Document:

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                                                                   EXHIBIT 10.26

                                REDENVELOPE, INC.

                        TRANSITION AGREEMENT AND RELEASE

         This Transition Agreement and Release (the "AGREEMENT") is made by and
between RedEnvelope, Inc., a Delaware corporation (the "COMPANY") and
Christopher Cunningham ("EXECUTIVE"). Executive has been employed by the Company
pursuant to the terms of an offer letter dated August 4, 1999, as amended on
November 30, 2000 (as amended, the "OFFER LETTER").

         The Company and Executive (collectively referred to as the "PARTIES")
acknowledge and agree that Executive's employment relationship with the Company
shall terminate no later than August 31, 2002. Prior to August 31, 2002,
Executive will transition his duties to such person(s) as directed by the
Company. In consideration for Executive's release of all claims that he may have
with respect to his employment by the Company, and provided Executive complies
with all of his continuing obligations as set forth in this Agreement, the
Parties agree to modify the terms of Executive's employment and Executive's
rights to receive benefits upon the termination of his employment as set forth
herein:

         1.       TRANSITION OF EMPLOYMENT.

                  (a)      SEPARATION DATE. Executive and the Company
acknowledge and agree that Executive's employment as Chief Information Officer
of the Company shall terminate no later than August 31, 2002. Without limiting
the effect of the foregoing, Executive acknowledges that his employment
continues to be "at-will" and that either Party may terminate his employment at
any time for any reason or no reason. The date of the termination of Executive's
employment with the Company shall be referred to in this Agreement as the
"SEPARATION DATE." Executive acknowledges and agrees that the terms and
conditions set forth in this Agreement neither give rise to a constructive
termination pursuant to the terms of the Offer Letter nor constitute a
Constructive Termination pursuant to Section 11(c) of this Agreement.

                  (b)      COMPENSATION. Executive acknowledges and agrees that
during the period commencing on April 4, 2002 and ending on the Separation Date,
Executive has received and will continue to earn a gross monthly base salary of
$20,833.33 (the "BASE SALARY") pursuant to the Company's regular payroll policy
(or in the same manner as other officers of the Company) and Executive will be
eligible to accrue up to 1.91 days of vacation each month. Executive
acknowledges and agrees that he will not be eligible to earn any bonus, whether
in cash, equity or otherwise, for fiscal years 2003 and 2004.

                  (c)      FINAL WAGES. Upon the termination of Executive's
employment with the Company for any reason, the Company shall pay Executive the
sum of (i) all salary and any other earned but unpaid wages owed to the
Executive through the Separation Date, (ii) payment for all accrued but unused
vacation days of Executive, and (iii) payment of all unreimbursed business
expenses properly incurred and submitted by Executive prior to the Separation
Date.

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         2.       SEVERANCE BENEFITS. In consideration for the release of claims
set forth below and other obligations under this Agreement, and provided that
Executive's employment is terminated (i) by mutual agreement of the Parties on
or before August 31, 2002 as a result of the completion of the transition of
Executive's duties (such termination, a "MUTUAL TERMINATION"), (ii) by the
Company without Cause (as defined below), or (iii) as a result of a Constructive
Termination (as defined below), and provided further that, as of the Separation
Date, Executive has complied with his continuing obligations under this
Agreement (including without limitation his execution of the Continuing
Representations Certificate within twenty-one (21) days following the Separation
Date as described in Section 22 herein), and provided further that Executive
does not revoke the Continuing Representations Certificate (as set forth
therein), the Company agrees to provide the severance benefits described in this
Section 2 to Executive.

         Executive acknowledges that the benefits described in this Section 2
exceed, and will be paid in lieu of, the severance benefits set forth in the
Offer Letter and any other prior agreement, whether oral or written, between the
Executive and the Company. Executive further acknowledges and agrees that he
will have no rights to any severance benefits if his employment is terminated
(i) by him (other than as a result of a Constructive Termination or as part of a
Mutual Termination) or (ii) by the Company for Cause. The Parties acknowledge
and agree that if Executive's employment is terminated as a result of a physical
or mental impairment that prevents his performance of the essential functions of
his position, Executive will be entitled to the severance benefits on the terms
and conditions described herein, subject to reduction in an amount equal to the
gross amount of any insurance proceeds (including cash and medical benefits)
paid to Executive, due to such impairment, during the six (6) month period
following such termination.

                  (a)      CASH BENEFITS. The Company will continue to pay
Executive, over the Company's regular payroll cycle, the Base Salary for the
first six (6) months following the effective date of the Continuing
Representations Certificate (or, at the Company's option, the first six (6)
months following the Separation Date), subject to, and reduced by, applicable
tax withholdings.

                  (b)      REIMBURSEMENT OF COBRA PREMIUMS. Provided Executive
makes an accurate and timely election for continuation of medical insurance
coverage under the terms of the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), the Company agrees to reimburse Executive for the
applicable premiums for continuation coverage for himself and his currently
enrolled dependents (as applicable) for the first six (6) months of continuation
coverage.

                  (c)      EXTENSION OF EXERCISE PERIOD. The Parties hereby
amend and restate the post-termination exercise period set forth in the
respective Option Agreements (as defined below) for each of the Options (as
defined below) such that Executive shall be permitted to exercise the Options as
to the vested shares subject to each such option on or before (i) the one (1)
year anniversary of the Separation Date in the event of a termination of
Executive's employment as a result of his death or disability or (ii) the three
(3) year anniversary of the Separation Date in the event of a termination of
Executive's employment as a result of a Mutual Termination, a Constructive
Termination or a termination by the Company without "Cause";

                                      -2-

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provided, however, in no event may Executive exercise the Options later than the
applicable expiration date of each such option.

                  (d)      RELOCATION. The Company will reimburse Executive for
the reasonable expenses incurred by him to relocate himself and his family to
the San Diego Area, up to a gross maximum amount of $6,000.

                  (e)      LAPTOP. Executive will retain possession of the IBM
Thinkpad T-30 notebook computer previously issued to him by the Company
following the Separation Date; provided, however, that the Company shall first
review the contents of such computer and remove all confidential and/or
proprietary information therefrom prior to surrendering such computer to
Executive following the Separation Date.

         3.       EMPLOYEE BENEFITS.

                  (a)      GROUP MEDICAL INSURANCE. Executive shall continue to
receive the Company's group medical insurance benefits at the Company's expense,
to the same extent it pays such premiums for other similarly situated employees
(subject to any applicable eligibility requirements) until the Separation Date.
Following such date, Executive will be eligible to continue coverage under the
Company's group medical insurance programs as provided by COBRA at his own
expense, except as otherwise set forth in Section 2(b) of this Agreement.

                  (b)      OTHER BENEFITS. Executive shall continue to be
eligible to participate in the Company's standard benefit programs available to
similarly situated employees (subject to any applicable eligibility
requirements) until the Separation Date. Except as otherwise provided above,
Executive shall not be entitled to participate in any of the Company's benefit
plans or programs offered to employees or officers of the Company after the
Separation Date.

         4.       EQUITY INTERESTS.

                  (a)      EQUITY AWARDS. Pursuant to the terms of the Company's
1999 Stock Plan (the "PLAN") and six (6) stock option agreements (collectively,
the "OPTION AGREEMENTS") dated, respectively, October 4, 1999, April 5, 2000,
August 23, 2000 (two stock option agreements bearing such date), June 1, 2001,
and July 25, 2002, Executive was granted stock options (the "OPTIONS") to
purchase an aggregate of 1,116,630 shares of the Company's Common Stock, which
Options vest in accordance with the vesting schedules set forth in the
respective Option Agreements (or the Notices of Stock Option Grant attached
thereto). The Parties acknowledge and agree that as of the date hereof,
Executive has not exercised any of the Options and that, assuming a Separation
Date of August 31, 2002, Executive will have vested in an aggregate of 450,341
shares subject to the Options, with 666,289 shares expiring unvested as of such
date.

                  (b)      PROMISSORY NOTE. Executive acknowledges and agrees
that he will not use a promissory note as consideration for any exercise of the
Options.

                  (c)      CHANGE OF CONTROL. In the event of a Change of
Control (as defined below) of the Company prior to the termination of
Executive's employment with the Company

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for any reason, the Company will accelerate the vesting of the Options such that
25% of the then-unvested shares subject to each such option will be immediately
vested and exercisable as of the effective date of the Change of Control.

                  (d)      EFFECT ON ISO STATUS. Executive acknowledges and
agrees that the amendments and modifications set forth in Section 2(c) may
affect the ISO status of certain of his Options and may result in adverse tax
consequences to him. Executive acknowledges and represents that he is not
relying on the Company for advice regarding his individual tax situation, that
he has been advised to consult his personal tax planner, attorney, or accountant
with regard to these matters prior to executing this Agreement, and that he has
done so or knowingly declined to do so.

                  (e)      NO OTHER RIGHTS. Executive acknowledges and agrees
that he remains bound by the terms of the Option Agreements, as modified herein.
Executive acknowledges and agrees that, notwithstanding anything contained in
the Offer Letter or under any other agreement, whether oral or written, between
the Executive and the Company, Executive shall not be entitled to any
acceleration of vesting of any of the Options as a result of the termination of
his employment with the Company or as a result of a Change of Control of the
Company that occurs after the termination of his employment with the Company.
Executive acknowledges and agrees that the Options lapse in their entirety as to
any unvested shares as of the Separation Date. Except as set forth in Section
2(c) and this Section 4, Executive shall have no right, title or interest in or
to any shares of the Company's capital stock or other securities under the Offer
Letter, or under any other document, instrument or arrangement, whether oral or
written, with the Company.

         5.       NO OTHER PAYMENTS DUE. Executive acknowledges and agrees that
upon receipt of the payments to be made on and after the Separation Date
pursuant to this Agreement, Executive will have received all salary, accrued
vacation, commissions, bonuses, wages, compensation or other such sums due to
Executive as of the Separation Date, other than amounts, if any, to be paid
after the Separation Date pursuant to this Agreement. The Parties further
acknowledge and agree that, upon the payment by the Company of all wages due, or
to become due, to Executive, the California Labor Code Section 206.5 will not be
applicable to the Parties hereto. That section provides in pertinent part as
follows:

                  NO EMPLOYER SHALL REQUIRE THE EXECUTION OF ANY RELEASE OF ANY
                  CLAIM OR RIGHT ON ACCOUNT OF WAGES DUE, OR TO BECOME DUE, OR
                  MADE AS AN ADVANCE ON WAGES TO BE EARNED, UNLESS PAYMENT OF
                  SUCH WAGES HAS BEEN MADE.

         6.       RELEASE OF CLAIMS. In consideration for the Parties'
obligations set forth in this Agreement, the Parties, on behalf of themselves
and their heirs, executors, current and former officers, directors, employees,
investors, attorneys, stockholders, administrators, predecessor and successor
corporations and assigns, hereby fully and forever release the other Party and
its/his heirs, executors, current and former officers, directors, employees,
investors, attorneys, stockholders, administrators, predecessor and successor
corporations and assigns, of and from

                                      -4-

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any claim, duty, obligation or cause of action relating to any matters of any
kind, whether presently known or unknown, suspected or unsuspected, that the
Party may possess arising from any omissions, acts or facts that have occurred
up until and including the date of this Agreement including, without limitation:

                  (a)      any and all claims relating to or arising from
Executive's employment relationship with the Company and the termination of that
relationship;

                  (b)      any and all claims relating to Executive's right to
receive, or receipt of, wages or other compensation;

                  (c)      any and all claims relating to, or arising from,
Executive's right to purchase, or actual purchase of shares of the capital stock
or other securities of the Company;

                  (d)      any and all claims for wrongful discharge of
employment; breach of contract, both express and implied; breach of a covenant
of good faith and fair dealing, both express and implied; negligent or
intentional infliction of emotional distress; breach of privacy; negligent or
intentional misrepresentation; negligent or intentional interference with
contract or prospective economic advantage; negligence; and defamation;

                  (e)      any and all claims for violation of any federal,
state or municipal statute, including, but not limited to, Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") as related to severance
benefits, the Equal Pay Act of 1963, the Age Discrimination in Employment Act of
1967, the Americans With Disabilities Act, California Labor Code Section 1197.5,
the California Fair Employment and Housing Act, the Fair Labor Standards Act,
and any family and medical leave acts;

                  (f)      any and all claims arising out of any other laws and
regulations relating to employment or employment discrimination; and

                  (g)      any and all claims for attorneys' fees and costs.

         The Parties agree that the release set forth in this Section 6 shall be
and remain in effect in all respects as a complete general release as to the
matters released. This release does not extend to any obligations incurred or
specified under this Agreement. In addition, the Parties acknowledge and agree
that this release does not extend to any rights that Executive may have to be
indemnified and held harmless with respect to his performance of his duties
while he served as an officer to the fullest extent allowed by law, the
Company's Amended and Restated Certificate of Incorporation, or D&O insurance
policy. The Parties further acknowledge and agree that this release does not
extend to any claims the Company may have under the Confidentiality Agreement
(as defined below).

         7.       ACKNOWLEDGMENT OF WAIVER OF CLAIMS UNDER ADEA. Executive
acknowledges that he is waiving and releasing any rights he may have under the
Age Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and
release is knowing and voluntary. Executive and the Company agree that this
waiver and release does not apply to any rights or

                                      -5-

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claims that may arise under ADEA after the Effective Date (as defined in Section
18 below) of this Agreement. Executive acknowledges that the consideration given
for this waiver and release Agreement is in addition to anything of value to
which Executive was already entitled. Executive further acknowledges that he has
been advised by this writing that (a) he should consult with an attorney prior
to executing this Agreement; (b) he may have at least twenty-one (21) days
within which to consider this Agreement; (c) he has seven (7) days following his
execution of this Agreement to revoke the Agreement (the "Revocation Period").
This Agreement shall not be effective until the Revocation Period has expired.

         8.       CIVIL CODE SECTION 1542. The Parties represent that they are
not aware of any claim by either of them other than the claims that are released
by this Agreement. Executive and the Company acknowledge that they have been
advised by legal counsel and are familiar with the provisions of California
Civil Code Section 1542, which provides 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.

         Executive and the Company, being aware of said Code section, agree to
expressly waive any rights they may have thereunder, as well as under any other
statute or common law principles of similar effect.

         9.       EXECUTIVE COVENANTS.

                  (a)      GENERAL. The Parties agree that for all periods
described in this Agreement, they shall continue to conduct themselves in a
professional manner.

                  (b)      NON-DISPARAGEMENT. The Parties agree to refrain from
any disparagement, criticism, defamation, or slander of the other Party, or
tortious interference with the contracts and relationships of the other Party.

                  (c)      CONFIDENTIALITY. The Parties agree to maintain in
strict confidence the existence of this Agreement, the contents and terms of
this Agreement, and the consideration for this Agreement (hereinafter
collectively referred to as "SEPARATION INFORMATION"). Each Party hereto agrees
to take every reasonable precaution to prevent disclosure of any Separation
Information to third parties, and each agrees that there will be no publicity,
directly or indirectly, concerning any Separation Information. The Parties
hereto agree to take every precaution to disclose Separation Information only to
those employees, officers and directors of the Company, and attorneys,
accountants and governmental entities who have a reasonable need to know of such
Separation Information.

                  (d)      NONDISCLOSURE. Executive acknowledges and agrees that
this Agreement in no way modifies Executive's obligations to the Company under
the terms of the Confidential Information and Invention Assignment Agreement
between Executive and the Company (the

                                      -6-

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"CONFIDENTIALITY AGREEMENT"), a copy of which is attached hereto as Exhibit A.
Executive shall continue to maintain the confidentiality of all confidential and
proprietary information of the Company prior to and after the Separation Date as
provided under the Confidentiality Agreement. Executive represents and warrants
that at all times up until the Effective Date he has been in compliance with his
obligations to the Company under the Confidentiality Agreement. Executive agrees
to execute the Separation Certification, attached hereto as Exhibit B, and
return it to the Company within seven (7) days following the Separation Date,
which certifies that Executive will have returned all the Company's property and
confidential and proprietary information in his possession to the Company.

         10.      BREACH OF THE AGREEMENT. Executive acknowledges that upon his
breach of this Agreement or the Confidentiality Agreement, the Company would
sustain irreparable harm from such breach, and, therefore, Executive agrees that
in addition to any other remedies which the Company may have under this
Agreement, the Confidentiality Agreement, or otherwise, the Company shall be
entitled to obtain equitable relief, including specific performance and
injunctions, restraining him from committing or continuing any such violation.
Executive acknowledges and agrees that upon his material or intentional breach
of any of the provisions of the Agreement or the Confidentiality Agreement, in
addition to any other remedies the Company may have under this Agreement or
otherwise, the Company's obligations to provide benefits to Executive as
described in this Agreement, including without limitation those benefits
provided in Sections 2 and 4 herein, shall immediately terminate.

         11.      DEFINITIONS. The definitions set forth in this Section 11
supercede and replace in their entirety any definitions of these terms as set
forth in the Offer Letter and any prior agreement, whether oral or written,
between Executive and the Company on the subjects set forth herein.

                  (a)      CAUSE. For the purposes of this Agreement, "Cause"
for the Company's termination of Executive's employment will mean Executive's
(i) gross negligence in the performance of his job responsibilities; (ii)
failure or refusal to comply with the lawful directives of the Company's Board
of Directors not inconsistent with his position and responsibilities (other than
a refusal to incur any of (i) - (iii) under the definition of Constructive
Termination below); (iii) willful misconduct that the Company reasonably
determines is materially detrimental to the business or reputation of the
Company; (iv) dishonest or fraudulent conduct in the performance of his job
responsibilities or that the Company reasonably determines is materially
detrimental to the business or reputation of the Company; (v) conviction of a
felony; (vi) material breach of the Confidentiality Agreement or his duties of
confidentiality owed to any third parties as a result of his position with the
Company; or (vii) death; provided, however, that an occurrence of any of (i)
through (iii) above shall constitute Cause hereunder only after the Company has
provided Executive with written notice of such gross negligence, failure or
misconduct and a reasonable opportunity for him to cure such gross negligence,
failure or misconduct (assuming such gross negligence, failure or misconduct is
capable of being cured). For purposes of the immediately preceding proviso, a
majority of the members of the Company's Board of Directors shall determine
whether a cure has been effected or whether a reasonable opportunity to cure was
provided.

                                      -7-

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                  (b)      CHANGE OF CONTROL. For the purposes of this
Agreement, "Change of Control" shall mean any of the following: (i) a merger of
the Company into another entity (other than a merger effected solely for the
purpose of changing the state of domicile of the Company), (ii) any other
transaction in which more than 50% of the voting control of the Company is
transferred (other than an equity financing of the Company in which the Company
is the surviving entity), including, without limitation, the sale of more than
50% of the outstanding shares of the Company's capital stock; (iii) the sale of
all or substantially all of the assets of the Company, or (iv) immediately prior
to the liquidation or dissolution of the Company.

                  (c)      CONSTRUCTIVE TERMINATION. For the purposes of this
Agreement, "Constructive Termination" will mean Executive's resignation from his
employment with the Company within thirty (30) days following: (i) a material
reduction or change in his title, job duties, authority, responsibilities or job
requirements inconsistent with his position with the Company; (ii) any material
reduction of his base compensation; (iii) any elimination of a material benefit
provided to him pursuant to his employment with the Company; (iv) the Company's
failure to cure any material breach by it of the terms of this Agreement within
a reasonable time following written notice from him to the Company's Board of
Directors, in each case under (i) through (iv) above, other than with
Executive's written consent.

         12.      AUTHORITY. The Company represents and warrants that the
undersigned has the authority to act on behalf of the Company and to bind the
Company and all who may claim through it to the terms and conditions of this
Agreement. Executive represents and warrants that he has the capacity to act on
his own behalf and on behalf of all who might claim through him to bind them to
the terms and conditions of this Agreement. Executive represents and warrants
that there are no liens or claims of lien or assignments in law or equity or
otherwise of or against any of the claims or causes of action released herein.

         13.      NO REPRESENTATIONS. Executive has not relied upon any
representations or statements made by the Company which are not specifically set
forth in this Agreement.

         14.      SEVERABILITY. In the event that any provision hereof becomes
or is declared by a court or other tribunal of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision.

         15.      ARBITRATION. The Parties shall attempt to settle all disputes
arising in connection with this Agreement through good faith consultation. In
the event no agreement can be reached on such dispute within fifteen (15) days
after notification in writing by either Party to the other concerning such
dispute, the dispute shall be settled by binding arbitration to be conducted in
San Francisco before the American Arbitration Association under its California
Employment Dispute Resolution Rules, or by a judge to be mutually agreed upon.
The arbitration decision shall be final, conclusive and binding on both Parties
and any arbitration award or decision may be entered in any court having proper
jurisdiction. The Parties agree that the prevailing party in any arbitration
shall be entitled to injunctive relief in any court of competent jurisdiction to
enforce the arbitration award. The Parties further agree that the prevailing
Party in any such proceeding shall be awarded reasonable attorneys' fees and
costs. This Section 15 shall not apply to the

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Confidentiality Agreement. THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO
TRIAL BY JURY IN REGARD TO ARBITRABLE CLAIMS.

         16.      ENTIRE AGREEMENT. This Agreement, the Plan, the Option
Agreements, and the exhibits hereto (including the Confidentiality Agreement),
represent the entire agreement and understanding between the Company and
Executive concerning Executive's separation from the Company, and supersede and
replace any and all prior agreements and understandings on the matters addressed
herein, including but not limited to the Offer Letter (except that Sections
1(b), 4(a), 5 and 6 of the Offer Letter shall continue pursuant to their terms).
The Parties expressly agree that nothing in this Agreement in any way alters the
"at-will" nature of Executive's employment relationship with the Company and, to
the extent his employment continues during any period, either Party may
terminate that employment relationship at any time for any or no reason.

         17.      NO ORAL MODIFICATION. This Agreement may only be amended in
writing signed by Executive and the Company.

         18.      GOVERNING LAW. This Agreement shall be governed by the laws of
the State of California, without regard to its conflicts of law provisions.

         19.      EFFECTIVE DATE. This Agreement is effective upon the
expiration of the Revocation Period described in Section 7 and such date is
referred to herein as the "EFFECTIVE DATE."

         20.      COUNTERPARTS. This Agreement may be executed in counterparts,
and each counterpart shall have the same force and effect as an original and
shall constitute an effective, binding agreement on the part of each of the
undersigned.

         21.      ASSIGNMENT. This Agreement may not be assigned by Executive or
the Company without the prior written consent of the other Party.
Notwithstanding the foregoing, this Agreement may be assigned by the Company to
a corporation controlling, controlled by or under common control with the
Company or to an acquiror of all or substantially all of the Company's business,
stock or assets, without the consent of Executive.

         22.      CONTINUING REPRESENTATIONS. Executive expressly acknowledges
and agrees that, in order to be eligible for the benefits described in this
Agreement, Executive must sign, and not revoke, a Continuing Representations
Certificate, in substantially the same form as attached hereto as Exhibit C,
within twenty-one (21) days following the Separation Date, reaffirming each of
the waivers, releases, warranties and representations contained in this
Agreement as of such date and that Executive's rights continue to be as defined
by the terms of this Agreement as of such date.

         23.      APPLICABLE TAX WITHHOLDING. All payments made under this
Agreement shall be subject to reduction to reflect taxes or other charges
required to be withheld by law or otherwise authorized to be withheld by
Executive.

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         24.      VOLUNTARY EXECUTION OF AGREEMENT. This Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf of
the Parties hereto, with the full intent of releasing all claims. The Parties
acknowledge that:

                  (a)      they have read this Agreement;

                  (b)      they have been represented in the preparation,
negotiation, and execution of this Agreement by legal counsel of their own
choice or that they have voluntarily declined to seek such counsel;

                  (c)      they understand the terms and consequences of this
Agreement and of the releases it contains; and

                  (d)      they are fully aware of the legal and binding effect
of this Agreement.

                            [Signature Page Follows]

                                      -10-

<PAGE>

         IN WITNESS WHEREOF, the Parties have executed this Transition Agreement
and Release on the respective dates set forth below.

                                            REDENVELOPE, INC.

Dated as of Aug 22, 2002                    By: Alison L. May
                                                --------------------------------

                                            Print Name: Alison L. May
                                                        -----------------------

                                            Title: Pres & CEO

                                            CHRISTOPHER CUNNINGHAM

Dated as of Aug 28, 2002                    /s/ Christopher Cunningham
                                            --------------------------------
                                            Signature

                                      -11-

<PAGE>

                                    EXHIBIT A

                            CONFIDENTIALITY AGREEMENT

                                      -12-
<PAGE>

                                REDENVELOPE, INC.

                          CONFIDENTIAL INFORMATION AND
                         INVENTION ASSIGNMENT AGREEMENT

         As a condition of my becoming employed by or retained as a consultant
by RedEnvelope, Inc., a Delaware corporation or any of its current or future
subsidiaries, affiliates, successors or assigns (collectively, the "Company"),
and in consideration of my employment or consulting relationship with the
Company and my receipt of the compensation now and hereafter paid to me by the
Company, I agree to the following:

         1.       EMPLOYMENT OR CONSULTING RELATIONSHIP. I understand and
acknowledge that this Agreement does not alter, amend or expand upon any rights
I may have to continue in the employ of, or in a consulting relationship with,
or the duration of my employment or consulting relationship with, the Company
under any existing agreements between the Company and me or under applicable
law. Any employment or consulting relationship between the Company and me,
whether commenced prior to or upon the date of this Agreement, shall be referred
to herein as the "Relationship."

         2.       AT-WILL RELATIONSHIP. I understand and acknowledge that my
Relationship with the Company is and shall continue to be at-will, as defined
under applicable law, meaning that either I or the Company may terminate the
Relationship at any time for any reason or no reason, without further obligation
or liability.

         3.       CONFIDENTIAL INFORMATION.

                  (a)      COMPANY INFORMATION. I agree at all times during the
term of my Relationship with the Company and thereafter, to hold in strictest
confidence, and not to use, except for the benefit of the Company, or to
disclose to any person, firm, corporation or other entity without written
authorization of the Board of Directors of the Company, any Confidential
Information of the Company which I obtain or create. I further agree not to make
copies of such Confidential Information except as authorized by the Company. I
understand that "Confidential Information" means any Company proprietary
information, technical data, trade secrets or know-how, including, but not
limited to, research, product plans, products, services, suppliers, customer
lists and customers (including, but not limited to, customers of the Company on
whom I called or with whom I became acquainted during the Relationship), prices
and costs, markets, software, developments, inventions, laboratory notebooks,
processes, formulas, technology, designs, drawings, engineering, hardware
configuration information, marketing, licenses, finances, budgets or other
business information disclosed to me by the Company either directly or
indirectly in writing, orally or by drawings or observation of parts or
equipment or created by me during the period of the Relationship, whether or not
during working hours. I understand that "Confidential Information" includes, but
is not limited to, information pertaining to any aspects of the Company's
business which is either information not known by actual or potential
competitors of the Company or is proprietary information of the Company or its
customers or suppliers, whether of a technical nature or otherwise. I further
understand that Confidential Information does not include any of the foregoing
items which has become publicly and widely

<PAGE>

known and made generally available through no wrongful act of mine or of others
who were under confidentiality obligations as to the item or items involved.

                  (b)      FORMER EMPLOYER INFORMATION. I represent that my
performance of all terms of this Agreement as an employee or consultant of the
Company has not breached and will not breach any agreement to keep in confidence
proprietary information, knowledge or data acquired by me in confidence or trust
prior or subsequent to the commencement of my Relationship with the Company, and
I will not disclose to the Company, or induce the Company to use, any
inventions, confidential or proprietary information or material belonging to any
previous employer or any other party.

                  (c)      THIRD PARTY INFORMATION. I recognize that the Company
has received and in the future will receive confidential or proprietary
information from third parties subject to a duty on the Company's part to
maintain the confidentiality of such information and to use it only for certain
limited purposes. I agree to hold all such confidential or proprietary
information in the strictest confidence and not to disclose it to any person,
firm or corporation or to use it except as necessary in carrying out my work for
the Company consistent with the Company's agreement with such third party.

         4.       INVENTIONS.

                  (a)      INVENTIONS RETAINED AND LICENSED. I have attached
hereto, as Exhibit A, a list describing with particularity all inventions,
original works of authorship, developments, improvements, and trade secrets
which were made by me prior to the commencement of the Relationship
(collectively referred to as "Prior Inventions"), which belong solely to me or
belong to me jointly with another, which relate in any way to any of the
Company's proposed businesses, products or research and development, and which
are not assigned to the Company hereunder; or, if no such list is attached, I
represent that there are no such Prior Inventions. If, in the course of my
Relationship with the Company, I incorporate into a Company product, process or
machine a Prior Invention owned by me or in which I have an interest, the
Company is hereby granted and shall have a non-exclusive, royalty-free,
irrevocable, perpetual, worldwide license (with the right to sublicense) to
make, have made, copy, modify, make derivative works of, use, sell and otherwise
distribute such Prior Invention as part of or in connection with such product,
process or machine.

                  (b)      ASSIGNMENT OF INVENTIONS. I agree that I will
promptly make full written disclosure to the Company, will hold in trust for the
sole right and benefit of the Company, and hereby assign to the Company, or its
designee, all my right, title and interest throughout the world in and to any
and all inventions, original works of authorship, developments, concepts,
know-how, improvements or trade secrets, whether or not patentable or
registrable under copyright or similar laws, which I may solely or jointly
conceive or develop or reduce to practice, or cause to be conceived or developed
or reduced to practice, during the period of time in which I am employed by or a
consultant of the Company (collectively referred to as "Inventions"), except as
provided in Section 4(e) below. I further acknowledge that all inventions,
original works of authorship, developments, concepts, know-how, improvements or
trade secrets which are made by me (solely or jointly with others) within the
scope of and during the period of my Relationship with the Company are "works
made for hire" (to the greatest extent permitted by applicable law)

                                       -2-

<PAGE>

and are compensated by my salary (if I am an employee) or by such amounts paid
to me under any applicable consulting agreement or consulting arrangements (if I
am a consultant), unless regulated otherwise by the mandatory law of the state
of California.

                  (c)      MAINTENANCE OF RECORDS. I agree to keep and maintain
adequate and current written records of all Inventions made by me (solely or
jointly with others) during the term of my Relationship with the Company. The
records may be in the form of notes, sketches, drawings, flow charts, electronic
data or recordings, laboratory notebooks, and any other format. The records will
be available to and remain the sole property of the Company at all times. I
agree not to remove such records from the Company's place of business except as
expressly permitted by Company policy which may, from time to time, be revised
at the sole election of the Company for the purpose of furthering the Company's
business.

                  (d)      PATENT AND COPYRIGHT RIGHTS. I agree to assist the
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents,
trademarks, mask work rights, moral rights, or other intellectual property
rights relating thereto in any and all countries, including the disclosure to
the Company of all pertinent information and data with respect thereto, the
execution of all applications, specifications, oaths, assignments, recordations,
and all other instruments which the Company shall deem necessary in order to
apply for, obtain, maintain and transfer such rights and in order to assign and
convey to the Company, its successors, assigns and nominees the sole and
exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement until the expiration of the
last such intellectual property right to expire in any country of the world. If
the Company is unable because of my mental or physical incapacity or
unavailability or for any other reason to secure my signature to apply for or to
pursue any application for any United States or foreign patents or copyright
registrations covering Inventions or original works of authorship assigned to
the Company as above, then I hereby irrevocably designate and appoint the
Company and its duly authorized officers and agents as my agent and attorney in
fact, to act for and in my behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the
application for, prosecution, issuance, maintenance or transfer of letters
patent or copyright registrations thereon with the same legal force and effect
as if originally executed by me. I hereby waive and irrevocably quitclaim to the
Company any and all claims, of any nature whatsoever, which I now or hereafter
have for infringement of any and all proprietary rights assigned to the Company.

                  (e)      EXCEPTION TO ASSIGNMENTS. I understand that the
provisions of this Agreement requiring assignment of Inventions to the Company
do not apply to any invention which qualifies fully under the provisions of
California Labor Code Section 2870 (attached hereto as Exhibit B). I will
advise the Company promptly in writing of any inventions that I believe meet
such provisions and are not otherwise disclosed on Exhibit A.

         5.       RETURNING COMPANY DOCUMENTS. I agree that, at the time of
termination of my Relationship with the Company, I will deliver to the Company
(and will not keep in my possession, recreate or deliver to anyone else) any and
all devices, records, data, notes, reports,

                                       -3-

<PAGE>

proposals, lists, correspondence, specifications, drawings, blueprints,
sketches, laboratory notebooks, materials, flow charts, equipment, other
documents or property, or reproductions of any aforementioned items developed by
me pursuant to the Relationship or otherwise belonging to the Company, its
successors or assigns. I further agree that any property situated on the
Company's premises and owned by the Company, including disks and other storage
media, filing cabinets or other work areas, is subject to inspection by Company
personnel at any time with or without notice. In the event of the termination of
the Relationship, I agree to sign and deliver the "Termination Certification"
attached hereto as Exhibit C.

         6.       NOTIFICATION TO OTHER PARTIES.

                  (a)      EMPLOYEES. In the event that I leave the employ of
the Company, I hereby consent to notification by the Company to my new employer
about my rights and obligations under this Agreement.

                  (b)      CONSULTANTS. I hereby grant consent to notification
by the Company to any other parties besides the Company with whom I maintain a
consulting relationship, including parties with whom such relationship commences
after the effective date of this Agreement, about my rights and obligations
under this Agreement.

         7.       SOLICITATION OF EMPLOYEES, CONSULTANTS AND OTHER PARTIES. I
agree that during the term of my Relationship with the Company, and for a period
of twenty-four (24) months immediately following the termination of my
Relationship with the Company for any reason, whether with or without cause, I
shall not either directly or indirectly solicit, induce, recruit or encourage
any of the Company's employees or consultants to terminate their relationship
with the Company, or take away such employees or consultants, or attempt to
solicit, induce, recruit, encourage or take away employees or consultants of the
Company, either for myself or for any other person or entity. Further, for a
period of twenty-four (24) months following termination of my Relationship with
the Company for any reason, with or without cause, I shall not solicit any
licensor to or customer of the Company or licensee of the Company's products, in
each case, that are known to me, with respect to any business, products or
services that are competitive to the products or services offered by the Company
or under development as of the date of termination of my Relationship with the
Company.

         8.       REPRESENTATIONS AND COVENANTS.

                  (a)      FACILITATION OF AGREEMENT. I agree to execute
promptly any proper oath or verify any proper document required to carry out the
terms of this Agreement upon the Company's written request to do so.

                  (b)      CONFLICTS. I represent that my performance of all the
terms of this Agreement will not breach any agreement to keep in confidence
proprietary information acquired by me in confidence or in trust prior to
commencement of my Relationship with the Company. I have not entered into, and I
agree I will not enter into, any oral or written agreement in conflict with any
of the provisions of this Agreement.

                                       -4-

<PAGE>

                  (c)      VOLUNTARY EXECUTION. I certify and acknowledge that I
have carefully read all of the provisions of this Agreement and that I
understand and will fully and faithfully comply with such provisions.

         9.       GENERAL PROVISIONS.

                  (a)      GOVERNING LAW. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California, without giving effect to the principles of conflict of
laws.

                  (b)      ENTIRE AGREEMENT. This Agreement sets forth the
entire agreement and understanding between the Company and me relating to the
subject matter herein and merges all prior discussions between us. No
modification or amendment to this Agreement, nor any waiver of any rights under
this Agreement, will be effective unless in writing signed by the party to be
charged. Any subsequent change or changes in my duties, obligations, rights or
compensation will not affect the validity or scope of this Agreement.

                  (c)      SEVERABILITY. If one or more of the provisions in
this Agreement are deemed void by law, then the remaining provisions will
continue in full force and effect.

                  (d)      SUCCESSORS AND ASSIGNS. This Agreement will be
binding upon my heirs, executors, administrators and other legal representatives
and will be for the benefit of the Company, its successors, and its assigns.

                  (e)      SURVIVAL. The provisions of this Agreement shall
survive the termination of the Relationship and the assignment of this Agreement
by the Company to any successor in interest or other assignee.

                  (f)      ADVICE OF COUNSEL. I ACKNOWLEDGE THAT, IN EXECUTING
THIS AGREEMENT, I HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT
LEGAL COUNSEL, AND I HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF
THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY
REASON OF THE DRAFTING OR PREPARATION HEREOF.

                            [Signature Page Follows]

                                       -5-

<PAGE>

         The parties have executed this Agreement on the respective dates set
forth below:

COMPANY:                               EMPLOYEE:

REDENVELOPE, INC.                          [ILLEGIBLE], an
Individual:

/s/ Thomas Bazzone                     /s/ Christopher Cunningham
--------------------------             ------------------------------
Signature                              Signature

By: Thomas Bazzone                         Christopher Cunningham
                                       ------------------------------
                                       Printed Name

Title: CCO

Date: 10/12/99                         Date: 10-4-99

Address: 201 Spear St                  Address: _____________________
         SF CA 94105
                                       ______________________________

                                SIGNATURE PAGE TO
                          CONFIDENTIAL INFORMATION AND
                         INVENTION ASSIGNMENT AGREEMENT

<PAGE>

                                    EXHIBIT A

                            LIST OF PRIOR INVENTIONS
                        AND ORIGINAL WORKS OF AUTHORSHIP
                             EXCLUDED FROM SECTION 4

<TABLE>
<CAPTION>
                                                    Identifying Number
  Title                     Date                   or Brief Description
---------                 --------               ------------------------
<S>                       <C>                    <C>
</TABLE>

[X] No inventions or improvements

[ ] Additional Sheets Attached

Signature of Employee/Consultant: /s/ Christopher Cunningham
                                  ---------------------------
Print Name of Employee/Consultant: C. Cunningham
                                   --------------
Date: 10-4-99

<PAGE>

                                    EXHIBIT B

Section 2870 of the California Labor Code is as follows:

         (a)      Any provision in an employment agreement which provides that
an employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:

                  (1)      Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer; or

                  (2)      Result from any work performed by the employee for
the employer.

         (b)      To the extent a provision in an employment agreement purports
to require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.

<PAGE>

                                    EXHIBIT C

                            TERMINATION CERTIFICATION

         This is to certify that I do not have in my possession, nor have I
failed to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, laboratory
notebooks, flow charts, materials, equipment, other documents or property, or
copies or reproductions of any aforementioned items belonging to RedEnvelope,
Inc., its subsidiaries, affiliates, successors or assigns (together the
"Company").

         I further certify that I have complied with all the terms of the
Company's Confidential Information and Invention Assignment Agreement signed by
me, including the reporting of any inventions and original works of authorship
(as defined therein), conceived or made by me (solely or jointly with others)
covered by that agreement.

         I further agree that, in compliance with the Confidential Information
and Invention Assignment Agreement, I will preserve as confidential all trade
secrets, confidential knowledge, data or other proprietary information relating
to products, processes, know-how, designs, formulas, developmental or
experimental work, computer programs, data bases, other original works of
authorship, customer lists, business plans, financial information or other
subject matter pertaining to any business of the Company or any of its
employees, clients, consultants or licensees.

         I further agree that for twenty-four (24) months from the date of this
Certificate, I shall not either directly or indirectly solicit, induce, recruit
or encourage any of the Company's employees or consultants to terminate their
relationship with the Company, or take away such employees or consultants, or
attempt to solicit, induce, recruit, encourage or take away employees or
consultants of the Company, either for myself or for any other person or entity.
Further, for a period of twenty-four (24) months from the date of this
Certificate, I shall not solicit any licensor to or customer of the Company or
licensee of the Company's products, in each case, that are known to me, with
respect to any business, products or services that are competitive to the
products or services offered by the Company or under development as of the date
of termination of my Relationship with the Company.

Date: SEPT. 3, 2002                     /s/ Christopher Cunningham
                                       -------------------------------
                                       (Employee's Signature)

                                           Christopher Cunningham
                                       -------------------------------
                                       (Type/Print Employee's Name)
<PAGE>

                                    EXHIBIT B

                            SEPARATION CERTIFICATION

         This is to certify that I do not have in my possession, nor have I
failed to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, notebooks, flow
charts, materials, equipment, other documents or property, or copies or
reproductions of any aforementioned items belonging to RedEnvelope, Inc., its
subsidiaries, affiliates, successors or assigns (together the "COMPANY").

         I further certify that I have complied with, and will continue to
comply with, all of the terms of the Confidential Information and Invention
Assignment Agreement dated _________, 200__ (see Exhibit A, the "CONFIDENTIALITY
AGREEMENT") signed by me, including the reporting of any inventions and original
works of authorship (as defined therein), conceived or made by me (solely or
jointly with others) covered by that agreement.

         I further agree that, in compliance with the Confidentiality Agreement,
I will preserve as confidential all trade secrets, confidential knowledge, data
or other proprietary information relating to products, processes, know-how,
designs, formulas, developmental or experimental work, computer programs, data
bases, other original works of authorship, customer lists, business plans,
financial information or other subject matter pertaining to any business of the
Company or any of its employees, clients, consultants or licensees.

Date: Aug 28, 2002

                                       -----------------------------------------
                                       (Executive's Signature)

                                       Christopher Cunningham
                                       -----------------------------------------
                                       (Type/Print Executive's Name)

                                      -13-

<PAGE>

                                    EXHIBIT C

                     CONTINUING REPRESENTATIONS CERTIFICATE

         This is to certify that the waivers, covenants, warranties and
representations made by me and set forth in the Transition Agreement and Release
(the "Agreement") dated ________, 2002, between RedEnvelope, Inc. (the
"Company") and me, continue to be true and correct as of the date hereof and
that I remain bound by, and my rights continue to be defined by, the terms of
the Agreement. The Agreement is hereby incorporated in its entirety into this
Certificate and capitalized terms not defined in this Certificate have the same
meanings as in the Agreement.

         In addition, I expressly agree and acknowledge as of the date hereof
that:

         1.       Except as set forth in the Agreement, I have no right, title
or interest in or to any shares of the Company's capital stock or other
securities under the Option Agreements, the Offer Letter, or any other document,
instrument or agreement (whether oral or written) with the Company;

         2.       I have received all salary, accrued vacation, commissions,
bonuses, wages, severance payments, compensation or other such sums due to me,
other than amounts, if any, to be paid after the date hereof pursuant to the
Agreement. I further acknowledge and agree that, upon the payment by the Company
of all wages due, or to become due, to me, the California Labor Code Section
206.5 will not be applicable. That section provides in pertinent part as
follows:

                  NO EMPLOYER SHALL REQUIRE THE EXECUTION OF ANY RELEASE OF ANY
                  CLAIM OR RIGHT ON ACCOUNT OF WAGES DUE, OR TO BECOME DUE, OR
                  MADE AS AN ADVANCE ON WAGES TO BE EARNED, UNLESS PAYMENT OF
                  SUCH WAGES HAS BEEN MADE

         3.       I, on behalf of myself and my heirs, executors, and assigns,
hereby fully and forever release the Company and its current and former
officers, directors, employees, investors, attorneys, stockholders,
administrators, predecessor and successor corporations and assigns, of and from
any claim, duty, obligation or cause of action relating to any matters of any
kind, whether presently known or unknown, suspected or unsuspected, that I may
possess arising from any omissions, acts or facts that have occurred up until
and including the date of this Certificate including, without limitation:

                  (a)      any and all claims relating to or arising from my
employment relationship with the Company and the termination of that
relationship;

                  (b)      any and all claims relating to my right to receive,
or receipt of, wages, severance benefits, or other compensation;

                                      -14-

<PAGE>

                  (c)      any and all claims relating to, or arising from, my
right to purchase, or actual purchase of shares of the capital stock or other
securities of the Company;

                  (d)      any and all claims for wrongful discharge of
employment; breach of contract, both express and implied; breach of a covenant
of good faith and fair dealing, both express and implied; negligent or
intentional infliction of emotional distress; breach of privacy; negligent or
intentional misrepresentation; negligent or intentional interference with
contract or prospective economic advantage; negligence; and defamation;

                  (e)      any and all claims for violation of any federal,
state or municipal statute, including, but not limited to, Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") as related to severance
benefits, the Equal Pay Act of 1963, the Age Discrimination in Employment Act of
1967, the Americans With Disabilities Act, California Labor Code Section 1197.5,
the California Fair Employment and Housing Act, the Fair Labor Standards Act,
and any family and medical leave acts;

                  (f)      any and all claims arising out of any other laws and
regulations relating to employment or employment discrimination; and

                  (g)      any and all claims for attorneys' fees and costs.

         I agree that the release set forth herein shall be and remain in effect
in all respects as a complete general release as to the matters released. This
release does not extend to any obligations incurred or specified under this
Certificate. In addition, this release does not extend to any rights I may have
to be indemnified and held harmless with respect to my performance of my duties
while I was an officer and/or member of the Company's Board to the fullest
extent allowed by law, the Company's Amended and Restated Certificate of
Incorporation, or D&O insurance policy. I further acknowledge that I am not
aware of any claim other than the claims that are released hereunder.

         3.       I acknowledge that I am waiving and releasing any rights I may
have under the Age Discrimination in Employment Act of 1967 ("ADEA") and that
this waiver and release is knowing and voluntary. I agree that this waiver and
release does not apply to any rights or claims that may arise under ADEA
following the Certificate Effective Date. I acknowledge that the consideration
given for this waiver and release is in addition to anything of value to which I
was already entitled. I further acknowledge that I have been advised by this
writing that (a) I should consult with an attorney prior to executing this
Continuing Representations Certificate; (b) I may have at least twenty-one (21)
days within which to consider this Continuing Representations Certificate; (c) I
have seven (7) days following his execution of this Continuing Representations
Certificate to revoke the Continuing Representations Certificate (the
"Certificate Revocation Period"). This Continuing Representations Certificate
shall not be effective until the Certificate Revocation Period has expired (the
"Certificate Effective Date").

         4.       I acknowledge that I have been advised by legal counsel and am
familiar with the provisions of California Civil Code Section 1542, which
provides as follows:

                                      -15-

<PAGE>

                  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.

         Being aware of said Code section, I agree to expressly waive any rights
I may have thereunder, as well as under any other statute or common law
principles of similar effect; and

         5.       I certify that I have complied with all of my obligations
under the Agreement and the Confidentiality Agreement.

                  I have executed this Certificate on the date set forth below.

                                                    CHRISTOPHER CUNNINGHAM

Dated as of Aug 28, 2002                            /s/ [ILLEGIBLE]
                                                    ----------------------------
                                                    Signature

                                      -16-<PAGE>

                                                                   EXHIBIT 10.27

                 SERVICING, WAREHOUSING & DISTRIBUTION AGREEMENT

This Servicing, Warehousing and Distribution Agreement (the "Fulfillment
Agreement" or "Agreement") is made as of the 1st day of October 2001, by and
between, on the one hand, 3PF, INC., a Delaware corporation and wholly owned
subsidiary of the Rentrak corporation, hereinafter referred to as "3PF", and
RENTRAK CORPORATION , a [Delaware] corporation, hereinafter referred to as "
RENTRAK", and, on the other hand, REDENVELOPE, INC. hereinafter referred to as
"CUSTOMER."

                                    RECITALS

WHEREAS 3PF provides customers with, among other things, warehousing,
management, distribution, and inventory services.

WHEREAS Customer is a distributor of goods and merchandise (hereinafter,
"Stock") and desires to contract with 3PF for certain of 3PF's services under
the convenants, terms, and restrictions contained herein.

THEREFORE, for valuable consideration as set forth herein, Customer and 3PF
agree as follows:

                                    SECTION I
                      FULFILLMENT AND WAREHOUSING SERVICES

1.1. Warehousing Services: 3PF agrees to provide certain warehouse space,
     management, equipment and related services to Customer as set forth herein.
     The warehouse space shall be located at 3PF's facility at 3300 S.R. 73
     South, Building 5, Wilmington, Ohio 45177 (hereinafter referred to as the
     "Facility"). The warehouse Facility space is approximately 102,400 square
     feet of floor space which includes office space of approximately 3,400 sq.
     ft. The Facility shall be maintained structurally and mechanically in good
     working order by 3PF as is required per 3PF's lease agreement. 3PF's
     services shall include without limitation payment of all common area
     maintenance charges, real estate taxes, HVAC, electrical, plumbing and
     water, security, insurance, janitorial and supplies, continuance of
     existing Internet access, and trash removal. Customer shall not be required
     to pay any expenses in connection with the maintenance or operation of the
     Facility except as expressly set forth

   Printed 12/14/2001 11:57 AM                Initials (3PF) /s/ [ILLEGIBLE]

                                          Initials (Rentrak) /s/ [ILLEGIBLE]

                                      Initials (RedEnvelope) /s/ MWM

                                 - Page 1 of 21 -

<PAGE>

     herein.

1.2. Equipment: 3PF agrees to provide the existing warehousing equipment in the
     Facility being 620 bays of pallet rack, 32 bays of flow rack, 1 forklift, 1
     drexel truck, 4 order pickers and 6 pallet trucks. 3PF shall further
     provide all maintenance of existing equipment and replacement equipment if
     any of the foregoing is no longer fully operational at any time during the
     term of this Agreement. In addition to the afore-listed major equipment,
     the facility also includes various other smaller pieces of equipment which
     include but are not limited to: tape guns, air pillow machines, movable
     conveyor, jewelry storage lockers, security cameras, employee lockers,
     kitchen facilities, etc. 3PF will adequately outfit the facility with such
     items as to support the order/fulfillment volume projected for Customer's
     Christmas CY2001 season. This inventory of smaller equipment and items
     shall remain within the Facility and be considered part of this Agreement
     throughout the term of this Agreement. Any additional equipment for the
     Facility purchased by Customer ("Customer Owned Equipment") shall be
     Customer's property. 3PF shall hold all Customer Owned Equipment and shall
     exercise reasonable care in the use and custody of such property and shall
     use such property only in performing its obligations under this Agreement.
     Customer assumes full responsibility for all maintenance of Customer's
     owned equipment. 3PF shall not grant any security interest or incur any
     liens or any other encumbrances on the Customer Owned Equipment. Upon
     termination or expiration of this Agreement, or upon Customer's written
     request, 3PF will promptly return all Customer Owned Equipment.

1.3. Additions: Any additional structural and/or leasehold improvements of the
     Facility, other than regular maintenance and repairs or improvements
     required to keep the facility complaint with local building code, shall be
     at the expense of Customer and must be approved in writing by 3PF and the
     Facility's Landlord, which approval by 3PF shall not be unreasonably
     withheld.

1.4. Additional Space: In the event the Customer requires additional warehouse
     space, 3PF shall make a good faith effort to secure the necessary storage
     space on behalf of Customer at the same then current charge per square foot
     per month (i.e. $[*] per square foot per month).

1.5. Instructions; Shipments: 3PF shall respond to regular electronically
     transmitted instructions from Customer by providing the fulfillment
     services requested in accordance with this Agreement by such instructions
     and including packaging and shipment of the Stock identified in the
     instruction. Shipments will be completed on the same "day" in accordance
     with the

   Printed 12/14/2001 11:57 AM                Initials (3PF) /s/ [ILLEGIBLE]

                                          Initials (Rentrak) /s/ [ILLEGIBLE]

                                      Initials (RedEnvelope) /s/ MWM

                                 - Page 2 of 21 -

* Material has been omitted pursuant
to a request for confidential treatment.

<PAGE>

following examples:

<TABLE>
<CAPTION>
        ORDER RECEIVED @3PF                       ORDER SHIPPED BY 3PF
----------------------------------------------------------------------------
<S>                                          <C>
[*]                                          By [*]
----------------------------------------------------------------------------
[*]                                          Within [*]
----------------------------------------------------------------------------
</TABLE>

     Shipping cut-off times in this Agreement shall be the same as in the
     previous agreement between Customer and 3PF dated September 29th, 1999. In
     addition, 3PF will work with Customer to make a good faith effort to meet
     fulfillment goals of Customer surrounding specific holiday events.

1.6  Exclusions: The provisions of Section 1.5 shall not apply in the case of
     back orders, items which have not been received by 3PF or are not available
     to 3PF or for any inability to fill such orders due to strike, riots,
     storms, fires, explosions, acts of God, war or governmental action, or any
     other similar cause which is beyond the reasonable control of 3PF. In such
     case, 3PF will use all reasonable efforts to complete such instructions and
     shall promptly advise Customer of such action.

1.7  Provision of Services. All services provided by 3PF are subject to the
     provisions of this Fulfillment Agreement, including any Schedules, Exhibits
     and Appendices hereto.

                                   SECTION II
                              TERM AND TERMINATION

2.1  Term. This Agreement shall be effective as of October 1, 2001, and shall
     continue in full force and in effect for twenty two (22) months and shall
     terminate on July 31st, 2003.

2.2  Termination for Cause. Either party may terminate this Agreement by written
     notice if the other party breaches any of its material obligations,
     representations or warranties under this Agreement and fails to cure such
     breach within thirty (30) days after receipt of written notice from the
     other party specifying such breach.

   Printed 12/14/2001 11:57 AM             Initials (3PF) /s/ [ILLEGIBLE]

                                       Initials (Rentrak) /s/ [ILLEGIBLE]

                                   Initials (RedEnvelope) /s/ [ILLEGIBLE]

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* Material has been omitted pursuant to a request for confidential treatment.

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2.3  Termination for Insolvency. This Agreement may be terminated at any time by
     either party, effective immediately upon notice, if the other party: (1)
     becomes insolvent, (2) files a petition in bankruptcy, or (3) makes an
     assignment for the benefit of creditors.

2.4  Termination for Failure to Meet Service Level Commitment. If 3PF is unable
     to ship any order within the applicable time-frame set forth in Section 1.5
     and subject to the limitations of paragraph 1.6, and such failure is not
     directly attributable to weather, computer problems, or demand exceeding 5%
     of order projections provided to 3PF by Customer, 3PF agrees to upgrade all
     delayed orders to a service level which provides comparable delivery to
     Customer's customers using the carrier of 3PF's choice, 3PF will pay the
     difference between the original service level and the upgraded service
     level. Furthermore, if in the course of any rolling twelve(12) month
     period, more than ten(10) such failures occur, Customer shall have the
     right to terminate this Agreement upon sixty(60) days written notice to
     3PF.

2.5  Survival. Sections 4.1,5 and 6 (except for 6.11), and all accrued payment
     obligations, shall survive any termination or expiration of this Agreement.

2.6  Abandonment. All stock which remains at the facility more than 30 days
     after termination of this Agreement shall be deemed abandoned, and shall at
     the option of 3PF become property of 3PF.

                                   SECTION III
                              PRICING AND PAYMENT

3.1  Payment. Customer shall pay for the services performed by 3PF in accordance
     with the schedule of fees, rates, charges, and terms set forth on the
     attached Schedule 1.1. Billing to Customer will be on a fiscal month basis
     and will conform to Customer's monthly fiscal calendar.

3.2  Additional Charges. If Customer requests 3PF to perform services not listed
     in Schedule 1.1 and 3PF is willing to provide such services, the parties
     shall agree in a prior writing as to the services to be performed and the
     charges to be paid for the services.

3.3  Pricing Changes. All rates, fees and charges set forth on Schedule 1.1
     shall remain fixed

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     during the term of this Agreement. Notwithstanding the above, the freight
     rates set forth on Schedule 1.1 shall remain fixed during the term of this
     Agreement, provided, however, that such rates may be adjusted to reflect
     all rate changes imposed by the freight companies / commercial carriers
     selected by Customer and such rate increases shall become effective as of
     the date imposed by the applicable freight companies/ commercial carriers
     selected by Customer. Such rate changes shall not exceed actual changes in
     cost incurred by 3PF.

3.4  Delinquency. 3PF encourages prompt payment by its clients. Payment must be
     received by 3PF within (30) thirty days of date of invoice. In the event
     that payment is not received within thirty (30) days, 3PF may elect to
     suspend performance under this Agreement upon written notice to Customer.
     Until such late payment is cured, an interest charge shall be assessed on
     the balance owed in the amount of one and one-half percent (1 1/2%) per
     month or the maximum amount allowed by applicable law, whichever is lower.
     Assessment of such charge shall not be deemed a waiver of any other remedy
     3PF may have hereunder or at law.

                                   SECTION IV
                                  WAREHOUSING

4.1  Ownership. Title and exclusive ownership to the Stock stored and warehoused
     by and in the possession and control of 3PF shall at all times remain with
     Customer. Neither this Agreement nor any warehouse receipt for the delivery
     and acceptance of the Stock by 3PF shall be construed to be anything other
     than a non-negotiable instrument of title.

4.2  Stock from Vendors. All Stock submitted for 3PF's services under this
     Agreement shall be delivered at Customer's expense to the 3PF dock at 3300
     State Route 73 South, Building 5, Wilmington, Ohio, 45177. All such Stock
     shall be in good condition, properly marked, sized, and packaged for
     handling. Customer shall furnish at or prior to each inbound delivery, a
     manifest, packing list, order list, or other listing in such style and
     format as is consistent with the current format being supplied to 3PF by
     Customer or such new format as both parties may agree upon in the future,
     which identifies each container and its contents. Included therein shall be
     the brand names, serial numbers (if applicable), SKU numbers, part numbers,
     size, weight, and insured or declared value of items as are necessary for
     inventory and distribution, or as may be required by 3PF. Customer shall
     inform 3PF prior to or at delivery of any special precautions necessitated
     by the nature, conditions, or packaging of the Stock and of all

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     statutory requirements specific to the Stock with which 3PF does or may
     need to comply. In the event Customer acquires Stock from a third party and
     such Stock does not meet the above requirements, 3PF will use commercially
     reasonable efforts to accept such Stock subject to Customer paying all
     3PF's reasonable costs and expenses in accepting and stocking such items at
     the charges shown on Schedule 1.1 as such may be amended from time to time
     upon the mutual written agreement of the parties.

4.3  Customer's Inventory. Any Stock delivered to 3PF from Customer's facility
     or from a third party facility shall be transported at the expense of
     Customer, freight prepaid and shall be subject to charges as defined in
     schedule 1.1 of this Agreement. 3PF shall have no duty or obligation to
     accept stock on a COD basis.

4.4  Inspection: 3PF reserves the right to open and inspect any packages of
     Stock received by it for warehousing or distribution. Stock shall not be
     deemed accepted by 3PF or become subject to this Agreement until it is
     delivered to the warehouse specified on Schedule 1.1 and the bill of lading
     accepting shipment is signed for by 3PF. 3PF shall not be responsible for
     any damage to the Stock caused in transit to 3PF's warehouse facility and
     all Stock is accepted subject to any pre-existing damage.

4.5  Facility Access. Employees of Customer with proper identification and proof
     of employment by Customer shall be allowed free access to the warehouse
     facility at any time. Customer agrees to provide 48-hours notice of any
     warehouse visitors who are not employees of Customer. 3PF reserves the
     right to refuse access to the facility for non-Customer employees, however,
     such refusal shall not be unreasonably given. In the event any employee,
     visitor, contractor or other person under the direction of Customer
     violates any employee or visitor policies of 3PF, including but not limited
     to creating a danger to other employees, causing harassment of employees,
     or disturbing the operation of 3PF, 3PF in its sole discretion shall have
     the right to have such employee removed from the Facility immediately.
     Customer shall be liable for and shall indemnify and hold 3PF harmless from
     any and all damages to property or equipment or injuries to persons caused
     Customer's representatives or agents.

4.6  Hours. Inbound shipments to 3PF warehouse and distribution center shall be
     during 3PF's normal hours as such may change from time to time unless
     alternative arrangements have been made with 3PF prior to arrival.

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4.7  Receipt and Verification. Promptly upon receipt and acceptance of Stock,
     3PF shall initiate to Customer an electronic facsimile confirmation of
     receipt of the Stock. The original Vendor's packing slip will be forwarded
     daily to Customer via Airborne Express overnight priority service.

4.8  Identification. All Stock shall be kept and remain identifiable as Customer
     Stock.

4.9  Removal: No Stock shall be removed from 3PF's warehouses by anyone other
     than 3PF or its carriers without prior written authorization from Customer.
     Customer shall furnish in writing to 3PF the name, address, phone number
     and any security information required by Customer or 3PF of each person who
     shall have authorization to remove or direct removal of such Stock.
     Customer shall be responsible for updating such information.

4.10 Freight Charges. Distribution shall be at Customers expense at the prices
     and rates set forth on Schedule 1.1, and shall be made on or as soon as
     reasonably practicable after the date that 3PF receives valid written
     authorization from Customer.

4.11 Distribution. 3PF shall deliver outbound Stock to a carrier chosen by
     Customer for delivery in accordance with the authorized instructions of
     Customer. In the event distribution cannot be made as a result of 3PF's
     acts or omissions, 3PF will waive the handling charges for such shipment.

4.12 Commitment of Assets by 3PF: 3PF hereby acknowledges and agrees that it has
     not and will not claim any security interest, lien or other encumbrance (a
     "Lein") of any kind (whether consensual or otherwise) in and to all or any
     portion of the assets of Customer, including without limitation the Stock.
     To the extent any such Lien automatically arises by operation of law, 3PF
     hereby disclaims any such Lien and shall be deemed to have automatically
     released any such Lien in favor of Customer.

                                    SECTION V
             LIABILITY/INDEMNIFICATION/INSURANCE/SECURITY/WARRANTIES

5.1  Insurance. Stock stored or warehoused by 3PF is not insured against loss or
     damage unless Customer requests such coverage in writing and pays the
     applicable premium. In addition 3PF

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     will not be liable for any loss or damages relating to transportation
     carriers or packaging deficiencies.

5.2  Liability. 3PF shall not be liable to Customer for any damage, loss,
     demurrage, or injury to Stock of Customer unless such loss is the result of
     3PF's failure, to exercise such care in regard to such Stock or the
     distribution thereof as a reasonably careful person would exercise under
     like circumstances, and 3PF shall not be liable for damages that could not
     have been avoided by the exercise of such care. Accordingly, 3PF shall be
     liable for all losses, demurrage or injury to Stock caused by the gross
     negligence or willful misconduct of 3PF. 3PF shall not under any
     circumstances be liable to Customer for any damage, injury, loss,
     demurrage, or default in its obligations of any kind which arise from the
     following (each, a "Force Majeure Event"):

          a)   Fire, war, Act of God, acts of Terrorism, or any natural disaster
               or calamity,

          b)   Power outages,

          c)   Strikes, lockouts or labor disputes at 3PF, its carrier(s), or at
               any party providing services to 3PF,

          d)   Any governmental actions, or

          e)   Acts of gross, reckless, or willful misconduct of the employees
               of Customer

     If a Force Majeur Event which materially affects 3PF's ability to perform
     its obligations under this Agreement continues for more than fourteen (14)
     business days, then Customer may terminate this Agreement upon written
     notice to 3PF.

5.3  Consequential Damages. Neither party shall be liable to the other or any
     third party for any indirect or consequential loss or damages, however
     arising, including but not limited to, loss of income, loss of profit or
     loss of opportunity, provided that such loss is not caused by the
     negligence or willful misconduct of such party.

5.4  Inventory Shrinkage. 3PF does not anticipate inventory shrinkage for Stock
     held by 3PF. Shrinkage is an uncorrectable negative difference between
     physical and book inventory of stock. 3PF shall not be liable for any
     Customer losses as a result of inventory shrinkage, unless such shrinkage
     causes the inventory to fall below the Ninety-Eight and One-Half percent
     (98.5%) inventory accuracy level. 3PF shall be liable for the entire
     percentage of the discrepancy below this accuracy level. 3PF will replace
     such percentage of inventory below

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     this accuracy level as determined by Customer's external auditor and at
     price equal to the Customer's cost for those items. Inventory accuracy
     shall be defined as inventory overages minus inventory shortages, as
     measured by dollar value of the discrepancy and a percentage of total
     inventory value at cost. The measurement period shall constitute the period
     of time between physical inventories, which shall be no fewer than one (1)
     time per calendar year, and no more than twelve (12) times per year, as
     determined by Customer. Accountability shall begin as product is received,
     using the physical counts by 3PF as a beginning inventory. Shortages will
     become payable only after two (2) consecutive inventory shortages. The net
     shortage or overage over the previous two (2) inventories shall be carried
     to the next inventory. Payment of the first shortage after two (2)
     consecutive shortages will be made thirty (30) days after reconciliation of
     the second shortage.

5.5  Warranties; Representations; and Indemnity. 3PF represents and warrants
     that: (1) the services provided hereunder will be performed in a
     professional manner by qualified, competent personnel and in accordance
     with generally accepted industry standards applicable to such services; (2)
     the performance by 3PF of its obligations under this Agreement will not
     cause 3PF to be in breach of any agreement by which it is bound; (3) except
     as otherwise provided herein, 3PF's equipment at the Facility is not and
     will not be subject to any security interest, lien or other encumbrance;
     and (4) 3PF's underlying lease to the Facility does and will allow 3PF to
     perform its obligations during the term of this Agreement with the
     following exception: it is understood that 3PF is currently under
     negotiations with its landlord to extend its existing lease for the
     Facility. Should 3PF be unable to secure a renewal of or extension to its
     existing lease for the Facility, 3PF may notify Customer in writing prior
     to January 3, 2002, that 3PF has been unable to extend its lease for the
     period of this Agreement. Should such notice be received by Customer prior
     to January 3, 2002, the term of this agreement shall end on June 30, 2002.
     (5) 3PF and Customer shall defend, indemnify and hold each other harmless
     against any and all losses, costs, damages and liabilities, including
     without limitation reasonable attorneys' fees, arising out of any breach by
     either party of their representations, warranties or obligations under this
     Agreement.

                                   SECTION VI
                                  MISCELLANEOUS

6.1  Transferability: The rights and obligations of Customer created under this
     Agreement may not be transferred, or assigned to a third party, or for the
     benefit of a third party, either directly or

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     indirectly, without the prior written notice to 3PF. Customer can assign
     this Agreement in the event of the sale, merger, or acquisition of
     substantially all of the assets of the Customer. In the event of sale,
     merger, or acquisition of Customer by a third party, 3PF may choose to
     terminate this Agreement without penalty with six-month's written
     notice to the other party. In the event of sale, merger, or acquisition of
     3PF by a third party, Customer may choose to terminate this Agreement
     without penalty with six-month's written notice to the other party.

6.2  Termination: Upon termination, Customer agrees to pay all transportation
     and shipping charges, fees and expenses incurred and owed by Customer to
     3PF pursuant to this Agreement. Handling, order, packaging, insurance and
     all other non-transportation and shipping charges, fees and expenses shall
     be paid within five (5) days after final billing to Customer. Prior and
     subsequent to any termination, Customer shall be granted free access in
     accordance with this Agreement to the Stock and Customer Owned Equipment at
     any time and may remove any Stock and/or Customer Owned Equipment from the
     Facility.

6.3  Notice. All notices or notification required hereunder shall be deemed
     sufficient if in writing and sent via first-class mail, postage prepaid,
     with a copy sent by facsimile to the attention and address and facsimile
     number set forth below:

          3PF:

          3PF
          3300 State Route 73 S.
          Wilmington, Ohio 45177
          Attn.: Edward A. Barnick, Executive Vice President
          Facsimile Number-(937) 383-2649

          Customer:

          RED ENVELOPE, INC.
          201 Spear Street, 3rd Floor
          San Francisco, CA 94105
          Attn: Christopher Cunningham, CIO
          Facsimile Number:(415) 371-1134

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6.4  Severability. In the event that any of the terms of this Agreement shall be
     deemed invalid, unlawful, or unenforceable to any extent, such term shall
     be severed from the remaining terms, which shall continue to be valid to
     the fullest extent permitted by law.

6.5  Taxes. Customer agrees to pay and/or indemnify 3PF from all taxes
     applicable to the sale, delivery, shipment, or storage of Customer's Stock,
     including but not limited to sales, use, personal, franchise, gross
     receipts, excise, tariff, franchise and business taxes, together with any
     penalties, fines, or interest thereon, imposed by any federal, state,
     province, local government, or any other taxing authority, but excluding
     any taxes based on 3PF net income and any taxes based on 3PF's use, lease
     or ownership of the Facility, including without limitation any property
     taxes.

6.6  Governing Law, Jurisdiction. If any fees or costs are incurred to enforce
     this Agreement, or if any suit or action is brought to enforce any
     provision of this Agreement, or for damages for the breach of any of the
     terms of this Agreement, the prevailing party shall be entitled to
     reasonable attorney fees and costs as awarded through the arbitration
     process. This Agreement shall be interpreted and enforced in accordance
     with the laws of the State of Oregon, without reference to provisions of
     conflicts of laws.

6.7  Confidentiality. Customer and 3PF each acknowledge the sensitivity and
     importance of information and documents exchanged or acquired pursuant to
     this Agreement. Customer's client's names, Stock, prices for Stock,
     ordering and shipping quantities, prices for packaging materials and
     freight, the details of this Agreement, and any other information which is
     marked "confidential" or "proprietary" or which would reasonably be
     understood to be confidential, whether written or oral, are the
     confidential information property of Customer. The details of this
     Agreement, 3PF's logistics, software, quotations, operations, costs,
     customer's names, price schedules, and all other related documents,
     information, and appendixes are confidential and owned by 3PF. Neither
     party shall disclose any of the other party's confidential information to
     any third party except such party's attorneys and accountants (subject to
     the confidentiality provisions of this Agreement) without first obtaining
     the prior express written authorization of the other party. Neither party
     shall use the name or trademarks of the other in any advertisement without
     first obtaining the prior express written permission of such party.
     Notwithstanding the above, however, upon the prior written approval of
     Customer in each instance, 3PF may use Customer's name for the purpose of
     advertising the services, which 3PF renders to its customers, and upon the
     prior

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     written approval of 3PF in each instance, Customer may use 3PF's name in
     representing its services. This provision will remain in force for one year
     following the expiration or termination of this agreement.

6.8  Non-Solicitation: Customer and 3PF agree that during the term of this
     Agreement and for a period of two years after its termination, neither
     party nor its Representatives will hire, employ or solicit for employment,
     directly or indirectly, any employees of the other party without the prior
     written consent of the other party, which consent may be withheld in its
     sole discretion. For purposes of this Section 6, employees shall include
     all employees of 3PF or Customer as of the date of this Agreement and all
     new employees of 3PF and Customer that become employees after the date
     hereof up until the expiration of the no solicitation period provided for
     in this Section 6.

6.9  Entire Agreement. This Agreement and its appendices and exhibits contains
     the entire agreement and understanding of the parties as to the subject
     matter herein, and supersedes all other prior agreements, understandings
     and arrangements, written or oral, between the parties relating to the
     subject matter hereof.

6.10 Counterparts. This Agreement may be executed in one or more counterparts,
     each of which shall be deemed an original, but all of which together shall
     constitute but one and the same instrument.

6.11 Binding Arbitration. In the event a dispute or claim arises between the
     parties hereto concerning this Agreement the parties agree to submit such
     disputes and/or claims to binding arbitration pursuant to the commercial
     arbitration rules of the American Arbitration Association ("AAA"). Either
     party may make a demand for arbitration. If either party demands such
     arbitration, arbitration shall be conducted in Portland, Oregon, before a
     single arbitrator jointly selected by the parties hereto. If the parties
     are unable to agree on an arbitrator within thirty (30) days after the
     arbitration demand is field, the AAA shall select the arbitrator. The
     arbitration filing fee, if any, and fees of the arbitrator shall initially
     be shared equally between the parties, provided, however, that the
     prevailing party shall be reimbursed for these costs by the non-prevailing
     party at the conclusion of the arbitration proceeding. Each side shall bear
     their own legal fees and costs and any other fees associated with
     participating in the arbitration process.

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6.12 Exclusive Use: For the duration of this Agreement, Customer agrees that it
     shall exclusively use 3PF as its primary third-party fulfillment shipper.
     This does not apply to the Customer's drop shipments by third party or to
     shipping arrangements which may be necessary to support volumes in excess
     of the capacity of the Facility. For the duration of this Agreement,
     Customer shall have exclusive use of the Facility and 3PF shall not use the
     Facility in connection with providing services to any third party or allow
     any third party to use the Facility.

6.13 Representation of Continuation of Services: 3PF agrees and represents that
     for the term of this Agreement, it shall not cease doing business as a
     third-party fulfillment company.

6.14 Independent Contractor: 3PF is an independent contractor and not an
     employee, partner or agent of Customer. Neither party shall have authority
     to commit or create any liability on the part of the other in any manner
     whatsoever. Personnel retained or assigned by 3PF to perform work under
     this Agreement shall at all times be considered employees, agents, or
     contractors of 3PF, and at no time employees of Customer, and 3PF shall be
     fully responsible for compensation, payroll taxes, workman's compensation
     coverage, and any other legal requirements associated with employment.

                                   SECTION VII
                                RIGHT OF REFUSAL

                                  SECTION VIII
              GUARANTEE AND OTHER REPRESENTATIONS AND OBLIGATIONS

8.1  Rentrak Guarantee. Rentrak hereby gurantees the performance by 3PF of 3PF's
     obligations hereunder, including without limitation 3PF's indemnification
     obligations. Rentrak's gurantee shall not exceed the obligations of 3PF
     under this agreement. Rentrak shall be responsible for 3PF's obligations in
     the event that 3PF is unable to perform its obligations hereunder.
     Customer, in its sole discretion, shall have the right to bring action
     against Rentrak or 3PF, or both entities, in the event that 3PF breaches
     any of its obligations hereunder, including without limitation 3PF's
     failure to perform any of its indemnification obligations hereunder.

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8.2  Customer Payment: Should this agreement terminate prior to July 31, 2003,
     Customer agrees to pay 3PF a monthly sum equal to the actual monthly base
     rent paid by 3PF to its landlord, plus all CAMS, taxes, utilities, and
     insurance applicable specifically to the Facility and paid by 3PF. In the
     event of early termination, 3PF and Rentrak agree to make a good faith
     effort to re-lease/reuse the space vacated by Customer. Should this space
     be re-leased or used for other purposes by 3PF prior to July 31, 2003,
     Customer's monthly payment to 3PF shall be reduced on a pro-rated basis for
     the portion of space which has been re-leased.

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Witness the execution of this agreement, this 14th day of December, 2001.

3PF,INC., A SUBSIDIARY OF RENTRAK              REDENVELOPE, INC.

By: /s/ Edward Barnick                            By: /s/ Martin McClanan
    -------------------                            -----------------------
DATE: 12/18/01                                 DATE: December 14, 2001

      Edward Barnick                                 Martin McClanan
      Executive Vice President                       Chief Executive Officer

With respect to Section VIII only:

RENTRAK CORPORATION

BY: /s/ Mark Thoenes
    ----------------

DATE: 12/19/01

      Mark Thoenes
      Chief Financial Officer, Rentrak Corporation

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                                  SCHEDULE 1.1
                                       TO
                 SERVICING, WAREHOUSING & DISTRIBUTION AGREEMENT

Fulfillment Services shall include the Facility and services listed below:

RATE FOR FACILITY CHARGE: $[*] PER MONTH.

Located at 3300 S.R. 73 South, Building 5, Wilmington, Ohio 45177, and
hereinafter referred to as the "Facility". The warehouse Facility space is
approximately 102,400 square feet of floor space which includes office space of
approx. 3,400 sq. ft. 3PF services shall include payment of all common area
maintenance charges, real estate taxes, HVAC, electrical, plumbing, water,
security, insurance, janitorial and trash removal.

NATURE OF STOCK: GIFT MERCHANDISE, NOTIONS, AND NOVELTIES

SYSTEMS REQUIREMENTS: VIA THE CUSTOMER PROVIDED AND MAINTAINED MACS SYSTEM.

MANAGEMENT: MANAGEMENT FEE: $[*] PER MONTH

          3PF will provide a dedicated management team, including but not
          limited to five (5) "key" personnel, or their equivalently trained and
          competent replacement. This staff will be of a number adequate to
          professionally manage and supervise the warehousing operations of
          Customer.

          The management team's objective is to provide management, direction,
          support, and expertise in the areas of receiving, pick, pack,
          manifesting, inventory management, returns processing, transportation,
          logistics, and various duties relating to the physical fulfilment and
          distribution of Customer's stock.

          The 3PF management team will take direct operational instructions from
          a Customer representative. The 3PF management team will continue to
          have a reporting structure to 3PF in order to assure compliance with
          3PF employee policies and guidelines.

          The 3PF management team, may from time to time offer recommendations
          to Customer which may

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* Material has been omitted pursuant
to a request for confidential treatment.
<PAGE>

          recommend proposed efficiencies and cost reduction programs with the
          purpose of reducing the overall expenses to Customer and/or enhancing
          productivity.

          If in the event Customer requires additional dedicated management to
          be added to the 3PF management team, 3PF agrees to increase the
          additional management to Customer's account within thirty (30) days of
          the request. 3PF may increase the "Management Charge" for additional
          management at the fully burdened cost to 3PF, plus [*] percent
          ([*]%). Conversely, should Customer request that 3PF decrease the
          dedicated management servicing the account, 3PF will reduce the
          "Management Fee" by the same fully burdened cost sixty (60) days
          following the reduction in staffing. Customer may also, at its
          discretion, supplement the management team at the facility with staff
          who are directly employed by Customer and such action will not result
          in a change in the monthly management fee.

          It is understood and agreed that Customer shall commence immediately
          to replace two (2) of the five (5) dedicated "key" 3PF management
          personnel with Customer's employees. These employees shall be based at
          the Facility and take daily direction from 3PF's senior manager
          assigned to Customer's account. Customer may consider existing 3PF
          employees for these positions only with 3PF's consent. It is further
          understood that upon placement of Customer's employees in the
          facility, a reduction in the monthly management fee will occur in
          accordance with the guidelines stated in the preceding paragraph
          excepting should Customer hire a 3PF employee the sixty (60) day
          notice period shall be waived.

PICK, PACK, AND MANIFEST CHARGE: $[*] PER ORDER, PLUS $[*] PER ITEM AFTER ONE
UNIT.

          The pick, pack and manifest charge will be at the per order rate of
          $[*] per order and will include the order selection of one item. A
          per unit charge in the amount of $[*] per unit will apply to units
          beyond one unit on an order.

          3PF will be responsible for performing the order selection of
          specifically identified items, ordered by Customer's customer. 3PF
          labor will perform the electronic and visual confirmation of the
          selected items into an over-wrap shipping container (when appropriate)
          and secure those items ordered using the necessary packing materials
          suitable for transportation and within carrier specifications. 3PF
          will print all customer order documents including the gift card and
          accurately match the order documents to an order. 3PF labor will
          accurately label and electronically manifest the finished, packed
          carton(s), include any designated inserts, and tender them to the
          appropriate/designated carrier.

RECEIVING CHARGE:                      $[*] PER MONTH

          The "Receiving Charge" is based on the labor responsible to perform
          the physical receipt of goods, the confirmation of quantities
          delivered versus the quantities ordered, palletizing (when needed) and

   Printed 12/14/2001 11:57 AM                Initials (3PF) /s/ [ILLEGIBLE]

                                          Initials (Rentrak) /s/ [ILLEGIBLE]

                                      Initials (RedEnvelope) /s/ [ILLEGIBLE]

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<PAGE>

          physical "put-away"/stocking to a proper warehouse location. In
          addition, 3PF will perform random visual inspections of not less that
          ten percent (10%) of goods delivered. The purpose of inspecting items
          received is to validate vendor compliance to Customer's quality and
          standards of goods ordered. Customer and 3PF will jointly develop the
          written criteria, guidelines and instructions to be followed by 3PF
          staff for receiving processing and inspection. 3PF shall work to
          receive and put away all goods in a timely manner.

          The "Receiving Charge" is limited to receiving into the primary
          facility identified in this Agreement. Should additional space be
          occupied by Customer requiring receiving into a separate physical
          facility, an additional receiving charge will be negotiated.

RETURNS PROCESSING CHARGE:            $[*] PER RETURN AUTHORIZATION, PLUS $[*]
                                      PER ITEM.

          3PF labor will physically receive and visually inspect all items
          returned to 3PF. 3PF labor will identify and/or determine the reason
          for return using criteria and/or per Customer's request. 3PF labor
          will perform any and all duties relating to the processing of returned
          goods including (but not limited to) data entry into customers MACS
          system. 3PF labor will physically stock and "put-away" inventory into
          a properly identified shelf location. 3PF will process all returns
          within [*] business days of receipt of goods at 3PF's facility during
          the months of February 1st through November 16th During the time
          period from November 19th through January 31st, 3PF will make every
          reasonable effort to process customer returns with [*] business days
          from date of receipt but no later than [*] calendar days. Returns will
          be sent to 3PF on a freight pre-paid basis.

GIFT WRAPPING OR GIFT BOXING CHARGE:  $[*] PER FINISHED ITEM

          3PF labor will perform the physical gift wrapping or gift boxing of
          those items identified per the order request as requiring gift wrap or
          gift boxing. Such orders will include a hand tied ribbon, gift card,
          tissue wrapping, and portfolio insert in compliance with Customer's
          gift boxing/gift wrapping standards.

ENGRAVING AND PERSONALIZATION CHARGE: PER ITEM CHARGE TBD

          3PF and Customer agree to determine a per item charge for engraving
          based upon a time and motion study to determine the number of items
          which can be engraved in an hour and the hourly rate of $[*] per
          hour. In the event that engraving and personalization service is
          provided to Customer prior to the establishment of a per item rate,
          3PF may invoice Customer at the rate of $[*] per hour for work
          performed in the engraving area in performing engraving tasks.

   Printed 12/14/2001 11:57 AM                Initials (3PF) /s/ [ILLEGIBLE]

                                          Initials (Rentrak) /s/ [ILLEGIBLE]

                                      Initials (RedEnvelope) /s/ [ILLEGIBLE]

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<PAGE>

 SUPPLIES CHARGE: ONE TIME CHARGE

          Customer will order shipping supplies which will be received and
          stored in the facility. 3PF's management team and labor will work with
          Customer to support any inventory processes implemented by Customer to
          track and manage supplies inventory. The following additional
          stipulations apply:

               -    Customer agrees to purchase its supplies through the vendor
                    "xpedx" using their Portland, OR sales office as the primary
                    point of contact.

               -    Customer may from time-to-time request competitive bids for
                    shipping supplies from other suppliers, in the event that
                    Customer is able to obtain more favorable pricing from a
                    vendor other than xpedx, Customer shall allow xpedx to meet
                    the price obtained by Customer. Should xpedx be unable or
                    unwilling to meet the price obtained by Customer, Customer
                    shall be free from its obligation to purchase supplies from
                    xpedx.

               -    3PF shall conduct an inventory of all shipping supplies
                    currently on hand for use in the Customer account which are
                    usable and applicable to Customer's business and combine
                    this with a reasonable estimate of supplies consumed in
                    service of Customer since October 1, 2001. 3PF shall present
                    a one-time invoice to Customer for supplies on-hand plus
                    supplies consumed. This invoice will price these supplies at
                    the actual original price paid by 3PF for the supplies.

 CREDIT TERMS:

          Within ten (10) days of the commencement of this Agreement, Customer
          shall issue through its bank, and have delivered to 3PF an original,
          Letter of Credit (LOC) for the benefit of and in a form acceptable to
          3PF in the amount of $[*] as security for payments due under the terms
          of this Agreement. 3PF may terminate this Agreement should Customer
          not deliver such LOC within ten (10) business days. To be deemed
          acceptable to 3PF, the LOC shall include the following covenants: a)
          the LOC shall be non-revocable during the term of the Agreement
          without 3PF's written permission which would be granted at 3PF's sole
          discretion, and; b) the LOC shall have a term equal to the term of
          this Agreement.Immediately upon receipt of written notification to 3PF
          confirming the execution of the LOC, 3PF will provide written
          notification to Customer acknowledging termination of the "Prior
          Agreement" entered into and dated September 29, 1999, including all of
          its amendments and extensions, for distribution and fulfillment
          services.

          The Customer shall also remit by wire transfer to 3PF, in a bank
          account designated by 3PF, during the peak season (Thanksgiving Day
          through December 31st) and in any other month during the calendar year
          in which Customer and 3PF agree that the value of 3PF's services
          (including freight) to Customer are anticipated to exceed $[*] for
          that month, estimated weekly payments in advance for services
          (including freight) to be provided by 3PF to Customer.

   Printed 12/14/2001 11:57 AM                Initials (3PF) /s/ [ILLEGIBLE]

                                          Initials (Rentrak) /s/ [ILLEGIBLE]

                                      Initials (RedEnvelope) /s/ MWM

                                - Page 19 of 21 -

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<PAGE>

          The failure of the Customer to remit estimated advanced weekly
          payments during the peak season or any month in which the value of
          services (including freight) to be provided by 3PF to Customer are
          anticipated to exceed $[*] shall permit 3PF to terminate this
          Agreement. Should the Bank reduce the amount of their letter of credit
          to 3PF on behalf of Customer for any reason, without written consent
          of 3PF, then 3PF shall be permitted to terminate this Agreement.

SPECIAL PROJECTS AND /OR HOURLY LABOR CHARGES:

          Normal hours:
          Includes: Monday through Friday Operation during normal operating
          hours (8 a.m. - 2 a.m.), Receiving (8 a.m. - 3 p.m.), Verification,
          Quality Control Stocking, Stocking, Order Picking (8 a.m. - 12 a.m.),
          Order Packing, Shipment Manifesting and Processing, Electronic
          Transfer Of Shipment Confirmation, order Tracking, Claims Processing
          with Carriers, Nightly 50 SKU Inventory.

          Straight time: $[*] per labor hour
          Overtime: (outside of normal operating hours): $[*] per labor hour
          Holiday time: $[*] per labor hour

          3PF Holiday Schedule:
              New Year's Eve             New Year's Day
              Memorial Day (observed)    Independence Day (Observed)
              Labor Day (Observed)       Thanksgiving Day
              Friday after Thanksgiving  Christmas Eve
              Christmas Day

          3PF may be requested to perform duties and functions from time to time
          that are outside the scope and pricing of the proposed schedule. In
          order to assure Customer that there will be no interruption of
          services, 3PF has provided a per labor charge that will apply to these
          instances. 3PF shall not incur such charges without the prior written
          approval of Customer.

CARRIERS & RATES:

          USPS: Published Rates
          UPS: Ground
              Published Residential Rates - as published
              Published Commercial Rates - [*]% discount
              Published Domestic 2-3 Day Rates - [*]% discount
          Airborne (next day and second day air): See attached rate sheet
          DHL(International): See enclosed rate sheet

   Printed 12/14/2001 11:57 AM                Initials (3PF) /s/ [ILLEGIBLE]

                                          Initials (Rentrak) /s/ [ILLEGIBLE]

                                      Initials (RedEnvelope) /s/ [ILLEGIBLE]

                               - Page 20 of 21 -

* Material has been omitted pursuant
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<PAGE>
          The Airborne rates will be per the attached rate schedule. It is
          understood that a new Airborne agreement rate schedule is under
          negotiation between 3PF and Airborne Express. It is also understood
          that a new rate schedule may result in an increase in Airborne rates.
          Should 3PF receive from Airborne Express a new rate schedule(s), 3PF
          will be permitted to replace the attached schedule and charge Customer
          per the revised base rates. 3PF guarantees Customer that the new base
          rates offered to Customer will be charged at a rate not to exceed
          those rates offered by 3PF to Rentrak by [*]% and will be no less
          favorable than rates offered to any other customer receiving
          fulfillment services from 3PF of comparable carton volume.

          "Base rate" is defined as the rate as noted on the 3PF provided
          schedule and excludes any fuel surcharge(s), beyond charge(s),
          residential surcharge(s), Saturday delivery charge(s), dimensional
          charge(s) or hazardous material charge(s) which may be assessed to 3PF
          by the carrier. 3PF agrees that any charge(s) excluding the base
          charge will be charged to Customer, at the actual charge to 3PF from
          the carrier with no additional mark up. Customer also agrees not to
          solicit from any carrier, rates and/or services from any air, ground
          or LTL transportation carrier during the term of this Agreement
          without sixty (60) days prior written notice to 3PF.

INVOICE TERMS:  All charges due net thirty (30) days from date of invoice.

ATTACHMENTS:

          Current Airborne rate schedule
          DHL rate schedule

   Printed 12/14/2001 11:57 AM                Initials (3PF) /s/ [ILLEGIBLE]

                                          Initials (Rentrak) /s/ [ILLEGIBLE]

                                      Initials (RedEnvelope) /s/ [ILLEGIBLE]

                                - Page 21 of 21 -

* Material has been omitted pursuant
to a request for confidential treatment.

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