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You make your way through Route 1 as normal. Once you deliver the Parcel, the guy behind the counter says "Hey, take these pokeballs and come back when you catch two pokemon, I want to see if these old things still work". You have your option of catching from Route 1 and 22 (same pokemon from red and blue), Once you have caught 2 pokemon, The guy thanks you and gives you a letter to take back to blue along with a receipt.
You make your way back to Pallet town and you hand over the letter and recipt to Blue. He then says thanks and gives you 5 pokeballs and 2 potions. He then asks back for his pokemon, saying "My dad would be furious if I were to to just give away his prized pokemon"
You then make your way back to home and Professer Oak is there having coffee with your mother, he then intorduces himself and see's that you have two pokemon on you. He then hands you a pokedex and says something along the lines "I can see you have quite amazing potential, Have you ever consider being a pokemon trainer?"