Document:

Heritage 2006 Equity Incentive Plan

 Exhibit 10.16 
 HERITAGE 
 2006 EQUITY INCENTIVE PLAN 
 Heritage Bankshares, Inc. hereby establishes the Heritage 2006 Equity Incentive Plan upon the terms and conditions set forth below. 
 1. Definitions 
 In this Plan document, except where
the context otherwise indicates, words in the masculine gender shall be deemed to include males and females, singular terms also shall refer to the plural, and the following definitions shall apply: 
 1.1. “Agreement” means a written agreement specifying the terms and conditions of an Award. 
 1.2. “Award” means any Option, Right, Restricted Stock or Other Stock Award granted under the Plan. 
 1.3. “Board” means the Board of Directors of the Corporation. 
 1.4. “Change in Control” means the occurrence of any of the following: (i) the acquisition by any “person” or “group” (as defined in or pursuant to Sections 13(d) and 14(d) of the
Exchange Act) (other than the Corporation, any Subsidiary or any Corporation or Subsidiary’s employee benefit plan), directly or indirectly, as “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of the
Corporation representing twenty percent (20%) or more of either the then outstanding shares or the combined voting power of the then outstanding securities of the Corporation but excluding for this purpose, a merger or consolidation that is
excluded from clause (iii)(a) immediately below; (ii) either a majority of the directors of the Corporation elected at the Corporation’s annual stockholders meeting shall have been nominated for election other than by or at the direction
of the “incumbent directors” of the Corporation, or the “incumbent directors” shall cease to constitute a majority of the directors of the Corporation. The term “incumbent director” shall mean any director who was a
director of the Corporation on July 26, 2006 and any individual who becomes a director of the Corporation subsequent to July 26, 2006 and who is elected or nominated by or at the direction of at least two-thirds of the then incumbent
directors; (iii) the shareholders of the Corporation approve (a) a merger, consolidation or other business combination of the Corporation with any other “person” or “group” (as defined in or pursuant to Sections 13(d)
and 14(d) of the 1934 Act) or affiliate thereof, other than a merger or consolidation that would result in the outstanding common stock of the Corporation immediately prior thereto continuing to represent (either by remaining outstanding or by being
converted into common stock of the surviving entity or a parent or affiliate thereof) more than fifty percent (50%) of the outstanding common stock of the Corporation or such surviving entity or a parent or affiliate thereof outstanding
immediately after such merger, consolidation or other business combination, or (b) a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the 

 Corporation of all or substantially all of the Corporation’s assets; or (iv) any other event or circumstance
which is not covered by the foregoing subsections of this Section 1.4 but which the Board of Directors determines to affect control of the Corporation and with respect to which the Board of Directors adopts a resolution that the event or
circumstance constitutes a Change in Control for purposes of the Plan. This definition of “Change in Control” shall not be amended after (i) the occurrence of a Change in Control; (ii) the public announcement of a proposal for a
transaction that, if consummated, would constitute a Change in Control; or (iii) the Board of Directors learns of a specific proposal containing the essential terms of a transaction that, if consummated, would constitute a Change in Control;
provided, however, that in the case of a proposal under clause (ii) or clause (iii) immediately above, if the proposal is finally withdrawn or terminated, this definition may be amended after the withdrawal or termination. For purposes of
the Plan and all related Agreements, if the employment of any Participant is terminated by the Corporation and/or any Subsidiary (other than for cause) after an event causing the definition of “Change in Control” to become nonamendable
under the preceding subsections of this Section 1.4, that Participant’s termination of employment shall be considered to have occurred after a Change in Control if a Change in Control occurs with respect to and within two (2) years
after the event causing the definition of “Change in Control” to become nonamendable. 
 1.5. “Code” means the Internal
Revenue Code of 1986, as amended. 
 1.6. “Common Stock” means the common stock, par value $5.00 per share, of the Corporation.

 1.7. “Corporation” means Heritage Bankshares, Inc. 
 1.8. “Date of Exercise” means the date on which the Corporation receives notice of the exercise of an Option or Right in accordance with the
terms of Article 8. 
 1.9. “Date of Grant” means the date on which the grant of an Award is authorized under the Plan or such
later date as may be specified in the authorization. 
 1.10. “Effective Date” means July 26, 2006. 
 1.11. “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 1.12. “Fair Market Value” of a share of Common Stock on any relevant date means: (i) the weighted average (based on daily trading volume)
during the thirty (30) day period next preceding the Grant Date of the “last sale” prices of a share of Common Stock on the five (5) days nearest preceding the Date of Grant on which at least 300 shares were traded; and
(ii) if (i) is inapplicable, the fair market value as determined in good faith by the Board. For purposes of this definition, “last sale” prices and trading volume shall be determined according to the OTC Market Report as
reported for the applicable dates. 

 1.13. “Incentive Stock Option” means an Option granted as such under the Plan that is intended
at the Date of Grant to qualify as an incentive stock option under Section 422 of the Code. 
 1.14. “Nonstatutory Stock
Option” means an Option granted under the Plan that is not an Incentive Stock Option. 
 1.15. “Option” means an option to
purchase Shares granted under the Plan in accordance with the terms of Article 6. 
 1.16. “Option Period” means the period
during which an Option may be exercised. 
 1.17. “Option Price” means the price per Share at which an Option may be exercised.

 1.18. “Other Stock Award” means an award of Shares granted under the Plan in accordance with the terms of Article 10.

 1.19. “Participant” means an individual to whom an Award has been granted. 
 1.20. “Permanent Disability” means disabled within the meaning of Code Section 72(m)(7). 
 1.21. “Plan” means the Heritage 2006 Equity Incentive Plan. 
 1.22. “Related Option” means the Option granted in connection with a specified Right. 
 1.23.
“Related Right” means the Right granted in connection with a specified Option. 
 1.24. “Restricted Stock” means Shares
granted in accordance with the terms of Article 9. 
 1.25. “Retirement” means retirement of an officer or other employee from
the Corporation or a Subsidiary at or after age 65, or in the case of a non-employee director, retirement from the Board at or after age 65. 
 1.26. “Right” means a stock appreciation right granted under the plan in accordance with the terms of Article 7. 
 1.27. “Right Period” means the period during which a Right may be exercised. 
 1.28. “Share” means a share of
Common Stock that is authorized but unissued pursuant to the Plan. 

 1.29. “Subsidiary” means a corporation at least 50% of the total combined voting power of all
classes of stock of which is owned by the Corporation, either directly or through one or more other Subsidiaries. 
 1.30. “Termination
of Service” means termination of an officer’s or other employee’s employment with the Corporation or a Subsidiary, or in the case of a non-employee director, termination from service as a director on the Board. 
 2. Purpose 
 The Plan is intended to assist the
Corporation in attracting, retaining, and motivating directors, officers, and other key employees of outstanding ability and to promote the identification of their interests with those of the shareholders of the Corporation. 
 3. Administration 
 3.1. The Board shall have the
power to determine in its discretion the directors, officers, and other key employees of the Corporation or a Subsidiary to whom Awards shall be granted, the number of Shares to be subject to each Award, and the terms and conditions of each Award.
Without limiting the generality of the foregoing, the Board may provide in its discretion in an Agreement: 
 (i) that Options or Rights will
not become exercisable until a Change in Control or other specified event(s) with respect to the Corporation or the Participant; 
 (ii) for
an agreement by the Participant to render services to the Corporation or a Subsidiary upon such terms and conditions as may be specified in the Agreement; 
 (iii) for restrictions on the transfer, sale or other disposition of shares of Common Stock issued to the Participant under the Plan, in which case, the Corporation may place a legend upon the applicable certificates
noting the restrictions on any Shares issued pursuant to an Award. 
 (iv) for an agreement by the Participant to resell to the Corporation,
under specified conditions, shares of Common Stock issued under the Plan; and 
 (v) for the payment of all or part of the Option Price upon
the exercise of an Option or purchase of Common Stock pursuant to an Other Stock Award, subject to Section 9 or Section 10 below, as applicable. 

 3.2. The Plan shall be administered by the Board. In addition to any other powers granted to the Board
hereunder, it shall have the following powers, subject to the express provisions of the Plan: 
 (i) to construe and interpret the Agreements
and the Plan; 
 (ii) to require, whether or not provided for in the pertinent Agreement, of any person to whom Shares are to be issued under
the Plan, the making of any representations or agreements which the Board may deem necessary or advisable in order to comply with the securities laws of the United States or of any state, including Section 16(b) of the Exchange Act; 

(iii) to provide for satisfaction of a Participant’s tax liabilities arising in connection with the Plan under such terms and conditions as the
Board deems appropriate, including requirements in the event of a disqualifying disposition of shares of Common Stock acquired by a Participant pursuant to exercise of an Incentive Stock Option; and 
 (iv) to make all other determinations and take all other actions necessary or advisable for the administration of the Plan. 
 3.3. Agreements shall be executed on behalf of the Corporation by the Chairman of the Board. 
 3.4. Any determinations or actions made or taken by the Board pursuant to this Article shall be binding and final. 
 4. Eligibility 
 Awards may be granted to those
directors, officers, and other key employees of the Corporation or a Subsidiary who are selected for Awards by the Board. Only individuals who are employees of the Corporation or a Subsidiary shall be eligible for the grant of Incentive Stock
Options. 
 5. Stock Subject to the Plan 
 5.1. The maximum number of Shares that may be issued under the Plan is 250,000. 
 5.2. If an Award expires or terminates for any
reason (other than termination by virtue of the exercise of a Related Option or Related Right, as the case may be) in whole or in part, the shares of Common Stock (or applicable portion thereof) which had been subject to the Agreement relating
thereto shall become Shares that are available for the grant of other Awards. 
 5.3. Shares of Common Stock issued upon the exercise of a
Right (or if cash is payable in connection with the exercise, that number of Shares having a Fair Market Value equal to the cash payable upon exercise) shall be charged against the number of Shares 

 issuable under the Plan and shall not become available for the grant of other Awards. If the Right referred to in the
preceding sentence is a Related Right, the Shares subject to the Related Option, to the extent not charged against the number of Shares subject to the Plan in accordance with this Section 5.3, shall become available for the grant of other
Awards. 
 5.4. The shares of Common Stock issued under the Plan may be authorized but unissued shares, treasury shares or shares purchased
by the Corporation on the open market or from private sources for use under the Plan. 
 6. Options 
 6.1. All Agreements granting Options shall specify the extent to which the Option is intended to be either (i) a Nonstatutory Stock Option or
(ii) an Incentive Stock Option. 
 6.2. The Option Period shall be determined by the Board and specifically set forth in the Agreement,
provided however, that an Option shall not be exercisable after ten years from the Date of Grant. 
 6.3. All Incentive Stock Options granted
under the Plan shall comply with the provisions of the Code governing incentive stock options and with all other applicable rules and regulations, including the following limitation. To the extent that the aggregate Fair Market Value (determined
without regard to this limitation as of the time the respective options are granted) of Common Stock with respect to which Incentive Stock Options and any other incentive stock options (within the meaning of Section 422 of the Code) are
exercisable for the first time by the Optionee during any calendar year (under the Plan and any other incentive stock option plans of the Corporation or any Subsidiary), shall exceed One Hundred Thousand Dollars ($100,000), the options shall be
treated as options which are not incentive stock options. This limitation shall be applied by taking options into account in the order in which they were granted. If, as a result of this limitation, an Option is to be treated in part as an Incentive
Stock Option and in part as a Nonstatutory Stock Option, (i) the Corporation shall first designate shares of Common Stock that are issued pursuant to the exercise of the Option as shares acquired pursuant to the exercise of Incentive Stock
Options, until the shares so designated represent the entire portion of the Option that may be treated as an Incentive Stock Option; (ii) the Corporation shall then designate all additional shares of Common Stock that are issued pursuant to the
exercise of the Option as shares acquired pursuant to the exercise of Nonstatutory Stock Options; and (iii) the Corporation shall issue separate certificates for and identify the certificates as Incentive Stock Option shares or Nonstatutory
Stock Option shares, as applicable, in the stock transfer records of the Corporation. 
 6.4. No Option shall be granted with an Option Price
that is less than the Fair Market Value of the Shares covered by the Option on the Date of Grant. 

 6.5. Tax obligations of a Participant resulting from the exercise of an Option shall be withheld or
provided for pursuant to any methods approved by the Board. The amount of taxes paid pursuant to this Section at the time of the exercise of the Option shall be equal to the statutory minimum withholding obligations that result from the exercise of
the Option. 
 6.6. All other terms of Options granted under the Plan shall be determined by the Board in its sole discretion. 
 7. Rights 
 7.1. A Right may be granted under the
Plan: 
 (i) in connection with, and at the same time as, the grant of an Option; 
 (ii) by amendment of an outstanding Nonstatutory Stock Option granted under the Plan; or 
 (iii) independently of any Option granted under the Plan. 
 A Right granted under clause (i) or (ii) of the preceding sentence is a Related Right. A Related Right may, in the Board’s discretion, apply to all or a portion of the Shares subject to the Related Option. 
 7.2. A Right may be exercised in whole or in part as provided in the Agreement, and subject to the provisions of the Agreement, entitles its Participant
to receive, without any payment to the Corporation (other than required tax withholding amounts) either cash or that number of Shares (equal to the highest whole number of Shares), or a combination thereof, in an amount or having a Fair Market Value
determined as of the Date of Exercise not to exceed the number of Shares subject to the portion of the Right exercised multiplied by an amount equal to the excess of (i) the Fair Market Value per Share on the Date of Exercise of the Right over
(ii) either (A) the Fair Market Value per Share on the Date of Grant of the Right if it is not a Related Right, or (B) the Option Price as provided in the Related Option if the Right is a Related Right. 
 7.3. The Right Period shall be determined by the Board and specifically set forth in the Agreement, provided, however, that: 
 (i) a Right will expire no later than the earlier of (A) ten years from the Date of Grant or (B) in the case of a Related Right, the expiration
of the Related Option; 
 (ii) a Right may be exercised only when the Fair Market Value of a Share exceeds either (A) the Fair Market
Value per Share on the Date of Grant of the Right if it is not a Related Right, or (B) the Option Price as provided in the Related Option if the Right is a Related Right; and 

 (iii) a Right that is a Related Right to an Incentive Stock Option may be exercised only when and to the
extent the Related Option is exercisable. 
 7.4. The exercise, in whole or in part, of a Related Right shall reduce the number of Shares
subject to the Related Option by the number of Shares with respect to which the Related Right is exercised. Similarly, the exercise, in whole or in part, of a Related Option shall reduce the number of Shares subject to the Related Right by the
number of Shares with respect to which the Related Option is exercised. 
 7.5. Tax obligations of a Participant resulting from the exercise
of a Right shall be withheld or provided for pursuant to any methods approved by the Board. The amount of taxes paid pursuant to this Section at the time of the exercise of the Option shall be equal to the statutory minimum withholding obligations
that result from the exercise of the Option. 
 8. Exercise 
 An Option or Right may, subject to the provisions of the Agreement under which it was granted, be exercised in whole or in part by the delivery to the Corporation of written notice of the exercise, in such form as the
Board may prescribe, accompanied, in the case of an Option, by full payment for the Shares with respect to which the Option is exercised. A Participant may pay the purchase price either (i) in cash; (ii) with previously acquired shares of
Common Stock (valued at Fair Market Value on the Date of Exercise of the Option) that have either been purchased in open market transactions or issued by the Corporation pursuant to a plan thereof or of a Subsidiary; (iii) by payment of such
other consideration as the Board may specify; or (iv) a combination thereof. Notwithstanding the foregoing, an Option or Right shall not be exercised unless the exercise and the issuance of the Shares with respect thereto comply with all
applicable provisions of law, including state and federal securities laws and rules and regulations thereunder, and any listing agreement with any securities exchange on which the Shares may be listed. 
 9. Restricted Stock 
 9.1. The Board may cause the
Corporation to issue Restricted Stock from time to time. Whenever the Board deems it appropriate to grant Restricted Stock to a Participant, notice shall be given to the Participant stating the number of Shares granted as Restricted Stock and the
terms and conditions to which the Restricted Stock is subject. That notice shall become an Agreement upon written acceptance by the Participant, and certificates representing the Restricted Stock shall be issued and delivered to the Participant as
soon as practicable after execution and return of the Agreement. Restricted Stock may be granted with or without cash consideration. 
 9.2.
Restricted Stock issued pursuant to the Plan shall be subject to the following restrictions: 
 (i) No Restricted Stock may be sold, assigned,
transferred, pledged, hypothecated, or otherwise encumbered or disposed of until the restrictions set forth in the applicable Agreement have lapsed or been removed pursuant to Section 9.3 or Section 9.4. 

 (ii) In the case of a Participant’s Termination of Service for any reason (whether voluntarily or
involuntarily, with or without cause), the Participant shall forfeit to the Corporation any Restricted Stock on which the restrictions have not lapsed or been removed pursuant to Section 9.3 or Section 9.4 below on the date of the
Termination of Service, and the Corporation shall have no obligation to pay any amounts with respect to such Restricted Stock, unless the Board determines to the contrary. 
 9.3. The Board shall establish as to each Award of Restricted Stock (i) the terms and conditions upon which the restrictions set forth in
Section 9.2 above shall lapse, and (ii) the extent, if any, to which the Participant shall have the voting, dividend, distribution and other rights of a shareholder with respect to the Restricted Stock. Certificates representing Restricted
Stock shall bear a legend referring to the restrictions set forth in the Plan and the Participant’s Agreement. Those terms and conditions may include, without limitation, the lapsing of restrictions as a result of the death, Permanent
Disability or Retirement of the Participant or the occurrence of a Change in Control. 
 9.4. Notwithstanding Section 9.2(i) and
Section 9.2(ii) above, the Board may at any time, in its sole discretion, accelerate the time at which any or all restrictions on Restricted Stock will lapse or remove any and all such restrictions. 
 9.5. Tax obligations of a Participant resulting from the Participant’s earning Restricted Stock hereunder shall be withheld or provided for pursuant
to any methods approved by the Board and set forth in the Agreement. The amount of taxes so paid shall be equal to the statutory minimum withholding obligations that result when the Restricted Stock is earned. 
 10. Other Stock Awards 
 The Board may cause the
Corporation to issue Common Stock from time to time pursuant to an Other Stock Award in exchange for consideration from the Participant specified by the Board that is either the Participant’s cash or other direct payment to the Corporation or
the Participant’s past services rendered to the Corporation or a Subsidiary on or before the date of issuance. Whenever the Board deems it appropriate to grant an Other Stock Award to a Participant, notice shall be given to the Participant
stating the number of Shares to be issued pursuant to the Other Stock Award and the other terms and conditions of the Other Stock Award. That notice shall become an Agreement upon written acceptance by the Participant. Tax obligations of a
Participant resulting from the Participant’s Other Stock Award shall be withheld or provided for pursuant to any methods approved by the Board and set forth in the Agreement. The amount of taxes so paid shall be equal to the applicable
statutory minimum withholding obligations that result when the Common Stock is earned. 

 11. Nontransferability of Options and Rights 
 Unless otherwise determined by the Board, Options and Rights granted under the Plan shall not be transferable other than by will or the laws of descent
and distribution, and an Option or Right may be exercised during the Participant’s lifetime only by him or in the event of his legal disability, by his legal representative. A Related Right is transferable only when the Related Option is
transferable and only with the Related Option and under the same conditions. 
 12. Capital Adjustments 
 The number and class of Shares subject to each outstanding Award, the Option Price and the aggregate number and class of Shares for which Awards
thereafter may be made shall be adjusted by the Board, as appropriate and equitable, to reflect such events as stock dividends, dividends payable other than in cash or other extraordinary dividends, stock splits, recapitalizations, mergers,
consolidations or reorganizations of or by the Corporation. 
 13. Termination or Amendment 
 The Board shall have the power to terminate the Plan and to amend it in any respect, provided that, after the Plan has been approved by the shareholders
of the Corporation, the Board may not, without the approval of the shareholders of the Corporation, amend the Plan so as to increase the aggregate number of Shares that may be issued under the Plan (except as provided in Article 12), to modify
the requirements as to eligibility to receive Awards, or to increase materially the benefits accruing to Participants. Notwithstanding the preceding sentence, no termination or amendment of the Plan shall, without his or her consent, adversely
affect the rights or obligations of a Participant with respect to any Award previously granted except as reasonably required for compliance with Rule 16b-3 under the Exchange Act or with the provisions of the Code and other applicable rules and
regulations thereunder governing incentive stock options. 
 14. Modification, Extension and Renewal of Options and Rights 
 Subject to the terms and conditions and within the limitations of the Plan, the Board may modify, extend or renew outstanding Awards, or accept the
surrender of outstanding options and rights (to the extent not theretofore exercised) granted under the Plan or under any other plan of the Corporation, a Subsidiary or a company or similar entity acquired by the Corporation or a Subsidiary, and
authorize the granting of new Awards pursuant to the Plan in substitution therefor (to the extent not theretofore exercised), and the substituted Options and Rights may specify a lower exercise price than the surrendered options and rights, a longer
term than the surrendered options and rights or have any other provisions that are authorized by the Plan. Notwithstanding the foregoing, however, no modification of an Award previously granted under the Plan shall, without the consent of the
Participant, adversely affect the rights or obligations of the Participant except as reasonably required for compliance with Rule 16b-3 under the Exchange Act or with 

 the provisions of the Code and other applicable rules and regulations thereunder governing incentive stock options.

 15. Term of the Plan 
 Unless sooner
terminated by the Board pursuant to Article 13, the Plan shall terminate on the date ten years after its adoption by the Board, and no Awards may be granted or awarded after termination. The termination shall not affect the validity of any
Award outstanding on the date of termination. 
 16. Indemnification of Board 
 In addition to any other indemnification rights they may have as directors, the members of the Board shall be indemnified by the Corporation against the
reasonable expenses, including attorneys’ fees, actually incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Award granted hereunder, and against all amounts reasonably paid by them in settlement thereof or paid by them in satisfaction of a judgment in any such action, suit or proceeding,
if such members acted in good faith and in a manner which they believed to be in, and not opposed to, the best interests of the Corporation. 
 17.
General Provisions 
 17.1. The establishment of the Plan shall not confer upon any director, officer, or other employee of the
Corporation any legal or equitable right against the Corporation, any Subsidiary or the Board, except as expressly provided in the Plan. 
 17.2. The Plan does not constitute inducement or consideration for the employment of any officer or other employee of the Corporation, nor is it a contract between the Corporation or any Subsidiary and any director, officer, or other
employee of the Corporation. Participation in the Plan shall not give a director, officer, or other employee of the Corporation any right to be retained in the service of the Corporation or any Subsidiary. 
 17.3. The interests under the Plan of any Participant under the Plan are not subject to the claims of creditors and may not, in any way, be assigned,
alienated or encumbered. 
 17.4. The Plan shall be governed, construed and administered in accordance with the laws of the Commonwealth of
Virginia and the intention of the Corporation that Incentive Stock Options granted under the Plan qualify under Section 422 of the Code. 

 IN TESTIMONY WHEREOF, Heritage Bankshares, Inc. has caused this Plan to be executed in its name by its
duly authorized officer effective the 26th day of July, 2006. 
  

			
	HERITAGE BANKSHARES, INC.
		
	By:	 	 /s/ Peter M. Meredith, Jr.

	Its:	 	Chairman of the BoardSettlement Agreement, dated December 22, 2006

 Exhibit 10.1 
 SETTLEMENT AGREEMENT 
 In order to settle as fully as possible all known and unknown claims I might
have against Sharper Image Corporation (Company) and all related parties, I, Richard Thalheimer, and agree as follows: 
 A. Special Payment and
Benefits: After this Agreement becomes effective, the Company will pay me the following amounts and benefits, to none of which I clearly am otherwise entitled, except as noted. None of these will be taken into account in determining my rights or
benefits under any other program 
 1. Severance Pay: The Company will pay me $1.775 million on April 1, 2007.
This amount is less than the severance pay I claim I am entitled to receive. 
 2. Nonqualified Retirement Benefit:
The Company will pay me $3.9 million on April 1, 2007. This is $2 million more than the present value of the nonqualified retirement benefit the Company contends I am entitled to receive in a lump sum, but less than the benefit I claim I am
entitled to receive. 
 3. Office/Secretarial Allowance: The Company will pay me $300,000 on April 1, 2007 as an
allowance intended to assist me in renting office space and securing secretarial assistance for three years. 
 4.
Attorneys Fees: The Company will directly pay up to $80,000 (promptly after I or my attorneys submit proof of my expenditures) of my reasonable attorneys fees I incurred in negotiating this Agreement. It will make its payment directly to my
attorneys after they provide their tax identification numbers to the Company. 
 5. Compensation and Benefit Plans: I
shall have no rights under any bonus, incentive compensation, commission, medical, dental, life insurance, retirement, and other compensation or benefit plans of the Company or any affiliate, except as follows: 
 (a) Group Insurance: The Company will continue to cover me and my dependents under the most valuable insured health program it
provides to U.S. employees generally, except that this coverage may be secondary to Medicare or any employer-provided coverage for which I or my dependents are eligible. If it ceases to provide such a program, or is not permitted by the insurer to
cover me and my dependents, the Company and I will then in good faith try to negotiate a reasonable replacement arrangement if that can be done in a manner that does not cause me to suffer tax penalties. Subject to the preceding sentence, my
continued health coverage will cease when I die and my dependent’s continued health coverage will cease on the later of my death or September 30, 2016. 

 (b) Qualified Plan Retirement Benefits: Without regard to my execution of this
Agreement, I will retain my vested benefits under all qualified retirement plans of the Company, and all rights associated with such benefits, as determined under the official terms of those plans. 
 6. Stock Options: All of my options to buy Company stock that are vested and outstanding as of the date of this Agreement will
remain outstanding until the earlier of (a) the date they expire by their own terms for reasons unrelated to my termination of employment, or (b)(1) for options granted before October 21, 2002, March 15, 2007 or, if later, 30
days after those options first can be exercised without violating applicable securities laws, or (2) for options granted after October 21, 2002, the fourth anniversary of the date I signed this Agreement. My options’ per share
exercise price shall be adjusted as determined by the Company in connection with the restatement of the Company’s financial statements. I acknowledge and agree that I will not exercise any option until I have received written notification of
the adjusted exercise price. I am not entitled to any additional options. I shall not be entitled to any compensation for the amount by which their exercise price is increased. 
 7. Sculptures: I would like to purchase two sculptures that decorate my former office or that the Company retails. The Company
will sell me the 3CPO sculpture that was in my former office for $7,500 (which is 50% of its retail price of $15,000) and a Superman for $2,500 (which is 50% of its retail price of $5,000), for a total of $10,000, which I already have paid to the
Company. I will pay the Company the cost of shipping Superman to me, within 30 days after this Agreement becomes effective. I may take the 3CPO model from the Company’s office (or have it picked up at my own expense), and the Company will ship
a Superman to me. 
 8. Discount Card: I will receive a director’s discount card for life, entitling me to a
discount of 50% on goods that the Company is then retailing, up to $50,000 (based on marked retail price) per year. 
 9.
Interest, Etc.: The Company may pay me the cash amounts due under subsections 1-3 of this section before April 1, 2007, except any amount I notify it by January 10, 2007 cannot be paid before April 1, 2007 without violating
Internal Revenue Code Section 409A. Absent notice from me, the Company may, but need not, assume that all such amounts may be paid before April 1, 2007 without violating Section 409A. If the Company pays me any cash amount due under
those subsections after January 15, 2007, it shall include interest from January 15, 2007 at the annual rate of 6 percent, compounded annually. If the payment is made after April 1, 2007, the 6 percent rate shall increase to 10
percent for the period after April 1, 2007. If (a) full payment of the cash amounts due under subsections 1-3 of this section is not made by April 1, 2007, (b) the Company does not pay me all of the remaining amount within two
weeks after I have made written demand on the Company for payment of that remaining amount, (c) I bring a lawsuit to collect the 

 
remaining amount, and (d) I ultimately prevail in the lawsuit and am awarded all or part of the remaining amount I seek, I shall also be entitled to my
attorneys fees and costs incurred to collect that amount by means of the lawsuit but only to the extent they are reasonable, including in relation to the amount I am awarded, as determined by the court. The preceding sentence shall also apply if I
sue the Company to enforce subsection 5 or 6 of this section after clause (b) has been satisfied as to the subsection 5 or 6 benefit I am seeking, and I ultimately prevail. 
 B. My Release: Subject to the exceptions in the last sentence of this subsection, I release (i.e., give up) all known and unknown claims that I presently have against the Company, all current and former
parents, subsidiaries, related companies, partnerships, joint ventures, or other affiliates, and, with respect to each of them, their predecessors and successors; and, with respect to each such entity, all of its past, present, and future employees,
officers, directors, stockholders, owners, representatives, assigns, attorneys, agents, insurers, employee benefit programs (and the trustees, administrators, fiduciaries, and insurers of such programs), and any other persons acting by, through,
under or in concert with any of the persons or entities listed in this subsection, and their successors (Released Parties). For example, I am releasing all claims I have under any implied, oral, or written employment agreements, the Age
Discrimination in Employment Act (ADEA) WARN Act, Title VII of the Civil Rights Act of 1964, Sections 1981 and 1983 of the Civil Rights Act of 1866, the Americans With Disabilities Act (ADA), the Employee Retirement Income Security Act of 1974
(ERISA), and similar state or local laws, such as the California Fair Employment and Housing Act, California Labor Code Section 200 et seq., and any applicable California Industrial Welfare Commission order. The only claims I am
not releasing by entering into this Agreement are claims that the law does not permit me to waive by signing this Agreement, my ownership rights as to Company stock I presently own, any indemnification rights I may have relating to my employment
with the Company or my service as a Company director, my right to enforce this Agreement, and my rights under the May 9, 2006 agreement between the Thalheimer and Knightspoint entities (May 9, 2006 Agreement) except as explicitly modified by
this Agreement. 
 C. Company’s Release: The Company releases me from any claims it may have against me (a) that I must repay gains relating
to options to purchase common shares of the Company’s stock granted by the Company to me or exercised by me in or after 1994, or (b) that I must repay bonuses that were excessive because Company expenses were understated (x) with
respect to options granted to employees in or after 1994 or (y) with respect to the matters resulting in the restatement of Company financial statements described in Note B to the Company’s financial statements included in the
Company’s Form 10-K for the fiscal year ended January 31, 2005. 
 D. Representations & Promises: I acknowledge and agree that:

 1. Entire Agreement: Except as provided in this paragraph, this Agreement is the entire agreement relating to my
employment or my service as a director, the termination of that employment and service, and any claims or future 

 
rights that I might have with respect to the Company and the Released Parties. This Agreement only may be amended by a written agreement that the Company and
I sign. This Agreement shall be governed by Federal law and the laws of California. This Agreement does not supersede or modify the May 9, 2006 Agreement, except as provided in paragraph 9 below (giving the Company the right to appoint a
director to fill the vacancy caused by my resignation) and this Agreement does not supersede, modify, or waive any duties or obligations I have to the Company or the Released Parties under any other agreement or otherwise, except as specifically
provided in Section C. 
 2. No Other Representations: When the Company and I decided to sign this Agreement, neither
of us was relying on any representations that were not in this Agreement. 
 3. No Uncompensated Matters: I have not
suffered any job-related wrongs or injuries, such as any type of age or other discrimination, for which I might still be entitled to compensation or relief in the future. I have properly reported all hours that I have worked and I have been paid all
wages, overtime, commissions, compensation, benefits, unused vacation pay, and other amounts that the Company or any Released Party should have paid me in the past. 
 4. Nonadmission of Wrongdoing: This Agreement is not an admission of wrongdoing by the Company, any other Released Party, or me.

 5. Unknown Claims/No Assigned Claims: The claims the Company and I are releasing are limited to the claims set
forth in Sections B (as to me) and C (as to the Company) and include any such claims that we do not know we might have and that, with hindsight, we might regret having released. Accordingly, the Company and I expressly waive all rights afforded by
Section 1542 of the Civil Code of the State of California (“Section 1542”). Section1542 states as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time
of executing the release, which if known by him must have materially affected his settlement with the debtor.” Neither I nor the Company have assigned or given any of the claims we are releasing to anyone else. 
 6. Severability: If the Company or I successfully assert that any provision in this Agreement is void, the rest of the Agreement
shall remain valid and enforceable unless the other party to this Agreement elects to cancel it. If this Agreement is cancelled, I will repay the special payment or benefits I received for signing it. 
 7. Truthfulness: If I initially did not think any representation I am making in this Agreement was true, or if I initially was
uncomfortable making it, I resolved all my doubts and concerns before signing this Agreement. I have carefully read this Agreement, I fully understand what it means, I am entering into it 

 
knowingly and voluntarily, and all my representations in it are true. The Company would not have given me the special payments or benefits I am
getting in exchange for entering into this Agreement but for the representations and promises I am making by signing it. 
 8. Resignation: I hereby resign all my positions with the Company, including my director position, and waive any rights I may have to designate my successor. The Company shall have the right to designate my successor. 
 9. Nondisparagement: Subject to paragraphs 10 and 11 below, I agree not to take any action or to make any statement, written or
oral, that disparages or criticizes the business or management of the Company or any of its subsidiaries or affiliates, or any of their respective directors, officers, agents, or employees. I further agree not to take any action that is intended to,
or that does in fact, damage the business or reputation of the Company or any of its subsidiaries or affiliates, or the personal or business reputations of any of their respective directors, officers, agents, or employees, or that interferes with,
impairs, or disrupts the normal operations of the Company or any of its subsidiaries or affiliates. 
 10. Permissible
Disclosures: Nothing in this Agreement is intended to or shall preclude me from providing truthful testimony in response to a valid subpoena, court order, regulatory request or other judicial, administrative or legal process or otherwise as
required by law, in which event I shall notify the Company in writing as promptly as practicable after receiving any such request of the anticipated testimony and at least 10 days prior to providing such testimony (or, if such notice is not possible
under the circumstances, with as much prior notice as is possible). 
 11. Cooperation: I agree to cooperate fully
with the Company and its subsidiaries and affiliates concerning requests for information about the business of the Company or its subsidiaries or affiliates or my involvement and participation therein, the defense, prosecution or investigation of
any claims or actions now in existence or which may be brought in the future against or on behalf of the Company or its subsidiaries or affiliates which relate to events or occurrences that transpired while I was employed by or a director of the
Company, and in connection with any investigation or review by any federal, state or local regulatory, quasi-regulatory or self-governing authority (including, without limitation, the Securities and Exchange Commission) as any such investigation or
review relates to events or occurrences that transpired while I was employed by or a director of the Company. My full cooperation shall include, but not be limited to, being available to meet and speak with officers or employees of the Company or
its counsel at reasonable times and locations, executing accurate and truthful documents, and taking such other actions as may reasonably be requested of me by the Company or its counsel to effectuate the foregoing. In requesting such cooperation,
the Company will consider other commitments that I may have at the time of the request. The Company will reimburse me for any reasonable, out-of-pocket travel, hotel and meal, or similar 

 
expenses incurred in connection with my performance of obligations pursuant to this paragraph for which I have obtained prior, written approval from the
Company. 
 12. No Wrongdoing: I represent and warrant that, apart from the issues raised in the course of the ongoing
investigation involving the pricing of Company stock options, I am not aware of any actions or omissions by any current or former officer, director, employee, agent, consultant or representative of the Company (including me) through the date of the
execution of this Agreement that were or have been alleged to be (individually or collectively) in any way harmful or detrimental to the Company, its business, or its shareholders, including, without limitation, violations of any laws or accounting
policies or principles, the taking of unreasonable tax positions, or the furnishing of inaccurate statements, invoices or other reports to any person or entity. 
 13. Confidential Information: I agree that in the course of my employment with the Company I have had access to confidential and
proprietary information relating to the Company, its subsidiaries, and affiliates, and their respective businesses, clients, finances, operations, strategic or other plans, employees, trade practices, trade secrets, know how, or other matters that
are not publicly known outside the Company and that are integral to the operations and success of the Company (Confidential Information), and that such Confidential Information has been disclosed to me in confidence and only for the use of the
Company. I agree that (a) I will keep such Confidential Information confidential at all times, (b) I will not make use of such Confidential Information on my own behalf, or on behalf of any third party, and (c) I will return to the
Company all copies, duplicates, reproduction, or excerpts of such Confidential Information within my possession, custody, or control. The provisions of this paragraph 13 are in addition to any other written confidentiality or non-disclosure
agreements that I may have with the Company or any of the Released Parties, and are not meant to and do not excuse any additional obligations that I may have under such agreements. 
 14. Return of Company Property: All documents (electronic, paper or otherwise), records (electronic, paper or otherwise),
materials, software, equipment, and other physical property, and all copies of the foregoing, whether or not otherwise containing Confidential Information, that have come into my possession or been produced by me in connection with my Company
employment or service as a Company director (Property), have been and remain the sole property of the Company or its subsidiaries or affiliates, as applicable. I have returned all such Property to the Company (or, to the extent that it is later
discovered that I have not, I will do so promptly and in no event later than three days after discovering that I retain such Property). 
 15. Return of My Property: I will be entitled to the return of the items set forth on Schedule 15 attached to this Agreement that presently are in the Company’s possession, but I must arrange for picking
these items up (or having 

 
them shipped) at my own expense, and must pick them up by March 1, 2007. Except as noted in Schedule 15, I purchased each of these items entirely with
my own personal funds and have not sold, given, or transferred any of them to the Company. 
 16. Taxes: I
acknowledge and agree that I am responsible for paying all taxes and related penalties, and interest on my income. The Company will withhold taxes, including from amounts or benefits payable under this agreement, and report them to tax authorities,
as it determines it is required to do. The Company has not warranted to me that taxes and penalties will not be imposed under Internal Revenue Code Section 409A. I promise to indemnify the Company and hold it harmless with respect to all such
taxes, penalties, and interest (other than FICA taxes imposed on the Company). 
 17. Counterpart Execution: This
document shall become binding when the Company delivers a copy of this Agreement to me that only it has executed, after I have first delivered a copy of this Agreement to the Company that only I have executed (along with a signed Statement of
Counsel), delivery in each case to be by fax, or electronic delivery. Thereafter, the Company and I intend to re-execute duplicate originals, but this Agreement shall remain binding even if we fail to do so. 
  

	
	 BEFORE SIGNING THIS AGREEMENT, READ IT CAREFULLY AND DISCUSS IT WITH YOUR
ATTORNEY. TAKE AS MUCH TIME AS YOU NEED TO CONSIDER THIS AGREEMENT BEFORE DECIDING WHETHER TO SIGN IT, UP TO 21 DAYS. BY SIGNING IT, YOU WILL BE WAIVING YOUR KNOWN AND UNKNOWN CLAIMS.
  
 YOU MAY REVOKE THIS AGREEMENT IF YOU REGRET HAVING SIGNED IT. TO DO SO, YOU MUST DELIVER A
WRITTEN NOTICE OF REVOCATION TO ETHAN LIPSIG AT 25TH FLOOR, 515 S. FLOWER STREET, LOS ANGELES, CALIFORNIA 90071 BEFORE 7 24-HOUR PERIODS HAVE EXPIRED FROM THE TIME YOU SIGNED IT. IF YOU REVOKE THIS AGREEMENT, IT WILL NOT GO INTO EFFECT AND YOU WILL
NOT RECEIVE THE SPECIAL PAYMENTS OR BENEFIT DESCRIBED IN IT.

  

							
	 Date & Time: December 22, 2006
	 	/s/ Richard Thalheimer	 		  	
		 	Richard Thalheimer	 		  	

  

							
	 Date: December 22, 2006
	 	/s/ Jerry W. Levin	 		  	
		 	Sharper Image Corporation

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