STEINER LEISURE LIMITED - Steiner Leisure Ltd.

Compensation PhilosophyThe Compensation Committee believes that the Company's goal of maximizing shareholder value dependsto a significant extent on the Company's ability to attract and retain qualified executive officers. In order to do so,the Compensation Committee believes that the Company is required to offer attractive compensation packages.The Compensation Committee also believes that shareholder value is enhanced by aligning the interests ofits executive officers with the interests of its shareholders. In the opinion of the Compensation Committee, thecompensation arrangements for the named executives and other executive officers of the Company promote such analignment of interests by offering (i) non-equity incentive compensation in the form of cash bonuses tied to specifiedCompany and business unit performance targets and (ii) the opportunity to receive equity awards under the EquityPlan, including equity incentive awards tied to specified Company and business unit performance targets.These forms of at-risk incentive compensation opportunities represent a very significant portion of the totalcompensation to the executive officers of the Company and are linked directly to the Company's performance.Total compensation is targeted with a mix of both cash and equity-based compensation. The CompensationCommittee chooses cash compensation to be competitive for recruitment and retention of top talent. TheCompensation Committee chooses equity-based compensation for similar reasons, but also to create a linkagebetween shareholder reward and executive reward. The committee believes that the portion of equity-basedcompensation, vesting over three years, creates this linkage. This is especially true viewed over successive years; atany given time, zero, two-thirds or one-third of shares awarded, as the case may be, are not yet vested. The relativeamounts of each element are based on input from the Compensation Committee’s independent compensation advisorand the collective judgment of the Compensation Committee.The Compensation Committee further believes that an executive officer's total compensation opportunityshould be commensurate with position and responsibility. Accordingly, the proportion of total compensationattributable to variable, at-risk elements increases with successively higher levels of responsibility at the Company.Thus, the most senior executive officers of the Company who are responsible for the development and execution ofthe Company's strategic plans have the largest portion of their compensation tied to variable incentives, includingequity-based compensation, in which ultimate value is dependent on changes that impact shareholder value.The determination of the target amount of equity awards for each of the named executives for 2007 wasbased on taking the total amount of targeted compensation (i.e., the compensation payable if all of the performancetargets applicable to incentive awards are achieved) for such individual that was deemed appropriate by theCompensation Committee and subtracting from that amount the proposed base salary and targeted short-termincentive compensation. The aggregate value of the two equity award components was intended to equal theremainder from that subtraction.Components of Compensation - OverviewThe Company's compensation program for its executive officers consists of four components: base salary,non-equity incentive compensation in the form of cash bonuses, awards of restricted shares and performance shares(through January 2006, equity awards included share options) under the Equity Plan, and various employee benefits(including, among other things, automobile allowances, medical and disability insurance and 401(k) plan benefits).The program places a significant percentage of the Company's executive officers' compensation at risk, rewardingthe executives if the performance of the Company warrants such a reward and, accordingly, encouraging thebuilding of shareholder value.Categories of Named Executives' CompensationThe Compensation Committee views the general parameters of compensation for the named executives inthree categories. The first compensation category is for the Chief Executive Officer. This category reflects theoverall responsibilities of the senior executive officer of the Company and the applicable compensation isdetermined accordingly.Bowne ID # g12968-5.pdf 17 May 2, 2008 12:16:2913