SECURITIES AND EXCHANGE COMMISSION

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cq4yW64ljYwEKwnFUT5Ddoux7qKzOMHZwm7bZtl6GTqCefvyEwJUHAlZpSLHKZib gbkUMNhIwKmhS3UM/s9/aw== 0001018946-03-000076.txt : 20030515 0001018946-03-000076.hdr.sgml : 20030515 20030515173543 ACCESSION NUMBER: 0001018946-03-000076 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEINER LEISURE LTD CENTRAL INDEX KEY: 0001018946 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PERSONAL SERVICES [7200] IRS NUMBER: 980164731 STATE OF INCORPORATION: C5 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28972 FILM NUMBER: 03706284 BUSINESS ADDRESS: STREET 1: 770 SOUTH DIXIE HWY. CITY: CORAL GABLES STATE: FL ZIP: 33146 BUSINESS PHONE: 3053589002 MAIL ADDRESS: STREET 1: STE 104A STREET 2: SAFFREY SQ CITY: NASSAU STATE: C5 ZIP: 00000 10-Q 1 stnr1q10q2003.htm SECURITIES AND EXCHANGE COMMISSION



SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549


FORM 10-Q
(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from			_____________	To ______________


STEINER LEISURE LIMITED (Exact name of Registrant as Specified in its Charter)

Commission File Number: 0-28972

	Commonwealth of The Bahamas				98-0164731
(State or other jurisdiction of incorporation or organization)					(I.R.S. Employer Identification No.)

		Suite 104A, Saffrey Square
		Nassau, The Bahamas			Not Applicable
		(Address of principal executive offices)			(Zip Code)

(242) 356-0006 (Registrant's telephone number, including area code)


			(Former name , former address and former fiscal year, if changed since last report)

Indicate by check 4 whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [4 ] Yes [ ] No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). [4 ] Yes [ ] No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class				Outstanding
Common Shares, par value (U.S.) $.01 per share				16,388,253, which excludes 1,866,406 treasury shares as of May 7, 2003

STEINER LEISURE LIMITED

INDEX

PART I. FINANCIAL INFORMATION		Page No.

ITEM 1.	Unaudited Financial Statements

	Condensed Consolidated Balance Sheets as of December 31, 2002 and March 31, 2003		3

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2002 and 2003		4

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2003		5

	Notes to Condensed Consolidated Financial Statements		7

ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		14

ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk		22

ITEM 4.	Controls and Procedures		23

PART II. OTHER INFORMATION

ITEM 2.	Changes in Securities and Use of Proceeds		24

ITEM 6.	Exhibits and Reports on Form 8-K		24

SIGNATURES AND CERTIFICATIONS			25

PART I. - FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31,			March 31,
	2002			2003
ASSETS					(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	15,175,000		$	13,961,000
Accounts receivable, net		12,348,000			10,321,000
Accounts receivable - students, net		4,481,000			4,664,000
Inventories		16,637,000			15,601,000
Assets held for sale		322,000			995,000
Other current assets		6,210,000			6,213,000
Total current assets		55,173,000			51,755,000
PROPERTY AND EQUIPMENT, net		49,087,000			49,082,000
GOODWILL, net		46,340,000			46,340,000
OTHER ASSETS:
Intangible assets, net		5,980,000			5,855,000
Deferred financing costs, net		1,083,000			1,130,000
Other		1,948,000			2,033,000
Total other assets		9,011,000			9,018,000
Total assets	$	159,611,000		$	156,195,000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	7,981,000		$	5,371,000
Accrued expenses		15,524,000			13,523,000
Current portion of long-term debt		14,528,000			17,660,000
Liabilities related to assets held for sale		8,378,000			7,310,000
Current portion of deferred tuition revenue		5,286,000			5,644,000
Gift certificate liability		542,000			555,000
Income taxes payable		2,017,000			1,967,000
Total current liabilities		54,256,000			52,030,000
LONG-TERM DEBT, net of current portion		27,713,000			23,196,000
LONG-TERM DEFERRED RENT		1,050,000			998,000
LONG-TERM DEFERRED TUITION REVENUE		96,000			102,000
MINORITY INTEREST		50,000			49,000
SHAREHOLDERS' EQUITY:
Preferred shares, $.0l par value; 10,000,000 shares authorized, none
issued and outstanding		--			--
Common shares, $.0l par value; 100,000,000 shares authorized,
18,248,000 shares issued in 2002 and 18,255,000 shares issued
in 2003		182,000			183,000
Additional paid-in capital		39,701,000			39,799,000
Accumulated other comprehensive income		614,000			526,000
Retained earnings		65,320,000			68,683,000
Treasury shares, at cost, 1,866,000 shares in 2002 and 2003		(29,371,000	)		(29,371,000	)
Total shareholders' equity		76,446,000			79,820,000
Total liabilities and shareholders' equity	$	159,611,000		$	156,195,000

The accompanying notes to condensed consolidated financial statements are an integral part of these balance sheets.

STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2003

(Unaudited)

	Three Months Ended
	March 31,
	2002				2003
REVENUES: REVENUES:
Services		$	39,971,000			$	45,875,000
Products			17,866,000				19,290,000
Total revenues			57,837,000				65,165,000
COST OF REVENUES:
Cost of services			31,202,000				36,732,000
Cost of products			13,403,000				14,468,000
Total cost of revenues			44,605,000				51,200,000
Gross profit			13,232,000				13,965,000
OPERATING EXPENSES:
Administrative			3,048,000				3,368,000
Salary and payroll taxes			3,483,000				4,220,000
Total operating expenses			6,531,000				7,588,000
Income from operations			6,701,000				6,377,000
OTHER INCOME (EXPENSE):
Interest expense			(901,000	)			(967,000	)
Other income			77,000				13,000
Total other income (expense)			(824,000	)			(954,000	)
Income from continuing operations before provision for income taxes, minority interest and equity investment			5,877,000				5,423,000
PROVISION FOR INCOME TAXES			175,000				333,000
Income from continuing operations before minority interest and equity investment			5,702,000				5,090,000
MINORITY INTEREST			(507,000	)			2,000
INCOME IN EQUITY INVESTMENT			79,000				102,000
Income from continuing operations before discontinued operations and cumulative effect of a change in accounting principle			5,274,000				5,194,000
LOSS FROM DISCONTINUED OPERATIONS (which includes loss on disposal in 2003 of $833,000), net of taxes			(2,763,000	)			(1,831,000	)
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE, net of taxes			(29,644,000	)			- --
Net income (loss)		$	(27,133,000	)		$	3,363,000
Income (loss) per share-basic:
Income before discontinued operations and cumulative effect of a change in accounting principle		$	0.33			$	0.32
Loss from discontinued operations			(0.18	)			(0.11	)
Cumulative effect of a change in accounting principle			(1.87	)			--
		$	(1.72	)		$	0.21
Income (loss) per share-diluted:
Income before discontinued operations and cumulative effect of a change in accounting principle		$	0.32			$	0.32
Loss from discontinued operations			(0.17	)			(0.12	)
Cumulative effect of a change in accounting principle			(1.80	)			--
		$	(1.65	)		$	0.20

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2003

(Unaudited)

	Three Months Ended
	March 31,
	2002			2003
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS:
Net income (loss)	$	(27,133,000	)	$	3,363,000
Loss from discontinued operations		2,763,000			998,000
Loss on disposal of discontinued operations		-			833,000
Cumulative effect of a change in accounting principle		29,644,000			--
Income from continuing operations		5,274,000			5,194,000
Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations:
Depreciation and amortization		1,561,000			1,770,000
Provision for doubtful accounts		305,000			60,000
Minority interest		507,000			(2,000	)
Income in equity investment		(79,000	)		(102,000	)
(Increase) decrease in:
Accounts receivable		495,000			1,724,000
Inventories		356,000			886,000
Other current assets		(1,541,000	)		(14,000	)
Other assets		(118,000	)		19,000
Increase (decrease) in:
Accounts payable		(1,762,000	)		(2,565,000	)
Accrued expenses		388,000			(1,887,000	)
Income taxes payable		(188,000	)		(45,000	)
Deferred tuition revenue		(771,000	)		364,000
Gift certificate liability		(196,000	)		13,000
Net cash provided by operating activities of continuing operations		4,231,000			5,415,000
CASH FLOWS FROM INVESTING ACTIVITIES OF CONTINUING OPERATIONS:
Proceeds from maturities of marketable securities		515,000			--
Capital expenditures		(3,203,000	)		(1,337,000	)
Net cash used in investing activities of continuing operations		(2,688,000	)		(1,337,000	)

(Continued)

STEINER LEISURE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2003

(Unaudited)

	Three Months Ended
	March 31,
	2002			2003
CASH FLOWS FROM FINANCING ACTIVITIES OF CONTINUING OPERATIONS:
Proceeds from long-term debt	$	6,296,000		$	--
Payments on long-term debt		(2,892,000	)		(1,385,000	)
Debt issuance costs		(108,000	)		(277,000	)
Proceeds from share option exercises		1,624,000			--
Net cash (used in) provided by financing activities of continuing operations		4,920,000			(1,662,000	)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH		(65,000	)		31,000
NET CASH USED IN DISCONTINUED OPERATIONS		(2,803,000	)		(3,661,000	)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS		3,595,000			(1,214,000	)
CASH AND CASH EQUIVALENTS,
Beginning of year		10,242,000			15,175,000
CASH AND CASH EQUIVALENTS,
End of year	$	13,837,000		$	13,961,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	891,000		$	634,000

Income taxes	$	136,000		$	580,000

The accompanying notes to consolidated financial statements are an integral part of these statements.

STEINER LEISURE LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)

BASIS OF PRESENTATION OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

The unaudited condensed consolidated statements of operations of Steiner Leisure Limited ("Steiner Leisure" or the "Company") for the three months ended March 31, 2002 and 2003 reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly present the results of operations for these interim periods. The results of operations for any interim period are not necessarily indicative of results for the full year.

The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002 and the Company's other filings with the SEC.

(2)

ORGANIZATION:

Steiner Leisure Limited (including its subsidiaries where the context requires, the "Company") is a worldwide provider of spa services. The Company, incorporated in the Bahamas, commenced operations effective November 1995 with the contributions of substantially all of the assets and certain of the liabilities of the Maritime Division (the "Maritime Division") of Steiner Group Limited, now known as STGR Limited ("Steiner Group"), a U.K. company and an affiliate of the Company, and all of the outstanding common stock of Coiffeur Transocean (Overseas), Inc. ("CTO"), a Florida corporation and a wholly owned subsidiary of Steiner Group. These operations consisted almost entirely of offering spa services and products on cruise ships. The contributions of the net assets of the Maritime Division and CTO were recorded at historical cost in a manner similar to a pooling of interests.

On July 3, 2001, the Company purchased a 60% equity interest of each of Mandara Spa LLC ("Mandara US") and Mandara Spa Asia Limited ("Mandara Asia" and (collectively with Mandara US, "Mandara Spa"). During 2002, the Company acquired the balance of the equity interests in Mandara Spa. Mandara Spa operates spas principally in the United States, the Caribbean, the Pacific and Asia. Mandara Spa also provides spa services for Norwegian Cruise Line, Orient Lines and Silverseas Cruises.

(3)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(a)

Inventories

Inventories, consisting principally of beauty products, are stated at the lower of cost (first-in, first-out) or market. Manufactured finished goods include the cost of raw material, labor and overhead. Inventories consist of the following:

		December 31,		March 31,
		2002		2003
Finished Goods	$	12,602,000	$	12,169,000
Raw Materials		4,035,000		3,432,000
	$	16,637,000	$	15,601,000

(b)

Goodwill

Pursuant to Statement of Financial Accounting Standards Board Statement ("SFAS") No. 142, "Goodwill and Other Intangible Assets," goodwill is subject to at least an annual assessment for impairment by applying a fair value-based test. The impairment loss is the amount, if any, by which the implied fair value of goodwill is less than the carrying or book value. Impairment loss for goodwill arising from the initial application of SFAS 142 is to be reported as resulting from a change in accounting principle. The Company adopted SFAS 142 on January 1, 2002. During the second quarter of 2002, the Company completed its assessment of its intangible assets and wrote off $29.6 million of intangible assets. These intangibles primarily consisted of goodwill related to our July 2001 acquisitions of the Greenhouse Day Spa and C.Spa chains. The write-off has been accounted for as a cumulative effect of a change in accounting principle and has been recorded effective January 1, 2002.

(c)

Income Taxes

The Company files a consolidated tax return for its domestic subsidiaries. In addition, the Company's foreign subsidiaries file income tax returns in their respective countries of incorporation, where required. The Company follows SFAS 109, "Accounting for Income Taxes." SFAS 109 utilizes the liability method and deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of enacted tax laws. SFAS 109 permits the recognition of deferred tax assets. Deferred income tax provisions and benefits are based on the changes to the asset or liability from period to period. For any partnership interest (including limited liability companies), the Company records its allocable share of income, gains, losses, deductions and credits of the partnership.

(d)

Translation of Foreign Currencies

Assets and liabilities of foreign subsidiaries are translated at the rate of exchange in effect at the balance sheet date; income and expenses are translated at the average rates of exchange prevailing during the year. The related translation adjustments are reflected in the accumulated other comprehensive income (loss) in the condensed consolidated balance sheets. Foreign currency gains and losses resulting from transactions, including intercompany transactions, are included in the condensed consolidated statements of operations. The majority of the Company's income is generated outside of the United States. The transaction gains (losses) reflected in administrative expenses were approximately $107,000 and $(27,000) for the three months ended March 31, 2002 and 2003, respectively.

(e)

Earnings Per Share

Basic earnings per share is computed by dividing the net income available to shareholders by the weighted average number of outstanding common shares. The calculation of diluted earnings per share is similar to that of basic earnings per share, except that the denominator includes dilutive common share equivalents such as share options. The computation of weighted average common and common equivalent shares used in the calculation of basic and diluted earnings per share is as follows:

Three Months Ended
March 31,

	2002	2003
Weighted average shares outstanding used in
calculating basic earnings per share	15,815,000	16,386,000
Dilutive common share equivalents	674,000	84,000
Weighted average common and common equivalent
shares used in calculating diluted earnings per share	16,489,000	16,470,000
Options outstanding which are not included in the
calculation of diluted earnings per share because
their impact is anti-dilutive	1,339,000	3,770,000

(f)

Stock-Based Compensation

The Company follows the provisions of SFAS 123, "Accounting for Stock-Based Compensation," in accounting for stock-based transactions with non-employees and, accordingly, records compensation expense in the consolidated statements of operations for such transactions. The Company continues to apply the provisions of Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and related interpretations for stock-based transactions with employees, as permitted by SFAS 123.

The Company applies APB 25 and related interpretations in accounting for options granted to employees. Accordingly, no compensation cost has been recognized related to such grants. Had compensation cost for the Company's shares been based on fair value at the grant dates for awards under the Company's option plan consistent with the methodologies of SFAS 123, the Company's three months ended March 31, 2002 and 2003 net income (loss) and diluted earnings per share would have been reduced/increased to the pro forma amounts indicated below:

			Three Months Ended
			March 31,
			2002			2003
Compensation expense	As reported	$	-		$	-
	Pro forma		2,654,000			2,172,000
Net income (loss)	As reported		(27,133,000	)		3,363,000
	Pro forma		(29,787,000	)		1,191,000
Basic earnings per share	As reported		(1.72	)		0.21
	Pro forma		(1.88	)		0.07
Diluted earnings per share	As reported		(1.65	)		0.20
	Pro forma		(1.81	)		0.07

The fair value of each option grant is estimated on the date of grant using the Black-Scholes model with the following assumptions: expected volatility of 60.5%, and 59.3% for the three months ended March 31, 2002 and 2003, respectively, risk-free interest rate of 6.0%, no dividends and expected term of 6.5 years.

(g)

Recent Accounting Pronouncements

In June 2001, Financial Accounting Standards Board ("FASB") issued SFAS 143, "Accounting for Asset Retirement Obligations." SFAS 143 applies to legal obligations associated with the retirement of long-lived assets that result from acquisition, construction, development and/or the normal operation of a long-lived asset. SFAS 143 is effective for financial statements for fiscal years beginning after June 15, 2002. The Company adopted this statement in the first quarter of 2003. The adoption of this statement did not have a material impact on the Company's financial position or results of operations.

In June 2002, FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity Including Certain Costs Incurred in a Restructuring." The principal difference between SFAS 146 and EITF 94-3 relates to SFAS 146's requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost was recognized at the date of an entity's commitment to an exit plan. A fundamental conclusion reached by FASB in this statement is that an entity's commitment to a plan, by itself, does not create an obligation that meet s the definition of a liability. Therefore, this statement eliminates the definition and requirements for recognition of exit costs in EITF 94-3. This statement also establishes that fair value is the objective for initial measurement of the liability. The effective date of the new statement is January 1, 2003, with earlier adoption encouraged. In connection with its discontinued day spa operations, the Company early adopted SFAS 146 in 2002.

In January 2003, the FASB Issued Interpretation ("FIN") No. 46, "Consolidation of Variable Interest Entities." FIN 46 requires an investor with a majority of the variable interests in a variable interest entity to consolidate the entity and also requires majority and significant variable interest investors to provide certain disclosures. A variable interest entity is an entity in which the equity investors do not have a controlling interest or the equity investment at risk is insufficient to finance the entity's activities without receiving additional subordinated financial support from the other parties. It applies to the first fiscal year or interim period beginning after June 15, 2003. The Company believes the adoption of FIN 46 will not impact the Company's financial position or results of operations.

(4)

DISCONTINUED OPERATIONS:

In the fourth quarter of 2002, the Company approved and committed to a plan to sell or dispose of its day spa segment, with the exception of two of its day spas. The day spa segment primarily consisted of the financial position and results of operations of the Greenhouse and C.Spa day spa chains. In accordance with SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the operating results of the day spa segment, excluding the day spas that are being kept, are reported in discontinued operations and the remaining assets and liabilities are classified as assets held for sale and liabilities related to assets held for sale, respectively, on the condensed consolidated balance sheets as of December 31, 2002 and March 31, 2003. During the first quarter ended March 31, 2003, the Company disposed of ten day spas and the remaining four day spas to be disposed of were sold effective April 15, 2003.

Additional information regarding the Company's discontinued day spa operations is as follows:

	Three Months Ended
	March 31,
	2002		2003

Revenues	$	3,408,000	$	2,648,000
Loss from operations, net of taxes		2,763,000		998,000
Loss on disposal, net of taxes		-		833,000

		December 31,		March 31,
		2002		2003
Assets held for sale
Current assets	$	70,000	$	--
Property and equipment		252,000		--
Other assets		--		995,000
	$	322,000	$	995,000
Liabilities related to assets held for sale
Accounts payable & accrued expenses	$	874,000	$	2,640,000
Gift certificate liability		6,011,000		3,648,000
Other liabilities		1,493,000		1,022,000
	$	8,378,000	$	7,310,000

In connection with the transactions to sell the day spas to third parties, the Company remains liable under certain leases for those day spas in the event third party lease assignees fail to pay rent under such leases. The total amount that the Company remains liable for under such assigned leases, if the assignees fail to make the payments that they are required to make, is approximately $6.0 million.

In connection with the discontinued day spa operations, the President of the day spas segment has terminated her employment with the Company and has received a severance payment of $748,000 under her employment agreement during the second quarter of 2003. A final agreement with respect to the termination of employment by that officer is currently being negotiated.

(5)

DERIVATIVE FINANCIAL INSTRUMENT:

Effective September 28, 2001, the Company entered into an interest rate swap agreement to reduce its exposure to market risks from changing interest rates. Under the swap agreement, the Company agrees to exchange the difference between fixed and variable interest amounts calculated by reference to a notional principal amount. Any differences paid or received on interest rate swap agreements are recognized as adjustments to interest expense over the life of each swap, thereby adjusting the effective interest rate on the underlying obligation. The Company does not hold or issue such financial instruments for trading purposes. Derivatives used for hedging purposes must be designated as, and effective as, a hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in the fair value of the derivative contract must be highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge cont ract.

The interest rate swap has a notional amount of $11.0 million as of March 31, 2003 and matures on September 30, 2003. The interest rate swap agreement effectively converts a portion of the Company's LIBOR-based variable rate borrowings into fixed rate borrowings with a pay rate of 7.68%. The Company recorded unrealized gains of $146,000 and $81,000 in accumulated other comprehensive income (loss) for the three months ended March 31, 2002 and 2003, respectively in connection with this swap. There was no gain or loss on the swap as a result of ineffectiveness. Prepayment of the loan, changes in counterparty credit worthiness and changing market conditions could result in the reclassification into earnings of gains and losses that are reported in accumulated other comprehensive income (loss). The Company reclassified losses of ($108,000) and ($136,000) related to the interest rate swap into interest expense in the first three months ended March 31, 2002 and 2003, respectively. Appr oximately $152,000 in losses are expected to be reclassified into earnings within the next 12 months as interest payments occur.

(6)

ACCRUED EXPENSES:

Accrued expenses consists of the following:

		December 31,		March 31,
		2002		2003

Operative commissions	$	2,050,000	$	2,099,000
Minimum line commissions		6,066,000		4,049,000
Payroll and bonuses		2,164,000		2,510,000
Rent		932,000		722,000
Interest		95,000		113,000
Other		4,217,000		4,030,000
Total	$	15,524,000	$	13,523,000

(7)

LONG-TERM DEBT:

Long-term debt consists of the following:

		December 31,			March 31,
		2002			2003

Term loan	$	23,347,000		$	22,000,000
Revolving loan		9,796,000			9,796,000
Subordinated notes		4,608,000			4,608,000
Note payable		4,100,000			4,100,000
Other debt		390,000			352,000
Total long-term debt		42,241,000			40,856,000
Less: current portion		(14,528,000	)		(17,660,000	)
Long-term debt, net of current portion	$	27,713,000		$	23,196,000

In July 2001, the Company entered into a credit agreement with a syndicate of banks that provides for a term loan of $45 million and a revolving facility of up to $10 million. Borrowings under the credit agreement are secured by substantially all of the assets of the Company and bear interest primarily at London Interbank Offered Rate ("LIBOR") based rates plus a spread that is dependent upon the Company's financial performance. Borrowings under the term loans were used to fund the July 2001 acquisitions and borrowings under the revolving facility have been used for working capital needs. The maturity date of the revolving and term loans is July 2, 2004. The interest rate as of March 31, 2003 was 4.9% per annum for both the term loan and the revolving facility. As of March 31, 2003, there was no availability under the revolving facility.

The credit agreement contains customary affirmative, negative and financial covenants, including limitations on dividends, capital expenditures and funded debt, and requirements to maintain prescribed interest expense and fixed charge coverage ratios. As of March 31, 2003, the Company was in compliance with all of its financial covenants.

The subordinated notes are the Mandara - US Notes and the Mandara - Asia Notes. The Mandara - US Notes interest accrues quarterly but is payable on the maturity date. The Mandara - Asia Notes interest accrues and is payable quarterly. The interest rates on all the Notes is 9% per annum and they all mature on January 2, 2005.

The note payable is due to the company that formerly owned a 40% minority interest in Mandara Spa. The note bears interest at approximately nine percent per annum due quarterly and matures on various dates through March 31, 2006.

All of the long-term debt is denominated in US dollars.

(8)

COMPREHENSIVE INCOME (LOSS):

SFAS 130, "Reporting Comprehensive Income," establishes standards for reporting and disclosure of comprehensive income and its components in financial statements. The components of the Company's comprehensive income are as follows:

Three Months Ended March 31,
Three Months Ended March 31,
	2002	2003


Net income (loss)	$	(27,133,000	)	$	3,363,000
Unrealized gain on interest rate
swap, net of taxes		146,000			81,000
Foreign currency translation adjustments,
net of taxes		368,000			(169,000	)
Comprehensive income (loss)	$	(26,619,000	)	$	3,275,000

(9)

SEGMENT INFORMATION:

Information about the Company's Spa Operations and Schools segments for the three months ended March 31, 2002 and 2003 is as follows:

	Three Months Ended March 31,

2002		2003

Revenues:
Spa Operations	$	53,560,000	$	61,160,000
Schools		4,277,000		4,005,000
	$	57,837,000	$	65,165,000
Operating Income:
Spa Operations	$	6,309,000	$	6,081,000
Schools		392,000		296,000
	$	6,701,000	$	6,377,000

		December 31,		March 31,
		2002		2003

Identifiable Assets:
Spa Operations	$	136,817,000	$	134,639,000
Schools		22,794,000		21,556,000
	$	159,611,000	$	156,195,000

Included in identifiable assets of the Spa Operations segment at December 31, 2002 and March 31, 2003 are assets held for sale of $322,000 and $995,000, respectively.

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Steiner Leisure is a worldwide provider of spa services. We sell our services and products to cruise passengers and at resort and day spas primarily in the United States, the Caribbean, the Pacific and Asia. Payments to cruise lines and resort spa owners are based on a percentage of our passenger revenues and, in certain cases, a minimum annual rental or a combination of both.

In July 2001, we completed the acquisitions of the Mandara Spa resort spas and cruise ship concessions and the Greenhouse and C.Spa day spa chains. These transactions were accounted for under the purchase method, and accordingly, our financial results included the results of the acquired entities subsequent to their acquisitions. In the fourth quarter of 2002, we determined to sell or otherwise dispose of most of our day spa operations. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," the operating results of the former day spa segment, excluding the day spas that are not being disposed of, are reported in discontinued operations and the remaining assets and liabilities are classified as assets held for sale and liabilities related to assets held for sale, respectively, on the condensed consolidated balance sheets as of December 31, 2002 and March 31, 2003. During the first quarter of 2003 , we disposed of ten day spas and the assets of the remaining four day spas to be disposed of were sold effective April 15, 2003.

Steiner Leisure and Steiner Transocean Limited, our subsidiary that conducts our shipboard operations, are Bahamas international business companies ("IBCs"). The Bahamas does not tax Bahamas IBCs. Under current legislation, we believe that income from our maritime operations will be foreign source income that will not be subject to United States, United Kingdom or other taxation. A significant portion of our income for the first quarter of 2003 was not subject to tax in the United States or other jurisdictions. Earnings from Steiner Training Limited and Elemis Limited, United Kingdom subsidiaries, are subject to U.K. tax rates (generally up to 31%). The income from our United States subsidiaries, Steiner Beauty Products, Inc. (which sells products in the U.S.), Steiner Management Services, LLC (which performs administrative services), Steiner Spa Resorts (Nevada), Inc. (which runs the spa at the Aladdin Resort), Steiner Spa Resorts (Connecticut), Inc. (which runs our spa at the Mohega n Sun Casino) and Steiner Education Group, Inc. (which runs our schools through its subsidiaries) will generally be subject to U.S. federal income tax at regular corporate rates (generally up to 35%) and may be subject to additional U.S. federal, state and local taxes. Steiner Spa Limited and Steiner Spa Asia Limited own 100% of Mandara US and Mandara Asia, respectively. These subsidiaries pay taxes in certain taxable jurisdictions.

Critical Accounting Policies

We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The listing is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management's judgment in their application. The impact on our business operations and any associated risks related to these policies is discussed under results of operations, below, where such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 2 in the Notes to the Consolidated Financial Statements in Item 15 of Steiner Leisure's Annual Report on Form 10-K for 2002 filed with the Securities and Exchange Commission. Note that our preparation of this Form 10-Q requires us to make estim ates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

Cost of revenues includes:

cost of services, including an allocable portion of wages paid to shipboard and land-based spa employees, payments to cruise lines and land-based spa lessors and other staff-related shipboard expenses, spa facilities depreciation, as well as, with respect to our schools, directly attributable campus costs such as rent and employee wages; and

cost of products, including an allocable portion of wages paid to shipboard and land-based spa employees, payments to cruise lines and land-based spa lessors and other staff-related shipboard expenses, as well as costs associated with development, manufacturing and distribution of products.

Cost of revenues may be affected by, among other things, sales mix, production levels, exchange rates, changes in supplier prices and discounts, purchasing and manufacturing efficiencies, tariffs, duties, freight and inventory costs. Certain cruise line agreements provide for increases in the percentages of services and products revenues and/or, as the case may be, the amount of minimum annual line commissions over the terms of such agreements. These payments may also be increased under new agreements with cruise lines and land-based lessors that replace expiring agreements. In general, we have experienced increases in these payments as a percentage of revenues upon entering into new agreements with cruise lines.

Cost of products includes the cost of products sold through our various methods of distribution. To a lesser extent, cost of products also includes the cost of products consumed in rendering services. This amount would not be a material component of the cost of services rendered and would not be practicable to identify separately.

Operating expenses include administrative expenses, salary and payroll taxes. In addition, operating expenses include amortization of intangibles relating to our acquisitions of resort spas in 2001.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets in question. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease. For certain properties, leasehold improvements are amortized over the lease term which includes renewal periods that may be obtained at our option, that are considered significant to the continuation of our operations and to the existence of leasehold improvements the value of which would be impaired by our discontinuing use of the leased property. We perform ongoing evaluations of the estimated useful lives of our property and equipment for depreciation purposes. The estimated useful lives are determined and continually evaluated based on the period over which services are expected to be rendered by the asset, industry practice and asset maintenance policies. Maintenance and repai r items are expensed as incurred.

Goodwill

We adopted SFAS 142, "Goodwill and Other Intangible Assets" on January 1, 2002. In lieu of amortization for 2002, we were required to perform an initial impairment review of our goodwill and are required to perform an annual impairment review thereafter. During the second quarter of 2002, we completed our assessment of our intangible assets and wrote off $29.6 million of intangible assets. Those intangibles primarily consisted of goodwill related to our July 2001 acquisitions of the Greenhouse and C.Spa day spa chains. The write-off has been accounted for as a cumulative effect of a change in accounting principle and has been recorded effective January 1, 2002. As of March 31, 2003, we had unamortized goodwill and intangibles of $52.2 million.

Accounting for Income Taxes

As part of the process of preparing our consolidated financial statements we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves our estimating our actual current tax exposure together with an assessment of temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities which are included within our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in the statement of operations.

Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We have recorded a valuation allowance of $24.8 million (which includes $22.2 million related to our discontinued operations) as of March 31, 2003, due to uncertainties related to our ability to utilize some of our deferred tax assets, primarily consisting of net operating losses carried forward, before they expire. The valuation allowance is based on our estimates of taxable income and the period over which our deferred tax assets will be recoverable. In the event that actual results differ from these estimates or we adjust these estimates in future periods, we may need to establish an additional valuation allowance which could impact our financial position and results of operations.

Recently Issued Accounting Standards

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS 143, "Accounting for Asset Retirement Obligations." SFAS 143 applies to legal obligations associated with the retirement of long-lived assets that result from acquisition, construction, development and/or the normal operation of a long-lived asset. SFAS 143 is effective for financial statements for fiscal years beginning after June 15, 2002. We adopted SFAS 143 in the first quarter of 2003. The adoption of SFAS 143 did not have a material impact on our financial position or results of operations.

In June 2002, FASB issued SFAS 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity Including Certain Costs Incurred in a Restructuring." The principal difference between SFAS 146 and EITF 94-3 relates to SFAS 146's requirements for recognition of a liability for a cost associated with an exit or disposal activity. SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF 94-3, a liability for an exit cost was recognized at the date of an entity's commitment to an exit plan. A fundamental conclusion reached by FASB in this statement is that an entity's commitment to a plan, by itself, does not create an obligation that meets the definition of a liability. Therefore, SFAS No 146 eliminates the definition and requirements for recognition of exit costs in EITF 94-3. SFAS 146 also establishes that fair value is the objective for initial measurement of the liability. The effective date of the SFAS 146 is January 1, 2003, with earlier adoption encouraged. In connection with its discontinued day spa operations, we early adopted SFAS 146 in 2002.

In January 2003, the FASB Issued Interpretation ("FIN") No. 46, "Consolidation of Variable Interest Entities." FIN 46 requires an investor with a majority of the variable interests in a variable interest entity to consolidate the entity and also requires majority and significant variable interest investors to provide certain disclosures. A variable interest entity is an entity in which the equity investors do not have a controlling interest or the equity investment at risk is insufficient to finance the entity's activities without receiving additional subordinated financial support from the other parties. It applies to the first fiscal year or interim period beginning after June 15, 2003. We believe the adoption of FIN 46 will not impact our financial position or results of operations.

Results of Operations

The following table sets forth for the periods indicated, certain selected income statement data expressed as a percentage of revenues:

	Three Months Ended
	March 31,
	2002		2003
Revenues:
Services	69.1	%	70.4	%
Products	30.9		29.6
Total revenues	100.0		100.0
Cost of Revenues:
Cost of services	53.9		56.4
Cost of products	23.2		22.2
Total cost of revenues	77.1		78.6
Gross profit	22.9		21.4
Operating expenses:
Administrative	5.3		5.1
Salary and payroll taxes	6.0		6.5
Total operating expenses	11.3		11.6
Income from operations	11.6		9.8
Other income (expense):
Interest expense	(1.5	)	(1.5	)
Other income	0.1		--
Total other income (expense)	(1.4	)	(1.5	)
Income from continuing operations before provision for income taxes, minority interest and equity investment	10.2		8.3
Provision for income taxes	0.3		0.5
Income from continuing operations before minority interest and equity investment	9.9		7.8
Minority interest and equity investment	(0.8	)	0.2
Income from continuing operations before discontinued operations and cumulative effect of a change in accounting principle	9.1		8.0
Loss from discontinued operations, net of taxes	(4.7	)	(2.8	)
Cumulative effect of a change in accounting principle, net of taxes	(51.3	)	- --
Net income (loss)	(46.9	)%	5.2	%

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

Revenues. Revenues increased approximately 12.7%, or $7.4 million, to $65.2 million in the first quarter of 2003 from $57.8 million in the first quarter of 2002. Of this increase, $5.9 million was attributable to an increase in services revenues and $1.5 million was attributable to an increase in products revenues. The increase in revenues was primarily attributable to an average of nine additional spa ships in service in the first quarter of 2003 compared to the first quarter of 2002. The increase was also attributable to the opening of the Mohegan Spa in April 2002 and the improved performance of our land-based spas in the first quarter of 2003 compared to the first quarter of 2002, which reflected significantly greater impact from the terrorist attacks of September 11, 2001. We had an average of 1,283 shipboard staff members in service in the first quarter of 2003 compared to an average of 1,144 shipboard staff members in service in the first quarter of 2002. Revenues p er shipboard staff per day decreased by 1.3% to $382 in the first quarter of 2003 from $387 in the first quarter of 2002.

Cost of Services. Cost of services increased $5.5 million to $36.7 million in the first quarter of 2003 from $31.2 million in the first quarter of 2002. Cost of services as a percentage of services revenue increased to 80.1% in the first quarter of 2003 from 78.1% in the first quarter of 2002. These increases were attributable to increases in commissions allocable on cruise ships covered by agreements that provide for increases in commissions in the first quarter of 2003 compared to the first quarter of 2002. Additionally, the increase as a percentage of services revenues was attributable to a decrease in revenues at our massage therapy schools in 2003 without a corresponding decline in fixed costs at the schools.

Cost of Products. Cost of products increased $1.1 million to $14.5 million in the first quarter of 2003 from $13.4 million in the first quarter of 2002. Cost of products as a percentage of products revenue was 75.0% in the first quarter of each 2003 and 2002. This was attributable to increases in commissions allocable to products sales on cruise ships covered by agreements which provide for increases in commissions in the first quarter of 2003 compared to the first quarter of 2002 being offset by increased efficiency of our manufacturing facility.

Operating Expenses. Operating expenses increased $1.1 million to $7.6 million in the first quarter of 2003 from $6.5 million in the first quarter of 2002. Operating expenses as a percentage of revenues increased to 11.6% in the first quarter of 2003 from 11.3% in the first quarter of 2002. The increase was primarily due to the cost of additional personnel in the product manufacturing, staff training and information technology areas in the first quarter of 2003 and start-up costs related to the opening of the Elemis Day Spa in Coral Gables, Florida in February 2003.

Other Income (Expense). Other income (expense) increased $0.2 million to expense of $1.0 million in the first quarter of 2003 from expense of $0.8 million in the first quarter of 2002. This increase was primarily attributable to the increase in interest expense related to interest due under the notes to the sellers of Mandara Spa, which became payable in December 31, 2002.

Provision for Income Taxes. Provision for income taxes increased $0.1 million to $0.3 million in the first quarter of 2003 from $0.2 million in the first quarter of 2002. The provision for income taxes increased to an overall effective rate of 6.1% for the first quarter of 2003 from an overall effective rate of 3.1% for the first quarter of 2002 primarily due to the income earned in jurisdictions that tax our income increasing to a greater extent than our income earned in jurisdictions that do not tax our income.

Loss from Discontinued Operations, Net of Taxes. The loss from discontinued operations decreased $0.9 million to ($1.8) million in the first quarter of 2003 from ($2.7) million in the first quarter of 2002. The loss on disposal for the first quarter of 2003 was $833,000. The $2.7 million loss from operations in the first quarter of 2002 included the impact of the 17 day spas which were to be disposed of, compared to a $1.0 million loss from operations in the first quarter of 2003, which included the impact of only 14 of those day spas (three of which were disposed of in the fourth quarter of 2002 and ten of which were disposed of during the first quarter of 2003).

Cumulative Effect of a Change in Accounting Principle, Net of Taxes. During the second quarter of 2002, in accordance with SFAS 142, we wrote-off $29.6 million in intangible assets. These intangibles primarily consisted of goodwill related to our July 2001 acquisitions of the Greenhouse Day Spa and C.Spa chains. The write-off has been accounted for as a cumulative effect of a change in accounting principle and has been recorded effective January 1, 2002.

Liquidity and Capital Resources

Cash flow from operating activities of continuing operations was $5.4 million in the first quarter of 2003 and $4.2 million in the first quarter of 2002. We had a working capital deficit of approximately ($275,000) at March 31, 2003, compared to working capital of $917,000 at December 31, 2002.

In July 2001, we purchased a 60% equity interest in each of Mandara Spa LLC ("Mandara US") and Mandara Spa Asia Limited ("Mandara Asia" and, collectively with Mandara US, referred to as "Mandara Spa"). Mandara Spa operates spas principally in the United States, the Caribbean, the Pacific and Asia. Mandara Spa also provides spa services for Norwegian Cruise Line, Orient Lines and Silverseas Cruises. Effective March 1, 2002, we acquired an additional approximately 20% interest in Mandara Spa LLC for consideration of approximately $2.9 million in cash and, effective December 31, 2002, we acquired the remaining interests in Mandara US (20%) and Mandara Asia (40%) in exchange for a total of 400,000 common shares, valued at approximately $5.6 million.

In connection with the Mandara Spa acquisition, we paid $30.9 million in cash including ($1.5 million in transaction costs), $7.0 million in subordinated debt, $10.6 million in common shares and assumed $4.1 million of subordinated indebtedness and the selling equity holders guaranteed certain income levels for an 18-month period. If the income levels were not achieved, then, amounts owed on the subordinated debt would be reduced on a pro rata basis. We issued to the selling equity holders subordinated notes in the aggregate principal amount of $7,000,000, and which have an interest rate of 9% per annum and a maturity date of January 2, 2005 (the "Notes"). The Notes are subordinate in right of payment to Steiner's senior credit facility. Interest on the $1.4 million of the Notes issued to the former shareholders of Mandara Spa Asia (the "Mandara-Asia Notes") accrues, and is payable, quarterly. Interest on the $5.6 million of the Notes issued to the former members of Mandara Spa (the " Mandara-US Notes") accrues quarterly, but is payable on the maturity date. Amounts due under the Notes (both principal and interest) must be "earned" by Mandara Spa LLC and/or Mandara Asia Limited, as applicable, by generating income in the post-acquisition period. Interest on the Mandara-US Notes is not payable until the end of the earnout period. Hence, if not "earned," no interest or principal will be due on these Notes. Interest on the Mandara-Asia Notes accrues, and is payable, quarterly. However, if Mandara Spa Asia Limited fails to meet the earnout threshold, all interest payments previously paid to the former shareholders of Mandara Spa Asia Limited are required to be repaid to Steiner by such former shareholders. Because principal and interest due under the Mandara-US Notes, and the repayment of principal of the Mandara-Asia Notes are not payable until after the settlement of the earnout contingency, and if the earnout is not met, the notes are cancelable and any interest payments previously p aid to the former shareholders of Mandara Spa Asia Limited will be repaid to us, we have not recorded any purchase price (goodwill) related to the Notes. As of December 31, 2003, in connection with the earnout, approximately $2.8 million in principal (representing a reduction in the original principal amount) and $472,000 of interest is due under the Mandara - US Notes and $1.4 million in principal and $221,000 of interest is due under the Mandara - Asia Notes. In accordance with SFAS 141, these amounts have been recorded as a component of the purchase price of Mandara Spa.

In connection with our acquisition of Mandara Spa we incurred approximately $7.3 million in costs from July 2001 through March 2002 relating to the completion of the build-out of certain luxury spa facilities operating under the "Mandara" name.

In July 2001, we entered into a credit agreement with a syndicate of banks that provides for a term loan of $45 million and a revolving credit facility of up to $10 million. Borrowings under the credit agreement are secured by substantially all of our assets and bear interest primarily at London Interbank Offered Rate ("LIBOR") based rates plus a spread that is dependent upon our financial performance. Borrowings under the term loan were used to fund acquisitions and borrowings under the revolving facility have been used for working capital needs. As of March 31, 2003, approximately $22.0 million was outstanding under the term loan and approximately $9.8 million was outstanding under the revolving facility. At March 31, 2003, the effective rates on the term loan and revolving facility were approximately 6.0% and 4.9%, respectively.

Other limitations on capital expenditures, or on other operational matters, could apply in the future. Also, the recent amendment to our credit facility provided us with partial relief with respect to principal payments for the first quarter of 2003. A result of that relief is that we will be required to use a portion of our cash flow to make interest payments with respect to that unpaid principal.

Effective September 28, 2001, we entered into an interest rate swap agreement to reduce our exposure to market risks from changing interest rates. Under the swap agreement, we agree to exchange the difference between fixed and variable interest amounts calculated by reference to a notional principal amount. Any differences paid or received on interest rate swap agreements are recognized as adjustments to interest expense over the life of each swap, thereby adjusting the effective interest rate on the underlying obligation. We do not hold or issue such financial instruments for trading purposes. Derivatives used for hedging purposes must be designated as, and effective as, a hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in the fair value of the derivative contract must be highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract.

In July 2001, the Company purchased the assets of the Greenhouse Day Spa business. As a result, we acquired 11 luxury day spas under the "Greenhouse" name at various locations in the United States and acquired the "Greenhouse" mark. Also in July 2001, we purchased the entity that operated six C.Spa day spas in California. We opened an additional "Greenhouse" day spa in February 2002.

In the fourth quarter of 2002, the Company decided to dispose of, or otherwise close, 17 of those 18 day spas. The remaining day spa is located at a hotel and is continuing to operate as part of our resort spa operations. In the fourth quarter of 2002, the Company began negotiations with potential third party acquirers of the assets of those day spas as well as with landlords at the shopping centers and other venues where those day spas are located. During the first quarter of 2003, we disposed of ten day spas and the assets of the remaining four spas to be disposed of were sold effective April 15, 2003.

These transactions involved our paying to those landlords amounts representing various portions of the remaining terms of the leases involved. In the transactions involving transfers of spa assets and assignments of the leases, we typically were required to make payments to those acquirers in consideration of their assuming both the lease in question and certain gift certificate liabilities related to the spas in question. The lease assignments to third parties generally did not include releases from the landlords of the spas in question and, accordingly, to the extent that these third parties fail to pay rent under the leases, we would remain liable for that rent. We would, in those instances, have a cause of action for such rental amounts against those third parties. The total amount that we remain liable for under such assigned leases, if the assignees fail to make the payments that they are required to make, is approximately $6 million.

In addition, in connection with these discontinued operations, Celeste Dunn, President of our Steiner Day Spas, Inc. subsidiary, terminated her employment. In connection with that termination, Ms. Dunn received a severance payment of $748,000 during the second quarter of 2003. A final agreement with respect to the termination of Ms. Dunn's employment is currently being negotiated.

We believe that cash generated from operations is sufficient to satisfy the cash required to operate our current business for the foreseeable future. To the extent there is a significant slow-down in travel resulting from terrorist attacks, other international hostilities or any other reasons, cash generated from operations may not satisfy the cash required to operate our business. In that case we would need outside financing which may not be available on commercially acceptable terms, or at all.

Inflation and Economic Conditions

We do not believe that inflation has had a material adverse effect on revenues or results of operations. However, public demand for activities, including cruises, is influenced by general economic conditions, including inflation. Periods of economic recession or high inflation, particularly in North America where a substantial number of cruise passengers reside, could have a material adverse effect on the cruise industry upon which we are dependent. The current softness of the economy in North America and over-capacity in the cruise industry could have a material adverse effect on our business, results of operations and financial condition.

Cautionary Statement Regarding Forward-Looking Statements

From time to time, including in this report, we may publish "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements reflect our current views about future events and are subject to known and unknown risks, uncertainties and other factors which may cause our actual results to differ materially from those expressed or implied by such forward-looking statements.

Such forward-looking statements include statements regarding:

our proposed activities pursuant to agreements with cruise lines or land-based operators;

our future land-based activities;

our ability to secure renewals of agreements with cruise lines upon their expiration;

scheduled introductions of new ships by cruise lines;

our ability to generate sufficient cash flow from operations;

the extent of the taxability of our income;

the effects of acquisitions and new projects;

our market sensitive financial instruments;

our future financial results; and

our ability to increase sales of our products.

Factors that could cause actual results to differ materially from those expressed or implied by our forward-looking statements include the following:

our dependence on cruise line concession agreements of specified terms that are, in some cases, terminable by cruise lines with limited or no advance notice under certain circumstances;

our dependence on the cruise industry and the resort industry and our being subject to the risks of those industries, including operation of facilities in countries with histories of economic and/or political instability;

economic downturns that could reduce the number of customers on cruise ships and at resorts and that could otherwise reduce consumer demand for our products and services and the continuing effect on the economy in general and the travel and leisure segment in particular of the events of September 11, 2001, the war in Iraq and the threat of future terrorist attacks and armed hostilities;

our dependence on a limited number of cruise companies and further consolidation of companies in the cruise industry;

our obligation to make minimum payments to certain cruise lines and lessors of land-based spas, irrespective of the revenues received by us from customers;

increases in payments accompanying renewals of expiring cruise line agreements and land-based spa agreements, or the securing of new agreements;

our dependence on the continued viability of the cruise lines we serve and the resorts where we operate our land-based spas;

delays in new ship introductions and unscheduled withdrawals from service of ships we serve;

the effects of outbreaks of illnesses, such as SARS, or the perceived risk of such outbreaks, on our resort spas in Asia and in other locations, as well as on our cruise ship operations;

the possible increasing effects of seasonality on our business;

our dependence for success on our ability to recruit and retain qualified personnel;

our dependence on a single product manufacturer;

changes in the taxation of our Bahamas subsidiaries and increased amounts of our income being subject to taxation;

changing competitive conditions, including increased competition from providers of shipboard spa services;

our limited experience in land-based operations including with respect to the integration of acquired businesses;

risks relating to our non-U.S. operations;

uncertainties beyond our control that could affect our ability to timely and cost-effectively construct land-based spa facilities;

changes in laws and government regulations applicable to us and the cruise industry;

product liability or other claims against us by customers of our products or services;

currency risk;

restrictions imposed on us as a result of our credit facility; and

our need to seek additional financing and the risk that such refinancing may not be available on satisfactory terms, or at all.

These risks and other risks are detailed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission. That report contains important cautionary statements and a discussion of many of the factors that could materially affect the accuracy of our forward-looking statements and/or adversely affect our business, results of operations and financial position.

Forward-looking statements should not be relied upon as predictions of actual results. Subject to any continuing obligations under applicable law, we expressly disclaim any obligation to disseminate, after the date of this report, any updates or revisions to any such forward-looking statements to reflect any change in expectations or events, conditions or circumstances on which any such statements are based.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our major market risk exposure is changing interest rates. Our policy is to manage interest rate risk through the use of a combination of fixed and floating rate debt and interest rate derivatives based upon market conditions. Our objective in managing the exposure to interest rate changes is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve our objectives, we use interest rate swaps to manage net exposure to interest rate changes to our borrowings. These swaps are entered into with a group of financial institutions with investment grade credit ratings, thereby reducing the risk of credit loss.

Effective September 28, 2001, we entered into an interest rate swap agreement to reduce our exposure to market risks from changing interest rates. Under the swap agreement, we agreed to exchange the difference between fixed and variable interest amounts calculated by reference to a notional principal amount. Any differences paid or received on interest rate swap agreements are recognized as adjustments to interest expense over the life of each swap, thereby adjusting the effective interest rate on the underlying obligation. We do not hold or issue such financial instruments for trading purposes. Derivatives used for hedging purposes must be designated as, and effective as, a hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in the fair value of the derivative contract must be highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Within the 90 days prior to the filing date of this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-14(c) and 15d-14(c). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the date of their evaluation in timely alerting them to material information relating to us (including our consolidated subsidiaries) required to be included in this Quarterly Report.

Changes in Internal Controls

There were no significant changes in our internal controls or in other factors that could significantly affect such internal controls subsequent to the date of the evaluation described in paragraph (a) above. As a result, no corrective actions were required or undertaken.

PART II. - OTHER INFORMATION

Item 2 Changes in Securities and Use of Proceeds
Recent Sale of Unregistered Securities

On January 29, 2003, we sold to Gerald Katzoff a total of 8,143 of our common shares, valued at $100,000, in a privately negotiated transaction. Those shares, together with additional consideration, were issued to Mr. Katzoff in connection with the assignment to an entity controlled by Mr. Katzoff of assets related to the Greenhouse Day Spa in New York City (the "Spa"), which had been operated by a subsidiary of ours. Most of those assets had been acquired in 2001 by that subsidiary from an entity controlled by Mr. Katzoff. In connection with this transaction, Mr. Katzoff agreed to assume certain obligations relating to the Spa. The issuance of the common shares to Mr. Katzoff was effectuated without registration under the Securities Act of 1933 in reliance upon the exemption from such registration provided by Section 4(2) of that Act.


Item 6.	Exhibits and Reports on Form 8-K

(a)		Exhibits
10.2		Employment Agreement dated May 14, 2003 between Steiner Leisure Limited and Leonard Fluxman.
10.5		Employment Agreement dated as of January 1, 2002 between Elemis Limited and Sean C. Harrington.
10.26(a)		Second Amendment and Consent to Credit Agreement, dated December 31, 2002 by and among Steiner Leisure Limited, ABN AMRO Bank NV, Suntrust Bank, BankUnited FSB, The International Bank of Miami, NA, and HSBC Bank USA.
10.26(b)		Third Amendment, Waiver and Consent to Credit Agreement, dated March 7, 2003 by and among Steiner Leisure Limited, ABN AMRO Bank NV, Suntrust Bank, BankUnited FSB, The International Bank of Miami, NA, and HSBC Bank USA.
10.26(c)		Fourth Amendment and Consent to Credit Agreement, dated March 28, 2003 by and among Steiner Leisure Limited, ABN AMRO Bank NV, Suntrust Bank, BankUnited FSB, The International Bank of Miami, NA, and HSBC Bank USA.
10.27		Employment Agreement dated May 14, 2003 between Steiner Leisure Limited and Glenn Fusfield.
10.28		Employment Agreement dated May 14, 2003 between Steiner Leisure Limited and Thomas R. Posey.
99.1		Certification of Chief Executive Officer of Steiner Leisure Limited pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2		Certification of Acting Chief Financial Officer of Steiner Leisure Limited pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

		Reports on Form 8-K
No Reports on Form 8-K were filed in the first quarter of 2003 on behalf of Steiner Leisure Limited.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: May 15, 2003

	STEINER LEISURE LIMITED
	(Registrant)


	/s/ Clive E. Warshaw
	Clive E. Warshaw Chairman of the Board


	/s/ Leonard I. Fluxman
	Leonard I. Fluxman President and Chief Executive Officer


	/s/ Robert H. Lazar
	Robert H. Lazar Vice President and Acting Chief Financial Officer

CERTIFICATIONS

I, Leonard I. Fluxman, certify that:

I have reviewed this quarterly report on Form 10-Q of Steiner Leisure Limited;

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent function):

All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

/s/ Leonard I. Fluxman
- --------------------------------------------------------------------------------

Leonard I. Fluxman
President and Chief Executive Officer

CERTIFICATIONS

I, Robert H. Lazar, certify that:

I have reviewed this quarterly report on Form 10-Q of Steiner Leisure Limited;

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent function):

All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

/s/ Robert H. Lazar
- --------------------------------------------------------------------------------

Robert H. Lazar
Vice President and Acting Chief Financial Officer

The following is a list of all exhibits filed as a part of this report:

Exhibit Number	Description
10.2	Employment Agreement dated May 14, 2003 between Steiner Leisure Limited and Leonard Fluxman.
10.5	Employment Agreement dated as of January 1, 2002 between Elemis Limited and Sean C. Harrington.
10.26(a)	Second Amendment and Consent to Credit Agreement, dated December 31, 2002 by and among Steiner Leisure Limited, ABN AMRO Bank NV, Suntrust Bank, BankUnited FSB, The International Bank of Miami, NA, and HSBC Bank USA.
10.26(b)	Third Amendment, Waiver and Consent to Credit Agreement, dated March 7, 2003 by and among Steiner Leisure Limited, ABN AMRO Bank NV, Suntrust Bank, BankUnited FSB, The International Bank of Miami, NA, and HSBC Bank USA.
10.26(c)	Fourth Amendment and Consent to Credit Agreement, dated March 28, 2003 by and among Steiner Leisure Limited, ABN AMRO Bank NV, Suntrust Bank, BankUnited FSB, The International Bank of Miami, NA, and HSBC Bank USA.
10.27	Employment Agreement dated May 14, 2003 between Steiner Leisure Limited and Glenn Fusfield.
10.28	Employment Agreement dated May 14, 2003 between Steiner Leisure Limited and Thomas R. Posey.
99.1	Certification of Chief Executive Officer of Steiner Leisure Limited pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2	Certification of Acting Chief Financial Officer of Steiner Leisure Limited pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-10 3 exhibit10_2.htm MI931918.DOC;1 AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") is made May 14, 2003, to be effective as indicated herein, by and between Steiner Leisure Limited, a Bahamas international business company (the "Company"), and Leonard Fluxman ("Employee").

W I T N E S S E T H:

WHEREAS, the Company and Employee entered into an Employment Agreement dated December 22, 2000, as amended effective January 1, 2002 (collectively, the "Prior Agreement"); and

WHEREAS, the Company wishes to further amend the Prior Agreement and incorporate in this document all of the terms of the services to be performed by Employee for the Company.

NOW THEREFORE, in consideration of the premises and mutual agreements hereinafter contained, the parties hereto agree as follows:

Employment, Duties

Effective on the Effective Date (as defined in Section 2, below), the Company hereby employs Employee as President and Chief Executive Officer of the Company and Employee hereby accepts such employment. Employee shall be the officer of the Company principally responsible for the Company's day to day executive decision-making and strategic planning and shall have such duties and responsibilities consistent with the foregoing and otherwise consistent with Employee's position as may be determined from time to time by the Board of Directors of the Company (the "Board"), including duties with respect to affiliates (as defined in Rule 405 under the Securities Act of 1933, as amended) of the Company (each, an "Affiliate").

It is the intention of the parties hereto that, during the term of this Agreement, Employee shall be elected and serve as a member of the Board, and as a member of the executive committee of the Board if such a committee should be established. During the term of this Agreement, Employee shall devote all his business time and effort to the conduct of his duties hereunder, provided that Employee may (i) serve on corporate, civic and charitable boards or committees, (ii) provide services on a pro bono basis to civic and charitable organizations and (iii) attend to his personal investments, so long as such activities do not interfere with the performance of Employee's responsibilities as an employee of the Company in accordance with this Agreement and are consistent with the Company's policies. The Company agrees that, to the extent that any such activities have been conducted by Employee prior to the date of this Agreement, the continued conduct of such activities (or the conduct of activitie s similar in nature and scope thereto) subsequent to such date shall not thereafter be deemed to interfere with the performance of Employee's responsibilities to the Company or to be inconsistent with the Company's policies. The Company also agrees that Employee may receive compensation in connection with his service on corporate boards, without set-off, adjustment or diminution of his salary, bonus or any other rights hereunder.

Effective Date; Term

This Agreement is for a term commencing January 1, 2001 (the "Effective Date") and terminating on December 31, 2005, unless terminated sooner in accordance with the terms and conditions in Section 5, below.

Compensation

Salary and Bonus. Except as otherwise provided herein, the Company (or any Affiliate) shall pay to Employee during the term hereof compensation as described in this Section 3(a), all of which shall be subject to such deductions as may be required by applicable law or regulation:

Base Salary. (A) a base salary at the rate of not less than Three Hundred Ninety Thousand Dollars (U.S. $390,000.00) per year through December 31, 2002, and (B) commencing in January 2003, a base salary at the rate of not less than Three Hundred Ninety Nine Thousand Three hundred Sixty Dollars (U.S. $399,360.00) per year for each calendar year ("Year") during the term of this Agreement, subject to review annually and possible increase in the sole discretion of the Board by the Board, payable in bi-weekly installments (the "Base Salary").

(ii) Incentive Bonus. Employee is eligible to receive a bonus (the "Incentive Bonus") equal to one hundred percent (100%) of Base Salary tied to achieved Company budgeted Net Earnings (as defined below) for the respective Year in the term. With respect to each Year during the term hereof, the Incentive Bonus shall be based on a budget for the four fiscal quarters of each Year hereunder, which budget includes an estimate of the Net Earnings for such Year and which budget shall have been approved for the purpose of the compensation payable hereunder by the Compensation Committee of the Board (the "Budget"). At the end of the Year, if the Company shall have met seventy-five percent (75%) of the Net Earnings set forth in the Budget ("Budgeted Net Earnings") (i) for the Year, Employee shall be entitled to receive an amount equal to 0.500 times the Base Salary then in effect for the Year in question. During the term of this Agreement, in the event at the end of any Year in question, the Company has exceeded seventy-five percent (75%), up to and including one-hundred twenty-five percent (125%) of Budgeted Net Earnings for such Year, then for each one percent (1%) increase over seventy-five percent (75%) up to one hundred twenty-five percent (125%), the Employee shall be entitled to receive an additional amount equal to 0.020 times the Base Salary then in effect for the Year in question. In the event at the end of any such Year the Company has exceeded one hundred twenty-five percent (125%) of Budgeted Net Earnings for such Year, then for each one percent (1%) increase over one hundred twenty-five percent (125%), the Employee shall be entitled to receive, in addition to the amounts payable for exceeding seventy-five percent (75%) of Budgeted Net Earnings, an amount equal to 0.010 times the Base Salary then in effect for the Year in question. Notwithstanding the foregoing, Employee shall not be entitled to receive any amount in excess of five percent (5%) of the Budgeted Net Earnings pursuant to this Section 3(a)(ii) for such Year. Any amount which Employee is entitled to receive herein shall be payable within sixty (60) days after the end of the Year in question. For purposes of this Section 3(a)(ii), "Net Earnings" shall mean earnings of the Company before taxes,

interest, depreciation and amortization determined in accordance with generally accepted accounting principles consistently applied, except that the calculation of Net Earnings shall not take into account the effect of the loss on disposal related to the discontinued operations charge for 2002 or 2003 in connection with the disposition of the Company's day spa assets.

Disability Insurance. During each Year during the term hereof, Employee shall be paid an amount to be used toward the payment of the premium on a disability insurance policy (a "Policy") covering Employee, upon delivery to the Company of evidence reasonably satisfactory to the Company of the purchase by Employee of a Policy with an annual premium due during such Year in an amount at least equal to the amount requested by Employee under this Section 3(b) (the "Disability Payment Amount"). The Disability Payment Amount shall be an amount that is proportionate (based on the relative amounts of the respective Base Salaries) to the amount received by Employee in that regard for 2000. The Disability Payment Amount shall be increased proportionately to the extent, and at the time, of any increase in the Base Salary during the term hereof.

Deferred Compensation. Employee may elect, in accordance with the provisions of any deferred compensation plan agreement that may be entered into between Employee and the Company (a "Deferred Plan"), to defer all or a portion of the amount of the Incentive Bonus payable to Employee. Any and all amounts that Employee elects to defer shall be held and administered in accordance with the terms and provisions of any such Deferred Plan.

Share Options. Upon the date of the initial execution of the Prior Agreement, and in addition to any share options that may be granted to Employee as part of the Company's annual grant of options to officers and employees, Employee was granted share options (the "Options") to purchase three hundred eighty seven thousand eight hundred sixty (387,860) of the Company's common shares. The Options shall expire on the tenth anniversary of the date of grant, shall vest cumulatively at the rate of one-third thereof on each of the first three anniversaries of the date of grant, and shall be exercisable at an exercise price per share equal to the fair market value of a share of the Company's common stock on the date of grant; provided, however, that, subject to the one year post-grant employment requirement of Section 6.3 of the Company's Amended and Restated 1996 Share Option and Incentive Plan (the "Plan"), any unvested portion of the Option shall vest im mediately in the event of: (i) Employee's death or Disability (as hereinafter defined), (ii) Employee's retirement or early retirement in accordance with the policies of the Company, (iii) Employee's termination by the Company without Cause (as hereinafter defined), (iv) Employee's termination of his employment for Good Reason (as hereinafter defined), or (v) a Change in Control (as hereinafter defined). Such Options shall be granted under the Plan and shall be "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") to the extent that the Options satisfy the requirements of Section 422 without any revision in the terms of the Options as set forth above. In the event that Rule 144 limits the number of shares that may be sold in any three-month period, Employee shall have the right to require the Company to file and keep effective a resale registration statement covering any shares of common stock purchased pursuant to the Options (or pursuant to any other share option granted by the Company).

In addition to the foregoing, if Employee's employment with the Company terminates for any reason and at the time of such termination the common stock of Steiner Education Group, Inc. ("Steiner Education") is not registered under Section 12 of the Securities Exchange Act of 1934, as amended, and is not publicly traded, then Employee (or Employee's estate in the case of Employee's death) shall have the right to require the Company to purchase, or to cause Steiner Education to repurchase, any shares of stock of Steiner Education held by Employee at the time of such termination, for a purchase price equal to the then value of such stock. The value of such stock shall be as agreed upon between Employee (or his estate) and Steiner Education, determined in accordance with customary investment banking methodology, or, if the parties cannot reach an agreement as to such value, then as determined by an independent investment banking firm selected by Employee (or his estate), and reasonably acceptable to the Company, with the costs in connection with such valuation being borne by the Company.

Life Insurance. During each Year during the term hereof, the Company shall provide Employee with term life insurance with a death benefit equal to two times the then current Base Salary. The Company shall pay all premiums with respect to such life insurance. Such life insurance may be provided either through the Company's group life insurance programs, by an individual policy, or by a combination of both group and individual policies.

Other Benefits. During the term hereof, the Company shall provide to Employee all other benefits currently provided to the executive officers (as defined for purposes of the Securities Exchange Act of 1934, as amended) of the Company, as well as those which the Company may, in the future, provide to its executive officers, including, without limitation, life insurance, medical coverage, benefits under any 401(k) plan of the Company or any Affiliate and the right to participate in share option or similar plans. The Company also shall provide Employee with a private office and an annual allowance for the use by Employee in purchasing or leasing an automobile and for the payment of insurance, maintenance and other expenses in connection with such automobile as reflected in the Budget.

Expense Reimbursement; Relocation. The Company shall reimburse Employee for all ordinary and necessary business expenditures made by Employee in connection with, or in furtherance of, his employment hereunder upon presentation by Employee of expense statements, receipts, vouchers or such other supporting information as may from time to time be reasonably requested by the Board. When traveling for business of the Company, Employee at his sole discretion and at the Company's expense shall travel via first class accommodations. The Company shall not, without Employee's prior written consent, relocate Employee more than 50 miles from the Company's principal place of business in Miami-Dade County, Florida.

Vacation

Employee shall be entitled to (i) four (4) weeks paid vacation per Year (the "Vacation Days") and (ii) additional Vacation Days on each day that is a United States federal holiday. Employee shall use reasonable efforts to take at least two (2) weeks of vacation per Year. The vacation provided for in this Section 4 shall be coextensive with, and not cumulative with, vacations allowed pursuant to any employment agreements or

other arrangements with any Affiliates of the Company. The Company shall pay to Employee on or before January 30th of the following Year, an amount representing the Base Salary (at the rate in effect for the Year during which the Vacation Days were to have been taken) with respect to the Vacation Days not taken by Employee during a Year; provided, however, that no payment shall be made with respect to more than ten (10) Vacation Days for any one Year. In the event that Employee's employment hereunder is terminated other than pursuant to Section 5(c) below, then the Company shall pay to Employee within fifteen (15) days after the date of such termination an amount representing the Base Salary (at the rate in effect for the Year during which such termination occurs) with respect to the Vacation Days not taken by Employee during that Year, pro rated, if appropriate, to reflect the Year in question through the termination date being less than a full Year.

Termination and Non-Renewal

Death. In the event of Employee's death during the term hereof, the Company shall have no further obligations to make payments or otherwise under this Agreement, except that the Company shall pay to Employee's estate (i) within ten (10) days after the date of Employee's death (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, and any Incentive Bonus pursuant to Section 3(a)(ii), above, in each case to which Employee was entitled on the date of death pursuant to the terms of those Sections; and (ii) within sixty (60) days after the end of the Year in which Employee died, if the Budgeted Net Earnings are met for the Year in question, an amount equal to the Incentive Bonus pursuant to Section 3(a)(ii), above, which would have been payable to Employee for the Year during which Employee died had Employee been employed by the Company on the last day of that Year. In addition, the Company shall pay to Employee's surviving spouse, or to Employee's estate if there i s no surviving spouse, an amount equal to the sum of (i)100% of Base Salary, at the annual rate in effect on the date of Employee's death, and (ii) the "Average Bonus" (as defined below), such sum to be payable in bi-weekly installments for a period of one year following Employee's death. Employee's estate shall be entitled to immediate vesting of the Options and any share options held by Employee on the date of his death which were granted on or after the date hereof, all of which shall remain exercisable until the earlier of one year following the Employee's death or the date (or dates) the Option (and other options) would otherwise expire in the absence of Employee's death. For purposes of this Agreement, the term "Average Bonus," when calculated with reference to any date, shall mean, if such date is on or prior to June 30 of the Year in which such date occurs, the arithmetic average of Employee's annual Incentive Bonus for the three preceding Years; or, if such date is after June 30 of such Year, the a rithmetic average of Employee's Incentive Bonus for such Year (calculated on an annualized basis based on the Company's results through the full calendar quarter in which such date occurs) and for the two preceding Years.

In any case under this Section 5 where Average Bonus is a component of a payment due hereunder before the time that such Average Bonus shall have been determined in accordance with this Agreement (the "Determination Time"), the Company may include in such payment, on account of such component, its good faith estimate of the amount of such component (but not less than 90% of the amount which would have been due had such Incentive Bonus been the same as Employee's Incentive Bonus for the preceding Year). Promptly after Determination Time, the Company shall pay Employee (or his surviving spouse or estate, as the case may be) any balance due, and Employee (or such person) shall refund to the Company any excess payment.

Disability. If Employee becomes physically or mentally disabled during the term hereof so that he is unable to perform the services required of Employee pursuant to this Agreement for a period of 180 consecutive days (a "Disability"), the Company, at its option, may terminate Employee's employment hereunder (the date of such termination, the "Disability Date"), and, thereafter, Employee shall not be deemed to be employed hereunder (except that Employee's obligations under Section 6, below, shall remain in full force and effect) and the Company shall have no further obligations to make payments or otherwise under this Agreement, except as provided in this Section 5(b). In determining Disability under this Section 5(b) the Company shall rely upon the written opinion of the physician regularly attending Employee in determining whether a Disability is deemed to exist. If the Company disagrees with the opinion of such physician, the Company may ch oose a second physician, the two (2) physicians shall choose a third physician, and the written opinion of a majority of the three (3) physicians shall be conclusive as to Employee's Disability. The expenses associated with the utilization of any physician other than the physician regularly attending Employee shall be borne solely by the Company. Employee hereby consents to any required medical examination and agrees to furnish any medical information requested by the Company and to waive any applicable physician/patient privilege that may arise because of such determination. In the event of a Disability, the Company shall pay to Employee (i) within ten (10) days after the Disability Date (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, and (B) any Incentive Bonus payable pursuant to Section 3(a)(ii) above, in each case to which Employee was entitled on the Disability Date pursuant to the terms of those Sections, and (C) any amount due to Employee as of the Disability Date as reimbu rsement of expenses under Section 3(f) above, and (ii) within sixty (60) days after the end of the Year in which the Disability Date occurs, if the Budgeted Net Earnings are met for the Year in question, an amount equal to the Incentive Bonus pursuant to Section 3(a)(ii), above, which Employee would have been entitled to receive during the Year in which the Disability Date occurs had Employee been employed by the Company on the last day of that Year. In addition, the Company shall pay Employee an amount equal to the sum of (i) 100% of Base Salary, at the annual rate in effect on Employee's Disability Date, and (ii) the Average Bonus, such sum to be payable in bi-weekly installments for a period of one year following Employee's Disability Date. Employee shall also be entitled to immediate vesting of the Options and any other share options held by Employee on the Disability Date and which were granted on or after the date hereof, all of which shall remain exercisable until the earlier of one year following Em ployee's Disability Date and the date (or dates) the Options (and such other options) would otherwise expire in the absence of Employee's Disability. Nothing in this Agreement is intended to cause the Company to be in violation of the Americans with Disabilities Act.

For Cause by Company. The Company may at any time during the term hereof terminate Employee's employment hereunder for Cause. For purposes of this Agreement, "Cause" shall mean the occurrence of any of the following events: (i) Employee's continued failure to substantially perform Employee's duties with the Company (other than any such failure resulting from Employee's incapacity due to physical or mental illness or injury); (ii) a violation by Employee of any written policy or directive of the Company applicable to Employee specifically, or to officers or employees generally, the violation of which policy or directive is materially and demonstrably injurious to the

Company; (iii) Employee's excessive alcoholism or drug abuse that substantially impairs the ability of Employee to perform Employee's duties hereunder; (iv) continued gross negligence by Employee in the performance of his duties under this Agreement that results in material and demonstrable damage to the Company or any Affiliate; (v) violation by Employee of any lawful direction from the Board provided such direction is not inconsistent with Employee's duties and responsibilities to the Company hereunder; (vi) fraud, embezzlement or other criminal conduct by Employee that results in material and demonstrable damage to the Company; (vii) intentional or reckless conduct that results in material and demonstrable damage to the Company; or (viii) the committing by Employee of an act involving moral turpitude that results in material and demonstrable damage to the Company; provided, however, that in the case of any of the events described in clauses (i), (ii) (iv) (v) or (vii) above, such event shall not constitute Cause hereunder unless and until there is given to Employee by the Company a written notice which sets forth the specific respects in which it believes that Employee's conduct constitutes Cause hereunder, which conduct is not cured within ten (10) days of written notice thereof. If the Company terminates Employee's employment under this Agreement pursuant to this Section 5(c), the Company shall have no further obligations to make payments or otherwise under this Agreement, except that Employee shall be entitled to receive any (i) unpaid accrued Base Salary pursuant to Section 3(a)(i), above, through the date that is thirty (30) days after the date that the Company gives written notice of such termination to Employee (the "Termination Notice Date"), (ii) Incentive Bonus that is accrued and unpaid as of the date of such termination and (iii) any other amounts due to Employee under this Agreement as of the date of termination, including, but not limited to, reimbursement of expenses under Sect ion 3(f), above, in each case within sixty (60) days after the Termination Notice Date. Notwithstanding the foregoing, Employee shall, for all purposes, cease to be deemed to be employed by the Company as of the date of any termination of Employee pursuant to this Section 5(c), irrespective of whether written notice of termination is given on such date.

For Good Reason by Employee. Employee may at any time during the term hereof, without any prior notice, terminate this Agreement for Good Reason. For purposes of this Agreement, " Good Reason" shall mean the occurrence of any of the following events: (i) a material breach by the Company of this Agreement (including, without limitation; the Company's relocation of Employee in breach of Section 3(g) above; and the Company's failure to pay any compensation to Employee more than ten (10) days after the date such payment is due); (ii) a reduction in Employee's Base Salary or any other compensation or benefits (other than a reduction in the Incentive Bonus which is solely attributable to lower Net Earnings); (iii) a material reduction in or interference with Employee's position, duties, responsibilities or support with respect to his employment by the Company under this Agreement without Employee's prior written consent; or (iv) a "Change in Contro l" of the Company (as defined below).

directors then still in office who were Present Directors or New Directors); or (iii) any of the following circumstances has occurred: (A) any transaction as a result of which a change in control of the Company would be required to be reported in response to Item 1 (a) of the Current Report on Form 8-K as in effect on the date hereof, pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement, (B) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act; (x) becomes the "beneficial owner," (as defined in Rule 13d-3 under the Exchange Act of twenty percent (20%) or more of the combined voting power of then outstanding securities of the Company, or (y) acquires by proxy or otherwise the right to vote for the election of directors, for any merger or consolidation of the Company or for any other matter or question, more than 2 0% of the then outstanding voting securities of the Company, except that a person or group shall be deemed to be a beneficial owner of all securities that such person or group has the right to acquire regardless of whether such right is immediately exercisable or only exercisable after the passage of time or (C) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) that is the "beneficial owner" as defined in Rule 13d-3 under the Exchange Act of 20% or more of the then outstanding voting securities of the Company commences soliciting proxies.

In the event that Employee elects to terminate this Agreement upon or following a Change in Control of the Company, then Employee shall provide notice thereof no more than one (1) year after the effective date of the Change in Control.

In the event that Employee terminates this Agreement pursuant to the first paragraph of this Section 5(d), or if the Company terminates Employee's employment under this Agreement (other than for Cause or due to death or Disability), then the Company shall pay to Employee within ten (10) days after the date of such termination an amount equal to (i) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above; (ii) a lump sum amount equal to the aggregate Base Salary (based on the Base Salary in effect on the date of the termination of Employee's employment) with respect to a period equal to the longer of twelve (12) months or the remainder of the term of this Agreement which would have occurred in the absence of such termination; (iii) any Incentive Bonus then payable, but unpaid pursuant to Section 3(a)(ii), above, and (iv) an amount equal to the Average Bonus for each full Year during the remainder of the term of this Agreement which would have occurred in the absence of such termin ation and a ratable portion thereof for any partial Year; provided, however, that if such termination occurs upon or following a Change in Control, then the Company shall pay to Employee the greater of (A) the sum of the amounts determined under clauses (i) through (iv) above in this sentence or (B) an amount equal to 2.99 times Employee's "Base Amount" within the meaning of Section 280G of the Code. The Company shall also pay to Employee within ten (10) days after the date of such termination any other amounts due to Employee as of the date of termination including, but not limited to, reimbursement of expenses under Section 3(g) above. In addition to Employee's rights under share option agreements outstanding prior to the date hereof, Employee shall also be entitled to immediate vesting of the Options and any other share options held by Employee on the date of such termination which were granted on or after before the date hereof, all of which shall remain exercisable until the

earlier of one year following the date of such termination or the date the Option (and other options), would otherwise expire in the absence of such termination.

To provide Employee with adequate protection in connection with Employee's ongoing employment with the Company, the Company provides Employee with various benefits, pursuant to this Agreement and otherwise. On or following a "Change in Control," within the meaning of Section 280G of the Code, it is possible that a portion of those benefits might be characterized as "excess parachute payments," within the meaning of Section 280G of the Code. The parties hereto acknowledge that the protections set forth in this Section 5(d) are important, and it is agreed that Employee should not have to bear the burden of any excise tax that might be levied under Section 4999 of the Code in the event that a portion of the benefits payable to Employee pursuant to this Agreement or otherwise are treated as excess parachute payments. The Company and Employee, therefore, have agreed as follows:

Notwithstanding any other provision of this Agreement to the contrary, if it shall be determined that any payment or benefit provided by the Company and any other person to or for the benefit of Employee, whether paid or payable or provided or providable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this clause (i) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, being hereinafter collectively referred to as the "Excise Tax"), then the Company shall pay to or on behalf of Employee an additional payment (a "Gross-Up Payment") in an amount such that after payment by Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest or penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

All determinations regarding whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination shall be made by an independent public accounting firm with a national reputation in the United States that is selected by Employee (the "Accounting Firm") which shall provide detailed support and calculations both to the Company and to Employee within fifteen (15) business days after the receipt of notice from Employee that there has been a Payment, or such earlier time as is requested by the Company. The amount of any Gross-Up Payment shall be paid in a lump sum within seven (7) days following such determination by the Accounting Firm. In the event that the Accounting Firm's determination is not finally accepted by the Internal Revenue Service upon any audit, then an appropriate adjustment shall be computed (with an additional Gross-Up Payment, if applicable) by the Accounting Firm based upon the final amount of the Excise Tax so determined. Such adjustment shall be paid by the appropriate party in a lump sum within seven (7) days following the

computation of such adjustment by the Accounting Firm. All fees and expenses of the Accounting Firm shall be borne solely by the Company.

The provisions of this Section 5(d) regarding the Company's obligation to make a Gross-Up Payment shall survive termination of Employee's employment for any reason.

By Employee for Illness. In the event that during the term hereof Employee becomes ill such that, in the written opinion of a physician reasonably acceptable to the Company, it would not be advisable for Employee to continue his employment with the Company hereunder, Employee may terminate his employment hereunder upon reasonable notice to the Company and, in such event, Employee shall not be deemed to have breached this Agreement as a result of such termination. In the event of such termination by Employee, the Company shall have no further obligations to make payments or otherwise under this Agreement, except that the Company shall pay to Employee (i) within ten (10) days after the date of such termination (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above and (B) any Incentive Bonus payable pursuant to Section 3(a)(ii), above, in each case to which Employee is entitled on the date of such termination pursuant to the terms of those Sections, (ii) any amounts due to Employee as of the date of termination as reimbursement of expenses under Section 3(f), above, and (iii) within sixty (60) days after the end of the Year in which Employee died, if the Budgeted Net Earnings are met for the Year in question, an amount equal to the Incentive Bonus pursuant to Section 3(a)(ii), above, which Employee would have been entitled to receive for the Year in which Employee terminated employment pursuant to this Section 5(e) had Employee been employed by the Company on the last day of that Year.

No Offset - No Mitigation. Employee shall not be required to mitigate any damages under this Agreement by seeking other comparable employment. The amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation or benefits earned by or provided to Employee as a result of his employment by another employer.

Non-Renewal. In the event that the employment of Employee hereunder continues for the full term of this Agreement and Employee's employment with the Company is not renewed as of the date of termination of this Agreement on terms no less favorable to Employee than the terms of this Agreement, then Employee shall be entitled to receive from the Company, within fifteen (15) days after the date of such termination, an amount equal to (i) two times the Base Salary in effect as of the date of termination of this Agreement; (ii) any Incentive Bonus pursuant to Section 3(a)(ii), above, to which Employee was entitled on the date of termination pursuant to the terms of those Sections and (iii) any amount due to Employee as of the date of termination as reimbursement under Section 3(f), above.

Non-Competition; Confidentiality; etc.

All references to the "Company" in this Section 6 shall include all Affiliates where the context permits.

Acknowledgment. Employee acknowledges and agrees that (i) in the course of Employee's employment by the Company, it will be necessary for Employee to acquire information which could include, in whole or in part, information concerning the sales, products, services, customers and prospective customers, sources of supply, computer programs, system documentation, software development, manuals, formulae, processes, methods, machines, compositions, ideas, improvements, inventions or other confidential or proprietary information belonging to the Company or relating to the affairs of the Company (collectively, the "Confidential Information"), (ii) the

restrictive covenants set forth in this Section 6 are reasonable and necessary in order to protect and maintain such proprietary interests and the other legitimate business interests of the Company and that such restrictive covenants in this Section 6 shall survive the termination of this Agreement for any reason and (iii) the Company would not have entered into this Agreement unless such covenants were included herein.

Non-Competition. Employee covenants and agrees that during the term hereof and for a period of one (1) year following the termination of Employee's employment hereunder for any reason (or two (2) years following such termination if the Company elects to pay to Employee, in addition to all other amounts payable under this Agreement, an amount equal to the sum of (i) one additional Year's Base Salary at the rate then in effect and (ii) the Average Bonus (calculated with reference to the date of termination of Employee's employment hereunder), such sum to be payable in bi-weekly installments during such second year), Employee shall not, on any vessel or within one hundred (100) miles of any non-vessel venue where, or from which, the Company is then offering its services or products, or had in the then preceding two (2) years offered its services or products, engage, directly or indirectly, whether as an individual, sole proprietor, or as a principal, agen t, officer, director, employer, employee, consultant, independent contractor, partner or shareholder of any firm, corporation or other entity or group or otherwise, in any Competing Business. For purposes of this Agreement, the term "Competing Business" shall mean any individual, sole proprietorship, partnership, firm, corporation or other entity or group which offers or sells or attempts to offer or sell (i) spa services, skin or hair care products, or degree or non-degree educational programs in massage therapy, skin care or related courses or (ii) any other services or products offered or sold by the Company. Notwithstanding the foregoing, Employee is not precluded from (i) maintaining a passive investment in publicly held entities provided that employee does not have more than a five percent (5%) beneficial ownership in any such entity; or (ii) serving as an officer or director of any entity, the majority of the voting securities of which is owned, directly or indirectly, by the Company (collecti vely, a "Permitted Activity").

Non-Solicitation of Customers and Suppliers. Employee agrees that during his employment hereunder, he shall not, whether as an individual or sole proprietor, or as a principal, agent, officer, director, employer, employee, consultant, independent contractor, partner or shareholder of any firm, corporation or other entity or group or otherwise, directly or indirectly, solicit the trade or business of, or trade, or conduct business with, any customer, prospective customer, supplier, or prospective supplier of the Company for any purpose other than for the benefit of the Company. Employee further agrees that for one year following termination of his employment hereunder for any reason, Employee shall not, directly or indirectly, solicit the trade or business of, or trade, or conduct business with any customers or suppliers, or prospective customers or suppliers, of the Company. Notwithstanding the foregoing, Employee is not precluded from a Permitted Activity.

Non-Solicitation of Employees, Etc. Employee agrees that during the term of his employment hereunder and thereafter for a period of two (2) years, he shall not, directly or indirectly, as an individual or sole proprietor or as a principal, agent, employee, employer, consultant,

independent contractor, officer, director, shareholder or partner of any person, firm, corporation or other entity or group or otherwise without the prior express written consent of the Company approach, counsel or attempt to induce any person who is then in the employ of, or then serving as independent contractor with, the Company to leave the employ of, or terminate such independent contractor relationship with, the Company or employ or attempt to employ any such person or persons who at any time during the preceding six (6) months was in the employ of, the Company. Notwithstanding the foregoing, Employee is not precluded from a Permitted Activity.

Non-Disclosure of Confidential Information. Employee agrees to hold and safeguard the Confidential Information in trust for the Company, its successors and assigns and only use the Confidential Information for purposes of performing his duties hereunder and agrees that he shall not, without the prior written consent of the Board, misappropriate or disclose or make available to anyone for use outside the Company's organization at any time, either during his employment hereunder or subsequent to the termination of his employment hereunder for any reason, any of the Confidential Information, whether or not developed by Employee, except as required in the performance of Employee's duties to the Company or as required by applicable law. In the event that Employee is requested or required by, or under applicable law or court, or administrative order to disclose any of the Confidential Information, Employee shall provide the Company with prompt written notice of any such request or requirement so that the Company may seek a protective order or other appropriate remedy. If Employee is legally compelled to disclose Confidential Information, Employee shall disclose only that portion of the Confidential Information which Employee is legally required to disclose.

Disclosure of Works and Inventions/Assignment of Patents. Employee shall disclose promptly to the Company any and all works, publications, inventions, discoveries and improvements authored, conceived or made by Employee during the period of his employment hereunder and related to the business or activities of the Company, and hereby assigns and agrees to assign all his interest therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments which the Company shall deem necessary to apply for and obtain Letters of Patent or Copyrights, or similar documents or rights, of the United States or any foreign country or to otherwise protect the Company's interest therein. Such obligations shall continue beyond the termination of Employee's employment hereunder for any reason with respect to works, inventions, discoveries and improvements authored, conceived or made by Emplo yee during the period of Employee's employment under this Agreement.

Return of Materials. Upon the termination of Employee's employment with the Company for any reason, Employee shall promptly deliver to the Board all correspondence, drawings, blueprints, manuals, letters, notes, notebooks, financial records, reports, flowcharts, programs, proposals and any other documents concerning the Company's business, including, without limitation, its customers or suppliers or concerning its products, services or processes and all other documents or materials containing or constituting Confidential Information; provided, however, that nothing in this Section 6(g) shall require Employee to deliver to the Board any property that is owned by Employee and that contains no Confidential Information.

Limitation on Restrictions. Notwithstanding anything to the contrary in this Section 6, the restrictions set forth in Sections 6(a) through 6(g), above, shall not apply if Employee terminates this Agreement under Section 5(d), above, unless Employee receives as a result of such termination the amount required to be paid to Employee pursuant to the fourth paragraph in Section 5(d), above, within thirty (30) days after the date of such termination above, in which case the restrictions in this Section 6 shall apply until the last date that this Agreement would have been in effect had it not been terminated as aforesaid and (ii) Section 6(b) shall not apply if Employee's employment is terminated after a Change in Control that is not approved by the Board.

Non-Assignment; Successors; etc.

The Company may assign any of its rights, but not its obligations, under this Agreement, without the prior written consent of Employee, which shall not be unreasonably withheld. The successors of the Company shall be bound by the terms hereof, and where the context permits, references to "Company" herein shall be deemed to apply to any such successors. Employee may assign his rights, but not his obligations, hereunder and the obligations of Employee hereunder, other than the obligations set forth in Section 1, above, shall continue after the termination of his employment hereunder for any reason and shall be binding upon his estate, personal representatives, designees or other legal representatives, as the case may be ("Heirs"), and all of Employee's rights hereunder shall inure to the benefit of his Heirs. All of the rights of the Company hereunder shall inure to the benefit of, and be enforceable by the successors of the Company.

Notices

Except as set forth in Section 5(c), above, any notices or demands given in connection herewith shall be in writing and deemed given when (i) personally delivered, (ii) sent by facsimile transmission to a number provided in writing by the addressee and a confirmation of the transmission is received by the sender or (iii) three (3) days after being deposited for delivery with a recognized overnight courier, such as FedEx, and addressed or sent, as the case may be, to the address or facsimile number set forth below or to such other address or facsimile number as such party may in writing designate:

If to Employee:

341 Costa Brava Ct.

Coral Gables, FL 33143

Facsimile Number: (305) 662-2065

If to the Company:

Robert C. Boehm

c/o Steiner Management Services

770 South Dixie Highway, Suite #200

Coral Gables, FL 33146

Facsimile Number: (305) 372-9310

Entire Agreement; Certain Terms

This Agreement constitutes and contains the entire agreement of the parties with respect to the matters addressed herein and supersedes any and all prior negotiations, correspondence, understandings and agreements between the parties respecting the subject matter hereof, including, but not limited to all other agreements and arrangements relating to the payment of any compensation to Employee with respect to any services performed, or to be performed on behalf of the Company or any Affiliate. No waiver of any rights under this Agreement, nor any modification or amendment of this Agreement shall be effective or enforceable unless in writing and signed by the party to be charged therewith. When used in this Agreement, the terms "hereof," "herein" and "hereunder" refer to this Agreement in its entirety, including any exhibits or schedules attached to this Agreement and not to any particular provisions of this Agreement, unless otherwise indicated.

Counterparts

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Governing Law, etc

This Agreement shall be governed by and construed in accordance with the laws of Florida without regard to choice of law provisions and the venue for all actions or proceedings brought by Employee arising out of or relating to this Agreement shall be in the state or federal courts, as the case may be, located in Miami-Dade County, Florida (collectively, the "Courts"). Employee hereby irrevocably waives any objection which he now or hereafter may have to the laying of venue of any action or proceeding arising out of or relating to this Agreement brought in any of the Courts and any objection on the ground that any such action or proceeding in any of the Courts has been brought in an inconvenient forum. Nothing in this Section 11 shall affect the right of the Company or an Affiliate to bring any action or proceeding against Employee or his property in the courts of other jurisdictions. In the event of any litigation between the parties hereto with respect to this Agreement, each part y shall bear his or its own costs and expenses ("Legal Costs and Expenses") in connection with such litigation, including, but not limited, to reasonable attorneys' fees at the trial and appellate court levels; provided, however, that with respect to any litigation concerning whether a termination by Employee was for Good Reason, the Company shall pay Employee's Legal Costs and Expenses (regardless of whether Employee is the prevailing party), and provided, further, that with respect to any litigation concerning whether a termination by the Company was for Cause, Employee shall be entitled to recover his Legal Costs and Expenses from the Company unless the Company is the prevailing party in any such litigation as determined by a final and nonappealable decision or order.

Severability

It is the intention of the parties hereto that any provision of this Agreement found to be invalid or unenforceable be reformed rather than eliminated. If any of the provisions of this Agreement, or any part thereof, is hereinafter construed to be invalid or unenforceable, the same shall not affect the remainder of such provision or the other provisions of this Agreement, which shall be given full effect, without regard to the invalid portions. If any of the provisions of Section 6, above, or any portion thereof, is held to be unenforceable because of the duration of such provision or portions thereof, the area covered thereby or the type of conduct restricted therein, the parties hereto agree that the court making such determination shall have the power to modify the duration, geographic area and/or, as the case may be, other terms of such provisions or portions thereof, and, as so modified, said provisions

or portions thereof shall then be enforceable. In the event that the courts of any one or more jurisdictions shall hold such provisions wholly or partially unenforceable by reason of the scope thereof or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the Company's rights provided for herein in the courts of any other jurisdictions as to breaches or threatened breaches of such provisions in such other jurisdictions, the above provisions as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants.

Non-Waiver

Failure by either the Company or Employee to enforce any of the provisions of this Agreement or any rights with respect hereto, or the failure to exercise any option provided hereunder, shall in no way be considered to be waiver of such provisions, rights or options, or to in any way affect the validity of this Agreement.

Headings

The headings preceding the text of the paragraphs of this Agreement have been inserted solely for convenience of reference and neither constitute a part of this Agreement nor affect its meaning, interpretation, or effect.

IN WITNESS WHEREOF, the parties have executed these presents as of the day and year first above written.

STEINER LEISURE LIMITED

s/s Leonard I. Fluxman By: s/s Clive E. Warshaw

Leonard I. Fluxman Clive E. Warshaw,

Chairman of the Board

EX-10 4 exhibit10_5.htm EXHIBIT 10 EXHIBIT 10.5

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") is made this 1st day of January, 2002 by and between Elemis Limited, a company organized under the laws of England and Wales (the "Company"), and Sean C. Harrington ("Employee").

W I T N E S S E T H:

WHEREAS, the Company and Employee desire to provide for the terms of the services to be performed by Employee for the Company.

NOW THEREFORE, in consideration of the premises and mutual agreements hereinafter contained, the parties hereto agree as follows:

1. Employment, Duties.

The Company hereby employs Employee as Managing Director of the Company and Employee hereby accepts such employment. Employee shall have such duties and responsibilities consistent with the position as may be determined from time to time by the Board of Directors of the Company (the "Board") or the President and Chief Executive Officer (the "CEO") of Steiner Leisure Limited, the parent company of the Company ("Steiner"), including duties with respect to affiliates (as defined in Rule 405 under the Securities Act of 1933, as amended) of the Company (each, an "Affiliate"). Employee shall be based at the principal offices of the Company, which offices are currently located in Harrow Weald, England. In the event of a relocation of Employee by the Company as a result of the relocation of such principal offices, the terms of Section 3(d), below, shall govern. During the term of this Agreement, Employee shall devote all his working time and effort to the conduct of his duties hereunder.

2. Effective Date; Term. This Agreement is for a term of five (5) years commencing 1 January 2002 ("Commencement Date") and terminating on 31 December 2006, (the "Term"), unless terminated sooner in accordance with the terms and conditions in Section 5, below.

3. Compensation.

(a) Salary; Bonus; Etc. Except as otherwise provided herein, the Company (or any Affiliate) shall pay to Employee during the Term hereof compensation as described in this Section 3(a), all of which shall be subject to such deductions as may be required by applicable law or regulation:

(i) Base Salary. (A) From 1 January 2002, a base salary at the rate of One Hundred Forty Six Thousand British Pounds (146,000.) per year for 2002 and (B) from 1 January 2003, a base salary at the rate of One Hundred Sixty-one Thousand Three Hundred Thirty British Pounds (161,330.) per year for 2003, and not less than said amount each calendar year ("Year") thereafter during the Term of this Agreement, subject to

review annually, and possible increase in the sole discretion of the Board, by the Board payable in bi-weekly installments (the "Base Salary"), and subject to Section 5. below.

(ii) Incentive Bonus. (A) With respect to each Year during the term hereof, additional cash compensation as described in this Section 3 (a) (ii) (the "Incentive Bonus") based budgets for the four fiscal quarters of each Year hereunder which budgets, with respect to Steiner, includes an estimate of the Net Earnings (as defined below) and with respect to Company, includes an estimate of the Consolidated Net Earnings (as defined below) for such Year and which budgets shall have been approved for the purpose of the compensation payable hereunder by the Compensation Committee of the Steiner Board (the "Budget"). (A) At the end of each Year, if the Company and / or Steiner shall have met seventy-five percent (75%) of the Consolidated Net Earnings and / or Net Earnings set forth in their respective Budget(s) ("Budgeted Net Earnings") for such Year, then Employee shall be entitled to receive an amount equal to (i) if based on Company, then 0.20, and / or (ii) if based on Steiner, then 0.05, times the Base Salary then in effect for the Year in question. (B) At the end of each Year, if the Company and / or Steiner shall have exceeded seventy-five percent (75%), up to and including one hundred twenty-five percent (125%) of their respective Budgeted Net Earnings for such Year, then for each one percent (1%) increase over seventy-five percent (75%), up to and including one hundred twenty-five percent (125%), Employee shall be entitled to receive an additional amount equal to (i) if based on Company, then 0.008, and / or (ii) if based on Steiner, then 0.002, times the Base Salary then in effect for the Year in question. (C) At the end of each Year, if the Company and / or Steiner shall have exceeded one hundred twenty-five percent (125%) of their respective Budgeted Net Earnings for such Year, then for each one percent (1%) increase over one hundred twenty-five percent (125%), Employee shall be entitled to receive an additional amount equal to (i) if base d on Company, then 0.004, and / or (ii) if based on Steiner, then 0.001, times the Base Salary then in effect for the Year in question. Notwithstanding the foregoing, Employee shall not be entitled to receive any amount in excess of two and one-half percent (2.5%) of the Consolidated Net Earnings of Company pursuant to this Section 3(a)(ii) for such Year. Any amount which the Employee is entitled to receive herein shall be payable within sixty (60) days after the end of the Year in question. Except as provided in Section 5, below, Employee shall only be entitled to receive an Incentive Bonus payment with respect to a given Year if he is employed hereunder on the last day of such Year. For purposes of this Section 3(a)(ii), "Consolidated Net Earnings" shall mean the consolidated earnings of Company before taxes, interest, depreciation and amortization, less intercompany sales, plus intercompany cost of goods sold, plus third party Cosmetics, Ltd. and Elemis Beautiful Skin Care Centers sales, less third party Cosmetics, Ltd. and Elemis Beautiful Skin Care Centers cost of sales. "Net Earnings" shall mean earnings of Steiner before taxes, interest, depreciation and amortization as determined in accordance with generally accepted accounting principles consistently applied. The Consolidated Net Earnings and Net Earnings for any Year shall be calculated based on the data provided for use in Steiner's annual report on Form 10-K for such Year.

(iii) Disability Insurance. During each Year during the term hereof, up to Two Thousand Pounds (2,000) (the "Maximum Disability Payment") to be used toward the payment of the premium on a disability insurance policy (a "Policy") covering Employee, upon delivery to the Company of

evidence reasonably satisfactory to the Company of the purchase by Employee of a Policy with an annual premium due during such Year in an amount at least equal to the amount requested by Employee under this Section 3(a)(iii). The Maximum Disability Payment shall be increased proportionately to the extent, and at the time of any increase in the Base Salary during the term hereof.

(iv) Pension. The Company will pay into a private pension scheme maintained by Employee during his employment an amount equal to five percent (5%) of his Base Salary from time to time. The amount paid by the Company shall be reviewed in accordance with the Company Pension policy at the discretion of the Company during the term hereof.

(b) Other Benefits. During the term hereof, the Company shall provide to Employee: (i) term life insurance with a death benefit payable to beneficiaries designated by Employee equal to the then current Base Salary, (ii) health insurance coverage for Employee and his immediate family, including eligibility for the A-Band plan, at the Company's expense, and (iii) eligibility to participate in share option or similar plans, (iv) a private office and an annual allowance of Eight Thousand Five Hundred Eighty Pounds (8,580) for the use by Employee in purchasing or leasing an automobile and for the payment of insurance, maintenance and other expenses in connection with such automobile.

(c) Expense Reimbursement; Relocation. The Company shall reimburse Employee for all ordinary and necessary business expenditures made by Employee in connection with, or in furtherance of, his employment hereunder upon presentation by Employee of expense statements, receipts, vouchers or such other supporting information as may from time to time be reasonably requested by the CEO or the Board. When traveling for business of the Company, Employee, at his sole discretion and at the Company's expense, shall travel via "Business" or "Club" class accommodations for international travel involving flying time of three (3) hours or more each way. In the event the Employee is relocated outside of England, or more than seventy-five (75) kilometers from Employee's then principal place of business with the Company, then, in each case, the Company shall (i) reimburse Employee for all reasonable moving expenses necessitated by such relocation and (ii) shall make such adjustments in the compe nsation of Employee hereunder so that after such relocation, Employee's effective compensation shall be no less than Employee's effective compensation prior to such relocation.

(d) Sick Pay. Employee shall continue to receive his regular compensation, including any bonus or other contractual benefits due to him under this Agreement in respect of an aggregate of twenty-six (26) weeks of absence due to illness or injury in any calendar year of the Term and thereafter such compensation payable under this Section shall be inclusive of any statutory sick pay to which the Employee is entitled under the provisions of the Social Security Contributions and Benefits Act 1992 or any other relevant legislation and for the avoidance of doubt, any social security sickness benefit or other benefits recoverable by the Employee (whether or not actually recovered) may be deducted therefrom.

4. Vacation. Employee shall be entitled to (i) four (4) weeks paid vacation per Year (the "Vacation Days") and (ii) additional vacation days on each day that is a United Kingdom bank, and other public holidays. Notwithstanding the foregoing, Employee shall not be entitled to take in excess of two (2) consecutive weeks of vacation without the prior written consent of the CEO. The vacation provided for in this Section 4 shall be coextensive with, and not cumulative with, vacations allowed pursuant to any employment agreements or other arrangements with any Affiliates of the Company. The Company shall pay to Employee on or before January 30th of the following Year, an amount representing the Base Salary (at the rate in effect for the Year during which the Vacation Days were to have been taken) with respect to the Vacation Days not taken by Employee during a Year; provided, however, that no payment shall be made with respect to more than ten (10) Vacation Days for a ny one Year. In the event that Employee's employment hereunder is terminated other than pursuant to Section 5(c) or Section 5(f) below, then the Company shall pay to Employee within fifteen (15) days after the date of such termination an amount representing the Base Salary (at the rate in effect for the Year during which such termination occurs) with respect to the Vacation Days not taken by Employee during that Year, pro rated, if appropriate, to reflect the Year in question through the termination date being less than a full year.

5. Termination.

(a) Death. In the event of Employee's death during the term hereof, the Company shall have no further obligations to make payments or otherwise under this Agreement, except that the Company shall pay to Employee's estate (i) within ten (10) days after the date of Employee's death any (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, and (B) any amount due to Employee as of the date of death as reimbursement of expenses under Section 3(d), above; and (ii) within sixty (60) days after the end of the Year in which Employee died, if the Budgeted Net Earnings for Company and / or Steiner are met or exceeded for the Year in question, an amount of the Incentive Bonus pursuant to Section 3(a)(ii), above, calculated on a pro-rata basis to the date of death.

(b) Disability. If Employee becomes physically or mentally disabled during the term hereof so that he is unable to perform the services required of Employee pursuant to this Agreement for an aggregate of six (6) months in any twelve (12) month period (a "Disability"), the Company, at its option, may terminate Employee's employment hereunder (the date of such termination, the "Disability Date") and, thereafter, Employee shall not be deemed to be employed hereunder (except that Employee's obligations under Section 6, below, shall remain in full force and effect) and the Company shall have no further obligations to make payments or otherwise under this Agreement, except as provided in this Section 5(b). In determining Disability under this Section 5(b) the Company shall rely upon the written opinion of the physician regularly attending Employee in determining whether a Disability is deemed to exist. If the Company disagrees with the opinion of such physician, the Co mpany may choose a second physician, the two (2) physicians shall choose a third physician, and the written opinion of a majority of the three (3) physicians shall be conclusive as to Employee's Disability. The expenses associated with the utilization of any physician other than the physician regularly attending Employee shall be borne solely by the Company. Employee hereby consents to any required medical examination and agrees to furnish any medical information requested by the Company and to waive any applicable physician/patient privilege that may arise because of such determination. In the event of a Disability, the Company shall pay to Employee (i) within ten (10) days after the Disability Date (A) any unpaid

accrued Base Salary pursuant to Section 3(a)(i), above, and (B) any amount due to Employee as of the Disability Date as reimbursement of expenses under Section 3(d), above; and (ii) within sixty (60) days after the end of the Year in which the Disability Date occurs, if the Budgeted Net Earnings for Company and / or Steiner are met or exceeded for the Year in question, an amount of the Incentive Bonus pursuant to Section 3(a)(ii), above, calculated on a pro-rata basis to the Disability Date.

(c) For Cause by Company. The Company may at any time during the term hereof, terminate Employee's employment hereunder: (A) without notice, upon the occurrence of any of the following events: (i) Employee's excessive alcoholism or drug abuse that substantially impairs the ability of Employee to perform Employee's duties hereunder; (ii) gross negligence by the Employee in the performance of his duties under this Agreement that results in damage to the Company or any Affiliate; (iii) fraud, embezzlement or other criminal conduct by Employee that results in material damage to the Company or any Affiliate, or could reasonably be expected to result in material damage to the Company or any Affiliate; (iv) the committing by Employee of an act involving moral turpitude that results in material damage to the Company, or could reasonably be expected to result in material damage to the Company or any Affiliate, (v) if Employee becomes bankrupt or makes any composition or enters into any d eed of arrangement with his creditors; (vi) if Employee is disqualified from holding office in another company in which he is concerned or interested because of wrongful trading under the Insolvency Act 1986; or (vii) if Employee shall become of unsound mind or become a patient under the Mental Health Act 1993; or (B) with written notice, if any of the following occurrences have not been fully rectified, as determined solely by Company, within five (5) business days after receipt by Employee of such written notice from the Company describing the event: (i) a material breach of this Agreement ; (ii) a material violation by Employee of any lawful written policy or directive of the Company, or Steiner, or any Affiliate applicable to Employee specifically, or to officers or employees of the Company, or Steiner, or any Affiliate generally; (iii) violation by Employee of any lawful direction from the Board provided such direction is not inconsistent with Employee's duties and responsibilities to the Company or a ny Affiliate hereunder; or (iv) intentional or reckless conduct that results in material damage to the Company or any Affiliate, or could reasonably be expected to result in material damage to the Company. If the Company terminates Employee's employment under this Agreement pursuant to this Section 5(c), the Company shall have no further obligations to make payments or otherwise under this Agreement, except that the Company shall pay to Employee within sixty (60) days after the date that the Company gives written notice of such termination to Employee (the "Termination Notice Date") any (i) unpaid accrued Base Salary pursuant to Section 3(a)(i), above, through the date that is thirty (30) days after the Termination Notice Date, (ii) amounts due to Employee as of the date of such termination as reimbursement of expenses under Section 3(d), above. Notwithstanding the foregoing, Employee shall, for all purposes, cease to be deemed to be employed by the Company as of the date of any termination of Emplo yee pursuant to this Section 5(c), irrespective of whether written notice of termination is given on such date.

(d) For Cause by Employee. Employee may at any time during the term hereof, terminate this Agreement upon the occurrence of any of the following events: (i) a material breach by the Company of this Agreement or (ii) a "Change in Control" of Steiner (as defined below), subject to the terms of this Section 5(d). In the event that Employee terminates this Agreement pursuant to clause (i) above, then the Company shall pay to Employee (A) within ten (10) days after the

date of receipt by Company of such written notice advising the Company of Employee's decision to terminate, an amount equal to the Base Salary then payable, but then unpaid, for the full term of this Agreement pursuant to Section 3(a)(i), above; (B) within sixty (60) days after the end of the Year in which Employee terminates, if the Budgeted Net Earnings for Company and / or Steiner are met or exceeded for the Year in question, an amount of Incentive Bonus pursuant to Section 3(a)(ii) above, calculated on a pro-rata basis to the date of termination, and (C) within ten (10) days after the date of receipt by Company of such written notice, any amount due to Employee as of the date of such termination including as reimbursement of expenses under Section 3(d), above; and (ii) an amount equal to the Average Bonus, as defined in Section 5(e), below, for each full Year during the remainder of the Term of this Agreement which would have occurred in the absence of such termination and a rata ble portion thereof for any partial Year.

For purposes of this Section 5(d), a "Change in Control" of Steiner shall be deemed to occur if (i) all or substantially all of the assets of Steiner are sold or otherwise disposed of or Steiner is liquidated or dissolved or adopts a plan of liquidation, (ii) during any period of twelve (12) consecutive months, Present Directors and/or New Directors cease for any reason to constitute at least half of the Steiner Board (for purposes of the preceding clause, "Present Directors" shall mean individuals who, at the beginning of such consecutive 12 month period, were members of the Steiner Board and "New Directors" shall mean any director whose election by the Steiner Board or whose nomination for election by Steiner's shareholders was approved by a vote of at least two-thirds of the directors then still in office who were Present Directors or New Directors); or (iii) any of the following circumstances has occurred (A) any transaction as a result of which a change in control of Ste iner would be required to be reported in response to Item 1 (a) of Steiner's Current Report on Form 8-K as in effect on the date hereof, pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not Steiner is then subject to such reporting requirement, (B) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act; (x) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of twenty percent (20%) or more of the combined voting power of then outstanding securities of Steiner, or (y) acquires by proxy or otherwise the right to vote for the election of directors, for any merger or consolidation of Steiner or for any other matter or question, more than 20% of the then outstanding voting securities of Steiner, except that a person or group shall be deemed to be a beneficial owner of all securities that such person or group has the right to acquire regardless of whether such right is imm ediately exercisable or only exercisable after the passage of time or (C) any "person" or "group" within the meaning of Sections 13 (d) and 14 (d) (2) of the Exchange Act) that is the "beneficial owner" as defined in Rule 13d-3 under the Exchange Act of 20% or more of the then outstanding voting securities of Steiner commences soliciting proxies.

In the event of a Change in Control, this Agreement shall continue in effect until December 31, 2006 unless the Employee terminates this Agreement as provided below. In the event a Change in Control occurs on or before January 1, 2006, Employee may terminate this Agreement within one (1) year after the date of such Change in Control. In the event a Change in Control occurs after January 1, 2006, Employee may terminate this Agreement on or before the date that represents three-fourths of the number of days between the date of the Change in Control and December 31, 2006. Any such termination shall be by written notice to the Company, with a copy to the Board of Steiner, at least thirty (30) days prior to the proposed termination date; provided, however, that if

the Change in Control is on or after December 1, 2006, then the aforesaid notice shall be given at any time on or after the Change in Control and prior to or on the termination date. The period of time between the Change in Control and the date of the notice of termination referenced in the preceding sentence is referred to herein as the "Change in Control Period." In the event that Employee so notifies the Company that he wishes to terminate this Agreement, then Employee shall be entitled to receive from the Company, within ten (10) days after the end of the Change in Control Period, an amount equal to (i) the greater of (A) the Base Salary then in effect pursuant to Section 3(a)(i), above, for the remainder of the term of this Agreement which would have occurred in the absence of such termination and (B) twice the Base Salary then in effect pursuant to Section 3(a)(i), above; (ii) within sixty (60) days after the end of the Year in which Employee terminates, if the Budgeted Net Earnings for Company and / or Steiner are met or exceeded for the Year in question, an amount of the Incentive Bonus pursuant to Section 3(a)(ii) above, calculated on a pro-rata basis to the date of termination; (iii) an amount equal to the Average Bonus for each full Year during the remainder of the term of this Agreement which would have occurred in the absence of such termination and a ratable portion thereof for any partial Year; and (iv) any amount due to Employee as of the date of such termination including as reimbursement of expenses under Section 3(d), above. The exercise of any rights under this paragraph would be in lieu of any rights the Employee might have under Section 5(g), below.

(e) Without Cause By Company. In the event that during the term hereof the Company terminates Employee's employment hereunder other than for cause pursuant to Section 5(c) above, then the Company shall pay to Employee within ten (10) days after the date of such termination (except as otherwise provided herein) an amount equal to (i) any unpaid accrued Base Salary then in effect pursuant to Section 3(a)(i), above, (ii) an amount equal to the Base Salary pursuant to Section 3(a)(i), above then in effect with respect to a period equal to the longer of twelve (12) months or the remainder of the term of this Agreement which would have occurred in the absence of such termination; (iii) within sixty (60) days after the end of the Year in which Employee was terminated, if the Budgeted Net Earnings for Company and / or Steiner are met or exceeded for the Year in question, an amount of the Incentive Bonus pursuant to Section 3(a)(ii) above, calculated on a pro-rata basis to the date of te rmination; (iv) an amount equal to the Average Bonus for each full Year during the remainder of the term of this Agreement which would have occurred in the absence of such termination and a ratable portion thereof for any partial Year; (v) any amount due to Employee as of the date of termination as reimbursement of expenses under Section 3(d), above; and (vi) an amount equal to the cost of Employee's health insurance provided by the Company as in effect at the time of such termination for a period of one (1) year after the date of such termination. For purposes of this Agreement, the term "Average Bonus," when calculated with reference to any date, shall mean, if such date is on or prior to June 30 of the Year in which such date occurs, the arithmetic average of Employee's annual Incentive Bonus for the three preceding Years; or, if such date is after June 30 of such Year, the arithmetic average of Employee's Incentive Bonus for such Year and for the two preceding Years.

hereunder upon reasonable notice to the Company and, in such event, Employee shall not be deemed to have breached this Agreement as a result of such termination. In the event of such termination by Employee, the Company shall have no further obligations to make payments or otherwise under this Agreement, except that the Company shall pay to Employee (i) within ten (10) days after the date of such termination any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, (ii) any amounts due to Employee as of the date of termination of Employee as reimbursement of expenses under Section 3(d), above, and (iii) within sixty (60) days after the end of the Year in which Employee terminated, if the Budgeted Net Earnings for Company and / or Steiner are met or exceeded for the Year in question, an amount of the Incentive Bonus pursuant to Section 3(a)(ii), above, calculated on a pro-rata basis to the date of such termination.

(g) No Offset - No Mitigation. Employee shall not be required to mitigate any damages under this Agreement by seeking other comparable employment. The amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation or benefits earned by or provided to Employee as a result of his employment by another employer.

6. Non-Competition; Confidentiality; etc. All references to the "Company" in this Section 6 shall include all Affiliates where the context permits.

(a) Acknowledgment. Employee acknowledges and agrees that (i) in the course of Employee's employment by the Company, it will be necessary for Employee to acquire information which could include, in whole or in part, information concerning the sales, products, services, customers and prospective customers, sources of supply, computer programs, system documentation, software development, manuals, formulae, processes, methods, machines, compositions, ideas, improvements, inventions or other confidential or proprietary information belonging to the Company or relating to the affairs of the Company (collectively, the "Confidential Information"), (ii) the restrictive covenants set forth in this Section 6 are reasonable and necessary in order to protect and maintain such proprietary interests and the other legitimate business interests of the Company and that such restrictive covenants in this Section 6 shall survive the termination of this Agreement for any reason and (iii) the Company would not have entered into this Agreement unless such covenants were included herein.

(b) Non-Competition. Employee covenants and agrees that during the term hereof and for a period of one (1) year following the termination of Employee's employment with the Company for any reason, Employee shall not on any vessel or within one hundred (100) miles of any non-vessel venue where or from which the Company is then offering its services or products or had in the then preceding two (2) years offered its services or products, business, engage, directly or indirectly, whether as an individual, sole proprietor, or as a principal, agent, officer, director, employer, employee, consultant, independent contractor, partner or shareholder of any firm, corporation or other entity or group or otherwise in any Competing Business. For purposes of this Agreement, the term "Competing Business" shall mean any individual, sole proprietorship, partnership, firm, corporation or other entity or group which offers or sells or attempts to offer or sell spa services, skin or hair care products which had in the then preceding two (2) years been offered or sold by the Company.

Notwithstanding the foregoing, Employee is not precluded from (i) maintaining a passive investment in publicly held entities provided that employee does not have more than a five percent (5%) beneficial ownership in any such entity; or (ii) serving as an officer or director of any entity, the majority of the voting securities of which is owned, directly or indirectly, by the Company (collectively, a "Permitted Activity").

(c) Non-Solicitation of Customers and Suppliers. Employee agrees that during his employment with the Company, he shall not, whether as an individual or sole proprietor, or as a principal, agent, officer, director, employer, employee, consultant, independent contractor, partner or shareholder of any firm, corporation or other entity or group or otherwise, directly or indirectly, solicit the trade or business of, or trade, or conduct business with, any customer, prospective customer, supplier, or prospective supplier of the Company for any purpose other than for the benefit of the Company. Employee further agrees that for one (1) year following termination of his employment hereunder with the Company for any reason, Employee shall not, directly or indirectly, solicit the trade or business of, or trade, or conduct business with any customers or suppliers, or prospective customers or suppliers of the Company. Notwithstanding the foregoing, Employee is not precluded from a Permitte d Activity.

(d) Non-Solicitation of Employees, Etc. Employee agrees that during the term of his employment hereunder and thereafter for a period of one (1) year, he shall not directly or indirectly, as an individual or sole proprietor or as a principal, agent, employee, employer, consultant, independent contractor, officer, director, shareholder or partner of any person, firm, corporation or other entity or group otherwise, without the prior express written consent of the Company approach, counsel or attempt to induce any person who is then in the employ of the Company to leave the employ of the Company or employ or attempt to employ any such person or persons who at any time during the preceding six (6) months was in the employ of, the Company. Notwithstanding the foregoing, Employee is not precluded from a Permitted Activity.

(e) Non-Disclosure of Confidential Information. Employee agrees to hold and safeguard the Confidential Information in trust for the Company and its successors and assigns, and only use the Confidential Information for purposes of performing his duties hereunder, and agrees that he shall not, without the prior written consent of the President of Steiner or the Board, misappropriate or disclose or make available to anyone for use outside the Company's organization at any time, either during his employment hereunder or subsequent to the termination of his employment hereunder for any reason, any of the Confidential Information, whether or not developed by Employee, except as required in the performance of Employee's duties to the Company or as required by applicable law. In the event that Employee is requested or required by, or under applicable law or court, or administrative order to disclose any of the Confidential Information, Employee shall provide the Company with prompt wri tten notice of any such request or requirement so that the Company may seek a protective order or other appropriate remedy. If Employee is legally compelled to disclose Confidential Information, Employee shall disclose only that portion of the Confidential Information which Employee is legally required to disclose.

or activities of the Company (the "Rights"), and hereby assigns and agrees to assign all his interest therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments which the Company shall deem necessary to apply for and obtain Letters of Patent or Copyrights, or similar documents or rights, of the United States or any foreign country or to otherwise protect the Company's interest in the Rights. Such obligations shall continue beyond the termination of Employee's employment with the Company for any reason with respect to works, inventions, discoveries and improvements authored, conceived or made by Employee during the course of Employee's employment under this Agreement.

(g) Return of Materials. Upon the termination of Employee's employment with the Company for any reason, Employee shall promptly deliver to the Board all correspondence, drawings, blueprints, manuals, letters, notes, notebooks, financial records, reports, flowcharts, programs, proposals and any other documents concerning the Company's business, including, without limitation, its customers or suppliers or concerning its products, services or processes and all other documents or materials containing or constituting Confidential Information; provided, however, that nothing in this Section 6(g) shall require Employee to deliver to the Board any property that is owned by Employee and that contains no Confidential Information.

(h) Limitation on Restrictions. Notwithstanding anything to the contrary in this Section 6, the restrictions set forth in (i) Sections 6(a) through 6(g), above, shall not apply if Employee terminates this Agreement under Section 5(d), above, unless Employee receives as a result of such termination the amount required to be paid to Employee pursuant to the last paragraph in Section 5(d), above, within thirty (30) days after the date of such termination above, in which case the restrictions in this Section 6 shall apply until the last date that this Agreement would have been in effect had it not been terminated as aforesaid and (ii) Section 6(b) shall not apply if Employee's employment is terminated after a Change in Control that is not approved by the Board.

7. Employment Rights Act Information. The following information is supplied pursuant to the Employment Rights Act 1996, Section 3, and reflects the Company's current practice:

(a) Disciplinary Rules. In addition to this Agreement, the disciplinary rules and procedures to which Employee is subject are as follows:

(i) the _____________ manual of the Company dated __________;

(ii) the Policies and Procedures Handbook of Steiner, as amended from time to time.

(b) Grievance Procedure. If Employee is dissatisfied with any disciplinary decision relating to Employee, or is seeking redress of any grievance relating to his employment, Employee shall utilize the Dispute Resolution Procedure in Policies and Procedures Handbook of Steiner.

(c) Appeals. After exhausting the procedures referred to in clause (b), above, Employee can then appeal to the Board of Directors of Steiner in connection with grievances relating to Employee's employment.

(d) Certificate. A contracting-out certificate under the Pension Schemes Act 1993 is [not] in force with respect to Employee's employment hereunder.

By Employee's execution of this document below, Employee acknowledges that he has read, and is familiar with the terms of each of the aforementioned documents.

8. Effect of Termination of Employment. Upon termination of Employee's employment with the Company for any reason, Employee shall (a) at the request of the Company immediately resign from office as a director of the Company and from any other office or offices held by him with any Affiliate of the Company as may be so requested without claim for compensation and in the event of his failure to do so, the Company is hereby irrevocably authorized to appoint some person in his name and on. his behalf to sign and deliver such resignation or resignations to the Company and (b) not without the consent of the Company at any time thereafter represent himself still to be employed by the Company or any Affiliate of the Company.

9. Non-Assignment; Successors; etc. The Company may assign any of its rights, but not its obligations under this Agreement, without the prior written consent of Employee, which shall not be unreasonably withheld. The successors of the Company shall be bound by the terms hereof, and where the context permits, references to the "Company" herein shall be deemed to refer to such successors. Employee may assign his rights, but not his obligations, hereunder and the obligations of Employee hereunder, other than the obligations set forth in Section 1, above, shall continue after the termination of his employment hereunder for any reason, however, only the obligation in Section 6(g) shall be binding upon his estate, personal representatives, designees or other legal representatives, as the case may be ("Heirs"), and all of Employee's rights hereunder shall inure to the benefit of his Heirs. All of the rights of the Company hereunder shall inure to the benefit of, and b e enforceable by the successors of the Company.

10. Notices. Any notices or demands given in connection herewith shall be in writing and deemed given when (i) personally delivered, (ii) sent by facsimile transmission to a number provided in writing by the addressee and a confirmation of the transmission is received by the sender or (iii) three (3) days after being deposited for delivery with a recognized overnight courier, such as FedEx, and addressed or sent, as the case may be, to the address or facsimile number set forth below or to such other address or facsimile number as such party may in writing designate:

If to Employee:

Sean C. Harrington

________________________

If to the Company:

Leonard I. Fluxman

c/o Steiner Management Services

770 South Dixie Highway, Suite #200

Coral Gables, FL 33146

Facsimile Number: (305) 372-9310

11. Entire Agreement; Certain Terms. This Agreement constitutes and contains the entire agreement of the parties with respect to the matters addressed herein and supersedes any and all prior negotiations, correspondence, understandings and agreements between the parties respecting the subject matter hereof, including, but not limited to all other agreements and arrangements relating to the payment of any compensation to Employee with respect to any services performed, or to be performed on behalf of the Company or any Affiliate. No waiver of any rights under this Agreement, nor any modification or amendment of this Agreement shall be effective or enforceable unless in writing and signed by the party to be charged therewith. When used in this Agreement, the terms "hereof," "herein" and "hereunder" refer to this Agreement in its entirety, including any exhibits or schedules attached to this Agreement and not to any particular provisions of this Agreem ent, unless otherwise indicated.

12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

13. Governing Law, etc. This Agreement shall be governed by and construed in accordance with English law without regard to choice of law provisions and the venue for all actions or proceedings brought by Employee arising out of or relating to this Agreement shall be in the courts located in London (collectively, the "Courts").

14. Severability. It is the intention of the parties hereto that any provision of this Agreement found to be invalid or unenforceable be reformed rather than eliminated. If any of the provisions of this Agreement, or any part thereof, is hereinafter construed to be invalid or unenforceable, the same shall not affect the remainder of such provision or the other provisions of this Agreement, which shall be given full effect, without regard to the invalid portions. If any of the provisions of Section 6, above, or any portion thereof, is held to be unenforceable because of the duration of such provision or portions thereof, the area covered thereby or the type of conduct restricted therein, the parties hereto agree that the court making such determination shall have the power to modify the duration, geographic area and/or, as the case may be, other terms of such provisions or portions thereof, and, as so modified, said provisions or portions thereof shall then be enforceabl e. In the event that the courts of any one or more jurisdictions shall hold such provisions wholly or partially unenforceable by reason of the scope thereof or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the Company'

s rights provided for herein in the courts of any other jurisdictions as to breaches or threatened breaches of such provisions in such other jurisdictions, the above provisions as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants.

15. Non-Waiver. Failure by either the Company or Employee to enforce any of the provisions of this Agreement or any rights with respect hereto, or the failure to exercise any option provided hereunder, shall in no way be considered to be waiver of such provisions, rights or options, or to in any way affect the validity of this Agreement.

16. Headings. The headings preceding the text of the paragraphs of this Agreement have been inserted solely for convenience of reference and neither constitute a part of this Agreement nor affect its meaning, interpretation, or effect.

[SIGNATURE LINES ARE ON NEXT PAGE]

IN WITNESS WHEREOF, the parties have executed these presents as of the day and year first above written.

/s/ Sean C. Harrington

Sean C. Harrington

Elemis Limited

By:/s/ Leonard Fluxman

Leonard Fluxman,

Director

EX-10 5 exhibit10_26a.htm MI925568.DOC;1 EXHIBIT 10.26a

SECOND AMENDMENT and CONSENT
to
CREDIT AGREEMENT

THIS SECOND AMENDMENT and CONSENT ("Amendment") is made as of December 31, 2002 by and among Steiner Leisure Limited, a company organized under the laws of The Commonwealth of the Bahamas (the "Borrower"), the financial institutions listed on the signature pages hereof (the "Lenders") and ABN AMRO Bank N.V., as contractual representative (the "Administrative Agent"), under that certain Credit Agreement dated as of July 2, 2001 by and among the Borrower, the Lenders, the Administrative Agent, SunTrust Bank, as "Syndication Agent" and BankUnited, FSB, as "Documentation Agent", as amended by the First Amendment, Waiver and Consent thereto dated as of March 8, 2002 (the "Credit Agreement"). Capitalized terms used but not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.

WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to the Credit Agreement;

WHEREAS, the Borrower has informed the Lenders that the Borrower is considering acquiring (i) from Shiseido Investment US, Inc., a company organized under the laws of Delaware, the remaining 20.22% of the membership interests of Mandara Spa LLC, a Delaware limited liability company ("Mandara U.S.") through its Subsidiary, Steiner Spa Limited, a company organized under the laws of The Commonwealth of The Bahamas ("Mandara Holdings U.S."), and (ii) from Shiseido Co., Ltd., a company organized under the laws of Japan, the remaining 40% of the membership interests of Mandara Spa Asia Limited, a company organized under the laws of the British Virgin Islands ("Mandara Asia") through its Subsidiary, Steiner Spa Asia Limited, a company organized under the laws of The Commonwealth of The Bahamas ("Mandara Holdings Asia"), on substantially the terms and conditions outlined in that certain draft dated December 20, 2002 of the proposed Equity Exchange Agreement among Mandar a Holdings U.S., Mandara Holdings Asia, Shiseido Investments US, Inc. and Shiseido Co., Ltd. (the "Draft Exchange Agreement"), and such other related information as has been provided to the Lenders, whereupon Mandara U.S. and Mandara Asia would become indirect wholly-owned Subsidiaries of the Borrower (the "Proposed Acquisition");

WHEREAS, the purchase price for the Proposed Acquisition exceeds the limitations set forth for "Permitted Acquisitions" under the terms of the Credit Agreement;

WHEREAS, the Borrower has requested that the Lenders (i) consent to the Proposed Acquisition and otherwise treat the Proposed Acquisition as a Permitted Acquisition under the Credit Agreement and (ii) amend certain other provisions of the Credit Agreement; and

WHEREAS, the Lenders and the Administrative Agent have agreed to amend the Credit Agreement and consent to the Proposed Acquisition on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the Administrative Agent have agreed to the following amendment and consent to the Credit Agreement.

Amendments. Effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 3 below, the Credit Agreement is hereby amended as follows:

Section 1.1 of the Credit Agreement is hereby amended to restate the definitions for "Shiseido" and "Shiseido Note" in their entirety and to substitute the following defined terms therefor:

"Shiseido" means Shiseido Co., Ltd., a company organized under the laws of Japan.

"Shiseido Note" means that certain unsecured promissory note amended and restated as of March 28, 2001 by Mandara U.S. in an aggregate principal amount of $4,100,000 in favor of Shiseido, as the same may be amended, supplemented or modified in accordance with Section 7.3(S) hereof.

Section 7.3(S) of the Credit Agreement is hereby amended to add the words ", the Shiseido Note" immediately following each reference to "the Mandara Subordinated Notes" therein.

Upon the consummation of the Proposed Acquisition, Schedule 6.8 to the Credit Agreement shall be deemed automatically amended to reflect that the sole stockholder of Mandara Asia is Mandara Holdings Asia and that the sole membership interest holder of Mandara Spa LLC is Mandara Holdings U.S.

Consent to Proposed Acquisition. Notwithstanding the provisions of Section 7.3(G)(z)(iv)(a) and (b) of the Credit Agreement to the contrary, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 3 below, the Lenders hereby agree that (i) the purchase price limitation applicable to individual Acquisitions under Section 7.3(G)(z)(iv)(a) shall not apply to the Proposed Acquisition and (ii) the purchase price limitation applicable to all Acquisitions occurring during a calendar year under Section 7.3(G)(z)(iv)(b) of the Credit Agreement shall not apply to prohibit the Proposed Acquisition. Consequently, the Lenders hereby (a) consent to the consummation of the Proposed Acquisition during the calendar year ending December 31, 2002, on substantially the terms as more particularly described in the Draft Exchange Agreement and (b) agree to otherwise treat the Proposed Acquisition as a Permitted Acquisition for all other purposes under the Credit Agreement; provided, that:

if the Proposed Acquisition is consummated substantially as contemplated in the Draft Exchange Agreement, then neither the Parent nor any of its Subsidiaries shall make any other Acquisitions (whether or not such Acquisitions would comply with any provisions of Section 7.3(G)) for the remainder of the calendar year ending December 31, 2002;

if the Proposed Acquisition is not consummated as contemplated in the Draft Exchange Agreement, then Sections 7.3(G)(z)(iv)(a) and (b) (and all other provisions of Section 7.3(G)) shall continue to apply to all other Acquisitions proposed by the Parent or any of its Subsidiaries for the remainder of such calendar year;

the Borrower shall have delivered to the Administrative Agent a subordination agreement in form and substance reasonably satisfactory to the Administrative Agent executed by and among Shiseido, the Administrative Agent, Mandara U.S. and the Borrower whereby, inter alia, Shiseido shall agree to subordinate payment of the Indebtedness evidenced by the Shiseido Note and any guarantee therefor provided by the Borrower or any of its Subsidiaries, to the payment in full in cash of the Secured Obligations.

no Default or Unmatured Default shall have occurred and be continuing or would result from the Proposed Acquisition or the incurrence of any Indebtedness in connection therewith;

either (x) Mandara U.S. and Mandara Asia shall be merged with and into the Borrower or any wholly-owned Subsidiary immediately following the Proposed Acquisition, with the Borrower or such wholly-owned Subsidiary being the surviving entity following such merger or (y) the results of operations of Mandara U.S. and Mandara Asia shall be reported on a consolidated basis with the Borrower and its consolidated Subsidiaries;

the purchase is consummated pursuant to a negotiated acquisition agreement on a non-hostile basis and, if necessary, approved by Mandara U.S.'s and/or Mandara Asia's board of directors or comparable governing body (and shareholders, if necessary) prior to the consummation of the Proposed Acquisition; and the acquisition documents in respect of the Proposed Acquisition are reasonably satisfactory to the Administrative Agent (including, without limitation, in respect of representations, indemnities and opinions) and the results of due diligence in respect of such purchase are reasonably satisfactory to the Administrative Agent;

the businesses being acquired shall be substantially similar, related or incidental to the businesses or activities engaged in by the Borrower and its Subsidiaries on the Closing Date; and

the Borrower shall have delivered to the Administrative Agent and the Lenders a certificate from one of the Authorized Officers, demonstrating to the reasonable satisfaction of the Administrative Agent that after giving effect to the Proposed Acquisition and the incurrence of any Indebtedness permitted by Section 7.3(A) of the Credit Agreement in connection therewith, on a pro forma basis using historical financial statements obtained from the seller(s) (broken down by fiscal quarter

in the Borrower's reasonable judgment the amounts from which shall be unadjusted unless adjustments thereto have been approved in writing by the Administrative Agent) in respect of the Proposed Acquisition as if the Proposed Acquisition and such incurrence of Indebtedness had occurred on the first day of the immediately preceding twelve-month period ending on the last day of the Borrower's most recently completed fiscal quarter, the Borrower would have been in compliance with the financial covenants in Section 7.4 of the Credit Agreement and not otherwise in Default.

In addition to the foregoing, this consent is contingent on the condition subsequent that the Borrower and its Subsidiaries shall comply with (x) all of the requirements of the Collateral Documents in respect of the Proposed Acquisition and (y) all of the provisions regarding Collateral set forth in the Credit Agreement and the other Loan Documents with respect to Mandara U.S. and Mandara Asia, including, without limitation, the delivery of Subsidiary Guarantees, Collateral Documents, corporate resolutions, opinions and other documentation in form and substance reasonably satisfactory to the Administrative Agent in accordance with the terms of Sections 7.2(J), (K) and (N), in each case, to the full extent applicable and giving effect to any grace periods provided therein.

Condition of Effectiveness. The effectiveness of this Amendment is subject to the condition precedent that:

the Administrative Agent shall have received:

counterparts of this Amendment duly executed by the Borrower, the Required Lenders and the Administrative Agent;

counterparts of the Reaffirmation attached hereto duly executed by each Subsidiary Guarantor; and

for the account of each Lender, a fee in the amount of 7.5 basis points on the sum of (i) such Lender's Revolving Loan Commitment and (ii) the aggregate outstanding principal amount of such Lender's Term Loans; and

except as expressly provided in Section 2 above, the Borrower is otherwise in compliance with the conditions contained in Section 7.3(G)(z) of the Credit Agreement.

Representations and Warranties of the Borrower. The Borrower hereby represents and warrants as follows:

This Amendment and the Credit Agreement as modified hereby constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms.

As of the date hereof and giving effect to the terms of this Amendment, (i) there exists no Default or Unmatured Default and (ii) the representations and warranties contained in Article VI of the Credit Agreement, as modified hereby, are true and correct, except for changes reflecting events, conditions or transactions permitted or not prohibited by the Credit Agreement.

Reference to and Effect on the Credit Agreement and Loan Documents.

Upon the effectiveness of Sections 1 and 2 hereof, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as modified hereby.

The Borrower reaffirms the terms and conditions of the Credit Agreement and the Loan Documents executed by it, including, without limitation, the Security Agreement, the Pledge Agreements, the Collection Account Agreements, the Intellectual Property Security Agreements and the Real Property Documents, as applicable, and acknowledges and agrees that except as specifically modified above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of or consent to any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.

Governing Law. THE ADMINISTRATIVE AGENT ACCEPTS THIS AMENDMENT, ON BEHALF OF ITSELF, THE ARRANGER AND THE LENDERS, AT CHICAGO, ILLINOIS BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE BETWEEN THE BORROWER AND THE ADMINISTRATIVE AGENT, THE ARRANGER, ANY LENDER, OR ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AMENDMENT OR THE CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET SEQ., BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS.

Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

STEINER LEISURE LIMITED, as the Borrower

/s/

Name: Leonard Fluxman

Title: President and Chief Executive Officer

ABN AMRO BANK N.V., as Administrative Agent and as a Lender

/s/

Name: David Martens

Title: SVP

/s/

Name: Nancy Carney

Title: Vice President

SUNTRUST BANK, Syndication Agent and as a Lender

/s/

Name: Sanja Shank

Title: Assistant Vice President

BANKUNITED FSB, as Documentation Agent and as a Lender

/s/

Name: Roberto Pelaez

Title: Senior Vice President

Director of Corporate Banking

THE INTERNATIONAL BANK OF MIAMI, N.A., as a Lender

/s/

Name: Caridad C. Errazquin

Title: Vice President

HSBC BANK USA, as a Lender

/s/

Name: Gregory Roll

Title: First Vice President

EX-10 6 exhibit10_26b.htm MI925570.DOC;1 EXHIBIT 10.26b

EXECUTION COPY

THIRD AMENDMENT, WAIVER AND CONSENT
to
CREDIT AGREEMENT

THIS THIRD AMENDMENT, WAIVER AND CONSENT to CREDIT AGREEMENT ("Amendment") is made as of March 7, 2003 by and among Steiner Leisure Limited, a company organized under the laws of The Commonwealth of the Bahamas (the "Borrower"), the financial institutions listed on the signature pages hereof (the "Lenders") and ABN AMRO Bank N.V., as contractual representative (the "Administrative Agent"), under that certain Credit Agreement dated as of July 2, 2001 by and among the Borrower, the Lenders, the Administrative Agent, SunTrust Bank, as "Syndication Agent" and BankUnited, FSB, as "Documentation Agent", as amended by the First Amendment, Waiver and Consent thereto dated as of March 8, 2002 and by the Second Amendment and Consent thereto (the "Second Amendment") dated as of December 31, 2002 (the "Credit Agreement"). Capitalized terms used but not otherwise defined herein shall have the respective meanings given to them in the Cre dit Agreement.

WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to the Credit Agreement;

WHEREAS, the Borrower has informed the Lenders that the Borrower is contemplating a series of Asset Sales involving the assets of Greenhouse Day Spa Group, Inc., a Florida corporation, Steiner Marks Limited, a company organized under the laws of The Commonwealth of the Bahamas and Steiner Day Spas, Inc., a California corporation, which Asset Sales shall be consummated on substantially the payment terms outlined on Exhibit A attached hereto, which Exhibit A shall describe, with respect to each Asset Sale, (i) all cash (if any) and all non-cash consideration required to be paid or otherwise transferred to the Borrower and its Subsidiaries for the applicable transferred assets and (ii) all transaction-related cash and non-cash payments required to be made by the Borrower or any of its Subsidiaries to the purchasers (including actual amounts and the maximum amount payable under contingent purchase price adjustments or other contingent agreements) (as such terms relate to each Asset Sale, the "Applicable Payment Terms") (each such Asset Sale being referred to individually as a "Proposed Asset Sale" and, collectively as the "Proposed Asset Sales");

WHEREAS, Section 7.3(B)(iii)(a) of the Credit Agreement requires that any Asset Sale permitted under such Section 7.3(B)(iii) be for consideration consisting of at least eighty-five percent (85%) cash;

WHEREAS, Section 7.3(B)(iii)(b) of the Credit Agreement requires that any Asset Sale permitted under such Section 7.3(B)(iii) be for consideration constituting not less than fair market value for the applicable transferred assets, as determined in good faith by the Borrower's board of directors or equivalent governing body;

WHEREAS, the Borrower closed (i) the "57^th Street Asset Sale" (as defined on Exhibit A attached hereto) on January 29, 2003 and (ii) the "Beverly Hills, California Asset Sale" (as defined on Exhibit A attached hereto) on March 1, 2003;

WHEREAS, the Borrower has failed to comply with Section 2.5(C) of the Credit Agreement, which requires that the Revolving Credit Obligations (other than any outstanding L/C Obligations) be reduced to zero and remain at zero for a period of thirty (30) consecutive days at least once each fiscal year (the "Clean-Down Provision"), for the fiscal year ending 2001 and the fiscal year ending 2002;

WHEREAS, the Borrower has requested additional time to deliver the Subsidiary Guarantees, Collateral Documents, corporate resolutions, opinions and other documentation required by Sections 7.2(J), (K) and (N) of the Credit Agreement and Section 2 of the Second Amendment in connection with the "Proposed Acquisition" (under and as defined in the Second Amendment; herein, the "Final Mandara Acquisition");

WHEREAS, the Borrower has requested that the Lenders (a) amend the Credit Agreement as provided herein, (b) waive the Defaults resulting from (i) the failure of the Borrower to comply with the provisions of Section 2.5(C) of the Credit Agreement and (ii) the consummation of each of the 57^th Street Asset Sale and the Beverly Hills, California Asset Sale, and (c) consent to (i) the Proposed Asset Sales and otherwise treat the Proposed Asset Sales as permitted transactions under the Credit Agreement and (ii) an extension of time to deliver the documents required under the Credit Agreement and the Second Amendment in connection with the Final Mandara Acquisition; and

WHEREAS, the Lenders and the Administrative Agent have agreed to do so on the terms and conditions set forth herein;

Amendment. Effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4 below, the Administrative Agent and the Lenders hereby agree to amend the definition of "Net Cash Proceeds" set forth in Section 1.1 of the Credit Agreement by adding the following proviso at the end thereof:

provided, however, that in each of the case of clauses (a) and (b) above, cash or Cash Equivalents received by such Person or any of its Subsidiaries pursuant to indemnification provisions in favor of such Person or its Subsidiaries and provisions for reimbursement of costs and expenses actually incurred by such Person or its Subsidiaries in connection with any Asset Sale (but whether or not incurred at the time of closing) shall not be deemed "Net Cash Proceeds."

Waiver. Effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4 below, the Administrative Agent and the Lenders hereby agree to waive any Default or Unmatured Default arising from (a) the closing of the 57^th Street Asset Sale, and more specifically caused by a failure to satisfy Section 7.3(B)(iii)(a) of the Credit Agreement in connection therewith, (b) the closing of the

Beverly Hills, California Asset Sale, and more specifically caused by a failure to satisfy Sections 7.3(B)(iii)(a) and (b) of the Credit Agreement in connection therewith (provided, that for purposes of clarification, the waiver in this clause (b) is further subject to the delivery of the certificate referred to in Section 4(b)) and (c) the failure to comply with the Clean-Down Provision described in Section 2.5(C) of the Credit Agreement for the fiscal years ending 2001 and 2002.

Consents.

Consent to Proposed Asset Sales.

Notwithstanding the provisions of Section 7.3(B)(iii)(a) and (b) of the Credit Agreement to the contrary, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4 below, the Administrative Agent and the Lenders hereby:

(x) agree that the requirement that any Asset Sale be for consideration consisting of at least eighty-five percent (85%) cash shall be waived with respect to the Proposed Asset Sales and consent to the consummation of each individual Proposed Asset Sale, on substantially the Applicable Payment Terms described on Exhibit A hereto (as the same may be amended or otherwise modified with the prior written consent of the Administrative Agent; provided, that (a) notwithstanding the footnote qualification on Exhibit A, neither the Borrower nor any of its Subsidiaries shall make or become obligated to make any actual or contingent cash payment that has not been specifically described on Exhibit A to any purchaser in connection with such Proposed Asset Sale without the prior written consent of the Administrative Agent and (b) the Borrower shall be entitled to receive additional cash consideration not reflected on Exhibit A as consideration for any Proposed Asset Sale upon notice to but without the prior written consent of the Administrative Agent);

(y) agree that the requirement that any Asset Sale be for not less than fair market value (as determined in good faith by the Borrower's board of directors or equivalent governing body) as consideration for the applicable transferred assets shall be satisfied with respect to the Proposed Asset Sales by (1) the board of director's delegation of authority, through a duly authorized resolution (the "Resolution"), to Leonard I. Fluxman, in his capacity as president and chief executive officer of the Borrower ("Fluxman"), to make such good faith determination of fair market value and (2) the delivery of the certificates referred to in Section 4(b); and

(z) agree to otherwise treat each individual Proposed Asset Sale as a transaction permitted under the terms of the Credit Agreement for all other purposes under the Credit Agreement (including Sections 12.12(C)(ii) and 12.12(D) thereof);

provided, that in order for the foregoing clauses (x), (y) and (z) to become effective with respect to any individual Proposed Asset Sale, the conditions set forth in Section 7.3(B)(iii)(c) of the Credit Agreement shall have been satisfied, and the certificate referred to in Section 4(b) shall have been delivered, with respect to such Proposed Asset Sale prior to its consummation.

Notwithstanding the Borrower's assertion that it does not anticipate receiving any cash consideration for any of the Proposed Asset Sales, nothing in this Amendment shall in any way limit the Borrower's obligation to make a mandatory prepayment of the Obligations in an amount equal to one hundred percent (100%) of any Net Cash Proceeds of any Proposed Asset Sale or any Net Cash Proceeds received upon conversion to cash or Cash Equivalents of non-cash proceeds from any Proposed Asset Sale, in each case, in accordance with the terms of, and as more fully described in, Section 2.5(B)(i) of the Credit Agreement.

Consent to Delivery of Mandara Collateral Documents. Notwithstanding the provisions of Sections 7.2(J), (K) and (N) of the Credit Agreement or Section 2 of the Second Amendment to the contrary, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4 below, the Administrative Agent and the Lenders hereby agree that, solely with respect to the Mandara Final Acquisition, the Borrower and its Subsidiaries shall be given until March 31, 2003 to comply with (i) all of the requirements of the Collateral Documents in respect of the Proposed Acquisition and (ii) all of the provisions regarding Collateral set forth in the Credit Agreement and the other Loan Documents with respect to Mandara U.S. and Mandara Asia, including, without limitation, the delivery of Subsidiary Guarantees, Collateral Documents, corporate resolutions, opinions and other documentation in form and substance reasonably satisfactor y to the Administrative Agent in accordance with the terms of Sections 7.2(J), (K) and (N) of the Credit Agreement in each case, to the full extent applicable.

Condition of Effectiveness.

The effectiveness of this Amendment is subject to the receipt by the Administrative Agent of the following:

counterparts of this Amendment duly executed by the Borrower, the Required Lenders and the Administrative Agent;

counterparts of the Reaffirmation attached hereto duly executed by each Subsidiary Guarantor;

for the account of each Lender that delivers a duly executed signature page to this Amendment, a fee by wire transfer of immediately available funds in the amount of 7.5 basis points on the sum of (i) such Lender's Revolving Loan Commitment and (ii) the aggregate outstanding principal amount of such Lender's Term Loans;

a copy of the Resolution, certified to the Administrative Agent and the Lenders by the Senior Vice President and General Counsel of the Borrower;

all out-of-pocket expenses incurred by the Administrative Agent invoiced by February 27, 2003 in connection with the Credit Agreement, this Amendment, any other Loan Document or the transactions contemplated by any of the foregoing (including, without limitation, the reasonable fees and disbursements of Sidley Austin Brown &Wood and Clifford Chance US LLP), shall have been paid by the Borrower; and

all legal matters incident to this Amendment and the effects hereof or any of the Loan Documents shall be reasonably satisfactory to the Administrative Agent and its counsel.

The effectiveness of Section 3(a) of this Amendment with respect to each Proposed Asset Sale (including, without limitation, the Beverly Hills, California Asset Sale, but excluding the 57^th Street Asset Sale) is further subject to the receipt by the Administrative Agent of a certificate, duly executed by Fluxman, dated as of the date of such Proposed Asset Sale and otherwise in form and substance satisfactory to the Administrative Agent, certifying that, in Fluxman's good faith determination, the consideration received under such Proposed Asset Sale constitutes not less than fair market value for the assets transferred by the Borrower and its Subsidiaries in connection therewith.

Administrative Agent's Authorization and Agreement to Release Liens. The Administrative Agent reaffirms its agreement to deliver (and the Lenders reaffirm the irrevocable authorization granted to the Administrative Agent to deliver), upon the consummation of each Proposed Asset Sale permitted hereby and upon at least five (5) Business Day's prior request by the Borrower (which, notwithstanding anything to the contrary in the Credit Agreement, may be made orally), such documents as may be necessary to evidence the release of the Liens granted to the Administrative Agent for the benefit of the Holders of Secured Obligations on the Collateral that is sold or transferred in connection with such Proposed Asset Sale, subject to the terms of Section 12.12(D) of the Credit Agreement.

Representations and Warranties of the Borrower. The Borrower hereby represents and warrants as follows:

The execution, delivery and performance by the Borrower of this Amendment and of the Credit Agreement as modified by this Amendment (i) has been duly authorized by all requisite corporate action and (ii) will not violate (a) any provision of any statute, rule or regulation, or the Certificate of Incorporation or By-laws (or similar governing documents) of the Borrower, (b) any applicable order of any court or any rule, regulation or order of any other agency of government or (c) any indenture, agreement or other instrument to which any of the Loan Parties is a party or by which any of the Loan Parties or any of their properties is bound, or be in conflict with, result in a breach of, or constitute (with notice or lapse of time or both) a default under, any such indenture, agreement, or other instrument.

This Amendment and the Credit Agreement as modified hereby constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms.

As of the date hereof and giving effect to the terms of this Amendment, (i) there exists no Default or Unmatured Default and (ii) the representations and warranties contained in Article VI of the Credit Agreement, as modified hereby, are true and correct, except for changes reflecting events, conditions or transactions permitted or not prohibited by the Credit Agreement.

Reference to and Effect on the Credit Agreement and Loan Documents.

Upon the effectiveness of this Amendment, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as modified hereby.

The Borrower reaffirms the terms and conditions of the Credit Agreement and the Loan Documents executed by it, including, without limitation, the Security Agreement, the Pledge Agreements, the Collection Account Agreements, the Intellectual Property Security Agreements and the Real Property Documents, as applicable, and acknowledges and agrees that except as specifically modified above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of or consent to any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.

Should there by a need for further waivers with respect to these covenants or any other provisions of the Loan Documents, those requests shall be evaluated by the Lenders when formally requested, in writing, by the Borrower, and the Lenders may deny any such request for any reason in their sole discretion.

CONFIRMATION AND ACKNOWLEDGEMENT OF THE OBLIGATIONS; RELEASE. THE BORROWER HEREBY (A) CONFIRMS AND ACKNOWLEDGES TO THE ADMINISTRATIVE AGENT AND THE LENDERS THAT IT IS VALIDLY AND JUSTLY INDEBTED TO THE ADMINISTRATIVE AGENT AND THE LENDERS FOR THE PAYMENT OF ALL SECURED OBLIGATIONS WITHOUT OFFSET, DEFENSE, CAUSE OF ACTION OR COUNTERCLAIM OF ANY KIND OR NATURE WHATSOEVER AND (B) REAFFIRMS AND ADMITS THE VALIDITY AND ENFORCEABILITY OF THE CREDIT AGREEMENT AND THE LOAN DOCUMENTS AND THE LIENS IN THE COLLATERAL WHICH WERE GRANTED PURSUANT TO ANY OF THE LOAN DOCUMENTS OR OTHERWISE. THE BORROWER, ON ITS OWN BEHALF AND ON BEHALF OF ITS SUCCESSORS AND ASSIGNS, HEREBY WAIVES, RELEASES AND DISCHARGES THE ADMINISTRATIVE AGENT AND EACH LENDER AND ALL OF THE AFFILIATES OF THE ADMINISTRATIVE AGENT AND EACH LENDER, AND ALL OF THE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS, AGENTS, SUCCESSORS AND ASSIGNS OF THE ADMINISTRATIVE AGENT, EACH LENDER AND SUCH AFFILIATES, FROM ANY AND ALL CLAIMS, DEMANDS, ACTIONS OR CAUSES OF ACTION (KNOWN OR UNKNOWN) ARISING OUT OF OR IN ANY WAY RELATING TO ANY OF THE LOAN DOCUMENTS AND ANY DOCUMENTS, AGREEMENTS,

DEALINGS OR OTHER MATTERS CONNECTED WITH ANY OF THE LOAN DOCUMENTS, IN EACH CASE TO THE EXTENT ARISING (X) ON OR PRIOR TO THE DATE HEREOF OR (Y) OUT OF, OR RELATING TO, ACTIONS, DEALINGS OR MATTERS OCCURRING ON OR PRIOR TO THE DATE HEREOF.

Governing Law. THE ADMINISTRATIVE AGENT ACCEPTS THIS AMENDMENT, ON BEHALF OF ITSELF, THE ARRANGER AND THE LENDERS, AT CHICAGO, ILLINOIS BY ACKNOWLEDGING AND AGREEING TO IT THERE. ANY DISPUTE BETWEEN THE BORROWER AND THE ADMINISTRATIVE AGENT, THE ARRANGER, ANY LENDER, OR ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AMENDMENT OR THE CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET SEQ., BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS.

Costs and Expenses. The Borrower acknowledges and agrees that its obligations set forth in Section 11.7 of the Credit Agreement include the preparation, execution and delivery of this Amendment and any other documentation contemplated hereby or thereby (whether or not this Amendment becomes effective or the transactions contemplated hereby are consummated), including, but not limited to, the reasonable fees and disbursements of Sidley Austin Brown & Wood and Clifford Chance US LLP, counsel to the Administrative Agent.

Loan Document. This Amendment is a Loan Document pursuant to the Credit Agreement and shall (unless expressly indicated herein or therein) be construed, administered, and applied, in accordance with all of the terms and provisions of the Credit Agreement.

Successors and Assigns. The provisions of this Amendment shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns.

Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment.

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

STEINER LEISURE LIMITED, as the Borrower

/s/

Name: Leonard I. Fluxman

Title: President & Chief Executive Officer

ABN AMRO BANK N.V., as Administrative Agent and as a Lender

/s/

Name: Steven C. Wimpenny

Title: Group Senior Vice President

/s/

Name: Parker H. Douglas

Title: Senior Vice President

SUNTRUST BANK, as Syndication Agent and as a Lender

/s/

Name: Sanja Shank

Title: Vice President

BANKUNITED FSB, as Documentation Agent and as a Lender

/s/

Name: Roberto Pelaez

Title: Senior Vice President & Director

THE INTERNATIONAL BANK OF MIAMI, N.A., as a Lender

/s/

Name: Caridad Errazquin

Title: Vice President

HSBC BANK USA, as a Lender

/s/

Name: Gregory Roll

Title: First Vice President

EX-10 7 exhibit10_26c.htm MI925545.DOC;1 EXHIBIT 10.26c

EXECUTION COPY

FOURTH AMENDMENT AND CONSENT
to
CREDIT AGREEMENT

THIS FOURTH AMENDMENT AND CONSENT to CREDIT AGREEMENT ("this Amendment") is made as of March 28, 2003 by and among Steiner Leisure Limited, a company organized under the laws of The Commonwealth of the Bahamas (the "Borrower"), the financial institutions listed on the signature pages hereof (the "Lenders") and SUNTRUST BANK, as contractual representative (the "Administrative Agent"), under that certain Credit Agreement dated as of July 2, 2001 (as amended, the "Credit Agreement") by and among the Borrower, the Lenders, SUNTRUST BANK, as Lender and Syndication Agent, ABN AMRO BANK N.V., as a Lender and as Arranger and Administrative Agent (succeeded as Administrative Agent by SUNTRUST BANK on March 18, 2003), and BankUnited, FSB, as Documentation Agent, as amended by the First Amendment, Waiver and Consent thereto dated as of March 8, 2002, the Second Amendment and Consent thereto (the "Second Amendment") dated as of December 31, 2002, and the Third Amendment, Waiver and Consent, dated as of March 7, 2003 (the "Third Amendment"). Capitalized terms used b ut not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.

WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to the Credit Agreement;

WHEREAS, the Borrower has requested that the Lenders amend the Credit Agreement as provided herein; and

WHEREAS, the Lenders and the Administrative Agent have agreed to do so on the terms and conditions set forth herein.

Amendment. Effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 4 below, the Credit Agreement is hereby amended as follows:

The definition of "EBITDA" set forth in Section 1.1 of the Credit Agreement is hereby amended by adding the following proviso at the end thereof:

provided, further, that for the fiscal period ending December 31, 2002, certain non-cash losses on disposal of certain day spa operations of the Borrower and its Subsidiaries, in the amount of $14,406,000, shall not be deducted in the computation of EBITDA; and for any fiscal period in fiscal year 2003, certain non-cash losses on disposal of certain day spa operations of the Borrower and its Subsidiaries, shall not be deducted in the computation of EBITDA.

The installment payment table set forth in Section 2.1(D) of the Credit Agreement is hereby amended as follows to delete the amounts set forth therein for Payment Dates in 2003 and 2004 and to substitute the following amounts therefor:

Installment Date		Term Loan Installment Amount
March 31, 2003		$1,347,195
June 30, 2003		$4,000,000
September 30, 2003		$4,500,000
December 31, 2003		$4,500,000
March 31, 2004		$4,500,000
Term Loan Termination Date		$4,500,000

The table set forth in Section 7.4(C) of the Credit Agreement is hereby amended as follows to delete the Fixed Charge Coverage Ratio levels for the four fiscal quarters in 2003, the fiscal quarter ending March 31, 2004, and each quarter thereafter, and to substitute the following levels therefor:

Fiscal Quarter Ending		Term Loan
March 31, 2003		1.05 to 1.00
June 30, 2003		1.05 to 1.00
September 30, 2003		1.05 to 1.00
December 31, 2003		1.05 to 1.00
March 31, 2004 and each quarter thereafter		1.05 to 1.00

The table set forth in Section 7.4(D) of the Credit Agreement is hereby amended as follows to delete the level of Capital Expenditures for fiscal year 2003, and to substitute the following level therefor:

Applicable Period Capital Expenditures

January 1, 2003 through December 31, 2003 $5,000,000

Section 11.13(A) of the Credit Agreement is hereby amended and restated to read in its entirety as follows:

(A) JURISDICTION. EACH OF THE PARTIES HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF EITHER (AT ADMINISTRATIVE AGENT'S ELECTION) ANY ILLINOIS STATE OR UNITED STATES DISTRICT COURT SITTING IN CHICAGO, ILLINOIS, OR ANY FLORIDA STATE OR UNITED STATES DISTRICT COURT SITTING IN MIAMI-DADE COUNTY, FLORIDA, IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS (WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE) AND HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR

PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH STATE OR FEDERAL COURT. EACH OF THE PARTIES HEREBY ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS OR MIAMI-DADE COUNTY, FLORIDA. EACH OF THE PARTIES HEREBY WAIVES, IN ANY AND ALL DISPUTES BROUGHT PURSUANT TO THIS SUBSECTION (A), ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.

Section 2.5(C) of the Credit Agreement is hereby amended by adding the following proviso at the end thereof:

provided that, the requirements set forth in this Section 2.5(C) shall not apply for the fiscal year ending December 31, 2003.

Consent. Notwithstanding the provisions of Sections 7.2(J), (K) and (N) of the Credit Agreement, Section 2 of the Second Amendment or Section 3(b) of the Third Amendment to the contrary, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 3 below, the Administrative Agent and the Lenders hereby agree that, solely with respect to the Final Mandara Acquisition, the Borrower and its Subsidiaries shall be given until May 15, 2003 to comply with (i) all of the requirements of the Collateral Documents in respect of the Final Mandara Acquisition and (ii) all of the provisions regarding Collateral set forth in the Credit Agreement and the other Loan Documents with respect to Mandara U.S. and Mandara Asia, including, without limitation, the delivery of Subsidiary Guarantees, Collateral Documents, corporate resolutions, opinions and other documentation in form and substance reasonably satisfactory to the Administrative Agent in accordance with the terms of Sections 7.2(J), (K) and (N) of the Credit Agreement in each case, to the full extent applicable.

Condition of Effectiveness.

The effectiveness of this Amendment is subject to the receipt by the Administrative Agent of the following:

counterparts of this Amendment duly executed by the Borrower, all of the Lenders and the Administrative Agent;

counterparts of the Reaffirmation attached hereto duly executed by each Subsidiary Guarantor;

for the account of each Lender that delivers a duly executed signature page to this Amendment, a fee by wire transfer of immediately available funds in the amount of 50 basis points, calculated on the sum of (i) such Lender's Revolving Loan Commitment and (ii) the aggregate outstanding principal amount of such Lender's Term Loans;

all out-of-pocket expenses incurred by the Administrative Agent in connection with the Credit Agreement, this Amendment, any other Loan Document or the transactions contemplated by any of the foregoing (including, without limitation, the reasonable fees and disbursements of Shutts & Bowen LLP), shall have been paid by the Borrower; and

all legal matters incident to this Amendment and the effects hereof or any of the Loan Documents shall be reasonably satisfactory to the Administrative Agent and its counsel.

Representations and Warranties of the Borrower. The Borrower hereby represents and warrants as follows:

The execution, delivery and performance by the Borrower of this Amendment and of the Credit Agreement as modified by this Amendment (i) has been duly authorized by all requisite corporate action and (ii) will not violate (a) any provision of any statute, rule or regulation, or the Certificate of Incorporation or By-laws (or similar governing documents) of the Borrower, (b) any applicable order of any court or any rule, regulation or order of any other agency of government or (c) any indenture, agreement or other instrument to which any of the Loan Parties is a party or by which any of the Loan Parties or any of their properties is bound, or be in conflict with, result in a breach of, or constitute (with notice or lapse of time or both) a default under, any such indenture, agreement, or other instrument.

This Amendment and the Credit Agreement as modified hereby constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms.

As of the date hereof and giving effect to the terms of this Amendment, (i) there exists no Default or Unmatured Default and (ii) the representations and warranties contained in Article VI of the Credit Agreement, as modified hereby, are true and correct, except for changes reflecting events, conditions or transactions permitted or not prohibited by the Credit Agreement.

Reference to and Effect on the Credit Agreement and Loan Documents.

Upon the effectiveness of this Amendment, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as modified hereby.

The Borrower reaffirms the terms and conditions of the Credit Agreement and the Loan Documents executed by it, including, without limitation, the Security Agreement, the Pledge Agreements, the Collection Account Agreements, the Intellectual Property Security Agreements and the Real Property Documents, as applicable, and acknowledges and agrees that except as specifically modified above, the Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of or consent to any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.

Should there by a need for further waivers with respect to these covenants or any other provisions of the Loan Documents, those requests shall be evaluated by the Lenders when formally requested, in writing, by the Borrower, and the Lenders may deny any such request for any reason in their sole discretion.

CONFIRMATION AND ACKNOWLEDGEMENT OF THE OBLIGATIONS; RELEASE. THE BORROWER HEREBY (A) CONFIRMS AND ACKNOWLEDGES TO THE ADMINISTRATIVE AGENT AND THE LENDERS THAT IT IS VALIDLY AND JUSTLY INDEBTED TO THE ADMINISTRATIVE AGENT AND THE LENDERS FOR THE PAYMENT OF ALL SECURED OBLIGATIONS WITHOUT OFFSET, DEFENSE, CAUSE OF ACTION OR COUNTERCLAIM OF ANY KIND OR NATURE WHATSOEVER AND (B) REAFFIRMS AND ADMITS THE VALIDITY AND ENFORCEABILITY OF THE CREDIT AGREEMENT AND THE LOAN DOCUMENTS AND THE LIENS IN THE COLLATERAL WHICH WERE GRANTED PURSUANT TO ANY OF THE LOAN DOCUMENTS OR OTHERWISE. THE BORROWER, ON ITS OWN BEHALF AND ON BEHALF OF ITS SUCCESSORS AND ASSIGNS, HEREBY WAIVES, RELEASES AND DISCHARGES THE ADMINISTRATIVE AGENT AND EACH LENDER AND ALL OF THE AFFILIATES OF THE ADMINISTRATIVE AGENT AND EACH LENDER, AND ALL OF THE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS, AGENTS, SUCCESSORS AND ASSIGNS OF THE ADMINISTRATIVE AGENT, EACH LENDER AND SUCH AFFILIATES, FROM ANY AND ALL CLAIMS, DE MANDS, ACTIONS OR CAUSES OF ACTION (KNOWN OR UNKNOWN) ARISING OUT OF OR IN ANY WAY RELATING TO ANY OF THE LOAN DOCUMENTS AND ANY DOCUMENTS, AGREEMENTS, DEALINGS OR OTHER MATTERS CONNECTED WITH ANY OF THE LOAN DOCUMENTS, IN EACH CASE TO THE EXTENT ARISING (X) ON OR PRIOR TO THE DATE HEREOF OR (Y) OUT OF, OR RELATING TO, ACTIONS, DEALINGS OR MATTERS OCCURRING ON OR PRIOR TO THE DATE HEREOF.

Governing Law. THE ADMINISTRATIVE AGENT ACCEPTS THIS AMENDMENT, ON BEHALF OF ITSELF, AND THE LENDERS. ANY DISPUTE BETWEEN THE BORROWER AND THE ADMINISTRATIVE AGENT, THE ARRANGER, ANY LENDER, OR ANY OTHER HOLDER OF SECURED OBLIGATIONS ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AMENDMENT OR THE CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE

INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION 105/5-1 ET SEQ., BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF ILLINOIS.

Costs and Expenses. The Borrower acknowledges and agrees that its obligations set forth in Section 11.7 of the Credit Agreement include the preparation, execution and delivery of this Amendment and any other documentation contemplated hereby or thereby (whether or not this Amendment becomes effective or the transactions contemplated hereby are consummated), including, but not limited to, the reasonable fees and disbursements of Shutts & Bowen LLP, counsel to the Administrative Agent.

Loan Document. This Amendment is a Loan Document pursuant to the Credit Agreement and shall (unless expressly indicated herein or therein) be construed, administered, and applied, in accordance with all of the terms and provisions of the Credit Agreement.

Successors and Assigns. The provisions of this Amendment shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns.

Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment.

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

STEINER LEISURE LIMITED, as the Borrower

/s/

Name: Carl S. St. Philip

Title: Senior Vice President &

Chief Financial Officer

SUNTRUST BANK, as Administrative Agent, Syndication Agent and as a Lender

/s/

Name: Sanja Shank

Title: Vice President

BANKUNITED FSB, as Documentation Agent and as a Lender

/s/

Name: Roberto Pelaez

Title: Senior Vice Presidenr

ABN AMRO BANK N.V., as a Lender

/s/

Name: Judith M. Bresnen

Title: Group Vice President

/s/

Name: John M. Pastor

Title: Vice President

THE INTERNATIONAL BANK OF MIAMI, N.A., as a Lender

/s/

Name: Caridad C. Errazquin

Title: Vice President

HSBC BANK USA, as a Lender

/s/

Name: Gregory Roll

Title: First Vice President

EX-10 8 exhibit10_27.htm EMPLOYMENT AGREEMENT EXHIBIT 10.27

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") is made effective the 14th day of May 2003 by and between Steiner Leisure Limited, a Bahamas international business company (the "Company"), and Glenn Fusfield ("Employee").

W I T N E S S E T H:

WHEREAS, the Company and Employee desire to provide for the terms of the services to be performed by Employee for the Company, as previously reflected in that certain Employment Agreement between Employee and the Company dated October 10, 2000, as amended, effective January 1, 2002 (collectively, the "Prior Agreement") and as further amended hereby by amending and restating the Prior Agreement herein.

NOW THEREFORE, in consideration of the premises and mutual agreements hereinafter contained, the parties hereto agree as follows:

Employment. The Company hereby employs Employee as Chief Operating Officer of the Company and Employee hereby accepts such employment. Employee shall have such duties and responsibilities consistent with such position as may be determined from time to time by the Board of Directors of the Company (the "Board") or the President of the Company (the "President"), including duties with respect to affiliates (as defined in Rule 405 under the Securities Act of 1933, as amended) of the Company (each, an "Affiliate"). During the term of this Agreement, Employee shall devote all his working time and effort to the conduct of his duties hereunder. Employee shall be based at the principal offices of the Company's Steiner Management Services, LLC Affiliate, which offices currently are located in Coral Gables, Florida. In the event of a relocation of Employee by the Company as a result of the relocation of such principal offices, the terms of Section 3(d), bel ow, shall govern.

Term. This Agreement is for a term commencing on November 15, 2000 and terminating on December 31, 2003, unless terminated sooner in accordance with the terms and conditions in Sections 2(b), and 5, below.

Compensation; Expense Reimbursement.

Salary; Bonus; Etc. Except as otherwise provided herein, the Company (or any Affiliate) shall pay to Employee during the term hereof compensation as described in this Section 3(a), all of which shall be subject to such deductions as may be required by applicable law or regulation:

Base Salary. (A) a base salary at the rate of Two Hundred Thirty Thousand Four Hundred Dollars (U.S. $230,400) per year for calendar year ("Year") 2003 and (B) a base salary at the rate of not less than Two Hundred Thirty Thousand Four Hundred Dollars

(U.S. $230,400) per year for each Year thereafter during the term of this Agreement, subject to annual review, and possible increase in the sole discretion of the Board, payable in bi-weekly installments (the "Base Salary").

Incentive Bonus. Employee is eligible to receive a bonus (the "Incentive Bonus") equal to Fifty percent (50%) of Base Salary tied to achieved Company budgeted Net Earnings (as defined below) for the respective Year in the term. With respect to each Year during the term hereof, the Incentive Bonus shall be based on a budget for the four fiscal quarters of each Year hereunder, which budget includes an estimate of the Net Earnings for such Year and which budget shall have been approved for the purpose of the compensation payable hereunder by the Compensation Committee of the Board (the "Budget"). At the end of the Year, if the Company shall have met seventy-five percent (75%) of the Net Earnings set forth in the Budget ("Budgeted Net Earnings") for the Year to date, Employee shall be entitled to receive an amount equal to 0.250 times the Base Salary then in effect for the Year in question. During the term of this Agreement, in the event at the end of any Year in ques tion, the Company has exceeded seventy-five percent (75%), up to and including one-hundred twenty-five percent (125%) of Budgeted Net Earnings for such Year, then for each one percent (1%) increase over seventy-five percent (75%) up to one hundred twenty-five percent (125%), the Employee shall be entitled to receive an additional amount equal to 0.010 times the Base Salary then in effect for the Year in question. In the event at the end of any such Year , the Company has exceeded one hundred twenty-five percent (125%) of Budgeted Net Earnings for such Year , then for each one percent (1%) increase over one hundred twenty-five percent (125%), the Employee shall be entitled to receive, in addition to the amounts payable for exceeding seventy-five percent (75%) of Budgeted Net Earnings, an amount equal to 0.0050 times the Base Salary then in effect for the Year in question. Notwithstanding the foregoing, Employee shall not be entitled to receive any amount in excess of two and one-half percent (2.5%) of the B udgeted Net Earnings pursuant to this Section 3(a)(ii) for such Year. Any amount which Employee is entitled to receive herein, shall be payable within sixty (60) days after the end of the Year in question. For purposes of this Section 3(a)(ii), "Net Earnings" shall mean earnings of the Company before taxes, interest, depreciation and amortization determined in accordance with generally accepted accounting principles consistently applied, except that the calculation of net "Net Earnings" shall not take into account the effect of the loss on disposal related to the discontinued operations charge for 2002 or 2003 in connection with the disposition of the Company's day spa assets. .

Disability Insurance. During each term hereof, up to Three Thousand One Hundred Fifty Dollars (U.S. $3,150) (the "Maximum Disability Payment") per Year (and reduced proportionately for any less than full Year during which this Agreement is in effect) to be used by Employee toward the payment of the premium on a disability insurance policy (a "Policy") covering Employee, upon delivery to the Company of evidence reasonably satisfactory to the Company of the purchase by Employee of a Policy with an annual premium due during such Year in an amount at least equal to the amount requested by Employee under this Section 3(a)(ii).

The $3,150 Maximum Disability Payment was based on a Base Salary of $175,000 and that amount shall be increased proportionately to the extent, and at the time of any increase in the Base Salary during the term hereof. The Maximum Disability Payment shall be payable in equal installments at the times that the Base Salary is paid to Employee and shall be subject to such deductions as may be required by applicable law or regulation.

Deferred Compensation. Employee may elect, in accordance with the provisions of any deferred compensation plan agreement that may be entered into between, Employee and the Company (a "Deferred Plan"), to defer all or a portion of the amount of the Incentive Bonus payable to Employee. Any and all amounts that Employee elects to defer shall be held and administered in accordance with the terms and provisions of any such Deferred Plan.

Other Benefits. During the term hereof, the Company shall provide to Employee all other benefits currently provided to the executive officers (as defined for purposes of the Securities Exchange Act of 1934, as amended) of the Company, as well as those which the Company may, in the future, provide to its executive officers, including, without limitation, life insurance, medical coverage, benefits under any 401(k) plan of the Company or any Affiliate (subject to rules relating to a waiting period after the commencement of employment) and shall be eligible to participate in share option or similar plans. The Company also shall provide Employee with an annual allowance of Seven Thousand Dollars ($7,000) for the use by Employee in purchasing or leasing an automobile and for the payment of insurance, maintenance and other expenses in connection with such automobile.

Expense Reimbursement; Relocation. The Company shall reimburse Employee for all ordinary and necessary business expenditures made by Employee in connection with, or in furtherance of, his employment hereunder upon presentation by Employee of expense statements, receipts, vouchers or such other supporting information as may from time to time be reasonably requested by the President or the Board. In the event Employee is relocated outside of the United States, or more than fifty (50) miles from Employee's then principal place of business with the Company, then, in each case, the Company shall (i) reimburse Employee for all reasonable moving expenses necessitated by such relocation and (ii) shall make such adjustments, if any, in the compensation of Employee hereunder so that after such relocation, Employee's compensation shall be no less than Employee's compensation prior to such relocation.

Vacation. Employee shall be entitled to (i) four (4) weeks paid vacation per Year (the "Vacation Days") and (ii) additional vacation days on each day that is a United States federal holiday. Notwithstanding the foregoing, Employee shall not be entitled to take in excess of two (2) consecutive weeks of vacation without the prior written consent of the President. The vacation provided for in this Section 4 shall be coextensive with, and not cumulative with, vacations allowed pursuant to any employment agreements or other arrangements with any Affiliates of the Company. The Company shall pay to Employee on or before January 30th of the following Year, an amount representing the Base Salary (at the rate in effect for

the Year during which the Vacation Days were to have been taken) with respect to the Vacation Days not taken by Employee during a Year; provided, however, that no payment shall be made with respect to more than ten Vacation Days for any one Year.

Termination and Non-Renewal.

Death. In the event of Employee's death during the term hereof, the Company shall have no further obligations to make payments or otherwise under this Agreement, except that the Company shall pay to Employee's estate (i) within ten (10) days after the date of Employee's death any (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, and (B) Incentive Bonus pursuant to Section 3(a)(ii), above in each case to which Employee was entitled on the date of death pursuant to the terms of that section and (C) any amount due to Employee as of the date of death as reimbursement of expenses under Section 3(d), above; and (ii) within sixty (60) days after the end of the Year in which Employee died, if the Budgeted Net Earnings are met for the Year in question, an amount equal to the Incentive Bonus pursuant to Section 3(a)(ii), above, which would have been payable to Employee for the Year during which Employee died had Employee been employed by the Company on the last day of that Year.

Disability. If Employee becomes physically or mentally disabled during the term hereof so that he is unable to perform the services required of Employee pursuant to this Agreement for an aggregate of six (6) months in any twelve (12) month period (a "Disability"), the Company, at its option, may terminate Employee's employment hereunder (the date of such termination, the "Disability Date") and, thereafter, Employee shall not be deemed to be employed hereunder (except that Employee's obligations under Section 6, below, shall remain in full force and effect) and the Company shall have no further obligations to make payments or otherwise under this Agreement, except as provided in this Section 5(b). In the event of a Disability, the Company shall pay to Employee (i) within ten (10) days after the Disability Date (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, and (B) any Incentive Bonus payable pursuant to Section 3(a)(ii), above, in each cas e to which Employee was entitled on the Disability Date pursuant to the terms of those Sections and (C) any amount due to Employee as of the Disability Date as reimbursement of expenses under Section 3(d), above; and (ii) within sixty (60) days after the end of the Year in which the Disability Date occurs, if the Budgeted Net Earnings are met for the Year in question, an amount equal to the Incentive Bonus pursuant to Section 3(a)(ii), above, which Employee would have been entitled to receive during the Year in which the Disability Date occurs had Employee been employed by the Company on the last day of that Year. Nothing in this Agreement is intended to cause the Company to be in violation of the Americans with Disabilities Act.

For Cause by Company. The Company may at any time during the term hereof, without any prior notice, terminate Employee's employment hereunder upon the occurrence of any of the following events: (i) a material breach by Employee of this Agreement; (ii) a material violation by Employee of any lawful written policy or directive of the Company or any Affiliate applicable to Employee specifically, or to officers or employees of the Company or any Affiliate generally; (iii) Employee's excessive alcoholism or drug abuse that substantially impairs the ability of Employee to perform Employee's duties hereunder; (iv) gross negligence by the Employee in the performance of his

duties under this Agreement that results in damage to the Company or any Affiliate; (v) violation by Employee of any lawful direction from the Board provided such direction is not inconsistent with Employee's duties and responsibilities to the Company or any Affiliate hereunder; (vi) fraud, embezzlement or other criminal conduct by Employee; (vii) intentional or reckless conduct that results in damage to the Company or any Affiliate, or could reasonably be expected to result in damage to the Company; or (viii) the committing by Employee of an act involving moral turpitude that results in damage to the Company or any Affiliate, or could reasonably be expected to result in damage to the Company or any Affiliate. If the Company terminates Employee's employment under this Agreement pursuant to this Section 5(c), the Company shall have no further obligations to make payments or otherwise under this Agreement, except that Employee shall be entitled to receive any (i) unpaid accrued Base Salary pursuant t o Section 3(a)(i), above, through the date that is thirty (30) days after the date that the Company gives written notice of such termination to Employee (the "Termination Notice Date"), (ii) Incentive Bonus that is accrued pursuant to Section 3(a)(ii), above, and unpaid as of the date of such termination and (iii) any amount due to Employee under this Agreement as of the date of such termination, reimbursement of expenses under Section 3(d), above, in each case within sixty (60) days after the Termination Notice Date. Notwithstanding the foregoing, Employee shall, for all purposes, cease to be deemed to be employed by the Company as of the date of any termination of Employee pursuant to this Section 5(c), irrespective of whether written notice of termination is given on such date.

For Cause by Employee. Employee may at any time during the term hereof terminate this Agreement upon (i) a material breach by the Company of this Agreement on five (5) days prior written notice, or (ii) a Change in Control (as defined below), on the terms described below. In the event that Employee terminates this Agreement pursuant to clause (i) above, then the Company shall pay to Employee within ten (10) days after the date of such termination an amount equal to (A) the Base Salary then payable, but then unpaid, for the full term of this Agreement pursuant to Section 3(a)(i), above; (B) any Incentive Bonus then payable, pursuant to Section 3(a)(ii), above, but unpaid, and (C) any amount due to Employee as of the date of such termination including as reimbursement of expenses under Section 3(d), above; and (ii) within sixty (60) days after the end of the Year in which Employee was terminated, if the Budgeted Net Earnings are met for the Year in question, an amount equal to t he Incentive Bonus pursuant to Section 3(a)(ii), above, which Employee would have been payable to Employee for the Year during which Employee's employment terminated had Employee been employed by the Company on the last day of that Year.

For purposes of this Section 5(d), a "Change in Control" of the Company shall be deemed to occur if (i) all or substantially all of the assets of the Company are sold or otherwise disposed of or the Company is liquidated or dissolved or adopts a plan of liquidation, (ii) during any period of twelve (12) consecutive months, Present Directors and/or New Directors cease for any reason to constitute at least half of the Board (for purposes of the preceding clause, "Present Directors" shall mean individuals who, at the beginning of such consecutive 24 month period, were members of the Board and "New Directors" shall mean any director whose election by the Board or whose nomination for election by the Company's shareholders was approved by a vote of at least two-thirds of the directors then still in office who were Present Directors or New Directors); or (iii) any of the following circumstances has occurred otherwise than through a transaction or transactions arranged by, or consum mated with the prior approval of the Board: (A) any transaction as a result of which a change in control of the Company would be required to be reported in response to Item 1 (a) of the Current Report on Form 8-K as in effect on the date hereof, pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company

is then subject to such reporting requirement, otherwise than through an arrangement or arrangements consummated with the prior approval of the Board; (B) any "person" or "group" within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act; (x) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of twenty percent (20%) or more of the combined voting power of then outstanding securities of the Company, or (y) acquires by proxy or otherwise the right to vote for the election of directors, for any merger or consolidation of the Company or for any other matter or question, more than 20% of the then outstanding voting securities of the Company, except that a person or group shall be deemed to be a beneficial owner of all securities that such person or group has the right to acquire regardless of whether such right is immediately exercisable or only exercisable after the passage of time or (C) any "person" or "group" within the meaning of Sections 13 (d) and 14 (d) (2) of the Exchange Act) that is the ("beneficial owner" as defined in Rule 13d-3 under the Exchange Act of 20% or more of the then outstanding voting securities of the Company commences soliciting proxies.

In the event of a Change in Control, this Agreement shall continue in effect until December 31, 2003 unless the Employee terminates this Agreement as provided below. In the event a Change in Control occurs on or before January 1, 2003, Employee may terminate this Agreement within six (6) months after the date of such Change in Control. In the event a Change in Control occurs after January 1, 2003, Employee may terminate this Agreement on or before the date that is mid-way between the date of the Change in Control and December 31, 2003. Any such termination shall be by written notice to the Board at least thirty (30) days prior to the proposed termination date; provided, however, that if the Change in Control is on or after December 1, 2003, then the aforesaid notice shall be given at any time on or after the Change in Control and prior to or on the termination date. The period of time between the Change in Control and the date of the notice of termination referenced in the preceding sentence is referred to herein as the "Change in Control Period." In the event that Employee so notifies the Company that he wishes to terminate this Agreement, then Employee shall be entitled to receive from the Company, within ten (10) days after the end of the Change in Control Period, (i) an amount equal to twice the Base Salary pursuant to Section 3(a)(i), above, then in effect and (ii) any Incentive Bonus then payable, pursuant to Section 3(a)(ii), above but unpaid, and (iii) any amount due to Employee as of the date of such termination including as reimbursement of expenses under Section 3(d), above. The exercise of any rights under this paragraph would be in lieu of any rights the Employee might have under Section 5(g), below.

Without Cause By Company. In the event that during the term hereof the Company terminates Employee's employment hereunder other than for cause pursuant to Section 5(c) above, then the Company shall pay to Employee within ten (10) days after the date of such termination (except as otherwise provided herein) (i) if such termination occurs prior to January 1, 2002, an amount equal to (A) twice the Base Salary then in effect pursuant to Section 3(a)(i), above, as of the date of such termination, (B) any Incentive Bonus that is accrued pursuant to Section 3 (a)(ii), above, (C) any amount due to Employee as of the date of termination as reimbursement of expenses under Section 3(d), above, (D) an amount equal to the Incentive Bonus pursuant to Section 3(a)(ii), above, that would have been payable to

Employee for the balance of the Year during which such termination occurs had Employee continued employment with the Company through the end of that Year, payable within sixty (60) days after the end of that Year and (E) an amount equal to the cost of Employee's health insurance provided by the Company as in effect at the time of such termination for a period of one (1) year after the date of such termination (the "Healthcare Amount"); (ii) if such termination occurs on or after January 1, 2002, but prior to January 1, 2003, an amount equal to (A) the Base Salary then in effect pursuant to Section 3(a)(i), above, as of the date of such termination, from the date of such termination through December 31, 2003, (B) one-half of the Base Salary then in effect pursuant to Section 3(a)(i), above, as of the date of such termination, (C) any Incentive Bonus that is accrued pursuant to Section 3(a)(ii), above, and unpaid as of the date of such termination, (D) any amount due to Employee as of the date of termination as reimbursement of expenses under Section 3(d), above, (E) an amount equal to the Incentive Bonus pursuant to Section 3(a)(ii), above, that would have been payable to Employee for the balance of the Year during which such termination occurs had Employee continued employment with the Company through that Year and (F) the Healthcare Amount; and (iii) if such termination occurs on or after January 1, 2003, an amount equal to (A) the Base Salary in effect pursuant to Section 3(a)(i), above, as of the date of such termination from the date of such termination through December 31, 2003, (B) the Base Salary then in effect pursuant to Section 3(a)(i), above, as of the date of such termination, (C) any Incentive Bonus that is accrued pursuant to Section 3(a)(ii) above, and unpaid as of the date of such termination, (D) any amount due to Employee as of the date of termination as reimbursement of expenses under Section 3(d), above, (E) an amount equal to the Incentive Bonus pursuant to Section 3(a)(ii), a bove, that would have been payable to Employee for the balance of the Year during which such termination occurs had Employee continued employment with the Company through that Year and (F) the Healthcare Amount. Each payment described in this Section 5(e) with respect to an Incentive Bonus shall include the amount that would have been payable with respect to that Incentive Bonus after the end of the year in question.

By Employee for Illness. In the event that during the term hereof Employee becomes ill such that, in the written opinion of a physician reasonably acceptable to the Company, it would not be advisable for Employee to continue his employment with the Company hereunder, Employee may terminate his employment hereunder upon reasonable notice to the Company and, in such event, Employee shall not be deemed to have breached this Agreement as a result of such termination. In the event of such termination by Employee, the Company shall have no further obligations to make payments or otherwise under this Agreement, except that the Company shall pay to Employee (i) within ten (10) days after the date of such termination (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, and (B) any Incentive Bonus payable pursuant to Section 3(a)(ii), above in each case to which Employee is entitled on the date of such termination pursuant to the terms of those Sections, (ii) any amount due to Employee as of the date of such termination as, reimbursement of expenses under Section 3(d), above; and (iii) within sixty (60) days after the end of the Year in which such Termination occurs, if the Budgeted Net Earnings are met for the Year in question, an amount equal to the Incentive Bonus pursuant to Section 3(a)(ii), above, which Employee

would have been entitled to receive during the Year in which Employee terminated employment pursuant to this Section 5(e) had Employee been employed by the Company on the last day of that Year.

Non-Renewal. In the event that the employment of Employee hereunder continues for the full term of this Agreement and this Agreement is not renewed as of the date of termination of this Agreement for a period of at least one year on terms no less favorable to Employee, then Employee shall be entitled to receive from the Company, within fifteen (15) days after the date of such termination, an amount equal to (i) the Base Salary pursuant to Section 3(a)(i), above, in effect as of the date of termination of this Agreement; (ii) any Incentive Bonus pursuant to Section 3(a)(ii), above in each case to which Employee was entitled on the date of termination pursuant to the terms of those Sections and (iii) any amount due to Employee as of the date of termination as reimbursement of expenses under Section 3(d), above.

Non-Competition; Confidentiality; etc. All references to the "Company" in this Section 6 shall include all Affiliates, where the context permits.

Acknowledgment. Employee acknowledges and agrees that (i) in the course of Employee's employment by the Company, it will be necessary for Employee to acquire information which could include, in whole or in part, information concerning the sales, products, services, customers and prospective customers, sources of supply, computer programs, system documentation, software development, manuals, formulae, processes, methods, machines, compositions, ideas, improvements, inventions or other confidential or proprietary information belonging to the Company or relating to the affairs of the Company (collectively, the "Confidential Information"), (ii) the restrictive covenants set forth in this Section 6 are reasonable and necessary in order to protect and maintain such proprietary interests and the other legitimate business interests of the Company and that such restrictive covenants in this Section 6 shall survive the termination of this Agreement for any reason and (iii) the Com pany would not have entered into this Agreement unless such covenants were included herein.

Non-Competition. Except as provided in the last sentence of this Section 6(b), Employee covenants and agrees that during the term hereof and for a period of two (2) years following the termination of Employee's employment with the Company, for any reason, Employee shall not, on any vessel or within one hundred (100) miles of any venue where

the Company is then conducting, or had in the then preceding two (2) years conducted, any part of its business, engage, directly or indirectly, whether as an individual, sole proprietor, or as a principal, agent, officer, director, employer, employee, consultant, independent contractor, partner or shareholder of any firm, corporation or other entity or group or otherwise in any Competing Business. For purposes of this Agreement, the term "Competing Business" shall mean any individual, sole proprietorship, partnership, firm, corporation or other entity or group which offers or sells or attempts to offer or sell (i) spa services, skin or hair care products, or degree or non-degree educational programs in massage therapy, skin care or related courses or (ii) any other services then offered or sold by the Company. Notwithstanding the foregoing, (i) Employee is not precluded from (A) maintaining a passive investment in publicly held entities provided that employee does not have more than a five percent (5%) beneficial ownership in any such entity; or (B) serving as an officer or director

of any entity, the majority of the voting securities of which is owned, directly or indirectly, by the Company (collectively, a "Permitted Activity"); and (ii) Employee shall only be restricted from involvement as aforesaid in the operational aspects of a cruise ship operator during the term of this Agreement and thereafter for a period of one (1) year.

Non-Solicitation of Customers and Suppliers. Employee agrees that during his employment with the Company, he shall not, whether as an individual or sole proprietor, or as a principal, agent, officer, director, employer, employee, consultant, independent contractor, partner or shareholder of any firm, corporation or other entity or group or otherwise, directly or indirectly, solicit the trade or business of, or trade, or conduct business with, any customer, prospective customer, supplier, or prospective supplier of the Company for any purpose other than for the benefit of the Company. Employee further agrees that for two (2) years following termination of his employment hereunder for any reason, Employee shall not, directly or indirectly, solicit the trade or business of, or trade, or conduct business with any customers or suppliers, or prospective customers or suppliers, of the Company.

Non-Solicitation of Employees, Etc. Employee agrees that during the term of his employment with the Company and thereafter for a period of two (2) years, he shall not, directly or indirectly, as an individual or sole proprietor, or as a principal, agent, employee, employer, consultant, independent contractor, officer, director, shareholder or partner of any person, firm, corporation or other entity or group or otherwise, without the prior express written consent of the Company approach, counsel or attempt to induce any person who is then in the employ of, or then serving as independent contractor with, the Company to leave the employ of, or terminate such independent contractor relationship with, the Company or employ or attempt to employ any such person or persons who at any time during the preceding six (6) months was in the employ of, the Company.

Non-Disclosure of Confidential Information. Employee agrees to hold and safeguard the Confidential Information in trust for the Company and its successors and assigns and only use the Confidential Information for purposes of performing his duties hereunder, and agrees that he shall not, without the prior written consent of the Board, misappropriate or disclose or make available to anyone for use outside the Company at any time, either during his employment hereunder or subsequent to the termination of his employment hereunder for any reason, any of the Confidential Information, whether or not developed by Employee, except as required in the performance of Employee's duties to the Company or as required by applicable law. In the event that Employee is requested or required by, or under applicable law or court, or administrative order to disclose any of the Confidential Information, Employee shall provide the Company with prompt written notice of any such request or requirement so that the Company may seek a protective order or other appropriate remedy. If Employee is legally compelled to disclose Confidential Information, Employee shall disclose only that portion of the Confidential Information which Employee is legally required to disclose.

Disclosure of Works and Inventions/Assignment of Patents. Employee shall disclose promptly to the Company any and all works, publications, inventions, discoveries and improvements authored, conceived or made by Employee during the period of his employment

with the Company and related to the business or activities of the Company (the "Rights"), and hereby assigns and agrees to assign all his interest therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments which the Company shall deem necessary to apply for and obtain Letters of Patent or Copyrights, or similar documents or rights, of the United States or any foreign country or to otherwise protect the Company's interest in the Rights. Such obligations shall continue beyond the termination of Employee's employment with the Company for any reason with respect to works, inventions, discoveries and improvements authored, conceived or made by Employee during the period of Employee's employment with the Company.

Return of Materials. Upon the termination of Employee's employment with the Company. Employee shall promptly deliver to the Board all correspondence, drawings, blueprints, manuals, letters, notes, notebooks, financial records, reports, flowcharts, programs, proposals and any other documents concerning the Company's business, including, without limitation, its customers or suppliers or concerning its products, services or processes and all other documents or materials containing or constituting Confidential Information; provided, however, that nothing in this Section 6(g) shall require Employee to deliver to the Board any property that is owned by Employee and that contains no Confidential Information.

Limitation on Restrictions. Notwithstanding anything to the contrary in this Section 6, the restrictions set forth in Sections 6(a) through 6(g), above, shall not apply if Employee terminates this Agreement under Section 5(d), above, unless Employee receives as a result of such termination the amount required to be paid to Employee pursuant to the last paragraph in Section 5(d), above, within thirty (30) days after the date of such termination above, in which case the restrictions in this Section 6 shall apply until the last date that this Agreement would have been in effect had it not been terminated as aforesaid.

Employee Not Restricted. Employee represents and warrants that Employee is not subject to any non-competition or other agreement that would restrict in any way Employee's ability to perform duties for the Company.

Non-Assignment; Successors; etc. The Company may not assign any of its rights, but not its obligations under this Agreement, without the prior written consent of Employee, which shall not be unreasonably withheld. The successors of the Company shall be bound by the terms hereof, and where the context permits, references to the "Company" herein shall be deemed to refer to such successors. Employee may assign his rights, but not his obligations, hereunder and the obligations of Employee hereunder, other than the obligations set forth in Section 1, above, shall continue after the termination of his employment hereunder for any reason and shall be binding upon his estate, personal representatives, designees or other legal representatives, as the case may be ("Heirs"), and all of Employee's rights hereunder shall inure to the benefit of his Heirs. All of the rights of the Company hereunder shall inure to the benefit of, and be enforceable by the successors of the Co mpany.

Notices. Except as set forth in Section 5(c), above, any notices or demands given in connection herewith shall be in writing and deemed given when (i) personally delivered, (ii) sent by facsimile transmission to a number provided in writing by the addressee and a confirmation of the transmission is received by the sender or (iii) three (3) days after being deposited for delivery with a recognized overnight courier, such as FedEx, and addressed or sent, as the case may be, to the address or facsimile number set forth below or to such other address or facsimile number as such party may in writing designate:

If to Employee:

10040 S.W. 141 Street

Miami, Florida 33176

If to the Company:

Leonard I. Fluxman

c/o Steiner Management Services

770 South Dixie Highway, Suite #200

Coral Gables, FL 33146

Facsimile Number: (305) 372-9310

Entire Agreement; Certain Terms. This Agreement constitutes and contains the entire agreement of the parties with respect to the matters addressed herein and supersedes any and all prior negotiations, correspondence, understandings and agreements between the parties respecting the subject matter hereof, including, but not limited to all other agreements and arrangements relating to the payment of any compensation to Employee with respect to any services performed, or to be performed on behalf of the Company or any Affiliate. No waiver of any rights under this Agreement, nor any modification or amendment of this Agreement shall be effective or enforceable unless in writing and signed by the party to be charged therewith. When used in this Agreement, the terms "hereof," "herein" and "hereunder" refer to this Agreement in its entirety, including any exhibits or schedules attached to this Agreement and not to any particular provisions of this Agreement , unless otherwise indicated.

Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

Governing Law, etc. This Agreement shall be governed by and construed in accordance with the laws of Florida without regard to choice of law provisions and the venue for all actions or proceedings brought by Employee arising out of or relating to this Agreement shall be in the state or federal courts, as the case may be, located in Miami-Dade County, Florida (collectively, the "Courts"). Employee hereby irrevocably waives any objection which he now or hereafter may have to the laying of venue of any action or proceeding arising out of or relating to this Agreement brought in any of the Courts and any objection on the ground that any such action or proceeding in any of the Courts has been brought in an

inconvenient forum. Nothing in this Section 11 shall affect the right of the Company or an Affiliate to bring any action or proceeding against Employee or his property in the courts of other jurisdictions. In the event of any litigation between the parties hereto with respect to this Agreement, the prevailing party therein shall be entitled to receive from the other party all of such prevailing party's expenses in connection with such litigation, including, but not limited, to reasonable attorneys' fees at the trial and appellate court levels.

Severability. It is the intention of the parties hereto that any provision of this Agreement found to be invalid or unenforceable be reformed rather than eliminated. If any of the provisions of this Agreement, or any part thereof, is hereinafter construed to be invalid or unenforceable, the same shall not affect the remainder of such provision or the other provisions of this Agreement, which shall be given full effect, without regard to the invalid portions. If any of the provisions of Section 6, above, or any portion thereof, is held to be unenforceable because of the duration of such provision or portions thereof, the area covered thereby or the type of conduct restricted therein, the parties hereto agree that the court making such determination shall have the power to modify the duration, geographic area and/or, as the case may be, other terms of such provisions or portions thereof, and, as so modified, said provisions or portions thereof shall then be enforceable. In the event that the courts of any one or more jurisdictions shall hold such provisions wholly or partially unenforceable by reason of the scope thereof or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the Company's rights provided for herein in the courts of any other jurisdictions as to breaches or threatened breaches of such provisions in such other jurisdictions, the above provisions as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants.

Non-Waiver. Failure by either the Company or Employee to enforce any of the provisions of this Agreement or any rights with respect hereto, or the failure to exercise any option provided hereunder, shall in no way be considered to be waiver of such provisions, rights or options, or to in any way affect the validity of this Agreement.

Headings. The headings preceding the text of the paragraphs of this Agreement have been inserted solely for convenience of reference and neither constitute a part of this Agreement nor affect its meaning, interpretation, or effect.

[SIGNATURE LINES ARE ON NEXT PAGE]

IN WITNESS WHEREOF, the parties have executed these presents as of the day and year first above written.

s/s Glenn Fusfield

Glenn Fusfield

STEINER LEISURE LIMITED

By:s/s Leonard I. Fluxman

Leonard I. Fluxman

President and Chief Executive Officer

EX-10 9 exhibit10_28.htm AMENDED AND RESTATED AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

This Employment Agreement (this "Agreement") is made the 14th day of May 2003, to be effective as indicated herein, by and between Steiner Leisure Limited, a Bahamas international business company (the "Company"), and Thomas R. Posey ("Employee").

W I T N E S S E T H:

WHEREAS, the Employee and Mandara Spa LLC ("Mandara"), now a wholly-owned subsidiary of the Company, previously entered into an Employment Agreement dated as of September 24, 2000, as amended effective December 19,2002 (collectively, the "Prior Agreement"), and Employee and the Company now desire to further amend the terms of the Prior Agreement and replace the Prior Agreement with this Agreement and restate in this Agreement all of the terms of employment of Employee by the Company (including any subsidiary thereof), and

WHEREAS, the Company and Employee desire to provide for the revised terms of the services to be performed by Employee for the Company.

NOW THEREFORE, in consideration of the premises and mutual agreements hereinafter contained, the parties hereto agree as follows:

Employment; Duties. The Company hereby employs Employee as President and Chief Operating Officer of Mandara and Employee hereby accepts such employment. Employee shall have such duties and responsibilities consistent with the position as may be determined from time to time by the Board of Directors of the Company (the "Board") or the Chief Executive Officer of the Company (the "CEO"), including duties with respect to affiliates (as defined in Rule 405 under the Securities Act of 1933, as amended) of the Company (each, an "Affiliate"). Among other responsibilities for which Employee is responsible hereunder, Employee shall be responsible for the operations (including those that commence after the date hereof) of the land-based resort spas of Mandara and other Affiliates located outside of Asia, Guam, the Maldives, Saipan and, except as provided in the next sentence, elsewhere in the Pacific. Notwithstanding the foregoing, Employee also shall be responsible for the operations of the land-b ased resort spas of the Company and its Affiliates in Bora Bora, Fiji, Hawaii, Mexico and Tahiti, and other locations in the Pacific that may be specifically identified in the future by the CEO (these resort spas for which Employee is responsible are referred to collectively herein as the "Responsible Operations"). Employee shall report to the CEO. During the term of this Agreement, Employee shall devote all his working time and effort to the conduct of his duties hereunder.

2. Effective Date; Amendment of Prior Agreement; Term. The terms and conditions of this Agreement shall be effective for a term of sixty (60) months (each calendar year, a "Year") commencing on January 1, 2003 ("Commencement Date") and terminating on December 31, 2007, ("Term") unless terminated sooner in accordance with the terms and conditions set forth below.

3. Compensation.

(a) Salary; Bonus; Etc. Effective on the Commencement Date, the Company, or any Affiliate shall pay to Employee during the Term hereof compensation as described in this Section 3(a), all of which shall be subject to such deductions as may be required by applicable law or regulation:

(i) Base Salary. (A) From January1, 2003 through December 31, 2003, a base salary at the rate of Two Hundred Thousand Dollars ($200,000) per Year, and (B) a base salary at the rate of not less than Two Hundred Thousand Dollars ($200,000) per Year for each Year thereafter during the Term of this Agreement, subject to review annually by the CEO, payable in bi-weekly installments (the "Base Salary").

(ii) Incentive Bonus. (A) Employee is eligible to receive a bonus (the "Incentive Bonus") equal to Fifty percent (50%) of Base Salary tied to the average of the achieved budgeted Net Earnings (as defined below) of the Responsible Operations during each respective Year in the Term, including those Responsible Operations during part of any Year. With respect to each Year during the Term hereof, the Incentive Bonus shall be based on the collective budgets for the four fiscal quarters of each Year hereunder, which budgets include an estimate of the Net Earnings for such Year for the Responsible Operations and which budget shall have been approved for the purpose of the compensation payable hereunder by the Compensation Committee of the Board (the "Budget"). At the end of each Year, (i) if the Responsible Operations shall have met seventy-five percent (75%) of the Net Earnings set forth in the Budget ("Budgeted Net Earnings") for such Year, then Employee shall be entitled to re ceive an amount equal to 0.250 times the Base Salary then in effect for the Year in question, (ii) if the Responsible Operations have exceeded seventy-five percent (75%), up to and including one hundred twenty-five percent (125%) of Budgeted Net Earnings for such Year, then for each one percent (1%) increase over seventy-five percent (75%) up to and including one hundred twenty-five percent (125%), the Employee shall be entitled to receive an additional amount equal to 0.010 times the Base Salary then in effect for the Year in question; and (iii) (a) if the Responsible Operations have exceeded one hundred twenty-five percent (125%) of the Budgeted Net Earnings for such Year, then for each one percent (1%) increase over one hundred twenty-five percent (125%), the Employee shall be entitled to receive an additional amount equal to 0.0050 times the Base Salary then in effect for the Year in question. Any amount which the Employee is entitled to receive herein shall be payable within sixty (60) days after the e nd of such Year. Notwithstanding the foregoing, Employee shall not be entitled to receive any amount in excess of two and one-half percent (2.5%) of the collective Budgeted Net Earnings for the Responsible Operations pursuant to this Section 3(a)(ii) for such Year. For purposes of this Section 3(a)(ii), "Net Earnings" shall mean earnings of the respective Responsible Operations before taxes, interest, depreciation and amortization as determined in accordance with generally accepted accounting principles consistently applied..

(iii) Disability Insurance. During each Year during the term hereof, up to Three Thousand One Hundred Forty-seven Dollars ($3,147.) to be used toward the payment of the premium on a disability insurance policy (a "Policy") covering Employee, upon delivery to the Company of evidence reasonably satisfactory to the Company of the purchase by Employee of a Policy with an annual premium due during such Year in an amount at least equal to the amount requested by Employee under this Section 3(a)(iii).

(b) Deferred Compensation. Employee may elect, in accordance with the provisions of any deferred compensation plan agreement that may be entered into between, Employee and the Company (a "Deferred Plan"), to defer all or a portion of the amount of the Incentive Bonus payable to Employee. Any and all amounts that Employee elects to defer shall be held and administered in accordance with the terms and provisions of any such Deferred Plan.

(c) Other Benefits. During the term hereof, the Company shall provide to Employee life insurance, medical coverage and the right to participate in share option or similar plans. The Company also shall provide Employee with a private office and an annual allowance of Six Thousand Seven Hundred Fifty Dollars ($6,750.) for the use by Employee in purchasing or leasing an automobile and for the payment of insurance, maintenance and other expenses in connection with such automobile.

(d) Expense Reimbursement; Relocation. The Company shall reimburse Employee for all ordinary and necessary business expenditures made by Employee in connection with, or in furtherance of, his employment hereunder upon presentation by Employee of expense statements, receipts, vouchers or such other supporting information as may from time to time be reasonably requested by the CEO. In the event Employee is relocated outside of the United States, or more than fifty (50) miles from Employee's then principal place of business with the Company, then, in each case, the Company shall (i) reimburse Employee for all reasonable moving expenses necessitated by such relocation and (ii) shall make such adjustments in the compensation of Employee hereunder so that after such relocation, Employee's effective compensation shall be no less than Employee's effective compensation prior to such relocation.

4. Vacation. Employee shall be entitled to (i) four (4) weeks paid vacation per Year commencing January 1, 2003, and (ii) additional vacation days on each day that is a United States federal holiday. Notwithstanding the foregoing, Employee shall not be entitled to take in excess of two (2) consecutive weeks of vacation without the prior written consent of the CEO. The vacation provided for in this Section 4 shall be coextensive with, and not cumulative with, vacations allowed pursuant to any employment agreements or other arrangements with any Affiliates of the Company. Vacation time not used may not be accumulated from year to year. When traveling for business of the Company, Employee, at his sole discretion and at the Company's expense, shall travel via "Business" or "Club" class accommodations for international flights and domestic flights over three hours duration.

5. Termination.

(a) Death. In the event of Employee's death during the term hereof, the Company shall have no further obligations to make payments or otherwise under this Agreement, except that the Company shall pay to Employee's estate (i) within ten (10) days after the date of Employee's death (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, and (B) any amount due to Employee as of the date of death as reimbursement of expenses under Section 3(d), above, and (ii) within sixty (60) days after the end of the Year in which Employee died, if the Budgeted Net Earnings are met or exceeded for the Year in question, an amount of the Incentive Bonus pursuant to Section 3(a)(ii), above, calculated on a pro-rata basis to the date of death.

(b) Disability. If Employee becomes physically or mentally disabled during the term hereof so that he is unable to perform the services required of Employee pursuant to this Agreement for an aggregate of six (6) months in any twelve (12) month period (a "Disability"), the Company, at its option, may terminate Employee's employment hereunder (the date of such termination, the "Disability Date"), and, thereafter, Employee shall not be deemed to be employed hereunder (except that Employee's obligations under Section 6, below, shall remain in full force and effect) and the Company shall have no further obligations to make payments or otherwise under this Agreement, except as provided in this Section 5(b). In the event of a Disability, the Company shall pay to Employee (i) within ten (10) days after the Disability Date (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, and (B) any amount due to Employee as of the Disability Date as reimbursement of expenses under Section 3(d), a bove; and (ii) within sixty (60) days after the end of the Year in which the Disability Date occurs, if the Budgeted Net Earnings are met or exceeded for the Year in question, an amount of the Incentive Bonus pursuant to Section 3(a)(ii), above, calculated on a pro-rata basis to the Disability Date. Nothing in this Agreement is intended to cause the Company to be in violation of the Americans with Disabilities Act.

(c) For Cause by Company. The Company may at any time during the term hereof, without any prior notice, terminate Employee's employment hereunder upon the occurrence of any of the following events: (i) a material breach by Employee of this Agreement; (ii) a material violation by Employee of any lawful written policy or directive of the Company applicable to Employee specifically, or to officers or employees of the Company generally;(iii) Employee's excessive alcoholism or drug abuse that substantially impairs the ability of Employee to perform Employee's duties hereunder or adversely affects the name, reputation or goodwill of the Company or any Affiliate; (iv) gross negligence by the Employee in the performance of his duties under this Agreement that results in damage to the Company or any Affiliate; (v) violation by Employee of any lawful direction from the CEO, provided such direction is not inconsistent with Employee's duties and responsibilities to the Company hereunder and provided Employ ee has reasonable advance notice of such direction; (vi) fraud, embezzlement or other criminal conduct by Employee that results in material damage, or could reasonably be expected to result in material damage to the Company; (vii) intentional or reckless tortious conduct that results in material damage, or could reasonably be expected to result in material damage to the Company; or (viii) the committing by Employee of an act involving moral turpitude; or (ix) unless contrary to applicable law, including but not limited to the Family and Medical Leave Act, to the extent applicable, the failure by Employee to report to work without the written consent of the CEO for three (3) consecutive days, or fifteen (15) days during any thirty (30) day period as a result of illness, provided that Employee provides, within three (3) days after the end of such absence, written confirmation from a physician that such absence from work was appropriate for medical reasons. If the Company terminates Employee's employment und er this Agreement pursuant to this Section 5(c), the Company shall have no further obligations to make payments or otherwise under this Agreement, except that Employee shall be entitled to receive any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, through the date that is thirty (30) days after the date that the Company gives written notice of such termination to Employee ("Termination Notice Date") within sixty (60) days after the Termination Notice Date, and (ii) amounts due to Employee as of the date of such termination as reimbursement of expenses under Section 3(d), above. Notwithstanding the foregoing, Employee shall, for all purposes, cease to be deemed to be employed by the Company as of the date of any termination of Employee pursuant to this Section 5(c), irrespective of whether written notice of termination is given on such date.

(d) Termination by Employee. Employee may terminate his employment under this Agreement for any reason whatsoever by giving written notice thereof at least forty-five (45) days in advance of such termination to the CEO (the "Voluntary Notice"). The Termination Date shall be the date specified in the Employee's notice to the CEO. In the event of such termination by Employee, the Company shall have no further obligations to make payments or otherwise under this Agreement, except that Employee shall be entitled to receive, as calculated as of the Termination Date, (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above, (B) within sixty (60) days after the end of the Year in which Employee terminates, if the Budgeted Net Earnings are met or exceeded for the Year in question, an amount of Incentive Bonus pursuant to Section 3(a)(ii) above, calculated on a pro-rata basis to the date of termination, and (C) reimbursement of expenses pursuant to Section 3(d). Except as otherwise sta ted, such amounts shall be paid to Employee within sixty (60) days after the Termination Date. The Company may elect to waive the aforesaid Voluntary Notice period and terminate Employee at any time after receipt of the written notice and, in such event, Employee shall only be entitled to receive such Base Salary and Incentive Bonus through, and Employee's eligibility to receive such Incentive Bonus shall be determined, as of the date of the Company-determined termination.

For purposes of this Section 5(d), "Change in Control" of the Company shall be deemed to occur if (i) all or substantially all of the assets of the Company are sold or otherwise disposed of or the Company is liquidated or dissolved or adopts a plan of liquidation, (ii) during any period of twelve (12) consecutive months, Present Directors and/or New Directors cease for any reason to constitute at least half of the Board (for purposes of the preceding clause, "Present Directors" shall mean individuals who, at the beginning of such consecutive twelve (12) month period, were members of the Board, and "New Directors" shall mean any director whose election by the Board or whose nomination for election by the Company's shareholders was approved by a vote of at least two-thirds of the directors then still in office who were Present Directors or New Directors); or (iii) any of the following circumstances has occurred otherwise than through a transaction or transactions arranged by, or consummated with the prior a pproval of the Board: (A) any transaction as a result of which a change in control of the Company would be required to be reported in response to Item 1 (a) of the Current Report on Form 8-K as in effect on the date hereof, pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (B) any "person" or "group" within the meaning of Sections 13 (d) and 14 (d) (2) of the Exchange Act (a) becomes the "beneficial owner," as defined in Rule 13d-3 under the Exchange Act, of twenty percent (20%) or more of the then outstanding voting securities of the Company, or (b) acquires by proxy or otherwise the right to vote for the election of directors, for any merger or consolidation of the Company or for any other matter or question, more than 20% of the then outstanding voting securities of the Company, except that a person or group shall be deemed to be a beneficial owner of all securities that such person or group has the right to acquire regardless of whether such right is immediately exercisable or only exercisable after the passage of time or (C) any "person" or "group" within the meaning of Sections 13 (d) and 14 (d) (2) of the Exchange Act that is the "beneficial owner" as defined in Rule 13d-3 under the Exchange Act of 20% or more of the then outstanding voting securities of the Company commences soliciting proxies.

In the event of a Change in Control, this Agreement shall continue in effect unless the Employee terminates this Agreement as provided below. In the event a Change in Control occurs, Employee may terminate this Agreement by providing written notice CEO at least thirty (30) days prior to the proposed termination date. The period of time between a Change in Control and the date of the notice of termination referenced in the preceding sentence is referred to herein as the "Change in Control Period". In the event that Employee so notifies the Company that he wishes to terminate this Agreement, then Employee shall be entitled to receive from the Company, within ten (10) days after the Change in Control Period, (i) an amount equal to one (1) times Base Salary pursuant to Section 3(a)(i), above, then in effect and (ii) within sixty (60) days after the end of the Year in which Employee terminates, if the Budgeted Net Earnings are met or exceeded for the Year in question, an amount of the Incentive Bonus pursua nt to Section 3(a)(ii) above, calculated on a pro-rata basis to the date of termination; and (iii) any amount due to Employee as of the date of such termination including reimbursement of expenses pursuant to Section 3(d).

(e) Without Cause by Company. In the event that during the term hereof the Company terminates Employees employment hereunder other than for cause pursuant to Section 5(c) above, then the Company shall pay to Employee within ten (10) days after the date of such termination (except as otherwise provided herein) as specified by the Company: (A) an amount equal to twelve (12) months of Base Salary then in effect pursuant to Section 3(a)(i) above, as of the date of such termination, (B) within sixty (60) days after the end of the Year in which Employee was terminated, if the Budgeted Net Earnings are met or exceeded for the Year in question, an amount of the Incentive Bonus pursuant to Section 3(a)(ii) above, calculated on a pro-rata basis to the date of termination, (C) any amount due to Employee as of the date of termination as reimbursement of expenses under Section 3(d) above and (D) accrued unused vacation.

(f) By Employee for Illness. In the event that during the term hereof Employee becomes ill such that, in the written opinion of a physician reasonably acceptable to the Company, it would not be advisable for Employee to continue his employment with the Company hereunder, Employee may terminate his employment hereunder upon reasonable notice to the Company and, in such event, Employee shall not be deemed to have breached this Agreement as a result of such termination. In the event of such termination by Employee, the Company shall have no further obligations to make payments or otherwise under this Agreement, except that the Company shall pay to Employee (i) within ten (10) days after the date of such termination (A) any unpaid accrued Base Salary pursuant to Section 3(a)(i), above and (B) any amounts due to Employee as of the date of termination as reimbursement of expenses under Section 3(d), above, and (ii) within sixty (60) days after the end of the Year in which Employee terminated, if the Budgeted Net Earnings are met or exceeded for the Year in question, an amount of the Incentive Bonus pursuant to Section 3(a)(ii), above, calculated on a pro-rata basis to the date of such termination.

6. Non-Competition; Confidentiality; etc. All references to the "Company" in this Section 6 shall include all Affiliates.

(b) Non-Competition. Employee covenants and agrees that during the term hereof and for a period of one (1) year following the termination of Employee's employment hereunder for any reason, Employee shall not, in any portion of the world where, or from which, the Company is then conducting, or had in the then preceding two (2) years conducted, any part of its business, engage, directly or indirectly, whether as an individual, sole proprietor, or as a principal, agent, officer, director, employer, employee, consultant, independent contractor, partner or shareholder of any firm, corporation or other entity or group or otherwise in any Competing Business. For purposes of this Agreement, the term "Competing Business" shall mean any individual, sole proprietorship, partnership, firm, corporation or other entity or group which offers or sells or attempts to offer or sell (i) spa services, skin or hair care products, or degree or non-degree educational programs in massage therapy, skin care or related courses or (ii) any other services then offered or sold by the Company on board vessels or within Fifty (50) miles of any location where the Company is then offering such product or service. Notwithstanding the foregoing, Employee is not precluded from (i) maintaining a passive investment in publicly held entities provided that employee does not have more than a five percent (5%) beneficial ownership in any such entity; or (ii) serving as an officer or director of any entity, the majority of the voting securities of which is owned, directly or indirectly, by the Company (collectively, a "Permitted Activity").

(c) Non-Solicitation of Customers and Suppliers. Employee agrees that during his employment hereunder, he shall not, whether as an individual or sole proprietor, or as a principal, agent, officer, director, employer, employee, consultant, independent contractor, partner or shareholder of any firm, corporation or other entity or group or otherwise, directly or indirectly, solicit the trade or business of, or trade, or conduct business with, any customer, prospective customer, supplier, or prospective supplier of the Company for any purpose other than for the benefit of the Company. Employee further agrees that for two (2) years following termination of his employment hereunder for any reason, Employee shall not, directly or indirectly, solicit the trade or business of, or trade, or conduct business with any customers or suppliers, or prospective customers or suppliers, of the Company. Notwithstanding the foregoing, Employee is not precluded from a Permitted Activity.

(d) Non-Solicitation of Employees, Etc. Employee agrees that during the term of his employment hereunder and thereafter for a period of two (2) years, he shall not, as a principal, agent, employee, employer, consultant, independent contractor, officer, director, shareholder or partner of any person, firm, corporation or other entity or group or in any individual representative capacity whatsoever or otherwise, directly or indirectly, without the prior express written consent of the Company approach, counsel or attempt to induce any person who is then in the employ of, or then serving as independent contractor with, the Company to leave the employ of, or terminate such independent contractor relationship with, the Company or employ or attempt to employ any such person or persons who at any time during the preceding six (6) months was in the employ of, the Company. Notwithstanding the foregoing, Employee is not precluded from a Permitted Activity.

(e) Non-Disclosure of Confidential Information. Employee agrees to hold and safeguard the Confidential Information in trust for the Company, its successors and assigns and agrees that he shall not, without the prior written consent of the CEO, misappropriate or disclose or make available to anyone for use outside the Company's organization at any time, either during his employment hereunder or subsequent to the termination of his employment hereunder for any reason, any of the Confidential Information, whether or not developed by Employee, except as required in the performance of Employee's duties to the Company.

(f) Disclosure of Works and Inventions/Assignment of Patents. Employee shall disclose promptly to the Company any and all works, publications, inventions, discoveries and improvements authored, conceived or made by Employee during the period of his employment hereunder and related to the business or activities of the Company, and hereby assigns and agrees to assign all his interest therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments which the Company shall deem necessary to apply for and obtain Letters of Patent or Copyrights, or similar documents or rights, of the United States or any foreign country or to otherwise protect the Company's interest therein. Such obligations shall continue beyond the termination of Employee's employment hereunder for any reason with respect to works, inventions, discoveries and improvements authored, conceived or made by Employee during the period of Employee's employment under this Agreement.

(g) Return of Materials. Upon the termination of Employee's employment with the Company for any reason, Employee shall promptly deliver to the President all correspondence, drawings, blueprints, manuals, letters, notes, notebooks, financial records, reports, flowcharts, programs, proposals and any other documents concerning the Company's business, including, without limitation, its customers or suppliers or concerning its products, services or processes and all other documents or materials containing or constituting Confidential Information; provided, however, that nothing in this Section 6(g) shall require Employee to deliver to the CEO any property that is owned by Employee and that contains no Confidential Information.

(h) Status of Section. The provisions of this Section 6 shall be construed as an agreement on the part of Employee independent of any other part of this Agreement or any other agreement, and the existence of any claim or cause of action of Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the provisions of this Section 6.

7. Non-Assignment; Successors; etc. The Company may assign any of its rights, but not its obligations under this Agreement. Employee may assign his rights, but not his obligations, hereunder and the obligations of Employee hereunder, other than the obligations set forth in Section 1, above, shall continue after the termination of his employment hereunder for any reason and shall be binding upon his estate, personal representatives, designees or other legal representatives, as the case may be ("Heirs"), and all of Employee's rights hereunder shall inure to the benefit of his Heirs. All of the rights of the Company hereunder shall inure to the benefit of, and be enforceable by the successors of the Company.

8. Notices. Any notices or demands given in connection herewith shall be in writing and deemed given when (i) personally delivered, (ii) sent by facsimile transmission to a number provided in writing by the addressee and a confirmation of the transmission is received by the sender or (iii) three (3) days after being deposited for delivery with a recognized overnight courier, such as FedEx, and addressed or sent, as the case may be, to the address or facsimile number set forth below or to such other address or facsimile number as such party may in writing designate:

If to Employee:

Thomas R. Posey

6425 135^th Drive

Pinecrest, Florida 33156

If to the Company:

Leonard I. Fluxman

c/o Steiner Management Services

770 South Dixie Highway

Suite #200

Coral Gables, FL 33146

Facsimile Number: (305) 372-9310

9. Entire Agreement; Certain Terms. This Agreement constitutes and contains the entire agreement of the parties with respect to the matters addressed herein and supersedes any and all prior negotiations, correspondence, understandings and agreements between the parties respecting the subject matter hereof, including, but not limited to all other agreements and arrangements relating to the payment of any compensation to Employee with respect to any services performed, or to be performed on behalf of the Company or any Affiliate. No waiver of any rights under this Agreement, nor any modification or amendment of this Agreement shall be effective or enforceable unless in writing and signed by the party to be charged therewith. When used in this Agreement, the terms "hereof," "herein" and "hereunder" refer to this Agreement in its entirety, including any exhibits or schedules attached to this Agreement and not to any particular provisions of this Agreement, unless otherwise indicated.

10. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11. Governing Law, etc. This Agreement shall be governed by and construed in accordance with the laws of Florida without regard to choice of law provisions and the venue for all actions or proceedings brought by Employee arising out of or relating to this Agreement shall be in the state or federal courts, as the case may be, located in Miami-Dade County, Florida (collectively, the "Courts"). Employee hereby irrevocably waives any objection which he now or hereafter may have to the laying of venue of any action or proceeding arising out of or relating to this Agreement brought in any of the Courts and any objection on the ground that any such action or proceeding in any of the Courts has been brought in an inconvenient forum. Nothing in this Section 11 shall affect the right of the Company or an Affiliate to bring any action or proceeding against Employee or his property in the courts of other jurisdictions. In the event of any litigation between the parti es hereto with respect to this Agreement, the prevailing party therein shall be entitled to receive from the other party all of such prevailing party's expenses in connection with such litigation, including, but not limited, to reasonable attorneys' fees.

12. Severability. It is the intention of the parties hereto that any provision of this Agreement found to be invalid or unenforceable be reformed rather than eliminated. If any of the provisions of this Agreement, or any part thereof, is hereinafter construed to be invalid or unenforceable, the same shall not affect the remainder of such provision or the other provisions of this Agreement, which shall be given full effect, without regard to the invalid portions. If any of the provisions of Section 6, above, or any portion thereof, is held to be unenforceable because of the duration of such provision or portions thereof, the area covered thereby or the type of conduct restricted therein, the parties hereto agree that the court making such determination shall have the power to modify the duration, geographic area and/or, as the case may be, other terms of such provisions or portions thereof, and, as so modified, said provisions or portions thereof shall then be enforceable. In the event that the courts of any one or more jurisdictions shall hold such provisions wholly or partially unenforceable by reason of the scope thereof or otherwise, it is the intention of the parties hereto that such determination not bar or in any way affect the Company's rights provided for herein in the courts of any other jurisdictions as to breaches or threatened breaches of such provisions in such other jurisdictions, the above provisions as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants.

13. Non-Waiver. Failure by either the Company or Employee to enforce any of the provisions of this Agreement or any rights with respect hereto, or the failure to exercise any option provided hereunder, shall in no way be considered to be waiver of such provisions, rights or options, or to in any way affect the validity of this Agreement.

14. Headings. The headings preceding the text of the paragraphs of this Agreement have been inserted solely for convenience of reference and neither constitute a part of this Agreement nor affect its meaning, interpretation, or effect.

[SIGNATURE LINES ARE ON NEXT PAGE]

IN WITNESS WHEREOF, the parties have executed these presents as of the day and year first above written.

/s/

Thomas R. Posey

STEINER LEISURE LIMITED

By: /s/

Leonard I. Fluxman

President and Chief Executive Officer

EX-99.1 CHARTER 10 stnrexhibit99_1.htm Exhibit 99 Exhibit 99.1

CERTIFICATION PURSUANT TO
SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as President and Chief Executive Officer of Steiner Leisure Limited (the "Company"), does hereby certify that to the undersigned's knowledge:

the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 ("10-Q") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Company's 10-Q being filed fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Leonard Fluxman
	Leonard Fluxman
	President and Chief Executive Officer

Dated: May 15, 2003

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to Steiner Leisure Limited. and will be retained by Steiner Leisure Limited and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.2 BYLAWS 11 stnrexhibit99_2.htm Exhibit 99 Exhibit 99.2

CERTIFICATION PURSUANT TO
SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned, as Vice President and Acting Chief Financial Officer of Steiner Leisure Limited. (the "Company"), does hereby certify that to the undersigned's knowledge:

the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 ("10-Q") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Company's 10-Q being filed fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Robert H. Lazar
	Robert H. Lazar
	Vice President and Acting Chief Financial Officer

Dated: May 15, 2003

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906 has been provided to Steiner Leisure Limited and will be retained by Steiner Leisure Limited and furnished to the Securities and Exchange Commission or its staff upon request.

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