Exhibit 10.7

STEINER LEISURE LIMITED

AMENDED AND RESTATED

NON-EMPLOYEE DIRECTORS' SHARE

OPTION PLAN

Adopted February 23, 2004

 

1. INTRODUCTION.

This plan shall be known as the "Steiner Leisure Limited Non-Employee Directors'
Share Option Plan" (this "Plan"). This Plan sets forth the terms of grants of
options (each, an "Option") to purchase the common shares (the "Shares") of
Steiner Leisure Limited (the "Company") to Non-Employee Directors (as defined
below) of the Company. The purpose of this Plan is to advance the interests of
Company and its shareholders by promoting an identity of interest between the
Company's non-employee directors and its shareholders, providing non-employee
directors with a proprietary stake in the Company's success and strengthening
the Company's ability to attract and retain qualified non-employee directors by
affording such persons an opportunity to share in the future success of the
Company.

2. DEFINITIONS.

(a) "Act" means the Securities Act of 1933, as amended.

(b) "Board" means the Board of Directors of the Company.

(c) "Company" means Steiner Leisure Limited.

(d) "Date of Grant" means the date as of which an Option is granted to a
Non-Employee Director pursuant to Section 5 of this Plan.

(e) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(f) "Fair Market Value" means, on the date in question, or if the prices
described in clauses (i) and (ii), below, are not available on such date, on the
latest date preceding the date in question on which such prices are available,
(i) the closing sales price per share of the Shares underlying an Option on the
Nasdaq Stock Market ("Nasdaq") or, if the Shares are not then traded on Nasdaq,
on any national securities exchange, or (ii) if the Shares are not then traded
on Nasdaq or such exchange, and are then traded on an over-the-counter market,
the average of the closing bid and asked prices for the Shares in such
over-the-counter market, or (iii) if the Shares are then not listed on Nasdaq or
such exchange, or traded in an over-the-counter market, such value as the Board
may determine.

(g) "Non-Employee Director" means a member of the Board of Directors of the
Company who is not an employee of the Company or any subsidiary (as defined
under Rule 12b-2 under the Exchange Act) of the Company on a date in question.

(h) "Options" means the options to purchase Shares granted pursuant to this
Plan.

(i) "Plan" means this Steiner Leisure Limited Directors' Share Option Plan.

(j) "Shares" means the common shares of the Company, par value (U.S.) $.01 per
share.

3. ADMINISTRATION.

This Plan shall be administered by the Board or a committee of the Board so
designated by the Board to administer this Plan. Where the context so requires,
references to the Board herein shall refer to any such committee. Subject to the
provisions of this Plan, the Board shall be authorized to interpret this Plan,
to establish, amend and rescind any rules and regulations relating to this Plan
and to make all other determinations necessary or advisable for the
administration of this Plan; provided, however, that the Board shall have no
discretion with respect to the selection of directors to receive Options, the
number of Shares to be received upon exercise of Options or the timing of grants
of Options, all of which shall be determined in accordance with the provisions
of this Plan.

Notwithstanding the foregoing, the Board may amend this Plan pursuant to Section
8, below. The determinations of the Board in the administration of this Plan, as
described herein, shall be final and conclusive. The Chairman of the Board and
the President of the Company, and either of them, shall be authorized to
implement this Plan in accordance with its terms and to take such actions of a
ministerial nature as shall be necessary to effectuate the intent and purposes
thereof. Except as otherwise provided herein, the validity, construction and
effect of this Plan and any rules and regulations relating to this Plan shall be
determined in accordance with the laws of the Commonwealth of the Bahamas
subject to any applicable requirements under United States federal or state
securities laws.

4. ELIGIBILITY; OPTION AGREEMENT.

Only Non-Employee Directors shall be eligible to receive Options under this
Plan. Options shall be evidenced by written option agreements in such form as
the Board shall approve.

5. GRANTS OF OPTIONS.

Options shall be granted to Non-Employee Directors, subject to Section
5(o), below, and the limitation on the number of Shares that may be issued under
this Plan as described in Section 6, below, as follows:

(a) Grants to Initial Directors. Each of the initial four Non-Employee Directors
(the "Initial Directors") shall be granted, on the effective date of the
appointment or election of such Initial Director (the "Initial Effective Date")
without the need for further action by the Board, an Option to purchase that
number of Shares equal to 2,813 (which reflects adjustment for splits of the
Shares after the grant thereof) multiplied by a fraction, the numerator of which
is the number of days from the Initial Effective Date until the scheduled date
of the then next annual meeting of shareholders of the Company ("Annual
Meeting") (or, if such date has not yet been scheduled, a date approximating the
date of the next Annual Meeting as determined in good faith by the Board), and
the denominator of which is 365.

(b) Annual Grants. On the date of each Annual Meeting during the term of this
Plan (an "Annual Meeting Date") each individual elected or re-elected as a
Non-Employee Director at such meeting or continuing as a Non-Employee Director
shall be granted, without the need for further action by the Board, an Option to
purchase 3,000 Shares. In addition, any Non-Employee Director who serves as
Chair of a committee of the Board shall be granted on each Annual Meeting Date
an Option to purchase an additional 1000 Shares for each such Chair held.

(c) Other Grants. Any new Non-Employee Director who is appointed by the Board to
fill a vacancy on the Board, or who is otherwise appointed or elected to the
Board otherwise than at an Annual Meeting shall be granted, on the effective
date of such appointment or election (the "Effective Date"), without the need
for further action by the Board, an Option to purchase that number of Shares
equal to 3,000 (plus any additional Shares as may be required by the last
sentence of Section 5(b), above) multiplied by a fraction, the numerator of
which is the number of days from the Effective Date until the scheduled date of
the then next Annual Meeting (or, if such date has not yet been scheduled, the
anniversary date of the then immediately preceding Annual Meeting or, in the
absence of such date, a date approximating the date of the next Annual Meeting
as determined in good faith by the Board), and the denominator of which is 365.

(d) Exercise Price. The exercise price of each Option shall be the Fair Market
Value of the Shares on the Date of Grant.

(e) Duration of Options. Except as otherwise provided herein or in the option
agreement with respect to an Option grant, the latest date on which an Option
may be exercised (the "Final Exercise Date") shall be the date which is ten
years from the Date of Grant.

(f) Exercise of Options. Except as otherwise provided herein or in the option
agreement with respect to an Option grant, an Option shall become exercisable
one year after the Date of Grant. An Option may be exercised by giving written
notice to the Secretary of the Company specifying the number of Shares to be
purchased, accompanied by the full purchase price for the Shares to be
purchased. An Option may not be exercised for a fraction of a Share.

(g) Payment for Shares. Shares purchased pursuant to the exercise of an Option
granted under this Plan shall be paid for as follows: (i) in cash or by
certified check, bank draft or money order payable to the order of the Company,
(ii) through the delivery of Shares having a Fair Market Value on the last
business day preceding the date of exercise equal to the purchase price,
provided that, in the case of Shares acquired directly from the Company, such
Shares have been held for at least six months, or (iii) by a combination of cash
and Shares, as provided in clauses (i) and (ii), above.

(h) Withholding Taxes. Prior to issuance of the Shares upon exercise of an
Option, the Option holder shall pay or make adequate provision for any
applicable United States federal or state, or other tax withholding obligations
of the Company. Where approved by the Board in its sole discretion, the Option
holder may provide for the payment of withholding taxes upon exercise of the
Option by requesting that the Company retain Shares with a Fair Market Value
equal to the amount of taxes required to be withheld. In such case, the Company
shall issue the net number of Shares to the Option holder by deducting the
Shares retained from the Shares with respect to which the Option was exercised.
The Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined. All elections by
Option holders to have Shares withheld for this purpose shall be made in writing
in form acceptable to the Board.

(i) Delivery of Share Certificates. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the certificate evidencing the Shares underlying an
Option, an Option holder shall not have any rights as a shareholder of the
Company. A certificate for the number of Shares purchased pursuant to the
exercise of an Option shall be issued as soon as practicable after exercise of
the Option. However, the Company shall not be obligated to deliver a certificate
evidencing Shares issuable under an Option (i) until, in the opinion of the
Company's counsel, all applicable Bahamas and United States federal and state
laws and regulations have been complied with and any applicable taxes have been
paid, (ii) if the Shares are at the time traded on Nasdaq or any national
securities exchange, until the Shares represented by the certificate to be
delivered have been listed or are authorized to be listed on Nasdaq or such
exchange, and (iii) until all other legal matters in connection with the
issuance and delivery of such certificate have been approved by the Company's
counsel. If the sale of Shares has not been registered under the Act, the
Company may require, as a condition to exercise of the Option, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of the Act and may require that the certificate
evidencing such Shares bear an appropriate legend restricting transfer. The
inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares.

(j) Assignment or Transfer. Except as set forth in this Section
5(j), no Option may be transferred other than by will or by the laws of descent
and distribution, and during a Non-Employee Director's lifetime an Option may be
exercised only by the Non-Employee Director to whom it was granted. An Option
may be transferred to a (i) Non-Employee Director's spouse, children or
grandchildren (referred to herein as "Family Members"), (ii) a trust or trusts
for the exclusive benefit of Family Members or (iii) a partnership in which
Family Members are the only partners. Any transfer pursuant to this Section 5
(j) shall be subject to the following: (i) there shall be no consideration for
such transfer, (ii) there may be no subsequent transfers without the approval of
the Board and (iii) all transfers shall be made so that no liability under
Section 16(b) of the Exchange Act arises as a result of such transfer. Following
any transfer, an Option shall continue to be subject to the same terms and
conditions as were applicable to the Non-Employee Director immediately prior to
transfer, with the transferee being deemed to be the Non-Employee Director for
such purposes, except that the events of death and termination of service
described in Sections 5(k) and 5(l), below, shall continue to apply with respect
to the Non-Employee Director.

(l) Death. Upon the death of a Non-Employee Director, all Options held by such
Non-Employee Director that are not then exercisable shall immediately become
exercisable. All Options held by such Non-Employee Director immediately prior to
death may be exercised by his or her executor or administrator, or by the person
or persons to whom the Option is transferred by will or the applicable laws of
descent and distribution, at any time within the three years following the date
of death (but not later than the Final Exercise Date); provided, however, that
the Company shall be under no obligation to deliver a certificate representing
Shares that may be issued pursuant to such exercise until the Company is
satisfied as to the authority of the person or persons exercising the Option.

(m) Other Termination of Status of Non-Employee Director. If a Non-Employee
Director ceases to be a member of the Board for any reason other than death, all
Options held by such Non-Employee Director that are not then exercisable shall
terminate three years following the date they first become exercisable. Options
that are exercisable on the date of such termination shall continue to be
exercisable for a period of three years following the date of termination (or
until the Final Exercise Date, if earlier). Notwithstanding the foregoing, all
Options held by a Non-Employee Director shall terminate immediately upon the
termination of such Non-Employee Director's membership on the Board if such
termination was based on the misconduct of such Non-Employee Director. After
completion of the aforesaid three-year periods, such Options shall terminate to
the extent not previously exercised, expired or terminated.

(n) Change in Control. In the event of a Change in Control (as defined below) of
the Company, any Options outstanding as of the date of such Change in Control is
determined to have occurred that are not yet exercisable on such date shall
become fully exercisable. For purposes of this Section 5(m) a "Change in
Control" means the happening of any of the following:

(i) 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 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;

(ii) 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 more than 20% of the then
outstanding voting securities of the Company, otherwise than through a
transaction or transactions arranged by, or consummated with the prior approval
of, the Board 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, otherwise than through an arrangement or arrangements
consummated with the prior approval of the Board;

(iii) during any period of 24 consecutive months (not including any period prior
to the adoption of this Plan), Present Directors and/or New Directors cease for
any reason to constitute a majority of the Board. For purposes of the preceding
sentence, "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

(iv) 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.

(o) Rule 16b-3. Options granted hereunder are required to comply with the
applicable provisions of Rule 16b-3 under the Exchange Act and the award thereof
shall contain such additional conditions or restrictions as may be required
thereunder to qualify to the maximum extent for the exemption from Section 16(b)
of the Exchange Act available pursuant to Rule 16b-3.

6. SHARES AUTHORIZED.

(a) General. Subject to adjustment as provided below, the aggregate number of
Shares that may be issued pursuant to Options granted under this Plan is
185,625. Such Shares may be authorized but unissued Shares, or may be Shares
reacquired by the Company and held in treasury. If any Option granted under this
Plan terminates without being exercised in full, the number of Shares as to
which such Option was not exercised shall be available for future grants within
the limits set forth in this Section 6(a).

(b) Certain Adjustments. Subject to any required action by the shareholders of
the Company in the event of any reorganization, recapitalization, share split,
share dividend, combination of shares, issuance of rights or any other change in
the capital or corporate structure of the Company, the number of Shares covered
by each outstanding Option and the number of Shares available for issuance under
this Plan, but as to which Options have not been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the exercise price per Share under outstanding Options, shall be adjusted
equitably to reflect the occurrence of such event; provided, however, that no
adjustments shall be made except as shall be necessary to preserve, rather than
enlarge or reduce the value of awards under this Plan. Any such adjustment shall
be made by the Board.

 

7. EFFECT AND DISCONTINUANCE.

Neither adoption of this Plan nor the grant of Options to a Non-Employee
Director hereunder shall confer upon any person any right to continued status as
a director of the Company or affect in any way the right of the Company to
terminate a director at any time. The Board may at any time discontinue granting
Options under this Plan.

8. EFFECTIVE DATE; TERMINATION AND AMENDMENT OF PLAN.

(a) Term. The effective date of this Plan shall be the date of its adoption by
the Board of Directors and shareholders of the Company as indicated on the cover
page of this Plan. The final award under this Plan shall be made on the date of
the Annual Meeting in 2006, but the pertinent terms of this Plan shall continue
thereafter while previously awarded Options remain outstanding.

(b) Termination and Amendment. The Board may terminate or amend this Plan as it
shall deem advisable or to conform to any change in any law or regulation
applicable thereto; provided, however, that the Board may not make any amendment
that would reduce any award previously made under this Plan.

9. GENERAL PROVISIONS.

(a) Other Compensation. Nothing in this Plan is intended to be a substitute for,
or shall preclude or limit the establishment or continuation of, any other plan,
practice or arrangement for the payment of compensation or benefits to
Non-Employee Directors that the Company now has or may hereafter put into
effect.

(b) Section 16. Options awarded hereunder and Shares underlying such Options
shall be held by the Non-Employee Director for such period of time required so
as to avoid liability under Section 16(b) of the Exchange Act.

(c) Headings. Headings are given to sections of this Plan solely as a
convenience to facilitate reference and are not intended to affect the meaning
of any provision hereof. The references herein to any statute, regulation or
other provision of law shall be construed to refer to any amendment or successor
to such provisions.