SHARPER IMAGE CORPORATION
 
                              EXECUTIVE BONUS PLAN
 
    This  Executive  Bonus Plan (the  "Plan") is  established  by Sharper  Image
Corporation (the "Company")  effective for fiscal years beginning after December
31, 2000.
 
1.       PURPOSE
 
         The  purposes of the Plan are to:
 
         A)   Promote the interests of the Company.
 
         B)   Provide  incentives and rewards to senior  executives,  as a group
              and individually,  who are largely responsible for the management,
              growth and profitability of the Company.
 
         C)   Qualify   compensation   under   the  Plan  as   performance-based
              compensation  within the meaning of Section 162(m) of the Internal
              Revenue Code of 1986 or successor provision ("Section 162(m)").
 
     Should  any  further  limitation  on  bonuses  payable  under  the  Plan be
necessary to satisfy the requirements of Section 162(m) under final  regulations
thereunder, such limitations shall apply.
 
2.   ADMINISTRATION
 
     The Plan will be administered by the Company's  Compensation Committee or a
subcommittee  thereof that  satisfies the  requirements  of Section  162(m) (the
"Committee").  The Committee  will have full  authority to administer  the Plan,
including  authority  to interpret  and  construe any relevant  provision of the
Plan, determine eligibility for an award and to adopt such rules and regulations
as it may deem  necessary.  Decisions of the  Committee are final and binding on
all persons who have an interest in the Plan.
 
3.       ELIGIBILITY AND PARTICIPATION
 
         A)   The executives  eligible to participate in the Plan for any fiscal
              year  shall be each  officer  of the  Company at the level of Vice
              President and above.
 
         B)   Participants are approved for each fiscal year by the Committee by
              name or  position  and will not be  eligible  for an award for any
              fiscal  year unless  explicitly  approved  for such  fiscal  year.
              Participants may, at the discretion of the Committee,  be approved
              for participation for part of a fiscal year on a pro-rata basis.
 
         C)   No executive shall  participate in the Plan for any fiscal year if
              he/she  participates  in any  other  Company-sponsored  incentive,
              sales or bonus plan for that  fiscal  year,  unless the  Committee
              approves such participation.
 
         D)   No participant may receive any award under the Plan for any fiscal
              year if he/she terminates employment before the end of that fiscal
              year for any reason other than  Company-approved  retirement after
              attaining age 65, death,  disability  or  involuntary  termination
              without  cause,  unless the Bonus  Plan  Committee  approves  such
              participation. If an executive's employment is terminated during a
              fiscal year, the Committee may, in its sole discretion,  reduce or
              cancel the participation of such executive for that year.
 
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4.       DETERMINATION OF BONUSES
 
         A)   The  Committee  shall  establish a target bonus for each  eligible
              participant,  either by name or  position,  for such fiscal  year,
              payable if a specified  Company  performance goal is satisfied for
              such fiscal year. The target bonus payable to any  Participant for
              any  fiscal  year  shall  be  a  specified   percentage   of  that
              participant's  salary for the fiscal  year,  but in no event shall
              exceed $3,000,000.  Both the specified  percentage and the Company
              performance  goal for a fiscal  year  shall be  determined  by the
              Committee within the first ninety (90) days of such fiscal year of
              the Company (or within  such  earlier  period as shall be required
              under Section 162(m)).
 
         B)   The performance goal for each fiscal year shall be based on one of
              the following measures of Company performance: (i) the achievement
              of a specified  closing or average closing price of Company common
              stock, (ii) the absolute or percentage  increase in the closing or
              average closing price of Company common stock,  and/or one or more
              of the  following  measures of the  Company's  net income for such
              fiscal year  determined  in  accordance  with  generally  accepted
              accounting  principles  as  consistently  applied by the  Company:
              absolute net income or a percentage or absolute dollar increase in
              net income,  earnings per share or a percentage or absolute dollar
              increase  in  earnings  per  share,  or  return  on  equity  or  a
              percentage or absolute  dollar  increase in return on equity.  The
              Committee  may provide for various  levels of bonus  depending  on
              relative  performance toward a performance goal. The Committee may
              establish  a goal based on one or more  measures  of net income or
              may establish  multiple goals based on more than one measure,  but
              any bonus  payable must be based on the  satisfaction  of at least
              one goal.
 
         C)   For  purposes of this Plan,  net income shall be net income of the
              Company  and its  consolidated  subsidiaries  as  reported  by the
              Company and certified by its independent public  accountants,  but
              the  Committee  in fixing any goal may  exclude  any or all of the
              following  if they have a material  effect on annual  net  income:
              events  or  transactions  that are  either  unusual  in  nature or
              infrequent  in  occurrence  (such as  restructuring\reorganization
              charges,  the sale or discontinuance  of a business  segment,  the
              sale  of  investment  securities,   losses  from  litigation,  the
              cumulative effect of changes in accounting principles, and natural
              disasters) depreciation, interest or taxes.
 
         D)   Final  payouts are subject to the  approval of the  Committee  and
              shall occur as soon as practical  after the close of the Company's
              financial  books for the fiscal year.  The Committee  reserves the
              right to reduce or cancel any payout that would  otherwise  be due
              to a participant if, in its sole  discretion,  the Committee deems
              such action warranted based on other circumstances relating to the
              performance of the Company or the participant.
 
5.       DEFERRAL OF BONUSES
 
         A)   The  Committee  may,  subject to such limits as the  Committee may
              specify,  permit a participant in the Plan to defer all or part of
              the bonus  awarded to him/her  with  respect to any fiscal year by
              executing and  delivering to the Company a deferral  election form
              provided by the Committee no later than the date  specified in the
              notification to the participant of his/her  participation for such
              fiscal year.
 
         B)   The  deferred  bonus will be  credited to a special  book  account
              maintained for each  participant and will accrue earnings based on
              a  reasonable  rate of  interest  or on one or more  predetermined
              actual  investments  (whether  or not assets  associated  with the
              amount  originally owed are actually  invested  therein) such that
              the amount payable by the employer at the later date will be based
              on the actual rate of return of a specific  investment  (including
              any  decrease  as  well  as  any  increase  in  the  value  of  an
              investment).  Distribution  of the  deferred  bonus  plus  accrued
              interest  will be made at such time or times and in such manner as
              the  participant  shall  specify  at the  time  he/she  files  the
              deferral election forms,  subject,  however,  to such restrictions
              and limitations as the Committee may from time to time impose.
 
         C)   The  obligation to pay a deferred bonus plus earnings shall at all
              times be an unfunded and unsecured  obligation of the Company. The
              participant and his/her beneficiary(ies) shall look exclusively to
              the general  assets of the  Company,  as general  creditors of the
              Company.  The Plan is intended to be unfunded  for purposes of the
              Employee  Retirement  Income Security Act of 1974 and the Internal
              Revenue  Code of  1986.  The  participant  shall  have no right to
              assign, pledge or encumber his/her interest in the amount credited
 
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              to the deferred  bonus  account.  The  participant  may,  however,
              designate one or more beneficiaries to receive the account balance
              in the event of his/her death.
 
6.   AMENDMENT/TERMINATION
 
     The Company hereby  reserves the right,  exercisable  by the Committee,  to
amend the Plan at any time and in any respect or to  discontinue  and  terminate
the Plan in whole or in part at any time,  subject to Section  7.  Amendment  or
termination  may be effective  with respect to any amount which has not yet been
paid out,  except that  amounts  which have been  credited  to a deferred  bonus
account shall be paid out in accordance  with the applicable  deferral  election
or, if the Committee so determines upon termination of the Plan,  distributed to
such  participant  as soon as practicable  after  termination of the Plan. In no
event shall any award be increased,  other than pursuant to Section 4(C),  after
the  last  day  that  an  award  must  be   specified   for   qualification   as
performance-based compensation under Section 162(m).
 
     No provision of the Plan shall be deemed to  constitute a commitment of the
Company to pay, or to confer any  contractual or other rights upon a participant
to receive a bonus award for any one or more fiscal  years or to confer upon any
participant  any right to continue in the employ of the Company or to constitute
any  contract or  agreement  of  employment  or to interfere in any way with the
right of the Company or a participant to terminate the participant's  employment
at any time, with or without cause,  but nothing  contained  herein shall affect
any  contractual  right  of  a  participant  pursuant  to a  written  employment
agreement.
 
7.   TERM AND SHAREHOLDER APPROVAL
 
     In no event shall any award be made under the Plan for any fiscal beginning
after calendar year 2005. The Plan,  awards under the Plan, and any amendment to
the Plan which would change the class of executives  who are eligible to receive
awards under the Plan or the permissible  amount of such awards shall be subject
to approval of the Company's shareholders in such manner and with such frequency
as shall be required under Section 162(m).
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