Employment Agreement

Sharper Image Corporation

350 The Embarcadero

Sixth Floor

San Francisco, California 94105

December 23, 2006

VIA FEDERAL EXPRESS & ELECTRONIC MAIL

Jeffrey P. Forgan

c/o Sharper Image Corporation

350 The Embarcadero, Sixth Floor

San Francisco, California 94105

Dear Jeff:

                        This will confirm the agreement (the "Agreement") that has been reached with you in connection with your resignation of employment from Sharper Image Corporation ("Sharper Image" or the "Company"). All capitalized terms not defined herein shall have the meaning ascribed in the Employment Agreement dated as of May 10, 2006 between you and the Company (the "Employment Agreement).

1.      Termination Date: Effective as of November 8, 2006 (the "Termination Date"), you have resigned from all positions with the Company, including as Executive Vice President and Chief Financial Officer as well as from any and all other positions currently or previously held by you in the course of your employment with the Company and any of its subsidiary or affiliate entities, and your employment with the Company ceased as of the Termination Date. A copy of your letter of resignation dated November 8, 2006 is attached hereto as Exhibit A. You agree to execute any additional documents necessary to effect such resignation.

2.      Pay and Benefits Through Termination Date: You acknowledge that you have been paid through the Termination Date for all accrued salary together with accrued but unused vacation pay, less all applicable Federal, state and local withholding taxes and deductions. You hereby acknowledge and agree that, other than as specifically set forth in this Agreement, you are not due any compensation from the Company, including compensation for unpaid salary, unpaid bonus, accrued or unused vacation or other paid time off, or in connection with the exercise of stock options. Other than as expressly set forth herein, your eligibility to participate in the Company's benefit plans and programs terminated as of November 8, 2006.

3.      Termination Benefits: In consideration of your obligations set forth in this Agreement, including but not limited to your consent to the General Release set forth in paragraph 6 below, although you have resigned from employment with the Company without Good Reason, you will be entitled to receive the following termination benefits upon the Effective Date (defined below):

a.       Severance: You acknowledge and agree that you are not entitled to receive any severance payment under Section 4(b) of the Employment Agreement.

b.      Health Coverage: In the event that you timely elect to receive continued health coverage in the Company's group health plans pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), the Company agrees to pay the premiums for the same coverage in effect immediately prior to the Termination Date, from the Effective Date of this Agreement until the earlier of (i) twelve (12) months after the Termination Date, or (ii) you become eligible for coverage under another employer's group health plan, if earlier, all subject to the requirements, conditions and limitations of COBRA and such plans, which may be amended from time to time. Thereafter, should you choose to maintain continuation health coverage under COBRA, it shall be at your own expense.

c.       Stock Options: All of your options to purchase the Company's common shares ("Options") that are vested and outstanding as of the Termination Date will remain outstanding and shall have their exercise price adjusted as determined by the Board of Directors (or a Committee of a Board of Directors) of the Company (the "Board") in connection with the restatement of the Company's financial statements. You acknowledge that as of the Termination Date, you held 35,000 vested and outstanding Options (the "Outstanding Options"). The Outstanding Options shall remain exercisable for twelve (12) months following the Termination Date, with or without the provision of services to the Company, at the adjusted exercise price determined by the Board. You acknowledge and agree that you may not exercise the Outstanding Options until you have received written notification of the adjusted exercise price. You further acknowledge that you are not entitled to any award of any additional Options before or after the Effective Date.

4.      Consulting Services: For a period of four (4) months from the Termination Date (the "Consulting Period"), you shall make yourself available for substantially all or your working time (subject to any time used by you for job interviews or otherwise obtaining employment), at mutually agreed times, to provide advice, assistance, or information with respect to finance, accounting and treasury, and such other areas as reasonably requested by the Company (the "Consulting Services"), for which you will be paid a consulting fee of $25,000.00 per month, in arrears. During the Consulting Period, you shall serve as an independent contractor and not an employee of the Company. The Company and you shall treat your consulting engagement as that of an independent contractor, and not an employee, for all purposes, including (i) Federal, state, and local income and employment taxes, (ii) benefits and (iii) insurance. As a consultant, you shall not have any right or authority to assume or create any obligation or responsibility, express or implied, on behalf of or in the name of the Company, or to bind the Company in any manner, except as may be authorized in writing by an officer of the Company, and shall not make any contrary representation to any third party. Without in any way limiting the generality of the foregoing, you shall have no right or authority to accept service of legal process on behalf of the Company. Should you breach this paragraph 4, in addition to any and all other remedies available to the Company, you shall have no right to any further payments under this paragraph and the General Release set forth in paragraph 6 below shall remain in full force and effect. If requested by the Company, you will provide to the Company a representation on the Company's restated financials similar to the representations required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, or if you are unable to provide such representation, an explanation to the Company's Chief Executive Officer or Chief Financial Officer or the Chairman of the Audit Committee of the Board as to why such representation cannot be provided.

5.      409A Issues and Taxes: Notwithstanding anything in this Agreement to the contrary, if required by section 409A of the Internal Revenue Code of 1986, as amended, to avoid the imposition of additional taxes, the amounts described in paragraphs 3 and 4 hereof, to the extent required to be paid but not yet paid, shall upon your request be modified to the extent reasonably practicable and necessary to resolve any section 409A issues, provided that there is no increased cost to the Company. Any and all tax liabilities incurred by you as a result of the payments made or benefits provided under this Agreement, however, shall be your sole responsibility.

6.      General Release and Waiver; Company Limited Release:

a.       In consideration of the Company's obligations hereunder and acceptance of your resignation, you, your heirs, successors, and assigns, hereby knowingly and voluntarily release and forever discharge the Company and its subsidiaries and affiliates, together with all of their respective current and former officers, directors, consultants, agents, representatives and employees, and each of their predecessors, successors and assigns (collectively, the "Releasees"), from any and all debts, demands, actions, causes of actions, accounts, covenants, contracts, agreements, claims, damages, omissions, promises, and any and all claims and liabilities whatsoever, of every name and nature, known or unknown, suspected or unsuspected, both in law and equity ("Claims"), which you ever had, now have, or may hereafter claim to have against the Releasees by reason of any matter, cause or thing whatsoever arising from the beginning of time to the time you sign this Agreement (the "General Release"). This General Release of Claims shall apply to any Claim of any type, i