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                                                                    EXHIBIT 10.4

                         INVESTOR SUBSCRIPTION AGREEMENT


               THIS AGREEMENT, made as of December 10, 1998, by and between
FREESHOP INTERNATIONAL, INC., a Washington corporation (the "Corporation"), and
FINGERHUT COMPANIES, INC., a Minnesota corporation (the "Investor").

                              W I T N E S S E T H :

               WHEREAS, the Corporation and the Investor desire to enter into
this Investor Subscription Agreement (this "Agreement") pursuant to which the
Investor will purchase, and the Corporation will sell, 4,048,467 shares of the
Corporation's common stock, without par value (the "Common Stock"), and the
Corporation will, pursuant to the Warrant Agreement dated as of the date hereof
between the Corporation and Investor (the "Warrant Agreement"), grant to the
Investor warrants to purchase a number of shares which together with the shares
of Common Stock issued to the Investor pursuant to this Agreement will represent
40.0% of the outstanding Common Stock (subject to adjustment as provided in the
Warrant Agreement);

               WHEREAS, in order to induce the Investor to enter into this
Agreement, the Corporation has also entered into a Stockholders Agreement dated
as of the date hereof (the "Stockholders Agreement") (the transactions
contemplated by this Agreement, the Stockholders Agreement and the Warrant
Agreement being referred to herein as the "Transaction");

               NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth below, the parties hereto hereby agree as follows:

                                    ARTICLE I

               Section I.1. Issuance of the Subscription Stock. Upon the
execution of this Agreement, the Investor shall purchase, and the Corporation
shall issue to the Investor, 4,048,467 shares of Common Stock (the "Investor
Stock"), which following such issuance will be 19.9% of the issued and
outstanding shares of Common Stock, at a price of $.98803 per share, for
aggregate consideration of $4,000,000.00, $500,000 of which shall be paid by the
surrender and cancellation of a Convertible Promissory Note, dated as of
December 4, 1998, issued by the Corporation to the Investor. The Corporation
shall deliver to the Investor a certificate representing such Investor Stock.


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                                   ARTICLE II

               Section II.1. Investor Representations and Warranties. In
connection with the purchase and sale of the Investor Stock hereunder and the
warrants pursuant to the Warrant Agreement, the Investor represents and warrants
to the Corporation that:

                (i) The Investor is aware that the Investor Stock, the Warrants
        and the shares of Common Stock issuable upon exercise of the Warrants
        (collectively, the "Investor Securities") have not been registered under
        the Securities Act of 1933, as amended (the "Securities Act"), or any
        state securities laws, in reliance on exemptions from such registration.
        It is understood that reliance by the Corporation on such exemptions is
        predicated in part upon the truth and accuracy of the statements made by
        the Investor in this Agreement.

                (ii) The Investor's duly authorized representatives, either
        alone or with the assistance of the Investor's professional advisors,
        have such knowledge and experience in financial and business matters
        that they are capable of evaluating the merits and risks of Investor's
        purchase of the Investor Securities.

                (iii) The Investor has sufficient financial resources to be able
        to bear the risk of the Investor's investment in the Investor
        Securities.

                (iv) The duly authorized representatives of the Investor have
        either spoken or met with, or been given reasonable opportunity to speak
        with or meet with, representatives of the Corporation for the purpose of
        asking questions of, and receiving answers and information from, such
        representatives concerning the Investor's investment in the Investor
        Securities.

                (v) The Investor is purchasing the Investor Securities for its
        own account for investment purposes and not with a view toward the sale
        or distribution of all or any part of such securities. No one other than
        the Investor has any beneficial interest in the Investor Securities.

                (vi) It is understood that, because the Investor Securities have
        not been registered under the Securities Act, (a) the Investor
        Securities have the status of securities acquired in a transaction under
        Section 4(2) of the Securities Act; and (b) the Investor Securities
        cannot be sold unless such stock is subsequently registered or an
        exemption from registration is available.

                (vii) Investor will in no event sell or distribute all or any
        part of the Investor Securities unless (a) there is an effective
        registration statement under the Securities Act and applicable state
        securities laws covering any such transaction involving such stock, or
        (b) the Corporation receives an opinion of the Investor's legal counsel,
        in form acceptable to the Corporation, stating that such transaction is
        exempt from registration.


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                (viii) Investor understands that at the present time Rule 144
        promulgated under the Securities Act may not be relied upon for the
        resale or distribution of the Investor Securities because the
        Corporation does not file the reports or make information about the
        Corporation publicly available nor is there a public market for the
        Investor Securities. Moreover, there can be no assurance that the
        Corporation will in the future file such reports or make publicly
        available such information, or that a public market for the Investor
        Securities will develop.

                (ix) This Agreement has been duly executed and delivered by the
        Investor, and constitutes the legal, valid and binding obligation of the
        Investor, enforceable in accordance with its terms, except as limited by
        (a) bankruptcy, insolvency or similar laws of general application
        affecting the enforcement of creditors' rights, and (b) the availability
        of equitable remedies.

                (x) The execution, delivery and performance of this Agreement by
        the Investor does not and will not conflict with, violate or cause a
        breach of any agreement, contract or instrument to which the Investor is
        a party or any judgment, order or decree to which the Investor is
        subject.


                                   ARTICLE III

               In connection with the transactions contemplated hereunder, the
Corporation represents and warrants to the Investor that:

               Section III.1. Corporate Organization, Etc. The Corporation is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Washington with full corporate power and authority to carry on
its business as it is now being conducted, and to own, operate and lease its
properties and assets. The Corporation is duly qualified or licensed to do
business and is in corporate and tax good standing in those jurisdictions set
forth in Schedule 3.1, which sets forth every jurisdiction in which the conduct
of its business, the ownership or lease of its properties, the proposed conduct
of its business or ownership or lease of its properties, or the sale of its
capital stock to the Investor at the closing of the Transaction require it to be
so qualified or licensed, unless the failure to be so qualified would not have a
material adverse effect upon the Corporation or the ability of the Corporation
to meet its obligations hereunder. The Corporation has no subsidiaries.

               Section III.2. Authorization, Etc. The Corporation has full power
and authority to enter into and consummate the Transaction. The execution,
delivery and performance of this Agreement, the issuance of the Investor Stock
and all other agreements and transactions which are part of the Transaction have
been duly authorized by the board of directors of the Corporation and no other
corporate proceedings, including authorization by the stockholders of the
Corporation, on its part are necessary to authorize this Agreement, the issuance
of the Investor Stock or the Transaction. This Agreement constitutes a legal,
valid


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and binding obligation of the Corporation enforceable against the Corporation in
accordance with its terms.

               Section III.3. Capitalization. (i) Set forth in Schedule 3.3 is a
description of the indebtedness of the Corporation, outstanding as of the date
hereof. (ii) Set forth in Schedule 3.3 is (A) a list of the shareholders of the
Corporation and the number of shares of Common Stock held by each, (B) a
description of the authorized capital stock of the Corporation, and (C) a
description of all rights to acquire shares of capital stock of the Corporation,
the terms thereof, and the persons holding such rights. The Corporation has
reserved for issuance the total number of shares deliverable upon exercise of
the warrants pursuant to the Warrant Agreement. The issuance of the Investor
Stock has been duly and validly authorized and, when issued in accordance with
the terms hereof, the Investor Stock will be duly and validly issued, fully paid
and nonassessable and free of preemptive rights.

               Section III.4. No Violation. The execution, delivery and
performance by the Corporation of this Agreement, and all other agreements which
are part of the Transaction, and the fulfillment of and compliance with the
respective terms hereof and thereof by the Corporation, do not and will not (a)
conflict with or result in a breach of the terms, conditions or provisions of,
(b) constitute a default or event of default under (with due notice, lapse of
time or both), (c) result in the creation of any lien upon the Corporation's
capital stock or assets pursuant to, (d) give any third party the right to
accelerate any obligation under, (e) result in a violation of, or (f) require
any authorization, consent, approval, exemption or other action by, notice to,
or filing with any authority pursuant to, the articles of incorporation, bylaws
of the Corporation or any applicable regulation, order or contract to which the
Corporation or its respective properties are subject.

               Section III.5. Binding Obligation. This Agreement constitutes a
valid and binding obligation of the Corporation, enforceable in accordance with
its respective terms, except to the extent enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
generally affecting creditors' rights and by equitable principles (regardless of
whether the enforcement is sought in equity or at law).

               Section III.6. Financial Statements. The Corporation has
delivered to the Investor its audited financial statements for the year ended
December 31, 1997. Attached hereto as Schedule 3.6 is the Corporation's
unaudited balance sheet as at October 31, 1998 (the "Balance Sheet"). Also set
forth in Schedule 3.6 is the unaudited statement of operations for the ten-month
period ended October 31, 1998. Each of such financial statements was prepared in
accordance with GAAP consistently applied, and fairly presents in all material
respects the financial condition of the Corporation at the date thereof, and
reflects the assets and liabilities of the Corporation as of the date hereof
except as set forth in Schedule 3.6. Since October 31, 1998, there has been no
material adverse change in the business, operations, properties, prospects or
condition (financial or otherwise) of the Corporation, except that the
Corporation has continued to experience losses consistent with the results of
previous months during 1998.

               Section III.7. Litigation. Except as set forth in Schedule 3.7
hereto, there is no action, suit, proceeding or investigation pending, or, to
the best knowledge of the Corporation,


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threatened against the Corporation which might result in any adverse change in
the business, operations, conditions, prospects, properties or assets of the
Corporation or the ability of the Corporation to perform the Transaction. There
is no judgment, order, writ, injunction, or decree outstanding against the
Corporation.

               Section III.8. Ownership of Property, Liens. On and as of the
date hereof, the Corporation is the lawful owner of, has good and marketable
title to and is in lawful possession of, or has valid leasehold interests in,
all properties and other assets, real or personal, tangible, intangible or
mixed, purported to be owned or leased, as the case may be, by the Corporation
on the Balance Sheet and none of its properties and assets is subject to any
Liens, except as set forth in Schedule 3.8. The Corporation conducts its
business without infringement or claim of infringement of any material license,
patent, trademark, trade name, service mark, copyright, trade secret or other
intellectual property right of others, and there is no infringement or claim of
infringement by others of any material license, patent, trademark, trade name,
service mark, copyright, trade secret or other intellectual property right of
the Corporation.

               Section III.9. No Default. Except as set forth in Schedule 3.9
and except for the fact that certain accounts payable of the Corporation are
past due, the Corporation is not in default under or with respect to any
material contract, agreement, lease or other instrument to which it is a party
or by which its property is bound or affected.

               Section III.10. No Burdensome Restrictions. There presently
exists no condition, event or act under any contract, lease, agreement or other
instrument to which the Corporation is a party or by which any of its property
is bound or affected, and no charge, corporate restriction, judgment, decree or
order and no provision of applicable law or governmental regulation to which the
Corporation is subject, which could have a material adverse effect on the
Corporation.

               Section III.11. Tax Matters. All Federal, state and local tax
returns, reports and statements required to be filed by or on behalf of the
Corporation have been filed with the appropriate governmental agencies in all
jurisdictions in which such returns, reports and statements are required to be
filed, and all taxes (including real property taxes) and other charges shown to
be due and payable have been or will be timely paid prior to the date on which
any fine, penalty, interest, late charge or loss may be added thereto for
nonpayment thereof, except such taxes as are being contested in good faith by
appropriate proceedings for which adequate reserves have been established. All
state and local sales and use taxes required to be paid by the Corporation have
been paid except to the extent where the failure to so pay would not have a
material adverse effect. All federal and state returns have been filed by the
Corporation for all periods for which returns were due with respect to employee
tax withholding, social security and unemployment taxes, and the amounts shown
thereon to be due and payable have been paid in full or adequate provisions
therefor have been made.

               Section III.12. Compliance with Law and Applicable Government
Regulations. The Corporation is presently in material compliance with regard to
its operations, practices, real property, plants, structures, machinery,
equipment and other property, and all other aspects of its business, with all
applicable statutes, rules, regulations and orders, including, but


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not limited to, all regulations relating to the safe conduct of business,
environmental protection, quality and labeling, antitrust, taxes, consumer
protection, equal opportunity, discrimination, health, sanitation, fire, zoning,
building and occupational safety.

               Section III.13. ERISA and Related Matters; Benefit Plans;
Obligations to Employees. Except as set forth in Schedule 3.13 hereto, neither
the Corporation, nor any ERISA Affiliate of the Corporation, is a party to or
participates in or has any liability or contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee pension benefit plan" or
"multiemployer plan" (as those terms are respectively defined in Sections 3(1),
3(2) and 3(37) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); (ii) any retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation plan, vacation pay,
severance pay, bonus or benefit arrangement, insurance or hospitalization
program or any other fringe benefit arrangements for any employee, director,
consultant or agent, whether pursuant to contract, arrangement, custom or
informal understanding, which does not constitute an "employee benefit plan" (as
defined in Section 3(3) of ERISA); or (iii) any employment agreement not
terminable on 30 days' or less written notice, without further liability. Any
plan, arrangement or agreement required to be listed on Schedule 3.13 for which
the Corporation or any ERISA Affiliate of the Corporation may have any liability
or contingent liability is sometimes hereinafter referred to as a "Benefit
Plan". For purposes of this Section, the term "ERISA Affiliate" shall mean any
trade or business, whether or not incorporated, that together with the
Corporation would be deemed a "single employer" within the meaning of Section
4001(b)(i) of ERISA.

               Section III.14. Brokerage. There are no claims for brokerage
commissions, finders' fees or similar compensation in connection with the
Transaction based on any arrangement or agreement binding upon the Corporation.

               Section III.15. Employment, Shareholders and Subscription
Agreements. Except for the agreements described in Schedule 3.15, there are no
(i) employment agreements covering the management of the Corporation, (ii)
collective bargaining agreements or other labor agreements covering any
employees of the Corporation, (iii) agreements for managerial, consulting or
similar services to which the Corporation is a party or by which it is bound or
(iv) agreements regarding the Corporation, its assets or operations or any
investment therein to which any of its stockholders is a party or by which it is
bound, including without limitation any stock option plan or stock appreciation
right plan.

               Section III.16. Environmental Laws. The Corporation is not aware
of, and the Corporation has not received any written notice, notification,
demand, request for information, complaint, citation, summons, investigation,
administrative order, consent order, agreement, litigation or settlement arising
under or relating to Environmental Laws nor, to the Corporation's knowledge, are
any of the foregoing threatened, with respect to or in connection with the
Corporation or any properties now or previously owned, leased or operated by the
Corporation. All uses by the Corporation of any now or previously owned, leased
or operated property comply and at all times have complied with applicable
Environmental Laws. The prior uses of all now or previously owned, leased or
operated properties have at all times


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complied with applicable Environmental Laws. No property now or previously
owned, leased or operated by the Corporation or any Subsidiary of the
Corporation, no property to which any materials originating at or from the
Corporation or any Subsidiary of the Corporation have been sent, and no property
on which the Corporation or any Subsidiary or the Corporation has transported or
arranged for the transportation of any material is listed or, to the
Corporation's knowledge, proposed for listing on the National Priorities List
promulgated pursuant to CERCLA, on CERCLIS (as defined in CERCLA) or on any
similar federal, state or foreign list of sites requiring investigation or
cleanup, nor, to the knowledge of the Corporation, is any such property
threatened to be placed on any such list. Other than in compliance with all
applicable Environmental Laws, no Hazardous Materials are located on any
properties now or previously owned, leased or operated by the Corporation or
have been released into the environment, or deposited, discharged, placed or
disposed of at, on, or under any of such properties. No portion of any such
property is being used, or has been used at any previous time, for the disposal,
storage, treatments processing or other handling of Hazardous Materials (other
than processing or handling or generation of Hazardous Materials in compliance
with all applicable Environmental Laws), nor is any such property affected by
any Hazardous Materials Contamination.

               Section III.17. Full Disclosure. None of the information
(financial or otherwise) furnished by or on behalf of the Corporation in
connection with the consummation of the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not misleading
in the light of the circumstances under which such statements were made.

               Section III.18. Employees. Schedule 3.18 sets forth a list of all
officers, directors, employees and consultants of the Corporation earning more
than $25,000 annually. The Corporation is in compliance with all Federal, state
and local statutes, rules and regulations or orders affecting employment and
employment practices of the Corporation, including terms and conditions of
employment and wages and hours except for such circumstances, which,
individually or in the aggregate, if enforced would not materially impair the
ability of the Corporation to meet its obligations under the Transaction or
conduct its business as presently conducted. Except as set forth in Schedule
3.18, the Corporation does not have any liability to any of its employees,
officers or directors other than for the payment of salaries and director fees
to be paid for current periods in the ordinary course of business except as
reflected on the Balance Sheet.

               Section III.19. Contracts. The Corporation has delivered to the
Investor true and complete copies of all the contracts and documents listed in
the schedules to this Agreement. Set forth in Schedule 3.19 is a list of
contracts to which the Corporation is a party which are not terminable by the
Corporation without liability on less than 60 days notice.

               Section III.20. Intellectual Property.

               (a) Schedule 3.20(a). Set forth in Schedule 3.20(a) is a list of
the Intellectual Property (as hereinafter defined) owned or used by the
Corporation and material to its business, and there is no additional such
Intellectual Property used in the business of the


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Corporation. All such Intellectual Property either is owned by the Corporation
or used pursuant to a valid license which is not currently terminable due to any
breach or noncompliance by the Corporation and which shall not be adversely
affected by the transactions contemplated herein. Schedule 3.20(a) indicates
which such Intellectual Property is owned by the Corporation and which of such
Intellectual Property is covered by a license. None of the Corporation's rights
in or to any such Intellectual Property shall be adversely affected by its
execution or delivery of this Agreement or by the performance of its obligations
hereunder.

               "Intellectual Property": means: (i) any and all domain names,
trademarks, service marks, brand names, certification marks, trade dress,
assumed names, trade names, logos and other indications of origin, sponsorship
or affiliation, together with the goodwill associated therewith (whether the
foregoing are registered or unregistered); registrations thereof in any
jurisdiction and applications to register any of the foregoing in any
jurisdiction, and any extension, modification or renewal of any such
registration or application; (ii) any and all inventions, developments,
improvements, discoveries, know how, concepts and ideas, whether patentable or
not in any jurisdiction; (iii) any and all patents, revalidations, industrial
designs, industrial models and utility models, patent applications (including
reissues, continuations, divisions, continuations-in-part and extensions) and
patent disclosures; (iv) any and all non-public information, trade secrets and
proprietary or confidential information and rights in any jurisdiction to limit
the use or disclosure thereof by any person; (v) any and all writings and other
works, whether copyrighted, copyrightable or not in any jurisdiction, such works
including computer programs and software (including source code, object code,
data and databases); (vi) any and all copyrights, copyright registrations and
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; (vii) any and all other intellectual property or
proprietary rights; and (viii) any and all agreements, licenses, immunities,
covenants not to sue and the like relating to any of the foregoing.

               (b) Except as set forth in Schedule 3.20(b), the Corporation owns
all right, title and interest in, or has the right to use, the Intellectual
Property used in the conduct of its business, and there are no claims or causes
of action arising out of or related to any infringement or misappropriation of
any of the Intellectual Property. Except as set forth in Schedule 3.20(b), each
employee of the Corporation and each independent contractor or outside
consultant or other agent who has worked or is working for the Corporation and
who has participated or is participating in the design or development of any
Intellectual Property for, on behalf of or at the request of the Corporation,
has assigned all of his/her/its right, title and interest in and to such
Intellectual Property to the Corporation. Each such assignment agreement is in
full force and effect and has not been in any respect breached, waived or
modified.

               (c) No claims with respect to any Intellectual Property have been
asserted or, to the Corporation's knowledge, threatened (i) against the
Corporation, or (ii) to the Corporation's knowledge, against any other person
based on its use of any of the Corporation's Intellectual Property. To the
Corporation's knowledge, no use of any of the Corporation's Intellectual
Property by any person (including the Corporation) constitutes an unauthorized
use, infringement, misappropriation or other violation of the Intellectual
Property of any other


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person. Without limiting the generality of the foregoing, no person ever
employed or otherwise engaged by the Corporation has asserted or, to the
Corporation's knowledge, threatened any claim against the Corporation relating
to any Intellectual Property. All granted and issued patents, copyright
registrations, and registered trademarks and service marks listed on Schedule
3.20(a) and all copyrights held by the Corporation are valid, enforceable and
subsisting. To the knowledge of the Corporation, there has not been, nor is
there presently, any unauthorized use, infringement, misappropriation or
violation of any of its Intellectual Property by any person. To the
Corporation's knowledge, except as set forth in Schedule 3.20(c), the
Corporation has the full right to possess, use, copy, distribute, display,
transfer and license all Intellectual Property used in the business of the
Corporation.

               (d) Except as set forth in Schedule 3.20(d), no Intellectual
Property of the Corporation is subject to any outstanding order, award,
decision, injunction, judgment, decree, stipulation or agreement in any manner
restricting the transfer, use, enforcement or licensing thereof by the
Corporation. Except as set forth in Schedule 3.20(d), the Corporation has not
entered into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property. The Corporation has not entered into
any agreement granting any third party the right to bring infringement actions
with respect to, or otherwise to enforce rights with respect to, any of the
Corporation's Intellectual Property. The Corporation has the exclusive right to
file, prosecute and maintain all applications and registrations with respect to
its Intellectual Property.

               (e) Except as set forth in Schedule 3.20(e), to the knowledge of
the Corporation, the Corporation has taken all reasonable and necessary steps to
obtain, maintain, enforce and protect its Intellectual Property and its rights
thereunder. The Corporation has paid all fees, annuities and all other payments
which have heretofore become due to any governmental or regional authority with
respect to the Corporation's Intellectual Property.

               (f) Except as set forth in Schedule 3.20(f), the Corporation has
not transferred title in or to any copy of any computer program or software. No
computer program or software has been supplied by the Corporation to any person.

               Section III.21. Customer Warranties. There are no pending, nor to
the best knowledge of the Corporation, threatened, any claims under or pursuant
to any warranty, whether expressed or implied, on products or services sold
prior to the date hereof by the Corporation which are not set forth in Schedule
3.21.

               Section III.22. Insurance. All of the insurance policies of the
Corporation are in full force and effect, all premiums with respect thereto
covering all periods up to and including the date hereof have been paid or
accrued therefor, and no notice of cancellation or termination has been received
with respect to any such policy. Schedule 3.22 hereto sets forth a complete and
accurate summary of all policies, including name of insurer, the types and
amounts of coverage. The Corporation has not breached or otherwise failed to
perform in any material respects its obligations under any of such policies nor
has the Corporation received any adverse notice or communication from any of the
insurers party to the policies with respect to any such alleged breach or
failure in connection with any of the policies. Except as set forth


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<PAGE>   10
in Schedule 3.22, all of such policies remain in full force and effect through
30 days after the date hereof. Except as set forth in Schedule 3.22, the
Corporation has never been refused any insurance with respect to its assets or
operations, nor has coverage ever been limited by any insurance carrier to which
the Corporation has applied for any insurance policy or with which it has
carried an insurance policy.

               Section III.23. Accounts Receivable; Inventories. The accounts
receivable of the Corporation reflected in the Balance Sheet and such additional
accounts receivable as are reflected on the books of the Corporation on the date
hereof are good and collectible except to the extent reserved against thereon
(which reserves have been determined based upon actual prior experience and are
consistent with prior practices) or except as collected in the ordinary course
after the date of the Balance Sheet. All such accounts receivable (except to the
extent so reserved against) are valid, genuine and subsisting, arise out of bona
fide sales and deliveries of goods, performance of services or other business
transactions and are not subject to defenses, set-offs or counterclaims. Except
as set forth in Schedule 3.23 hereto, the Corporation is not aware of any
material adverse conditions affecting the supply of materials available to the
Corporation, and the consummation of the Transaction will not adversely affect
any such supply.

               Section III.24. Accredited Investors. All issuances of securities
by the Corporation have been in accordance with all applicable federal and state
laws.


                                   ARTICLE IV

               Section IV.1. Restrictions on Transfer. The Investor shall not
sell, transfer, assign, encumber or otherwise dispose of any interest (a
"Transfer") in any shares of the Investor Stock except as permitted under the
Stockholders Agreement.

               Section IV.2. Additional Restrictions on Transfer. The
certificates representing the Investor Stock shall bear the legends set forth in
the Stockholders Agreement.


                                    ARTICLE V

               Section V.1. Survival of Representations and Warranties. The
representations and warranties shall survive the consummation of the
Transaction. The representations and warranties in Sections III.2 and III.20
shall not terminate. All other representations and warranties shall terminate on
the earlier to occur of (i) January 1, 2000 or (ii) the occurrence of a
Qualified Public Offering as such term is defined in the Stockholders Agreement.


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               Section V.2. Indemnification of the Investor by the Corporation.
The Corporation shall reimburse, indemnify and hold harmless the Investor from,
against and in respect of the following ("Claim(s)"): (i) any and all damage,
loss, liability, claim or deficiency resulting from, or which exists or arises
due to any untruth, inaccuracy, breach or omission of, from or in, the
representations and warranties made in Article III hereof as long as such
representations and warranties shall survive, or from any untruth, inaccuracy,
breach or omission of, from or in, any representation or warranty, or any
nonfulfillment of any covenant or agreement made in any other agreement which is
part of the Transaction; and (ii) any and all actions, suits, claims,
proceedings, investigations, audits, demands, assessments, fines, judgments,
costs and other expenses (including, without limitation, reasonable audit and
legal fees) resulting from the circumstances described in clause (i) of this
Section. The obligations of the Corporation under this Section V.2 shall
terminate upon the consummation of a Qualified Public Offering as such term is
defined in the Stockholders Agreement.


                                   ARTICLE VI

               Section VI.1. Definitions. For purposes of this Agreement the
following terms shall have the following meanings:

               "Environmental Laws" means any and all applicable federal, state,
local and foreign statutes, laws, judicial decisions, regulations, ordinances,
rules, judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and governmental
restrictions, whether now or hereafter in effect, relating to pollution or
protection of human health, the environment or to emissions, discharges or
releases of pollutants, contaminants, Hazardous Materials or wastes into the
environment, including ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, Hazardous
Materials or wastes or the clean-up or other remediation thereof.

               "GAAP": United States generally accepted accounting principles,
consistently applied.

               "Hazardous Materials" means (i) any "hazardous substance" as
defined in CERCLA; (ii) asbestos; (iii) polychlorinated biphenyls; (iv)
petroleum, its derivatives, by-products and other hydrocarbons; and (v) any
other toxic, radioactive, caustic or otherwise hazardous substance regulated
under Environmental Laws.

               "Hazardous Materials Contamination" means contamination which is
subject to clean-up, remediation, removal, permitting or other regulation under
any Environmental Law (a) of the improvements, buildings, facilities,
personalty, soil, groundwater, air or other elements on or of the relevant
property by Hazardous Materials, or any derivatives thereof, or (b) on or of any
other property as a result of Hazardous Materials, or any derivatives thereof,
generated on, emanating from or disposed of in connection with the relevant
property.


                                      -11-


<PAGE>   12
               "Lien": any mortgage, deed of trust, pledge, security interest,
encumbrance, lien or charge of any kind whatsoever.

               "Transaction": the related set of transactions which dated as of
the date of this Agreement between the Corporation and the Investor relating to
the proposed purchase of shares of Common Stock and warrants by the Investor.

               "Transaction Closing": the closing of the Transaction.


                                   ARTICLE VII

               The parties further agree as follows:

               Section VII.1. Agreement to Defend. In the event any action,
suit, proceeding or investigation which would prevent the consummation of the
transactions contemplated hereby is commenced, all the parties hereto agree to
cooperate and use their best efforts to defend against and respond thereto.

               Section VII.2. Further Assurances. Subject to the terms and
conditions of this Agreement, the parties hereto shall use their best efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective as promptly as possible the Transaction
contemplated by this Agreement, and to cooperate with each other in connection
with the foregoing.

               Section VII.3. Technology License Agreement. Promptly after the
Transaction, the parties agree to negotiate in good faith a Technology License
Agreement to provide for the licensing of technology by either or both parties
on an arms-length basis and for most favored nation status for each party.

               Section VII.4. Issuance of Additional Shares. In the event the
parties learn after the closing that there are additional securities, options or
warrants issued to third parties and outstanding as of the date of this
Agreement which have not been taken into account in calculating the number of
shares of Common Stock sold to Investor pursuant to this Agreement, the
Corporation shall issue to Investor without charge additional shares of Common
Stock so that Investor shall hold a number of shares which represent 19.9% of
the issued and outstanding shares of the Corporation's Common Stock as of the
date of this Agreement.

               Section VII.5. Deliveries After Closing. From time to time after
the date hereof, at the Investor's request and without further consideration
from the Investor, the Corporation shall execute and deliver such other
instruments of conveyance and transfer and take such other action as the
Investor reasonably may require to convey, transfer to and vest in


                                      -12-


<PAGE>   13
the Investor and to put the Investor in possession of any rights or property to
be sold, conveyed, transferred and delivered hereunder.

               Section VII.6. Public Announcements. The form, content and timing
of all press releases, public announcements or publicity statements with respect
to this Agreement and transactions contemplated hereby shall be subject to the
prior approval of both the Corporation and the Investor, which approval shall
not be unreasonably withheld. No press releases, public announcements or
publicity statements shall be released by either party without such prior mutual
agreement.


                                  ARTICLE VIII

               Section VIII.1. Notices. All notices, requests, other
communications and distributions to any party hereunder shall be in writing
(including prepaid overnight courier, telex, facsimile transmission or similar
writing) and shall be given to such party at its address or telecopy number set
forth below or at such other address or telecopy number as such party may
hereafter specify for the purpose by notice to the other parties.

               If to the Corporation:

                      FreeShop International, Inc.
                      95 South Jackson, Suite 300
                      Seattle, Washington  98104
                      Attn: Mr. Timothy C. Choate

               If to the Investor:

                      Fingerhut Companies, Inc.
                      4400 Baker Road
                      Minnetonka, MN  55343
                      Attn:  Michael P. Sherman, Esq.


Each such notice, request or other communication shall be effective (i) if given
by telex or telecopy, when such telex or telecopy is transmitted to the telex or
telecopy number specified on the signature pages hereof and the appropriate
answer back is received (in the case of telex) or telephonic confirmation of
receipt thereof is obtained (in the case of telecopy) or (ii) if given by mail,
prepaid overnight courier or any other means, when received at the address
specified on the signature pages hereof or when delivery at such address is
refused.

               Section VIII.2. Severability. Whenever possible, each provision
of this Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability will
not affect any other provision of any other jurisdiction, but this


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<PAGE>   14
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision had never been contained
herein.

               Section VIII.3. Complete Agreement. This Agreement and the other
agreements which are part of the Transaction embody the complete agreement and
understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.

               Section VIII.4. Counterparts. This Agreement may be executed in
separate counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same agreement.

               Section VIII.5. Successors and Assigns. Except as otherwise
provided herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the Corporation and the Investor and their respective successors
and assigns.

               Section VIII.6. Remedies. Each of the parties to this Agreement
will be entitled to enforce its rights under this Agreement specifically, to
recover damages and costs (including reasonable attorney's fees) caused by any
breach of any provision of this Agreement and to exercise all other rights
existing in its favor. The parties hereto agree to acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party may in its sole discretion apply to any court of
law or equity of competent jurisdiction (without posting any bond or deposit)
for specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.

               Section VIII.7. Applicable Law. The provisions of this Agreement
shall be construed in accordance with the laws of the State of Washington and
all rights and remedies shall be governed by such laws without regard to
principles of conflict of laws.

               Section VIII.8. Amendment and Waiver. The provisions of this
Agreement may be amended and waived only with the prior written consent of the
Corporation and the Investor.


               IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.


                                            FREESHOP INTERNATIONAL, INC.


                                            By /s/ TIM CHOATE
                                               ---------------------------------



                                      -14-


<PAGE>   15
                                            FINGERHUT COMPANIES, INC.


                                            By /s/ MICHAEL SHERMAN
                                               -------------------------------


                                      -15-