EXHBIT 10.1

                 EMPLOYMENT AND SEVERANCE AGREEMENT AND RELEASE

      This AGREEMENT is entered into by and between PhotoWorks, Inc. (the
"Company"), and Gary Christophersen ("Employee"), to be effective as provided
herein.

WHEREAS, the Company employs Employee as its President and Chief Executive
Officer, and Employee is on the Company's Board of Directors and serves as its
Chairman; and

WHEREAS, the Company has informed the Employee it is seeking a successor to
Employee to serve as President and Chief Executive Officer; and

WHEREAS, the Company desires that Employee remain in the position of President
and Chief Executive Officer until a successor is located and that Employee
assist in the transition of his duties to the successor, and Employee is willing
to do so; and

WHEREAS, the Company and Employee desire to terminate the employment
relationship on amicable grounds and Employee desires to obtain the severance
benefits provided for herein, to which Employee is not otherwise entitled; the
parties therefore agree as follows:

1. Title. Employee shall retain the title of President and Chief Executive
Officer until a successor is appointed ----- by the Board of Directors of the
Company.

2. Duties. While serving as Chief Executive Officer, Employee shall report
directly to the Board of Directors of the Company and perform those duties that
are customary for the position of Chief Executive Officer of a public company.
Thereafter, Employee shall cooperate and assist in a transition of his present
duties to the successor, assist the Company in achieving its strategic goals and
business plan, and perform such other and further duties as may be reasonably
requested of Employee by the Board of Directors or its designee; provided that
such other and further duties shall be of a nature and level of responsibility
appropriate for an executive level employee. Employee shall at all times during
his employment comply with all applicable laws and all policies of the Company,
and exercise his best efforts and act in furtherance of the Company's interests.

3. Term and Termination. Employee agrees to continue serving in the capacity of
President and Chief Executive Officer until the earlier of the appointment of a
successor to such position, or September 30, 2003. If a successor is appointed
prior to September 30, 2003, Employee shall remain in the employ of the Company
and perform the duties specified in paragraph 2 above until September 30, 2003.
Employee agrees that he shall resign his employment with the Company effective
September 30, 2003 (the "Resignation Date"). At the election of the Board of
Directors, Employee may be relieved of his duty to continue providing services
through the Resignation Date, but in such event, Employee shall remain an
employee of the Company and be entitled to compensation and benefits as
specified in paragraph 5 through the Resignation Date. The Company shall have
the right to terminate this Agreement in the event of a material breach by
Employees of his duties hereunder, provided Employee shall be given notice of
the breach and a reasonable opportunity to cure if the breach is curable.


Severance Agreement and Release - 1
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4. Time Commitment of Employee. Through September 30, 2003, Employee shall
continue to commit a similar number of hours to his duties as he has over the
past year.

5. Compensation During Employment. Employee shall be paid a salary of $162,000
per year, pro rata and less lawfully required withholdings, from the Effective
Date of this Agreement through the Resignation Date, provided that Employee
performs his duties hereunder for such period. During said period, Employee will
continue to be eligible for all benefits and perquisites made available by the
Company to its executive level employees. All entitlement to ongoing
compensation, benefits, and other remuneration shall cease on the Resignation
Date unless otherwise expressly specified herein. On the first regular payroll
date after the Resignation Date, Employee will be paid all accrued but unpaid
compensation earned through the Resignation Date, and will be paid for
Employee's accrued but unused vacation time and personal time, which the parties
agree are equal to 332.47 vacation hours and 16.05 personal hours as of May 31,
2003.

6. Severance Benefits. In consideration of the representations, promises and
covenants of Employee herein, each of which are acknowledged by Employee to be a
material inducement to the Company to enter into this Agreement and to provide
the consideration to which Employee is not otherwise entitled, Employee shall be
provided the following severance benefits, subject to (i) Employee performing
his duties hereunder through the Resignation Date or such earlier Date as the
Board of Directors shall notify Employee in writing that he is relieved from
providing further services hereunder; and (ii) Employee timely executing,
delivering and not revoking a release of claims in the form attached as Exhibit
A hereto (the "Release").

      A. Employee shall be paid severance in the total amount of one hundred
      thousand dollars ($100,000.00), less lawfully required withholdings. Fifty
      thousand dollars ($50,000) of this amount will be paid on the first
      regular pay date in October 2003, and the remaining fifty thousand
      ($50,000) of this amount will be paid on the first regular pay date in
      January 2004. Until such time as the Company makes the second payment of
      fifty thousand dollars, Employee will continue to receive health benefits
      under the Company's health plan. The Company retain the option to pay the
      second payment at an earlier date.

      B. Employee shall be eligible for a bonus calculated in accordance with
      bonus plan for executive employees as adopted on May 30, 2003 by the Board
      of Directors for the fiscal year ending September 30, 2003, Employee's
      bonus under the to be developed bonus plan shall be calculated as if he
      remained employed in the capacity of President and Chief Executive Officer
      through September 30, 2003. The bonus, less lawfully required
      withholdings, shall be paid to Employee at the same time bonuses under the
      plan are paid to other executive level employees, but no later than
      November 30, 2003.

      C. Contingent on Employee remaining in the employ of the Company,
      Employee's previously granted but as yet unvested stock options shall
      continue to vest through the Resignation Date. Thereafter, Employee's
      stock options shall continue to vest during the period Employee remains a
      Director of the Company to the extent provided by the plan(s) under which
      such stock options were granted. Employee's right to exercise vested stock
      options after his employment ends and/or after he ceases to be a Director
      of the Company shall be governed exclusively by the applicable stock
      option plan(s) and any stock option agreement(s) and stock option
      grant(s).


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7. Board Membership. Employee agrees to continue to serve as a Director of the
Company. After the Resignation Date, Employee shall be compensated for his
services as a Director on the same basis as other outside Directors of the Board
performing similar duties.

8. Release of Claims. Employee expressly waives and releases the Company, its
officers, agents, employees, directors, successors, assigns, parents,
subsidiaries and affiliated entities (the "Released Parties") from and against
any and all claims, causes of action, liability and damages employee has or may
have against the Released Parties, asserted or unasserted, known or unknown,
arising from or in any way relating to employee's employment or the termination
of such employment through the Effective Date of this release, including without
limitation, common law claims for breach of contract and/or torts, and claims
under any law, statute, ordinance or regulation of the United States and any
state, county, municipality or other governmental entity, specifically including
Title VII of the Civil Rights Act of 1964 as amended, the Age Discrimination in
Employment Act, the Fair Labor Standards Act, the Equal Pay Act, the Family and
Medical Leave Act, the Americans with Disabilities Act, the Employment
Retirement Income Security Act, the Health Insurance Portability Protection Act,
the Washington Law Against Discrimination, any and all other laws regarding
civil rights, and any other legal limitation on the employment relationship.
Employee agrees that he is entitled to no further compensation or consideration
from the Company after the Resignation Date except as expressly provided in this
Agreement. The parties agree that nothing herein is intended to affect
Employee's rights with respect to his vested balance in the PhotoWorks 401(k)
Plan.

9. Confidential Information, Non-Competition.

      A. Employee agrees to not use or disclose any Confidential Information of
      the Company. Confidential Information is information not known to the
      general public and includes, without limitation, trade secrets, plans,
      programs, source and object codes, specifications, drawings, diagrams,
      schematics, formulae, product designs and concepts, reports, studies,
      technical know-how, methods, customer and supplier lists, customer
      requirements, price lists and policies, budgets, projections, bids, costs,
      financial reports, financing materials, training programs and manuals, and
      sales and marketing programs, materials, plans, and strategies.

      B. Employee agrees that during his employment by the Company and for six
      months thereafter, and, if longer, while Employee serves as a Director of
      the Company, Employee will not in any capacity (including without
      limitation, as an employee, officer, agent, director, consultant, owner,
      shareholder, partner, member or joint venture) directly or indirectly,
      whether or not for compensation, engage in or assist others to engage in
      any business that is, or is preparing to be, in competition with the
      Company's business of film processing and any and all other businesses in
      which the Company is engaged or demonstrably prepared to be engaged at the
      conclusion of the period in which Employee provides services to the
      Company. Employee agrees that this prohibition extends to any country in
      which the Company conducts business.


Severance Agreement and Release - 3
<PAGE>

10. Nondisparagement. Employee agrees to refrain from making any type of
negative or disparaging comments about, or in any way casting in an unfavorable
light, the business operations or conduct of the Company and its past or present
directors, officers, employees, representatives, and agents. The Company agrees
to direct its officers and executive employees refrain from making or
authorizing any type of negative or disparaging comments about, or in any way
casting in an unfavorable light, the conduct or performance of Employee. The
Company shall timely issue a public announcement stating that Employee resigned
from the Company.

11. Confidentiality. Each party shall maintain in confidence and not disclose
the existence of or specific terms --------------- included in this Agreement,
except to the extent required to obtain tax, accounting or legal advice, to the
extent disclosure is compelled by legal process, or to the extent disclosure is
compelled by applicable law (e.g., complying with securities law disclosure
requirements).

12. Binding Effect. Employee's rights, duties, and release of claims hereunder
inure to and will bind employee's heirs, successors, and assigns, and will
benefit the Company and its successors and assigns. No waiver of or forbearance
to enforce any right or provision hereof shall be binding unless in writing and
signed by the party to be bound, and no such waiver or forbearance in any
instance shall apply to any other instance or to any other right or provision.

13. Governing Law; Venue. This Agreement will be governed by the laws of the
State of Washington without regard to its conflicts of laws rules to the
contrary. The parties hereby consent to the exclusive jurisdiction and venue of
the state and federal courts sitting in King County, Washington for all matters
and actions arising under or relating to this Agreement, employee's employment,
and the termination thereof. The prevailing party in any such action shall be
entitled to reasonable attorney's fees and costs incurred in connection with
such litigation.

14. Severability. No term hereof shall be construed to limit or supercede any
other right or remedy of the Company under applicable law with respect to the
protection of trade secrets or otherwise. If any provision of this Agreement is
held to be invalid or unenforceable to any extent in any context, it shall
nevertheless be enforced to the fullest extent allowed by law in that and other
contexts, and the validity and force of the remainder of the Agreement shall not
be affected.

15. Final Agreement. This Agreement represents the final agreement of the
parties as to all matters addressed herein and supercedes all previous
agreements, negotiations, and discussions by the parties regarding the subject
matters addressed herein.

16. Knowing and Voluntary Waiver of Rights. Employee is hereby advised that this
Agreement affects his legal rights. Employee acknowledges he has had the
opportunity to consult with legal counsel of his choosing prior to executing
this Agreement, and has either done so or elected to proceed without counsel.
Employee is hereby advised that he is waiving legal rights under the Age
Discrimination in Employment Act by executing this Agreement, which Act requires
that Employee be advised to consult an attorney prior to executing this
Agreement. Employee has 21 days in which to consider this Agreement, but may
sign and return it sooner if Employee so elects. This Agreement can be revoked
by Employee for seven days after it is executed by employee, by written notice
of revocation delivered to the Company's offices. The severance benefits
provided for herein are offered individually to employee and are not part of any
group program or plan.


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<PAGE>

17. Effective Date. This Agreement shall be effective seven days after the date
executed by Employee and delivered to the Company (the "Effective Date").

PhotoWorks, Inc.


By: /s/Matt Kursh
    -------------------
    Matt Kursh
Its:   Board Member
Dated: 6/13/2003__

Employee:


/s/ Gary Christophersen
-----------------------
Gary Christophersen
Dated: 6/13/2003__


Severance Agreement and Release - 5
<PAGE>

EXHIBIT A: FINAL RELEASE OF CLAIMS

Employee expressly waives, and releases PhotoWorks, Inc. ("Company"), its
officers, agents, employees, directors, successors, assigns, parents,
subsidiaries and affiliated entities (the "Released Parties") from and against,
any and all claims, causes of action, liability and damages Employee has or may
have against the Released Parties, asserted or unasserted, known or unknown,
arising from or in any way relating to Employee's employment or the termination
of such employment through the Effective Date of this release, including without
limitation, common law claims for breach of contract and/or torts, and claims
under any law, statute, ordinance or regulation of the United States and any
state, county, municipality or other governmental entity, specifically including
Title VII of the Civil Rights Act of 1964 as amended, the Age Discrimination in
Employment Act, the Fair Labor Standards Act, the Equal Pay Act, the Family and
Medical Leave Act, the Americans with Disabilities Act, the Employment
Retirement Income Security Act, the Health Insurance Portability Protection Act,
the Washington Law Against Discrimination, any and all other laws regarding
civil rights, and any other legal limitation on the employment relationship.
Employee agrees that he is entitled to no further compensation or consideration
from the Company after the date of this Final Release except as expressly
provided in the Employment and Severance Agreement and Release entered into by
Employee and the Company ("Agreement").

Employee represents that he has not filed any complaints, charges, or lawsuits
against the Released Parties with any governmental agency or court, and agrees
that he will not file any complaint, charge, or lawsuit in the future asserting
a claim he is releasing under this Final Release; provided that this covenant
shall not preclude Employee from exercising any non-waiveable legal right he may
have to file a charge with the Equal Employment Opportunity Commission, but
Employee acknowledges and agrees that he has waived any and all rights to
receive monetary compensation in connection with the resolution or ultimate
disposition of such charge or any related legal proceeding.

Employee acknowledges that he is executing this Final Release in exchange for
and as a condition of receiving the consideration set forth in the Agreement.

Employee is hereby advised that he is waiving legal rights under the Age
Discrimination in Employment Act by executing this Agreement, which Act requires
that Employee be advised to consult an attorney prior to executing this
Agreement. Employee has 21 days in which to consider this Agreement, but may
sign and return it sooner if Employee so elects. This Agreement can be revoked
by Employee for seven days after it is executed by Employee, by written notice
of revocation delivered to the Company's offices. The severance benefits
provided for herein are offered individually to Employee and are not part of any
group program or plan.

This Agreement shall be effective seven days after the date executed by Employee
and delivered to the Company.

Employee:                                    Dated:
          ----------------------------              ------------------------
          Gary Christopherson


Exhibit A - Release