STEINER LEISURE LIMITED - Steiner Leisure Ltd.

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Glenn Fusfield, one report with respect to one transaction; and Clive Warshaw, one report with respect to onetransaction (indirect ownership – restricted share award to wife).CERTAIN TRANSACTIONSThe Audit Committee of the board of directors is responsible for review and approval of transactionsbetween the Company or its subsidiaries, and related parties. For this purpose, a "related party" is any officer,director, nominee for director, 5% shareholder or any employee (other than, for employees who are not directors orexecutive officers, where the amount of the transaction does not exceed $50,000 ("Other Employee Transactions"))of the Company and their immediate family members.The Audit Committee has adopted the above policy in writing. Pursuant to the Audit Committee'sdirection, the Company has also adopted a written policy setting forth procedures related to approval by seniormanagement of Other Employee Transactions.To the extent practicable, related party transactions are presented to the Audit Committee prior to theirconsummation. When reviewing and evaluating a related party transaction, the Audit Committee may consider,among other things, any effect a transaction may have upon a director's independence, whether the transactioninvolves terms and conditions that are no less favorable to the Company than those that could be obtained in atransaction between the Company and an unrelated third party and the nature of the related party's involvement inthe transaction. Management will notify the Audit Committee not less frequently than quarterly of new related partytransactions of which they are aware and any material changes to any previously approved, conditionally approvedor ratified related party transactions. The Company has adopted procedures to implement the foregoing policies.United Kingdom LeaseEffective June 24, 2000, Elemis entered into a 20-year lease with Harrow Weald Limited ("HWL"),whereby Elemis leases approximately 12,500 square feet of space in the London borough of Harrow used for theoperations of Elemis and the Company's United Kingdom training operations (the "Lease"). HWL is an entity ownedby the children of Clive E. Warshaw and Michèle Steiner Warshaw. The annual rent is subject to increase after thefifth, tenth and 15th years of the Lease term based on market conditions. In addition to other obligations of Elemisunder the Lease, rent payments totaled approximately $319,570 for 2007, based on the average British PoundsSterling to U.S. Dollar exchange rate in effect for that year. For the first five years of the Lease term, the rentreflected the agreement of HWL to reduce by 50% the annual rent. The second five-year term commenced in June2005. In addition to the end of the 50% rent reduction in June 2005, rent was adjusted at that time as required underthe terms of the Lease using the changes in a United Kingdom retail price index as the guideline, as approved by theAudit Committee. For 2008, the total rent will be approximately $315,230, based on the British Pounds Sterling toU.S. Dollar exchange rate in effect on April 10, 2008. The Company believes that the terms of the Lease are no lessfavorable to the Company than would have been obtained from an unrelated party.Compensation of Robert SchaverienRobert Schaverien serves as the Managing Director of Steiner Training Limited ("Training"), a UnitedKingdom subsidiary of the Company responsible for the training of shipboard employees. Mr. Schaverien is the sonin-lawof Clive E. Warshaw and Michèle Steiner Warshaw. For 2007, Mr. Schaverien received a salary ofapproximately $220,480, a bonus of approximately $152,966, an automobile allowance of approximately $22,691and the following other benefits and perquisites in the approximate aggregate amount of $4,156: payment of medicaland dental insurance premiums, reimbursement for home Internet line charges and samples of Company products.The dollar amounts for the perquisites and personal benefits described above for Mr. Schaverien and, whereapplicable, for Ms. Warshaw, below, were determined as described in note (3) to the "Summary CompensationTable," above, under "Executive Compensation."In December 2007, Mr. Schaverien was granted, as part of the annual equity award to executive officersand certain other employees of the Company, (i) 1,039 restricted shares that vest equally over three years, and whichhave a grant date fair value of $43,472 and (ii) 2,853 restricted shares that vest equally on each of March 3, 2009,December 4, 2009 and December 4, 2010 (provided that certain specified performance targets are met for 2008) andwhich have a grant date fair value of $119,370.32Bowne ID # g12968-5.pdf 36 May 2, 2008 12:16:32
The grant date fair value for each of these awards is the dollar amount recognized by the Company forfinancial statement reporting purposes for 2007 in accordance with FAS 123R (excluding forfeiture estimates). Themethodologies and assumptions utilized in the valuation of these equity awards are set forth in Note 2(n) to theConsolidated Financial Statements of Steiner Leisure Limited and its Subsidiaries, contained in the Company'sAnnual Report on Form 10-K for the year ended December 31, 2007.The Company and Mr. Schaverien have entered into an employment agreement that expires onDecember 31, 2009. That agreement provides for the payment of an annual base salary of not less thanapproximately $208,840 and a bonus comprised of three components for 2008, described below. Under the firstcomponent, Mr. Schaverien is entitled to receive a bonus of 15% of his base salary upon the attainment by Trainingof 90% of its budgeted operating income (subject to a specified adjustment) for the year in question, as approved bythe Compensation Committee, and additional bonuses based on Training’s exceeding that 90% threshold, up to amaximum bonus of 60% of base salary. For 2007, the above bonus component was based on the net income ofTraining. Under the second component, Mr. Schaverien is entitled to receive a bonus of five percent of his basesalary upon the attainment of 90% of the budgeted earnings per share of the Company, as approved by theCompensation Committee, for the year in question and additional bonuses based on the Company's exceeding that90% threshold, including exceeding its budgeted earnings per share. For 2007, the performance target was the sameas for 2008. Under the third component, Mr. Schaverien is entitled to receive an amount equal to five percent of hisbase salary upon the attainment of 90% of the budgeted net revenue of the Company's Maritime Division for theyear in question, as approved by the Compensation Committee, and additional bonuses based on that division’sexceeding that 90% threshold, including exceeding its budgeted net revenue. For 2007, the performance measurewas budgeted net income of the Maritime Division and the threshold amount of the bonus was 15% of base salary.The balance of Mr. Schaverien’s agreement has terms that are the same or similar to those of theemployment agreements in effect for the named executives. For 2008, Mr. Schaverien will receive a base salary ofapproximately $250,113 and other benefits similar to those described above.The compensation amounts for 2007 and for the employment agreement are based on the average BritishPounds Sterling to U.S. Dollar exchange rate for 2007. The compensation amount for 2008 and the minimum basesalary amount are based on the British Pounds Sterling to U.S. Dollar exchange rate on April 10, 2008. Because heis an executive officer of the Company, the compensation payable to Mr. Schaverien (including the targets uponwhich his bonus is based) is required to be approved by the Compensation Committee of the board of directors inaddition to the Audit Committee.Compensation of Patty FluxmanSince June 11, 2006, Patty Fluxman, the wife of Leonard I. Fluxman, President and Chief ExecutiveOfficer and a director of the Company, has served, pursuant to a two-year agreement with the Company approved bythe Audit Committee, as Senior Human Resources Specialist for the Company’s Steiner Management Services LLCsubsidiary. In that capacity, she receives an annual salary of $103,500 and is not entitled to any other compensationfrom the Company. Under her agreement with the Company, Ms. Fluxman coordinates the Company's equity awardprograms and otherwise provides assistance with respect to human resources matters as requested from time to timeby the Chief Financial Officer of the Company.Compensation of Michèle Steiner WarshawMichèle Steiner Warshaw serves as Executive Vice President of the Company's Cosmetics Limitedsubsidiary. That subsidiary owns rights with respect to a number of products sold by the Company. Ms. Warshaw isa member of the board of directors of the Company and is the wife of Clive E. Warshaw. Pursuant to a five-yearemployment agreement with the Company effective January 1, 2007, Ms. Warshaw is entitled to receive a basesalary of $80,000, a fee of $1,500 for each meeting of the board of directors and a committee thereof (where invitedby that committee) attended and an annual award under the Equity Plan of restricted shares of the Company in anamount determined by dividing $50,000 by the closing price of the Company’s common shares on the date of suchaward.This agreement also provides for a payment of one year’s base salary to Ms. Warshaw in the event sheterminates the agreement after a material breach thereof or reduction in compensation or benefits by the Company, a33Bowne ID # g12968-5.pdf 37 May 2, 2008 12:16:32
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STEINER LEISURE LIMITED - Steiner Leisure Ltd.

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