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<title>Prepared By R.R. Donnelley Financial -- Form 8-K</title>
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<b>UNITED STATES </b></font></div>

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<b>SECURITIES AND EXCHANGE COMMISSION </b></font></div>

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<b>Washington, D.C. 20549 </b></font></div>

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<b>Form 8-K </b></font></div> <div><font Size="1">&nbsp;</font></div>

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<b>Current Report </b></font></div>

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<b>Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 </b></font></div>

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<b>Date of Report (Date of earliest event reported):&nbsp;&nbsp;12/22/2006 </b></font></div>




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<b>SHARPER IMAGE CORPORATION </b></font></div>

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<b>(Exact name of registrant as specified in its charter)</b></font></div>

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<b>Commission File Number:&nbsp;&nbsp;0-15827</b></font></div>

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<div Align="center"><font Face="times New Roman" Size="3" Color="#000000"><b>94-2493558</b></font>
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<b>(State or other jurisdiction of</b></font>
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<div Align="center"><font Face="times New Roman" Size="2" Color="#000000"><b>(IRS Employer</b></font>
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<b>incorporation)</b></font>
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<b>Identification No.)</b></font>
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<b>350 THE EMBARCADERO, 6TH FLOOR</div><div Align="center">SAN FRANCISCO, CALIFORNIA 94105</b></font></div>


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<b>(Address of principal executive offices, including zip code)</b></font>
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<b>(415) 445-6000 </b></font>
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<b>(Registrant&#146;s telephone number, including area code)</b></font>
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<b> </b></font>
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<b>(Former name or former address, if changed since last report) </b></font>
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<b>Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:<BR><BR>
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<b>[&nbsp;&nbsp;]&nbsp;&nbsp;
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)<BR><BR>

[&nbsp;&nbsp;]&nbsp;&nbsp;
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)<BR><BR>


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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))<BR><BR>


[&nbsp;&nbsp;]&nbsp;&nbsp;
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Information to be included in the report</b>
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<b>Item 5.02.&nbsp;&nbsp;&nbsp;&nbsp;Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers</b></font>
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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  As previously disclosed, on November 8, 2006 (the "Termination Date"), Ms. Tracy Wan resigned from her position as President and Chief Operating Officer of Sharper Image Corporation (the "Company").<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December 22, 2006, the Company entered into a letter agreement (the "Separation Agreement") with Ms. Wan regarding her previous termination of employment with the Company.  The Separation Agreement will become effective on December 30, 2006, unless revoked by Ms. Wan prior to that date.  <p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the terms of the Separation Agreement, in lieu of any amounts payable to Ms. Wan under her employment agreement with the Company, dated May 10, 2006, and in full satisfaction of any severance obligation of the Company to her, Ms. Wan is entitled to be paid severance in the amount of $32,251.  The severance amount to be paid to Ms. Wan gives effect to certain amounts Ms. Wan previously received upon the exercise of options to purchase common stock of the Company that had been granted to her at exercise prices that were below the fair market value of the Company's stock on the date of grant.  Under the terms of the Separation Agreement, Ms. Wan will be permitted to exercise certain vested stock options, as described in more detail below, until November 8, 2007.  Ms. Wan's health coverage will continue pursuant to the terms of a letter agreement between her and the Company, dated October 20, 2003.<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the Termination Date, Ms. Wan held 373,000 vested options to purchase shares of common stock of the Company.  Under the terms of the Separation Agreement, these options will remain outstanding until November 8, 2007 (or, if later, 30 days following the date on which the Company determines that exercising these options would no longer violate applicable securities laws) but will have their exercise price adjusted as determined by the Board of Directors of the Company in connection with the Company's restatement.  Ms. Wan has agreed not to exercise these options until the Company provides written notice to her of the Board's determination of the adjusted exercise price.  All unvested options held by Ms. Wan as of the Termination Date terminated and ceased to be exercisable as of that date.<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ms. Wan has also provided the Company with a general release of any and all claims which she has or may have against the Company.  The Company has granted Ms. Wan a limited release in respect of any and all claims relating to the repayment of gains relating to options granted by the Company to Ms. Wan or exercised by her in or after 1994.  The Company has also agreed to maintain directors and officers insurance coverage for Ms. Wan for six years unless the Company determines in its sole discretion that it cannot continue such policies on reasonable terms without an increase in cost.<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A copy of the Separation Agreement is attached hereto as Exhibit 10.1 and is incorporated in this report by reference. <p>Item 9.01.  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial Statements and Exhibits.<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Exhibits<p>Exhibit 10.1 </div><div align="left" style="text-indent:4%"> Letter agreement, dated as of December 22, 2006, by and between Sharper Image Corporation and Tracy Wan </div><div align="left" style="text-indent:4%"> </div><div align="left" style="text-indent:4%"></font>
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<b>Signature(s) </b></font>
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized. </font>
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	SHARPER IMAGE CORPORATION</font>
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	Date: December 29, 2006</font>
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	By:</font>
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	/s/&nbsp;&nbsp;&nbsp;&nbsp;Daniel W. Nelson</font>
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	Daniel W. Nelson</font>
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	<div><font Face="times New Roman" Size="2" Color="#000000">Senior Vice President, Interim Chief Financial Officer</font>
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<b>Exhibit Index </b></font>
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	<b>Exhibit&nbsp;No.</b></font>
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	<b>Description</b></font>
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	EX-10.1</font>
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	Letter agreement, dated as of December 22, 2006, by and between Sharper Image Corporation and Tracy Wan</font>
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Prepared By R.R. Donnelley Financial -- Form 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):  12/22/2006
SHARPER IMAGE CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number:  0-15827
DELAWARE
94-2493558
(State or other jurisdiction of
(IRS Employer
incorporation)
Identification No.)
350 THE EMBARCADERO, 6TH FLOOR
SAN FRANCISCO, CALIFORNIA 94105
(Address of principal executive offices, including zip code)
(415) 445-6000
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ]  
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Information to be included in the report
Item 5.02.    Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
As previously disclosed, on November 8, 2006 (the "Termination Date"), Ms. Tracy Wan resigned from her position as President and Chief Operating Officer of Sharper Image Corporation (the "Company").
On December 22, 2006, the Company entered into a letter agreement (the "Separation Agreement") with Ms. Wan regarding her previous termination of employment with the Company.  The Separation Agreement will become effective on December 30, 2006, unless revoked by Ms. Wan prior to that date.
Under the terms of the Separation Agreement, in lieu of any amounts payable to Ms. Wan under her employment agreement with the Company, dated May 10, 2006, and in full satisfaction of any severance obligation of the Company to her, Ms. Wan is entitled to be paid severance in the amount of $32,251.  The severance amount to be paid to Ms. Wan gives effect to certain amounts Ms. Wan previously received upon the exercise of options to purchase common stock of the Company that had been granted to her at exercise prices that were below the fair market value of the Company's stock on the date of grant.  Under the terms of the Separation Agreement, Ms. Wan will be permitted to exercise certain vested stock options, as described in more detail below, until November 8, 2007.  Ms. Wan's health coverage will continue pursuant to the terms of a letter agreement between her and the Company, dated October 20, 2003.
As of the Termination Date, Ms. Wan held 373,000 vested options to purchase shares of common stock of the Company.  Under the terms of the Separation Agreement, these options will remain outstanding until November 8, 2007 (or, if later, 30 days following the date on which the Company determines that exercising these options would no longer violate applicable securities laws) but will have their exercise price adjusted as determined by the Board of Directors of the Company in connection with the Company's restatement.  Ms. Wan has agreed not to exercise these options until the Company provides written notice to her of the Board's determination of the adjusted exercise price.  All unvested options held by Ms. Wan as of the Termination Date terminated and ceased to be exercisable as of that date.
Ms. Wan has also provided the Company with a general release of any and all claims which she has or may have against the Company.  The Company has granted Ms. Wan a limited release in respect of any and all claims relating to the repayment of gains relating to options granted by the Company to Ms. Wan or exercised by her in or after 1994.  The Company has also agreed to maintain directors and officers insurance coverage for Ms. Wan for six years unless the Company determines in its sole discretion that it cannot continue such policies on reasonable terms without an increase in cost.
A copy of the Separation Agreement is attached hereto as Exhibit 10.1 and is incorporated in this report by reference.
Item 9.01.          Financial Statements and Exhibits.
(d) Exhibits
Exhibit 10.1
Letter agreement, dated as of December 22, 2006, by and between Sharper Image Corporation and Tracy Wan
Signature(s)
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
SHARPER IMAGE CORPORATION
Date: December 29, 2006
By:
/s/    Daniel W. Nelson
Daniel W. Nelson
Senior Vice President, Interim Chief Financial Officer
Exhibit Index
Exhibit No.
Description
EX-10.1
Letter agreement, dated as of December 22, 2006, by and between Sharper Image Corporation and Tracy Wan