STEINER LEISURE LIMITED - Steiner Leisure Ltd.

compensation information determined from an analysis of those databases was adjusted to reflect the difference inthe revenues of the Company as compared to those companies. The committee has determined that, due to the variednature and multitude of the companies on which the Consultant relied in its analysis, it would not be materiallyuseful or practicable to include a list of those companies in this discussion.Components of Compensation - AnalysisBase Salary. Base salary is subject to the "floor" established in the employment agreements for eachnamed executive with such an agreement (the salary in effect as of the effective date of the agreement). As part ofthe Compensation Committee's determination of overall compensation for the named executives, consideration isgiven to percentage increases in base salaries.Overall, salary targets for the named executives and other executive officers are set based on theCompany's budgets for the upcoming year (which budgets are required to be approved by the CompensationCommittee to the extent they affect compensation of executive officers). Typically, there is a general percentageincrease in base salary for all the named executives, with individual variances based on relative performance (merit)or the need to bring the base salary of one or more individuals to peer levels.For 2007, the percentage increase was 6.0% for Mr. Fluxman and 7.5% for the other named executives.This was part of the total compensation package for the year and was intended to bring their total compensation intoline with what the Compensation Committee deemed appropriate in light of the advice of the Consultant. The largerincrease in base salary for the named executives other than Mr. Fluxman reflected the recommendation of Mr.Fluxman that those executives be recognized for the Company's strong performance in 2006.Short-term Incentive Compensation. In addition to base salary, the employment agreements for the namedexecutives provide them with the opportunity to earn additional cash compensation if the annual Company and, inthe case of Messrs. Fusfield and Harrington, annual business unit, targets are met or exceeded. The types ofperformance targets for, and the threshold, target and maximum amounts of, these awards are established in theemployment agreements for the named executives, where applicable, and for Mr. Harrington, for 2007, by theCompensation Committee. These awards are mathematically interpolated between threshold and maximum amountsand, in general, no positive or negative discretion is applicable to the award determination.The Company-wide performance measure for non-equity incentive compensation awards is the earningsper share of the Company. For Messrs. Fluxman, Boehm and Lazarus, the performance target for receipt of nonequityincentive compensation is the achievement of the budgeted earnings per share of the Company for the year inquestion. The Committee believes that the targeted earnings per share budgeted for 2007 was an appropriateperformance target in light of the challenges to achieve the growth reflected in that amount in all of the Company'sbusiness units, including the significant budgeted growth in some of the Company's business units.For Messrs. Fusfield and Harrington, that performance target also is a basis for the receipt of non-equityincentive compensation, but that performance target only constituted, for 2007, 15% and 20%, respectively of thetarget bonus for each of those individuals. The balance of the performance targets for the non-equity incentivecompensation for Messrs. Fusfield and Harrington were based on the net income of the operating units which theylead. For Mr. Fusfield, those operating units were the Company's Maritime Division, upon which most of hispotential short-term incentive compensation was based, and the Company's day spa in Coral Gables, Florida (the"Day Spa"), upon which a small portion of such potential compensation was based. For Mr. Harrington, theoperating units were those conducting operations of the Company relating to its Elemis Limited subsidiary.The committee believes that the net income performance target amount for the Maritime Divisionrepresented a challenging performance target because, among other things, it reflected a budgeted increase in growthfor that division, notwithstanding the fact that commission payments under agreements with cruise lines, thedivision's principal cost element, was scheduled to increase for 2007.The committee believes that the amount of the Day Spa performance target was appropriate in light of thechallenges to achieving that target in light of the competition, increasing costs and other factors affecting thatbusiness. For 2007, the budgeted net income target for those operations was not achieved.Bowne ID # g12968-5.pdf 19 May 2, 2008 12:16:2915