Exhibit 10.21

The CIT Group/
Business Credit, Inc.
3rd Floor
300 South Grand Avenue
Los Angeles, CA 90071
Tel: 213-613-2575
Fax: 213-613-2588

     [LOGO]
                               February 13, 1997

Sharper Image Corporation
650 Davis Street
San Francisco, CA 94111

Gentlemen:

Reference is made to the  Financing  Agreement  between us dated  September  21,
1994,  as amended (the  "Financing  Agreement").  Capitalized  terms used herein
shall have the same  meanings as specified  in the  Financing  Agreement  unless
otherwise specifically defined herein.

Effective immediately, pursuant to mutual understanding, the Financing Agreement
shall be, and hereby is, amended as follows:

(A)  The definitions of Fixed Charge Coverage Ratio and Line of Credit shall be,
and each hereby is, amended in its entirety to read as follows:

     "Fixed  Charqe  Coverage  Ratio  shall  mean a ratio  determined  as of the
     relevant  calculation  date by  dividing  EBITDA  by the sum of i)  Capital
     Expenditures and ii) Interest Expenses, for the relevant period,  provided,
     however that if Availability  (which,  notwithstanding any provision to the
     contrary contained in this Financing  Agreement,  shall for the purposes of
     this  definition  of Fixed Charge  Coverage  Ratio be computed at all times
     based upon advance  percentages of (x) twenty percent (20%) with respect to
     Eligible  Proprietary  Products  Inventory and (y) forty-five percent (45%)
     with respect to all other Eligible Inventory) upon the close of business on
     each Friday  during the ninety (90) day period  immediately  preceding  and
     ending on any  calculation  date  equaled or exceeded  $2,000,000,  Capital
     Expenditures will be excluded from the calculation of this ratio."

     "Line of Credit shall mean the commitment of CITBC to make Revolving  Loans
     under  Section 3 hereof,  make CAPEX Term Loans under Section 3A hereof and
     issue Letter of Credit  Guaranties under Section 4 hereof,  all pursuant to
     and in accordance with Sections 3, 3A and 4 of this Financing


A company of
Dai-Ichi Kangyo Bank and
Chase Manhattan Corporation



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     Agreement,  in the aggregate  amount of (a) $29,500,000 for the period from
     October 1, 1997 through and including December 31, 1997 and (b) $24,500,000
     at all other times,  provided  that (i) such amount shall be  automatically
     and without  any  further act by CITBC or the Company  reduced by an amount
     equal  to the aggregate amount of all drawdowns of CAPEX Term Loans made by
     CITBC to the Company hereunder and (ii) the aggregate  outstanding  balance
     of Revolving  Loans and Letters of Credit shall not exceed (x)  $25,000,000
     for the period from  October 1, 1997,  through and  including  December 31,
     1997 and (y) $20,000,000 at all other times."

(B)  Section 3,  Paragraph  1  shall be, and hereby is,  amended by amending the
second sentence thereof in its entirety to read as follows:

     "Such loans and advances shall be in amounts up to the sum of:

     (a) twenty percent (20%) of the aggregate  value of the Company's  Eligible
     Inventory  which is  Proprietary  Products  Inventory  plus  (b) (i)  fifty
     percent  (50%) for the period  from August 1, 1997  through  and  including
     August  31,  1997,  (ii)  fifty-five  percent  (55%)  for the  period  from
     September  1 1997  through and  including  October  31,  1997,  (iii) sixty
     percent  (60%) for the period from  November 1, 1997 through and  including
     December 31, 1997 and  (iv) forty-five percent (45%) at all other times, of
     the aggregate value of the Company's other Eligible Inventory provided that
     in no event  shall the  aggregate  amount of  Eligible  Inventory  computed
     pursuant to the clause (a) above exceed  twenty-five  percent  (25%) of the
     total of all Eligible Inventory."

(C)  Section 6, Paragraphs 8, 10, 11 and 12 of the Financing Agreement shall be,
and each hereby is, amended as follows:

     (i) The Net Worth  covenant set forth in Paragraph 8 of Section 6 shall be,
     and hereby  is,  amended by  amending  the Net Worth  amount for the fiscal
     quarter ending on October 31, 1997 to be "$24,000,000". Such covenant shall
     remain unchanged for all other fiscal quarters and periods.

     (ii) The Working  Capital  Covenant  set forth in Paragraph 10 of Section 6
     shall be, and hereby is, amended by amending the Working Capital amount for
     the  fiscal  quarters  ending  July 31,  1997 and  October  31,  1997 to be
     $9,500,000"  (for July 31, 1997) and  "$7,500,000"  (for October 31, 1997),
     respectively.  Such  covenant  shall remain  unchanged for all other fiscal
     quarters and periods.

     (iii) The Fixed Charge  Coverage Ratio set forth in Paragraph 11 of Section
     6 shall be, and hereby is,  amended by  amending  the Ratio  solely for the
     four (4) consecutive  quarters ending July 31, 1997 and October 31, 1997 to
     be ".40 to 1" (for July 31, 1997) and ".50 to 1" (for October 31, 1997),



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     respectively,  provided that such Ratio shall remain 1.0 to 1 for all other
     periods computed for the four (4) consecutive  quarters then ending, all as
     more fully provided in said Paragraph 11 of Section 6.

     (iv) The  Leverage  Ratio set forth in  Paragraph 12 of Section 6 shall be,
     and hereby is,  amended by amending the ratio for the fiscal quarter ending
     October 31, 1997 to be "2.50 to 1" Such ratio shall  remain  unchanged  for
     all other fiscal quarters and periods.

(D)  The  Effectiveness  of all of the  amendments set forth above shall be, and
hereby is,  subject to the  fulfillment to CITBC's  satisfaction  of each of the
Conditions Precedent. The "Conditions Precedent" shall mean:

     (i) The Company shall pay all  Out-of-Pocket  Expenses incurred by CITBC in
     connection  with  the  agreement  and all the  documents  and  transactions
     contemplated hereby (including, without limitation, the reasonable fees and
     expenses of CITBC's  outside legal  counsel in connection  with the warrant
     referred to in clause  (iii)  below).  All such  expenses may be charged to
     your Revolving Loan Account on the respective due dates thereof.

     (ii)  CITBC's  receipt of a  secretary's  certificate  certifying  Board of
     Directors Resolutions  authorizing the execution,  delivery and performance
     by the  Company  of this  Agreement  and  all  documents  and  transactions
     contemplated hereby.

     (iii)  The  Company  shall  enter  into a  warrant  agreement  (in form and
     substance  satisfactory  to CITBC) and take all other actions  necessary to
     grant to CITBC  or its assigns a warrant to purchase up to 50,000 shares of
     its voting common stock at $3.50 per share.





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Except to the  extent  set forth  herein,  no other  change in any of the terms,
provisions or conditions of the Financing  Agreement is intended or implied.  If
the foregoing is in accordance with your  understanding  of our agreement kindly
so indicate by signing and returning the enclosed copy of this letter.

                                        Very truly yours,

                                        THE CIT GROUP/BUSINESS
                                        CREDIT, INC.

                                        By: /s/ Bonnie Schain
                                            ------------------------------------
                                        Title: Assistant Vice President
Read and Agreed to:

SHARPER IMAGE CORPORATION


By: /s/ Craig P. Womack
    ------------------------------------------
Title: President, Chief Administrative Officer


By: /s/ Tracy Y. Wan
    -------------------------------------------
Title: Sr. V.P., Chief Financial Officer