BARRY GILBERT EMPLOYMENT AGREEMENT

               This  Employment  Agreement (this  "Agreement")  has been entered
into,  effective as of the second day of December  1996,  between  SHARPER IMAGE
CORPORATION,   a  Delaware  corporation  (the  "Company"),   and  BARRY  GILBERT
("Executive")  to  provide  for the  employment  of  Executive  on the terms and
conditions set forth herein.

       WHEREAS,  the Company  wishes to employ  Executive as the Company's  Vice
Chairman and to assure itself of the continued  employment  efforts of Executive
for the period provided in this Agreement,  and Executive is willing to continue
to serve in the employ of the Company on a full-time  basis in such position for
such period upon the terms and conditions hereinafter provided.

       NOW,  THEREFORE,   in  consideration  of  the  mutual  agreements  herein
contained,  intending to be legally  bound,  the Company and Executive  agree as
follows:

       1. Employment. The Company hereby employs Executive, and Executive hereby
accepts such  employment by the Company,  upon the terms and  conditions  herein
provided.

       2. Term of Employment.  Executive's  employment with the Company pursuant
to this Agreement shall commence on December 2, 1996 and shall continue  through
January 31, 1999,  unless such  employment is sooner  terminated or subsequently
extended as  hereinafter  provided.  Unless earlier  terminated,  this Agreement
shall  continue in effect after  January 31, 1999,  unless either the Company or
Executive  elects to terminate  this Agreement by providing not less than thirty
(30) days prior written notice to the other party.  The period during which this
Agreement  continues in effect shall constitute the "Employment  Period". In the
event of a termination of this Agreement, Executive shall be entitled to receive
severance benefits in accordance with Section 7 hereof.

       3. Positions and Responsibilities.

               (a) Position. During the Employment Period, Executive shall serve
as the  Company's  Vice  Chairman  and  shall  be  responsible  for the  general
management of the business and affairs of the Company, reporting directly to the
Chairman  of the Board  and Chief  Executive  Officer  ("CEO")  and the Board of
Directors of the Company (the "Board").

               (b)  Duties.  During the  Employment  Period,  and subject to the
control  of the Board,  Executive  shall  oversee  all  functional  heads of the
organization,  and will lead and motivate the management  team.  Executive shall
work with the CEO to develop  overall  strategy and ensure that sales and profit
goals are achieved. Executive shall have full profit and loss responsibility for
the Company,  including all sales, operations,  merchandising,  marketing, human
resources, systems, finance, stores and administration. In addition,


<PAGE>


Executive  shall  perform  such other  executive  and/or  administrative  duties
consistent with the office of Vice Chairman as from time to time may be assigned
to  Executive by the Board,  but subject to the  conditions  in this  Agreement.
Executive  shall devote  Executive's  full  business  time and attention to, and
exert  Executive's  best  efforts  in, the  performance  of  Executive's  duties
hereunder,  so as to promote the business of the Company.  Executive's principal
place of business shall be at the Company's  corporate offices in San Francisco,
California.

               (c) Death or Incapacity of Chief Executive Officer.  In the event
of the death or incapacity of the CEO during the  Employment  Period,  Executive
shall be  automatically  promoted to serve as the Company's CEO,  subject to the
review and discretion of the Board.

       4. Compensation.  For all services rendered by Executive pursuant to this
Agreement,  the Company shall pay Executive, and Executive agrees to accept, the
salary, bonuses and other benefits described below in this Section 4.

               (a) Salary. The Company shall pay Executive an annual base salary
("Base  Salary") as determined  by the Board in accordance  with this Section 4,
payable at periodic intervals in accordance with the Company's payroll practices
for  salaried  employees.   Executive's  Base  Salary  shall  be  Three  Hundred
Twenty-Five Thousand Dollars  ($325,000.00) for the period from the commencement
of  Executive's  employment  through the last day of the pay period ending after
December  6,  1998.  Commencing  on the first day of the first pay period of the
Company following  December 6, 1998,  Executive's Base Salary shall be increased
to Three Hundred Fifty Thousand Dollars  ($350,000).  In accordance with Section
4(c) hereof,  the amount of the Base Salary shall be reviewed by the Board on at
least an annual basis for the fiscal year ending January 31, 2000 and all future
years,  and  any  modifications  will be  effective  as of the  date  determined
appropriate by the Board.

               (b)  Bonuses.  In addition  to Base  Salary,  Executive  shall be
entitled to receive a bonus payment of Fifty Thousand  Dollars  ($50,000.00)  on
December 5, 1998 in the event Executive is employed by the Company on that date.
In addition Executive shall be entitled to receive an annual bonus ("Bonus") for
each fiscal year of the Company ending with or within the  Employment  Period in
which the earnings per share for that fiscal year have increased fifteen percent
(15%) over the prior fiscal year. For these  purposes,  earnings per share shall
be calculated  after deducting all management  bonuses.  The amount of the Bonus
shall be  calculated  at the end of each fiscal year  according to the following
formula:  the Bonus  shall  equal the  earnings  per share for such  fiscal year
multiplied by Two Hundred Thousand (200,000).

               (c) Annual Compensation Review.  Notwithstanding  anything herein
to the contrary, Executive's compensation, consisting of salary, bonus and stock
option  grants,  shall  be  reviewed  not less  than  annually  by the  Board of
Directors.

                                       2.


<PAGE>

               (d) Health Care. During the Employment Period, Executive shall be
eligible to  participate  in any health  insurance  programs  and medical  plans
available to officers or employees of the Company.

               (e)  Participation  in  Benefit  and Equity  Compensation  Plans.
During the  Employment  Period,  Executive  shall be  eligible  to  receive  all
benefits,  including those under equity  participation  and bonus  programs,  to
which key employees are or become  eligible  under such plans or programs as may
be established by the Board.

               (f) Stock  Option  Grants.  In addition to the other  benefits to
which the Executive shall be entitled to under this Agreement, upon commencement
of the Employment Period, the Company shall grant to Executive two stock options
under the  Company's  Stock  Option Plan (the  "Plan").  Both  options  shall be
governed under the terms of the Plan.

               The first  option  grant (the  "First  Option")  shall be for One
Hundred Fifty Thousand  (150,000) shares of the Company's common stock that will
vest  according to the following  schedule:  Fifty Thousand  (50,000)  shares on
February 1, 1997, Fifty Thousand  (50,000) shares on February 1, 1998, and Fifty
Thousand  (50,000)  shares on  February  1, 1999.  Such shares will vest only if
Executive is employed by the Company on such dates and shall vest in  accordance
with the terms of the Plan and the First Option.

               The second  option grant (the "Second  Option")  shall be for One
Hundred  Fifty  Thousand  (150,000)  shares of the Company's  common stock.  The
Second Option shall vest entirely upon the  Executive's  completion of seven (7)
years of continuous  employment  with the Company.  However,  the vesting of the
Second Option shall accelerate by the following  specified  amounts in the event
that any of the following  conditions are  satisfied:  (i) in the event that the
Company's  earnings per share for the fiscal year ending January 31, 2000 equals
or exceeds $.89 or the closing price of the Company's  common stock has equalled
or exceeded Eight Dollars  ($8.00) per share for each of the twenty (20) trading
days immediately preceding January 31, 2000, then Fifty Thousand (50,000) shares
of the Second Option shall vest on January 31, 2000;  (ii) in the event that the
Company's  earnings per share for the fiscal year ending January 31, 2001 equals
or exceeds $1.05 or the closing  price of the  Company's  stock has exceeded Ten
Dollars  ($10.00) per share for each of the twenty (20) trading days immediately
preceding  January 31, 2001,  then Fifty Thousand  (50,000) shares of the Second
Option  shall vest on January 31,  2001;  (iii) in the event that the  Company's
earnings per share for the fiscal year ending January 31, 2002 equals or exceeds
$1.25 or the  closing  price of the  Company's  common  stock  has  equalled  or
exceeded  Twelve Dollars  ($12.00) per share for each of the twenty (20) trading
days immediately preceding January 31, 2002, then Fifty Thousand (50,000) shares
of the Second Option shall vest on February 1, 2002.  The shares  subject to the
Second  Option  shall vest only if  Executive is employed by the Company on said
dates.  The  vesting  of the  First  Option  and  the  Second  Option  shall  be
accelerated in accordance with the terms of the Plan;  provided,  however,  that
the  vesting of the Second  Option  shall be  accelerated  only if the change of
control

                                       3.
<PAGE>

event causing such  acceleration has occurred  following June 2, 1997. The First
Option and the Second  Option shall be ten year grants and shall  contain and be
subject to all other standard terms  applicable to the other stock option grants
under the Plan.  Promptly  following the commencement of the Employment  Period,
the Company will prepare and execute the appropriate stock option agreements for
the Executive to reflect the two option grants described in this Section 4(f).

               (g) 401(k) Plan  Benefits.  In addition to the other  benefits to
which Executive  shall be entitled to under this  Agreement,  Executive shall be
entitled to  participate  in the Company's  401(k) Plan and shall be entitled to
receive  the full  benefit of  contributions  to be made by the  Company for the
benefit of Executive under the terms of the 401(k) Plan.

       5. Vacation. During the Employment Period, Executive shall be entitled to
vacation in accordance with the Company policy in effect for executive officers.

       6.  Indemnification.   The  Company  shall  maintain  indemnification  of
Executive   pursuant  to  the   provisions  of  the  Company's   Certificate  of
Incorporation  and Bylaws to the fullest  extent of  Delaware  law and all other
applicable law, and shall provide Executive with indemnification pursuant to the
Company's  standard  indemnification  agreement and any director's and officer's
liability insurance policy maintained by the Company.

       7. Severance Benefits.

               (a)   Termination  of  Employment.   In  the  event   Executive's
employment terminates for any reason then Executive shall be entitled to receive
severance benefits as follows:

                       (i)  Voluntary  Resignation.  If  Executive's  employment
terminates by reason of Executive's  voluntary resignation (and such termination
is not an Involuntary  Termination or a termination  for Cause),  then Executive
shall not be entitled to receive severance benefits under this Agreement.

                       (ii)  Involuntary  Termination  Other Than For Cause.  If
Executive's  employment is terminated as a result of an Involuntary  Termination
other than for Cause,  then the following  severance  benefits  shall be paid or
otherwise provided to Executive: (A) if such termination occurs during the first
two years of the  Employment  Period,  Executive  shall be  entitled  to receive
severance payments,  in the form of monthly cash payments in accordance with the
Company's payroll policies, for the remainder of the initial two-year Employment
Term  under  this  Agreement  at the Base  Salary  rate in effect at the time of
termination,  but in no event  shall  Executive  receive  fewer than twelve (12)
monthly  payments  at such Base Salary rate  following  termination;  (B) if the
termination  occurs  following  the  completion  of two years of the  Employment
Period,  Executive shall be entitled to receive twelve (12) monthly  payments at
the Base Salary rate for the period following

                                       4.


<PAGE>

termination until Executive accepts any position with another employer, at which
time Executive shall receive no further payments.

                       (iii) Termination for Cause. If Executive's employment is
terminated  for Cause,  then  Executive  shall not be  entitled  to receive  any
severance payments or other severance benefits under this Section 8. Executive's
benefits will be continued  under the Company's then existing  benefit plans and
policies  in  accordance  with such plans and  policies in effect on the date of
termination.

               (b)  Benefit  Reduction.  Should  any  of  Executive's  severance
benefits  under  this  Section  8  (including  any  severance  payments  and any
accelerated  vesting of outstanding  options or shares of stock) be deemed to be
parachute  payments under Code Section 280G,  then,  first, the dollar amount of
any severance payment and, secondly, the accelerated   vesting of any options or
shares  of  stock,  will be  reduced  to the  extent  (and  only to the  extent)
necessary to provide  Executive with the maximum  after-tax  benefit  available,
after  taking into  account any  parachute  excise tax which might  otherwise be
payable by Executive  under Code Section 4999 and any analogous State income tax
provision.

       8.  Noncompetition  and Confidential  Information.  While employed by the
Company, Executive will not directly or indirectly manage, operate,  participate
in, be employed by, perform  consulting  services for, or otherwise be connected
in any manner with, any firm, person,  corporation, or enterprise which would be
competitive  with the  business of the Company.  Executive  will not at any time
disclose to others any  confidential  information  relating to the Company or to
the business of the Company and confirms that such  information  constitutes the
exclusive property of the Company.  The foregoing shall not preclude Executive's
investment in any such firm,  corporation or enterprise provided that at any one
time Executive and members of Executive's  immediate family do not own more than
one percent (1%) of any voting securities of any such entity.

       9. Failure to Comply.  If for any reason  Executive shall cease to render
services  as  required by this  Agreement  without  the  written  consent of the
Company, or if Executive shall breach the provisions of Section 8 hereof,  then,
except as provided in Section 7 hereof,  Executive  will thereby  relinquish all
rights to any  benefits  hereunder  (other  than vested  stock  options or other
vested benefits),  and the Company shall reserve whatever rights, if any, it may
have against Executive under this Agreement or otherwise.

       10. Successors.  Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
or to all or  substantially  all of the Company's  business  and/or assets shall
assume the  obligations  under this Agreement and shall perform the  obligations
under this  Agreement  in the same  manner and to the same extent as the Company
would be required to perform such obligations in the absence of a succession.

                                       5.

<PAGE>

       11. Notices.  Notices and all other  communications  contemplated by this
Agreement  shall be in writing  and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt  requested and postage  prepaid.  Mailed  notices to Executive  shall be
addressed to Executive at the home address from which  Executive  most  recently
communicated  to the  Company in  writing.  In the case of the  Company,  mailed
notices shall be addressed to its corporate  headquarters,  and all notice shall
be directed to the attention of its Secretary.

       12. Miscellaneous Provisions.

               (a) Definition of Terms. The capitalized  terms in this Agreement
shall have the meanings set forth in this Agreement or in Appendix A hereto.

               (b) Waiver.  No  provision of this  Agreement  shall be modified,
waived or discharged unless the  modification,  waiver or discharge is agreed to
in  writing  and  signed  by  Executive   and  by  an   authorized   officer  or
representative of the Company (other than Executive).  No waiver by either party
of any breach of, or of  compliance  with,  any  condition  or provision of this
Agreement by the other party shall be considered a waiver of any other condition
or provision or of the same condition or provision of another time.

               (c)  Whole   Agreement.   No   agreements,   representations   or
understandings  (whether oral or written and whether  express or implied)  which
are not expressly set forth in this  Agreement have been made or entered into by
either party with respect to the subject matter hereof.

               (d) Choice of Law. The validity, interpretation, construction and
performance  of this  Agreement  shall be  governed  by the laws of the State of
California.

               (e)  Severability.  If any term or provision of this Agreement or
the application  thereof to any  circumstance  shall, in any jurisdiction and to
any  extent,  be  invalid  or  unenforceable,  such term or  provision  shall be
ineffective  as to  such  jurisdiction  to the  extent  of  such  invalidity  of
unenforceability  without invalidating or rendering  unenforceable the remaining
terms and  provisions  of this  Agreement or the  application  of such terms and
provisions to  circumstances  other than those as to which it is held invalid or
unenforceable,  and  a  suitable  and  equitable  term  or  provision  shall  be
substituted therefor to carry out, insofar as may be valid and enforceable,  the
intent and purpose of the invalid or unenforceable term or provision.

               (f) Arbitration.  Any dispute or controversy  arising under or in
connection  with this  Agreement may be settled by  arbitration in the County of
San  Francisco,  California,  in  accordance  with  the  rules  of the  American
Arbitration  Association then in effect.  Such arbitration  proceedings shall be
nonbinding  and any  claim  with  respect  to  this  Agreement,  whether  or not
previously the subject of an arbitration proceeding, may be brought in any court
of competent jurisdiction.

                                       6.


<PAGE>

               (g)  Employment   Taxes.  All  payments  made  pursuant  to  this
Agreement  will be subject to  withholding  of applicable  income and employment
taxes.

               (h)  Assignment  by  Company.  The  Company may assign its rights
under this  Agreement to an  affiliate,  and an affiliate  may assign its rights
under this  Agreement to another  affiliate of the Company;  provided,  however,
that if there is any such  assignment,  the Company will  guarantee all payments
and the performance of all obligations under this Agreement.  In the case of any
such  assignment,  the term  "Company"  when used in a section of this Agreement
shall mean the corporation or other entity that actually employs Executive.

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

               IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed  this
Agreement this day and year first above written.

SHARPER IMAGE CORPORATION                              EXECUTIVE

By:  /s/ Richard Thalheimer                            /s/ Barry Gilbert
     -------------------------                         ---------------------
        Richard Thalheimer                             Barry Gilbert
        Chairman of the Board and Chief
          Executive Officer



                                       7.
<PAGE>


                                   APPENDIX A

                                  Definitions

                Cause.  "Cause" shall mean (i) the material  breach by Executive
of one or more of Executive's  obligations  under this  Agreement  which are not
otherwise  corrected within ten (10) days following the Company's written notice
to  Executive  of  such  breach,  (ii)  conviction  of a  felony, (iii) repeated
unexplained or unjustified absence,  (iv) willful breach of fiduciary duty under
this Agreement or (v) gross  negligence or willful  misconduct  where such gross
negligence  or  willful  misconduct  has  resulted  or is  likely  to  result in
substantial and material damage to the Company or its subsidiaries.

                Involuntary  Termination.  "Involuntary  Termination" shall mean
termination by the Company of  Executive's  employment for any reason other than
for Cause, and shall include Executive's voluntary resignation following (i) the
material  breach by the  Company  of one or more of its  obligations  under this
Agreement  which are not  otherwise  corrected  within  ten (10) days  following
Executive's written notice to the Company of such breach, or (ii) the occurrence
of any  of the  following  events  without  Executive's  express  prior  written
consent:  (A) a change in Executive's position with the Company which materially
reduces Executive's level of  responsibilities,  (B) a relocation of Executive's
place of employment  by more than twenty (20) miles from the  Company's  current
executive offices without  Executive's  prior consent,  or (c) the assignment of
additional material job responsibilities or a reduction in job  responsibilities
inconsistent  with Executive's  position with the Company and Executive's  prior
responsibilities.

                                       1.