The Audit Committee has undertaken on behalf of the Board of Directors to be the recipient of communications from shareholders relating to our Company.  If particular communications are directed to the full Board, independent Directors as a group, or individual Directors, the Audit Committee will route these communications to the appropriate Directors or committees so long as the intended recipients are clearly stated.

Communications intended to be anonymous may be made by calling our national hotline service at 866-210-7649 or 866-210-7650.  When calling, please identify yourself as a shareholder of our Company intending to communicate with the Audit Committee.  This third party service undertakes to forward the communications to the Audit Committee if so requested and clearly stated.  You may also send communications intended to be anonymous by mail, without indicating your name or address, to Helen of Troy Limited, 1 Helen of Troy Plaza, El Paso, Texas, 79912, USA, Attention: Chairman of the Audit Committee.  Communications not intended to be made anonymously may be made by calling the hotline number or by mail to that address, including whatever identifying or other information you wish to communicate.

Communications from employees or agents of our Company will not be treated as communications from our shareholders unless the employee or agent clearly indicates that the communication is made solely in the person’s capacity as a shareholder.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 2012, none of the members of the Compensation Committee was an officer (or former officer) or employee of the Company, and no executive officer of the Company served on the Compensation Committee (or equivalent), or the Board of Directors of another entity whose executive officer(s) served on the Company’s Compensation Committee or Board.

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DIRECTOR COMPENSATION

The following table summarizes the total compensation earned by all non-employee Directors during fiscal 2012:

(1)          These amounts reflect the aggregate grant date fair value of restricted stock awards computed in accordance with FASB ASC Topic 718, as required under SEC rules.  Under stock ownership guidelines adopted by the Board, each Director is required to hold the shares until their retirement from the Board, except that each Director may sell up to 30 percent of the shares granted in order to pay any tax liabilities associated with the grant. Further information regarding the awards is included in “Grants to Directors of Plan Based Awards in Fiscal Year 2012”, “Outstanding Equity Awards for Non-Employee Directors at Fiscal Year-End 2012” and “Non-Employee Director Equity Compensation Plan.”

(2)   Stanlee Rubin served on the Board of Directors until October 11, 2011.

Gerald J. Rubin is our only Director that is also an employee of the Company.  He has not received any remuneration for his service as a member of the Board of Directors.

In fiscal 2012, the following cash compensation was paid to our non-employee Directors:

(1)          All non-employee Directors receive a quarterly cash retainer of $6,000.

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(2)          All non-employee Directors receive a cash fee of $3,000 for each quarterly meeting of the Board of Directors attended.

(3)          All independent Directors receive a quarterly cash fee of $6,000 for participation in executive sessions.

(4)          The Deputy Chairman and lead Director receives a quarterly cash fee of $10,000.

(5)          Each non-chair member of the Audit Committee receives a quarterly cash fee of $6,000, each non-chair member of the Compensation Committee receives a quarterly cash fee of $3,000 and each non-chair member of the Corporate Governance Committee receives a quarterly cash fee of $1,500.

(6)          The Compensation Committee Chairman receives a quarterly cash fee of $5,000.

(7)   The Corporate Governance Committee Chairman receives a quarterly cash fee of $2,500.

(8)          The Audit Committee Chairman receives a quarterly cash fee of $10,000.

The members of the Nominating Committee did not receive compensation for their service on that committee in fiscal 2012. The Nominating Committee consists of Messrs. Abromovitz (Chairman), Meeker and Woody.  In addition to the amounts shown above, non-employee Board members received reimbursement for travel and lodging expenses incurred while attending Board and committee meetings and Board-related activities, such as visits to Company locations.

In fiscal 2012, the following share-based compensation was awarded to certain independent Directors:

(1)          These reflect shares of restricted stock that vested immediately.   Under stock ownership guidelines adopted by the Board, each Director is required to hold the shares until their retirement from the Board, except that each Director may sell up to 30 percent of the shares granted in order to pay any tax liabilities associated with the grant.  See “Director Stock Ownership and Compensation Guidelines.” The grant date fair value is based on the closing sale price of the Common Stock on October 24, 2011 of $29.48 per share.

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The following table provides information on the outstanding equity awards at fiscal year-end 2012 for non-employee Directors:

All options were issued under the Company’s 1995 Non-Employee Stock Option Plan.  Under the plan, all options were issued at a price not less than the fair market value of the Common Stock at the date of grant, vested one year from the date granted, and expire ten years after the options were granted.  Currently, all outstanding options under the plan are vested.  This stock option plan expired by its terms on June 6, 2005.  Therefore, no additional options have been granted since that date.  All stock awards have been issued under the Company’s 2008 Non-employee Directors Stock Incentive Plan.  All shares vested immediately at grant.

Director Stock Ownership and Compensation Guidelines

The Compensation Committee and the Board of Directors believe that Directors should own and hold Common Stock to further align their interests and actions with the interests of the Company’s shareholders.  Accordingly, upon recommendation of the Compensation Committee, in June 2008, the Board of Directors adopted stock ownership and compensation guidelines for the Company’s Directors.  Under these guidelines, the Directors should hold shares of the Company’s Common Stock equal in value to at least three times the annual cash retainer for Directors.  The guidelines provide that the stock ownership levels should be achieved by each Director within five years from the adoption of the guidelines or, in the case of a new Director, within five years of his or her first appointment to the Board of Directors.  The Compensation Committee will review stock ownership levels on the first trading day of the calendar year based on the greater of the fair market value and the Director’s cost basis in the shares on such date.  In the event of an increase in the annual cash retainer, the Directors will have five years from the time of the increase to acquire any additional shares needed to comply with the guidelines.  To further encourage equity participation, the guidelines provide that equity awards to non-employee Directors either vest over a period of at least three years or are required to be held by the Director until his or her service with the Company ends.  However, each Director may sell up to 30 percent of the shares granted in order to pay any tax liabilities associated with the grant.  The Board of Directors also believe that compensation arrangements should be flexible enough to allow the Directors to receive a balanced mix of equity and cash keeping in mind the Board’s guidelines for achieving and maintaining stock ownership.  In this respect, the Board of Directors will seek to target Director compensation at a mix of approximately 60 percent cash and 40 percent equity.

Non-Employee Director Equity Compensation Plan

At the 2008 annual general meeting of shareholders, the Company’s shareholders approved the Helen of Troy Limited 2008 Non-Employee Directors Stock Incentive Plan (the “2008 Director Plan”). The purpose of the 2008 Director Plan is to (1) aid the Company in attracting, securing and retaining Directors of outstanding ability and (2) motivate such persons to exert their best efforts on behalf of the Company and its subsidiaries and its affiliates by providing incentives through the granting of awards under the plan.  Only non-employee Directors of the Company are eligible to participate in the 2008 Director Plan.  Because Gerald J. Rubin is an employee of the Company, he is not eligible to participate in the 2008 Director Plan.

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The 2008 Director Plan is administered by the Compensation Committee of the Board of Directors. The 2008 Director Plan permits grants of restricted stock, restricted stock units and other stock-based awards to the Company’s non-employee Directors.  The vesting criteria and other terms and conditions of restricted stock, restricted stock units and other stock-based awards will be determined by the Compensation Committee.  Shares which are subject to awards which terminate, expire, are cancelled, exchanged, forfeited, lapse or are settled for cash may be utilized again with respect to awards granted under the 2008 Director Plan.  As of June 25, 2012,  45,100 shares of restricted stock have been granted under the plan and 132,144 shares of Common Stock remain available for future issue (subject to adjustment in certain circumstances). The plan will expire by its terms on August 19, 2018.

If a participant’s service is terminated for any reason, the participant will only be entitled to the restricted stock or restricted stock units vested at the time of such termination of service. The participant’s unvested restricted stock and restricted stock units will be forfeited. Notwithstanding the foregoing, the Compensation Committee may accelerate the vesting of unvested restricted stock or restricted stock units held by a participant if the participant is terminated without “cause” (as determined by the Compensation Committee) by the Company.  In the event of a Change of Control (as defined in the 2008 Director Plan), (1) the participants will have the right to settle from and after the date of the Change of Control any restricted stock unit held by such participant in whole or in part, notwithstanding that such restricted stock unit may not be fully vested, and (2) any and all restrictions on any participant’s other stock-based award will lapse and such stock will immediately vest in the participant, notwithstanding that the other stock-based award was unvested.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of June 1, 2012, the beneficial ownership of the Common Stock of the Directors and the executive officers of the Company; the Directors and executive officers of the Company as a group; and each person known to the Company to be the beneficial owner of more than five percent of the Common Stock:

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EXECUTIVE OFFICERS

The executive officers of the Company are Gerald J. Rubin, Thomas J. Benson and Vincent D. Carson. Mr. Rubin is also a Director of the Company and his biography is included above under “Proposal 1:  Election of Directors.”

THOMAS J. BENSON, age 55, has been Senior Vice President and Chief Financial Officer of the Company since August 2003. Mr. Benson served as Chief Financial Officer of Elamex, S.A. de C.V., a provider of manufacturing and shelter services, from June 2002 to August 2003, and as Chief Financial Officer of Franklin Connections / Azar Nut Company, a manufacturer, packager and distributor of candy and nut products, from May 1994 to June 2002. He has served as an investments director in two private investment firms and spent seven years in public accounting. He received his B.S. from St. Mary’s College and his Masters Degree of Taxation from DePaul University.

VINCENT D. CARSON, age 52, joined the Company in November 2001. He served in the capacity of Vice President, General Counsel and Secretary from November 2001 to September 2010.  Since September 2010, he has served as Senior Vice President, General Counsel and Secretary of the Company.  Prior to joining the Company, Mr. Carson had a 16 year legal career in private practice in El Paso, Texas.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has reviewed and discussed with management the Compensation Discussion and Analysis for the fiscal year ended February 29, 2012 to be included in the proxy statement for the Annual Meeting filed pursuant to Section 14(a) of the Exchange Act.  Based on its review and discussion referred to above, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the proxy statement on Schedule 14A for the Company’s Annual Meeting and incorporated by reference in the Company’s Annual Report on Form 10-K for the fiscal year ended February 29, 2011.

Members of the Compensation Committee:

Gary B. Abromovitz, Chairman

Timothy F. Meeker

William F. Susetka

Darren G. Woody

This Report of the Compensation Committee is not “soliciting material,” and is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates this information by reference.

COMPENSATION DISCUSSION AND ANALYSIS

Throughout this proxy statement, the following individuals are collectively referred to as the “named executive officers”:

·                  Gerald J. Rubin, Chairman of the Board of Directors, Chief Executive Officer and President;

·                  Thomas J. Benson, Senior Vice President and Chief Financial Officer; and

·                  Vincent D. Carson, Senior Vice President, General Counsel and Secretary.

We sometimes refer to Messrs. Benson and Carson as “other named executive officers”.

Executive Summary

The Compensation Committee oversees the compensation of our named executive officers and is responsible for evaluating our Chief Executive Officer’s performance in light of the goals and objectives of the Company.  The Compensation Committee has taken a number of actions since the beginning of fiscal 2012 to make our executive compensation program for our Chief Executive Officer and the other named executive officers more reflective of our performance and more responsive to shareholder interests.  Most significantly, the Company entered into a revised employment agreement (“Revised Agreement”) with Mr. Rubin, our Chief Executive Officer, that instituted substantial changes to his previous employment agreement and our pay practices.  The Revised Agreement became effective on October 11, 2011, the date of our 2011 annual general meeting of shareholders, and replaced Mr. Rubin’s previous employment

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agreement entered into in 1999 (“1999 agreement”).  At that annual general meeting, a very high percentage of our shareholders voted in favor of the compensation (including the Revised Agreement) of our named executive officers described in our 2011 proxy statement (“say on pay”), as well as compensation programs submitted to them for their approval. Those compensation programs included a new annual cash bonus plan named the Helen of Troy Limited 2011 Annual Incentive Plan (“2011 Bonus Plan”) and amendments to the Helen of Troy Limited 2008 Stock Incentive Plan (“2008 Stock Plan”), which is the Company’s primary equity award plan.

Historically, substantially all of Mr. Rubin’s compensation has been performance based.  The Revised Agreement became effective on October 11, 2011 and substantially changed the short-term and long-term performance elements and goals for our Chief Executive Officer’s incentive compensation.  As disclosed in the proxy statement relating to the “say on pay” vote for the 2011 annual general meeting, the changes pertaining to performance targets and goals under the Revised Agreement did not begin until fiscal 2013.  The Compensation Committee determined it could not implement the incentive compensation until fiscal 2013 because of the following:

·                                          almost two-thirds of the fiscal 2012 performance period had passed at the time the Revised Agreement became effective;

·                                          the Compensation Committee viewed establishing new performance goals when the performance period was substantially complete as a poor pay practice and not aligned with the best interests of the shareholders; and

·                                          because substantially all of fiscal 2012 performance period was complete, revising the performance goal would have resulted in an adverse tax consequence to the Company.

As a result, for fiscal 2012, Mr. Rubin’s incentive compensation continued to be effectively governed by a cash bonus performance plan originally adopted in 1997 (“1997 Bonus Plan”).  The Compensation Committee does not intend to continue to use this plan after fiscal 2012.  Beginning in fiscal 2013, Mr. Rubin’s cash bonus will be governed by the 2011 Bonus Plan. For additional information regarding the Revised Agreement and a comparison of the terms of the 1999 agreement and the Revised Agreement see “—Our Compensation Program for Our Chief Executive Officer—Revised CEO Employment Agreement,” and “Executive Compensation—Employment Contract for Chairman of the Board, Chief Executive Officer and President.”

A summary of the actions taken by the Compensation Committee since the beginning of fiscal 2012 includes the following:

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Institutional Shareholder Services, Inc. evaluates certain risk indicators to provide a measure of concern of the governance-related risk of an entity across four areas of governance: board of directors, compensation/remuneration, shareholder rights, and audit (“GRId Score”). As a result of our pre-existing governance procedures and the compensation policies implemented in fiscal 2012, the Company’s GRId Score, as of the date of this proxy statement, is designated “low concern,” the most favorable GRId Score, in all four areas of governance.

Revised CEO Employment Agreement

Until October 11, 2011, the compensation of our Chief Executive Officer, Mr. Rubin, was governed by the 1999 agreement and the 1997 Bonus Plan.  While these compensation arrangements largely reflected a pay for performance philosophy, many aspects of the 1999 agreement did not reflect current best practices in executive compensation.  Moreover, since the 1999 agreement was entered into in 1999, the Company’s sales revenue has grown substantially.  Accordingly, in fiscal 2011, the Compensation Committee retained the services of independent counsel and an independent compensation consultant to negotiate a revised employment agreement with Mr. Rubin. Based upon the recommendation of the

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Compensation Committee, on September 13, 2011, Mr. Rubin and the Company entered into the Revised Agreement, which became effective October 11, 2011, after the approval by our shareholders of certain proposed compensation plans at the 2011 annual general meeting of shareholders. We presented the provisions of the Revised Agreement to our shareholders in connection with that vote, and our shareholders voted overwhelmingly in favor of the compensation of our named executive officers described in our 2011 proxy statement and those compensation programs submitted for the shareholders’ approval.

The Compensation Committee believes the terms of the Revised Agreement incorporate best governance practices designed to benefit our shareholders.  While the Revised Agreement became effective on October 11, 2011, Mr. Rubin’s performance based compensation solely for the fiscal 2012 continued to be computed under the terms of the 1997 Bonus Plan.  Under the Revised Agreement, the short-term and long-term performance elements and goals for our Chief Executive Officer’s risk based compensation has been significantly changed.  However, these changes could not begin until fiscal 2013 since the fiscal 2012 performance period was nearly two-thirds completed.  Accordingly, for tax and pay practices reasons, the Compensation Committee determined to retain the existing performance pay structure for the remainder of fiscal 2012.  The Compensation Committee does not intend to continue to use this plan after fiscal 2012.  Beginning in fiscal 2013, Mr. Rubin’s cash bonus will be governed by the 2011 Bonus Plan.  For additional information regarding the Revised Agreement and a comparison of the terms of the 1999 agreement and the Revised Agreement see “—Our Compensation Program for Our Chief Executive Officer—Revised CEO Employment Agreement,” and “Executive Compensation—Employment Contract for Chairman of the Board, Chief Executive Officer and President.”

Pay for Performance

Historically, substantially all of Mr. Rubin’s compensation has been performance based.  The Compensation Committee believes that performance based compensation aligns our executives’ interests with our annual corporate goals and that a significant portion of compensation to our named executive officers should be performance-based. As discussed above, for fiscal 2012, Mr. Rubin’s performance compensation was computed under the terms of the 1997 Bonus Plan.  His bonus under the 1997 Bonus Plan for fiscal 2012 was based on a pre-established performance target that has been approved by the Company’s shareholders.  This pre-established performance target was graduated percentage ranging from 5 percent to 10 percent of the annual earnings of the Company as computed under the 1997 Bonus Plan less his base salary. For additional information regarding the 1999 agreement and the 1997 Bonus Plan, see “—Our Compensation Program for Our Chief Executive Officer—1999 Agreement,” and “Executive Compensation—Employment Contract for Chairman of the Board, Chief Executive Officer and President.”

For fiscal 2013 and future years, Mr. Rubin’s performance compensation will be based on a balanced mix of equity and cash awards. Under the Revised Agreement and the 2011 Bonus Plan, the Compensation Committee uses targeted, performance-based compensation goals in our executive compensation program for our Chief Executive Officer.  These targets are specific performance goals that were approved by our shareholders at the 2011 annual general meeting, which are designed to incorporate performance criteria that promote our short-term and long-term business strategies, build long-term shareholder value and avoid encouraging excessive risk-taking. Accordingly, substantially all of our Chief Executive Officer’s pay will be “at risk,” or dependent upon both the Company’s and his own performance, for fiscal 2013.  For additional information regarding the Revised Agreement and the 2011 Bonus Plan, see “—Our Compensation Program for Our Chief Executive Officer—Revised CEO Employment Agreement,” and “Executive Compensation—Employment Contract for Chairman of the Board, Chief Executive Officer and President.”

Fiscal 2012 Performance Overview

Despite the challenging retail environment and economy in our industry during fiscal 2012, we were able to meet a number of objectives aimed to further our core initiatives to grow our business and increase shareholder value, including:

·                  a return on average equity for fiscal 2012 of 15%;

·                  a cumulative total shareholder return over the past five fiscal years that exceeds both the NASDAQ Market Index and the Dow Jones-U.S. Personal Products, Broad Market Cap, Yearly, and Total Return Index;

·                  record net sales revenue of approximately $1.18 billion, an increase of 52.1 percent compared to fiscal 2011;

·                  record net income of approximately $110.4 million, an increase of 18.3 percent compared to fiscal 2011;

·                  the successful completion of many key initiatives and cost-saving objectives related to the integration of Kaz, Inc. into the Company, including some significant back-office staffing integrations and consolidation of facilities;

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·                  the acquisition of PUR Water Purification Products, Inc. and certain other assets related to the PUR water filtration business, including manufacturing equipment, trademarks, customer lists, distribution rights, patents, and the goodwill of the PUR water filtration business; and

·                  the implementation of our upgraded Enterprise Resource Planning system, which includes significant new functionality in the areas of sales forecasting, transportation management, business intelligence, and product information management.

Overview of Compensation Practices

Oversight of Our Executive Compensation Program

The Compensation Committee oversees the compensation of our named executive officers and is composed entirely of independent Directors as defined under the listing standards of NASDAQ.  The Compensation Committee is responsible for evaluating the Chief Executive Officer’s performance in light of the goals and objectives of the Company.  It also makes compensation recommendations with respect to our other executive officers, including approval of awards for incentive compensation and equity-based plans.  The Compensation Committee and the Corporate Governance Committee also assist the Board of Directors in developing succession planning for our executive officers.

Objectives of Our Compensation Program

Our compensation program is designed to attract, motivate and retain key employees and to align the long-term interests of the named executive officers with those of our shareholders.  The philosophy that the Compensation Committee uses to set executive compensation levels and structures is based on the following principles:

·                  compensation for our executive officers should be linked to performance;

·                  a higher percentage of compensation should be performance-based as an executive officer’s range of responsibility and ability to influence the Company’s results increase;

·                  compensation should be competitive in relation to the marketplace; and

·                  outstanding achievement should be recognized.

In addition, we believe that our compensation programs for executive officers should be appropriately tailored to encourage employees to grow our business, but not encourage them to do so in a way that poses unnecessary or excessive material risk to us.

The Role of Chief Executive Officer in Determining Executive Compensation

The Compensation Committee, working with the Chief Executive Officer, evaluates and approves all compensation regarding our named executive officers.  Our other named executive officers report directly to our Chief Executive Officer who supervises the day to day performance of those officers.  Accordingly, the Chief Executive Officer establishes the criteria and any targets used to determine bonuses, including each other named executive officer’s individual performance and Company-based performance factors, and makes recommendations to the Compensation Committee regarding salaries, bonuses and equity awards for the other named executive officers.  The Compensation Committee strongly considers the compensation recommendations and the performance evaluations of the Chief Executive Officer in making its decisions and any recommendations to the Board of Directors with respect to non-CEO compensation, incentive compensation plans and equity-based plans that are required to be submitted to the Board.  In deliberations or approvals regarding the compensation of the other named executive officers, the Compensation Committee may elect to invite the Chief Executive Officer to be present but not vote.  In any deliberations or approvals of the Compensation Committee regarding the Chief Executive Officer’s compensation, the Chief Executive Officer is not invited to be present.

Compensation Consultant and Other Advisers

The Compensation Committee has the independent authority to hire compensation, accounting, legal, or other advisors.  In connection with any such hiring, the Compensation Committee can determine the scope of the consultant’s assignments and their fees.  The scope of a consultant’s services may include providing the Compensation Committee with data regarding compensation trends, assisting the Compensation Committee in the preparation of market surveys or tally sheets or otherwise helping it evaluate compensation decisions.  In fiscal 2012, the Compensation Committee retained Pearl Meyer & Partners (“Pearl Meyer”) as its independent compensation consultant and Gibson, Dunn & Crutcher LLP as its independent legal counsel.

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During fiscal 2012, Pearl Meyer assisted the Compensation Committee with respect to Mr. Rubin’s compensation program by:

·                  assisting in the design and negotiation of his revised compensation and employment agreement;

·                  advising on appropriate executive performance goals and metrics for Mr. Rubin;

·                  reviewing and recommending adjustments to Mr. Rubin’s pay structure;

·                  advising on market trends and developments; and

·                  advising on Mr. Rubin’s severance benefits.

See “Executive Compensation—Employment Contract for Chairman of the Board, Chief Executive Officer and President” for a detailed description of the revised employment agreement with Mr. Rubin.  Pearl Meyer works directly with the Compensation Committee (and not on behalf of management) to assist the Compensation Committee in meeting its responsibilities.  Pearl Meyer performs no other services for the Company and, to date, has not undertaken any projects on behalf of management.

2011 Executive Compensation Vote

At our 2011 annual general meeting of shareholders, our shareholders voted overwhelmingly in favor of the compensation of our named executive officers described in our 2011 proxy statement (“say on pay”), as well as several compensation programs submitted for the shareholders’ approval.  In addition to the “say on pay” proposal, at our 2011 annual general meeting of shareholders, we submitted to the shareholders for approval, the 2011 Bonus Plan and amendments to the 2008 Stock Plan.  In connection with the “say on pay” proposal, in addition to those plans, we presented the provisions of the Revised Agreement to our shareholders. As noted to the shareholders, the Revised Agreement would only be binding on Mr. Rubin and the Company if the Company’s shareholders approved the 2011 Bonus Plan and the amendments to the 2008 Stock Plan. In order to assist shareholders in understanding the provisions of the Revised Agreement and the 2011 Bonus plan and the amendments to the 2008 Stock Plan, members of the Compensation Committee and the Company’s investor relations group made personal visits and phone calls as part of our outreach effort to certain shareholders and their advisory services groups.

At our 2011 annual general meeting of shareholders, our shareholders voted in favor of the compensation of our named executive officers described in our 2011 proxy statement (“say on pay”),  our amendments to the 2008 Stock Plan, and our adoption of the 2011 Bonus Plan as follows:

In consideration of the results, the Compensation Committee acknowledged the support received from a very high percentage of our shareholders and viewed the results as confirmation of the Company’s existing executive compensation policies and decisions. It also considered shareholder feedback it received in connection with the 2011 annual general meeting and the proximity of that meeting to the end of fiscal 2012.  As a result, since the 2011 annual general meeting, we have not significantly changed our compensation principles and objectives in response to that vote.  Consistent with the recommendation of the Board of Directors of the Company in the 2011 proxy statement, the shareholders of the Company voted to hold the non-binding advisory “say on pay” vote on an annual basis at our 2011 annual general meeting. In response to this vote, the Company determined that a non-binding advisory “say on pay” vote will be held annually.

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Our Compensation Program for Our Chief Executive Officer

Mr. Rubin is a co-founder of the Company, and he served as President of the Company prior to our initial public offering in 1971.  Mr. Rubin served as President, Chief Executive Officer, and Chairman of the Board of Directors from 1971 to 1984, and from 1984 to June 2000, he served as Chief Executive Officer and Chairman of the Board of Directors.  Since June 2000, Mr. Rubin has served as Chief Executive Officer, Chairman of the Board of Directors and President of the Company.  Mr. Rubin sets the overall strategic vision for our Company, and oversees the senior management team and the Company’s growth and acquisition strategy.

Elements of the Compensation Program for Our Chief Executive Officer

The principal components of compensation for our Chief Executive Officer are:

·                  base salary;

·                  performance-based incentive bonuses;

·                  equity grants (under the Revised Agreement);

·                  perquisites and other personal benefits (eliminated under the Revised Agreement); and

·                  post-termination benefits, including change of control benefits.

The Compensation Committee reviews total compensation for the Chief Executive Officer annually and evaluates his performance.  Each year, the Compensation Committee also certifies that the amounts of any bonus payments under the 1997 Bonus Plan (and in future years, under the 2011 Bonus Plan) have been accurately determined and that the performance targets approved by the shareholders, and any other material terms previously established by the Compensation Committee, were in fact satisfied.  The Compensation Committee believes that performance-based cash compensation should constitute a substantial portion of our Chief Executive Officer’s total compensation.  As a result, the Chief Executive Officer’s base salary has historically represented a comparatively small percentage of the Chief Executive Officer’s total compensation, and it continues to do so under the Revised Agreement. Historically, Mr. Rubin’s total compensation has been primarily performance-based and tied directly to the profitability of the Company.  Although the annual performance target under the 1997 Bonus Plan has historically determined a large portion of Mr. Rubin’s compensation and could be viewed as encouraging a short-term focus at the expense of sustained performance, we believe that several factors mitigate this risk and align his interests with the long-term interests of the Company and our shareholders.  First, as one of the largest beneficial owners of Common Stock, the Compensation Committee believes that Mr. Rubin has an incentive to maintain a long-term focus on sustainable performance.  Second, significant transactions that could influence short-term performance, such as acquisitions, are reviewed and approved by the Board of Directors.  Additionally, Mr. Rubin shares directly in the risk in any negative impact of underperforming strategic transactions because it reduces his compensation. Finally, beginning in fiscal 2013, under the Revised Agreement and the 2011 Bonus Plan, Mr. Rubin’s performance-based compensation will consist of a mix of cash and equity to provide an appropriate balance of incentives to achieve both the short-term and long-term goals of the Company.

1999 Employment Agreement

Until October 11, 2011, Mr. Rubin’s compensation was governed by the 1999 agreement, which was entered into in 1999.  The Revised Agreement replaced the 1999 agreement on October 11, 2011, the date of the approval of the 2011 Bonus Plan and the amendments to the 2008 Stock Plan by our shareholders at the 2011 annual general meeting.  While the Revised Agreement became effective on October 11, 2011 and substantially changed the short-term and long-term performance elements and goals for our Chief Executive Officer’s incentive compensation, those changes did not begin until fiscal 2013.  Because almost two-thirds of the fiscal 2012 performance period had passed at the time the Revised Agreement became effective and for other pay practice reasons, the Compensation Committee determined to retain the existing performance pay structure for the remainder of fiscal 2012.  As a result, for fiscal 2012, Mr. Rubin’s incentive compensation continued to be effectively governed by the 1997 Bonus Plan.

Any bonus earned under the 1997 Bonus Plan was based on a pre-established performance target that has been approved by the Company’s shareholders.  At the 2003 annual general meeting, the shareholders approved an amendment to the 1997 Bonus Plan to change the performance targets from a pre-tax fixed percentage of earnings to a pre-tax percentage of earnings based on a graduating scale.  Shareholders last approved the terms of the performance goals at the 2008 annual general meeting.  The performance targets provided that Mr. Rubin’s cash bonus would increase or decrease as pre-tax earnings increased or decreased, respectively.  This provided Mr. Rubin with an incentive to work to reward positive earnings performance and directly aligned his interests with those of our shareholders.  In connection with the amendment to the 1997

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Bonus Plan in 2003, Mr. Rubin agreed to a reduction in the number of stock options he would otherwise have been entitled to receive under the 1999 agreement.  Between fiscal 2003 and fiscal 2012, Mr. Rubin did not receive any equity awards pursuant to the 1999 agreement because he was not eligible to receive grants of stock options under any of the Company’s equity compensation plans, including the 2008 Stock Plan, prior to its amendments in October 2011.  Because Mr. Rubin was not eligible to participate in the 2008 Stock Plan, the 1999 agreement provided that the Company use reasonable efforts to cause the Company’s shareholders to approve additional shares of Common Stock to enable the Company to grant options to Mr. Rubin as described in the 1999 agreement.  The Compensation Committee elected to not support any proposal to the shareholders for additional equity grants if it provided guaranteed option awards and did not conform to performance guidelines of good pay practices with an emphasis on long-term shareholder value.

In 2005, the Company and Mr. Rubin entered into an amendment to Mr. Rubin’s employment agreement reducing his employment term from five years to three years.  The Compensation Committee determined, and Mr. Rubin agreed, that the term reduction was in the best interests of our shareholders in order to effectively eliminate the tax “gross up” provision that otherwise would have been triggered in the event of a change in control of the Company.  By reducing the term of the employment agreement, the amendment also effectively reduced Mr. Rubin’s severance as a result of a termination following a change of control to a limit of 2.99 times his “base amount” as defined in Section 280G(b)(3) of the Code.

Revised CEO Employment Agreement

As noted above, Mr. Rubin and the Company entered into the Revised Agreement in September 2011, which became effective upon the approval of the amendments to the 2008 Stock Plan by our shareholders at the 2011 annual general meeting. We presented the provisions of the Revised Agreement to our shareholders in connection with the approval of those compensation plans, and our shareholders voted overwhelmingly in favor of the compensation of our named executive officers described in our 2011 proxy statement and those compensation programs submitted for the shareholders’ approval.

The following chart provides a comparison of the terms of the 1999 agreement and the Revised Agreement.  The Compensation Committee believes the Revised Agreement reflects best practices in executive compensation and further aligns the interests of shareholders and Mr. Rubin.  For further information concerning the Revised Agreement, see “Executive Compensation—Employment Contract for Chairman of the Board, Chief Executive Officer and President.”

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Base Salary of Our Chief Executive Officer

We provide our named executive officers and other employees with a base salary to provide a fixed amount of compensation for regular services rendered during the fiscal year.  The 1999 agreement and the Revised Agreement set Mr. Rubin’s base salary at $600,000 per year. Mr. Rubin’s salary has remained at this level since 1999, with no increases for inflation or cost of living adjustments.  The Compensation Committee has not sought to increase Mr. Rubin’s salary because it believes that the majority of our Chief Executive Officer’s compensation should be attributed to the pre-established performance goals of the Company.

Performance-Based Incentive Bonuses for Our Chief Executive Officer

The Compensation Committee believes that performance-based awards align our executives’ interests with our annual corporate goals.  The Compensation Committee believes, however, that a significant portion of performance-based compensation at the Chief Executive Officer level is important to the success of the Company and to provide a form of incentive-based compensation to Mr. Rubin.

Under the 1997 Bonus Plan, Mr. Rubin’s incentive compensation fluctuated depending on the Company’s financial performance. Mr. Rubin’s incentive bonus under the 1997 Bonus Plan was capped at $15,000,000 in any one fiscal year. Under the Revised Agreement, Mr. Rubin continued to participate in the 1997 Bonus Plan for fiscal 2012. During fiscal 2012, Mr. Rubin was entitled to receive an annual cash incentive bonus based upon a graduated percentage ranging from 5 percent to 10 percent of the annual earnings of the Company as computed under the 1997 Bonus Plan less his base salary.  For fiscal 2012, annual earnings for the Company as computed under the 1997 Bonus Plan were approximately $128 million.  For more information regarding the 1997 Bonus Plan, see “Executive Compensation – Employment Contract for Chairman of the Board, Chief Executive Officer and President.”

Mr. Rubin is entitled to participate in the 2011 Bonus Plan for which he will be entitled to receive an annual bonus during each of the fiscal years ended February 28, 2013, February 28, 2014 and February 28, 2015, based on the achievement of a graduated percentage of Adjusted EBITDA consisting of operating income (loss) before impairment charges plus depreciation and amortization charges,  in each case, as determined in accordance with GAAP plus the amount of Mr. Rubin’s bonus (without giving effect to any bonus received in respect of a transfer of Insurance Policies, as defined below) accrued during the applicable year.  The Compensation Committee thinks it is prudent to base Mr. Rubin’s performance bonus on this metric because it is a meaningful measure of the Company’s operating results and its ability to service its financial obligations and fund growth. The Adjusted EBITDA formula is subject to adjustment in the event that the Company or any of its subsidiaries consummates an acquisition of the stock or assets of another entity or business or divests any stock or assets of the Company or its subsidiaries. The Compensation Committee believes these adjustments properly modify performance targets under the 2011 Bonus Plan to account for the impact of acquisitions and divestitures and encourage transactions that are accretive to the Company, consistent with the Company’s long-term goals. Any such bonus that is earned and payable will be paid two-thirds in the form of cash or cash equivalents up to a maximum of $10,000,000.

To further encourage a long-term focus on sustainable performance, the remainder of the bonus will be paid in the form of restricted stock.  Any restricted stock will be granted under the 2008 Stock Plan and will vest, with respect to Mr. Rubin’s bonus for fiscal years 2013 and 2014, on February 28, 2015, and with respect to Mr. Rubin’s bonus for fiscal year 2015, on the date the Compensation Committee certifies the performance goals are achieved, in each case subject to Mr. Rubin’s continued employment with the Company (other than in the case of certain termination events as described below). The Compensation Committee believes this mix of cash and equity bonuses provide our Chief Executive Officer an appropriate balance of incentives to achieve both the short-term and long-term goals of the Company.  In the event there are insufficient shares of restricted stock available for issuance pursuant to the 2008 Stock Plan to satisfy amounts owing in respect of the annual bonus, the amount of the bonus which is not able to be satisfied in shares of restricted stock will be paid in the form of cash or cash equivalents.

Additionally, under the Revised Agreement and the 2011 Bonus Plan, three life insurance policies and the obligation to pay the associated premiums will be transferred to Mr. Rubin over the term of the agreement subject to the Company meeting certain performance conditions.  The amount of the annual bonus and value of the transfer of each of the life

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insurance policies (based on cash surrender values) is capped under the 2011 Bonus Plan. Specifically, the value of the transfer of the Guardian Insurance Policy will not exceed $3,000,000, the value of the transfer of the Sun Life Insurance Policy will not exceed $4,000,000 and the value of the transfer of the Metropolitan Insurance Policy will not exceed $7,000,000, in each case, based on the cash surrender value of the applicable policy. In order to encourage a long-term focus and align the interests of the Chief Executive Officer to our shareholders, the vast majority of the value of the transfer of these policies is concentrated in the latter half of the term of the Revised Agreement.  The 2011 Bonus Plan and the specific performance conditions related to the annual cash bonus and the transfer of the insurance policies were approved by the Company’s shareholders at the 2011 annual general meeting of shareholders.

Equity-Based Compensation for Our Chief Executive Officer

The 1999 agreement provided that Mr. Rubin was eligible to receive 250,000 stock options on a quarterly basis that immediately vested.  Mr. Rubin had not received any equity awards pursuant to the 1999 agreement since 2003 and was not eligible to receive grants of stock options under any of the Company’s equity compensation plans, including the 2008 Stock Plan prior to its amendments, in fiscal 2012. The Revised Agreement eliminated this quarterly grant of stock options.

The Compensation Committee believes that executive compensation should be linked, in part, to building long-term shareholder value. This objective is met by providing long-term incentives in the form of equity-based awards, such as performance-based restricted stock units. These grants make the performance of the Company’s Common Stock a targeted incentive. As part of this objective, pursuant to the Revised Agreement, Mr. Rubin received 700,000 restricted stock units (the “Performance RSUs”) in March 2012 that vest over three years if certain performance goals are achieved. These performance goals are based on the achievement of a graduated percentage of the ratio of (1) operating income (loss) after impairment charges, plus depreciation and amortization charges (subject to certain adjustments) to (2) average invested capital. The Compensation Committee elected to base the vesting of the Performance RSUs on this performance metric because it measures how effectively the Company is using its invested capital to generate positive returns for the Company. The Compensation Committee believes that the Performance RSUs will help better align the Chief Executive Officer’s interests with the shareholders.  Additionally, the target opportunity under the Performance RSUs is concentrated in the latter half of the term of the Revised Agreement in order to encourage a long-term focus.  For additional information regarding the performance conditions for the Performance RSUs, see “Executive Compensation—Employment Contract for Chairman of the Board, Chief Executive Officer and President.”

Perquisites and Other Personal Benefits Provided to Our Chief Executive Officer

In fiscal 2012, the Company provided our Chief Executive Officer with limited perquisites and other personal benefits.  The Company is required to provide most of these benefits pursuant to the terms of the 1999 agreement.  The perquisites that were available to Mr. Rubin under the 1999 agreement include an automobile and a driver, all expenses of operating, maintaining and insuring the automobile, legal assistance, financial planning and tax return preparation up to $10,000 per year, reimbursement for certain medical care for himself and his wife, and disability insurance coverage. However, in fiscal 2012, Mr. Rubin did not request a driver for his automobile or medical care reimbursement or reimbursement for tax preparation fees.  Additionally, in May 2009, Mr. Rubin’s individual disability insurance policy expired and was not renewed.  The Revised Agreement eliminates all of these perquisites, effective October 11, 2011.  The Compensation Committee eliminated these perquisites because they are no longer deemed to be in the best interests of our shareholders.  Under the Revised Agreement, three life insurance policies and the obligation to pay the associated premiums will be transferred to Mr. Rubin over the term of the agreement subject to the Company meeting certain performance conditions.  For more information, see “Executive Compensation—Employment Contract for Chairman of the Board, Chief Executive Officer and President.”  In fiscal 2012, with approval of the Board of the Directors, Mr. Rubin was reimbursed for a total of approximately $134,000 in personal legal fees in connection with the review and evaluation of the Revised Agreement.

The 1999 agreement also provided that the Company must pay or reimburse Mr. Rubin for reasonable travel and other expenses incurred by him in performing his obligations under his employment agreement, including certain travel expenses incurred by his spouse, and any taxes incurred by him with respect to these payments.  During fiscal 2012, there were no payments that resulted in reimbursable tax expense.  The Revised Agreement similarly provides that the Company must pay or reimburse Mr. Rubin for reasonable travel and other expenses incurred by him in performing his obligations under his employment agreement but does not provide for reimbursement of travel expenses incurred by his spouse or tax reimbursements.  The Company also provides other benefits to Mr. Rubin, such as participation in a 401(k) plan, including matching contributions, group medical, group life, and group dental insurance, as well as vacation and paid holidays.  These benefits are available to all our employees, including each named executive officer, and we believe they are comparable to those provided at other companies.

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Potential Post-Termination Benefits for our Chief Executive Officer

Change in Control

The 1999 agreement provides that the Company must make certain payments to Mr. Rubin if he terminated his employment within six months after a “change in control” (as defined in the 1999 agreement), a so-called modified single trigger arrangement.  The Revised Agreement also provides Mr. Rubin with change of control benefits, but they are double triggered, meaning that they only are available if, during his employment period, Mr. Rubin’s employment is terminated by the Company without “cause” or Mr. Rubin terminated his employment for “good reason,” in each case in connection with, or within 12 months following, a “change in control” (as those terms are defined in the Revised Agreement).  The benefits under both the 1999 agreement and the Revised Agreement are more fully described under “Executive Compensation – Employment Contract for Chairman of the Board, Chief Executive Officer and President” and “Executive Compensation – Potential Payments Upon Termination or Change in Control.”

The change in control provisions are intended to ensure that we will retain the benefit of Mr. Rubin’s services without distraction in the face of a potential change in control and that Mr. Rubin will evaluate potential transactions on an objective basis.  The change in control provisions set forth in Mr. Rubin’s employment agreement may not be modified by the Compensation Committee without obtaining Mr. Rubin’s approval.

Severance

The 1999 agreement provides that, if Mr. Rubin’s employment was terminated by the Company without “cause” or if he terminated his employment for “good reason” (as those terms are defined in the 1999 agreement) or as a result of a “change in control,” then for the three years following any such event, he would have been entitled to receive, among other things, monthly payments of his base salary and annual bonus payments equal to the highest annual bonus paid to him in the preceding three years.  Mr. Rubin also would be entitled to receive certain benefits following a termination of his employment by reason of death or disability.  These benefits are more fully described under “Executive Compensation – Employment Contract for Chairman of the Board, Chief Executive Officer and President” and “Executive Compensation – Potential Payments upon Termination or Change in Control.”  The 1999 agreement also provides for the immediate vesting of all options granted to Mr. Rubin if his employment was terminated by the Company without “cause,” if he terminated his employment for “good reason,” including in the event of a change of control, or if his employment was terminated for death or disability.

Under the Revised Agreement, if, during the employment period, Mr. Rubin terminates his employment for “good reason” or the Company terminates his employment without “cause,” in each case other than in connection with a “change in control” (as those terms are defined in the Revised Agreement), then the restrictions on restricted stock, restricted stock units and other stock wards granted to Mr. Rubin prior to the date of termination will be removed (other than the Performance RSUs for which the applicable performance conditions have not been achieved as of the date of termination) and all option awards granted to Mr. Rubin prior to the date of termination will vest.  In addition, he is entitled to $30,000,000 if his employment terminates before February 28, 2013, $20,000,000 if his employment terminates on or after February 28, 2013 but before February 28, 2014 and $15,000,000 if his employment terminates on or after February 28, 2014 but not later than February 28, 2015, payable in cash and/or shares of Common Stock at the Compensation Committee’s discretion.  Mr. Rubin also is entitled to receive certain benefits following a termination of his employment by reason of death or disability or a change of control and termination during the employment period.  These benefits are more fully described under “Executive Compensation – Employment Contract for Chairman of the Board, Chief Executive Officer and President” and “Executive Compensation – Potential Payments upon Termination or Change in Control.”

Because the Revised Agreement does not provide for any retirement benefits for Mr. Rubin following his termination with the Company, the Compensation Committee believes the severance provisions of the Revised Agreement are a competitive compensation element in the current executive labor market. As noted above, the Revised Agreement reduces the potential severance payable to our Chief Executive Officer over the term of the Revised Agreement, with no severance due to Mr. Rubin at the end of the term, because the Compensation Committee wanted to eliminate a pay practice it no longer deemed to be in the best interest of our shareholders. Additionally, the Compensation Committee believes that these revised severance provisions are more beneficial to the Company and its shareholders than having conducted negotiations with Mr. Rubin in the event of his termination under the terms of the 1999 agreement, which included an “evergreen” term.

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The Company’s Compensation Program for Other Named Executive Officers

The Company’s other named executive officers are not party to employment agreements.  As a result, their compensation is reviewed and determined by the Compensation Committee on an annual basis.  The Compensation Committee may also review a named executive officer’s compensation if that executive officer is promoted or experiences a change in responsibilities.

Our other named executive officers report directly to our Chief Executive Officer who supervises the day to day performance of those officers.  Our Chief Executive Officer annually reviews our executive compensation program (other than for himself) and makes compensation recommendations to the Compensation Committee with respect to the named executive officers, among others.  The Compensation Committee strongly considers the recommendations of the Chief Executive Officer in making its decisions and any recommendations to the Board of Directors with respect to non-CEO compensation, incentive compensation plans and equity-based plans that are approved by the Board.  The Compensation Committee has engaged Equilar in order to gain access to its compensation database and uses the database in order to assist the Compensation Committee in evaluating compensation trends and market practice for the non-CEO named executive officers.

Elements of Our Compensation Program for Our Other Named Executive Officers

The principal components of compensation for our other named executive officers are:

·                  Base salary;

·                  Bonuses, including performance-based incentive bonuses;

·                  Long-term equity compensation; and

·                  Other personal benefits.

The Company has no pre-established policy or target for the allocation between either cash and non-cash or short-term and long-term incentive compensation.  Rather, the Compensation Committee reviews the performance of the Company and the individuals and determines the appropriate level and mix of compensation elements.

Base Salary of Our Other Named Executive Officers

The Company provides our other named executive officers with a base salary to provide a fixed amount of compensation for regular services rendered during the fiscal year.  In setting or increasing base salaries, the Compensation Committee strongly considers the recommendations made by our Chief Executive Officer.  In addition, the committee considers each executive’s job responsibilities, qualifications, experience, performance history and length of service with the Company and comparable salaries paid by our competitors.  The Compensation Committee may, in its discretion, change the base salary of other named executive officers based on that named executive officer’s performance.  No change in base salary of either of the other named executive officer was made in fiscal 2012.

Annual Incentive Bonuses for Our Other Named Executive Officers

Performance-based awards are intended to align executives’ interests with our annual corporate goals.  Annual incentive bonuses take into account both individual and corporate performance, including the Company’s earnings.  While the amount of funds available for distribution as bonuses varies with Company earnings, the actual amount that may be distributed is subjectively determined each year considering recommendations made by our Chief Executive Officer and reviewed by the Compensation Committee.

For fiscal 2012, the Chief Executive Officer established an annual incentive target for each of Messrs. Benson and Carson, which is expressed as a percentage of the executive’s base salary paid during fiscal 2012.  For fiscal 2012, the annual incentive target was set at 30% for Messrs. Benson and Carson.  As a result, Mr. Benson was eligible to receive up to $123,000 related to this bonus, and Mr. Carson was eligible to receive up to $82,500.  After the end of fiscal 2012, the Chief Executive Officer reviewed the Company’s financial results and condition and the executive officer’s individual performance for fiscal 2012.  No specific weights were applied to any factor.  The Chief Executive Officer noted that the Company performed admirably in fiscal 2012, despite a challenging environment. This was evidenced by, among other things, record sales revenue of approximately $1.18 billion and record net income of approximately $110.4 million. As a result of this analysis and considering the individual performance of these executive officers, the annual incentive award percentage payout for Messrs. Benson and Carson was 100% of their target annual incentive opportunity.  These bonuses were reviewed and approved by the Compensation Committee.

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Although incentive bonuses are primarily based on individual and corporate performance, in some circumstances the Compensation Committee may provide additional discretionary bonus awards.  The Compensation Committee believes that discretionary bonuses, where warranted, can be effective in motivating, rewarding and retaining our executive officers.  In fiscal 2012 a holiday bonus of $2,500 was awarded to Mr. Benson and Mr. Carson.  The remainder of Messrs. Benson’s and Carson’s bonuses for fiscal 2012 was discretionary and recommended by the Chief Executive Officer in recognition of the Company’s financial performance and the significant efforts of Messrs. Benson and Carson in connection with their substantial work on achievements of the Company in fiscal 2012. Mr. Benson received a discretionary bonus of $161,500 for his efforts related to the acquisition of the PUR water filtration business, the integration initiatives related to Kaz, Inc. and the upgrading of the Company’s Enterprise Resource System. Mr. Carson received a discretionary bonus of $75,000 for his efforts related to the acquisition of the PUR water filtration business.

Long-Term Equity Compensation for Our Other Named Executive Officers

At the 2008 annual general meeting of shareholders, the Company’s shareholders approved the 2008 Stock Plan, which the Company uses to grant equity awards to its named executive officers and to key employees.  Equity-based compensation and ownership give these individuals a continuing stake in the long-term success of the Company, and the delayed vesting of stock options helps to encourage retention.  The Compensation Committee and the Board of Directors believe that the executive officers and key employees of the Company should be rewarded for earnings performance that may result from their efforts and believe this should be accomplished, in part, by awarding equity compensation to these individuals, which increase their stake in the Company’s long-term success and further align their interests with those of shareholders.  For more information regarding the Company’s long-term equity compensation, see “Executive Compensation – Equity Compensation Plan Information.”

At the 2008 annual general meeting of shareholders, the Company’s shareholders also approved the 2008 Employee Stock Purchase Plan (the “2008 ESPP”). All employees that own less than five percent of the total combined voting power or value of all classes of stock of the Company or any of its subsidiaries are eligible to participate in the 2008 ESPP, including the named executive officers.  During fiscal 2012, Thomas J. Benson, one of our named executive officers, participated in the 2008 ESPP.  Under the plan, employees are entitled to purchase shares of the Company’s Common Stock at a discount to market value.  The purchase price is 85 percent of the closing sale price of the Common Stock on NASDAQ on either the first day or last day of each option period, whichever is less.  As of February 29, 2012, 239,269 shares remain available for issuance under the 2008 ESPP.  For an additional discussion of the material terms of the 2008 ESPP, see “Executive Compensation – Equity Compensation Plan Information - Employee Stock Purchase Plan.”

Other Benefits Provided for Our Other Named Executive Officers

We provide other benefits to the named executive officers, such as participation in a 401(k) plan, including matching contributions, group medical, group life and group dental insurance, as well as vacation and paid holidays.  These benefits are available to all our employees, including each named executive officer, and we believe they are comparable to those provided at other companies.

Equity Grant Practices

Grants of stock options are made without regard to anticipated earnings or other material announcements by the Company.  Under the 2008 Stock Plan, the exercise price of stock options granted under the plan may not be less than the closing price of our Common Stock on NASDAQ on the date of the grant.  The vesting period of options for other named executive officers has historically been over a five year period at the graduated rate per year of 10, 15, 20, 25, and 30 percent.  The Compensation Committee believes that these vesting terms encourage retention of our executive officers.  The Compensation Committee may, however, adjust the vesting of options as it deems necessary under the circumstances.  Our Compensation Committee normally determines any annual grants of stock options to other named executive officers and employees on the next business day following the filing of the Company’s annual report on Form 10-K. The Board of Directors has not adopted stock ownership guidelines for our Chief Executive Officer principally because the Chief Executive Officer is a founder of the Company and has been one of the largest beneficial owners of Common Stock since the Company’s inception.

Tax Implications of Executive Compensation

Section 162(m) of the Code places a limit of $1,000,000 on the amount of compensation that a company may deduct in any one year with respect to its principal executive officer and each of its other three most highly paid executive officers other than the Chief Financial Officer.  There is an exception to the $1,000,000 limitation for performance-based compensation that meets certain requirements.  Annual cash incentive compensation and stock option awards are generally forms of performance-based compensation that meet those requirements and, as such, are fully deductible.

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Grants of stock options to our named executive officers under our 2008 Stock Plan and the grant of the Performance RSUs are intended to comply with Section 162(m) for treatment as performance-based compensation.  Therefore, we expect to be able to deduct compensation of our named executive officers related to compensation under each of these plans.  Mr. Rubin will receive the Performance RSUs that vest on a graduated basis if certain performance conditions are achieved.

The incentive cash bonus payments to our Chief Executive Officer under the 1997 Bonus Plan and the 2011 Bonus Plan are intended to be designed to comply with Section 162(m) for treatment as performance based compensation.  Section 162(m) allows companies to deduct, for federal income tax purposes, certain performance-based compensation over $1,000,000.  The material terms of the pre-established performance goals for the awards under the 1997 Bonus Plan and the 2011 Bonus Plan must be approved by the shareholders every five years in order for the Company to be eligible to deduct for tax purposes the incentive awards paid under those plans.  The Company’s shareholders last approved the terms of the performance goals under the 1997 Bonus Plan at the 2008 annual general meeting. The Company’s shareholders approved the terms of the 2011 Bonus Plan at the 2011 annual general meeting.

The Compensation Committee has considered and will continue to consider tax deductibility in structuring compensation arrangements.  However, the Compensation Committee retains discretion to establish executive compensation arrangements that it believes are consistent with the principles described earlier and in the best interests of our Company and its shareholders, even if those arrangements may not be fully deductible under Section 162(m).

EXECUTIVE COMPENSATION

The following table sets forth the summary of compensation earned during fiscal 2010 through fiscal 2012 by the Company’s Chief Executive Officer, Chief Financial Officer and one other executive officer whose total compensation exceeded $100,000 and who was serving as an executive officer at the end of the fiscal 2012 (such persons referred to collectively, as the “named executive officers”).