CELEBRATEEXPRESS COM INC, S-1, 2000-01-12

CELEBRATEEXPRESS COM INC
S-1, 2000-01-12

Previous: DELANO TECHNOLOGY CORP, F-1, 2000-01-12

Next: INNOFONE COM INC, SB-2, 2000-01-12

<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 12, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933
------------------------

CELEBRATEEXPRESS.COM, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
WASHINGTON 5947 91-1644428
(State of or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code Number)
organization)
</TABLE>

11220-120(TH) AVENUE NORTHEAST
KIRKLAND, WASHINGTON 98033
(425) 952-2708

(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

CORPORATION SERVICE COMPANY
1010 UNION AVENUE S.E.
OLYMPIA, WASHINGTON 98501
(560) 754-9333
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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

COPIES TO:

<TABLE>
<S> <C>
CHRISTOPHER W. WRIGHT JOHN E. HAYES, III
MATTHEW D. LATIMER JEFF T. HARRIS
JEFFRY A. SHELBY PATRICIA A. ELIAS
COOLEY GODWARD LLP BROBECK, PHLEGER & HARRISON LLP
5200 CARILLON POINT 370 INTERLOCKEN BOULEVARD, SUITE 500
KIRKLAND, WA 98033-7355 BROOMFIELD, COLORADO 80021
(425) 893-7700 (303) 410-2000
</TABLE>

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

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.

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

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
number for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

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

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $0.001 par value........................... $40,000,000 $10,560
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED , 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[CELEBRATEEXPRESS.COM LOGO]

SHARES
COMMON STOCK

CelebrateExpress.com, Inc. is offering shares of its common stock.
This is our initial public offering, and no public market currently exists for
our shares. We have applied for approval for quotation of our common stock on
the Nasdaq National Market under the symbol "CBXP." We anticipate that the
initial public offering price will be between $ and $ per share.

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

INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.

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

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to CelebrateExpress.com............................ $ $
</TABLE>

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

CelebrateExpress.com has granted the underwriters a 30-day option to
purchase up to an additional shares of common stock to cover
over-allotments.

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

ROBERTSON STEPHENS

U.S. BANCORP PIPER JAFFRAY

E*OFFERING

PACIFIC CREST

THE DATE OF THIS PROSPECTUS IS , 2000
<PAGE>
[ARTWORK DESCRIPTIONS]

COVER PAGE

Celebrate Express.com logo highlighted over a background featuring a
photograph of a young girl in a costume looking at a cake decorated with cake
toppers and lighted candles sitting on a table top. Next to the cake are various
themed party goods, helium ballons and a chair.

INSIDE FRONT COVER PAGE

Top: Banner with text reading "CelebrateExpress.com our vertical business
model."

Middle: Vertical business model diagram featuring sequential numbers from
one to seven arranged in ascending order from the top to the bottom of the page.
Next to each number is a dot. The dots are connected by horizontal and vertical
lines connecting the flow of steps in the vertical business model. Each number
also features a corresponding picture showing: 1. images of a party setting; 2.
a worker next to production equipment; 3. a mother and child using a computer to
view the company's website; 4. a telephone customer service representative; 5. a
warehouse worker; 6. a BirthdayExpress.com shipping box; and 7. a child wearing
a party hat and blowing a noisemaker. Next to, or below, each number is the
following text:

"1 We provide a broad selection of party supplies including proprietary and
licensed products, offering our customers a one-stop solution"

"2 Over 40% of our products are made in our own manufacturing facility or
sourced directly from manufacturers worldwide"

"3 We offer our products via our websites and our printed direct marketing
pieces, both developed by in-house staff"

"4 Our staff of 70 trained party planners is available to assist customers
24 hours a day, 7 days a week via phone, email and online chat"

"5 Orders are processed 24 hours a day, 7 days a week in our distribution
centers"

"6 Each order is customized and backed by a 100% product guarantee"

"7 Orders arrive providing our customers with their customized assortment
of products ready to celebrate their special occasion"

Bottom: Banner with text reading "Over 170 popular party themes"
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS,
"CELEBRATEEXPRESS.COM," "WE," "US" AND "OUR" REFER TO
CELEBRATEEXPRESS.COM, INC., A WASHINGTON CORPORATION.

UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN OUR COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
DELIVERY REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Summary..................................................... 4
Risk Factors................................................ 8
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Capitalization.............................................. 18
Dilution.................................................... 19
Selected Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Business.................................................... 27
Management.................................................. 37
Certain Transactions........................................ 43
Principal Shareholders...................................... 45
Description of Capital Stock................................ 47
Shares Eligible for Future Sale............................. 49
Underwriting................................................ 51
Legal Matters............................................... 53
Experts..................................................... 53
Where You Can Find Additional Information................... 53
Index to Financial Statements............................... F-1
</TABLE>

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

3
<PAGE>
SUMMARY

YOU SHOULD READ THIS SUMMARY TOGETHER WITH THE MORE DETAILED INFORMATION AND
OUR CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES APPEARING ELSEWHERE
IN THIS PROSPECTUS.

CELEBRATEEXPRESS.COM, INC.

We are a leading online destination for party supplies and services. Through
our CelebrateExpress.com and BirthdayExpress.com websites, we offer consumers a
large selection of theme-related party supplies as well as detailed party
planning content. We believe this combination offers consumers a one-stop
shopping solution that reduces the amount of stress, time and effort involved in
planning an event or celebration.

We provide a compelling electronic commerce solution for the
highly-fragmented party supply marketplace by combining the convenience and
functionality of the Internet with the following key elements of our
vertically-integrated business model:

- our ability to design, manufacture and source theme-related products;

- our direct marketing experience;

- our commitment to excellent customer service; and

- our licenses and proprietary designs.

As a result, we have grown our net sales and customer base, maintained high
gross margins and established a leading online destination to serve our market.
As of November 30, 1999, our database included profiles on over
550,000 customers. In the six months ended November 30, 1999, we generated
$10.7 million in revenue and gross margins of over 44%.

THE MARKET FOR PARTY SUPPLIES

According to the trade publication PARTY & PAPER RETAILER, retail sales of
party supplies increased from $8.7 billion in 1996 to $11.4 billion in 1998.
Party supplies are distributed and sold in a highly-fragmented marketplace in
which no complete source for theme-specific products exists. We believe
store-based retailers are generally unable to meet consumer needs due to their
narrow product selections and limited ability to customize assortments and
quantities for a specific event. The long supply chain from manufacturers to
retail stores also limits retailers' ability to respond to changing consumer
preferences. As a result, consumers are often forced to expend considerable time
and energy visiting multiple store locations to fulfill their party supply
needs.

We believe consumers also face difficulty in obtaining quick and easy access
to reliable party planning advice, such as recommendations regarding theme,
age-appropriate activities, decorating ideas, menu, venue and other details. We
believe this is due, in part, to inexperienced and inadequately trained
employees and other limitations of the traditional party supply retail channel,
and that a significant market opportunity exists for an electronic commerce
company to meet the needs of underserved consumers in our market.

OUR STRATEGY

Our goal is to be the leading solution for the event and celebration market.
To achieve this goal, we plan to:

4
<PAGE>
online and offline marketing strategies to reach this audience, including direct
marketing, co-branding, public relations, affiliate programs, traditional print
and broadcast media advertising and other partnerships and campaigns.

PURSUE BROADER PARTY MARKET. We intend to leverage our brands, electronic
commerce platform, direct marketing experience and operational infrastructure to
pursue opportunities in other areas of our market beyond the young family
segment. We recently expanded our product offerings to include entertainment
solutions for holidays and special occasions. We also intend to increase our
marketing to corporations and other organizations.

RISKS RELATED TO OUR BUSINESS

An investment in our common stock involves a high degree of risk. Since our
inception in June 1994, we have incurred significant losses, including a net
loss of $3.0 million in the six months ended November 30, 1999, and as of
November 30, 1999, we had an accumulated deficit of approximately $4.8 million.
We expect our operating losses to continue for the foreseeable future and
increase as we expand our sales and marketing efforts, introduce new products
and bring our new distribution facility in Greensboro, North Carolina into full
operation. In addition, we may encounter a number of risks, including
unpredictability of operating results, inventory risk, reliance on third party
relationships, and intense competition. Before deciding whether to invest in
shares of our common stock, you should carefully consider the risks and
uncertainties described in "Risk Factors" beginning on page 8 of this
prospectus.

CORPORATE INFORMATION

Our principal executive offices are located at 11220-120(th) Avenue
Northeast, Kirkland, Washington 98033, and our telephone number is
(425) 952-2708. Our websites include and references in this prospectus to our
websites refer to "www.CelebrateExpress.com" and "www.BirthdayExpress.com."
Information contained on our websites does not constitute part of this
prospectus.

CelebrateExpress.com-TM-, BirthdayExpress-Registered Trademark- and
BirthdayExpress.com-TM- are trademarks owned by us. This prospectus also makes
reference to trademarks, service marks, brand names and logos of other companies
which are the property of their respective owners.

5
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common stock offered by
CelebrateExpress.com............ shares

Common stock to be outstanding
after this offering............. shares

Use of proceeds................... We intend to use the net proceeds for working capital
and general corporate purposes, including increased
sales and marketing expenses and capital expenditures,
as well as possible acquisitions of product lines,
technologies and businesses.

Proposed Nasdaq National Market
symbol.......................... CBXP
</TABLE>

Common stock outstanding after this offering is based on shares outstanding
as of November 30, 1999. It does not include:

- 1,039,800 shares issuable upon exercise of outstanding options as of
November 30, 1999; and

- 232,400 shares available for future grant or issuance under our stock
option plan as of November 30, 1999.

Except as otherwise noted, all information in this prospectus:

- reflects the conversion of all outstanding shares of our preferred stock
into shares of common stock upon the closing of this offering; and

- does not take into account the possible issuance of additional shares of
common stock to the underwriters pursuant to their right to purchase
additional shares to cover overallotments.

6
<PAGE>
SUMMARY FINANCIAL DATA

The summary financial data should be read in conjunction with our
consolidated financial statements and the related notes included elsewhere in
this prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED MAY 31, NOVEMBER 30,
----------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................................... $ 1,155 $ 3,580 $ 6,179 $ 9,558 $ 13,136 $ 5,656 $ 10,659
Gross profit.................................... 401 1,454 3,113 4,689 6,067 2,727 4,731
Total operating expenses........................ 831 1,602 3,192 5,318 7,122 3,156 7,805
Loss from operations............................ (430) (148) (79) (629) (1,055) (429) (3,074)
Net loss........................................ $ (429) $ (152) $ (110) $ (716) $ (1,181) $ (495) $ (2,966)
Net loss per share--basic and diluted........... $ (0.61) $ (0.20) $ (0.08) $ (0.36) $ (0.59) $ (0.25) $ (1.47)
Weighted average shares outstanding............. 708 762 1,438 1,978 2,001 1,988 2,016
</TABLE>

The following table presents summary consolidated balance sheet data as of
November 30, 1999 with pro forma presentation to reflect the conversion of all
our preferred stock into 3,038,819 shares of common stock, and pro forma as
adjusted presentation to reflect the sale of shares of our common stock in
this offering at an assumed initial public offering price of $ per share and
the application of the net proceeds after deducting underwriting discounts and
commissions and estimated offering expenses.

<TABLE>
<CAPTION>
NOVEMBER 30, 1999
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................. $ 7,119 $ 7,119
Working capital....................................................... 7,919 7,919
Total assets.......................................................... 11,872 11,872
Long-term debt and capital lease obligations.......................... 349 349
Mandatorily redeemable convertible preferred stock.................... 14,443 --
Total shareholders' equity (deficit).................................. (4,794) 9,649
</TABLE>

7
<PAGE>
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN
INVESTMENT DECISION. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE HARMED, THE VALUE OF OUR
STOCK COULD DECLINE, AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.

RISKS RELATED TO OUR BUSINESS

WE HAVE A LIMITED ONLINE OPERATING HISTORY UPON WHICH TO EVALUATE OUR FUTURE
PERFORMANCE

We were incorporated and began selling products through direct marketing
programs in June 1994. We launched our BirthdayExpress.com website in
April 1996; however, our online operations did not comprise a significant part
of our business until late 1998. Accordingly, we have only a limited online
operating history upon which you can evaluate our business and prospects.
Because we are a growth-stage company and our market is new and rapidly
evolving, you must consider the risks that we may frequently encounter that are
different from other companies, as well as risks associated with our ability to:

- implement our vertically-integrated business model;

- attract new customers, retain existing customers and maintain customer
satisfaction;

- design, produce, license, source and market new products successfully;

- maintain our margins in the event of price competition, or rising
production or product costs;

- continue to develop and upgrade our technology;

- broaden awareness of our brands;

- manage our online and offline marketing costs; and

- forecast consumer demand.

If we are unsuccessful in addressing these risks and uncertainties, our
business, financial condition and results of operations will be harmed.

WE HAVE A HISTORY OF LOSSES, AND WE EXPECT LOSSES FOR THE FORESEEABLE FUTURE

Since our inception in 1994, we have incurred significant net losses,
resulting primarily from the costs of marketing programs to attract new
customers, the development of our websites and proprietary databases and the
growth of our operational infrastructure. In the six months ended November 30,
1999, we had a net loss of $3.0 million, and as of November 30, 1999, we had an
accumulated deficit of approximately $4.8 million. We expect consolidated
operating losses to continue for the foreseeable future as a result of
increasing sales and marketing expenses, additional product offerings and the
costs associated with bringing our new distribution facility in Greensboro,
North Carolina into full operation.

We do not have sufficient cash to indefinitely sustain operating losses. Our
potential profitability depends on our ability to generate and sustain
substantially higher net sales while maintaining reasonable expense levels. If
we do achieve profitability, we cannot be certain that we would be able to
sustain or increase profitability on a quarterly or annual basis in the future.

IF WE DO NOT EXPAND SALES INTO OTHER SEGMENTS OF OUR MARKET, WE MAY NOT BE ABLE
TO ACHIEVE OUR DESIRED REVENUE GROWTH

We derive nearly all of our revenue from the sale of party products to young
families with a specific focus on children's birthday parties. In order to
achieve our desired revenue growth, we believe it will be necessary to
successfully expand our business beyond young family and children's birthday

8
<PAGE>
party products. We intend to expand the number of party themes we offer in other
categories; however, our management does not have meaningful experience with
these new themes or categories. Each new theme offered by us will likely be
untested and subject to rejection by the marketplace. Our future success is in
part dependent on our ability to expand our products and services into new
product categories, and we may not be successful in these efforts.

WE RELY ON A RELATIVELY NEW MANAGEMENT TEAM AND DEPEND ON KEY PERSONNEL TO GROW
OUR BUSINESS

Several key members of our management team have joined us since October 1,
1999, including: Gary Halperin, our Chief Financial Officer; Vicki Brummond, our
Vice President of Business Development; and Melissa Stevens, our Vice President
of Marketing. Our future success depends on these officers effectively working
together with our original management team. Any of our officers or employees can
terminate his or her employment with us at any time. The loss of the services of
one or more of our key personnel could seriously interrupt our business, and we
may not be able to successfully locate, hire, assimilate or retain replacements.

We depend on the continued services and performance of our senior management
and other key personnel, particularly Michael Jewell, our Co-Chief Executive
Officer and President, and Jan Jewell, our Co-Chief Executive Officer and Chief
Creative Officer. Although we maintain and are the beneficiary of separate
$1.0 million "key person" life insurance policies for both Michael and Jan
Jewell, we do not believe the proceeds would be adequate to compensate for the
loss of either individual.

Our Co-Chief Executive Officers, Michael and Jan Jewell, are married to each
other. This relationship may affect, among other things, the management style
and decision-making process of the senior management team and may produce
results different from those that would be expected if our Co-Chief Executive
Officers were unrelated. In addition, a change in their personal relationship
may affect the continued service of one or both of them.

FAILURE TO SUCCESSFULLY PROMOTE AND MAINTAIN OUR BRANDS WOULD ADVERSELY AFFECT
OUR BUSINESS

Building and maintaining recognition of our brands is critical to attracting
and expanding our customer base. Because we plan to continue building brand
recognition, we will need to increase our financial commitment to creating and
maintaining brand awareness. We cannot be certain that our marketing efforts or
brands will attract new customers, retain existing customers or encourage repeat
purchases. If these efforts do not result in an associated increase in our
sales, our business would be adversely affected.

FAILURE OF OUR STRATEGIC RELATIONSHIPS TO ATTRACT CUSTOMERS COULD HARM OUR
BUSINESS

We have established relationships with online and offline businesses and
plan to establish new relationships with businesses that complement our
strategic objectives. We cannot be certain that any of these relationships will
be successful in attracting new customers, that we will be able to maintain
these relationships, or that we will be able to enter into similar relationships
in the future. For example, we recently entered into an agreement with Buena
Vista Internet Group in which we pay for banner ads and links on the Disney.com
and Family.com websites. Because our agreement with Buena Vista Internet Group
was only recently established, it is uncertain whether we will benefit from this
relationship. Our current strategic relationships may evolve over time or be
terminated, and we may be unable to establish additional strategic relationships
in the future.

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY AGAINST CURRENT AND FUTURE
COMPETITORS

We believe the market for party supplies is highly fragmented and that the
electronic commerce market in which we operate is new, rapidly evolving and
intensely competitive. We expect competition

9
<PAGE>
to intensify in the future as competitors enter our market and launch new
websites. Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share, any of which could seriously harm our
net sales and results of operations.

We currently compete with a variety of other companies, including:

- party goods superstores such as Party City;

- traditional card and gift specialty retailers such as Hallmark;

- mass merchandisers such as Wal-Mart;

- supermarkets and drugstores such as Safeway and Walgreens;

- catalog retailers of novelty items such as Oriental Trading Co. and Ace
Novelty; and

- other online retailers of party goods such as BirthdayUSA.com and
GreatEntertaining.com.

Some of our competitors have longer operating histories, larger customer or
user bases, greater brand recognition and significantly greater financial,
marketing and other resources than we do. Many of these competitors can also
devote substantially more resources to website development and may be able to
better leverage their customer bases and strategic relationships. In addition,
large, well-established or well-financed entities may join with our online
competitors, Internet retailers or other companies as the use of the Internet
increases.

Our competitors may be able to secure products from vendors on more
favorable terms, fulfill customer orders more efficiently and adopt more
aggressive pricing or inventory availability policies than we can. Traditional
store-based retailers also enable customers to see and feel products in a manner
that is not possible over the Internet. Our online competitors may adopt new
technologies that have greater performance and features than our systems.
Additionally, new technologies and the expansion of existing technologies, such
as price comparison programs, may increase competition. Dealing with these
competitors may require significant additional expenditures and could affect our
results of operations. We cannot be sure that we will be able to compete
successfully against these competitors.

FLUCTUATIONS IN THE PRICE OF PAPER MAY INCREASE OUR COSTS AND MAKE OUR EXPENSES
DIFFICULT TO PREDICT

We are vulnerable to fluctuations in the price of paper stock. Paper goods
comprise a significant portion of our total inventory. In addition, a portion of
our marketing expenditures is related to direct marketing efforts, which include
printed promotional materials. If the price of paper increases significantly, we
may be unable to pass the additional costs on to our customers, and our
financial condition and results of operations will be negatively affected. In
addition, fluctuations in the price of paper may make it difficult for us to
accurately forecast our expenses.

IF WE EXPERIENCE DIFFICULTIES WITH OUR PRODUCTION FACILITIES, WE MAY EXPERIENCE
DELAYS, DEPLETE OUR INVENTORY OR LOSE CUSTOMERS

We produce paper goods, including plates, cups and invitations, thank-you
notes, centerpieces, place mats and favor boxes for 24 of our party themes,
which, along with related sourced products, accounted for over 40% of our
revenue during the three months ended November 30, 1999. Because we do not have
duplicate production equipment, a failure of one of our machines could halt our
production process. Because our equipment was custom designed, spare parts or
repair technicians may not be immediately available. We do not keep extra
inventory in our warehouse to compensate for delays in production, and an
extended mechanical failure could severely deplete our inventory, result in
decreased sales and loss of customers.

10
<PAGE>
IF WE ARE NOT ABLE TO OBTAIN SUFFICIENT QUANTITIES OF POPULAR THEMED DECORATIONS
OR PRODUCTS, INCLUDING LICENSED PRODUCTS, IN A TIMELY MANNER, OUR NET SALES MAY
DECREASE

Our success depends on our ability to purchase products in sufficient
quantities at competitive prices. We purchase many of our products
internationally, a strategy that is subject to inherent risks and challenges
that could affect our operations, including unexpected changes in international
regulatory requirements and difficulties in developing new supplier
relationships and in obtaining import licenses. Additionally, we do not have
long-term or exclusive arrangements with any vendor or distributor that
guarantee the availability of such materials or products. Therefore, we do not
have a predictable or guaranteed supply of such materials or products.

Our future sales are contingent upon our ability to obtain licenses or to
obtain licensed products from third party suppliers. In many instances, these
licenses could be terminated for no reason or on very short notice or be
modified to be less favorable to us or more favorable to our competitors. In
addition, products for which we currently hold licenses, or other popular
products in our industry may be licensed exclusively to our competitors. We
cannot be certain we will have access to any licensed products in sufficient
quantities and this could materially harm our business.

FAILURE OF THIRD PARTIES TO DELIVER OUR PRODUCTS IN A COST EFFECTIVE AND TIMELY
MANNER COULD CAUSE US TO LOSE CUSTOMERS

We rely upon other parties for product shipments, including shipments to and
from our Kirkland, Washington and Greensboro, North Carolina facilities. It is
possible that events beyond our control, such as a strike or other disruption,
may affect the ability of other parties to deliver materials to our facilities
or our merchandise to customers. Any such event could negatively affect our
business. Our customer orders are often time-sensitive and any delays by our
third-party shipment providers could cause us to lose customers.

Our third-party shipment providers may also increase the charges for their
shipping services. We currently offer shipping incentives as a means to acquire
and retain customers. We may not be able to pass on any future shipping charges
to our customers and any increase in shipping charges could negatively affect
our business.

WE MAY EXPERIENCE DIFFICULTY INTEGRATING OUR NEW DISTRIBUTION FACILITY

We are not experienced in coordinating and managing multiple distribution
facilities. We also do not have experience managing operations in geographically
distant locations. We have recently leased a second distribution facility in
Greensboro, North Carolina, which we began using in early 2000 to supplement the
distribution operations of our Kirkland, Washington facility. We are also in the
process of installing and testing a new automated inventory management system in
the North Carolina facility. We have no prior experience with the inventory
management system to be implemented in our North Carolina facility and may
encounter unexpected difficulties in implementing this system. It is possible
that delays, cost overruns or other complications associated with opening the
North Carolina facility or the implementation of the new inventory management
system could negatively affect our business. Additionally, we have no experience
in the North Carolina labor market and may face difficulty hiring and
integrating new employees to staff the North Carolina facility.

OUR CUSTOMER AND PROSPECT DATABASES ARE CRITICAL TO OUR SUCCESS

Failure to keep our proprietary customer and prospect databases current, or
any damage or destruction of the information in these proprietary databases,
could seriously harm our business. Our inability to expand our databases of
customers and prospects and create targeted online and offline direct marketing
offers, or our failure to enhance and refine our techniques for segmenting this
information to maximize its usefulness may harm our business. In addition, if
federal or state

11
<PAGE>
governments enact privacy legislation resulting in the increased regulation of
mailing lists, we could experience increased costs in complying with potential
regulations concerning the solicitation of consents to keep or add customer
names to our physical or electronic mailing lists or otherwise be unable to
achieve the desired database growth.

CHANGES IN CONSUMER DEMAND MAY RENDER A PORTION OF OUR INVENTORY OBSOLETE AND
DECREASE OUR SALES

Rapidly changing trends in consumer tastes and preferences for party
supplies and accessories subject us to inventory risk. It is critical to our
success that we accurately forecast consumer demand. The demand for specific
products can change between the time the products are ordered by us and the date
we receive them. If we underestimate consumer demand, we may disappoint
customers and lose potential sales to our competitors. In addition, if our
products do not achieve sufficient consumer acceptance, or if we overstock
unpopular products, we may be required to take significant inventory markdowns,
which could reduce our net sales and gross margins.

FAILURE TO ADAPT TO CHANGING TECHNOLOGY MAY NEGATIVELY AFFECT OUR BUSINESS

The Internet and online commerce are rapidly changing. To remain
competitive, we must continue to enhance and improve the functionality and
features of our online stores, telephone order system, computer network and the
systems we use to process customers' orders and payments. If competitors
introduce new products and services embodying new technologies, or are better
able to use new or existing technologies, or if new industry standards and
practices emerge, and we do not respond quickly and effectively, our existing
websites and proprietary technology and systems may become obsolete and
customers could stop using our websites. Our business could also be negatively
affected by technical difficulties, system downtime or heavy congestion on the
Internet.

WE MAY BE LIABLE IF THIRD PARTIES MISAPPROPRIATE OUR USERS' PERSONAL INFORMATION

If third parties were able to penetrate our network security or otherwise
misappropriate our users' personal information, we could be subject to
liability. Our liability could include claims for unauthorized purchases with
credit card information, impersonation or other similar fraud claims as well as
for other misuses of personal information, such as unauthorized marketing
purposes. These claims could result in costly and time-consuming litigation
which could adversely affect our financial condition. In addition, the Federal
Trade Commission and state agencies have been investigating various Internet
companies regarding their use of personal information very similar to the
personal information that we collect from users of our websites. We could incur
additional expenses or otherwise lose our ability to grow our database if new
regulations regarding the use of personal information are introduced or if our
privacy practices are investigated.

WE MAY BE SUED FOR INFORMATION RETRIEVED FROM OUR WEBSITES OR FROM OUR PRINTED
MATERIALS

We may be subject to claims for defamation, negligence, copyright or
trademark infringement, personal injury or other legal theories relating to the
information we publish on our online sites or in our printed materials. These
types of claims have been brought in the past, sometimes successfully, against
online services as well as other publishers of printed materials. We could also
be subject to claims based upon the content that is accessible from our online
sites through links to other online sites or through content and materials that
may be posted by members in chat rooms or on bulletin boards. Our insurance,
which covers commercial general liability, may not adequately protect us against
these types of claims.

12
<PAGE>
INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND COULD IMPAIR OUR
BUSINESS

Other parties may assert infringement or unfair competition claims against
us. To date, we have not been notified of any such claims. We cannot predict
whether third parties will assert claims of infringement against us, or whether
any future assertions or prosecutions will harm our business. If we are forced
to defend against any such claims, whether they are with or without merit or are
determined in our favor, we may face costly litigation, diversion of technical
and management personnel or product shipment delays. As a result of such a
dispute, we may have to develop non-infringing technology or enter into royalty
or licensing agreements. Such royalty or licensing agreements, if required, may
not be available on terms acceptable to us, if at all. If there is a successful
claim of product infringement against us, and we are unable to develop
non-infringing technology or license the infringed or similar technology on a
timely basis, it could impair our business.

IF THE PROTECTION OF OUR TRADEMARKS AND PROPRIETARY RIGHTS IS INADEQUATE, OUR
BRANDS AND REPUTATION COULD BE IMPAIRED, AND WE COULD LOSE CUSTOMERS

The steps we take to protect our proprietary rights may be inadequate. We
regard our copyrights, service marks, trademarks, trade dress, trade secrets and
similar intellectual property as critical to our success. We rely on trademark
and copyright law, trade secret protection and confidentiality or license
agreements with our employees, customers and others to protect our proprietary
rights; however, we cannot be certain that this protection will be adequate.
"Birthday Express" and "Great Days" are registered with the United States Patent
and Trademark Office, and we have recently filed federal trademark and service
mark applications for "CelebrateExpress.com" and "BirthdayExpress.com."
Effective trademark, service mark, copyright and trade secret protection may not
be available in every country in which we will offer our products and services.
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear. Therefore,
we may be unable to prevent third parties from acquiring domain names that are
similar to ours, or infringe upon or otherwise decrease the value of our
trademarks and other proprietary rights.

WE MAY INCUR SIGNIFICANT COSTS OR EXPERIENCE PRODUCT AVAILABILITY DELAYS IN
COMPLYING WITH REGULATIONS APPLICABLE TO THE MANUFACTURE OF OUR PRODUCTS

We use a variety of water-based inks, paper and coatings in the manufacture
of our paper party products. We are required to maintain our manufacturing
operations in compliance with United States federal, state and local laws and
regulations, including but not limited to rules and regulations associated with
CERCLA, FDA and OSHA. Our failure to comply with current or future laws and
regulations applicable to our business, or to pass annual inspections of our
facilities by regulatory bodies, could harm our business.

OUR FACILITIES AND SYSTEMS ARE VULNERABLE TO NATURAL DISASTERS AND OTHER
UNEXPECTED PROBLEMS WHICH COULD DAMAGE OUR REPUTATION OR BRANDS AND REDUCE OUR
NET SALES

Our leased facility in Kirkland, Washington houses substantially all of our
computer communications and information systems and our product development and
production facilities. The occurrence of an earthquake, fire, flood, volcanic
eruption or other natural disaster or unanticipated problems, such as power
loss, telecommunications failure or break-in, could cause interruptions or
delays in our business, loss of data or render us unable to accept and fulfill
customer orders. We have no formal disaster recovery plan, and our business
interruption insurance may not adequately compensate us for losses that may
occur. In addition, the failure to obtain the data communications capacity
required by us, as a result of human error, natural disaster or other
operational disruptions, could result in interruptions in our online stores. The
occurrence of any or all of these events could damage our reputation and brand
and impair our business.

13
<PAGE>
WE MAY BE ADVERSELY IMPACTED IF THE SOFTWARE, COMPUTER TECHNOLOGY AND OTHER
SYSTEMS USED BY US OR OUR VENDORS ARE AFFECTED BY THE YEAR 2000 DATE CHANGE OR
BY OTHER DATES OCCURRING IN THE YEAR 2000

Any failure of our material systems, our vendors' material systems or the
Internet to be Year 2000 compliant would harm us. Such consequences would
include difficulties in operating our websites effectively, taking product
orders, making product deliveries or conducting other fundamental parts of our
business. Although January 1, 2000 is past, it is possible that problems have
gone undetected, or that other dates in the Year 2000, such as February 29,
2000, may further affect computer software and systems. We are currently unable
to assess completely whether our internal systems or the internal systems of our
vendors have been affected by the Year 2000 date change or whether such systems
will be affected by other dates occurring after January 1, 2000. It is possible
that some of our vendors', distributors' and suppliers' internal systems have
already been or will be negatively affected by the Year 2000 date change. If
these parties have failed to remediate their Year 2000 exposure effectively, it
could result in delays in deliveries of orders to us. At this time, we have not
yet developed a contingency plan to address situations that may result if we or
our vendors are unable to achieve Year 2000 compliance. The cost of developing
and implementing such a plan, if necessary, could be material.

Our business also depends indirectly on the Year 2000 compliance of the
computer systems and financial services used by our consumers. A significant
disruption in the ability of consumers to reliably access the Internet or our
websites or to use their credit cards would have an adverse effect on demand for
our services and would have a significant adverse effect on us.

RISKS RELATED TO THE INTERNET INDUSTRY

IF WE CANNOT PROTECT OUR DOMAIN NAMES, IT WILL IMPAIR OUR ABILITY TO
SUCCESSFULLY BUILD OUR BRANDS

We may be unable to acquire or maintain Internet domain names related to our
brands in the United States and other countries in which we may conduct
business. As a result, we may be unable to prevent third parties from acquiring
and using domain names related to our brands. Such use could damage our brands
and reputation and take customers away from our websites. The acquisition and
maintenance of domain names is generally regulated by governmental agencies.
Governing bodies may establish additional top-level domains, appoint additional
domain name registrars or modify the requirements for holding domain names. If
we cannot prevent others from using similar domain names, we may be unable to
successfully build our brands, which could negatively affect our business.

OUR LONG-TERM SUCCESS DEPENDS ON THE DEVELOPMENT OF THE ELECTRONIC COMMERCE
MARKET, WHICH IS UNCERTAIN

Our future sales substantially depend upon the widespread acceptance and use
of the Internet as an effective medium of commerce by consumers. Demand for
recently introduced products and services over the Internet is subject to a high
level of uncertainty. Although independent market research firms forecast
worldwide Internet sales to grow substantially in the next few years, we cannot
be certain our sales will grow at the same rate or at all. The development of
the Internet as a viable commercial marketplace is subject to a number of risks,
including the willingness of potential customers to shift their purchasing from
traditional vendors to online vendors and the adequacy of communication services
to promote the acceptance of the Internet as an effective commerce medium.

IF WE BECOME SUBJECT TO ADDITIONAL BURDENS ASSOCIATED WITH GOVERNMENT
REGULATION, OUR SALES MAY DECLINE AND OUR BUSINESS MAY BE NEGATIVELY AFFECTED

Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent. Laws and regulations may
be adopted covering issues such as user privacy, pricing, content, taxation and
quality of products and services. Any new legislation could hinder the growth in
use of the Internet and decrease the acceptance and adoption of electronic
commerce.

14
<PAGE>
Federal, state and foreign governments might attempt to regulate our
transmissions or levy sales or other taxes relating to our activities. The laws
governing the Internet remain largely unsettled, even in areas where legislation
has been enacted. It may take years to determine whether and how existing laws
such as those governing taxation apply to the Internet. In addition, the growth
and development of the market for electronic commerce may prompt calls for more
stringent consumer protection and privacy laws, both in the United States and
abroad, which may impose additional burdens on companies conducting business
online. The adoption or modification of laws or regulations relating to the
Internet and other online services could cause our sales to decline and
negatively affect our business.

RISKS RELATED TO THIS OFFERING

WE MAY APPLY THE NET PROCEEDS OF THIS OFFERING TO USES THAT DO NOT IMPROVE OUR
RESULTS OF OPERATIONS OR INCREASE OUR MARKET VALUE

Our management will have considerable discretion in the application of the
net proceeds of this offering, and you will not have the opportunity, as part of
your investment decision, to assess whether the proceeds are being used
appropriately. The net proceeds of this offering may be used for corporate
purposes that do not increase our results of operations or our market value.
Pending application of the proceeds, they may be placed in investments that do
not produce income or that lose value. See "Use of Proceeds."

WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT FUNDS TO GROW OUR BUSINESS

We currently believe the net proceeds from this offering, together with our
current cash and cash equivalents, will be sufficient to fund our working
capital and capital expenditure requirements for at least the next 12 months.
However, due to our limited operating history and the nature of our industry,
our future capital needs are difficult to predict. Therefore, we may require
additional capital after this offering to support our operations or the
expansion of our business. We may not be able to obtain additional funding, if
required, in amounts or on terms acceptable to us. If we are unable to raise
additional capital, our growth could be impeded.

EXECUTIVE OFFICERS, DIRECTORS AND AFFILIATED ENTITIES WILL CONTINUE TO HAVE
SUBSTANTIAL CONTROL OVER CELEBRATEEXPRESS.COM AFTER THE OFFERING WHICH COULD
DELAY OR PREVENT A CHANGE IN OUR CORPORATE CONTROL FAVORED BY OUR OTHER
SHAREHOLDERS

Executive officers, directors and affiliated entities, if acting together,
would be able to significantly influence all matters requiring approval by our
shareholders, including the election of directors and the approval of mergers or
other business combination transactions. These shareholders will beneficially
own, in the aggregate, approximately % of our common stock following the
completion of this offering. In addition, our Co-Chief Executive Officers,
Michael and Jan Jewell, are married to each other and collectively will control
approximately % of our common stock after this offering. The interest of
these shareholders may differ from the interests of other shareholders, and
these shareholders, acting together, would be able to influence significantly
all matters requiring approval by shareholders. As a result, these shareholders
could approve or cause us to take actions of which you disapprove or that are
contrary to your interest and those of other investors.

IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US EVEN IF DOING SO WOULD BE
BENEFICIAL TO OUR SHAREHOLDERS

Provisions of our Amended and Restated Articles of Incorporation, our Bylaws
and Washington law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our shareholders. See "Description of
Capital Stock" and "Management--Board Composition" for a discussion of such
anti-takeover provisions.

15
<PAGE>
THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK, OUR STOCK PRICE MAY
EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS AND ANY VOLATILITY IN OUR STOCK
PRICE COULD RESULT IN CLAIMS AGAINST US

Prior to this offering, investors could not buy or sell our common stock
publicly. An active public market for our common stock may not develop or be
sustained after the offering. The initial public offering price will be
determined by negotiations between us and the representatives of the
underwriters. The market price of our common stock may decline below the initial
public offering price after this offering.

Fluctuations in market price and volume are particularly common among
securities of electronic commerce and other Internet companies. The market price
of our common stock may fluctuate significantly in response to the following
factors, some of which are beyond our control:

- variations in quarterly operating results;

- changes in market valuations of Internet and other electronic commerce
companies;

- announcements relating to significant contracts, acquisitions, strategic
partnerships, joint ventures or capital commitments;

- additions or departures of key personnel;

- future sales of common stock; and

- changes in financial estimates by securities analysts.

In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
common stock. We may be the target of similar litigation. Securities litigation
could result in substantial costs and divert management's time and attention.

SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET MAY DEPRESS
OUR STOCK PRICE

Our current shareholders hold a substantial number of shares, which they
will be able to sell in the public market in the near future. All of the
shares sold in this offering will be freely tradable, with the
5,056,619 other shares outstanding, based on the number of shares outstanding as
of November 30, 1999, being restricted securities as defined in Rule 144 of the
Securities Act of 1933, as amended. Approximately of those shares
will be freely tradable beginning 180 days after the effective date of this
offering, and the remainder of these will become freely tradable at various
times thereafter. Sales of a substantial number of shares of our common stock
after this offering could cause our stock price to fall. In addition, the sale
of these shares could impair our ability to raise capital through the sale of
additional stock.

THE PURCHASERS IN THIS OFFERING WILL IMMEDIATELY EXPERIENCE SUBSTANTIAL DILUTION
IN NET TANGIBLE BOOK VALUE

The initial public offering price is substantially higher than the book
value per share of our outstanding common stock immediately after the offering.
Accordingly, if you purchase common stock in the offering, you will incur
immediate dilution of approximately $ in the book value per share of our common
stock from the price you pay for our common stock.

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES

This prospectus contains forward-looking statements that relate to future
events or our future financial performance, which involve risks and
uncertainties. We use words such as "may," "will," "should," "would," "could,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" and similar expressions to identify forward-looking
statements. These statements are only predictions. Our actual results could
differ materially from those anticipated in these forward-looking statements as
a result of various factors, including the risk factors above and elsewhere in
this prospectus.

16
<PAGE>
USE OF PROCEEDS

Our net proceeds from the sale of the shares of common stock we are
offering are estimated to be $ million, or $ million if the
underwriters' option to purchase additional shares is exercised in full,
assuming an offering price of $ per share and after deducting the
underwriting discounts and commissions and estimated offering expenses.

We currently expect to use the gross proceeds for working capital and
general corporate purposes, including increased sales and marketing expenses,
and capital expenditures made in the ordinary course of business. In addition,
we may use a portion of the net proceeds for the acquisition of product lines,
technologies and businesses; however, we have no present commitments, agreements
or ongoing negotiations with respect to any such acquisitions. Our management
will have broad discretion concerning the allocation and use of the net proceeds
of the offering to be received by us. Pending the uses described above, we will
invest the net proceeds in short-term, investment grade, interest-bearing
securities.

DIVIDEND POLICY

We have never declared or paid cash dividends on our capital stock. We
intend to retain any future earnings to fund the development and growth of our
business and do not anticipate paying any cash dividends in the foreseeable
future.

17
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of November 30, 1999:

- on an actual basis;

- on a pro forma basis to reflect the conversion of all outstanding shares
of convertible preferred stock into 3,038,819 shares of common stock; and

- on a pro forma as adjusted basis to reflect the sale of shares of
common stock in this offering at an assumed initial public offering price
of $ per share and the application of the net proceeds, after
deducting underwriting discounts and commissions and our estimated
offering expenses.

The pro forma and pro forma as adjusted information set forth below is
unaudited and should be read in conjunction with our consolidated financial
statements and related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
NOVEMBER 30, 1999
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ---------- ------------
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C>
Current portion of long-term debt and capital lease
obligations............................................... $ 138 $ 138
======= ======= ======
Long-term debt and capital lease obligations................ $ 349 $ 349
Mandatorily redeemable convertible preferred stock:
Par value, $0.001--Authorized 3,150,005 shares actual and
pro forma; 5,000,000 shares pro forma as adjusted:
Series A: Designated 1,500,005 shares; issued and
outstanding, 1,500,005 shares (preference in
liquidation of $1.20 per share); no shares issued or
outstanding, pro forma and pro forma as adjusted...... 1,780 --
Series B: Designated 1,650,000 shares; issued and
outstanding, 1,538,814 (preference in liquidation of
$8.32 per share); no shares issued or outstanding, pro
forma and pro forma as adjusted....................... 12,663 --
Shareholders' equity (deficit):
Common Stock--$0.001 par value; authorized 8,349,995
shares; issued and outstanding 2,017,800 shares;
5,056,619 shares pro forma; shares, pro forma as
adjusted................................................ 475 14,918
Unearned compensation..................................... (452) (452)
Accumulated deficit of S corporation...................... (981) (981)
Accumulated deficit....................................... (3,836) (3,836)
------- ------- ------
Total shareholders' equity (deficit)...................... (4,794) 9,649
------- ------- ------
Total capitalization.................................... $ 9,998 $ 9,998
======= ======= ======
</TABLE>

The outstanding share information in the table above is as of November 30,
1999 and excludes:

- 1,039,800 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $3.80 per share; and

- 232,400 shares available for future issuance under our 1999 Equity
Incentive Plan.

18
<PAGE>
DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma net tangible book value per share of our common
stock after this offering. Pro forma net tangible book value per share
represents the amount of our total tangible assets less total liabilities
divided by the pro forma number of shares of common stock outstanding. As of
November 30, 1999, our pro forma net tangible book value was approximately
$9.6 million, or $1.91 per share of common stock. Without taking into account
any other changes in net tangible book value after November 30, 1999, other than
to give effect to the receipt by us of the net proceeds from the sale of the
shares of common stock offered by us at an assumed initial public
offering price of $ per share, our pro forma net tangible book value at
November 30, 1999 would have been approximately $ million, or $ per
share. This represents an immediate increase in net tangible book value of $
per share to existing shareholders and an immediate dilution of $ per share to
new investors purchasing shares at the initial public offering price. The
following table illustrates this per share dilution.

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $

Pro forma net tangible book value per share as of November
30, 1999.................................................. $1.91

Increase per share attributable to new investors............
-----

Pro forma net tangible book value per share after the
offering..................................................
------

Dilution per share to new investors.........................
======
</TABLE>

The following table summarizes on a pro forma basis as of November 30, 1999,
the number of shares of common stock purchased from us, the total consideration
paid to us and the average price per share paid to us by existing shareholders
and by new investors purchasing shares of common stock in this offering. The
information presented is based upon an assumed initial public offering price of
$ per share, before deducting estimated underwriting discounts and
commissions and estimated offering expenses.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- -------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders..................... 5,056,619 % $15,262,690 % $3.02
New investors.............................
--------- ----- ----------- -----
Total..................................... 100.0% $ 100.0%
========= ===== =========== =====
</TABLE>

The information presented above with respect to existing shareholders
assumes the conversion of outstanding convertible preferred stock into an
aggregate of 3,038,819 shares of common stock upon the closing of this offering.
This information is as of November 30, 1999 and excludes:

- 1,039,800 shares of common stock issuable upon exercise of options
outstanding at a weighted average exercise price of $3.80 per share; and

- 232,400 shares of common stock available for future issuance under our
1999 Equity Incentive Plan.

The issuance of common stock in connection with the exercise of these
options will result in further dilution to new investors. See "Management--1999
Amended and Restated Equity Incentive Plan" and Note 8 of notes to consolidated
financial statements.

19
<PAGE>
SELECTED FINANCIAL DATA

You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and the related notes and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this prospectus. The selected data in this section is
not intended to replace the consolidated financial statements.

The consolidated statement of operations data set forth below for the fiscal
years ended May 31, 1997, 1998 and 1999, and consolidated balance sheet data as
of May 31, 1998 and 1999 have been derived from our audited consolidated
financial statements included elsewhere in this prospectus, which have been
audited by Deloitte & Touche LLP, independent auditors. The consolidated balance
sheet data as of May 31, 1997 have been derived from our audited consolidated
financial statements not included in this prospectus. The consolidated statement
of operations data for the fiscal years ended May 31, 1995 and 1996 and the
selected consolidated balance sheet data as of May 31, 1995 and 1996 have been
derived from our unaudited consolidated financial statements not included in
this prospectus. The consolidated statement of operations data for the six
months ended November 30, 1998 and 1999 and consolidated balance sheet data as
of November 30, 1999, have been derived from our unaudited consolidated
financial statements which, in the opinion of management, have been prepared on
the same basis as the audited consolidated financial statements and reflect all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of operations and financial position. The pro forma information
written is unaudited and is presented as if the conversion of preferred stock
had occurred on November 30, 1999. The historical results do not necessarily
indicate the results you should expect in any future period.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED MAY 31, NOVEMBER 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales........................................... $1,155 $3,580 $6,179 $9,558 $13,136 $5,656 $10,659
Cost of goods sold.................................. 754 2,126 3,066 4,869 7,069 2,929 5,928
Gross profit........................................ 401 1,454 3,113 4,689 6,067 2,727 4,731
Operating expenses:
Sales and marketing............................... 585 1,292 2,734 4,376 5,916 2,610 6,438
General and administrative........................ 108 193 327 596 716 321 619
Product development............................... 138 117 131 346 490 225 748
------ ------ ------ ------ ------- ------ -------
Total operating expenses........................ 831 1,602 3,192 5,318 7,122 3,156 7,805
------ ------ ------ ------ ------- ------ -------
Loss from operations................................ (430) (148) (79) (629) (1,055) (429) (3,074)
Other income (expense), net......................... 1 (4) (31) (87) (126) (66) 108
Net loss............................................ $ (429) $ (152) $ (110) $ (716) $(1,181) $ (495) $(2,966)
====== ====== ====== ====== ======= ====== =======
Net loss per common share--basic and diluted........ $(0.61) $(0.20) $(0.08) $(0.36) $ (0.59) $(0.25) $ (1.47)
====== ====== ====== ====== ======= ====== =======
Pro forma net loss per common share--basic and
diluted........................................... $ (0.40) $ (0.65)
======= =======
Weighted average shares outstanding................. 708 762 1,438 1,978 2,001 1,988 2,016
====== ====== ====== ====== ======= ====== =======
Pro forma weighted average shares outstanding....... 2,951 4,596
======= =======
</TABLE>

<TABLE>
<CAPTION>
MAY 31, NOVEMBER 30, 1999
---------------------------------------------------- ---------------------
1995 1996 1997 1998 1999 ACTUAL PRO FORMA
-------- -------- -------- -------- -------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 27 $ 29 $ 64 $ 76 $ 127 $ 7,119 $ 7,119
Working capital (deficit)......................... 64 (84) (197) (1,398) (741) 7,919 7,919
Total assets...................................... 317 472 1,356 1,816 2,912 11,872 11,872
Long-term debt and capital lease obligations...... 107 45 193 92 400 349 349
Mandatorily redeemable convertible preferred
stock........................................... -- -- -- -- 1,780 14,443 --
Total shareholders' equity (deficit).............. 37 (50) (39) (750) (1,909) (4,794) 9,649
</TABLE>

20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND THE RELATED NOTES INCLUDED ELSEWHERE IN THIS
PROSPECTUS.

OVERVIEW

We were incorporated as Birthday Express, Inc. on June 15, 1994, at which
time we launched our first official direct marketing campaign. In April 1996, we
established our Birthday Express.com website; however, our online operations did
not comprise a significant part of our business until late 1998. In 1997, we
began the process of acquiring and customizing production equipment and
expanding our proprietary designs, and in December 1998, we began producing
products in our Kirkland, Washington facility. Since May 1999, we have increased
the depth of our management team to include a Vice President of Marketing, Vice
President of Business Development, Chief Technology Officer, Vice President of
Operations and Chief Financial Officer. In January 2000, we changed our name to
CelebrateExpress.com, Inc. and opened a fulfillment center in Greensboro, North
Carolina to expand our distribution capacity and reduce shipping expenses.

Our sales consist of products ordered, and related shipping fees paid by our
customers. We recognize revenue at the time our products are shipped, net of any
discounts and reserves for expected returns. Approximately 93% of customer
purchases are made with credit cards, and we generally receive payment from
credit card companies within one to two business days after shipment of product.
We carry inventory at the lower of cost or market value and use the
first-in-first-out method to determine cost. We expense advertising and
promotional costs as incurred. In the case of direct marketing campaigns, costs
are capitalized at the time incurred and amortized over the period that we
market our promotional materials to potential customers.

We incurred net losses of $110,000 in 1997, $716,000 in 1998 and
$1.2 million in 1999 for each of the fiscal years ended May 31. For the six
months ended November 30, 1999, our net loss was $3.0 million. As of
November 30, 1999, we had an accumulated deficit of approximately $4.8 million.
The net losses resulted primarily from costs associated with marketing programs
to attract new customers, the development of our websites and proprietary
databases and the development of our operational infrastructure.

We plan to invest heavily in marketing and promotion, the hiring of
additional employees and the enhancement of our websites and operational
infrastructure. Therefore, we expect to incur increasing sales and marketing,
product development and general and administrative expenses. As a result, we
will need to generate higher revenue to achieve and maintain profitability,
although we may never be able to do so. If our revenue growth is slower than
anticipated, or our operating expenses exceed our expectations, our losses will
be significantly greater.

SIX MONTHS ENDED NOVEMBER 30, 1998 AND 1999

NET SALES. Net sales consist of product sales and outbound shipping
charges, net of any discounts and reserves for expected returns. Net sales
increased from $5.7 million for the six months ended November 30, 1998 to
$10.7 million for the six months ended November 30, 1999. The increase in net
sales primarily resulted from expanded marketing efforts and the introduction of
new product lines.

COST OF GOODS SOLD. Cost of goods sold consists primarily of the cost of
merchandise, production costs and inbound and outbound shipping charges. Cost of
goods sold increased from $2.9 million for the six months ended November 30,
1998 to $5.9 million for the six months ended November 30, 1999. The increase in
cost of goods sold as a percentage of net sales from 51.8% to 55.6% primarily
reflects

21
<PAGE>
an increase in promotional discounts such as coupons and free shipping programs
as well as increased shipping costs.

SALES AND MARKETING. Sales and marketing expenses consist primarily of
advertising costs, order processing and fulfillment costs, credit card costs and
the salary and benefits of our sales, marketing and customer service personnel.
Advertising costs include online marketing efforts, print advertising and direct
marketing campaigns. Sales and marketing expenses increased from $2.6 million
for the six months ended November 30, 1998 to $6.4 million for the six months
ended November 30, 1999. This primarily reflected an increase in the overall
costs of customer service and order processing to handle the 88.5% increase in
revenue, as well as increased costs related to direct marketing and advertising
and increasing the size of our marketing department. We intend to continue to
pursue an aggressive marketing strategy to attract new customers. Therefore, we
expect sales and marketing expenses to increase significantly in future periods.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
salaries and related costs for our executive, administrative and finance
personnel, support services, professional fees and deferred compensation, as
well as general corporate expenses such as rent and depreciation. General and
administrative expenses increased from $321,000 for the six months ended
November 30, 1998 to $619,000 for the six months ended November 30, 1999. This
increase was primarily attributable to increased personnel. As we continue to
increase our operational infrastructure to support our growth, we expect general
and administrative expenses to increase. For the six months ended November 30,
1999, we recorded total unearned compensation of $459,000 in connection with
option grants to employees and directors, which represents the difference
between the deemed fair value of the common stock and the exercise price at the
time the options were granted. Amortization of unearned compensation during the
six months ended November 30, 1999 was $76,000.

PRODUCT DEVELOPMENT. Product development expenses primarily consist of
payroll and related expenses for website personnel, site hosting fees, Web
content and design expenses, merchandising and graphic layout artists. Product
development expenses increased from $225,000 for the six months ended November
30, 1998 to $748,000 for the six months ended November 30, 1999. This increase
is the result of expenses incurred to improve our website interfaces, the
introduction of new technology and the overall expansion of our proprietary
product design department. We intend to continue to build the infrastructure
necessary to provide a high level of service on our websites. Therefore, we
expect product development expenses to increase in the future.

OTHER INCOME (EXPENSE), NET. Other income (expense), net consists primarily
of earnings on our cash and cash equivalents and interest payments on our loan
and lease agreements. Other income (expense), net increased from an expense of
($66,000) for the six months ended November 30, 1998 to income of $107,000 for
the six months ended November 30, 1999, primarily due to $152,000 of interest
income earned on the proceeds of our Series B preferred stock issued in July and
August 1999.

FISCAL YEARS ENDED MAY 31, 1997, 1998 AND 1999.

NET SALES. Net sales increased from $6.2 million in 1997 to $9.6 million in
1998 and to $13.1 million in 1999. The increase in net sales reflects expanded
marketing efforts and the introduction of new product lines.

COST OF GOODS SOLD. Cost of goods sold increased from $3.1 million in 1997
to $4.9 million in 1998 and to $7.1 million in 1999. The increase from 49.6% in
1997 to 50.9% in 1998 was primarily the result of increased shipping expenses
due to price increases from independent carriers. The increase from 50.9% in
1998 to 53.8% in 1999 was primarily due to the costs associated with
establishing our in-house production facility, including labor costs and
depreciation on equipment. Most of these costs are

22
<PAGE>
fixed. Our production facility is currently running at less than 25% capacity,
and we expect that at higher production levels these costs would become a lower
percentage of total cost of goods sold.

SALES AND MARKETING. Sales and marketing expenses increased from $2.7
million in 1997 to $4.4 million in 1998 and to $5.9 million in 1999. The overall
increase in sales and marketing expenses reflects expanded marketing efforts to
attract new customers and an increase in labor costs to support our growing
business. Expanded marketing efforts accounted for $847,000 of the increase from
1997 to 1998 and $328,000 of the increase from 1998 to 1999. The increases in
labor costs represented $584,000 of the increase from 1997 to 1998 and $846,000
of the increase from 1998 to 1999. Overall, sales and marketing expenses
represented 44.2%, 45.8% and 45.0% of net sales for each of the years ended May
31, 1997, 1998 and 1999.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
from $327,000 in 1997 to $596,000 in 1998 and to $716,000 in 1999. The increases
from 1997 to 1998 and from 1998 to 1999 primarily reflected the costs associated
with hiring additional personnel.

PRODUCT DEVELOPMENT. Product development expenses increased from $131,000
in 1997 to $346,000 in 1998 and to $490,000 in 1999. These increases were the
result of the expansion of our in-house capacity to develop proprietary products
and enhancements to our websites to increase their functionality and ease of
use.

OTHER INCOME (EXPENSE), NET. Other income (expense), net decreased from an
expense of $(31,000) in 1997 to an expense of $(87,000) in 1998 and to an
expense of $(126,000) in 1999. This decrease was primarily attributable to
interest expense charged on various short-term and long-term notes.

INCOME TAXES. As of May 31, 1999, we had net operating loss carryforwards
for federal income tax purposes of $503,000, which expire in 2014. We have
provided a full valuation allowance on the deferred tax asset because of
uncertainty regarding its utilization. Changes in the ownership of our common
stock, as set forth in the Internal Revenue Code of 1986, may restrict our
ability to realize the benefit of the carryforwards. To date, we have not been
required to make any federal income tax payments.

23
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

The following table sets forth unaudited, quarterly consolidated statements
of operations data for the six quarters ended November 30, 1999. In the opinion
of management, this unaudited information has been prepared on the same basis as
the annual consolidated financial statements and includes all adjustments
(consisting only of normal recurring adjustments) necessary for the fair
presentation of our results of operations for those periods. This information
should be read in conjunction with the consolidated financial statements and
related notes appearing elsewhere in this prospectus. The results of operations
for any quarter are not necessarily indicative of the results of operations for
any future period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------
AUG. 31, NOV. 30, FEB. 28, MAY 31, AUG. 31, NOV. 30,
1998 1998 1999 1999 1999 1999
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales.................................. $2,786 $2,870 $2,940 $4,540 $5,088 $5,571
Cost of goods sold......................... 1,495 1,434 1,599 2,541 2,783 3,146
------ ------ ------ ------ ------ -------
Gross profit............................... 1,291 1,436 1,341 1,999 2,305 2,425
------ ------ ------ ------ ------ -------
Operating expenses:
Sales and marketing...................... 1,258 1,363 1,440 1,881 2,514 3,922
General and administrative............... 151 160 165 239 295 325
Product development...................... 88 136 113 128 228 520
------ ------ ------ ------ ------ -------
Total operating expenses............... 1,497 1,659 1,718 2,248 3,037 4,767
------ ------ ------ ------ ------ -------
Loss from operations..................... (206) (223) (377) (249) (732) (2,342)
Other income (expense), net.............. (31) (35) (24) (36) 14 93
------ ------ ------ ------ ------ -------
Net loss............................... $ (237) $ (258) $ (401) $ (285) $ (718) $(2,249)
====== ====== ====== ====== ====== =======
</TABLE>

Our net sales increased over the six quarters as a result of sales to new
customers, repeat purchases by existing customers and overall growth. Gross
profit decreased primarily due to promotional discounts and free shipping
incentives to acquire customers, increased shipping costs and the costs
associated with our in-house production facilities. Our sales and marketing,
product development and general and administrative expenses increased as we
built our operational infrastructure and marketed our solution to new customers.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations primarily through the sale of preferred
stock, capital lease obligations and short-term notes. During 1997, we obtained
related party short-term notes totaling $1.0 million. As of November 30, 1999,
we received $13.7 million from the issuance of preferred stock, net of issuance
costs. Of this amount, $1.0 million was received in October 1998 and
$12.7 million in July and August 1999. In October 1998, we converted $780,000 of
promissory notes into preferred stock. In fiscal 1999, we entered into $546,000
of secured equipment loans.

Net cash used in operating activities was $3,975,000 for the six months
ended November 30, 1999, $54,000 for fiscal year 1997, $455,000 for fiscal year
1998 and $656,000 for fiscal year 1999. Net cash used in operating activities
consisted primarily of net losses as well as increased inventory balances. Our
inventory balances increased $59,000 in 1998, $655,000 in 1999 and $891,000 for
the six months ended November 30, 1999. These increases reflect the increases in
our sales volume and are offset by increases in accounts payable of $79,000 for
fiscal year 1998 and $918,000 for fiscal year 1999. As of November 30, 1999,
accounts payable balance decreased by $763,000 due to the availability of cash
from the Series B preferred stock financing.

24
<PAGE>
Net cash used in investing activities was $1.3 million for the six months
ended November 30, 1999, $275,000 for fiscal year 1997, $443,000 for fiscal year
1998 and $523,000 for fiscal year 1999, and reflects purchases of equipment
commensurate with the overall growth of our business. Net cash used in investing
activities consists primarily of capital expenditures for computers, software
and office furniture as well as the costs to acquire our production facilities.

Net cash provided from financing activities was $12.3 million for the six
months ended November 30, 1999, $364,000 for fiscal year 1997, $911,000 for
fiscal year ended May 31, 1998 and $1.2 million for the fiscal year ended
May 31, 1999. The $12.3 million in the six months ended November 30, 1999
consists of the proceeds from the Series B preferred stock financing and the pay
down of our short-term notes. Financing activities for the year ended May 31,
1999 included proceeds from our Series A preferred stock financing and securing
a long-term equipment loan.

We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated needs for
working capital and capital expenditures through at least the next 12 months. We
may need to raise additional funds prior to the expiration of such period if,
for example, we pursue business or technology acquisitions or experience
operating losses that exceed our current expectations. If we raise additional
funds through the issuance of equity, equity-related or debt securities, such
securities may have rights, preferences or privileges senior to those of the
rights of our common stock and our shareholders may experience additional
dilution. We cannot be certain that additional financing will be available to us
on favorable terms when required, or at all.

YEAR 2000 COMPLIANCE

Many currently-installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These systems
may recognize a date using "00" as the year 1900 rather than the year 2000. As a
result, computer systems and/or software used by many companies and governmental
agencies may need to be upgraded to comply with Year 2000 requirements or risk
system failure or miscalculations causing disruptions of normal business
activities.

We expect most material Year 2000 compliance problems to have arisen on or
immediately after January 1, 2000. As of January 11, 2000, we are not aware of
any Year 2000-related problems associated with our internal systems or software
or with the software and systems of our vendors, distributors or suppliers. It
is possible, however, that further Year 2000-related problems will arise after
January 1, 2000. For example, the date February 29, 2000 may present further
problems for non-compliant systems or software.

We do not expect to experience any material adverse effects on our business,
financial condition or results of operations from any vendor, distributor or
supplier who may experience Year 2000 problems after January 1, 2000. In
addition, we have completed an internal assessment of all material information
technology and non-information technology systems at our headquarters, including
our accounting software, our network server and related software, our personal
computers and related software and our telephone system. We believe that all of
these systems either are or will be made Year 2000 compliant and will not be
affected by dates after January 1, 2000. We are not currently aware of any Year
2000 problems relating to these systems which would harm our business, financial
condition or results of operations. Any systems discovered to be non-compliant
will be made Year 2000 compliant through normal upgrades of our software or
hardware, or, when necessary, replacement of our software or hardware.

COSTS. To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. Most of our expenses have related to,
and are expected to continue to relate to, the upgrades or replacements, when
necessary, of software or hardware, as well as costs associated with time spent
by employees in the evaluation process and Year 2000 compliance matters
generally. These expenses are included in our capital expenditures budget and
are not expected to be material to our

25
<PAGE>
financial position or results of operations. These expenses, however, if higher
than anticipated, could have a material and adverse effect on our business,
results of operations and financial condition.

RISKS. We may not discover Year 2000 compliance problems in our systems
that will require substantial revisions or replacements. In the event that the
fulfillment and operational facilities that support our business, or our
Web-hosting facilities, are not Year 2000 compliant, we may be unable to deliver
goods or services to our customers and portions of our websites may become
unavailable. In addition, we cannot be certain that third-party software,
hardware or services incorporated into our systems will not need to be revised
or replaced, which could be time-consuming and expensive. Our inability to fix
or replace third-party software, hardware or services on a timely basis could
result in lost revenue, increased operating costs and other business
interruptions, any of which could harm our business, results of operations and
financial condition. Moreover, the failure to adequately address Year 2000
compliance issues in our software, hardware or systems could result in claims of
mismanagement, misrepresentation or breach of contract and related litigation,
which could be costly and time-consuming to defend.

In addition, we cannot be certain that governmental agencies, utility
companies, Internet access companies and others outside our control will be Year
2000 compliant. The failure by these entities to be Year 2000 compliant could
result in a systemic failure beyond our control, including, for example, a
prolonged Internet, telecommunications or electrical failure, which could also
prevent us from offering our products to our users, decrease the use of the
Internet or prevent users from accessing our services, any of which would have a
material and adverse effect on our business, results of operations and financial
condition.

CONTINGENCY PLAN. We do not currently have a contingency plan to deal with
the worst-case scenario that might occur if technologies on which we depend are
affected by yet undetected problems associated with the Year 2000.

If our present efforts to address the Year 2000 compliance issues discussed
above are not successful, or if distributors, suppliers and other third parties
with which we conduct business do not successfully address such issues, our
users could seek alternate suppliers of our products and services. Any material
Year 2000 problem could require us to incur significant unanticipated expenses
to remedy and could divert our management's time and attention, either of which
could have a material and adverse effect on our business, operating results and
financial condition.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which is
effective for all fiscal quarters for all fiscal years beginning after June 15,
2000. Although we do not believe SFAS No. 133 will have a material impact on our
financial statements, because of the complexity of SFAS No. 133, the ultimate
impact has not yet been determined.

MARKET RISK

Our interest income is sensitive to changes in the general level of U.S.
interest rates, particularly since the majority of our investments are in
short-term instruments. Due to the nature of our short-term investments, we have
concluded that there is no material interest rate risk exposure. We have long
term debt which is primarily at fixed rates, therefore we have concluded that
there is no material exposure to interest rate risk.

26
<PAGE>
BUSINESS

OVERVIEW

We are a leading online destination for party supplies and services. Through
our CelebrateExpress.com and BirthdayExpress.com websites, we offer consumers a
large selection of theme-related party supplies in customized assortments and
quantities, as well as detailed party planning content. We believe our
vertically-integrated, direct-to-consumer business model creates significant
advantages over our competitors including lower product costs, greater
merchandise availability and broader selection. By combining our large selection
of unique products with extensive party planning advice, we offer consumers a
one-stop shopping solution that reduces the amount of stress, time and effort
involved in planning an event or celebration.

Over the past year, we have grown our net sales and customer base,
maintained high gross margins and established a leading online destination to
serve our market. As of November 30, 1999, our database included profiles on
over 550,000 customers. In the six months ended November 30, 1999, we generated
$10.7 million in net sales and gross margins of over 44%.

INDUSTRY BACKGROUND

GROWTH OF THE INTERNET AND ELECTRONIC COMMERCE

The Internet has emerged as a significant global medium for communication
and commerce. International Data Corporation (IDC) estimates that the number of
users worldwide accessing the Internet will increase from approximately
196 million at the end of 1999 to approximately 502 million by the end of 2003.
Jupiter Communications also estimates that the number of U.S. households online
will increase from approximately 45 million in 1999 to 68 million by the end of
2003, approximately two-thirds of all U.S. households. As the number of Internet
users grows, the amount of online commerce is expected to increase at an even
greater rate. According to IDC, the amount of commerce conducted over the
Internet will top $1.3 trillion by 2003, and Forrester Research estimates that
business to consumer sales over the Internet will increase from $20 billion in
1999 to $144 billion by 2003. We believe that the unique capabilities of the
Internet, particularly in situations where broad product selection, availability
of information and convenience are important to consumers, will result in the
continued adoption of the Internet as a means for conducting transactions.

WOMEN AND YOUNG FAMILIES

Women and young families represent an increasingly significant and
fast-growing segment of Internet users. IDC estimates that of all U.S.
households online in 1999, approximately 43% consisted of families with children
under the age of 18. According to Jupiter Communications, women are expected to
represent approximately 78.9 million, or the majority, of U.S. Internet users by
the end of 2003. For the six months ended November 30, 1999, women placed over
85% of orders on our websites, and we believe that women and young families
represent an important demographic audience for party supplies and services.

THE MARKET FOR PARTY SUPPLIES AND RELATED PRODUCTS

Throughout the year, people of all ages observe special occasions, such as
birthdays, anniversaries, graduations, baby and bridal showers, weddings,
corporate events and holidays. The domestic retail party supplies industry,
which includes sales of paper plates, cups, napkins, balloons, cards, costumes,
party decorations and related products, grew from sales of $8.7 billion in 1996
to $11.4 billion in 1998 according to the trade publication PARTY & PAPER
RETAILER. These amounts do not include other party-related products, including
flowers, gifts and games which we believe represent significant market
opportunities.

27
<PAGE>
Party supplies are distributed and sold in a highly-fragmented marketplace
in which no complete source for theme-specific products exists. To preserve
valuable shelf space and avoid the costs of carrying inventory, traditional
retailers, such as party goods superstores, mass merchants, supermarkets,
drugstores, and specialty retailers, often do not stock a broad or deep
selection of products. We believe these retailers are generally unable to meet
consumer needs due to their narrow product selections and limited ability to
customize assortments and quantities for a specific event. The long supply chain
from manufacturers to retail stores also limits the ability of retailers to
respond to changing consumer preferences. As a result, consumers are often
forced to expend considerable time and energy visiting multiple store locations
to fulfill their party supply needs.

We believe consumers also face difficulty in obtaining quick and easy access
to reliable party planning advice, such as recommendations regarding theme,
age-appropriate activities, decorating ideas, menu, venue and other details. We
believe this is due, in part, to inexperienced and inadequately trained
employees and other limitations of the traditional party supply retail channel.
We believe there is a significant market opportunity for an electronic commerce
company to meet the needs of underserved consumers in our market.

THE CELEBRATEEXPRESS.COM SOLUTION

We are a leading online destination for party supplies and services. Through
our CelebrateExpress.com and BirthdayExpress.com websites, we offer consumers a
large selection of theme-related party supplies in customized assortments and
quantities, as well as detailed party planning information. Our staff of 70
trained party planners is available via our websites and toll-free telephone
service center to assist customers with their party and event planning needs,
24 hours a day, seven days a week. Our one-stop shopping solution reduces the
stress associated with planning an event or celebration. In addition, we believe
our vertically-integrated production and product sourcing create significant
advantages over our competitors including lower product costs, greater
merchandise availability and broader selection. By managing the process from
product design and production to fulfillment, we believe we are able to offer
our customers a convenient one-stop shopping solution that delivers superior
value and a compelling shopping experience.

Key elements of our solution include:

CONVENIENT SHOPPING EXPERIENCE. By offering a broad selection of products,
advice and information, we reduce the stress associated with planning an event
or celebration. Our online stores, which are available 24 hours a day, seven
days a week, organize our products into convenient and easy-to-navigate
departments, such as party themes, favors, activities, gifts, games and
costumes. Customers may choose from a variety of shipping options including UPS,
Federal Express, United States Postal Service and Airborne Freight. Orders of
in-stock items placed before 12:00 p.m. (Pacific time) can be delivered
overnight to customers throughout the contiguous United States.

PARTY PLANNING ADVICE AND CONTENT. Our websites feature theme-related party
planning guides and information, including helpful decorating tips, activities,
games and recipes. We also offer our online customers a party checklist to
assist them in effectively planning events. In addition, our staff of over 70
trained party planners is available to process orders and offer party planning
ideas and advice. Customers are able to contact our party planners via our "Live
Help" feature on our websites and through our toll-free numbers 24 hours a day,
seven days a week.

SELECTION AND CUSTOMIZATION. By leveraging the Internet, our centralized
distribution, and our design, production and fulfillment capabilities, we offer
consumers a broad selection of party supplies. We offer an inventory of over 170
different party themes, 24 of which are our licensed or proprietary designs.
Each of these themes can consist of as many as 50 individual items.
Additionally, we offer our customers personalized products and customized order
features that typically provide a greater number

28
<PAGE>
of options than a traditional retailer. We allow our customers to customize
their orders to match the exact number of guests, order a la carte items and
personalize products, such as historical date scrolls and birthday banners. We
also believe our customers save money with our direct-to-consumer model.

EXCELLENT CUSTOMER SERVICE. Our customer service department provides free
pre- and post-purchase support through our websites and toll-free telephone
service center, 24 hours a day, seven days a week. After an order is taken via
our websites, customers receive an email confirmation that their order has been
received. They can also obtain information regarding the status of their order,
receive order-tracking information and, when necessary, ask product-related and
other questions either online or through our toll-free customer support line.

STRONG DIRECT MARKETING EXPERIENCE. We believe that our direct marketing
capabilities provide us with an effective customer acquisition and retention
model. Our model leverages the strengths of targeted advertising, both online
and offline, to acquire and retain customers. Since our inception in 1994, we
have assembled a detailed profile of over 550,000 customers, the majority of
whom have placed orders from us within the last 18 months. These profiles
typically include the number and type of past purchases and the dates of the
related events as well as the advertising lead source that prompted the customer
to contact us. In addition, this database contains an additional 2 million
prospect households. We believe the knowledge derived from this database allows
us to acquire and track customers more effectively than many of our competitors.

LICENSES AND PROPRIETARY DESIGNS. Our in-house design and production
capabilities and our international product sourcing allow us to provide an
increasing number of unique products directly to consumers. In addition, our
design staff can create and update designs based on consumer requests and
feedback. We currently design and produce products for 24 party themes, four of
which are licensed properties relating to the popular young family themes
MADELINE, THEODORE TUGBOAT, THE BIG COMFY COUCH and the artwork of Christian
Riese Lassen.

OUR STRATEGY

Our goal is to be the leading solution for the event and celebration market.
To achieve this goal, we plan to:

AGGRESSIVELY BUILD OUR BRANDS. We intend to establish CelebrateExpress.com
and BirthdayExpress.com as the leading brands for party-related products and
services. Through our advertising and promotional activities we target
purchasers of party supplies, with a focus on women and young families, whom we
identify as our core customers. We plan to continue to use a variety of online
and offline marketing strategies to reach this audience, including direct
marketing, co-branding, public relations, affiliate programs, traditional print
and broadcast media advertising and other partnerships and campaigns. For
example, we currently have entered into agreements with Buena Vista Internet
Group (operator of the Disney.com and Family.com websites), The Pillsbury
Company, Oxygen Media, Inc., America Online, Inc. and Microsoft Corporation.

PROMOTE REPEAT PURCHASES. We believe customer loyalty and repeat purchases
are critical to our success. We intend to expand our customer and product
databases, design and license new products, use direct marketing techniques to
target customers, increase the level of personalization on our websites and
continually enhance our level of customer service. We believe these initiatives
will drive repeat purchases as consumers become increasingly aware of our
product offerings and use our services for a broader set of occasions.

PURSUE BROADER PARTY MARKET. We intend to leverage our brands, electronic
commerce platform, direct marketing experience and operational infrastructure to
pursue revenue opportunities beyond the young family market. We recently
expanded our product offerings to include entertainment solutions

29
<PAGE>
for a variety of holidays and special occasions. We also intend to increase our
marketing to corporations and other organizations as part of our strategy
targeting corporate and professional event planners, party centers and catering
companies. In addition, we currently ship to 59 countries and believe the global
reach of the Internet will provide us with additional opportunities for
international sales.

USE TECHNOLOGY TO ENHANCE THE ONLINE SHOPPING EXPERIENCE. We intend to use
technology to capitalize on the flexibility of our online format, improve our
product and service offerings and to take advantage of the unique
characteristics of the Internet as a retail medium. Among other objectives, we
plan to develop features that improve the functionality, ease of use and level
of customer service on our websites.

EXPAND PRODUCTION AND PRODUCT SOURCING CAPABILITIES. We believe that our
direct-to-consumer model provides significant advantages to us. We plan to
continue to expand our vertically-integrated design, production and
international product sourcing programs to increase our unique product selection
and efficiency. We currently source products directly from manufacturers in
eight countries and view this as an attractive opportunity to further reduce
costs and improve margins.

THE CELEBRATEEXPRESS.COM EXPERIENCE

CelebrateExpress.com offers products and services that provide our customers
with the tools they need to create a memorable party experience. We supplement
our websites with a staff of trained party planners, available through online
chat or by telephone, to provide our customers with personalized service and
information.

Our online store offers useful party and event planning information,
targeted merchandising and product displays, quick and secure payment, search
capabilities and after-purchase support. We promote brand loyalty and repeat
purchases by providing a convenient, easy-to-use experience that encourages
customers to return frequently. Key features of the CelebrateExpress.com
experience include:

- PLANNING THE EVENT. Customers may use the information on our websites to
gather ideas and plan for a special event. For example, our online party
planning guides suggest theme-related party activities and recipes, and
our event checklist provides a guide to planning and hosting a successful
event.

- BROWSING THE MERCHANDISE. Customers can select and browse merchandise
categories, such as PARTY THEMES, ACTIVITIES or GIFTS. Each merchandise
category contains a list of available products, as well as a list of the
top ten most popular products within the category. Clicking on a specific
theme displays all related merchandise, including party accessories,
costumes, pinatas, games, activities and recipes.

- SELECTING THE RIGHT PRODUCT. We provide customers with detailed photos of
our merchandise and descriptions that list the contents and quantities in
each party package. Customers may purchase packaged sets, order a la carte
or select individual place settings to accommodate their exact number of
guests.

- CHECKING OUT. Customers may check out and proceed to payment or add the
desired items to their virtual shopping cart and continue browsing our
online stores. We also offer an express ordering feature on our websites
that enables customers to check out quickly by entering product numbers
directly from our printed marketing materials. Payment is made using a
credit card through a secure, encrypted payment system. Once the
transaction is submitted, a print-ready receipt is displayed, and an email
confirmation is sent to the customer. Customers may also call our
toll-free number listed at the bottom of every screen to place an order
over the phone, learn more about our products or ask about order status.

30
<PAGE>
- RECEIVING THE ORDER. Our shopping experience does not end when the order
is placed. Each package we ship contains a thank-you card, and the
contents are wrapped in colorful paper and sealed with a sticker. We
believe this creative packaging builds excitement and momentum for the
party and helps us to establish brand identity and customer loyalty. After
the order has been received, a customer can visit our websites or contact
one of our party planners for additional assistance.

PRODUCTS

Our online stores offer an extensive selection of quality, theme-related
party products. We offer private label items such as balloons, crepe paper, cake
toppers, pinatas and costumes, which we believe helps build our brands. We
select products based on careful analysis of our customers' buying patterns, as
well as feedback from the product request sections on our websites, which
enables us to quickly identify product trends in the marketplace. We offer an
extensive selection of product categories, including:

- PARTYWARE. We offer a wide variety of paper products such as plates, cups,
napkins, invitations, decorations, party hats and thank-you notes, as well
as plastic utensils, balloons, gift wrap and reusable party banners. These
items can be coordinated with a specific theme chosen by the customer.

- FAVORS. We sell theme-related party favors separately or as part of
packaged theme assortments. Party favors include small toys and gifts such
as top hats and canes, magic tricks, magnets, stickers, blowouts and
pinwheels.

- ACTIVITIES. We offer a variety of theme-related activities including
pinatas, games and crafts. Games such as JUMPIN' JACK'S POTATO SACK and
the A TASTE FOR WINE AND MURDER mystery game and crafts such as our
exclusive TREASURE BOX DECORATING KIT and BIRD HOUSE ACTIVITY include all
the necessary materials and instructions to provide additional party
entertainment.

- DRESS-UP. Our selection of costumes, T-shirts and dress-up accessories
coordinate with party themes and are available in a variety of sizes. Many
of our costumes are designed internally.

- GIFTS. Customers can purchase a variety of theme-related gifts including
figurines, toys, dolls, bean bags, first and second birthday products,
mealtime items, music, books, videos and games.

- HISTORICAL DATE SCROLLS. Each of our 11" X 14" scrolls contains a record
of historical events that took place on a specific day. Various printed
borders are available, including designs from nationally recognized
artists, and the scroll may be personalized with the recipient's name.

PRODUCT DESIGN, LICENSING, SOURCING AND PRODUCTION

We design and produce products for 24 party themes, four of which are
licensed properties relating to popular, young family themes. We currently
employ seven full-time professional graphic layout artists to create our
proprietary designs and related marketing materials. At our customized, on-site
production facility, we produce paper plates, paper cups, invitations, thank-you
notes, centerpieces, place mats, favor boxes, craft activities and costumes
based on these licenses and proprietary designs. In 1999, we designed, sourced
and produced over 40% of the products we sold based on revenue. During the same
period, eight of our top 20 party themes, as a percentage of sales, were
designed and produced by us.

We believe our unique product designs, licenses and production capabilities
differentiate us from competitors, improve inventory control, enhance margins
and reduce product delivery time. Furthermore, our ability to control finished
inventory improves our flexibility to respond to changes in the popularity of
designs, because we can produce designs based on customer demand. Once a design
is

31
<PAGE>
ready for production, we require only 48 hours to turn paper stock into finished
product. Currently, our production facility is operating at less than 25%
capacity.

In addition to producing products in-house, we also source many of our
products directly from a diverse network of over 400 manufacturers and
distributors throughout North America, Europe and Asia. We believe sourcing our
products directly from manufacturers allows us to reduce costs, monitor product
quality and coordinate our product selections to match our themed packages.

ADVERTISING AND MARKETING RELATIONSHIPS

We intend to continue to establish and leverage strategic relationships with
online and offline companies. To date, we have established the following
relationships, among others, for marketing and brand awareness purposes:

- DISNEY.COM / FAMILY.COM. We have entered into an agreement with Buena
Vista Internet Group that provides us with banner ads and links. Under
this agreement, we pay a fixed monthly amount for these rights.

- OXYGEN MEDIA. We have a link to our BirthdayExpress.com website on the
Oxygen.com website.

- PILLSBURY. We currently feature Pillsbury products in our direct marketing
materials. In exchange, Pillsbury displays our BirthdayExpress.com website
and products on approximately 1.5 million coupons located in grocery store
display cases throughout the United States.

- AOL. We are listed in AOL's online shopping area and also advertise our
websites through banner and other advertisements in AOL's proprietary
online environment for which we pay a fixed fee for impressions delivered.

- THE MICROSOFT NETWORK. We are a tenant on Microsoft's online shopping
channel. MSN features our products, advertisements and links to our online
stores for which we pay a fixed fee.

We plan to continue to establish relationships with businesses that
complement our strategic objectives. These relationships will evolve over time
and can be terminated for no reason or on very short notice at any time. These
relationships may not continue on their current terms, or at all.

MARKETING AND CUSTOMER ACQUISITION

We employ a combination of online and offline marketing programs to acquire
customers and build brand awareness. We target purchasers of party supplies,
focusing on women and young families, whom we identify as our core customers.
Following the completion of this offering, we expect to significantly increase
our investment in marketing, advertising and promotion to acquire and retain
customers.

OFFLINE MARKETING AND PROMOTION. Our offline advertising strategy includes
direct marketing, public relations, print advertising and private label
packaging. We advertise in family periodicals such as CHILD, PARENTING, FAMILY
FUN, DISNEY MAGAZINE and WORKING MOTHER. In addition, we currently are featured
by Pillsbury in approximately 1.5 million coupons located in grocery stores
throughout the United States. We also print and send millions of direct
marketing pieces annually to customers and prospects. We will continue to use
our direct marketing programs to generate interest in our products and services
and to direct potential and existing customers to our websites. Most of our
direct marketing materials are designed to illustrate the breadth of our product
selection and foster strong brand awareness. We attempt to use our direct
marketing materials and special promotions to drive traffic to our online
stores.

ONLINE MARKETING AND PROMOTION. We use four primary methods to reach our
potential customers online: banner advertisements, website sponsorships,
outbound email marketing and an online affiliate

32
<PAGE>
program. We buy banner ads that are displayed during keyword searches on online
portals. We have entered into marketing and sponsorship arrangements with
electronic commerce sites such as MSN, AOL, and the Family.com and Disney.com
web properties of Buena Vista Internet Group. Our affiliate program is designed
to create incentives for others to create inbound links that connect directly to
our websites. We pay our registered affiliates a referral fee based on the total
dollar amount purchased by consumers who accessed our websites through a link
from their website.

CUSTOMER SERVICE

We believe that a high level of customer service and support is critical to
retaining and expanding our customer base. Current features on our websites
allow customers to access shipping information, company policies, frequently
asked questions and product guarantees and to request order status information
online. In addition, our party planners are available by telephone 24 hours a
day, seven days a week to answer questions from customers. These party planners
can help a customer select a party theme and choose related favors, games,
decorations and other items. We believe we provide a high level of support by
training our party planners in our product offerings and in party planning
techniques. We also offer a money back guarantee to customers who are not 100%
satisfied with their purchase. We offer our online customers live online chat
functionality that enables easier communication with our customer service
department. This feature allows users to receive immediate interactive
assistance from a party planner.

FULFILLMENT AND SHIPPING

We believe that managing the customer experience is very important to our
success. A key element of this strategy involves the fulfillment of orders
in-house, which enables us to customize an order to the exact number of guests,
ship packages quickly, and even upgrade shipping to ensure timely delivery. We
maintain approximately 99% of our active SKUs in stock at our distribution
centers. We use the United States Postal Service, Airborne Freight, United
Parcel Service and Federal Express to offer overnight, two-day, three-day and
ground delivery. To improve delivery time, we opened a warehouse and
distribution center in Greensboro, North Carolina, in January 2000. Through our
distribution centers we are able to reach over 80% of our target U.S. customer
base via ground shipment within three days.

Our inventory management system tracks the quantities of product shipped,
which enables us to more accurately forecast customer demand. Our distribution
system can handle complex product orders, which often include over 120
individual components. We believe this uniquely designed "mass customization"
fulfillment process better equips us to serve our customers' specific needs.

TECHNOLOGY AND OPERATIONS

We have invested significantly in technology intended to provide a seamless
and reliable customer shopping experience and to support increased levels of
use. We have developed a scalable technology infrastructure to support our
websites and customer service center as well as to maintain our enterprise
systems. These systems include accounting, finance, warehouse and management
reporting and analysis functions in addition to our proprietary customer,
prospect and product databases. Our websites are designed to be accessible from
all standard browsers without the need for additional client software. Our
systems are designed to capture large amounts of customer-specific data, which
is important to our ability to target and develop a relationship with our
customers. We also incorporate encryption and fraud detection technologies
designed to protect the privacy of customer information and the integrity of
customer transactions.

Our production systems are hosted in our data center located at our
headquarters in Kirkland, Washington. Our Web servers are currently hosted at a
third-party facility in Bellevue, Washington,

33
<PAGE>
which provides redundant data communication lines and emergency power back-up.
We are adding redundant data communication lines, environmental control and
power systems, including a standby power generator, to our data center. Once
this is complete we will be relocating our Web servers to our data center. We
have maintenance contracts with our major technology vendors for host and
network equipment and have engaged a third-party service for 24-hour-per-day
independent monitoring of our infrastructure in addition to our own internal
monitoring systems. We are also planning a backup data center facility in North
Carolina, in conjunction with our Greensboro distribution center, to ensure
continuity of business operations in the event of a catastrophic failure at our
Kirkland facility.

We have designed our systems to scale for increases in traffic and
transactions by installing additional applications or storage servers or
additional processors per server. We maintain excess server and bandwidth
capacity to allow us to continue critical business functions in the event of
hardware failure or unusually heavy website traffic.

COMPETITION

The online party goods market is new, rapidly evolving and intensely
competitive. We expect competition to intensify in the future. Increased
competition may result in price reductions, reduced gross margins or loss of
market share, any of which could seriously harm our net sales and results of
operations. Current and new competitors can enter our market with little
difficulty and can launch new websites at a relatively low cost.

We currently compete with a variety of other companies, including:

- party goods superstores such as Party City;

- traditional card and gift specialty retailers such as Hallmark;

- mass merchandisers such as Wal-Mart;

- supermarkets and drugstores such as Safeway and Walgreens;

- catalog retailers of novelty items such as Oriental Trading Co. and Ace
Novelty; and

- other online retailers of party goods including BirthdayUSA.com and
GreatEntertaining.com.

We believe the principal competitive factors in our market are brand
recognition, product selection and availability, quality, convenience, customer
service, price and accurate and timely order fulfillment and delivery. Many of
these current and potential competitors may have the ability to devote
substantially more resources to marketing, customer service, product development
and order fulfillment operations than we do. In addition, larger and more
well-financed entities may acquire, invest in or form joint ventures with our
competitors. Some of our competitors may be able to secure products from
suppliers on more favorable terms, fulfill customer orders more efficiently and
adopt more aggressive pricing or inventory availability policies than we can.

INTELLECTUAL PROPERTY

We regard our brands, copyrights, service marks, trademarks, trade dress,
trade secrets and similar intellectual property as critical to our success. We
rely on trademark and copyright law, trade secret protection and confidentiality
or license agreements with our employees, customers, partners and others to
protect our proprietary rights. In May 1994, the United States Patent and
Trademark Office granted us a registered trademark for "Birthday Express," in
February 1995, we were granted the service mark "Birthday Express" and in
August 1996, we were granted the service mark "Great Days." We have recently
filed federal trademark applications for the "BirthdayExpress.com" and
"CelebrateExpress.com" marks. Effective trademark, service mark, copyright and
trade secret protection may not be available in every country in which we will
offer our products and services.

34
<PAGE>
Furthermore, the relationship between regulations governing domain names and
laws protecting trademarks and similar proprietary rights is unclear. Therefore,
we may be unable to prevent third parties from acquiring domain names that are
similar to, infringe upon or otherwise decrease the value of our trademarks and
other proprietary rights.

We also rely to a material extent on technology and designs developed and
licensed from third parties. These licenses may not continue to be available to
us on commercially reasonable terms in the future. The loss of existing licenses
could harm the performance of our existing services until equivalent technology
can be identified, obtained and integrated. Failure to obtain new technology
licenses may result in delays or reductions in the introduction of new features,
functions or services, which would harm our business. We have not been notified
that our technologies infringe on the proprietary rights of others. However,
there can be no assurances that third parties will not claim infringement in the
future. We expect that the continued growth of the Internet will result in an
increasing number of infringement claims as legal standards related to our
market continue to evolve. Any such claim, with or without merit, could be time
consuming, result in costly litigation, and may have a material adverse effect
on our business and results of operations.

GOVERNMENT REGULATION

Due to the increasing popularity and use of the Internet, it is possible
that a number of laws and regulations may be adopted with respect to the
Internet covering issues such as user privacy, freedom of expression, pricing,
content and quality of products and services, taxation, advertising,
intellectual property rights and information security. The nature of this
legislation and the manner in which it may be interpreted and enforced cannot be
fully determined and, therefore, this legislation could subject us to potential
liability, which in turn could harm our business. The adoption of any such laws
or regulations might also decrease the rate of growth of Internet use, which in
turn could decrease the demand for our products and services, or increase the
cost of doing business, or otherwise harm our business, financial condition and
results of operations. In addition, applicability to the Internet of existing
laws governing issues such as property ownership, copyrights and other
intellectual property issues, taxation, libel, obscenity and personal privacy is
uncertain. The vast majority of these laws were adopted prior to the advent of
the Internet and related technologies and, as a result, do not contemplate or
address the unique issues of electronic commerce.

Several states have also proposed legislation that would limit the use of
personal information gathered online or require websites to establish privacy
policies. The Federal Trade Commission has also initiated action against at
least one website regarding the manner in which information is collected from
users and provided to third parties. Changes to existing laws or the passage of
new laws intended to address these issues, including some recently proposed
changes, could create uncertainty in the marketplace that could reduce demand
for our products and services, increase the cost of doing business as a result
of litigation costs or increased service delivery costs. In addition, because
our products and services are accessible throughout the United States, other
jurisdictions may claim that we are required to qualify to do business as a
foreign corporation in a particular state. We are qualified to do business in
Washington State and North Carolina. Our failure to qualify in a jurisdiction
where we are required to do so could subject us to taxes and penalties for the
failure to qualify and could result in our inability to enforce contracts in
those jurisdictions. Any new legislation or regulation of this kind, or the
application of laws or regulations from jurisdictions whose laws do not
currently apply to our business, could harm our business, financial condition or
results of operations.

EMPLOYEES

As of November 30, 1999, we had 222 employees, including 53 in customer
service, 15 in marketing, 25 in technology and information systems, 114 in
operations and 15 in executive management and administration. We devote, and
will continue to devote, substantial resources to

35
<PAGE>
attract high-quality employees; however, in light of the tight labor market in
which we operate, we cannot assure that we will be successful in doing so. None
of our employees is represented by a labor union. We have not experienced any
work stoppages and consider our employee relations to be good.

FACILITIES

Our corporate offices, production facility and West Coast distribution
facility are located in Kirkland, Washington, where we lease approximately
43,000 square feet under leases that expire in December 2003. In addition, we
lease approximately 32,000 square feet in Greensboro, North Carolina, for our
East Coast distribution operations under a lease that expires in December 2004.
We also operate a retail store located in Redmond, Washington.

LEGAL PROCEEDINGS

From time to time, we may be involved in litigation relating to claims
arising out of our ordinary course of business. As of November 30, 1999, there
are no claims or actions pending or threatened against us, the ultimate
disposition of which would have a materially adverse effect on us.

36
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors and their ages as of November 30, 1999
are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- ------------------------------------------
<S> <C> <C>
Michael K. Jewell......................... 41 President, Co-Chief Executive Officer and
Chairman of the Board
Jan A. Jewell............................. 42 Co-Chief Executive Officer, Chief Creative
Officer and Director
Gary Halperin............................. 49 Chief Financial Officer, Vice President of
Finance, Treasurer and Secretary
Vicki Brummond............................ 37 Vice President of Business Development
Ed Morin.................................. 37 Chief Technology Officer
Travis Roberts............................ 35 Vice President of Operations
Melissa Stevens........................... 42 Vice President of Marketing
Robert T. Nelsen (1)...................... 36 Director
Ronald A. Weinstein (1)................... 58 Director
</TABLE>

- ---------

(1) Member of the audit and compensation committee.

MICHAEL K. JEWELL co-founded CelebrateExpress.com and has served as our
President and a member of our board of directors since our inception in
June 1994, and as our Chairman Co-Chief Executive Officer since December 1999.
From January 1996 to August 1997, Mr. Jewell also served as Vice President of
Finance of Engineering Animation, Inc. (EAI), an Internet and software animation
company. From August 1992 to January 1996, Mr. Jewell was an operations
consultant to EAI. From March 1989 to March 1992, Mr. Jewell served as a
strategic planning and operations advisor to companies funded by Advanced
Technology Partners, a venture capital firm. From May 1984 to August 1988, Mr.
Jewell was Vice President of Finance and member of the Strategic Planning
Committee of Credence Systems, Inc., a publicly-held manufacturer of
semiconductor test equipment. Mr. Jewell earned an M.B.A. from the University of
Southern California in entrepreneurial management and a B.A. in strategic
marketing from San Jose State University. Michael K. Jewell is the husband of
Jan A. Jewell.

JAN A. JEWELL co-founded CelebrateExpress.com and has served as our Chief
Creative Officer and a member of our board of directors since our inception in
June 1994, and as our Co-Chief Executive Officer since December 1999.
Ms. Jewell is also a director of the Kids In Distressed Situations Charity, a
national charity of leading retailers and manufacturers of children's products
committed to helping children in need. From April 1988 to April 1992, Ms. Jewell
co-founded and served as President of Albach Borbey, Inc., a jewelry design and
manufacturing company. From 1979 to April 1988, Ms. Jewell founded and served as
President of Jan Albach Designs, a jewelry design, manufacturing and retailing
company. Ms. Jewell holds a B.A. in fine arts from the University of Houston.
Jan A. Jewell is the wife of Michael K. Jewell.

GARY HALPERIN has served as our Chief Financial Officer, Vice President of
Finance and Treasurer since October 1999. From October 1998 to October 1999
Mr. Halperin was the President of Pure Health Solutions of Western Washington,
Inc. From April 1987 to October 1998, he served as Vice President, Finance and
Operations for the Western Washington division of IKON Office Solutions, Inc.,
an office products company. Mr. Halperin holds a B.S. in economics from the
University of Pennsylvania's Wharton School of Finance and Commerce.

VICKI BRUMMOND has served as our Vice President of Business Development
since November 1999. From August 1997 to November 1999, she served as Senior
Marketing Manager for Humongous

37
<PAGE>
Entertainment, Inc., a marketer and developer of children's CD-ROMs. From
December 1996 to June 1997, Ms. Brummond served as an Account Supervisor for
Shadwick Public Relations, a public relations company. From July 1993 to
December 1996, Ms. Brummond served as a Senior Promotions Manager for Phillips
Media Software, a software company. Ms. Brummond holds an M.B.A. from
Northwestern University and a B.A. in marketing from the University of
Wisconsin.

ED MORIN has served as our Chief Technology Officer since July 1999. From
August 1992 to June 1999, he founded and served as President of Northwest
Nexus, Inc., an Internet service and Web solutions provider. Mr. Morin holds a
B.S. in business administration from Oregon State University.

TRAVIS ROBERTS has served as our Vice President of Operations since
July 1999. From July 1998 to July 1999, he served as our Director of Operations.
From June 1997 to July 1998, Mr. Roberts served as Director of Operations for
Pacific Rim, an import company. From March 1987 to May 1997, Mr. Roberts served
as Director of Distribution for the West Coast distribution facility of The
Sherwin-Williams Company, a paint products company. Mr. Roberts holds a B.A. in
business management from the University of Nevada, Reno.

MELISSA STEVENS has served as our Vice President of Marketing since
November 1999. From June 1996 to October 1999, she served in various positions
and most recently as a partner and management supervisor for the Seattle,
Washington office of Bozell Worldwide, an advertising agency. From June 1994 to
June 1996, Ms. Stevens was Director of Catalog Marketing for Garden
Botanika, Inc., a cosmetics and skin care company. Ms. Stevens holds a B.A. in
English from the University of Santa Clara.

ROBERT T. NELSEN has served as a member of our board of directors since
July 1999. Since July 1994, he has served as a managing director of various
venture capital funds associated with ARCH Venture Partners, including ARCH
Venture Fund II, L.P., ARCH Venture Fund III, L.P. and ARCH Venture Fund IV,
L.P. From April 1987 to July 1994, Mr. Nelsen was Senior Manager at ARCH
Development Corporation, a company affiliated with the University of Chicago,
where he was responsible for new company formation. Mr. Nelsen serves on the
board of directors of Caliper Technologies Corp., a publicly-held, lab-chip
systems developer and manufacturer. He holds a B.S. in biology and economics
from the University of Puget Sound and an M.B.A. from the University of Chicago.

RONALD A. WEINSTEIN has served as a member of our board of directors since
October 1998. Since November 1992, he has served as the managing general partner
of the Weinstein Family Limited Partnership, an investment partnership.
Mr. Weinstein also serves on the board of directors of Molbak's, Inc., a garden
supply company, Coinstar, Inc., a publicly-held, consumer services company, and
Great Circle Family Foods, LLC, a food processing company. Mr. Weinstein also
served on the board of directors of Quality Food Centers, Inc., a publicly-held,
grocery store retailer, until its sale in 1998.

BOARD COMPOSITION

We currently have 4 directors. Upon the closing of this offering, the terms
of office of the directors will be divided into three classes: Class I, whose
term will expire at the annual meeting of shareholders to be held in 2000 or
special meeting held in lieu thereof, Class II, whose term will expire at the
annual meeting of shareholders to be held in 2001 or special meeting held in
lieu thereof and Class III, whose term will expire at the annual meeting of
shareholders to be held in 2002 or special meeting held in lieu thereof. The
Class I director is Robert T. Nelsen, the Class II director is Ronald A.
Weinstein and the Class III directors are Michael K. Jewell and Jan A. Jewell.
At each annual meeting of shareholders after the initial classification or
special meeting in lieu thereof, the successors to directors whose terms will
then expire will be elected to serve from the time of election and qualification
until the third annual meeting following election or special meeting held in
lieu thereof. In addition, our articles of incorporation will provide that the
authorized number of directors may be

38
<PAGE>
changed only by resolution of the board of directors. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors. This classification of the board of
directors may have the effect of delaying or preventing changes in control or
management of CelebrateExpress.com, although our directors may be removed for
cause by the affirmative vote of the holders of a majority of our common stock.
See "Description of Capital Stock--Anti-Takeover Effects of Provisions of Our
Articles of Incorporation, Bylaws and Washington Law" for a discussion of other
anti-takeover provisions found in our articles of incorporation.

BOARD COMPENSATION

We do not currently provide our directors with cash compensation for their
services as members of the board of directors, although members are reimbursed
for reasonable expenses incurred in connection with attendance at board and
committee meetings. In June 1999, the board of directors granted Mr. Weinstein,
a non-employee director, an option to purchase 30,000 shares of our common stock
at a price of $0.35 per share. This option vested with respect to 7,500 shares
on October 1, 1999 and then vests monthly thereafter in 36 equal installments.
Directors are eligible to participate in our stock plans and non-employee
directors will receive shares as compensation for their services after the
completion of this offering. See "Management--Employee Benefit Plans--1999
Amended and Restated Equity Incentive Plan."

BOARD COMMITTEES

Our board of directors has an audit committee and a compensation committee.
The audit committee meets with our independent auditors at least annually to
review the results of the annual audit. The audit committee also recommends to
the board the independent auditors to be retained and reviews the accountants'
comments as to controls, adequacy of staff and management performance and
procedures in connection with the audit and financial controls. The compensation
committee makes recommendations to the board regarding our stock option plans
and the compensation of officers. The audit committee and the compensation
committee are each composed of two independent directors, Messrs. Nelsen and
Weinstein.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No interlocking relationship exists between our board of directors or
compensation committee and the board of directors or compensation committee of
any other company, nor has such interlocking relationship existed in the past.

EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation for
services rendered to us in the fiscal year ended May 31, 1999 by our Co-Chief
Executive Officers. No other officers of CelebrateExpress.com earned $100,000 or
more in combined salary and bonus in fiscal 1999. We have never granted any
stock options to our Co-Chief Executive Officers.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- --------------------------- -------- -------- ------------
<S> <C> <C> <C>
Michael K. Jewell........................................... $28,000 -- --
President and Co-Chief Executive Officer
Jan A. Jewell............................................... 62,923 -- --
Co-Chief Executive Officer, Chief Creative Officer and
Secretary
</TABLE>

39
<PAGE>
EMPLOYEE BENEFIT PLANS

1999 AMENDED AND RESTATED EQUITY INCENTIVE PLAN

In September 1994 our board of directors adopted and our shareholders
approved our equity incentive plan which was amended and restated as the 1999
Equity Incentive Plan in July 1999. As of November 30, 1999, 1,340,000 shares of
common stock were reserved for issuance and options to purchase an aggregate of
1,039,800 shares were outstanding under the 1999 Equity Incentive Plan. Prior to
the completion of this offering, we expect our board of directors and
shareholders to approve the amendment and restatement of the 1999 Equity
Incentive Plan ("1999 Plan"), which will have a total of shares of
common stock reserved for issuance.

If the 1999 Plan is approved, beginning on January 1, 2001, the number of
reserved shares will be increased automatically by the lesser of (i)
( %) of the total number of common stock outstanding on such January 1 or
(ii) shares. Notwithstanding the foregoing, our board of directors may
designate a smaller number of shares to be added to the share reserve on any
given January 1. When a stock award expires or is terminated before it is
exercised, the shares not acquired pursuant to the stock awards shall again
become available for issuance under the 1999 Plan. As to stock awards granted
under the 1994 Plan and/or the 1999 Plan that expire or are terminated before
they are exercised, these shares shall again be returned to the pool of shares
available for future awards under the 1999 Plan.

The 1999 Plan permits the grants of options to directors, officers,
employees and consultants and advisors. Options may be either "Incentive Stock
Options" (ISOs) within the meaning of Section 422 of the Internal Revenue Code,
or nonstatutory stock options. The 1999 Plan also permits the grant of stock
bonuses and rights to purchase restricted stock.

The 1999 Plan is administered by our board of directors. Our board of
directors may delegate its authority to administer the 1999 Plan to the
compensation committee. The administrator has the authority to select the
eligible persons to whom award grants are to be made, to designate the number of
shares to be covered by each award, to determine whether an option is to be an
ISO or a nonstatutory stock option, to establish vesting schedules, to specify
the exercise price and the type of consideration to be paid upon exercise and to
specify other terms.

The maximum term of options granted under the 1999 Plan is 10 years. Unless
the terms of the stock option agreement provide for earlier termination, an
option shall expire three months after the termination of an optionholder's
service; however, if an optionholder is permanently disabled or dies during his
or her service, that person's options may be exercised up to 12 months following
disability or 18 months following death.

Generally, an optionholder may not transfer a stock option other than by
will or the laws of descent or distribution unless the optionholder holds a
nonstatutory stock option that provides otherwise. However, an optionholder may
designate a beneficiary who may exercise the option following the optionholder's
death.

Any individual who becomes a non-employee director after this offering will
automatically receive an initial grant of options to purchase shares of
common stock upon being elected to the board of directors. On the day following
each annual meeting, any person who is then a non-employee director will
automatically be granted an option to purchase shares of common stock,
provided that if any non-employee director that had not served in that capacity
for the entire period since the preceding annual meeting, then the number of
shares subject to the annual grant shall be reduced, pro rata, for each full
quarter the person did not serve during the previous period. Initial grants and
annual grants vest one third per year from the date it is granted.

40
<PAGE>
In the event of certain changes in control, all outstanding options under
the 1999 Plan either will be assumed, continued or substituted for by any
surviving entity except for options to purchase 234,700 shares of common stock
which will fully accelerate. If the surviving entity determines not to assume,
continue or substitute for such awards, the vesting provisions of such stock
awards will be accelerated and such stock awards will be terminated upon the
change of control if not previously exercised.

Our board of directors has the authority to amend or terminate the 1999
Plan; provided, however, that no amendment or termination of the 1999 Plan may
adversely affect the rights and obligations with respect to options or unvested
awards unless the participant consents to such an amendment or modification.
Amendments will generally be submitted for shareholder approval only to the
extent required by applicable law.

EMPLOYEE STOCK PURCHASE PLAN

Effective upon the completion of this offering, we expect to implement an
employee stock purchase plan ("Purchase Plan"). We have authorized a total of
shares of common stock for issuance under the Purchase Plan. The share
reserve will increase automatically every year, starting on January 1, 2001, by
the lesser of (i) 1% of the total number of shares outstanding on such
January 1 or (ii) shares. Our board of directors may designate a smaller
number of shares to be added to the share reserve on any given January 1. The
Purchase Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Internal Revenue Code of 1986, as amended.
Under the Purchase Plan, eligible employees will be able to purchase common
stock at a discount price in periodic offerings. The Purchase Plan will commence
on the effective date of this initial public offering.

Unless otherwise determined by the board of directors, all employees are
eligible to participate in the Purchase Plan so long as they are employed by us
(or a subsidiary designated by the board of directors) for at least 20 hours per
week and are customarily employed by us (or a subsidiary designate by the board
of directors) for at least five months per calendar year.

Under the Purchase Plan, employees who participate in an offering may have
up to 15% of their earnings for the period of that offering withheld. The amount
withheld is used at the end of the offering period to purchase shares of common
stock. The price paid for common stock at the commencement date of that offering
period will equal the lower of 85% of the fair market value of the common stock
at the commencement date of that offering period or 85% of the fair market value
of the common stock on the relevant purchase date. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment.

Upon changes in control of CelebrateExpress.com, our board of directors has
discretion to provide that each right to purchase common stock will be assumed
or an equivalent right substituted by the successor entity or our board of
directors may provide for all sums collected by payroll deductions to be applied
to purchase stock immediately prior to the change in control transaction.

Our board of directors has the authority to amend or terminate the Purchase
Plan; provided, however, that no amendment or termination of the Purchase Plan
may adversely affect any outstanding rights to purchase common stock. Amendments
will generally be submitted for shareholder approval only to the extent required
by law.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

Our articles of incorporation limit the liability of directors to the
fullest extent permitted by the Washington Business Corporation Act as it
currently exists or as it may be amended in the future. Consequently, subject to
the Washington Business Corporation Act, no director will be personally liable

41
<PAGE>
to us or our shareholders for monetary damages resulting from his or her conduct
as a director of CelebrateExpress.com, except liability for:

- acts or omissions involving intentional misconduct or knowing violations
of law;

- unlawful distributions; or

- transactions from which the director personally receives a benefit in
money, property or services to which the director is not legally entitled.

Upon the closing of this offering, our articles of incorporation will also
provide that we may indemnify any individual made a party to a proceeding
because that individual is or was a director or officer of ours, and this right
to indemnification will continue as to an individual who has ceased to be a
director or officer and will inure to the benefit of his or her heirs, executors
or administrators. Any repeal of or modification to our articles of
incorporation may not adversely affect any right of a director or officer of
ours who is or was a director or officer at the time of such repeal or
modification. To the extent the provisions of our articles of incorporation
provide for indemnification of directors or officers for liabilities arising
under the Securities Act, those provisions are, in the opinion of the Securities
and Exchange Commission, against public policy as expressed in the Securities
Act and they are therefore unenforceable.

Upon the closing of this offering, our bylaws will provide that we will
indemnify our directors and officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law.

Upon the closing of this offering, we expect to enter into agreements to
indemnify our directors and certain officers, in addition to indemnification
provided for in our articles of incorporation or bylaws. These agreements, among
other things, indemnify our directors and certain officers for certain expenses,
including attorneys' fees, judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, including any action by us arising
out of such person's services as our director or officer or any other company or
enterprise to which the person provides services at our request. We believe that
these provisions and agreements are necessary to attract and retain qualified
persons as directors and officers. We also intend to maintain liability
insurance for our officers and directors.

42
<PAGE>
CERTAIN TRANSACTIONS

Since June 1996, we have issued and sold securities to the persons
identified below who are our directors, executive officers, and/or holders of
more than 5% of our common stock. You may find more details about shares held by
these purchasers in the "Principal Shareholders" section of this prospectus.

PROMISSORY NOTES

From September 1996 to December 1998, we borrowed an aggregate of $1,869,000
from Michael Jewell our Co-Chief Executive Officer and issued to him promissory
notes at interest rates ranging from 7% to 8% with varying dates of maturity.
During the same period, we borrowed an aggregate of $310,182 from Mr. Jewell's
brother, Richard Jewell, and issued to him promissory notes at interest rates
ranging from 6% to 9% with varying dates of maturity.

In November 1996, Michael Jewell converted promissory notes totalling an
aggregate of $1,200,000, into 120,000 shares of our common stock.

In August 1998, Michael and Jan Jewell individually guaranteed the payment
and performance of CelebrateExpress.com in connection with the repayment of
promissory notes in the aggregate principal amount of $545,715 to GE Capital
Corporation. The individual guarantees remain in place as long as the promissory
notes remain outstanding. As of November 30, 1999, the remaining principal
amount on the notes was $424,466.

In June 1999, we issued to Arch Venture Fund IV, L.P., a holder of more than
5% of our capital stock, a $250,000 promissory note accruing interest at 9.75%
per annum. The promissory note was repaid in July 1999.

SERIES A PREFERRED STOCK

In October 1998, we sold an aggregate of 1,500,005 shares of Series A
preferred stock at a price per share of $1.20 to a group of private investors
that included the following directors, officers and 5% shareholders:

<TABLE>
<CAPTION>
SHARES OF
SERIES A
PURCHASER STOCK
- --------- ---------
<S> <C>
Jan A. Jewell............................................... 325,000
Michael K. Jewell........................................... 325,000
Entities affiliated with Ronald A. Weinstein................ 166,666
</TABLE>

Michael Jewell converted promissory notes totaling an aggregate of $780,000,
into the above-referenced 325,000 shares of our Series A preferred stock issued
to each of him and Jan Jewell. At the time of the Series A preferred stock
transaction, Mr. Ronald Weinstein became a member of our board of directors.

43
<PAGE>
SERIES B PREFERRED STOCK

In July and August 1999, we sold an aggregate of 1,538,814 shares of
Series B preferred stock at a price per share of $8.32 to a group of private
investors that included the following directors and 5% shareholders:

<TABLE>
<CAPTION>
SHARES OF
SERIES B
PURCHASER STOCK
- --------- ---------
<S> <C>
ARCH Venture Fund IV, L.P................................... 600,962
Entities affiliated with Advanced Technology Ventures....... 369,388
Entities affiliated with Sigma Partners..................... 360,577
Entities affiliated with Ronald A. Weinstein................ 70,489
</TABLE>

At the time of the transaction, Mr. Robert Nelsen became a member of our board
of directors. Mr. Nelsen is a managing director in ARCH Venture Partners IV,
LLC, which is the general partner of ARCH Venture Fund IV, L.P.

We have entered into an Amended and Restated Voting Agreement, Amended and
Restated Right of First Refusal Agreement and Amended and Restated Investor
Rights Agreement with our preferred shareholders. The Voting Agreement and Right
of First Refusal Agreement will terminate on the closing of this offering.
Holders of shares of our preferred stock, and our common stock issued or
issuable upon conversion thereof, have registration rights under the Amended and
Restated Investor Rights Agreement. See "Description of Capital
Stock--Registration Rights of Certain Holders."

Stock option grants to our directors and executive officers are described in
this prospectus under captions "Management--Board Compensation," "--Executive
Compensation" and "Principal Shareholders."

We plan to enter into indemnification agreements with our executive officers
and directors for the indemnification of and advancement of expenses to such
persons to the fullest extent permitted by law. We also intend to enter in these
agreements with our future directors and executive officers. For a description
of limitations of liability and certain indemnification arrangements with
respect to our directors and officers, see "Management--Limitation of Liability
and Indemnification Matters."

We believe that all transactions with affiliates described above were made
on terms no less favorable to us than could have been obtained from unaffiliated
third parties. Our policy is to require that a majority of the independent and
disinterested outside directors on our board of directors approve all future
transactions between us and our officers, directors, principal shareholders and
their affiliates. Such transactions will continue to be on terms no less
favorable to us than we could obtain from unaffiliated third parties.

44
<PAGE>
PRINCIPAL SHAREHOLDERS

The following table sets forth certain information with respect to
beneficial ownership of our common stock as of November 30, 1999, and as
adjusted to reflect the sale of common stock offered hereby, as to (A) each
person (or group of affiliated persons) known by us to own beneficially more
than 5% of our outstanding common stock, (B) each of our directors, (C) Michael
K. and Jan A. Jewell, our Co-Chief Executive Officers, and (D) all directors and
executive officers of the company as a group.

Unless otherwise indicated, the address for each of the named individuals is
c/o CelebrateExpress.com, 11220-120(th) Avenue Northeast, Kirkland, Washington
98033. Except as otherwise indicated, and subject to applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all shares of common stock held by them.

Beneficial ownership is determined in accordance with the rules of the
Commission. Shares of common stock subject to options or warrants that are
exercisable or will become exercisable within 60 days of November 30, 1999, are
deemed outstanding for the purpose of computing the percentage of ownership of
the person or entity holding options or warrants but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person or entity. Percentage of shares beneficially owned is based on 5,056,619
shares of common stock outstanding as of November 30, 1999 and shares of
common stock to be outstanding after this offering.

<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY
OWNED
SHARES -------------------
BENEFICIALLY BEFORE AFTER
NAME OWNED OFFERING OFFERING
- ---- ------------ -------- --------
5% SHAREHOLDERS
<S> <C> <C> <C>
ARCH Venture Fund IV, L.P(1)................................ 600,962 11.9%
1000 Second Ave., Suite 3700
Seattle, WA 98104
Entities affiliated with Advanced Technology Ventures(2).... 394,788 7.8%
485 Ramona Street, Suite 201
Palo Alto, CA 94301
Entities affiliated with Sigma Partners(3).................. 360,577 7.1%
2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025

CO-CHIEF EXECUTIVE OFFICERS AND DIRECTORS
Michael K. Jewell(4)........................................ 2,600,000 51.4%
Jan A. Jewell(5)............................................ 2,600,000 51.4%
Robert T. Nelsen(6)......................................... 600,962 11.9%
Ronald A. Weinstein(7)...................................... 277,364 5.5%

ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP(8).......... 3,484,576 68.7%
</TABLE>

- ---------

(1) Excludes 20,833 shares held by Keith L. Crandell and 20,834 shares held by
Alex Knight, both managing directors in ARCH Venture Partners IV, LLC, the
general partner of ARCH Venture Fund IV, L.P. ARCH Venture Fund IV, L.P.,
disclaims beneficial ownership of those shares.

(2) Consists of 381,155 shares held by Advanced Technology Ventures V, L.P. and
13,633 shares held by ATV Entrepreneurs Fund V, L.P. ATV Associates V, LLC
is the general partner of Advanced Technology Ventures and ATV
Entrepreneurs.

45
<PAGE>
(3) Consists of 101,140 shares held by Sigma Associates IV, L.P., 9,979 shares
held by Sigma Investors IV, L.P. and 249,458 shares held by Sigma Partners
IV, L.P. Sigma Management IV, L.L.C. is the general partner of Sigma
Associates, Sigma Investors and Sigma Partners.

(4) Includes shares held individually by and jointly with Jan A. Jewell,
Mr. Jewell's spouse.

(5) Includes shares held individually by and jointly with Michael K. Jewell,
Ms. Jewell's spouse.

(6) Consists of 600,962 shares held by ARCH Venture Fund IV, L.P. Mr. Nelsen is
a managing director in ARCH Venture Partners IV, LLC, which is the general
partner of ARCH Venture Fund IV, L.P. Mr. Nelsen disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest
therein.

(7) Includes 9,375 shares subject to options exercisable within 60 days of
November 30, 1999, 133,996 shares held by the Weinstein Family Limited
Partnership, 66,996 shares held by the You Lucky Dog Trust, and 66,997
shares held by the ADS 1212 Trust. Mr. Weinstein disclaims beneficial
ownership of the shares held in the trusts except to the extent of his
pecuniary interest therein.

(8) Includes 15,625 shares subject to options exercisable within 60 days of
November 30, 1999.

46
<PAGE>
DESCRIPTION OF CAPITAL STOCK

On the closing of this offering, our authorized capital stock will consist
of 60,000,000 shares of common stock, $.001 par value, and 5,000,000 shares of
preferred stock, $.001 par value. The following description of our capital stock
does not purport to be complete. This description is subject to and qualified in
its entirety by our amended and restated articles of incorporation and bylaws,
which are included as exhibits to the registration statement of which this
prospectus forms a part, and by the provisions of Washington law.

COMMON STOCK

As of November 30, 1999, there were 5,056,619 shares of common stock
outstanding that were held of record by 44 shareholders. There will be
shares of common stock outstanding after giving effect to the sale of common
stock in this offering.

The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by our board of directors out of funds legally available therefor. See
"Dividend Policy." In the event of the liquidation, dissolution or winding up of
CelebrateExpress.com, the holders of our common stock are entitled to share
ratably in all assets remaining after payment of liabilities, subject to prior
distribution rights of preferred stock, if any, then outstanding. The common
stock has no preemptive or conversion rights or other subscription rights. There
are no redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable, and the
shares of common stock to be issued upon completion of this offering will be
fully paid and nonassessable.

PREFERRED STOCK

At the closing of this offering, our amended and restated articles of
incorporation will authorize 5,000,000 shares of preferred stock. Our board of
directors has the authority to issue the preferred stock in one or more series
and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, without
further vote or action by the shareholders. The issuance of preferred stock may
have the effect of delaying, deferring or preventing a change in control of
CelebrateExpress.com without further action by the shareholders. For example,
our board of directors could issue preferred stock that has the power to prevent
a change of control transaction. The issuance of preferred stock with voting and
conversion rights may adversely affect the voting power of the holders of common
stock, including the loss of voting control to others. Upon the closing of this
offering, no shares of preferred stock will be outstanding, and we currently
have no plans to issue any of the preferred stock.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

At the closing of this offering, the holders of 3,038,819 shares of common
stock will be entitled to rights with respect to the registration of such shares
under the Securities Act. The holders of registration rights are those investors
that purchased shares of our Series A and Series B preferred stock, as well as
some of our founders who hold such securities. If we propose to register any of
our securities under the Securities Act, either for our own account or for the
account of other security holders exercising registration rights, such holders
are entitled to notice of such registration and are entitled to include shares
of common stock in such registration, subject to the ability of the underwriters
to limit the number of shares included in the offering. All fees and expenses of
such registrations (other than underwriting discounts and commissions) will be
borne by us.

47
<PAGE>
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR ARTICLES OF INCORPORATION, BYLAWS AND
WASHINGTON LAW

ARTICLES OF INCORPORATION AND BYLAWS

Our board of directors, without shareholder approval, will have upon the
closing of this offering authority under our amended and restated articles of
incorporation to issue preferred stock with rights superior to the rights of the
holders of common stock. As a result, our board could issue preferred stock
quickly and easily, which could adversely affect the rights of holders of common
stock and which our board could issue with terms calculated to delay or prevent
a change in control or make removal of management more difficult.

Upon the closing of this offering our bylaws, as amended, will provide that,
except as otherwise required by law or by our amended and restated articles of
incorporation, special meetings of the shareholders can only be called pursuant
to a resolution adopted by our board of directors, the chairman of the board or
president. These provisions of our amended and restated articles of
incorporation and bylaws, as amended, could discourage potential acquisition
proposals and could delay or prevent a change in control. These provisions are
intended to enhance the likelihood of continuity and stability in the
composition of the board of directors and in the policies formulated by the
board of directors and to discourage certain types of transactions that may
involve an actual or threatened change of control. These provisions are designed
to reduce our vulnerability to an unsolicited acquisition proposal. The
provisions also are intended to discourage certain tactics that may be used in
proxy fights. However, such provisions could have the effect of discouraging
others from making tender offers for our shares and, as a consequence, they also
may inhibit fluctuations in the market price of our shares that could result
from actual or rumored takeover attempts. Such provisions also may have the
effect of preventing changes in our management.

ANTI-TAKEOVER PROVISIONS OF WASHINGTON LAW

Washington law also imposes restrictions on certain transactions between a
corporation and certain significant shareholders. Chapter 23B.19.040 of the
Washington Business Corporation Act prohibits a "target corporation," with
certain exceptions, from engaging in certain significant business transactions
with an "acquiring person," which is defined as a person or group of persons
that beneficially owns 10% or more of the voting securities of the target
corporation, for a period of five years after such acquisition, unless the
transaction or acquisition of shares is approved by a majority of the members of
the target corporation's board of directors prior to the time of acquisition.
Such prohibited transactions include, among others:

-- a merger or consolidation with, disposition of assets to, or issuance or
redemption of stock to or from, the acquiring person;

-- termination of 5% or more of the employees of the target corporation as
a result of the acquiring person's acquisition of 10% or more of the
shares; or

-- allowing the acquiring person to receive any disproportionate benefits
as a shareholder.

After the five-year period, a "significant business transaction" may occur,
as long as it complies with certain "fair price" provisions of the statute. A
corporation may not "opt out" of this statute. This provision may have the
effect of delaying, deferring or preventing a change in control.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for our common stock is American Securities
Transfer & Trust.

LISTING

We have applied to list our common stock on the Nasdaq National Market of
the Nasdaq Stock Market, Inc. under the trading symbol "CBXP."

48
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices. Furthermore, because a
large number of our shares of common stock outstanding will not be available for
sale shortly after this offering because of contractual and legal restrictions
on resale as described below, sales of substantial amounts of our common stock
in the public market after these restrictions lapse could depress the prevailing
market price and limit our ability to raise equity capital in the future.

Upon completion of this offering, we will have outstanding
shares of common stock, assuming no exercise of the underwriters' over-allotment
option and no exercise of outstanding options. Of these shares, all of the
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act, unless these shares are purchased
by "affiliates" as that term is defined in Rule 144 of the Securities Act. The
remaining 5,056,619 shares of common stock held by existing shareholders are
restricted shares. Restricted shares may be sold in the public market only if
registered or if they qualify for an exemption from registration under the
Securities Act.

As a result of the contractual restrictions described below and the rules
under the Securities Act, the restricted shares will be available for sale in
the public market as follows:

<TABLE>
<CAPTION>
DAYS AFTER THE SHARES ELIGIBLE
EFFECTIVE DATE FOR SALE COMMENT
- ------------------------ ------------------------ ------------------------
<S> <C> <C>
On Effectiveness........ Shares not locked-up and
saleable under Rule 144
90 days................. Shares not locked-up and
saleable under Rules 144
and 701
180 days................ Lock-up released; shares
saleable under
Rules 144 and 701
</TABLE>

Additionally, of the 1,039,800 shares that may be issued upon the exercise
of options outstanding as of November 30, 1999, approximately shares will
be vested and eligible for sale 180 days after the date of this prospectus.

Pursuant to certain "lock-up" agreements, the executive officers, directors
and shareholders of the company, who collectively hold common shares and
options to purchase common shares, have agreed not to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of any such
shares for a period of 180 days from the date of this prospectus. FleetBoston
Robertson Stephens Inc. may, in its sole discretion and at any time without
notice, release all or any portion of the securities subject to lock-up
agreements. See "Underwriting."

In general, under Rule 144 as in effect at the closing of this offering,
beginning 90 days after the date of this prospectus, a person who has
beneficially owned those shares for at least one year would be entitled to sell,
within any three month period, a number of shares that does not exceed the
greater of:

- 1% of the then-outstanding shares of common stock; or

- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale and
notice requirements and to the availability of current public information
about the company.

49
<PAGE>
Under Rule 144(k), a person who is not deemed to have been an affiliate of
CelebrateExpress.com at any time during the three months preceding a sale and
who has beneficially owned the shares proposed to be sold for at least two
years, including the holding period of any prior owner who is not an affiliate
of CelebrateExpress.com is entitled to sell such shares without complying with
the manner of sale, public information, volume limitation or notice provisions
of Rule 144. Therefore, unless otherwise restricted, "144(k) shares" may be sold
immediately upon completion of this offering.

Subject to various limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from us by our employees,
directors, officers, consultants or advisors prior to the completion of this
offering, pursuant to written compensatory benefit plans or written contracts
relating to the compensation of these persons. In addition, the Securities and
Exchange Commission has indicated that Rule 701 will apply to stock options
granted to us before this offering, along with the shares acquired upon exercise
of such options. Securities issued in reliance on Rule 701 are deemed to be
restricted shares and, beginning 90 days after the date of this prospectus,
unless subject only to the manner of sale provisions of Rule 144 and by
affiliates under Rule 144 without compliance with its one-year minimum holding
period requirement.

We intend to file, within 180 days of effective date of this offering, a
registration statement on Form S-8 to register all shares of common stock
issuable under our 1999 Plan and Purchase Plan. The registration statement will
become effective automatically upon filing. Shares issued under the 1999 Plan,
after the filing of a registration statement on Form S-8, and unexercised
options as of the offering, may be sold in the open market, subject, in the case
of certain holders, to the Rule 144 limitations applicable to affiliates, the
above-referenced lock-up agreements and vesting restrictions imposed by us.

In addition, following this offering, the holders of 3,038,819 shares of
outstanding common stock, or their transferees, will have rights to require us
to register their shares for future sale. See "Description of Capital
Stock--Registration Rights of Certain Holders."

50
<PAGE>
UNDERWRITING

The underwriters, FleetBoston Robertson Stephens Inc., U.S. Bancorp Piper
Jaffrey Inc., E*OFFERING Corp., and Pacific Crest Inc., have severally agreed
with us, subject to the terms and conditions of the underwriting agreement, to
purchase from us the numbers of shares of common stock set forth opposite their
respective names below. The underwriters are committed to purchase and pay for
all shares if any are purchased.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc..........................
U.S. Bancorp Piper Jaffray Inc..............................
E*OFFERING Corp.............................................
Pacific Crest Inc...........................................
-------
Total...................................................
=======
</TABLE>

We have been advised by the representatives that the underwriters propose to
offer the shares of common stock to the public at the initial public offering
price set forth on the cover page of this prospectus and to certain dealers at
such price less a concession of not in excess of $ per share, of which
$ may be reallowed to other dealers. After the initial public offering, the
public offering price, concession and reallowance to dealers may be reduced by
the representatives. No such reduction shall change the amount of proceeds to be
received by us as set forth on the cover page of this prospectus. The common
stock is offered by the underwriters as stated herein, subject to receipt and
acceptance by them and subject to their right to reject any order in whole or in
part.

The underwriters have advised that they do not expect sales to discretionary
accounts to exceed 5% of the total shared offered.

OVER-ALLOTMENT OPTION. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of common stock at the same price per
share as we will receive for the shares that the underwriters have agreed
to purchase. To the extent that the underwriters exercise this option, each of
the underwriters will have a firm commitment to purchase approximately the same
percentage of such additional shares that the number of shares of common stock
to be purchased by it shown in the above table represents as a percentage of the
shares offered hereby. If purchased, such additional shares will be sold
by the underwriters on the same terms as those on which the shares are
being sold. We will be obligated, pursuant to the option, to sell shares to the
extent the option is exercised. The underwriters may exercise such option only
to cover over-allotments made in connection with the sale of the shares of
common stock offered hereby.

The following table summarizes the compensation to be paid to the
underwriters by us:

<TABLE>
<CAPTION>
TOTAL
--------------------------
WITHOUT OVER- WITH OVER-
PER SHARE ALLOTMENT ALLOTMENT
--------- ------------- ----------
<S> <C> <C> <C>
Underwriting Discounts and Commissions payable by us........ $ $ $
</TABLE>

We estimate that expenses payable by us in connection with this offering,
other than the underwriting discounts and commissions referred to above, will be
approximately $ . The public offering price, underwriting discount
and other terms set forth in the underwriting agreement are subject to approval
by the pricing committee of our board of directors.

51
<PAGE>
INDEMNITY. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including liabilities
under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.

LOCK-UP AGREEMENTS. All our executive officers, directors, shareholders of
record, optionholders and warrantholders have agreed with us or FleetBoston
Robertson Stephens Inc., for a period of 180 days after the date of this
prospectus, subject to certain exceptions, not to offer to sell, contract to
sell, or otherwise sell, dispose of, loan, pledge or grant any rights with
respect to any shares of common stock, any option or warrants to purchase any
shares of common stock, or any securities convertible into or exchangeable for
shares of common stock owned as of the date of this prospectus or, with certain
exceptions, thereafter acquired directly by such holders or with respect to
which they have or hereafter acquire the power of disposition, without the prior
written consent of FleetBoston Robertson Stephens, Inc. However, FleetBoston
Robertson Stephens, Inc. may, in its sole discretion and at any time without
notice, release all or any portion of the securities subject to the lock-up
agreements. There are no agreements between the representatives and any of our
shareholders providing consent by the representatives to the sale of shares
prior to the expiration of the period of 180 days after this prospectus.

FUTURE SALES. In addition, we have agreed that during the period of
180 days after this prospectus, we will not, subject to certain exceptions,
without the prior written consent of FleetBoston Robertson Stephens, Inc.:

- Consent to the disposition of any shares held by shareholders prior to the
expiration of the period of 180 days after this prospectus; or

- Issue, sell, contract to sell or otherwise dispose of, any shares of
common stock, any options or warrants to purchase any shares of common
stock or any securities convertible into, exercisable for or exchangeable
for shares of common stock, other than (1) the sale of shares in this
offering, (2) the issuance of common stock upon the exercise or conversion
of outstanding options, warrants or convertible securities, and (3) our
issuance of stock options under existing equity incentive plan and stock
purchase plan. See "Shares Eligible for Future Sale."

INTERNET DISTRIBUTION. E*OFFERING Corp. is the exclusive Internet
underwriter for this offering. E*OFFERING Corp. has agreed to allocate a portion
of the shares that it purchases to E*TRADE Securities, Inc. E*OFFERING Corp. and
E*TRADE will allocate shares to their respective customers in accordance with
usual and customary industry practices. A prospectus in electronic format will
be made available on Internet sites maintained by E*OFFERING Corp. and E*TRADE.
Other than the prospectus in electronic format, the information on these
Internet sites is not part of this prospectus or the registration statement of
which the prospectus forms a part.

LISTING. We have filed an application to have the common stock approved for
quotation on the Nasdaq National Market under the symbol "CBXP."

NO PRIOR PUBLIC MARKET. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price for
the common stock offered hereby will be determined through negotiations between
us and the representatives. Among the factors to be considered in such
negotiations are prevailing market conditions, our financial information, market
valuations of other companies that we and the underwriters believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.

STABILIZATION. The representatives have advised us that, pursuant to
Regulation M under the Securities Act, certain persons participating in this
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which

52
<PAGE>
might otherwise prevail in the open market. A "stabilizing bid" is a bid for the
purchase of the common stock on behalf of the underwriters for the purpose of
fixing or maintaining the price of the common stock. A "syndicate covering
transaction" is the bid for or the purchase of the common stock on behalf of the
underwriters to reduce a short position incurred by the underwriters in
connection with this offering. A "penalty bid" is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with this offering if the common
stock originally sold by such underwriter or syndicate member is purchased by
the representatives in a syndicate covering transaction and has therefore not
been effectively placed by such underwriter or syndicate member. The
representatives have advised us that such transactions may be effected on the
Nasdaq National Market or otherwise and, if commenced, may be discounted at any
time.

DIRECTED SHARE PROGRAM. At our request, the underwriters have reserved up
to five percent of common stock offered by us for sale, at the initial public
offering price, to our directors, officers, employees, business associates and
related persons. The number of shares of common stock available for sale to the
general public will be reduced to the extent such individuals purchase such
reserved shares. Any reserved shares which are not so purchased will be offered
by the underwriters to the general public on the same basis as the other shares
offered hereby.

LEGAL MATTERS

The validity of the issuance of the common stock offered hereby will be
passed upon for us by Cooley Godward LLP, Kirkland, Washington. Attorneys at
Cooley Godward LLP are the beneficial owners, through investment partnerships,
of 29,645 shares of our common stock. Certain legal matters in connection with
this offering will be passed upon for the underwriters by Brobeck, Phleger &
Harrison LLP, Broomfield, Colorado.

EXPERTS

The consolidated financial statements as of May 31, 1998 and 1999 and for
each of the three years in the period ended May 31, 1999, included in this
prospectus, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing in this prospectus and elsewhere in the
registration statement, and have been so included in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities & Exchange Commission a registration
statement on Form S-1 under the Securities Act that registers the shares of our
common stock to be sold in this offering. The registration statement, including
the attached exhibits and schedules, contains additional relevant information
about us and our capital stock. The rules and regulations of the Commission
allow us to omit certain information included in the registration statement from
this document.

In addition, we file reports, proxy statements and other information with
the Commission under the Securities Exchange Act of 1934. You may read and copy
this information at the following public reference rooms of the Commission:

<TABLE>
<S> <C> <C>
WASHINGTON, D.C. NEW YORK, NEW YORK CHICAGO, ILLINOIS
450 Fifth Street, N.W., 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, NY 10048 Chicago, IL 60661-2511
</TABLE>

You may also obtain copies of this information by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. You may

53
<PAGE>
obtain information on the operation of the public reference rooms by calling the
Commission at 1-800-SEC-0330.

The Commission also maintains an Internet website that contains reports,
proxy statements and other information about issuers, like CelebrateExpress.com,
who file electronically with the Commission. The address of that site is
http://www.sec.gov.

We intend to furnish our shareholders with annual reports containing audited
consolidated financial statements, and make available to our shareholders
quarterly reports for the first three quarters of each year containing unaudited
interim consolidated financial information.

54
<PAGE>
CELEBRATEEXPRESS.COM, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Independent Auditors' Report................................ F-2

Consolidated Financial Statements:

Consolidated Balance Sheets as of May 31, 1998 and 1999; and
as of November 30, 1999 (unaudited)....................... F-3

Consolidated Statements of Operations for the years ended
May 31, 1997, 1998 and 1999; and the six months ended
November 30, 1998 and 1999 (unaudited).................... F-4

Consolidated Statements of Shareholders' Deficit for
the years ended May 31, 1997, 1998 and 1999; and the six
months ended November 30, 1999 (unaudited)................ F-5

Consolidated Statements of Cash Flows for the years ended
May 31, 1997, 1998 and 1999; and the six months ended
November 30, 1998 and 1999 (unaudited).................... F-6

Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors of
CelebrateExpress.com, Inc.
Kirkland, Washington

We have audited the consolidated balance sheets of CelebrateExpress.com,
Inc. and subsidiaries (the Company) as of May 31, 1998 and 1999, and the related
consolidated statements of operations, shareholders' deficit, and cash flows for
each of the three years in the period ended May 31, 1999. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of May 31, 1998
and 1999, and the results of their operations and their cash flows for each of
the three years in the period ended May 31, 1999, in conformity with generally
accepted accounting principles.

DELOITTE & TOUCHE LLP
September 15, 1999
(January 7, 2000, as to Notes 1, 5 and 8)

F-2
<PAGE>
CELEBRATEEXPRESS.COM, INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
PRO FORMA
NOVEMBER 30,
MAY 31, MAY 31, NOVEMBER 30, 1999
1998 1999 1999 (NOTE 6)
----------- ----------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents................................ $ 76,302 $ 127,031 $ 7,118,950 $
Accounts receivable...................................... 7,205 17,148 89,646
Inventories.............................................. 794,854 1,450,022 2,340,904
Prepaid expenses......................................... 198,124 304,672 244,674
----------- ----------- -----------
Total current assets................................. 1,076,485 1,898,873 9,794,174
FIXED ASSETS, net.......................................... 702,463 952,507 2,005,009
OTHER ASSETS............................................... 37,502 60,168 72,920
----------- ----------- -----------
TOTAL...................................................... $ 1,816,450 $ 2,911,548 $11,872,103
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable......................................... $ 990,948 $ 1,908,510 $ 1,145,218
Accrued liabilities...................................... 177,588 273,527 591,422
Revolving line of credit................................. 90,000 90,000
Related party notes payable.............................. 1,027,983 175,182
Current portion of long-term debt and capital lease
obligations............................................ 188,198 192,723 138,257
----------- ----------- -----------
Total current liabilities............................ 2,474,717 2,639,942 1,874,897
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS............... 91,858 400,272 348,417
----------- ----------- -----------
Total liabilities.................................... 2,566,575 3,040,214 2,223,314

COMMITMENTS AND CONTINGENCIES (Note 5)

MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:
Par value, $0.001--Authorized 10,000, 1,700,000 and
3,150,005 shares:
Series A: Designated 1,500,005 shares; issued and
outstanding, 1,500,005 shares for May 31, 1999, and
November 30, 1999 (preference in liquidation of $1.20
per share)........................................... 1,780,285 1,780,285
Series B: Designated 1,650,000 shares; issued and
outstanding, 1,538,814 shares for November 30, 1999
(preference in liquidation of $8.32 per share)....... 12,662,680
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock--$0.001 par value; authorized, 3,000,000,
4,500,000, and 8,349,995 shares; issued and
outstanding, 1,991,800, 2,015,300, and 2,017,800
shares................................................. 682,127 10,912 474,712 14,917,677
Unearned compensation.................................... (26,003) (69,197) (451,776) (451,776)
Accumulated deficit of S corporation..................... (1,406,249) (981,509) (981,509) (981,509)
Accumulated deficit...................................... (869,157) (3,835,603) (3,835,603)
----------- ----------- ----------- -----------
Total shareholders' equity (deficit)................. (750,125) (1,908,951) (4,794,176) 9,648,789
----------- ----------- ----------- -----------
TOTAL...................................................... $ 1,816,450 $ 2,911,548 $11,872,103
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>
CELEBRATEEXPRESS.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
------------------------------------- -------------------------
1997 1998 1999 1998 1999
---------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES........................ $6,179,045 $9,558,187 $13,136,414 $5,655,856 $10,659,077
COST OF GOODS SOLD............... 3,066,467 4,869,096 7,068,936 2,928,484 5,928,305
---------- ---------- ----------- ---------- -----------
Gross profit............. 3,112,578 4,689,091 6,067,478 2,727,372 4,730,772
OPERATING EXPENSES:
Sales and marketing............ 2,733,810 4,376,241 5,916,006 2,610,170 6,438,201
General and administrative..... 326,544 596,253 715,706 321,344 618,915
Product development............ 131,420 345,945 490,572 224,571 747,433
---------- ---------- ----------- ---------- -----------
Total operating
expenses............... 3,191,774 5,318,439 7,122,284 3,156,085 7,804,549
LOSS FROM OPERATIONS............. (79,196) (629,348) (1,054,806) (428,713) (3,073,777)
OTHER INCOME (EXPENSE):
Interest income (expense),
net.......................... (30,316) (86,952) (125,979) (66,214) 107,331
---------- ---------- ----------- ---------- -----------
NET LOSS......................... $ (109,512) $ (716,300) $(1,180,785) $ (494,927) $(2,966,446)
========== ========== =========== ========== ===========
Net loss per common share, basic
and diluted.................... $ (0.08) $ (0.36) $ (0.59) $ (0.25) $ (1.47)
========== ========== =========== ========== ===========
Pro forma net loss per common
share, basic and diluted....... $ (0.40) $ (.65)
=========== ===========
Weighted average number of common
shares......................... 1,437,867 1,978,204 2,001,093 1,988,361 2,016,425
========== ========== =========== ========== ===========
Pro forma weighted average number
of common shares............... 2,950,980 4,595,535
=========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>
CELEBRATEEXPRESS.COM, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT

<TABLE>
<CAPTION>
CELEBRATEEXPRESS.COM, INC.
COMMON STOCK ACCUMULATED TOTAL
--------------------------- UNEARNED DEFICIT OF ACCUMULATED SHAREHOLDERS'
SHARES AMOUNTS COMPENSATION S CORPORATION DEFICIT DEFICIT
------------ ------------ ------------ -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, June 1, 1996..... 762,600 $ 530,630 $ -- $ (580,437) $ -- $ (49,807)
Issuance of common
stock................. 1,200,000 120,000 120,000
Exercise of stock
options............... 13,000 650 650
Net loss................ (109,512) (109,512)
--------- --------- ----------- -----------
BALANCE, May 31, 1997..... 1,975,600 651,280 (689,949) (38,669)
Exercise of stock
options............... 16,200 675 675
Unearned compensation--
Stock options......... 30,172 (30,172)
Amortization of unearned
compensation.......... 4,169 4,169
Net loss................ (716,300) (716,300)
--------- --------- --------- ----------- -----------
BALANCE, May 31, 1998..... 1,991,800 682,127 (26,003) (1,406,249) (750,125)
Exercise of stock
options............... 23,500 2,545 2,545
Unearned compensation--
Stock options......... 62,608 (62,608)
Amortization of unearned
compensation.......... 19,414 19,414
Net loss to October 15,
1998.................. (311,628) (311,628)
Conversion to C
corporation........... (736,368) 736,368
Net loss................ (869,157) (869,157)
--------- --------- --------- ----------- ----------- -----------
BALANCE, May 31, 1999..... 2,015,300 10,912 (69,197) (981,509) (869,157) (1,908,951)
Exercise of stock
options (unaudited)... 2,500 250 250
Capital contribution
(unaudited)........... 5,000
Unearned compensation--
Stock options
(unaudited)........... 458,550 (458,550)
Amortization of unearned
compensation
(unaudited)........... 75,971 75,971
Net loss (unaudited).... (2,966,446) (2,966,446)
--------- --------- --------- ----------- ----------- -----------
BALANCE, November 30,
1999 (unaudited)........ 2,017,800 $ 474,712 $(451,776) $ (981,509) $(3,835,603) $(4,794,176)
========= ========= ========= =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>
CELEBRATEEXPRESS.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED MAY 31, NOVEMBER 30,
----------------------------------- -------------------------
1997 1998 1999 1998 1999
--------- --------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss........................................... $(109,512) $(716,300) $(1,180,785) $ (494,927) $(2,966,446)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization.................... 58,562 131,283 263,061 108,455 273,931
Compensation expense--Stock options.............. 4,169 19,414 7,793 75,971
Cash provided (used) by changes in operating
assets and liabilities:
Inventories.................................... (413,287) (59,182) (655,168) (257,097) (890,882)
Accounts receivable............................ (51,254) 44,049 (9,943) (158,430) (72,498)
Prepaid expenses and other assets.............. (122,966) (46,272) (106,543) 162,249 44,849
Accounts payable............................... 566,975 78,679 917,553 21,023 (758,292)
Accrued liabilities............................ 17,391 108,111 95,941 39,100 317,893
--------- --------- ----------- ---------- -----------
Net cash used by operating activities.............. (54,091) (455,463) (656,470) (571,834) (3,975,474)
INVESTING ACTIVITIES:
Payments for purchases of fixed assets............. (274,784) (443,445) (522,603) (235,272) (1,324,034)
FINANCING ACTIVITIES:
Payments on capital lease obligations.............. (7,072) (21,741) (31,985) (15,063) (16,120)
Net borrowings on line of credit................... 90,000 (90,000) (90,000)
Borrowings of long-term debt....................... 200,000 635,716 260,639
Principal payments on long-term debt............... (166,667) (125,500) (227,958) (38,316) (57,201)
Borrowings on notes payable........................ 127,000 225,000 89,362
Principal payments on notes payable................ (148,500) (76,500) (77,167) (33,000)
Borrowings on related party notes.................. 980,983 244,199 44,017 250,000
Principal payments on related party notes.......... (316,500) (150,621) (425,182)
Issuance of mandatorily redeemable convertible
preferred stock, net of issuance costs........... 1,000,285 1,000,285 12,662,680
Issuance of common stock, net of issuance costs.... 120,650 675 2,545 2,545 250
--------- --------- ----------- ---------- -----------
Net cash provided by financing activities.......... 363,911 910,917 1,229,802 1,025,681 12,291,427
--------- --------- ----------- ---------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS............ 35,036 12,009 50,729 218,575 6,991,919
CASH AND CASH EQUIVALENTS:
Beginning of period................................ 29,257 64,293 76,302 76,302 127,031
--------- --------- ----------- ---------- -----------
End of period...................................... $ 64,293 $ 76,302 $ 127,031 $ 294,877 $ 7,118,950
========= ========= =========== ========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest........... $ 36,281 $ 75,702 $ 119,895 $ 52,742 $ 44,786
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Capital lease obligation incurred during the
year............................................. $ 38,018 $ 73,942 $ 13,166 $ -- $ --
Related party note payable exchanged for preferred
stock............................................ 780,000 780,000
Unearned compensation in connection with stock
option plan...................................... 30,172 62,608 54,241 458,550
Capital contribution from subsidiary............... 5,000
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE>
CELEBRATEEXPRESS.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED MAY 31, 1997, 1998, AND 1999, AND

SIX MONTHS ENDED NOVEMBER 30, 1998 AND 1999

NOTE 1: ORGANIZATION AND BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS: CelebrateExpress.com, Inc., formerly known as
BirthdayExpress.com, Inc. (the "Company"), a Washington corporation, offers
theme-related party supplies and services through the Company's direct marketing
efforts, websites and two retail stores located in Washington State. In January
2000, the Company changed its name to CelebrateExpress.com, Inc.

INITIAL PUBLIC OFFERING: On December 22, 1999, the Company's Board of
Directors authorized the filing of a registration statement for the initial
underwritten public offering of its common stock. Upon the closing of the
offering, the presently outstanding preferred stock will convert into common
stock.

CONSOLIDATION POLICY AND BASIS OF PRESENTATION: The consolidated financial
statements include the accounts of the Company and its now wholly-owned
subsidiaries. As the consolidated entities have been under common control from
the inception of the subsidiaries, the financial statements are presented on a
consolidated basis for all periods presented. All significant intercompany
accounts and transactions have been eliminated in consolidation.

UNCERTAINTIES AND USE OF ESTIMATES: The Company is subject to certain
business risks that could affect future operations and financial performance.
These risks include the Company's limited online operating history and limited
experience with its new product lines. As a growth-stage company, there are
risks associated with management's ability to implement its
vertically-integrated business model; attract and retain customers; design,
produce, license, source and market new products successfully; maintain its
margins in the event of price competition, or rising production or product
costs; and continue to develop and upgrade its technology.

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS: The Company considers all highly liquid
securities with a maturity of three months or less when purchased to be cash
equivalents.

INVENTORIES: Inventories are stated at the lower of weighted average cost
or market using the first-in, first-out method.

PREPAID EXPENSES: Prepaid expenses include printed marketing material
costs. These prepaid costs consist of the costs to produce, print, and
distribute. Such costs are amortized over the period in which the promotional
material is marketed to potential customers, which is generally three months.

FIXED ASSETS: Fixed assets, which include equipment, computers and
software, furniture and fixtures, and leasehold improvements, are depreciated on
a straight-line basis over their estimated useful lives, ranging from three to
five years, or the life of the lease, whichever is shorter.

LONG-LIVED ASSETS: The Company periodically reviews long-lived assets,
including identified intangible assets, for impairment to determine whether any
events or circumstances indicate that the

F-7
<PAGE>
CELEBRATEEXPRESS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1: ORGANIZATION AND BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

carrying amount of the assets may not be recoverable. Such review includes
estimating expected future cash flows generated by such assets.

REVENUE RECOGNITION: Revenue from product sales is recognized upon shipment
to the customer.

SOFTWARE DEVELOPMENT: The American Institute of Certified Public
Accountants' issued Statement of Position No. 98-1, ACCOUNTING FOR THE COSTS OF
COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE, which required the
capitalization of software developed for internal use. The Company capitalizes
the costs of new specified upgrades and enhancements to existing software, and
expenses routine maintenance expenditures as incurred.

FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying amounts for cash and cash
equivalents, accounts receivable, notes payable, long-term debt, lines of
credit, and accounts payable approximate fair value because of the recent
issuance or the short-term maturity of these instruments.

INCOME TAXES: Prior to October 1998, the Company filed income taxes as a
subchapter S corporation which resulted in income taxes being incurred directly
by the shareholders. During October 1998, the Company converted to a
C corporation, which results in income taxes being incurred by the corporation.
There were no taxes incurred as a result of conversion.

ACCUMULATED DEFICIT: The accumulated deficit of the Company prior to
October 15, 1998 (S corporation deficit) has been offset against common stock in
the consolidated financial statements. To the extent that the S corporation
deficit exceeded the balance of common stock, this amount has been separately
classified as accumulated deficit--S corporation.

UNEARNED COMPENSATION: Unearned compensation represents the unamortized
difference between the option exercise price and the fair market value of the
Company's common stock for shares subject to option at the grant date for
options issued under the Company's stock option plan. Amortization of unearned
compensation is being charged to operations and is being amortized over the
vesting period of the options.

UNAUDITED INTERIM FINANCIAL INFORMATION: The unaudited interim financial
information as of November 30, 1999, and for the six-month periods ended
November 30, 1998 and 1999, was prepared by the Company in a manner consistent
with the audited consolidated financial statements and pursuant to the rules and
requirements of the Securities and Exchange Commission. The unaudited
information, in management's opinion, reflects all adjustments that are of a
normal recurring nature and that are necessary to present fairly the results for
the periods presented. The results of operations for the six-month period ended
November 30, 1999, are not necessarily indicative of the results to be expected
for the entire year.

UNAUDITED PRO FORMA INFORMATION: The accompanying pro forma information,
which is unaudited, is presented as if the conversion of preferred stock into
common stock (Note 6) had occurred on November 30, 1999.

NEW ACCOUNTING PRONOUNCEMENTS: In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS) No.
133, ACCOUNTING FOR DERIVATIVES AND HEDGING ACTIVITIES, which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for derivatives used for
hedging

F-8
<PAGE>
CELEBRATEEXPRESS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1: ORGANIZATION AND BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

activities. It requires that all derivatives be recognized either as an asset or
liability, be measured at fair value, and that the results of such measurement
be included either in the income statement or shareholders' equity, depending on
the nature of the transaction. SFAS No. 133 is effective for the Company's year
ending May 31, 2002. The impact of the adoption of SFAS No. 133 on the Company's
financial position and results of operations has not yet been determined.

NOTE 2: FIXED ASSETS

Fixed assets consist of the following at May 31:

<TABLE>
<CAPTION>
1998 1999
--------- ----------
<S> <C> <C>
Equipment............................................. $ 445,523 $ 779,678
Computers and software................................ 338,313 461,081
Furniture and fixtures................................ 118,485 116,567
Leasehold improvements................................ 44,655 147,945
--------- ----------
946,976 1,505,271
Accumulated depreciation.............................. (244,513) (552,764)
--------- ----------
$ 702,463 $ 952,507
========= ==========
</TABLE>

Included in fixed assets are assets under capital lease obligations in the
amount of $120,796 and $133,962 and related accumulated depreciation of $24,765
and $49,089 at May 31, 1998 and 1999, respectively.

NOTE 3: INCOME TAXES

Upon inception, the Company's shareholders elected to file income taxes as a
subchapter S corporation. During October 1998, the Company's shareholders
elected to file income taxes as a C corporation. As of May 31, 1999, the
Company's deferred tax assets of $188,740 consist primarily of the tax benefit
related to federal net operating loss carryforwards since conversion to a C
corporation on October 15, 1998. Losses were incurred when the Company was an S
corporation; therefore, no carryforwards exist.

A valuation allowance in the full amount of the net deferred tax asset
balance has been established as it is uncertain that the Company will be able to
realize such tax assets in the future. At May 31, 1999, the Company has net
operating loss carryforwards in the amount of $503,105, which expire in 2014.

As a result of the anticipated completion of the Company's planned initial
public offering, the Company may incur a change in ownership as defined under
Section 382 of the Internal Revenue Code. Such change in ownership may impose
certain limitations on the utilization of the Company's net operating loss and
credit carryforwards.

F-9
<PAGE>
CELEBRATEEXPRESS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4: BORROWING ARRANGEMENTS

LINE-OF-CREDIT AGREEMENT: The Company had a line-of-credit agreement that
provided aggregate borrowings of $90,000, which expired on July 31, 1999. The
credit facility was paid in full during August 1999.

<TABLE>
<CAPTION>
1998 1999
----------- ---------
<S> <C> <C>
LONG-TERM OBLIGATIONS:
Various notes payable to majority shareholder with
interest payments ranging between 6% and 8% until
maturity ranging from September 30, 1998, to July 31,
1999; outstanding balance of notes payable converted
to preferred stock in October 1998 (Note 6)........... $ 917,983 $ --
Various unsecured notes payable to minority shareholder
with interest payments ranging from 6% to 9% until
maturity ranging from October 31, 1998, to
December 22, 1999..................................... 110,000 175,182
Unsecured notes payable with interest payments of 8%
until maturity on September 31, 1998.................. 76,500
Notes payable with principal and interest payments at
9.5% until maturity in September 2001 and
February 2003, secured by certain equipment........... 488,257
Unsecured note payable with principal and interest
payments at 8% until maturity in September 1999....... 113,333 33,333
Various capital lease obligations with imputed interest
rates ranging from 9.5% to 31.2% and maturing from
December 1999 to April 2002........................... 90,224 71,405
Less current portion.................................... (1,216,182) (367,905)
----------- ---------
$ 91,858 $ 400,272
=========== =========
</TABLE>

Interest expense on notes payable to majority and minority shareholders
totaled $8,060, $34,247, and $36,094 for the years ended May 31, 1997, 1998, and
1999, respectively.

Scheduled principal payments on long-term debt for the next four years
ending May 31 are as follows:

NOTE 5: COMMITMENTS AND CONTINGENCIES

The Company leases buildings under noncancellable operating lease agreements
with expiration dates through 2005. One such lease is renewable at the option of
the Company for a period of three years. Another such lease provides for
contingent rental increases based upon a base minimum rent plus a percent of
sales. No such percentage rent amounts were paid in fiscal years ended May 31,
1997, 1998, or 1999. Rental expense totaled $112,183, $119,868, and $184,607 in
the years ended May 31, 1997, 1998, and 1999, respectively.

F-10
<PAGE>
CELEBRATEEXPRESS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5: COMMITMENTS AND CONTINGENCIES (CONTINUED)

As of May 31, 1999, future annual minimum rental payments under
noncancellable operating lease agreements for the years ending May 31 are as
follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- --------
<S> <C> <C>
2000................................................... $ 252,578 $ 39,678
2001................................................... 284,006 27,622
2002................................................... 291,870 17,484
2003................................................... 300,454
2004................................................... 197,424
Thereafter............................................. 49,858
---------- --------
$1,376,190 84,784
==========
Less amounts representing interest..................... (13,379)
--------
Present value of capital lease obligations............. 71,405
Less current portion................................... (30,768)
--------
$ 40,637
========
</TABLE>

In July 1999 the Company entered into two agreements with an Internet
service provider, which provide for a guaranteed number of impressions over ten
months. In accordance with the agreements, the Company is required to make
payments periodically over the ten month period totalling $500,146.

On December 1, 1999, the Company entered into a long-term operating lease
for a distribution warehouse facility in Greensboro, North Carolina.

NOTE 6: PREFERRED STOCK

AUTHORIZED SHARES: On October 15, 1998, the Company amended its articles of
incorporation to authorize the issuance of 1,700,000 of preferred stock.

PREFERRED STOCK: In October 1998, the Company issued 1,500,005 shares of
Series A preferred stock in a private placement for $1,000,285 to third-party
entities and conversion of notes payable to a shareholder of $780,000, net of
issuance costs of $19,723.

CONVERSION: Each share of Series A preferred stock is convertible at any
time, at the option of the holder, into one share of common stock. Series A
preferred stock will be automatically converted into shares of common stock upon
the earlier of the closing of a public offering with an offering price of no
less than $12.00 per share and aggregate proceeds of at least $20,000,000 or
upon a vote to convert by holders of 67% of the outstanding Series A preferred
stock.

REDEMPTION: Shares may be redeemed, at the option of the holder, at any
time after September 30, 2005, at $1.20 per share plus any declared but unpaid
dividends.

LIQUIDATION: In the event of liquidation of the Company, the holders of
Series A preferred stock will be entitled to receive, prior to any distributions
to the common stock shareholders, an amount equal to $1.20 per share plus any
dividends declared but unpaid.

F-11
<PAGE>
CELEBRATEEXPRESS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6: PREFERRED STOCK (CONTINUED)

DIVIDENDS: Dividends of $0.096 per share per annum are noncumulative and
may be authorized and paid quarterly at the discretion of the Company's Board of
Directors. There were no dividends declared for the year ended May 31, 1999.

VOTING: Each share of Series A preferred stock has voting rights and powers
equivalent to one share of common stock.

On July 20, 1999, the Company amended the articles of incorporation to
authorize the Company to issue 3,150,000 shares of preferred stock and 8,349,995
shares of common stock and the Company issued 1,538,814 shares of Series B
preferred stock for total proceeds of $12,662,680, net of issuance costs of
$140,252. Series B preferred stock has the same rights and preferences as Series
A preferred stock with the following exceptions:

REDEMPTION: Shares may be redeemed, at the option of the holder, at any
time after September 30, 2005, at $8.32 per share plus any declared but unpaid
dividends.

LIQUIDATION: In the event of liquidation of the Company, the holders of
Series B preferred stock will be entitled to receive, prior to any distributions
to the common stock shareholders, an amount equal to $8.32 per share plus any
dividends declared but unpaid.

DIVIDENDS: Dividends of $0.6656 per share per annum are noncumulative and
may be authorized and paid quarterly at the discretion of the Company's Board of
Directors.

NOTE 7: LOSS PER SHARE

Basic loss per common share is computed using the weighted average number of
shares outstanding. Diluted loss per common share is computed using the weighted
average number of shares outstanding adjusted for the incremental shares
attributed to outstanding options to purchase common stock. All options to
purchase common stock were not included in the computation of diluted loss per
common share in 1997, 1998, or 1999 since the effect of assuming their exercise
would be antidilutive. Pro forma loss per share (unaudited) and pro forma
weighted average shares outstanding (unaudited) reflect the assumed conversion
of mandatorialy redeemable convertible preferred stock, as if such conversion
occurred at the original date of issuance.

NOTE 8: STOCK OPTION PLAN

During 1994, the Company adopted a Stock Option Plan (the Plan) under which
incentive or nonqualified stock options to acquire shares of the Company's
common stock may be granted to employees and non-employees of the Company. The
Plan is administered by the Board of Directors and permits the issuance of
options at an exercise price of not less than the fair market value of the
underlying shares on the date of grant. Generally, options vest at the rate of
25% on the first anniversary of the grant and 25% each successive year until
fully vested. Options granted under the Plan are exercisable over a period of
time, not to exceed ten years, designated by the Board of Directors and are
subject to other terms and conditions as determined by the Board of Directors.
Pursuant to the Plan, options may be issued to allow the 300,000 shares of
stock.

The Company measures the compensation cost of stock options in accordance
with Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, under which no recognition of expense is required in accounting for
stock options granted to employees for which the exercise price

F-12
<PAGE>
CELEBRATEEXPRESS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8: STOCK OPTION PLAN (CONTINUED)

equals or exceeds the fair value of the stock at the grant date. In those cases
where options have been granted when the option price is below fair market
value, the Company recognizes compensation expense over the vesting period.
Compensation expense of $-0-, $4,169, and $19,414 was recognized during
the years ended May 31, 1997, 1998, and 1999, respectively, for options granted
with exercise prices less than the grant date fair market value.

The fair value of each option granted during 1997, 1998, and 1999 is
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions: a four year expected life, a risk-free interest rate
of 4.3% to 5.5%, a stock price volatility of -0-%, and no dividends over the
expected life. Had compensation cost been determined using SFAS No. 123,
ACCOUNTING FOR STOCK BASED COMPENSATION, the Company's pro forma net loss for
the periods ended May 31, 1997, 1998, and 1999, would increase by $403, $781,
and $1,934, respectively.

Stock option transactions are summarized as follows:

<TABLE>
<CAPTION>
1997 1998 1999
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Number of shares under option:
Outstanding, beginning of year....... 58,900 $ -- 184,100 $ -- 198,700 $ --
Granted.............................. 149,200 0.10 60,000 0.10 94,100 0.12
Exercised............................ (13,000) 0.05 (13,500) 0.05 (26,200) 0.08
Canceled or expired.................. (11,000) 0.05 (31,900) 0.09 (31,900) 0.10
------- ----- ------- ----- ------- -----
Outstanding, end of year............... 184,100 $0.09 198,700 $0.10 234,700 $0.11
======= ===== ======= ===== ======= =====
Exercisable, end of year............... 84,336 $0.06 107,730 $0.10 74,600 $0.09
======= ===== ======= ===== ======= =====
</TABLE>

During the six months ended November 30, 1999, the Company granted options
to employees and directors at exercise prices as follows: 67,000 at an exercise
price of $0.35; 706,600 at an exercise price of $5.00; and 42,000 at an exercise
price of $9.75. Unearned compensation recorded related to such options was
$458,550. Amortization of all unearned compensation was $75,971 for the six
months ended November 30, 1999.

In July 1999, the Board of Directors adopted the 1999 Amended and Restated
Equity Incentive Plan (the 1999 Plan). A total of 1,340,000 shares of common
stock has been authorized for issuance under the 1999 Plan. When a stock award
expires or is terminated before it is exercised, the shares not acquired
pursuant to the stock award shall again become available for issuance under the
1999 Plan.

The 1999 Plan permits the grant of options to directors, officers,
employees, consultants, and advisors. Options may be either incentive stock
options (ISOs) within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, or nonstatutory stock options. The 1999 Plan permits the grant
of stock bonuses and rights to purchase restricted stock.

F-13
<PAGE>
CELEBRATEEXPRESS.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8: STOCK OPTION PLAN (CONTINUED)

Generally, stock options are granted at an amount equal to or greater than
the fair market value of the common stock at the date of grant. Stock options
expire ten years from the grant date. Additional information regarding options
outstanding as of May 31, 1999, is as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- --------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE IN YEARS PRICE EXERCISABLE PRICE
- --------------- ----------- -------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.05 to $0.10 223,800 8.3 $0.11 73,725 $0.09
0.35 10,900 9.3 0.35 875 0.35
</TABLE>

NOTE 9: SEGMENT INFORMATION

The Company markets their products to individuals in the United States and
abroad through two interdependent distribution channels (direct marketing and
the Company's electronic commerce websites) and limited retail operations. As
such, the Company's interaction with the customer provides for relatively
homogenous operations. The Company does not believe it currently has more than
one segment as defined by SFAS No. 131, DISCLOSURE ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION.

F-14
<PAGE>
INSIDE BACK COVER PAGE

Top half of page: Color photograph of a young girl in a costume looking at a
cake decorated with cake toppers and lighted candles sitting on a table top.
Next to the cake are various themed party goods, helium ballons and a chair.

Middle: Text on black background reading as follows: "Celebrate the Wonder
At Celebrate Express.com, we understand that birthdays are built one day at a
time. With over 170 party themes, we can help make your child's special day the
one they've been dreaming of. With our convenient express delivery service, you
can order the perfect theme for your child's party today and have it delivered
to your doorstep tomorrow. Visit our webiste and experience it for yourself.
It's that easy. Celebrate the wonder with Celebrate Express.com"

Bottom left corner: CelebrateExpress.com Logo on black background.

Bottom right corner: Picture of themed party goods displayed on a table with
two chairs, including a cake with cake toppers, cups, plates, utensils, napkins,
invitations, gift boxes, tablecloth, helium balloons, crayons and noisemakers.
Underneath the logo is the text, "Visit our Website at www.CelebrateExpress.com"

BACK PAGE

Center: CelebrateExpress.com Logo on white background

Lower right corner: Picture of young girl in costume looking up toward the
CelebrateExpress.com logo.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of common stock being registered. All amounts are estimates except
the SEC registration and the NASD filing fees.

<TABLE>
<S> <C>
SEC Registration fee.............................................. $ 10,560
NASD fee.......................................................... 4,500
Nasdaq National Market initial listing fee........................ 95,000
Printing and engraving............................................ 160,000
Legal fees and expenses of the Company............................ 250,000
Accounting fees and expenses...................................... 250,000
Blue sky fees and expenses........................................ 5,000
Transfer agent fees............................................... 10,000
Miscellaneous..................................................... 114,940
---------
Total............................................................. $ 900,000
=========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Sections 25B.08.500 through 23.B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). The directors and officers of the registrant also may be
indemnified against liability they may incur for serving in that capacity
pursuant to a liability insurance policy maintained by the registrant for this
purpose.

Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, knowing violations of law or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. The registrant's amended and restated articles of incorporation,
(Exhibit 3.2 hereto) contains provisions for implementing, to the fullest extent
permitted by Washington law, these limitations on a director's liability to the
registrant and its shareholders.

The registrant has entered into certain indemnification agreements with its
directors and certain of its officers, the form of which is attached as
Exhibit 10.1 to this registration statement and incorporated herein by
reference. The indemnification agreements provide the registrant's directors and
certain of its officers with indemnification to the maximum extent permitted by
the WBCA.

The underwriting agreement (Exhibit 1.1 hereto) provides for indemnification
by the underwriters of the registrant and its executive officers and directors
and by the registrant of the Underwriters, for certain liabilities, including
liabilities arising under the Securities Act, in connection with matters
specifically provided in writing by the underwriters for inclusion in this
registration statement.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

(a) During the past three years, the Registrant has issued unregistered
securities to a limited number of persons as described below:

(1) From December 1, 1996 to December 1, 1999, we granted stock options to
purchase an aggregate of 1,200,900 shares of common stock at exercise
prices ranging from $0.10 to $9.75 per share to employees, consultants,
directors and other service providers pursuant to CelebrateExpress.com's
1999 Equity Incentive Plan.

(2) In October 1998 we issued 1,500,005 shares of Series A preferred stock
at $1.20 per share to 20 accredited investors for gross proceeds to us of
$1,020,006 and conversion of notes payable to a shareholder of $780,000.

(3) In July and August 1999 we sold an aggregate of 1,538,814 shares of
Series B preferred stock at a price per share of $8.32 to 16 accredited
investors for gross proceeds to us of $12,802,932.

(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).

The issuances described in Items 15(a)(2) and (3) were deemed to be
exempt from registration under the Securities Act in reliance upon
Rule 506 of Regulation D thereunder as transactions by an issuer not
involving any public offering. The issuances described in Item 15(a)(1)
were exempt from registration pursuant to Rule 701 or Rule 506
promulgated under the Securities Act. The recipients of securities in
each such transaction represented their intentions to acquire the
securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends where
affixed to the securities issued in such transactions. All recipients had
adequate access, through their relationships with us, to information
about us.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement
3.1 Restated Articles of Incorporation, as amended
3.2 Form of Amended and Restated Articles of Incorporation to be effective on the
closing of the offering made pursuant to this Registration Statement
3.3 Bylaws of the Registrant
3.4 Bylaws of the Registrant to be effective upon the closing of the offering made
pursuant to this Registration Statement
4.1* Form of Registrant's Common Stock Certificate
4.2 Amended and Restated Investors' Rights Agreement dated July 21, 1999
5.1* Opinion of Cooley Godward LLP
10.1 Form of Indemnity Agreement to be entered into by the Registrant and each of its
directors and executive officers
10.2* 1999 Equity Incentive Plan and form of agreements thereunder
10.3* 1999 Employee Stock Purchase Plan and form of agreements thereunder
10.4* Master Security Agreement, dated August 12, 1998, by and between the Registrant and
General Electric Capital Corporation and promissory notes thereunder
10.5 Form of Individual Guaranty between Michael K. Jewell and Jan A. Jewell and General
Electric Capital Corporation, dated August 12, 1998
10.6 Lease Agreement between Registrant and Highwoods Realty Limited Partnership dated
December 1, 1999
</TABLE>

II-2
<PAGE>
<TABLE>
<S> <C>
10.7 Lease Agreement between Registrant and 405 Business Park Limited Partnership dated
December 1, 1995
10.8 Lease Agreement between Registrant and Queen Investment Company dated April 30,
1999, as amended
10.9 Form of Series A Preferred Stock Purchase Agreement, dated October 15, 1998
10.10 Form of Series B Preferred Stock Purchase Agreement, dated July 21, 1999
10.11 Form of Amended and Restated Right of First Refusal Agreement, dated July 21, 1999
10.12 Form of Amended and Restated Voting Agreement, dated July 21, 1999
10.13 Form of Promissory Note between Registrant and Michael K. Jewell
10.14 Promissory Note between Registrant and ARCH Venture Fund IV, L.P., dated June 17,
1999
21.1 List of Subsidiaries
23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.3* Consent of Counsel (see Exhibit 5.1)
24.1 Power of Attorney (see Page II-4 of the Registration Statement)
27.1 Financial Data Schedule
</TABLE>

- ---------

* To be supplied by amendment.

(B) FINANCIAL STATEMENT SCHEDULES

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
consolidated financial statements or notes thereto.

ITEM 17. UNDERTAKINGS

CelebrateExpress.com hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of
CelebrateExpress.com pursuant to the Washington Business Corporation Act, the
Amended and Restated Articles of Incorporation or the Bylaws of
CelebrateExpress.com, Indemnification Agreements entered into between
CelebrateExpress.com and its officers and directors, the Underwriting Agreement,
or otherwise, CelebrateExpress.com has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by CelebrateExpress.com of expenses incurred or paid by a director,
officer, or controlling person of CelebrateExpress.com in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered hereunder,
CelebrateExpress.com will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

CelebrateExpress.com hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by CelebrateExpress.com pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act,
CelebrateExpress.com, Inc. certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-1 and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Kirkland, King County, state of
Washington, on this 12th day of January, 2000.

<TABLE>
<S> <C> <C>
CELEBRATEEXPRESS.COM, INC.

By: /s/ MICHAEL K. JEWELL
-----------------------------------------
Michael K. Jewell
PRESIDENT AND CO-CHIEF EXECUTIVE OFFICER
</TABLE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Michael K. Jewell and Gary Halperin, his
true and lawful attorneys-in-fact each acting alone, with full power of
substitution and resubstitution, for him and in his name, place and stead in any
and all capacities to sign any or all amendments (including post-effective
amendments) to this registration statement, and any registration statement filed
pursuant to Rule 462(b) under the Securities Act in connection with the
registration under the Securities Act of equity securities of
CelebrateExpress.com, Inc. and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact, or their substitutes, each acting alone, may lawfully do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ------------------------------------ -------------------

<C> <S> <C>
/s/ MICHAEL K. JEWELL President, Co-Chief Executive
------------------------------------------- Officer and Chairman of the Board January 12, 2000
Michael K. Jewell of Directors

/s/ JAN A. JEWELL
------------------------------------------- Co-Chief Executive Officer, Chief January 12, 2000
Jan A. Jewell Creative Officer and Director

Chief Financial Officer, Vice
/s/ GARY HALPERIN President of Finance, Treasurer
------------------------------------------- and Secretary (Principal January 12, 2000
Gary Halperin Accounting and Financial Officer)

/s/ ROBERT T. NELSEN
------------------------------------------- Director January 12, 2000
Robert T. Nelsen

/s/ RONALD A. WEINSTEIN
------------------------------------------- Director January 12, 2000
Ronald A. Weinstein
</TABLE>

II-4
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
PAGE
---------------
<C> <S> <C>
1.1* Form of Underwriting Agreement
3.1 Restated Articles of Incorporation, as amended
3.2 Form of Amended and Restated Articles of Incorporation to be effective on the closing of
the offering made pursuant to this Registration Statement
3.3 Bylaws of the Registrant
3.4 Bylaws of the Registrant to be effective upon the closing of the offering made pursuant to
this Registration Statement
4.1* Form of Registrant's Common Stock Certificate
4.2 Amended and Restated Investors' Rights Agreement dated July 21, 1999
5.1* Opinion of Cooley Godward LLP
10.1 Form of Indemnity Agreement to be entered into by the Registrant and each of its directors
and executive officers
10.2* 1999 Equity Incentive Plan and form of agreements thereunder
10.3* 1999 Employee Stock Purchase Plan and form of agreements thereunder
10.4* Master Security Agreement, dated August 12, 1998, by and between the Registrant and General
Electric Capital Corporation and promissory notes thereunder
10.5 Form of Individual Guaranty between Michael K. Jewell and Jan A. Jewell and General
Electric Capital Corporation, dated August 12, 1998
10.6 Lease Agreement between Registrant and Highwoods Realty Limited Partnership dated December
1, 1999
10.7 Lease Agreement between Registrant and 405 Business Park Limited Partnership dated December
1, 1995
10.8 Lease Agreement between Registrant and Queen Investment Company dated April 30, 1999, as
amended
10.9 Form of Series A Preferred Stock Purchase Agreement, dated October 15, 1998
10.10 Form of Series B Preferred Stock Purchase Agreement, dated July 21, 1999
10.11 Form of Amended and Restated Right of First Refusal Agreement, dated July 21, 1999
10.12 Form of Amended and Restated Voting Agreement, dated July 21, 1999
10.13 Form of Promissory Note between Registrant and Michael K. Jewell
10.14 Promissory Note between Registrant and ARCH Venture Fund IV, L.P., dated June 17, 1999
21.1 List of Subsidiaries
23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.3* Consent of Counsel (see Exhibit 5.1)
24.1 Power of Attorney (see Page II-4 of the Registration Statement)
27.1 Financial Data Schedule
</TABLE>

- ---------

* To be supplied by amendment.

II-5

<PAGE>

AMENDED AND RESTATED

ARTICLES OF INCORPORATION
OF
BIRTHDAYEXPRESS.COM, INC.

ARTICLE I

The name of this corporation is BIRTHDAYEXPRESS.COM, INC. (the
"Corporation").

ARTICLE II

The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the Washington Business
Corporations Act. The Corporation shall have perpetual existence.

ARTICLE III

(A) CLASSES OF STOCK. The Corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the Corporation is authorized to issue
is Eleven Million Five Hundred Thousand (11,500,000) shares, each with a par
value of $0.001 per share. Eight Million Three Hundred Forty-Nine Thousand Nine
Hundred Ninety-Five (8,349,995) shares shall be Common Stock and Three Million
One Hundred Fifty Thousand Five (3,150,005) shares shall be Preferred Stock.

(B) RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock authorized by these Articles of Incorporation may be issued from
time to time in one or more series. The first series of Preferred Stock shall
be designated "Series A Preferred Stock" and shall consist of One Million Five
Hundred Thousand Five (1,500,005) shares. The second series of Preferred Stock
shall be designated "Series B Preferred Stock" and shall consist of One Million
Six Hundred Fifty Thousand (1,650,000) shares. The rights, preferences,
privileges, and restrictions granted to and imposed on the Series A and B
Preferred Stock are as set forth below in this Article III(B).

SECTION 1. DIVIDEND PROVISIONS. The holders of shares of Series A and
Series B Preferred Stock shall be entitled to receive dividends, out of any
assets legally available therefore, prior and in preference to any declaration
or payment of any dividend (payable other than in Common Stock or other
securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of the
Corporation) on the Common Stock of the Corporation, at the rate of $0.096 per
share per annum on each outstanding share of Series A Preferred Stock and
$0.6656 per share per annum on each outstanding share of Series B Preferred
Stock, payable quarterly when, as and if declared by the Board of Directors.
Such

<PAGE>

dividends shall not be cumulative.

SECTION 2. LIQUIDATION

(a) PREFERENCE. In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntary or involuntary, the holders
of the Series A and Series B Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets of the Corporation to
the holders of Common Stock by reason of their ownership thereof, an amount per
share equal to (i) $1.20 per share for each share of Series A Preferred Stock
then held by them and (ii) $8.32 per share for each share of Series B Preferred
Stock then held by them, plus declared but unpaid dividends, if any. If, upon
the occurrence of such event, the assets and funds thus distributed among the
holders of the Series A and B Preferred Stock shall be insufficient to permit
the payment to such holders of the full aforesaid preferential amounts, then the
entire assets and funds of the Corporation legally available for distribution
shall be distributed ratably among the holders of the Series A and B Preferred
Stock in proportion to the preferential amount each such holder is otherwise
entitled to receive.

(b) REMAINING ASSETS. Upon the completion of the distribution
required by Section 2(a) above, if assets remain in the Corporation, the holders
of the Common Stock of the Corporation shall receive all of the remaining assets
of the Corporation.

(i) DEEMED LIQUIDATION. For purposes of this Section 2,
a liquidation, dissolution or winding up of the Corporation shall be deemed to
occur if the Corporation shall sell, convey, or otherwise dispose of or encumber
all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any other transaction or series of related transactions
in which more than fifty percent (50%) of the voting power of the Corporation is
disposed of, provided that this Section 2(c)(i) shall not apply to a merger
effected solely for the purpose of changing the domicile of the Corporation.

(ii) VALUATION OF CONSIDERATION. In the event of a
deemed liquidation as described in Section 2(c)(i) above, if the consideration
received by the Corporation is other than cash, its value will be deemed its
fair market value. Any securities shall be valued as follows:

(A) Securities not subject to investment letter
or other similar restrictions on free marketability:

(1) If traded on a securities exchange or
the Nasdaq National Market, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the thirty-day period
ending three (3) days prior to the closing;

(2) If actively traded over-the-counter,
the value shall be deemed to be the average of the closing bid or sale prices
(whichever is applicable) over the thirty-day period ending three (3) days prior
to the closing; and

<PAGE>

(3) If there is no active public market,
the value shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Preferred Stock.

(B) The method of valuation of securities subject
to investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a shareholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in Section 2(c)(ii)(A) to reflect the approximate fair
market value thereof, as mutually determined by the Corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
Preferred Stock.

(iii) NOTICE OF TRANSACTION. The Corporation shall give
each holder of record of Series A Preferred Stock written notice of such
impending transaction not later than twenty (20) days prior to the shareholders'
meeting called to approve such transaction, or twenty (20) days prior to the
closing of such transaction, whichever is earlier, and shall also notify, such
holders in writing of the final approval of such transaction. The first of such
notices shall describe the material terms and conditions of the impending
transaction and the provisions of this Section 2, and the Corporation shall
thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than ten (10) days after the
Corporation has given the first notice provided for herein or sooner than ten
(10) days after the Corporation has given notice of any material changes
provided for herein; PROVIDED, HOWEVER, that such periods may be shortened upon
the written consent of the holders of Preferred Stock that are entitled to such
notice rights or similar notice rights and that represent at least a majority of
the voting power of all then outstanding shares of such Preferred Stock.

(iv) EFFECT OF NONCOMPLIANCE. In the event the
requirements of this Section 2(c) are not complied with, the Corporation shall
forthwith either cause the closing of the transaction to be postponed until such
requirements have been complied with, or cancel such transaction, in which event
the rights, preferences and privileges of the holders of the Series A Preferred
Stock shall revert to and be the same as such rights, preferences and privileges
existing immediately prior to the date of the first notice referred to in
Section 2(c)(iii) hereof.

SECTION 3. REDEMPTION

(a) Subject to the rights of series of Preferred Stock which
may from time to time come into existence, at any time after September 30, 2005,
but within thirty (30) days (the "Redemption Date") after the receipt by this
Corporation of a written request from a holder of Preferred Stock, that all or
some of such holder's shares of Preferred Stock be redeemed, and concurrently
with surrender by such holder of the certificate(s) representing such shares,
this Corporation shall, to the extent it may lawfully do so, redeem the shares
specified in such request by paying in cash therefor a sum per share equal to
$1.20 per share of Series A Preferred Stock and $8.32 per share of Series B
Preferred Stock, (each as adjusted for any stock dividends, combinations or
splits with respect to such shares) plus all declared or accumulated by unpaid
dividends on such shares (the "Redemption Price"); PROVIDED, HOWEVER, that in no
event, shall the Company be obligated to redeem any shares of such holder (or
any shares thereinafter transferred

<PAGE>

by such redeeming holder) more than once during any calendar year.

(b) Subject to the rights of series of Preferred Stock which
may from time to time come into existence, at least fifteen (15) but no more
than thirty (30) days prior to each Redemption Date, written notice shall be
mailed, first class postage prepaid, to each holder of record of the Preferred
Stock to be redeemed, at the address last shown on the records of this
Corporation for such holder, notifying such holder of the redemption to be
effected, specifying the number of shares to be redeemed from such holder of the
Redemption Date, the Redemption Price, the place at which payment may be
obtained and calling upon such holder to surrender to this Corporation, in the
manner and at the place designated, his, her, or its certificate or certificates
representing the shares to be redeemed (the "Redemption Notice"). Except as
provided in Section 3(c), on or after the Redemption Date, each holder of
Preferred Stock to be redeemed shall surrender to this Corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof an each surrendered
certificate shall be canceled. At its option the Company may elect to pay the
Redemption Price in three equal annual installments, which installments shall be
paid on the applicable Redemption Date and the first and second year
anniversaries thereof, respectively. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.

(c) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holder of
shares of Series A and B Preferred Stock designated for redemption in the
Redemption Notice as holder of Series A and B Preferred Stock (except the right
to receive the Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of this Corporation or
be deemed to be outstanding for any purpose whatsoever. Subject to the rights
of series of Preferred Stock which may from time to time come into existence, if
the funds of the Corporation legally available for redemption of shares of
Series A and B Preferred Stock on any Redemption Date are insufficient to redeem
the total number of shares of Series A and B Preferred Stock to be redeemed on
such date, those funds which are legally available will be used to redeem the
maximum possible number of such shares ratably among the holders of such shares
to be redeemed based upon the total Redemption Price applicable to the shares of
Series A and B Preferred Stock for which each holder has requested redemption on
such Redemption Date. The shares of Series A and B Preferred Stock not redeemed
shall remain outstanding and entitled to all the rights and preferences provided
herein. Subject to the rights of series of Preferred Stock which may from time
to time come into existence, at any time thereafter when additional funds of the
Corporation are legally available for the redemption of shares of Series A and B
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which the Corporation has become obliged to redeem on any Redemption
Date but which it has not redeemed.

SECTION 4. CONVERSION. The holders of the Series A and B Preferred
Stock shall have conversion rights as follows (the "Conversion Rights"):

<PAGE>

(a) RIGHT TO CONVERT. Subject to Section 4(c), each share of
Series A and B Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for such stock, into shares of fully paid
and nonassessable shares of Common Stock on a one-for-one basis.

(b) AUTOMATIC CONVERSION. Each share of Series A and B
Preferred Stock shall automatically be converted into shares of Common Stock on
a one-for-one basis, upon the earlier of (i) except as provided below in
Section 4(c), the Corporation's sale of its Common Stock in a firm commitment
underwritten public offering pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), which results in
aggregate cash proceeds to the Corporation of $20,000,000 (net of underwriting
discounts and commissions) at a public offering price of at least $12.00 per
share or (ii) the date specified by written consent or agreement of the holders
of two-thirds (66-2/3%) of the then outstanding shares of Series A and B
Preferred Stock, voting together as a single class.

(c) MECHANICS OF CONVERSION. Before any holder of Series A or
B Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he, she or it shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer agent for
such series of Preferred Stock, and shall give written notice to the Corporation
at its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of such series of Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date. If the conversion is in connection
with an underwritten offering of securities registered pursuant to the
Securities Act the conversion may, at the option of any holder tendering such
Preferred Stock for conversion, be conditioned upon the closing with the
underwriters of the sale of securities pursuant to such offering, in which event
the person(s) entitled to receive Common Stock upon conversion of such Preferred
Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities.

(d) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR SPLITS
AND COMBINATIONS. The Conversion Prices of the Series A and B Preferred Stock
shall be subject to adjustment from time to time as follows:

(i) If the Corporation shall, after the date upon which
any shares of Series A or B Preferred Stock were first issued in each case (the
"PURCHASE DATE"), fix a record date for the effectuation of a split or
subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock or other securities or rights
convertible into, or

<PAGE>

entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock (hereinafter referred to as "COMMON STOCK
EQUIVALENTS") without payment of any consideration by such holder for the
additional shares of Common Stock or the Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the
Conversion Price of each of the Series A and B Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable
on conversion of each share of such series shall be increased in proportion
to such increase of the aggregate of shares of Common Stock outstanding (with
such increase of the aggregate of shares of Common Stock outstanding with
respect to such Common Stock Equivalents determined based upon the maximum
number of shares of Common Stock issuable upon exercise of such Common Stock
Equivalents).

(ii) If the number of shares of Common Stock outstanding
at any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for each of the Series A and B Preferred Stock
shall be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.

(e) OTHER DISTRIBUTIONS. In the event the Corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights, then, in each such case for the purpose of this
Section 4(e), the holders of Series A and B Preferred Stock shall be entitled to
a proportionate share of any such distribution as though they were the holders
of the number of shares of Common Stock of the Corporation into which their
shares of Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.

(f) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or Section 2) provision shall be made so that the holders of the
Series A and B Preferred Stock shall thereafter be entitled to receive upon
conversion of such Preferred Stock the number of shares of stock or other
securities or property of the Corporation or otherwise, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of such Preferred Stock after the recapitalization to the end that
the provisions of this Section 4) shall be applicable after that event and be as
nearly equivalent as practicable.

(g) NO IMPAIRMENT. The Corporation will not, by amendment of
its Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder

<PAGE>

by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of Preferred Stock against impairment.

(h) NO FRACTIONAL SHARES. No fractional shares shall be issued
upon the conversion of any share or shares of the Series A or B Preferred Stock,
and the number of shares of Common Stock to be issued shall be rounded to the
nearest whole share. The number of shares issuable upon such conversion shall
be determined on the basis of the total number of shares of Series A and B
Preferred Stock the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.

(i) NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock, at least ten (10) days
prior to the date specified therein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.

(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A and B Preferred Stock, such number of
its shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of such series of Preferred Stock; and
if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of such series of Preferred Stock, in addition to such other remedies as shall
be available to the holder of such Preferred Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary, to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite shareholder approval of any
necessary amendment to these articles.

(k) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A or B Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his address appearing on the books of
the Corporation.

SECTION 5. VOTING RIGHTS. The holder of each share of Series A or B
Preferred Stock shall, have the right to one vote for each share of Common Stock
into which such Preferred Stock could then be converted, and with respect to
such vote, such holder shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any shareholders' meeting in
accordance with the bylaws of the Corporation, and shall be entitled to vote,
together with holders of Common

<PAGE>

Stock, with respect to any question upon which holders of Common Stock have
the right to vote. Fractional votes shall not, however, be permitted and any
fractional voting rights available on an as-converted basis (after
aggregating all shares into which shares of Series A and B Preferred Stock
held by each holder could be converted) shall be rounded to the nearest whole
number (with one-half being rounded upward).

SECTION 6. PROTECTIVE PROVISIONS. So long as at least 500,000 shares
of Preferred Stock are outstanding (as adjusted for stock splits, stock
dividends or recapitalizations), the Corporation shall not without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of at least a majority of the then outstanding shares of Series A and B
Preferred Stock, voting together as a single class:

(a) effect a transaction described in Section 2(c)(i) above;

(b) alter or change the rights, preferences or privileges of
the shares of Series A or B Preferred Stock so as to affect materially and
adversely the shares of such series;

(c) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series A or B Preferred
Stock;

(d) authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or exercisable
for any equity security, having a preference over, or being on a parity, with,
the Series A or B Preferred Stock with respect to voting, dividends, conversion
or upon liquidation;

(e) redeem, purchase or otherwise acquire (or pay into or set
funds aside for a sinking fund for such purpose) any share or shares of
Preferred Stock or Common Stock; PROVIDED, HOWEVER, that this restriction shall
not apply to the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for the Corporation
or any subsidiary pursuant to agreements under which the Corporation has the
option to repurchase such shares at cost upon the occurrence of certain events,
such as the termination of employment, or through the exercise of any right of
first refusal;

(f) change the number of directors except as may be provided
pursuant to that certain Voting Agreement entered into between the Corporation
and the parties set forth on the execution pages thereto, as may be amended from
time to time; or

(g) amend these Amended and Restated Articles of Incorporation
or the Bylaws of the Company in a manner which materially and adversely affects
the holders of the Series A and B Preferred Stock.

SECTION 7. STATUS OF CONVERTED STOCK. In the event any shares of
Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so
converted shall be canceled and shall not be issuable by the Corporation. The
Articles of Incorporation of the Corporation shall be appropriately amended to
effect the corresponding reduction in the Corporation's authorized capital
stock.

<PAGE>

SECTION 8. RESIDUAL RIGHTS. All rights accruing to the outstanding
shares of the Corporation not expressly provided for to the contrary herein
shall be vested with the Common Stock.

SECTION 1. DIVIDEND RIGHTS. Subject to the prior rights of holders of
all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.

SECTION 2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 2 of Division (B) of this Article III.

SECTION 3. REDEMPTION. The Common Stock is not redeemable.

SECTION 4. VOTING RIGHTS. The holder of each share of Common Stock
shall have the right to one vote, and shall be entitled to notice of any
shareholders' meeting in accordance with the bylaws of the Corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.

ARTICLE IV

The name of the registered agent of this Corporation and the address of
its registered office are as follows:

Corporation Service Company
1010 Union Avenue, SE, Suite B
Olympia, Washington 98501-1539

ARTICLE V

No shareholder of the Corporation shall have, solely by reason of being a
shareholder, any preemptive or preferential right or subscription right to any
stock of the Corporation or to any obligations convertible into stock of the
Corporation, or to any warrant or option for the purchase thereof, except to the
extent provided by resolution or resolutions of the Board of Directors or by
written agreement with the Corporation.

ARTICLE VI

The right to cumulate votes in the election of Directors shall not exist
with respect to shares of stock of this Corporation.

ARTICLE VII

<PAGE>

The number of Directors of this Corporation shall be determined in the
manner provided by the Bylaws and may be increased or decreased from time to
time in the manner provided therein, subject to Article III(B)(6)(f) of these
Articles of Incorporation.

ARTICLE VIII

The Board of Directors shall have the power to adopt, amend or repeal the
Bylaws of this Corporation, subject to the power of the shareholders to amend or
repeal such Bylaws. The shareholders shall also have the power to amend or
repeal the Bylaws of this Corporation and to adopt new Bylaws.

ARTICLE IX

This Corporation reserves the right to amend or repeal any of the
provisions contained in these Articles of Incorporation in any manner now or
hereafter permitted by law, and the rights of the shareholders of this
Corporation are granted subject to this reservation.

ARTICLE X

Any action which could be taken at a meeting of the shareholders may be
taken without a meeting or a vote if the action is taken by shareholders holding
of record or otherwise entitled to vote in the aggregate not less than the
minimum number of votes necessary, to authorize or take such action at a meeting
at which all shares entitled to vote on the action were present and voted. The
taking of action by shareholders without a meeting or vote must be evidenced by
one or more written consents describing the action taken, signed by shareholders
holding of record or otherwise entitled to vote in the aggregate not less than
the minimum number of votes necessary, in order to take such action by written
consent.

ARTICLE XI

To the full extent that the Washington Business Corporation Act, as it
exists on the date hereof or may hereafter be amended, permits the limitation or
elimination of the liability of Directors and Officers, a Director or Officer of
this Corporation shall not be liable to this Corporation or its shareholders for
monetary damages for conduct as a Director or Officer. Any amendments to or
repeal of this Article XI shall not adversely affect any right or protection of
a Director or Officer of this corporation for or with respect to any acts or
omissions of such Director or Officer occurring prior to such amendment or
repeal.

ARTICLE XII

This Corporation is authorized to indemnify its Directors and Officers to
the fullest extent permitted by the Washington Business Corporation Act, as it
exists on the date hereof or may hereafter be amended.

<PAGE>

Dated: July 19, 1999

BIRTHDAYEXPRESS.COM, INC.

By: /s/ Michael K. Jewell
---------------------
Its: President
---------

<PAGE>

ARTICLES OF AMENDMENT

TO THE

ARTICLES OF INCORPORATION

BIRTHDAYEXPRESS.COM, INC.

Pursuant to the provisions of RCW 23B.10 of the Washington Business
Corporation Act, BirthdayExpress.com, Inc., a Washington corporation, (the
"Corporation") hereby adopts the following amendment to its articles of
incorporation:

FIRST: Article I of the articles of incorporation, setting forth the
name of the Corporation, is amended to read in its entirety as follows:

"The name of this corporation is CelebrateExpress.com, Inc. (the
"Corporation").

SECOND: The amendment does not provide for an exchange,
reclassification or cancellation of any issued shares.

THIRD: The amendment was adopted on January 5, 2000 by the directors of
the Corporation in accordance with the provisions of RCW 23B.10.020. Shareholder
approval was not required.

FOURTH: These Articles of Amendment will become effective upon filing.

[The remainder of this page intentionally left blank.]

1.
<PAGE>

The undersigned hereby certifies that he is an officer of the
corporation and is authorized to execute these Articles of Amendment on behalf
of the Corporation.

EXECUTED this 5th day of January, 2000.

BIRTHDAYEXPRESS.COM, INC.

By: /s/ Michael K. Jewell
-----------------------------
Michael K. Jewell
President

<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CELEBRATEEXPRESS.COM, INC.

NAME

The name of this Corporation (hereinafter called the "Corporation") is
CELEBRATEEXPRESS.COM, INC.

II.

AUTHORIZED SHARES

2.1 This Corporation is authorized to issue 65,000,000 shares of stock in
the aggregate. Such shares shall be divided into two classes as follows:

(a) 60,000,000 shares of common stock ("Common Stock").

(b) 5,000,000 shares of preferred stock ("Preferred Stock"). Holders
of Common Stock are entitled to one vote per share on any matter on which
holders of Common Stock are entitled to vote. On dissolution of the
Corporation, after any preferential amount with respect to the Preferred Stock
has been paid or set aside, the holders of Common Stock and the holders of any
series of Preferred Stock entitled to participate further in the distribution of
assets are entitled to receive the net assets of the Corporation.

2.2 The Board of Directors is authorized, subject to limitations
prescribed by the Washington Business Corporation Act (the "Act") and by the
provisions of this Article II, to provide for the issuance of shares of
Preferred Stock in series, to establish from time to time the number of shares
to be included in each series and to determine the designations, relative
rights, preferences and limitations of the shares of each series. The authority
of the Board of Directors with respect to each series includes determination of
the following:

2.2.1 The number of shares in and the distinguishing designation
of that series;

2.2.2 Whether shares of that series shall have full, special,
conditional, limited or no voting rights, except to the extent otherwise
provided by the Act;

2.2.3 Whether shares of that series shall be convertible and the
terms and conditions of the conversion, including provision for adjustment
of the conversion rate in circumstances determined by the Board of
Directors;

2.2.4 Whether shares of that series shall be redeemable and the
terms and conditions of redemption, including the date or dates upon or
after which they shall be redeemable and the amount per share payable in
case of redemption, which amount may vary under different conditions or at
different redemption dates;

<PAGE>

2.2.5 The dividend rate, if any, on shares of that series, the
manner of calculating any dividends and the preference of any dividends;

2.2.6 The rights of shares of that series in the event of
voluntary or involuntary dissolution of the Corporation and the rights of
priority of that series relative to the Common Stock and any other series
of Preferred Stock on the distribution of assets on dissolution; and

2.2.7 Any other rights, preferences and limitations of that series
that are permitted by the Act.

Within any limits stated in these Articles or in the resolution of the
Board of Directors establishing a series, the Board of Directors, after the
issuance of shares of a series, may amend the resolution establishing the series
to decrease (but not below the number of shares of such series then outstanding)
the number of shares of that series, and the number of shares constituting the
decrease shall thereafter constitute authorized but undesignated shares, and the
Board of Directors may amend the rights and preferences of the shares of any
series that has been established but is wholly unissued.

The authority herein granted to the Board of Directors to determine the
relative rights and preferences of the Preferred Stock shall be limited to
unissued shares, and no power shall exist to alter or change the rights and
preferences of any shares that have been issued.

2.3 The Board of Directors shall have the authority to issue shares of the
capital stock of this Corporation and the certificates therefor subject to such
transfer restrictions and other limitations as it may deem necessary to promote
compliance with applicable federal and state securities laws, and to regulate
the transfer thereof in such manner as may be calculated to promote such
compliance or to further any other reasonable purpose.

2.4 At any time when the Corporation is subject to the reporting
requirements of Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended, special meetings of the shareholders for any purpose or
purposes may be called only by the Board of Directors or the Chairman of the
Board (if one be appointed) or the Chief Executive Officer.

III.

DIRECTORS

3.1 The number of directors of the Corporation and the manner in which
such directors are to be elected shall be as set forth in the Bylaws.

3.2 Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances, the directors shall
be divided into three classes designated as Class I, Class II and Class III,
respectively. Directors shall be assigned to each class in accordance with a
resolution or resolutions adopted by the Board of Directors. At the first
annual meeting of shareholders following the adoption and filing of these
Articles of Incorporation, the term of office of the Class I directors shall
expire and Class I directors shall be elected for a full term of three years.
At the second annual meeting of shareholders following the

2.
<PAGE>

adoption and filing of these Amended and Restated Articles of Incorporation, the
term of office of the Class II directors shall expire and Class II directors
shall be elected for a full term of three years. At the third annual meeting of
shareholders following the adoption and filing of these Amended and Restated
Articles of Incorporation, the term of office of the Class III directors shall
expire and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of shareholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting.

Notwithstanding the foregoing provisions of this section, each
director shall serve until his successor is duly elected and qualified or until
his death, resignation or removal. Neither the Board of Directors nor any
individual director may be removed without cause. Subject to any limitation
imposed by law, any individual director or directors may be removed with cause
by the holders of a majority of the voting power of the corporation entitled to
vote at an election of directors. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.

3.3 In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors shall have the power to make, adopt, amend or
repeal the Bylaws, or adopt new Bylaws for this Corporation, by a resolution
adopted by a majority of the directors.

3.4 Vacancies in the Board of Directors may be filled by a majority of
the remaining directors, though less than a quorum, or by a sole remaining
director. The shareholders may elect a director at any time to fill any
vacancy not filled by the directors.

IV.

SHAREHOLDER RIGHTS

4.1 No shareholder of this Corporation shall have, solely by reason of
being a shareholder, any preemptive or preferential right or subscription right
to any stock of this Corporation or to any obligations convertible into stock of
this Corporation, or to any warrant or option for the purchase thereof, except
to the extent provided by resolution or resolutions of the Board of Directors
establishing a series of Preferred Stock or by written agreement with this
Corporation.

4.2 In any election for directors of the Corporation, a holder of shares
of any class or series of stock then entitled to vote has the right to vote in
person or by proxy the number of shares of stock held thereby for as many
persons as there are directors to be elected. No cumulative voting for
directors shall be permitted.

4.3 The approval of any plan of merger, plan of share exchange, sale,
lease, exchange or other disposition of all, or substantially all, of the
Corporation's property otherwise than in the usual and regular course of
business, or proposal to dissolve, shall require the affirmative vote of the
holders of not less than a majority of all outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of directors of
the Corporation. At any time when the corporation is subject to the reporting
requirements of Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended, pursuant to the authority granted under RCW

3.
<PAGE>

23B.10.030, RCW 23B.11.030, RCW 23B.12.020, and RCW 23B.14.020, the vote of
shareholders of this Corporation required in order to approve amendments to the
Articles of Incorporation, a plan of merger or share exchange, the sale, lease,
exchange, or other disposition of all or substantially all of the property of
the Corporation not in the usual and regular course of business, or dissolution
of the Corporation shall be a majority of all of the votes entitled to be cast
by each voting group, regardless of whether or not the corporation is a "public
company," as that term is defined in Section 23B.01.400 of the Act.

INDEMNIFICATION AND LIABILITY OF OFFICERS AND DIRECTORS

5.1 The Corporation may indemnify, in the manner and to the full extent
permitted by law, any person (or the estate of any person) who was or is a party
to, or is threatened to be made a party to any threatened, pending or complete
action, suit or proceeding, whether or not by or in the right of the
Corporation, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise. The Corporation may, to the full extent
permitted by law, purchase and maintain insurance on behalf of any such person
against any liability which may be asserted against such person. To the full
extent permitted by law, the indemnification provided herein shall include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, and, in the manner provided by law, any such expenses may be paid by
the corporation in advance of the final disposition of such action, suit or
proceeding. The indemnification provided herein shall not be deemed to limit
the right of the Corporation to indemnify any other person for any such expenses
to the full extent permitted by law, nor shall it be deemed exclusive of any
other rights to which any person seeking indemnification from the Corporation
may be entitled under any agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.

5.2 No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for his conduct as a
director, except for (i) acts or omissions that involve intentional misconduct
or a knowing violation of law by the director, (ii) approval of distributions or
loans in violation of RCW 23B.08.310, or (iii) any transaction from which the
director will personally receive a benefit in money, property or services to
which the director is not legally entitled. If the Act is hereafter amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Act, as so
amended. Any amendment to or repeal of this Article shall not adversely affect
any right or protection of a director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal.

4.
<PAGE>

VI.

OTHER MATTERS

6.1 Except as otherwise provided in these Articles, as amended from time
to time, the Corporation reserves the right to amend, alter, change or repeal
any provisions contained in these Articles in any manner now or hereafter
prescribed or permitted by statute.

6.2 The Corporation shall have authority to correct clerical errors in any
documents filed with the Secretary of State of Washington, including these
Articles or any amendments hereto, without the necessity of special shareholder
approval of such corrections.

Dated:
------------------------

CelebrateExpress.com, Inc.

By:
--------------------------------
Its:
--------------------------------

<PAGE>

BYLAWS

BIRTHDAY EXPRESS, INC.

Originally adopted on:
Amendments are listed on page i.

<PAGE>

AMENDMENTS
DATE OF
ARTICLE EFFECT OF AMENDMENT AMENDMENT

<PAGE>

TABLE OF CONTENTS

SECTION 1 SHAREHOLDERS AND SHAREHOLDERS' MEETINGS. . . . . . . . . . . 1

1.1 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . 1

1.2 Special Meetings . . . . . . . . . . . . . . . . . . . . . . 1

1.3 Notice of Meetings . . . . . . . . . . . . . . . . . . . . . 1

1.4 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . 1

1.5 Shareholders' Action Without a Meeting . . . . . . . . . . . 2

1.6 Telephone Meetings . . . . . . . . . . . . . . . . . . . . . 2

1.7 List of Shareholders . . . . . . . . . . . . . . . . . . . . 2

1.8 Quorum and Voting. . . . . . . . . . . . . . . . . . . . . . 2

1.9 Adjourned Meetings . . . . . . . . . . . . . . . . . . . . . 3

1.10 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . 3

SECTION 2 BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . 3

2.1 Number and Qualification . . . . . . . . . . . . . . . . . . 3

2.2 Election--Term of Office . . . . . . . . . . . . . . . . . . 3

2.3 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . 3

2.4 Quorum and Voting. . . . . . . . . . . . . . . . . . . . . . 4

2.5 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . 4

<PAGE>

2.6 Special Meetings . . . . . . . . . . . . . . . . . . . . . . 4

2.7 Notice of Meetings . . . . . . . . . . . . . . . . . . . . . 4

2.8 Directors' Action Without A Meeting. . . . . . . . . . . . . 5

2.9 Committees of the Board of Directors . . . . . . . . . . . . 5

2.10 Telephone Meetings . . . . . . . . . . . . . . . . . . . . . 5

2.11 Compensation of Directors. . . . . . . . . . . . . . . . . . 5

SECTION 3 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3.1 Officers Enumerated--Election. . . . . . . . . . . . . . . . 6

3.2 Qualifications . . . . . . . . . . . . . . . . . . . . . . . 6

3.3 Duties of the Officers . . . . . . . . . . . . . . . . . . . 6

3.4 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.5 Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.6 Compensation . . . . . . . . . . . . . . . . . . . . . . . . 7

SECTION 4 SHARES AND CERTIFICATES OF SHARES. . . . . . . . . . . . . . 7

4.1 Share Certificates . . . . . . . . . . . . . . . . . . . . . 7

4.2 Consideration for Shares . . . . . . . . . . . . . . . . . . 8

4.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . 8

<PAGE>

4.4 Loss or Destruction of Certificates. . . . . . . . . . . . . 8

4.5 Fixing Record Date . . . . . . . . . . . . . . . . . . . . . 8

SECTION 5 BOOKS, RECORDS AND REPORTS . . . . . . . . . . . . . . . . . .9

5.1 Records of Corporate Meetings, Accounting Records and
Share Registers. . . . . . . . . . . . . . . . . . . . . . . 9

5.2 Copies of Corporate Records. . . . . . . . . . . . . . . . . 9

5.3 Examination of Records . . . . . . . . . . . . . . . . . . . 9

5.4 Financial Statements . . . . . . . . . . . . . . . . . . . 10

SECTION 6 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . . .10

SECTION 7 CORPORATE SEAL . . . . . . . . . . . . . . . . . . . . . . .10

SECTION 8 MISCELLANEOUS PROCEDURAL PROVISIONS. . . . . . . . . . . . .10

SECTION 9 AMENDMENT OF BYLAWS. . . . . . . . . . . . . . . . . . . . .11

SECTION 10 INDEMNIFICATION OF DIRECTORS AND OTHERS. . . . . . . . . . .11

10.1 Grant of Indemnification . . . . . . . . . . . . . . . . . .11

10.2 Limitations on Indemnification . . . . . . . . . . . . . . .11

10.3 Advancement of Expenses. . . . . . . . . . . . . . . . . . .11

10.4 Right to Enforce Indemnification . . . . . . . . . . . . . .12

10.5 Nonexclusivity . . . . . . . . . . . . . . . . . . . . . . .12

<PAGE>

10.6 Indemnification of Officers, Employees and Agents. . . . . .12

10.7 Insurance and Other Security . . . . . . . . . . . . . . . .13

10.8 Amendment or Modification. . . . . . . . . . . . . . . . . .13

10.9 Effect of Section. . . . . . . . . . . . . . . . . . . . . .13

SECTION 11 REPRESENTATION OF SHARES OF OTHER CORPORATIONS . . . . . . .13

SECTION 12 CONTRACTS, LOANS, CHECKS, DEPOSITS . . . . . . . . . . . . .13

12.1 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . .13

12.2 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . .14

12.3 Checks, Drafts, Etc. . . . . . . . . . . . . . . . . . . . .14

12.4 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . .14

12.5 Contracts with or Loans to Directors and Officers. . . . . .14
</TABLE>

<PAGE>

BYLAWS

BIRTHDAY EXPRESS, INC.

SECTION 1

SHAREHOLDERS AND SHAREHOLDERS' MEETINGS

1.1 ANNUAL MEETING. The annual meeting of the shareholders of this
corporation (the "Corporation") for the election of directors and for the
transaction of such other business as may properly come before the meeting shall
be held each year at the principal office of the Corporation, or at some other
place either within or without the State of Washington as designated by the
Board of Directors, on the day and at the time specified in Exhibit A, which is
attached hereto and incorporated herein by this reference or on such other day
and time as may be set by the Board of Directors. If the specified day is a
Sunday or a legal holiday, then the meeting will take place on the next business
day at the same time or on such other day and time as may be set by the Board of
Directors.

1.2 SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes may be called at any time by the Board of Directors, the
Chairman of the Board, the President, a majority of the Board of Directors, or
any shareholder or shareholders holding in the aggregate one-fourth of the
voting power of all shareholders. The meetings shall be held at such time and
place as the Board of Directors may prescribe, or, if not held upon the request
of the Board of Directors, at such time and place as may be established by the
President or by the Secretary in the President's absence. Only business within
the purpose or purposes described in the meeting notice may be conducted.

1.3 NOTICE OF MEETINGS. Written notice of the place, date and time of
the annual shareholders' meeting and written notice of the place, date, time and
purpose or purposes of special shareholders' meetings shall be delivered not
less than 10 (or, if required by Washington law, 20) or more than 60 days before
the date of the meeting, either personally, by facsimile, or by mail, or in any
other manner approved by law, by or at the direction of the President or the
Secretary, to each shareholder of record entitled to notice of such meeting.
Mailed notices shall be deemed to be delivered when deposited in the mail,
first-class postage prepaid, correctly addressed to the shareholder's address
shown in the Corporation's current record of shareholders.

1.4 WAIVER OF NOTICE. Except where expressly prohibited by law or the
Articles of Incorporation, notice of the place, date, time and purpose or
purposes of any

<PAGE>

shareholders' meeting may be waived in a signed writing delivered to the
Corporation by any shareholder at any time, either before or after the meeting.
Attendance at the meeting in person or by proxy waives objection to lack of
notice or defective notice of the meeting unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting. A shareholder waives objection to consideration of a
particular matter at a meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to considering
the matter when it is presented.

1.5 SHAREHOLDERS' ACTION WITHOUT A MEETING. The shareholders may take
any action without a meeting that they could properly take at a meeting, if one
or more written consents setting forth the action so taken are signed by all of
the shareholders entitled to vote with respect to the subject matter and are
delivered to the Corporation for inclusion in the minutes or filing with the
corporate records. If required by Washington law, all nonvoting shareholders
must be given written notice of the proposed action at least ten days before the
action is taken, unless such notice is waived in a manner consistent with these
Bylaws. Actions taken under this section are effective when all consents are in
the possession of the Corporation, unless otherwise specified in the consent. A
shareholder may withdraw consent only by delivering a written notice of
withdrawal to the Corporation prior to the time that all consents are in the
possession of the Corporation.

1.6 TELEPHONE MEETINGS. Shareholders may participate in a meeting of
shareholders by means of a conference telephone or any similar communications
equipment that enables all persons participating in the meeting to hear each
other during the meeting. Participation by such means shall constitute presence
in person at a meeting.

1.7 LIST OF SHAREHOLDERS. At least ten days before any shareholders'
meeting, the Secretary of the Corporation or the agent having charge of the
stock transfer books of the Corporation shall have compiled a complete list of
the shareholders entitled to notice of a shareholders' meeting, arranged in
alphabetical order and by voting group, with the address of each shareholder and
the number, class, and series, if any, of shares owned by each.

1.8 QUORUM AND VOTING. The presence in person or by proxy of the
holders of a majority of the votes entitled to be cast on a matter at a meeting
shall constitute a quorum of shareholders for that matter. If a quorum exists,
action on a matter shall be approved by a voting group if the votes cast within
a voting group favoring the action exceed the votes cast within the voting group
opposing the action, unless a greater number of affirmative votes is required by
the Articles of Incorporation or by law. If the Articles of Incorporation or
Washington law provide for voting by two or more voting groups on a matter,
action on a matter is taken only when voted upon by each of those voting groups

<PAGE>

counted separately. Action may be taken by one voting group on a matter even
though no action is taken by another voting group. The shareholders present at
a duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.

1.9 ADJOURNED MEETINGS. If a shareholders' meeting is adjourned to a
different place, date or time, whether for failure to achieve a quorum or
otherwise, notice need not be given of the new place, date or time if the new
place, date or time is announced at the meeting before adjournment. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in these Bylaws, that determination shall apply to any
adjournment thereof, unless Washington law requires fixing a new record date.
If Washington law requires that a new record date be set for the adjourned
meeting, notice of the adjourned meeting must be given to shareholders as of the
new record date. Any business may be transacted at an adjourned meeting that
could have been transacted at the meeting as originally called.

1.10 PROXIES. A shareholder may appoint a proxy to vote or otherwise
act for the shareholder by signing an appointment form, either personally or by
an agent. No appointment shall be valid after 11 months from the date of its
execution unless the appointment form expressly so provides. An appointment of
a proxy is revocable unless the appointment is coupled with an interest. No
revocation shall be effective until written notice thereof has actually been
received by the Secretary of the Corporation or any other person authorized to
tabulate votes.

SECTION 2

BOARD OF DIRECTORS

2.1 NUMBER AND QUALIFICATION. The business affairs and property of
the Corporation shall be managed under the direction of a Board of Directors,
the number of members of which is set forth in Exhibit A. The Board of
Directors may increase or decrease this number by resolution. A decrease in the
number of directors shall not shorten the term of an incumbent director.

2.2 ELECTION--TERM OF OFFICE. The directors shall be elected by the
shareholders at each annual shareholders' meeting or at a special shareholders'
meeting called for such purpose. Despite the expiration of a director's term,
the director continues to serve until his or her successor is elected and
qualified or until there is a decrease in the authorized number of directors.

2.3 VACANCIES. Except as otherwise provided by law, vacancies in the
Board of Directors, whether caused by resignation, death, retirement,
disqualification, removal,

<PAGE>

increase in the number of directors, or otherwise, may be filled for the
remainder of the term by the Board of Directors, by the shareholders, or, if
the directors in office constitute less than a quorum of the Board of
Directors, by an affirmative vote of a majority of the remaining directors.
The term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected. A vacancy that will
occur at a specific later date may be filled before the vacancy occurs, but the
new director may not take office until the vacancy occurs.

2.4 QUORUM AND VOTING. At any meeting of the Board of Directors, the
presence in person (including presence by electronic means such as a telephone
conference call) of a majority of the number of directors presently in office
shall constitute a quorum for the transaction of business. Notwithstanding the
foregoing, in no case shall a quorum be less than one-third of the authorized
number of directors. If a quorum is present at the time of a vote, the
affirmative vote of a majority of the directors present at the time of the vote
shall be the act of the Board of Directors and of the Corporation except as may
be otherwise specifically provided by the Articles of Incorporation, by these
Bylaws, or by law. A director who is present at a meeting of the Board of
Directors when action is taken is deemed to have assented to the action taken
unless: (a) the director objects at the beginning of the meeting, or promptly
upon his or her arrival, to holding it or to transacting business at the
meeting; (b) the director's dissent or abstention from the action taken is
entered in the minutes of the meeting; or (c) the director delivers written
notice of his or her dissent or abstention to the presiding officer of the
meeting before its adjournment or to the Corporation within a reasonable time
after adjournment of the meeting. The right of dissent or abstention is not
available to a director who votes in favor of the action taken.

2.5 REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such place, date and time as shall from time to time be fixed
by resolution of the Board.

2.6 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be held at any place and at any time and may be called by the Chairman of the
Board, the President, Vice President, Secretary or Treasurer, or any two or more
directors.

2.7 NOTICE OF MEETINGS. Unless the Articles of Incorporation provide
otherwise, any regular meeting of the Board of Directors may be held without
notice of the date, time, place, or purpose of the meeting. Any special meeting
of the Board of Directors must be preceded by at least two days' notice of the
date, time, and place of the meeting, but not of its purpose, unless the
Articles of Incorporation or these Bylaws require otherwise. Notice may be
given personally, by facsimile, by mail, or in any other manner allowed by law.
Oral notice shall be sufficient only if a written record of such notice is
included in the Corporation's minute book. Notice shall be deemed effective at
the earliest of: (a)

<PAGE>

receipt; (b) delivery to the proper address or telephone number of the director
as shown in the Corporation's records; or (c) five days after its deposit in
the United States mail, as evidenced by the postmark, if correctly addressed
and mailed with first-class postage prepaid. Notice of any meeting of the
Board of Directors may be waived by any director at any time, by a signed
writing, delivered to the Corporation for inclusion in the minutes, either
before or after the meeting. Attendance or participation by a director at a
meeting shall constitute a waiver of any required notice of the meeting unless
the director promptly objects to holding the meeting or to the transaction of
any business on the grounds that the meeting was not lawfully convened and the
director does not thereafter vote for or assent to action taken at the meeting.

2.8 DIRECTORS' ACTION WITHOUT A MEETING. The Board of Directors or a
committee thereof may take any action without a meeting that it could properly
take at a meeting if one or more written consents setting forth the action are
signed by all of the directors, or all of the members of the committee, as the
case may be, either before or after the action is taken, and if the consents are
delivered to the Corporation for inclusion in the minutes or filing with the
corporate records. Such action shall be effective upon the signing of a consent
by the last director to sign, unless the consent specifies a later effective
date.

2.9 COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors, by
resolutions adopted by a majority of the members of the Board of Directors in
office, may create from among its members one or more committees and shall
appoint the members thereof. Each such committee must have two or more members,
who shall be directors and who shall serve at the pleasure of the Board of
Directors. Each committee of the Board of Directors may exercise the authority
of the Board of Directors to the extent provided in its enabling resolution and
any pertinent subsequent resolutions adopted in like manner, provided that the
authority of each such committee shall be subject to applicable. law. Each
committee of the Board of Directors shall keep regular minutes of its
proceedings and shall report to the Board of Directors when requested to do so.

2.10 TELEPHONE MEETINGS. Members of the Board of Directors or of any
committee appointed by the Board of Directors may participate in a meeting of
the Board of Directors or committee by means of a conference telephone or
similar communications equipment that enables all persons participating in the
meeting to hear each other during the meeting. Participation by such means
shall constitute presence in person at a meeting.

2.11 COMPENSATION OF DIRECTORS. The Board of Directors may fix the
compensation of directors as such and may authorize the reimbursement of their
expenses.

SECTION 3

OFFICERS

<PAGE>

3.1 OFFICERS ENUMERATED--ELECTION. The officers of the Corporation
shall consist of such officers and assistant officers as may be designated by
resolution of the Board of Directors. The officers may include a Chairman of
the Board, a President, one or more Vice Presidents, a Secretary, a Treasurer,
and any assistant officers. The officers shall hold office at the pleasure of
the Board of Directors. Unless otherwise restricted by the Board of Directors,
the President may appoint any assistant officer, the Secretary may appoint one
or more Assistant Secretaries, and the Treasurer may appoint one or more
Assistant Treasurers; provided that any such appointments shall be recorded in
writing in the corporate records.

3.2 QUALIFICATIONS. None of the officers of the Corporation need be a
director. Any two or more corporate offices may be held by the same person.

3.3 DUTIES OF THE OFFICERS. Unless otherwise prescribed by the Board
of Directors, the duties of the officers shall be as follows:

CHAIRMAN OF THE BOARD. The Chairman of the Board, if one is
elected, shall preside at meetings of the Board of Directors and of the
shareholders, shall be responsible for carrying out the plans and directives of
the Board of Directors, shall report to and consult with the Board of Directors
and, if the Board so resolves, shall be the Chief Executive Officer. The
Chairman of the Board shall have such other powers and duties as the Board of
Directors may from time to time prescribe.

PRESIDENT. The President shall exercise the usual executive
powers pertaining to the office of President. In the absence of a Chairman of
the Board, the President shall preside at meetings of the Board of Directors and
of the shareholders, perform the other duties of the Chairman of the Board
prescribed in this Section, and perform such other duties as the Board of
Directors may from time to time designate. In addition, if there is no
Secretary in office, the President shall perform the duties of the Secretary.

VICE PRESIDENT. Each Vice President shall perform such duties as
the Board of Directors may from time to time designate. In addition, the Vice
President, or if there is more than one, the most senior Vice President
available, shall act as President in the absence or disability of the President.

SECRETARY. The Secretary shall be responsible for and shall keep,
personally or with the assistance of others, records of the proceedings of the
directors and shareholders; authenticate records of the Corporation; attest all
certificates of stock in the name of the Corporation; keep the corporate seal,
if any, and affix the same to certificates of stock and other proper documents;
keep a record of the issuance of certificates of stock and the transfers of the
same; and perform such other duties as the Board of Directors

<PAGE>

may from time to time designate.

TREASURER. The Treasurer shall have the care and custody of, and
be responsible for, all funds and securities of the Corporation and shall cause
to be kept regular books of account. The Treasurer shall cause to be deposited
all funds and other valuable effects in the name of the Corporation in such
depositories as may be designated by the Board of Directors. In general, the
Treasurer shall perform all of the duties incident to the office of Treasurer,
and such other duties as from time to time may be assigned by the Board of
Directors.

ASSISTANT OFFICERS. Assistant officers may consist of one or more
Assistant Vice Presidents, one or more Assistant Secretaries, and one or more
Assistant Treasurers. Each assistant officer shall perform those duties
assigned to him or her from time to time by the Board of Directors, the
President, or the officer who appointed him or her.

3.4 VACANCIES. Vacancies in any office arising from any cause may be
filled by the Board of Directors at any regular or special meeting.

3.5 REMOVAL. Any officer or agent may be removed by action of the
Board of Directors with or without cause, but any removal shall be without
prejudice to the contract rights, if any, of the person removed. Election or
appointment of an officer or agent shall not of itself create any contract
rights.

3.6 COMPENSATION. The compensation of all officers of the Corporation
shall be fixed by the Board of Directors.

SECTION 4

SHARES AND CERTIFICATES OF SHARES

4.1 SHARE CERTIFICATES. Share certificates shall be issued in
numerical order, and each shareholder shall be entitled to a certificate signed
by the President or a Vice President, and attested by the Secretary or an
Assistant Secretary. Share certificates may be sealed with the corporate seal,
if any. Facsimiles of the signatures and seal may be used as permitted by law.
Every share certificate shall state:

(a) the name of the Corporation;

(b) that the Corporation is organized under the laws of the
State of Washington;

(d) the number, class and series (if any) of shares that the
certificate represents;

<PAGE>

and

(e) if the Corporation is authorized to issue shares of more
than one class or series, that upon written request and without charge, the
Corporation will furnish any shareholder with a full statement of the
designations, preferences, limitations and relative rights of the shares of each
class or series, and the authority of the Board of Directors to determine
variations for future series.

4.2 CONSIDERATION FOR SHARES. Shares of the Corporation may be issued
for such consideration as shall be determined by the Board of Directors to be
adequate. The consideration for the issuance of shares may be paid in whole or
in part in cash, or in any tangible or intangible property or benefit to the
Corporation, including but not limited to promissory notes, services performed,
contracts for services to be performed, or other securities of the Corporation.
Establishment by the Board of Directors of the amount of consideration received
or to be received for shares of the Corporation shall be deemed to be a
determination that the consideration so established is adequate.

4.3 TRANSFERS. Shares may be transferred by delivery of the
certificate, accompanied either by an assignment in writing on the back of the
certificate, or by a written power of attorney to sell, assign and transfer the
same, signed by the record holder of the certificate. Except as otherwise
specifically provided in these Bylaws, no shares of stock shall be transferred
on the books of the Corporation until the outstanding certificate therefor has
been surrendered to the Corporation.

4.4 LOSS OR DESTRUCTION OF CERTIFICATES. In the event of the loss or
destruction of any certificate, a new certificate may be issued in lieu thereof
upon satisfactory proof of such loss or destruction, and upon the giving of
security against loss to the Corporation by bond, indemnity or otherwise, to the
extent deemed necessary by the Board of Directors, the Secretary, or the
Treasurer.

4.5 FIXING RECORD DATE. The Board of Directors may fix in advance a
date as the record date for determining shareholders entitled: (i) to notice of
or to vote at any shareholders' meeting or any adjournment thereof; (ii) to
receive payment of any share dividend; or (iii) to receive payment of any
distribution. The Board of Directors may in addition fix record dates with
respect to any allotment of rights or conversion or exchange of any securities
by their terms, or for any other proper purpose, as determined by the Board of
Directors and by law. The record date shall be not more than 70 days and, in
case of a meeting of shareholders, not less than 10 days (or such longer period
as may be required by Washington law) prior to the date on which the particular
action requiring determination of shareholders is to be taken. If no record
date is fixed for determining the shareholders entitled to notice of or to vote
at a meeting of shareholders, the record date shall be the date before the day
on which notice of the meeting is mailed. If no record

<PAGE>

date is fixed for the determination of shareholders entitled to a distribution
(other than one involving a purchase, redemption, or other acquisition of the
Corporation's own shares), the record date shall be the date on which the Board
adopted the resolution declaring the distribution. If no record date is fixed
for determining shareholders entitled to a share dividend, the record date
shall be the date on which the Board of Directors authorized the dividend.

SECTION 5

BOOKS, RECORDS AND REPORTS

5.1 RECORDS OF CORPORATE MEETINGS, ACCOUNTING RECORDS AND SHARE
REGISTERS. The Corporation shall keep, as permanent records, minutes of all
meetings of the Board of Directors and shareholders, and all actions taken
without a meeting, and all actions taken by a committee exercising the authority
of the Board of Directors. The Corporation or its agent shall maintain, in a
form that permits preparation of a list, a list of the names and addresses of
its shareholders, in alphabetical order by class of shares, and the number,
class, and series, if any, of shares held by each. The Corporation shall also
maintain appropriate accounting records, and at its principal place of business
shall keep copies of: (a) its Articles of Incorporation or restated Articles of
Incorporation and all amendments in effect; (b) its Bylaws or restated Bylaws
and all amendments in effect; (c) minutes of all shareholders' meetings and
records of all actions taken without meetings for the past three years; (d) the
year-end balance sheets and income statements for the past three fiscal years,
prepared as required by Washington law; (e) all written communications to
shareholders generally in the past three years; (f) a list of the names and
business addresses of its current officers and directors; and (g) its most
recent annual report to the Secretary of State.

5.2 COPIES OF CORPORATE RECORDS. Any person dealing with the
Corporation may rely upon a copy of any of the records of the proceedings,
resolutions, or votes of the Board of Directors or shareholders, when certified
by the Chairman of the Board, President, Vice President, Secretary or Assistant
Secretary.

5.3 EXAMINATION OF RECORDS. A shareholder shall have the right to
inspect and copy, during regular business hours at the principal office of the
Corporation, in person or by his or her attorney or agent, the corporate records
referred to in the last sentence of Section 5.1 of these Bylaws if the
shareholder gives the Corporation written notice of the demand at least five
business days before the date on which the shareholder wishes to make such
inspection. In addition, if a shareholder's demand is made in good faith and
for a proper purpose, a shareholder may inspect and copy, during regular
business hours at a reasonable location specified by the Corporation, excerpts
from minutes of any

<PAGE>

meeting of the Board of Directors, records of any action of a committee of the
Board of Directors, records of actions taken by the Board of Directors without
a meeting, minutes of shareholders' meetings held or records of action taken by
shareholders without a meeting not within the past three years, accounting
records of the Corporation, or the record of shareholders; provided that the
shareholder shall have made a demand describing with reasonable particularity
the shareholder's purpose and the records the shareholder desires to inspect,
and provided further that the records are directly connected to the
shareholder's purpose. This section shall not affect any right of shareholders
to inspect records of the Corporation that may be otherwise granted to the
shareholders by law.

5.4 FINANCIAL STATEMENTS. Not later than four months after the end of
each fiscal year, or in any event prior to its annual meeting of shareholders,
the Corporation shall prepare a balance sheet and income statement in accordance
with Washington law. The Corporation shall furnish a copy of each to any
shareholder upon written request.

SECTION 6

FISCAL YEAR

The fiscal year of the Corporation shall be as set forth in Exhibit A.

SECTION 7

CORPORATE SEAL

The corporate seal of the Corporation, if any, shall be in the form shown
on Exhibit A.

SECTION 8

MISCELLANEOUS PROCEDURAL PROVISIONS

The Board of Directors may adopt rules of procedure to govern any
meetings of shareholders or directors to the extent not inconsistent with law,
the Corporation's Articles of Incorporation, or these Bylaws, as they are in
effect from time to time. In the absence of any rules of procedure adopted by
the Board of Directors, the chairman of the meeting shall make all decisions
regarding the procedures for any meeting.

SECTION 9

AMENDMENT OF BYLAWS

<PAGE>

The Board of Directors is expressly authorized to make, alter and
repeal the Bylaws of the Corporation, subject to the power of the
shareholders of the Corporation to change or repeal the Bylaws.

SECTION 10

INDEMNIFICATION OF DIRECTORS AND OTHERS

10.1 GRANT OF INDEMNIFICATION. Subject to Section 10.2, each person
who was or is made a party or is threatened to be made a party to or is
involved (including, without limitation, as a witness) in any threatened,
pending, or completed action, suit or proceeding, whether formal or informal,
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she is or was a director of the Corporation
or who, while a director of the Corporation, is or was serving at the request
of the Corporation as a director, officer, employee or agent of this or
another Corporation or of a partnership, joint venture, trust, other
enterprise, or employee benefit plan, whether the basis of such proceeding is
alleged action in an official capacity as a director or in any other capacity
while serving as a director, officer, employee or agent, shall be indemnified
and held harmless by the Corporation to the fullest extent permitted by
applicable law, as then in effect, against all expense, liability and loss
(including attorneys' fees, costs, judgments, fines, ERISA excise taxes or
penalties and amounts to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, and such indemnification
shall continue as to a person who has ceased to be a director and shall inure
to the benefit of his or her heirs, executors and administrators.

10.2 LIMITATIONS ON INDEMNIFICATION. Notwithstanding Section 10.1, no
indemnification shall be provided hereunder to any such person to the extent
that such indemnification would be prohibited by the Washington Business
Corporation Act or other applicable law as then in effect, nor, except as
provided in Section 10.4 with respect to proceedings seeking to enforce rights
to indemnification, shall the Corporation indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person except where such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation.

10.3 ADVANCEMENT OF EXPENSES. The right to indemnification conferred
in this section shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of its final
disposition, except where the Board of Directors shall have adopted a resolution
expressly disapproving such advancement of expenses.

10.4 RIGHT TO ENFORCE INDEMNIFICATION. If a claim under Section 10.1
is not paid in full by the Corporation within 60 days after a written claim has
been received by the

<PAGE>

Corporation, or if a claim for expenses incurred in defending a proceeding in
advance of its final disposition authorized under Section 10.3 is not paid
within 20 days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, to the extent successful in whole
or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. The claimant shall be presumed to be entitled to
indemnification hereunder upon submission of a written claim (and, in an
action brought to enforce a claim for expenses incurred in defending. any
proceeding in advance of its final disposition, where the required
undertaking has been tendered to the Corporation), and thereafter the
Corporation shall have the burden of proof to overcome the presumption that
the claimant is so entitled. It shall be a defense to any such action (other
than an action with respect to expenses authorized under Section 10. 3) that
the claimant has not met the standards of conduct which make it permissible
hereunder or under the Washington Business Corporation Act for the
Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of
the Corporation (including its Board of Directors, independent legal counsel,
or its shareholders) to have made a determination prior to the commencement
of such action that indemnification of or reimbursement or advancement of
expenses to the claimant is proper in the circumstances because he or she has
met the applicable standard of conduct set forth herein or in the Washington
Business corporation Act nor (except as provided in Section 10.3) an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel, or its shareholders) that the claimant is not
entitled to indemnification or to the reimbursement or advancement of
expenses shall be a defense to the action or create a presumption that the
claimant is not so entitled.

10.5 NONEXCLUSIVITY. The right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its final disposition
conferred in this section shall be valid to the extent consistent with
Washington law.

10.6 INDEMNIFICATION OF OFFICERS, EMPLOYEES AND AGENTS. The
Corporation may, by action of its Board of Directors from time to time, provide
indemnification and pay expenses in advance of the final disposition of a
proceeding to officers, employees and agents of the Corporation on the same
terms and with the same scope and effect as the provisions of this section with
respect to the indemnification and advancement of expenses of directors and
officers of the Corporation or pursuant to rights granted pursuant to, or
provided by, the Washington Business Corporation Act or on such other terms as
the Board may deem proper.

10.7 INSURANCE AND OTHER SECURITY. The Corporation may maintain
insurance, at its expense, to protect itself and any individual who is or was a
director, officer, employee or

<PAGE>

agent of the Corporation or another Corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against or incurred
by the individual in that capacity or arising from his or her status as an
officer, director, agent, or employee, whether or not the Corporation would
have the power to indemnify such person against the same liability under the
Washington Business Corporation Act. The Corporation may enter into
contracts with any director or officer of the Corporation in furtherance of
the provisions of this section and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of
credit) to ensure the payment of such amounts as may be necessary to effect
indemnification as provided in this section.

10.8 AMENDMENT OR MODIFICATION. This section may be altered or amended
at any time as provided in these Bylaws, but no such amendment shall have the
effect of diminishing the rights of any person who is or was an officer or
director as to any acts or omissions taken or omitted to be taken prior to the
effective date of such amendment.

10.9 EFFECT OF SECTION. The rights conferred by this section shall be
deemed to be contract rights between the Corporation and each person who is or
was a director or officer. The Corporation expressly intends each such person
to rely on the rights conferred hereby in performing his or her respective
duties on behalf of the Corporation.

SECTION 11

REPRESENTATION OF SHARES OF OTHER CORPORATIONS

Unless otherwise restricted by the Board of Directors, the Chairman,
President, and any Vice President of the Corporation are each authorized to
vote, represent and exercise on behalf of the Corporation all rights incident to
any and all shares of other corporations standing in the name of the
Corporation. This authority may be exercised by such officers either in person
or by a duly executed proxy or power of attorney.

SECTION 12

CONTRACTS, LOANS, CHECKS, DEPOSITS

12.1 CONTRACTS. The Board may authorize any officer or officers, agent
or agents, to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the corporation, and that authority may be general
or confined to specific instances.

12.2 LOANS. No loans shall be contracted on behalf of the corporation
and no evidence of indebtedness shall be issued in its name unless authorized by
a resolution of the Board. That authority may be general or confined to
specific instances.

<PAGE>

12.3 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation shall be signed by the officer or officers, or agent or agents,
of the corporation and in the manner as shall from time to time be prescribed by
resolution of the Board.

12.4 DEPOSITS. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in the
banks, trust companies or other depositories as the Board may select.

12.5 CONTRACTS WITH OR LOANS TO DIRECTORS AND OFFICERS. The
corporation may enter into contracts and otherwise transact business as
vendor, purchaser, or otherwise, with its directors, officers, and
shareholders and with corporations, associations, firms, and entities in
which they are or may become interested as directors, officers, shareholders,
members, or otherwise, as freely as though such interest did not exist,
except that no loan shall be made by the corporation to its officers or
directors unless first approved by the holders of two-thirds of the voting
shares and no loans shall be made by the corporation secured by its shares.
In the absence of fraud the fact that any director, officer, shareholder, or
any corporation, association, firm or other entity of which any director,
officer or shareholder is interested, is in any way interested in any
transaction or contract shall not make the transaction or contract void or
voidable, or require the director, officer, or shareholder to account to this
corporation for any profits therefrom if the transaction or contract is or
shall be authorized, ratified, or approved by (a) vote of a majority of a
quorum of the Board excluding any interested director or directors, (b) the
written consent of the holders of a majority of the shares entitled to vote,
or (c) a general resolution approving the acts of the directors and officers
adopted at a shareholders meeting by vote of the holders of the majority of
the shares entitled to vote. Nothing herein contained shall create or imply
any liability in the circumstances above described or prevent the
authorization, ratification or approval of such transactions or contracts in
any other manner.

<PAGE>

The undersigned, being the Secretary of the corporation, hereby certifies
that these Bylaws consisting of 15 pages are the Bylaws of Birthday Express,
Inc., adopted by resolution of the directors on June 25, 1994.

Dated June 25, 1994
-------------
/s/ Jan A. Jewell
-----------------
Jan Jewell, Secretary

<PAGE>

Exhibit A

TO THE BYLAWS OF

BIRTHDAY EXPRESS, INC.

Section 1.1.
Date and time of annual shareholders' meeting: 3 PM, THIRD FRIDAY
IN JANUARY

Section 2.1.
Number of members of Board of Directors, unless and until changed
by resolution of the Board of Directors: 2

Section 6.
Fiscal year: CALENDAR YEAR; JANUARY 1 THROUGH DECEMBER 31

Section 7.
Corporate seal, if any: NONE

Date Bylaws Adopted: June 25, 1994
-------------

<PAGE>

Exhibit A
To the Bylaws of
BirthdayExpress.com, Inc.

Section 1.1. Date and time of annual shareholders' meeting: 3PM, third Friday
in January

Section 2.1. Number of members of Board of Directors, unless changed by
resolution of the Board of Directors: 5

Section 6. Fiscal year: Calendar year, January 1 through December 31

Section 7. Corporate seal, if any: None

Bylaws Adopted: June 25, 1994
Amended: July 19, 1999

<PAGE>

BYLAWS OF

CELEBRATEEXPRESS.COM, INC.

<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS

PAGE
<S> <C> <C>
ARTICLE 1 OFFICES. . . . . . . . . . . . . . . . . . . . . . . . .1

1.1 Principal Office . . . . . . . . . . . . . . . . . . . .1

1.2 Registered Office and Registered Agent . . . . . . . . .1

1.3 Other Offices. . . . . . . . . . . . . . . . . . . . . .1

ARTICLE 2 SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . .1

2.1 Annual Meeting . . . . . . . . . . . . . . . . . . . . .1

2.2 Special Meetings . . . . . . . . . . . . . . . . . . . .2

2.3 Notice of Meetings . . . . . . . . . . . . . . . . . . .2

(a) Notice of Special Meeting . . . . . . . . . . . .3

(b) Proposed Articles of Amendment or Dissolution . .3

(d) Declaration of Mailing. . . . . . . . . . . . . .3

(e) Waiver of Notice. . . . . . . . . . . . . . . . .3

2.4 Quorum . . . . . . . . . . . . . . . . . . . . . . . . .3

2.5 Voting of Shares . . . . . . . . . . . . . . . . . . . .4

2.6 Adjourned Meetings . . . . . . . . . . . . . . . . . . .4

2.7 Record Date. . . . . . . . . . . . . . . . . . . . . . .4

<PAGE>

<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
<S> <C> <C>
2.8 Record of Shareholders Entitled to Vote. . . . . . . . .4

2.9 Telephonic Meetings. . . . . . . . . . . . . . . . . . .5

2.10 Proxies. . . . . . . . . . . . . . . . . . . . . . . . .5

2.11 Organization . . . . . . . . . . . . . . . . . . . . . .5

ARTICLE 3 BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . .6

3.1 Management Responsibility. . . . . . . . . . . . . . . .6

3.2 Number of Directors, Qualification . . . . . . . . . . .6

3.3 Election . . . . . . . . . . . . . . . . . . . . . . . .6

3.4 Vacancies. . . . . . . . . . . . . . . . . . . . . . . .6

3.5 Removal. . . . . . . . . . . . . . . . . . . . . . . . .6

3.6 Resignation. . . . . . . . . . . . . . . . . . . . . . .6

3.7 Annual Meeting . . . . . . . . . . . . . . . . . . . . .7

3.8 Regular Meetings . . . . . . . . . . . . . . . . . . . .7

3.9 Special Meetings . . . . . . . . . . . . . . . . . . . .7

3.10 Notice of Meeting. . . . . . . . . . . . . . . . . . . .7

3.11 Quorum of Directors. . . . . . . . . . . . . . . . . . .8

3.12 Presumption of Assent. . . . . . . . . . . . . . . . . .8

<PAGE>

<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
<S> <C> <C>
3.13 Action by Directors Without a Meeting. . . . . . . . . .8

3.14 Telephonic Meetings. . . . . . . . . . . . . . . . . . .8

3.15 Compensation . . . . . . . . . . . . . . . . . . . . . .8

3.16 Committees . . . . . . . . . . . . . . . . . . . . . . .8

ARTICLE 4 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . .9

4.1 Appointment. . . . . . . . . . . . . . . . . . . . . . .9

4.2 Qualification. . . . . . . . . . . . . . . . . . . . . .9

4.3 Officers Designated. . . . . . . . . . . . . . . . . . .9

(a) Chief Executive Officer . . . . . . . . . . . . 10

(b) President . . . . . . . . . . . . . . . . . . . 10

(d) Secretary . . . . . . . . . . . . . . . . . . . 10

(e) Chief Financial Officer . . . . . . . . . . . . 11

(f) Treasurer . . . . . . . . . . . . . . . . . . . 11

4.4 Delegation . . . . . . . . . . . . . . . . . . . . . . 11

4.5 Resignation. . . . . . . . . . . . . . . . . . . . . . 11

4.6 Removal. . . . . . . . . . . . . . . . . . . . . . . . 11

<PAGE>

<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
<S> <C> <C>
4.7 Vacancies. . . . . . . . . . . . . . . . . . . . . . . 11

4.8 Compensation . . . . . . . . . . . . . . . . . . . . . 12

ARTICLE 5 EXECUTION OF CORPORATION INSTRUMENTS AND VOTING OF
SECURITIES OWNED BY THE CORPORATION. . . . . . . . . . 12

5.1 Execution of Corporate Instruments . . . . . . . . . . 12

5.2 Voting of Securities Owned by the Corporation. . . . . 12

ARTICLE 6 STOCK . . . . . . . . . . . . . . . . . . . . . . . . 12

6.1 Form and Execution of Certificates . . . . . . . . . . 12

6.2 Lost Certificates. . . . . . . . . . . . . . . . . . . 13

6.3 Transfers. . . . . . . . . . . . . . . . . . . . . . . 13

6.4 Registered Shareholders. . . . . . . . . . . . . . . . 13

6.5 Execution of Other Securities. . . . . . . . . . . . . 14

ARTICLE 7 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . 14

7.1 Books of Accounts, Minutes and Share Register. . . . . 14

7.2 Copies of Resolutions. . . . . . . . . . . . . . . . . 15

ARTICLE 8 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE 9 CORPORATE SEAL . . . . . . . . . . . . . . . . . . . . 15

ARTICLE 10 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . 15

<PAGE>

<CAPTION>
TABLE OF CONTENTS
(CONTINUED)
PAGE
<S> <C> <C>
10.1 Right to Indemnification . . . . . . . . . . . . . . . 15

10.2 Right of Indemnitee to Bring Suit. . . . . . . . . . . 16

10.3 Nonexclusivity of Rights . . . . . . . . . . . . . . . 16

10.4 Insurance, Contracts and Funding . . . . . . . . . . . 17

10.5 Indemnification of Employees and
Agents of the Corporation. . . . . . . . . . . . . . . 17

10.6 Persons Serving Other Entities . . . . . . . . . . . . 17

ARTICLE 11 AMENDMENT OF BYLAWS. . . . . . . . . . . . . . . . . . 17
</TABLE>

<PAGE>

BYLAWS OF

CELEBRATEEXPRESS.COM, INC.

These BYLAWS are promulgated pursuant to the Washington Business
Corporation Act, as set forth in Title 23B of the Revised Code of Washington.

ARTICLE 1

OFFICES

1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall
be located at the principal place of business or such other place as the Board
of Directors may designate.

1.2 REGISTERED OFFICE AND REGISTERED AGENT. The registered office of
the Corporation shall be located in the State of Washington at such place as may
be fixed from time to time by the Board of Directors upon filing of such notices
as may be required by law, and the registered agent shall have a business office
identical with such registered office. Any change in the registered agent or
registered office shall be effective upon filing such change with the office of
the Secretary of State of the State of Washington.

1.3 OTHER OFFICES. The Corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Washington, as the Board of Directors may from time to time
determine or the business of the Corporation may require.

ARTICLE 2

SHAREHOLDERS

2.1 ANNUAL MEETING

(a) The annual meeting of the shareholders of the Corporation
for the election of directors and for the transaction of such other business as
may properly come before the meeting shall be held each year on a date and at a
time and place to be set by the Board of Directors.

(b) At an annual meeting of the shareholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be:
(i) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (ii) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or
(iii) otherwise properly brought before the meeting by a shareholder. For
business to be properly brought before an annual meeting by a shareholder, the
shareholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a shareholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
later than the close of

<PAGE>

business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that no
annual meeting was held in the previous year or the date of the annual meeting
has been changed by more than thirty (30) days from the date contemplated at the
time of the previous year's proxy statement, notice by the shareholder to be
timely must be so received not earlier than the close of business on the
ninetieth (90th) day prior to such annual meeting and not later than the close
of business on the later of the sixtieth (60th) day prior to such annual meeting
or, in the event public announcement of the date of such annual meeting is first
made by the Corporation fewer than seventy (70) days prior to the date of such
annual meeting, the close of business on the tenth (10th) day following the day
on which public announcement of the date of such meeting is first made by the
Corporation. A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting: (A) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (B) the name and
address, as they appear on the Corporation's books, of the shareholder proposing
such business, (C) the class and number of shares of the Corporation which are
beneficially owned by the shareholder, (D) any material interest of the
shareholder in such business and (E) any other information that is required to
be provided by the shareholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as a
proponent to a shareholder proposal. Notwithstanding the foregoing, in order to
include information with respect to a shareholder proposal in the proxy
statement and form of proxy for a shareholders' meeting, shareholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.

2.2 SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes may be called at any time by a majority of the Board of
Directors or by the Chairperson of the Board (if one be elected) or by the Chief
Executive Officer. The Board of Directors may designate any place as the place
of any special meeting called by the Chairperson, the Chief Executive Officer or
the Board.

2.3 NOTICE OF MEETINGS. Except as otherwise provided in Subsections
2.3(b) and 2.3(c) below, the Secretary, Assistant Secretary, or any transfer
agent of the Corporation shall deliver, either personally or by mail, private
carrier, telegraph or teletype, or telephone, wire or wireless equipment which
transmits a facsimile of the notice, not less than ten (10) nor more than sixty
(60) days before the date of any meeting of shareholders, written notice stating
the place, day, and time of the meeting to each shareholder of record entitled
to vote at such meeting. If mailed in the United States, such notice shall be
deemed to be delivered when deposited in the United States mail, with
first-class postage thereon prepaid, addressed to the shareholder at his address
as it appears on the Corporation's record of shareholders. If mailed outside
the United States,

<PAGE>

such notice shall be deemed to be delivered five (5) days after being deposited
in the mail, with first-class airmail postage thereon, return receipt requested,
addressed to the shareholder at the shareholder's address as it appears on the
Corporation's record of shareholders.

(a) NOTICE OF SPECIAL MEETING. In the case of a special
meeting, the written notice shall also state with reasonable clarity the purpose
or purposes for which the meeting is called and the actions sought to be
approved at the meeting. No business other than that specified in the notice
may be transacted at a special meeting.

(b) PROPOSED ARTICLES OF AMENDMENT OR DISSOLUTION. If the
business to be conducted at any meeting includes any proposed amendment to the
Articles of Incorporation or the proposed voluntary dissolution of the
Corporation, then the written notice shall be given not less than twenty (20)
nor more than sixty (60) days before the meeting date and shall state that the
purpose or one of the purposes is to consider the advisability thereof, and, in
the case of a proposed amendment, shall be accompanied by a copy of the
amendment.

(c) PROPOSED MERGER, CONSOLIDATION, EXCHANGE, SALE, LEASE OR
DISPOSITION. If the business to be conducted at any meeting includes any
proposed plan of merger or share exchange, or any sale, lease, exchange, or
other disposition of all or substantially all of the Corporation's property
otherwise than in the usual or regular course of its business, then the written
notice shall state that the purpose or one of the purposes is to consider the
proposed plan of merger or share exchange, sale, lease, or disposition, as the
case may be, shall describe the proposed action with reasonable clarity, and, if
required by law, shall be accompanied by a copy or a detailed summary thereof;
and written notice shall be given to each shareholder of record, whether or not
entitled to vote at such meeting, not less than twenty (20) nor more than sixty
(60) days before such meeting, in the manner provided in Section 2.3 above.

(d) DECLARATION OF MAILING. A declaration of the mailing or
other means of giving any notice of any shareholders' meeting, executed by the
Secretary, Assistant Secretary, or any transfer agent of the Corporation giving
the notice, shall be prima facie evidence of the giving of such notice.

(e) WAIVER OF NOTICE. Notice of any shareholders' meeting may
be waived in writing by any shareholder at any time, either before or after the
meeting. Except as provided below, the waiver must be signed by the shareholder
entitled to the notice, and be delivered to the Corporation for inclusion in the
minutes or filing with the corporate records. A shareholder's attendance at a
meeting waives objection to lack of notice, or defective notice, unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting.

2.4 QUORUM. A quorum shall exist at any meeting of shareholders if a
majority of the shares entitled to vote is represented in person or by proxy.
Shares entitled to vote as a separate voting group may take action on a matter
at a meeting only if a quorum of those shares exists with respect to that
matter. The shareholders present at a duly organized meeting may continue to
transact business at such meeting and at any adjournment of such meeting (unless
a new record date is or must be set for the adjourned meeting), notwithstanding
the withdrawal of enough

<PAGE>

shareholders from either meeting to leave less than a quorum. Once a share is
represented for any purpose at a meeting other than solely to object to holding
the meeting or transacting business at the meeting, it is deemed present for
quorum purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for the adjourned meeting.

2.5 VOTING OF SHARES. Except as otherwise provided in the Articles of
Incorporation or these Bylaws, every shareholder of record shall have the right
at every shareholders' meeting to one vote for every share standing in his name
on the books of the Corporation. If a quorum exists, action on a matter, other
than the election of directors, is approved by a voting group if the votes cast
within the voting group favoring the action exceed the votes cast within the
voting group opposing the action, unless a greater number is required by the
Articles of Incorporation or the Washington Business Corporation Act.

2.6 ADJOURNED MEETINGS. A majority of the shares represented at a
meeting, even if less than a quorum, may adjourn the meeting from time to time
without further notice. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. However, if a
new record date for the adjourned meeting is or must be fixed in accordance with
the Washington Business Corporation Act, notice of the adjourned meeting must be
given to persons who are shareholders as of the new record date. At any
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting.

2.7 RECORD DATE. For the purpose of determining shareholders entitled
to notice of or to vote at any meeting of shareholders, or any adjournment
thereof, or entitled to receive payment of any dividend, the Board of Directors
may fix in advance a record date for any such determination of shareholders,
such date to be not more than seventy (70) days and, in the case of a meeting of
shareholders, not less than ten (10) days prior to the meeting or action
requiring such determination of shareholders. If no record date is fixed for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend, the
day before the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date, which it must do if the meeting is adjourned
more than one hundred twenty (120) days after the date is fixed for the original
meeting.

2.8 RECORD OF SHAREHOLDERS ENTITLED TO VOTE. After fixing a record
date for a shareholders' meeting, the Corporation shall prepare an alphabetical
list of the names of all shareholders on the record date who are entitled to
notice of the shareholders' meeting. The list shall be arranged by voting
group, and within each voting group by class or series of shares, and show the
address of and number of shares held by each shareholder. A shareholder,
shareholder's agent, or a shareholder's attorney may inspect the shareholders
list, beginning ten days prior to the shareholders' meeting and continuing
through the meeting, at the Corporation's principal office

<PAGE>

or at a place identified in the meeting notice in the city where the meeting
will be held during regular business hours and at the shareholder's expense.
The shareholders list shall be kept open for inspection during such meeting or
any adjournment. Failure to comply with the requirements of this section shall
not affect the validity of any action taken at such meeting.

2.9 TELEPHONIC MEETINGS. Shareholders may participate in a meeting by
means of a conference telephone or other communications equipment by which all
persons participating in the meeting can hear each other during the meeting, and
participation by such means shall constitute presence in person at a meeting.

2.10 PROXIES. At all meetings of shareholders, a shareholder may vote
by proxy executed in writing by the shareholder or by his duly authorized
attorney in fact. Such proxy shall be filed with the secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven (11) months from the date of its execution, unless otherwise provided in
the proxy.

2.11 ORGANIZATION

(a) At every meeting of shareholders, the Chairperson of the
Board of Directors, or, if a Chairperson has not been appointed or is absent,
the Chief Executive Officer, or, if the Chief Executive Officer is absent, a
chairman of the meeting chosen by a majority in interest of the shareholders
entitled to vote, present in person or by proxy, shall act as chairman. The
Secretary, or, in his absence, an Assistant Secretary directed to do so by the
Chief Executive Officer, shall act as secretary of the meeting.

(b) The Board of Directors of the Corporation shall be entitled
to make such rules or regulations for the conduct of meetings of shareholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to shareholders of
record of the Corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of shareholders shall not be required to
be held in accordance with rules of parliamentary procedure.

ARTICLE 3

BOARD OF DIRECTORS

3.1 MANAGEMENT RESPONSIBILITY. All corporate powers shall be
exercised by or under the

<PAGE>

authority of, and the business and affairs of the Corporation shall be managed
under the direction of, the Board of Directors, except as may be otherwise
provided in the Articles of Incorporation or the Washington Business Corporation
Act.

3.2 NUMBER OF DIRECTORS, QUALIFICATION. The authorized number of
directors of the Corporation shall be not less than four (4) nor more than nine
(9), the specific number to be set by resolution of the Board of Directors.
Directors need not be shareholders. No reduction of the authorized number of
directors shall have the effect of removing any director before that director's
term of office expires.

3.3 ELECTION. At the first annual meeting of shareholders and at each
annual meeting thereafter, the shareholders shall elect directors to hold office
at the annual meeting. If, for any reason, the directors shall not have been
elected at an annual meeting, they may be elected at a special meeting of
shareholders called for that purpose in accordance with these Bylaws. Despite
the expiration of a director's term, the director continues to serve until the
director's successor shall have been elected and qualified or until there is a
decrease in the number of directors.

3.4 VACANCIES. Any vacancy occurring in the Board of Directors
(whether caused by resignation, death, an increase in the number of directors,
or otherwise) may be filled the Board of Directors or the shareholders if not
filled by the Board. If the directors in office constitute fewer than a quorum
of the Board, they may fill the vacancy by the affirmative vote of a majority of
all the directors in office. A director elected to fill any vacancy shall hold
office until the next shareholders meeting at which directors are elected.

3.5 REMOVAL. One or more members of the Board of Directors (including
the entire Board) may be removed, with cause, at a meeting of shareholders
called expressly for that purpose. A director may be removed only if the number
of votes cast to remove the director exceeds the number of votes cast not to
remove the director. Neither the Board of Directors nor any individual director
may be removed without cause.

3.6 RESIGNATION. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.

3.7 ANNUAL MEETING. The first meeting of each newly elected Board of
Directors shall be known as the annual meeting thereof and shall be held without
notice immediately after the annual shareholders' meeting or any special
shareholders' meeting at which a Board is elected. Said meeting shall be held
at the same place as such shareholders' meeting unless some other place shall be
specified by resolution of the Board of Directors.

<PAGE>

3.8 REGULAR MEETINGS. Regular meetings of the Board of Directors or
of any committee designated by the Board may be held at such place and such day
and hour as shall from time to time be fixed by resolution of the Board or
committee, without other notice than the delivery of such resolution as provided
in Section 3.10 below.

3.9 SPECIAL MEETINGS. Special meetings of the Board of Directors or
any committee designated by the Board may be called by the Chief Executive
Officer or the Chairperson of the Board (if one be elected) or any director or
committee member, to be held at such place and such day and hour as specified by
the person or persons calling the meeting.

3.10 NOTICE OF MEETING. Notice of the date, time, and place of all
special meetings of the Board of Directors or any committee designated by the
Board shall be given by the Secretary, or by the person calling the meeting, by
mail, private carrier, telegram, facsimile transmission, or personal
communication over the telephone or otherwise, provided such notice is received
at least two (2) days prior to the day upon which the meeting is to be held.

No notice of any regular meeting need be given if the time and
place thereof shall have been fixed by resolution of the Board of Directors or
any committee designated by the Board and a copy of such resolution has been
delivered by mail, private carrier, telegram or facsimile transmission to every
director or committee member and is received at least two (2) days before the
first meeting held in pursuance thereof.

Notice of any meeting of the Board of Directors or any committee
designated by the Board need not be given to any director or committee member if
it is waived in a writing signed by the director entitled to the notice, whether
before or after such meeting is held.

A director's attendance at or participation in a meeting waives
any required notice to the director of the meeting unless the director at the
beginning of the meeting, or promptly upon the director's arrival, objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors or any committee designated by the Board need be
specified in the notice or waiver of notice of such meeting unless required by
the Articles of Incorporation or these Bylaws.

Any meeting of the Board of Directors or any committee designated
by the Board shall be a legal meeting without any notice thereof having been
given if all of the directors or committee members have received valid notice
thereof, are present without objecting, or waive notice thereof in a writing
signed by the director and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records, or any combination thereof.

3.11 QUORUM OF DIRECTORS. A majority of the number of directors fixed
by or in the manner provided by these Bylaws shall constitute a quorum for the
transaction of business. If a quorum is present when a vote is taken, the
affirmative vote of a majority of directors present is the act of the Board of
Directors unless the Articles of Incorporation or these Bylaws require the vote
of a greater number of directors.

<PAGE>

A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place. If the meeting is
adjourned for more than forty-eight (48) hours, then notice of the time and
place of the adjourned meeting shall be given before the adjourned meeting takes
place, in the manner specified in Section 3.10 of these Bylaws, to the directors
who were not present at the time of the adjournment.

3.12 PRESUMPTION OF ASSENT. Any director who is present at any meeting
of the Board of Directors at which action on any corporate matter is taken shall
be presumed to have assented to the action taken unless (a) the director objects
at the beginning of the meeting, or promptly upon the director's arrival, to
holding the meeting or transacting business at the meeting; (b) the director's
dissent or abstention from the action taken is entered in the minutes of the
meeting; or (c) the director delivers written notice of dissent or abstention to
the presiding officer of the meeting before the adjournment thereof or to the
Corporation within a reasonable time after adjournment of the meeting. Such
right to dissent or abstain shall not be available to any director who voted in
favor of such action.

3.13 ACTION BY DIRECTORS WITHOUT A MEETING. Any action required by law
to be taken or which may be taken at a meeting of the Board of Directors or of a
committee thereof may be taken without a meeting if one or more written
consents, setting forth the action so taken, shall be signed by all of the
directors or all of the members of the committee, as the case may be, either
before or after the action taken and delivered to the Corporation for inclusion
in the minutes or filing with the corporate records. Such consent shall have
the same effect as a unanimous vote at a meeting duly held upon proper notice on
the date of the last signature thereto, unless the consent specifies a later
effective date.

3.14 TELEPHONIC MEETINGS. Members of the Board of Directors or any
committee designated by the Board may participate in a meeting of the Board or
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other
during the meeting. Participation by such means shall constitute presence in
person at a meeting.

3.15 COMPENSATION. By resolution of the Board of Directors, the
directors and committee members may be paid their expenses, if any, or a fixed
sum or a stated salary as a director or committee member for attendance at each
meeting of the Board or of such committee as the case may be. No such payment
shall preclude any director or committee member from serving the Corporation in
any other capacity and receiving compensation therefor.

3.16 COMMITTEES. The Board of Directors, by resolution adopted by a
majority of the full Board, may from time to time designate from among its
members one or more committees, each of which must have two (2) or more members
and, to the extent provided in such resolution, shall have and may exercise all
the authority of the Board of Directors, except that no such committee shall
have the authority to:

(a) authorize or approve a distribution except according to a
general formula or method prescribed by the Board of Directors;

<PAGE>

(b) approve or propose to shareholders action that the
Washington Business Corporation Act requires to be approved by shareholders;

(d) adopt any amendment to the Articles of Incorporation;

(e) adopt, amend or repeal these Bylaws;

(f) approve a plan of merger; or

(g) authorize or approve the issuance or sale or contract for
sale of shares, or determine the designation and relative rights, preferences
and limitations of a class or series of shares, except that the Board of
Directors may authorize a committee, or a senior executive officer of the
Corporation, to do so within limits specifically prescribed by the Board of
Directors.

Meetings of such committees shall be governed by the same
procedures as govern the meetings of the Board of Directors. All committees so
appointed shall keep regular minutes of their meetings and shall cause them to
be recorded in books kept for that purpose at the office of the Corporation.

ARTICLE 4

OFFICERS

4.1 APPOINTMENT. The officers of the Corporation shall be appointed
annually by the Board of Directors at its annual meeting held after the annual
meeting of the shareholders. If the appointment of officers is not held at such
meeting, such appointment shall be held as soon thereafter as a Board meeting
conveniently may be held. Except in the case of death, resignation or removal,
each officer shall hold office at the pleasure of the Board of Directors until
the next annual meeting of the Board and until his successor is appointed and
qualified.

4.2 QUALIFICATION. None of the officers of the Corporation need be a
director, except as specified below. Any two or more of the corporate offices
may be held by the same person.

4.3 OFFICERS DESIGNATED. The officers of the Corporation shall be a
Chief Executive Officer, a President, one or more Vice Presidents (the number
thereof to be determined by the Board of Directors), a Secretary, a Chief
Financial Officer and a Treasurer, each of whom shall be elected by the Board of
Directors. Such other officers and assistant officers as may be deemed
necessary may be appointed by the Board of Directors.

The Board of Directors may, in its discretion, appoint a
Chairperson of the Board of Directors; and, if a Chairperson has been appointed,
the Chairperson shall, when present, preside at all meetings of the Board of
Directors and the shareholders and shall have such other powers commonly
incident to his office and as the Board may prescribe.

<PAGE>

(a) CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
be the chief executive officer of the corporation and, subject to the direction
and control of the Board, shall supervise and control all of the assets,
business, and affairs of the corporation. The Chief Executive Officer shall
vote the shares owned by the corporation in other corporations, domestic or
foreign, unless otherwise prescribed by resolution of the Board. In general,
the Chief Executive Officer shall perform all duties incident to the office of
Chief Executive Officer and such other duties as may be prescribed by the Board
from time to time.

The Chief Executive Officer shall, unless a Chairperson of the
Board of Directors has been appointed and is present, preside at all meetings of
the shareholders and the Board of Directors.

(b) PRESIDENT. The President shall report to the Chief
Executive Officer. In the absence of the Chief Executive Officer or his
inability to act, the President, if any, shall perform all the duties of the
Chief Executive Officer and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Chief Executive Officer; provided that
no such President shall assume the authority to preside as Chairperson of
meetings of the Board unless such President is a member of the Board. In
general, the President shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board from time to
time.

(c) VICE PRESIDENTS. In the absence of the President or his
inability to act, the Vice Presidents, if any, in order of their rank as fixed
by the Board of Directors or, if not ranked a Vice President designated by the
Board shall perform all the duties of the President and when so acting shall
have all the powers of, and be subject to all the restrictions upon, the
President; provided that no such Vice President shall assume the authority to
preside as Chairperson of meetings of the Board unless such Vice President is a
member of the Board. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be respectively prescribed
for them by the Board, these Bylaws or the President.

(d) SECRETARY. The Secretary shall attend all meetings of the
shareholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the Corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the shareholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.

(e) CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep or cause to be kept the books of account of the Corporation in a thorough
and proper manner and shall render statements of the financial affairs of the
Corporation in such form and as often as required by the

<PAGE>

Board of Directors or the President. The Chief Financial Officer, subject to
the order of the Board of Directors, shall have the custody of all funds and
securities of the Corporation. The Chief Financial Officer shall perform
other duties commonly incident to his office and shall also perform such
other duties and have such other powers as the Board of Directors or the
President shall designate from time to time. The President may direct the
Treasurer or any Assistant Treasurer, or the Controller or any Assistant
Controller to assume and perform the duties of the Chief Financial Officer in
the absence or disability of the Chief Financial Officer, and each Treasurer
and Assistant Treasurer and each Controller and Assistant Controller shall
perform other duties commonly incident to his office and shall also perform
such other duties and have such other powers as the Board of Directors or the
President shall designate from time to time.

(f) TREASURER. Subject to the direction and control of the
Board of Directors, the Treasurer shall have charge and custody of and be
responsible for all funds and securities of the Corporation; and, at the
expiration of his term of office, he shall turn over to his successor all
property of the Corporation in his possession.

In the absence of the Treasurer, an Assistant Treasurer may
perform the duties of the Treasurer.

4.4 DELEGATION. In case of the absence or inability to act of any
officer of the Corporation and of any person herein authorized to act in his
place, the Board of Directors may from time to time delegate the powers or
duties of such officer to any other officer or director or other person whom it
may select.

4.5 RESIGNATION. Any officer may resign at any time by delivering
written notice to the Corporation. Any such resignation shall take effect when
the notice is delivered unless the notice specifies a later date. Unless
otherwise specified in the notice, acceptance of such resignation by the
Corporation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the Corporation under any
contract to which the officer is a party.

4.6 REMOVAL. Any officer or agent elected or appointed by the Board
of Directors may be removed by the Board at any time with or without cause.
Election or appointment of an officer or agent shall not of itself create
contract rights.

4.7 VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification, creation of a new office, or any other cause may be
filled by the Board of Directors for the unexpired portion of the term or for a
new term established by the Board.

4.8 COMPENSATION. Compensation, if any, for officers and other agents
and employees of the Corporation shall be determined by the Board of Directors,
or by the Chief Executive Officer to the extent such authority may be delegated
to him by the Board. No officer shall be prevented from receiving compensation
in such capacity by reason of the fact that he is also a director of the
Corporation.

<PAGE>

ARTICLE 5

EXECUTION OF CORPORATION INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION

5.1 EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the Corporation
any corporate instrument or document, or to sign on behalf of the Corporation
the corporate name without limitation, or to enter into contracts on behalf of
the Corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the Corporation.

All checks and drafts drawn on banks or other depositaries on
funds to the credit of the Corporation or in special accounts of the Corporation
shall be signed by such person or persons as the Board of Directors shall
authorize so to do.

Unless authorized or ratified by the Board of Directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the Corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.

5.2 VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the Corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairperson of the Board of Directors, the Chief Executive Officer, the
President or any Vice President.

ARTICLE 6

STOCK

6.1 FORM AND EXECUTION OF CERTIFICATES. Certificates for the shares
of stock of the Corporation shall be in such form as is consistent with the
Articles of Incorporation and applicable law. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in the name of
the Corporation by the Chairperson of the Board of Directors, the Chief
Executive Officer, the President or any Vice President and by the Treasurer or
Assistant Treasurer or the Secretary or Assistant Secretary, certifying the
number of shares owned by him in the Corporation. Any or all of the signatures
on the certificate may be facsimiles. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued with the same effect as if
he were such officer, transfer agent, or registrar at the date of issue. Each
certificate shall state upon the face or back thereof, in full or in summary,
all of the powers, designations, preferences, and rights, and the limitations or
restrictions of the shares authorized to be issued or shall, except as otherwise
required by law, set forth on the face or back a statement that the Corporation
will furnish without charge to each shareholder who so requests the powers,
designations, preferences and relative, participating,

<PAGE>

optional, or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights. Within a reasonable time after the issuance or transfer of
uncertificated stock, the Corporation shall send to the registered owner thereof
a written notice containing the information required to be set forth or stated
on certificates pursuant to this section or otherwise required by law or with
respect to this section a statement that the Corporation will furnish without
charge to each shareholder who so requests the powers, designations, preferences
and relative paticipating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Except as otherwise expressly provided by law,
the rights and obligations of the holders of certificates representing stock of
the same class and series shall be identical.

6.2 LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the Corporation in such manner as it shall
require or to give the Corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.

6.3 TRANSFERS

(a) Transfers of record of shares of stock of the Corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.

(b) The corporation shall have power to enter into and perform
any agreement with any number of shareholders of any one or more classes of
stock of the Corporation to restrict the transfer of shares of stock of the
Corporation of any one or more classes owned by such shareholders in any manner
not prohibited by the Act.

6.4 REGISTERED SHAREHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Washington.

6.5 EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the Corporation, other than stock certificates (covered
in Section 6.1), may be signed by the Chairperson of the Board of Directors, the
Chief Executive Officer, the President or any Vice President, or such other
person as may be authorized by the Board of Directors, and the corporate seal
impressed thereon or a facsimile of such seal imprinted thereon and attested by
the signature of the Secretary or an Assistant Secretary, or the Chief Financial
Officer or Treasurer or an Assistant Treasurer; PROVIDED, HOWEVER, that where
any such bond, debenture or other corporate

<PAGE>

security shall be authenticated by the manual signature, or where permissible
facsimile signature, of a trustee under an indenture pursuant to which such
bond, debenture or other corporate security shall be issued, the signatures
of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as
aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the
Corporation or such other person as may be authorized by the Board of
Directors, or bear imprinted thereon the facsimile signature of such person.
In case any officer who shall have signed or attested any bond, debenture or
other corporate security, or whose facsimile signature shall appear thereon
or on any such interest coupon, shall have ceased to be such officer before
the bond, debenture or other corporate security so signed or attested shall
have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the Corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the Corporation.

Except as otherwise specifically provided in these Bylaws, no
shares of stock shall be transferred on the books of the Corporation until the
outstanding certificate therefor has been surrendered to the Corporation. All
certificates surrendered to the Corporation for transfer shall be cancelled, and
no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that in case
of a lost, destroyed, or mutilated certificate a new one may be issued therefor
upon such terms (including indemnity to the Corporation) as the Board of
Directors may prescribe.

ARTICLE 7

BOOKS AND RECORDS

7.1 BOOKS OF ACCOUNTS, MINUTES AND SHARE REGISTER. The corporation
shall keep as permanent records minutes of all meetings of its shareholders and
Board of Directors, a record of all actions taken by the shareholders or Board
of Directors without a meeting, and a record of all actions taken by a committee
of the Board of Directors exercising the authority of the Board of Directors on
behalf of the Corporation. The corporation shall maintain appropriate
accounting records. The corporation or its agent shall maintain a record of its
shareholders, in a form that permits preparation of a list of the names and
addresses of all shareholders, in alphabetical order by class of shares showing
the number and class of shares held by each. The corporation shall keep a copy
of the following records at its principal office: the Articles or Restated
Articles of Incorporation and all amendments to them currently in effect; the
Bylaws or Restated Bylaws and all amendments to them currently in effect; the
minutes of all shareholders' meetings, and records of all actions taken by
shareholders without a meeting, for the past three years; its financial
statements for the past three years, including balance sheets showing in
reasonable detail the financial condition of the Corporation as of the close of
each fiscal year, and an income statement showing the results of its operations
during each fiscal year prepared on the basis of generally accepted accounting
principles or, if not, prepared on a basis explained therein; all written
communications to shareholders generally within the past three years; a list of
the names

<PAGE>

and business addresses of its current directors and officers; and its most
recent annual report delivered to the Secretary of State of Washington.

7.2 COPIES OF RESOLUTIONS. Any person dealing with the Corporation
may rely upon a copy of any of the records of the proceedings, resolutions, or
votes of the Board of Directors or shareholders, when certified by the Chief
Executive Officer, the President or Secretary.

ARTICLE 8

FISCAL YEAR

The fiscal year of the Corporation shall be set by resolution of the
Board of Directors.

ARTICLE 9

CORPORATE SEAL

The Board of Directors may adopt a corporate seal for the Corporation
which shall have inscribed thereon the name of the Corporation, the year and
state of incorporation and the words "corporate seal".

ARTICLE 10

INDEMNIFICATION

10.1 RIGHT TO INDEMNIFICATION. Each individual (hereinafter an
"indemnitee") who was or is made a party or is threatened to be made a party to
or is otherwise involved (including, without limitation, as a witness) in any
actual or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a director or
officer of the Corporation or that, while serving as a director or officer of
the Corporation, he or she is or was also serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation or of a foreign or domestic partnership,
joint venture, trust, employee benefit plan or other enterprise, whether the
basis of the proceeding is alleged action in an official capacity as such a
director, officer, employee, partner, trustee, or agent or in any other capacity
while serving as such director, officer, employee, partner, trustee, or agent,
shall be indemnified and held harmless by the Corporation to the full extent
permitted by applicable law as then in effect, against all expense, liability
and loss (including, without limitation, attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts to be paid in settlement) incurred
or suffered by such indemnitee in connection therewith, and such indemnification
shall continue as to an indemnitee who has ceased to be a director, officer,
employee, partner, trustee, or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; provided, however, that no
indemnification shall be provided to any such indemnitee if the Corporation is
prohibited by the Washington Business Corporation Act or other applicable law as
then in effect from paying such indemnification; and provided, further, that
except as provided in Section 10.2 of this Article with respect to proceedings

<PAGE>

seeking to enforce rights to indemnification, the Corporation shall indemnify
any such indemnitee in connection with a proceeding (or part thereof) initiated
by such indemnitee only if such proceeding (or part thereof) was authorized or
ratified by the Board of Directors. The right to indemnification conferred in
this Section 10.1 shall be a contract right and shall include the right to be
paid by the Corporation the expenses incurred in defending any proceeding in
advance of its final disposition (hereinafter an "advancement of expenses").
Any advancement of expenses shall be made only upon delivery to the Corporation
of a written undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal that such indemnitee is not entitled to be indemnified for such expenses
under this Section 10.1 and upon delivery to the Corporation of a written
affirmation (hereinafter an "affirmation") by the indemnitee of his or her good
faith belief that such indemnitee has met the standard of conduct necessary for
indemnification by the Corporation pursuant to this Article.

10.2 RIGHT OF INDEMNITEE TO BRING SUIT. If a written claim for
indemnification under Section 10.1 of this Article is not paid in full by the
Corporation within ninety (90) days after the Corporation's receipt thereof,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim. If successful, in whole or in part, in any such suit or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expenses of prosecuting or defending such suit. The indemnitee shall be
presumed to be entitled to indemnification under this Article upon submission of
a written claim (and, in an action brought to enforce a claim for an advancement
of expenses, where the required undertaking and affirmation have been tendered
to the Corporation) and thereafter the Corporation shall have the burden of
proof to overcome the presumption that the indemnitee is so entitled. Neither
the failure of the Corporation (including the Board of Directors, independent
legal counsel or the shareholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances nor an actual determination by the Corporation (including the
Board of Directors, independent legal counsel or the shareholders) that the
indemnitee is not entitled to indemnification shall be a defense to the suit or
create a presumption that the indemnitee is not so entitled.

10.3 NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the
advancement of expenses conferred in this Article X shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, provision of the Articles of Incorporation or Bylaws of the
Corporation, general or specific action of the Board of Directors, contract or
otherwise.

10.4 INSURANCE, CONTRACTS AND FUNDING. The corporation may maintain
insurance, at its expense, to protect itself and any individual who is or was a
director, officer, employee or agent of the Corporation or who, while a
director, officer, employee or agent of the Corporation, is or was serving at
the request of the Corporation as a agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against any expense, liability or loss asserted against or incurred
by the individual in that capacity or

<PAGE>

arising from the individual's status as a director, officer, employee or agent,
whether or not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Washington Business
Corporation Act. The corporation may enter into contracts with any director,
officer, employee or agent of the Corporation in furtherance of the provisions
of this Article and may create a trust fund, grant a security interest or use
other means (including, without limitation, a letter of credit) to ensure the
payment of such amounts as may be necessary to effect indemnification as
provided in this Article.

10.5 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
corporation may, by action of the Board of Directors, grant rights to
indemnification and advancement of expenses to employees and agents of the
Corporation with the same scope and effect as the provisions of this Article
with respect to the indemnification and advancement of expenses of directors and
officers of the Corporation or pursuant to rights granted pursuant to, or
provided by, the Washington Business Corporation Act or otherwise.

10.6 PERSONS SERVING OTHER ENTITIES. Any individual who is or was a
director, officer or employee of the Corporation who, while a director, officer
or employee of the Corporation, is or was serving (a) as a director or officer
of another foreign or domestic corporation of which a majority of the shares
entitled to vote in the election of its directors is held by the Corporation,
(b) as a trustee of an employee benefit plan and the duties of the director or
officer to the Corporation also impose duties on, or otherwise involve services
by, the director or officer to the plan or to participants in or beneficiaries
of the plan or (c) in an executive or management capacity in a foreign or
domestic partnership, joint venture, trust or other enterprise of which the
Corporation or a wholly owned subsidiary of the Corporation is a general partner
or has a majority ownership or interest shall be deemed to be so serving at the
request of the Corporation and entitled to indemnification and advancement of
expenses under this Article.

ARTICLE 11

AMENDMENT OF BYLAWS

11.1 These Bylaws may be altered, amended or repealed and new Bylaws
may be adopted by the Board, except that the Board may not repeal or amend any
Bylaw that the shareholders have expressly provided, in amending or repealing
such Bylaw, may not be amended or repealed by the Board. The shareholders may
also alter, amend and repeal these Bylaws or adopt new Bylaws. All Bylaws made
by the Board may be amended, repealed, altered or modified by the shareholders.

The foregoing Bylaws were read, approved, and duly adopted by the Board
of Directors, of CelebrateExpress.com, Inc., on the _____ day of ______ ____,
and the Secretary of the Corporation was empowered to authenticate such Bylaws
by his signature below.

Jan A. Jewell, Secretary

<PAGE>

BIRTHDAYEXPRESS.COM, INC.

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

JULY 21, 1999

<PAGE>

BirthdayExpress.com
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

1.2 Company Registration . . . . . . . . . . . . . . . . . . . . . . . . . . .2

1.3 Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . .3

1.4 Furnish Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .4

1.5 Expenses of Company Registration . . . . . . . . . . . . . . . . . . . . .4

1.6 Underwriting Requirements. . . . . . . . . . . . . . . . . . . . . . . . .4

1.7 Delay of Registration. . . . . . . . . . . . . . . . . . . . . . . . . . .5

1.8 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

1.9 Reports Under Securities Exchange Act of 1934. . . . . . . . . . . . . . .7

1.10 Assignment of Registration Rights. . . . . . . . . . . . . . . . . . . . .7

1.11 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . . . . .8

1.12 Termination of Registration Rights . . . . . . . . . . . . . . . . . . . .8

2. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . .9

2.1 Delivery of Financial Statements . . . . . . . . . . . . . . . . . . . . .9

2.2 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

2.3 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . . . .9

2.4 Visitation Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

2.5 Qualified Small Business . . . . . . . . . . . . . . . . . . . . . . . . 11

2.6 Termination of Covenants . . . . . . . . . . . . . . . . . . . . . . . . 11

3. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

3.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 12

3.2 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 12

3.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

3.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

3.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

3.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

3.7 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . 12

<PAGE>

TABLE OF CONTENTS
(CONTINUED)

<CAPTION>
PAGE
<S> <C>
3.8 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 13

3.9 Additional Series B Purchasers . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>

<PAGE>

BIRTHDAYEXPRESS.COM, INC.

AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT

THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the
"Agreement") is made as of the 21st day of July, 1999, by and among
BIRTHDAYEXPRESS.COM, INC., a Washington corporation (the "Company"), MICHAEL
JEWELL AND JAN JEWELL (the "Founders"), the holders of shares of Series A
Preferred Stock (the "Series A Preferred") listed on EXHIBIT A hereto (the
"Series A Holders") the purchasers of Series B Preferred Stock (the "Series B
Preferred") listed on EXHIBIT B hereto (the "Series B Purchasers") (the
Series A Holders and the Series B Purchasers may be referred to,
collectively, herein as the "Investors" and, individually, as an "Investor")

RECITALS

WHEREAS, the Founders and the Series A Holders possess certain rights and
obligations pursuant to a certain Investors' Rights Agreement dated October 15,
1998, among the Company, the Founders and the Series A Holders (the "Prior
Agreement").

WHEREAS, the Company and the Series A Holders desire to terminate the
Prior Agreement and to accept the rights and obligations created pursuant hereto
in lieu of the rights and obligations granted to them under the Prior Agreement.

WHEREAS, the Series B Purchasers and the Company are parties to the
Series B Preferred Stock Purchase Agreement of even date herewith (the "Purchase
Agreement") providing for the sale and issuance to the Series B Purchasers of
the Series B Preferred.

WHEREAS, in order to induce the Company to enter into the Purchase
Agreement and to induce the Series B Purchasers to invest funds in the Company
pursuant to the Purchase Agreement, the Founders, the Series B Purchasers, the
Series A Holders and the Company hereby agree that this Agreement shall govern
the rights of the Founders, the Series B Purchasers, the Series A Holders and
the Company as to the matters set forth herein, and the Company, the Founders
and the Series A Holders hereby agree that the Prior Agreement shall be
superseded, rendered void and replaced in its entirety by this Agreement.

AGREEMENT

The parties hereby agree as follows:

1. REGISTRATION RIGHTS. The Company and the Investors covenant and
agree as follows:

1.1 DEFINITIONS. For purposes of this Section 1:

(a) The terms "register," "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Securities Act
of 1933, as amended (the "Securities Act"), and the declaration or ordering of

<PAGE>

effectiveness of such registration statement or document;

(b) The term "Registrable Securities" means (i) the
shares of Common Stock issuable or issued upon conversion of the Series A
Preferred and/or Series B Preferred held by the Investors, (ii) the shares of
Common Stock issued to the Founders (the "Founders' Stock"), and (iii) any other
shares of Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares listed in (i); PROVIDED, HOWEVER, that the foregoing
definition shall exclude in all cases any Registrable Securities sold by a
person in a transaction in which his or her rights under this Agreement are not
assigned. Notwithstanding the foregoing, Common Stock or other securities shall
only be treated as Registrable Securities if and so long as they have not been
(A) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (B) sold in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act under Section 4(l) thereof so that all transfer restrictions, and
restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale;

(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;

(d) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.10 of this Agreement;

(e) The term "Form S-3" means such form under the
Securities Act as in effect on the date hereof or any successor form under the
Securities Act;

(f) The term "SEC" means the Securities and Exchange
Commission; and

(g) The term "Qualified IPO" means a firm commitment
underwritten public offering by the Company of shares of its Common Stock
pursuant to a registration statement on Form S-1 under the Securities Act, the
public offering price of which is not less than $12.00 per share (appropriately
adjusted for any stock split, dividend, combination or other recapitalization)
and which results in aggregate cash proceeds to the Company of $20,000,000 (net
of underwriting discounts and commissions).

1.2 COMPANY REGISTRATION. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock under the Securities Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan or a transaction
covered by Rule 145 under the Securities Act, a registration in which the only
stock being registered is Common Stock issuable upon conversion of debt
securities which are also being registered, or any registration on any form
which does not include substantially the same information as would be

<PAGE>

required to be included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the
Company in accordance with Section 3.3, the Company shall, subject to the
provisions of Section 1.6, cause to be registered under the Securities Act
all of the Registrable Securities that each such Holder has requested to be
registered.

1.3 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:

(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to one hundred
twenty (120) days.

(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for up to one hundred twenty
(120) days.

(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.

(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.

(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

(f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, such obligation to continue for one hundred twenty (120) days.

<PAGE>

(g) Cause all such Registrable Securities registered
pursuant hereunder to be listed on each securities exchange on which similar
securities issued by the Company are then listed.

(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereunder and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration.

(i) Use its best efforts to furnish, at the request of
any Holder requesting registration of Registrable Securities pursuant to this
Section 1, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this
Section 1, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities and
(ii) a letter dated such date, from the independent certified public accountants
of the Company, in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.

1.4 FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.

1.5 EXPENSES OF COMPANY REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications of Registrable Securities pursuant to
Section 1.2 for each Holder (which fight may be assigned as provided in
Section 1.10), including (without limitation) all registration, filing, and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company and the reasonable fees and disbursements (not to exceed
$10,000) of one counsel for the selling Holder or Holders selected by them with
the approval of the Company, which approval shall not be unreasonably withheld,
shall be borne by the Company.

1.6 UNDERWRITING REQUIREMENTS. In connection with any
offering involving an underwriting of shares of the Company's capital stock,
the Company shall not be required under Section 1.2 to include any of the
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it (or by other persons entitled to select the underwriters), and then
only in such quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by
shareholders to be included in such offering exceeds the amount of securities
sold other than by

<PAGE>

the Company that the underwriters determine in their sole discretion is
compatible with the success of the offering, then the Company shall be
required to include in the offering only that number of such securities,
including Registrable Securities, which the underwriters determine in their
sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling
shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder or in such other
proportions as shall mutually be agreed to by such selling shareholders) but
in no event shall the amount of securities of the selling Holders included in
the offering be reduced below twenty percent (20%) of the total amount of
securities included in such offering, unless such offering is the initial
public offering of the Company's securities.

1.7 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.

1.8 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Section 1:

(a) To the extent permitted by law, the Company will
indemnify, and hold harmless each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; and the Company will pay to
each such Holder, underwriter or controlling person, as incurred, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER,
that the indemnity agreement contained in this subsection 1.8(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable to
any Holder, underwriter or controlling person for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.

(b) To the extent permitted by law, each selling Holder
will indemnify and

<PAGE>

hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such
registration; and each such Holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 1.8(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; PROVIDED,
HOWEVER, that the indemnity agreement contained in this subsection 1.8(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
PROVIDED, that in no event shall any indemnity under this subsection 1.8(b)
exceed the net proceeds from the offering received by such Holder, except in
the case of willful fraud by such Holder.

(c) Promptly after receipt by an indemnified party
under this Section 1.8 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.8,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; PROVIDED, HOWEVER, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 1.8, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.8.

(d) If the indemnification provided for in this
Section 1.8 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that

<PAGE>

resulted in such loss, liability, claim, damage or expense as well as any
other relevant equitable considerations; PROVIDED, that in no event shall any
contribution by a Holder under this Subsection 1.8(d) exceed the net proceeds
from the offering received by such Holder, except in the case of willful
fraud by such Holder. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.

(e) Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.

(f) The obligations of the Company and Holders under
this Section 1.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.

1.9 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view
to-making available to the Holders the benefits of Rule 144 promulgated under
the Securities Act and any other rule or regulation of the SEC that may at any
time permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to:

(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act;

(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act; and

(c) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.

1.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of all of such Holder's Registrable Securities,

<PAGE>

PROVIDED the Company is, within a reasonable time after such transfer,
furnished with written notice of the name and address of such transferee or
assignee and the securities with respect to which such registration rights
are being assigned; and PROVIDED, FURTHER, that such assignment shall be
effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the
Securities Act. For the purposes of determining the number of shares of
Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired
partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated
together and with the partnership; provided that all assignees and
transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under Section 1.

1.11 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees
that, during the period of duration (up to, but not exceeding, 180 days)
specified by the Company and an underwriter of Common Stock or other securities
of the Company, following the effective date of a registration statement of the
Company filed under the Securities Act, it shall not, to the extent requested by
the Company and such underwriter, directly or indirectly sell, offer to sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other than to donees who
agree to be similarly bound) any securities of the Company held by it at any
time during such period except Common Stock included in such registration;
PROVIDED, HOWEVER, that:

(a) such agreement shall be applicable only to the first
such registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and

(b) all officers and directors of the Company, all
holders of one percent (1%) or more of the then outstanding capital stock of the
Company, and all other persons with registration rights (whether or not pursuant
to this Agreement) enter into similar agreements.

In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period, and each Holder agrees
that, if so requested, such Holder will execute an agreement in the form
provided by the underwriter containing terms which are essentially consistent
with the provisions of this Section 1.11.

Notwithstanding the foregoing, the obligations described in
this Section 1.11 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to an SEC Rule 145 transaction
on Form S-4 or similar forms which may be promulgated in the future.

1.12 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be
entitled to exercise any

<PAGE>

right provided for in this Section 1 after the earlier of (i) three (3) years
following the consummation of a Qualified IPO, or (ii) such time as Rule 144
or another similar exemption under the Securities Act is available for the
sale of all of such Holder's shares during a three (3)-month period without
registration.

2. COVENANTS OF THE COMPANY

2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall
deliver to each Holder of at least 20,833 shares of Registrable Securities
(other than a Holder reasonably deemed by the Company to be a competitor of the
Company):

(a) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
shareholder's equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail and,
beginning for the 1999 fiscal year, prepared in accordance with generally
accepted accounting principles ("GAAP") and audited and certified by an
independent public accounting firm of nationally recognized standing selected by
the Company;

(b) as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited profit or loss statement, a
statement of cash flows for such fiscal quarter and an unaudited balance sheet
as of the end of such fiscal quarter; and

(c) with respect to the financial statements called for
in subsection (b) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by GAAP) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment, provided that the foregoing shall not restrict the right of the
Company to change its accounting principles consistent with GAAP, if the Board
of Directors determines that it is in the best interest of the Company to do so.

2.2 INSPECTION. The Company shall permit each Holder of at
least 20,833 shares of Registrable Securities (except for a Holder reasonably
deemed by the Company to be a competitor of the Company), at such Holder's
expense, to visit and inspect the Company's properties, to examine its books of
account and records and to discuss the Company's affairs, finances and accounts
with its officers, all at such reasonable times as may be requested by the
Investor; PROVIDED, HOWEVER, that the Company shall not be obligated pursuant to
this Section 2.2 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.

2.3 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this Section 2.3, the Company hereby grants to each Major Investor
(as hereinafter defined) a right of first offer with respect to future sales by
the Company of its Shares (as hereinafter defined). For purposes of this
Section 2.3, a "Major Investor" shall mean any person who holds at least 20,833

<PAGE>

shares of the Series A Preferred issued pursuant to the Prior Agreement or the
Series B Preferred issued pursuant to the Purchase Agreement or the Common Stock
issued upon conversion of the Series A Preferred or Series B Preferred, or any
combination of each. For purposes of this Section 2.3, Major Investor includes
any general partners and affiliates of a Major Investor. A Major Investor who
chooses to exercise the right of first offer may designate as purchasers under
such right itself or its partners or affiliates in such proportions as it deems
appropriate.

Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of such
Shares to each Major Investor in accordance with the following provisions:

(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.

(b) Within 15 calendar days after delivery of the
Notice, the Major Investor may elect to purchase or obtain, at the price and on
the terms specified in the Notice, up to that portion of such Shares which
equals the proportion that the number of shares of Common Stock issued and held,
or issuable upon conversion and exercise of all convertible or exercisable
securities then held, by such Major Investor bears to the total number of shares
of Common Stock then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities).

(c) The Company may, during the 45-day period following
the expiration of the period provided in subsection 2.3(b) hereof, offer the
remaining unsubscribed portion of the Shares to any person or persons at a price
not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for
the sale of the Shares within such period, or if such agreement is not
consummated within 60 days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered
unless first reoffered to the Major Investors in accordance herewith.

(d) The right of first offer in this paragraph 2.3 shall
not be applicable (i) to the issuance or sale of capital stock (or options
therefor) to employees, consultants, officers and directors, pursuant to plans
or agreements approved by the Board of Directors for the primary purpose of
soliciting or retaining their services, (ii) to or after consummation of a
Qualified IPO, (iii) to the issuance of securities pursuant to the conversion or
exercise of convertible or exercisable securities, (iv) to the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise, (v) to the issuance of securities to financial institutions
or lessors in connection with commercial credit arrangements, equipment
financings, or similar transactions, the terms of which are approved by the
Board of Directors, (vi) to the issuance or sale of the Series A Preferred or
Series B Preferred, (vii) stock splits, stock dividends or like

<PAGE>

transactions, (viii) to the issuance of securities to a strategic partner in
connection with license agreements, joint marketing agreement, technology
development agreements or similar strategic relationships, the terms of which
are approved by the Board of Directors, or (ix) to the issuance of securities
to academic or research institutions in connection with the license of
technology or research and development services, the terms of which are
approved by the Board of Directors.

(e) The right of first offer established by this
Section 2.3 shall terminate and be of no further force or effect when the sale
of securities pursuant to a registration statement filed by the Company under
the Act in connection with the initial firm commitment underwritten offering of
its securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of Sections 13 or 15(d)
of Exchange Act, whichever event shall first occur.

(f) The right of first refusal set forth in this
Section 2.3 may not be signed or transferred, except that (i) such right is
assignable by each Holder to any wholly owned subsidiary or parent of, or to any
corporation or entity that is, within the meaning of the Act, controlling,
controlled by or under common control with, any such Holder, (ii) such right is
assignable between and among any of the Holders, and (iii) such right is
assignable to a transferee who acquires at least 20,833 shares (as adjusted for
stock splits, combinations, recapitalizations and the like) of Registrable
Securities.

2.4 VISITATION RIGHTS. The Company shall permit each Holder of
at least 250,000 shares of Registrable Securities to appoint one representative,
reasonably acceptable to the Company, to attend all meetings of the Company's
Board of Directors in a nonvoting capacity, and in connection therewith, the
Company shall give such representative copies of all notices, minutes, consents
and other materials, financial or otherwise, which the Company provides to its
Board of Directors; provided, however, that the Company reserves the right to
exclude each such representative from access to any material or meeting or
portion thereof if the Company believes upon advice of counsel that such
exclusion is reasonably necessary to preserve the attorney-client privilege, to
protect highly confidential proprietary information or for other similar
reasons.

2.5 QUALIFIED SMALL BUSINESS. For so long as any of the
Registrable Securities are held by a Holder (in whose hands such Shares are
eligible to qualify as "QUALIFIED SMALL BUSINESS STOCK" as defined in Section
1202(c) of the Internal Revenue Code of 1986, as amended (the "Code")), the
Company will use its reasonable efforts to comply with the reporting and
recordkeeping requirements of Section 1202 of the Code, any regulations
promulgated thereunder and any similar state laws and regulations.

2.6 TERMINATION OF COVENANTS.

(a) The covenants set forth in Sections 2.1 through
Section 2.5 shall terminate as to each Investor and be of no further force or
effect (i) immediately prior to the consummation of a Qualified IPO, or
(ii) when the Company shall sell, convey, or otherwise dispose of or encumber
all or substantially all of its property or business or merge into or
consolidate with any other corporation (other than a wholly-owned subsidiary
corporation) or effect any other transaction or series of related transactions
in which more than fifty percent (50%) of the voting

<PAGE>

power of the Company is disposed of, provided that this subsection (ii) shall
apply to a merger effected exclusively for the purpose of changing the domicile
of the Corporation.

(b) The covenants set forth in Sections 2.1 and 2.2
shall terminate as to each Holder and be of no further force or effect when the
Company first becomes subject to the periodic reporting requirements of Sections
13 or 15(d) of the Exchange Act, if this occurs earlier the events described in
Section 2.6(a) above.

3. MISCELLANEOUS

3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided in
this agreement, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective permitted successors and assigns
of the parties (including transferees any of the Series A Preferred Stock or any
Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.

3.2 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the Company and the holders
of a majority of the Registrable Securities then outstanding, not including the
Founders' Stock; provided that if such amendment has the effect of affecting the
Founders' Stock (i) in a manner different than securities issued to the
Investors and (ii) in a manner adverse to the interests of the holders of the
Founders' Stock, then such amendment shall require the consent of the holder or
holders of a majority of the Founders' Stock. Any amendment or waiver effected
in accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then outstanding, each are holder of all such Registrable
Securities, and the Company.

3.3 NOTICES. Unless otherwise provided, any notice required or
permitted by this Agreement shall be in writing and shall be deemed sufficient
upon delivery, when delivered personally or by overnight courier or sent by
telegram or fax, or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
party to be notified at such party's address or fax number as set forth below or
on EXHIBIT A hereto or as subsequently modified by written notice.

3.4 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(a) such provision shall be excluded from this Agreement, (b) the balance of
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of Agreement shall be enforceable in accordance with its terms.

3.5 GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto shall be governed, construed and interpreted in
accordance with the laws of the State of Washington, without giving effect to
principles of conflicts of laws.

<PAGE>

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

3.7 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

3.8 AGGREGATION OF STOCK. All shares of the Preferred Stock
held or acquired affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.

3.9 ADDITIONAL SERIES B PURCHASERS. If 1,580,000 shares of
Series B Preferred are not sold on the date of this Agreement, the Company has
the right, pursuant to Section 1.2(c) of the Purchase Agreement, at any time
prior to October 30, 1999, to sell that number of shares of Series B Preferred
equal to the difference between 1,580,000 minus the number of shares of Series B
Preferred Stock issued and sold on the date of this Agreement to one or more
additional purchasers as determined by the Company. Any such additional
purchaser shall execute an Addendum Agreement substantially in the form attached
hereto as EXHIBIT C and shall become a party to this Agreement and shall be
considered a "Series B Purchaser" for purposes of this Agreement.

[Signature Page Follows]

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. /s/ Michael K. Jewell
---------------------
(Investor)

By: /s/ Michael K. Jewell By: /s/ Jan A. Jewell
--------------------- ---------------------
Michael Jewell, President
Name:
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title:
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

/s/ Michael K. Jewell
---------------------
Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By:
Kirkland, Washington 98033
Name:
Fax: (425) 889-9741
Title:

/s/ Jan A. Jewell
-----------------
Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. ADS 1212 Trust
--------------
(Investor)

By: By: /s/ Victor D. Alhadeff
Michael Jewell, President /s/ Ronald A. Weinstein

Name: Victor D. Alhadeff and Ronald
-----------------------------
A. Weinstein
------------
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title: Co-trustees
-----------
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

ADS 1212 Trust
--------------
Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By: /s/ Victor D. Alhadeff
Kirkland, Washington 98033 /s/ Ronald A. Weinstein

Name: Victor D. Alhadeff and
Ronald A. Weinstein
Fax: (425) 889-9741
Title: Co-Trustees
-----------

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. /s/ Keith L. Crandell
---------------------
(Investor)

By: By: Keith L. Crandell
-----------------
Michael Jewell, President
Name: Managing Director
-----------------
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title:
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By:
Kirkland, Washington 98033
Name:
Fax: (425) 889-9741
Title:

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC.
(Investor)

By: By:
Michael Jewell, President
Name:
(print)
Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033
Title:
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Eagle Creek Capital LLC
-----------------------
Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By: /s/ Susan Rasinski
Kirkland, Washington 98033 ------------------

Name: Susan Rasinski
--------------
Fax: (425) 889-9741
Title: Managing Partner
----------------

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. GC&H Investments
----------------
(Investor)

By: By: /s/ John L. Cardoza
Michael Jewell, President -------------------
Name: John L. Cardoza
---------------
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title: Executive Partner
Fax No.: (425) 889-9741 -----------------

FOUNDERS: SERIES B PURCHASERS:

GC&H Investments
Michael Jewell (Investor) ----------------

Address: 11220 120th Avenue N.E. By: /s/ John L. Cardoza
Kirkland, Washington 98033 -------------------
Name: John L. Cardoza
Fax: (425) 889-9741 ---------------
Title: Executive Partner
-----------------

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. /s/ C. Bradford Jeffries
(Investor) ------------------------

By: By:
Michael Jewell, President
Name: C. Bradford Jeffries
--------------------
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title:
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

/s/ C. Bradford Jeffries
Michael Jewell (Investor) ------------------------

Address: 11220 120th Avenue N.E. By: C. Bradford Jeffries
Kirkland, Washington 98033 --------------------
Name:
Fax: (425) 889-9741
Title:

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:
<S> <C>

BIRTHDAYEXPRESS.COM, INC. /s/ Carolyn K. Jewell /s/ Richard K. Jewell
-------------------------------------------
(Investor)

By: By:
Michael Jewell, President
Name: Carolyn K. Jewell and Richard K. Jewell
---------------------------------------
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title:
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By:
Kirkland, Washington 98033
Name:
Fax: (425) 889-9741
Title:

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741
</TABLE>

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. /s/ Alex Knight
(Investor) ---------------

By: By:
Michael Jewell, President
Name: Alex Knight
-----------
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title:
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By:
Kirkland, Washington 98033
Name:
Fax: (425) 889-9741
Title:

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC.
(Investor)

By: By:
Michael Jewell, President
Name:
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title:
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Madrona Investment Group LLC
----------------------------
Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By: /s/ Tom Alberg
Kirkland, Washington 98033 --------------
Name: Tom Alberg
----------
Fax: (425) 889-9741
Title: Principal
---------

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. /s/ David J. Mees, Jr.
(Investor) ----------------------

By: By:
Michael Jewell, President
Name: David J. Mees, Jr.
------------------
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title: Independent Investor
--------------------
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By:
Kirkland, Washington 98033
Name:
Fax: (425) 889-9741
Title:

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. Thomas E. Mees & Roberta G. Mees
--------------------------------
(Investor)

By: By: /s/ Thomas E. Mees /s/ Roberta G. Mees
--------------------------------------
Michael Jewell, President
Name: Thomas E. Mees & Roberta G. Mees
------------------------------------
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title:
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By:
Kirkland, Washington 98033
Name:
Fax: (425) 889-9741
Title:

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. /s/ Cynthia Mees
----------------
(Investor)

By: By:
Michael Jewell, President
Name: Cynthia Mees
------------
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title:
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By:
Kirkland, Washington 98033
Name:
Fax: (425) 889-9741
Title:

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. Nordsee Trust
-------------
(Investor)

By: By: /s/ J. Burgess Jamieson
Michael Jewell, President -----------------------

Name: J. Burgess Jamieson
-------------------
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title: Trustee
-------
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Nordsee Trust
-------------
Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By: /s/ J. Burgess Jamieson
Kirkland, Washington 98033 -----------------------

Name: J. Burgess Jamieson
-------------------
Fax: (425) 889-9741
Title: Trustee
-------

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. /s/ Bradley Reiflers
------------------------------------
(Investor)

By: Michael Jewell, President By: Bradley Reiflers
--------------------------------

Name:
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title:
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By:
Kirkland, Washington 98033
Name:
Fax: (425) 889-9741
Title:

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. Ring Associates II
------------------------------------
(Investor)

By: Michael Jewell, President By: /s/ Richard E. Stroble
--------------------------------

Name: Richard E. Stroble
Address: 11220 120th Avenue N.E. ------------------------------
Kirkland, Washington 98033 (print)

Title: Co-Managing Partner
-----------------------------
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Ring Associates II
------------------------------------
Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By: /s/ Richard E. Stroble
Kirkland, Washington 98033 --------------------------------

Name: Richard E. Stroble
------------------------------
Fax: (425) 889-9741

Title: Co-Managing Partner
-----------------------------

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. Royal Hills LLC
------------------------------------
(Investor)

By: Michael Jewell, President By: /s/ John O'Neil
--------------------------------

Name: John O'Neil
Address: 11220 120th Avenue N.E. ------------------------------
Kirkland, Washington 98033 (print)

Title: Managing Member
-----------------------------
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By:
Kirkland, Washington 98033

Name:

Fax: (425) 889-9741

Title:

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC.
(Investor)

By: By: /s/ Martin J. Silver
Michael Jewell, President /s/ Victoria H. Silver
------------------------------------

Name: Martin J. Silver /
Address: 11220 120th Avenue N.E. Victoria H. Silver
Kirkland, Washington 98033 ------------------------------
(print)

Title:

Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By:
Kirkland, Washington 98033

Name:
Fax: (425) 889-9741

Title:

Jan A. Jewell

Address: 11220 120(th) Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. /s/ Wade Woodson
------------------------------------
(Investor)

By: By: Wade Woodson
Michael Jewell, President --------------------------------

Name:
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033

Title:

Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

/s/ Wade Woodson
------------------------------------
Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By: Wade Woodson
Kirkland, Washington 98033 --------------------------------

Name:

Fax: (425) 889-9741

Title:

Jan A. Jewell

Address: 11220 120(th) Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BIRTHDAYEXPRESS.COM, INC. /s/ Ronald A. Weinstein
------------------------------------
(Investor)

By: By: Weinstein Family LP
Michael Jewell, President --------------------------------

Name: Ronald A. Weinstein
Address: 11220 120th Avenue N.E. ------------------------------
Kirkland, Washington 98033 (print)

Title: G.P.
-----------------------------
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASERS:

Weinstein Family L.P.
------------------------------------
Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By: /s/ Ronald A. Weinstein
Kirkland, Washington 98033 --------------------------------

Name: Ronald A. Weinstein
------------------------------
Fax: (425) 889-9741
Title: G.P.
-----------------------------

Jan A. Jewell

Address: 11220 120(th) Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
<PAGE>

The parties have executed this Amended and Restated Investors' Rights
Agreement as of the date first above written.

COMPANY: SERIES A HOLDERS:

BirthdayExpress.com, Inc. YOU LUCKY DOG TRUST
<S> <C>
(Investor)

By: By: /s/ Victor D. Alhadeff /s/ Ronald A. Weinstein
Michael Jewell, President
Name: Victor D. Alhadeff and Ronald A. Weinstein
Address: 11220 120th Avenue N.E. (print)
Kirkland, Washington 98033
Title: CO-TRUSTEES
Fax No.: (425) 889-9741

</TABLE>

FOUNDERS: SERIES B PURCHASERS:

YOU LUCKY DOG TRUST
<S> <C>
Michael Jewell (Investor)

Address: 11220 120th Avenue N.E. By: /s/ Victor D. Alhadeff /s/ Ronald A. Weinstein
Kirkland, Washington 98033
Name: Victor D. Alhadeff and Ronald A. Weinstein
Fax: (425) 889-9741
Title: CO-TRUSTEES

</TABLE>

Jan A. Jewell

Address: 11220 120th Avenue N.E.
Kirkland, Washington 98033

Fax: (425) 889-9741

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

SIGMA PARTNERS IV, L.P.
SIGMA ASSOCIATES IV, L.P.
SIGMA INVESTORS IV, L.P.

By: Sigma Management IV, L.L.C.
Its: General Partner

By: /s/ Wade Woodson
----------------
Its: Managing Director

Address: c/o Sigma Partners
2884 Sand Hill Road, Suite 121
Menlo Park, California 94025

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

ADVANCED TECHNOLOGY VENTURES V, LP

By: ATV Associates V, LLC
Its: General Partner

By: /s/ Jos C. Henkens
------------------
Jos C. Henkens
Managing Director

Address: c/o ATV Associates V, LLC
Six Princeton Road
Menlo Park, California 94025

ATV ENTREPRENEURS V, LP

By: ATV Associates V, LLC
Its: General Partner

By: /s/ Jos C. Henkens
------------------
Jos C. Henkens
Managing Director

Address: c/o ATV Associates V, LLC
Six Princeton Road
Menlo Park, California 94025

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

ARCH VENTURE FUND IV, L.P.

By: Arch Venture Partners IV, LLC
Its: General Partner

By: /s/ Robert Nelsen
-----------------
Robert Nelsen
Managing Director

Address: c/o Arch Venture Partners IV, LLC
1000 Second Avenue, Suite 3700
Seattle, Washington 98104

SIGNATURE PAGE TO AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT

<PAGE>

EXHIBIT A

SERIES A HOLDERS

<TABLE>
<CAPTION>
NAME AND ADDRESS OF PURCHASER NUMBER OF SHARES
<S> <C>
ADS 1212 Trust 41,666
Attn: Margaret Weiland
c/o Sloan Capital Companies
1301 Fifth Avenue, Suite 3000
Seattle, Washington 98101

Keith L. Crandell 20,833
c/o Arch Venture Partners
610 S. Stough Street
Hinsdale, Illinois 60532

Harvey P. Eisen 83,334
c/o Bedford Oak Advisors, LLC
100 South Bedford Road
Mount Kisco, New York 10549

GC&H Investments 20,834
Attn: Jim Kindler
One Maritime Plaza, 20th Floor
San Francisco, California 94111

Jos C. Henkens 20,834
Advanced Technology Ventures
Six Princeton Road
Menlo Park, California 94025

C. Bradford Jeffries 41,667
One Maritime Plaza, Suite 2000
San Francisco, California 94111

Jan Jewell 325,000
1020 88th Avenue NE
Bellevue, Washington 98004

Michael K. Jewell 325,000
1020 88th Avenue NE
Bellevue, Washington 98004

Richard K. Jewell & Carolyn K. Jewell 20,834
4560 Vista De La Patria
Del Mar, California 92014

<PAGE>

Alex Knight 20,834
c/o Arch Venture Partners
1000 Second Avenue, Suite 3700
Seattle, Washington 98104

David J. Mees, Jr. 50,000
927 10th Street
Boulder, Colorado 80302

Thomas E. and Roberta G. Mees 41,667
P.O. Box 1729
Palo Alto, California 94302

Cynthia Mees 50,000
13035 Welcome Way
Reno, Nevada 89511

Nordsee Trust 41,667
c/o Sigma Partners
Attn: Winnie Schlossareck
2884 Sand Hill Road, Suite 121
Menlo Park, California 94025

Brad Reiflers 41,667
Refco
200 Liberty Street, Suite 230
New York, New York 10281

Ring Associates II 83,334
1411 Fourth Avenue Building
Suite 1415
Seattle, Washington 98101

Royal Hills LLC 83,333
Attn: John O'Neil
2810 Eastlake Avenue E
Seattle, Washington 98102

Martin J. Silver and Victoria H. Silver, 20,834
Trustees of The Silver Family Trust U/D/T
dated December 19, 1997
601 Almond Avenue
Los Altos, California 94022

Wade Woodson 41,667
2884 Sand Hill Road, #121
Menlo Park, California 94022

<PAGE>

Weinstein Family Limited Partnership 83,334
Attn: Ronald Weinstein
4823 Lake Washington Boulevard NE, #1
Kirkland, Washington 98033

You Lucky Dog Trust 41,666
Attn: Margaret Weiland
c/o Sloan Capital Companies
1301 Fifth Avenue, Suite 3000
Seattle, Washington 98101
</TABLE>

<PAGE>

EXHIBIT B

SERIES B PURCHASERS

<TABLE>
<CAPTION>
NAME AND ADDRESS OF PURCHASER NUMBER OF SHARES
<S> <C>
Arch Venture Fund IV, L.P. 600,962
c/o Arch Venture Partners IV, LLC
1000 Second Avenue, Suite 3700
Seattle, Washington 98104

Advanced Technology Ventures V, L.P. 348,137
c/o ATV Associates V, LLC
Six Princeton Road
Menlo Park, California 94025

ATV Entrepreneurs V, L.P. 12,440
c/o ATV Associates V, LLC
Six Princeton Road
Menlo Park, California 94025

Sigma Partners IV, L.P. 249,458
c/o Sigma Partners
2884 Sand Hill Road, Suite 121
Menlo Park, California 94025

Sigma Associates IV, L.P. 101,140
c/o Sigma Partners
2884 Sand Hill Road, Suite 121
Menlo Park, California 94025

Sigma Investors IV, L.P. 9,979
c/o Sigma Partners
2884 Sand Hill Road, Suite 121
Menlo Park, California 94025

ADS 1212 TRUST 17,622
ATTN: MARGARET WEILAND
C/O SLOAN CAPITAL COMPANIES
1301 FIFTH AVENUE, SUITE 3000
SEATTLE, WASHINGTON 98101

<PAGE>

GC&H INVESTMENTS 8,811
ATTN: JIM KINDLER
ONE MARITIME PLAZA, 20TH FLOOR
SAN FRANCISCO, CALIFORNIA 94111

C. BRADFORD JEFFRIES 17,622
ONE MARITIME PLAZA, SUITE 2000
SAN FRANCISCO, CALIFORNIA 94111

<PAGE>

NORDSEE TRUST 17,622
C/O SIGMA PARTNERS
ATTN: WINNIE SCHLOSSARECK
2884 SAND HILL ROAD, SUITE 121
MENLO PARK, CALIFORNIA 94025

RING ASSOCIATES II 15,625
1411 FOURTH AVENUE BUILDING
SUITE 1415
SEATTLE, WASHINGTON 98101

WADE WOODSON 17,622
2884 SAND HILL ROAD, #121
MENLO PARK, CALIFORNIA 94025

WEINSTEIN FAMILY LIMITED 35,245
PARTNERSHIP
ATTN: RONALD WEINSTEIN
4823 LAKE WASHINGTON BOULEVARD NE, #1
KIRKLAND, WASHINGTON 98033

YOU LUCKY DOG TRUST 17,622
ATTN: MARGARET WEILAND
C/O SLOAN CAPITAL COMPANIES
1301 FIFTH AVENUE, SUITE 3000
SEATTLE, WASHINGTON 98101

MADRONA INVESTMENT GROUP, LLC 30,048
1000 SECOND AVENUE, SUITE 3700
SEATTLE, WA 98104

EAGLE CREEK CAPITAL, LLC 30,048
P.O. BOX 2908
KIRKLAND, WA 98083-2908

ATV ENTREPRENEURS V, LP 304
C/O ATV ASSOCIATES V, LLC
SIX PRINCETON ROAD
MENLO PARK, CALIFORNIA 94025

ADVANCED TECHNOLOGY VENTURES V, LP 8,507
C/O ATV ASSOCIATES V, LLC
SIX PRINCETON ROAD
MENLO PARK, CALIFORNIA 94025

</TABLE>

<PAGE>

CELEBRATEEXPRESS.COM, INC.

INDEMNIFICATION AGREEMENT

This INDEMNIFICATION AGREEMENT (this "Agreement") dated as of
________________ is made between CELEBRATEEXPRESS.COM, INC., a Washington
corporation (the "Company"), and ________________ ("Indemnitee").

RECITALS

WHEREAS, Indemnitee is a director or officer of the Company and in such
capacity is performing valuable services for the Company;

WHEREAS, the Company and Indemnitee recognize the difficulty in obtaining
directors' and officers' liability insurance and the significant cost of such
insurance;

WHEREAS, the Company and Indemnitee further recognize the substantial
increase in litigation subjecting directors and officers to expensive litigation
risks at the same time that such liability insurance has been severely limited;

WHEREAS, the Company has adopted bylaws (the "Bylaws") providing for
indemnification of the officers, directors, agents and employees of the Company
to the full extent permitted by the Business Corporation Act of Washington (the
"Statute");

WHEREAS, the Bylaws and the Statute specifically provide that they are
not exclusive, and thereby contemplate that contracts may be entered into
between the Company and its directors and officers with respect to
indemnification of such directors and officers; and

WHEREAS, to induce Indemnitee to serve or continue to serve as a director
or officer of the Company, the Company desires to confirm the contract
indemnification rights provided in the Bylaws and agrees to provide the
Indemnitee with the benefits contemplated by this Agreement.

AGREEMENT

In consideration of the recitals above, the mutual covenants and
agreements herein contained, and Indemnitee's continued service as a director or
officer, as the case may be, of the Company after the date hereof, the parties
to this Agreement agree as follows:

1. INDEMNIFICATION OF INDEMNITEE

1.1 SCOPE. The Company agrees to hold harmless and indemnify
Indemnitee to the full extent provided under the provisions of the Company's
Amended and Restated Articles of Incorporation and the Bylaws, and to the full
extent permitted by law, notwithstanding that the basis for such indemnification
is not specifically enumerated in this Agreement, the Company's Amended and
Restated Articles of Incorporation, the Bylaws, any statute or otherwise. In the
event of any change, after the date of this Agreement, in any applicable law,
statute or rule

<PAGE>

regarding the right of a Washington corporation to indemnify a member of its
board of directors or an officer, such change, to the extent that it would
expand Indemnitee's rights hereunder, shall be included within Indemnitee's
rights and the Company's obligations hereunder, and, to the extent that it
would narrow Indemnitee's rights or the Company's obligations hereunder, shall
not affect or limit the scope of this Agreement; provided, however, that in no
event shall any part of this Agreement be construed so as to require
indemnification when such indemnification is not permitted by then applicable
law.

1.2 NONEXCLUSIVITY. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Amended and Restated Articles of Incorporation, the
Bylaws, any agreement, any vote of shareholders or disinterested directors, the
Statute, or otherwise, whether as to action in Indemnitee's official capacity or
otherwise.

1.3 INCLUDED COVERAGE. If Indemnitee was or is made a party,
or is threatened to be made a party, to or is otherwise involved (including,
without limitation, as a witness) in any Proceeding (as defined below), the
Company shall hold harmless and indemnify Indemnitee from and against any and
all losses, claims, damages (compensatory, exemplary, punitive or otherwise),
liabilities or expenses, including, without limitation, attorneys' fees, costs,
judgments, fines, ERISA excise taxes or penalties, witness fees, amounts paid in
settlement and other expenses incurred in connection with the investigation,
defense, settlement or approval of such Proceeding (collectively, "Damages").

1.4 DEFINITION OF PROCEEDING. For purposes of this Agreement,
"Proceeding" shall mean any completed, actual, pending or threatened action,
suit, claim, hearing or proceeding, whether civil, criminal, arbitrative,
administrative, investigative or pursuant to any alternative dispute resolution
mechanism (including an action by or in the right of the Company) and whether
formal or informal, in which Indemnitee is, was or becomes involved by reason of
the fact that Indemnitee is or was a director, officer, employee or agent of the
Company or that, being or having been such a director, officer, employee or
agent, Indemnitee is or was serving at the request of the Company as a director,
officer, employee, trustee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise (collectively, a "Related Company"),
including service with respect to an employee benefit plan, whether the basis of
such proceeding is alleged action (or inaction) by Indemnitee in an official
capacity as a director, officer, employee, trustee or agent or in any other
capacity while serving as a director, officer, employee, trustee or agent;
provided, however, that, except with respect to an Enforcement Action (defined
in Section 3.1 below, an action challenging the Company's determination that
Indemnitee is not entitled to indemnification pursuant to Section 1.5, and any
other action to enforce the provisions of this Agreement, "Proceeding" shall not
include any action, suit, claim or proceeding instituted by or at the direction
of Indemnitee unless such action, suit, claim or proceeding is or was authorized
by the Company's Board of Directors.

1.5 DETERMINATION OF ENTITLEMENT. In the event that a
determination of Indemnitee's entitlement to indemnification is required
pursuant to Section 23B.08.550 of the Statute or a successor statute or pursuant
to other applicable law, the appropriate decision-maker

<PAGE>

shall make such determination; provided, however, that Indemnitee shall
initially be presumed in all cases to be entitled to indemnification, that
Indemnitee may establish a conclusive presumption of any fact necessary to such
a determination by delivering to the Company a declaration made under penalty
of perjury that such fact is true and that, unless the Company shall deliver to
Indemnitee written notice of a determination that Indemnitee is not entitled to
indemnification within twenty (20) calendar days after the Company's receipt of
Indemnitee's initial written request for indemnification, such determination
shall conclusively be deemed to have been made in favor of the Company's
provision of indemnification, and that the Company hereby agrees not to assert
otherwise.

1.6 CONTRIBUTION. If the indemnification provided under
Section 1.1 is unavailable by reason of a court decision, based on grounds other
than any of those set forth in paragraphs (b) through (d) of Section 4.1, then,
in respect of any Proceeding in which the Company is jointly liable with
Indemnitee (or would be if joined in such Proceeding), the Company shall
contribute to the amount of Damages (including attorneys' fees) actually and
reasonably incurred and paid or payable by Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and Indemnitee on the other from the transaction from which such
Proceeding arose and (ii) the relative fault of the Company on the one hand and
of Indemnitee on the other in connection with the events that resulted in such
Damages as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of Indemnitee on the other shall be
determined by reference to, among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such Damages. The Company agrees that it would not be
just and equitable if contribution pursuant to this Section 1.6 were determined
by pro rata allocation or any other method of allocation that does not take
account of the foregoing equitable considerations.

1.7 SURVIVAL. The indemnification and contribution provided
under this Agreement shall apply to any and all Proceedings, notwithstanding
that Indemnitee has ceased to serve the Company or a Related Company and shall
continue so long as Indemnitee shall be subject to any possible Proceeding,
whether civil, criminal or investigative, by reason of the fact that Indemnitee
was a director or officer of the Company or serving in any other capacity
referred to in Section 1.4 of this Agreement.

2. EXPENSE ADVANCES.

2.1 GENERALLY. The right to indemnification of Damages
conferred by Section 1 shall include the right to have the Company pay
Indemnitee's expenses in any Proceeding as such expenses are incurred and in
advance of such Proceeding's final disposition (such right, an "Expense
Advance").

2.2 CONDITIONS TO EXPENSE ADVANCE. The Company's obligation to
provide an Expense Advance is subject to the following conditions:

2.2.1 UNDERTAKING. If the Proceeding arose in connection
with Indemnitee's service as a director or an officer of the Company (and not in
any other capacity in which

<PAGE>

Indemnitee rendered service, including service to any Related Company), then
Indemnitee or Indemnitee's representative shall have executed and delivered to
the Company an undertaking, which need not be secured and shall be accepted
without reference to Indemnitee's financial ability to make repayment, by or on
behalf of Indemnitee to repay all Expense Advances if it shall ultimately be
determined by a final, unappealable decision rendered by a court having
jurisdiction over the parties that Indemnitee is not entitled to be indemnified
under this Agreement or otherwise.

2.2.2 COOPERATION. Indemnitee shall give the Company such
information and cooperation as it may reasonably request and as shall be within
Indemnitee's legal power to so provide.

2.2.3 AFFIRMATION. Indemnitee shall furnish, upon request
by the Company and if required under applicable law, a written affirmation of
Indemnitee's good faith belief that any applicable standards of conduct have
been met by Indemnitee.

3. PROCEDURES FOR ENFORCEMENT

3.1 ENFORCEMENT. In the event that any claim for
indemnification, whether an Expense Advance or otherwise, is made hereunder and
is not paid in full within ninety (90) calendar days after written notice of
such claim is delivered to the Company, Indemnitee may, but need not, at any
time thereafter bring suit against the Company to recover the unpaid amount of
the claim (an "Enforcement Action"). It shall be a defense to any action for
which a claim for indemnification is made under Section 1 hereof (other than an
action brought to enforce a claim for expenses pursuant to Section 2 hereof,
provided that the required undertaking has been tendered to the Company) that
Indemnitee is not entitled to indemnification because of the limitations set
forth in Section 4 hereof.

3.2 PRESUMPTIONS IN ENFORCEMENT ACTION. In any Enforcement
Action, the following presumptions (and limitation on presumptions) shall apply:

(a) The Company expressly affirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on it hereunder
to induce Indemnitee to continue as a director or officer, as the case may be,
of the Company;

(b) Neither (i) the failure of the Company (including
the Company's Board of Directors, independent or special legal counsel or the
Company's shareholders) to have made a determination prior to the commencement
of the Enforcement Action that indemnification of Indemnitee is proper in the
circumstances nor (ii) an actual determination by the Company, its Board of
Directors, independent or special legal counsel or shareholders that Indemnitee
is not entitled to indemnification shall be a defense to the Enforcement Action
or create a presumption that Indemnitee is not entitled to indemnification
hereunder; and

(c) If Indemnitee is or was serving as a director or
officer of a corporation of which a majority of the shares entitled to vote in
the election of its directors is held by the Company or as a partner, trustee or
otherwise in an executive or management capacity in a

<PAGE>

partnership, joint venture, trust or other enterprise of which the Company or a
wholly owned subsidiary of the Company is a general partner or has a majority
ownership, then such corporation, partnership, joint venture, trust or other
enterprise shall conclusively be deemed a Related Company and Indemnitee shall
conclusively be deemed to be serving such Related Company at the Company's
request.

3.3 ATTORNEYS' FEES AND EXPENSES FOR ENFORCEMENT ACTION. In
the event Indemnitee is required to bring an Enforcement Action, the Company
shall pay all of Indemnitee's fees and expenses in bringing and pursuing the
Enforcement Action (including attorneys' fees at any stage, including on
appeal); provided, however, that the Company shall not be required to provide
such payment for such attorneys' fees or expenses if a court of competent
jurisdiction determines that each of the material assertions made by Indemnitee
in such Enforcement Action was not made in good faith.

4. LIMITATIONS ON INDEMNITY; MUTUAL ACKNOWLEDGMENT

4.1 LIMITATION ON INDEMNITY. No indemnity pursuant to this
Agreement shall be provided by the Company:

(a) On account of any suit in which a final,
unappealable judgment is rendered against Indemnitee for an accounting of
profits made from the purchase or sale by Indemnitee of securities of the
Company in violation of the provisions of Section 16(b) of the Securities
Exchange Act of 1934, as amended;

(b) For Damages that have been paid directly to
Indemnitee by an insurance carrier under a policy of insurance maintained by the
Company;

(c) With respect to remuneration paid to Indemnitee if
it shall be determined by a final judgment or other final adjudication that such
remuneration was in violation of law;

(d) On account of Indemnitee's conduct which is finally
adjudged by a court having jurisdiction in the matter to have been intentional
misconduct, a knowing violation of law or the RCW 23B.08.310 or any successor
provision of the Statute, or a transaction from which Indemnitee derived an
improper personal benefit;

(e) If a final decision by a court having jurisdiction
in the matter with no further right of appeal shall determine that such
indemnification is not lawful (and, in this respect, both the Company and
Indemnitee have been advised that the Securities and Exchange Commission (the
"SEC") believes that indemnification for liabilities arising under the federal
securities laws is against public policy and is, therefore, unenforceable and
that claims for indemnification should be submitted to appropriate courts for
adjudication); or

(f) In connection with any proceeding (or part thereof)
initiated by Indemnitee, or any proceeding by Indemnitee against the Company or
its directors, officers, employees or other indemnitees, unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the Company, (iii) such

<PAGE>

indemnification is provided by the Company, in its sole discretion, pursuant to
the powers vested in the Company under the Statute, or (iv) the proceeding is
initiated pursuant to Section 3.3 hereof.

4.2 PARTIAL INDEMNIFICATION. If Indemnitee is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of any Damages in connection with a Proceeding, but not, however, for
the total amount thereof, the Company shall nevertheless indemnify Indemnitee
for the portion of such Damages to which Indemnitee is entitled.

4.3 MUTUAL ACKNOWLEDGMENT. The Company and Indemnitee
acknowledge that, in certain instances, federal law or public policy may
override applicable state law and prohibit the Company from indemnifying
Indemnitee under this Agreement or otherwise. For example, the Company and
Indemnitee acknowledge that the SEC has taken the position that indemnification
is not permissible for liabilities arising under certain federal securities
laws, and federal legislation prohibits indemnification for certain ERISA
violations. Furthermore, Indemnitee understands and acknowledges that the
Company has undertaken or may be required in the future to undertake with the
SEC to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy to
indemnify Indemnitee.

5. NOTIFICATION AND DEFENSE OF CLAIM.

5.1 NOTIFICATION. Not later than thirty (30) days after
receipt by Indemnitee of notice of the commencement of any Proceeding,
Indemnitee shall, if a claim in respect thereof is to be made against the
Company under this Agreement, notify the Company of the commencement thereof;
but the omission so to notify the Company will not, however, relieve the Company
from any liability which it may have to Indemnitee under this Agreement unless
and only to the extent that such omission can be shown to have prejudiced the
Company's ability to defend the Proceeding.

If, at the time of the receipt of a notice of a claim pursuant to Section
5.1, the Company has director and officer liability insurance in effect, the
Company shall give prompt notice of the commencement of such proceeding to the
insurers in accordance with the procedures set forth in the respective policies.
The Company shall take all necessary or desirable action to cause such insurers
to pay, on behalf of the Indemnitee, all amounts payable as a result of such
Proceeding in accordance with the terms of such policies.

5.2 DEFENSE OF CLAIM. With respect to any such
Proceeding as to which Indemnitee notifies the Company of the commencement
thereof:

(a) The Company may participate therein at its own
expense;

(b) The Company, jointly with any other indemnifying
party similarly notified, may assume the defense thereof, with counsel
satisfactory to Indemnitee. After notice from the Company to Indemnitee of its
election so to assume the defense thereof, the Company

<PAGE>

shall not be liable to Indemnitee under this Agreement for any legal or other
expenses (other than reasonable costs of investigation) subsequently incurred
by Indemnitee in connection with the defense thereof unless (i) the employment
of counsel by Indemnitee has been authorized by the Company, (ii) Indemnitee
shall have reasonably concluded that there may be a conflict of interest
between the Company (or any other person or persons included in the joint
defense) and Indemnitee in the conduct of the defense of such action, (iii) the
Company shall not, in fact, have employed counsel to assume the defense of such
action, in each of which cases the fees and expenses of counsel shall be at the
Company's expense, or (iv) the Company is not financially or legally able to
perform its indemnification obligations. The Company shall not be entitled to
assume the defense of any proceeding brought by or on behalf of the Company or
as to which Indemnitee shall have reasonably made the conclusion provided for
in (ii) or (iv) above;

(c) The Company shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any
Proceeding effected without its written consent;

(d) The Company shall not settle any action or claim in
any manner that would impose any penalty or limitation on Indemnitee without
Indemnitee's written consent; and

(e) Neither the Company nor Indemnitee will unreasonably
withhold its, his or her consent to any proposed settlement.

6. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or to fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable, as provided
in this Section 6. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify or make contribution to Indemnitee to the full extent
permitted by any applicable portion of this Agreement that shall not have been
invalidated, and the balance of this Agreement not so invalidated shall be
enforceable in accordance with its terms.

7. GOVERNING LAW; BINDING EFFECT; AMENDMENT AND TERMINATION.

(a) This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Washington.

(b) This Agreement shall be binding on Indemnitee and on the
Company and its successors and assigns (including any transferee of all or
substantially all its assets and any successor by merger or otherwise by
operation of law), and shall inure to the benefit of Indemnitee and
Indemnitee's heirs, personal representatives and assigns and to the benefit of
the Company and its successors and assigns. The Company shall not effect any
merger, consolidation, sale of all or substantially all of its assets or other
reorganization in which it is not the surviving entity, unless the surviving
entity agrees in writing to assure all of the Company's obligations under this
Agreement.

<PAGE>

(c) No amendment, modification, termination or cancellation of
this Agreement shall be effective unless in writing signed by both parties
hereto.

8. ENTIRE AGREEMENT. This Agreement is the entire agreement of the
parties regarding its subject matter and supersedes all prior written or oral
communications or agreements.

9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.

10. AMENDMENTS; WAIVERS. Neither this Agreement nor any provision may
be amended except by written agreement signed by the parties. No waiver of any
breach or default shall be considered valid unless in writing, and no such
waiver shall be deemed a waiver of any subsequent breach or default.

11. NOTICES. All notices, claims and other communications hereunder
shall be in writing and made by hand delivery, registered or certified mail
(postage prepaid, return receipt requested), facsimile or overnight air courier
guaranteeing next-day delivery:

(a) If to the Company, to:

CelebrateExpress.com, Inc.
11220--120th Avenue Northeast
Kirkland, WA 98033
Attn: Gary Halperin

with a copy to:

Cooley Godward LLP
5200 Carillon Point
Kirkland, WA 98033
Attn: Christopher W. Wright, Esq.

(b) If to Indemnitee, to the address specified on the last page
of this Agreement or to such other address as either party may from time to time
furnish to the other party by a notice given in accordance with the provisions
of this Section 11. All such notices, claims and communications shall be deemed
to have been duly given if (i) personally delivered, at the time delivered, (ii)
mailed, five days after dispatched, (iii) sent by facsimile transmission, upon
confirmation of receipt, and (iv) sent by any other means, upon receipt.

12. DIRECTORS' AND OFFICERS' INSURANCE.

(a) The Company hereby covenants and agrees that, subject to
the provisions of Section 12(c) hereof, the Company shall, from a date no later
than the closing date of the Company's first registered public offering of the
Company's Common Stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended, maintain directors' and officers' insurance
in full force and effect so long as Indemnitee continues to serve as a

<PAGE>

director or officer of the Company and thereafter so long as Indemnitee shall
be subject to any possible Proceeding.

(b) In all policies of directors' and officers' insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits, subject to the same limitations, as are
accorded to the Company's directors or officers most favorably insured by such
policy.

(c) Notwithstanding the foregoing provisions of this Section
12, the Company shall have no obligation to maintain directors' and officers'
insurance if the Company determines in good faith that such insurance is not
reasonably available, the premium costs for such insurance are disproportionate
to the amount of coverage provided, or the coverage provided by such insurance
is limited by exclusions so as to provide an insufficient benefit.

13. SPECIFIC PERFORMANCE. The Company and Indemnitee agree herein
that a monetary remedy for breach of this Agreement, at some later date, will be
inadequate, impracticable and difficult of proof, and further agree that such
breach would cause Indemnitee irreparable harm. Accordingly, the Company and
Indemnitee agree that Indemnitee shall be entitled to temporary and permanent
injunctive relief to enforce this Agreement without the necessity of proving
actual damages or irreparable harm. The Company and Indemnitee further agree
that Indemnitee shall be entitled to such injunctive relief, including temporary
restraining orders, preliminary injunctions and permanent injunctions, without
the necessity of posting bond or other undertaking in connection therewith. Any
such requirement of bond or undertaking is hereby waived by the Company, and the
Company acknowledges that in the absence of such a waiver, a bond or undertaking
may be required by the court.

14. SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.

[Signature Page Follows]

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.

COMPANY:

CELEBRATEEXPRESS.COM, INC.

By:

Its:

INDEMNITEE:

Print name:

Address:

<PAGE>

INDIVIDUAL GUARANTY

Date: August 12, 1998

General Electric Capital Corporation
44 Old Ridgebury Road
Danbury, CT 06810

To induce you to enter into, purchase or otherwise acquire, now or
at any time hereafter, any promissory notes, security agreements, chattel
mortgages, pledge agreements, conditional sale contracts, lease agreements,
and/or may other documents or instruments evidencing, or relating to, any
lease, loan, extension of credit or other financial accommodation
(collectively "Account Documents" and each an "Account Document") to Birthday
Express, Inc., a corporation organized and existing under the laws of the
State of Washington ("Customer"), but without in any way binding you to do
so, the undersigned, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, does hereby guarantee to you,
your successors and assigns, the due regular and punctual payment of any sum
or sums of money which the Customer may owe to you now or at any time
hereafter, whether evidenced by an Account Document, on open account or
otherwise, and whether it represents principal, interest, rent, late charges,
indemnities, an original balance, an accelerated balance, liquidated damages,
a balance reduced by partial payment, a deficiency after sale or other
disposition of any leased equipment, collateral or security, or any other
type of sum of any kind whatsoever that the Customer may owe to you now or at
any time hereafter, and does hereby further guarantee to you, your successors
and assigns, the due, regular and punctual performance of any other duty or
obligation of any kind or character whatsoever that the Customer may owe to
you now or at any time hereafter (all such payment and performance
obligations being collectively referred to as "Obligations"). Undersigned
does hereby further guarantee to pay upon demand all losses, costs,
attorneys' fees and expenses which may be suffered by you by reason of
Customer's default or default of the undersigned.

This Guaranty is a guaranty of prompt payment and performance (and
not merely n guaranty of collection). Nothing herein shall require you to
first seek or exhaust any remedy against the Customer, its successors and
assigns, or any other person obligated with respect to the Obligations, or to
first foreclose, exhaust or otherwise proceed against any leased equipment,
collateral or security which may be given in connection with the Obligations.
It is agreed that you may, upon any breach or default of the Customer, or at
any time thereafter, make demand upon the undersigned and receive payment and
performance of the Obligations, with or without notice or demand for payment
or performance by the Customer, its successors or assigns, or any other
person. Suit may be brought and maintained against the undersigned, at your
election, without joinder of the Customer or any other person as parties
thereto. The obligations of each signatory to this Guaranty shall be joint
and several.

The undersigned agrees that its obligations under this Guaranty
shall be primary, absolute, continuing and unconditional, irrespective of and
unaffected by any of the following actions or circumstances (regardless of
any notice to or consent of the undersigned): (a) the genuineness, validity,
regularity and enforceability of the Account Documents or any other document:
(b) any extension, renewal, amendment, change, waiver or other modification
of the Account Documents or any other document; (c) the absence of, or delay
in, any action to enforce the Account Documents, this Guaranty or any other
document; (d) your failure or delay in obtaining any other guaranty of the
Obligations (including, without limitation, your failure to obtain the
signature of any other guarantor hereunder); (e) the release of, extension of
time for payment or performance by, or any other indulgence granted to the
Customer or any other person with respect to the Obligations by operation of
law or otherwise; (f) the existence, value, condition, loss, subordination or
release (with or without substitution) of, or failure to have title to or
perfect and maintain a security interest in, or the time, place and manner of
any sale or other disposition of any leased equipment, collateral or security
given in connection with the Obligations, or any other impairment (whether
intentional or negligent, by operation of law or otherwise) of the rights of
the undersigned: (g) the Customer's voluntary or involuntary bankruptcy,
assignment for the benefit of creditors, reorganization, or similar
proceedings affecting the Customer or any of its assets; or (h) any other
action or circumstances which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor.

This Guaranty may be terminated upon delivery to you (at your
address shown above) of a written termination notice from the undersigned.
However, as to all Obligations (whether matured, unmatured, absolute,
contingent or otherwise) incurred by the Customer prior to your receipt of
such written termination notice (and regardless of any subsequent amendment,
extension or other modification which may be made with respect to such
Obligations), this Guaranty shall nevertheless continue and remain
undischarged until all such Obligations are indefeasibly paid and performed
in full.

The undersigned agrees that this Guaranty shall remain in full force
and effect or be reinstated (as the case may be) if at any time payment or
performance of any of the Obligations (or any part thereof) is rescinded,
reduced or must otherwise be restored or returned by you, all as though such
payment or performance had not been made. If, by reason of any bankruptcy,
insolvency or similar laws affecting the rights of creditors, you shall be
prohibited from exercising any of your rights or remedies against the
Customer or any other person or against any property, then, as between you
and the undersigned, such prohibition shall be of no force and effect, and
you shall have the right to make demand upon, and receive payment from, the
undersigned of all amounts and other sums that would be due to you upon a
default with respect to the Obligations.

Notice of acceptance of this Guaranty and of any default by the
Customer or any other person is hereby waived. Presentment, protest demand,
and notice of protest, demand and dishonor of any of the Obligations, and the
exercise of possessory, collection or other remedies for the Obligations, are
hereby waived. The undersigned warrants that it has adequate

<PAGE>

means to obtain from the Customer on a continuing basis financial data and
other information regarding the Customer and is not relying upon you to
provide any such data or other information. Without limiting the foregoing,
notice of adverse change in the Customer's financial condition or of any
other fact which might materially increase the risk of the undersigned is
also waived. All

settlement, compromises, accounts stated and agreed balances made in good
faith between the Customer, its successors or assigns and you shall be
binding upon and shall not affect the liability of the undersigned.

Payment of all amounts now or hereafter owed to the undersigned by
the Customer or any other obligor for any of the Obligations is hereby
subordinated in right of payment to the indefeasible payment in full to you
of all Obligations and is hereby assigned to you as a security therefor. The
undersigned hereby irrevocably and unconditionally waives and relinquishes
all statutory, contractual, common law, equitable and all other claims
against the Customer, any other obligor for any of the Obligations, any
collateral therefor, or any other assets of the Customer or any such other
obligor, for subrogation, reimbursement, exoneration, contribution,
indemnification, setoff or other recourse in respect of sums paid or payable
to you by the undersigned hereunder, and the undersigned hereby further
irrevocably and unconditionally waives and relinquishes any and all other
benefits which it might otherwise directly or indirectly receive or be
entitled to receive by reason of any amounts paid by, or collected or due
from, it, the Customer or any other obligor for any of the Obligations, or
realized from any of their respective assets.

THE UNDERSIGNED HEREBY UNCONDITIONALLY WAIVES ITS RIGHT TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY
OR INDIRECTLY, THIS GUARANTY, THE OBLIGATIONS GUARANTEED HEREBY, ANY OF THE
RELATED DOCUMENTS, ANY DEALINGS BETWEEN US RELATING TO THE SUBJECT MATTER
HEREOF OR THEREOF, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN
US. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY, THE
OBLIGATIONS GUARANTEED HEREBY, OR ANY RELATED DOCUMENTS. IN THE EVENT OF
LITIGATION, THIS GUARANTY MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

As used in this Guaranty, the word "person" shall include any
individual, corporation, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization, or any government or any
political subdivision thereof.

This Guaranty is intended by the parties as a final expression of
the guaranty of the undersigned and is also intended as a complete and
exclusive statement of the terms thereof. No course of dealing, course of
performance or trade usage, nor any paid evidence of any kind, shall be used
to supplement or modify any of the terms hereof. Nor are there any conditions
to the full effectiveness of this Guaranty. This Guaranty and each of its
provisions may only be waived, modified, varied, released, terminated or
surrendered, in whole or in part, by a duly authorized written instrument
signed by you. No failure by you to exercise your rights hereunder shall give
rise to any estoppel against you, or excuse the undersigned from performing
hereunder. Your waiver of any right to demand performance hereunder shall not
be a waiver of any subsequent or other right to demand performance hereunder.

This Guaranty shall not be discharged or affected by the death of
any of the undersigned, but shall bind their respective heirs, executors,
administrators, and assigns, and the benefits thereof shall extend to and
include your successors and assigns. In the event of default hereunder, you
may at any time inspect undersigned's records, or at your option, undersigned
shall furnish you with a current independent audit report.

If any provisions of this Guaranty are in conflict with any
applicable statute, rule or law, then such provisions shall be deemed null
and void to the extent that they may conflict therewith, but without
invalidating any other provisions hereof.

THIS GUARANTY IS BEING EXECUTED BY THE UNDERSIGNED INDIVIDUALS IN
THEIR OWN CAPACITY AND NOT AS A DIRECTOR, OFFICER, EMPLOYEE, OR
REPRESENTATIVE FOR ANY CORPORATION OR OTHER ORGANIZATION.

WITNESS our hands on the day and year above written.

Signed in the presence of:
<TABLE>
<S> <C>

- ------------------- -----------------
Print Name:
Address:

Telephone No. :
Social Security No.

(Sign and print your name only. DO NOT
add any title or corporate office).
</TABLE>

<PAGE>

LEASE PROVISIONS & EXHIBITS

LANDLORD: HIGHWOODS REALTY LIMITED PARTNERSHIP

TENANT: BIRTHDAY EXPRESS.COM, INC. LEASE DATE:

BUILDING ADDRESS: 488 Gallimore Dairy Road, Suite D, Greensboro, North
Carolina 27409

NOTICES ADDRESS: 11220 120th Avenue, N.E., Kirkland, Washington 98033, Attn:
Mike Jewell, President

RENTABLE SQUARE FOOTAGE: 32,000

LEASE TERM: Five (5) years RENT COMMENCEMENT: December 1, 1999

TERM: MONTHLY RENT: ANNUAL RENT: PRICE P.R.S.F.:
12/01/99 - 11/30/01 $10,586.67 $127,040.00 $3.97
12/01/01 - 11/30/03 $11,013.33 $132,160.00 $4.13
12/01/03 - 11/30/04 $11,466.67 $137,600.00 $4.30

ALL RENTS ARE DUE ON THE 1ST DAY OF EACH MONTH

OPTION TO TERMINATE: Provided Tenant is not in default hereunder, Tenant shall
have the option to terminate this Lease on the third anniversary of the
Commencement Date, upon a prior one hundred twenty (120) day written notice to
Landlord and a payment to Landlord of four (4) months rent and unamortized
Tenant Improvements totaling forty thousand dollars and 00/100 ($40,000.00).

RIGHT TO RELOCATE: Provided Tenant is not in default hereunder, Tenant shall
have the right to relocate to other available properties (i.e., not under lease
to other tenants) owned by Highwoods, or its controlled affiliates, at least
twenty five percent (25%) greater in size, without penalty, providing a prior
ninety (90) day written notice of its intent to relocate. The economic terms
pursuant to which the relocation space will be leased shall be subject to mutual
agreement, failing which the notice of intent to relocate will be deemed
rescinded. The other lease terms shall be substantially the same as set forth in
this Lease.

FIRST RIGHT OF REFUSAL: Provided Tenant is not in default hereunder, Tenant
shall have a First Right of Refusal on all contiguous space in the Building.
Tenant shall have five (5) business days to respond in writing after receipt
from Landlord of a written notice of third party offer. Tenant's failure to
agree in writing within five (5) business days, to lease the space on the same
terms as set forth in the third party offer, shall nullify all of Tenant's
rights to that space. Tenant will retain a First Right of Refusal on all
contiguous space in the future, upon availability within the Building.

OPTION TO RENEW: Provided Tenant is not in default hereunder, Tenant shall have
two (2) options to renew this Lease for a period of five (5) years each, upon
the same terms and conditions contained herein, save and except any option to
renew, and upon a rental rate equal to the Fair Market Value at the time of the
renewal. Tenant shall provide Landlord ninety (90) day prior written notice of
its intent to exercise said option.

SECURITY DEPOSIT: $10,586.67 ($5,293.33 to be returned to Tenant after year
two (2))

<PAGE>

PRO-RATA %: 37.04%

EXPENSE PASS THRU'S:
Taxes: Entire Cost
Insurance: Entire Cost
Common Area Maintenance: Entire Cost

PAID DIRECTLY BY TENANT:
x Janitorial x Extermination
x Garbage x Light Bulbs
x Water/Sewer x Interior Maintenance
x Security x Signage
x Electrical/Gas x Plate Glass Breakage
x HVAC x Fire Extinguisher Maintenance

EXHIBITS ATTACHED:
x A Legal Description x D Insurance Requirements
x B Building Layout/Specs x E Parking Rules & Regulations
x C Rules & Regulations x F Signage

<PAGE>

NORTH CAROLINA )
) LEASE AGREEMENT
GUILFORD COUNTY )

THIS LEASE, made and entered into this the 12 day of November, 1999,
by and between HIGHWOODS REALTY LIMITED PARTNERSHIP, a North Carolina Limited
Partnership, hereinafter referred to as "Landlord" and BIRTHDAY EXPRESS.COM,
INC., a Washington Corporation, hereinafter referred to as "Tenant".

RECITALS

Landlord is seized of the business premises described herein, having
space therein to let. Tenant desires to lease such space from Landlord. The
parties desire to enter into a Lease Agreement defining their respective rights,
duties and liabilities relating to the premises.

IN CONSIDERATION of the mutual covenants contained herein, the parties
agree as follows:

1. DESCRIPTION OF PREMISES: Landlord is the owner of a 86,400 rentable
square foot building (the "Building") located at 488 Gallimore Dairy Road,
Guilford County, Greensboro, North Carolina, being more fully described on
Exhibit "A" attached hereto and hereby made a part hereof.

The Leased Space shall consist of that portion of said Building and
other improvements in the amount of 32,000 rentable square feet, as outlined in
red on Exhibit "B" attached hereto, said space together with all parking and
other common area rights is hereinafter referred to as the "Premises". The
entire Leased Space Premises shall be for the exclusive use of Tenant, its
agents, servants, employees and invitees for office and related uses. The Leased
Space is more commonly known as Suite D.

Landlord represents and warrants that it is the owner in fee simple of
the Premises and that there are no covenants, restrictions or zoning or other
regulations which prevent, restrict, or are violated by, this Lease or the use
of the Premises as contemplated herein.

2. TERM: The term of this Lease shall be for a period of five (5)
years, beginning December 1, 1999, the "Commencement Date", through November 30,
2004, the "Termination Date". In the event Landlord shall permit Tenant to take
possession of the Premises prior to the Commencement Date referenced above, all
the terms and conditions of this Lease shall apply. If Landlord cannot deliver
the Premises to the Tenant after the Commencement Date set forth herein, then
rent will not commence until such date as Tenant takes possession of the
Premises. The above, however, is subject to the provision that the period
permitted for the delay of delivery of possession of the Premises shall not
exceed forty five (45) days after the Commencement Date set forth in the first
sentence of this Section 2 (except that those delays beyond Landlord's control,
including, without limitation, those encompassed in the meaning of the term
"force majeure", or caused by Tenant (the "Delays") shall be excluded in
calculating such period). If Landlord does not deliver possession to Tenant
within such period, then Tenant may terminate this Lease by written notice to
Landlord; provided, that written notice shall be ineffective if given after
Tenant takes possession of any part of the Premises, or if given more than one
hundred (100) days after the original Commencement Date plus the time of any
Delays.

3. BASE RENT: Tenant shall pay base rental for the Premises leased as
follows:

TERM: MONTHLY RENT: ANNUAL RENT: PRICE P.R.S.F.:
- ----- ------------- ------------ ---------------
12/01/99 - 11/30/01 $10,586.67 $127,040.00 $3.97
12/01/01 - 11/30/03 $11,013.33 $132,160.00 $4.13
12/01/03 - 11/30/04 $11,466.67 $137,600.00 $4.30

All rental payments are payable in advance on the first (1st) day of
each month without prior offset or deduction to Landlord at Landlord's address
specified in Section 41 hereof entitled "NOTICES" or at such other place as
Landlord may direct. In the event any Tenant check tendered to Landlord in
payment of its obligations hereunder is returned by Tenant's bank for
insufficient funds, any and all charges incurred by Landlord as a result shall
be billed to Tenant by Landlord as additional rent hereunder.

4. OCCUPANCY AND ACCEPTANCE OF PREMISES: Landlord shall deliver actual
possession of the Premises to Tenant on the Commencement Date according to the
specifications indicated in Exhibit "B" attached hereto and by this reference
made a part hereof, provided Landlord is able to furnish to Tenant evidence
obtained from local governmental authorities having jurisdiction that the
Premises have been duly inspected and approved for Tenant's occupancy. If the
Premises are ready for Tenant's occupancy prior to the Commencement Date,
Landlord shall so notify Tenant and Tenant may accept such early occupancy,
provided, however, in such event Tenant shall pay to Landlord base rental
calculated on a daily basis assuming a 365 day year, for each day Tenant
shall occupy the Premises prior to the Commencement Date. If permission is
given to Tenant to occupy the Demised Premises prior to the date of
commencement of the term hereof, such occupancy shall be subject to all the
provisions of this Lease except those relating to the term of this Lease.

Upon Tenant's occupancy of the Premises Tenant shall render to
Landlord, within thirty (30) days of such occupancy date, a written notice
listing each and every respect in which the Premises are incomplete according to
such building specifications as noted above; Landlord shall then have sixty (60)
days from its receipt of said notice to complete those items contained in such
listing. The existence of such items shall not alter the Tenant obligation to
pay rent pursuant to Section 3, except to the extent they impair Tenant's
ability to conduct its business.

During Tenant's move-in, a representative of the Tenant must be on-site
with any moving company to ensure proper treatment of Premises. Elevators in
multi-story office buildings must remain in use for the general public during
business hours. Any specialized use of elevators must be coordinated with the
Landlord's Property Manager. All packing materials and refuse must be properly
disposed of. Any damage or destruction due to moving caused by Tenant or
Tenant's moving company will be the sole responsibility of the Tenant.

Landlord warrants that the Premises currently comply with all laws,
including the Americans with Disabilities Act ("ADA"). Tenant shall, at its own
expense, comply, in its use of the Premises, with all future governmental
regulations to include those relating to the ADA.

5. AUDIT: If Tenant disputes the amount of operating expenses as set
forth in the invoice from the Landlord within forty-five days after receipt
thereof, Tenant shall have the right upon notice to have Landlord's book and
records relating to operating expenses audited by a qualified professional
selected by Tenant or by Tenant itself. If after such audit Tenant still
disputes the amount of operating expenses, a certification as to the proper
amount shall be made by an independent certified public accountant in
consultation with Landlord's and Tenant's professionals, which certification
shall be final and conclusive, absent manifest error. If such audit reveals
that operating expenses were overstated in the calendar year audited Landlord
shall within thirty (30) days after the certification pay to Tenant the amount
of any overstatement which it had collected from Tenant, and if the
overstatement is greater than three percent (3%), Landlord shall pay all of
Tenant's review and audit costs. However, if such certification does not show
that Landlord had made such an overstatement then Tenant shall pay both the
costs of its professional as well as the reasonable charges of Landlord's
independent certified public accountant engaged to determine the correct
amount of operating expenses. If the certification shows that Landlord has
undercharged Tenant then Tenant shall within thirty (30) days pay to Landlord
the amount of any undercharge.

Books and records necessary to accomplish any audit permitted under
this Section shall be retained for twelve months after the end of each calendar
year, and on receipt of notice of Tenant's dispute of the operating expenses
shall be made available to Tenant to conduct the audit, which may be either at
the Premises, or at Landlord's office in Winston-Salem, North Carolina.

In the event that the Tenant elects to have a professional audit
Landlord's operating expenses as provided in this Lease, such audit must be
conducted by an independent nationally or regionally recognized accounting firm
that is not being compensated by Tenant on a contingency fee basis. All
information obtained through such audit as well as any compromise, settlement or
adjustment reached as a result of such audit shall be held in strict confidence
by Tenant and its officers, agents, and employees and as a condition to such
audit, the Tenant's auditor shall execute a written agreement agreeing that the
auditor is not being compensated on a contingency fee basis and that all
information obtained through such audit as well as any compromise, settlement or
adjustment reached as a result of such audit, shall be held in strict confidence
and shall not be revealed in any manner to any person except upon the prior
written consent of the Landlord, which consent shall not be unreasonably
withheld in Landlord's sole discretion, or if required pursuant to any
litigation between Landlord and Tenant materially related to the facts disclosed
by such audit, or if required by law.

No subtenant shall have any right to conduct an audit and no assignee
shall conduct an audit for any period during which such assignee was not in
possession of the Premises.

6. LATE PAYMENT OF RENT: All monthly installments of rent herein
stipulated are due in advance without prior offset or deduction on the first
(1st) day of each month during the term hereof, as set forth in Section 3
hereof entitled "BASE RENT". All rents not received on the first (1st) day of
the month shall be deemed "past due" and all rents not received by the
Landlord by the tenth (10th) day of each month during the term hereof shall be
subject to a late charge of 5% of the amount due.

In any such event, Landlord shall so invoice Tenant for any such
charge, which shall become due immediately upon Tenant's receipt of the invoice
but in no event later than twenty (20) days from the invoice date.

Once any payment of rent is thirty (30) days past due, the total due,
including the 5% charge, shall bear interest at eighteen (18) percent per annum.

7. NO ACCORD AND SATISFACTION: No acceptance by Landlord of a lesser
sum than the Base Rent, late charges, additional rent and other sums then due
shall be deemed to be other than on account of the earliest installment of
such payments due, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice
to Landlord's right to recover the balance of such installment or pursue any
other remedy in this Lease provided.

8. USE: Premises shall be used for such office, assembly, storage,
distribution and manufacturing activities as are allowed under existing zoning
and recorded covenants. Landlord and Tenant both acknowledge that the extent
and height to which Tenant can store and rack goods and materials is dependent
on the type, volume, and density that goods and materials are stored. Landlord
makes no representations as to the ability and height to which goods and
materials may be stored in the Premises. For clarification, Tenant should
consult current local fire codes. Tenant shall not conduct, or allow to be
conducted, on or within the Premises any business or permit any act which in
any way increases the cost of fire insurance on the building or constitutes a
nuisance or is contrary to or in violation of the laws, statutes or ordinances
of local state or federal governments having jurisdiction and Tenant agrees to
comply, at Tenant's expense, with all governmental regulations to include
those relating to the Americans with Disabilities Act (ADA), but Landlord
shall be responsible for the Building and the Premises complying with all
laws, regulations, ADA, etc. Any violation of this provision by Tenant shall
be a breach of this Lease.

It is hereby agreed and understood that the following functions are
prohibited outside the building walls or in the parking or service areas:
storage of any item; manufacture or assembly of any product; refuse
accumulation; rallies or meetings; any conduct of business. Personal property of
Tenant of any type or size shall be permitted outside the Premises only during
times of loading or unloading operations.

9. QUIET ENJOYMENT: The Landlord covenants that Tenant, upon paying the
Landlord the rental stipulated herein together with all other charges reserved
herein, and performing the covenants, promises and agreements herein, shall
peaceably and quietly have, hold and enjoy the Premises and all rights,
easements, appurtenances and privileges belonging or appertaining thereto,
during the full term hereby granted and any extensions or renewals thereof.

10. COMMON AREAS: As used in this Lease, Common Areas shall mean all
areas of the entire building and appurtenances which are available for the
common use of tenants and which are not held for the exclusive use of the
Tenant or other tenants, including but not limited to: the parking areas and
entrances and exits thereto, driveways and truck service ways, sidewalks,
landscaped areas, access roads, building equipment rooms, and other areas and
facilities provided for the common or joint use and benefit of occupants of
the Building, their employees, agents, customers and invitees. Landlord
reserves the right, from time to time, to reasonably alter said common areas,
including converting common areas into leasable areas, constructing additional
parking facilities in the common areas, increasing or decreasing common area
land and/or facilities and to exercise control and management of the common
areas and to establish, modify, change and enforce such reasonable Rules and
Regulations as Landlord in its discretion may deem desirable for the
management of the Building. In the event of an increase (accepting an increase
that will benefit the Tenants) or a decrease in the Common Area, Tenant's
percentage share will be adjusted accordingly.

Tenant agrees to abide by and conform to such rules and regulations,
as do not unreasonably interfere with Tenant's business, and shall be
responsible for the compliance with same by its employees, agents, customers and
invitees. The failure of Landlord to enforce any of such Rules and Regulations
against Tenant or any other tenant shall not be deemed to be a waiver of same.

Landlord shall have the right to restrict or close all or any portion
of the common areas at such times and for such periods as may, in the reasonable
opinion of the Landlord, be necessary to prevent a dedication thereof, or to
preserve the status thereof as private property, or to prevent the accrual of
any rights in any person; and Landlord may also close said common areas for
purposes of maintenance and repair as may be required from time to time.

Tenant shall pay to Landlord its proportionate share of the entire
common area maintenance cost. Tenant's proportionate share shall be the relation
of Tenant's 32,000 rentable square foot area to the 86,400 rentable square foot
of total building area, or 37.04%, to be adjusted if any building area is
converted to common area. Common Area expenses shall include, but are not
limited to the following incurred by Landlord with respect to the Building: snow
removal; window washing; painting; security services; any alteration or other
work required by any governmental authority as a result of laws hereafter
enacted or effective, not attributable primarily to the particular use made by a
particular tenant to include costs expended by Landlord in order to place and
keep the Building and common areas in compliance with the Americans with
Disabilities Act (ADA) and any other legislation by any governmental body,
casualty, boiler and machinery, loss of rents insurance and general and excess
liability insurance; cleaning, striping, sealing and minor repairs to parking
areas, driveways, sidewalks and loading areas (but not replacement); lawn care
and landscaping maintenance; management and administrative fees; and all other
expenses paid in connection with the operation of the Building chargeable
against income. Landlord, upon written demand by Tenant therefor, but not sooner
than ninety (90) days after the expiration of a lease year shall furnish Tenant
a summary schedule of Common Area Expenses for such lease year if there shall
occur therein an increase in Common Area Expenses as aforesaid.

During the term hereof, Landlord shall notify Tenant of its
proportionate share due for such cost. Landlord shall have the option through
the Lease term to require Tenant's reimbursement on either a monthly, quarterly
or annual basis, at Landlord's sole discretion, to become due and payable as
additional rent within ten (10) days, if invoiced monthly or thirty (30) days,
if invoiced quarterly or annually, from the date of invoice. Tenant shall pay to
Landlord a monthly amount equal to one thousand three hundred thirty three
dollars and 33/100 ($1,333.33). This estimated amount shall cover the cost of
Common Area Maintenance Expenses, which will be trued-up at the end of each
calendar year.

11. ASSIGNMENT AND SUBLETTING: Tenant covenants and agrees that neither
this Lease nor the term hereby granted, nor any part thereof, will be
assigned, mortgaged, pledged, encumbered or otherwise transferred
(individually and collectively referred to as a "Transfer"), by operation of
law or otherwise, and that neither the Premises, nor any part thereof, will
be sublet or advertised for subletting or occupied, by anyone other than
Tenant, or for any purpose other than as hereinabove set forth, without the
prior written consent of Landlord not to be unreasonably withheld. Landlord's
withholding of consent shall be deemed reasonable if the use or occupancy of
the Premises by such sublessee or assignee is likely to increase the
likelihood of Landlord being responsible for any costs of compliance with the
Americans with Disabilities Act (ADA) or any other legislation by any
governmental body. Notwithstanding the foregoing:

(a) Any Transfer to any corporation or entity controlled (as
hereinafter defined) by Tenant, or to the surviving corporation in the event
of a consolidation or merger to which Tenant shall be a party and any Major
Change (as hereinafter defined) must be approved by Landlord in accordance
with the first paragraph of Section 11, above and, without such approval,
shall at Landlord's election be void and/or constitute an Event of Default.
The term "control" or "controlled" shall mean ownership of more than fifty
percent (50%) of the voting stock of a corporation or more than fifty percent
(50%) of all of the legal and equitable interest in any other business
entity. The term "Major Change" as used herein shall mean any reorganization,
recapitalization, refinancing or other transaction or series of transactions
involving Tenant which results in the net worth of Tenant and its
consolidated subsidiaries immediately after such transaction(s) being less
than fifty percent (50%) of the net worth of Tenant and its consolidated
subsidiaries as of the end of the fiscal year immediately preceding the date
of this Lease.

(b) A sale, transfer or assignment of a general partner's interest
or any portion thereof in Tenant, if Tenant is a partnership, or a sale,
transfer or assignment of twenty-five percent (25%) or more of the voting
stock of Tenant if Tenant is a corporation, whether such sale, transfer or
assignment occurs in a single transaction or a series of transactions, shall
be deemed a Transfer and require Landlord's consent in accordance with the
procedures specified in the first paragraph of Section 11, above above;
provided, however, that notwithstanding any provision of this Lease to the
contrary, a sale or transfer of the capital stock of Tenant shall not be
deemed a Transfer if (i) such sale or transfer occurs in connection with any
bona fide financing or capitalization for the benefit of Tenant, or (ii)
Tenant becomes a publicly traded corporation.

(c) Subject to subsection (b) above, if Tenant is a corporation,
limited liability company, partnership, or similar entity, and if the entity,
if any, which owns or controls a majority of the voting shares/rights at any
time changes for any reason, such change of ownership or control shall
constitute a Transfer; provided that if Tenant's net worth after such change
in the ownership or control of a majority of the voting shares/rights is
equal to the greater of Tenant's net worth at the date of this Lease or the
net worth of the Tenant on the day prior to such change in the ownership or
control of a majority of the voting shares/rights, and the provisions of
clauses (1), (4) and (5) of subsection (d) below are otherwise satisfied,
such change of ownership or control shall constitute a "Permitted Transfer."
Furthermore, a change in the ownership or control of a majority of the voting
shares/rights of Tenant shall not constitute a Transfer so long as Tenant is
an entity whose outstanding stock is listed on a recognized security
exchange, or if at least eighty percent (80%) of its voting stock is owned by
another entity, the voting stock of which is so listed.

(d) Notwithstanding anything in this Paragraph 11 to the contrary,
use of a portion of the Premises by any of Tenant's Affiliates shall not be
deemed a Transfer requiring Landlord's consent. For purposes of this Lease,
the term "Affiliate" shall mean any corporation, limited liability company or
partnership which controls, is controlled by, or is under common control with
Tenant. In addition, Tenant may assign its entire interest under this Lease
to a successor to Tenant by purchase, merger, consolidation or reorganization
without the consent of Landlord, provided that all of the following
conditions are satisfied (a "Permitted Transfer"): (1) Tenant is not in
default under this Lease; (2) Tenant's successor shall own all or
substantially all (which for purposes of this Lease shall be deemed to be at
least eighty percent (80%)) of the assets of Tenant; (3) Tenant's successor
shall have a net worth which is at least equal to the greater of Tenant's net
worth at the date of this Lease or Tenant's net worth as of the day prior to
the proposed purchase, merger, consolidation or reorganization; (4) the use
of the Premises by such successor to Tenant will not violate the Permitted
Use; and (5) Tenant shall give Landlord written notice at least 15 days prior
to the date the proposed purchase, merger, consolidation or reorganization
actually occurs. Tenant's notice to Landlord shall include information and
documentation showing that each of the above conditions has been satisfied.
If requested by Landlord, Tenant's successor shall sign a commercially
reasonable form of assumption agreement.

12. LANDLORD'S REPAIRS: The Landlord, at its sole cost and expense,
shall maintain and keep in good condition and repair the roof, parking areas
and exterior landscaping, foundation, exterior and supporting walls of the
Building together with repairs necessary due to structural defects, if any.
Landlord shall also maintain and repair, at its sole cost and expense, the
electrical wiring (from the utility company's distribution lines to the
Premises, including the electrical service exclusive of fuses, fuse blocks,
breaker units or meter deposits) servicing the Premises, the water line
servicing the Premises, and the sanitary sewer lines and/or septic tank
servicing the Premises. However, the Landlord shall not be responsible for
such maintenance and repairs in the event the same are required as a result
of the gross negligence or willful act of the Tenant or its clients,
customers, licensees, assignees, agents, employees or invitees and further,
which event the cost of such maintenance and repairs so required shall be the
sole responsibility of the Tenant.

13. TENANT REPAIRS; ALTERATIONS: The Tenant shall effect, at its sole
cost and expense, all maintenance and repairs to the following components of
said Premises, to the extent solely serving the Leased Space: the floor and
wall coverings (whether paint or otherwise); lights, light fixtures, and
light bulbs; interior and exterior doors and door locks, overhead doors;
ceiling tiles; water heaters; windows, frames, glass, window blinds; all
heating, ventilating and air conditioning equipment; all plumbing and
electrical not described in Section 12 above; security systems and any other
improvements not required to be maintained by Landlord in the immediately
preceding Section hereof, except in the event the improvements installed by
Landlord may be defective in material or labor in installation. All such
repairs and replacements required by this section shall be made only by
persons approved in advance by Landlord, not to be unreasonably withheld.
Should Tenant fail to comply with the maintenance and repairs required above,
the Landlord shall have the right to enter on the Premises and make necessary
repairs and perform and maintenance required. Any cost incurred by Landlord
shall be paid by the Tenant at cost plus an aggregate of ten percent (10%)
for overhead and for profit.

Tenant shall submit to the Landlord for Landlords' prior written
approval all of the plans and specifications for any alterations, additions
or improvements in and to the Premises which Tenant may deem desirable or
necessary in its use and occupancy thereof. Such alterations, additions or
improvements shall not be made without the prior written approval of
Landlord, not to be unreasonably withheld. If any changes are made to the
plans by the Landlord, Tenant shall review final plans and provide written
approval prior to Landlord starting upfit construction. All such alterations,
additions or improvements shall be made in accordance with applicable city,
county, state and federal laws and ordinances, and building and zoning rules
and regulations and all present and future governmental regulations relating
to the Americans with Disabilities Act (ADA). Landlord's approval hereunder
shall not be deemed a warranty that Tenant's alterations meet such ADA
regulations, however, such consent shall carry a requirement that such
alterations will be constructed by Tenant, at its own expense, in full
compliance with all existing ADA governmental regulations. Tenant shall be
liable for all damages or injuries which may result to any person or property
by reason of or to the extent caused by any alterations, additions or
improvements made by it to the Premises and shall hold the Landlord harmless
with respect thereto. All additions and improvements made by the Tenant shall
become a part of the Premises and shall, upon the termination or expiration
of this Lease, belong to Landlord except as may be otherwise set forth in a
letter agreement or other written instrument executed by the parties hereto
and attached to this Lease as an amendment hereto and thereby made a part
hereof.

In the event Tenant performs any alterations, additions or
improvements to the Premises, Tenant agrees that it shall provide to Landlord
a reproducible set of as-built plans for Landlord's files.

If Tenant fails to perform Tenant's obligations under this Section,
or if Tenant fails to exercise reasonable diligence in making necessary
repairs and replacements, Landlord may at its option enter upon the Premises
after ten (10) days prior written notice to Tenant, perform such obligation
on Tenant's behalf, and the cost thereof together with interest thereon shall
become due and payable as additional rental to Landlord together with
Tenant's next rental installment.

At Landlord's option, exercised in writing at time of approval,
Landlord may require that Tenant remove any or all alterations or
improvements at Tenant's expense upon termination of the Lease.

14. HEATING, VENTILATION AND AIR CONDITIONING: The Tenant shall at its
sole cost and expense keep in force a maintenance contract for the entire
term of this Lease on all heating, air conditioning and ventilation equipment
pertaining solely to the Premises, providing for service inspections to be
done on a semi-annual basis. Tenant shall submit a copy of said contract to
Landlord within ten (10) days after occupancy of the Premises. Landlord must
reasonably approve the terms of the maintenance contract and the firm Tenant
chooses as the maintenance contractor.

Landlord shall be responsible for replacement of any defective motor
or compressor within the system provided it is not as a result of negligence
or willful act of the Tenant, its clients, customers, licensees, assignees,
agents, employees, or invitees. However, Tenant's failure to provide the
required maintenance contract constitutes a negligent or willful act and
whereby releases Landlord form any and all liability for said equipment.

Upon termination of this Lease, Tenant will deliver the HVAC
equipment in good operating condition, normal wear and tear excepted.

15. FEDERAL REGULATION AND/OR PROHIBITION OF CFC'S: Due to an
environmental threat that the earth's ozone layer has deteriorated, there is
international concern for the control of Chlorofluorocarbons ("CFC's") and
possible ban thereof. Future legislation could mandate:

1) New maintenance standards and procedures on HVAC equipment in order
to reduce the amount of freon existing in the system; or

2) Conversion of the equipment in order to accommodate the use of a
substitute chemical; or

3) Replacement of the equipment in the event the equipment does not
comply with the required performance and maintenance standards.

Landlord and Tenant hereby acknowledge that any costs associated
with the above shall be considered a maintenance item and included in common
area maintenance charges.

16. SUBORDINATION AND ATTORNMENT: Tenant agrees that this Lease shall be
subject and subordinate to any mortgages or Deeds of Trust now or hereafter
placed upon the Premises and to all modifications thereto, and to all present
and future advances made with respect to any such mortgage or deed of trust.
Tenant agrees, at any time during the term of this Lease, to execute any and
all documents necessary to effectuate this subordination, which Landlord may
request. Tenant agrees to attorn to the mortgagee, trustee, or beneficiary
under any such mortgage or deed of trust or the purchaser at a sale pursuant
to the foreclosure thereof. In the event of the sale, assignment, or transfer
by Landlord of its interest in the Premises to a successor in interest who
expressly assumes the obligations of the Landlord hereunder, the Landlord
shall thereupon be released or discharged from all of its covenants and
obligations hereunder, except such obligations as shall have accrued prior to
any such sale, assignment or transfer; and Tenant agrees to look solely to
any successor in interest of the Landlord for performance of any such
obligations. Tenant shall have ten (10) days from its receipt of Landlord's
request to deliver any such fully executed documents to Landlord. Tenant's
failure to execute and deliver any such documents shall constitute a default
hereunder. Notwithstanding any of the foregoing, Tenant's quiet possession
and enjoyment of the Premises shall not be disturbed so long as Tenant
performs its obligations under this Lease.

17. CHANGE IN OWNERSHIP OF PREMISES: If the ownership of the Premises or
the name or address of the party entitled to receive rent hereunder shall be
changed, the Tenant may, until receipt of proper notice of such change(s),
continue to pay the rent and other charges herein reserved accrued and to
accrue hereunder to the party to whom and in the manner in which the last
preceding installment of rent or other charge was paid, and each such payment
shall, to the extent thereof, exonerate and discharge the Tenant.

18. CONDEMNATION: If the whole of the Building, or such substantial
portion thereof, or of the parking for the Building, as will make the
Premises unusable (or will substantially impair the use) for the purposes
referred to herein, shall be condemned by any legally constituted authority
for any public use or purpose, then in either of said events the term hereby
granted shall cease from the time when possession thereof is taken by the
condemning authority, and rental shall be accounted for as between Landlord
and Tenant as of that date. In the event the portion condemned is such that
the remaining portion including parking can, after restoration and repair, be
made usable for Tenant's purposes, then this Lease shall not terminate;
however, the rent shall be reduced equitably to the amount of the Premises
and parking taken. In such an event, Landlord shall make such repairs as may
be necessary as soon as the same can be reasonably accomplished. Such
termination, however, shall be without prejudice to the rights of either
Landlord or Tenant, or both, to recover compensation and damage caused by
condemnation from the condemnor. It is further understood and agreed that
neither the Tenant nor Landlord shall have any rights in any award made to
the other by any condemnation authority.

Any minor condemnation or taking of the Premises for the
construction or maintenance of streets or highways shall not be considered a
condemnation or taking for the purposes of this Section 18 so long as the
Premises shall not be materially or adversely affected, ingress and egress
for the remainder of the Premises shall be adequate for the business of
Tenant, and the provisions of any loan documents of Landlord's lender which
encumber the Premises are complied with.

19. RIGHT OF LANDLORD TO ENTER; "FOR RENT" SIGNS: The Tenant agrees that
the Landlord or its agents may at all reasonable times after reasonable
notice, except in case of emergency, enter upon the Premises for the purpose
of inspection or repair of the Building or the building systems and such
other purposes as Landlord may deem necessary or proper for the reasonable
protection of Landlord's interest in the Premises. In addition, the Landlord
may enter the Premises at all reasonable times, after reasonable notice, to
exhibit the Premises to prospective purchasers. During the two (2) months
immediately preceding the final expiration of the term created hereunder or
any renewal thereof, the Landlord, may exhibit the Premises to prospective
tenants and/or affix a notice that the premises are for rent; such notice
shall not be greater than four (4) square feet in area, and shall be affixed
to a suitable part thereof, exclusive of doors and windows and so as not to
obstruct the Tenant's signs.

20. TAXES: Landlord agrees to pay before they become delinquent all
taxes, assessments and governmental charges of any kind and nature whatsoever
(hereinafter referred to as "taxes") lawfully levied or assessed against the
Building and the grounds, parking areas, driveways and alleys around the
Building and the grounds, parking areas, driveways and alleys around the
Building, except any taxes attributable to the operation of Tenant's business
or Tenant's property.

If at any time during the term of this Lease, the present method of
taxation shall be changed so that in lieu of the whole or any part of any
taxes, assessments or governmental charges levied, assessed or imposed on
real estate and the improvements thereof, there shall be levied, assessed or
imposed on Landlord a capital levy or other tax directly on the rents
received therefrom and/or a franchise tax, assessment levy or charge measured
by or based, in whole or in part, upon such rents for the present or any
future building or building on the Premises, then all such taxes,
assessments, levies or charges, or the part thereof so measured or based,
shall be deemed to be included with the term "taxes" for the purposes hereof.

Tenant shall pay to Landlord its proportionate share of the entire
cost of all taxes referenced herein. Tenant's proportionate share shall be
the relation of Tenant's 32,000 rentable square foot area to the 86,400
rentable square feet of total building area, or 37.04%, subject to adjustment
if common area is converted to building area. Real estate taxes, as
referenced herein, shall be defined as the amount of the total tax invoice
(property assessment x tax rate) and shall exclude any discount or late
penalty charge and shall include any charge or fee incurred by Landlord as a
result of its reasonable attempt in securing a reduction in the assessed
value of the Property.

During the term hereof, Landlord shall notify Tenant of its
proportionate share due for such cost. Landlord shall have the option through
the Lease term to require Tenant's reimbursement on either a monthly,
quarterly, or annual basis, at Landlord's sole discretion, to become due and
payable as additional rent within ten (10) days, if invoiced monthly or
thirty (30) days, if invoiced quarterly or annually from the date of invoice.
Tenant shall pay to Landlord a monthly amount equal to four hundred fifty
three dollars and 33/100 ($453.33). This estimated amount shall cover the
cost of Tax Expenses, which will be trued-up at the end of each calendar year.

21. TENANT'S COMPLIANCE; INSURANCE REQUIREMENTS. Tenant, in its use of
the Premises, shall comply with all applicable laws, ordinances and
regulations affecting the Premises, now existing or hereafter adopted,
including the Rules and Regulations.

Throughout the Term, Tenant, at its sole cost and expense, shall
keep or cause to be kept for the mutual benefit of Landlord, Landlord's
managing agent, (presently Highwoods Realty Limited Partnership and its
affiliates) and Tenant, Commercial General Liability Insurance (1986 ISO Form
or its equivalent) with a combined single limit, each Occurrence and General
Aggregate-per location of at least TWO MILLION DOLLARS ($2,000,000), which
policy shall insure against liability of Tenant, arising out of and in
connection with Tenant's use of the Premises, and which shall insure the
indemnity provisions contained herein. Not more frequently than once every
three (3) years, Landlord may require the limits to be increased if in its
reasonable judgment (or that of its mortgagee) the coverage is insufficient.
Tenant shall also carry the equivalent of ISO Special Form Property Insurance
on its personal property and fixtures located in the Premises and any
improvements made by Tenant for their full replacement value and with
coinsurance waived, and Tenant shall neither have, nor make, any claim
against Landlord for any loss or damage to the same, regardless of the cause
thereof.

Prior to taking possession of the Premises, and annually thereafter,
Tenant shall deliver to Landlord certificates or other evidence of insurance
satisfactory to Landlord. All such policies shall be non-assessable and shall
contain language to the extent obtainable that: (i) any loss shall be payable
notwithstanding any act or negligence of Landlord or Tenant that might
otherwise result in forfeiture of the insurance, (ii) that the policies are
primary and non-contributing with any insurance that Landlord may carry, and
(iii) that the policies cannot be canceled, non-renewed, or coverage reduced
except after thirty (30) days' prior written notice to Landlord. If Tenant
fails to provide Landlord with such certificates or other evidence of
insurance coverage, Landlord may obtain such coverage and Tenant shall
reimburse the cost thereof on demand.

Anything in this Lease to the contrary notwithstanding, Landlord
hereby releases and waives unto Tenant (including all partners, stockholders,
officers, directors, employees and agents thereof), its successors and
assigns, and Tenant hereby releases and waives unto Landlord (including all
partners, stockholders, officers, directors, employees and agents thereof),
its successors and assigns, all rights to claim damages for any injury, loss,
cost or damage to persons or to the Premises or any other casualty, as long
as the amount of which injury, loss, cost or damage has been paid either to
Landlord, Tenant, or any other person, firm or corporation, under the terms
of any Property, General Liability, or other policy of insurance, to the
extent such releases or waivers are permitted under applicable law. As
respects all policies of insurance carried or maintained pursuant to this
Lease and to the extent permitted under such policies, Tenant and Landlord
each waive the insurance carriers' rights of subrogation. Subject to the
foregoing, Tenant shall indemnify and hold Landlord harmless from and against
any and all claims arising out of (i) Tenant's use of the Premises or any
part thereof, (ii) any activity, work, or other thing done, permitted or
suffered by Tenant in or about the Premises or the Building, or any part
thereof, (iii) any breach or default by Tenant in the performance of any of
its obligations under this Lease, or (iv) any act or negligence of Tenant, or
any officer, agent, employee, contractor, servant, invitee or guest of
Tenant; and in each case from and against any and all damages, losses,
liabilities, lawsuits, costs and expenses (including attorneys' fees at all
tribunal levels) arising in connection with any such claim or claims as
described in (i) through (iv) above, or any action brought thereon.

If such action is brought against Landlord, Tenant upon notice from
Landlord shall defend the same through counsel selected by Tenant's insurer,
or other counsel reasonably acceptable to Landlord. Tenant assumes all risk
of damage or loss to its property or injury or death to persons in, on, or
about the Premises, from all causes except those for which the law imposes
liability on Landlord regardless of any attempted waiver thereof, and Tenant
hereby waives such claims in respect thereof against Landlord, except to the
extent arising out of the negligence or willful misconduct of Landlord, its
agents, employees, contractors, etc. The provisions of this paragraph shall
survive the termination of this Lease.

Landlord shall keep the Building, including the improvements,
insured against damage and destruction by perils insured by the equivalent of
ISO Special Form Property Insurance in the amount of the full replacement
value of the Building.

Each party shall keep its personal property and trade fixtures in
the Premises and Building insured with the equivalent of ISO Special Form
Property Insurance in the amount of the full replacement cost of the property
and fixtures. Tenant shall also keep any non-standard improvements made to
the Premises at Tenant's request insured to the same degree as Tenant's
personal property.

Tenant's insurance policies required by this Lease shall: (i) be
issued by insurance companies licensed to do business in the state in which
the Premises are located with a general policyholder's ratings of at least A-
and a financial rating of at least VI in the most current Best's Insurance
Reports available on the Commencement Date, or if the Best's ratings are
changed or discontinued, the parties shall agree to a comparable method of
rating insurance companies; (ii) name the non-procuring party as an
additional insured as its interest may appear [other landlords or tenants
may be added as additional insureds in a blanket policy]; (iii) provide
that the insurance not be canceled, non-renewed or coverage materially
reduced unless thirty (30) days advance notice is given to the non-procuring
party; (iv) be primary policies; (v) provide that any loss shall be payable
notwithstanding any gross negligence of Landlord or Tenant which might result
in a forfeiture thereunder of such insurance or the amount of proceeds
payable; (vi) have no deductible exceeding TEN THOUSAND DOLLARS ($10,000),
unless accepted in writing by Landlord; and (vii) be maintained during the
entire Term and any extension terms.

Tenant agrees to pay to the Landlord its proportionate share of the
entire cost that Landlord may incur in the cost of maintaining the policies
required hereunder. Tenant's proportionate share shall be the relation of
Tenant's 32,000 rentable square foot area to the 86,400 rentable square feet
of total building area, or 37.04%, subject to adjustment if common area is
converted to building area.

During the term hereof, Landlord shall notify Tenant of its
proportionate share due for such cost. Landlord shall have the option through
the Lease term to require Tenant's reimbursement on either a monthly,
quarterly or annual basis, at Landlord's sole discretion, to become due and
payable as additional rent within ten (10) days, if invoiced monthly or
thirty (30) days if invoiced quarterly or annually from the date of invoice.
Tenant shall pay to Landlord a monthly amount equal to fifty three dollars
and 33/100 ($53.33). This estimated amount shall cover the cost of Insurance
Expenses, which will be trued-up at the end of each calendar year.

22. DAMAGE AND DESTRUCTION: In the event the Premises are damaged by any
peril covered by standard policies of fire and extended coverage insurance
and ISO Special Form Insurance to an extent which is less than fifty percent
(50%) of the cost of replacement of the Premises, the damage to that portion
of the Premises which Landlord is obligated to insure pursuant to the
immediately preceding Section hereof, shall promptly be repaired by Landlord,
at Landlord's expense, but in no event shall Landlord be required to repair
or replace Tenant's stock-in-trade, trade fixtures, furniture, furnishings,
special equipment and other items of construction and personal property which
Tenant is required to insure pursuant to the immediately preceding Section
hereof. In the event of such damage and (a) Landlord is not required to
repair as provided herein, or (b) the Premises are damaged to the extent of
fifty percent (50%) or more of the cost of replacement of the Premises, or
(c) the Building is damaged to the extent of fifty percent (50%) or more of
the cost of replacement, or (d) such damage is twenty-five percent (25%) or
more of the cost of replacement of the Premises and the same occurs during
the last year of the initial term or any extensions or renewal terms of this
Lease, then, in any such event(s), Landlord may elect either to repair or
rebuild the Premises or the Building of which the Premises are a part, as the
case may be, or to terminate this Lease upon giving notice of such election,
in writing, to Tenant within ninety (90) days after the happening of the
event causing such damage.

If such damage, repairing or rebuilding shall render the Premises
untenantable, in whole or in part, a proportionate abatement of the rent and
additional rent stipulated herein shall be allowed from the date such damage
occurred until the date Landlord completes the repairs or rebuilding, said
proportion to be based on the degree to which Tenant's use of the Premises is
impaired. If Landlord is required or elects to repair the Premises as
provided herein, Tenant shall repair its floor and wall covering s which
Tenant is obligated to insure pursuant to the terms hereof, in a manner and
to at least a condition equal to that prior to such damage or destruction; in
addition, Tenant shall repair or replace its stock-in-trade, trade fixtures,
furniture, furnishings, special equipment and other items of construction and
personal property which tenant is required to insure pursuant to this Lease
in a manner and to a condition Tenant deems appropriate and adequate for the
conduct of its business within the Premises. In addition, Tenant is hereby
given the sole option to terminate this Lease in the event the repairing or
rebuilding to be effected by Landlord and required hereunder cannot be
completed within one hundred twenty (120) days from the date of the
occurrence of the damage and destruction.

23. LIABILITIES OF THE PARTIES: Landlord and Tenant waive all claims
against the other for damages to goods or for injuries to persons on or about
the Premises or common areas from any cause arising at any time other than
damages or injuries directly resulting from either party's negligence or
willful misconduct. The Landlord and Tenant will indemnify the other on
account of any damage or injury to any persons, or to the goods of any
person, arising from the use of the Premises by the other party, or arising
from the failure of the other party to keep the Premises in good condition as
provided herein, in either case except to the extent caused by Landlord's or
Tenant's negligence or willful misconduct. The Landlord and Tenant shall not
be liable to the other party for any damage by or from any act or negligence
of any unaffiliated occupant of the same Building, or by any unaffiliated
owner or occupant of adjoining or contiguous property.

The Tenant agrees to pay for all damages to the Building, as well as
all damage or injuries suffered by Tenant or occupants thereof, caused by
misuse or neglect of the Premises by the Tenant in violation of the terms of
this Lease.

Landlord is specifically not responsible under any circumstance for
any damage to any computer, computer component, or computer peripheral,
hardware or software damaged by any interruption, usage or variation for
whatever reason in the electrical distribution system in the building, except
to the extent caused by Landlord's negligence or willful misconduct.

Notwithstanding any other term or provision herein contained, it is
specifically understood and agreed that there shall be no personal liability
of Landlord (nor Landlord's agent, if any) in respect to any of the
covenants, conditions or provisions of this Lease. In the event of a breach
or default by Landlord of any of its obligations under this Lease, Tenant
shall look solely to the equity of the Landlord in the property for the
satisfaction of Tenant's remedies.

24. PARKING: The Landlord warrants that it will, without charge and
throughout the term of this Lease and any extensions or renewals thereof,
provide the Tenant with no fewer than one and one-half (1.5) per one thousand
(1,000) square feet leased of unreserved parking spaces on the property
around the demised Premises which complies with applicable city or county
code. Tenant agrees to comply with the parking rules contained in the Parking
Rules and Regulations attached hereto as Exhibit "E" together with all
reasonable modifications and additions thereto which Landlord may from time
to time make.

25. SIGNS: Landlord hereby agrees to allow Tenant to have a lighted or
spot-lighted sign, as long as such sign complies with standard building
finishes. Said sign shall be at the sole expense of the Tenant. See Exhibit
"F".

26. UTILITIES: Landlord will provide utility service connections to the
Premises, including electrical service, natural gas (where available), water
and sewer. The Tenant shall pay directly for the use of (a) natural gas or
other fuels used to heat the Premises, (b) 120/208V electricity for heating
air conditioning and the lighting throughout the Premises used for operation
of Tenant's business. Tenant shall keep the Premises at a temperature
sufficiently high to prevent freezing of water in sprinkler system, pipes,
and fixtures.

Tenant will be responsible for the payment of charges for the use of
water and sewer, proportionate to its share of the total rentable square
footage of the Building, or 37.04%, subject to adjustment if common area is
converted to building area. Landlord warrants that in the event that
excessive use by any Tenant is discovered, Landlord agrees to meter the
Tenant in question.

27. HEAT, VENTILATION, AND CLIMATE CONTROL COMFORT: Landlord has
installed HVAC equipment to provide adequate comfort for normal user load
requirements. If determined before or during Tenant's occupancy that the
Tenant's use of high heat output equipment or other intensive uses (i.e.:
computer rooms, telephone rooms or work stations at greater density than five
persons per 1,000 square feet), requires additional cooling equipment,
Landlord will install necessary additional HVAC equipment at Tenant's sole
expense.

28. PLATE GLASS BREAKAGE: Notwithstanding anything herein to the
contrary, except by negligence of Landlord, Tenant shall be solely
responsible for repair and replacement in the event of plate glass damage or
breakage.

29. GARBAGE REMOVAL: Tenant will be responsible for providing a
container for garbage and arrange for its systematic pickup.

30. JANITORIAL SERVICES: Tenant shall provide janitorial services and
supplies to the Premises, at its own expense.

31. FIRE EXTINGUISHERS: Tenant covenants during the Term and such
further time as Tenant occupies any part of the Premises to keep the Premises
equipped with all safety appliances, including but not limited to an
operating fire extinguisher, required by law or ordinance or any other
regulation of any public or private authority having jurisdiction over the
Premises (including insurance underwriters or rating bureaus) because of any
use made by Tenant and to procure all licenses and permits so required
because of such use and, if required by Landlord, to do any work so required
because of such use, it being understood that the foregoing provisions shall
not be construed to broaden in any way Tenant's permitted uses.

32. EXTERMINATION: The Tenant shall, at its sole cost and expense, on a
reasonably frequent basis, employ professional exterminators to control pests
within the Premises and supply Landlord with a copy of the contract therefor.

33. STORING OF FLAMMABLE MATERIALS: The Tenant agrees that it shall not
store nor shall it use any dangerous and/or flammable chemical material(s)
within or around the Premises in a manner which violates any law or which may
cause the costs incurred by Landlord with respect to taxes and insurance
regarding the Premises to increase in which case Tenant shall bear the cost
of any such increase.

34. REPLACEMENT OF LIGHT BULBS: Tenant shall, at its sole cost and
expense, replace all light bulbs within the Premises.

35. KITCHEN APPLIANCES AND EQUIPMENT: In the event of installation of a
kitchen or kitchen equipment by either Landlord or Tenant, such maintenance
and repair of all items contained within the area shall be at the sole cost
and expense of Tenant, to include but not limited to: maintenance, repair and
replacement of a microwave oven, refrigerator, stove, ice maker, coffee
maker, garbage disposal, dishwasher, sink, faucet or any other item within
the area. Tenant hereby acknowledges to Landlord that any fixtures described
herein are NOT to become a part of the Premises.

36. REMOVAL OF TENANT'S FIXTURES: Notwithstanding any other provision
hereof, the Tenant shall have the privilege at any time, on or before
vacating the Premises, of removing any or all of its personal property,
equipment and fixtures, and Tenant shall repair any damage caused by the
removal thereof and shall leave the Premises in good and clean condition and
repair.

37. DEFAULT BY TENANT: In the event Tenant shall fail to pay the monthly
rental rate by ten (10) days after the due date; or if Tenant is adjudicated
a bankrupt; or if Tenant files a petition in bankruptcy under any section or
provision of the bankruptcy law; or if an involuntary petition in bankruptcy
is filed against Tenant, and same is not withdrawn or dismissed within sixty
(60) days from filing thereof, or if a receiver or trustee is appointed for
Tenant's property and the order appointing such receiver or trustee remains
in force for sixty (60) days after the entry of such order; or if, whether
voluntarily or involuntarily, Tenant takes advantage of any debtor relief
proceedings under any present or future law, reduced payment thereof
deferred; or if Tenant makes an assignment for the benefit of the creditors;
or if Tenant's effects shall be levied upon or attached under process against
Tenant, not satisfied or dissolved within sixty (60) days after written
notice from Landlord to Tenant to obtain satisfaction thereof; or if Tenant
shall abandon the Premises; or if Tenant shall fail to perform or observe any
other covenant, agreement, or condition to be performed or kept by the Tenant
under the terms and provisions of this Lease, and such failure shall continue
to thirty (30) days after written notice thereof has been given by Landlord
and received by the Tenant (or such longer period as may reasonably be
required provided Tenant diligently prosecutes such cure to completion); then
in any one of such events, Landlord shall have the right, at the option of
the Landlord, then or at any time thereafter while such defaults continue, to
elect either: (1) to cure such default or defaults at the expense of Tenant
and without prejudice to any other remedies which it might otherwise have,
any payment made or expenses incurred by Landlord in curing such default
shall bear interest thereon at 18% per annum, or at such maximum legal rate
as permitted by North Carolina law, whichever shall be lower, to be and
become additional rent to be paid by Tenant with the next installment of rent
falling due thereafter; or (2) to re-enter the Premises and dispossess Tenant
and anyone claiming under Tenant, with or without an order of the court, and
remove their effects, and take complete possession of the Premises and then
elect to take any one or (to the extent not inconsistent) more of the
following actions: (i) declare this Lease forfeited and the term ended; or
(ii) elect to continue this Lease in full force and effect, but with the
right at any time thereafter to declare this Lease forfeited and the term
ended; or (iii) declare Tenant's right to possession of the Premises to be
terminated; or (iv) exercise any other remedies or maintain any action
permitted to landlords pursuant to the laws of the State of North Carolina,
or any other applicable law. In such re-entry the Landlord may, without
committing trespass, have all persons and Tenant's personal property removed
from the Premises. Tenant hereby covenants in such event for itself and all
others occupying the Premises under Tenant; to peacefully yield up and
surrender the Premises to the Landlord. Should Landlord declare either (i)
this Lease forfeited and the term ended; (ii) the termination of Tenant's
right to possession of the Premises; then in any one such events, Landlord
shall be entitled to recover from Tenant the rental and all other sums due
and owing by Tenant to the date of termination, plus the costs of curing all
of Tenant's defaults existing at or prior to the date of termination, plus
rental for the balance of the term under this Lease less any rental obtained
by Landlord on another Lease for the balance of the term remaining under this
Lease. Should Landlord, following default as aforesaid, elect to continue
this Lease in full force, Landlord shall use its best efforts to rent the
Premises by private negotiations, with or without advertising, and on the
best terms available for the remainder of the term hereof, or for such longer
or shorter period as Landlord shall deem advisable. Tenant shall remain
liable for payment of all rentals and other charges and costs imposed on
Tenant herein, in the amounts, at the times and upon the conditions as herein
provided, but Landlord shall credit against such liability of the Tenant all
amounts received by Landlord from such re-letting after first reimbursing
itself for all costs incurred in curing Tenant's defaults and re-entering,
preparing and refinishing the Premises for re-letting, and the Premises, and
for the payment of any reasonable procurement fee and reasonable commission
paid to obtain another tenant, and for all reasonable attorney fees and legal
costs incurred by Landlord.

38. RE-ENTRY BY LANDLORD: No re-entry by Landlord or any action brought
by Landlord to oust Tenant from the premises shall operate to terminate this
Lease unless Landlord shall give written notice of termination to Tenant, in
which event Tenant's liability shall be as above provided. No right or remedy
granted to Landlord herein is intended to be exclusive of any other right or
remedy, and each and every right and remedy herein provided shall be
cumulative and in addition to any other right or remedy hereunder or now or
hereafter existing in law or equity or by statute. In the event of
termination of this Lease, Tenant waives any and all rights to redeem the
Premises either given by any statute now in effect or hereafter enacted.

39. WAIVER OF RIGHTS: No waiver by Landlord of any provision hereof
shall be deemed to be a waiver of any other provision hereof or of any
subsequent breach by Tenant of the same or any other provision. Landlord's
consent to or approval of any act shall not be deemed to render unnecessary
the obtaining of Landlord's consent to or approval of any subsequent act by
Tenant. The acceptance of rent hereunder by Landlord shall not be a waiver of
any preceding breach by Tenant of any provision hereof other than the failure
of Tenant to pay the particular rent as accepted regardless of Landlord's
knowledge of said preceding breach at the time of acceptance of such rent.

40. SECURITY DEPOSIT: Tenant shall deposit with Landlord the sum of ten
thousand five hundred eighty six dollars and 67/100 ($10,586.67), to be held
by Landlord as security for Tenant's satisfactory performance of the terms,
covenants and conditions of this Lease including the payment of Basic Rent
(either pro-rated or entire month) and Late Payment of Rent Charges (as
specified in Section 6 herein). A sum of five thousand two hundred ninety
three dollars and 33/100 (5,293.33) will be returned to Tenant after Year Two
(2) of this Lease, and Landlord shall retain the balance of five thousand two
hundred ninety three dollars and 34/100 ($5,293.34) to be held as Security
Deposit for the remainder of the term of this Lease.

(a) Application of Security Deposit. Landlord may use, apply or
retain the whole or any part of the security so deposited to the extent
required for payment of any Basic Rent (pro-rated or entire month),
Additional Rent or Late Payment of Rent Charges or any other sum as to which
Tenant is in default or for any sum which Landlord may expend or may be
required to expend by reason of Tenant's default in respect of any of the
terms, covenants and conditions of this Lease including any damages or
deficiency in the re-letting of the demised premises or other reentry by
Landlord.

(b) Replenishment of Security Deposit. If Landlord uses, applies or
retains the whole or any part of the security, Tenant shall replenish the
security to its sum of five thousand two hundred ninety three dollars and
34/100 ($5,293.34) within five (5) days after being notified by the Landlord
of the amount due. Tenant shall be in default of this Lease if the amount due
is not paid within the required period of time.

(c) Transfer of Property. In the event of a sale or leasing of the
Real Property or any part thereof, of which the demised premises form a part,
Landlord shall have the right to transfer the security to the vendee or
lessees and Landlord shall ipso facto be released by Tenant from all
liability for the return of said security; and Tenant agrees to look solely
to the new Landlord for the return of said security (provided such new
Landlord has, at the time of transfer, a liquid net worth equal to or greater
than Landlord's); and it is agreed that the provisions hereof shall apply to
every transfer of assignment made of the security to a new landlord.

(d) Prohibition on Tenant Assignment. Tenant covenants that it shall
not assign or encumber the security deposit given to Landlord pursuant to
this Lease. Neither Landlord, its successors or assigns shall be bound by any
such assignment of encumbrance or any attempted assignment or encumbrance by
Tenant of the security deposit.

(e) When Returned. In the event that Tenant shall fully and
faithfully comply with all the terms, covenants and conditions of this Lease,
any part of the security not used or retained by Landlord shall be returned
to Tenant after the Expiration Date of the Lease and inspection and approval
of the Premises by Landlord, normal wear and tear excepted and after delivery
of exclusive possession of the demised premises to Landlord.

41. NOTICES: All notices provided for herein shall be in writing and
shall be deemed to have been given when received after being deposited in the
United States mails, postage fully prepaid, and directed to the parties
hereto at their respective addresses given below:

<TABLE>

<S> <C> <C>
Landlord: Notices only: HIGHWOODS REALTY LIMITED PARTNERSHIP
380 Knollwood Street, Suite 430
Winston-Salem, North Carolina 27103

Landlord: Payments only: HIGHWOODS REALTY LIMITED PARTNERSHIP
P.O. Box 65195
Charlotte, North Carolina 28265-0195

Tenant: BIRTHDAY EXPRESS.COM, INC.
488 Gallimore Dairy Road, Suite D
Greensboro, North Carolina 27409

Notices: 11220 120th Avenue, N.E.
Kirkland, Washington 98033
Attn: Mike Jewell, President

With a Copy To: Cooley Godward, L.L.P.
5200 Carillon Point
Kirkland, WA 98033-7356
Attn: Kevin Austin

</TABLE>

Either party may, in addition, deliver written notice by hand
delivery or Federal Express. Further, the parties hereto may give or receive
notice by or from their respective attorneys and may, by like notice,
designate a new address to which subsequent notice shall be directed.

42. COMPLIANCE WITH LAWS: In addition to other provisions herein, Tenant
shall promptly execute and comply with all laws, ordinances, rules,
regulations and requirements of any or all federal, state and municipal
authorities having jurisdiction over the manner in which the Tenant's
business is conducted, but only insofar as these laws, ordinances, rules and
regulations and requirements are violated by the conduct of Tenant's business.

43. RULES AND REGULATIONS: Tenant, its agents, servants and invitees
shall observe faithfully and comply with the rules and regulations set forth
on the schedule designated BUILDING RULES AND REGULATIONS, attached hereto as
Exhibit "C" and by this reference made a part hereof. Landlord shall have the
right, from time to time, during the term of this Lease to make reasonable
changes in, and additions to, said rules and regulations, provided such
changes and additions do not unreasonably affect the conduct of Tenant's
business in the Premises. Any failure by Landlord to enforce any said rules
and regulations now or hereafter in effect, either against Tenant or any
other tenant in the Building, shall not constitute a waiver of such rules and
regulations. The defined words in this Lease, whenever used in said rules and
regulations, shall have the same meanings as herein.

44. HAZARDOUS WASTE: As used in this agreement, "Hazardous Waste" shall
mean any hazardous or toxic substance, material, water or similar term which
is regulated by local authorities, the State of North Carolina or the United
States of America, including, but not limited to, any material, substance,
waster or similar term which is (i) defined as a hazardous material under the
laws of the State of North Carolina; (ii) defined as a hazardous substance
under Section 311 of the Federal Water Pollution Control act (33 U.S.C.
Section 1317); (iii) defined as a hazardous waste under Section 1004 of the
Federal Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et.
sez.); (iv) defined as a hazardous waster substance under Section 101 of the
Comprehensive Environmental Response, Compensation and Liability Act, (42
U.S.C. Section 9601 et. sez.); (v) defined as a hazardous waste or toxic
substance, waste, material or similar term in rules and regulations, as
amended from time to time, which are adopted by any administrative agency
including, but not limited to, the Environmental Protection Agency, the
Occupational Safety and Health Administration, and any such similar local,
state or federal agency having jurisdiction over the Premises whether or not
such rules and regulations have the force of law; (vi) defined as a hazardous
or toxic waste, substance, material or similar term in any statute,
regulation, rule or law enacted or adopted at any time after the date of this
agreement by local authorities, the State of North Carolina, or the federal
government.

The Tenant shall not cause or permit its invitees or employees, to
cause, the discharge from the Premises of any hazardous material, and the
Tenant shall immediately notify the Landlord of the existence of any
hazardous material discovered on the Premises, whether placed there by spill,
release, discharge, disposal or storage.

The Tenant shall promptly pay, discharge, or remove any claim,
charge or lien upon the Premises, and shall indemnify and hold harmless the
Landlord, from any and all loss, damage or expense resulting from such
Hazardous Waste the existence of which is caused by Tenant.

This indemnification of Landlord by Tenant includes, without
limitation, costs incurred in connection with any investigation of site
conditions or any clean-up, remedial, removal or restoration work required by
and federal, state or local governmental agency or political subdivision
because of hazardous material present in the soil or ground water on or under
the Premises. Without limiting the foregoing, if the presence of any
hazardous material on the Premises and Building caused by Tenant or its
invitees or employees results in the contamination of the Premises or
Building, Tenant shall promptly take all actions at its sole expense, as are
necessary to return the same to the condition existing prior to the
introduction of any such hazardous material thereto; provided that Landlord's
approval of such actions shall first be obtained, which approval shall not be
unreasonably withheld so long as such actions would not potentially have any
material adverse long-term or short-term effect on the Premises and Building.
The foregoing indemnity shall survive the expiration or earlier termination
of this Lease.

Landlord reserves the right, at its sole expense, to inspect the
Premises from time to time, but no more than twice a year, for the existence
of Hazardous Waste. If discovered, Tenant shall be responsible for all costs
associated with the immediate clean up and/or disposal of such Hazardous
Waste, when the existence of which is caused by Tenant.

45. SURRENDER: Thirty (30) days prior to the termination of this Lease
or any extension or renewal hereof, Tenant shall notify Landlord in writing
of the day it intends to vacate the Premises together with a forwarding
address and telephone number. The Tenant shall surrender the Premises in good
and clean condition and repair, excepting only normal wear and tear and
damage by fire or other casualty damage covered by insurance and paid to
Landlord. Tenant shall not remain in the Premises without the benefit of a
written Lease or renewal agreement executed by the parties hereto prior to
the expiration of the then existing term. No other holding over of the
Premises shall be allowed on any basis whatsoever.

The delivery of keys or other such tender of possession of the
Premises to Landlord or to an employee of Landlord shall not operate as a
termination of this Lease or a surrender of the Premises.

Any pro-rated rent or damages in excess of the security deposit held
by Landlord shall be invoiced by Landlord and payable by Tenant within ten
(10) days from the date of invoice, but shall still be subject to audit.

46. HOLDOVER: In the event Tenant remains in possession of the leased
premises after the expiration of the term of this Lease, without having first
extended this Lease by written agreement with Landlord, such holding over
shall not be construed as a renewal or extension of this Lease. Such holding
over shall be deemed to have created and be construed as tenancy from month
to month, terminable on 30 days notice in writing from either party to the
other. The monthly rental to be paid shall be 150% of the monthly rental
payable during the last month of the term of this Lease. All other terms and
conditions of this Lease shall continue to be applicable for both Landlord
and Tenant.

If Tenant fails to surrender the Premises to Landlord on expiration
of the term as required by this Section, Tenant shall hold Landlord harmless
from all damages resulting from Tenant's failure to surrender the Premises,
including without limitation, claims made by the succeeding Tenant resulting
from Tenant's failure to surrender the Premises.

47. LIENS: If Tenant shall cause any material to be furnished to the
Premises or labor to be performed thereon or therein, Landlord shall not
under any circumstances be liable for the payment of any expenses incurred or
for the value of any work done or material furnished. All such work shall be
at Tenant's expense and Tenant shall be solely and wholly responsible to all
contractors, laborers, and materialmen furnishing labor and material to the
Premises. Nothing herein shall authorize the Tenant or any person dealing
through, with or under Tenant to charge the Premises or any interest of the
Landlord therein or this Lease with any mechanic's liens or other liens or
encumbrances whatsoever. On the contrary, (and notice is hereby given) the
right and power to charge any lien or encumbrance of any kind against the
Landlord or its estate is hereby expressly denied.

48. BENEFITS, BURDENS AND ENTIRE AGREEMENT: This Lease is binding on and
benefits the parties hereto and their respective heirs, legal
representatives, successors, nominees and assigns. Throughout this agreement
the masculine gender shall be deemed to include the feminine, the feminine
the masculine, the singular the plural and the plural the singular.

This Lease, and all exhibits, contains the entire agreement between
the parties hereto with respect to the Premises leased hereunder; further,
this Lease may not be modified, altered or amended except by an instrument in
writing, executed by the parties hereto or their respective heirs, legal
representatives, successors, nominees or assigns and which instrument shall
be attached hereto as an amendment to this Lease and shall thereby become a
part hereof.

49. ATTORNEY'S FEES: If either Landlord or Tenant files an action to
enforce any agreement contained in this Lease, or for breach of any covenant
or condition, the prevailing party in any such action, or the party settling
to its benefit, shall be reimbursed by the other party for reasonable
attorneys' fees in the action.

50. GOVERNING LAW: This Lease shall be governed by and construed under
the laws of the State of North Carolina.

51. ESTOPPEL CERTIFICATES: Tenant shall execute and deliver to Landlord,
upon its occupancy of the Premises, a certificate/statement provided by
Landlord, certifying that this Lease is unmodified and in full force and
effect and other factual data relating to the Lease or the Premises which
Landlord may reasonably request. Furthermore, either party may be required,
from time to time during the term of the Lease, to execute and deliver to the
other party a certificate/statement for purposes of refinancing, syndication,
sale of property, etc. In such event, such party shall have ten (10) days
from its receipt thereof from Landlord to execute and deliver such fully
executed certificate/statement to the other party. A party's failure to
execute said certificate shall constitute a default hereunder.

53. CHRONIC DEFAULTS: Tenant will be in "Chronic Default" under this
Lease if Tenant commits a default (either a Monetary or Non-Monetary Default)
during any 365-day period in which any of the following combinations of
default has already occurred:

(1) Two Monetary Defaults; or

(2) Three Non-Monetary Defaults; or

(3) One Monetary Default and two Non-Monetary Defaults

(a) Remedies. If Tenant is in Chronic Default, Landlord may
immediately exercise any or all remedies available under this Lease or at law
or in equity, all without giving Tenant any notice or an opportunity to cure
the last default causing Tenant's Chronic Default (notwithstanding any notice
and cure provision or other lease provision to the contrary).

(b) Definitions. For the purpose of this Section, (1) a Monetary
Default occurs if Tenant fails to pay any sum of money when due (including,
but not limited to, Base Rent, Additional Rent, Percentage Rent, Escalation
Rent, Common Area Maintenance Charges, Utility Charges, Pass-thru Expenses,
or other Rent); (2) a Non-Monetary Default occurs if Tenant fails to perform
any of its obligations under this Lease other than the timely payment of
money.

54. EVIDENCE OF AUTHORITY: If requested by Landlord, Tenant shall
furnish appropriate legal documentation evidencing the valid existence and
good standing of Tenant and the authority of any parties signing this Lease
to act for Tenant. If Tenant signs as a corporation, each of the persons
executing this Lease on behalf of Tenant does hereby covenant and warrant
that Tenant is a duly authorized and existing corporation, that Tenant has
and is qualified to do business in North Carolina, that the corporation has
full right and authority to enter into this Lease and that each of the
persons signing on behalf of the corporation is authorized to do so.

55. LEASE REVIEW; DATE OF EXECUTION: The submission of this Lease to
Tenant for review does not constitute a reservation of or option for the
Premises, and this Lease shall become effective as a contract only upon
execution and delivery by both Landlord and Tenant. The date of execution
shall be entered on the top of the first page of this Lease by Landlord, on
the date that Landlord executes this Lease, and shall be the date on which
the last party signed the Lease, or as otherwise may be specifically agreed
by both parties. Such date, once inserted, shall be established as the final
date of ratification by all parties to this Lease, and shall be the date for
use throughout this Lease as the "date of execution" or "execution date".

56. Option to Terminate: Provided Tenant is not in default hereunder,
Tenant shall have the option to terminate this Lease on the third anniversary
of the Commencement Date, upon a prior one hundred twenty (120) day written
notice to Landlord and a payment to Landlord of four (4) months rent and
unamortized Tenant Improvements totaling forty thousand dollars and 00/100
($40,000.00).

57. RIGHT TO RELOCATE: Provided Tenant is not in default hereunder,
Tenant shall have the right to relocate to other available properties (i.e.,
not under lease to other tenants) owned by Highwoods, or its affiliates, at
least twenty five percent (25%) greater in size, without penalty, providing a
prior ninety (90) day written notice of its intent to relocate. The economic
terms pursuant to which the relocation space will be leased shall be subject
to mutual agreement, failing which the notice of intent to relocate will be
deemed rescinded. The other lease terms shall be substantially the same as set
forth in this Lease.

58. FIRST RIGHT OF REFUSAL: Provided Tenant is not in default hereunder,
Tenant shall have a First Right of Refusal on all contiguous space in the
Building. Tenant shall have five (5) business days to respond in writing after
receipt from Landlord of a written notice of third party offer. Tenant's
failure to agree in writing within five (5) business days, to lease the space
on the same terms as set forth in the third party offer, shall nullify all of
Tenant's rights to that space. Tenant will retain a First Right of Refusal on
all contiguous space in the future, upon availability within the Building.

59. OPTION TO RENEW: Provided Tenant is not in default hereunder, Tenant
shall have two (2) options to renew this Lease for a period of five (5) years
each, upon the same terms and conditions contained herein, save and except any
option to renew, and upon a rental rate equal to the Fair Market Value at the
time of the renewal. Tenant shall provide Landlord ninety (90) day prior
written notice of its intent to exercise said option.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Lease
Agreement or have caused their duly authorized representatives to execute same
in two (2) original counterparts, as of the day and year first above written.

LANDLORD:
HIGHWOODS REALTY LIMITED PARTNERSHIP,
a North Carolina Limited Partnership
By: Highwoods Properties, Inc., General
Partner

Attest:

/s/ Julie K. Goco By: /s/ John O. Dunn III
- ------------------------------- ------------------------------------
Assistant Secretary Vice President
(Corporate Seal)

TENANT:
BIRTHDAY EXPRESS.COM, INC., A Washington
Corporation

Attest:

By: /s/ Gary Halperin
- ------------------------------- ------------------------------------
Secretary CFO
(Corporate Seal)

<PAGE>

STATE OF NORTH CAROLINA )
) ACKNOWLEDGMENT
COUNTY OF FORSYTH )

I, Jennifer P. Allard, a Notary Public for the aforesaid State and
County, do hereby certify that Julie K. Goco personally came before me this
day and acknowledged to me that she/he is the Assistant Secretary of HIGHWOODS
PROPERTIES, INC., a North Carolina Corporation, and that by authority duly
given and as an act of the corporation, the foregoing instrument was signed in
its name by John O. Dunn, III, its Vice President, sealed with its corporate
seal, and attested to by Julie K. Goco, its Assistant Secretary.

Witness my hand and official seal or stamp, this the 12 day of
November, 1999.

My Commission Expires: 12-29-03 /s/ Jennifer P. Allard
------------ ---------------------------------------
Notary Public

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

STATE OF ___________________ )
) ACKNOWLEDGMENT
COUNTY OF _________________ )

I, Kathy J. Petree, a Notary Public for the aforesaid State and
County, do hereby certify that ______________________________________ (name of
Secretary) personally came before me this day and acknowledged to me that
she/he is the ____________ Secretary of BIRTHDAY EXPRESS.COM, INC., a
Washington Corporation, and that by authority duly given and as an act of the
corporation, the foregoing instrument was signed in its name by Gary Halperin
(name of CFO), its CFO, sealed with its corporate seal, and attested to by
__________________________________ (name of Secretary), its __________
Secretary.

Witness my hand and official seal or stamp, this the 2nd day of
November, 1999__.

My Commission Expires: 8/3/02 /s/ Kathy J. Petree
-------- ---------------------------------------
Notary Public

<PAGE>

EXHIBIT "A"

LEGAL DESCRIPTION

BEGINNING at a point located the eight (8) following courses and distances from
an existing iron pipe at the southernmost point of the property described in a
Deed of Trust from Petula Associates, Ltd., an Iowa Corporation, and
Forsyth/Gallimore Partners, a North Carolina General Partnership to The Fidelity
Company, Trustee for Calabras of America, Inc., recorded in Book 3361, Page
1096, Guilford County Registry: South 87 degrees 19' 50" East 100.70 feet to an
iron stake; thence along the West right of way line of Gallimore Dairy Road
North 77 degrees 44' 59" East 178.33 feet to an iron stake; thence continuing
with said right of way line North 76 degrees 54' 23" East 98.07 feet to an iron
stake; continuing with said right of way line North 72 degrees 1' 26" East 96.25
feet to an iron stake; continuing with said right of way line North 63 degrees
23' 09" East 95.41 feet to an iron stake continuing with said right of way line
North 54 degrees 47' 31" East 95.83 feet to an iron stake thence leaving said
right of way line North 34 degrees 27' West 279.04 feet to a point; and North 40
degrees 5' 53" West 60.02 feet to the point and place of BEGINNING; thence from
said BEGINNING point along a counterclockwise curve to the left a chord bearing
and distance of North 54 degrees 47' 25" West 95.96 feet to a point (said curve
having a radius of 305.11 feet) thence North 63 degrees 50' 15" West 160.60 feet
to a point; thence along a clockwise curve to the right a chord bearing and
distance of North 31 degrees 44' West 172.40 feet to a point, the southeastern
corner of the property designated Tract 8 shown on a survey prepared for Forsyth
Partners, which survey is more particularly identified below (said curve having
a radius of 162.20 feet); thence with the eastern boundary line of said Tract 8
North 11 degrees 01' 42" East 60 feet to a point ; thence continuing with said
eastern boundary line North 21 degrees 41' 12" East 226.20 feet to a point, the
southwestern corner of the property designated Tract 5 on the survey identified
below; thence with the southern boundary line of said Tract 5 South 64 degrees
8' 18" East 342.66 feet to a point; thence continuing with said southern
boundary line of Tract 5 South 48 degrees 25' 49" East 83.11 feet to a point,
the northwestern corner of the property designated Tract 13 on the survey
identified below; thence with the western boundary line of said Tract 13 South
25 degrees 51' 42" West 369.86 feet to the point and place of BEGINNING,
containing 3.412 acres and being designated as Tract 12 on a survey prepared for
Forsyth Partners (Gallimore Dairy Road, Guilford County, North Carolina)
prepared by Richard T. Evans, Registered Land Surveyor, of Evans Engineering,
Inc., dated February 3, 1984, latest revision dated June 6, 1986.

TOGETHER WITH AND SUBJECT TO an access easement for the purpose of ingress and
egress to and from the above described tract over the adjoining real property
owned by the Grantor/Trustor, it being the intention of the Grantor/Trustor that
this access easement be over and upon such roadways and parking areas as may be
developed by the Grantor/Trustor on its adjoining real property; or in the event
that such roadways and parking areas are not developed, then this access
easement shall be reasonably located at such place and in such width as is
commercially reasonable for similar commercial real estate developments, it
being the intention of the Grantor/Trustor that in any event reasonable access
to public roadways is granted herewith to the above tract.

<PAGE>

EXHIBIT "B"

FLOOR PLAN

<PAGE>

EXHIBIT "C"

BUILDING RULES & REGULATIONS

1. Tenant shall not do or permit anything to be done in the Premises or in
the Building which will in any way increase the rate payable, or violate
any provision, in respect of any policy of fire insurance on the Building
or Landlord's property therein; obstruct or interfere with the rights of
other tenants, or unreasonably injure or annoy them; use the Premises as
sleeping apartments; engage in or permit games of chance or any form of
gambling or immoral conduct in or about the Premises; encumber or obstruct
or deposit rubbish and similar substances in the parking and loading
areas, sidewalks or entrance areas; bring or keep any animals, or
flammable, combustible or explosive substances, to or in the Building;
violate security procedures established by Landlord, or in any way create
a nuisance.

2. Tenant shall not use the Premises or the Building for any purpose that
will damage the Premises or the Building, or for any purposes other than
those specified in the Lease.

3. Canvassing, soliciting and peddling in and about the Building are
prohibited, and Tenant shall cooperate, without expense, to prevent such
activities.

4. Tenant shall not install or use in the Building any air conditioning unit,
engine, boiler, generator, machinery, heating unit, stove, ventilator,
radiator or any other similar apparatus which will require the use of
electrical current or water without the prior written consent of Landlord,
and then only as Landlord may direct.

5. Tenant shall not use in the Building any machine, other than standard
office machines such as computers, faxes, typewriters, calculators,
copying machines and similar machines, without the prior written approval
of Landlord. All office equipment and any other device of any electrical
or mechanical nature shall be placed by Tenant in the Premises in settings
approved by Landlord, so as to absorb or prevent any vibration, noise or
annoyance. Tenant shall not cause improper noises, vibrations or odors
within the Building.

6. Tenant shall not place a load on any floor in the Premises exceeding the
floor load limit which such floor was designed to carry, nor shall Tenant
install, operate or maintain in the Premises any heavy item or equipment
except in such manner as to achieve a proper distribution of weight, so
long as Landlord notifies Tenant of such loads.

7. Tenant shall not use scotch tape or other adhesive material for the
purposes of hanging items on the interior walls of the Premises.

8. Tenant shall not deposit any trash, refuse, cigarettes, or other
substances of any kind out of the Building, except in the refuse
containers provided therefor. In addition, if Tenant shall place or allow
or cause to be placed in the garbage dumpsters excess trash or refuse,
such as boxes or cartons, which would necessitate an additional pick-up
for such garbage dumpsters, the Tenant shall be responsible for such
additional pick-up at its sole cost and expense. Tenant shall exercise its
best efforts to keep the sidewalks, entrances in and about the Building
clean and free from rubbish. The outside areas immediately adjoining the
Premises shall be kept clean and free from snow, ice, dirt and rubbish by
Tenant, and Tenant shall not place, suffer or permit any obstruction or
storage or display of goods in such areas.

9. Tenant shall not use the washrooms, rest rooms and plumbing fixtures of
the Building, and appurtenances thereto, for any other purpose than the
purposes for which they were constructed, and Tenant shall not deposit any
sweepings, rubbish, rags or other improper substances therein. Tenant
shall not waste water by interfering or tampering with the faucets or
otherwise. If Tenant or Tenant's servants, employees, agents, contractor,
jobbers, licensees, invitees, guests or visitors cause any such damage to
such washrooms, rest rooms, plumbing fixtures or appurtenances, such
damage shall be repaired at Tenant's expense, and Landlord shall not be
responsible therefor.

10. Landlord shall have the right to prohibit any publicity, advertising or
use of the name of the Building by Tenant which, in Landlord's reasonable
opinion, impairs the reputation of the Building or its desirability as a
building for offices, and upon written notice from Landlord, Tenant shall
refrain from or discontinue any such publicity, advertising or use of the
Building name.

11. The sashes, sash doors, skylights, windows and doors that reflect or admit
light or air into the leased area shall not be covered or obstructed by
Tenant without Landlord's prior written approval. Landlord shall approve
reasonable coverings. Tenant hereby agrees to keep the Premises at a
temperature sufficiently high to prevent freezing of water pipes and
fixtures.

12. No radio or television aerial or other device shall be erected on the roof
or exterior walls to the Premises or Building in which the Premises are
located without first obtaining in each instance the Landlord's consent in
writing. Any aerial or device installed without written consent shall be
subject to removal by Landlord at Tenant's expense without notice at any
time. No radio, phonograph or similar device shall be used in a manner so
as to be heard or seen outside the Premises.

13. Tenant, upon the termination of its lease, shall deliver to Landlord all
keys to doors in the Building. In the event of the loss of any key, it
shall be the sole responsibility and expense of Tenant to have the locks
to the Premises re-keyed or additional locks installed.

14. In the event Landlord provides a VIM Postal Unit, keys for such unit will
be distributed at the time of occupancy. Landlord however, will not be
responsible for: (a) the replacement of lost or damaged keys or issuance
of extra keys; (b) incorrect distribution of mail; (c) delivery schedules
of mail; or (d) mail delivery to door.

15. Tenant shall have cleaned, at its expense, not less than semiannually, the
carpet that has been provided by the Landlord for Tenant's use.

16. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the agreements,
covenants, conditions and provisions of any lease of premises in the
Building.

<PAGE>

EXHIBIT "D"

INSURANCE REQUIREMENTS

As referenced in Section 21 herein, an insurance certificate must be provided to
Landlord within thirty (30) days of execution of this Lease showing those
coverages specified. The following information must be incorporated on all
certificates:

1) Tenant's specific leased property address;

2) Thirty (30) day cancellation notice to Landlord; and

3) Highwoods Realty Limited Partnership (Landlord) specifically named as
Certificate Holder and Additional Insured.

<PAGE>

EXHIBIT "E"

PARKING RULES & REGULATIONS

Tenant shall be entitled to park in common with other tenants of
Landlord on the parking areas located adjacent to the Building(s) within
which the Premises are located. Tenant shall be entitled to one and one-half
(1.5), per one thousand (1,000) square feet leased, unreserved parking
spaces. Tenant agrees to cooperate with Landlord and other tenants in the use
of such parking facilities. Tenant agrees not to overburden such parking
facilities and agrees to cooperate with Landlord and other tenants in the use
of such parking facilities. Landlord reserves the right, in its reasonable
discretion, to determine whether parking facilities are being overburdened
and, in such event, to allocate parking spaces among Tenant and other tenants
or restrict the number of vehicles which may be parked thereon.

Parking as used herein means the use by Tenant's employees, its
visitors, invitees and customers of those portions of the parking area
designed by Landlord for the parking of motor vehicles in connection with use
of and/or visits to the Premises. There will be no assigned parking unless
elected by the Landlord in specific instances. Tenant agrees and covenants to
park all trucks, trailers or other commercial vehicles in the parking spaces
at the rear of the Building(s) within which the Premises are located or where
otherwise designated by Landlord. No vehicle, equipment or machinery may be
repaired, serviced, cleaned, steam cleaned, lubricated, sandblasted, painted
or otherwise maintained in any parking areas, roadways or service areas
adjacent to or surrounding the Building(s) in which the Premises are located,
or anywhere within the parking area. Any vehicle belonging to Tenant, or
Tenant's employees, agents, subcontractors, contractors, licensees, invitees
or visitors abandoned (72 hours without movement constitutes abandonment) or
disabled or in a state of non-operation or disrepair shall not be permitted
anywhere in the parking area and will be considered as trespassing on same,
and subject to removal therefrom by Landlord, and all cost resulting
therefrom, including towing, and if necessary, storage charges, shall be paid
by Tenant to Landlord upon demand. Tenant hereby agrees to enforce said
restriction with respect to Tenant's own vehicles and those of Tenant's
employees, agents, visitors, contractors and subcontractors, licensees and
invitees. Should a violation of this restriction occur, the vehicle,
equipment, trailer or machinery shall be deemed abandoned or in trespass and
may be removed from the parking area and all costs thereof shall be the
obligation of the Tenant. Should the Landlord be required to pay any towing,
removal or storage charges, said expenses or obligations shall become the
debt of the identified Tenant under this Lease and shall be reimbursed to the
Landlord as additional rent when invoiced. Landlord accepts no responsibility
for theft, collision, vandalism, fire, acts of God or any other casualty of
vehicles or equipment parked or stored in the parking area or for removal
required as set forth in this paragraph while the vehicle or equipment is
under tow or otherwise stored. Notwithstanding the foregoing, Landlord shall
not be responsible to the Tenant for the nonperformance by any other tenant
to any parking rule, and Landlord shall not be required to police said
parking area or to remove vehicles or to stop any nonconforming use.

<PAGE>

EXHIBIT "F"

Signage for AirPark South:

- - Overhead panels are 2' x 12', aluminum, and burgundy with white
lettering.

- - Landlord pays for overhead panel and tenant pays for lettering, logo,
and installation charges.

- - Lettering, logo, and installation charges of overhead panel are
approximately $205.00.

- - Tenant name on directory signage is available for a charge of $64.00.

- - Landlord provides front door signage.

<PAGE>

INDUSTRIAL LEASE AGREEMENT

LESSOR: CONTINENTAL, INC.

LESSEE: BIRTHDAY EXPRESS, INC.

<PAGE>

<TABLE>

<S> <C> <C>
TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II
BASIC LEASE PROVISIONS OF THE LEASE AGREEMENT. . . . . . . . . . . . . . . . . . . IV
1. PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. PREMISES, PARKING AND COMMON AREAS. . . . . . . . . . . . . . . . . . . . . . .1
3. TERM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
4. RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
5. SECURITY DEPOSIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
6. USE.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREAS SERVICES . . . . . . . . . .5
8. INSURANCE INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
9. DAMAGE OR DESTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
10. REAL PROPERTY TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11. UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
12. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . . . . . 11
13. DEFAULT REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14. CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15. BROKER'S FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
16. ESTOPPEL CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17. LESSOR'S LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
18. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
19. INTEREST ON PAST-DUE OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . 17
20. TIME OF ESSENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
21. ADDITIONAL RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS . . . . . . . . . . . . . . . . 17
23. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
24. WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
25. RECORDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
26. HOLDING OVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
27. CUMULATIVE REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
28. COVENANTS AND CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
29. BINDING EFFECT, CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . 19
30. ATTORNEY'S FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
31. LESSOR'S ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
32. AUCTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
33. SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
34. MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
35. CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
36. GUARANTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
37. QUIET POSSESSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
38. SECURITY MEASURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
39. EASEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
40. PERFORMANCE UNDER PROTEST . . . . . . . . . . . . . . . . . . . . . . . . . . 21
41. AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

<PAGE>

42. CONFLICT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
43. OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
44. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
45. OPTION TO RENEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
LEGAL DESCRIPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
HAZARDOUS WASTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
RENT SCHEDULE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ADDENDUM 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ADDENDUM 1A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
<PAGE>

BASIC LEASE PROVISIONS OF THE LEASE AGREEMENT
FOR
405 BUSINESS PARK
BETWEEN
405 BUSINESS PARK LIMITED PARTNERSHIP, AS LESSOR, AND
BIRTHDAY EXPRESS, INC., AS LESSEE

The following basic terms of the Lease (herein called the "Basic Lease
Provisions") between Lessor and Lessee are an integral part of and are
incorporated by reference into the within lease:

A. The Building: 405 Business Park Annex

B. The Premises: 11220 - 120th Avenue NE, Suite 101

1. The suite number of the premises and the floors of the building in
which the premises are located are as follows:

Suite #101
1st Floor

2. The space within the premises is further described in the Lease,
including the floor plan attached hereto as Exhibit A, and
consists of the following approximate number of rentable square
feet: 16,734 (See Exhibit A)

C. The Term:

5 years and 1 months, beginning on December 1, 1995 (the commencement
date) and ending on December 31, 2000 (the expiration date).

D. The Base Rent: See exhibit D

E. Lessee's Proportionate Share of the Operating Expenses and/or increases
in Real Estate Taxes of the building, for purposes of determining
Lessee's annual rental adjustment, is hereby agreed to be forty six and
57/100 percent (46.57%).

F. The Security Deposit: $16,986.76 (first months prepaid rent and security
deposit)

G. The Space Plans Approval Date: N/A

H. Lessee's Contribution for Tenant Finish Improvements: N/A

I. Broker(s): Pacific Real Estate Partners
Employing Party: Continental Real Estate Management Services

J. Addresses for Notices and Payments: 601 Union Street, Suite 2000
Seattle, WA 98101

Lessor: 405 Business Park Limited Partnership
c/o Continental Real Estate Management Services
601 Union Street, Suite 2000
Seattle, WA 98101

Lessee: Birthday Express, Inc.
11220 - 120th Avenue NE, Suite 101
Kirkland, WA 98033

Checks Payable To: Continental Real Estate Management Services
Payment Address: 601 Union Street, Suite 2000

<PAGE>

INDUSTRIAL LEASE

1. PARTIES.

This lease, dated ____________19___ for reference purposes only is made
by and between 405 Business Park Limited Partnership (herein called
Lessor) and Birthday Express, Inc. (herein called Lessee).

2. PREMISES, PARKING AND COMMON AREAS.

2.1 PREMISES. Lessor hereby leases to Lessee and Lessee leases from
Lessor for the term, at the rental, and upon all of the conditions
set forth herein, real property situated in the County of King,
State of Washington commonly known as 405 Business Park Annex and
described as 11220-120th Avenue NE, Kirkland, WA 98033 herein
referred to as the "Premises", as outlined on Exhibit A attached
hereto, including rights to the common areas as hereinafter
specified but not including any rights to the roof of the premises
or to any building in the industrial center. The premises are a
portion of a building herein referred to as the "Building". The
premises, the building, the common areas, the land upon which the
same are located, along with all other buildings and improvements
thereon, are herein collectively referred to as the "Industrial
Center". See Exhibit E, Addendum 1A.

2.2 VEHICLE PARKING. Parking spaces in the common areas are
unreserved and unassigned. However, Lessee shall conform to such
parking rules and regulations as Lessor, in its reasonable
discretion, dictates. Lessee shall have the right to utilize its
pro-rata share of total designated parking stalls on the
Industrial Center site. At the time of lease execution, the
Lessee's pro-rata share allows the Lessee to utilize approximately
28 designated parking stalls. All of the above referenced stalls
are on a first come, first serve, non reserved basis except for
five (5) existing, reserved visitor parking stalls adjacent to the
Lessee's premises.

2.3 COMMON AREAS - DEFINITION. The term "Common Areas" is defined as
all areas and facilities outside the premises and within the
exterior boundary line of the industrial center that are provided
and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and of other Lessees of the
industrial center and their respective employees, suppliers,
shippers, customers and invitees, including parking areas, loading
and unloading areas, trash areas, roadways, sidewalks, walkways,
parkways, driveways and landscaped areas.

2.4 COMMON AREAS - LESSEE'S RIGHTS. Lessor hereby grants to Lessee,
for the benefit of Lessee and its employees, suppliers, shippers,
customers and invitees, during the term of this lease, the
non-exclusive right to use, in connection with others entitled to
such use, the common areas as they exist from time to time,
subject to any rights, powers, and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and
regulations or restrictions governing the use of the industrial
center. Under no circumstances shall the right herein granted to
use the common areas be deemed to include the right to store any
property, temporarily or permanently, in the common areas. Any
such storage shall be permitted only by the prior written consent
of Lessor or Lessor's designated agent, which consent may be
revoked at any time. In the event that any unauthorized storage
shall occur then Lessor shall have the right, without notice, in
addition to such other rights and remedies that it may have to
remove the property and charge the cost to Lessee, which cost
shall be immediately payable upon demand by Lessor.

2.5 COMMON AREA - RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control
and management of the common areas and shall have the right, from
time to time, to establish, modify, amend and enforce reasonable
rules and regulations with respect thereto. Lessee agrees to
abide by and

1
<PAGE>

conform to all such rules and regulations, and to cause its
employees, suppliers, shippers, customers, and invitees to so
abide and conform. Lessor shall not be responsible to Lessee for
the noncompliance with said rules and regulations by other Lessees
of the industrial center, other than the remedies provided Lessee
in this lease. Lessor shall be responsible for enforcing the
terms of its leases with other Lessees in the Industrial Center
which use the same common areas, so that such use does not
interfere with this Lessees use of their demised premises or
common areas provided under this lease. Lessee acknowledges at
the time of lease execution, no Rules and Regulations exist on the
property. Lessor may install any new Rules and Regulations at its
discretion, subject to the provisions of this lease.

2.6 COMMON AREAS - CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time:

(a) To make changes to the common areas, including, without
limitation, changes in the location, size, shape and number of
driveways, entrances, parking spaces, parking areas, loading and
unloading areas, ingress, egress, direction of traffic, landscaped
areas and walkways;

(b) To close temporarily any of the common areas for
maintenance purposes so long as reasonable access to the premises
remains available;

(c)

(d) To add additional buildings and improvements to the common
areas, but in no event shall Lessee's existing rights be reduced.

(e) To use the common areas while engaged in making additional
improvements, repairs or alterations to the industrial center, or
any portion thereof;

(f) To do and perform such other acts and make such other
changes in, to or with respect to the common areas and industrial
center as Lessor may, in the exercise of sound business judgment,
deem to be appropriate.

(g) Lessor shall not make changes which interfere with Lessees
use of its premises, block visibility to Lessees premises, or
prevent ingress or egress of lease or its customers.

3. TERM.

3.1 TERM. The term of this lease shall be for Five (5) Years
commencing on December 1, 1995 and ending on December 31, 2000,
unless sooner terminated pursuant to any provision hereof.
See Exhibit E, Addendum 1, Paragraph 2.

3.2 DELAY IN POSSESSION. Notwithstanding said commencement date, if
for any reason Lessor cannot deliver possession of the premises to
Lessee on said date, Lessor shall not be subject to any liability
therefor, nor shall such failure affect the validity of this lease
or the obligations of Lessee hereunder or extend the term hereof,
but in such case, Lessee shall not be obligated to pay rent or
perform any other obligation of Lessee under the terms of this
lease, except as may be otherwise provided in this lease, until
possession of the premises is tendered to Lessee; provided
however, that if Lessor shall not have delivered possession of the
premises within sixty (60), days from said commencement date,
Lessee may at Lessee's option, by notice in writing to Lessor,
cancel this lease, in which event the parties shall be discharged
from all obligations hereunder, provided further, however, that if
such written notice of Lessee is not received by Lessor, Lessee's
right to cancel this lease hereunder shall terminate and be of no
further force or effect.

<PAGE>

3.3 EARLY POSSESSION. If Lessee occupies the premises prior to said
commencement date, such occupancy shall be subject to all
provisions of this lease, such occupancy shall not advance the
termination date.

4. RENT.

4.1 BASE RENT. See Exhibit D

4.2 OPERATING EXPENSES. In addition to base rent, Lessee shall pay to
Lessor during the term hereof, as additional rental, Lessee's
share as hereinafter defined, of all operating expenses during
each calendar year of the term of this lease, in accordance with
the following provisions:

(a) "Lessee's Share" is defined for purposes of this lease, as
46.57 percent.

(b) "Operating Expenses" is defined, for purposes of this
lease, as all costs incurred by Lessor, if any, for:

(I) The operation, repair and maintenance, in neat,
clean, good order and condition of the following:

(aa) The common areas, including parking areas,
loading and unloading areas, trash areas, roadways,
sidewalks, walkways, parkways, driveways, landscaped
areas, striping, bumpers, irrigation systems.
Common areas lighting facilities and fences and
gates.
(bb) Trash disposal services.
(cc) Tenant directories.
(dd) Fire detection systems including sprinkler
system maintenance and repair.
(ee) Security Services.
(ff) Any other service to be provided by Lessor
that is elsewhere in this lease stated to be an
"Operating Expense".

(II) Any deductible portion of an insured loss concerning
any of the items or matters described in this paragraph
4.2.

(III) The cost of the premiums in the liability and
property insurance policies to be maintained by Lessor
under paragraph 8 hereof.

(IV) The amount of the real property tax to be paid by
Lessor under paragraph 10.1 hereof.

(V) The cost of water, gas and electricity to service
the common areas.

(c) The inclusion of the improvements, facilities and service
set forth in paragraph 4.2(b)(I) of the definition of operating
expenses shall not be deemed to impose an obligation upon Lessor
to either have said improvements or facilities or to provide those
services unless the industrial center already has the same, Lessor
already provides the services or Lessor agreed elsewhere in this
lease to provide the same or some of them.

(d) Lessor's obligation to provide the estimate and the actual
costs is on a best-efforts basis. The determination of the
estimated costs is solely within the discretion of the Lessor.
Nonpayment of the estimated or actual direct costs will provide
Lessor with the same legal rights with respect to such nonpayment
that it has with respect to nonpayment of the base rent. No
interest or earnings shall be payable by Lessor to Lessee if any
sums accumulate pursuant to the operating costs paragraph; Lessee
shall have no interest or ownership with respect to any sums
accumulated by Lessor.

<PAGE>

5. SECURITY DEPOSIT.

Lessee shall deposit with Lessor upon execution hereof Sixteen Thousand,
Nine Hundred Eighty Six Dollars and 76/100 ($16,986.76); prepaid rent for
month 1, Seven Thousand Four Hundred Forty Eight and 38/100 ($7,448.38)
and Nine Thousand Five Hundred Thirty Eight and 38/100 ($9,538.38) as a
security deposit for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this
lease, Lessor may use, apply or retain all or any portion of said deposit
for the payment of any, rent or other charge in default or for the
payment of any other sum to which Lessor may become obligated by reason
of Lessee's default, or to compensate Lessor for any loss or damage which
Lessor may suffer thereby. If Lessor so uses or applies all or any
portion of said deposit, Lessee shall within ten (10) days after written
demand therefor deposit cash with Lessor in an amount sufficient to
restore said deposit to the full amount then required of Lessee. If the
monthly rent shall from time to time, increase during the term of this
lease, Lessee shall, at the time of such increase, deposit with Lessor
additional money as a security deposit so that the total amount of the
security deposit held by Lessor shall at all times bear the same
proportion to the then current base rent as the initial security deposit
bears to the initial base rent. Lessor shall not be required to keep
said security deposit separate from its general accounts. If Lessee
performs all of Lessee's obligations hereunder, said deposit or so much
thereof as has not theretofore been applied by Lessor, shall be returned,
without payment of interest or other increment for its use, to Lessee (or
at Lessor's option, to the last assignee, if any, of Lessee's interest
hereunder) at the expiration of the term hereof, and after Lessee has
vacated the premises. No trust relationship is created herein between
Lessor and Lessee and Lessee with respect to said security deposit.

6. USE.

6.1 USE. The premises shall be used and occupied only for the
warehousing, packaging and mailing of merchandise related to the
Birthday Express, Children's Party Catalog and accessory retail
operations as are legal within the City of Kirkland zoning code or
any other use which is reasonably comparable and for no other
purpose.

6.2 COMPLIANCE WITH LAW. Lessee shall at Lessee's expense, promptly
comply with all applicable statutes, ordinances, rules,
regulations, orders, covenants, and restrictions of record, and
requirements of any life insurance underwriters or rating bureaus,
now in effect or which may hereafter come into effect, whether or
not they reflect a change in policy from that now existing, during
the term or any part of the term hereof, relating in any manner to
the premises and the occupation and use by Lessee of the premises
and of the common areas. Lessee shall not use nor permit the use
of the premises or the common areas in any manner that will tend
to create waste or a nuisance or shall tend to disturb other
occupants of the industrial center.

6.3 CONDITION OF PREMISES.

(a) Lessor shall deliver the premises to Lessee clean and free
of debris on the lease commencement date (unless Lessee is already
in possession) and Lessor warrants to Lessee that the plumbing,
lighting, air conditioning, heating, and loading doors in the
premises shall be in good operating condition on the lease
commencement date. In the event that it is determined that the
warranty has been violated, then it shall be the obligation of
Lessor, after receipt of written notice from Lessee setting forth
with specificity the nature of the violation, to promptly, at
Lessor's sole cost rectify such violation. Lessee's failure to
give such written notice to Lessor within thirty (30) days after
the lease commencement date shall cause the conclusive presumption
that Lessor has complied with all of Lessor's obligations
hereunder. The warranty contained in this paragraph 6.3 (a) shall
be of no force or effect if prior to the date of this lease,
Lessee was an owner or occupant of the premises.

(b) Except as otherwise provided in this lease, Lessee hereby
accepts the premises in their condition existing as of the lease
commencement date or the date that Lessee takes possession of the
premises, whichever is earlier; subject to all applicable zoning,

4
<PAGE>

municipal county and state laws, ordinances and regulations
governing and regulating the use of the premises, and any
covenants or restrictions of record, and accepts this lease
subject thereto and to all matters disclosed thereby and by any
exhibits attached hereto. Lessee acknowledges that neither Lessor
nor Lessor's agent has made any representation or warranty as to
the present or future suitability of the premises for the conduct
of Lessee's business.

7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREAS SERVICES.

7.1 LESSOR'S OBLIGATIONS. Subject to the provisions of paragraph 4.2
(Operating Expenses), 6 (Use), 7.2 (lessee's Obligations) and 9
(Damage or Destruction) and except for damage caused by any
negligent or intentional act or omission of Lessee, Lessee's
employees, suppliers, shippers, customers, or invitees, in which
event Lessee shall repair the damage. Lessor, at Lessor's
expense, subject to reimbursement pursuant to paragraph 4.2, shall
keep in good condition and repair the foundations, exterior walls,
structural condition of interior bearing walls, and roof of the
premises, as well as the parking lots, walkways, driveways,
landscaping, fences, signs and utility installations of the common
areas and all parts thereof as well as providing the services for
which there is an operating expense pursuant to paragraph 4.2.
Lessor shall not, however, be obligated to paint the interior
surface of exterior walls, nor shall Lessor be required to
maintain, repair or replace windows, doors or plate glass of the
premises. Lessor shall have no obligation to make repairs under
this paragraph 7.1 until a reasonable time after receipt of
written notice from Lessee of the need for such repairs. Lessor
shall periodically, at its sole discretion, paint the exterior
building walls. The cost of any such building maintenance items
shall be in accordance with all provisions in paragraph 4.2
(Operating Expenses) of this lease. Lessor shall not be liable
for damages or loss of any kind or nature by reason of Lessor's
failure to furnish any common areas services when such failure is
caused by accident, breakage, repairs, strikes, lockout or other
labor disturbances or disputes of any character, or by any other
cause beyond the reasonable control of Lessor.

7.2 LESSEE'S OBLIGATIONS.

(a) Subject to the provisions of paragraph 6 (Use), 7.1
(Lessor's Obligations), and 9 (Damage or Destruction) Lessee, at
Lessee's expense shall keep in good condition and repair the
premises and every part thereof (whether or not the damaged
portion of the premises or the means of repairing the same are
reasonably or readily accessible to Lessee) including, without
limiting the generality of the foregoing, all plumbing, heating,
ventilating and air conditioning systems, electrical and lighting
facilities, and equipment within the premises, fixtures, interior
walls and interior surfaces of exterior walls, ceilings, windows,
doors, plate glass, and skylights located within the premises.
Lessor reserves the right to procure and maintain the ventilating
and air conditioning system maintenance contract and if Lessor so
elects, Lessee shall reimburse Lessor upon demand, for the cost
thereof.

(b) If Lessee fails to perform Lessee's obligations under this
paragraph 7.2 or under any other paragraph of this Lease, Lessor
may enter upon the premises after ten (10) days prior written
notice to Lessee (except in the case of emergency, in which no
notice shall be required), perform such obligations on Lessee's
behalf and put the premises in good order, condition and repair,
and the cost thereof together with interest thereon at the maximum
rate then allowable by law shall be due and payable as additional
rent to Lessor together with Lessee's next base rent installment.

(c) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the premises to Lessor in the
same condition as received, ordinary wear and tear accepted, clean
and free of debris. Any damage or deterioration of the premises
shall not be deemed ordinary wear and tear if the same could have
been prevented by good maintenance practices. Lessee shall repair
any damage to the premises

5
<PAGE>

occasioned by the installation or removal of Lessee's trade
fixtures, alterations, furnishings and equipment, notwithstanding
anything to the contrary otherwise stated in this lease. Lessee
shall leave the air lines, power panels, electrical distribution
systems, lighting fixtures, space heaters, air conditioning,
plumbing and fencing on the premises in good operating condition.

7.3 ALTERATIONS AND ADDITIONS.

(a) Lessee shall not without Lessor's prior written consent,
make any alterations, improvements, additions, or utility
installations on or about the premises, or the industrial center,
except for nonstructural alterations to the premises not exceeding
$2,500 in cumulative costs, during the term of this Lease. In any
event, whether or not in excess of $2,500 in cumulative cost,
Lessee shall make no change or alterations to the interior of the
premises, the exterior of the building nor the industrial center
without Lessor's prior written consent. As used in this paragraph
7.3 the term "Utility Installation" shall mean carpeting, window
coverings, air lines, power panels, electrical distribution
systems, lighting fixtures, space heaters, air conditioning,
plumbing and fencing. Lessor may require that Lessee remove any
or all of said alterations, improvements, additions or utility
installations at the expiration of the term, and restore the
premises and the industrial center to their prior condition.
Lessor may require Lessee to, provide Lessor, at Lessee's sole
cost and expense, a lien and complete bond in an amount equal to
one and one half times the estimated cost of such improvements, to
insure Lessor against any liability for mechanic's and
materialmen's liens and to insure completion of the work. Should
Lessee make any alterations, improvements, additions, utility
installations, without the prior approval of Lessor, Lessor may,
at any time during the term of this Lease, require that Lessee
remove any or all of the same.

(b) Any alterations, improvements, additions or utility
installations in or about the premises or the industrial center
that Lessee shall desire to make and which requires the consent of
the Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent, the
consent shall be deemed conditioned upon Lessee acquiring a permit
to do so from appropriate governmental agencies, the furnishing of
a copy thereof to Lessor prior to the commencement of the work and
the compliance by Lessee of all conditions of said permits in a
prompt and expeditious manner.

(c) Lessee shall pay when due, all claims for labor or
materials furnished or alleged to have been furnished to or for
Lessee at or for use in the premises, which claims are or may be
secured by any mechanics or materialmen's lien against the
premises, or the industrial center, or any interest therein.
Lessee shall give to Lessor not less than ten (10) days notice
prior to the commencement of any work in the premises, and Lessor
shall have the right to post notices of non-responsibility in or
on the premises or the building as provided by law. If Lessee
shall, in good faith, contest the validity of such lien, claim or
demand, then Lessee shall, at its sole expense defend itself and
Lessor against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the premises of the industrial
center, upon the condition that if Lessor shall require, Lessee
shall furnish to Lessor a surety bond satisfactory to Lessor in an
amount equal to such contested lien claim or demand indemnifying
Lessor against liability for the same and holding the premises and
the industrial center free from the effect of such lien or claim
in addition, Lessor may require Lessee to pay Lessor's attorneys
fees and costs in participating in such action if Lessor shall
decide it is to Lessor's best interest to do so.

(d) All alterations, improvements, additions, utility
installations (whether or not such utility installations
constitute trade fixtures of Lessee) , which may be made on the
premises, shall be the property of Lessor and shall remain upon
and be surrendered with the premises at the expiration of the
lease term, unless Lessor requires their removal pursuant to
paragraph 7.3(a) Notwithstanding the provisions of this paragraph
7.3(d). Lessee's machinery and equipment other than that which is
affixed to the premises so that it cannot be removed without
material damage to the premises and

<PAGE>

other than utility installations, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of
paragraph 7.2.

7.4 UTILITY ADDITIONS. Lessor reserves the right to install new or
additional utility facilities throughout the building and the
common areas for the benefit of Lessor or Lessee, or any other
Lessee of the industrial center, including, but not by way of
limitation, such utilities as plumbing, electrical systems,
security systems, communication systems, and fire protection and
detector systems, so long as such installations do not
unreasonably interfere with Lessee's use of the premises.

8. INSURANCE INDEMNITY.

8.1 LIABILITY INSURANCE - LESSEE. Lessee shall at Lessee's expense
obtain and keep in force during the term of this lease a policy of
Combined Single Limit Bodily Injury and Property Damage insurance
insuring Lessor against any liability arising out of the use,
occupancy or maintenance of the premises and the industrial
center. Such insurance shall be an amount not less than
$500,000.00 per occurrence. The policy shall insure performance
by Lessee of the indemnity provisions of this paragraph 8. The
limits of said Insurance shall not however limit the liability of
Lessee hereunder.

8.2 LIABILITY INSURANCE - LESSOR. Lessor shall obtain and keep in
force during the term of this lease a policy of Combined Single
Limit Bodily injury and Property Damage Insurance insuring Lessor
but not Lessee against any liability arising out of the ownership,
use, occupancy or maintenance of the industrial center in an
amount not less than $500,000.00 per occurrence.

8.3 PROPERTY INSURANCE. Lessor shall obtain and keep in force during
the term of this lease a policy or policies of insurance, covering
loss or damage to the industrial center improvements, but not
Lessee's personal property, fixtures, equipment or tenant
improvements, in an amount not to exceed the full replacement
value thereof, as the same may exist from time to time, providing
protection against all perils included within the classification
of fire, extended coverage, vandalism, malicious mischief, flood
(in the event same is required by a lender having a lien on the
premises) special extended perils ("all risk"' as such term is
used in the insurance industry), plate glass insurance and such
other insurance as Lessor deems advisable. In addition, Lessor
shall obtain and keep in force, during the term of this Lease, a
policy of rental value insurance covering a period of one year,
with loss payable to Lessor, which insurance shall also cover all
operating expenses for said period in the event that the premises
shall suffer an insured loss as defined in paragraph 9.1 (g)
hereof, the pro rata deductible amounts under the casualty
insurance policies relating to the premises shall be paid by
Lessee, subject to all provisions in paragraph 9.0 (Damage and
Destruction) of this lease. Lessee shall have its rental
obligation abated in direct proportion to the timing and amount of
funds received by the Lessor from the Insurance Policy covering
rental value insurance.

8.4 PAYMENT OF PREMIUM INCREASE.

(a) After the term of this lease has commenced, Lessee shall
not be responsible for paying Lessee's share of any increase in
the property insurance premium for the industrial center specified
by Lessor's insurance carrier as being caused by the use, acts or
omissions, of any other Lessee of the industrial center, or by the
nature of such other Lessee's occupancy which create an
extraordinary or unusual risk.

(b) Lessee however shall pay the entirety of any increase in
the property insurance premium for the industrial center over what
it was immediately prior to the commencement of the term of this
lease, if the increase is specified by Lessor's insurance carrier
as being caused by the nature of Lessee's occupancy or any act or
omission of Lessee.

8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating of A-1 or AAA or
better or such other rating as may be

7
<PAGE>

required by a lender having a lien on the premises, as set forth
in the most current issue of "Best's Insurance Guide". Lessee
shall not do or permit to be done anything which shall invalidate
the insurance policies carried by Lessor. Lessee shall deliver to
Lessor copies of liability insurance policies required under
paragraph 8.1 or certificates evidencing the existence and amounts
of such insurance within seven (7) days after the commencement
date of this Lease. No such policy shall be cancelable or subject
to reduction of coverage or other modifications except after
thirty (30) days prior written notice to Lessor. Lessee shall, at
least thirty (30) days prior to the expiration of such policies,
furnish Lessor with renewals or "binders" thereof.

8.6 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery
against the other for loss or damage arising out of or incident to
the perils insured against which perils occur in, on or about the
premises whether due to the negligence of Lessor or Lessee or
their agents, employees contractors and/or invitees. Lessee and
Lessor shall, upon obtaining the policies of insurance required
give notice to the insurance carrier or carriers that the
foregoing mutual waiver of subrogation is contained in this Lease.

8.7 INDEMNITY. Lessee shall indemnify and hold harmless Lessor from
and against any and all claims arising from Lessee's use of the
industrial center, or from the conduct of Lessee's business or
from any activity, work or things done, permitted or suffered by
Lessee, in or about the premises or elsewhere and shall further
indemnify and hold harmless Lessor from and against any and all
claims arising from any breach or default in the performance of
any obligation on Lessee's part to be performed under the terms of
this Lease, or arising from any act or omission of Lessee, or any
of Lessee's agents, contractors, or employees, and from and
against all costs, attorney fees, expenses and liabilities
incurred in the defense of any such claim or any action or
proceeding brought thereon, and in case any action or proceeding
be brought against Lessor by reason of any such claim, Lessee upon
notice from Lessor shall defend the same at Lessee's expense by
counsel reasonably satisfactory to Lessor and Lessor shall
cooperate with Lessee in such defense. Lessee, as a material part
of the consideration to Lessor, hereby assumes all risk of damage
to property of Lessee or injury to persons, in, upon or about the
industrial center arising from any cause and Lessee hereby waives
all claims in respect thereof against Lessor.

8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any
loss of income therefrom or for damage to the goods, wares,
merchandise or other property of Lessee, invitees, customers, or
any other non employee persons of Lessee in or about the premises
or the industrial center, nor shall Lessor be liable for injury to
the person of Lessee, Lessee's employees, agents or contractors,
whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage,
leakage obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or
from any other cause, whether said damage or injury results from
conditions, arising upon the premises or upon other portions of
the industrial center, or from other sources or places and
regardless of whether the cause of such damage or injury or the
means of repairing the same is inaccessible to Lessee. Lessor
shall not be liable for any damages arising from any act or
neglect of any other Lessee, occupant or user of the industrial
center, nor from the failure of Lessor to enforce the provisions
of any other lease of the industrial center.

9. DAMAGE OR DESTRUCTION.

9.1 DEFINITIONS.

(a) "Premises, Partial Damage" shall mean if the premises are
damaged or destroyed to the extent that the cost of repair is less
than fifty percent of the then replacement cost of the premises.

8
<PAGE>

(b) "Premises, Total Destruction" shall mean if the premises
are damaged or destroyed to the extent that the cost of repair is
fifty percent or more of the then replacement cost of the
premises.

(c) "Premises, Building Partial Damage" shall mean if the
building of which the premises are a part is damaged or destroyed
to the extent that the cost to repair is less than fifty percent
of the then replacement cost of the building.

(d) "Premises, Building Total Destruction" shall mean if the
building of which the premises are a part is damaged or destroyed
to the extent that the cost to repair is fifty percent or more of
the then replacement cost of the building.

(e) "Industrial Center Buildings" shall mean all of the
buildings on the industrial center site.

(f) "Industrial Center Buildings, Total Destruction" shall mean
if the industrial center buildings are damaged or destroyed to the
extent that the cost of repair is fifty percent or more of the
then replacement cost of the industrial center buildings.

(g) "Insured Loss" shall mean damage or destruction which was
covered by an event required to be covered by the insurance
described in paragraph 8. The fact that an insured loss has a
deductible amount shall not make the loss an uninsured loss.

(h) "Replacement Cost" shall mean the amount of money necessary
to be spent in order to repair or rebuild the damaged area to the
condition that existed immediately prior to the damage occurring
excluding all improvements made by Lessees.

9.2 PREMISES PARTIAL DAMAGE; PREMISES BUILDING PARTIAL DAMAGE.

(a) Insured Loss. Subject to the provisions of paragraph 9.4
and 9.5, if at any time during the term of this lease there is
damage which is an insured loss and which falls into the
classification of either premises damage or premises building
partial damage, then Lessor shall at Lessor's expense repair such
damage to the premises, but not Lessee's fixtures, equipment or
tenant improvements as soon as reasonably possible and this lease
shall continue in full force and effect.

(b) Uninsured Loss. Subject to the provisions of paragraph 9.4
and 9.5, if at any time during the term of this Lease, there is
damage which is not an insured loss, and which falls within the
classification of premises partial damage or premises building
partial damage, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's
expense), which damage prevents Lessee from using the premises,
Lessor may at Lessor's option either (1) repair such damage as
soon as reasonably possible, at Lessor's expense, in which event
this lease shall continue in full force and effect, or (2) give
written notice to Lessee within thirty (30) days after the date of
the occurrence of such damage of Lessor's intention to cancel and
terminate this lease as of the date of the occurrence of such
damage. In the event Lessor elects to give such notice of
Lessor's intention to cancel and terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of
such notice to give written notice to Lessor of Lessee's intention
to repair such damage at Lessee's expense, without reimbursement
from Lessor in which event this lease shall continue in full force
and effect and Lessee shall proceed to make such repairs as soon
as reasonably possible. If Lessee does not give such notice
within such Ten (10) day period this lease shall be canceled and
terminated as of the date of the occurrence of such damage.

9.3 PREMISES TOTAL DESTRUCTION; PREMISES BUILDING TOTAL DESTRUCTION;
INDUSTRIAL CENTER BUILDINGS TOTAL DESTRUCTION.

(a) Subject to the provisions of paragraph 9.4 and 9.5 if at
any time during the term of this lease there is damage whether or
not it is an insured loss, and which falls into the
classifications of either (1) premises total destruction, or (2)
premises building total destruction or (3) industrial center
buildings total destruction, then Lessor may at

9
<PAGE>

Lessor's option either (1) repair such damage or destruction, but
not Lessee's fixtures, equipment or tenant improvements, as soon
as reasonably possible at Lessor's expense, and this lease shall
continue in full force and effect, or (2) give written notice to
Lessee within thirty (30) days after the date of occurrence of
such damage of Lessor's intention to cancel and terminate this
Lease, in which case this lease shall be canceled and terminated
as of the date of the occurrence of such damage.

9.4 DAMAGE NEAR END OF TERM.

(a) Subject to paragraph 9.4(b), if at any time during the last
six months of the term of this Lease, there is substantial damage,
whether or not an insured loss; which falls within the
classification of premises partial damage, Lessor may at Lessor's
option cancel and terminate this lease as of the date of
occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within thirty (30) days after the date
of occurrence of such damage.

(b) Notwithstanding paragraph 9.4 in the event that Lessee has
an option to extend or renew this Lease, and the time within which
said option may be exercised has not yet expired. Lessee shall
exercise such option, if it is to be exercised at all, no later
than twenty (20) days after the occurrence of an insured Loss
failing without the classification of premises partial damage
during the last six (6) months of the term of this Lease. If
Lessee duly exercises such option during said twenty (20) day
period, Lessor shall at Lessor's expense, repair such damage, but
not Lessee's fixtures, equipment or tenant improvements; as soon
as reasonably possible and this lease shall continue in full force
and effect. If Lessee fails to exercise such option during said
twenty (20) day period, then Lessor may at Lessor's option
terminate and cancel this lease as of the expiration of said
twenty (20) day period by giving written notice to Lessee of
Lessor's selection to do so within ten (10) days after the
expiration of said twenty (20) day period, notwithstanding any
term or provision in the grant of option to the contrary.

9.5 ABATEMENT OF RENT; LESSEE'S REMEDIES.

(a) In the event Lessor repairs or restores the premises
pursuant to the provisions of this paragraph 9, the rent payable
hereunder for the period during which such damage, repair or
restoration continues shall be abated in proportion to the degree
to which Lessee's use of the premises is impaired. Except for
abatement of rent, if any, Lessee shall have no claim against
Lessor for any damage suffered by reason of any such damage,
destruction, repair or restoration.

(b) If Lessor shall be obligated to repair or restore the
premises under the provisions of this paragraph 9 and shall not
the such repair or restoration within ninety (90) days after such
obligation shall accrue, Lessee may at Lessee's option cancel and
terminate this lease by giving Lessor written notice of Lessee's
election to do so at any time prior to the commencement of such
repair or restoration. In such event this lease shall terminate
as of the date of such notice.

9.6 TERMINATION - ADVANCE PAYMENTS. Upon termination of this lease
pursuant to this paragraph 9, an equitable adjustment shall be
made concerning advance rent and any advance payments made by
Lessee to Lessor. Lessor shall, in addition, return to Lessee so
much of Lessee's security deposit as has not theretofore been
applied by Lessor.

9.7 WAIVER. Lessor and Lessee waive the provisions of any statute
which relate to termination of leases when leased property is
destroyed and agree that such event shall be governed by the terms
of this Lease.

<PAGE>

10. REAL PROPERTY TAXES.

10.1 PAYMENT OF TAXES. Lessor shall pay the real property tax as
defined in paragraph 10.3 applicable to the industrial center
subject to reimbursement by Lessee of Lessee's share of such taxes
in accordance with the provisions of paragraph 4.2, except as
otherwise provided in paragraph 10.2.

10.2 ADDITIONAL IMPROVEMENTS. Lessee shall not be responsible for
paying Lessee's share of any increase in real property tax
specified in the tax assessor's records and work sheets as being
caused by additional improvements placed upon the industrial
center by other Lessees or by Lessor for the exclusive enjoyment
of such other Lessees. Lessee shall, however, pay to Lessor at
the time that operating expenses are payable under paragraph
4.2(c) the entirety of any increase in real property tax, if
assessed solely by reason of additional improvements placed upon
the premises by Lessee or at Lessee's request.

10.3 DEFINITION OF "REAL PROPERTY TAX". As used herein, the term "real
property tax" shall include any term of real estate tax or
assessment, general, special, ordinary or extraordinary, and any
license fee, commercial rental tax, improvement bond or bonds,
levy or tax (other than inheritance, personal income or estate
taxes) imposed on the industrial center or any portion thereof by
any authority having the direct or indirect power to tax,
including any city, county, state or federal government, or any
school, agricultural, sanitary, fire, street, drainage or other
improvement district, thereof, as against any legal or equitable
interest of Lessor in the industrial center or in any portion
thereof, as against Lessor's right to rent or other income
therefrom, and as against Lessor's business of leasing the
industrial center.

10.4 JOINT ASSESSMENT. If the industrial center is not separately
assessed, Lessee's share of the real property tax liability shall
be an equitable proportion of the real property taxes for all of
the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other
information as may be reasonably available. Lessor's reasonable
determination thereof in good faith, shall be conclusive. Lessor
acknowledges that the Industrial Center consists of two adjacent
tax parcels (#33-26-05-9031 1700 33 2605, 50 1700). The two
Industrial Center parcels are separately assessed.

10.5 PERSONAL PROPERTY TAXES.

(a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and
all other personal property of Lessee contained in the premises or
elsewhere. When possible, Lessee shall cause said trade fixtures,
furnishings, equipment and all other personal property to be
assessed and billed separately from the real property of Lessor.

(b) If any of Lessee's said personal property shall be assessed
with Lessor's real property, Lessee shall, pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a
written statement setting forth the taxes applicable to Lessee's
property.

11. UTILITIES.

Lessee shall pay for all water, gas, heat, light, power, telephone and
other utilities and services supplied to the premises, together with any
taxes thereon if any such services are not separately metered to the
premises. Lessee shall pay at Lessor's option, either Lessee's share of
a reasonable proportion to be determined by Lessor of all charges jointly
metered with other premises in the building.

12. ASSIGNMENT AND SUBLETTING.

<PAGE>

12.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise
transfer or encumber all or any part of Lessee's interest in the
lease or in the premises, without Lessor's prior written consent,
which Lessor shall not unreasonably withhold. Lessor shall
respond to Lessee's request for consent hereunder in a timely
manner and any attempted assignment, transfer, mortgage,
encumbrance or subletting without such consent shall be void, and
shall constitute a breach of this lease without the need for
notice to Lessee under paragraph 13.1.

12.2 LESSEE AFFILIATE. Notwithstanding the provisions of paragraph
12.1 thereof, Lessee may assign or sublet the premises, or any
portion thereof, without Lessor's consent, to any corporation
which controls, is controlled by or is under common control with
Lessee, or to any corporation resulting from the merger or
consolidation with Lessee, or to any person or entity which
acquires all the assets of Lessee as a going concern of the
business that is being conducted on the premises, all of which are
referred to as "Lessee Affiliate" provided that before such
assignment shall be effective said assignee shall assume, in full;
the obligations of Lessee under this Lease. Any such assignment
shall not in any way affect or limit the liability of Lessee under
the terms of this lease even if after such assignment or
subletting the terms of this lease are materially changed or
altered without the consent of Lessee, the consent of whom shall
not be necessary.

12.3 TERMS AND CONDITIONS OF ASSIGNMENT. Regardless of Lessor's
consent, no assignment shall release Lessee of Lessee's
obligations hereunder or after the primary liability of Lessee to
pay the base rent and Lessee's share of operating expenses, and to
perform all other obligations to be performed by Lessee hereunder.
Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment. Neither a delay in
the approval or disapproval of such assignment nor the acceptance
of rent shall constitute a waiver or estoppel of Lessor's right to
exercise its remedies for the breach of any of the terms or
conditions of this paragraph 12 or this Lease. Consent to one
assignment shall not be deemed consent to any subsequent
assignment in the event of default by any assignee of Lessee or
any successor of Lessee, in the performance of any of the terms
hereof. Lessor may proceed directly against Lessee without the
necessity of exhausting remedies against said assignee. Lessor
may consent to subsequent assignments of this lease or amendments
or modifications of this lease with assignees of Lessee, without
notifying Lessee, or any successor of Lessee, and without
obtaining its or their consent thereto and such action shall not
relieve Lessee of liability under this Lease.

12.4 TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. Regardless of
Lessor's consent, the following terms and conditions shall apply
to any subletting by Lessee of all or any part of the premises and
shall be included in subleases.

(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any
sublease heretofore or hereafter made by Lessee, and Lessor may
collect such rent and income and apply same toward Lessee's
obligations under this Lease, provided, however, that until a
default shall occur in the performance of Lessee's obligations
under this Lease, Lessee may receive, collect and enjoy the rents
accruing under such sublease. Lessor shall not by reason of this
or any other assignment of such sublease to Lessor nor by reason
of the collection of the rents from sublessee, be deemed liable to
the sublessee for any failure of Lessee to perform and comply with
any of Lessee's obligations to such sublease under such sublease.
Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating
that default exists in the performance of Lessee's obligations
under this Lease, to pay to Lessor the rents due and to become due
under the sublease. Lessee agrees that such sublessee shall have
the right to rely upon any such statement and request from Lessor
and that such sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists
and notwithstanding any notice from or claim from Lessee to the
contrary. Lessee shall have no right or claim against such
sublessee or Lessor for any such rents so paid by said sublessee
to Lessor.

<PAGE>

(b) No sublease entered into by Lessee shall be effective
unless and until it has been approved in writing by Lessor in
entering into any sublease. Lessee shall use only such form of
sublease as is satisfactory to Lessor and once approved by Lessor,
such sublease shall not be changed or modified without Lessor's,
prior written consent. Any sublease shall, by reason of entering
into a sublease under this lease, be deemed, for the benefit of
Lessor, to have assumed and agreed to conform and comply with each
and every obligation herein to be performed by Lessee other than
such obligations as are contrary to or inconsistent with
provisions contained in a sublease to which Lessor has expressly
consented in writing.

(c) If Lessee's obligations under this lease have been
guaranteed by third parties, then a sublease, and Lessor's consent
thereto, shall not be effective unless said guarantees give their
written consent to such sublease and the terms thereof.

(d) The consent by Lessor to any subletting shall not release
Lessee from its obligations or after the primary liability of
Lessee to pay the rent and perform and comply with all of the
obligations of Lessee to be performed under this Lease.

(e) The consent by Lessor to any subletting shall not
constitute a consent to any subsequent subletting by Lessee or to
any assignment or subletting by the sublessee. However, Lessor
may consent to subsequent subletting and assignments of the
sublease or any amendments or modifications thereto without
notifying Lessee or anyone else liable on the lease or sublease
and without containing their consent and such action shall not
relieve such persons from liability.

(f) In the event of any default under this Lease, Lessor may
proceed directly against Lessee, any guarantors or any one else
responsible for the performance of this Lease, including the
sublessee, without first exhausting Lessor's remedies against any
other person or entity responsible therefor to Lessor or any
security held by Lessor or Lessee.

(g) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor at its option and without any
obligation to do so, may require any sublease to attorn to Lessor,
in which event Lessor shall undertake the obligation of Lessee
under such sublease from the time of the exercise of said option
to the termination of such sublease, provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid
by such sublessee to Lessee or for any other prior defaults of
Lessee under such sublease.

(h) Each and every consent required of Lessee under a sublease
shall also require the consent of Lessor.

(i) No sublease shall further assign or sublet all or any part
of the premises without Lessor's prior written consent.

(j) Lessor's written consent to any subletting of the premises
by Lessee shall not constitute an acknowledgment that no default
then exists under this lease of the obligations to be performed by
Lessee nor shall such consent be deemed a waiver of any then
existing default except as may be otherwise stated by Lessor at
the time.

(k) With respect to any subletting to which Lessor has
consented, Lessor agrees to deliver a copy of any notice of
default by Lessee to the sublessee. Such sublessee shall have the
right to cure a default of Lessee within ten (10) days after
service of said notice of default upon such sublessee, and the
sublessee shall have a right of reimbursement and offset from and
against Lessee for any such defaults cured by the sublessee.

12.5 ATTORNEY'S FEES. In the event, Lessee shall assign or sublet the
premises or request the consent of Lessor to any assignment or
subletting or if Lessee shall request the consent of Lessor for
any act Lessee proposes to do then Lessee shall pay Lessor's

<PAGE>

reasonable attorney's fees incurred in connection therewith, such
attorney's fees not to exceed $350.00 for each such request.

13. DEFAULT REMEDIES.

13.1 DEFAULT. The occurrence of any one or more of the following
events shall constitute a material default of this lease by
Lessee.

(a) The vacating or abandonment of the premises by Lessee

(b) The failure by Lessee to make any payment of rent or any
other payment required to be made by Lessee hereunder, as and when
due, where such failure shall continue for a period of three (3)
days after written notice thereof from Lessor to Lessee. In the
event that Lessor serves Lessee with a Notice to Pay Rent or Quit
pursuant to applicable Unlawful Detainer statutes such Notice to
Pay Rent or Quit shall also constitute the notice required by this
subparagraph.

(c) Except as otherwise provided in this Lease, the failure by
Lessee to observe or perform any of the covenants, conditions or
provisions of this lease to be observed or performed by Lessee,
other than described in paragraph (b) above, where such failure
shall continue for a period of ten (10) days after written notice
thereof from Lessor to Lessee, provided, however, that if the
nature of Lessee's noncompliance is such that more than ten (10)
days are reasonable required for its cure, then Lessee shall not
be deemed to be in default if Lessee commenced such cure within
said ten (10) day period and thereafter obligingly prosecutes such
cure to completion. To the extent permitted by law, such ten (10)
day notice shall constitute the sole and exclusive notice required
to be given to Lessee under applicable Unlawful Detainer statutes.

(d) (1) The making by Lessee of any general arrangement or
general assignment for the benefit of creditors, (2) Lessee
becomes a "debtor" as defined in 11 U.S.C. & 101 or any successor
statute thereto, (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days, (3) the
appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the premises, or
of Lessee's interest in this Lease, where possession is not
restored to Lessee within thirty (30) days; or (4) the attachment,
execution or other judicial seizure of substantially all of
Lessee's assets located at the premises or of Lessee's interest in
this lease, where such seizure is not discharged within thirty
(30) days. In the event that any provision of this paragraph 13.1
(d) is contrary to any applicable law, such provision shall be of
no force or effect.

(e) The discovery by Lessor that any financial statement given
to Lessor by Lessee, any assignee of Lessee, any subtenant of
Lessee, any successor in interest of Lessee or any guarantor of
Lessee's obligation hereunder was materially false.

13.2 REMEDIES. In the event of any such material default by Lessee,
Lessor may at any time thereunder, with or without notice or
demand and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such default. Lessee
shall not be In default of this lease by its act of exercising its
early lease termination option - see Exhibit E.

(a) Terminate Lessee's right to possession of the premises by
any lawful means, in which case this lease and the term hereof
shall terminate and Lessee shall immediately surrender possession
of the premises to Lessor. In such event Lessor shall be entitled
to recover from Lessee all damages incurred by Lessor by reason of
Lessee's default including, but not limited to, the cost of
recovering possession of the premises, expenses of reletting,
including necessary renovation and alteration of the premises,
reasonable attorney's fees, and any real estate commission
actually paid, the worth at the time of award by the court having
jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term after the time of such award exceeds the
amount of such rental loss for the same period that Lessee proves
could be reasonably

<PAGE>

avoided, that portion of the leasing commission paid by Lessor
pursuant to paragraph 15 applicable to the unexpired term of this
Lease.

(b) Maintain Lessee's right to possession in which case this
lease shall continue in effect whether or not Lessee shall have
vacated or abandoned the premises, in such event Lessor shall be
entitled to enforce all of Lessor's rights and remedies under this
Lease, including the right to recover the rent as it becomes due
hereunder.

(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein
the premises are located. Unpaid installments of rent and other
unpaid monetary obligations of Lessee under the terms of this
lease shall bear interest from the date due at the maximum rate
then allowable by law.

13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a
reasonable time, but in no event later than ten (10) days after
written notice by Lessee to Lessor and to the holder of any first
mortgage or deed of trust covering the premises whose name and
address shall have theretofore been furnished to Lessee in writing
specifying wherein Lessor has failed to perform such obligation,
provided, however, that if the nature of Lessor's obligation is
such that more than ten (10) days are required for performance
then Lessor shall not be in default if Lessor commences
performance within such ten (10) day period and thereafter
diligently prosecutes the same to completion. In the event of any
material default by Lessor not capable of reasonable cure in the
time and manner specified above, Lessee may at any time thereunder
with or without notice or demand and without limiting Lessee in
the exercise of any right or remedy which Lessee may have by
reason of such default:

(a) Terminate the lease and surrender the premises to
Lessor. In such event, Lessee shall be entitled to recover from
Lessor all damages incurred by Lessee by reason of Lessor's
default;

or,

(b) In the event any condition arises in, or damage
exists to the premises, which condition or damage is within
Lessor's duty to maintain, correct or repair but Lessor falls to
or is unable or unwilling to do so and for which immediate action
is necessary to prevent potential injury to Lessee's customers,
employees, property, or business, Lessee may, but shall not be
required, make such repairs or perform such maintenance
immediately, without notice to Lessor. Lessor shall reimburse
Lessee for the reasonable and necessary costs or such repairs or
maintenance within thirty (30) days after Lessee's demand for
reimbursement submitted to Lessor with an itemized statement of
the repairs and charges.

13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of base rent, Lessee's share of operating
expenses, or other Sums due hereunder will cause Lessor to incur
costs not contemplated by this lease, the exact amount of which
will be extremely difficult to ascertain. Such costs include, but
are not limited to, processing and accounting charges, and late
charges which may be imposed on Lessor by the terms of any
mortgage or trust deed covering the property. Accordingly, if any
installment of base rent. operating expenses, or any other sum
due from Lessee shall not be received by Lessor or Lessor's
designee within ten (10) days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee shall
pay to Lessor a late charge equal to six percent (6%) of such
overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will
incur by reason of late payment by Lessee. Acceptance of such
late charge by Lessor shall in no event constitute a waiver of
Lessee's default with respect to such overdue amount, nor prevent
Lessor from exercising any of the other rights and remedies
granted hereunder. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) consecutive
installments of any of the aforesaid monetary obligations of
Lessee, then base rent shall automatically become

<PAGE>

due and payable quarterly in advance, rather than monthly,
notwithstanding paragraph 4.1 or any other provision of this lease
to the contrary.

14. CONDEMNATION.

If the premises or any portion thereof or the industrial center are taken
under the power of eminent domain, or sold under the threat of the
exercise of said power (all of which are herein called "condemnation"),
this lease shall terminate as to the part so taken as of the date the
condemning authority takes title or possession, whichever first occurs.
If more than ten percent of the floor area of the premises, or more than
twenty five percent of that portion of the common areas designated as
parking for the industrial center is taken by condemnation, Lessee may at
Lessee's option, to be exercised in writing only within thirty (30) days
after Lessor shall have given Lessee written notice of such taking (or in
the absence of such notice, within thirty (30) days after the condemning
authority shall have taken possession) terminate this lease as of the
date the condemning authority takes such possession. If Lessee does not
terminate this lease in accordance with the foregoing, this lease shall
remain in full force and effect as to the portion of the premises
remaining, except that the rent shall be reduced in the proportion that
the floor area of the premises taken bears to the total floor area of the
premises. No reduction of rent shall occur if the only area taken is
that which does not have the premises located thereon. Any award for the
taking of all or any part of the premises under the power of eminent
domain or any payment made under threat of the exercise of such power
shall be the property of Lessor, whether such award be made as
compensation for diminution in value of the leasehold or for the taking
of the fee, or as severance damages, provided, however, that Lessee shall
be entitled to any award for loss of or damage to Lessee's trade fixtures
and removable personal property. In the event that this lease is not
terminated by reason of such condemnation, Lessor shall to the extent of
severance damages received by Lessor in connection with such
condemnation, repair any damage to the premises caused by such
condemnation except to the extent that Lessee has been reimbursed
therefor by the condemning authority. Lessee shall pay any amount in
excess of such severance damages required to complete such repair.

15. BROKER'S FEE.

Upon execution of this lease by both parties, Lessor shall pay all fees
due to Brokers. Lessee hereby warrants that it has no written agreement
with any broker.

16. ESTOPPEL CERTIFICATE.

(a) Each party (as "responding party") shall at any time, upon
not less than ten (10) days prior written notice from the other
party ("requesting party") execute, acknowledge and deliver to the
requesting party, a statement in writing (1) certifying that this
lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the date
to which the rent and other charges are paid in advance, if any,
and (2) acknowledging that there are not, to the responding
party's knowledge, any uncured defaults on the part of the
requesting party, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrance of the premises or of the
business of the requesting party.

(b) At the requesting party's option, the failure to deliver
such statement within such time shall be a material default of
this lease by the party who is to respond, without any further
notice to such party, or it shall be conclusive upon such party
that (1) this lease is in full force and effect without
modification except as may be represented by the requesting party,
(2) there are no incurred defaults in the requesting party's
performance, and (3) if Lessor is the requesting party, not more
than one month's rent has been paid in advance.

(c) If Lessor desires to finance, refinance or sell the
property, or any part thereof, Lessee hereby agrees to deliver to
any lender or purchaser designated by Lessor such financial
statements of Lessee as may be reasonably required by such lender
or purchaser. Such

<PAGE>

statements shall include the past three (3) years financial
statements of Lessee. All such financial statements shall be
received by Lessor and such lender or purchaser in confidence and
shall be used only for the purposes, herein set forth.

17. LESSOR'S LIABILITY.

The term "Lessor" as used herein shall mean only the owner or owners, at
the time in question, of the fee title or a Lessee's interest in a ground
lease of the industrial center, and except as expressly provided in
paragraph 15, in the event of any transfer of such title or interest,
Lessor heroin named (and in case of any subsequent transfer's, then the
grantor) shall be relieved from and after the date of such transfer or
all liability as respects Lessor's obligations thereafter to be
performed, except for Lessor's obligations set forth in Exhibit C,
provided that any funds in the hands of Lessor or the then grantor at the
time of such transfer, in which Lessee has an interest, shall be
delivered to the grantee. The obligations contained in this lease to be
performed by Lessor shall, subject as aforesaid, be binding on Lessor's
successors and assigns, only during their respective periods of
ownership, except for Lessor obligations set forth in Exhibit C.

18. SEVERABILITY.

The invalidity of any provision of this lease as determined by a court of
competent jurisdiction, shall in no way affect the validity of any other
provision hereof.

19. INTEREST ON PAST-DUE OBLIGATIONS.

Except as expressly herein provided, any amount due to Lessor not paid
when due shall bear interest at the maximum rate then allowable by law
from the date due. Payment of such interest shall not excuse or cure any
default by Lessee under this Lease, provided, however, that interest
shall not be payable on late charges incurred by Lessee nor on any
amounts upon which late charges are paid by Lessee.

20. TIME OF ESSENCE.

Time is of the essence with respect to the obligations under this Lease.

21. ADDITIONAL RENT.

All monetary obligations of Lessee to Lessor under the terms of this
Lease, including but not limited to Lessee's share of operating expenses
and insurance and tax expenses payable shall be deemed to be rent.

22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS.

This lease contains all agreements of the parties with respect to any
matter mentioned herein. No prior or contemporaneous agreement or
understanding pertaining to any such matter shall be effective. This
lease may be modified in writing only, signed by the parties in interest
at the time of the modification. Except as otherwise stated in this
Lease, Lessee hereby acknowledges that neither the real estate broker
listed in paragraph 15 hereof nor any cooperating broker on this
transaction, nor the Lessor or any employee or agents of any of said
persons has made any oral or written warranties or representations to
Lessee relative to the condition or use by Lessee of the premises or the
property and Lessee acknowledges that Lessee assumes all responsibility
regarding the Occupation Safety Health Act, the legal use and
adaptability of the premises and the compliances thereof with all
applicable laws and regulations in effect during the term of this Lease,
except as otherwise specifically stated in this Lease.

<PAGE>

23. NOTICES.

Any notice required or permitted under this lease shall be given when
actually delivered or 48 hours after deposited in United States mail as
certified mail addressed to the address following or to such other
address as may be specified from time to time by either of the parties in
writing.

Lessee: Birthday Express, Inc.
11220-120th Avenue NE, Suite 101
Kirkland, WA 98033

Lessor: 405 Business Park Limited Partnership
Continental Real Estate Management Services
601 Union Street, Suite 2000
Seattle, WA 98101

24. WAIVERS.

No waiver by Lessor or any provision hereof shall be deemed a waiver of
any other provision hereof or of any subsequent breach by Lessee of the
same or any other provision. Lessor's consent to or approval of any act
shall not be deemed to render unnecessary the obtaining of Lessor's
consent to or approval of any subsequent act by Lessee. The acceptance
of rent hereunder by Lessor shall not be a waiver of any preceding breach
by Lessee of any provision hereof other than the failure of Lessee to pay
the particular rent so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.

25. RECORDING.

Either Lessor or Lessee shall, upon request of the other, execute,
acknowledge and deliver to the other a "short form" memorandum of this
lease for recording purposes.

26. HOLDING OVER.

(a) If Lessee does not vacate the leased premises at the time
required, Lessor shall have the option to treat Lessor as a tenant
from month to month, subject to all of the provisions of this
lease except the provisions for term and renewal (and at a rental
rate equal to 125 percent of the rent last paid by Lessee during
the original term for the first two months of the lease period.
After the second month, the rental shall be increased to represent
150 percent hold over cost). Failure of Lessee to remove
fixtures, furniture, furnishings, or trade fixtures which Lessee
is required to remove under this lease shall constitute a failure
to vacate to which this paragraph shall apply if the property not
removed will substantially interfere with occupancy of the
premises by another tenant or with occupancy by Lessor for any
purpose including preparation for a new tenant.

(b) If a month to month tenancy results from a holdover by
Lessee under this paragraph 26, the tenancy shall be terminable at
the end of any monthly rental period on written notice from Lessor
given not less than ten (10) days prior to the termination date
which shall be specified in the notice. Lessee waives any notice
which would otherwise be provided by law with respect to a month
to month tenancy.

27. CUMULATIVE REMEDIES.

No remedy or election hereunder, shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in
equity.

<PAGE>

28. COVENANTS AND CONDITIONS.

Each provision of this lease performable by Lessee shall be deemed both a
covenant and a condition.

29. BINDING EFFECT, CHOICE OF LAW.

Subject to any provisions hereof restricting assignment or subletting by
Lessee and subject to the provisions of paragraph 17, this lease shall
bind the parties, successors and assigns. This lease shall be governed
by the laws of the state where the industrial center is located and any
litigation concerning this lease between the parties hereto shall be
initiated in the county in which the industrial center is located.

30. ATTORNEY'S FEES.

If either party named herein bring an action to enforce the terms,
hereof or declare rights hereunder, the prevailing party in any such
action, on trial or appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the court.

31. LESSOR'S ACCESS.

Lessor and Lessor's agents shall have the right to enter the premises at
reasonable times for the purpose of inspecting the same, showing the same
to prospective purchasers, lenders, or Lessees, and making such
alterations, repairs, improvements or additions to the premises or to the
building of which they are part as Lessor may deem necessary or
desirable. Lessor may at any time place on or about the premises or the
building any ordinary "For Sale" signs, and Lessor may at any time during
the last 120 days of the term hereof place on or about the premises any
ordinary "For lease" signs. All activities of Lessor pursuant to this
paragraph shall be without abatement of rent, nor shall Lessor have any
liability to Lessee for the same.

32. AUCTIONS.

Lessee shall not conduct nor permit to be conducted, either voluntarily
or involuntarily, any auction upon the premises or the common areas
without first having obtained Lessor's prior written consent
notwithstanding anything to the contrary in this lease. Lessor shall not
be obligated to exercise any standard of reasonableness, in determining
whether to grant such consent.

33. SIGNS.

Lessee shall have the right, at its sole cost, to professionally install
two building exterior wall mounted signs, subject to the following
conditions:

1) Lessee shall have the right to install one (1) sign on the
eastern building wall, facing I-405. Such sign shall not
exceed 54 square feet and Lessee shall be responsible for
gaining all required city of Kirkland permits. Lessee
shall submit a sketch of the desired sign to the Lessor for
its approval, such approval shall not be unreasonably
withheld.

<PAGE>

2) Lessee shall have the right to install one (1) sign on the western
building wall, facing 120th Street. Such sign shall not exceed 36
square feet and Lessee shall be responsible for gaining all
required city of Kirkland permits. Lessee shall submit a sketch
of the desired sign to the Lessor for its approval, such approval
shall not be unreasonably withhold.

3) Lessee shall have the right to seek appropriate permits
from the city of Kirkland to install temporary sign and/or
displays on the roof of the building. Such displays shall
not be on the roof in excess of 14 days and all displays
shall be approved in advance by the Lessor, such approval
shall not be unreasonably withheld.

34. MERGER.

The voluntary or other surrender of this lease by Lessee, or a mutual
cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall at the option of Lessor terminate all or any existing
subtenancies or may at the option of Lessor, operate as an assignment to
Lessor of any or all of such subtenancies.

35. CONSENTS.

Except for paragraph 33 hereof, wherever in this lease the consent of one
party is required to an act of the other party such consent shall not be
unreasonably withheld or delayed.

36. GUARANTOR.

In the event that there is a guarantor of this Lease, said guarantor
shall have the same obligations as Lessee under this Lease.

37. QUIET POSSESSION.

Upon Lessee paying the rent for the premises and observing and performing
all of the covenants, conditions and provisions on Lessee's part to be
observed and performed hereunder, Lessee shall have quiet possession of
the premises for the entire term hereof subject to all of the provisions
of this lease. The individuals executing this lease on behalf of Lessor
represent and warrant to Lessee that they are fully authorized and
legally capable of executing this lease on behalf of Lessor and that such
execution is binding upon all parties, holding an ownership interest in
the property.

38. SECURITY MEASURES.

Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for the
benefit of the premises or the industrial center. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and
the property of Lessee and of Lessee's agents, and invitees from act of
third parties. Nothing herein contained shall prevent Lessor at Lessor's
sole option, from providing security protection for the industrial center
or any part thereof, in which event the cost thereof shall be included
within the definition of operating expenses, as set forth in paragraph
4.2(b).

39. EASEMENTS.

Lessor reserves to itself the right, from time to time, to grant such
easements, rights and dedications that Lessor deems necessary or
desirable and to cause the recordation of parcel maps and restrictions,
so long as such easements, rights, dedications, maps and restrictions
do not unreasonably interfere with the use of the premises by Lessee.
Lessee shall sign any

<PAGE>

of the aforementioned documents upon request of Lessor and failure to do
so shall constitute a material default of this lease by Lessee without
the need for further notice to Lessee.

40. PERFORMANCE UNDER PROTEST.

If at any time a dispute shall arise as to any amount or sum of money to
be paid by one party to the other under the provisions hereof, the party
against whom the obligation to pay the money is asserted shall have the
right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the
part of said party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation, on the part of said
party to pay such sum or any part thereof, said party shall be entitled
to recover such sum or so much thereof as it was not legally required to
pay under the provisions of this lease.

Any legal action relating to this lease shall be brought only in King
County Superior Court in the State of Washington.

41. AUTHORITY.

If Lessee is a corporation, trust, or general or limited partnership,
each individual executing this lease on behalf of such entity represents
and warrants that he or she is duly authorized to execute this lease on
behalf of said entity. If Lessee is a corporation, trust, or
partnership, Lessee shall, within thirty (30) days after execution of
this lease, deliver to Lessor evidence of such authority satisfactory to
Lessor.

42. CONFLICT.

Any conflict between the printed provisions of this lease and the
typewritten or handwritten provisions, if any, shall be controlled by the
typewriter or handwritten provisions.

43. OFFER.

Preparation of this lease by Lessor or Lessor's agent and submission of
same to Lessee shall not be deemed an offer to lease. This lease becomes
binding upon Lessor and Lessee only when fully executed by Lessor and
Lessee.

44. SUBORDINATION.

This lease is subject and is hereby subordinated to all present and
future mortgages, deeds of trust and other encumbrances affecting the
demised premises or the property of which said premises are a part. The
Lessee agrees to execute, at no expense to the Lessor, any instrument
which may be deemed necessary or desirable by the Lessor to further
effect the subordination of this lease to any mortgage, deed of trust or
encumbrances.

45. OPTION TO RENEW.

See Exhibit E, Addendum 4.

<PAGE>

LESSOR: LESSEE:

/S/ Stephen C. Grey /S/ Michael K Jewell
- ------------------------------------ -----------------------------------

Stephen C. Grey, Senior Vice President Michael K Jewell, President

405 Business Park Limited Partnership Jan A. Jewell, Co-President
c/o Continental Real Estate Management Birthday Express, Inc.
Services 11220-120th Avenue NE, Suite
102
601 Union Street, Suite 2000 Kirkland, WA 98033
Seattle, WA 98101

State of Washington )
) ss.
County of King )

On this 9th day November, 1995, before me, personally appeared Stephen C. Grey,
to me known to be the Senior Vice President, of the corporation that executed
the within and foregoing instrument; and acknowledged the said instrument to be
the free and voluntary act and deed of said corporation, for the uses and
purposes therein mentioned, and on oath stated that he/she was authorized to
execute said instrument and that the seal affixed hereto (if any) is the
corporate seal of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Official Seal the
day and year first above written.

/S/ Carole Jean Larson
---------------------------------------------
Notary Public in and for the State of SEAL
Washington residing at Auburn
My Appointment Expires: 6-15-98

State of Washington )
) ss.
County of King )

On this 9th day November, 1995, before me, personally appeared Michael Jewell,
to me known to be the President, of the corporation that
executed the within and foregoing instrument; and acknowledged the said
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that he/she was
authorized to execute said instrument and that the seal affixed hereto (if any)
is the corporate seal of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my Official Seal the
day and year first above written.

/S/ Renee Long
---------------------------------------------
Notary Public in and for the State of
Washington residing at __________
My Appointment Expires: 1-19-96

<PAGE>

EXHIBIT A

Premises

[ROOM PLAN]

<PAGE>

EXHIBIT B
LEGAL DESCRIPTION

PARCEL 1:

THE NORTH HALF OF THE SOUTH TWO-THIRDS DESCRIBED AS FOLLOWS:

THE NORTH 348.12 FEET OF THE SOUTH 690 FEET OF THE WEST 375.38 FEET OF THE
NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 33, TOWNSHIP 26 NORTH,
RANGE 5 EAST, W.M. IN KING COUNTY, WASHINGTON; AND THE NORTH 11.29 FEET OF THE
SOUTH HALF OF SAID SOUTH TWO-THIRDS; EXCEPT THE WEST 30 FEET FOR ROAD; AND
EXCEPT PORTIONS DEEDED TO THE STATE OF WASHINGTON FOR PRIMARY STATE HIGHWAY NO.
1, RECORDED UNDER RECORDING NUMBERS 4561981 AND 96362465.

PARCEL 2:

THE NORTH 179.75 FEET OF THE SOUTH 446.63 FEET OF THE WEST 375.38 FEET OF THE
NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 33, TOWNSHIP 26 NORTH,
RANGE 5 EAST, W.M., IN KING COUNTY, WASHINGTON; EXCEPT THE WEST 30 FEET FOR
ROAD; EXCEPT PORTIONS DEEDED TO THE STATE OF WASHINGTON FOR PRIMARY STATE
HIGHWAY NO. 1 BY DEEDS RECORDED UNDER RECORDING NUMBERS 4561981, 6362465,
4585665 AND 6404474;

TOGETHER WITH AN EASEMENT FOR DRIVEWAY PURPOSES OVER A STRIP OF LAND 26.67 FEET
WIDE, WHOSE SOUTH MARGIN IS THE NORTH MARGIN OF THIS PARCEL;

TOGETHER WITH AN EASEMENT FOR PARKING OVER THE NORTH 40 FEET OF THE SOUTH 266.88
FEET OF THE WEST 375.38 FEET, AND AN EASEMENT FOR INGRESS AND EGRESS OVER THE
SOUTH 25 FEET OF THE NORTH 65 FEET OF THE SOUTH 266.88 FEET OF THE WEST 375.38
FEET; ALL IN THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER, SECTION 33,
TOWNSHIP 26 NORTH, RANGE 5 EAST, W.M., IN KING COUNTY, WASHINGTON.

TOGETHER WITH AN EASEMENT FOR INGRESS AND EGRESS OVER THE SOUTH 25 FEET OF THE
NORTH 179.75 FEET OF THE SOUTH 446.63 FEET OF THE WEST 375.38 FEET; AND
RESERVING THE MUTUAL RIGHT OF PARKING ON THE NORTH 40 FEET OF THE SOUTH 266.88
FEET OF THE WEST 375.38 FEET; BOTH TO THE BENEFIT OF RESENT AND FUTURE OWNERS OF
THE SOUTH 266.88 FEET OF THE WEST 375.38 FEET, ALL IN THE NORTHEAST QUARTER OF
THE NORTHWEST QUARTER.

OF SECTION 33, TOWNSHIP 26 NORTH, RANGE 5 EAST, W.M. IN KING COUNTY, WASHINGTON;
EXCEPT THAT PORTION LYING WITHIN NORTHEAST 112TH STREET, IF ANY; AND EXCEPT THE
WEST 30 FEET OF ROAD; AND EXCEPT PORTION CONVEYED TO THE STATE OF WASHINGTON BY
DEEDS RECORDED UNDER RECORDING NUMBERS 457359 AND 6350591.

PARCEL 3:

THE NORTH ONE-THIRD OF THE NORTH 348.12 FEET OF THE SOUTH 690 FEET OF THE WEST
375.38 FEET OF THE NORTHEAST QUARTER OF THE NORTHWEST QUARTER OF SECTION 33,
TOWNSHIP 26 NORTH, RANGE 5 EAST, W.M., IN KING COUNTY, WASHINGTON; EXCEPT THE
WEST 30 FEET THEREOF FOR ROAD PURPOSES; AND EXCEPT THAT PORTION THEREOF CONVEYED
TO THE STATE OF WASHINGTON FOR SECONDARY STATE HIGHWAY NO. 2-A BY DEEDS RECORDED
UNDER RECORDING NUMBERS 4569597, RECORDS OF SAID COUNTY;

EXCEPT THAT PORTION OF SAID NORTH ONE-THIRD LYING WITHIN THE NORTH 630 FEET OF
SAID NORTHEAST QUARTER OF THE NORTHWEST QUARTER.

<PAGE>

EXHIBIT C

HAZARDOUS WASTE

The term "Hazardous Substances", as used in this lease shall mean pollutants,
contaminants, toxic or hazardous wastes, or any other substances, the use and/or
the removal of which is required or the use of which is restricted, prohibited
or penalized by any "Environmental Law", which term shall mean any federal,
state or local law, ordinance or other statute of a governmental or
quasi-governmental authority relating to pollution or protection of the
environment. Lessee hereby agrees that (i) no activity will be conducted on the
premises that will produce any Hazardous Substance, except for such activities
that are part of the ordinary course of Lessee's business activities (the
"Permitted Activities") provided said Permitted Activities are conducted in
accordance with all Environmental Laws and have been approved in advance in
writing by Lessor; Lessee shall be responsible for obtaining any required
permits and paying any fees and providing any testing required by any
governmental agency; (ii) the premises will not be used in any manner for the
storage of any Hazardous Substances except for the temporary storage of such
materials that are used in the ordinary course of Lessee's business (the
"Permitted Materials") provided such Permitted Materials are properly stored in
a manner and location meeting all Environmental Laws and approved in advance in
writing by Lessor; Lessee shall be responsible for obtaining any required
permits and paying any fees and providing any testing required by any
governmental agency; (iii) no portion of the premises will be used as a landfill
or a dump; (iv) Lessee will not install any underground tanks of any type; (v)
Lessee will not allow any surface of subsurface conditions to exist or come into
existence that constitute, or with the passage of time may constitute a public
or private nuisance; (vi) Lessee will not permit any Hazardous Substances to be
brought onto the premises, except for the Permitted Materials described below,
and if so brought or found located thereon, the same shall be immediately
removed, with proper disposal, and all required cleanup procedures shall be
diligently undertaken pursuant to all Environmental Laws. Lessor or Lessor's
representative shall have the right but not the obligation to enter the premises
for the purpose of inspecting the storage, use and disposal of Permitted
Materials to ensure compliance with all Environmental Laws. Should it be
determined, in Lessor's sole opinion, that said Permitted Materials are being
improperly stored, used or disposed of, then Lessee shall immediately take such
corrective action as requested by Lessor. Should Lessee fail to take such
corrective action within 24 hours, Lessor shall have the right to perform such
work and Lessee shall promptly reimburse Lessor for any and all costs associated
with said work. If at any time during or after the term of the lease, the
premises is found to be so contaminated or subject to said conditions, Lessee
shall diligently institute proper and thorough cleanup procedures at Lessee's
sole cost, and Lessee agrees to indemnify and hold Lessor harmless from all
claims, demands, actions, liabilities, costs, expenses, damages and obligations
of any nature arising from or as a result of the use of the premises by Lessee.
The foregoing indemnification and the responsibilities of Lessee shall survive
the termination or expiration of this Lease. Lessee shall not be liable or
responsible for any claims arising from the presence of any Hazardous Substance
determined to be on the site prior to Lessee's occupancy. If at any time during
the term of the lease or any extension or renewal thereof, the premises and/or
Industrial Center are found to be contaminated by Hazardous Substances or
subject to said conditions which are determined to have been on the premises
prior to the inception of the lease, Lessor shall, in accordance with all
federal, state, and/or local governmental mandates, diligently institute proper
and thorough cleanup procedures at Lessor's sole cost, and Lessor agrees to
indemnify and hold Lessee harmless from all claims, demands, actions,
liabilities, costs, expenses, damages, and obligations of any nature arising
from or as a result of the prior presence of Hazardous Substances or conditions
caused thereby. The foregoing indemnification and the responsibilities of
Lessor shall survive the termination or expiration of this lease. If Lessor is
not able to immediately institute proper and thorough cleanup procedures in
accordance with all federal, state, and/or local governmental mandates, and if
in Lessee's opinion said failure to do so detrimental to Lessee continuing
business on the premises or to Lessee's employees, Lessee reserves the right to
terminate the lease pursuant to Paragraph 13.3

Permitted Materials (if none, enter none): None

<PAGE>

EXHIBIT D

Rent Schedule

<TABLE>
<CAPTION>
MONTHS RENT
------ ----
<C> <C>
1-4 Free*
5-25 $7,448.38
26-61 $9,538.38
</TABLE>

* Rental abatement for months 1 -4 shall include full abatement of all CAM
charges.

<PAGE>

EXHIBIT E

ADDENDUM 1

1. PREMISES, PARKING AND COMMON AREAS 12.1 PREMISES)

Lessee to occupy 14,534 square feet December 1, 1995 through December
31, 1997.

Lessee to occupy 16,734 square feet January 1, 1998 through December 31,
2000.

Lessee shall have the right during the period December 1. 1995 -
December 31, 1997 to utilize approximately 2,200 square feet of this
space on a non-permanent and strictly periodic basis for the purpose of
general storage and/or company meetings.

2. TERM (3.1 TERM)

Lessee shall have the option to terminate this Lease anytime after the
37th month, by giving the Lessor 120 days notice prior to said
termination date and by paying a penalty of $13,387.20 on a sliding scale
of $13,387.20 for the 38th month to $0.00 for the 60th month.

3. OPTION TO RENEW

Provided Lessee is not in default of the terms and conditions of the
Lease, Lessee has the option to renew its Lease under the same terms and
conditions contained in this lease for two (2) additional terms of three
(3) years ("Extended Term`) following expiration of the Initial Term,
provided that Base Rent shall be market rate for a five year lease in
comparable buildings in the vicinity. The option shall be exercised by
Lessee giving not less that one hundred and eighty (150) days written
notice of its intent to exercise its option to renew. If Lessor and
Lessee fail to agree in writing on base rent for the extended term within
forty five (45) days of Lessor's receipt of Lessee's notice exercising
the option, then the option shall be void and Lessee's original notice
exercising the option shall be treated as if it were never given.

4. EXCLUSIVITY OF LESSEE'S USE

Lessor agrees, during the term of this Lease not to lease any space
within the Industrial Center to a "Party Goods", store or mail order
company. A "Party Goods", store or mail order Company shall be
considered as any Lessee whose primary use of Premises is the sale or
distribution of paper, plastic or party favor gifts; expressly utilized
for party or entertainment functions.

<PAGE>

EXHIBIT E

ADDENDUM 1A

[SITE PLAN]

<PAGE>

LEASE AMENDMENT

DATED: APRIL 30, 1999

BETWEEN: QUEEN INVESTMENT COMPANY LANDLORD
a Washington Limited Liability Company

AND: BIRTHDAY EXPRESS, INC. TENANT
a Washington corporation

By written Lease Agreement dated November 9, 1995, Tenant
leased from Landlord approximately 16,734 square feet of warehouse and office
space, located in the 405 Business Park Annex, 11220 120th Avenue NE,
Kirkland, Washington (hereinafter referred to as the "First Premises"). AND

By written Lease Agreement dated May 29, 1997, Tenant
leased from Landlord approximately 6,080 square feet of warehouse and office
space, located in the 405 Business Park Annex, 11218 120th Avenue NE,
Kirkland, Washington (hereinafter referred to as the "Second Premises").

Said documents are hereinafter jointly referred to as the "Lease".
The Lease for the First Premises terminates on December 31, 2000 and the
Lease for the Second Premises terminates on November 21, 2000.

Tenant now wishes to occupy temporary office and warehouse space
within the 405 Business Park, extend the term of the First and Second
Premises and expand into an additional approximate 11,696 square feet of
warehouse and office space in the 405 Business Park Annex, located at 11216
120th Avenue NE, Kirkland Washington (hereinafter referred to as the "Third
Premises").

NOW, THEREFORE, the parties agree as follows:

1. Effective May 17, 1999, Tenant shall temporarily occupy
approximately 1,225 square feet of warehouse space located in the west half
of 11232 120th Avenue NE, Suite 103 and 1,250 square feet of office space
located at 11232 120th Avenue NE, Suite 206, 405 Business Park (hereinafter
jointly referred to as the "Temporary Space"). Tenant shall occupy the
Temporary Space from May 17, 1999 through November 30, 1999. Tenant shall
have the option to shorten the lease term should the 405 Business Park Annex,
located at 11216 120th Ave NE become available and tenant moves into the
space.

2. The Base Rent for the Temporary Space will be as follows:

Suite 103 $ 673.75 per month, NNN
Suite 206 $1,875.00 per month, full service

3. The lease term for the First Premises shall be extended for three
(3) years effective January 1, 2001 through December 31, 2003. The Base Rent for
the First Premises shall be as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
BASE Rent
Period First Premises
-----------------------------------------------------------------------
<S> <C>
January 1, 2001 - December 31, 2001 $ 9,919.92
-----------------------------------------------------------------------
January 1, 2002 - December 31, 2002 $10,316.72
-----------------------------------------------------------------------
January 1, 2003 - December 31, 2003 $10,729.39
-----------------------------------------------------------------------
</TABLE>

4. The Lease term for the Second Premises shall also be extended
for three (3) years and 1.3 months effective November 22, 2000 through
December 31, 2003. The Base Rent for the Second Premises shall be as follows:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
BASE Rent
Period Second Premises
-----------------------------------------------------------------------
<S> <C>
November 1, 2000 - December 31, 2000 $ 3,648.00
-----------------------------------------------------------------------
January 1, 2001 - December 31, 2001 $ 3,648.00
-----------------------------------------------------------------------
January 1, 2002 - December 31, 2002 $ 3,757.44
-----------------------------------------------------------------------
January 1, 2003 - December 31, 2003 $ 3,870.16
-----------------------------------------------------------------------
</TABLE>

5. Effective December 1, 1999, or sooner should the space become
available, Tenant shall expand into approximately 11,696 square feet of
warehouse and office space in the 405 Business Park Annex, located at 11216
120th Avenue NE, Kirkland Washington. Tenant shall take possession of the
space in "as-is" condition. The lease term for the Third Premises shall
commence December 1, 1999 through December 31, 2003 and the Base Rent shall
be as follows: Landlord to provide space in move in condition for Tenant with
joint appoint in office area.

<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
BASE Rent
Period THIRD Premises
-----------------------------------------------------------------------
<S> <C>
December 1, 1999 - December 31, 2000 $ 6,432.80
-----------------------------------------------------------------------
January 1, 2001 - December 31, 2001 $ 6,625.78
-----------------------------------------------------------------------
January 1, 2002 - December 31, 2002 $ 6,824.55
-----------------------------------------------------------------------
January 1, 2003 - December 31, 2003 $ 7,029.29
-----------------------------------------------------------------------
</TABLE>

6. If not then in default, Tenant shall have an option to renew the
First, Second and Third Premises for one (1) three-year term, under the same
terms and conditions except as to the Base Rent, by giving not less than 180
days advanced written notice of its intent to exercise its option to renew.
The Base Rent for the three premises shall be at the then current market
rent, however, in no event shall the rental be less than the prior month's
rent.

7. Provided Tenant's Lease is still in effect and Tenant has not
defaulted thereunder, Tenant shall be granted the First Opportunity to Lease
the Adjacent Space located at 11200 120th NE with approximately 4,041 square
feet of office and warehouse space, should it become available during
Tenant's lease term. Said availability is subject to the renewal of the
current tenant's options to renew.

8. Tenant has been granted the right to sublease any of the three
Premises according to Article 12 - Assignment and Subletting, of the two
leases dated November 9, 1995 and May 29, 1997.

9. The Option to Terminate, as outlined in the Lease dated November
9, 1995, is hereby null and void.

10. Except as expressly modified hereby, all terms of the Leases shall
remain in full force and effect and shall continue through the existing and
extended terms.

IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first written above.

QUEEN INVESTMENT COMPANY, LLC BIRTHDAY EXPRESS, INC.
a Washington Limited Liability Company a Washington corporation

BY: /S/ RICHARD LEA III BY: /S/ MICHAEL K. JEWELL
------------------- ---------------------

ITS: PRESIDENT ITS: PRESIDENT
--------- ---------

DATE: 5/6/99 DATE: 5/3/99
------ ------

<PAGE>

STATE OF WASHINGTON CORPORATE
} ss.
COUNTY OF KING

On this 6th day of May A.D. 99, before me personally appeared
Richard Lea, III, to me known to be the President of Queen Investment
Company, LLC, the corporation that executed the within and foregoing
instrument, and acknowledged the same instrument to be the free and voluntary
act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that they were authorized to execute said
instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year first above written.
/s/ Valerie Kennedy
-------------------

Notary Public in and for the State of Washington, residing at Puyallup

STATE OF WASHINGTON CORPORATE
} ss.
COUNTY OF KING

On this 4 day of May A.D. 1999, before me personally appeared
Michael K. Jewell to me known to be the President and _______________________
to me known to be the _______________________________________ of Birthday
Express the corporation that executed the within and foregoing instrument, and
acknowledged the same instrument to be the free and voluntary act and deed of
said corporation, for the uses and purposes therein mentioned, and on oath
stated that they were authorized to execute said instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year first above written.
/s/ Sue Hames
-------------

Notary Public in and for the State of Washington, residing at King.
Co. Bothell.

STATE OF ___________________ INDIVIDUAL
} ss.
COUNTY OF _____________

This is to certify that on this ______________ day of
_________________ A.D. 19___, before me the undersigned, a Notary Public in
and for the State of ___________________________, duly commissioned and
qualified, personally appeared
______________________________________________________________________________
______________________________________________________________________________
to me known to be the individual ____ described in and who executed the within
and foregoing instrument, and acknowledged to me that ____________________
signed and sealed the same as ____________ free and voluntary act and deed, for
the uses and purposes therein mentioned.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year first above written. ____________________________________

Notary Public in and for the State of ________________________________,
residing at __________________________.

STATE OF ___________________ INDIVIDUAL
} ss.
COUNTY OF _____________

This is to certify that on this ______________ day of _________________
A.D. 19___, before me the undersigned, a Notary Public in and for the State of
___________________________, duly commissioned and qualified, personally
appeared
______________________________________________________________________________
______________________________________________________________________________
to me known to be the individual ____ described in and who executed the within
and foregoing instrument, and acknowledged to me that ____________________
signed and sealed the same as ____________ free and voluntary act and deed, for
the uses and purposes therein mentioned.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year first above written. ____________________________________

Notary Public in and for the State of ________________________________,
residing at __________________________.

<PAGE>

LEASE AMENDMENT NO. 2

DATED: SEPTEMBER 14, 1999

BETWEEN: QUEEN INVESTMENT COMPANY LANDLORD
a Washington Limited Liability Company

AND: BIRTHDAY EXPRESS.COM, INC. TENANT
a Washington Corporation

By written Lease dated November 9, 1995, Tenant leased from
Landlord approximately 16,734 square feet of warehouse and office space, located
in the 405 Business Annex, 11220 120th Avenue NE, Kirkland, Washington
(hereinafter referred to as the "First Premises"). By written Lease dated May
29, 1997, Tenant leased from Landlord approximately 6,080 square feet of
warehouse and office space, located in the 405 Business Annex, 11218 120th
Avenue NE, Kirkland, Washington (hereinafter referred to as the "Second
Premises"). By Lease Amendment dated April 30, 1999, Tenant leased temporary
office and warehouse space within the 405 Business Park (hereinafter referred to
as the "Temporary Space"); extended the term of the First and Second Premises
and is to expand into an approximate 11,696 square feet of warehouse and office
space in the 405 Business Annex, located at 11216 120th Avenue NE, Kirkland
Washington (hereinafter referred to as the "Third Premises"). Said documents are
hereinafter jointly referred to as the "Lease". The Lease expires December 31,
2003.

Tenant now wishes to convert the Temporary Space as described
in Lease Amendment dated April 30, 1999 to a permanent lease; expand into an
additional approximate 1,225 square feet of warehouse space located in the east
half of Suite 103 at 11232 120th Avenue NE, Kirkland Washington; lease
approximately 2,255 square feet of office space, located at 11232 120th Avenue
NE, Suite 204, Kirkland, Washington and lease an approximate 950 square feet of
office space located at 11232 120th Avenue NE, Suite 107, Kirkland, Washington.

NOW, THEREFORE, the parties agree as follows:

1. Effective September 6, 1999, Tenant shall permanently lease
approximately 2,450 square feet of warehouse space located at 11232 120th Avenue
NE, Suite 103, Kirkland, Washington (hereinafter referred to as the "Fourth
Premises") and approximately 1,250 square feet of office space located at 11232
120th Avenue NE, Suite 206, Kirkland, Washington (hereinafter referred to as the
"Fifth Premises"). The Base Rent for Suite 103 shall be as follows:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
BASE RENT
PERIOD FOURTH PREMISE
---------------------------------------------------------------------------------
<S> <C>
September 1, 1999 - September 5, 1999 $ 112.29 per month
---------------------------------------------------------------------------------
September 6, 1999 - September 30, 1999 $1,122.92 per month
---------------------------------------------------------------------------------
October 1, 1999 - August 31, 2000 $1,347.50 per month
---------------------------------------------------------------------------------
September 1, 2000 - August 31, 2001 $1,387.93 per month
---------------------------------------------------------------------------------
September 1, 2001 - August 31, 2002 $1,429.56 per month
---------------------------------------------------------------------------------
September 1, 2002 - August 31, 2003 $1,472.45 per month
---------------------------------------------------------------------------------
September 1, 2003 - December 31, 2003 $1,516.62 per month
---------------------------------------------------------------------------------

The Base Rent for Suite 206 shall be as follows:

<CAPTION>
---------------------------------------------------------------------------------
BASE RENT
PERIOD FIFTH PREMISE
---------------------------------------------------------------------------------
<S> <C>
September 1, 1999 - August 31, 2000 $ 1,875.00 per month
---------------------------------------------------------------------------------
September 1, 2000 - August 31, 2001 $1,931.25 per month
---------------------------------------------------------------------------------
September 1, 2001 - August 31, 2002 $1,989.19 per month
---------------------------------------------------------------------------------
September 1, 2002 - August 31, 2003 $2,048.87 per month
---------------------------------------------------------------------------------
September 1, 2003 - December 31, 2003 $2,110.33 per month
---------------------------------------------------------------------------------

2. Effective May 1, 2000, Tenant shall lease approximately 2,255 square
feet of office space located at 11232 120th Avenue NE, Suite 204, Kirkland,
Washington (hereinafter referred to as the "Sixth Premises"). Tenant shall
occupy the Sixth Premise from May 1, 2000 through December 31, 2003. The Base
Rent for Suite 204 shall be as follows:

<CAPTION>
-------------------------------------------------------------------
BASE RENT
PERIOD SIXTH PREMISE
-------------------------------------------------------------------
<S> <C>
May 1, 2000 - April 30, 2001 $2,818.75 per month
-------------------------------------------------------------------
May 1, 2001 - April 30, 2002 $3,382.50 per month
-------------------------------------------------------------------
May 1, 2002 - December 31, 2003 $3,483.98 per month
-------------------------------------------------------------------

3. Effective October 1, 1999, Tenant shall lease approximately 950
square feet of office and warehouse space located at 11232 120th Avenue NE,
Suite 107, Kirkland, Washington (hereinafter referred to as the "Seventh
Premises"). This occupancy is contingent upon Landlords' ability to obtain a
fully executed Lease Termination with existing tenant, Decks Northwest, Inc., to
terminate their Lease and to relinquish the Premises effective October 1, 1999.
Tenant shall occupy the Seventh Premise from October 1, 1999 through December
31, 2003. The Base Rent for Suite 107 shall be as follows:

<CAPTION>
-----------------------------------------------------------------------
BASE RENT
PERIOD SEVENTH PREMISE
-----------------------------------------------------------------------

<PAGE>

<S> <C>
October 1, 1999 - September 30, 2000 $570.00 per month
-----------------------------------------------------------------------
October 1, 2000 - September 30, 2001 $587.10 per month
-----------------------------------------------------------------------
October 1, 2001 - September 30, 2002 $604.71 per month
-----------------------------------------------------------------------
October 1, 2002 - December 31, 2003 $622.85 per month
-----------------------------------------------------------------------

4. The Fourth, Fifth, Sixth and Seventh Premises shall become subject
to the terms of the Lease dated November 9, 1995. Tenant's total leased square
footage of warehouse and office space shall now total as follows:

<CAPTION>
----------------------------------------------- -----------------

PREMISE SQUARE
FOOTAGE
----------------------------------------------- -----------------
<S> <C>
First Premise (11220 120th Ave NE) 16,734
----------------------------------------------- -----------------
Second Premise (11218 120th Ave NE) 6,080
----------------------------------------------- -----------------
Third Premise (11216 120th Ave NE) 11,696
----------------------------------------------- -----------------
Fourth Premise (Suite 103) 2,450
----------------------------------------------- -----------------
Fifth Premise (Suite 206) 1,250
----------------------------------------------- -----------------
Sixth Premise (Suite 204) 2,255
----------------------------------------------- -----------------
Seventh Premise (Suite 107) 950
----------------------------------------------- -----------------
TOTAL 41,415
----------------------------------------------- -----------------
</TABLE>

5. Tenant's Option to Renew the First, Second and Third Premises for
one (1) three-year term, as stated in Lease Amendment dated April 30, 1999 shall
now include the Fourth, Fifth, Sixth and Seventh Premises. All other terms and
conditions of the Option to Renew shall remain the same and in full effect.

6. Tenant's First Opportunity to Lease, as stated in Amendment dated
April 30, 1999 shall remain the same and in full effect.

7. Tenant has been granted the right to sublease any of the seven
Premises according to Article 12 - Assignment and Subletting, of the two leases
dated November 9, 1995 and May 29, 1997.

8. Except as expressly modified hereby, all terms of the Leases shall
remain in full force and effect and shall continue through the existing and
extended terms.

IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first written above.

QUEEN INVESTMENT COMPANY, LLC BIRTHDAY EXPRESS.COM, INC.
a Washington Limited Liability Company a Washington corporation

BY: /s/ RICHARD LEA, III BY: /s/ MICHAEL K. JEWELL
-------------------- ---------------------

ITS: PRESIDENT ITS: PRESIDENT
--------- ---------

DATE: 10/21/99 DATE: 10/4/99
-------- -------
<PAGE>

STATE OF WASHINGTON } CORPORATE
ss.
COUNTY OF KING
On this 21st day of October A.D. 19 __ , before me personally
appeared Richard Lea, III, to me known to be the President of Queen
Investment Company, LLC, the corporation that executed the within and
foregoing instrument, and acknowledged the same instrument to be the free and
voluntary act and deed of said corporation, for the uses and purposes therein
mentioned, and on oath stated that they were authorized to execute said
instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year first above written. /s/ Valorie Kennedy
---------------------------

Notary Public in and for the State of Washington, residing at Puyallup.

STATE OF WASHINGTON } CORPORATE
ss.
COUNTY OF KING

On this 4 day of October A.D. 1999, before me personally appeared
Michael K. Jewell to me known to be the President and
____________________________________________ to me known to be the
_______________________________________ of Birthday Express the corporation
that executed the within and foregoing instrument, and acknowledged the same
instrument to be the free and voluntary act and deed of said corporation, for
the uses and purposes therein mentioned, and on oath stated that they were
authorized to execute said instrument.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year first above written. /s/ Sue Homes
---------------------------

Notary Public in and for the State of Washington, residing at King
Co.

STATE OF __________________________ } INDIVIDUAL
COUNTY OF _____________________ ss.

________________________________________________________________________________
to me known to be the individual ____ described in and who executed the within
and foregoing instrument, and acknowledged to me that ____________________
signed and sealed the same as ____________ free and voluntary act and deed, for
the uses and purposes therein mentioned.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year first above written.

_______________________________________________

Notary Public in and for the State of ________________________________,
residing at __________________________.

STATE OF __________________________ } INDIVIDUAL
COUNTY OF _____________________ ss.

______________________________________________________________________________

______________________________________________________________________________
to me known to be the individual ____ described in and who executed the within
and foregoing instrument, and acknowledged to me that ____________________
signed and sealed the same as ____________ free and voluntary act and deed, for
the uses and purposes therein mentioned.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year first above written.

____________________________________

<PAGE>

Notary Public in and for the State of ________________________________,
residing at __________________________.

<PAGE>

BIRTHDAY EXPRESS, INC.

SERIES A PREFERRED STOCK PURCHASE AGREEMENT

OCTOBER 15, 1998

<PAGE>

TABLE OF CONTENTS

PAGE
----
<S> <C> <C>
1. Purchase and Sale of Preferred Stock.....................................................................1

1.1 Sale and Issuance of Series A Preferred Stock...................................................1
1.2 Closing; Delivery...............................................................................1

2. Representations and Warranties of the Company............................................................2

2.1 Organization, Good Standing and Qualification...................................................2
2.2 Capitalization..................................................................................2
2.3 Subsidiaries....................................................................................2
2.4 Authorization...................................................................................2
2.5 Valid Issuance of Securities....................................................................3
2.6 Governmental Consents...........................................................................3
2.7 Litigation......................................................................................3
2.8 Intellectual Property...........................................................................4
2.9 Compliance with Other Instruments...............................................................4
2.10 Agreements; Action..............................................................................4
2.11 Disclosure......................................................................................4
2.12 No Conflict of Interest.........................................................................5
2.13 Rights of Registration and Voting Rights........................................................5
2.14 Title to Property and Assets....................................................................5
2.15 Labor Agreements and Actions....................................................................5
2.16 Permits.........................................................................................6

3. Representations and Warranties of the Purchasers.........................................................6

3.1 Authorization...................................................................................6
3.2 Purchase Entirely for Own Account...............................................................6
3.3 Disclosure of Information.......................................................................6
3.4 Restricted Securities...........................................................................6
3.5 No Public Market................................................................................7
3.6 Legends.........................................................................................7
3.7 Accredited Investor.............................................................................7
3.8 Foreign Investors...............................................................................7

4. Conditions of the Purchasers' Obligations at Closing.....................................................7

4.1 Representations and Warranties..................................................................8
4.2 Performance.....................................................................................8
4.3 Compliance Certificate..........................................................................8
4.4 Qualifications..................................................................................8
4.5 Board of Directors..............................................................................8
4.6 Investors' Rights Agreement.....................................................................8
4.7 Voting Agreement................................................................................8
4.8 Restated Articles...............................................................................8

-i-

<PAGE>

4.9 Right of First Refusal Agreement................................................................8

5. Conditions of the Company's Obligations at Closing.......................................................8

5.1 Representations and Warranties..................................................................8
5.2 Performance.....................................................................................9
5.3 Qualifications..................................................................................9
5.4 Investors' Rights Agreement.....................................................................9
5.5 Voting Agreement................................................................................9
5.6 Right of First Refusal Agreement................................................................9
5.7 Minimum Subscription............................................................................9

6. Miscellaneous............................................................................................9

6.1 Survival of Warranties..........................................................................9
6.2 Transfer; Successors and Assigns................................................................9
6.3 Governing Law...................................................................................9
6.4 Counterparts....................................................................................9
6.5 Titles and Subtitles...........................................................................10
6.6 Notices........................................................................................10
6.7 Finder's Fee...................................................................................10
6.8 Attorney's Fees................................................................................10
6.9 Amendments and Waivers.........................................................................10
6.10 Severability...................................................................................10
6.11 Delays or Omissions............................................................................10
6.12 Entire Agreement...............................................................................11
6.13 Confidentiality................................................................................11
6.14 Exculpation Among Purchasers...................................................................11
6.15 Waiver of Conflicts............................................................................11

</TABLE>
-ii-

<PAGE>

BIRTHDAY EXPRESS, INC.

SERIES A PREFERRED STOCK PURCHASE AGREEMENT

THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT") is
made as of the 15th day of October, 1998 by and between BIRTHDAY EXPRESS, INC.,
a Washington corporation (the "COMPANY") and the investors listed on EXHIBIT A
attached hereto (each a "PURCHASER" and together the "PURCHASERS").

The parties hereby agree as follows:

1. PURCHASE AND SALE OF PREFERRED STOCK.

1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK.

(a) The Company shall adopt and file with the
Secretary of State of the State of Washington on or before the Closing (as
defined below) the Amended and Restated Articles of Incorporation in the form
attached hereto as EXHIBIT B (the "RESTATED ARTICLES").

(b) Subject to the terms and conditions of this
Agreement, each Purchaser agrees to purchase at the Closing and the Company
agrees to sell and issue to each Purchaser at the Closing that number of shares
of Series A Preferred Stock set forth opposite each such Purchaser's name on
EXHIBIT A attached hereto at a purchase price of $1.20 per share. The shares of
Series A Preferred Stock issued to the Purchaser pursuant to this Agreement
shall be hereinafter referred to as the "STOCK."

1.2 CLOSING; DELIVERY.

(a) The purchase and sale of the Stock shall take
place at the offices of Venture Law Group, 4750 Carillon Point, Kirkland
Washington 98033, at 10:00 a.m., on October 15, 1998 or at such other time and
place as the Company and the Purchasers mutually agree upon, orally or in
writing (which time and place are designated as the "CLOSING").

(b) At the Closing, the Company shall deliver to each
Purchaser a certificate representing the Stock being purchased thereby against
payment of the purchase price therefor by cancellation of indebtedness owed by
the Company, check payable to the Company or by wire transfer to the Company's
bank account.

(c) If 1,700,000 shares of Series A Preferred Stock
of the Company are not sold at the Closing, the Company shall have the right, at
any time prior to October 30, 1998, to sell that number of shares of Series A
Preferred Stock equal to the difference between 1,700,000 minus the number of
shares of Series A Preferred Stock issued and sold at the Closing to one or more
additional purchasers as determined by the Company, or to any Purchaser
hereunder who wishes to acquire additional shares of Series A Preferred Stock at
the price and on the terms set forth herein, provided that any such additional
purchaser shall be required to execute an Addendum Agreement substantially in
the form attached hereto as EXHIBIT G. Any

<PAGE>

additional purchaser so acquiring shares of Series A Preferred Stock shall be
considered a "Purchaser" for purposes of this Agreement, and any Series A
Preferred Stock so acquired by such additional purchaser shall be considered
"Stock" for purposes of this Agreement and all other agreements contemplated
hereby.

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Purchaser that, except as set forth on a
Schedule of Exceptions attached hereto as EXHIBIT C, specifically identifying
the relevant subsection hereof, which exceptions shall be deemed to be
representations and warranties as if made hereunder:

2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized and validly existing under the laws of the State
of Washington and has all requisite corporate power and authority to carry, on
its business. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.

2.2 CAPITALIZATION. The authorized capital of the Company
consists, or will consist immediately prior to the Closing, of:

(a) 1,700,000 shares of Preferred Stock, all of which
shares have been designated Series A Preferred Stock, none of which are issued
and outstanding immediately prior to the Closing. The fights, privileges and
preferences of the Preferred Stock are as stated in the Restated Articles.

(b) 4,500,000 shares of Common Stock, 1,992,100
shares of which are issued and outstanding at Closing. All of the outstanding
shares of Common Stock have been duly authorized, fully paid and are
nonassessable and issued in compliance with all applicable federal and state
securities laws.

(c) The Company has reserved 300,000 shares of Common
Stock for issuance to officers, directors, employees and consultants of the
Company pursuant to its 1994 Incentive Stock Option Plan duly adopted by the
Board of Directors and approved by the Company's shareholders (the "STOCK
PLAN"). Of such reserved shares of Common Stock, no shares have been issued
pursuant to restricted stock purchase agreements, options to purchase 42,100
shares have been granted and exercised, options to purchase 257,900 shares have
been granted and are currently outstanding, and there are no shares of Common
Stock available for issuance to officers, directors, employees and consultants
pursuant to the Stock Plan.

(d) Except (i) as provided in the Investors' Rights
Agreement and the Right of First Refusal Agreement (each as herein defined) and
(ii) for outstanding options issued pursuant to the Stock Plan, there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal or similar rights) or agreements, orally or in
writing, for the purchase or acquisition from the Company of any shares of its
capital stock.

2.3 SUBSIDIARIES. The Company does not currently own or
control, directly or indirectly, any interest in any other corporation,
association or other business entity.

-2-

<PAGE>

2.4 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the Investors' Rights
Agreement in the form attached hereto as EXHIBIT D (the "INVESTORS' RIGHTS
AGREEMENT"), the Right of First Refusal Agreement in the form attached hereto as
EXHIBIT E (the "RIGHT OF FIRST REFUSAL AGREEMENT"), and the Voting Agreement in
the form attached hereto as EXHIBIT F (the "VOTING AGREEMENT" and collectively
with this Agreement, the Investors' Rights Agreement and the Right of First
Refusal Agreement, the "AGREEMENTS"), the performance of all obligations of the
Company hereunder and thereunder and the authorization, issuance and delivery of
the Stock and the Common Stock issuable upon conversion of the Stock (together,
the "SECURITIES") has been taken or will be taken prior to the Closing, and the
Agreements, when executed and delivered by the Company, shall constitute valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of
general application affecting enforcement of creditors' rights generally, as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, or (ii) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.

2.5 VALID ISSUANCE OF SECURITIES. The Stock that is being
issued to the Purchasers hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will be
duly and validly issued, fully paid and nonassessable and free of restrictions
on transfer other than restrictions on transfer under this Agreement, the
Investors' Rights Agreement and applicable state and federal securities laws.
Based in part upon the representations of the Purchasers in this Agreement and
subject to the provisions of Section 2.6 below, the Stock will be issued in
compliance with all applicable federal and state securities laws. The Common
Stock issuable upon conversion of the Stock has been duly and validly reserved
for issuance, and upon issuance in accordance with the terms of the Restated
Articles, shall be duly and validly issued, fully paid and nonassessable and
free of restrictions on transfer other than restrictions on transfer under this
Agreement, the Investors' Rights Agreement and applicable federal and state
securities laws and will be issued in compliance with all applicable federal and
state securities laws.

2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for filings pursuant to applicable state
securities laws and Regulation D of the Securities Act of 1933, as amended (the
"SECURITIES ACT").

-3-

<PAGE>

condition or affairs of the Company, financially or otherwise, or any change in
the current equity ownership of the Company, nor is the Company aware that there
is any basis for the foregoing. Neither the Company nor any of its subsidiaries
is a party or subject to the provisions of any order, writ, injunction, judgment
or decree of any court or government agency or instrumentality. There is no
action, suit, proceeding or investigation by the Company or any of its
subsidiaries currently pending or which the Company or any of its subsidiaries
intends to initiate.

2.8 INTELLECTUAL PROPERTY. To its knowledge, the Company owns
or possesses sufficient legal rights to all patents, trademarks, service marks,
tradenames, copyrights, trade secrets, licenses, information and proprietary
rights and processes necessary for its business without any conflict with, or
infringement of the rights of others. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business, would violate any of the patents, trademarks, service marks,
tradenames, copyrights, trade secrets or other proprietary rights or processes
of any other person or entity. The Company is not aware that any of its
employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such employee's best efforts to promote the interest of the Company
or that would conflict with tile Company's business. Neither the execution or
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions, or provisions of, or constitute a default under, any
contract, covenant or instrument under which any such employee is now obligated.
The Company does not believe it is or will be necessary to use any inventions of
any of its employees (or persons it currently intends to hire) made prior to
their employment by the Company.

2.9 COMPLIANCE WITH OTHER INSTRUMENTS.

(a) The Company is not in violation or default of any
provisions of its Restated Articles or Bylaws or of any instrument, judgment,
order, writ, decree or contract to which it is a party or by which it is bound
or, to its knowledge, of any provision of federal or state statute, rule or
regulation applicable to the Company. The execution, delivery and performance of
the Agreements and the consummation of the transactions contemplated hereby or
thereby will not result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company.

(b) To its knowledge, the Company has avoided every
condition, and has not performed any act, the occurrence of which would result
in the Company's loss of any right granted under any license, distribution
agreement or other agreement.

2.10 AGREEMENTS; ACTION. There are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates, or any affiliate thereof.

-4-

<PAGE>

2.11 DISCLOSURE. The Company has fully provided the Purchasers
with all the information that the Purchasers have requested for deciding whether
to acquire the Stock and all information that the Company believes is reasonably
necessary to enable the Purchasers to make such a decision, including certain of
the Company's projections describing its proposed business (collectively, the
"BUSINESS PLAN"). To the extent the Business Plan was prepared by management of
the Company, the Business Plan and the financial and other projections contained
in the Business Plan were prepared in good faith; however, the Company does not
warrant that it will achieve such projections.

2.12 NO CONFLICT OF INTEREST. The Company is not indebted,
directly or indirectly, to any of its officers or directors or to their
respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary course
of business or relocation expenses of employees. To the Company's knowledge,
none of the Company's officers or directors, or any members of their immediate
families, are, directly or indirectly, indebted to the Company (other than in
connection with purchases of the Company's stock) or have any direct or indirect
ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation which competes with the Company except that officers, directors
and/or shareholders of the Company may own stock in (but not exceeding two
percent of the outstanding capital stock of) any publicly traded company that
may compete with the Company. To the Company's knowledge, none of the Company's
officers or directors or any members of their immediate families are, directly
or indirectly, interested in any material contract with the Company. The Company
is not a guarantor or indemnitor of any indebtedness of any other person, firm
or corporation.

2.13 RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except as
contemplated in the Investors' Rights Agreement, the Company has not granted or
agreed to grant any registration rights, including piggyback rights, to any
person or entity. To the Company's knowledge, except as contemplated in the
Voting Agreement, no shareholder of the Company has entered into any agreements
with respect to the voting of capital shares of the Company.

2.14 TITLE TO PROPERTY AND ASSETS. The Company owns its
property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to its knowledge, holds a
valid leasehold interest free of any liens, claims or encumbrances.

2.15 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could have
a material adverse effect on the assets, properties, financial condition,
operating results, or

-5-

<PAGE>

business of the Company, nor is the Company aware of any labor organization
activity involving its employees. The employment of each officer and employee
of the Company is terminable at the will of the Company. To its knowledge,
the Company has complied in all material respects with all applicable state
and federal equal employment opportunity laws and with other laws related to
employment.

2.16 PERMITS. The Company and each of its subsidiaries has
all franchises, permits, licenses and any similar authority necessary for the
conduct of its business, the lack of which could materially and adversely
affect the business, properties, prospects, or financial condition of the
Company. The Company is not in default in any material respect under any of
such franchises, permits, licenses or other similar authority.

3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby represents and warrants to the Company that:

3.1 AUTHORIZATION. Such Purchaser has full power and authority
to enter into this Agreement. The Agreements, when executed and delivered by the
Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief, or other equitable remedies, or
(b) to the extent the indemnification provisions contained in the Investors'
Rights Agreement may be limited by applicable federal or state securities laws.

3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with the Purchaser in reliance upon the Purchaser's representation to the
Company, which by the Purchaser's execution of this Agreement, the Purchaser
hereby confirms, that the Securities to be acquired by the Purchaser will be
acquired for investment for the Purchaser's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that the Purchaser has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, the Purchaser further represents that the Purchaser does not
presently have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person, with respect to any of the Securities. The Purchaser has not been formed
for the specific purpose of acquiring the Securities.

3.3 DISCLOSURE OF INFORMATION. The Purchaser has had an
opportunity to discuss the Company's business, management, financial affairs and
the terms and conditions of the offering of the Stock with the Company's
management and has had an opportunity to review the Company's facilities. The
Purchaser understands that such discussions, as well as the Business Plan and
any other written information delivered by the Company to the Purchaser, were
intended to describe the aspects of the Company's business which it believes to
be material.

3.4 RESTRICTED SECURITIES. The Purchaser understands that the
Securities have not been, and will not be registered under the Securities Act,
by reason of a specific exemption

-6-

<PAGE>

from the registration provisions of the Securities Act which depends upon,
among other things, the bona fide nature of the investment intent and the
accuracy of the Purchaser's representations as expressed herein. The
Purchaser understands that the Securities are "restricted securities" under
applicable U.S. federal and state securities laws and that, pursuant to these
laws, the Purchaser must hold the Securities indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. The Purchaser acknowledges that the Company has no
obligation to register or qualify the Securities for resale except as set
forth in the Investors' Rights Agreement. The Purchaser further acknowledges
that if an exemption from registration or qualification is available, it may
be conditioned on various requirements including, but not limited to, the
time and manner of sale, the holding period for the Securities, and on
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.

3.5 NO PUBLIC MARKET. The Purchaser understands that no public
market now exists for any of the securities issued by the Company, and that the
Company has made no assurances that a public market will ever exist for the
Securities.

3.6 LEGENDS. The Purchaser understands that the Securities,
and any securities issued in respect of or exchange for the Securities, may bear
one or all of the following legends:

(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT."

(b) Any legend set forth in the other Agreements.

(c) Any legend required by the Blue Sky laws of any
state to the extent such laws are applicable to the shares represented by the
certificate so legended.

3.7 ACCREDITED INVESTOR. The Purchaser is an accredited
investor as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.

-7-

<PAGE>

consequences, if any, that may be relevant to the purchase, holding,
redemption, sale, or transfer of the Stock. Such Purchaser's subscription and
payment for and continued beneficial ownership of the Stock, will not violate
any applicable securities or other laws of the Purchaser's jurisdiction.

4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The
obligations of each Purchaser to the Company under this Agreement are subject to
the fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:

4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true and correct in
all material respects on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.

4.2 PERFORMANCE. The Company shall have performed and complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.

4.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to the Purchasers at the Closing a certificate certifying that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled.

4.4 QUALIFICATIONS. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Stock pursuant to this Agreement shall be obtained and effective as of
the Closing.

4.5 BOARD OF DIRECTORS. As of the Closing, the Board shall be
comprised of Michael Jewell, Jan Jewell, Ron Weinstein, a vacancy for one member
elected by a majority of the holders of the Company's Common Stock and a vacancy
for one member elected by a majority of the holders of the Company's Series A
Preferred Stock.

4.6 INVESTORS' RIGHTS AGREEMENT. The Company, each Purchaser,
Michael Jewell and Jan Jewell shall have executed and delivered the Investors'
Rights Agreement in substantially the form attached as EXHIBIT D.

4.7 VOTING AGREEMENT. The Company, each Purchaser, Michael
Jewell and Jan Jewell shall have executed and delivered the Voting Agreement in
substantially the form attached as EXHIBIT F.

4.8 RESTATED ARTICLES. The Company shall have filed the
Restated Articles with the Secretary of State of Washington on or prior to the
Closing Date, which shall continue to be in full force and effect as of the
Closing Date.

-8-

<PAGE>

4.9 RIGHT OF FIRST REFUSAL AGREEMENT. The Company and each
Purchaser shall have executed and delivered the Right of First Refusal Agreement
in substantially the form attached as EXHIBIT E.

5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations
of the Company to each Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived:

5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Purchaser contained in Section 3 shall be true and correct on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.

5.2 PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed by the Purchasers on or prior to the
Closing shall have been performed or complied with in all material respects.

5.3 QUALIFICATIONS. All authorizations, approvals or permits,
if any, of any governmental authority or regulatory body of the United States or
of any state that are required in connection with the lawful issuance and sale
of the Stock pursuant to this Agreement shall be obtained and effective as of
the Closing.

5.4 INVESTORS' RIGHTS AGREEMENT. The Company, each Purchaser,
Michael Jewell and Jan Jewell shall have executed and delivered the Investors'
Rights Agreement in substantially the form attached as EXHIBIT D.

5.5 VOTING AGREEMENT. The Company, each Purchaser, Michael
Jewell and Jan Jewell shall have executed and delivered the Voting Agreement in
substantially the form attached as EXHIBIT F.

5.6 RIGHT OF FIRST REFUSAL AGREEMENT. The Company and each
Purchaser shall have executed and delivered the Right of First Refusal Agreement
in substantially the form attached as EXHIBIT E.

5.7 MINIMUM SUBSCRIPTION. The Company shall have received
payment for, and the Purchasers shall have purchased, at least 1,358,334 shares
of Series A Preferred Stock.

6. MISCELLANEOUS.

6.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in this
Agreement, the warranties, representations and covenants of the Company and the
Purchasers contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.

6.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and conditions
of this Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns

-9-

<PAGE>

of the parties. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, except as expressly provided in this
Agreement.

6.3 GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of Washington, without giving effect to principles of conflicts of
law.

6.4 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

6.5 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

6.6 NOTICES. Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient upon delivery, when
delivered personally or by overnight courier or sent by telegram or fax, or
forty-eight (48) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, addressed to the party to be notified at
such party's address as set forth on the signature page or EXHIBIT A hereto, or
as subsequently modified by written notice, and (a) if to the Company, with a
copy to William W. Ericson, Venture Law Group, 4750 Carillon Point, Kirkland,
Washington 98033 or (b) if to the Purchasers, with a copy to such party's
address as set forth on the signature page or EXHIBIT A hereto.

6.7 FINDER'S FEE. Each party represents that it neither is nor
will be obligated for any finder's fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which each Purchaser or any of its officers, employees,
or representatives is responsible.

6.8 ATTORNEY'S FEES. If any action at law or in equity
(including arbitration) is necessary to enforce or interpret the terms of any of
the Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.

6.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the Company and the holders
of at least a majority of the Common Stock issued or issuable upon conversion of
the Stock. Any amendment or waiver effected in accordance with this Section 6.9
shall be binding upon the Purchasers and each transferee of the Stock (or the
Common Stock issuable upon conversion thereof), each future holder of all such
securities, and the Company.

-10-

<PAGE>

6.10 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(a) such provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.

6.11 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any such
right, power or remedy of such non-breaching or non-defaulting party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.

6.12 ENTIRE AGREEMENT. This Agreement, and the documents
referred to herein constitute the entire agreement between the parties hereto
pertaining to the subject matter hereof, and any and all other written or oral
agreements relating to the subject matter hereof existing between the parties
hereto are expressly canceled.

6.13 CONFIDENTIALITY. Each party hereto agrees that, except
with the prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of Stock purchased hereunder. The provisions of this Section 6.13
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto with respect to
the transactions contemplated hereby.

6.14 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges
that it is not relying upon any person, firm or corporation, other than the
Company and its officers and directors, in making its investment or decision to
invest in the Company. Each Purchaser agrees that no Purchaser nor the
respective controlling persons, officers, directors, partners, agents, or
employees of any Purchaser shall be liable to any other Purchaser for any action
heretofore or hereafter taken or omitted to be taken by any of them in
connection with the purchase of the Stock.

6.15 WAIVER OF CONFLICTS. Each party to this Agreement
acknowledges that Venture Law Group, counsel for the Company, has in the past
performed and may continue to

-11-

<PAGE>

perform legal services for certain of the Purchasers in matters unrelated to
the transactions described in this Agreement, including the representation of
such Purchasers in venture capital financings and other matters. Accordingly,
each party to this Agreement hereby (a) acknowledges that they have had an
opportunity to ask for information relevant to this disclosure; and (b) gives
its informed consent to Venture Law Group's representation of certain of the
Purchasers in such unrelated matters and to Venture Law Group's
representation of the Company in connection with this Agreement and the
transactions contemplated hereby.

[Signature Pages Follow]

-12-

<PAGE>

The parties have executed this Series A Preferred Stock Purchase
Agreement as of the date first written above.

COMPANY:

BIRTHDAY EXPRESS, INC.

By:
-----------------------------------------
Name:
---------------------------------------
(print)
Title:
--------------------------------------

Address: 11220 120th Avenue NE
Kirkland, Washington 98033

PURCHASERS:

-------------------------------------------
(Print Name of Purchaser)

By:
-----------------------------------------
Name:
---------------------------------------
(print)
Title:
--------------------------------------

Address:

SIGNATURE PAGE TO PURCHASE AGREEMENT
<PAGE>

EXHIBITS

Exhibit A - Schedule of Purchasers

Exhibit B - Form of Amended and Restated Articles of Incorporation

Exhibit C - Schedule of Exceptions to Representations and Warranties

Exhibit D - Form of Investors' Rights Agreement

Exhibit E - Form of Right of First Refusal Agreement

Exhibit F - Form of Voting Agreement

Exhibit G - Form of Addendum Agreement

<PAGE>

BIRTHDAYEXPRESS.COM, INC.

SERIES B PREFERRED STOCK PURCHASE AGREEMENT

JULY 21, 1999

<PAGE>

BIRTHDAYEXPRESS.COM, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>

1. PURCHASE AND SALE OF PREFERRED STOCK...........................................................1

1.1 Sale and Issuance of Series B Preferred Stock.........................................1

1.2 Closing; Delivery.....................................................................1

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................2

2.1 Organization, Good Standing and Qualification.........................................2

2.2 Capitalization........................................................................2

2.3 Subsidiaries..........................................................................2

2.4 Authorization.........................................................................3

2.5 Valid Issuance of Securities..........................................................3

2.6 Governmental Consents.................................................................3

2.7 Litigation............................................................................3

2.8 Intellectual Property.................................................................4

2.9 Compliance with Other Instruments.....................................................4

2.10 Agreements; Action....................................................................4

2.11 Disclosure............................................................................4

2.13 No Conflict of Interest...............................................................5

2.14 Rights of Registration and Voting Rights..............................................5

2.15 Title to Property and Assets..........................................................6

2.16 Labor Agreements and Actions..........................................................6

2.17 Permits...............................................................................6

2.18 Qualified Small Business..............................................................6

3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...............................................6

3.1 Authorization.........................................................................6

3.2 Purchase Entirely for Own Account.....................................................6

3.3 Disclosure of Information.............................................................7

3.4 Restricted Securities.................................................................7

3.5 No Public Market......................................................................7

3.6 Legends...............................................................................7

<PAGE>

3.7 Accredited Investor...................................................................8

3.8 Foreign Investors.....................................................................8

4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING...........................................8

4.1 Representations and Warranties........................................................8

4.2 Performance...........................................................................8

4.3 Compliance Certificate................................................................8

4.4 Qualifications........................................................................8

4.5 Opinion of Counsel....................................................................8

4.6 Secretary's Certificate...............................................................9

4.7 Minimum Subscription..................................................................9

4.8 Board of Directors....................................................................9

4.9 Investors' Rights Agreement...........................................................9

4.10 Voting Agreement......................................................................9

4.11 Restated Articles.....................................................................9

4.12 Right of First Refusal Agreement......................................................9

5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.............................................9

5.1 Representations and Warranties........................................................9

5.2 Performance...........................................................................9

5.3 Qualifications........................................................................9

5.4 Investors' Rights Agreement..........................................................10

5.5 Voting Agreement.....................................................................10

5.6 Right of First Refusal Agreement.....................................................10

5.7 Minimum Subscription.................................................................10

6. MISCELLANEOUS.................................................................................10

6.1 Survival of Warranties...............................................................10

6.2 Transfer; Successors and Assigns.....................................................10

6.3 Governing Law........................................................................10

6.4 Counterparts.........................................................................10

6.5 Titles and Subtitles.................................................................10

6.6 Notices..............................................................................10

ii.

<PAGE>

6.7 Finder's Fee.........................................................................11

6.8 Attorney's Fees......................................................................11

6.9 Amendments and Waivers...............................................................11

6.10 Severability.........................................................................11

6.11 Delays or Omissions..................................................................11

6.12 Entire Agreement.....................................................................11

6.13 Confidentiality......................................................................12

6.14 Exculpation Among Purchasers.........................................................12

6.15 Waiver of Conflicts..................................................................12

6.16 Expenses.............................................................................12
</TABLE>

iii.

<PAGE>

EXHIBITS INDEX
<TABLE>
<S> <C>
EXHIBIT A - Schedule of Purchasers

EXHIBIT B - Form of Amended and Restated Articles of Incorporation

EXHIBIT C - Schedule of Exceptions to Representations and Warranties

EXHIBIT D - Form of Amended and Restated Investors' Rights Agreement

EXHIBIT E - Form of Amended and Restated Right of First Refusal Agreement

EXHIBIT F - Form of Amended and Restated Voting Agreement

EXHIBIT G - Form of Addendum Agreement

EXHIBIT H - Form of Legal Opinion

</TABLE>

<PAGE>

BIRTHDAYEXPRESS.COM, INC.

SERIES B PREFERRED STOCK PURCHASE AGREEMENT

THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement")
is made as of the 21st day of July, 1999 by and between BIRTHDAYEXPRESS.COM,
INC., a Washington corporation (the "Company") and the investors listed on
EXHIBIT A attached hereto (each a "Purchaser" and together the "Purchasers").

The parties hereby agree as follows:

1. PURCHASE AND SALE OF PREFERRED STOCK.

1.1 SALE AND ISSUANCE OF SERIES B PREFERRED STOCK

(b) Subject to the terms and conditions of this
Agreement, each Purchaser agrees to purchase at the Closing and the Company
agrees to sell and issue to each Purchaser at the Closing that number of
shares of Series B Preferred Stock set forth opposite each such Purchaser's
name on EXHIBIT A attached hereto at a purchase price of $8.32 per share. The
shares of Series B Preferred Stock issued to the Purchaser pursuant to this
Agreement shall be hereinafter referred to as the "Stock."

1.2 CLOSING; DELIVERY

(a) The purchase and sale of the Stock shall take
place at the offices of Cooley Godward LLP, 5200 Carillon Point, Kirkland
Washington 98033-7356, at 10:00 a.m., on July 21, 1999 or at such other time
and place as the Company and the Purchasers mutually agree upon, orally or in
writing (which time and place are designated as the "Closing").

(b) At the Closing, the Company shall deliver to
each Purchaser a certificate representing the Stock being purchased thereby
against payment of the purchase price therefor by cancellation of
indebtedness owed by the Company, check payable to the Company or by wire
transfer to the Company's bank account.

(c) If 1,580,000 shares of Series B Preferred
Stock of the Company are not sold at the Closing, the Company shall have the
right, at any time prior to October 30, 1999, to sell that number of shares
of Series B Preferred Stock equal to the difference between 1,580,000 minus
the number of shares of Series B Preferred Stock issued and sold at the
Closing to one or more additional purchasers as determined by the Company, or
to any Purchaser hereunder who wishes to acquire additional shares of Series
B Preferred Stock at the price and on the terms set forth herein, provided
that any such additional purchaser shall be required to execute an Addendum
Agreement substantially in the form attached hereto as EXHIBIT G. Any
additional purchaser so acquiring shares of Series B Preferred Stock shall be
considered a

1.
<PAGE>

"Purchaser" for purposes of this Agreement, and any Series B Preferred Stock
so acquired by such additional purchaser shall be considered "Stock" for
purposes of this Agreement and all other agreements contemplated hereby.

2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a corporation duly organized and validly existing under the laws
of the State of Washington and has all requisite corporate power and
authority to carry, on its business. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties.

2.2 CAPITALIZATION. The authorized capital of the Company
consists, or will consist immediately prior to the Closing, of:

(a) 3,150,005 shares of Preferred Stock, (i) of
which 1,500,005 shares have been designated Series A Preferred Stock, all of
which are issued and outstanding at Closing and (ii) 1,650,000 shares have
been designated Series B Preferred Stock, none of which are issued and
outstanding prior to Closing. The rights, privileges and preferences of the
Preferred Stock are as stated in the Restated Articles.

(b) 8,349,995 shares of Common Stock, 2,015,300
shares of which are issued and outstanding at Closing. All of the outstanding
shares of Common Stock have been duly authorized, fully paid and are
nonassessable and issued in compliance with all applicable federal and state
securities laws.

(c) The Company has reserved 1,340,000 shares of
Common Stock for issuance to officers, directors, employees and consultants
of the Company pursuant to its 1994 Incentive Stock Option Plan duly adopted
by the Board of Directors and approved by the Company's shareholders (the
"Stock Plan"). Of such reserved shares of Common Stock, no shares have been
issued pursuant to restricted stock purchase agreements, options to purchase
65,300 shares have been granted and exercised and are accounted for in
paragraph (b) immediately above, options to purchase 234,700 shares have been
granted and are currently outstanding, and there are 1,040,000 shares of
Common Stock available for issuance to officers, directors, employees and
consultants pursuant to the Stock Plan.

(d) Except (i) as provided in the Investors'
Rights Agreement and the Right of First Refusal Agreement (each as herein
defined) and (ii) for outstanding options issued pursuant to the Stock Plan,
there are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal or similar rights) or
agreements, orally or in writing, for the purchase or acquisition from the
Company of any shares of its capital stock.

2.3 SUBSIDIARIES. The Company does not currently own or
control, directly or indirectly, any interest in any other corporation,
association or other business entity.

2.
<PAGE>

2.4 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the Amended and
Restated Investors' Rights Agreement in the form attached hereto as EXHIBIT D
(the "Investors' Rights Agreement"), the Amended and Restated Right of First
Refusal Agreement in the form attached hereto as EXHIBIT E (the "Right of
First Refusal Agreement"), and the Amended and Restated Voting Agreement in
the form attached hereto as EXHIBIT F (the "Voting Agreement" and
collectively with this Agreement, the Investors' Rights Agreement and the
Right of First Refusal Agreement, the "Agreements"), the performance of all
obligations of the Company hereunder and thereunder and the authorization,
issuance and delivery of the Stock and the Common Stock issuable upon
conversion of the Stock (together, the "Securities") has been taken or will
be taken prior to the Closing, and the Agreements, when executed and
delivered by the Company, shall constitute valid and legally binding
obligations of the Company, enforceable against the Company in accordance
with their terms except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and other laws of general
application affecting enforcement of creditors' rights generally, as limited
by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, or (b) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.

2.5 VALID ISSUANCE OF SECURITIES. The Stock that is being
issued to the Purchasers hereunder, when issued, sold and delivered in
accordance with the terms hereof for the consideration expressed herein, will
be duly and validly issued, fully paid and nonassessable and free of
restrictions on transfer other than restrictions on transfer under this
Agreement, the Investors' Rights Agreement and applicable state and federal
securities laws. Based in part upon the representations of the Purchasers in
this Agreement and subject to the provisions of Section 2.6 below, the Stock
will be issued in compliance with all applicable federal and state securities
laws. The Common Stock issuable upon conversion of the Stock has been duly
and validly reserved for issuance, and upon issuance in accordance with the
terms of the Restated Articles, shall be duly and validly issued, fully paid
and nonassessable and free of restrictions on transfer other than
restrictions on transfer under this Agreement, the Investors' Rights
Agreement and applicable federal and state securities laws and will be issued
in compliance with all applicable federal and state securities laws.

2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part
of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for filings pursuant to
applicable state securities laws and Regulation D of the Securities Act of
1933, as amended (the "Securities Act").

2.7 LITIGATION. To the Company's knowledge, there is no
action, suit, proceeding or investigation pending or currently threatened
against the Company or any of its subsidiaries that questions the validity of
the Agreements or the right of the Company to enter into them, or to
consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse
changes in the assets, condition or affairs of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor
is the Company aware that there is any basis for the foregoing.

3.
<PAGE>

Neither the Company nor any of its subsidiaries is a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit, proceeding or
investigation by the Company or any of its subsidiaries currently pending or
which the Company or any of its subsidiaries intends to initiate.

2.8 INTELLECTUAL PROPERTY. To its knowledge, the Company
owns or possesses sufficient legal rights to all patents, trademarks, service
marks, tradenames, copyrights, trade secrets, licenses, information and
proprietary rights and processes necessary for its business without any
conflict with, or infringement of the rights of others. The Company has not
received any communications alleging that the Company has violated or, by
conducting its business, would violate any of the patents, trademarks,
service marks, tradenames, copyrights, trade secrets or other proprietary
rights or processes of any other person or entity. The Company is not aware
that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or
subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of such employee's best efforts to
promote the interest of the Company or that would conflict with tile
Company's business. Neither the execution or delivery of this Agreement, nor
the carrying on of the Company's business by the employees of the Company,
nor the conduct of the Company's business as proposed, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions, or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any such employee is now obligated. The Company does
not believe it is or will be necessary to use any inventions of any of its
employees (or persons it currently intends to hire) made prior to their
employment by the Company.

2.9 COMPLIANCE WITH OTHER INSTRUMENTS

(a) The Company is not in violation or default of
any provisions of its Restated Articles or Bylaws or of any instrument,
judgment, order, writ, decree or contract to which it is a party or by which
it is bound or, to its knowledge, of any provision of federal or state
statute, rule or regulation applicable to the Company. The execution,
delivery and performance of the Agreements and the consummation of the
transactions contemplated hereby or thereby will not result in any such
violation or be in conflict with or constitute, with or without the passage
of time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which
results in the creation of any lien, charge or encumbrance upon any assets of
the Company.

(b) To its knowledge, the Company has avoided
every condition, and has not performed any act, the occurrence of which would
result in the Company's loss of any right granted under any license,
distribution agreement or other agreement.

2.10 AGREEMENTS; ACTION. There are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates, or any affiliate thereof.

2.11 DISCLOSURE. The Company has provided each Purchaser
with all the information reasonably available to it without undue expense
that such Purchaser has requested for deciding whether to purchase the Stock
and all information that the Company believes is

4.
<PAGE>

reasonably necessary to enable such Purchaser to make such decision. To the
best of the Company's knowledge, neither this Agreement nor any other
agreements, written statements or certificates made or delivered in
connection herewith contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements herein or therein
not misleading.

2.12 FINANCIAL STATEMENTS. The Company has delivered to
each Purchaser its unaudited financial statements (balance sheet and profit
and loss statement) as at, and for the twelve-month period ended May 31, 1999
(the "Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated and with each other, except
that the Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company as of
the dates, and for the periods, indicated therein, subject to normal year-end
audit adjustments. Except as set forth in the Financial Statements, the
Company has no material liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to May 31,
1999 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted
accounting principles to be reflected in the Financial Statements, which, in
both cases, individually or in the aggregate, are not material to the
financial condition or operating results of the Company. Except as disclosed
in the Financial Statements, the Company is not a guarantor or indemnitor of
any indebtedness of any other person, firm, or corporation. The Company
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.

2.13 NO CONFLICT OF INTEREST. The Company is not indebted,
directly or indirectly, to any of its officers or directors or to their
respective spouses or children, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary
course of business or relocation expenses of employees. To the Company's
knowledge, none of the Company's officers or directors, or any members of
their immediate families, are, directly or indirectly, indebted to the
Company (other than in connection with purchases of the Company's stock) or
have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation which competes with the Company
except that officers, directors and/or shareholders of the Company may own
stock in (but not exceeding two percent of the outstanding capital stock of)
any publicly traded company that may compete with the Company. To the
Company's knowledge, none of the Company's officers or directors or any
members of their immediate families are, directly or indirectly, interested
in any material contract with the Company. The Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.

2.14 RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except as
contemplated in the Investors' Rights Agreement, the Company has not granted
or agreed to grant any registration rights, including piggyback rights, to
any person or entity. To the Company's knowledge, except as contemplated in
the Voting Agreement, no shareholder of the Company has entered into any
agreements with respect to the voting of capital shares of the Company.

5.
<PAGE>

2.15 TITLE TO PROPERTY AND ASSETS. The Company owns its
property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or
use of such property or assets. With respect to the property and assets it
leases, the Company is in compliance with such leases and, to its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances.

2.16 LABOR AGREEMENTS AND ACTIONS. The Company is not bound
by or subject to (and none of its assets or properties is bound by or subject
to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
knowledge of the Company, has sought to represent any of the employees,
representatives or agents of the Company. There is no strike or other labor
dispute involving the Company pending, or to the knowledge of the Company
threatened, which could have a material adverse effect on the assets,
properties, financial condition, operating results, or business of the
Company, nor is the Company aware of any labor organization activity
involving its employees. The employment of each officer and employee of the
Company is terminable at the will of the Company. To its knowledge, the
Company has complied in all material respects with all applicable state and
federal equal employment opportunity laws and with other laws related to
employment.

2.17 PERMITS. The Company and each of its subsidiaries has
all franchises, permits, licenses and any similar authority necessary for the
conduct of its business, the lack of which could materially and adversely
affect the business, properties, prospects, or financial condition of the
Company. The Company is not in default in any material respect under any of
such franchises, permits, licenses or other similar authority.

2.18 QUALIFIED SMALL BUSINESS The Company represents and
warrants to the Purchasers that, to the best of its knowledge, the Company is
a "QUALIFIED SMALL BUSINESS" within the meaning of Section 1202(d) of the
Internal Revenue Code of 1986, as amended (the "Code"), as of the date hereof
and the Shares should qualify as "QUALIFIED SMALL BUSINESS STOCK" as defined
in Section 1202(c) of the Code as of the date hereof.

3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby represents and warrants to the Company that:

3.1 AUTHORIZATION. Such Purchaser has full power and
authority to enter into this Agreement. The Agreements, when executed and
delivered by the Purchaser, will constitute valid and legally binding
obligations of the Purchaser, enforceable in accordance with their terms,
except (a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and any other laws of general application
affecting enforcement of creditors' rights generally, and as limited by laws
relating to the availability of a specific performance, injunctive relief, or
other equitable remedies, or (b) to the extent the indemnification provisions
contained in the Investors' Rights Agreement may be limited by applicable
federal or state securities laws.

3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is
made with the Purchaser in reliance upon the Purchaser's representation to
the Company, which by the

6.
<PAGE>

Purchaser's execution of this Agreement, the Purchaser hereby confirms, that
the Securities to be acquired by the Purchaser will be acquired for
investment for the Purchaser's own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof, and that
the Purchaser has no present intention of selling, granting any participation
in, or otherwise distributing the same. By executing this Agreement, the
Purchaser further represents that the Purchaser does not presently have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities. The Purchaser has not been formed for the
specific purpose of acquiring the Securities.

3.3 DISCLOSURE OF INFORMATION. The Purchaser has had an
opportunity to discuss the Company's business, management, financial affairs
and the terms and conditions of the offering of the Stock with the Company's
management and has had an opportunity to review the Company's facilities. The
Purchaser understands that such discussions, as well as the Business Plan and
any other written information delivered by the Company to the Purchaser, were
intended to describe the aspects of the Company's business which it believes
to be material.

3.4 RESTRICTED SECURITIES. The Purchaser understands that
the Securities have not been, and will not be registered under the Securities
Act, by reason of a specific exemption from the registration provisions of
the Securities Act which depends upon, among other things, the bona fide
nature of the investment intent and the accuracy of the Purchaser's
representations as expressed herein. The Purchaser understands that the
Securities are "restricted securities" under applicable U.S. federal and
state securities laws and that, pursuant to these laws, the Purchaser must
hold the Securities indefinitely unless they are registered with the
Securities and Exchange Commission and qualified by state authorities, or an
exemption from such registration and qualification requirements is available.
The Purchaser acknowledges that the Company has no obligation to register or
qualify the Securities for resale except as set forth in the Investors'
Rights Agreement. The Purchaser further acknowledges that if an exemption
from registration or qualification is available, it may be conditioned on
various requirements including, but not limited to, the time and manner of
sale, the holding period for the Securities, and on requirements relating to
the Company which are outside of the Purchaser's control, and which the
Company is under no obligation and may not be able to satisfy.

3.5 NO PUBLIC MARKET. The Purchaser understands that no
public market now exists for any of the securities issued by the Company, and
that the Company has made no assurances that a public market will ever exist
for the Securities.

3.6 LEGENDS. The Purchaser understands that the Securities,
and any securities issued in respect of or exchange for the Securities, may
bear one or all of the following legends:

(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF

7.
<PAGE>

COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT."

(b) Any legend set forth in the other Agreements.

(c) Any legend required by the Blue Sky laws of
any state to the extent such laws are applicable to the shares represented by
the certificate so legended.

3.7 ACCREDITED INVESTOR. The Purchaser is an accredited
investor as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.

3.8 FOREIGN INVESTORS. If the Purchaser is not a United
States person (as defined by Section 7701(a)(30) of the Internal Revenue Code
of 1986, as amended), such Purchaser hereby represents that it has satisfied
itself as to the full observance of the laws of its jurisdiction in
connection with any invitation to subscribe for the Stock or any use of this
Agreement, including (a) the legal requirements within its jurisdiction for
the purchase of the Stock, (b) any foreign exchange restrictions applicable
to such purchase, (c) any governmental or other consents that may need to be
obtained, and (d) the income tax and other tax consequences, if any, that may
be relevant to the purchase, holding, redemption, sale, or transfer of the
Stock. Such Purchaser's subscription and payment for and continued beneficial
ownership of the Stock, will not violate any applicable securities or other
laws of the Purchaser's jurisdiction.

4. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING. The
obligations of each Purchaser to the Company under this Agreement are subject
to the fulfillment, on or before the Closing, of each of the following
conditions, unless otherwise waived:

4.2 PERFORMANCE. The Company shall have performed and
complied with all covenants, agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied with by it on
or before the Closing.

4.3 COMPLIANCE CERTIFICATE. The President of the Company
shall deliver to the Purchasers at the Closing a certificate certifying that
the conditions specified in Sections 4.1 and 4.2 have been fulfilled.

4.4 QUALIFICATIONS. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with the lawful
issuance and sale of the Stock pursuant to this Agreement shall be obtained
and effective as of the Closing.

4.5 OPINION OF COUNSEL. Such Purchaser shall have received
an opinion of counsel from Cooley Godward LLP, counsel to the Company, in
substantially the form attached as EXHIBIT H hereto.

8.
<PAGE>

4.6 SECRETARY'S CERTIFICATE. The Company shall deliver a
certificate, executed by the Secretary of the Company, certifying as to: (a)
resolutions adopted by the Company's Board of Directors and shareholders
relating to the transactions contemplated by this Agreement; (b) Restated
Articles of the Company; and (c) Bylaws of the Company.

4.7 MINIMUM SUBSCRIPTION. The Company shall have received
payment for, and the Purchasers shall have purchased, at least 841,346 shares
of Series B Preferred Stock.

4.8 BOARD OF DIRECTORS. As of the Closing, the Board shall
be comprised of Michael Jewell, Jan Jewell, Ron Weinstein, Robert Nelsen and a
vacancy for one member elected by a majority of the holders of the Company's
Common Stock.

4.9 INVESTORS' RIGHTS AGREEMENT. The Company, each
Purchaser, Michael Jewell, Jan Jewell and holders representing the requisite
number of outstanding shares of Series A Preferred Stock of the Company (the
"Requisite Holders") shall have executed and delivered the Investors' Rights
Agreement in substantially the form attached as EXHIBIT D.

4.10 VOTING AGREEMENT. The Company, each Purchaser, Michael
Jewell and Jan Jewell and the Requisite Holders shall have executed and
delivered the Voting Agreement in substantially the form attached as EXHIBIT F.

4.11 RESTATED ARTICLES. The Company shall have filed the
Restated Articles with the Secretary of State of Washington on or prior to the
Closing Date, which shall continue to be in full force and effect as of the
Closing Date.

4.12 RIGHT OF FIRST REFUSAL AGREEMENT. The Company and the
Requisite Holders shall have executed and delivered the Right of First Refusal
Agreement in substantially the form attached as EXHIBIT E.

5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Purchaser contained in Section 3 shall be true and correct
on and as of the Closing with the same effect as though such representations
and warranties had been made on and as of the Closing.

5.2 PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed by the Purchasers on or prior to
the Closing shall have been performed or complied with in all material respects.

5.3 QUALIFICATIONS. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful issuance
and sale of the Stock pursuant to this Agreement shall be obtained and
effective as of the Closing.

<PAGE>

5.4 INVESTORS' RIGHTS AGREEMENT. The Company, each
Purchaser, Michael Jewell and Jan Jewell and the Requisite Holders shall have
executed and delivered the Investors' Rights Agreement in substantially the
form attached as EXHIBIT D.

5.5 VOTING AGREEMENT. The Company, each Purchaser, Michael
Jewell and Jan Jewell and the Requisite Holders shall have executed and
delivered the Voting Agreement in substantially the form attached as EXHIBIT F.

5.6 RIGHT OF FIRST REFUSAL AGREEMENT. The Company, each
Purchaser and the Requisite Holders shall have executed and delivered the Right
of First Refusal Agreement in substantially the form attached as EXHIBIT E.

5.7 MINIMUM SUBSCRIPTION. The Company shall have received
payment for, and the Purchasers shall have purchased, at least 841,346 shares
of Series B Preferred Stock.

6. MISCELLANEOUS

6.1 SURVIVAL OF WARRANTIES. Unless otherwise set forth in
this Agreement, the warranties, representations and covenants of the Company
and the Purchasers contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing.

6.2 TRANSFER; SUCCESSORS AND ASSIGNS. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

6.4 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

6.5 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

6.6 NOTICES. Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient upon delivery,
when delivered personally or by overnight courier or sent by telegram or fax,
or forty-eight (48) hours after being deposited in the U.S. mail, as certified
or registered mail, with postage prepaid, addressed to the party to be notified
at such party's address as set forth on the signature page or EXHIBIT A hereto,
or as subsequently modified by written notice, and (a) if to the Company, with
a copy to Christopher W. Wright,

10.

<PAGE>

Cooley Godward LLP, 5200 Carillon Point, Kirkland, Washington 98033-7356 or (b)
if to the Purchasers, with a copy to such party's address as set forth on the
signature page or EXHIBIT A hereto.

6.7 FINDER'S FEE. Each party represents that it neither is
nor will be obligated for any finder's fee or commission in connection with
this transaction. Each Purchaser agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature of
a finder's fee (and the costs and expenses of defending against such liability
or asserted liability) for which each Purchaser or any of its officers,
employees, or representatives is responsible.

6.8 ATTORNEY'S FEES. If any action at law or in equity
(including arbitration) is necessary to enforce or interpret the terms of any
of the Agreements, the prevailing party shall be entitled to reasonable
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.

6.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may
be amended or waived only with the written consent of the Company and the
holders of at least a majority of the Common Stock issued or issuable upon
conversion of the Stock. Any amendment or waiver effected in accordance with
this Section 6.9 shall be binding upon the Purchasers and each transferee of
the Stock (or the Common Stock issuable upon conversion thereof), each future
holder of all such securities, and the Company.

6.10 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, the parties agree
to renegotiate such provision in good faith. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (a) such provision shall be excluded from this Agreement, (b)
the balance of the Agreement shall be interpreted as if such provision were so
excluded and (c) the balance of the Agreement shall be enforceable in
accordance with its terms.

6.11 DELAYS OR OMISSIONS. No delay or omission to exercise
any right, power or remedy accruing to any party under this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any
such right, power or remedy of such non-breaching or non-defaulting party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party, shall be cumulative and not alternative.

11.

<PAGE>

6.13 CONFIDENTIALITY. Each party hereto agrees that, except
with the prior written permission of the other party, it shall at all times
keep confidential and not divulge, furnish or make accessible to anyone any
confidential information, knowledge or data concerning or relating to the
business or financial affairs of the other parties to which such party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, the performance of its obligations hereunder or the
ownership of Stock purchased hereunder. The provisions of this Section 6.13
shall be in addition to, and not in substitution for, the provisions of any
separate nondisclosure agreement executed by the parties hereto with respect to
the transactions contemplated hereby.

6.14 EXCULPATION AMONG PURCHASERS. Each Purchaser
acknowledges that it is not relying upon any person, firm or corporation, other
than the Company and its officers and directors, in making its investment or
decision to invest in the Company. Each Purchaser agrees that no Purchaser nor
the respective controlling persons, officers, directors, partners, agents, or
employees of any Purchaser shall be liable to any other Purchaser for any
action heretofore or hereafter taken or omitted to be taken by any of them in
connection with the purchase of the Stock.

6.15 WAIVER OF CONFLICTS. Each party to this Agreement
acknowledges that Cooley Godward LLP, counsel for the Company, has in the past
performed and may continue to perform legal services for certain of the
Purchasers in matters unrelated to the transactions described in this
Agreement, including the representation of such Purchasers in venture capital
financings and other matters. Accordingly, each party to this Agreement hereby
(a) acknowledges that they have had an opportunity to ask for information
relevant to this disclosure; and (b) gives its informed consent to Cooley
Godward LLP's representation of certain of the Purchasers in such unrelated
matters and to Cooley Godward LLP's representation of the Company in connection
with this Agreement and the transactions contemplated hereby.

6.16 EXPENSES. Irrespective of whether the Closing is
effected, each party shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement. In the event that the Closing is effected, the Company shall
reimburse the reasonable fees and expenses of Testa, Hurwitz & Thibeault, LLP,
special counsel for the Purchasers, not to exceed $10,000.

[SIGNATURE PAGES FOLLOW]

12.

<PAGE>

The parties have executed this Series B Preferred Stock Purchase
Agreement as of the date first written above.

COMPANY:

BIRTHDAYEXPRESS.COM, INC.

By:
----------------------------------
Name:
--------------------------------
(Print)
Title:
-------------------------------

Address: 11220 - 120th Avenue N.E.
Kirkland, Washington 98033

PURCHASERS:

-------------------------------------
(Print Name of Purchaser)

By:
----------------------------------
Name:
--------------------------------
(Print)
Title:
-------------------------------
Address:
-----------------------------

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

SIGNATURE PAGE TO SERIES B STOCK PURCHASE AGREEMENT

<PAGE>

BIRTHDAYEXPRESS.COM, INC.

AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AGREEMENT

THIS AMENDED AND RESTATED RIGHT OF FIRST REFUSAL AGREEMENT (the
"Agreement") is made and entered into as of the 21st day of July, 1999 by and
among BIRTHDAYEXPRESS.COM, INC., a Washington corporation (the "Company"), and
the holders of Series A Preferred Stock (the "Series A Preferred") of the
Company listed on EXHIBIT A to this Agreement (the "Series A Holders"), and the
purchasers of Series B Preferred Stock (the "Series B Preferred") of the Company
listed on EXHIBIT B to this Agreement (the "Series B Purchasers") (the Series A
Holders and the Series B Purchasers may be referred to, collectively, herein as
the "Investors" and, individually, as an "Investor").

RECITALS

WHEREAS, the Company and the Series A Holders possess certain rights
and obligations, pursuant to a certain Right of First Refusal Agreement dated
October 15, 1998, among the Company and the Series A Holders (the "Prior
Agreement").

WHEREAS, the Company and the Series A Holders desire to terminate the
Prior Agreement and to accept the rights rights and obligations created pursuant
hereto in lieu of the rights rights and obligations granted to them under the
Prior Agreement.

WHEREAS, in order to induce the Company to enter into the Purchase
Agreement and to induce the Series B Purchasers to invest funds in the Company
pursuant to the Purchase Agreement, the Series B Purchasers, the Series A
Holders and the Company hereby agree that this Agreement shall govern the rights
of the Series B Purchasers, the Series A Holders and the Company as to the
matters set forth herein, and the Company and the Series A Holders hereby agree
that the Prior Agreement shall be superseded, rendered void and replaced in its
entirety by this Agreement.

AGREEMENT

NOW THEREFORE, the parties agree as follows:

1. SALES BY INVESTORS

1.1 NOTICE OF SALES

(a) Should any Investor (or a Permitted Transferee, as
defined below) propose to accept one or more bona fide offers (collectively,
a "Purchase Offer") from any persons to purchase shares of the Company's
Series A or B Preferred Stock (or Common Stock

<PAGE>

issued upon conversion thereof) (the "Shares") from such Investor (other than
as set forth in Section 1.3 of this Agreement), such Investor shall promptly
but in no case with less than twenty (20) days notice prior to the expiration
of such Purchase Offer, deliver a notice (the "Notice") to the Company
stating the terms and conditions of such Purchase Offer including, without
limitation, the number of Shares proposed to be sold or transferred, the
nature of such sale or transfer, the consideration to be paid, and the name
and address of each prospective purchaser or transferee.

(b) The Company shall have the right, in its sole
discretion, exercisable at any time within fifteen (15) days after the
Company's receipt of the Notice, to purchase all or any portion of the Shares
on the same terms and conditions set forth in the Purchase Offer (the "Right
of First Refusal").

(c) In the event that the Company declines to exercise
in full the Right of First Refusal, the Company may notify all, but not less
than all, of the Investors who did not initially propose to accept the
Purchase Offer of the Company's decision not to exercise all or any part of
the Right of First Refusal. Should the Company elect to notify the Investors
the Company shall agree to assign any unexercised portion of the Right of
First Refusal to all of the Investors who did not initially propose to accept
the Purchase Offer on a pro rata basis, based upon the number of Conversion
Shares (as defined below) held by such Investor relative to the aggregate
number of Conversion Shares held by all Investors. Each such Investor shall
then have the right to submit, within five (5) days after receipt of the
notice of determination from the Company but in no case later than the
expiration of the Purchase Offer, notice to the Company and the Investor
proposing to accept a Purchase Offer of its irrevocable commitment to
exercise all or any portion of its pro-rata share of such Right of First
Refusal. If any Investors do not exercise their Right of First Refusal, the
Shares that would otherwise be allocated to such non-exercising Investors
shall be allocated to each exercising Investor on a pro-rata basis (based
upon the number of Conversion Shares held by such Investor relative to the
aggregate number of Conversion Shares held by all such exercising Investors),
provided that the Right of First Refusal must be exercised, if at all, prior
to the expiration of the Purchase Offer. Upon expiration or exercise of the
Right of First Refusal, the Company will provide notice to all Investors as
to whether or not the Right of First Refusal has been or will be exercised by
the Company or the Investors. "Conversion Shares" shall mean the number of
shares of Common Stock of the Company issued or issuable upon conversion of
Series A and/or Series B Preferred Stock held by the Investor and any shares
of Common Stock received by the Investor in connection with any stock
dividend, stock split or reclassification thereof.

1.2 NO ADVERSE EFFECT. The exercise or non-exercise of the
rights of the Company or Investors hereunder to purchase in one or more sales of
Shares made by an Investor shall not adversely affect their rights to purchase
in subsequent sales of Shares by an Investor.

1.3 PERMITTED TRANSACTIONS. The provisions of Section 1 of
this Agreement shall not pertain or apply to:

(a) any pledge of Shares made by an Investor pursuant
to a bona fide loan transaction which creates a mere security interest;

<PAGE>

(b) any repurchase of Shares by the Company;

(d) any transfer to an Investor's ancestors,
descendants or spouse or to a trust for their benefit; or

(e) any sale or transfer of Shares between the
Investors;

PROVIDED, in each case, that (i) the Investor(s) shall inform the
Company of such pledge, transfer or gift prior to effecting it, and (ii) the
pledgee, transferee or donee (each a "Permitted Transferee") shall furnish the
Company with a written agreement to be bound by and comply with all provisions
of this Agreement applicable to the Investors.

2. TRANSFER RESTRICTIONS

2.1 PROHIBITED TRANSFERS. Any attempt by an Investor to
transfer Shares in violation of Section 1 of this Agreement shall be void and
the Company agrees it will not effect such a transfer nor will it treat any
alleged transferee as the holder of such shares without the written consent of
the holders of a majority of the Conversion Shares.

2.2 LEGENDED CERTIFICATES. Each certificate representing
shares of the capital stock of the Company now or hereafter owned by the
Investors or issued to any Permitted Transferee pursuant to Section 1.3 shall
bear the following legend:

"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL
AGREEMENT BY AND BETWEEN THE SHAREHOLDER, THE CORPORATION AND
CERTAIN HOLDERS OF COMMON AND PREFERRED STOCK OF THE
CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION."

3. TERMINATION

3.1 TERMINATION EVENTS. This Agreement shall terminate upon
the earliest to occur of any one of the following events (and shall not apply to
any transfer by a Investor in connection with any such event):

(a) The liquidation, dissolution or indefinite
cessation of the business operations of the Company;

(b) The execution by the Company of a general
assignment for the benefit of creditors or the appointment of a receiver or
trustee to take possession of the property and assets of the Company;

<PAGE>

(c) A firm commitment underwritten public offering by
the Company of shares of its Common Stock pursuant to a registration
statement on Form S-1 under the Securities Act of 1933, as amended, which
results in aggregate cash proceeds to the Company of $20,000,000 (net of
underwriting discounts and commissions) at a public offering price of at
least $12.00 per share; or

(d) The sale, conveyance, disposal, or encumbrance of
all or substantially all of the Company's property or business or the
Company's merger into or consolidation with any other corporation (other than
a wholly, owned subsidiary corporation) or if the Company effects any other
transaction or series of related transactions in which more than fifty
percent (50%) of the voting power of the Company is disposed of, provided
that this Section 3.1(d) shall not apply a merger effected exclusively for
the purpose of changing the domicile of the Company.

3.2 REMOVAL OF LEGEND. At any time after the termination of
this Agreement in accordance with Section 3.1, any holder of a stock certificate
legended pursuant to Section 2.2 may surrender such certificate to the Company
for removal of such legend, and the Company will duly reissue a new certificate
without the legend.

4. MISCELLANEOUS

4.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement and the rights and obligations of the parties hereunder
shall inure to the benefit of, and be binding upon, the parties' respective
successors, assigns and legal representatives.

4.2 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the Company and the holders
of at least a majority of the Series A and Series B Preferred Stock (or their
respective successors and assigns), voting together as a single class. Any
amendment or waiver effected in accordance with this Section 4.2 shall be
binding upon the Company and the Investors and each of their respective
successors and assigns.

4.3 NOTICES. Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient on the date of
delivery, when delivered personally or by overnight courier or sent by telegram
or fax, or forty-eight (48) hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address or fax number as set forth below on the
signature page or on EXHIBIT A hereto, or as subsequently modified by written
notice.

4.4 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(a) such provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.

<PAGE>

4.5 GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto and the fights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of Washington, without giving effect to principles of conflicts of
law.

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

4.7 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

4.8 ADDITIONAL SERIES B PURCHASER. If 1,580,000 shares of
Series B Preferred are not sold on the date of this Agreement, the Company has
the right, pursuant to Section 1.2(c) of the Purchase Agreement, at any time
prior to October 30, 1999, to sell that number of shares of Series B Preferred
equal to the difference between 1,580,000 minus the number of shares of Series B
Preferred Stock issued and sold on the date of this Agreement to one or more
additional purchasers as determined by the Company. Any such additional
purchaser shall execute an Addendum Agreement substantially in the form attached
hereto as EXHIBIT C and shall become a party to this Agreement and shall be
considered a "Series B Purchaser" for purposes of this Agreement.

[Signature Page Follows]

<PAGE>

The parties have executed this Amended and Restated Right of First
Refusal Agreement as of the date first written above.

COMPANY: SERIES A HOLDER:

BIRTHDAYEXPRESS.COM, INC. -------------------------------------
(Print name)

By: By:
--------------------------- ---------------------------------

Title: Title:
------------------------ ------------------------------

Address: 11220 120th Avenue N.E Dated:
Kirkland, Washington 98033 ------------------------------

Fax No.: (425) 889-9741 SERIES B PURCHASER:

By:
---------------------------------

Title:
------------------------------

Dated:
------------------------------

SIGNATURE PAGE TO AMENDED AND RESTATED
RIGHT OF FIRST REFUSAL AGREEMENT

<PAGE>

BIRTHDAYEXPRESS.COM, INC.

AMENDED AND RESTATED VOTING AGREEMENT

THIS AMENDED AND RESTATED VOTING AGREEMENT (the "AGREEMENT") is made as
of the 21st day of July , 1999, by and among BIRTHDAYEXPRESS.COM, INC., a
Washington corporation (the "COMPANY"), MICHAEL JEWELL and JAN JEWELL (the
"FOUNDERS"), and the holders of shares of Series A Preferred Stock (the
"Series A Preferred Stock") listed on EXHIBIT A hereto (the "Series A Holders"),
and the holders of shares of Series B Preferred Stock (the "Series B Preferred
Stock") listed on EXHIBIT B hereto (the "Series B Purchasers") (the Series A
Holders and Series B Purchasers may be referred to, collectively, herein as the
"INVESTORS" and individually, an "INVESTOR").

RECITALS

WHEREAS, the Founders and the Series A Holders possess certain voting
rights and other rights and obligations pursuant to a certain Voting Agreement
dated October 15, 1998, among the Company, the Founders and the Series A Holders
(the "Prior Agreement").

WHEREAS, the Founders and the Series A Holders desire to terminate the
Prior Agreement and to accept the rights and obligations created pursuant hereto
in lieu of the rights and obligations granted to them under the Prior Agreement.

WHEREAS, in order to induce the Company to enter into the Purchase
Agreement and to induce the Series B Purchasers to invest funds in the Company
pursuant to the Purchase Agreement, the Series B Purchasers, the Series A
Holders, the Founders and the Company hereby agree that this Agreement shall
govern the rights of the Series B Purchasers, the Series A Holders, the Founders
and the Company as to the matters set forth herein, and the Founders, the
Series A Holders and the Company hereby agree that the Prior Agreement shall be
superseded, rendered void and replaced in its entirety by this Agreement.

AGREEMENT

NOW THEREFORE, the parties agree as follows:

1. ELECTION OF DIRECTORS

1.1 BOARD REPRESENTATION. At each annual meeting of the
shareholders of the Company, or at any meeting of the shareholders of the
Company at which members of the Board of Directors of the Company are to be
elected, or whenever members of the Board of Directors are to be elected by
written consent, the Founders and the Investors agree to vote or act with
respect to their shares so as to elect:

<PAGE>

(a) three (3) members of the Company's Board of
Directors designated by a majority of the outstanding shares of the Company's
Common Stock issued and outstanding as of the date hereof, one (1) of which, not
including the Founders, shall have experience in the internet and e-commerce
industries (the "I and E Director");

(b) one (1) member of the Company's Board of Directors
designated by a majority of holders of the outstanding shares of Series A
Preferred so long as at least 500,000 shares of Series A Preferred Stock issued
pursuant to the Prior Agreement remains outstanding (as adjusted for stock
splits, stock dividends, recapitalizations and the like); and

(c) one (1) member of the Company's Board of Directors
designated by a majority of holders of the outstanding shares of Series B
Preferred so long as at least 500,000 shares of Series B Preferred Stock issued
pursuant to the Purchase Agreement remains outstanding (as adjusted for stock
splits, stock dividends, recapitalizations and the like); PROVIDED, HOWEVER, for
so long as Arch Venture Fund IV, L.P. (together with its affiliates) continues
to hold at least one-third of such outstanding shares, such member shall be
designated by Arch Venture Fund IV, L.P.

The directors designated by the Investors are subject to the approval of a
majority of the Company's directors then serving in such capacity. The I and E
Director shall be subject to the approval of all of the Company's directors then
serving in such capacity.

1.2 APPOINTMENT OF DIRECTORS. In the event of the resignation,
death, removal or disqualification of a director selected by the Series A
Holders, Series B Purchasers or the holders of the Company's Common Stock, as
the case may be, the Series A Holders, Series B Purchasers or the holders of the
Company's Common Stock, as the case may be, shall promptly nominate a new
director, and, after written notice of the nomination has been given by the
Series A Holders, Series B Purchasers or the holders of the Company's Common
Stock, as the case may be, to the other parties (and, with respect to a nominee
designated by the Investors, such nominee has been approved by a majority of the
Company's directors then serving in such capacity), each Series A Holder,
Series B Purchaser and holder of shares of the Company's Common Stock shall vote
its shares of capital stock of the Company to elect such nominee to the Board of
Directors.

1.3 REMOVAL. Any Investors or holders of the Company's Common
Stock, individually or as a class, as the case may be, which in either case have
the authority to appoint directors, may remove their designated director(s) at
any time and from time to time, with or without cause (subject to the Bylaws of
the Company as in effect from time to time and any requirements of law), in
their sole discretion, and after written notice to each of the parties hereto of
the new nominee to replace such director and, with respect to a nominee of the
Investors, after such nominee has been approved by a majority of the Company's
directors then serving in such capacity, each Investor and holder of the
Company's Common Stock shall promptly vote its shares of capital stock of the
Company to elect such nominee to the Board of Directors.

2. DRAG ALONG RIGHTS.

2.
<PAGE>

2.1 DRAG ALONG RIGHT. If (a) Investors holding a majority of
the outstanding Series A and Series B Preferred Stock, voting together as a
single class (the "Majority Preferred Holders") as provided in Section 6(a) of
the Company's Amended and Restated Articles of Incorporation (the "Restated
Articles") and (b) shareholders holding the requisite number of shares of stock
of the Company as provided in the Restated Articles or as otherwise provided
under the Washington Business Corporation Act, agree to sell or transfer all of
the securities of the Company or agree to the sale of all or substantially all
of the assets of the Company, each in a transaction described in Section 2(c)(i)
of the Restated Articles, then all Investors and Founders ("Selling
Securityholders") will be required to vote in favor of and to sell all of the
securities of the Company held by them or vote in favor of the sale of the
assets of the Company.

2.2 CONSIDERATION. Notwithstanding the provisions of
Section 2.1 immediately above, no Selling Securityholder shall be required to
vote in favor of and to sell such securities unless: (a) the consideration to be
received is at least equal to the liquidation preference then applicable to such
securities (as set forth in Section 2 of the Amended and Restated Articles of
Incorporation), (b) the consideration to be received by all Selling
Securityholders will be the same consideration per share to be received by the
Majority Preferred Holders, and (c) the terms and conditions of such sale shall
be the same as those upon which the Majority Preferred Holders sell their
securities; PROVIDED HOWEVER, that any general indemnity given by the Selling
Securityholders, applicable to liabilities not specific to a particular Selling
Securityholder, to the purchaser in connection with such sale shall be
apportioned among the Selling Securityholders according to the consideration
received by each Selling Securityholder.

2.3 NOTICE. The Company shall provide written notice to the
Selling Securityholders setting forth the consideration to be paid by the
purchaser for the securities and the material terms of the sale within ten (10)
business days after the exercise of the Drag Along Rights pursuant to Section
2.1 ("Drag Along Notice").

2.4 DELIVERY OF SECURITIES. Within ten (10) business days
after the date of the Drag Along Notice, each Selling Securityholder shall
deliver to the Company, the duly endorsed certificate or certificates
representing the securities held by such Selling Securityholder to be sold, and
a limited power-of-attorney authorizing the Company to take all actions
necessary to sell or otherwise dispose of such Securities. In the event that a
Selling Securityholder should fail to deliver the Securities, the Company shall
cause the books and records of the Company to show that such Securities are
bound by the provisions of this Section 2 and that such Securities may only be
transferred to the purchaser in such sale.

2.5 REMITTANCE OF CONSIDERATION. Promptly after the
consummation of the sale, the Purchaser shall remit directly to the Selling
Securityholders the total sales price of the Securities sold pursuant thereto.

3. ADDITIONAL REPRESENTATIONS AND COVENANTS

3.1 NO REVOCATION. The voting agreements contained herein are
coupled with an interest and may not be revoked during the term of this
Agreement.

3.
<PAGE>

3.2 CHANGE IN NUMBER OF DIRECTORS. Except as otherwise
provided herein, the Founders and the Investors will not vote for any amendment
or change to the Articles of Incorporation or Bylaws providing for the election
of more or less than five (5) directors, or any other amendment or change to the
Articles of Incorporation Bylaws inconsistent with the terms of this Agreement.

3.3 LEGENDS. Each certificate representing shares of the
Company's capital stock held by Founders or Investors or any assignee of the
Founders or Investors shall bear the following legend:

"THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING
AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN SHAREHOLDERS OF THE
COMPANY (A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY), AND BY
ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH
INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL
THE PROVISIONS OF SAID VOTING AGREEMENT."

4. TERMINATION

4.1 TERMINATION EVENTS. This Agreement shall terminate upon
the earlier of.

(a) A firm commitment underwritten public offering by
the Company of shares of its Common Stock pursuant to a registration statement
on Form S-1 under the Securities Act of 1933, as amended, which results in
aggregate cash proceeds to the Company of $20,000,000 (net of underwriting
discounts and commissions) at a public offering price of at least $12.00 per
share; or

(b) The sale, conveyance, disposal, or encumbrance of
all or substantially all of the Company's property or business or the
Company's merger into or consolidation with any other corporation (other than
a wholly-owned subsidiary corporation) or if the Company effects any other
transaction or series of related transactions in which more than fifty
percent (50%) of the voting power of the Company is disposed of, PROVIDED
that this Section 3.1(b) shall not apply to a merger effected exclusively for
the purpose of changing the domicile of the Company.

4.2 REMOVAL OF LEGEND. At any time after the termination of
this Agreement in accordance with Section 3.1, any holder of a stock certificate
legended pursuant to Section 2.3 may surrender such certificate to the Company
for removal of the legend, and the Company will duly reissue a new certificate
without the legend.

5. MISCELLANEOUS

5.1 SUCCESSORS AND ASSIGNS The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

4.
<PAGE>

5.2 AMENDMENTS AND WAIVERS. Any term hereof may be amended or
waived only with the written consent of the Company, the Founders, and holders
of at least a majority of the Series A Preferred Stock, voting as a class, and
the holders of at least a majority of Series B Preferred Stock, voting as a
class. Any amendment or waiver effected in accordance with this Section 5.2
shall be binding upon the Company, the Investors and the Founders, and each of
their respective successors and assigns.

5.3 NOTICES. Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient on the date of
delivery, when delivered personally or by overnight courier or sent by telegram
or fax, or forty-eight (48) hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address or fax number as set forth on the
signature page or on EXHIBIT A hereto, or as subsequently modified by written
notice.

5.4 SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(a) such provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.

5.5 GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of Washington, without giving effect to principles of conflicts of
law.

5.6 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

5.7 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

5.8 ADDITIONAL SERIES B PURCHASERS. If 1,580,000 shares of
Series B Preferred are not sold on the date of this Agreement, the Company has
the right, pursuant to Section 1.2(c) of the Purchase Agreement, at any time
prior to October 30, 1999, to sell that number of shares of Series B Preferred
equal to the difference between 1,580,000 minus the number of shares of Series B
Preferred Stock issued and sold on the date of this Agreement to one or more
additional purchasers as determined by the Company. Any such additional
purchaser shall execute an Addendum Agreement substantially in the form attached
hereto as EXHIBIT C and shall become a party to this Agreement and shall be
considered a "Series B Purchaser" for purposes of this Agreement.

[Signature Page Follows]

5.
<PAGE>

The parties hereto have executed this Amended and Restated Voting
Agreement as of the date first written above.

COMPANY: SERIES A HOLDER:

BIRTHDAYEXPRESS.COM, INC. ---------------------------
(Investor)

By: By:
--------------------------------- ------------------------

Name:
----------------------
(print)
Address: 11220 - 120th Avenue N.E.
Kirkland, Washington 98033 Title:
---------------------
Fax No.: (425) 889-9741

FOUNDERS: SERIES B PURCHASER:

- ------------------------------------ ---------------------------
(Investor)

By:
------------------------

Name:
----------------------
(print)

Title:
- ------------------------------------ ---------------------

SIGNATURE PAGE TO AMENDED AND RESTATED
VOTING AGREEMENT

<PAGE>

PROMISSORY NOTE

$
Kirkland, Washington

On or before , the undersigned ("Borrower"), for value received, promises
to pay to the order of Michael K. Jewell (the "Lender"), the principal sum of
with interest from date of note set forth above. The unpaid principal amount
hereof shall bear interest at a rate equal to 8% simple interest.

This note is made under and governed by the State of Washington.

Dated

Borrower:
Birthday Express, Inc.

By: /s/ Michael K. Jewell
Michael K. Jewell, President

<PAGE>

PROMISSORY NOTE

$250,000 JUNE 17, 1999
KIRKLAND, WASHINGTON

FOR VALUE RECEIVED, BIRTHDAY EXPRESS, INC., a Washington corporation
("BORROWER"), hereby promises to pay to the order of ARCH VENTURE FUND IV,
L.P., ("LENDER"), in lawful money of the United States of America and in
immediately available funds, the principal sum of Two Hundred Fifty Thousand
Dollars ($250,000) (the "LOAN") together with accrued and unpaid interest
thereon, each due and payable on the dates and in the manner set forth below.

1. PRINCIPAL REPAYMENT. The outstanding principal amount of the Loan
shall be due and payable on July 15, 1999.

2. INTEREST RATE. Borrower further promises to pay interest on the
outstanding principal amount hereof from the date hereof until payment in
full, which interest shall be payable at the rate of Eight and Three-Quarters
percent (8.75%) per annum or the maximum rate permissible by law (which under
the laws of the State of Washington shall be deemed to be the laws relating
to permissible rates of interest on commercial loans), whichever is less.
Interest shall be due and payable on July 15, 1999 and shall be calculated on
the basis of a 360-day year for the actual number of days elapsed.

3. PLACE OF PAYMENT. All amounts payable hereunder shall be payable at
the office of Lender, 1000 Second Avenue, Suite 3700, Seattle, Washington
98104, unless another place of payment shall be specified in writing by
Lender.

4. EQUITY EVENT, ASSET SALE OR CHANGE IN CONTROL. Notwithstanding
SECTIONS 1 and 2, above, the outstanding principal amount of the Loan and all
accrued and unpaid interest thereon shall be due and payable (a) in the event
Borrower sells and issues shares of its equity securities (the "SERIES B
PREFERRED STOCK") to investors with total proceeds to the Borrower of not
less than $1,000,000 (the "EQUITY EVENT") or (b) upon (i) the sale, lease or
other disposition of all or substantially all of the Borrowers property (an
"ASSET SALE") or (ii) the merger or consolidation of the Borrower with or
into any other corporation or other entity or person (other than a
wholly-owned subsidiary corporation), or any other transaction or series of
related transactions in which more than fifty percent (50%) of the voting
power of the Corporation is transferred (a "CHANGE IN CONTROL").

5. APPLICATION OF PAYMENTS. Payment on this Promissory Note shall be
applied first to accrued interest, and thereafter to the outstanding
principal balance hereof.

6. DEFAULT. Each of the following events shall be an "EVENT OF DEFAULT"
hereunder:

(a) Borrower fails to pay timely any of the principal amount due under
this Promissory Note or any accrued interest or other amounts due under this
Promissory Note on the date the same becomes due and payable or within five (5)
business days thereafter;

<PAGE>

(b) Borrower files any petition or action for relief under any
bankruptcy, reorganization, insolvency or moratorium law or any other law for
the relief of, or relating to, debtors, now or hereafter in effect, or makes
any assignment for the benefit of creditors or takes any corporate action in
furtherance of any of the foregoing; or

(c) An involuntary petition is filed against Borrower (unless such
petition is dismissed or discharged within sixty (60) days) under any
bankruptcy statute now or hereafter in effect, or a custodian, receiver,
trustee, assignee for the benefit of creditors (or other similar official) is
appointed to take possession, custody or control of any property of Borrower.

(d) An Asset Sale or Change in Control

Upon the occurrence of an Event of Default hereunder, all unpaid principal,
accrued interest and other amounts owing hereunder shall, at the option of
Lender, and, in the case of an Event of Default pursuant to (b), (c) or (d)
above, automatically, be immediately due, payable and collectible by Lender
pursuant to applicable law, and upon an Event of Default pursuant to (d)
above, Borrower shall pay a penalty equal to $25,000.

7. WAIVER. Borrower waives presentment and demand for payment, notice of
dishonor, protest and notice of protest of this Promissory Note, and shall
pay all costs of collection when incurred, including, without limitation,
reasonable attorneys' fees, costs and other expenses.

The right to plead any and all statutes of limitations as a defense to
any demands hereunder is hereby waived to the full extent permitted by law.

8. GOVERNING LAW. This Promissory Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of
Washington, excluding conflict of laws principles that would cause the
application of laws of any other jurisdiction.

9. SUCCESSORS AND ASSIGNS. The provisions of this Promissory Note shall
inure to the benefit of and be binding on any successor to Borrower and shall
extend to any holder hereof.

ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY EXTEND
CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A
DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

BORROWER BIRTHDAY EXPRESS, INC.

By: /s/ Michael K. Jewell
--------------------------

Printed Name: Michael Jewell

Title: President

<PAGE>

List of Subsidiaries

List Selector & Processing, Inc., a Washington corporation

<PAGE>

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of CelebrateExpress.com,
Inc. on Form S-1 of our report dated September 15, 1999 (January 7, 2000, as
to Notes 1, 5, and 8), appearing in the Prospectus, which is part of this
Registration Statement. We also consent to the reference to us under the
headings "Selected Financial Data" and "Experts" in such Prospectus.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
Seattle, Washington

January 12, 2000

<PAGE>
<ARTICLE> 5

<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> MAY-31-1999 NOV-30-1999
<PERIOD-END> MAY-31-1999 NOV-30-1999
<CASH> 127,031 7,118,950
<SECURITIES> 0 0
<RECEIVABLES> 17,148 89,646
<ALLOWANCES> 0 0
<INVENTORY> 1,450,022 2,340,904
<CURRENT-ASSETS> 1,898,873 9,794,174
<PP&E> 1,505,271 2,826,595
<DEPRECIATION> 552,764 821,586
<TOTAL-ASSETS> 2,911,548 11,872,103
<CURRENT-LIABILITIES> 2,639,942 1,874,897
<BONDS> 0 0
1,780,285 14,442,965
0 0
<COMMON> 10,912 474,712
<OTHER-SE> (1,919,863) (451,776)
<TOTAL-LIABILITY-AND-EQUITY> 2,911,548 11,872,103
<SALES> 12,915,640 5,550,423
<TOTAL-REVENUES> 13,136,414 5,655,856
<CGS> 7,068,936 2,928,484
<TOTAL-COSTS> 14,191,220 6,084,569
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 125,979 66,214
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,180,785) (494,927)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,180,785) (494,927)
<EPS-BASIC> (.59) (.25)
<EPS-DILUTED> (.59) (.25)

</TABLE>