Employment Agreement

Sharper Image Corporation

350 The Embarcadero

Sixth Floor

San Francisco, California 94105

December 22, 2006

VIA FEDERAL EXPRESS & ELECTRONIC MAIL

Tracy Wan

38 Denise Drive

Hillsborough, CA  94010

Dear Tracy:

                        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 President and Chief Operating 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 shall be entitled to receive a severance payment of $32,251.00, payable in a lump sum, less applicable tax withholding and deductions, within thirty (30) days from the Effective Date, but in no event later than January 31, 2007. This payment is in lieu of any severance payment under Section 4(b) of the Employment Agreement and in full satisfaction of any severance obligation to you by the Company.

b.      Stock Options: All of your options to purchase the Company's common shares (the "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 373,000 vested and outstanding Options (the "Outstanding Options"). The Outstanding Options are set out in detail on Exhibit B hereto. The Outstanding Options shall remain exercisable until the later of the date that is (i) twelve (12) months following the Termination Date or (ii) thirty (30) days following the date on which the Company first determines that the exercise of the Outstanding Options would no longer violate applicable securities laws (which determination shall be communicated to you in writing by 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. In addition, you acknowledge that as of the Termination Date, you held 5,000 unvested Options, all of which terminated and ceased to be exercisable immediately upon the Termination Date. You further acknowledge that you are not entitled to any award of any additional Options before or after the Effective Date.

4.      Health Coverage: The Company agrees that it shall continue your health coverage in accordance with the letter agreement dated October 20, 2003 between you and the Company (the "Medical Plan Letter"), incorporated herein by this reference, whether or not you sign this Agreement. A copy of the letter from Aetna Insurance dated October 9, 2006 confirming health coverage is attached hereto as Exhibit C. Nothing herein shall limit the Company's ability to change health insurance providers in it sole discretion.

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:

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, including, without limitation, any and all Claims of any type that you may have arising under the common law, under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act ("ADEA"), the Older Workers Benefit Protection Act, the Americans With Disabilities Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act ("ERISA"), the Sarbanes-Oxley Act of 2002 or the California Fair Employment and Housing Act, the California Family Rights Act, or the California Labor Code section 1400 et seq., each as amended, and any other Federal, state or local statutes, regulations, ordinances or common law, or under any policy, agreement, contract, understanding or promise, written or oral, formal or informal, between any of the Releasees and you, and shall further apply, without limitation, to any and all Claims in connection with, related to or arising out of your employment, or the termination of your employment, with the Company; provided, however, that this General Release shall not apply to or impair (i) any rights you may have arising under or in connection any stock option plan adopted by the Company, as amended and restate