EXHIBIT 10.2


                                PHOTOWORKS, INC.
                            INVESTOR RIGHTS AGREEMENT


         THIS INVESTOR  RIGHTS  AGREEMENT (the  "Agreement") is made as of April
25,  2001,  by  and  among  PhotoWorks,  Inc.,  a  Washington  corporation  (the
"Company") and the purchasers listed on Exhibit A hereto (the "Investors").

                                    RECITALS

         A. The Company  and the  Investors  have  entered  into a  Subordinated
Convertible Debenture Purchase Agreement for sale by the Company and purchase by
the   Investors   of   the   Company's   subordinated   convertible   debentures
("Debentures") (the "Purchase Agreement").

         B.  In  connection   with  the  purchase  and  sale  of  the  Company's
Debentures,  the Company and each  Investor  desire to provide for the rights of
each Investor with respect to information  about the Company and registration of
the Common Stock issued or issuable  upon  conversion  of the Series B Preferred
Stock into which Debentures may be converted, on the terms of this Agreement.

         THE PARTIES AGREE AS FOLLOWS:

         1. Certain Definitions.  As used in this Agreement, the following terms
shall have the following respective meanings:

                  1.1  "Commission"  shall  mean  the  Securities  and  Exchange
Commission or any other federal agency at the time  administering the Securities
Act.

                  1.2 "Exchange Act" shall mean the  Securities  Exchange Act of
1934, as amended.

                  1.3 "Form S-1" shall mean Form S-1 issued by the Commission or
any substantially similar form then in effect.

                  1.4 "Form S-3" shall mean Form S-3 issued by the Commission or
any substantially similar form then in effect.

                  1.5 "Holder" shall mean any holder of outstanding  Registrable
Securities,  Series B Preferred Stock and/or Debentures which have not been sold
to the  public,  but only if such  holder  is the  Investor  or an  assignee  or
transferee of registration rights as permitted by Section 8.


<PAGE>

                  1.6 "Material Adverse Event" shall mean an occurrence having a
consequence  that  either  (a)  is  materially   adverse  as  to  the  business,
properties,  prospects,  or  financial  condition  of  the  Company  or  (b)  is
reasonably foreseeable, has a reasonable likelihood of occurring, and if it were
to occur might materially adversely affect the business,  properties,  prospects
or financial  condition of the Company;  provided,  however,  that the following
shall not be taken into account in determining a "Material  Adverse Event":  (i)
any adverse change, event or effect that is directly  attributable to conditions
affecting the United States economy  generally unless such conditions  adversely
affect such party in a materially  disproportionate manner, and (ii) any adverse
change,  event or effect that is directly  attributable to conditions  affecting
the Company's industry  generally,  unless such conditions  adversely affect the
Company in a materially disproportionate manner.

                  1.7 The  terms  "Register",  "Registered"  and  "Registration"
refer  to a  registration  effected  by  preparing  and  filing  a  registration
statement  on Form  S-1 or S-3 (or a  successor  form)  in  compliance  with the
Securities  Act  and  the  regulations  promulgated  thereunder   ("Registration
Statement") and the Commission's declaration or ordering of the effectiveness of
such Registration Statement.

                  1.8 "Registrable  Securities"  shall mean all Common Stock not
previously sold to the public and issued or issuable upon conversion or exercise
of any of the Company's  Series B Preferred  Stock purchased by or issued to the
Investor  or  issuable  to the  Investor  upon  conversion  of  any  Debentures,
including  Common Stock issued  pursuant to stock  splits,  stock  dividends and
similar distributions and all other Common Stock owned by any Holder at the time
of Registration hereunder.

                  1.9  "Registration  Expenses" shall mean all expenses incurred
by the Company in complying with Section 5 of this Agreement, including, without
limitation,  all federal and state registration,  qualification and filing fees,
printing  expenses,  fees and  disbursements  of counsel for the Company and one
special counsel for all Holders (if different from counsel to the Company), blue
sky fees and  expenses,  and the  expense of any special  audits  incident to or
required by any such registration.

                  1.10  "Securities  Act" shall mean the Securities Act of 1933,
as amended, or any
similar  federal  statute,  and the  rules  and  regulations  of the  Commission
thereunder, all as the same shall be in effect at the time.

                  1.11 "Selling Expenses" shall mean all underwriting  discounts
and  selling  commissions  applicable  to the  sale  of  Registrable  Securities
pursuant to this Agreement.

                  1.12  "Series B  Preferred  Stock"  shall  mean the  shares of
Series B Preferred  Stock into which the  Debentures  purchased by each Investor
are convertible pursuant to the Debentures and the Purchase Agreement.


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<PAGE>


                  1.13 "Shelf Registration  Statement" shall mean a Registration
Statement for an offering to be made on a continuous  basis pursuant to Rule 415
of the  Securities  Act (or such  successor  rule or similar  provision  then in
effect).

         2.  Financial  Statements  and Reports.  As long as any Investor  holds
Debentures  or Series B  Preferred  Stock,  the  Company  will  deliver  to such
Investor:

                           (i) as  soon  as  practicable  after  the end of each
fiscal  year of the  Company,  and in any event  within 90 days  thereafter,  an
audited  balance  sheet of the  Company  as of the end of such year and  audited
statements of income,  shareholders'  equity and cash flow for such year,  which
year-end  financial  reports shall be in reasonable detail and shall be prepared
in accordance with generally accepted  accounting  principles and accompanied by
the opinion of the Company's independent public accountants;

                           (ii) as soon as practicable  after the end of each of
the first three  quarters of any fiscal  year,  and in any event  within 45 days
thereafter,  an  unaudited  balance  sheet of the  Company as of the end of such
quarter,  and unaudited  statements of income and cash flow for such quarter and
for the current  fiscal  year to date,  prepared in  accordance  with  generally
accepted accounting principles (other than for accompanying notes);

                           (iii)  promptly  upon  receipt,  copies  of all audit
letters delivered by the Company's independent public accountants to management;
and

                           (iv) promptly upon filing,  all other documents filed
with or delivered to the Commission.

         3. Company Registration.

                  3.1  Registration  on Form S-3 or Form S-1 . The Company shall
use its best efforts to cause the Registrable Securities to be Registered for an
offering on a Registration  Statement on Form S-3 (or any successor form to Form
S-3) or S-1 (or any successor form to Form S-1) or such other  registration form
as may be available to the Company, and to cause such Registrable  Securities to
be qualified in such  jurisdictions  as the Holder may  reasonably  request,  no
later  than  March  31,  2002,  and  shall  use its best  efforts  to keep  such
Registration  Statement  effective  for a period  ending  at the later of (i) 48
months, or (ii) the date where all Registrable Securities can be sold under Rule
144(k).

         Notwithstanding  the  foregoing,  the Company shall not be obligated to
cause the Registrable Securities to be qualified in any particular  jurisdiction
in which the Company  would be required to execute a general  consent to service
of process in effecting such Registration,  qualification, or compliance, unless


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<PAGE>

the Company is already subject to service in such jurisdiction and except as may
be required by the Securities Act.

                  3.2 Registration of Other Securities in Company  Registration.
Any  Registration  Statement  filed  under  this  Section 3 may,  subject to the
provisions  of this Section 3.2,  include  securities  of the Company other than
Registrable  Securities,  but only if and to the extent this does not  adversely
affect the plan of  distribution  of the  Holders  or the market  price at which
Common Stock can be sold. Except in the case of an underwritten  public offering
of the  Company's  securities,  the inclusion of any  securities  other than the
Registrable  Securities  in  a  Registration  shall  not  limit  the  number  of
Registrable Securities to be included in such Registration.

                           (a)  Inclusion  of  Other  Holders  in   Underwritten
Company  Registration.  If the  Holders  determine  that  Registration  is for a
Registered public offering involving an underwriting, the right of any holder of
securities other than Registrable Securities to have such securities included in
the  Registration  shall be conditioned upon the inclusion of such securities in
the  underwriting  to the extent  provided  herein.  All  Holders  proposing  to
distribute their securities  through such underwriting  shall (together with the
other holders  distributing their securities  through such  underwriting)  enter
into an underwriting  agreement with the Underwriter's  Representative  for such
offering.  The  Underwriter's  Representative  shall be selected by the Holders,
subject  to the  approval  of  the  Company,  which  shall  not be  unreasonably
withheld.

                           (b) Marketing Limitation in Company Registration.  In
the event the Underwriter's  Representative  advises the Holders and the Company
in writing that market factors  (including,  without  limitation,  the aggregate
number of shares  of  Common  Stock  requested  to be  Registered,  the  general
condition  of the  market,  and the  status  of the  persons  proposing  to sell
securities  pursuant to the Registration)  require a limitation of the number of
shares to be underwritten, then (i) first, the securities other than Registrable
Securities or this Company's Series A Preferred Stock (or shares of Common Stock
issuable upon conversion of the Series A Preferred Stock) and securities held by
Sam Rubinstein,  and (ii) second, the Registrable Securities,  shall be excluded
from such Registration to the extent required by such limitation. No Registrable
Securities or other securities  excluded from the underwriting by reason of this
Section 3.2(b) shall be included in such Registration Statement.

                           (c) Right of Withdrawal in Company  Registration.  If
any Holder of Registrable  Securities,  or a holder of other securities entitled
(upon request) to be included in such Registration,  disapproves of the terms of
the underwriting,  such person may elect to withdraw therefrom by written notice
to the Company and the  Underwriter's  Representative  delivered  at least seven


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<PAGE>

days prior to the effective date of the Registration  Statement.  The securities
so withdrawn shall also be withdrawn from the Registration Statement.

                  3.3  Blue Sky in  Company  Registration.  In the  event of any
Registration  pursuant to Section 3, the Company will  exercise its best efforts
to Register and qualify the  securities  covered by the  Registration  Statement
under such other  securities or Blue Sky laws of such  jurisdictions as shall be
reasonably  appropriate  for  the  distribution  of such  securities;  provided,
however,  that the  Company  shall not be  required  to do business or to file a
general consent to service of process in any such states or jurisdictions.

         4. Expenses of  Registration.  All  Registration  Expenses  incurred in
connection  with  Registrations  pursuant  to Section  3.1 shall be borne by the
Company.  Notwithstanding  the above,  if any  Registration  begun  pursuant  to
Section 3 is subsequently  withdrawn at the request of the Holders of a majority
of the  Registrable  Securities  to be  registered,  the  Company  shall have no
further obligation to register the Registrable  Securities;  provided,  however,
that if at the time of such  withdrawal,  the Holders have learned of a Material
Adverse  Event with  respect to the  condition,  business,  or  prospects of the
Company  not  known  to the  Holders  at the  time  of the  commencement  of the
Registration  process,  then the Holders  shall retain their rights  pursuant to
Section 3. All Selling  Expenses,  if any,  shall be borne by the holders of the
securities Registered pro rata on the basis of the number of shares Registered.

         5.  Registration  Procedures and Obligations.  Whenever  required under
this Agreement to effect the  registration  of any Registrable  Securities,  the
Company shall, as expeditiously as reasonably possible:

                  (a)  Prepare  and file  with  the  Commission  a  Registration
Statement  with respect to such  Registrable  Securities  and use all reasonable
efforts to cause such Registration Statement to become effective,  and, upon the
request  of  any  of  the  Holders  of  the  Registrable  Securities  registered
thereunder,  keep such  Registration  Statement  effective  for the longer of 48
months or the date on which all unsold Registrable  Securities can be sold under
Rule 144(k).

                  (b) Prepare and file with the Commission  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.

                  (c)  Furnish  to the  Holders  such  numbers  of  copies  of a
prospectus,   including  a  preliminary   prospectus  and  such  amendments  and
supplements, all, in conformity with the requirements of the Securities Act, and
such other  documents as they may reasonably  request in order to facilitate the


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<PAGE>

disposition of Registrable Securities owned by them.

                  (d) Use all  reasonable  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)  Promptly  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  (i) 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,  (ii)  of any  request  by the  SEC or any  state
securities authority for amendments and supplements to a Registration  Statement
and prospectus or for additional  information  after the Registration  Statement
has  become  effective  and  (iii)  of  the  issuance  by the  SEC or any  state
securities  authority  of any  stop  order  suspending  the  effectiveness  of a
Registration Statement or the initiation of any proceedings for that purpose. In
the case of a Shelf  Registration  Statement,  the Company agrees that, upon the
happening of any event  described  in  subsections  (i),  (ii) and (iii) of this
Section  5(f),  the Company shall use its best efforts to file and have declared
effective (if an amendment) as soon as practicable an amendment or supplement to
the Shelf  Registration  Statement and shall extend the period during which such
Shelf Registration Statement shall be maintained effective by the number of days
in the period from and  including the date of the giving of notice of such event
to and  including  the date when the Company  gives notice that the amendment or
supplement has been filed and declared effective (if an amendment).

                  (g) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such Registration Statement and a CUSIP number
for all such Registrable  Securities,  in each case not later than the effective
date of such registration.

                  (h)  Furnish,  at the request of any Holder,  on the date that
such  Registrable  Securities  are  delivered  for  sale  in  connection  with a


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<PAGE>

registration pursuant to this Agreement, (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,  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.

         6.  Information   Furnished  by  Holder.  Each  Holder  of  Registrable
Securities to be included in any Registration  shall furnish to the Company such
information  regarding  such Holder as the Company  may  reasonably  request for
inclusion in such Registration Statement.

         7. Indemnification.

                  7.1  Company's  Indemnification  of  Holders.  To  the  extent
permitted  by law, the Company will  indemnify  each Holder and Zesiger  Capital
Group LLC ("ZCG") and their respective officers,  directors,  trustees, members,
employees,  partners, legal counsel for the Holders, and each person controlling
such Holder, with respect to which Registration, qualification, or compliance of
Registrable  Securities has been effected  pursuant to this Agreement,  and each
underwriter,  if any, and each person who controls any  underwriter  against all
claims,   losses,   damages,   liabilities,   or  actions  in  respect   thereof
(collectively,  "Damages")  to the extent such Damages arise out of or are based
upon any untrue  statement  (or alleged  untrue  statement)  of a material  fact
contained  in  any   prospectus  or  other   document   (including  any  related
Registration  Statement or amendment or supplement thereto) incident to any such
Registration,  qualification,  or  compliance,  or are based on any 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 any 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 applicable to the Company in connection  with any such
Registration,  qualification, or compliance; and the Company will reimburse each
such Holder,  each such  underwriter,  ZCG and each person who controls any such
Holder or  underwriter,  and their  respective  officers,  directors,  trustees,
members,  partners,  employees  and  legal  counsel  for any legal and any other
expenses  reasonably  incurred in connection with investigating or defending any
such claim, loss, damage,  liability,  or action;  provided,  however,  that the
indemnity  contained  in this  Section  7.1 shall not apply to  amounts  paid in
settlement of any such Damages if settlement is effected  without the consent of
the Company (which consent shall not  unreasonably  be withheld);  and provided,
further, that the Company will not be liable in any such case to the extent that
any such Damages arise out of or are based upon any untrue statement or omission
based  upon  written  information  furnished  to the  Company  by  such  Holder,


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underwriter,  or controlling person and stated to be for use in the Registration
Statement in connection with the offering of securities of the Company.

                  7.2  Holder's   Indemnification  of  Company.  To  the  extent
permitted  by law,  each Holder will,  if  Registrable  Securities  held by such
Holder  are  included  in  the   securities  as  to  which  such   Registration,
qualification  or,  compliance  is being  effected  pursuant to this  Agreement,
indemnify the Company,  each of its  directors and officers,  each legal counsel
and  independent  accountant of the Company,  each  underwriter,  if any, of the
Company's securities covered by such a Registration  Statement,  each person who
controls the Company or such  underwriter  within the meaning of the  Securities
Act, and each other such Holder, ZCG and their respective  officers,  directors,
trustees,  members,  employees and partners,  and each person  controlling  such
other  Holder,  against  all  Damages  arising  out of or based  upon any untrue
statement (or alleged untrue statement) of a material fact contained in any such
Registration Statement or amendment or supplement thereto, prospectus,  offering
circular,  or other  document,  or any 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 any  violation  by such  Holder 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   applicable  to  such  Holder  in  connection   with  any  such
Registration, qualification, or compliance, and will reimburse the Company, such
Holders,  ZCG,  such  directors,  officers,  trustees,  members,  employees  and
partners, persons, law and accounting firms, underwriters or control persons for
any  legal  and any  other  expenses  reasonably  incurred  in  connection  with
investigating or defending any such claim, loss, damage,  liability,  or action,
in each case to the extent,  but only to the extent,  that such untrue statement
(or alleged untrue  statement) or omission (or alleged omission) is made in such
Registration  Statement,  prospectus,  offering  circular,  or other document in
reliance  upon and in  conformity  with  written  information  furnished  to the
Company by such Holder and stated to be specifically  for use in connection with
the offering of securities of the Company, provided, however, that the indemnity
contained in this Section 7.2 shall not apply to amounts paid in  settlement  of
any such Damages if  settlement  is effected  without the consent of such Holder
(which consent shall not be unreasonably  withheld) and provided,  further, that
each  Holder's  liability  under this Section 7.2 shall not exceed such Holder's
gross  proceeds  from the offering of securities  made in  connection  with such
Registration.

                  7.3  Indemnification  Procedure.  Promptly after receipt by an
indemnified  party  under this  Section 7 of notice of the  commencement  of any
action, such indemnified party will, if a claim in respect thereof is to be made
against an  indemnifying  party under this  Section 7,  notify the  indemnifying
party in  writing of the  commencement  thereof  and  generally  summarize  such
action.  The  indemnifying  party shall have the right to  participate in and to
assume the defense of such claim; provided, however, that the indemnifying party
shall be  entitled  to select  counsel  for the  defense  of such claim with the


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approval of any parties entitled to indemnification, which approval shall not be
unreasonably  withheld;   provided  further,   however,  that  if  either  party
reasonably  determines that there may be a conflict  between the position of the
Company and the  indemnified  party in  conducting  the defense of such  action,
suit,  or proceeding  by reason of  recognized  claims for indemnity  under this
Section 7, then  counsel for such party shall be entitled to conduct the defense
to the extent  reasonably  determined by such counsel to be necessary to protect
the  interest of such party and the fees and  expenses of counsel for such party
shall be paid by the  Company.  The  failure  to  notify an  indemnifying  party
promptly of the commencement of any such action, if and to the extent materially
prejudicial  to the ability of the  indemnifying  party to defend  such  action,
shall  relieve such  indemnifying  party,  to the extent so  prejudiced,  of any
liability to the indemnified  party under this Section 7, but the omission so to
notify the indemnifying  party will not relieve such party of any liability that
such party may have to any  indemnified  party  otherwise  other than under this
Section 7.

                  7.4 Contribution.  If the indemnification provided for in this
Section 7 is held by a court of competent  jurisdiction  to be unavailable to an
indemnified  party with  respect to any Damages  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  Damages 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 resulted
in such  Damages as well as any other  relevant  equitable  considerations.  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; provided, however,
that in no event shall any  contribution  by a Holder exceed the gross  proceeds
from the  offering  of  securities  made in  connection  with such  Registration
received by such Holder.

                  7.5 Conflicts.  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.

                  7.6 Survival of  Obligations.  The  obligations of the Company
and Holders under this Section 7 shall survive the completion of any offering of
Registrable  Securities  in a  registration  statement  under this  Agreement or
otherwise.



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         8.  Transfer  of  Rights.   The  Registration   rights  and  rights  to
information  under this  Agreement  may be  assigned  in whole or in part by any
Holder to a  transferee  or  assignee  of any  Debentures  or Series B Preferred
Stock.

         9. Reports Under the Exchange  Act. 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  Commission  that may at any time permit a
Holder to sell  securities of the Company to the public without  Registration or
pursuant to a registration on Form S-3, the Company agrees to:

                  (a) file with the  Commission  in a timely  manner all reports
and other  documents  required of the Company under the  Securities  Act and the
Exchange Act; and

                  (b)  furnish to any  Holder,  so long as the  Holder  owns any
Registrable  Securities,  promptly  upon request (i) a written  statement by the
Company that it has complied  with the reporting  requirements  of Rule 144, the
Securities Act and the Exchange Act, or that it qualifies as a registrant  whose
securities  may be resold  pursuant to Form S-3,  (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  Commission
which  permits  the  selling  of any such  securities  without  Registration  or
pursuant to such form.

         10. Miscellaneous.

                  10.1 Governing  Law. This Agreement  shall be governed by, and
construed in  accordance  with,  the laws of the State of  Washington  excluding
those laws that direct the application of the laws of another jurisdiction.

                  10.2   Counterparts.   This   Agreement  may  be  executed  in
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

                  10.3 Headings.  The headings of the Sections of this Agreement
are for convenience and shall not by themselves  determine the interpretation of
this Agreement.

                  10.4 Notices. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given upon personal delivery
or delivery by courier,  or on the first business day after transmission if sent
by confirmed  facsimile  transmission or electronic mail  transmission,  or five
days after deposit in the United  States mail, by registered or certified  mail,
postage  prepaid,  addressed  (i) if to the  Company,  as set  forth  below  the
Company's  name  on the  signature  page of this  Agreement,  and  (ii) if to an
Investor,  at  such  Investor's  address  as set  forth  on  Exhibit  A to  this


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Agreement,  or at  such  other  address  as the  Company  or such  Investor  may
designate by 10 days' advance written notice to the other parties hereto.

         10.5  Amendment or Waiver.  This  Agreement may be amended or modified,
and the  obligations  of the Company under the  Agreement may be waived  (either
generally   or  in  a   particular   instance   and  either   retroactively   or
prospectively), only upon the written consent of the Company and holders of more
than  a  two-thirds  majority  of  the  Common  Stock  constituting  Registrable
Securities represented by all outstanding  Debentures,  Series B Preferred Stock
and Common  Stock  issued or issuable on  conversion  of such Series B Preferred
Stock,  all on an "as converted"  basis.  Any amendment,  modification or waiver
pursuant to, and in accordance  with,  this Section 10.5 shall be binding on the
Company, all holders of Registrable  Securities at the time outstanding and each
future  holder  of any such  securities.  The  foregoing  notwithstanding,  this
Agreement and any term thereof may be amended, waived,  discharged or terminated
by a written instrument signed by the party against whom enforcement of any such
amendment, waiver, discharge or termination is sought.

         10.6  Severability.  In case any provision of this  Agreement  shall be
invalid, illegal or unenforceable,  the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.

         10.7  Entire   Agreement;   Successors  and  Assigns.   This  Agreement
constitutes the entire  contract among the Company and the Investor  relative to
the subject matter hereof.  Any previous  agreement  between the Company and any
Investor  concerning  Registration  Rights is superseded by this Agreement.  The
terms and  conditions  of this  Agreement  shall  inure to the benefit of and be
binding upon the respective executors,  administrators,  heirs,  successor,  and
permitted assigns of the parties.


                                       11
<PAGE>



                  {SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT}
         IN WITNESS  WHEREOF,  the parties  hereto have  executed  this Investor
Rights Agreement as of the day and year first above written.

Company:                                    PHOTOWORKS, INC., a Washington
                                            corporation

                                            By:      /s/ Howard Lee
                                                     ---------------------------
                                                     Howard Lee, Chief Executive
                                                     Officer and President


                                            Address:   1260 16th Avenue West
                                                       Seattle, Washington 98119
                                                       Fax No. (206) 284-5357


Investor:                                   THE PURCHASERS, LISTED ON
                                            EXHIBIT A

                                            BY:  ZESIGER CAPITAL GROUP LLC,
                                            AGENT AND ATTORNEY IN FACT

                                            By:      /s/ Albert Zesiger
                                                     ---------------------------
                                                     Albert Zesiger
                                            Title:
                                                     --------------------------




                 [SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT]
<PAGE>

                                    Exhibit A

                             SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
<S>      <C>                                        <C>                                                      <C>
                Name of Purchaser*                             Nominee for Purchaser              Principal Amount of Debenture
                ------------------                             ---------------------              -----------------------------
                                                                                                             Purchased
1.       NFIB Serp Assets                           Huland & Co                                              $  39,750

2.       Public Employee Retirement                 Mellon Bank NA custodian for                             $ 639,750
         System of Idaho                            PERSI-Zesiger Capital

3.       City of Stamford Firemen's Pension Fund    City of Stamford Firemen's Pension Fund                  $ 189,750

4.       The Jenifer Altman Foundation              Batrus & Co.                                             $  99,750

5.       Asphalt Green, Inc.                        Cudd & Co.                                               $  30,000

6.       Dean Witter Foundation                     Tice & Co.                                               $ 129,750

7.       Lazar Foundation                           Hare & Co.                                               $  45,000

8.       HBL Charitable Unitrust                    HBL Charitable Unitrust                                  $  45,000

9.       Helen Hunt                                 Cudd & Co.                                               $  65,250

10.      Peter Looram                               Peter Looram                                             $  35,250

11.      Mary C. Anderson                           Mary C. Anderson                                         $  65,250

12.      Murray Capital, LLC                        Murray Capital, LLC                                      $  50,250

13.      Meehan Foundation                          Meehan Foundation                                        $  35,250

14.      Domenic J. Mizio                           Domenic J. Mizio                                         $  90,000

15.      Morgan Trust Co. of the                    Morgan Trust Co. of the                                  $ 165,000
         Bahamas Ltd. as Trustee U/A/D              Bahamas Ltd. as Trustee U/A/D
         11/30/93                                   11/30/93


<PAGE>

16.      Susan Uris Halpern                         Hare & Co.                                               $  99,750

17.      Theeuwes Family Trust, Felix               Theeuwes Family Trust, Felix                             $  50,250
         Theeuwes Trustee                           Theeuwes Trustee

18.      Wells Family LLC                           Atwell & Co.                                             $ 300,000

19.      Albert L. Zesiger                          Albert L. Zesiger                                        $ 150,000

20.      Barrie Ramsay Zesiger                      Barrie Ramsay Zesiger                                    $  99,750

21.      Wolfson Investment Partners LP             Wolfson Investment Partners LP                           $  75,000

                      Total                                                                                 $2,499,750
                      -----                                                                                 ----------

</TABLE>



*Address for each Purchaser:
c/o Zesiger Capital Group LLC
320 Park Avenue, 30th Floor
New York, NY 10022
Attention: Albert L. Zesiger


<PAGE>









    ========================================================================

                                PHOTOWORKS, INC.

                            INVESTOR RIGHTS AGREEMENT
    ========================================================================



                                 April 25, 2001