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Revolving Credit And Security Agreement - REDENVELOPE INC - 6-22-2004

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					                                                EXHIBIT 10.36

                                              EXECUTION COPY

                                 SECOND AMENDMENT TO
                        REVOLVING CREDIT AND SECURITY AGREEMENT

THIS SECOND AMENDMENT TO REVOLVING CREDIT AND SECURITY AGREEMENT, dated as of
June 21, 2004, 2004 (this "AMENDMENT"), is entered into by and between CAPITALSOURCE FINANCE
LLC, a Delaware limited liability company, as administrative, payment, and collateral agent for the Lenders
("AGENT") and as a Lender ("LENDER"), and REDENVELOPE, INC., a Delaware corporation (the
"BORROWER"). Capitalized terms used and not otherwise defined herein are used herein as defined in the
Credit Agreement (as defined below).

WHEREAS, the parties hereto entered into that certain Revolving Credit and Security Agreement, dated as of
June 13, 2003 (as amended to date and hereby and as further amended, supplemented, modified or restated
from time to time hereafter, the "CREDIT AGREEMENT");

WHEREAS, there are no outstanding Advances under the Revolving Facility as of the date of this Amendment;

WHEREAS, the Borrower has requested that Agent and Lender amend certain provisions of the Credit
Agreement as provided herein; and

WHEREAS, subject to satisfaction of the conditions set forth herein, Agent and Lender are willing to amend the
Credit Agreement as provided herein.

NOW, THEREFORE, in consideration of the premises and the other mutual covenants contained herein, the
receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows:

SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT. The following sections of the Credit
Agreement are amended as follows:

1.1 Section 2.1 of the Credit Agreement. The following sentences are hereby added to the end of Section 2.1 of
the Credit Agreement:

"Notwithstanding anything to the contrary in this Section 2.1, no Advances shall be made or permitted on or after
the Second Amendment Effective Date unless and until Borrower has provided Lender with an irrevocable
written notice of Borrower's intent to utilize the Revolving Facility (the "ACTIVATION NOTICE"). The
Activation Notice shall not become effective (the "ACTIVATION EFFECTIVE Date") until the later of: (i) the
third Business Day after the date of Receipt by Agent of the Activation Notice; and (ii) the second Business Day
after (A) Agent and Borrower have arranged for all future cash collections and cash payments of Borrower to be
swept to the Concentration Account on terms and conditions, and pursuant to such agreements, as required by
Agent in its Permitted Discretion; and (B) all of the conditions precedent set forth in Section 4.3 have been
satisfied."

1.2 Section 2.4 of the Credit Agreement. The third sentence of
Section 2.4 of the Credit Agreement is amended to read in full as follows:

"Notwithstanding the provisions of the Weekly Borrowing Certificates and Monthly Borrowing Certificates, (i)
except as provided in clause (ii) of this sentence, Eligible Inventory is only required to be computed on a monthly
basis based on the most recent Monthly Borrowing Certificate submitted or, if such Monthly Borrowing
Certificate was not timely submitted, as determined by Agent in its Permitted Discretion, and (ii) on and

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after the Receipt by Agent of a Activation Notice, from July 1 through December 31 of each year, the Value of
Eligible Inventory is only required to be computed on a weekly basis based on the most recent Weekly
Borrowing Certificate submitted or, if such Weekly Borrowing Certificate was not timely submitted, as
determined by Agent in its Permitted Discretion."

1.3 Section 2.5 of the Credit Agreement. The following sentence is hereby added to the end of Section 2.5 of the
Credit Agreement:

"Notwithstanding anything to the contrary in this Section 2.5, collections of Borrower's Accounts, proceeds of
Inventory, and other cash payments received by Borrower (including any credit card payments from credit card
processors) shall not be swept into the Concentration Account unless and until the earlier of (i) a Default or Event
of Default has occurred, or
(ii) Lender has received an Activation Notice in accordance with Section 2.1."

1.4 Section 2.14(e) of the Credit Agreement. Section 2.14(e) of the Credit Agreement is amended to read in full
as follows:

"(e) Upon delivery of the Activation Notice to Agent, and in no event later than three (3) Business Days prior to
the Activation Effective Date, and/or upon the occurrence of a Default or Event of Default, Borrower (i) shall
provide prompt written notice to its current bank to transfer all items, collections and remittances to the
Concentration Account, (ii) shall direct or shall have directed each Account Debtor to make payments to the
appropriate Blocked Account, and Borrower hereby authorizes Agent and/or Lenders, upon any failure to send
such directions within ten (10) calendar days after the Person becomes an Account Debtor, to send any and all
similar notices and directions to such Account Debtors, and (iii) shall cause each credit card and debit card
processor which processes credit card or debit card payments made by Borrower's customers to enter into
Credit Card Processor Agreements, and Borrower hereby authorizes Agent and/or Lenders, upon any failure by
Borrower to enter into any Credit Card Processor Agreements as required pursuant to this Agreement, to send
notices and directions to such credit card and debit card processors instructing them to make payment only to the
Blocked Account or Concentration Account, as determined by Agent."

1.5 Section 4.3 of the Credit Agreement. The following new Section 4.3 is hereby added to the Credit
Agreement:

      "4.3 ADDITIONAL CONDITIONS PRECEDENT TO ACTIVATION EFFECTIVE DATE

The obligations of Lenders to make any Advance on or after the Second Amendment Effective Date are subject
to, and the Activation Effective Date shall not occur until, the satisfaction, in the sole judgment of Agent, of the
following additional conditions precedent:

(a) Agent shall have received the Activation Notice; and

(b) Agent shall have received such consents, approvals, and agreements from such third parties as Agent and its
counsel shall determine in their Permitted Discretion are necessary or desirable, each in form and substance
satisfactory to Agent in its Permitted Discretion, including, without limitation, (1) the Landlord Waivers and
Consents with respect to any and all leases of real property, (2) fully executed Credit Card Processor
Agreements for all credit card and debit card processors and (3) fully executed account control agreements with
respect to each of the Borrower's Deposit

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Accounts and Borrower shall have provided Agent with (x) a current Schedule 5.5 (which shall list all credit card
and debit card processors used by Borrower to process credit card or debit card payments) and (y) a current
Schedule 5.18(c) (which shall list all of Borrower's Deposit Accounts and Investment Property);

(c) Agent shall have received a complete list, in form and substance satisfactory to Agent, of (i) all of Borrower's
domain names, domain name registrations, and the name and contact information for each registrar of all of
Borrower's domain names; and (ii) all of Borrower's leased locations, together with copies of all leases and
related documents and agreements entered into in connection therewith;

(d) Borrower shall (i) be in compliance with and (ii) deliver projections on the financial covenants set forth on
Annex I to this Agreement [on a pro forma and prospective basis after giving effect to such Advance];

(e) Borrower shall have delivered to Agent certified historical and prospective financial statements of Borrower
through the end of the Term on a quarter by quarter basis no less than fifteen (15) calendar days before the
proposed Advance; and

(f) Lender will have the opportunity to perform due diligence to investigate Borrower's projections and such
projections must be satisfactory to Lender in is Permitted Discretion

1.6 Section 6.1(b)(iv) of the Credit Agreement. Clause (iv) of
Section 6.1(b) of the Credit Amendment is amended to read in full as follows:

"(iv) on and after the earlier of the occurrence of a Default or Event of Default and the receipt by Agent of an
Activation Notice, on each Wednesday of each week during the Term until the Obligations are paid in cash in full
and this Agreement is terminated (and more frequently if an Event of Default has occurred and is continuing and
Agent shall so request in its Permitted Discretion), Borrower shall deliver to Agent a Weekly Borrowing
Certificate,"

1.7 Section 6.1(c) of the Credit Agreement. Each "$100,000" that appears in Section 6.1(c) of the Credit
Agreement, other than the "$100,000" contained in clause (xiv) of Section 6.1(c), is hereby changed to
"$250,000," and each "$200,000" in Section 6.1(c) of the Credit Agreement is hereby changed to "$500,000."

1.8 Section 6.4 of the Credit Agreement. The following new Section 6.4(b) is hereby added to the Credit
Agreement:

"Borrower shall not transfer, assign, encumber, or terminate, or permit to be encumbered or terminated, any of
Borrower's domain names."

1.9 Section 6.7(b) of the Credit Agreement. Section 6.7(b) of the Credit Agreement is amended to read in full as
follows:

"Notwithstanding any other provision of this Agreement and in addition to the other provisions of this Section 6.7,
Agent shall be entitled to conduct or obtain, or cause to be conducted or obtained, and Borrower upon Agent's
request shall permit to be conducted and obtained, from time to time as determined by Agent, appraisals of
Borrower's property and assets, including

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without limitation, its Inventory, in all events, at the Borrower's expense (but no more than one (1) time each year,
provided, however that upon Lender receiving an Activation Notice in accordance with Section 2.1 such
limitation shall be not more than two (2) times each year; provided further, however, that no such limits shall
apply if a Default or Event of Default has occurred and is continuing or Borrower has requested (i) Agent's or
Lenders' consent or approval to some matter, or (ii) Agent or Lenders to take or refrain from taking any action),
to be conducted by such appraisers as are satisfactory to the Agent in its sole and absolute discretion. Agent
intends to require Borrower to conduct one (1) or two
(2) such appraisals, as provided above, in each twelve (12) month period during which this Agreement is in
effect, provided however, Agent shall be entitled to conduct or obtain or require to be conducted or obtained
more or fewer appraisals in its Permitted Discretion. This Section 6.7(b) is in addition to and not in limitation of
Sections 6.7(a)."

1.10 Section 7.1 of the Credit Agreement. Section 7.1 of the Credit Agreement is amended to read in full as
follows:

"Upon delivery of the Activation Notice to Agent and thereafter, Borrower shall not violate, and shall fully comply
with, the financial covenants set forth on Annex I to this Agreement, which annex is incorporated herein and made
a part hereof."

1.11 Section 7.4 of the Credit Agreement. Section 7.4 of the Credit Agreement is amended to read in full as
follows:

"Borrower shall not, directly or indirectly, (a) merge with, purchase, own, hold, invest in or otherwise acquire any
obligations or stock or securities of, or any other interest in, or all or substantially all of the assets of, any Person
or any joint venture, (b) purchase, own, hold, invest in or otherwise acquire any Investment Property (except
those set forth on Schedule 5.3 as of the Closing Date and with respect to which Agent, for itself and the benefit
of the Lenders, has a perfected, first priority Lien in form and substance satisfactory to Agent in its Permitted
Discretion), or (c) make or permit to exist any loans, advances or guarantees to or for the benefit of any Person
or assume, guarantee, endorse, contingently agree to purchase or otherwise become liable for or upon or incur
any obligation of any Person (other than (i) those created by the Loan Documents, (ii) trade credit extended in
the ordinary course of business, (iii) advances for business travel and similar temporary advances made in the
ordinary course of business to officers, directors and employees, and (iv) the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary course of business). Borrower shall
not, directly or indirectly, purchase, lease, own, operate, hold, invest in or otherwise acquire any property or
asset or any Collateral that is located (A) outside of the continental United States of America or (B) at locations
other than the locations set forth on Schedule 5.18B, each of which locations is either owned by Borrower or
leased by Borrower but subject to a valid Landlord Waiver and Consent if required by Agent in its Permitted
Discretion. Borrower shall not have any Subsidiaries. On and after the delivery of an Activation Notice, (1)
Borrower shall have complied with Section 4.3 hereof, and (2) Borrower shall not thereafter enter into any
agreement(s) with any credit card or debit card processors to process credit card or debit card payments made
by Borrower's customers without (i) providing Agent at least thirty (30) calendar days advance written notice,
and (ii) entering into a Credit Card Processor Agreement with such Person prior to the commencement of any
such credit card and/or debit card processing arrangements between Borrower and such Person. No agreement
or

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arrangement between Borrower and any credit card or debit card processor to process credit card or debit card
payments made by Borrower's customers shall be amended, modified or otherwise changed in any manner which
would be materially adverse to Agent or any Lender as determined by Agent in its Permitted Discretion without
Agent's prior written consent. Notwithstanding any other provision of the Loan Documents and without limiting
Agent's other remedies hereunder, to the extent that any agreement or arrangement between Borrower and any
credit card or debit card processor to process credit card or debit card payments made by Borrower's
customers is amended, modified or otherwise changed in any manner which would be materially adverse to Agent
or any Lender as determined by Agent in its Permitted Discretion without Agent's prior written consent, Agent
shall be entitled to require Borrower to either amend such agreement or arrangement on terms satisfactory to
Agent in its Permitted Discretion or terminate such arrangement or agreement and to establish a new arrangement
or agreement with another credit card or debt card processor subject to a Credit Card Processor Agreement."

1.12 Section 8(c) of the Credit Agreement. The parenthetical that appears in Section 8(c) of the Credit
Agreement is amended to read in full as follows:

"(other than Sections 6.2 (except to the extent of the cure period specified in clause (a) of Article VIII above),
6.3(b), 6.4(b), 6.9 (except to the extent of the cure period specified therein) and 6.11, for which there shall be no
cure periods, and Section 6.1 for which there shall be a fifteen (15) calendar day cure period from the due dates
required pursuant thereto regardless of the knowledge of any Person or any notices)"

1.13 Annex I to the Credit Agreement. Annex I to the Credit Agreement is hereby replaced in full by Annex I
attached to this Amendment.

1.14 Annex II to the Credit Agreement. The following new item is hereby added to Annex II to the Credit
Agreement:

"As required pursuant to Section 6.1(b) of the Agreement, Borrower shall furnish to Agent as soon as available,
and in any event within five (5) Business Days after June 30 and December 31 of each year a current list, in form
and substance satisfactory to Agent, of all of Borrower's domain names, domain name registrations, and the name
and contact information for each registrar of all of Borrower's domain names."

1.15 Appendix A to the Credit Agreement. Appendix A to the Credit Agreement is hereby amended by deleting
the following definitions therein and replacing it with the following new definitions:

""Credit Card Processor Agreement" shall mean, individually and collectively, agreements in form and substance
satisfactory to Agent in its sole and absolute discretion by and between Borrower, Agent and credit card and/or
debit card processors which process credit card and/or debit card payments made by Borrower's customers,
providing, among other things, for the payment to the Blocked Account or Concentration Account, as determined
by Agent in its Permitted Discretion, of all amounts due to Borrower from credit card and/or debit card
processors."

"Monthly Borrowing Certificate" shall mean a Borrowing Base Certificate accompanied by the monthly reporting
information and accompanying materials and documentation as set forth on the Borrowing Certificate, including,
without limitation, (i) monthly internally prepared flash sales report and collections report in each case covering
the prior month for Borrower, (ii) inventory perpetual by warehouse, (iii) listing of discontinued

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product inventory (coded C1) by warehouse and location, (iv) calculation of ineligibles and rollforward of
inventory calculations and characterizations, including purchases, sales and costs of product sales, (v)
reconciliation of inventory to the Borrower's general ledger and financial statements, (vi) listing of inventory
reserves and support for calculations, (vii) summary aging of Borrower's inventory and status of top 10 products
by dollar value over 180 days old, (viii) inventory listing by product category for usable and unusable inventory
(by warehouses > 87 and warehouses < 88), (ix) detailed aging of Borrower's accounts payable with
reconciliations to Borrower's general ledger and financial statements, (x) monthly sales demand and gross margin
for Borrower by category for the prior month of Borrower and year to date, (xi) such other supporting
documentation and information with respect to the foregoing and other figures and information in the Monthly
Borrowing Certificate as Agent shall request in its Permitted Discretion, all of which shall be in form and
substance satisfactory to Agent in its Permitted Discretion and based on Borrower's accounting months, (xii) the
payroll taxes report required pursuant to Section 6.1(e), and (xiii) calculation of Unrestricted Cash Balance."

1.16 Appendix A to the Credit Agreement. Appendix A to the Credit Agreement is hereby amended by adding
the following definitions thereto in the proper alphabetical order:

""Activation Effective Date" shall have the meaning given in Section 2.1 hereof."

""Activation Notice" shall have the meaning given in Section 2.1 hereof."

""Cash Equivalents" means (a) marketable direct obligations issued or unconditionally guaranteed by the United
States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof, (b) marketable direct obligations issued by any state
of the United States or any political subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of acquisition, having the highest rating
obtainable from either S&P or Moody's, (c) commercial paper maturing no more than ninety
(90) days from the date of acquisition thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Moody's, (d) certificates of deposit, Eurodollar deposits or bankers' acceptances maturing
within 1 year from the date of acquisition thereof and bank deposits, in each case either (i) issued by any bank
organized under the laws of the United States or any state thereof or the District of Columbia or any U.S. branch
of a foreign bank or any foreign branch of a U.S. bank, in each case having at the date of acquisition thereof
combined capital and surplus of not less than $250,000,000, or (ii) certificates of deposit less than or equal to
$100,000 in the aggregate issued by any other bank insured by the Federal Deposit Insurance Corporation, (e)
repurchase obligations with a term of not more than seven days for underlying obligations of the types described
in clause (a) above entered into with any bank meeting the qualifications specified in clause
(d)(i) above, and (f) investments in money market funds with assets at least equal to $500,000,000."

""Second Amendment Effective Date" shall mean June 21, 2004."

""Unrestricted Cash Balance" shall mean the aggregate amount of Borrower's cash and Cash Equivalents that are
not subject, in each case, to any restrictions or encumbrances (other than Agent's security interest in such cash
and Cash Equivalents)."

1.17 Schedule A to the Credit Agreement. Schedule A to the Credit Agreement is hereby replaced in full by
Schedule A attached to this Amendment.

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1.18 Schedule 6.8 to the Credit Agreement. Paragraph 2 of Schedule 6.8 of the Credit Agreement is amended to
read in full as follows:

"2. Landlord Consent. Not less than three (3) Business Days prior to the Activation Effective Date, Borrower (i)
shall deliver to Agent a Landlord Waiver and Consent for the leased facility located at 4562 Alvarado Canyon
Road, San Diego, CA which is acceptable to Agent in its Permitted Discretion, or (ii) shall have relocated its
operations from such leased facility to another leased facility and shall deliver to Agent a Landlord Waiver and
Consent for such new leased facility which is acceptable to Agent in its Permitted Discretion."

SECTION 2. CREDIT AGREEMENT AND OTHER LOAN DOCUMENTS REMAIN IN FULL FORCE
AND EFFECT AS AMENDED BY THIS AMENDMENT. Except as specifically amended by the Amendment
and by the other New Loan Documents (as defined in Section 4.2 of this Amendment), the Credit Agreement
and the other Loan Documents shall remain in full force and effect and hereby are ratified and confirmed as so
amended. The New Loan Documents shall not constitute novations, satisfactions and accords, cures, releases or
satisfactions of the Credit Agreement and/or Loan Documents, but shall constitute amendments thereof. The
parties hereto agree to be bound by the terms and conditions of the Credit Agreement and the Loan Documents
as amended by the New Loan Documents, as though such terms and conditions were set forth herein and therein
in full. Each reference in the Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
similar import shall mean and be a reference to the Credit Agreement as amended by this Amendment, and each
reference herein or in any other Loan Document to the "Agreement", the "Loan Agreement" or the
"CapitalSource Loan Agreement" shall mean and be a reference to the Credit Agreement as amended and
modified by this Amendment. Each reference herein or in any Loan Document to any other Loan Document shall
mean and be a reference to such Loan Document as amended and modified by the New Loan Documents.

SECTION 3. REPRESENTATIONS. The Borrower hereby represents and warrants to the Agent and Lenders
as follows (with the understanding that the Agent and Lenders are relying materially on such representations and
warranties in entering into and performing this Amendment): (i) the Borrower is duly incorporated or organized,
validly existing and in good standing under the laws of its jurisdiction of organization and in good standing in each
jurisdiction where Borrower is required to be qualified to do business, (ii) the execution, delivery and
performance by the Borrower of the New Loan Documents to which it is a party are within its powers, have
been duly authorized, and do not contravene (A) its certificate of incorporation or bylaws or other organizational
documents, (B) any applicable law, or (C) any other agreement, document, instrument, order, judgment, or
decree to which it is a party or by which it is bound, (iii) no consent, license, permit, approval or authorization of,
or registration, filing or declaration with, any Governmental Authority or other Person is required in connection
with the execution, delivery, performance, validity or enforceability of the New Loan Documents by or against the
Borrower, (iv) the New Loan Documents have been duly executed and delivered by the Borrower, and the
execution, delivery and performance of the New Loan Documents have been duly authorized by all requisite
corporate action on the part of the Borrower, (v) the New Loan Documents constitute the Borrower's legal, valid
and binding obligations enforceable against it in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity, (vi) the Borrower is not in default under or breach of
any Loan Document or any document, instrument or agreement evidencing or relating to any other indebtedness
of Borrower and no such default or any other Default or Event of Default exists, has occurred and is continuing or
would result from the execution, delivery or performance of the New Loan Documents, and (vii) all
representations and warranties made by

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the Borrower under the Loan Documents are true and correct as of the date hereof (except to the extent that any
such representation and warranty expressly relates only to an earlier date) and are made as to the New Loan
Documents. All representations and warranties made in this Amendment shall survive the execution and delivery
of this Amendment and no investigation by the Agent or the Lenders shall affect such representations or
warranties or the right of the Agent and the Lenders to rely upon them.

SECTION 4. CONDITIONS PRECEDENT TO EFFECTIVENESS. The New Loan Documents shall be
effective only upon the satisfaction of the following conditions:

4.1 The Borrower shall have delivered to the Agent an executed original of this Amendment;

4.2 The Borrower shall have delivered to the Agent each other agreement, document and instrument required by
Agent in connection with this Amendment, including, without limitation, one or more modifications to the Credit
Card Processor Agreements as requested by Agent in Agent's Permitted Discretion (this Amendment and such
other agreements, documents, instruments, and modifications, collectively, the "NEW LOAN DOCUMENTS");

4.3 All representations and warranties made by the Borrower under the New Loan Documents shall be true and
correct as of the date hereof;

4.4 No breach of or default under any New Loan Document or any document, instrument or agreement
evidencing or relating to any other indebtedness of Borrower shall have occurred, and no such default or any
other Default or Event of Default exists, has occurred and is continuing or would result from the execution,
delivery or performance of the New Loan Documents;

4.5 There shall be no outstanding Advances under the Revolving Facility; and

4.6 The Borrower shall have delivered to Agent a certificate of the corporate secretary or assistant secretary of
Borrower, dated the date of this Amendment and in form and substance acceptable to Agent, as to (i) the
incumbency and signature of the Persons executing the New Loan Documents on behalf of Borrower, (ii) the
resolutions of the Borrower's Board of Directors approving the New Loan Documents, and (iii) confirmation that
there have been no changes to Borrower's Certificate of Incorporation and Bylaws since June 13, 2003.

SECTION 5. MISCELLANEOUS.

5.1 The execution, delivery and effectiveness of the New Loan Documents shall not, except as expressly
provided therein, be deemed to be an amendment or modification of, or operate as a waiver of, any provision of
any Loan Document or any right, power or remedy of the Agent and the Lenders, nor constitute a waiver of any
provision of any Loan Document, or any other document, instrument and/or agreement executed or delivered in
connection therewith or of any Default or Event of Default under any of the foregoing, in each case whether
arising before or after the date hereof or as a result of performance thereunder. No New Loan Document shall
preclude the future exercise of any right, remedy, power or privilege available to the Agent and the Lenders
whether under the Loan Documents, at law or otherwise.

5.2 The New Loan Documents may be executed in any number of counterparts (including by facsimile), and by
the different parties hereto or thereto on the same or separate counterparts, each of which shall be deemed to be
an original instrument but all of

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which, as applicable, together shall constitute one and the same agreement. The descriptive headings of the
various sections of the New Loan Documents are inserted for convenience of reference only and shall not be
deemed to affect the meaning or construction of any of the provisions thereof. Whenever the context and
construction so require, all words in the New Loan Documents in the singular number herein shall be deemed to
have been used in the plural, and vice versa, and the masculine gender shall include the feminine and neuter and
the neuter shall include the masculine and feminine.

5.3 The New Loan Documents may not be changed, amended, restated, waived, supplemented, discharged,
canceled, terminated or otherwise modified orally or by any course of dealing or in any manner other than as
provided in the applicable Loan Documents to which they relate or are a part. This Amendment shall be
considered part of the Credit Agreement and, together with the New Loan Documents, shall each be a Loan
Document for all purposes.

5.4 The Loan Documents as amended by the New Loan Documents constitute the final, entire agreement and
understanding between the parties with respect to the subject matter thereof and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements between the parties, and shall be binding
upon and inure to the benefit of the successors and assigns of the parties thereto and supersede all other prior
agreements and understandings, if any, relating to the subject matter thereof. There are no unwritten oral
agreements between the parties with respect to the subject matter thereof.

5.5 THE NEW LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE CHOICE OF LAW PROVISIONS SET FORTH IN,
AND SHALL BE SUBJECT TO THE WAIVER OF JURY TRIAL AND NOTICE PROVISIONS OF, THE
CREDIT AGREEMENT.

5.6 BORROWER ACKNOWLEDGES AND AGREES THAT (A) IT HAS NO CLAIMS,
COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES TO THE LOAN DOCUMENTS AND THE
PERFORMANCE OF ITS OBLIGATIONS THEREUNDER, OR (B) IF IT HAS ANY SUCH CLAIMS,
COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES TO THE LOAN DOCUMENTS AND/OR
ANY TRANSACTION RELATED TO THE LOAN DOCUMENTS AND/OR THE OBLIGATIONS, THE
SAME ARE HEREBY WAIVED, RELINQUISHED AND RELEASED IN CONSIDERATION OF
AGENT'S AND LENDERS' EXECUTION AND DELIVERY OF THIS AMENDMENT.

5.7 The Borrower may not assign, delegate or transfer any New Loan Document or any of its rights or
obligations thereunder without the prior written consent of the Agent and the Lenders and any delegation, transfer
or assignment in violation hereof shall be null and void. No rights are intended to be created under any New Loan
Document for the benefit of any third party donee, creditor or incidental beneficiary of the Borrower or any other
Person other than the Agent and the Lenders. Nothing contained in any New Loan Document shall be construed
as a delegation to the Agent and the Lenders of the Borrower's duty of performance, including, without limitation,
any duties under any account or contract in which the Agent and the Lenders have a security interest or Lien. The
New Loan Documents shall be binding upon the Borrower and its respective successors and permitted assigns.
The Agent and the Lenders' ability to assign, sell or transfer all or any part of the New Loan Documents shall be
governed by the Credit Agreement.

5.8 Except as specifically amended by the New Loan Documents, (i) the New Loan Documents shall not limit or
diminish the obligations of the parties under the Loan

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Documents, and (ii) the Borrower reaffirms its obligations under the Loan Documents to which it is a party and
agrees that the Loan Documents remain in full force and effect and are hereby ratified and confirmed. Each party
consents to the execution and delivery of the New Loan Documents by the other parties hereto.

5.9 The Borrower shall execute and deliver such other documents, certificates and/or instruments and take such
other actions or cause such other actions to be taken as the Agent or the Lenders may request in order more
effectively to consummate the transactions contemplated hereby.

                           [SIGNATURES APPEAR ON FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties have caused this Second Amendment to Revolving Credit and Security
Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above
written.

         AGENT AND LENDER:                                CAPITALSOURCE FINANCE LLC

                                                          By:___________________________________
                                                          Name:_________________________________
                                                          Title:________________________________

         BORROWER:                                        REDENVELOPE, INC.

                                                          By:___________________________________
                                                          Name:_________________________________
                                                          Title:________________________________




                                                     11
                                                    ANNEX I

                                          FINANCIAL COVENANTS

A) MINIMUM UNRESTRICTED CASH BALANCE

As measured on the last calendar day of the Borrower's accounting quarter ending on or closest to each of the
following dates (each, a "TEST DATE"), Borrower's Unrestricted Cash Balance for the applicable Test Period
ending on such Test Date shall not be less than the following:

                       ACCOUNTING/FISCAL
                         QUARTER ENDED                         MINIMUM UNRESTRICTED CASH
                         (ON OR ABOUT)                                  BALANCE
                         -------------                                  -------
                       June 30, 2004                                  $19,724,000
                       September 30, 2004                             $15,052,000
                       December 31 2004                               $25,594,000
                       March 31, 2005                                 $19,103,000
                       June 30, 2005                                  $19,724,000
                       September 30, 2005                             $15,052,000
                       December 31 2005                               $25,594,000
                       March 31, 2006                                 $19,103,000




; provided, however, that if Borrower's Unrestricted Cash Balance is less than the amounts set forth in (A) above
as of such Test Date, the Borrower shall be in compliance with (B) below:

B) MINIMUM EXCESS AVAILABILITY AND MINIMUM EBITDA

(i) Borrower shall maintain Excess Availability of at least $500,000.00 at all times; and

(ii) As measured on the last calendar day of the Borrower's accounting quarter ending on or closest to each of the
following dates, EBITDA for the trailing tweleve (12) months ending on such Test Date taken as one accounting
period shall not be less than the following:

                          ACCOUNTING/FISCAL
                            QUARTER ENDED
                            (ON OR ABOUT)                                 MINIMUM EBITDA
                            -------------                                 --------------
                         June 30, 2004                                     $(3,115,000)
                         September 30, 2004                                $(5,170,000)
                         December 31 2004                                  $(2,248,000)
                         March 31, 2005                                    $ (614,000)
                         June 30, 2005                                     $   363,000
                         September 30, 2005                                $   820,000
                         December 31 2005                                  $ 3,597,000
                         March 31, 2006                                    $ 4,894,000




For purposes of the covenants set forth in this Annex I, the terms listed below shall have the following meanings:

"EBITDA" shall mean the sum, without duplication, of the following:
Net Income determined in accordance with GAAP, plus, (a) Interest Expense, (b) taxes on income,

                                                         1
(c) depreciation expense, (d) amortization expense, (e) all other non-cash and/or non-recurring charges and
expenses approved by Agent in its Permitted Discretion, excluding accruals for cash expenses made in the
ordinary course of business, and (f) loss from any sale of assets, other than sales in the ordinary course of
business, less (a) gain from any sale of assets, other than sales in the ordinary course of business, and (b) all non-
cash and/or non-recurring income, all of the foregoing determined in accordance with GAAP.

"Interest Expense" shall mean total interest expense generated during the period in question (including attributable
to conditional sales contracts, Capital Leases and other title retention agreements in accordance with GAAP) of
Borrower with respect to all outstanding Indebtedness including accrued interest and payment-in-kind interest
and capitalized interest but excluding commissions, discounts and other fees owed with respect to letters of credit
and bankers' acceptance financing, and net costs under Interest Rate Agreements.

"Interest Rate Agreement" shall mean any interest rate swap, cap or collar agreement or other similar agreement
or arrangement designed to hedge the position with respect to interest rates.

"Net Income" shall mean the net income (or loss) of Borrower for such period taken as a single accounting period
determined in conformity with GAAP; provided, that there shall be excluded (i) the income (or loss) of any
Person in which any other Person (other than Borrower) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Borrower by such Person during such period, (ii) the income (or
loss) of any Person accrued prior to the date it becomes a Borrower or is merged into or consolidated with
Borrower or that Person's assets are acquired by Borrower,
(iii) the income of any Subsidiary of Borrower to the extent that the declaration or payment of dividends or similar
distributions of that income by that Subsidiary is not at the time permitted by operation of the terms of the charter
or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that
Subsidiary, (iv) compensation expense resulting from the issuance of capital stock, stock options or stock
appreciation rights issued to former or current employees, including officers, of Borrower, or the exercise of such
options or rights, in each case to the extent the obligation (if any) associated therewith is not expected to be
settled by the payment of cash by Borrower or any Affiliate thereof, and (v) compensation expense resulting from
the repurchase of capital stock, options and rights described in clause (iv) of this definition of Net Income.

                                                          2
                                        SCHEDULE A

                                     Lenders/Commitments

LENDERS                                                      COMMITMENT
-------                                                      ----------
CAPITALSOURCE FINANCE LLC                                  $11,000,000.00
4445 Willard Avenue, 12th Floor
Chevy Chase, Maryland 20815
Attention: Corporate Finance Group, Portfolio Manager
Telephone: (301) 841-2700
FAX: (301) 841-2360
E-Mail: gcoates@capitalsource.com

Wire Instructions:

Bank:           Bank of America, Baltimore, MD
Account:        003939396662
ABA:            0260-0959-3
Account Name:   CapitalSource Funding LLC -- CFG
Reference:      RedEnvelope, Inc.

TOTAL:                                                     $11,000,000.00
                                                           ==============




                                               1
          EXHIBIT 10.37

     Software License, Services,
     Support and Enhancements
            Agreement

                 for

        Red Envelope, Inc.

[MANHATTAN ASSOCIATES LOGO]

   powering supply chain excellence
[MANHATTAN ASSOCIATES LOGO] 2300 Windy Ridge Parkway Atlanta, GA 30339

                           SOFTWARE LICENSE, SERVICES, SUPPORT AND
                          ENHANCEMENTS AGREEMENT ("AGREEMENT")

                                    Client:        Red Envelope, Inc.
                                    Address:       201 Spear Street, Ste 300
                                                   San Francisco, CA 94105




Manhattan Associates, Inc., a Georgia corporation, ("Manhattan"), markets and supports certain software
applications licensed hereunder as "Licensed Products" and Client is a DELAWARE corporation or having a
principal place of business as noted above and Client is desirous of obtaining a license to use the Licensed
Products, subject to the terms and conditions of this Agreement.

NOW THEREFORE, in consideration of the background, the covenants herein contained, and intending to be
legally bound hereby, the parties agree as follows:

                                          ARTICLE I. DEFINITIONS

For purposes of this Agreement, the following terms shall mean:

CONFIDENTIAL INFORMATION

Certain confidential technical and business information, including without limitation, business plans and interests,
the Licensed Products and associated documentation, and this Agreement, including its existence and its terms
and conditions.

CUSTOMER SUPPORT

Services provided by Manhattan pursuant to this Agreement, for which Client has elected to subscribe, and
related to technical support on Licensed Products. Software Updates for Licensed Products are included as a
part of a Customer Support subscription.

CUSTOMER SUPPORT AND SOFTWARE ENHANCEMENTS FEES

The fee(s) defined in Article V, Section 5(C).

DESIGNATED PROCESSOR

The hardware server(s) identified in any Attachment to this Agreement or a written notification as described in
Article II. Section 1(C). In the case of non-server based software, the personal computers on which the Licensed
Products are resident.
DESIGNATED SITE

The physical location(s) where (a) the Licensed Products are installed upon the Designated Processor(s); or (b)
are otherwise utilized; and which are specifically identified in any Attachment to this Agreement or a written
notification as described in Article II. Section 1(C).

DISCLOSER

The party disclosing Confidential Information.

LICENSE FEE

The fee(s) defined in Article V, Section 5(A).

LICENSED PRODUCT(S)

The computer programming source and object code for the Licensed Products identified in each Attachment A to
this Agreement, any Software Enhancements, any Software Updates, the media in which the Licensed Products
are delivered, and the associated documentation. Certain security operational controls, Warehouse Management
System for Windows, Labor Management, Performance Management and Slotting Optimization are provided in
object code only.

LICENSED USER(S)

Any individual which has accessed the Licensed Products. Licensed Users are counted concurrently until ceasing
use of the Licensed Products and the total number of Licensed Users simultaneously using the Licensed Products
at any one time may not exceed the total number for which License Fees have been paid.

MODIFICATIONS

Any mutually agreed upon enhancements, modifications, or substitutions to the Licensed Products made by or at
the direction of Manhattan.

PUBLISHED PRODUCT SPECIFICATIONS

The User Guides and the Implementation Guides (in whatever media) associated with the Licensed Products, as
they may exist from time to time.

RECIPIENT

The party receiving Confidential Information.

SERVICES

Professional services provided to Client by Manhattan pursuant to Article III of this Agreement and related to the
Licensed Products, including programming, consulting, analysis, and training.

SOFTWARE ENHANCEMENTS

Subsequent versions and releases of the Licensed Products which Manhattan makes generally available without
payment of additional License Fees during the Subscription
Period. Software Updates for Licensed Products are included as a part of a Software Enhancements
subscription.

SOFTWARE UPDATES

Corrections to Client's current version of the Licensed Products.

SUBSCRIPTION PERIODS

The time periods in annual increments during which Customer Support and/or Software Enhancements are
available under this Agreement.

                            ARTICLE II. SOFTWARE LICENSE ("LICENSE")

1. LICENSE GRANT.

(A) Manhattan grants to Client a non-exclusive perpetual license to use the Licensed Products indicated in the
Attachments A which may be executed from time to time by the parties, and to use the Modifications, as follows:

(i) only on the Designated Processor(s), at the Designated Site(s), and only by the Licensed Users, as applicable,
identified in Attachments A attendant to this Agreement;

(ii) in the case of the N-Tier version of the Licensed Products, to also utilize the Licensed Products on personal
computers used as clients in conjunction with the Designated Processor;

(iii) to create Modifications to enhance Client's use of the Licensed Products solely in the manner contemplated
by this Agreement and not for any software development or other independent efforts intended to generate
revenues of any kind;

(iv) only by Client and for Client's benefit through its ordinary course of business and not for the benefit of any
third party, including without limitation, commercial timesharing or service bureau or other rental or sharing
arrangements, data processing or management information or services;

(v) only in the country in which they are first installed and may only be moved to another country with the prior
written permission of Manhattan; and,

(vi) copy the Licensed Products or Modifications for archival or backup purposes only, so long as all titles,
trademark, copyright, and restriction notices are reproduced. No other uses are granted hereunder.

(B) Client may not:

(i) reverse engineer, disassemble, or decompile any part of the Licensed Products or Modifications, except to the
extent required to obtain interoperability with other independently created or procured software or as specified
by law;

(ii) distribute, sell or otherwise transfer any part of the Licensed Products or Modifications; or
(iii) remove the patent, copyright, trade secret or other proprietary protection legends or notices that appear on
or in the Licensed Products.

(C) Client shall notify Manhattan in writing within thirty (30) days of any model change to a Designated Processor
(s), change in Designated Site(s) within the same country, or desire to reallocate Licensed Users.

2. OWNERSHIP. Manhattan retains all title, copyright and other proprietary rights in the Licensed Products and
Modifications, and all versions of each. Any developments including inventions relating to the Licensed Products
shall be owned by Manhattan. Client does not acquire any rights, express or implied, other than those specified in
this Agreement. Client agrees to secure and protect the Licensed Products and Modifications in a manner
consistent with maintaining Manhattan's rights therein. Violation of Manhattan's intellectual property rights shall be
the basis for immediate termination of this Agreement, which shall be in addition to and not in lieu of any equitable
remedies available to Manhattan. At Manhattan's written request, Manhattan may audit Client's use of the
Licensed Products or Modifications, at Manhattan's expense, but not more frequently than annually. Such audit
shall not unreasonably interfere with Client's business activities. If an audit reveals that Client has underpaid fees
to Manhattan, Client shall promptly pay any such underpaid fees.

3. WRONGFUL POSSESSION OR ACCESS. Upon knowledge of any unauthorized possession, use of, or
access to, any Licensed Products or Modifications, Client shall promptly notify Manhattan and furnish Manhattan
with full details of such knowledge, assist in preventing any recurrence thereof, and cooperate at Manhattan's
expense in any litigation or other proceedings reasonably necessary to protect the rights of Manhattan.

4. SOURCE CODE ESCROW. By executing an Attachment C attendant to this Agreement, Client elects to
have the remaining source code of the Licensed Products which it does not receive placed on deposit in
Manhattan's master escrow account, which source code shall be released upon the conditions outlined in said
Attachment. Upon making such election, Client agrees to pay to Manhattan the then-current annual fee
associated with being a beneficiary of such account. Further, Client will receive written confirmation from the
escrow agent of Client's registration. At least thirty (30) days prior to expiration of Client's annual subscription to
Source Code Escrow, Manhattan shall notify Client of the applicable escrow fees for the succeeding year,
whereupon, unless Client notifies Manhattan in writing of its desire to terminate its escrow subscription upon such
expiration date, Client's subscription to Source Code Escrow shall be extended and renewed for an additional
period of one (1) year at the then-current fees specified by Manhattan. If Client fails to remit escrow fees
pursuant to the terms hereof, Manhattan will have no duty to include Client as a beneficiary of its escrow account.
                                            ARTICLE III. SERVICES

1. SERVICES PROVISION. Manhattan will provide Services from time to time at Client's request and under
the terms and conditions of this Agreement.

2. MODIFICATIONS. As a part of Services, Manhattan will also provide Modifications at Client's request, as
documented by a Detailed Design Specification or similar mutually agreed upon instrument. Client and Manhattan
agree that the Modifications provided to Client shall not be a "work made for hire".

3. SERVICES TERMINATION. Client may, at its election and upon thirty (30) days prior written notice,
terminate the Services to be provided hereunder. However, such termination shall not affect any right or claim of
either party incurred or accruing prior to the date of termination, including without limitation, any right or claim of
Manhattan payable for services rendered or reimbursable expenses incurred prior to such termination date.

            ARTICLE IV. CUSTOMER SUPPORT AND SOFTWARE ENHANCEMENTS

1. CUSTOMER SUPPORT AND SOFTWARE ENHANCEMENTS. Customer Support and Software
Enhancements shall be provided in accordance with Manhattan's Worldwide Customer Support and Software
Enhancements policies, as they may exist during each annual Subscription Period. Subscriptions to Customer
Support and/or Software Enhancements are offered for only the Licensed Products and Client may not elect to
exclude any of the Licensed Products or any of the Designated Site(s) from Manhattan's Customer Support and
Software Enhancements subscriptions during the Subscription Period.

2. SUBSCRIPTION PERIOD. The Subscription Period begins upon execution of an Attachment B attendant to
this Agreement. At least thirty (30) days prior to expiration of a Subscription Period, Manhattan shall notify Client
of the applicable Customer Support and/or Software Enhancements Fees for the succeeding year. Whereupon,
unless Client notifies Manhattan in writing of its desire to terminate its current subscription (s) on or before the
expiration date for that Subscription Period, Client's subscription(s) to Customer Support and/or Software
Enhancements shall be extended and renewed for an additional period of one (1) year at the then current
subscription fees specified by Manhattan.
                                           ARTICLE V. GENERAL

1. MUTUAL NONDISCLOSURE.

(A) Pursuant to this Agreement, each party may, from time to time, furnish the other party with certain
Confidential Information. The parties agree to hold each other's Confidential Information in confidence. Each
party agrees to take all reasonable steps to ensure that Confidential Information is not disclosed or distributed by
its employees in violation of this Agreement. The disclosure of Discloser's Confidential Information does not grant
to the Recipient any license or rights to any trade secrets or under any patents or copyrights, except as expressly
provided by the licenses granted in this Agreement.

(B) The obligations of Recipient with respect to any particular portion of Confidential Information shall terminate
or shall not attach, as the case may be, when such information:

(i) was in the public domain at the time of Discloser's communication thereof to Recipient;

(ii) entered the public domain through no fault of Recipient subsequent to the time of Discloser's communication
thereof to Recipient;

(iii) was in Recipient's possession free of any obligation of confidence at the time of Discloser's communication
thereof to Recipient;

(iv) was independently developed by Recipient as demonstrated by written records; or,

(v) is required to be disclosed by court or government order and Discloser has been given notice of such order.

(C) Discloser understands that Recipient may develop information internally, or receive information from other
parties, that may be similar to Discloser's information. Accordingly, nothing in this Agreement shall be construed
as a representation or inference that Recipient will not independently develop products, for itself or for others,
that compete with the products or systems contemplated by Discloser's information. The parties agree that a
breach of the confidentiality obligations by Recipient shall cause immediate and irreparable monetary damage to
Discloser and shall entitle Discloser to injunctive relief in addition to all other remedies.

2. WARRANTIES. Manhattan warrants that it possesses all rights and interests necessary to enter into this
Agreement. In addition, Manhattan extends the following warranties:

(A) LICENSED PRODUCTS. For a period of twenty-four (24) months following execution of this Agreement
or six (6) months following the first commercial use of the Licensed Products at the initial Designated Site,
whichever occurs earlier, Manhattan warrants that the Licensed Products will materially perform the functions
described in the Published Product Specifications. Manhattan warrants that the Licensed Products: (i) will
completely and accurately address, present, produce, store and calculate data involving
dates beginning with January 1, 2000, and will not produce abnormally ending or incorrect results involving such
dates as used in any forward or regression date based functions; and (ii) will provide that all "date"-related
functionalities and data fields include the indication of century and millennium and will perform calculations which
involve a four-digit year field.

(B) SERVICES. For a period of ninety (90) days following the date of performance, Manhattan warrants that the
Services supplied hereunder shall be performed consistent with generally accepted industry standards.

(C) CUSTOMER SUPPORT AND SOFTWARE ENHANCEMENTS. During the Subscription Period,
Manhattan warrants that the Licensed Products will materially perform the functions described in the Published
Product Specifications as they may exist during the Subscription Period.

(D) WARRANTY EXCLUSIONS. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
THE IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. Manhattan makes no warranty with respect to and shall have no responsibility or liability whatsoever
for Modifications not made by Manhattan. All Modifications made by Client shall be made at the sole risk and
expense of Client and shall void any warranties of the Licensed Products to the extent such nonconformity is
caused by such Modification.

3. EXCLUSIVE REMEDIES. For any breach of warranties contained in Section 2 of this Article, Client's
exclusive remedy and Manhattan's entire liability shall be as follows:

(A) LICENSED PRODUCTS. The correction of errors in the Licensed Products that cause breach of warranty,
or if Manhattan is unable to provide such correction, Client shall be entitled to terminate this Agreement as it
relates to the non-conforming Licensed Products and receive a refund of the License Fees paid for the non-
conforming Licensed Products.

(B) SERVICES. The reperformance of the Services, or if Manhattan is unable to perform the Services as
warranted, Client shall be entitled to recover the fees paid to Manhattan for the unsatisfactory Services.

(C) CUSTOMER SUPPORT AND SOFTWARE ENHANCEMENTS. The correction of errors in the
Licensed Products that cause breach of warranty, or if Manhattan is unable to provide such correction, Client
shall be entitled to terminate this Agreement as it relates to the non-conforming Licensed Products and receive a
refund of the Customer Support and/or Software Enhancements Fees paid for the non-conforming Licensed
Products for the then current Subscription Period.
4. INDEMNITIES. INFRINGEMENT. Manhattan, at its sole expense, agrees to defend and indemnify Client
against any claim that the Licensed Products or Modifications directly infringe a copyright, patent, or other
intellectual property right, provided that: (i) Client notifies Manhattan in writing within thirty (30) days of the claim;
(ii) Manhattan has sole control of the defense and all related settlement negotiations; and (iii) Client provides
Manhattan with the information, assistance and authority to enable Manhattan to perform Manhattan's obligations
under this paragraph. Manhattan shall have no liability for any claims of infringement to the extent that such claims
result from the use of the Licensed Products in conjunction with non-Manhattan software or other non-Manhattan
products or upon a use of the Licensed Products in a manner not contemplated by the Published Product
Specifications. Nothing in this provision shall be construed as a limitation on Client's ability to retain legal counsel
at its own expense to monitor the proceedings.

Manhattan further agrees that if Client is prevented from using the Licensed Product(s) due to an actual or
claimed infringement of any patent, copyright or other intellectual property right, then at Manhattan's option and
as its entire obligation to Client with respect to such claims, Manhattan shall promptly either:

(i) procure for Client, at Manhattan's expense, the right to continue to use the Licensed Product(s);

(ii) replace or modify the Licensed Product(s) at Manhattan's expense so that the Licensed Product(s) become
non-infringing, but substantially equivalent in functionality; or

(iii) in the event that neither (i) or (ii) are reasonably feasible, terminate the Agreement as to the infringing
Licensed Products and return Client's License Fees for the infringing Licensed Product(s) amortized over a five
(5) year depreciation period from the execution of the Agreement.

5. PAYMENT.

(A) LICENSE FEES. In consideration for the License granted in Article II, Client agrees to pay to Manhattan
the License Fees designated on any Attachment A attendant to this Agreement upon the execution of this
Agreement and any Attachment A attendant to this Agreement.

(B) SERVICES FEES / EXPENSES. As compensation for performing Services, Client agrees to pay Manhattan
on a time and materials basis which shall be billed at Manhattan's then-current list prices. Training shall be billed
at Manhattan's then-current list prices. Manhattan will invoice Client every two (2) weeks while Services are
being performed. Client agrees to reimburse Manhattan for all reasonable out-of-pocket expenses Manhattan
incurs in providing Services. If amounts remain unpaid for thirty (30) days or more, Manhattan may, at its option,
refuse to perform additional Services under this Agreement until such amounts are paid.
(C) CUSTOMER SUPPORT AND SOFTWARE ENHANCEMENTS FEES. In consideration for the
Customer Support and/or Software Enhancements to be provided hereunder and for which Client elects to
subscribe, Client shall pay Customer Support and/or Software Enhancements Fees in accordance with any
Attachment B attendant to this Agreement and subsequently as an annual charge. The first payment shall be due
upon execution of any Attachment B attendant to this Agreement. During the Subscription Period, Client may be
billed additional Customer Support and Software Enhancements Fees resulting from additional Designated Sites,
additional Licensed Products, additional Licensed Users, or from the upgrade of service level. If Client fails to
remit Customer Support and/or Software Enhancements Fees pursuant to the terms hereof, Manhattan will have
no duty to provide Customer Support and Software Enhancements as specified under Article IV.

(D) TAXES. The fees listed in this Agreement do not include taxes. If Manhattan is required to pay any sales,
use, property, excise, value added, gross receipts, or other taxes levied on the Licensed Products or Services
under this Agreement or on Client's use thereof, then such taxes shall be billed to and paid by Client. This Section
does not apply to taxes based on Manhattan's net income or Manhattan's employer contributions and taxes.

(E) INVOICES. Client agrees to pay for all amounts due under this Agreement upon receipt of invoice. Such
amounts which remain unpaid for thirty (30) days after invoice date will bear interest from the invoice date of one
and one-half percent (1 1/2%) per month or the highest rate permitted by law, if less. Time is of the essence for
all payments due under this Agreement, and in the event any payment due to Manhattan is collected at law,
through an attorney-at-law or a collection agency, Client agrees to pay all costs of collection, including without
limitation, all court costs and reasonable attorney's fees.

(F) All payments made hereunder are nonrefundable, except as specifically provided otherwise in this Agreement.

6. LIMITED LIABILITY. EXCEPT FOR a) FAILURE TO COMPLY WITH MANHATTAN'S
PROPRIETARY RIGHTS, b) FAILURE TO COMPLY WITH THE MUTUAL NONDISCLOSURE
PROVISION, OR c) THE INFRINGEMENT INDEMNITY PROVISIONS CONTAINED HEREIN: (A) IN
NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR A MONETARY
AMOUNT GREATER THAN THE AMOUNTS PAID OR DUE PURSUANT TO THIS AGREEMENT,
AND (B) IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY
LOSS OR INJURIES TO EARNINGS, PROFITS OR GOODWILL, OR FOR ANY INCIDENTAL,
SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY PERSON OR ENTITY WHETHER
ARISING IN CONTRACT, TORT OR OTHERWISE, EVEN IF EITHER PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. THE LIMITATIONS SET FORTH IN THIS SECTION
SHALL APPLY EVEN IF ANY OTHER REMEDIES FAIL OF THEIR ESSENTIAL PURPOSE. The
provisions of this Agreement allocate the
risks between Manhattan and Client. Manhattan's pricing reflects this allocation of risk and the limitation of
liability specified herein.

7. EMPLOYEE RECRUITING. Each party acknowledges that the other party's employees are critical to the
servicing of its customers. Therefore, Client agrees not to solicit, employ or otherwise engage Manhattan's
employees without Manhattan's prior written consent for a period of thirty-six (36) months following that
employee's last date of employment by Manhattan and Manhattan agrees not to solicit, employ or otherwise
engage Client's employees involved in the services contemplated by this Agreement without Client's prior written
consent for a period of thirty-six (36) months following that employee's last date of employment by Client. Should
either party violate this provision, the violating party agrees to pay the other party the greater of onehalf of the
former employee's annual salary or fifty thousand dollars ($50,000). The parties further agree that in the event of
any actual or threatened breach of any of the provisions of this section, the non-breaching party shall be entitled
(in addition to any and all other rights and remedies at law or in equity for damages or otherwise, which rights and
remedies are and shall be cumulative) to specific performance, a temporary restraining order, or an injunction to
prevent such breach or contemplated breach. Further, such payment and additional relief does not restrict the
non-breaching party's rights or remedies as they relate to such former employee.

8. TERMINATION. If either party materially breaches this Agreement, the other party may give written notice of
its desire to terminate and the specific grounds for termination and, if such default is capable of cure and the party
in default fails to cure the default within thirty (30) days of the notice, the other party may terminate this
Agreement. If such default is incapable of cure, the other party may terminate this Agreement immediately upon
written notice of its desire to terminate. Upon termination, the License to use the Licensed Products and
Modifications shall be immediately revoked and all Licensed Products and Modifications and supporting
materials will be returned to Manhattan or destroyed and documentation supplied to Manhattan certifying
destruction. Confidentiality obligations shall survive this Agreement.

9. EXPORT ADMINISTRATION. Client agrees to comply fully with all relevant export laws and regulations of
the United States ("Export Laws") to assure that neither the Licensed Products nor any direct product thereof are
(A) exported, directly or indirectly, in violation of Export Laws; or (B) are intended to be used for any purposes
prohibited by Export Laws. Client will indemnify Manhattan for any losses, costs, liability, and damages, including
reasonable legal fees, incurred by Manhattan as a result of failure by Client to comply with this Section.
Manhattan may, from time to time, deny Client the right to license in certain countries in order to protect
Manhattan's interests.

10. GENERAL.

(A) WAIVER. The waiver of one breach hereunder shall not constitute the waiver of any other or subsequent
breach. No amendments, modifications or supplements to this Agreement shall be binding unless in writing and
signed by the parties.
(B) NOTICES. All notices shall be in writing and shall be sufficiently given if:
(i) delivered by hand; (ii) delivered by courier with a signed receipt; (iii) sent by facsimile transmission, but only if
original documents are delivered as of the fifth (5th) working day thereafter; or (iv) sent by registered mail or
certified mail, postage prepaid to the respective addresses of the parties noted herein or such other address as
shall be furnished from time to time in writing by either party. To expedite order processing, Client agrees that
Manhattan may treat documents faxed by Client to Manhattan as original documents. However, either party may
require the other to exchange original signed documents.

(C) GOVERNING LAW. The laws of the State of Georgia shall govern this Agreement, and all matters arising
out of or related to this Agreement, except actions arising under the patent and copyright provisions of the U.S.
Code. The parties hereby submit to the jurisdiction of the Georgia courts. The parties agree that this Agreement is
not subject to and shall not be interpreted by the United Nations Convention on Contracts for the International
Sale of Goods. No action arising out of this Agreement, regardless of form, may be brought more than one
(1) year after the claiming party knew or should have known of the cause of action.

(D) ASSIGNMENT. This Agreement may not be assigned by Client and any attempted assignment shall be void.

(E) PUBLICITY RIGHTS. Manhattan may include Client's name and logo among its list of customers and may
include a brief description of the services furnished by Manhattan and the functions performed thereby.

(F) LANGUAGE. Should a counterpart to this Agreement be prepared in a language other than English, then
English shall be the language of this Agreement and the English language counterpart shall govern all disputes,
performances and interpretations, and the counterpart in another language shall be for convenience only and shall
not affect the performance or interpretation of this Agreement.

(G) CURRENCY. All amounts stated in and payable under this Agreement shall be denominated and payable in
United States Dollars.

(H) SEVERABILITY. If any provision or portion thereof of this Agreement is held to be invalid or
unenforceable, the remaining provisions will remain in full force.

(I) THIRD PARTY SOFTWARE. Third party software which is licensed by the third party to Manhattan
("Software"), is hereby sublicensed or assigned by Manhattan to Client on a nonexclusive, nontransferable basis
to be used exclusively with the Licensed Products to which it relates. This third party software license will
terminate when this agreement terminates or when the Licensed Products are no longer being used by Client.
Client shall not reverse engineer, modify, copy, distribute or otherwise disclose the Software.
IN NO EVENT WILL MANHATTAN OR THE THIRD PARTY SOFTWARE MANUFACTURER BE
LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL LOSS OR DAMAGE,
INCLUDING WITHOUT LIMITATION, ANY LOST PROFITS OR SAVINGS, AND ANY LOSS OR
DAMAGE CAUSED BY THE LOSS OF USE OF ANY DATA OR INFORMATION OR ANY
INACCURATE DATA OR INFORMATION.

(J) The terms of all shipments of software are FOB Shipping Point. This Agreement, including its terms and
conditions and its attachments and amendments, is a complete and exclusive statement of the agreement between
the parties, which supersedes all prior or concurrent proposals and understandings, whether oral or written, and
all other communications between the parties relating to the subject matter of this Agreement. This Agreement,
and any amendments, Attachments, modifications or supplements thereto, shall not be effective until executed by
Client and accepted and executed by the Chief Financial Officer, Chief Legal Officer or Chief Executive Officer
of Manhattan. By execution, signer certifies that signer is duly authorized to execute this Agreement on behalf of
Manhattan. Accepted by Manhattan and effective as of.

MANHATTAN ASSOCIATES, INC.

                                           By: /s/ EDWARD K. QUIBELL
                                           -------------------------
                                           (Authorized Signature)




Edward K. Quibell
(Print or Type Name)

Chief Financial Officer
(Title)

By execution, signer certifies that signer is duly authorized to execute this Agreement on behalf of Client.

CLIENT

                                        By: /s/ JOHN W. ROBERTS
                                        -----------------------
                                        (Authorized Signature)

                                        /s/ JOHN W. ROBERTS
                                        ------------------------------
                                        (Print or Type Name and Title)

                                        12/29/03
                                        --------------
                                        (Date Signed)
[MANHATTAN ASSOCIATES LOGO]

                                          2300 Windy Ridge Parkway
                                              Atlanta, GA 30339

                                      ADDENDUM TO
                          SOFTWARE LICENSE, SERVICES, SUPPORT AND
                               ENHANCEMENTS AGREEMENT

Client: Red Envelope, Inc.
Address: 201 Spear Street, Ste 300
San Francisco, CA 94105

This Addendum is made by and between Manhattan Associates, Inc. ("Manhattan") and Client in consideration
of their mutual promises and subject to its Terms and Conditions. This Addendum amends the Software License,
Services, Support and Enhancements Agreement ("Agreement") by and between Manhattan and Client by its
Terms and Conditions.

THE AGREEMENT is amended by the addition of the following:

"This Agreement, including any and all Addenda and Attachments, must be executed by Client and received by
Manhattan no later than NOON on December 31, 2003 for the terms of this Agreement to be valid."

ARTICLE II. SOFTWARE LICENSE, is amended as follows:

SECTION 1. LICENSE GRANT, Paragraph (A), Subsection (vi), is amended by the addition of the following:

"Manhattan agrees that Client may provide for Disaster Recovery Services either on a computer processing unit
at its Columbus, Ohio Designated Site, which may be owned or leased by the Client, or on a processor provided
for Disaster Recovery by a third party organization. Client agrees to notify Manhattan of the Model and Serial
Number of said processor. "This license is granted only for the Licensed Products installed on Client's Designated
Processor and not for any other Licensed Products installed on any other processor(s). The Licensed Products
loaded upon a Disaster Recovery Processor will only be operational, other than for disaster recovery test
purposes, in case of disaster conditions and inoperability of the Client's Designated Processor(s). Immediately
upon the Client's Designated Processor(s) regaining operable status, Client agrees to cease using the Licensed
Products on the Disaster Recovery Processor, except as needed to restore the Designated Processor(s) to
proper operating condition. Should Client choose to utilize Disaster Recovery services provided by a third party
organization, Client agrees to provide Manhattan with a copy of Client's service agreement with the third party
and
an original Manhattan Non-Disclosure Agreement executed by the third party. Client agrees to be fully
responsible to Manhattan for all damages, including lost profits and consequential damages, if applicable, for any
unauthorized use, disclosure, or duplication of the Licensed Products by the third party organization or any other
unauthorized party."

SECTION 1. LICENSE GRANT, Paragraph (A), Subsection (vi), is further amended by the addition of the
following:

"Furthermore, Client may install and use the Licensed Products on a Designated Processor without payment of
additional License Fees, provided Client pays any additional third party license fees required by Manhattan's
licensors for such copies and so long as the use is limited solely to a testing and development environment with a
maximum of ten (10) concurrent users, simulated use. If use of the Licensed Products exceeds these limits, Client
agrees to pay then current License Fees for such usage of the Licensed Products. Client agrees to notify
Manhattan in writing of the Model, and Serial Number of said test processor. Further, in Client's test environment
Client may simulate up to 1000 users solely for test and development purposes provided however Client agrees
to provide Manhattan with not less than two (2) days advance notice of the date and duration of said test."

SECTION 1. LICENSE GRANT, is amended by the addition of the following:

"(D) Manhattan acknowledges that Client may experience peak seasons in which it may temporarily exceed the
number of Licensed Users permitted under this Agreement. As a specific accommodation of this situation,
Manhattan agrees that Client may temporarily exceed the total number of Licensed Users during for up to two (2)
consecutive months, provided however, in no event shall such use exceed a total of four (4) months in any
calendar year, and the total number of concurrent users shall not exceed two hundred (200). If use of the
Licensed Products exceeds these limits, Client agrees to pay the then-current License Fee for said excess
Licensed Users."

ARTICLE III. SERVICES, SECTION 1. SERVICES PROVISION, is amended by the addition of the
following:

"Manhattan agrees to perform implementation Services in accordance with Manhattan's PRISM methodology
which outlines implementation and includes the creation of the Project Plan, Statement of Work, Functional
Design and the Detail Design Specification for such implementation. In the event of a change in scope of the
implementation, the parties will mutually agree to modify the appropriate documentation by a Change Order.
Such Change Order may be initiated by Client. Manhattan will then estimate the added cost, net of any credit for
work that will not need to be performed, and advise Client of such cost. Client will then advise Manhattan
whether Client wants to proceed with the Change Order and, if so, the appropriate documentation will be Page 2
of 4 ADDSLSSEA.30808 appropriately amended. Manhattan agrees to perform these implementation Services
provided Client performs its obligations pursuant to this Agreement."
ARTICLE IV. CUSTOMER SUPPORT AND SOFTWARE ENHANCEMENTS, SECTION 1. is
amended as
follows:

"Notwithstanding anything to the contrary in the Worldwide Customer Support and Software Enhancement's
policy, provided Client is operating on version 2003R1 or later, in the event Manhattan creates a modification to
the Licensed Products per Client's request, and such modification creates a non-conformity in the Licensed
Products against the Published Product Specifications, Manhattan shall determine and fix such non-conformity in
the Licensed Products as part of Client's annual Customer Support and Software Enhancements Subscription.
However, in no event shall Manhattan have any liability for modifications not made by Manhattan and any errors
as a result of modifications not made by Manhattan shall be billable."

ARTICLE V. GENERAL, is amended as follows:

SECTION 2. WARRANTIES, Paragraph (C) is amended by the addition of the following:

"Manhattan's obligations shall not materially degrade from that set forth in the Worldwide Customer Support and
Software Enhancement in effect as of the date of this Agreement."

SECTION 5. PAYMENT, Paragraph (A), is amended by the addition of the following:

"For the Licensed Products, Licensed Users and Designated Sites licensed upon execution hereof, Client agrees
to pay the License Fees set forth in the Attachment A executed contemporaneously herewith in accordance with
the following schedule:

- Twenty-five percent (25%) upon execution hereof;

- Twenty-five percent (25%) within forty-five (45) days of execution hereof;

- Twenty-five percent (25%) within ninety (90) days of execution hereof; and

- The remaining twenty-five percent (25%) within one hundred eighty (180) days of execution hereof."

SECTION 5. PAYMENT, PARAGRAPH (A), is further amended by the addition of the following:

"Until December 31, 2004, Client may elect to pay an additional [ * ] of any Warehouse Management System
(WMS) Licensed Product License Fee due contemporaneously with each transaction under this Agreement
(including the initial execution of the Agreement as well as any licensing of additional Licensed Users, Licensed
Products and/or Designated Sites) for the cost of a runtime license to Visibroker. For the purposes of this

* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the
information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this
exhibit has been filed separately with the Securities and Exchange Commission.
transaction, the Visibroker License Fee will be [ * ]. Thereafter, and to any additional Licensed Products,
Licensed Users and Designated Sites, then-current prices, terms, and conditions shall apply."

SECTION 5. PAYMENT, Paragraph (B), is amended by the addition of the following:

"For Services for the initial implementation of the Licensed Products, Licensed Users and Designated Sites
licensed upon execution hereof, Manhattan agrees to provide Client a [ * ] discount on the billing rates listed
below for Services incurred by Client through December 31, 2004.

CONSULTING BILLING RATES ANALYSTS / R & D / OTHER BILLING RATES

                           Executives                                              [   *   ]
                           Vice President                                          [   *   ]
                           Design Leader / Director                                [   *   ]
                           Hardware System Consulting                              [   *   ]
                           Manager                                                 [   *   ]
                           Project Manager                                         [   *   ]
                           Senior Consultant                                       [   *   ]
                           Hardware Services                                       [   *   ]
                           Consultant/Hardware/Telephone                           [   *   ]
                           Support                                                 [   *   ]
                           Associate                                               [   *   ]
                           Vice President                                          [   *   ]
                           Director/Senior Development Manager                     [   *   ]
                           Development Manager                                     [   *   ]
                           Senior Software Engineer                                [   *   ]
                           Software Engineer                                       [   *   ]
                           Associate                                               [   *   ]




For the initial implementation of the Licensed Products, Licensed Users, and Designated Sites licensed
contemporaneously with the execution of this Addendum, and provided said implementation is completed on or
before December 31, 2004, as such date shall be extended due solely to the fault of Manhattan, Manhattan
estimates that the Services fees to provide the implementation Services specified in the Red Envelop Process
Flow Diagram.doc, the Red Envelope Project Plan V1 20031125.mpp, and the Red Envelope Functional Flow
20031121.doc ("Implementation documents") shall be [ * ], and

* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the
information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this
exhibit has been filed separately with the Securities and Exchange Commission.
Manhattan agrees not to exceed such amount. In the event the scope of project as described in said
implementation Documents should change, or associated roles and responsibilities should change, the
aforementioned estimated and "not to exceed" amounts shall be adjusted as mutually agreed to in good faith by
the parties. Further, in the event Client requests additional Services beyond those detailed in the Implementation
Documents; Manhattan agrees to provide an additional [ * ] discount on the Services Rates listed above. Page 3
of 4 ADDSLSSEA.30808 Client and Manhattan acknowledge Client's objective to have first commercial use of
the License Products on or before July 15, 2004. In the event such first commercial use is achieved on or before
said date, Client agrees to pay Manhattan an additional [ * ] in Services Fees. Should such First Commercial Use
occur after said date solely due to the fault of Manhattan, Manhattan agrees to pay Client [ * ]. Such payment
shall be made by either party no later than thirty (30) days following first commercial use of the Licensed
Products. In the event the scope of any or all of the project, Modifications, and/or the associated
roles/responsibilities should change with respect to said cost estimates, the parties will mutually agree to modify
the appropriate documentation and costs by a change order. Manhattan will estimate the added cost, net of any
credit for work that will not need to be performed, and advise Client of such cost. Client will then advise
Manhattan whether Client wants to proceed with the change order and, if so, the appropriate documentation will
be appropriately amended. In the event the scope of any or all of the project, Modifications, and/or the
associated roles/responsibilities should change with respect to said cost estimates is not mutually agreed to by
Client and Manhattan, the estimates and payment obligations provided herein shall no longer apply. Client is
responsible for the out-of-pocket expenses associated with said efforts. Manhattan agrees to perform these
implementation Services provided Client performs its obligations pursuant to this Agreement. After December 31,
2004, then-current prices terms and conditions shall apply."

SECTION 5. PAYMENT, Paragraph (C), is amended by the addition of the following:

"For the Licensed Products, Licensed Users and Designated Sites licensed upon execution hereof, Client agrees
to pay the Customer Support and Software Enhancements Fees set forth in the Attachment B executed
contemporaneously herewith in accordance with the following schedule:

- Twenty-five percent (25%) upon execution hereof;

- Twenty-five percent (25%) within ninety (90) days of execution hereof;

- Twenty-five percent (25%) within one hundred eighty (180) days of execution hereof; and

- The remaining twenty-five percent (25%) within two hundred seventy (270) days of execution hereof.
"Thereafter, and to any additional Licensed Products, Licensed Users and Designated Sites, then-current prices,
terms, and conditions shall apply."

* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the
information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this
exhibit has been filed separately with the Securities and Exchange Commission.
SECTION 5. PAYMENT, PARAGRAPH (C), is further amended by the addition of the following:

"For a period of four (4) years following the date of execution of this Agreement, for the Licensed Products,
Licensed Users and the Designated Sites licensed contemporaneously with this Addendum, Manhattan agrees not
to increase Client's prices for Customer Support and/or Software Enhancements Fees more than the national rate
of inflation for the preceding twelve (12) month period, as measured for the Consumer Price Index by the United
States Bureau of Labor Statistics (CPI-W) plus [ * ] per year. Following said four (4) Subscription Periods and
for additional Licensed Products, Licensed Users, or Designated Sites not licensed contemporaneously with this
transaction, then current prices, terms and conditions shall apply."

SECTION 7. EMPLOYEE RECRUITING, is replaced in its entirety by the following:

"Each party acknowledges that the other party's employees are critical to the servicing of its customers.
Therefore, each party agrees not to solicit, employ or otherwise engage the other party's employees without the
employing party's prior written consent for a period of twelve (12) months following that employee's last date of
employment by the employing party. Should either party violate this provision, the violating party agrees to pay
the other party the greater of one-half of the former employee's annual salary or fifty thousand dollars ($50,000).
The parties further agree that in the event of any actual or threatened breach of any of the provisions of this
section, the non-breaching party shall be entitled (in addition to any and all other rights and remedies at law or in
equity for damages or otherwise, which rights and remedies are and shall be cumulative) to specific performance,
a temporary restraining order, or an injunction to prevent such breach or contemplated breach. Further, such
payment and additional relief does not restrict the non-breaching party's rights or remedies as they relate to such
former employee."

SECTION 10. GENERAL, Paragraph (C) GOVERNING LAW, is amended by replacing "Georgia" with "New
York".

SECTION 10. GENERAL, Paragraph (E) is amended to read as follows:

"PUBLICITY RIGHTS. Manhattan may include Client's name and logo among its list of clients, and may disclose
Client's name only during its quarterly earnings announcement in fulfillment of its SEC disclosure requirements.
Either party may advertise or publicize the relationship created by this Agreement, provided that any such
advertisements or publicity materials are pre-approved by the other party, which approval shall not be
unreasonably withheld."

* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the
information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this
exhibit has been filed separately with the Securities and Exchange Commission.
THIS ADDENDUM, INCLUDING THE AGREEMENT OF WHICH IT IS A PART, IS A COMPLETE
AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES, WHICH
SUPERSEDES ALL PRIOR OR CONCURRENT PROPOSALS AND UNDERSTANDINGS, WHETHER
ORAL OR WRITTEN, AND ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES RELATING
TO THE SUBJECT MATTER OF THIS ADDENDUM AND THE AGREEMENT.

Notwithstanding anything to the contrary in the Agreement, in the event of a conflict between the terms and
conditions of this Addendum and those contained within the Agreement, the terms and conditions of this
Addendum shall prevail. All other terms and conditions remain unchanged and are ratified hereby.

THIS ADDENDUM SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CLIENT AND ACCEPTED
AND EXECUTED BY THE CHIEF FINANCIAL OFFICER , CHIEF LEGAL OFFICER OR CHIEF
EXECUTIVE OFFICER OF MANHATTAN.

By execution, signer certifies that signer is duly authorized to execute this Agreement on behalf of Manhattan.
Accepted by Manhattan and effective as of 12/30/03.

MANHATTAN ASSOCIATES, INC.

                                             /s/ EDWARD K. QUIBELL
                                             ---------------------
                                             (Authorized Signature)




Edward K. Quibell
(Printed Name)

Chief Financial Officer
(Title)

By execution, signer certifies that signer is duly authorized to execute this Agreement on behalf of Client.

CLIENT

                                     /s/ JOHN W. ROBERTS
                                     -------------------
                                     (Authorized Signature)

                                     /s/ John W. Roberts, svp Tech & Ops
                                     -----------------------------------
                                     (Printed Name and Title)

                                     12/29/03
                                     ---------------
                                     (Date Signed)
[MANHATTAN ASSOCIATES LOGO]

                                           2300 Windy Ridge Parkway
                                               Atlanta, GA 30339

                               ATTACHMENT A - LICENSED PRODUCTS
                                   (U.S & CANADIAN SITES ONLY)

Client: Red Envelope, Inc.
Address: 201 Spear Street, Ste 300
San Francisco, CA 94105

This Attachment A ("Attachment") to the Software License, Services, Support and Enhancements Agreement
("Agreement") is made by and between Manhattan Associates, Inc. ("Manhattan") and Client in consideration of
their mutual promises and subject to its terms and conditions. This Attachment amends the Agreement dated.
Client agrees to license the designated Licensed Products for use on the Designated Processor(s) at the
Designated Site(s).

THE "LICENSE USE" SECTION OF THE AGREEMENT IS AMENDED BY THE ADDITION OF THE
FOLLOWING: CLIENT HAS THE RIGHT TO USE ONLY THE LICENSED PRODUCTS DESIGNATED
ON THIS ATTACHMENT EXECUTED BY CLIENT AND ACCEPTED AND EXECUTED BY
MANHATTAN AND SUCH USE IS LIMITED TO THE INDICATED DESIGNATED PROCESSORS,
LICENSED USERS, AND DESIGNATED SITES, AS APPLICABLE. LICENSED PRODUCTS: TOTAL
LICENSE FEES:

WAREHOUSE MANAGEMENT SYSTEM (WMS)

       Outbound Distribution System (ODS)                            Inventory Management System (IMS)
       Radio Frequency Functions (ODS)                               Task Management System (IMS)
       Parcel Transportation Management System (ODS)                 Radio Frequency Functions (IMS)
       Transportation & Freight Management System (ODS)




PERFORMANCE MANAGEMENT - REPORTING (MUST BE USED IN THE SAME
DESIGNATED SITES WITH WMS)
PERFORMANCE MANAGEMENT - EVENTS (MUST BE USED IN THE SAME DESIGNATED
SITES WITH WMS)

                                  NUMBER OF LICENSED USERS: 100*

                                TOTAL SOFTWARE LICENSE FEES: [ * ]

*Client is licensed for one hundred (100) Licensed Users, however Client may utilize up to two hundred (200)
Licensed Users on a seasonal basis as defined in Article II, Section 1(D) of the Addendum executed
contemporaneously herewith.

* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the
information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this
exhibit has been filed separately with the Securities and Exchange Commission.
      DESIGNATED SITE(S)           DESIGNATED PROCESSOR(S) MODEL                           LICENSED USERS
       (name & address)    (Including Feature and Serial # if applicable)                     ALLOCATED
      ------------------   ----------------------------------------------                  --------------
1        Columbus, OH                      Open Systems                                           100
---------------------------------------------------------------------------------------------------------
2
---------------------------------------------------------------------------------------------------------
3
---------------------------------------------------------------------------------------------------------




This Attachment, including its terms and conditions and the Agreement of which it is a part, is a complete and
exclusive statement of the agreement between the parties relating to its subject matter, and which supersedes all
prior or concurrent proposals and understandings, whether oral or written, and all other communications between
the parties relating to its subject matter. Notwithstanding anything to the contrary in the Agreement, in the event of
a conflict between this Attachment and the Agreement, this Attachment shall prevail. All other terms and
conditions remain unchanged and are ratified hereby. This Attachment shall not be effective until executed by
Client and accepted and executed by the Chief Financial Officer, Chief Legal Officer or Chief Executive Officer
of Manhattan. By execution, signer certifies that signer is duly authorized to execute this Agreement on behalf of
Manhattan. Accepted by Manhattan and effective as of

MANHATTAN ASSOCIATES, INC.

                                            By /s/ EDWARD K. QUIBELL
                                            ------------------------
                                            (Authorized Signature)




Edward K. Quibell
(Print or Type Name)

Chief Financial Officer
Title)

By execution, signer certifies that signer is duly authorized to execute this Agreement on behalf of Client.

CLIENT

                                     By /s/ JOHN W. ROBERTS
                                     ----------------------
                                     (Authorized Signature)

                                     /s/ JOHN W. ROBERTS, SVP TECH & OPS
                                     -----------------------------------
                                     (Print or Type Name and Title)

                                     12/29/03
                                     ---------------
                                     (Date Signed)
[MANHATTAN ASSOCIATS LOGO]

                                            2300 Windy Ridge Parkway
                                                Atlanta, GA 30339

                         ATTACHMENT B -SUPPORT AND ENHANCEMENTS

                                    Client:        Red Envelope, Inc.
                                    Address:       201 Spear Street, Ste 300
                                                   San Francisco, CA 94105




This Attachment B ("Attachment") to the Software License, Services, Support and Enhancements Agreement
("Agreement") is made by and between Manhattan Associates, Inc. ("Manhattan") and Client in consideration of
their mutual promises and subject to its terms and conditions. This Attachment amends the Agreement dated
______________, as follows:

CUSTOMER SUPPORT AND SOFTWARE ENHANCEMENTS - Manhattan provides to Client and Client
accepts, subject to the terms and conditions of the Agreement, Customer Support and Software Enhancements
as indicated below:

SELECT TYPE:

- CUSTOMER SUPPORT & SOFTWARE ENHANCEMENTS

- REINITIATION FEES $ ________________

TOTAL CUSTOMER SUPPORT AND SOFTWARE ENHANCEMENTS FEES [ * ]

This Attachment, including its terms and conditions and the Agreement of which it is a part, is a complete and
exclusive statement of the agreement between the parties relating to its subject matter, and which supersedes all
prior or concurrent proposals and understandings, whether oral or written, and all other communications between
the parties relating to its subject matter. Notwithstanding anything to the contrary in the Agreement, in the event of
a conflict between this Attachment and the Agreement, this Attachment shall prevail. All other terms and
conditions remain unchanged and are ratified hereby. This Attachment shall not be effective until executed by
Client and accepted and executed by the Chief Financial Officer, Chief Legal Officer or Chief Executive Officer
of Manhattan. By execution, signer certifies that signer is duly authorized to execute this Agreement on behalf of
Manhattan. Accepted by Manhattan and effective as of.

* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the
information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this
exhibit has been filed separately with the Securities and Exchange Commission.
MANHATTAN ASSOCIATES, INC.

                                           By /s/ EDWARD K. QUIBELL
                                           -------------------------
                                           (Authorized Signature)




Edward K. Quibell
(Print or Type Name)

Chief Financial Officer
Title)

By execution, signer certifies that signer is duly authorized to execute this Agreement on behalf of Client.

CLIENT

                                     By /s/ JOHN W. ROBERTS
                                     ----------------------
                                     (Authorized Signature)

                                     /s/ JOHN W. ROBERTS, SVP TECH & OPS
                                     -----------------------------------
                                     (Print or Type Name and Title)

                                     12/29/03
                                     ------------------
                                     (Date Signed)
                                                  EXHIBIT 10.38

Sales Agreement Page 1

                                             SALES AGREEMENT

                                              DATE: APRIL 30, 2004

This Sales Agreement, hereinafter, called "Agreement", made by and between redEnvelope with offices at 201
Spear Street, Suite 300, San Francisco, California 94105, hereinafter called "Purchaser", and Vargo Material
Handling, Inc. with offices at 3709 Parkway Lane, Hilliard, OH 43026, hereinafter called "Supplier", constitutes
Agreement of the parties as follows:

A: PURCHASE AND SALE; DELIVERY AND INSTALLATION

1. Supplier agrees to sell to Purchaser and Purchaser agrees to purchase from Supplier, the equipment and any
services described in the Sedlak Request for Proposal dated February 18, 2004 (See Exhibit
1) with supplier exceptions and additions as agreed to and listed in Exhibit 2, for the price set forth in Supplier's
Proposal 4104-001 and subsequent correspondence as summarized below:

                        Equipment and System Engineering              [ * ]
                        Freight (Prepaid)                             [ * ]
                        Unloading                                     [ * ]
                        Permits and Bonds                             [ * ]
                        Installation (Non-Union)                      [ * ]
                        ----------------------------------------------------------
                        SUBTOTAL                                      [ * ]
                        Alternate # 1                                 [ * ]
                        Alternate # 8                                 [ * ]
                        Alternate #10                                 [ * ]
                        Alternate #11                                 [ * ]
                        Alternate #13                                 [ * ]
                        Alternate #14                                 [ * ]
                        Alternate #15                                 [ * ]
                        ----------------------------------------------------------
                        GRAND TOTAL                                   [ * ]




To the extent Exhibits 1 and 2 contain terms inconsistent with this Agreement, the terms of this Agreement shall
prevail.

2. Terms of Payment The initial payment of 10% [ * ] shall be paid upon Sedlak's review of engineering
drawings. The final payment of 10% [ * ] shall be paid net 30 days from acceptance of system by
redENVELOPE. The balance shall be paid monthly based upon equipment received and services completed.

* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the
information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this
exhibit has been filed separately with the Securities and Exchange Commission.

                           [SEDLAK MANAGEMENT CONSULTANTS LOGO]
Sales Agreement Page 2

3. This agreement constitutes the entire agreement between parties and no oral representation shall prevail,
notwithstanding any other terms and conditions of any order submitted by Purchaser. Any changes, modifications,
or additions to this Agreement are binding and enforceable only if made in writing and signed by both parties.

4. Correspondence between parties to be addressed as follows:

                                                     Purchaser

                                       John Roberts, Senior Vice President

redEnvelope
201 Spear St.

                                         San Francisco, California 94105

                                                    Consultant

                                       Ron Montgomery, Senior Consultant

Sedlak Management Consultants, Inc. 4020 Kinross Lakes Parkway
Richfield, OH 44286

                                                      Supplier

                                      Carlos Ysasi, Senior Project Manager

Vargo Material Handling, Inc. 3709 Parkway Lane
Hilliard, OH 43026-1729

                                             The Installation Site is:

                                         Lockbourne Fulfillment Center

redEnvelope
4000 Creekside Parkway
Lockbourne, OH 43137

5. All original invoices shall be sent to Purchaser with a copy to Consultant.

6. All matters relating to this invoice are to be coordinated through the Consultant.

7. The overall activity schedule encompasses a period of 16 weeks beginning March 26, 2004 and ending July
16, 2004, and an installation start date of April 28, 2004.

8. All equipment is to be ship via truck prepaid.

                          [SEDLAK MANAGEMENT CONSULTANTS LOGO]
Sales Agreement Page 3

9. One (1) duplicate copy of all released data such as acknowledgement, shipping documents, invoices, et cetera,
must be submitted to Consultant, in addition to the normal standard procedures.

10. One (1) reproducible set of installation drawings of layouts, major elevations and cross sections must be
submitted to Consultant for review prior to manufacturing.

11. It shall be Supplier's final responsibility to field check critical equipment and layout dimensions to avoid
building, equipment, and merchandise handling.

12. Reserved.

13. Two- (2) weeks' advance notification must be given Consultant prior to the initial shipment of equipment for
confirmation of site readiness.

14. An introductory meeting at Purchaser's offices is to take place within two (2) weeks, and will include all
Suppliers with their assigned project manager(s). This will assure a smooth transition between the points of
contact with each Supplier, Purchaser, and Consultant.

15. Supplier shall advise Purchaser in advance of Supplier's contractors' and subcontractors' on-site working
schedule for proper personnel clearance and working arrangements.

16. All Supplier's work and the work of Supplier's subcontractors are to be coordinated with other
equipment/building contractors.

17. One (1) set of unfolded reproducible drawings and one (1) set of unfolded prints shall be furnished of "as
built" drawings and shall include equipment layouts and elevation details. Electronic copies of said drawings shall
be provided on CD.

18. Three (3) sets of maintenance manuals including catalog information covering all purchased and/or
subcontracted items supplied under this contract shall be submitted to Purchaser by Supplier. These shall also
include the bills of material for all system components and a recommended spare parts list with pricing
information.

19. A kick-off meeting will be scheduled prior to the installation start date at Purchaser's offices with Supplier's
Project Manager, Installation Supervisor, and Purchaser and Consultant for review of a detailed timetable of
installation and interface with other subcontractors, and review of Purchaser's procedures.

20. Supplier shall provide a final system, which is free, clean, and clear of debris. A final wipe down is required.

                           [SEDLAK MANAGEMENT CONSULTANTS LOGO]
Sales Agreement Page 4

21. Time is of the essence and adherence to the schedule noted herein is required. Should Vargo be late in
delivering the system by August 1, 2004, at no fault of RedEnvelope, a penalty of 1% of the contract will be
imposed per day. This penalty shall not apply to delays caused solely by vendors engaged by Vargo in
connection with this agreement.

22. Housekeeping and safety standards must be maintained as requested in the Request for Proposal.

B. GENERAL TERMS

1. TAXES

Unless otherwise indicated, the price does not include any sales, use, excise, or similar taxes, and Purchaser shall
be responsible for all such taxes, whether or not invoiced by Supplier.

2. WARRANTY:

a. The supplier shall warrant that the system shall be free of defects in material and workmanship and provide
other customary warranties for a minimum of one year following final acceptance (completion of all above items).
Supplier shall provide repair service (parts and labor) with respect to valid warranty claims at no cost or expense
to Red Envelope during the warranty period.

a. Supplier's warranty and obligation to repair, or replace, as set forth above, does not apply to (1) any
equipment damaged by overloading, exposure to corrosive or abrasive substances or abnormal dampness or
other misuse, neglect, or accident, unless caused by Supplier; or (2) any equipment which has been improperly
installed, adjusted, operated, maintained, repaired, modified, or altered by persons other than Supplier, its
employees, or subcontractors.

b. If the equipment includes computer hardware or software, which Supplier acquires from original
manufacturers, Supplier agrees to convey and transfer to Purchaser whatever interest, rights, warranties, or
guarantees Supplier may obtain, if any. Supplier makes no representation nor assumes any obligation for these
items other than that offered in the preceding sentence.

c. SUPPLIER MAKES NO ADDITIONAL WARRANTIES, EXPRESS OR IMPLIED, AS TO ANY
EQUIPMENT, SOFTWARE, OR SERVICES SOLD UNDER THIS AGREEMENT, AND IN
PARTICULAR SUPPLIER MAKES NO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE EXCEPT AS PROVIDED IN THIS ARTICLE 2.

                          [SEDLAK MANAGEMENT CONSULTANTS LOGO]
Sales Agreement Page 5

3. INSURANCE BY SUPPLIER

Supplier will maintain insurance covering its operations as follows.

a. Worker's Compensation Insurance as required by the state having jurisdiction over Supplier and Employer's
Liability with limit of $500,000.

b. Comprehensive General Liability Insurance with combined single limit for bodily injuries and property damage
of $1,000,000 with a general umbrella policy of $5,000,000.

c. Automotive Liability Insurance for bodily injuries, including death and property damage with a combined single
limit of $1,000,000.

Supplier shall furnish to Consultant immediately, and in triplicate, copies of insurance certificates in accordance
with these requirements. A ten- (10) day prior notice clause must be approved in the event of cancellation,
alteration or revision to the stipulated insurance coverage.

4. It is the responsibility of Supplier to provide, prior to the manufacture of system components, written
concurrence of its agreement that the system resulting from this turn-key installation meets all applicable safety
codes with regards to the equipment components used and the resulting system, as well as to the ergonomics of
conveyor related work stations and their elevations. Where Supplier does not agree, a written description of
those instances where safety codes and the ergonomics of work stations and their elevations are not satisfactorily
met, shall be provided with suggestions for correcting those instances.

5. CHANGE ORDER

The parties may agree at any time prior to final payment of the Agreement to make additions, deletions, or other
revisions by Change Order or Work Order (as defined below) without invalidating the Agreement. Supplier will
perform no such change until an approved Change Order or Work Order is executed as provided below.

a. When the price, schedule and other conditions relating to the change can be determined prior to the start of
work under the change, the Purchaser will issue a document describing this change (Change Order) for
execution.

b. When the change requires immediate action and the issuance of an executed Change Order with firm price
would unreasonably delay the change; Purchaser shall place its signature upon a document authorizing

                           [SEDLAK MANAGEMENT CONSULTANTS LOGO]
          Sales Agreement                                                                          Page 6

                                Supplier to proceed with the change (Work Order). After the
                                change under the Work Order has been completed, Supplier will
                                calculate the firm price for the change using actual costs
                                (including overhead and reasonable profit) current at time of
                                performance of the work. The parties will incorporate
                                completed Work Order(s) into a Change Order for execution.




Unless expressly modified by a Change Order or Work Order, the provisions of the Agreement will govern all
work performed under such Change Order or Work Order.

7. LIENS

Supplier will protect Purchaser as to any lien asserted against Purchaser's property for work, material, or services
furnished by others at Supplier's request when Purchaser makes the payments provided for in the Agreement.

8. RIGHTS AND REMEDIES

If Supplier defaults in the performance of any of its obligations under the Agreement (other than it's obligations
under Section B(2) hereof) and if the default continues for a period of 20 days after Purchaser shall have given
Supplier written notice of the default, Purchaser shall have the right to terminate the Agreement upon written
notice to Supplier.

9. SECURITY INTEREST AND TITLE

a. Reserved.

b. Supplier hereby grants Purchaser a single site non-transferable and non-exclusive license to use all computer
software manufactured and provided by Supplier under the Agreement. Title to the software and documentation,
if any, provided hereunder shall at all times remain with Supplier. Purchaser agrees to use such software strictly in
compliance with the terms of the agreement, and for the use(s) contemplated herein, and specifically agrees not to
copy, furnish, disclose, or otherwise make said software, or any portion thereof, available to any third party.

c. The Supplier manufactured and provided software is a proprietary trade secret of Supplier. Purchaser agrees
to maintain confidentiality of Supplier software, and to restrict access to Purchaser's employees or agents directly
concerned with Purchaser's licensed use of same.

d. Refer to Section B(2)(b) for provisions of title for software, which Supplier acquires from original
manufacturers.

                          [SEDLAK MANAGEMENT CONSULTANTS LOGO]
Sales Agreement Page 7

10. DELAYS

If Supplier's performance is delayed or prevented by Purchaser or other cause beyond the reasonable control of
Supplier (such as casualty, labor trouble, governmental action, inability to obtain supplies or transportation, or any
order modification by Purchaser):

a. Purchaser agrees to pay Supplier invoices upon notification that equipment is ready for shipment in accordance
with the shipping schedule and to reimburse Supplier for expenses incident to such delay including, without
limitation, the cost of engineering, equipment and installation escalations; maintaining, repairing and refurbishing
equipment; storage, demurrage, and pullout charges from installation site; and

b. The time for delivery of the equipment and performance of the services will be extended accordingly, and
Supplier will not be liable for any damages caused by the delay; and

c. The stated purchase price shall be revised based upon labor wage rates and other conditions prevailing at the
time of actual performance.

11. INFRINGEMENT

Supplier agrees to indemnify, defend and hold Purchaser harmless from any damages that may be awarded
against Purchaser in any final judgment based upon a claim that the equipment or its use infringes any copyrights,
trade secrets, United States patents or other intellectual property rights, provided that Purchaser notifies Supplier
in writing, within 10 days of Purchaser's knowledge of any such claim, and gives Supplier the exclusive control of
the defense and settlement of any claim, including the right to make changes in the equipment (provided that such
changes do not impair the functionality, performance or appearance of the equipment) to avoid any alleged
infringement. Purchaser is responsible for any infringement claim arising from any modifications of the equipment
by purchaser or any combining by Purchaser of the equipment with other equipment not furnished by Supplier.

12. ASSIGNMENT/SUBCONTRACTS

Neither party to this Agreement may assign this Agreement without the consent of the other party, except that
either party may assign any of the obligators and benefits under this Agreement in connection with the sale or
transfer of all or substantially all of its assets or business.

                           [SEDLAK MANAGEMENT CONSULTANTS LOGO]
Sales Agreement Page 8

Supplier reserves the right to use subcontractors in the performance of any services to be performed by Supplier.
Supplier is responsible for the acts and omissions of any subcontractor so engaged.

13. LIMITATION OF REMEDIES/GOVERNING LAW

The Agreement sets forth Purchaser's sole and exclusive remedies for any defect in or non-conformity of any
equipment or services and for any negligent design, manufacture, or installation of the equipment, and for any
breach of the Agreement by Supplier. Supplier in no event shall be liable for incidental or consequential damages
(including loss of profits).

14. REPRESENTATIONS BY PURCHASER

Purchaser hereby represents to Supplier hat the person executing this agreement on behalf of Purchaser has legal
and corporate authority to do so, and that Supplier may rely on such execution to evidence Purchaser's
agreement to be bound hereby and to perform all Purchaser's obligations hereunder.

15. LEGAL PROVISIONS

This agreement shall be interpreted in accordance with the laws of the State of California, exclusive of provisions
regarding choice of law.

The parties evidence their agreement with the terms contained herein by causing this Agreement to be executed
by their respective officers as of the date first written above.

Approved and Executed By:

          Supplier                                 Purchaser
          --------------------------------------------------------------------------------
          /s/ J. MICHAEL VARGO       5/18/04       /s/ JOHN ROBERTS                5/6/04
          --------------------------------------------------------------------------------
          Signature                  Date          Signature                       Date

          PRESIDENT                                SVP TECHNOLOGY
          --------------------------------------------------------------------------------
          Title                                    Title




                          [SEDLAK MANAGEMENT CONSULTANTS LOGO]
Sales Agreement                                                  Page 9

EXHIBITS

     Exhibit 1:     Sedlak RFP

     Exhibit 2:     Vargo Material Handling, Project Proposal.




             [SEDLAK MANAGEMENT CONSULTANTS LOGO]
                           EXHIBIT 1

                         redENVELOPE
                     REQUEST FOR PROPOSAL

ISSUED DATE:                           February 18, 2004

ITEM 1.0:                              Material Handling Equipment
                                       (MHE)

PROJECT NUMBER:                        S-1808

LOCATION:                              Columbus, Ohio

PROPOSAL DUE DATE:                     March 5, 2004

                                                        [SEDLAK LOGO]
                                                 CONTENTS



                                                                     MHE-PAGE
1.0    INSTRUCTIONS TO OFFERORS...................................          3

2.0    SCHEDULES..................................................         5

3.0    DRAWINGS REQUIRED..........................................         7

4.0    WORKING CONDITIONS AND WORKMANSHIP.........................        10

5.0    INSURANCE AND BOND REQUIREMENTS............................        13

6.0    SPARE PARTS, TRAINING AND MANUALS..........................        15

7.0    DRAWINGS FURNISHED.........................................        17

8.0    ACCEPTANCE, WARRANTIES AND TESTING.........................        18

9.0    SCOPE OF WORK..............................................        21

10.0   DESCRIPTION OF OPERATION...................................        26

11.0   MATERIAL TO BE HANDLED AND FLOW RATES......................        29

12.0   EQUIPMENT SPECIFICATIONS SUMMARY FORM......................        31

13.0   PRICING FORMS..............................................        40




                              [SEDLAK LOGO]
RedEnvelope
February 18, 2004

1.0 INSTRUCTIONS TO OFFERORS

Sedlak, on behalf of our client, redENVELOPE submits the accompanying Request For Proposal and asks that
this proposal be prepared in accordance with the following "Instructions to Offerors."

1. It is the supplier's responsibility to review the proposed package conveyor system, racking and building to
verify all dimensions and elevations. All dimensions and elevations shown on drawings are for the sole purpose of
developing performance specifications for this system. It is the equipment supplier's responsibility to verify the
proposed system will meet or exceed the system's performance requirements while complying with American
Disability Act, all local, state, national, safety or OSHA codes.

2. Offerors are to submit specifications, and drawings when applicable, outlining the proposed equipment in
sufficient detail to permit a thorough evaluation of their proposal.

3. Exceptions to specifications are to be shown separately and with alternate pricing.

4. Alternates to specified equipment, or components, are to be shown separately and with alternate pricing.

5. Drawings and specifications for this proposal request are to be used in conjunction with each other, and that
which is shown in one and not mentioned in the other, or vice versa, shall be interpreted as though mentioned in
both. Scaling of drawings shall not be a means of determining dimensions. Should the drawings or specifications
be contradictory in any particular, or should there be any doubt to the meaning of either, offeror shall refer the
matter to redENVELOPE whose decision thereon shall rule.
RedEnvelope
February 18, 2004

6. Proposals are to be received at the offices of Sedlak no later than 12:00 noon on Friday, March 5, 2002.

7. Proposals are to consist of an original and two (2) copies. Include three (3) copies of any drawings, literature,
brochures or illustrations that may be helpful in describing the proposed equipment.

8. All blank spaces in Sections 12 and 13 shall be totally completed. Where required, amounts shall be written in
words as well as figures. Oral telephone proposals, modifications or notifications will not be considered or
recognized.

9. Proposals will not be opened publicly, but will be opened as soon as feasible after the due date.

10. All offerors may be requested to make a formal presentation of their proposals.

11. All requests for proposal materials shall be returned in the event of an unsuccessful proposal or a decline to
quote.

12. The offeror shall include the cost of securing any permits that may be required.

13. Inquires are to be directed to:

                     Sedlak
                     4020 Kinross Lakes Parkway
                     Richfield, Ohio 44286
                     Attn: Ron Montgomery                     or       Dave Teeple
                     Senior Consultant                                 Project Manager
                     rmontgomery@jasedlak.com                          dteeple@jasedlak.com
                     Phone:(330) 908-2225                              330-908-2352
                     Fax: (330) 908-2160                               330-908-2166
RedEnvelope
February 18, 2004

2.0 SCHEDULES

1. Activity schedule:

A. Bid due: March 5, 2004.

B. Contract to be issued on or about: March 12, 2004.

C. Delivery, de-installation and installation start-up to be during week of May 10, 2004.

D. Installation, including adjusting, final alignment and punch list correction of all equipment shall be completed by
July 20, 2004.

2. The supplier shall protect the purchaser in relation to start-up scheduling by prompt attention to matters
affecting start-up, such as damaged and/or defective components. On receipt of acknowledgments from sub-
suppliers of purchased items, supplier shall submit to the purchaser or their representative the schedule of material
and equipment deliveries to the site. The supplier and sub-suppliers shall allocate sufficient resources to meet the
contemplated schedules with adequate margin for the unforeseen.

3. Implementation plan shall consist of the following steps:

4. Schedule of payment will be as follows:

A progressive milestone payment schedule shall be presented in the proposal. These milestones shall show
monies due at the following milestones:
RedEnvelope
February 18, 2004

A. All Drawings Approved

B. Equipment Delivery (Monthly as applicable)

C. Installation Labor (Monthly as applicable)

D. System Acceptance

Purchaser (owner) shall pay invoices as per the following:

A. 10% in receipt of each invoice will be deducted and held as retainage.

B. 90% in receipt of each invoice will be paid by Purchaser within 30 days following the receipt of invoice.

The total retainage shall become due and payable as described in "Acceptance, Warranties and Testing" section.

3.0 DRAWINGS REQUIRED

1. The supplier shall provide the purchaser and Sedlak all engineering and installation drawings required for the
installation of the system along with any additional drawings required.

2. The supplier must notify Sedlak of any discrepancies between the Sedlak drawings and the drawings by the
supplier.

3. The supplier's engineering and installation drawings shall be reviewed prior to manufacture and installation of
equipment. One (1) set of reproducible drawings shall be submitted for review to Sedlak within sufficient time
after receipt of order to avoid any delay in the project schedule.
RedEnvelope
February 18, 2004

As applicable, the material to be submitted for review shall include, but not be limited to:

A. Systems layouts and elevation drawings.

B. Work platforms and maintenance platforms.

C. Special equipment design drawings.

D. Building loadings and drawings.

E. Mechanical components drawings.

Items A, B, C and E are to be to an approved scale.

F. Air piping schematics and layout drawings.

G. Electrical controls and systems operation descriptions.

H. Front face layouts of control cabinets and control consoles including system schematic mimic panels showing
lights, color graphic display layouts, push buttons, et cetera.

I. Seismic drawings and supporting calculations.

4. The submission of drawings for review by the supplier shall certify that the information contained on such
drawings conforms to the contract documents. Review of submitted drawings by Sedlak or its representatives
shall not relieve the supplier of liability for any variation between the drawings and the contract documents, unless
the supplier has notified Sedlak in writing of such variation when submitting the drawings and Sedlak gives
specific written approval thereof.

5. The supplier shall make original engineering drawings that shall be submitted for review and may use Sedlak
drawings as reference only.

6. The supplier shall make contingencies to insure that there will be sufficient time in
RedEnvelope
February 18, 2004

the schedule to complete the review process, including revisions to original issues. This shall be done prior to the
manufacturing and/or installation of equipment. This will be particularly enforced on special design and/or non-
standard equipment. The supplier shall take full responsibility for changing, as required by the purchaser, any
items which have been manufactured and/or installed without receiving prior approval.

7. Reproducible field drawings showing all changes (electrical, mechanical, et cetera) shall be maintained on site.
These drawings shall be updated weekly (as minimum) and be subject to review by the purchaser or their
representative. These reproducible drawings shall remain on site until replaced by the updated "as built" drawings.

8. Upon completion of the installation, the supplier shall furnish to the owner within three (3) weeks, one (1) set
of prints and one (1) set of reproducible "as built" drawings. Drawing size shall not exceed "D" (24" x 36") size
and shall be of "original" quality vellums, or better. All text shall be a minimum size of 3/32". Diskettes shall be
submitted to the purchaser and contain duplicated versions of the reproducible "as built" drawings.

9. The supplier shall provide drawings and calculations for the correct seismic zone in which the building site is
located. These drawings shall include, but not be limited to, the forces at the connection points on the building
structure (not on the conveyor support drops).

10. The supplier shall submit plans, calculations and documents, and shall obtain all approvals relating to his
equipment from the appropriate regulating authorities (local, state, et cetera) when such approval is required.

11. The supplier shall provide two (2) copies of documents certifying that the system(s) provided are designed to
perform according to these functional specifications. These
RedEnvelope
February 18, 2004

documents shall contain all calculations certified by a professional engineer pertinent to the designs supplied.
These documents shall be supplied within two weeks after the award of the contract and are for record purposes
only and will be neither reviewed nor approved by the purchaser.

4.0 WORKING CONDITIONS AND WORKMANSHIP

1. All equipment and work performed shall be free of defects and done in a professional manner, and must also
conform to Americans with Disability Act (ADA), all current national, state and local safety codes and OSHA
requirements. The purchaser will not be responsible for installation means, methods, techniques, sequences or
procedures, or safety precautions and programs. When specifications exceed code requirements, the
specifications shall govern. If the supplier furnishes any equipment or work not in conformance with such laws,
ordinances, rules and regulations, all costs arising from the correction thereof shall be borne by the supplier.

2. Work will be performed during day and/or night shift as to NOT INTERFERE WITH DAILY
OPERATIONS. Activities that could interfere with daily operations shall be performed after hours. Work will be
performed by skilled labor under the proper supervision of a qualified representative of the supplier. The supplier
shall notify Sedlak at least ten (10) working days before any material is shipped to the site. The current hours of
operation are - 7AM thru 12PM Monday thru Friday (with replenishment on third shift).

3. The supplier shall coordinate their work schedule in the various areas of the building so that interference with
the daily operations of installers and daily business operations of redENVELOPE is kept to a minimum. It is
expected that the supplier's installer will work closely with other contractors and Sedlak during engineering and
installation and furnish all information requested.
RedEnvelope
February 18, 2004

4. The supplier shall be responsible for a daily cleanup to keep the working area and adjacent areas free and
clear of all surplus and unnecessary materials and rubbish that accumulates during the course of the installation.
The supplier shall make arrangements for trash removal resulting from the installation work.

5. The supplier shall provide all machinery, supplies and other materials and labor required to install the
equipment. The connection by a certified electrician of the electrical equipment to the building's permanent power
system shall be the responsibility of the equipment installer. Electrical welders may be used to reduce fumes in the
building. Only propane fuel is acceptable should permanent power not be available. If propane fuel is used, the
tanks shall be handled and stored in accordance with OSHA and the purchaser's safety standards.

6. The supplier shall abide by and enforce the purchaser's instructions regarding signs, advertisements, safety
rules, personal conduct, fires and smoking at the job site.

7. The supplier's installation crew shall be established on-site prior to the receipt of the first equipment shipment.
The crew shall be headed by an experienced Field Operations Manager with an on-site office (telephone, et
cetera) for the duration of the installation phase of the project.

8. Unloading of equipment prior to and during the installation period shall be accomplished through area(s)
designated by the purchaser. Trailer loads of material may not be unloaded inside the building. The purchaser will
allocate areas for storing components/equipment prior to installation.

9. The supplier shall protect the building and structure, and the work materials and supplies of others, from
damage. Welding by the supplier shall be coordinated at times and by rules approved by Sedlak.
RedEnvelope
February 18, 2004

10. The supplier shall provide concrete dust control devices and/or incorporate concrete dust control practices
during the anchoring of equipment to concrete, cutting of concrete, removal of concrete or while concrete
finishing and leveling.

11. Prior to final acceptance, each piece of equipment shall be wiped down to eliminate excess
construction/installation dirt, dust and debris. It is intended that the equipment will be immediately operational
after completion of installation without delays for cleanup. On-site scheduling, subject to redENVELOPE
approval, is required before cleanup can begin. It is intended that only one cleanup be performed; therefore, it
may be necessary to employ a special cleanup crew to perform this work. Show costs for this separately. It is
suggested that the supplier prepare each shipment so as to reduce the cleanup required caused by road grime, et
cetera, accumulated while in transit.

12. The purchaser may, at any time before completion of the project, order additions to, omissions from, or
alterations in the project. All terms and conditions of the original contract shall become a part of each change
order.

Before any change is made or work done, the purchaser shall specify the same in detail and in writing. Promptly
after receipt of such specifications, the supplier shall submit to the purchaser a detailed estimate showing the cost
of the proposed change in the work, or the credit to be allowed and the extension of time, if any. The purchaser
shall promptly notify the supplier whether the estimate is acceptable and, if so, authorize in writing the change to
be made or work to be done. The purchaser reserves the right to reject any such proposal and to have the work
done by others.
RedEnvelope
February 18, 2004

5.0 INSURANCE AND BOND REQUIREMENTS

1. The supplier shall furnish Certificates of Insurance to the consultant prior to start of on-site work. As evidence
of the insurance being maintained, clauses shall be included obligating the insurer to give the purchaser ten (10)
working days' written notice prior to the cancellation of, or any change in, the coverage or the insurance policy.

2. The supplier shall require its sub-suppliers to provide Certificates of Insurance prior to the start of on-site
work.

3. The supplier and its sub-suppliers shall review the scope and magnitude of this project with their respective
insurance carriers so that insurance coverage provided by the supplier shall hold harmless the purchaser and its
representatives.

4. Insurance coverage for the following suggested categories, but not limited to these categories, shall meet or
exceed the statutory requirements of the State of Ohio.

A. Workers' Compensation

B. Employers' Liability Insurance

C. Comprehensive General Liability Insurance

D. Comprehensive Automobile Liability Insurance

E. Builder's Risk Insurance

F. Umbrella Insurance

5. Certificate holder to be:

                                                  redENVELOPE
                                                 San Francisco, CA
RedEnvelope
February 18, 2004

6. Installation location to be:

                                                 redENVELOPE
                                             4000 Creekside Parkway
                                              Lockbourne, OH 43137

7. It is the responsibility of the supplier to provide, prior to the manufacture of system components, written
concurrence of its agreement that the system resulting from this turn-key installation meets all applicable safety
codes with regards to the equipment components used and the resulting system, as well as to the ergonomics of
conveyor related work stations and their elevations. Where the supplier does not agree, a written description of
those instances where safety codes and the ergonomics of work stations and their elevations are not satisfactorily
met, shall be provided with suggestions for correcting those instances.

8. Certificates of Insurance shall be provided to Sedlak and/or its on-site representatives prior to the start of on-
site work.

6.0 SPARE PARTS, TRAINING AND MANUALS

6.1 SPARE PARTS

1. The offeror shall quote in the proposal the total cost for recommended spare parts required at the purchaser's
facility to properly cover repair contingencies and normal preventative maintenance operations. Should the
purchaser elect not to stock the spare parts or only a portion thereof, the value or value remaining (as stated in
the proposal) shall be credited to the contract.

2. An adequate supply of spare parts shall be provided and located on-site during installation to prevent delays
due to failure of an item with a long lead-time (greater than 7 working days).
RedEnvelope
February 18, 2004

3. The parts list shall be supplied to the purchaser electronically along with hard copies.

6.2 TRAINING

1. The offeror shall quote in the proposal the location and duration of the training to be furnished. The proposal
shall be specific in outlining the main elements of this training.

2. The offeror shall furnish detailed information, including costs, for a computerized maintenance program, if such
is available. This shall be offered as an option in the proposal.

3. The supplier shall be responsible for training the purchaser's personnel for safety, operations and maintenance
of the equipment furnished. Completion of training shall be required prior to final acceptance of system.

4. redENVELOPE reserves the right to videotape all initial training for use in future training and as refresher
training.

5. These training programs shall place special emphasis on the safety features of the system including the
operation of emergency stops, pull cord stops and restart procedures as well as general safety do's and don'ts
with regard to safe conveyor operations. Safety training shall include the review of all safety signage installed as
part of the contract.

6. If Allen Bradley (or other manufacturers, if available) PLC's are used, the supplier shall include a
troubleshooting video administrator's package and a minimum of six (6) lesson guides. This program shall be part
of the training provided with the system and remain with the purchaser.
RedEnvelope
February 18, 2004

6.3 MANUALS

1. The supplier shall furnish three (3) maintenance and operating manuals, including catalog information, covering
all purchased and/or subcontracted items supplied under the contract. The supplier shall also include, as a part of
the above manuals, a recommended spare parts list with pricing information. This list shall specifically note those
parts which are critical or are long-lead-time parts. These manuals are to be submitted to the consultant for
approval not later than thirty (30) days before the scheduled completion date of the equipment installation.
Copies of the manuals shall be available to the purchaser's maintenance personnel during the formal maintenance
training sessions to be held by the supplier's personnel.

7.0 DRAWINGS FURNISHED

Drawings are furnished to bidder as part of the specifications. Please note the legend on the drawings, which
describes actions required within color-coded equipment.

These drawings are instruments of service and are the property of Sedlak and its engineering representatives. All
information contained on these drawings is project specific and shall not be used otherwise. Sedlak makes no
warranties, expressed or implied with respect to these drawings.

Drawings in AutoCAD release 2000i format will be made available from the consultant after the award of the
contract.

           Drawing No.     File Name       Rev               Drawing Name
           ------------------------------------------------------------------------------
            CP1-EX         1808 CP1         -       Composite Equipment Layout - Existing

            CP1-11            1808 CP1            -         Composite Equipment Layout -
RedEnvelope
February 18, 2004

8.0 ACCEPTANCE, WARRANTIES AND TESTING

1. The offeror shall include as an alternate in the proposal, the annual cost of a maintenance contract for the
system effective after the expiration of the one-year warranty.

2. The system shall be a turn-key installation with complete responsibility for the installation and its operation by
the supplier. Prior to final acceptance, the supplier shall test the system during the commissioning period in the
presence of the purchaser, or a representative of the purchaser. Final acceptance shall occur upon:

A. Completion of the successful system acceptance test.

B. Completion of all commissioning and punch list items.

C. Issuance of a completion certificate by Sedlak with respect to system testing.

D. Receipt by purchaser of waivers of liens and such other evidence as may be required by the purchaser to
evidence that the supplier has made payment of all amounts due for equipment, materials, payroll or other items
purchased by supplier and delivered to the purchaser in connection with the project.

E. Receipt of "as built" drawings.

F. Receipt by purchaser of both the approved maintenance and operating manuals.

G. Completion of all training requirements.

H. The delivery of all project services to be provided by the supplier.

Purchaser shall provide supplier with written indication of final acceptance. Following final acceptance, all
retainage payments shall then become due and payable, upon submission of an appropriate invoice.

3. In no event shall the operation or beneficial use by the purchaser prior to final acceptance of any equipment,
whether for business, system acceptance testing or any
RedEnvelope
February 18, 2004

other purpose, or the payment of any progress payment relating thereto, constitute, or be deemed to constitute,
acceptance thereof by the purchaser.

4. Provided purchaser is not in default of the contract documents, supplier shall indemnify the purchaser from and
against any and all liens on the property of materials supplied by supplier, its subcontractors, suppliers and
tradesmen. Any lien filed in violation of this paragraph shall be removed by supplier within ten (10) days from
receipt of notice from purchaser or if after said ten (10) days such lien has not been removed, purchaser shall
have the option to have same removed and deduct the cost (including legal fees) from payments due under this
contract.

5. The supplier and the sub-suppliers, together with their material vendors shall provide mechanics' lien releases
covering all work, materials and equipment performed or delivered to the job site during the entire construction
period. Releases shall state the names of such persons or firms, together with the amount releases and signed by
an officer of the firm. Applicable releases shall be submitted with each invoice. The retainer shall not be paid until
release of lien is received.

6. The supplier shall promptly and diligently pursue and complete any corrective action as may be necessary to
cause the system or any component to perform in accordance with the specifications prior to final acceptance by
purchaser.

7. The purchaser's representative shall punch list each system only once. If, at the agreed upon time for punch
listing, the purchaser's representative finds the system not ready for punch listing, the supplier shall be back-
charged for any extra expense incurred.

8. The punch list shall be discussed with the supplier. All corrections shall be positively performed within ten (10)
working days. Failure to do so will allow the owner to exercise the option of back-charging the supplier for the
estimated costs of the items
RedEnvelope
February 18, 2004

and services in question.

9. Testing - All equipment, components and systems shall be demonstrated to Red Envelope and/or its
representative. These items are to include, but are not limited to, the following:

A. Flow rates - short duration. (Peak Flow Rate)

B. Flow rates - long duration - minimum 60 minutes. (Average Flow Rate)

C. E-stops.

D. Operating push buttons.

E. Full line conditions.

F. Accumulation (without jams).

G. All controls.

H. All safety and warning devices.

10. The supplier shall submit for review a detailed test plan for approval a minimum of 30 working days prior to
acceptance testing.

11. The supplier shall warrant that the system shall be free of defects in material and workmanship and provide
other customary warranties for a minimum of one year following final acceptance (completion of all above items).
Supplier shall provide repair service (parts and labor) with respect to valid warranty claims at no cost or expense
to Red Envelope during the warranty period.

12. After hand-over and acceptance, the supplier shall provide a qualified control engineer experienced with the
system for a minimum of four (4) shifts to assist the purchaser with operations.
RedEnvelope
February 18, 2004

9.0 SCOPE OF WORK

redENVELOPE is a source of fine collectibles and gifts through multi-channel operations including Direct,
Catalog, Internet, Classics and Merchandising. redENVELOPE's current distribution operations are held in an
approximately 194,400 square foot facility (187,800 SF distribution center and 6,600 SF offices) located in
Columbus, Ohio. Due to continuing growth, redENVELOPE has decided to modify its equipment layout within
its existing facility.

The reengineering of the existing material handling equipment layout will include the relocation of rack, carton
flow, and jewelry cage and modifications to existing conveyor system (refer to drawings for specific equipment).
Fulfillment operations will continue throughout the de-install/reinstall process. Supplier will also be accountable for
establishing temporary areas or lines to enable continuing operations. The supplier is responsible to determine
what additional equipment, if necessary, will be required to establish these temporary areas or lines. The supplier
is urged to have existing conveyors removed as part of this project and acquire used equipment as possible for
additional requirements.

The building clear height will be 28'+.

The rack vendor will be responsible for the relocation of the designated existing pallet rack, the relocation of
existing carton flow rack, and the relocation & installation of new shelving.

The conveyor supplier will be responsible for the de-installation of conveyor as detailed in the drawings. Where
possible, the conveyor supplier will re-use existing conveyor equipment, controls, etc. in the new layout. Supplier
is responsible to perform an on-site inspection of conveyor equipment to verify suitability for re-use. The
conveyor supplier will be responsible for installation of new conveyor, sorters, diverts, scanners, scales,
RedEnvelope
February 18, 2004

controls, conveyor cross overs, stiles, service walkways, safety requirements (emergency stop pull cords), etc.
throughout the remainder of the system. The conveyor supplier will verify all existing field obstructions and certify
that the necessary clearances exist, including but not limited to aisle clearances, for package conveyance. ALL
DRIVES AND CONVEYOR FLOOR SUPPORTS WILL BE LOCATED SO AS TO NOT INTERFERE
WITH LIFT TRUCK AISLES OR PERSONNEL ACCESS AISLES. Further, the supplier will verify that
redENVELOPE has adequate air supply to support the system, and provide air supply if necessary.

Sedlak will coordinate the sequence of installation events; however, vendors are responsible to coordinate
support issues amongst each other. If the selected vendor expects to use other vendor's equipment for support,
or expects other vendors to use the selected vendor's equipment for support, the vendors will be responsible to
notify each other in the beginning of the design process.

Equipment shall be designed, fabricated and installed according to the latest local, state and national codes, and
OSHA standards and specifications for the seismic zone in which the facility is located.

The scope of work for the successful conveyor supplier shall include the design, engineering, manufacture,
delivery and turn-key installation of all conveyor components shown on the accompanying drawings and
described within this specification. The successful supplier shall also be responsible for design and installation of
all conveyor controls and electrical work deemed necessary to ensure desired operations. Further, any conveyor
related work platforms, chutes, stairs, railings, highway guardrail, guard posts or related equipment proposed are
to be included within this proposal.

The offeror shall supply a complete listing of all equipment proposed. This listing shall include, but not be limited
to, conveyor speeds, length, widths, roller types and sizes and spacing, belt types and sizes, control devices,
elevations, et cetera. Note that all belt
RedEnvelope
February 18, 2004

conveyor inclines and declines shall not exceed 18 degrees.

All conveyors within the facility have been identified on the drawings as being a member of a specific system and
pricing is to be provided for each specific system. Proposals will not be accepted which simply provide a lump
sum total for all systems.

The following is a list of tasks to be performed by the MHE contractor for this project....

- Remove forty (40) sections of 8'-3" C.T.C. Selective Pallet Rack with four levels of beams with wire decking
on them. All will be re-erected in other areas of the building. Any left over beams, wire decks and other
miscellaneous parts will be stored on pallets in the DC.

- Remove seven (7) Pallet Flow Lanes (approx 10 ft. long) along with lift truck angle stops mounted along charge
end. Seven (7) will be reinstalled and twelve (12) new lanes installed as part of the Pallet Pick Area extension
(adjacent to engraving area). The lift truck angle stops will be required for the reinstalled and new lanes.

- Remove 815 Lin.Ft. of powered HK brand conveyor and 635 Lin.Ft. of gravity conveyor by various
manufacturers. A list of units to be reused in this facility are included in RFP equipment list

- Reconfigure existing Picking area by 1) Adding 260 Lin.Ft. of powered conveyor with three (3) line scanners
and three (3) bi-directional right angle transfers discharging totes to six (6) 67 Ft. long relocated gravity spurs.
Each spur to have fixed end stops and full line controls and 2) relocating fifteen (15) existing Kingway carton flow
racks with four picking levels each.

- Relocate existing Jewelry Cage by 1) Re-locating two hundred and ten
(210) Lin.Ft. of existing 10 Ft. high chain link fence enclosure with one (1) sliding gate and two (2) conveyor
openings with security doors; 2) Add one hundred and seventy five (175) Lin.Ft. of new 10 Ft. high chain link
fencing with four (4) conveyor openings (2-new+2-relocated) and the sliding gate reinstalled; 3) Install used/new
conveyors to convey totes and shipping cartons...1) inbound totes from picking system, 2) outbound totes to
merge with the existing packing sorter and 3) outbound oversize packing line passing through the jewelry cage to
allow direct conveyance completed jewelry cartons to the shipping system.

- Reconfigure conveyors adjacent to the jewelry cage to provide a new line scanner and new kickoff to the
jewelry cage (replacing existing retro reflective disc/photoeye arrangement) before continuing to the existing
merge junction onto the packing sorter.

- The existing jewelry cage contents...1) Relocate twelve (12) existing sections of carton shelving and add twelve
(12) new sections of 48" W x 60" L x 7' H with 4 shelves plus a top; 2) Relocate six (6) existing packing tables
and add six (6) new packing tables.
RedEnvelope
February 18, 2004

- Jewelry cage conveyors are to be reconfigured using used/new conveyors as follows...

- Inbound - Once diverted from the feed conveyor from picking; the inbound conveyor will incline to an elevation
which will allow the inbound & outbound conveyors to be stacked inside the jewelry cage and continue on to
discharge onto a gravity accumulator with a fixed end stop and full line controls.

- Outbound - The outbound leg will consist off a live roller conveyor (below the inbound leg) to join into the
existing merge junction to the packing sorter. A stop/start pull chord will be provided to control the outbound
conveyors.

- Box Insertion Spur - This spur would originate from the existing second packing sorter pop-up divert and
would then transfer totes onto an accumulating gravity line with a fixed end stop and full line controls. Boxes
would then be inserted and the tote be pushed onto the adjacent conveyor from packing sorter headed towards
the gift/ final lines. As part of this option, sixteen (16) new pallet flow lanes with lift truck angle stops are to be
installed adjacent to this conveyor spur.

- Add two (2) mechanical 'traffic cops' to existing live roller conveyor merge junctions of the packing sorter. As
an option the existing pop-up roller stops on these junctions may be repaired to their intended job (they currently
do not project high enough to stop totes).

- In the packing area, remove five (5) existing quality control gravity spur conveyors and equipment from existing
packing sorter. From the quality control area, remove 435 Lin.Ft. of existing powered conveyor feeding the gift
wrap and over wrap packing lines.

- In the new layout the packing stations will no longer separate gift wrap from over wrap totes. All stations will
completely pack all orders, eliminating the difference between the stations. From the packing sorter, totes will be
diverted at the third existing pop-up on the packing sorter to feed both of the existing packing lines. A swing arm
divert will be provided at the first packing line to divert totes on an as needed basis only to keep both lines full.

- Incomplete Order Spur - The first divert spur on the existing packing sorter will be converted to a incomplete
pick order spur prior to packing. RF pick verification in the pick area will signal the new packing scanner that the
tote has not received all of the items required for that order. If incomplete, the sorter will divert the tote to
accumulate on gravity conveyor. The spur will have a fixed end stop and full line controls. Totes will be dispersed
manually from here to the pick conveyor system to acquire the missing item.

- Outbound cartons (w/ all wrapping complete and shipping bar code label attached) will merge from four
different sources (singles packing, oversize packing, existing pack line #1 and existing pack line #2) onto one
central takeaway line to the shipping sorter. Existing conveyors in the pack areas do not change their original
direction or function.
RedEnvelope
February 18, 2004

               -     Install approximately 230 Lin.Ft. of used/new conveyor as a take
                     away from oversize packing stations to the central packing takeaway
                     line/shipping sorter. No merge controls are required for this line.

               -    Add a line scanner and inline scale to the existing shipping sorter.
                    The scanner will assign destinations to the six (6) existing sorter
                    spurs while the scale will accumulate carton IDs & weight
                    information for manifesting.

               -    Add a 30 linear foot gravity runout to the existing shipping sorter.
                    This runout is to have fixed end stop and full line controls which
                    stop the sorter.

               -    SHIPPING RECIRC & OUTBOUND ACCUMULATION OPTION - Provide pricing to
                    purchase and install used/new conveyors to expand the existing
                    shipping sorter by continuing from the end of the existing sorter
                    (the existing sorter presently dead ends) up an incline and around a
                    curve to accumulate above the existing over pack line and merge with
                    a parallel accumulation conveyor from oversize packing, singles
                    packing, and the middle pack line (the existing gift wrap line)
                    before continuing down a decline before allowing the other pack line
                    (the existing over pack line) to merge using a traffic cop to
                    control flow.

        10.0   DESCRIPTION OF OPERATION

               The following Description of Operation pertains to the proposed systems
               required for this proposal.

           -   WCS Enhancements - As part of this project systems and software will be
               instituted to enable the controls systems of the conveyors to communicate
               with the host PKMS computer for order tracking and real time interfaces
               for manifesting

           -   Order Processing - Orders/collates are printed in the offices and manually
               dispersed to the 1) Monogram/Engrave areas, 2) Two (2) order start points
               in the Pick areas, 3) the Jewelry Cage, or 4) in the Reserve Storage Area
               (for case plus quantities for single item orders, to be palletized and
               delivered to a singles pack station).

           -   Order Starting - From the order start points, the collates are joined to
               the license plate bar code of a tote by means of scanning the collate bar
               code and the tote license plate (LPN) bar code using an RF scanner gun.
               The collate bar code will contain all destination information for that
               order and will be tracked through the system using the license plate bar
               code on the tote.

           -   Line Scanners - The existing conveyor system sorters do not currently use
               any scanner tracking devices for what they are doing. Three (6) line
               scanners will be added to the existing and new equipment...(3) in the
               picking area, (1) at the jewelry divert, (1) at existing packing sorter
               and (1) at existing shipping sorter.

           -   Monogram & Engraving Area - Orders are issued to the machine used to
               process that item. Items to be processed are selected from the carton flow
               rack using RF scanners to
RedEnvelope
February 18, 2004

verify picks. Once picked these items are prepped and placed onto cookie sheets adjacent to the
Monogram/Engraving machine to do the work. When completed, the item will be placed in a tote; the collate &
tote LPN are scanned and placed on the takeaway conveyor to the picking area. Single item orders may be
manually transferred to the existing packing sorter prior to the scanner to shortcut the pick system.

- Tote Tracking - Totes traveling the conveyor system will use the tote license plate number (LPN) to track and
verify diverts to the various automated portions of the system.

- Pick Area Conveyors - Totes from Monogram/Engrave area travel the conveyor system to the pick area where
line scanners in each of the six (6) pick zones will bi-directionally right angle transfer any tote which requires an
item from that zone. Once the pick has been completed and verified with an RF scanner by the picker, the tote is
pushed back onto the center takeaway conveyor to proceed thru the pick area to packing.

- Active Picking Order Start - If an order does not have any Monogrammed or Engraved items the order may be
started in the first pick zone required or in one of two orders start areas of the pick module. The collate and tote
LPN bar codes are scanned and the tote is placed on the pick conveyor system to be pulled at the proper pick
zone(s).

- Totes which have no further picks continue on the conveyor system to the jewelry divert.

- Multi Item Orders With Jewelry - At the jewelry divert the tote is scanned and if a jewelry item is required to
complete the order, the tote is diverted to accumulate in the jewelry cage. The picked jewelry item is RF verified
to have been picked; any gift box packing is done and the tote is placed on the takeaway conveyor to rejoin totes
on their way to packing area.

- Jewelry Only Orders - If the order does not contain any other items (jewelry only), it may be started in the
jewelry cage by scanning the collate and shipping label. The required item is then picked and RF verified, gift
wrapped & placed into a shipping carton with a shipping label then placed on the takeaway conveyor to shipping
sorter area.

- Existing Packing Sorter - The existing packing sorter is currently being used to deliver totes to one of five
quality control diverts on a round robin keep full basis. The new line scanner added to this sorter will enable the
sorter sort to one of three destinations using the tote LPN to direct the tote to 1) Incomplete order line, 2)
Inbound to box insertion spur, and 3) Inbound to gift/final packing stations.

- Incomplete Order Spur - Existing packing sorter divert #1 will be used for this spur. When the tote LPN is read
at the scanner, the collate will be compared to the divert & pick verifications and if all diverts or picks have not
been completed, the tote will be diverted to this spur so that missing items may be added before packing. From
the spur the totes will be manually transported to point where the missing item can be acquired.
RedEnvelope
February 18, 2004

Full line controls will required for this spur and deactivate the divert and cause the tote to be recirculated.

- Box Insertion Spur - When the LPN is read at the scanner, the gift box insertion area will be listed as a
destination. The tote will be diverted here to a gravity accumulation line with a fixed end stop and full line
controls. Once the required gift box has been inserted into the tote, the tote is pushed to the adjacent takeaway
conveyor feeding the Gift/Final packing stations.

- Gift/Final Packing Spur - This spur will feed two (2) existing packing accumulation lines. A swing arm divert at
the first pack line will activate to divert totes based on full line signals from the first pack line. Or the tote may
continue past the divert to the second pack line using full line signals from the accumulator to signal need.

- Gift/Final Packing - Packers will be responsible for all packing required for any order. Using the collate to
verify all items have been picked, the packer will then gift wrap any items requiring gift wrapping to be place in a
gift box which has been placed in the tote in picking and tie with a decorative bow. Then all of the items and the
invoice will be placed in a shipping carton, which has been taped on the bottom only and placed on the takeaway
conveyor to the shipping sorter.

- Empty Totes - Empty totes will also be placed on the takeaway conveyor to the shipping sorter and be
manually collected at a point along the conveyor prior to the sorter.

- Oversize & Single Item Packing - Conveyable ship alone items too large for a tote will be picked from the
reserve area using a walkie rider and moved to a oversize pack station where they will be gift wrapped if
necessary and placed in a shipping carton with a shipping label. Note: some cartons may only have a shipping
label applied to the manufacturer's carton. Also Completed cartons are placed on a takeaway conveyor to the
shipping sorter. Non-conveyable items will be weighed at the oversize pack station and manually transported to a
waiting trailer.

- Shipping Sortation - The current shipping sorter is currently being used to deliver totes to one of six fill and seal
diverts on a round robin keep full basis. The new line scanner added to this sorter will enable the sorter sort to
one of six specific lines based on the carrier to be used (Airborne, FedEx, etc.) using the tote LPN bar code to
direct the tote. Lane assignments may be changed to accommodate different carrier assignments throughout the
day. Also added to the existing sorter feed conveyors at the scanner is an inline scale, which shall communicate
with the host computer to assign a shipping weight to all cartons for manifesting. Each shipping divert will contain
an air-pillow dunnage dispenser and a semi automatic taping machine. Taped cartons are then fluid loaded with
gravity best-flex conveyors onto a waiting trailer or palletized for future shipment.

- Sorter Runout - A gravity runout will be added to the discharge end of the existing
RedEnvelope
February 18, 2004

                 shipping sorter to accumulate no-reads and mis-directs from the sorter.
                 Cartons will be manually moved to intended ship line or reintroduced prior
                 to ship scanner.

          11.0   MATERIAL TO BE HANDLED AND FLOW RATES

                 MATERIALS HANDLED

                 The conveyor system will be used to transport totes and cartons of




miscellaneous products in routings as shown on the drawings. Refer to drawings for detailed flow rates. Cartons
and totes will vary in size and weight within the limits listed below and be readily conveyable. Those that are not
conveyable will be classified as non-conveyable.

A minimum of 6" vertical clearance over maximum carton height is required over all conveyors.

Sizes of cartons, cases and totes to be transported over the conveyor system are as follows:

                                                           CARTON SPECIFICATIONS
                                                                                      WEIGHT
                                                LENGTH     WIDTH     HEIGHT       Min       Max
                                                ------     -----     ------     --------   ------
                 Minimum                           8"        7"         4"       1/2 lbs    2 Lbs
                 Average (or most popular
                 size)                            10"        8"         4"       1/2 lbs      3 Lbs
                 Maximum                          29"       22"        22"        10 Lbs     60 Lbs
                 Tote                           24.5"       19"       9.5"         5 Lbs     65 Lbs




NOTES: (1) All dimensions relative to direction of flow on conveyor.

(2) The size indicated may not be for an actual carton but be a composite of extremes for design of the system.

(3) The above carton weights and sizes are for conveyor design and not to be used to determine what a person
can handle.
RedEnvelope
February 18, 2004

(4) Handling of totes will require that any accumulation units must be furnished with double sensors or electronic
sensors on each zone.
RedEnvelope
February 18, 2004                                                 MHE - 28

                [FLOW DIAGRAM OF SEDLAK MANAGEMENT CONSULTANTS]
                                                   [VARGO MATERIAL HANDLING INC LOGO]

                                                   [MATERIAL    HANDLING SYSTEMS LOGO]




                                                  EXHIBIT 2

                                                  June 18, 2004

Mr. Dave Teeple
Sedlak Management Consultants
4020 Kinross Lakes Parkway
Richfield, OH 44286

                                            RE: RED ENVELOPE

Dear Dave,

Thank you for the opportunity to submit a proposal to reconfigure the Red Envelope facility.

Per our conversation here are the following revised prices for the system. We will follow up with pricing
breakdowns in the proper format tomorrow.

                  System cost excluding pallet rack....................                   [ * ]

                  System cost including pallet rack....................                   [ * ]
                  Base System..........................................                   [ * ]
                  Pallet Rack..........................................                   [ * ]




*Pallet Rack is a combination of new uprights and used 96" beams.

Again, thank you for the opportunity and we look forward to implementing our proposal. If you have any
questions, please do not hesitate to call me at 614-876-1163.

          Sincerely,                  * Confidential treatment has been requested for portions
                                      of this exhibit. The copy filed herewith omits the
                                      information subject to the confidentiality request.
                                      Omissions are designated as [*]. A complete version of
                                      this exhibit has been filed separately with the
          Carlos N. Ysasi             Securities and Exchange Commission.
Sedlak Management Consultants
Ref: redEnvelope
4020 Kinross Lakes Parkway
Richfield, Ohio 44286

Re: Proposal 4104-001

              SECTION 1: COMPANY OVERVIEW:.................................   2

              SECTION 2: PROPOSAL OVERVIEW:................................   4

              SECTION 3: DESIGN PARAMETERS:................................   5

              SECTION 4: SCOPE OF WORK:....................................   6

              SECTION 5: PROJECT DURATIONS AND IMPLEMENTATION PLAN:........   8

              SECTION 6: PRICING:..........................................   9

              SECTION 7: TERMS AND CONDITIONS:.............................   10

              SECTION 8: LITERATURE FROM SELECT VENDORS:...................   11
SECTION 1: COMPANY OVERVIEW:

                            MATERIAL HANDLING SYSTEM SERVICES

                                SALES and INTEGRATION SERVICES

Siemens Dematic, Rapistan Division conveyor components and systems Ermanco Conveyor components and
systems
Omni Metal Craft conveyor components and systems Versa Conveyor components and systems
Overhead chain and power & free systems
Retail Distribution
Engineering and layout service
Feasibility and budgetary studies
Electrified Monorails
Garment conveyors and storage
Order selection systems
Facilities engineering
Rack and shelving - warehouse design
Systems electronic repair and diagnostic services Recycling/Balers/Shredders
Automated Storage and Retrieval
Automated Guided Vehicle System
Pneumatic Tube Systems
Safety Rails/Guards
Conveyor related equipment
Mezzanine and Platforms

                            INSTALLATION AND ERECTION SERVICES

Conveyors installations - package and overhead chain conveyor

                 Towlines
                 Racks and shelving                          Erection of modular offices
                 Monorails                                   Bridge cranes and hoists
                 Conveyor and rack guarding                  Storage mezzanines
                 Vertical Lifts                              Pallet Handling Systems

                                             MAINTENANCE AND REPAIR SERVICES

                 Baler repair
                 Cart repairs and caster replacement




Conveyors - repair and preventative maintenance inspections Cranes and hoists
Pallet Handling Systems
Rack damage repair
Vertical Lifts
                               SAMPLE CUSTOMER LISTING

American Airlines                         American Eagle Outfitters (2 Distribution Centers)
AMPSCO Corporation                        Baxter Health Care
Big Lots                                  Dial Corporation
Eagle Trading Co. (Mexico)                Filene's Basement
Ft. Dodge Labs                            G M Volvo
Gatx Logistics                            General Electric
General Motors Corporation                Glazers Distributors of Ohio
Grainger                                  Hesco
Honda of America                          JC Penney's
Kal Kan Foods Inc.                        Keebler
Limited Distribution                      Limited Express
Limited Stores                            Lucent Technologies
Micro Center                              Mid Atlantic Canners
National Logistics Services (Ontario)
Northwest Airlines                        Oasis/Ebco
Ogihara America Inc.                      Premier
Ross Laboratories                         Roxane Labs
Shonac Corporation                        Showa Aluminum
Siemens Dematic                           Stanley Electric US
Techneglas                                Thomson Consumer Electronics (RCA)
TS Tech                                   United Airlines
Value City Department Stores              Value City Furniture
Wal-Mart                                  Warehouse Associates
Whirlpool Corporation                     Xerox Corporation
Yamaha Motors Inc.
SECTION 2: PROPOSAL OVERVIEW:

This Proposal covers the conveyor, storage equipment, controls / field wiring, commissioning and training.

The proposed equipment has been selected to provide a system for the following functional areas:

1 Reserve

2 Pallet flow

3 Carton flow pick module(s)

4 Jewelry

5 Single Line Item Processing

6 Over Pack Processing

7 Gift - Box Insertion

8 Packing

9 Outbound Sorter

The equipment for this material handling reconfiguration is selected based on our previous experience with similar
applications. The following factors were considered during the selection process:

1 The equipment must meet and exceed the demands of the system rates and product handling data outlined in
Section 3: Design Parameters

2 The use of standard components will be employed where practical to aid in servicing or replacement of parts,
should the need arise.

3 Accessibility for maintenance and service

4 Personnel safety

The Layout of the proposed equipment is illustrated on the 4104-Q-4

WARRANY:

Vargo will warrant that the system shall be free of defects in material and workmanship and provide other
customary warranties for a minimum of one year following final acceptance (completion of all above items).
Supplier shall provide repair service (parts and labor) with respect to valid warranty claims at no cost or expense
to Red Envelope during the warranty period.
SECTION 3: DESIGN PARAMETERS:

MATERIAL TO BE HANDLED AND FLOW RATES:

The equipment will convey materials having the dimensions, weights, shapes, surfaces and other characteristics,
as set forth in this section. The equipment will have the mechanical capability to convey materials at the rates
specified in this section.

                                                         CARTON SPECIFICATIONS
                                               LENGTH                                WEIGHT
                                                                                  Min       Max
              Minimum                             8"       7"           4"      1/2 lbs     2 Lbs
              Average (or most popular
              size)                              10"       8"           4"      1/2 lbs       3 Lbs
              Maximum                            29"      22"          22"       10 Lbs      60 Lbs
              Tote                             24.5"      19"         9.5"        5 Lbs      65 Lbs




Conveyor live load is calculated at 25 lbs. per ft.

The products must by conveyable, and components inside must not overhang the parameter. They must also have
a flat bottom +/- 1/32".

Inclines and declines are limited to 18 degrees

Nose-overs and power feeders units are included

FLOW RATES:

(Attached)
SECTION 4: SCOPE OF WORK:

The following is a list of tasks that Vargo has quoted:

1 Remove forty (40) sections of 8'-3" C.T.C. Selective Pallet Rack with four levels of beams with wire decking
on them. All will be re-erected in other areas of the building. Any left over beams, wire decks and other
miscellaneous parts will be stored on pallets in the DC.

2 Remove seven (7) Pallet Flow Lanes (approx 10 ft. long) along with lift truck angle stops mounted along
charge end. Seven (7) will be reinstalled and twelve (12) new lanes installed as part of the Pallet Pick Area
extension (adjacent to engraving area). The lift truck angle stops will be required for the reinstalled and new lanes.

3 Remove 815 Lin.Ft. of powered HK brand conveyor and 635 Lin.Ft. of gravity conveyor by various
manufacturers. A list of units to be reused in this facility are included in RFP equipment list

4 Reconfigure existing Picking area by 1) Adding 260 Lin.Ft. of powered conveyor with three (3) line scanners
and three (3) bi-directional right angle transfers discharging totes to six (6) 67 Ft. long relocated gravity spurs.
Each spur to have fixed end stops and full line controls and 2) relocating fifteen (15) existing Kingway carton flow
racks with four picking levels each.

5 Relocate existing Jewelry Cage by 1) Re-locating two hundred and ten
(210) Lin.Ft. of existing 10 Ft. high chain link fence enclosure with one (1) sliding gate and two (2) conveyor
openings with security doors; 2) Add one hundred and seventy five (175) Lin.Ft. of new 10 Ft. high chain link
fencing with four (4) conveyor openings (2-new+2-relocated) and the sliding gate reinstalled; 3) Install used/new
conveyors to convey totes and shipping cartons...1) inbound totes from picking system, 2) outbound totes to
merge with the existing packing sorter and 3) outbound oversize packing line passing through the jewelry cage to
allow direct conveyance completed jewelry cartons to the shipping system.

6 Reconfigure conveyors adjacent to the jewelry cage to provide a new line scanner and new kickoff to the
jewelry cage (replacing existing retro reflective disc/photoeye arrangement) before continuing to the existing
merge junction onto the packing sorter.

7 The existing jewelry cage contents...1) Relocate twelve (12) existing sections of carton shelving and add twelve
(12) new sections of 48" W x 60" L x 7' H with 4 shelves plus a top; 2) Relocate six (6) existing packing tables
and add six (6) new packing tables.

8 Jewelry cage conveyors are to be reconfigured using used/new conveyors as follows...

- Inbound - Once diverted from the feed conveyor from picking; the inbound conveyor will incline to an elevation
which will allow the inbound & outbound conveyors to be stacked inside the jewelry cage and continue on to
discharge onto a gravity accumulator with
a fixed end stop and full line controls.

- Outbound - The outbound leg will consist off a live roller conveyor (below the inbound leg) to join into the
existing merge junction to the packing sorter. A stop/start pull chord will be provided to control the outbound
conveyors.

9 Box Insertion Spur - This spur would originate from the existing second packing sorter pop-up divert and
would then transfer totes onto an accumulating gravity line with a fixed end stop and full line controls. Boxes
would then be inserted and the tote be pushed onto the adjacent conveyor from packing sorter headed towards
the gift/ final lines. As part of this option, sixteen (16) new pallet flow lanes with lift truck angle stops are to be
installed adjacent to this conveyor spur.

10 Add two (2) mechanical 'traffic cops' to existing live roller conveyor merge junctions of the packing sorter. As
an option the existing pop-up roller stops on these junctions may be repaired to their intended job (they currently
do not project high enough to stop totes).

11 In the packing area, remove five (5) existing quality control gravity spur conveyors and equipment from
existing packing sorter. From the quality control area, remove 435 Lin.Ft. of existing powered conveyor feeding
the gift wrap and over wrap packing lines.

12 In the new layout the packing stations will no longer separate gift wrap from over wrap totes. All stations will
completely pack all orders, eliminating the difference between the stations. From the packing sorter, totes will be
diverted at the third existing pop-up on the packing sorter to feed both of the existing packing lines. A swing arm
divert will be provided at the first packing line to divert totes on an as needed basis only to keep both lines full.

13 Incomplete Order Spur - The first divert spur on the existing packing sorter will be converted to a incomplete
pick order spur prior to packing. RF pick verification in the pick area will signal the new packing scanner that the
tote has not received all of the items required for that order. If incomplete, the sorter will divert the tote to
accumulate on gravity conveyor. The spur will have a fixed end stop and full line controls. Totes will be dispersed
manually from here to the pick conveyor system to acquire the missing item.

14 Outbound cartons (w/ all wrapping complete and shipping bar code label attached) will merge from four
different sources (singles packing, oversize packing, existing pack line #1 and existing pack line #2) onto one
central takeaway line to the shipping sorter. Existing conveyors in the pack areas do not change their original
direction or function.

15 Install approximately 230 Lin.Ft. of used/new conveyor as a take away from oversize packing stations to the
central packing takeaway line/shipping sorter. No merge controls are required for this line.

16 Add a line scanner and inline scale to the existing shipping sorter. The scanner will assign destinations to the
six (6) existing sorter spurs while the scale will accumulate carton IDs & weight information for
manifesting.

17 Add a 30 linear foot gravity runout to the existing shipping sorter. This runout is to have fixed end stop and full
line controls which stop the sorter.

The option requested to add a brake meter belt, scanner & right angle transfer to the existing conveyors in the
pallet flow active pick area has been included here.
SECTION 5: PROJECT DURATIONS AND IMPLEMENTATION PLAN:

SCHEDULES:

                    Drawings for Approval........   2 Weeks
                    Manufacturing................   4 Weeks
                    Installation ................   11 Weeks
                    Completion Date .............   July 16, 2004




IMPLEMENTATION PLAN:

(Attached)
SECTION 6: PRICING:

(Attached)
SECTION 7: (AGREED UPON TERMS AND CONDITIONS):

1. Standard terms are Net 30 days with Sedlak approval for invoiced work and materials for all portions of this
contract.

2. Vargo will be available to sign, unload and inspect all materials at the site. No redENVELOPE employee will
be asked to be responsible for any shipment or package sent to the site.

3. Vargo will be responsible for all freight collection arrangements as part of this fixed price quote.
redENVELOPE will not be responsible for any freight payments or unloading.

4. Vargo included the cost of any required building permits with their quotation.

5. redENVELOPE will maintain existing operations throughout this project. Areas to be cleared for installation
work must be approved by Sedalk at least one week in advance of the requirement and the date when the area
will be reusable by redENVELOPE must be included.

6. Vargo will be responsible for any shipment receiving and staging. Areas required for staging must also be
approved by Sedalk at least one week in advance of the requirement and the date when the area will be reusable
by redENVELOPE must be included

7. Vargo will be responsible for all work area cleanup, trash removal and equipment wipe downs.

8. redENVELOPE will maintain existing operations throughout this project. Areas to be cleared for installation
work or staging must be approved by Sedalk at least one week in advance of the requirement and the date when
the area will be reusable by redENVELOPE must be included. Unlimited access can not be guaranteed.

9. Delay charges must be discussed and agreed to by both parties.

10. Vargo must include the cost of any required building permits with their quotation.

Added From Proposal 3

11. (5) No verbal orders are accepted. Customer purchase order or signed quote is required to process your
order.

12. (11) Buyer is responsible for payment of all applicable taxes, if any.

13. (21) Vargo Material Handling, Inc. is responsible for a final system wipedown prior to acceptance of each
unit of work.

14. (22) Power to be supplied by customer for installation equipment.

15. (23) One dock height door with dock plate to be provided by customer for unloading closed vans.

16. (24) Truck access to concrete pads for unloading.

17. (25) Ambient temperature for installation.

18. (28) If outside staging of material is required in unpaved areas, Vargo Material Handling is not responsible for
mud, dirt, snow, rain, ice and/or rust on materials.

19. (30) Vargo Material Handling shall pay to repair any damage (chips and gouges to the concrete slab) but will
not be responsible for normal scratches and abrasions that occur during rack or Vargo equipment installation.
REDENVELOPE
FEBRUARY 18, 2004                                                         MHE-31

12.0   EQUIPMENT SPECIFICATIONS SUMMARY FORMS (NEW EQUIPMENT)

       These forms must be filled in and returned with your equipment proposal.
       These forms are a necessary part of you proposal and your proposal will
       not be accepted without them.

       12.1   MECHANICAL SPECIFICATIONS

              1.     GRAVITY SKATEWHEEL CONVEYOR



Conveyor Width

   Overall                                                           30      "
                                                                 ------------
   Between Frames                                                    28      "
                                                                 ------------
   Rated Capacity of Frame Supported on 10'-0" Center                350     Lbs.
                                                                 ------------
   Deflection of Frame at Rated Capacity on 10'-0" Center           L/720    Lbs.
                                                                 ------------
Roller Diameter x Gauge                                          1 - 15/16" Ga.
                                                                 ------------
Roller Capacity (Lbs./Each)                                          65      Lbs.
                                                                 ------------
Roller Spacing                                                    3" / 24WPF "
                                                                 ------------
Roller Setting                                                      High
                                                                 ------------
Support Spacing                                                      10      Ft.
                                                                 ------------
Support Adjustability                                                 6
                                                                 ------------
Rollers Galvanized                                               Zinc Coated
                                                                 ------------
Total Feet                                                           50
                                                                 ------------
   Pick Module (Light Green)                                                 Ft.
                                                                 ------------
   Packing (Light Blue)                                                      Ft.
                                                                 ------------
   Gift-Wrap (Tan)                                                   50      Ft.
                                                                 ------------
   Shipping (Dark Green)                                                     Ft.
                                                                 ------------
   Shipping - Direct-to-Trailer Line (Dark Blue)                             Ft.
                                                                 ------------
   Tote Return (Magenta)                                                     Ft.
                                                                 ------------
   Trash (Red)                                                               Ft.
                                                                 ------------
   "Bulk By-Pass" Conveyor System (Gray)                                     Ft.
                                                                 ------------




                                      SEDLAK
REDENVELOPE
FEBRUARY 18, 2004                                                         MHE-32

12.0   EQUIPMENT SPECIFICATIONS SUMMARY FORMS (NEW EQUIPMENT)

       These forms must be filled in and returned with your equipment proposal.
       These forms are a necessary part of you proposal and your proposal will
       not be accepted without them.

               2.    LIVE ROLLER CONVEYOR



Conveyor Width

   Overall                                                         24 & 30   "
                                                                 ------------
   Between Frames                                                  22 & 28   "
                                                                 ------------
   Rated Capacity of Frame Supported on 10'-0" Center                650     Lbs.
                                                                 ------------
   Deflection of Frame at Rated Capacity on 10'-0" Center           L/720    Lbs.
                                                                 ------------
Roller Diameter x Gauge                                            2 x 16    Ga.
                                                                 ------------
Roller Capacity (Lbs./Each)                                          250     Lbs.
                                                                 ------------
Roller Spacing                                                        3      "
                                                                 ------------
Roller Setting                                                      High
                                                                 ------------
Support Spacing                                                      10      Ft.
                                                                 ------------
Support Adjustability                                                 6
                                                                 ------------
Rollers Galvanized                                                   Yes
                                                                 ------------
Type Drive (Belt, Chain)                                          Lineshaft
                                                                 ------------
Belt Return Roller Spacing                                            -      Ft.
                                                                 ------------
Belting Type                                                       O-Ring
                                                                 ------------
Total Feet                                                           306
                                                                 ------------




                                      SEDLAK
REDENVELOPE
FEBRUARY 18, 2004                                                         MHE-33

12.0   EQUIPMENT SPECIFICATIONS SUMMARY FORMS (NEW EQUIPMENT)

       These forms must be filled in and returned with your equipment proposal.
       These forms are a necessary part of you proposal and your proposal will
       not be accepted without them.

             3.      ACCUMULATION CONVEYOR



Conveyor Width

   Overall                                                           24      "
                                                                 ------------
   Between Frames                                                    22      "
                                                                 ------------
   Frame Depth                                                      4-1/2
                                                                 ------------
   Rated Capacity of Frame Supported on 10'-0" Center                650     Lbs.
                                                                 ------------
   Deflection of Frame at Rated Capacity on 10'-0" Center           L/720    Lbs.
                                                                 ------------
Roller Diameter x Gauge                                             2 x 16   Ga.
                                                                 ------------
Roller Capacity (Lbs./Each)                                          250     Lbs.
                                                                 ------------
Roller Spacing                                                        3      "
                                                                 ------------
Roller Setting                                                      High
                                                                 ------------
Support Spacing                                                      10      Ft.
                                                                 ------------
Support Adjustability                                                 6
                                                                 ------------
Rollers Galvanized                                                   Yes
                                                                 ------------
Type Accumulation                                                Mechanical
                                                                 ------------
                                                                 ------------
                                                                 ------------
Type of Release                                                  Singulation
                                                                 ------------
Typical Zone Length (Inches)                                         36      "
                                                                 ------------
Number of P.E. Sensors Per Accumulation Zone                          0
                                                                 ------------
Total Feet                                                           262
                                                                 ------------




                                      SEDLAK
REDENVELOPE
FEBRUARY 18, 2004                                                         MHE-34

12.0   EQUIPMENT SPECIFICATIONS SUMMARY FORMS (NEW EQUIPMENT)

       These forms must be filled in and returned with your equipment proposal.
       These forms are a necessary part of you proposal and your proposal will
       not be accepted without them.

             4.      BELT CONVEYOR FOR PACKAGE HANDLING



Conveyor Width

   Overall                                                          24 & 30 "
                                                                 ------------
   Between Frames                                                   22 & 28 "
                                                                 ------------
   Frame Depth                                                      4-1/2"
                                                                 ------------
   Rated Capacity of Frame Supported on 10'-0" Center                650     Lbs.
                                                                 ------------
   Deflection of Frame at Rated Capacity on 10'-0" Center                    Lbs.
                                                                 ------------
Bed Type (Slider, Roller, Etc.)                                    Roller
                                                                 ------------
Belt Width                                                         18 & 24
                                                                 ------------
Belt Type                                                          PVK-90
                                                                 ------------
   Incline/Decline                                                Rough Top
                                                                 ------------
   Level                                                            Smooth
                                                                 ------------
   Brake/Index                                                    Rough Top
                                                                 ------------
Belt Return Roller Spacing                                            5'     Ft.
                                                                 ------------
Side Guard Height                                                    12"
                                                                 ------------
Support Spacing                                                      10      Ft.
                                                                 ------------
Support Adjustability                                                 6
                                                                 ------------
Rollers Galvanized                                                   Yes
                                                                 ------------
Total Feet                                                           166
                                                                 ------------




                                      SEDLAK
          REDENVELOPE
          FEBRUARY 18, 2004                                                                     MHE-35

          12.0   EQUIPMENT SPECIFICATIONS SUMMARY FORMS (NEW EQUIPMENT)

                 These forms must be filled in and returned with your equipment proposal.
                 These forms are a necessary part of you proposal and your proposal will
                 not be accepted without them.

                        5.     ROLLER CURVES



           Conveyor Width

                 Overall                                                                 24 & 30   "
                                                                                       ------------
                 Between Frames                                                          22 & 28   "
                                                                                       ------------
           Tapered Rollers                                                                 Yes
                                                                                       ------------
           Roller Size x Gauge                                                           2 x 16
                                                                                       ------------
           Roller Spacing                                                                   3
                                                                                       ------------
           Roller Capacity                                                                 250
                                                                                       ------------
           Type of Drive (e.g., V-Belt)                                                 Lineshaft
                                                                                       ------------
           Support Adjustability                                                            6
                                                                                       ------------
           Rollers Galvanized                                                              Yes
                                                                                       ------------
           Quantity Provided                                                               11
                                                                                       ------------




6. SORTATION EQUIPMENT

Describe type of sortation equipment provided (diverts, scanners, in-motion weigh scales, in-motion cube, etc.).
State applicable information such as conveyor lengths, througput volume, speeds (fpm), product size limits,
scanner type, quantity, etc. to be employed. List by system.

         Urethane Belt Transfers                                                  2'-8" OAL x 24" OAW
                                                                                  -------------------
                                                                                   4-Strand, 60 FPM
                                                                                  -------------------
                                                                                       Qty (11)
                                                                                  -------------------

         Metler Toledo Inline Scale                                               5'-0" OAL x 30" OAW
                                                                                  -------------------
                                                                                  -------------------
                                                                                  -------------------

         ----------------------------------------------------                     -------------------
                                                                                  -------------------
                                                                                  -------------------

                                                                                  -------------------
                                                                                  -------------------

         ----------------------------------------------------                     -------------------

                                                                                  -------------------
                                                                                  -------------------
                                                                                  -------------------




                                                   SEDLAK
        REDENVELOPE
        FEBRUARY 18, 2004                                                           MHE-36

        12.0    EQUIPMENT SPECIFICATIONS SUMMARY FORMS (NEW EQUIPMENT)

                These forms must be filled in and returned with your equipment proposal.
                These forms are a necessary part of you proposal and your proposal will
                not be accepted without them.

                     7.     OTHER REQUIREMENTS



   Motor Drives - Total:

         Type                                                                Reliance TEFC
                                                                         ----------------------
         Quantity                                                                 19
                                                                         ----------------------
   Type Guardrail:

         Package Conveyors

         Roller                                                                2" Angle
                                                                         ----------------------
                                                                           Adjustable Channel
                                                                         ----------------------
                                                                         ----------------------
         Belt (Product)                                                    Adjustable Channel
                                                                         ----------------------
   Type of Floor Supports                                                  H-Stand Adjustable
                                                                         ----------------------
   Type of Ceiling Supports                                                        -
                                                                         ----------------------
   Type of Automatic Take-Up                                                       -
                                                                         ----------------------
   Type of Gravity Roller Gates                                          4' Lineshaft, Qty. (2)
                                                                         ----------------------
                                                                         ----------------------
   Quantity
                                                                         ----------------------
   Lock-In Roller Safety Feature for Overhead Conveyors                      Enclosed Frame
                                                                         ----------------------
   Type Bearings:

         Life (Hours)                                                                      Hrs.
                                                                     ----------------------
         Quantity of Precision Bearings                                       -
                                                                     ----------------------
         Make/Model Number                                                    -
                                                                     ----------------------
         Describe                                                             -
                                                                     ----------------------
Explain Method of Maintaining Carton Columnization on
Accumulation Conveyor                                                   Skewed Rollers
                                                                     ----------------------
Belts
                                                                     ----------------------
 Describe                                                               Urethane O-ring
                                                                     ----------------------
                                                                     ----------------------
                                                                     ----------------------




                                             SEDLAK
          REDENVELOPE
          FEBRUARY 18, 2004                                                            MHE-37

          12.0   EQUIPMENT SPECIFICATIONS SUMMARY FORMS (NEW EQUIPMENT)

                 These forms must be filled in and returned with your equipment proposal.
                 These forms are a necessary part of you proposal and your proposal will
                 not be accepted without them.

                         8.     COMPRESSED AIR REQUIREMENTS



            Supplier to list compressed air requirements (CFM) and
            description for all systems, including number of compressors,
            capacity, type, make, model number and size of each as
            required.                                                              3 CFM
                                                                                ------------
                                                                                ------------
                                                                                ------------




9. EXTENDIBLE CONVEYORS

            Receiving/Shipping Systems

                 Make
                                                                                ------------
                 Model Number
                                                                                ------------
                 Extended Length
                                                                                ------------
                 Collapsed Length
                                                                                ------------
                 Height Top of Belt
                                                                                ------------
                 Belt Width
                                                                                ------------
                 Quantity:

                 -   RC Receiving
                                                                                ------------
                 -   SH Shipping
                                                                                ------------




10. SAFETY GUARDING

        Conveyor:

            Type (Describe)
                                                                             ------------
                                                                             ------------

            Quantity (Sq. Ft.)                                                           Sq. Ft.
                                                                             ------------




11. NOISE LEVEL

Specification is 80 db. If noise level is exceeded, provide the following:

            Means to Reduce Noise (Describe)
                                                                                ------------
                                                                                ------------
                                                                                ------------
            New Noise Level                                                         60db
                                                                                ------------
                                                                                ------------
SEFLAK
 REDENVELOPE
 FEBRUARY 18, 2004                                                           MHE-38

 12.0   EQUIPMENT SPECIFICATIONS SUMMARY FORMS (NEW EQUIPMENT)

        These forms must be filled in and returned with your equipment proposal.
        These forms are a necessary part of you proposal and your proposal will
        not be accepted without them.

              12.    ELECTRICAL SPECIFICATIONS



List of systems control cabinets by system, including
location, size (length, height, depth) and amperage               72x72x12

Rating of disconnect(s)                                              100 a
                                                                 -------------
Total horsepower and amperage required @ (230,460 or 575)
volts, 60 hertz, 3 phase by system (specify panel location)          30 hp
                                                                 -------------
                                                                    75 FLA
                                                                 -------------
Number of Push Button Consoles                                         0
                                                                 -------------
Number of Start/Stop Push Buttons                                      3
                                                                 -------------
Number of Emergency Stops                                              1
                                                                 -------------
Number of Photoelectric Units                                         35
                                                                 -------------
Number of Operating Pull Cords                                        16
                                                                 -------------
Number of Starting Horns                                               2
                                                                 -------------
Number of Warning Lights and Strobes with Associated
Alarm/Horn                                                             0
                                                                 -------------
Special Control Stations (List)                                        0
                                                                 -------------
Number of Graphic Display Panels, Monitors and Locations               0
                                                                 -------------
                                                                 -------------
Type of:

   Electric Eyes                                                 Chammer E65
                                                                 -------------
   Starters                                                       AB 100/140
                                                                 -------------
   Motors
                                                                 -------------
   Plug-In Relays                                                   Kuhnke
                                                                 -------------
Type of Conduit                                                       EMT
                                                                 -------------
Make, Model and Quantity of Programmable Controllers             Siemens Qty 1
                                                                 -------------
                                                                 CPU - TBD
Program Logic Controller:

   Make and Model of PLC                                         Siemens S7
                                                                 -------------
   Memory Supplied                                               TBD          RAM
                                                                 -------------
   Memory Available After Programming                            TBD          RAM
                                                                 -------------
   Make and Model of Industrial Terminal Being Supplied          None
                                                                 -------------
   Make and Model of Printer Being Supplied                      None
                                                                 -------------
   Battery Shall Maintain Program (Days)                         TBD          Days
                                                                 -------------
   Battery Life Minimum (Months)                                 TBD          Months
                                                                 -------------
SEDLAK
REDENVELOPE
FEBRUARY 18, 2004                                                          MHE-39

12.0   EQUIPMENT SPECIFICATIONS SUMMARY FORMS (NEW EQUIPMENT)

       These forms must be filled in and returned with your equipment proposal.
       These forms are a necessary part of you proposal and your proposal will
       not be accepted without them.

            13.     EXCEPTIONS

                    Offeror shall include a list of specific exceptions (if any)
                    take to the base specifications. Descriptions of exceptions
                    will be helpful.

                                                                  1.
                                                                  -------------
                                                                  2.
                                                                  -------------
                                                                  3.
                                                                  -------------

                                                                           SEDLAK
           13.0   PRICING FORMS:

                  These forms must be filled in and returned with your equipment proposal.
                  These forms are a necessary part of your proposal and your proposal will
                  not be accepted without them.



                                                      CONVEYOR          FENCING RELOCATION &             RACK & SHELVING
                                                   MODIFICATIONS            INSTALLATION             RELOCATION & INSTALL
                                                   -------------        --------------------         --------------------
13.1 TOTAL COST

      System Engineering                                [ * ]                   [ * ]                             [ * ]

      Equipment                                         [ * ]                   [ * ]                             [ * ]

      Freight (Prepaid - Jobsite)                       [ * ]                   [ * ]                             [ * ]

      Unloading                                         [ * ]                   [ * ]                             [ * ]

      Mechanical Installation                           [ * ]                   [ * ]                             [ * ]

      Electrical Installation                           [ * ]           $                  -         $
                                                                        --------------------         --------------------
      Final Clean-Up                                    [ * ]                  [ * ]                          [ * ]

            TOTAL INSTALLED COST                        [ * ]                   [ * ]                             [ * ]

13.2 RECOMMENDED SPARE PARTS COST
                                                   =============        ====================         ====================

13.3 LABOR RATE SCHEDULE FOR ADDED WORK             STRAIGHT HR.            STRAIGHT HR.                   STRAIGHT HR.
                                                   -------------        --------------------         --------------------
      - Mechanical Supervisor                          [ * ]                   [ * ]                          [ * ]

      - Millwright                                      [ * ]                   [ * ]                             [ * ]

      - Electrical Supervisor                           [ * ]           $                  -         $
                                                                        --------------------         --------------------
      - Electrical                                      [ * ]           $                  -         $
                                                                        --------------------         --------------------
      - Laborer                                        [ * ]                   [ * ]                          [ * ]
                                                   =============        ====================         ====================
13.4 TOTAL TAXES

      - State (Combined)                                    0.0675

      - Local

13.5 PERMITS
     Permits
     Other - Weekend Tie-in

             TOTAL

13.6 PERFORMANCE BOND


13.7 PROPOSAL GRAND TOTAL




* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the
information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this
exhibit has been filed separately with the Securities and Exchange Commission.
             13.8   ALTERNATE PRICING

                    List by system and describe any alternate pricing to base proposal.
                    Include whether it is an addition (Add) or deletion (Deduct) to base
                    proposal.



     Number 1 - Computerized maintenance
                program. Includes 1 license and eng.
                RSView Diagnostics System                                                         (+)             [ * ]

     Number 2 - Annual cost of maintenance contract                                               (+)             [ * ]

     Number 3 - Shipping sorter recirculation and
                accumulation conveyors                                                            (+)             [ * ]

     Number 4 - Cost to move shipping sorter & fill
                and seal approximately 20 feet south
                of present location                                                               (+)             [ * ]

     Number 5 - Cost to move one existing pack line
                approximately 10 feet from current
                position                                                                          (+)             [ * ]

     Number 6     Cost to provide and install 294
                  sections of new selective pallet rack                                           (+)             [ * ]

     Number 7     Cost to provide and install 294
                  sections of used and new selective
                  rack with 96 clear load beams.                                                  (+)             [ * ]

     Number 8     Shipping Accumulation                Reference Sedlak
                  ShippingOption.                      drawing
                                                       (1808cp1revAwalt)                          (+)             [ * ]

     Number 9     Weekend Tie-In (+) 6,000             Reference Sedlak
                                                       drawing
                                                       (1808cp1revAwalt)                          (+)             [ * ]

     Number 10    Base Bid Clear Aisle and             Reference Sedlak
                  Jewelry Cage relocation              drawing
                                                       (CP1REVB-31704.dwg)                        (+)             [ * ]

     Number 11    Additional line scanner per                                                     (+)             [ * ]

     Number 12    Additional Software License(s)                                                  (+)             [ * ]

     Number 13    Deduct for PC per License                                                       (-)             [ * ]

SUMMARY
  Base Bid                                                                                                        [   *   ]
  Base Bid Clear Aisle                                                                                            [   *   ]
  Base Bid Clear Aisle (Accumulation)                                                                             [   *   ]
  Base Bid Clear Aisle (Accumulation) + Recirculation                                                             [   *   ]
  Base Bid Clear Aisle (Accumulation) + Recirculation + Options 1, 11 & 13                                        [   *   ]
  NOTE: SUMMARY PRICING INCLUDES PERMITS AND WEEKEND TIE-INS.

     TOTAL ALTERNATE PRICING                                                                                      $       -




* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the
information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this
exhibit has been filed separately with the Securities and Exchange Commission.
13.9   SCHEDULES

       Supplier shall list the following preliminary schedule for the overall
       system; reference Section 2.0 - Schedules of this specification.

          -    Engineering Layout Drawings for Approval                                                            2 We

          -    Manufacturing                                                                                       5 We

          -    Installation                                                                                       11 We

          -    Total Time Required After Receipt of Order                                                         15 We

          -    Completion Date                                                                                      -

13.10 TOTAL WEIGHT OF NEW COMPONENTS

13.11 TRAINING INCLUDED

          -    Operations                                                                                         Inclu

          -    Main Elements (List)                                                                               Inclu

          -    Safety                                                                                             Inclu

          -    Main Elements (List)                                                                               Inclu

          -    Location (where training occurs)                                                                   Inclu

       Maintenance:

          - Mechanical                                                                                            Inclu

          - Electrical                                                                                            Inclu

       Total




* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the
information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this
exhibit has been filed separately with the Securities and Exchange Commission.
13.12 GENERAL PURCHASING TERMS

       PAYMENT MILESTONES                                                                                         % of Co

       - All Drawings Approved                                                                                         10

       - Equipment Delivery (Monthly)                                                                                  20

       - Installation Labor (Monthly)                                                                                  70

       - Systems Acceptable

       - 30 Days Less 10% Retainer (Yes/No)                                                                            Ye

       PAYMENT TERMS
       (Describe Briefly)                                See Attached Terms and Condition

       WARRANTY
       (Describe Briefly)                                OEM's Factory warranty and Re-Used "As-Is"
                                                         and Used supplied by Vargo, 1 year.

       COMPLIANCE TO SAFETY CODES,
       INCLUDING OSHA (Yes/No)                                                                                         Ye

       INSURANCE LIMITS

       - Workers' Compensation                                                                                    OH - Un

       - Employers' Liability                                                                                     $ 2,000

       - Comprehensive General Liability
         - Bodily Injury                                                                                          $ 2,000
         - Property Damage                                                                                        $ 1,000
       - Comprehensive Automobile Liability
         - Bodily Injury                                                                                          $ 1,000
         - Property Damage                                                                                        $ 1,000

       - Builder's Risk Insurance                                                                                 $ 1,000

       - Umbrella Insurance                                                                                       $ 5,000

13.13 AUTHENTICATION

       Price Quotation Expiration Date:

            Submitted by: Carlos N .Ysasi
            Address: 3709 Parkway Lane
                     Hilliard, OH. 43026
            Name: Carlos N. Ysasi
            Title: Senior Project Engineer
            Phone: (614) 876-1163
            Fax:   (614) 876-0706
            Date: 22-Mar-04




* Confidential treatment has been requested for portions of this exhibit. The copy filed herewith omits the
information subject to the confidentiality request. Omissions are designated as [*]. A complete version of this
exhibit has been filed separately with the Securities and Exchange Commission.
                                               Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT FIRM

We consent to the incorporation by reference in Registration Statement No. 333-109294 of RedEnvelope, Inc.
on Form S-8 of our report dated June 21, 2004, appearing in this Annual Report on Form 10-K of
RedEnvelope, Inc. for the year ended March 28, 2004.

                                       /s/ Deloitte & Touche LLP

                                       San Francisco, California
                                       June 21, 2004
                                                   EXHIBIT 31.1

       CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Alison L. May, Chief Executive Officer, certify that:

1. I have reviewed this annual report on Form 10-K for the fiscal year ended March 28, 2004 of RedEnvelope,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this annual report is being prepared;

b. [paragraph omitted pursuant to SEC Release 33-8238]; and

c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this annual report based on such evaluation; and

d. disclosed in this annual report any change in the registrant's internal control over financial reporting that
occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to
materially affect, dhe registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal controls over financial reporting.

          Date: June 22, 2004

                 By:                /s/ ALISON L. MAY
                 --------------------------------------------------------------------------
                 Alison L. May
                 Chief Executive Officer
                                                   EXHIBIT 31.2

       CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric C. Wong, Chief Financial Officer, certify that:

1. I have reviewed this annual report on Form 10-K for the fiscal year ended March 28, 2004 of RedEnvelope,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this annual report is being prepared;

b. [paragraph omitted pursuant to SEC Release 33-8238.]and

c. evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this annual report based on such evaluation; and

d. n this annual report any change in the registrant's internal control over financial reporting that occurred during
the Iegistrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and
report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal controls over financial reporting.

                         Date: June 22, 2004

                                       By:                 /s/ ERIC C. WONG
                                 -------------------------------------------------
                                 Eric C. Wong
                                 Chief Financial Officer
                                                    Exhibit 32.1

                                                RedEnvelope, Inc.

                                      CERTIFICATION PURSUANT TO

                                            18 U.S.C. SECTION 1350,

                                        AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of RedEnvelope, Inc. (the "Company") on Form 10-K for the year ended
March 28, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I,
Alison L. May, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.

                                             /s/ Alison L. May

                                             Chief Executive Officer

                                             June 22, 2004
                                                  EXHIBIT 32.2

                                                RedEnvelope, Inc.

                                      CERTIFICATION PURSUANT TO

                                            18 U.S.C. SECTION 1350,

                                        AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of RedEnvelope, Inc. (the "Company") on Form 10-K for the year ended
March 28, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Eric
C. Wong, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.

                                             /s/ Eric C. Wong

                                             Chief Financial Officer

                                             June 22, 2004