Document:

<PAGE>

                                                                   EXHIBIT 10.11

                               SUBLEASE AGREEMENT

                                    BETWEEN

                                 3PF.COM, INC.,
                                 AS SUBLESSOR,

                                      AND

                               RED ENVELOPE, INC.
                                  AS SUBLESSEE

                              DATED: JUNE 18, 2002

                  PROPERTY LOCATED IN: VILLAGE OF OBETZ, OHIO

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                   Page
                                                                                   ----
<S>                                                                                <C>
EXHIBITS:

         EXHIBIT A--SITE PLAN OF PREMISES

         EXHIBIT B--ILLUSTRATIVE EXAMPLES OF OPERATING EXPENSES

         EXHIBIT C--CREEKSIDE RULES AND REGULATIONS

         EXHIBIT D--PRELIMINARY SPECIFICATIONS FOR LEASEHOLD IMPROVEMENTS

         EXHIBIT E--"TAXES" SECTION FROM MASTER LEASE

         EXHIBIT F--"CASUALTY" SECTION FROM MASTER LEASE

         EXHIBIT G--"TAX ABATEMENT" REAL & PERSONAL PROPERTY TAX ABATEMENT
                     DOCUMENTATION
</TABLE>

                                        i

<PAGE>

Revised 6/14/02

                  THIS SUBLEASE is made as of June 18, 2002, between 3PF.COM,
INC., a Delaware corporation having an address at 3300 State Route 73, South
Building 5, Wilmington, Ohio 45177 ("Sublessor"), and RED ENVELOPE, INC., a
Delaware corporation having an address at 201 Spear Street, 3rd Floor, San
Francisco, California 94105 ("Sublessee").

                                    RECITALS:

                  A.       Pursuant to Lease, dated August 16, 2000, between
Creekside III LLC and Sublessor, as amended by First Amendment to Lease, dated
March 30, 2001 (as amended, the "Master Lease"), Sublessor leases a building of
approximately 388,264 square feet (the "Building"), situated on the
approximately 18 acre parcel of land located in the Creekside Industrial Center
in the Village of Obetz, Ohio, depicted on EXHIBIT A hereto (the "Entire
Premises"). The entity from time to time holding the Landlord's interest under
the Master Lease is referred to as "Master Lessor".

                  B.       Sublessee desires to sublease from Sublessor and
Sublessor desires to sublease to Sublessee a portion of the Building upon the
terms and conditions hereinafter set forth.

                  NOW, THEREFORE, in consideration of the premises, the rents
reserved herein and the mutual benefits to be derived by Sublessor and
Sublessee, the parties agree as follows:

                  1.       SUBLEASE TERM.

                           (a)      PRIMARY TERM. Sublessor hereby subleases and
demises to Sublessee and Sublessee hereby subleases and takes from Sublessor the
portion of the Building depicted on EXHIBIT A as "Red Envelope" comprising
approximately 194,000 square feet (the "Demised Premises") for an initial term
(the "Primary Term") commencing on the date that all of the following conditions
have been satisfied (the "Term Commencement Date"): (i) Sublessor tenders
possession of the Demised Premises to Sublessee, with the Leasehold Improvements
(as hereinafter defined) substantially completed (as evidenced by the issuance
of any required certificate of occupancy or similar certificate with respect to
the Leasehold Improvements by the Village of Obetz), (ii) all equipment leased
by Sublessee pursuant to the Equipment Lease Agreement of even date herewith,
between Sublessor and Sublessee (the "Equipment Lease"), has been installed in
the Demised Premises and is fully operational and in good working order, (iii)
Sublessor has obtained from the Village of Obetz tax abatement agreements
substantially on the terms provided in EXHIBIT G , attached hereto, with respect
to the abatement of real property taxes, personal property taxes and inventory
taxes, (iv) Sublessor has transferred to the Demised Premises a sufficient
amount of Sublessee's stock located at Sublessee's Wilmington Ohio facility to
enable Sublessee to operate its business at the Demised Premises for a period of
at least thirty (30) days, and (v) Master Lessor has consented to this Sublease
in accordance with Section 32. The Primary Term shall expire on July 31, 2006.
Subject to the terms of this Sublease, Sublessee agrees to accept possession of
the Demised Premises when tendered by Sublessor. The targeted Term Commencement
Date shall be August 1, 2002. Sublessor shall give Sublessee at least fifteen
(15) days' prior written notice of the Term Commencement Date. Prior to the Term
Commencement Date, Sublessee may enter the Demised Premises for the

<PAGE>

purposes of preparing the Demised Premises for Sublessee's occupancy. Such early
entry shall not trigger the Term Commencement Date and Sublessee shall not be
required to pay any rent with respect to such early entry period.

                           (b)      EXTENDED TERMS. Provided this Sublease is
in full force and effect and there shall have been no Event of Default
(hereinafter defined) then continuing at the time of the exercise of the option,
Sublessee shall have two (2) successive options to extend the term of the
Sublease beyond the Primary Term. The first option shall extend the Primary Term
for additional periods of one (1) year and the second option shall extend the
Primary Term for a period of eight (8) months (each an "Extended Term"). Each
such Extended Term shall begin upon the expiration of the Primary Term or the
immediately preceding Extended Term, as the case may be. Each Extended Term
shall be on the same terms and conditions as the Primary Term. Sublessee may
exercise the aforesaid options only by giving notice to Sublessor not less than
one hundred eighty (180) days but not more than twelve (12) months prior to the
expiration of the Primary Term or the immediately preceding Extended Term, as
the case may be. Sublessee acknowledges that time is of the essence for the
exercise of such options. The Primary Term and the Extended Terms (to the extent
exercised by Sublessee) shall be collectively referred to as the "Sublease
Term".

                  2.       RENT.

                           (a)      BASE RENT. Commencing on the Term
Commencement Date and continuing throughout the Sublease Term, Sublessee shall
pay annual "Base Rent" to Sublessor, in equal monthly installments, in advance,
on the first day of each month of the Sublease Term, in accordance with the
following schedule:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                ANNUAL BASE RENT PER
      SUBLEASE YEAR                  SQUARE FOOT             ANNUAL BASE RENT
--------------------------------------------------------------------------------
<S>                             <C>                          <C>
Term Commencement Date
through March 31, 2003               $   2.90
--------------------------------------------------------------------------------
April 1, 2003 through July 31,
2003                                 $   3.25                   $ 585,240
--------------------------------------------------------------------------------
August 1, 2003 through July 31,
2004                                 $   3.25                   $ 630,500
--------------------------------------------------------------------------------
August 1, 2004 through July 31,
2005                                 $   3.25                   $ 630,500
--------------------------------------------------------------------------------
August 1, 2005 through March 31,
2006                                 $   3.25                   $ 643,440
--------------------------------------------------------------------------------
</TABLE>

                                       2

<PAGE>

<TABLE>
<S>                                 <C>                         <C>
April 1, 2006 through July 31,
2006                                $   3.45
--------------------------------------------------------------------------------
August 1, 2006 through July 31,
2007 (First Extended Term)          $   3.45                    $ 669,300
--------------------------------------------------------------------------------
August 1, 2007 through March 31,
2008 (Second Extended Term)         $   3.45                    $ 669,300
--------------------------------------------------------------------------------
</TABLE>

                  Annual Base Rent for the first year ending July 31, 2003 shall
be prorated based on the Term Commencement Date and, if the Term Commencement
Date is not the first day of a month, Base Rent for such month shall be prorated
per diem and be paid by Sublessee on the Rent Commencement Date. Annual Base
Rent for the second Extended Term shall be prorated based on the eight (8) month
term.

                           (b)      ADDITIONAL CHARGES; LATE PAYMENT. Sublessee
shall pay Base Rent and all other sums due under this Sublease and perform all
obligations under this Sublease at its cost and when due or required without
prior notice or demand, and without any rights of reduction, counterclaim or
offset. Sublessee shall pay Base Rent to Sublessor's address set forth herein or
at such other address or to such other person as Sublessor may from time to time
designate. All amounts payable by Sublessee under this Sublease (other than Base
Rent and current damages under Section 18(f)), and all interest and costs added
for non- or late payment, shall constitute "Additional Charges" under this
Sublease. If Sublessee fails to pay any Additional Charge, Sublessor shall have
all the rights and remedies with respect thereto as are provided herein or at
law or equity for non- or late payment of Base Rent. If Base Rent or any
Additional Charge is not received by Sublessor by its due date, then a late
payment charge of 5% of such past due amount will be immediately due and payable
from Sublessee.

                  3.       OPERATING EXPENSE PAYMENT. Sublessee will pay its
Proportionate Share of all Operating Expenses incurred by Sublessor during the
Sublease Term in connection with the operation, management, maintenance and
repair of the Land and the Building. Illustrative examples of those expenses
which are included within, and excluded from, the definition of "Operating
Expenses" as set forth in the Master Lease are attached hereto as EXHIBIT B.
Sublessee's Proportionate Share is fifty percent (50%). Sublessee will pay its
Proportionate Share of such Operating Expenses, in advance, on the first day of
each month, based upon Master Lessor's and Sublessor's estimate of the actual
Operating Expenses which will be incurred during each calendar year during the
Sublease Term. The Estimated Operating Expense Payment for the first such
calendar year is $ 6,628.33 per month. The Estimated Operating Expense Payment
for each calendar year thereafter will be adjusted based upon Master Lessor's
and Sublessor's estimate of its Operating Expenses for such calendar year.
Sublessor will use its reasonable efforts to notify Sublessee by December 1 of
each year during the Sublease Term of any adjustment in the monthly Estimated
Operating Expense Payment for the upcoming calendar year.

                                       3

<PAGE>

                  As soon as reasonably practicable after the end of each
calendar year upon receipt from Master Lessor, Sublessor will deliver to
Sublessee a written statement showing the actual Operating Expenses for such
calendar year and Sublessee's actual Proportionate Share thereof. If the sum of
the Estimated Operating Expense Payments paid by Sublessee during such calendar
year exceeds Sublessee's Proportionate Share of the actual Operating Expenses
incurred during such year, then Sublessor will apply the excess toward the next
succeeding monthly Estimated Operating Expense Payment(s) due from Sublessee
(or, if the Sublease Term has expired or terminated otherwise than due to
default of Sublessee, Sublessor shall immediately refund such amount to
Sublessee, which obligation shall survive the expiration or earlier termination
of this Sublease). If the sum of the Estimated Operating Expense Payments paid
by Sublessee during such calendar year is less than Sublessee's Proportionate
Share of the actual Operating Expenses incurred during such year, then Sublessee
will pay the deficiency to Sublessor within ten days after Sublessee's receipt
of Sublessor's written demand for the payment thereof.

                  4.       USE.

                           (a)      Sublessee will use the Demised Premises
solely for general office and warehouse use which shall include management,
assembly, and product personalization (e.g. monogramming, embroidery, etc.)
services. Sublessee will not cause or permit any waste or damage to the Demised
Premises, the Building or the Land and will not occupy or use the Demised
Premises for any business or purpose which is unlawful, hazardous, unsanitary,
noxious or offensive or which unreasonably interferes with the business
operations of other tenants or occupants in the remainder of the Building
("Adjacent Premises"). If the nature of Sublessee's use or occupancy of the
Demised Premises causes any increase in Sublessor's insurance premiums over and
above those chargeable for the least hazardous type of occupancy legally
permitted in the Demised Premises, then Sublessee will pay the resulting
increase within ten days after its receipt of a statement from Sublessor setting
forth the amount thereof. Sublessee will comply with Master Lessor's Rules and
Regulations for Creekside as set forth in the Master Lease and attached hereto
as EXHIBIT C (and any reasonable modifications thereto which are consistent with
the provisions of this Sublease).

                           (b)      Sublessee shall, at its sole expense, comply
with all laws and other governmental requirements which are now or hereafter in
force pertaining to the Demised Premises and Sublessee's use and occupancy
thereof, including, without limitation, the Americans with Disabilities Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Air Act, the Hazardous Materials Transportation Act, the Resource Conservation
and Recovery Act and the Water Pollution Control Act (collectively herein called
the "Legal Requirements"). To the extent the Legal Requirements require
modifications of the Entire Premises, the cost thereof shall be shared pro rata
based on the then square footage of the Adjacent Premises and the Subleased
Premises.

                  5.       SIGNS. Sublessee, at its cost, with Sublessor's prior
written consent, which shall not be unreasonably withheld, and with the consent
of Master Lessor to the extent required under the Master Lease, may erect and
shall thereafter maintain in good order, condition and repair such signs upon
the exterior walls of the Demised Premises as it desires, provided the
installation of such signs shall not affect or damage the roof of the Demised
Premises, and shall otherwise comply with all Legal Requirements applicable
thereto.

                                       4

<PAGE>

                  6.       MAINTENANCE AND REPAIR. Sublessee will at its sole
expense maintain the Demised Premises in a first-class condition and order of
repair, reasonable wear and tear and damage by casualty excepted. Sublessee's
maintenance obligation will extend to and include the repair and replacement, if
necessary, of all structural and non-structural elements and mechanical systems
located within the Demised Premises. Any repairs or replacements made to the
Demised Premises by Sublessee pursuant to this Section 6 will be made in a
workmanlike manner with materials at least equal in quality and grade to those
originally contained within the Demised Premises.

                  7.       MASTER LESSOR OBLIGATIONS. Master Lessor under the
Master Lease is obligated to maintain, repair and, if necessary, replace, the
roof, roof membrane and exterior walls of the Building (including exterior
glass) and all common areas serving the Building (including, without limitation,
the parking lot, driveways and loading dock areas) in a first-class condition
and order of repair; provided, however, that Sublessee (and not Master Lessor)
will be required to maintain the same if the need therefore arises due to the
fault or negligence of Sublessee or its agents, employees, licensees or
invitees. Except as otherwise expressly provided in Section 8, Sublessor will
not at any time during the Sublease Term be required to make any improvements,
repairs, replacements or alterations to the Demised Premises and will not incur
any liability to Sublessee as a result of Master Lessor's failure to do so.

                  Notwithstanding the foregoing, Sublessor shall (I) use
reasonable efforts to cause Master Lessor to comply with its obligations as
Master Lessor under the Master Lease (but shall not be required to initiate a
lawsuit), and (ii) repair all damage caused by Sublessor or any of its agents,
employees, contractors or invitees acting outside the scope of the Servicing,
Warehousing & Distribution Agreement between Sublessor and Sublessee of even
date herewith ("Servicing Agreement"). If, after receipt of written request from
Sublessee, Sublessor shall fail or refuse to take action for the enforcement of
Sublessor's rights against Master Lessor with respect to the Demised Premises
("Action"), Sublessee shall have the right to take such Action in its own name,
at its sole expense, and for that purpose and only to such extent, all of the
rights of Sublessor as tenant under the Master Lease are hereby conferred upon
and assigned to Sublessee, and Sublessee shall be subrogated to such rights to
the extent that such rights shall apply to the Demised Premises. If any Action
against Master Lessor in Sublessee's name shall be barred by reason of lack of
privity, nonassignability or otherwise, Sublessee may take such Action in
Sublessor's name; provided, that Sublessee has obtained the prior written
consent of Sublessor, which consent shall not be unreasonably withheld or
delayed; and provided, further, that Sublessee shall indemnify, protect, defend
by counsel reasonably satisfactory to Sublessor and hold Sublessor harmless from
and against any and all claims, demands, actions, suits, proceedings,
liabilities, obligations, losses, damages, judgments, costs and expenses
(including, without limitation, reasonable attorneys' fees) which Sublessor may
incur or suffer by reason of such Action, except to the extent incurred or
suffered by reason of Sublessor's negligent acts or omissions. If a default by
Master Lessor under the terms of the Master Lease shall result in the excuse of
Sublessor from the performance of any of its obligations to be performed under
the Master Lease or result in any reduction or abatement in the base rent or
additional rent to be paid by Sublessor thereunder, then Sublessee shall be
excused from the performance of any corresponding obligation relating to the
Subleased Premises and/or shall be entitled to a corresponding reduction in or
abatement of the rent to be paid by Sublessee hereunder.

                                       5

<PAGE>

                  8.       ALTERATIONS.

                           (a)      BUILDING SEPARATION WORK. Sublessor shall,
at its cost, perform all work and obtain all labor and materials necessary to
divide the Demised Premises from the Adjacent Premises, including (i)
constructing and erecting a dividing wall separating the Demised Premises and
the Adjacent Premises, (ii) removing and relocating any existing interior walls
and improvements as necessary, (iii) splitting alarm systems (if any), gas,
electrical and other utility delivery systems for the Demised Premises from that
serving the Adjacent Premises, including installing separate utility meters for
the Demised Premises and the Adjacent Premises, and (iv) splitting the heating,
ventilating and air conditioning systems serving the Building so as to serve the
Adjacent Premises (under separate controls located in the Adjacent Premises) and
the Demised Premises (collectively, the "Building Separation Work").
Notwithstanding the foregoing, Sublessee acknowledges that the Adjacent Premises
are not currently occupied, and agrees that Sublessor shall not be required to
complete the Building Separation Work until such time as it subleases or
occupies the Adjacent Premises. Sublessor shall perform the Building Separation
Work in a manner that minimizes any interference with Sublessee's operations at
the Demised Premises.

                           (b)      LEASEHOLD IMPROVEMENTS. Attached to this
Sublease as EXHIBIT D are the preliminary specifications approved by Sublessee
for the improvements to be made to the Demised Premises ("Leasehold
Improvements"), which shall be subject to approval by the Master Lessor. Once
the Master Lessor has approved the preliminary specifications, Sublessor will
proceed with the preparation of the final architectural and engineering
drawings, plans and specifications for the improvements. Once those drawings,
plans and specifications are completed, Sublessor will deliver a full set
thereof to Sublessee for its review and approval. The approved final drawings,
plans and specifications ("Final Plans") are incorporated herein by this
reference.

                  Sublessor will cause the Improvements to be constructed in
accordance with the Final Plans. Sublessor will use its reasonable efforts to
substantially complete construction of the Improvements on or before the
targeted Term Commencement Date, subject to delays caused by the occurrence of
events beyond its reasonable control, including, without limitation, labor
troubles, inability to procure materials, restrictive governmental laws and
pronouncements, acts of God, unseasonable weather, Sublessee's failure to timely
respond to any matter submitted for its review and Sublessee's requested change
orders ("Delay Events"). Sublessee agrees that it will review and either approve
or specify its objections to any documents or drawings submitted to it for its
review and approval hereunder within five days after its receipt of the same. If
Sublessee fails to respond to any submission to it within five days after its
receipt of same, then it will be deemed to have approved the same for all the
purposes of this Sublease.

                  Notwithstanding anything to the contrary contained herein, if
Sublessor's inability to substantially complete the improvements on or before
the targeted Term Commencement Date is attributable substantially to
Sublessee-caused delays (including, without limitation, Sublessee's failure to
timely respond to any matter submitted for its review, or delays caused by
Sublessee's requested change orders), then the Term Commencement Date will
remain August 1, 2002, notwithstanding the fact that the Leasehold Improvements
are not yet substantially completed, and Sublessee will, from and after the Term
Commencement Date, have an

                                       6

<PAGE>

obligation to pay Base Rent, Estimated Operating Expense Payments and perform
all of its other obligations and duties set forth in this Sublease. If the Term
Commencement Date does not occur by September 30, 2002, and such delay is not
attributable substantially to Sublessee-caused delays, then, unless the parties
agree otherwise, the Term Commencement Date shall not occur until January 1,
2003.

                           (c)      ALTERATIONS. Except for "Minor Alterations"
(as that term is hereafter defined), Sublessee may not at any time prior to or
during the Sublease Term make any alterations, additions or improvements to the
Demised Premises without the prior written consent of Sublessor. For the
purposes of this Subsection (c), "Minor Alterations" will mean any alteration,
addition or improvement to the Demised Premises which costs less than $10,000,
and which does not alter the exterior aesthetics or structural integrity of the
Building. All improvement, alterations and additions made at one time in
connection with any one job will be aggregated for the purposes of determining
whether the $10,000 limit has been exceeded. Any alterations, addition or
improvement made to the Demised Premises in accordance with this Subsection (c)
will at all times remain the property of Sublessor. No consent shall be required
for the installation of any of Sublessee's furniture, removable trade fixtures
and equipment, and no such furniture, fixtures or equipment shall become the
property of Sublessor.

                           (d)      NO LIENS. Sublessee shall not permit and
shall indemnify and hold Sublessor and Master Lessor harmless from any
mechanics' or other lien or security interest to be filed against the Demised
Premises (or any part thereof) or Base Rent or other sum payable hereunder which
arises out of Sublessee's use, occupancy, construction, maintenance, repair or
rebuilding of the Demised Premises or for work or materials furnished to the
Demised Premises or to Sublessee, its assignees, sublessees, concessionaires, or
licensees on behalf of Sublessee request. Any such lien shall, at Sublessee's
expense, be discharged within thirty (30) days after Sublessee's receipt of
notice thereof. Notice is hereby given that Sublessor and Master Lessor will not
be liable for any labor, service or material furnished or to be furnished to
Sublessee, and that no mechanics or other liens for such labor, services or
materials shall attach to or affect the interest of Sublessor or Master Lessor
in and to the Demised Premises or any part thereof.

                  9.       ACCESS AND INSPECTION. Sublessor and Master Lessor,
and their respective agents, shall have access to the Demised Premises at all
reasonable times to examine and inspect and, during the last one hundred eighty
(180) days of the Sublease Term, to show the Demised Premises to prospective
assignees, subtenants, mortgagees and purchasers, provided such examination,
inspection or showing will not unreasonably interfere with Sublessee's use of
the Demised Premises.

                  10.      SUBLESSEE'S INSURANCE. Sublessee will at its sole
expense maintain in full force and effect at all times during the Sublease Term
with respect to the Demised Premises and common areas: (a) comprehensive public
liability insurance for personal injury and property damage with liability
limits of not less than $2,000,000 for injury to one person, $4,000,000 for
injury from one occurrence and $1,000,000 for property damage; and (b) extended
coverage insurance on all property stored or placed by Sublessee in or about the
Demised Premises in an amount equal to the full replacement value thereof. Each
insurance policy required to be maintained by Sublessee hereunder will name
Sublessor, Master Lessor and Master Lessor's mortgagee, if any, as additional
insureds and will specifically provide that such insurance policy

                                       7

<PAGE>

cannot be terminated without giving at least 30 days' prior written notice to
Sublessor, Master Lessor and Master Lessor's mortgagee, if any..

                  11.      INDEMNIFICATION. Sublessor and Master Lessor will not
be liable for an Sublessee will indemnify and hold Sublessor and Master Lessor
harmless from any liability or expense associated with any damage or injury to
any person or property (including any person or property of Sublessee or any one
claiming under Sublessee) which arises directly or indirectly in connection with
the Demised Premises or Sublessee's use or occupancy thereof or of the common
areas; provided, however, that Sublessee will not be obligated to indemnify
Sublessor and Master Lessor as to any uninsured liability or expense occasioned
by gross negligence of Sublessor or Master Lessor.

                  12.      UTILITIES AND OCCUPANCY COSTS. Sublessee shall
arrange to have the accounts for all utility services which are separately
metered to the Demised Premises placed in the name of Sublessee. If Sublessee
does not transfer such utility accounts and Sublessor is billed therefor and
pays the same, Sublessee covenants to reimburse Sublessor for one hundred
percent (100%) of the amount of such bills.

                  Commencing on the Term Commencement Date and continuing
throughout the Sublease Term, (a) for all utilities separately metered to the
Demised Premises, Sublessee shall pay directly to the utility provider all
charges for all utilities used on or furnished to the Demised Premises or
Sublessee, its assignees, sublessees, concessionaries or licensees, on or before
the date such utility charges become due or bear interest or penalties, and (b)
for all utilities not separately metered to the Demised Premises, Sublessee
shall, at Sublessor's election, either pay directly to the utility provider or
pay to Sublessor its proportionate share of all charges for utilities furnished
to the Building.

                  Sublessor and Sublessee agree that for so long as the Adjacent
Premises remain unoccupied, Sublessee shall pay 100% of the cost of the
utilities to the Building including, without limitation, electrical, gas, HVAC,
water, and telecommunication and data communication services. Sublessor shall
not be responsible for any loss or interruption of utility services, except to
the extent caused by Sublessor's gross negligence or willful misconduct, and
Sublessee hereby waives any right under any law now or hereafter existing to
withhold Base Rent or any other sum due under this Sublease.

                  Sublessee will also contract for its own security, janitorial
and trash removal services and will promptly pay all costs associated with such
services.

                  13.      TAXES.

                           (a)      As an Additional Charge, commencing on the
Term Commencement Date and continuing throughout the Sublease Term, Sublessee
shall reimburse Sublessor for the following (collectively, the "Impositions"):
(a) a Proportionate Share of all taxes, assessments and charges which shall be
the obligation of the "Tenant" under the portion of the Master Lease attached
hereto as EXHIBIT E; and (b) all taxes, assessments and charges levied upon or
measured by the Base Rent and Additional Charges payable under this Sublease and
a Proportionate Share of all taxes, assessments and charges levied upon or
measured by the rents

                                       8

<PAGE>

and charges payable under the Master Lease. Sublessee's reimbursement shall be
paid in monthly installments, in advance, on the first day of each month, in an
amount reasonably estimated by Sublessor to become due for the following year.
At the end of each such year, Sublessor shall furnish Sublessee with a statement
of the actual amount of Impositions for such year. If the total of the monthly
installments paid by Sublessee for such year is less than the actual amount due
from Sublessee for such year, Sublessee shall, within thirty (30) days of
receipt of the statement, pay to Sublessor the difference. If the total of the
monthly installments paid by Sublessee for such year exceeds the actual amount
due from Sublessee for such year, the excess shall be credited against
subsequent monthly installments of Impositions due from Sublessee or be refunded
to Sublessee upon request. All payments of Impositions shall be prorated for the
year encompassing the Term Commencement Date and for the year encompassing the
date on which this Sublease expires or terminates (for a reason other than
termination of the Sublease as a result of an Event of Default).

         Notwithstanding the foregoing, Sublessor and Sublessee acknowledge that
certain Tax Abatement Agreements in the form attached hereto as EXHIBIT G have
been or will be obtained from the Village of Obetz prior to the Term
Commencement Date. Sublessor agrees that it will cooperate with Sublessee and
use its reasonable efforts to maintain the Tax Abatement Agreements in full
force and effect and will assist Sublessee in obtaining any additional
abatements of taxes that become available from the local taxing authorities.
Each party will pay its own expenses in connection with obtaining and
maintaining the Tax Abatements.

                           (b)      Sublessor and Sublessee acknowledge that
Sublessor has also filed on behalf of Sublessee and application with the Village
of Obetz for an abatement of personal property and inventory taxes
(collectively, the "Personal Property Tax Abatement"). Sublessor shall use
commercially reasonable efforts to obtain the Personal Property Tax Abatement.
If, at any time during the Primary Term or the Extended Term(s) of this
Sublease, the personal property and/or inventory tax rate for the Village of
Obetz (or other applicable taxing jurisdiction for the Demised Premises) exceeds
the then existing personal property and/or inventory tax rate for the City of
Wilmington (or other applicable taxing jurisdiction for Sublessee's existing
Wilmington facility), Sublessor shall reimburse Sublessee for the difference
between (i) the personal property and inventory taxes that are due to the
Village of Obetz (or other applicable taxing jurisdiction for the Demised
Premises) with respect to Sublessee's fixtures, equipment, other personal
property and inventory for sale located at the Demised Premises (collectively,
"Sublessee's Personal Property and Inventory") less (ii) the amount of personal
property and inventory taxes that would be due with respect to Sublessee's
Personal Property and Inventory if such personal property and inventory taxes
were calculated using the personal property and inventory tax rate then in
effect for the corresponding tax period in the City of Wilmington (or other
applicable taxing jurisdiction for Sublessee's existing Wilmington facility).
Sublessor shall make such reimbursement within thirty (30) days after receipt of
written verification of the then applicable personal property and/or inventory
tax rates, a copy of the applicable tax bills and an invoice from Sublessee. If
any such reimbursement is not received by its due date, then a late payment
charge of 5% of such past due amount will be immediately due and payable from
Sublessor.

                                       9

<PAGE>

                  14.      ASSIGNMENT AND SUBLETTING. Sublessee shall not assign
this Sublease or further sublet all or any part of the Demised Premises without
the prior written consent of Sublessor, which consent shall not be unreasonably
withheld, and without the prior written consent of Master Lessor to the extent
required under the Master Lease. Unless otherwise agreed to by Sublessor,
Sublessor's consent to any such assignment or sublease will not relieve
Sublessee from its obligations under this Sublease.

                  Notwithstanding the foregoing paragraph, and subject to the
notification requirements and Master Lessor's right to terminate the Master
Lease as provided in the Modification to Section 12 of the Master Lease,
Sublessee may assign this Sublease or sublet the whole of the Demised Premises
to any parent, subsidiary or division of Sublessee or assign or transfer this
Sublease pursuant to a sale of all or substantially all of Sublessee's assets or
stock, in each case without obtaining the consent of Sublessor, so long as such
sublessee or assignee shall have a financial condition and tangible net worth
equal to or greater than that of Sublessee, and provided Sublessee shall remain
primarily liable under this Sublease. If sublessor consents to any sublease
(whether it be to any parent, subsidiary or division of Sublessee or to some
third party), Sublessee shall pay Sublessor, as additional rent, 50% of the
Sublease Premium (as hereinafter defined) derived from that sublease. "Sublease
Premium" shall mean all rent, additional rent, and/or other monies, property and
other consideration of every kind whatsoever received by Sublessee from the
subtenant for, or by reason of, the sub-sublease, less (i) Base Rent and
Sublessee's Proportionate Share of Operating Expenses allocable to the space
covered by such sublease (as reasonably determined by Sublessor), and (ii)
commissions or other reasonable subleasing costs paid by Sublessee to procure
the sublease, amortized over the term of the sublease. Sublessee shall pay the
Sublease Premium to Sublessor as and when Sublessee receives payment from such
subtenant.

                  15.      RIGHT OF FIRST REFUSAL. At any time that Sublessor
shall desire to sublease all or any portion of the Adjacent Premises, it shall
give written notice to Sublessee. Sublessee shall have a first right to include
all or a portion of the Adjacent Premises under this Sublease by giving written
notice to Sublessor of its election to do so not more than ten (10) business
days after its receipt of Sublessor's notice. Sublessee's failure timely to give
such notice shall be deemed a waiver of its right of first refusal hereunder. If
Sublessee shall elect to Sublease the Adjacent Premises, it shall be on the same
terms and conditions of this Sublease except that Base Rent and Sublessee's
Proportionate Share of Sublessor's Operating Expenses shall be increased
proportionately based on the square footage of the Adjacent Premises included in
this Sublease.

                  16.      CASUALTY.

                           (a)      If, during the Sublease Term, the Demised
Premises shall be partially or totally damaged or destroyed by fire or other
casualty, Sublessee shall immediately notify Sublessor and Master Lessor of the
existence and extent of such damage. If the Sublease is not terminated as
provided in paragraph (b) below, Master Lessor is obligated to repair the
Demised Premises as provided in EXHIBIT F, and Sublessor shall have no
liability to Sublessee with respect to such repairs. If the Demised Premises are
rendered untenantable in whole or in part as a result of a fire or other
casualty, then all rent accruing after the occurrence of any such fire or other
casualty and prior to the completion of the repair of the Demised Premises by

                                       10

<PAGE>

Master Lessor as provided in EXHIBIT F will be equitably and proportionately
abated to reflect the untenantable portion of the Demised Premises.
Notwithstanding the foregoing, Sublessee's rent will only be abated if and to
the extent Sublessor's rent under the Master Lease is abated as provided in
EXHIBIT F. Sublessor will not be liable to Sublessee for any inconvenience or
interruption to Sublessee's business occasioned by such fire or other casualty
or the concomitant repair of the Demised Premises.

                           (b)      If the Demised Premises are damaged by fire
or other casualty and such damage would give Sublessor as "Tenant" the right
under EXHIBIT F to terminate the Master Lease, Sublessee shall also have the
option to terminate this Sublease by giving written notice to Sublessor within
twenty (20) days after receipt from Sublessor of Master Lessor's notice of
intent to repair such damage. If Sublessee shall not respond within such 20-day
period, Sublessee shall be conclusively deemed to have waived the option to
terminate hereunder. If the Sublessor as "Tenant" would have the right under
EXHIBIT F to terminate the Master Lease following damage or destruction to the
Building, regardless whether or not the Demised Premises is damaged, Sublessor
shall also have the option to terminate this Sublease by giving written notice
to Sublessee within the time period provided in EXHIBIT F for termination notice
to Master Lessor. If Master Lessor elects to terminate pursuant to the terms of
the Master Lease set forth in EXHIBIT F, Sublessor shall give prompt notice
thereof to Sublessee and this Sublease shall terminate as of the same date as
the Master Lease terminates. If notice of termination is given by either party
or Master Lessor, this Sublease shall terminate on the same date as the Master
Lease would terminate if the option under EXHIBIT F were exercised by Sublessor
as "Tenant" thereunder.

                  17.      EMINENT DOMAIN. If all or any substantial portion of
the Demised Premises or the Building is taken by or under threat of condemnation
so as to render the Demised Premises wholly untenantable, then this Sublease
will automatically terminate as of the date of the vesting of title to such
property in the condemning authority. If such taking does not render the Demised
Premises wholly untenantable, then this Sublease will not terminate but will
continue in full force and effect in accordance with its terms, except that Base
Rent and Tenant's Proportionate Share will be adjusted to fairly reflect the
portion of the Demised Premises or the Building which was so taken. Sublessor
will not be liable to Sublessee for any inconvenience or interruption to
Sublessee's business occasioned by any such taking. Master Lessor will be
entitled to receive the entire award made by the condemning authority for any
such taking.

                  18.      SURRENDER OF DEMISED PREMISES. Upon the termination
of Sublessee's right of possession under this Sublease, Sublessee will
immediately surrender possession of the Demised Premises to Sublessor in good
repair and "broom clean" condition, reasonable wear and tear and fire and
casualty excepted. Sublessee will at the same time remove all of its movable
trade fixtures from the Demised Premises. Sublessee will promptly repair any
damage caused to the Demised Premises by the removal of any of such movable
trade fixtures.

                  19.      DEFAULT.

                           (a)      EVENTS OF DEFAULT. Any of the following
occurrences, acts or omissions shall constitute an "Event of Default" under this
Sublease: (i) Sublessee fails to pay any Base Rent, Additional Charge or any
other charge or sum under this Sublease within five (5)

                                       11

<PAGE>

days of Sublessee's receipt of notice from Sublessor; or (ii) Sublessee fails to
observe or perform any other provision of this Sublease within twenty (20) days
of Sublessee's receipt of notice from Sublessor or Master Lessor, whichever
occurs first (provided that if the failure cannot reasonably be cured within
such 20-day period, then such failure shall not be deemed an Event of Default if
Sublessee commences to cure within such 20-day period and proceeds diligently
and in good faith thereafter to cure such failure and does cure such failure
within a reasonable time); or (iii) Sublessee fails to pay when due Base Rent,
Additional Charge or any other charge or sum under this Sublease six (6) times
in any twelve (12) month period; or (iv) Sublessee files a petition in
bankruptcy or for reorganization, is adjudicated a bankrupt, becomes insolvent
or makes an assignment for the benefit of creditors; or (v) a receiver or
trustee is appointed for Sublessee or all or substantially all of Sublessee's
assets, or for the Demised Premises or Sublessee's estate therein; or (vi) an
"Event of Default" by Sublessee as "Lessee" under the Equipment Lease provided
that Sublessor shall at the time hold the Lessor's interest in the Equipment
Lease and there exists no uncured default on the part of Sublessor under the
Servicing Agreement.

                           (b)      NOTICE TO TERMINATE. If an Event of Default
shall have happened and be continuing, Sublessor shall have the right to
terminate this Sublease. Thereupon, the Sublease Term and the estate hereby
granted shall expire and terminate as fully and completely and with the same
effect as if such date were the date herein fixed for the expiration of the
Sublease Term, and all rights of Sublessee hereunder shall expire and terminate
(but Sublessee shall remain liable as hereinafter provided), unless before such
date all arrears in Base Rent, Additional Charges, and any other sums due
hereunder shall have been paid in full and all Events of Default at the time
existing under this Sublease shall have been fully remedied.

                           (c)      RIGHT TO RE-ENTER. If an Event of Default
shall have happened and be continuing, Sublessor shall have the right to
re-enter and repossess the Demised Premises by summary proceedings, ejectment or
in any other lawful manner Sublessor determines to be necessary or desirable and
shall have the right to remove all persons and property therefrom. Sublessor
shall be under no liability by reason of any such re-entry, repossession or
removal. No such re-entry or repossession of the Demised Premises shall be
construed as an election by Sublessor to terminate the Sublease Term unless a
notice of such intention is given to Sublessee pursuant to Section 18(b), or
unless such termination is decreed by a court of competent jurisdiction.

                           (d)      AUTHORITY TO RELET. At any time or from time
to time after the re-entry or repossession of the Demised Premises pursuant to
Section 18(c), Sublessor may (but shall be under no obligation to) relet the
Demised Premises for the account of Sublessee, in the name of Sublessee or
Sublessor or otherwise, without notice to Sublessee, for such term or terms and
on such conditions and for such uses as Sublessor, in its absolute discretion,
may determine. Sublessor may collect and receive any rents payable by reason of
such reletting. Sublessor shall not be liable for any failure to relet the
Demised Premises or for any failure to collect any rents due upon any such
reletting.

                           (e)      SUBLESSEE'S LIABILITY CONTINUES. No
expiration or termination of the Sublease Term pursuant to Section 18(b), or by
operation of law or otherwise, and no re-entry or repossession of the Demised
Premises pursuant to Section 18(c) or otherwise, and no

                                       12

<PAGE>

reletting of the Demised Premises pursuant to Section 18(d) or otherwise, shall
relieve Sublessee of its liabilities and obligations hereunder, all of which
shall survive such expiration, termination, re-entry, repossession or reletting.

                           (f)      CURRENT DAMAGES. In the event of any
expiration or termination of the Sublease Term or re-entry or repossession of
the Demised Premises by reason of the occurrence of an Event of Default,
Sublessee will pay to Sublessor all Base Rent, Additional Charges and other sums
required to be paid by Sublessee to and including the date of such expiration,
termination, re-entry or repossession; and thereafter Sublessee shall, until the
end of what would have been the Sublease Term in the absence of such expiration,
termination, re-entry or repossession, and whether or not the Demised Premises
shall have been relet, be liable to Sublessor for, and shall pay to Sublessor,
as liquidated and agreed current damages: (i) all Base Rent, Additional Charges
and other sums which would be payable under this Sublease by Sublessee in the
absence of such expiration, termination, re-entry or repossession, less (ii) the
net proceeds, if any, of any reletting effected for the account of Sublessee
pursuant to Section 18(d), after deducting from such proceeds all Sublessor's
expenses in connection with such reletting (including all repossession costs,
brokerage commissions, attorneys' fees and expenses, employees' expenses,
alteration costs and expenses of preparation for such reletting). Sublessee will
pay such current damages on the days on which Base Rent would be payable under
this Sublease in the absence of such expiration, termination, re-entry or
repossession, and Sublessor shall be entitled to recover the same from Sublessee
on each such day.

                           (g)      FINAL DAMAGES. At any time after any such
expiration or termination of the Sublease Term or re-entry or repossession of
the Demised Premises by reason of the occurrence of an Event of Default, whether
or not Sublessor shall have collected any current damages pursuant to Section
18(f), Sublessor shall be entitled to recover from Sublessee, and Sublessee will
pay to Sublessor on demand, as and for liquidated and agreed final damages for
Sublessee's default and in lieu of all current damages beyond the date of such
demand (it being agreed that it would be impracticable or extremely difficult to
fix the actual damages), an amount equal to: (i) all Base Rent, additional
Charges and other sums which would be payable under this Sublease from the date
of such demand (or, if it be earlier, the date to which Sublessee shall have
satisfied in full its obligations under Section 18(f) to pay current damages)
for what would be the then unexpired Sublease Term in the absence of such
expiration, termination, re-entry or repossession, discounted at the rate of
four percent (4%) per annum, less (ii) the then fair rental value of the Demised
Premises (including Base Rent, Additional Charges, and all other sums payable
under this Sublease), for the same period, discounted at the rate of four
percent (4%) per annum. If any law shall limit the amount of such liquidated
final damages to less than the amount above agreed upon, Sublessor shall be
entitled to the maximum amount allowable under such law.

                           (h)      ADDITIONAL REMEDIES; RIGHT TO CURE. In
addition to the remedies set forth herein and at law or equity, if Sublessee
shall fail to perform any obligation under this Sublease, then Sublessor may,
but shall not be obligated to, with twenty (20) days prior written notice to
Sublessee, and without waiving or releasing such obligation or the Event of
Default, undertake such obligation and do all necessary work and make all
necessary payments in connection therewith for the account of Sublessee, and may
enter the Demised Premises for such purpose. No such entry shall be deemed an
eviction of Sublessee. Sublessee shall on demand

                                       13

<PAGE>

pay to Sublessor within ten (10) days of receipt of a statement therefor, the
amount so paid by Sublessor (including, without limitation, attorneys' fees and
the reasonable cost of investigation), together with interest thereon at the
annual rate of four percent (4%) above the prime rate last announced in the Wall
Street Journal, or the highest rate permitted by law, whichever is less. If the
amount set forth on the statement and interest thereon is not paid within such
period, the amount of the statement, together with interest accrued, shall be an
Additional Charge hereunder and added to and be considered a part of the next
succeeding monthly Base Rent payment. If there shall occur an Event of Default
under this Sublease, Sublessee shall pay to Sublessor, on demand, all expenses
incurred by Sublessor as a result thereof, including, without limitation,
attorneys' fees.

                  20.      HOLDING OVER. If Sublessee remains in occupancy of
the Demised Premises beyond the expiration or termination of the Sublease Term,
it shall remain solely as a subtenant from month-to-month and all provisions of
this Sublease applicable to the Sublease Term shall remain in full force and
effect, except that Base Rent shall be equal to one hundred fifty percent (150%)
of the Base Rent due under the Master Lease for the Entire Premises during such
hold-over period. Nothing in this Section is intended or shall be construed to
permit Sublessee to remain in occupancy of the Demised Premises beyond the
expiration or termination of the Sublease Term or to waive any right or remedy
of Sublessor as a result thereof.

                  21.      GENERAL PROVISIONS REGARDING DEFAULT. No right or
remedy under this Sublease or at law or equity shall be exclusive of any other
right or remedy but shall be cumulative. Failure to insist upon strict
performance of any provision of this Sublease or to exercise any right or remedy
of this Sub-lease or at law or equity shall not constitute a waiver of any
future performance. Receipt by Sublessor of any Base Rent, Additional Charge or
other sum payable under this Sublease with knowledge of an Event of Default or
Sublessee's breach of this Sublease shall not constitute a waiver of such Event
of Default or breach. No waiver by either party of any provision of this
Sublease shall be deemed to have been made unless made in writing. Each party
shall be entitled to injunctive relief in the event of violation or threatened
violation of their material obligations hereunder beyond applicable cure
periods. Sublessee hereby waives and surrenders for itself and all those
claiming under it, including creditors of all kinds, any right and privilege
which it or any of them may have to redeem the Demised Premises or to have a
continuance of this Sublease after expiration or termination of Sublessee's
right of occupancy by order or judgment, any legal process or writ, or under the
terms of this Sublease.

                  22.      MORTGAGE SUBORDINATION. Upon request by Sublessor or
Master Lessor, Sublessee shall execute and deliver an agreement subordinating
this Sublease and Sublessee's interest in the Demised Premises to any mortgage
upon the Entire Premises (or part thereof) or to any mortgage of Sublessor's
leasehold interest under the Master Lease; provided that the holder of such
mortgage shall agree in writing not to disturb Sublessee's tenancy if there is
no Event of Default beyond applicable cure periods under this Sublease.

                  23.      ESTOPPEL CERTIFICATES. Sublessee shall, from time to
time, upon fifteen (15) days prior written request from Sublessor, cause to be
executed, acknowledged and delivered a certificate stating that this Sublease is
unmodified and in full effect (or, if there have been modifications, that this
Sublease is in full effect as modified and setting forth such modifications),
the amount of Base Rent, the dates to which Base Rent has been paid, and stating

                                       14

<PAGE>

that, to the knowledge of the signer of such certificate, either no default
exists under this Sublease or specifying each such default of which the signer
has knowledge.

                  24.      TITLE AND CONDITION.

                           (a)      The Demised Premises are subleased to
Sublessee in their present condition by Sublessor, without representation or
warranty, express or implied, subject and subordinate to all easements,
restrictions, agreements and recorded matters, all taxes not yet payable, and
all applicable zoning restrictions, regulations and ordinances and building
restrictions and governmental regulations now or hereafter in effect. Sublessee
acknowledges that the leasehold estate demised herein is derived from and
subject to the Master Lease. Sublessee has examined the title to the Demised
Premises and has found the same satisfactory.

                           (b)      BY EXECUTION OF THIS SUBLEASE, SUBLESSEE
ACKNOWLEDGES AND AGREES THAT IT HAS INSPECTED THE DEMISED PREMISES. SUBJECT TO
SECTION 25 BELOW, SUBLESSEE SHALL ACCEPT THE DEMISED PREMISES ON THE TERM
COMMENCEMENT DATE IN THEIR THEN "AS IS" AND "WHERE IS" PHYSICAL AND
ENVIRONMENTAL CONDITION AND HEREBY RELEASES AND DISCHARGES SUBLESSOR FROM ANY
CLAIM, DEMAND, LIABILITY OR SUIT RELATED TO OR ARISING FROM THE PHYSICAL OR
ENVIRONMENTAL CONDITION OF THE DEMISED PREMISES. SUBLESSEE ACKNOWLEDGES AND
AGREES THAT NEITHER SUBLESSOR NOR ITS AGENTS OR EMPLOYEES HAS MADE ANY EXPRESS
WARRANTY OR REPRESENTATION REGARDING THE PHYSICAL OR ENVIRONMENTAL CONDITION OF
THE DEMISED PREMISES, THE QUALITY OF MATERIAL OR WORKMANSHIP OF THE DEMISED
PREMISES, LATENT OR PATENT, OR THE FITNESS OF THE DEMISED PREMISES FOR ANY
PARTICULAR USE OR PURPOSE AND THAT NO SUCH REPRESENTATION OR WARRANTY SHALL BE
IMPLIED BY LAW, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY
SUBLESSEE.

                           (c)      Sublessee acknowledges that EXHIBIT A is an
approximation only of the Building and improvements on the Land and that no
representation or warranty, express or implied, is hereby made by Sublessor, its
employees or agents, regarding the existence, location or size of any buildings
or improvements or the location of the boundaries of the Land depicted on
EXHIBIT A.

                  25.      REPRESENTATIONS AND WARRANTIES. (a) Sublessee
represents and warrants to Sublessor that: (i) Sublessee is a corporation, duly
organized, validly existing and in good standing under the laws of Delaware and
has the power to own its property and assets and carry on its business in Ohio;
(ii) the execution of this Sublease constitutes the binding obligation of
Sublessee and has been authorized by Sublessee's Board of Directors; and (iii)
the sublease of the Demised Premises will not conflict with or result in a
breach of Sublessee's Articles of Incorporation or By-laws or any agreement to
which Sublessee is a party or by which it may be bound, or violate any state or
federal governmental law, statute, ordinance or regulation.

                           (b)      Sublessor represents and warrants to
Sublessee that: (i) to its knowledge, the Master Lease is in full force and
effect and neither Master Lessor nor Sublessor

                                       15

<PAGE>

is in default thereunder; (ii) Sublessor knows of no claims or defenses or
circumstances which, with the passage of time, would lead to claims or defenses
by Master Lessor against Sublessor as tenant under the Master Lease; (iii) this
Sublease, if consented to by Master Lessor as provided for herein, does not
violate any provision of the Master Lease; and (iv) the Subleased Premises
(including the Leasehold Improvements) and building systems which Sublessor is
required to maintain and repair under the Master Lease are in good working order
and condition as of the Term Commencement Date and are in compliance with all
existing laws, ordinances, rules or regulations relating thereto which would
materially affect Sublessee's use or occupancy of the Subleased Premises.

                  26.      NOTICES, DEMANDS AND OTHER INSTRUMENTS. All notices,
demands or other communications given pursuant to this Sublease shall be in
writing and shall be deemed given on the date received if mailed by nationally
recognized overnight courier or three (3) days after the date mailed if mailed
by registered or certified mail, return receipt requested, with postage prepaid
if: (a) when mailed to Sublessor, it is addressed to Sublessor at its address
set forth above, and (b) when mailed to Sublessee, it is addressed to Sublessee
at its address set forth above. The parties may specify any other address in the
United States with fifteen (15) days' notice.

                  27.      SEPARABILITY. If any provision of this Sublease or
its application to any person or circumstance shall be declared invalid or
unenforceable, the remaining provisions of this Sublease, or the application of
such provision to persons or circumstances other than those to which it is
invalid or unenforceable, shall not be affected thereby and each provision shall
be valid and enforceable to the extent permitted by law.

                  28.      BINDING EFFECT. Subject to the terms and restrictions
of Section 13 and this Section, all provisions contained in this Sublease shall
be binding upon, inure to the benefit of, and be enforceable by, the respective
successors and assigns of Sublessor and Sublessee. The covenants and obligations
of Sublessor under this Sublease shall not be binding upon the Sublessor herein
named or any subsequent sublessor with respect to any period subsequent to the
transfer of all its interests in the Demised Premises, and, in the event of any
such transfer, Sublessee agrees to look solely to the transferee for the
performance of any term, covenant, obligation, warranty or representation of
Sublessor hereunder, but only with respect to the period beginning with such
transfer and ending with a subsequent transfer of such interest. If Sublessor
terminates the Master Lease and assigns this Sublease to the Master Lessor,
Sublessee hereby agrees to attorn to the Master Lessor as the "Sublessor" under
this Sublease provided Master Lessor assumes Sublessor's obligations under this
Sublease. If Sublessor shall acquire a fee interest in the Entire Premises, this
Sublease shall continue as a direct lease between Sublessor, as landlord, and
Sublessee, as tenant.

                  29.      INTERPRETATION, AMENDMENT AND MODIFICATION. This
Sublease shall be interpreted under the laws of Ohio. The recitals to this
Sublease are hereby incorporated in this Sublease. The Section and subsection
captions are for the convenient reference of the parties only and are not
intended to and shall not be deemed to modify the interpretation of the Section
or subsection from that which is indicated by the text of the Section or
subsection alone. All of the representations, warranties and indemnities
contained in this Sublease shall survive indefinitely the expiration or
termination of this Sublease. This Sublease is the product of

                                       16

<PAGE>

negotiation and the parties agree that it shall be interpreted in accordance
with its fair and apparent meaning and not for or against either party. This
Sublease contains the entire agreement between the parties with respect to the
Demised Premises and all prior negotiations or agreements, whether oral or
written, are superseded and merged herein. This Sublease may not be changed or
amended except by a writing duly authorized and executed by the party against
whom enforcement is sought.

                  30.      SUBLESSEE AND SUBLESSOR COVENANTS. Sublessee and
Sublessor agree that they intend to pass through to Sublessee the obligations of
Sublessor as tenant under the Master Lease with respect to the Subleased
Premises, from and after the Term Commencement Date. Sublessee therefore
covenants and agrees, from and after the Term Commencement Date, to comply with
and perform Sublessor's obligations under the Master Lease with respect to the
Subleased Premises. Sublessor covenants and agrees to comply with and perform
its obligations as tenant under the Master Lease with respect to the Adjacent
Premises. Sublessor further covenants and agrees that, so long as no Event of
Default has occurred and is continuing, without the prior written consent of
Sublessee, which consent shall not be unreasonably withheld or delayed,
Sublessor shall not terminate the Master Lease or amend or modify the Master
Lease in any manner which would materially impair the rights of Sublessee under
the Sublease.

                  31.      BROKERS. Sublessor and Sublessee covenant and
represent to each other that no parties are entitled to be paid a fee or
commission in connection with the transaction contemplated by this Sublease. If
any individual or entity shall assert a claim to a finder's fee or commission as
a broker or a finder, then the party who is alleged to have retained such
individual or entity or whose acts, omissions or representations are alleged to
give rise to such claim shall defend (with counsel reasonably acceptable to the
indemnified party), indemnify and hold harmless the other party from and against
any such claim and all costs, expenses, liabilities and damages incurred in
connection with such claim or any action or proceeding brought thereon.

                  32.      CONDITION PRECEDENT. This Sublease is subject to
receipt from Master Lessor, prior to the Term Commencement Date, of a written
consent to this Sublease and waiver of any right to terminate the Master Lease
which Master Lessor may possess as a result of Sublessor's subleasing of the
Demised Premises. If Master Lessor terminates the Master Lease as a result
thereof or refuses to consent to this Sublease, this Sublease shall
simultaneously terminate and neither party shall have any further rights or
obligations under the Sublease, and each party releases the other from any cost,
loss, damage, claim, liability, expense, fee or charge related thereto or
arising therefrom.

                  33.      SECURITY DEPOSIT. Concurrently with the execution of
this Sublease, Sublessee shall deliver to Sublessor a security deposit in the
amount of Two Hundred Thousand Dollars ($200,000) (the "Security Deposit"). The
Security Deposit will be retained by Sublessor as partial security for
Sublessee's performance of all its obligations under this Sublease. If Sublessee
defaults in the performance of any of its obligations under this Sublease, then
Sublessor will have the right to use all or a portion of the Security Deposit to
cure such default and Sublessee shall immediately deposit additional sums with
Sublessor in an amount sufficient to restore the Security Deposit to its
original amount. Any portion of the Security Deposit remaining unutilized
following the expiration of the Sublease Term and Sublessee's performance of all
its obligations under this Sublease will be promptly returned to Sublessee
without interest.

                                       17

<PAGE>

[Intentionally Blank; Signature and Acknowledgment Pages Follow]

                                       18

<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Sublease to be executed as of the date first above written.

WITNESSED:                                  3PF.COM, INC.,
                                            a Delaware corporation ("Sublessor")

Jennie Collins                              By: /s/ [ILLEGIBLE]
                                                --------------------------------

Executive Assistant                             Its: CHIEF FINANCIAL OFFICER

                                            RED ENVELOPE, INC.,
                                            a Delaware corporation ("Sublessee")

___________________________                 By: /s/ [ILLEGIBLE]
                                                --------------------------------

___________________________                     Its:______________President

___________________________                 And: /s/ [ILLEGIBLE]
                                                 -------------------------------

___________________________                     Its: _________Secretary

                                       19

<PAGE>

[SITE PLAN]

                                                                       EXHIBIT A

<PAGE>

                                    EXHIBIT B

                  ILLUSTRATIVE EXAMPLES OF OPERATING EXPENSES

The following are illustrative examples of some of the expenses which are
included within the definition of 'Operating Expenses':

                  1. Real estate taxes and assessments on the Building and the
Land;

                  2. Insurance premiums for liability and extended coverage
insurance policies maintained by Master Lessor on the Building and the Land;

                  3. Costs of snow removal and costs of maintaining and
repairing the landscaping and irrigation system which serves the Land;

                  4. Costs related to the provision of water, sewer, gas,
telephone, electricity and other utility services to or for the benefit of the
Building, unless such utility services are separately metered and placed in the
name of a tenant;

                  5. Salaries and related costs (including fringe benefits,
payroll taxes and a labor overhead charge of not more than 15%) of personnel
spending time on-site associated with the operation, management, and repair of
the Building and the Land;

                  6. A reasonable property management fee not to exceed four
percent (4%) of the gross rents of the Building;

                  7. Costs of maintaining and repairing the fire protection and
life safety systems for the buildings and all common areas serving the Building;

                  8. Accounting, legal and other professional services rendered
in connection with the operation, management and maintenance of the Building and
the Land; and

                  9. All other costs and expenses incurred by Landlord related
to the operation, management, maintenance and repair of the building and the
Land.

The following are those expenses which are excluded from the definition of
"Operating Expenses":

                  1. Landlord's debt service on any financing related to the
Building or the Land;

                  2. Franchise or income taxes payable by Landlord;

                  3. Salaries and related costs of Landlord's off-site
administrative personnel;

                  4. Costs of all tenant improvements;

                  5. Leasing commissions; and

                                    EXHIBIT B

                                       1

<PAGE>

                  6. Costs of utility usage for utility services separately
metered in the name of a tenant.

Operating Expenses will be computed for each calendar year during the Lease Term
based upon the accrual method of accounting. If the Building is ever less than
100% occupied, then Operating Expenses shall be calculated as if the Buildings
had been 100% occupied and the results will constitute Landlord's Operating
Expenses for such calendar year for all purposes of this Lease.

                                             Initialed and Approved by Sublessee

                                             /s/ [ILLEGIBLE]
                                                  ------------------------------
                                    EXHIBIT C

                                       2

<PAGE>

                                    EXHIBIT C

                             RULES AND REGULATIONS

1.       Landlord will provide Tenant with two sets of keys to the Leased
         Premises. Tenant may obtain additional keys to the Leased Premises at
         Tenant's sole expense. Tenant will provide only its authorized agents
         and employees with copies of such keys. Upon termination of the Lease,
         Tenant will return all keys to Landlord.

2.       Tenant will not alter or add locks or bolts on doors providing ingress
         and egress to the Leased Premises.

3.       Tenant will lock the Leased Premises and shut off water faucets, lights
         and electrical equipment and appliances located in the Leased Premises
         before leaving the Leased Premises each day.

4.       Tenant will not obstruct or impede other tenants' use of the common
         areas serving the Building.

5.       Tenant will place garbage and refuse only in trash containers approved
         by Landlord. Such containers will be kept either inside the Leased
         Premises or outside the Leased Premises in such areas as are from time
         to time designated by Landlord. Landlord must approve the trash
         collection and disposal service utilized to empty and haul away such
         garbage and refuse and the times and days of the week such containers
         will be emptied. Tenant will pay for the cost of the containers and the
         periodic trash collection and disposal charges.

6.       No aerials or antennae will be placed by Tenant on or about the Leased
         Premises or the Building without the prior consent of Landlord, which
         consent will not be unreasonably withheld.

7.       Tenant will not engage in any activity or utilize any machinery or
         apparatus which may be heard or seen outside the Leased Premises.

8.       Tenant will not use the plumbing facilities serving the Leased Premises
         for the disposal of refuse or any other improper use. Tenant will, at
         its sole expense, repair any damage to such plumbing facilities caused
         by any such misuse.

9.       No animals or birds will be allowed in or about the Leased Premises.

10.      Tenant will no store any personal property outside the Leased Premises.

11.      Tenant will not burn or incinerate trash, refuse or any other items in
         or outside the Leased Premises.

12.      Tenant will not allow anyone to reside or sleep in the Leased Premises.

                                    EXHIBIT C

                                       1

<PAGE>

13.      Landlord will not be responsible for any loss, theft or disappearance
         of personal property from the Leased Premises.

14.      Tenant will not cover all or any part of any window or door to the
         Leased Premises without obtaining the prior written consent of
         Landlord.

15.      Tenant will not conduct or permit to be conducted any auction or public
         sale on or about the Leased Premises or the Park.

16.      Tenant will maintain the inside of the Leased Premises at a temperature
         sufficiently high to prevent freezing of water, pipes, fixtures and
         fire protection systems inside the Leased Premises.

17.      Tenant will not cause or permit any unusual or objectionable odors to
         be produced upon or permeated from the Leased Premises.

18.      The sidewalk, entrances, passages, halls and parking areas will not be
         obstructed or encumbered by Tenant or used for any purpose other than
         ingress or egress to and from the Leased Premises.

19.      Tenant will not create or maintain any nuisance (including without
         limitation, loud noises, bright lights, smoke or dust) which will be
         visible from the exterior o the Leased Premises.

20.      Tenant will not conduct any noxious or offensive trade or activity at
         the Leased Premises.

21.      All deliveries and shipments will be made only at Tenant's loading
         dock(s) or other areas designated by Landlord.

22.      Tenant will park only in those areas designated by Landlord. Tenant
         will comply with all directional and other signs posted in the parking
         areas and will use only one parking stall per vehicle. Tenant will not
         park boats, mobile homes, trailers or similar vehicles in the common
         areas. Inoperable vehicles will not be allowed to remain in the common
         parking areas. Any vehicle which is parked in the common parking areas
         by Tenant in violation of these Rules and Regulations may be towed at
         Tenant's expense.

23.      Tenant will upon Landlord's request furnish Landlord with state
         automobile license numbers of Tenant's vehicles and its employees'
         vehicles and will notify Landlord of any changes within five days after
         such change occurs.

24.      Parking for tractors and trailers related to Tenant's business will be
         limited to the rear 60 feet at the rear of Tenant's Leased Premises.
         Tenant will not park tractors or trailers in the driveways, entrances,
         exits or areas behind other tenant's leased premises or the parking
         areas in front of the Building. The parking areas in the front of the
         Building will be used for automobile parking only.

25.      Tenant shall not load any vehicle beyond the weight limits established
         by the state and will be responsible for any damage caused to the
         common areas by vehicles making

                                    EXHIBIT C

                                       2

<PAGE>

         deliveries to or transporting goods from the Leased Premises including
         damage caused by overweight vehicles.

26.      Tenant agrees to cooperate and assist Landlord in the prevention of
         canvassing, soliciting and peddling within the Building and the Park.

27.      It is Landlord's desire to maintain the Building and the Park with the
         highest standard of dignity and good taste consistent with comfort and
         convenience for tenants. Landlord reserves the right to make such other
         and further reasonable rules and regulations as in its judgment may
         from time to time be necessary of the safety, care and cleanliness of
         the Leased Premises, the Building and the Park and the preservation of
         good order therein.

These Rules and Regulations (and any amendments hereto which are consistent with
the Lease) are intended to supplement the terms and provisions of the Lease and
shall be applied and interpreted in a manner which is consistent with the terms
and provisions of the Lease. In the event of a conflict between the Lease and
these Rules and Regulations (or any amendments thereto), the Lease will govern.

                                             Initialed and Approved by Sublessee

                                             /s/ [ILLEGIBLE]
                                                 -------------------------------

                                    EXHIBIT C

                                       3

<PAGE>

                                   EXHIBIT D

[insert preliminary specifications for leasehold improvements]

                                   EXHIBIT D

<PAGE>

                    Top Layer - Creekside Buildout Site Plan

[SITE PLAN]

<PAGE>

                                    EXHIBIT E

                     [insert tax section from Master Lease]

    Section 3. MANNER AND TIMING OF RENT PAYMENTS. The first monthly installment
of Base Rent and Estimated Operating Expense Payments will be paid by Tenant on
or before the Commencement Date. Thereafter, monthly installments of Base Rent
and Estimated Operating Expense Payments will be due and payable in advance on
or before the first day of each calendar month during the Lease Term. Each such
installment will be paid to Landlord at its address set forth in the Lease
Summary (or such other address as Landlord may designate from time to time). If
the Lease Term commences on a day other than the first day of the month or
terminates on a day other than the last day of the month, then the installments
of Base Rent and Estimated Operating Expense Payments for such month(s) will be
adjusted accordingly. If any installment of Base Rent or any Estimated Operating
Expense Payment or any other sum due hereunder is not received by Landlord by
its due date, then a late payment charge of 5% of such past due amount will be
immediately due and payable from Tenant. All installments of Base Rent and
Estimated Operating Expense Payments will be paid by Tenant without demand and
without any rights of reduction, counterclaim or offset. Tenant hereby agrees to
pay as additional rent any sales, use or other tax (other than income taxes) now
or hereafter imposed by any governmental authority upon the rent and other sums
payable by Tenant hereunder.

                                    EXHIBIT E

<PAGE>

                                    EXHIBIT F

                  [insert Casualty section from Master Lease]

    Section 18. CASUALTY . If the Leased Premises are damaged by fire or other
casualty, Landlord shall promptly give written notice to Tenant whether the
Leased Premises can reasonably be repaired within 180 days after the date of the
occurrence of such fire or other casualty. If Landlord notifies Tenant that it
does not believe that the Leased Premises can reasonably be repaired within such
180-day period, then both Landlord and Tenant will have the option of
terminating this Lease by giving written notice thereof to the other at any time
within 30 days after the date of Tenant's receipt of the aforementioned notice
from Landlord. If Landlord determines that the Leased Premises can reasonably be
repaired within such 180-day period or if neither party elects to terminate this
Lease despite the fact that Landlord has determined that the Leased Premises
cannot be reasonably repaired within such 180-day period, then Landlord will
proceed to repair the Leased Premises at its sole expense; provided, however,
that Landlord will in no event be required to repair any improvements previously
made to or any fixtures previously installed in the Leased Premises by Tenant.
If the Leased Premises are rendered untenantable in whole or in part as a result
of a fire or other casualty, then all rent accuring after the occurrence of any
such fire or other casualty and prior to the completion of the repair of the
Leased Premises will be equitably and proportionately abated to reflect the
untenantable portion of the Leased Premises. Landlord will not be liable to
Tenant for any inconvenience or interruption to Tenant's business occasioned by
such fire or other casualty or the concomitant repair of the Leased Premises.

                                    EXHIBIT F

<PAGE>

                             MASTER LESSOR'S CONSENT

                  1.       CONSENT. Subject to all of the terms and conditions
of this Agreement, Master Lessor hereby consents to the Sublease, including,
without limitation, the use of the Subleased Premises set forth in Section 4
thereof.

                  2.       SUBORDINATE. The Sublease shall be subject and
subordinate to the Master Lease and all of the Master Lease's provisions,
covenants, and conditions.

                  3.       NO RATIFICATION. This Agreement shall not operate as
a consent to, approval of, or ratification by Master Lessor of any of the
provisions of the Sublease and Master Lessor shall not be bound or estopped in
any way by the provisions of the Sublease. This Agreement shall not create in
Subtenant, as a third party beneficiary or otherwise, any rights except as
herein set forth.

                  4.       NO WAIVER. This Agreement shall not be construed to
modify, waive, or affect (i) any present or future breach or default on the part
of Sublessor under the Master Lease; (ii) any of the provisions, covenants, or
conditions in the Master Lease; (iii) any of Sublessor's obligations under the
Master Lease; or (iv) any rights or remedies of Master Lessor under the Master
Lease or to enlarge or increase Master Lessor's obligations or Sublessor's
rights under the Master Lease. Master Lessor shall have no obligations to any
party in connection with the Demised Premises other than those obligations set
forth in the Master Lease.

                  5.       NOT ASSIGNABLE. This Agreement is personal to
Sublessor and Subtenant and may not be assigned by Sublessor or Subtenant. Any
attempted assignment in violation of this section shall be void.

                  6.       NO RELEASE. Neither the Sublease not this Agreement
shall release or discharge Sublessor from any liability under the Master Lease
and Sublessor shall remain liable and responsible for the full performance and
observance of all of the provisions, covenants, and conditions set forth in the
Master Lease on the part of Sublessor to be performed and observed. The breach
or violation of any provision of the Master Lease by Subtenant shall constitute
a default by Sublessor in fulfilling such provision.

                  7.       CONSENT TO SUBSEQUENT SUBLEASE. This Agreement by
Master Lessor shall not be construed as a consent by Master Lessor to any future
assignment or subletting either by Sublessor or Subtenant. The Sublease may not
be assigned, renewed, or extended not shall the Demised Premises, or any part
thereof, be further sublet without the prior written consent of Master Lessor in
each instance. Notwithstanding the foregoing, Master Lessor's consent shall not
be required with respect to a sublease or assignment that is specifically
permitted under Section 14.

                  8.       NO DEFAULT. Master Lessor hereby certifies to
Sublessor and Sublessee that there exists no default, breach, failure of
condition or event of default under the Master Lease by Master Lessor or to the
best of Master Lessor's knowledge, Sublessor, nor any event or condition which,
with notice or the passage of time or both, would constitute a default, breach,

                                       1

<PAGE>

failure of condition or event of default thereunder and Master Lessor and, to
the best of Master Lessor's knowledge, Sublessor, has as of the date hereof,
complied with all of the terms and conditions of the Master Lease.

                  9.       NON-DISTURBANCE. In the event of a default by
Sublessor under the terms of the Master Lease that would allow Master Lessor to
terminate the Master Lease, then so long as Sublessee has not committed an event
of default under the terms of this Sublease, the Sublease shall continue in full
force and effect as a direct lease between Master Lessor and Sublessee, upon and
subject to all of the terms, covenants and conditions of the Sublease for the
balance of the Term of this Sublease. In such event Sublessee shall attorn to
Master Lessor and shall execute an attornment agreement in such form as may
reasonably be requested by Master Lessor.

                  10.      RELEASE AND WAIVER OF SUBROGATION. Master Lessor
hereby releases Sublessee and its agents and employees from any liability for
injury to any person or damage to property that is caused by or results from any
risk to the extent insured against under any valid and collectible policy of
"all risk" property insurance carried by Master Lessor or to the extent such
risk would have been insured under an "all risk" property insurance policy but
for the deductible provision thereof, provided that Sublessee shall not be
released from any such liability to the extent any damages resulting from such
injury or damage are not part of the recovery obtained by Master Lessor from
such insurance (except for the deductible portion thereof), but only if the
insurance in question permits such partial release. This release shall be in
effect only so long as the applicable insurance policy contains a clause to the
effect that this release shall not affect the right of the insured to recover
under such policy. Master Lessor shall cause its property insurance policy to
provide that the insurer waives all right of recovery by way of subrogation
against Sublessee in connection with any injury or damage covered by such
policy; provided, however, if any such insurance policy cannot be obtained with
such a waiver of subrogation, or such waiver of subrogation is only available at
rates which are not commercially reasonable, then Master Lessor shall notify
Sublessee of that fact and thereupon shall be relieved of the obligation to
obtain such waiver of subrogation rights from the insurer with respect to the
particular insurance involved.

                                  "MASTER LESSOR"
                                  _____________________________________________

                                  By: _________________________________________

                                      Its: ____________________________________

                                  By: _________________________________________

                                      Its: ____________________________________

                                  Date: _______________________________________

                                        BLOOMFIELD 34512-1 491487-6 06/14/2002

                                       2<PAGE>

                                                                   EXHIBIT 10.12

                                 March 12, 2002

Alison L. May
22 Jersey Street
San Francisco, CA 94114

Dear Alison:

         On behalf of RedEnvelope, Inc. (the "Company"), I am pleased to offer
you the full-time position of Chief Executive Officer and President of the
Company. The terms of your new position with the Company are as set forth below:

         1.       POSITION.

                  a. You will become the Chief Executive Officer and President
of the Company, working out of the Company's headquarters office in San
Francisco, California. You will also be appointed to the Company's Board of
Directors in connection with your employment with the Company. As Chief
Executive Officer and President, you will have the duties, responsibilities and
authority customarily associated with such position, including responsibility
for the overall management of the Company. You will report directly to the
Company's Board of Directors.

                  b. You agree to the best of your ability and experience that
you will at all times loyally and conscientiously perform all of your duties and
obligations to the Company. During your employment, you further agree that you
(i) will devote substantially all of your business time and attention to the
business of the Company; (ii) will not render commercial or professional
services of any nature to any person or organization, whether or not for
compensation, without the prior written consent of the Company's Board of
Directors, and (iii) will not directly or indirectly engage or participate in
any business or activity that is competitive in any manner with the business of
the Company. Nothing in this letter agreement will prevent you from: (i)
accepting speaking or presentation engagements in exchange for honoraria; (ii)
serving on advisory boards or boards of charitable organizations (including,
without limitation, the advisory board of the Lioness Fund), so long as such
service does not unduly interfere with the performance of your duties to the
Company; or (iii) owning, directly or indirectly, no more than one percent (1%)
of the outstanding equity securities of a corporation whose stock is listed on a
national stock exchange.

         2.       START DATE. Subject to fulfillment of any pre-conditions
imposed by this letter agreement, you will commence this new position with the
Company on April 8, 2002 (the "Start Date").

                                      -1-

<PAGE>

3.       REFERENCE CHECK; PROOF OF RIGHT TO WORK.

                  a.       This offer of employment is contingent upon the
successful completion of a reference check by the Company, including a check of
your personal references and other information relevant to employment.

                  b.       For purposes of federal immigration law, you will be
required to provide to the Company documentary evidence of your identity and
eligibility for employment in the United States. Such documentation must be
provided to us within three (3) business days of your date of hire, or our
employment relationship with you may be terminated.

         4.       COMPENSATION.

                  a.       BASE SALARY. You will be paid a base monthly salary
of $27,083.33, which is equivalent to $325,000 on an annualized basis, subject
to applicable tax withholding. Your salary will be payable pursuant to the
Company's regular payroll policy (or in the same manner as other similarly
situated employees of the Company).

                  b.       BONUS. You will not be entitled to a bonus for fiscal
year 2003 (i.e., the fiscal year ending March 31, 2003), unless otherwise
determined by the Company's Board of Directors. You will be eligible, subject to
approval by the Company's Board of Directors, for annual bonuses in subsequent
fiscal years pursuant to an incentive compensation plan that you will develop
with the Board of Directors.

         5.       STOCK OPTIONS.

                  a.       INITIAL GRANT. In connection with the commencement of
your employment, the Company will recommend that the Board of Directors grant
you a stock option to purchase such number of shares of the Company's Common
Stock as equals four percent (4%) of the Company's outstanding Common Stock as
calculated upon the earlier of (i) June 30, 2002 or (ii) immediately following
the final closing of the Company's next round of Preferred Stock financing
(currently anticipated to be a Series F Preferred Stock) in which the Company
raises, through all closings thereof, aggregate gross proceeds of at least $5
million, with an exercise price equal to the fair market value on the date of
the grant (the "Shares"). For purposes of the immediately preceding sentence,
the calculation of the Company's outstanding Common Stock will include all
then-outstanding shares of Preferred Stock on an as-converted basis, all
then-outstanding options on an as-exercised basis, all then-outstanding warrants
on an as-exercised (and, if applicable, as-converted) basis, and any authorized
but unissued option shares in the Company's employee stock option pool. These
option shares will vest at the rate of 25% of the total number of Shares on the
twelve (12) month anniversary of your Vesting Commencement Date (as defined in
your Stock Option Agreement, which date will be your Start Date, as defined
above) and 1/48th of the total number of Shares each month thereafter for the
succeeding three years on the monthly anniversary of your Vesting Commencement
Date. Vesting will, of course, depend on your continued employment with the
Company. The option will be an incentive stock option to the maximum extent
allowed by applicable law and will be subject to the terms of the Company's 1999
Stock Plan and the Stock Option Agreement (including the related notice of stock
option grant) between

                                      -2-

<PAGE>

you and the Company, which will be consistent with the terms of this letter
agreement. The option will be exercisable for a period of 12 months following a
termination of your employment relationship with the Company as a result of your
death or disability (or, if earlier, the expiration date of the term of the
option) and will be transferable to a trust for your benefit, or for the benefit
of an immediate family member, as permitted by applicable law. The Stock Option
Agreement will permit the use of a full-recourse, five-year term promissory
note, with such terms and conditions as the plan Administrator determines to be
appropriate, as an acceptable form of payment upon exercise of any of the
Shares.

                  In the event of a Change of Control of the Company, then 25%
of your unvested options or shares remaining as of the effective date of the
Change of Control will become immediately vested. As used herein, a "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 or the sale of all or substantially all of
the assets of the Company, or (iii) immediately prior to the liquidation or
dissolution of the Company.

                  b.       SUBSEQUENT OPTION GRANTS. Subject to the discretion
of the Company's Board of Directors, which will consider the matter at least
annually, you may be eligible to receive additional grants of stock options or
purchase rights from time to time in the future, on such terms and subject to
such conditions as the Board of Directors shall determine as of the date of any
such grant.

         6.       BENEFITS.

                  a.       INSURANCE BENEFITS; INDEMNIFICATION. The Company will
provide you with the opportunity to participate in the standard benefits plans
currently available to other similarly situated employees, including group
medical insurance, subject to any eligibility requirements imposed by such
plans. In addition, the Company currently indemnifies all officers and directors
to the maximum extent permitted by law (and advances expenses for which
indemnification is available to the maximum extent permitted by law) and the
Company will enter into its standard form of Indemnification Agreement (in the
form enclosed herewith) with you giving you such protection. The Company will
also maintain, at its sole expense, during the period of your service as a
director or officer of the Company or any of its affiliated entities and for
such additional period of time as you are subject to claims arising therefrom,
director and officer liability insurance in such amounts and subject to such
limitations as the Company shall, in good faith, determine. Notwithstanding the
foregoing, the Company shall have no obligation to obtain or maintain such
insurance coverage if the Company determines in good faith that: (i) such
insurance cannot be obtained or maintained on terms that are commercially
reasonable; (ii) if the premium costs for such insurance are substantially
disproportionate to the amount of coverage provided; (iii) if the coverage
provided by such insurance is limited by exclusions so as to provide

                                      -3-

<PAGE>

an insufficient benefit; or (iv) if you are covered by similar insurance
maintained by a parent or subsidiary of the Company.

                  b.       VACATION. You will be entitled to twenty (20) days of
paid time off per year (exclusive of Company holidays), pro-rated from the Start
Date for the remainder of this calendar year, and subject to the applicable cap
on accrual and other terms of the Company's vacation policy.

         7.       CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT.
Your acceptance of this offer and commencement of employment with the Company is
contingent upon the execution, and delivery to an officer of the Company, of the
Company's Confidential Information and Invention Assignment Agreement, a copy of
which is enclosed for your review and execution (the "Confidentiality
Agreement"), prior to or on your Start Date.

         8.       AT-WILL EMPLOYMENT. Subject only to the Company's obligations
described in Section 9 below, your employment with the Company will be on an "at
will" basis, meaning that either you or the Company may terminate your
employment at any time for any reason or no reason, without further obligation.

         9.       SEVERANCE BENEFITS. Upon termination of your employment with
the Company, you will be entitled to receive benefits only as set forth in this
Section 9 or as otherwise provided by applicable law. Your entitlement to these
severance benefits will be conditioned upon your execution and delivery to the
Company of (i) a general mutual release of all claims (provided that the Company
shall not be required to release any claims arising from a material breach by
you of the Confidentiality Agreement) and (ii) a resignation from all of your
positions with the Company.

                  a.       In the event of the termination of your employment by
the Company without "Cause", or as a result of your "Constructive Termination"
(as such terms are defined below), you will be entitled to receive (i) a cash
amount equal to twelve (12) months of your then-current base salary (less
applicable tax withholding), which benefit will be paid over the twelve (12)
month period following your execution of the release agreement on the Company's
normal payroll dates in equal installments, and (ii) twelve (12) months,
measured from the date of termination, of continued insurance coverage under
COBRA to be paid for by the Company.

                  b.       For purposes of this letter agreement, "Cause" for
your termination by the Company will mean your: (i) gross negligence in the
performance of your job responsibilities; (ii) failure or refusal to comply with
the lawful directives of the Company's Board of Directors not inconsistent with
your position and responsibilities (other than a refusal to incur any of (i) -
(iv) 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 your 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 your
Confidentiality Agreement or your duties of confidentiality owed to any third
parties as a result of your 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 you with written notice of

                                      -4-

<PAGE>

such gross negligence, failure or misconduct and a reasonable opportunity for
you 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 disinterested 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).

                  c.       For purposes of this letter agreement, "Constructive
Termination" will mean your resignation from all of your positions with the
Company within thirty (30) days following: (i) a material reduction or change in
your title, job duties, responsibilities or job requirements inconsistent with
your position with the Company; (ii) any material reduction of your base
compensation; (iii) any elimination of a material benefit provided to you
pursuant to your employment with the Company; (iv) a relocation of your place of
employment more than twenty-five (25) miles from San Francisco, California; (v)
the Company's failure to cure any material breach by it of the terms of this
letter agreement or the Indemnification Agreement referenced herein within a
reasonable time following written notice from you to the Company's Board of
Directors, in each case under (i) through (v) above, other than with your
written consent; or (vi) the actual occurrence of any "constructive termination"
of you by the Company under any applicable provision of California law.

                  d.       Notwithstanding the foregoing, in the event that the
Company terminates your employment without Cause and as a result of your
physical or mental impairment which prevents performance of the essential
functions of your position, the amount of cash payment that you would otherwise
be entitled to receive pursuant to Section 9(a)(i) above shall be reduced by the
gross amount of disability insurance proceeds that you are entitled to receive,
due to such impairment, during the twelve (12) month period following such
termination.

         10.      ATTORNEY FEES. The Company shall reimburse you for up to
$5,000 of the attorney or other professional fees reasonably incurred by you in
connection with the review and negotiation of the terms of your employment prior
to the Start Date upon submission of an invoice or other suitable documentation.

         11.      BUSINESS EXPENSES. The Company shall reimburse you, following
submission of appropriate documentation, for the reasonable travel,
entertainment, cellular telephone and other business expenses incurred in
connection with your duties to the Company, subject to the Company's expenditure
and reimbursement guidelines.

                                      -5-

<PAGE>

         We are all delighted to be able to extend you this offer and look
forward to working with you. To indicate your acceptance of the Company's offer,
please sign and date this letter in the space provided below and return it to
me, along with a signed and dated copy of the Confidentiality Agreement. This
letter agreement, together with the Confidentiality Agreement and other
documents referenced herein, set forth the terms of your employment with the
Company and supersede any prior representations or agreements, whether written
or oral. This letter agreement may not be modified or amended except by a
written agreement, signed by the Company and by you. This letter agreement will
be governed by California law, without regard to the conflicts of laws
provisions thereof.

Very truly yours,                            ACCEPTED AND AGREED:

REDENVELOPE, INC.                            ALISON L. MAY

By: /s/ Hilary Billings                      /s/ Alison L. May
   -----------------------------------       -----------------------------------
                                             Signature
Title: Chairman and CMO                      March 15, 2002
                                             Date

Attachment A: Confidential Information and Invention Assignment Agreement
Attachment B: Indemnification Agreement

                                      -6-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]