ASSET PURCHASE AGREEMENT

dated as of April 17, 2008

among

CREATIVE CATALOGS CORPORATION,

as Purchaser,

and

REDENVELOPE, INC.,

as Seller

TABLE OF CONTENTS

SCHEDULES

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT is made and entered into as of April 17, 2008, by and among Creative Catalogs Corporation, a Delaware corporation, or its assignee (the “Purchaser”), and RedEnvelope, Inc., a Delaware corporation (the “Seller”).

In consideration of the mutual covenants, agreements and warranties herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

1.1 Definitions. Unless otherwise defined herein, terms used herein shall have the meanings set forth below:

“Acquired Assets” shall have the meaning set forth in Section 2.1(a) hereof.

“Affiliate” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities or otherwise.

“Affiliated Group” means an affiliated group as defined in section 1504 of the Code (or any analogous combined, consolidated or unitary group defined under state, local or foreign income Tax Law) of which Seller is or has been a member.

“Agreement” means this Asset Purchase Agreement, including all the Schedules hereto, as the same may be amended, modified or waived from time to time in accordance with its terms.

“Allocation” shall have the meaning set forth in Section 12.6 hereof.

“Alternative Transaction” means any transaction occurring after the Bidding Procedures Order is entered involving the consummation of the sale pursuant to section 363(b) of the Bankruptcy Code of all or a material portion of the Business by the Seller to a purchaser or purchasers other than the Purchaser and/or one or more of its Affiliates at any time during the pendency of the Chapter 11 Case.

“Assignment and Assumption” shall have the meaning set forth in Section 10.2(b) hereof.

“Assumed Executory Contracts” means all Contracts and Leases identified in Schedule 2.1(a)(iv).

“Assumed Obligations” shall have the meaning set forth in Section 2.2(a) hereof.

“Assumed Post-Petition Obligations” shall have the meaning set forth in Section 2.2(b).

“Auction” shall mean the auction conducted by Seller pursuant to the Bidding Procedures Order and Section 8.2(d) hereof for substantially all of the Acquired Assets.

“Bankruptcy Code” means Title 11 of the United States Code.

“Bankruptcy Court” means the United States Bankruptcy Court for the Northern District of California, San Francisco Division.

“Bid” or “Bids” shall have the meaning set forth in Section 6.9 hereof.

“Bidders” shall have the meaning set forth in Section 6.9 hereof.

“Bidding Procedures Order” means the order of the Bankruptcy Court, in the form reasonably acceptable to the Purchaser which includes, among other things, (i) the Breakup Fee, Expense Reimbursement and all other payments to Purchaser arising under this Agreement as obligations of the Seller having super-priority as administrative expenses under section 364(c)(1) of the Bankruptcy Code in the Chapter 11 Case, (ii) Purchaser’s designation as the stalking horse bidder together with the provisions of this Agreement to be performed by Seller before the Closing; (iii) obligations setting a deadline for the filing of objections to the entry of the Sale Order, (iii) scheduling the Auction in accordance with the terms of this Agreement, (iv) scheduling the Sale Hearing, (v) providing for competitive bidding procedures pursuant to which competing offers may be solicited, made and accepted and containing the terms specified in Sections 8.2(d) and 11.2 hereof and (vi) approving and implementing the provisions of Sections 6.6, 6.7, 8.2(d) and 11.2 hereof.

“Books and Records” means all records and lists of Seller including: (i) all merchandise, analysis reports, marketing reports and creative material pertaining to the Acquired Assets, the Facilities or the Business, (ii) all records relating to past or present customers, suppliers or personnel of Seller (including customer lists, mailing address lists, e-mail address lists, recipient lists, sales records, correspondence with customers, customer files and account histories, supply lists and records of purchases from and correspondence with suppliers and any other written or electronic identifiable data relating to past or present customers or suppliers of the Business or personnel of Seller which has been created by Seller or its representatives, agents or employees), all records relating to all product, business and marketing plans of Seller, and (iii) all books, ledgers, files, reports, plans, drawings and operating records of every kind of Seller; provided, however, “Books and Records” shall not include any records exclusively related to the Excluded Assets or Seller’s minute books, stock books and Tax Returns.

“Breakup Fee” shall have the meaning set forth in Section 8.2(d)(i) hereof.

“Business” means the business activities carried on by or on behalf of Seller.

“Chapter 11 Case” means the case commenced by Seller under chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court.

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“Claim” shall have the meaning set forth in section 101(5) of the Bankruptcy Code.

“Closing” shall have the meaning set forth in Section 10.1 hereof.

“Closing Date” shall have the meaning set forth in Section 10.1 hereof.

“Closing Date Inventory” shall have the meaning set forth in Section 3.2 hereof.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Confidentiality Agreement” means the Confidentiality Agreement, dated as of March 3, 2008, between Purchaser and Seller.

“Contract” means any agreement, contract, commitment or other binding arrangement or understanding, whether written or oral, to which Seller is a party and which Seller is permitted under the Bankruptcy Code and applicable law to assume and assign other than an Employee Benefit Plan.

“Copyright Assignment” means a copyright assignment in form and substance reasonably satisfactory to Purchaser.

“DIP Amount” means the amounts, as of the date of the Closing, of all of Seller’s obligations to the Lenders under the DIP Facility, including, without limitation, any obligations thereunder for unpaid interest, costs, fees, and expenses.

“DIP Facility” means the Loan Agreement (Debtor-in-Possession) dated on or about the date hereof, entered into by and among Seller, as borrower and a debtor in bankruptcy, the agents for the lenders thereunder, and such other the parties thereto from time to time as lenders.

“Disclosure Schedules” shall have the meaning set forth in Section 4.1 hereof.

“Dollars” or “$” means dollars of the United States of America.

“Excluded Assets” shall have the meaning set forth in Section 2.3 hereof.

“Excluded Contracts” shall have the meaning set forth in Section 2.3(b) hereof.

“Excluded Environmental Liabilities” means any Liability or investigatory, corrective or remedial obligation, arising under environmental Laws with respect to Seller or any predecessor or Affiliate of Seller, arising out of or relating to the operation, use or environmental condition of the Business, the Acquired Assets or the Facilities prior to the Closing (including any arising from the on-site or off-site Release, threatened Release, treatment, storage, disposal, or arrangement for disposal of, or exposure to Hazardous Substances) whether or not constituting a breach of any representation or warranty herein and whether or not set forth on any Disclosure Schedule.

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“Excluded Liabilities” shall have the meaning set forth in Section 2.4 hereof.

“Expense Reimbursement” shall have the meaning set forth in Section 8.2(d)(i) hereof.

“Facilities” means collectively the premises at which Seller operates the Business, namely (i) Seller’s corporate headquarters facility of approximately 28,000 square feet of office space located in San Francisco, California, (ii) Seller’s fulfillment center of approximately 240,000 square feet located in Lockbourne, Ohio and (iii) Seller’s customer sales and service center of approximately 13,000 square feet located in San Diego, California.

“Final Order” means an Order as to which the time to file an appeal, a motion for rehearing or reconsideration or a petition for writ of certiorari has expired and no such appeal, motion or petition is pending.

“GAAP” means, at a given time, United States generally accepted accounting principles, consistently applied.

“Governmental Authority” means any United States federal, state or local or any foreign government, governmental regulatory or administrative authority, agency or commission or any court, tribunal or judicial or arbitral body.

“Highest or Best Bid” shall have the meaning set forth in Section 8.2(d)(viii) hereof.

“Indebtedness” with respect to any Person means any obligation of such Person for borrowed money, and in any event shall include (i) any obligation incurred for all or any part of the purchase price of property or other assets or for the cost of property or other assets constructed or of improvements thereto, other than accounts payable included in current liabilities and incurred in respect of property purchased in the Ordinary Course of Business, (ii) the face amount of all letters of credit issued for the account of such Person, (iii) obligations (whether or not such Person has assumed or become liable for the payment of such obligation) secured by Liens, (iv) capitalized lease obligations, (v) all guarantees and similar obligations of such Person, (vi) all accrued interest, fees and charges in respect of any indebtedness and (vii) all prepayment premiums and penalties, and any other fees, expenses, indemnities and other amounts payable as a result of the prepayment or discharge of any indebtedness.

“Intellectual Property” means all of the following in any jurisdiction throughout the world: (i) inventions (whether or not patentable or reduced to practice), all improvements thereto, and patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, reexaminations and counterparts thereof; (ii) trademarks, service marks, trade dress, logos, slogans, trade names, internet domain names, corporate names and all other indicia of origin, together with all translations, derivations and combinations thereof, and together with all goodwill associated therewith, and all applications, registrations and renewals in connection therewith; (iii) works of authorship (whether or not copyrightable), and copyrights, mask works and copyrightable works, and applications, registrations and renewals in connection therewith; (iv) trade secrets, know-how and other confidential, proprietary or business information (including ideas, research and

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development, formulas, compositions, manufacturing, production and other processes and techniques, methods, designs, technical and other data, charts, plans, diagrams, drawings and specifications, customer and supplier lists and business, marketing and other plans, studies and proposals); (v) computer software (including source code, executable code data, databases and documentation) and systems; (vi) copies and tangible embodiments of any of the foregoing in whatever form or medium; (vii) all other intellectual property and proprietary rights; and (viii) the right to sue and recover for any past, present or future infringement, misappropriation, dilution or any other causes of action, and to recover or collect any damages, proceeds, income, royalties or other payments in connection with or relating to any of the foregoing.

“Intellectual Property Assignments” means the Trademark Assignment and the Copyright Assignment.

“Inventory” means all inventory of any kind or nature owned by Seller, including all raw materials, work in process, semi-finished and finished products, replacement and spare parts, packaging materials, operating supplies, and fuels and other and similar items.

“Knowledge of Seller” shall mean the actual knowledge of each of Seller’s Chief Executive Officer, Chief Financial Officer and Chief Marketing Officer.

“Law” means any law, statute, regulation, ruling, or Order of, administered or enforced by or on behalf of, any Governmental Authority, or common law.

“Liability” means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due and regardless of when asserted), including any liability for Taxes.

“Lien” or “Liens” means any lien (statutory or otherwise), hypothecation, encumbrance, Claim, Liability, security interest, interest, mortgage, pledge, restriction, charge, instrument, license, preference, priority, security agreement, easement, covenant, encroachment, option, right of recovery, Tax (including foreign, federal, state and local Tax), Order of any Governmental Authority, of any kind or nature (including (i) any conditional sale or other title retention agreement and any lease having substantially the same effect as any of the foregoing, (ii) any assignment or deposit arrangement in the nature of a security device, (iii) any claim based on any theory that Purchaser is a successor, transferee or continuation of Seller or the Business, and (iv) any leasehold interest, license or other right, in favor of a Third Party or a Seller, to use any portion of the Acquired Assets), whether secured or unsecured, choate or inchoate, filed or unfiled, scheduled or unscheduled, noticed or unnoticed, recorded or unrecorded, contingent or non-contingent, material or non-material, known or unknown.

“Material Adverse Change” or “Material Adverse Effect” means any event, condition, development or effect that individually or in the aggregate with all other events, changes, conditions, developments and effects, is or is reasonably likely to be materially adverse to (i) the Acquired Assets and Assumed Obligations or (ii) the ability of Seller to perform its obligations under this Agreement, provided, however, that none of the following shall be deemed in and of itself, either alone or in combination, to constitute, and none of the following shall be

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taken into account in determining whether there has been or will be, a Material Adverse Change or a Material Adverse Effect: (a) the filing of the Chapter 11 Case, (b) changes in economic conditions generally or in the industries in which Seller operates, except to the extent such changes have a disproportionate effect on Seller, (c) any change of Law, accounting standards or regulatory policy, (d) changes or adverse conditions in the securities markets, including those relating to debt financing, except to the extent such changes have a disproportionate effect on Seller, and (e) any actions specifically required to be taken pursuant to this Agreement.

“Order” means any decree, order, injunction, rule, judgment, consent of or by any Governmental Authority.

“Ordinary Course of Business” means the operation of the Business by Seller in the usual and ordinary course in a manner substantially similar to the manner in which Seller operated, consistent with past practice prior to the date hereof, subject to any obligations as a debtor under the Bankruptcy Code or any order of the Bankruptcy Court.

“Permits” means licenses, permits, approvals, certificates of occupancy, authorizations, operating permits, registrations, plans and the like.

“Permitted Liens” means easements, covenants, conditions, restrictions and other similar matters of record on real property, leasehold estates or personalty that do not in any material respect detract from the value thereof and do not individually or in the aggregate in any material respect interfere with the present use of the property subject thereto.

“Person” means any corporation, partnership, joint venture, limited liability company, organization, entity, authority or natural person.

“Petition Date” means the date the Chapter 11 Case is commenced.

“Post-Petition Accounts Payable” shall mean post-petition trade account payables incurred in the Ordinary Course of Business and other post-petition current Liabilities incurred in the Ordinary Course of Business. Post-Petition Accounts Payable shall not include Liabilities arising from breach of contract, breach of warranty, tort, infringement or other violation of the rights of another Person (including any Intellectual Property rights), lawsuits or violation of Law.

“Post-Petition Employee Compensation” shall mean post-petition obligations with respect to any unpaid wages, salary, unused vacation or sick leave earned and accrued (to the extent not paid) with respect to the Rehired Employees.

“Proceeding” means any claim, charge, complaint, dispute, demand, action, investigation, inquiry, audit, suit in equity or at Law, administrative, regulatory or quasi-judicial proceeding, arbitration, account, contribution, and/or other causes of action of whatever kind or character.

“Purchase Price” shall have the meaning set forth in Section 3.1(a) hereof.

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“Purchase Price Protection” means bid protection as approved by the Bankruptcy Court which shall require any competing initial bid from a Third Party purchaser (other than the stalking horse bidder) to exceed the Purchase Price by an amount equal to the Breakup Fee and Expense Reimbursement plus an amount not less than $500,000 as shall be set forth in the Bidding Procedures Order.

“Purchaser” shall have the meaning set forth in the preamble hereof.

“Qualifying Bid” shall have the meaning set forth in Section 8.2(d)(vii) hereof.

“Rehired Employees” shall have the meaning set forth in Section 12.1 hereof.

“Rule” or “Rules” means the Federal Rules of Bankruptcy Procedure.

“Sale Hearing” means the hearing of the Bankruptcy Court to approve this Agreement and the transactions contemplated herein.

“Sale Motion” shall have the meaning set forth in Section 6.6(b) hereof.

“Sale Order” means the Final Order of the Bankruptcy Court, in form reasonably acceptable to the Purchaser and to be filed with the Bankruptcy Court on or before two (2) business days before the Sale Hearing to be entered by the Bankruptcy Court pursuant to sections 363 and 365 of the Bankruptcy Code.

“Schedules” means the schedules attached hereto (including the Disclosure Schedules).

“Seller” shall have the meaning set forth in the preamble hereof.

“Subsidiary” means, with respect to any Person, any corporation a majority of the total voting power of shares of stock of which is entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or any partnership, limited liability company, association or other business entity a majority of the partnership or other similar ownership interest of which is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes of this definition, a Person is deemed to have a majority ownership interest in a partnership, limited liability company, association or other business entity if such Person is allocated a majority of the gains or losses of such partnership, limited liability company, association or other business entity or is or controls the managing director or general partner of such partnership, limited liability company, association or other business entity.

“Tax” and, with correlative meaning, “Taxes” mean with respect to any Person (i) all federal, state, local, county, foreign and other taxes, assessments or other government charges, including any income, alternative or add-on minimum tax, estimated gross income, gross receipts, sales, use, ad valorem, value added, transfer, capital stock franchise, profits, license, registration, recording, documentary, intangibles, conveyancing, gains, withholding, payroll, employment, social security (or similar), unemployment, disability, excise, severance, stamp, occupation, premium, real property, personal property, unclaimed property,

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environmental or windfall profit tax, custom duty or other tax, governmental fee or other like assessment, charge, or tax of any kind whatsoever, together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Authority responsible for the imposition of any such tax (domestic or foreign) whether such Tax is disputed or not, (ii) Liability for the payment of any amounts of the type described in clause (i) above relating to any other Person as a result of being party to any agreement to indemnify such other Person, being a successor or transferee of such other Person, or being a member of the same affiliated, consolidated, combined, unitary or other group with such other Person, or (iii) Liability for the payment of any amounts of the type described in clause (i) arising as a result of being (or ceasing to be) a member of any Affiliated Group (or being included (or required to be included) in any Tax Return relating thereto).

“Tax Return” means any report, return, declaration, claim for refund or other information or statement relating to Taxes, including any schedules or attachments thereto and any amendments thereof.

“Third Party” means any Person other than Seller, Purchaser or any of their respective Affiliates.

“Trademark Assignment” means the trademark assignment in form and substance reasonably satisfactory to Purchaser.

“Transaction Documents” means this Agreement, and all other agreements, instruments, certificates and other documents to be entered into or delivered by any party in connection with the transactions contemplated to be consummated pursuant to this Agreement.

“WARN Act” means the Worker Adjustment and Retraining Notification Act, as amended.

1.2 Rules of Construction. Unless the context otherwise clearly indicates, in this Agreement:

(a) the singular includes the plural;

(b) “includes” and “including” are not limiting;

(c) “may not” is prohibitive and not permissive; and

(d) “or” is not exclusive.

ARTICLE II

PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES

2.1 Purchase and Sale of Assets.

(a) Subject to the terms and conditions set forth in this Agreement, at the Closing, Seller shall sell, contribute, convey, assign, transfer and deliver to Purchaser, free and clear of all Liens, Claims, and other interests and encumbrances (whether arising prior to or subsequent to

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the petition for the Chapter 11 Case) (except for the Assumed Obligations and Permitted Liens) to the fullest extent allowed by Law, and Purchaser shall purchase, acquire and take assignment and delivery of, for the consideration specified in Section 3.1, all properties, assets, rights, titles and interests of every kind and nature, owned, licensed or leased by Seller (including indirect and other forms of beneficial ownership) as of the Closing Date, whether tangible or intangible, real or personal and wherever located and by whomever possessed, including all of the following assets (all of the assets to be sold, assigned, transferred and delivered to Purchaser hereunder herein called the “Acquired Assets”; provided, that the Acquired Assets shall not include the Excluded Assets retained by Seller pursuant to Section 2.3 ):

(i) all billed and unbilled accounts, notes and credit card receivables (whether current or noncurrent) and all causes of action specifically pertaining to the collection of the foregoing;

(ii) all promotional allowances and vendor rebates and similar items;

(iii) all Intellectual Property, along with all goodwill associated therewith and the business symbolized thereby, all income, royalties, products, proceeds, damages and payments due or payable to Seller as of the Closing or thereafter, including damages and payments for past, present or future infringements, misappropriations or other causes of actions thereof, the right to sue and recover for past infringements, misappropriations or other causes of actions thereof and any and all corresponding rights that, now or hereafter, may be secured throughout the world and all copies and tangible embodiments of any such Intellectual Property in Seller’s possession or control;

(iv) all of Seller’s rights existing under the Assumed Executory Contracts (for the avoidance of doubt, a list of such Assumed Executory Contracts is set forth in Schedule 2.1(a)(iv)), as determined by Purchaser, to the extent that such Assumed Executory Contracts (A) have been entered into after the petition for the Chapter 11 Case, (B) have been assumed prior to the date of this Agreement pursuant to an Order of the Bankruptcy Court or (C) are assumed by Seller pursuant to Section 2.1(b);

(v) all safety deposit boxes, lock boxes and the like;

(vi) all owned machinery, equipment (including all transportation and office equipment), fixtures, trade fixtures, computer and information technology equipment and related data, telephone systems and furniture owned by Seller wherever located, including all such items which are located in any Facility;

(vii) all Inventory;

(viii) all owned office supplies, production supplies, spare parts, other miscellaneous supplies, and other tangible property of any kind wherever located, including all property of any kind located in any building, office or other space leased, owned or occupied by Seller or in any warehouse where any of Seller’s properties and assets may be situated;

(ix) all security deposits and advances and prepaid assets and other current assets including any Tax receivables and Tax refunds;

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(x) all claims, including Claims, deposits, prepayments, warranties, guarantees, refunds, reimbursements, causes of action, rights of recovery, rights of set-off and rights of recoupment of every kind and nature (whether or not known or unknown or contingent or non-contingent);

(xi) the right to receive and retain mail, accounts, notes and credit card receivables payments and other communications;

(xii) the right to bill and receive payment for products shipped or delivered and services performed but unbilled or unpaid as of the Closing;

(xiii) all Books and Records;

(xiv) all advertising, marketing and promotional materials;

(xv) other than as set forth on Schedule 2.1(xv), all Permits, licenses, certifications and approvals from all permitting, licensing, accrediting and certifying agencies, and the rights to all data and records held by such permitting, licensing and certifying agencies;

(xvi) all goodwill as a going concern and all other intangible properties;

(xvii) all telephone numbers;

(xviii) all of Seller’s rights to be indemnified;

(xix) all rights to proceeds under insurance policies; and

(xx) all security deposits relating to Assumed Executory Contracts.

(b) Notwithstanding anything in this Agreement to the contrary, (i) Purchaser may revise Schedule 2.1(a)(iv) to eliminate or add any Lease or Contract from Schedule 2.1(a)(iv) and exclude from or include in, as applicable, the definition of Assumed Executory Contracts such Lease or Contract by providing written notice to Seller up to three (3) Business Days prior to the Sale Hearing and (ii) in the case of any such revision, Seller shall give notice to the other parties to any such Lease or Contract within twenty-four hours of such addition or elimination, and Seller shall use all reasonable efforts to obtain any necessary Bankruptcy Court approval for the assumption and assignment to Purchaser of such additional Assumed Executory Contracts.

(c) If Purchaser removes any real property lease from the list of Assumed Executory Contracts pursuant to the preceding Section 2.1(b) and simultaneously requests in writing that the Seller not immediately reject any such real property lease, Purchaser shall have a total of one hundred and fifteen (115) days from the Petition Date to decide to take assignment of such lease(s) provided: (i) Purchaser shall be responsible for all rent and other sums owing from the date of Closing by Seller under the particular lease until such lease is either assumed and assigned to Purchaser at Purchaser’s option (and following such assignment, such lease will be an Assumed Obligation hereunder of Purchaser) or such lease is rejected by order of the Bankruptcy Court; (ii) Purchaser shall provide written notice to Seller of its intention to take

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assignment of the particular real property lease or its consent to the Seller’s rejection of the real property lease on or before the 115^th day following the Petition Date, and in the absence of such written notice, on or after the 116^th day, Seller may move to immediately reject such real property lease (provided that notwithstanding any failure of Purchaser to provide such notice, Purchaser shall be obligated for all sums owing from the date of Closing under the leases until the date such leases are formally rejected).

(d) At any time, Seller may immediately move to reject any Contract which is an Excluded Contract, and any real property lease which is an excluded contract where Seller has not received written notice from Purchaser pursuant to the terms of Section 2.1(c) above, upon notice to Purchaser and Purchaser shall have the right to inform Seller up to fifteen (15) days following the date of the notice thereof to require the Seller to assume and assign such Excluded Contract to Purchaser provided any applicable cure costs shall be borne by Purchaser.

2.2 Assignment and Assumption of Liabilities.

(a) Subject to the terms and conditions set forth in this Agreement, including Section 2.4 hereto, Purchaser shall only assume from Seller and thereafter be responsible for the payment, performance or discharge of the Liabilities and obligations of Seller under the Assumed Executory Contracts arising after the Closing (the “Assumed Obligations”).

(b) Notwithstanding the foregoing provisions of Section 2.2(a), Purchaser may, in its sole discretion, elect to assume all or any portion of the Post-Petition Accounts Payable or Post-Petition Employee Compensation by providing written notice to Seller at any time prior to the Closing, and any Post-Petition Accounts Payable or Post-Petition Employee Compensation that are so assumed shall become Assumed Obligations hereunder (such assumed portions of the Post-Petition Accounts Payable and Post-Petition Employee Compensation, collectively the “Assumed Post-Petition Obligations”). For the avoidance of doubt, (i) if Purchaser does not elect to assume any of the Post-Petition Accounts Payable or the Post-Petition Employee Compensation by providing such notice to Seller, all Post-Petition Accounts Payable and Post-Petition Employee Compensation shall be Excluded Liabilities hereunder and shall be retained by Seller, and (ii) if Purchaser elects to assume only a portion of the Post-Petition Accounts Payable or Post-Petition Employee Compensation, only the portions so assumed shall be Assumed Post-Petition Obligations and all other amounts of Post-Petition Accounts Payable or Post-Petition Employee Compensation shall be Excluded Liabilities and shall be retained by Seller.

(c) Section 2.2(a) shall not limit any claims or defenses Purchaser may have against any party other than Seller. The transactions contemplated by this Agreement shall in no way expand the rights or remedies of any Third Party against Purchaser or Seller.

2.3 Excluded Assets.

Notwithstanding anything to the contrary in this Agreement, the following assets of Seller shall be retained by Seller and are not being sold or assigned to Purchaser hereunder (all of the following are referred to collectively as the “Excluded Assets”):

(a) any and all rights under this Agreement and avoidance claims or causes of action arising under the Bankruptcy Code or applicable state Law, including all rights and avoidance claims of Seller arising under chapter 5 of the Bankruptcy Code;

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(b) all Contracts other than the Assumed Executory Contracts listed on Schedule 2.1(a)(iv) (taking into account any revisions to Schedule 2.1(a)(iv) made by Purchaser pursuant to Section 2.1(b)) (the “Excluded Contracts”);

(c) all cash (including checking account balances, certificates of deposit and other time deposits);

(d) all rights to proceeds under any director and officer liability insurance policies of Seller for claims arising prior to the Closing;

(e) any asset set forth on Schedule 2.3(e);

(f) all assets maintained pursuant to or in connection with any Employee Benefit Plan; and

(g) any equity securities of any other issuer owned by Seller and any notes receivable issued by any shareholder of the Seller in connection with the exercise of Seller’s stock options.

2.4 No Other Liabilities Assumed.

Seller acknowledges and agrees that pursuant to the terms and provisions of this Agreement, Purchaser will not assume, or in any way be liable or responsible for, any Liability of Seller (including Liabilities relating to the pre-petition or post-petition operation of the Business, the Excluded Assets or to the Acquired Assets (and the use thereof) or any outstanding checks), whether relating to or arising out of the Business, the Excluded Assets or the Acquired Assets or otherwise, other than the Assumed Obligations. In furtherance and not in limitation of the foregoing, except as specifically set forth in Section 2.2, neither Purchaser nor any of its Affiliates shall assume, and shall not be deemed to have assumed, any Liability of any kind or nature whatsoever of Seller resulting from, arising out of, relating to, in the nature of, or caused by (a) Indebtedness (other than Assumed Executory Contracts which are capitalized leases), (b) any Excluded Asset or Excluded Contract, (c) Taxes or escheat obligations of any kind or nature, (d) any Claim arising out of facts, events, circumstances, actions or inactions occurring on or prior to the Closing, (e) any Employee Benefit Plan, (f) any Excluded Environmental Liabilities, (g) any employees of Seller who are not Rehired Employees, any former employees or any retirees of Seller, or any dependents or beneficiaries thereof, (h) any breach of contract, breach of warranty, tort, infringement or other violation of the rights of another Person (including any Intellectual Property rights) or any lawsuits or violations of Law, (i) any other obligation of Seller or any predecessor or Affiliate of Seller whatsoever or any ERISA Affiliate other than the Assumed Obligations, (j) any Liability or obligation with respect to gift cards, gift certificates or the like, (k) any Liability of Seller arising under the WARN Act (whether prior to or after Closing), if any, including any such Liabilities arising out of or resulting in connection with the Closing and/or the consummation of the transactions contemplated by this Agreement, or (l) any Post-Petition Accounts Payable or Post-Petition Employee Compensation (unless expressly assumed by Purchaser pursuant to Section 2.2(b) (collectively, any such obligations, the “Excluded Liabilities”).

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2.5 Deemed Consents.

Seller shall request that by providing notice of its intent to assume and assign any Contract or Lease, that the Bankruptcy Court deem the non-debtor party to such Contract or Lease to have consented to the sale if, and to the extent that, pursuant to the Sale Order or other Bankruptcy Court Order, Seller is authorized to assume and assign to Purchaser and Purchaser is authorized to accept such Assumed Executory Contracts pursuant to section 365 of the Bankruptcy Code.

2.6 Obligations in Respect of Assumed Executory Contracts.

To the extent that any Assumed Executory Contract is subject to a cure pursuant to section 365 of the Bankruptcy Code, Seller shall be responsible for such cure and pay any amounts related to such cure obligations; provided, however, that Seller shall be responsible for such cure and pay any amounts related to such cure obligations for any Contract or Lease that is added to Schedule 2.1(a)(iv) by Purchaser following the date of this Agreement (the “Cure Costs”). Purchaser shall be responsible for paying all costs and expenses accrued under any Assumed Executory Contract subsequent to the Closing Date.

2.7 Post-Closing Assignment of Contracts.

With respect to any Contract which is not set forth on Schedule 2.1(a)(iv) and provided such Contract has not been rejected by Seller pursuant to section 365 of the Bankruptcy Code, upon written notice(s) from Purchaser, as soon as practicable, Seller shall take all actions reasonably necessary to assume and assign to Purchaser pursuant to section 365 of the Bankruptcy Code any Contract(s) set forth in Purchaser’s notice(s), and any applicable costs incurred subsequent to the Closing Date shall be borne by Purchaser. The covenant set forth in Section 2.7 shall survive the Closing, subject to the rights of Seller under Section 2.1(d). Notwithstanding anything in this Agreement to the contrary, on the date any Contract is assumed and assigned to Purchaser pursuant to this Section 2.7, such Contract shall be deemed an Assumed Executory Contract and deemed scheduled on Schedule 2.1(a)(iv) under the appropriate heading for all purposes under this Agreement.

ARTICLE III

BASIC TRANSACTION

3.1 Payment of Purchase Price.

(a) In consideration of the sale, transfer, conveyance and assignment of the Acquired Assets to Purchaser at the Closing, Purchaser shall pay in cash to Seller at the Closing $5,700,000 less any Closing Inventory Adjustment as provided in Section 3.2 below (the “Purchase Price”) less the DIP Amount (the “Cash Consideration”), payable by wire transfer of immediately available funds to that account or accounts designated in writing by Seller.

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(b) In addition, the Purchaser shall assume the Assumed Obligations.

(c) Payments made pursuant to this Section 3.1 shall be allocated among the assets purchased in accordance with Section 12.6.

3.2 Inventory Adjustment.

Immediately prior to the Closing Date, Seller and Purchaser shall take a physical inventory of all Inventory (the “Closing Date Inventory”). The Purchase Price shall be reduced for each dollar by which: (a) the book value of the usable Closing Date Inventory is less than $8,200,000, (b) the book value of the non-usable Closing Date Inventory is less than $400,000 and (c) the book value of the gift wrap Closing Date Inventory is less than $600,000. Book value of the Inventory shall be determined in accordance with Seller’s historical practices. Notwithstanding the foregoing, Buyer shall have the option, within its sole discretion, to waive its right to take a physical inventory as provided above.

3.3 Further Assurances.

From time to time after the Closing and without further consideration, (a) upon the request of Purchaser, Seller shall execute and deliver such documents and instruments of conveyance and transfer as Purchaser may reasonably request in order to consummate more effectively the purchase and sale of the Acquired Assets as contemplated hereby and to vest in Purchaser title to the Acquired Assets transferred hereunder, or to otherwise more fully consummate the transactions contemplated by this Agreement, and (b) Purchaser, upon the request of Seller, shall execute and deliver such documents and instruments of contract or lease assumption as Seller may reasonably request in order to confirm Purchaser’s Liability for the Assumed Obligations or otherwise to more fully consummate the transactions contemplated by this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER

4.1 Seller’s Representations and Warranties.

Seller represents and warrants to Purchaser to the best of its Knowledge that the statements contained in this Article IV are correct and complete as of the Closing Date, except as expressly set forth in the schedules relating to this Article IV (the “Disclosure Schedules”). The information disclosed in any numbered part of the Disclosure Schedule shall be deemed to relate to and to qualify only the particular representation or warranty set forth in the corresponding numbered section in this Agreement and shall not be deemed to relate to or to qualify any other representation or warranty unless the applicability of such disclosure to such other representation or warranty is reasonably apparent on its face. The mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty has to do with the existence of the document or other item itself).

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4.2 Validity of Agreement.

Subject to any necessary authorization from the Bankruptcy Court, Seller has full power and authority to execute and deliver the Transaction Documents to which it is a party and to consummate the transactions contemplated hereby and thereby. All Transaction Documents to which Seller is a party have been duly executed and delivered by Seller, except such Transaction Documents that are required by the terms hereof to be executed and delivered by Seller after the date hereof, in which case such Transaction Documents will be duly executed and delivered by Seller at or prior to the Closing, and, subject to any necessary authorization from the Bankruptcy Court, all Transaction Documents constitute, or will constitute, as the case may be, the valid and binding agreements of Seller, enforceable against Seller in accordance with their terms.

4.3 Organization, Standing and Power.

Seller is duly organized, validly existing and in good standing under the Laws of the State of Delaware and is qualified to do business in every jurisdiction in which it is required to be qualified. Subject to any necessary authorization from the Bankruptcy Court, Seller has all requisite corporate power and authority to own, lease and operate its properties, to carry on the Business as now being conducted, to execute and deliver the Transaction Documents, subject to Bankruptcy Court authorization and to perform its obligations thereunder, subject to applicable bankruptcy, reorganization, insolvency, moratorium and other Laws affecting creditors’ rights generally from time to time, and to general equitable principles.

4.4 No Conflicts.

Subject to the approval of the Bankruptcy Court, including pursuant to the entry of the Sale Order, none of the execution, delivery or performance of this Agreement and the Transaction Documents by Seller will (a) conflict with or result in a violation or breach of any of the terms, conditions or provisions of Seller’s Certificate of Incorporation or Bylaws, (b) result in the creation or imposition of any Lien upon any of the properties or assets of Seller, or (c) result in a violation or breach of any term or provision of any Law or Order applicable to Seller, other than such violations or breaches which would not materially and adversely affect the validity or enforceability of this Agreement of the Transaction Documents.

4.5 No Consents.

No consent, approval or action of, filing with or notice to any Governmental Authority is required to be obtained by Seller in connection with the execution, delivery and performance of this Agreement or any of the Transaction Documents, or the consummation of the transactions contemplated hereby or thereby, except (a) for consents, approvals or actions of and filings with or notice to the Bankruptcy Court and (b) where the failure to obtain any such consent, approval or action, to make any such filing or to give any such notice would not materially and adversely affect the ability of Seller to consummate the transactions contemplated by this Agreement or any of the Transaction Documents or to perform its obligations hereunder or thereunder or have a Material Adverse Effect on the condition of the Business.

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4.6 Legal Proceedings.

Except as set forth on Schedule 4.6 and except for Claims that will be discharged pursuant to an Order of the Bankruptcy Court:

(a) Other than the Chapter 11 Case, there are no Proceedings pending or, to the Knowledge of Seller, threatened against, relating to or affecting Seller with respect to the Business or any of the Acquired Assets which would (i) result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or any of the Transaction Documents, or (ii) have a Material Adverse Effect on the Business; and

(b) Except for Orders of the Bankruptcy Court, there are no Orders outstanding against Seller.

4.7 Financial Statements.

Each of the consolidated financial statements of Seller for the fiscal years ended March 31, 2006 and March 31, 2007 and the fiscal quarter ended December 31, 2007, as filed with the U.S. Securities and Exchange Commission (the “SEC”), have been prepared in all material respects in accordance with the published rules and regulations of the SEC (including Regulation S-X) and in accordance with United States generally accepted accounting principles applied on a consistent basis throughout the periods indicated (except as otherwise stated in such financial statements, including the related notes) and each fairly presents, in all material respects, the consolidated financial position, results of operations and cash flows of Seller as at the respective dates thereof and for the respective periods indicated therein, except as otherwise set forth in the notes thereto (subject, in the case of unaudited statements, to normal and recurring year-end adjustments, none of which is material, individually or in the aggregate, to Seller). Seller has not, since December 31, 2007, made any material change in the accounting practices or policies applied in the preparation of the above financial statements.

4.8 Title to Property.

Subject to receipt of the approval of the Bankruptcy Court pursuant to the Sale Order, Seller has, or at the Closing will have, the right to deliver to Purchaser good and marketable title to, or a valid leasehold interest in, all of the Acquired Assets free and clear of all liens, claims and interests (other than Permitted Liens).

4.9 Brokers.

Except as set forth on Schedule 4.9, Seller has not incurred any Liability to any broker, finder or agent with respect to the payment of any commission regarding the consummation of the transactions contemplated hereby.

4.10 Intellectual Property.

Except as set forth on Schedule 4.10, Seller (a) owns and possesses all right, title and interest in and to (or has the right to use pursuant to a license or other permission) the Intellectual

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Property; (b) has no obligation to compensate any Person for the right to use any of the Intellectual Property (except, in the case of Intellectual Property that is licensed, for obligations pursuant to the applicable license agreement); (c) has not granted to any Person any license, option or other similar rights in or to any of the Intellectual Property; (d) has not received any written notice from any Person that challenges the validity or enforceability of any of the Intellectual Property; (e) has not received any notice from any Person challenging Seller’s ownership of, or right to use, any of the Intellectual Property; and (f) to the Knowledge of Seller, no Person is infringing upon or has misappropriated any of the Intellectual Property.

4.11 Inventory.

The book value of the Inventory as of the date of this Agreement is not less than $7,000,000 in usable Inventory, $1,500,000 in non-usable Inventory and $900,000 in gift wrap Inventory. The book value of the Inventory has been determined in accordance with Seller’s historical practices.

4.12 Limitations.

Except as expressly provided herein or in the Sale Order approving this Agreement, the Purchaser agrees and acknowledges that all transfers of the Acquired Assets are “as is” and “where is”, and acknowledges and agrees that the Seller makes no representation of any kind whatsoever with respect to the Acquired Assets or otherwise, express or implied, including but not limited to any representation or warranty regarding the title or condition of the Acquired Assets, or the fitness, desirability, or the merchantability thereof or suitability thereof for any particular purpose, the current or future tax liability, assessment or valuation of any of the Acquired Assets, the compliance of any of the Acquired Assets in their current or future state with applicable laws or the actual projected income or operating expense of the business or Acquired Assets. The Purchaser further acknowledges and represents that it has reviewed and inspected the Acquired Assets, has had the opportunity to inspect the books and records of the Seller and the public filing records, and enters into this Agreement after independent investigation of the facts and circumstances relating to the Acquired Assets, the operations of the business and the transactions described herein.

4.13 Contracts.

Seller has made available to Purchaser a correct and complete copy of each Assumed Executory Contract listed on Schedule 2.1(a)(iv) and each Excluded Contract listed on Schedule 2.3(b), and such Contracts shall collectively include all of Seller’s material Contracts and Leases. In addition, all executory contracts of Seller existing as of the date hereof are included on Schedule 2.1(a)(iv), Assumed Executory Contracts (other than any of Seller’s employment contracts and the financial consulting contract between Seller and Tatum LLC), and if any additional Contracts or Leases, that are not included on Schedule 2.1(a)(iv), are determined after the date hereof to constitute executory contracts, Purchaser shall have the right, in its sole discretion, to add such Contract or Lease to Schedule 2.1(a)(iv) and shall not be responsible for the Cure Costs in accordance with Section 2.6 above.

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser represents and warrants to Seller as follows:

5.1 Organization.

Purchaser is validly existing and in good standing under the Laws of the State of Delaware and has the full power and authority to execute, deliver and perform this Agreement and to consummate all transactions contemplated hereby.

5.2 Authority.

The execution, delivery and performance by Purchaser of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Purchaser and do not and will not violate any provisions of its organizational documents, any applicable Law or any agreement or instrument by which it is bound or Order binding upon it. This Agreement constitutes a valid and binding agreement of Purchaser, enforceable against Purchaser in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium and other Laws affecting creditors’ rights generally from time to time in effect, and to general equitable principles.

5.3 No Conflicts or Violations.

The execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby by Purchaser do not and shall not (a) conflict with or result in any breach of any of the terms, conditions or provisions of, (b) constitute a default under, (c) result in a violation of, (d) give any Third Party the right to modify, terminate or accelerate any obligation under, or (e) require any authorization, consent, approval, exemption or other action by or notice or declaration to, or filing with, any court or administrative or other Governmental Authority, under any agreement or instrument to which Purchaser is bound or affected, or any Law to which Purchaser is subject or any Order to which Purchaser is subject.

5.4 Brokers.

Purchaser has incurred no Liability to any broker, finder or agent with respect to the payment of any commission regarding the consummation of the transactions contemplated hereby.

5.5 Confidentiality.

In the event the transactions contemplated hereby are not consummated for any reason, without limiting the other rights and/or remedies of the parties, the Purchaser shall comply with all of the terms and provisions of the Confidentiality Agreement, and shall promptly return to the Seller, or destroy, all documents and other materials and all copies of the foregoing that were furnished to the Purchaser to date in connection with its due diligence investigation of the Seller, its assets or the Seller’s business, as provided therein.

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5.6 Investigation.

The Purchaser has or will make its own investigation concerning the physical condition of the Acquired Assets and the business, the condition of title or any other matter pertaining to the Acquired Assets; and, other than the specific representations made by the Seller pursuant to this Agreement, the Purchaser is not relying on any representations, warranties or inducements of the Seller (or any agent of the Seller) with respect to the physical condition of the Acquired Assets, the condition of title to the Acquired Assets or any other matter pertaining to the Acquired Assets or related business.

5.7 No Other Representations or Warranties.

Except for the representations and warranties and covenants contained in this Agreement, Purchaser does not make any other express or implied representation or warranty with respect to the transactions contemplated hereby, and Purchaser disclaims any other representations or warranties, whether made by it or any of its Affiliates, officers, directors, employees, agents or representatives.

ARTICLE VI

COVENANTS OF SELLER; OTHER AGREEMENTS

6.1 Consents and Approvals.

(a) Seller and the Purchaser shall, at Seller’s sole cost and expense, use commercially reasonable efforts (i) to obtain all necessary consents and approvals, as reasonably requested by Purchaser, to consummate the purchase and sale of the Acquired Assets and the assignment of the Assumed Obligations, together with any other necessary consents and approvals to consummate the transactions contemplated hereby, including obtaining the Bidding Procedures Order and Sale Order, (ii) to make, as reasonably requested by Purchaser, all filings, applications, statements and reports to all authorities that are required to be made prior to the Closing Date by or on behalf of Seller or any of its Affiliates pursuant to any applicable Law in connection with this Agreement and the transactions contemplated hereby and (iii) to obtain, as requested by Purchaser, all required consents and approvals (if any) necessary to assign and transfer Seller’s Permits to Purchaser at Closing and, to the extent that one or more of Seller’s Permits are not transferable, to assist Purchaser in obtaining replacements therefor. In the event that certain of Seller’s Permits, or any Contract or other license or agreement necessary for the operation of the Business as presently conducted are not transferable or replacements therefor are not obtainable on or before the Closing, but such Permits, Contracts or other licenses or agreements are obtainable after the Closing, Seller shall continue to use such commercially reasonable efforts in cooperation with Purchaser after the Closing as may be required to obtain all required consents and approvals to transfer, or obtain replacements for, such Permits, Contracts or other licenses or agreements after Closing and shall do all things necessary to give Purchaser the benefits that would be obtained under such Permits, Contracts or other licenses or agreements, in each case at Seller’s sole cost and expense.

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(b) Each of the parties shall give any other notices to, make any other filings with, and use reasonable best efforts to obtain, any other authorizations, consents and approvals of any Governmental Authority in connection with the matters contemplated by this Agreement.

6.2 Access to Information and Facilities.

Seller agrees that, prior to the Closing Date, Purchaser and its representatives (including its accountants, advisors, consultants and legal counsel) shall, upon reasonable notice and so long as such access does not unreasonably interfere with the business operations of Seller, have reasonable access during normal business hours to all Facilities and shall be entitled to make such reasonable investigation of the properties, businesses and operations of Seller (including any environmental audits and investigations or to conduct a physical inventory of the Inventory) and such examination of the Books and Records and financial condition of Seller as it reasonably requests and to make extracts and copies to the extent necessary of the Books and Records; provided, that Purchaser shall not conduct any soil sampling or similarly invasive environmental testing and shall be bound by and shall comply with the terms of the Confidentiality Agreement with respect to Purchaser’s ability to use or disclose any such information. Prior to the Closing Date, within 15 days after the end of each calendar month, Seller shall provide the Purchaser with Seller’s interim monthly and year-to-date financial statements for such month which shall include those parts of the internal management reports as requested by the Purchaser relating to such calendar month. Such interim financial statements shall (a) fairly present the financial condition of Seller as of the respective dates thereof and the results of operations and cash flows for the periods covered thereby (subject to changes resulting from normal year-end adjustments for recurring accruals (which shall not be material individually or in the aggregate) and to the absence of footnote disclosure) and (b) be in accordance