Charter for the Audit Committee of the Board of Directors

Purpose and Powers

The purpose of the Audit Committee established by this charter will be: to oversee the accounting and financial reporting processes, and the internal and external audits of RedEnvelope, Inc. (the "Company"); to provide to the Board of Directors (the "Board") the results of its examinations and recommendations derived therefrom; to outline to the Board improvements made, or to be made, in internal accounting controls; to appoint, compensate and oversee the Company's independent accountants; to oversee the Company's investment activities; to engage and compensate independent counsel and other advisors as it deems necessary to carry out its duties; to the extent permitted under applicable laws, rules and regulations, and the Company's bylaws and Certificate of Incorporation, delegate to one or more members of the Audit Committee the authority to grant pre-approvals of audit services and non-audit services, provided that such decisions are presented to the full Audit Committee at regularly scheduled meetings; to provide the Board such additional information and materials as it may deem necessary to make the Board aware of significant financial matters which require Board attention; and to serve as the Qualified Legal Compliance Committee (the "QLCC") in accordance with Section 307 of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated by the SEC thereunder.

The Audit Committee will undertake those specific duties and responsibilities listed below, and such other duties as the Board from time to time may prescribe.

Charter Review

The Audit Committee will review and reassess the adequacy of this charter at least once every year. Additionally, to the extent and in the manner that the Company is legally required to do so by the rules of the Securities and Exchange Commission (the "SEC"), this charter (as then constituted) shall be publicly filed.


The Audit Committee shall consist of at least three members of the Board. Such members will be elected and serve at the pleasure of the Board. The members of the Audit Committee will not be employees of the Company. Each member of the Audit Committee shall meet the independence standards and have the financial expertise as required by the Rules of the National Association of Securities Dealers, Inc., the Securities Exchange Act of 1934 and the rules promulgated thereunder (collectively, the "Exchange Act"), the Sarbanes-Oxley Act of 2002 and all other applicable rules and regulations. The Audit Committee will meet as necessary to develop its procedures and to discharge its duties as the QLCC.


The Audit Committee will meet quarterly, or more often as it deems necessary or appropriate to fulfill its responsibilities set forth herein.


To fulfill its responsibilities and duties, the Audit Committee shall:

1.       Appoint the independent accountants for ratification by the stockholders and approve the compensation of and oversee the independent accountants.

2.       Review the plan for and the scope of the audit and related services at least annually.

3.       Confirm that the proposed audit engagement team for the independent public accountants complies with the applicable auditor rotation rules.

4.       Pre-approve all audit services and permitted non-audit services to be provided by the independent accountants as required by the Exchange Act.

5.       Inquire of management of the Company and the independent accountants about significant risks or exposures and assess the steps management has taken to minimize such risk to the Company.

6.       Review with management any significant changes to GAAP, SEC and other accounting policies or standards that will impact or could impact the financial reports under review.

7.       Review with management and the independent accountants at the completion of the annual audit:

a.       The Company's annual financial statements and related footnotes;

b.       The independent accountant's audit of the financial statements;

c.        Any significant changes required in the independent accountant's audit plan;

d.       Any difficulties or disputes with management encountered during the course of the audit;

e.       Other matters related to the conduct of the audit which are to be communicated to the Committee under generally accepted auditing standards.

8.       Ensure the receipt of, and review, a report from the independent accountant required by Section 10A of the Exchange Act.

9.       Ensure the receipt of, and review, a written statement from the Company's independent accountants delineating all relationships between the accountants and the Company, consistent with Independence Standards Board Standard 1.

10.    Review with the Company's independent accountants any disclosed relationship or service that may impact the objectivity and independence of the accountant.

11.    Review with management and the independent accountants at least annually the Company's application of critical accounting policies and its consistency from period to period, and the compatibility of these accounting policies with generally accepted accounting principles, and (where appropriate) the Company's provisions for future occurrences which may have a material impact on the financial statements of the Company.

12.    Consider and approve, if appropriate, significant changes to the Company's accounting principles and financial disclosure practices as suggested by the independent accountants, and management. Review with the independent accountants and management, at appropriate intervals, the extent to which any changes or improvements in accounting or financial practices, as approved by the Committee, have been implemented.

13.    Review and discuss with management all material off-balance sheet transactions, arrangements, obligations (including contingent obligations) and other relationships of the Company with unconsolidated entities or other persons, that may have a material current or future effect on financial condition, changes in financial condition, results of operations, liquidity, capital resources, capital reserves or significant components of revenues or expenses.

14.    Oversee the adequacy of the Company's system of internal accounting controls. Obtain from the independent accountants management letters or summaries on such internal accounting controls. Review any related significant findings and recommendations of the independent accountants together with management's responses thereto.

15.    Oversee the Company's compliance with the Foreign Corrupt Practices Act.

16.    Oversee the Company's compliance with SEC requirements for disclosure of accountant's services and Audit Committee members and activities.

17.    Oversee the Company's finance function, which may include the adoption from time to time of a policy with regard to the investment of the Company's assets.

18.    Review and approve all related party transactions other than compensation transactions.

19.    Review the periodic reports of the Company with Finance management and the independent accountants prior to filing of the reports with the SEC.

20.    Periodically discuss with the independent accountants, without management being present, (i) their judgments about the quality, appropriateness, and acceptability of the Company's accounting principles and financial disclosure practices, as applied in its financial reporting, and (ii) the completeness and accuracy of the Company's financial statements.

21.    Review and discuss with management the Company's earnings press releases (including the use of "pro forma" or "adjusted" non-GAAP information) as well as financial information and earnings guidance provided to analysts.

22.    Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters.

23.    Establish procedures for the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

In addition to the above responsibilities, the Audit Committee will undertake such other duties as the Board delegates to it or that are required by applicable laws, rules and regulations, as the same may be amended from time to time.

Finally, the Audit Committee shall ensure that the Company's independent accountants understand both (i) their ultimate accountability to the Board and the Audit Committee, as representatives of the Company's stockholders and (ii) the Board's and the Audit Committee's ultimate authority and responsibility to select, evaluate and, where appropriate, replace the Company's independent accountants (or to nominate the outside accountant to be proposed for stockholder approval in any proxy statement).

QLCC Responsibilities

To fulfill its responsibilities and duties as the Qualified Legal Compliance Committee (the "QLCC"), the Audit Committee shall, acting by majority vote:

1.       Establish written procedures for the confidential receipt, retention and consideration of attorney reports of certain material violations ("Attorney Reports") that are required under applicable standards of professional conduct established by the SEC.

2.       Inform the Compliance Officer and Chief Executive Officer of any report of evidence of a material violation contained in such Attorney Reports, unless the QLCC decides that reporting the evidence to one or both such officers would be, under the circumstances, futile.

3.       Decide if an investigation is necessary to determine whether the material violation specified in the Attorney Report has occurred, is occurring, or is about to occur. If such an investigation is undertaken, the QLCC will: (i) initiate the investigation, which may be undertaken either by the Compliance Officer or outside counsel; and (ii) retain such additional expert personnel as the QLCC deems necessary to complete the investigation. At the conclusion of any such investigation, the QLCC will: (i) direct the company to adopt appropriate remedial measures, including appropriate disclosures or the imposition of appropriate sanctions; and (ii) inform the Compliance Officer, the Chief Executive Officer and the Board of Directors of the results of the investigation and the appropriate remedial measures to be adopted.

If the Company fails in any material respects to take any of the remedial measures recommended by the QLCC, the QLCC has the authority to take all other appropriate action, including notifying the SEC.

The QLCC may undertake such other duties as the Board of Directors from time to time may prescribe.


The Audit Committee will to the extent deemed appropriate record its summaries of recommendations to the Board in written form that will be incorporated as a part of the minutes of the Board. To the extent required, the Audit Committee will also prepare and sign a Report of the Audit Committee for inclusion in the Company's proxy statement for its Annual Meeting of Stockholders.