Document:

Exhibit 10.25
                 EMPLOYMENT AND SEPARATION AGREEMENT AND RELEASE

      This AGREEMENT is entered into by and between PhotoWorks, Inc. (the
"Company"), and Loran Cashmore Bond ("Executive"), to be effective as provided
herein.

WHEREAS, the Company employs Executive as its Vice President-Administration,
Chief Accounting Officer, and Secretary/Treasurer; and

WHEREAS, the Company has informed the Executive it will be hiring a new
President and Chief Executive Officer; and

WHEREAS, the Company desires to provide Executive with separation benefits
should the new President and Chief Executive Officer decide to make significant
changes in the management team in the first 12 months after beginning
employment;

NOW, THEREFORE, for good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties agree as follows:

1. Term of Agreement. This Agreement shall be in force and effect only from its
effective date until the expiration of twelve months after the next President
and Chief Executive Officer hired by the Company begins work, unless
automatically terminated by the death or disability of the Executive. For
purposes of this agreement "effective date" shall be defined as the hire date of
the next President and Chief Executive Officer. "Disability" shall mean the
Executive's inability (with such accommodation as may be required by law and
which places no undue burden on the Company), as determined by an independent
physician selected by the Company and reasonably acceptable to the Executive, to
perform her normal duties for a period or periods aggregating 120 calendar days
in any 12-month period as a result of physical or mental illness, loss of legal
capacity or any other cause beyond the Executive's control, unless the Executive
is granted a leave of absence by the Board.

2. Severance Benefits. If Executive's employment with Company should be
involuntarily terminated without cause, or should the Executive resign for good
reason within twelve months of a new President and Chief Executive Officer
beginning work at the Company, and at the time of the notice of termination or
resignation, Company shall have a cash balance of at least two million dollars
($2,000,000.00), Company will pay to Executive the following severance benefits,
on the condition that Executive signs a full Release of Claims in the form
attached hereto as Exhibit A. For purposes of this agreement "cash balance"
shall be defined as the book balance of the Company as reported on the daily
cash report on the date of notification of termination or resignation.

      A. Executive shall be paid severance in the amount of fifty-eight thousand
      five hundred dollars ($58,500.00), less lawfully required withholdings.
      Twenty nine thousand two hundred fifty dollars ($29,250.00) of this amount
      will be paid on the first regular pay date after termination date, and the
      remaining twenty nine thousand two hundred fifty dollars ($29,250.00) of
      this amount will be paid no later than the first regular pay date that
      occurs no less than three months following termination date.

Separation Agreement and Release - 1
<PAGE>

      B. Executive shall be paid any accrued vacation and earned personal time
      on the next regular payroll date after her termination.

      C. Executive's health benefits for herself and her dependents shall be
      continued for three calendar months beyond the month in which the
      termination takes effect, on the same terms as the Company provides them
      immediately prior to the termination, or until the Company has made the
      second severance payment, whichever is later, provided, however, that
      health benefits continuation shall cease upon Executive becoming employed
      in a position that provides reasonably comparable health benefits.

3. Definitions.

      A. For purposes of this Agreement, "termination without cause" means
      involuntary termination for reasons other than the following:

            (i) A clear refusal to carry out any material lawful duties of the
      Executive or any reasonable directions of the Board or Chief Executive
      Officer, provided the Executive has been given reasonable notice and
      opportunity to correct any such failure;

            (ii) Violation by the Executive of a state or federal criminal law
      involving the commission of a crime against the Company or any of its
      subsidiaries;

            (iii) Deception, fraud, misrepresentation or dishonesty by the
      Executive, or any incident materially compromising the Executive's
      reputation or ability to represent the Company with investors, customers
      or the public; or

            (iv) Unauthorized use or disclosure of confidential information or
      trade secrets.

      B. For purposes of this Agreement, "good reason" means:

            (i) The assignment to the Executive of any duties materially
      inconsistent and adverse with respect to the Executive's title, position,
      or authority, or removal of a substantial majority of the duties of the
      Executive without replacing them with other duties consistent with a
      position at the executive level in the Company; provided, however, that
      the Company retains the right to make reasonable reorganizations of duties
      within the executive levels of the Company that it determines are in the
      best interests of the Company.

            (ii) Any other material violation of any provision of this Agreement
      by the Company.

4. Confidential Information, Non-Competition.

Separation Agreement and Release - 2
<PAGE>

      A. Executive agrees that, during and after her employment with the
      Company, she will 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. Executive agrees that during her employment by the Company and for six
      months thereafter, Executive 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 Executive provides services to the
      Company. Executive agrees that this prohibition extends to any country in
      which the Company conducts business.

5. Nondisparagement. Executive agrees that during her employment and afterward,
she will 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, Executives,
representatives, and agents. The Company agrees to direct its officers and
executives to refrain from making or authorizing any type of negative or
disparaging comments about, or in any way casting in an unfavorable light on,
the conduct or performance of Executive.

6. Confidentiality. Each party shall maintain in confidence and not disclose the
existence of or specific terms included in this Agreement, or any payment made
pursuant to the 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).

7. Cooperation. Executive agrees that for six months following termination of
her employment pursuant to this Agreement, she will reasonably cooperate with
management in case of litigation and as needed to effect a smooth transition of
duties to any successor to Executive.

8. Binding Effect. Executive's rights, duties, and release of claims hereunder
inure to and will bind Executive'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.

9. 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

Separation Agreement and Release - 3
<PAGE>

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, Executive'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.

10. 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.

11. 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
matter addressed herein.

PhotoWorks, Inc.

By: /s/ Douglas Rowan
        Douglas Rowan
  Its:   Board Member
  Dated: September 23, 2003

Executive:

/s/ Loran Cashmore Bond
Loran Cashmore Bond
Dated: August 14, 2003

Separation Agreement and Release - 4
<PAGE>

EXHIBIT A: RELEASE OF CLAIMS

Executive 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 Executive has or may
have against the Released Parties, asserted or unasserted, known or unknown,
arising from or in any way relating to Executive'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.
Executive agrees that she 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 Executive and the Company ("Agreement").

Executive represents that she has not filed any complaints, charges, or lawsuits
against the Released Parties with any governmental agency or court, and agrees
that she will not file any complaint, charge, or lawsuit in the future asserting
a claim she is releasing under this Final Release; provided that this covenant
shall not preclude Executive from exercising any non-waiveable legal right she
may have to file a charge with the Equal Employment Opportunity Commission, but
Executive acknowledges and agrees that she 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.

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

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

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

Executive: _______________________________                Dated:________________
           Loran Cashmore Bond

Exhibit A - ReleaseExhibit 10.26

October 2, 2003

Dear Philippe:

On behalf of the Board of Directors of PhotoWorks, Inc. (herein referred to as
PhotoWorks and/or "the Company"), I am delighted to present this offer for you
to join the Company and lead our executive team. The specifics of our offer are
as follows:

POSITION & REPORTING RELATIONSHIP

Your position will be President & Chief Executive Officer. You will report
directly to the Board of Directors.

COMPENSATION

Your compensation package will consist of the following elements:

Base Salary

Your cash compensation includes an initial monthly base salary of $18,750, which
computes to $225,000 on an annualized basis. Your base salary will be paid
bi-weekly in accordance with the Company's normal payroll schedule, and will be
reviewed on an annual basis no later than the anniversary date of your initial
employment.

Salary Escalation

Your monthly base salary will be automatically increased to $25,000, equivalent
to $300,000 per year, and your bonus eligibility will be set at 50%, when the
following two conditions are met for 3 consecutive months: (1) monthly revenue
from digital services of at least $650,000 (specifically prints from digital
files that are uploaded from a computer or kiosk; mailed-in on media, i.e.,
digifilm; or ordered from the PhotoWorks archive), including associated shipping
charges; (2) the Company's cash balance at the end of the month is at least
$3,000,000. The salary increase will be in effect after these conditions are
met; it is not retroactive. Your bonus will be pro-rated to adjust for a
mid-year salary escalation, assuming the escalation occurs. The Board will
review these salary escalation provisions three months after your start date and
will, at its sole discretion but with your approval, make any changes that it
deems necessary to ensure that the milestones are appropriate.

Performance Bonus

You will participate in our performance bonus program which provides financial
incentives based on the Company's results compared to financial targets and
other metrics established by the Compensation Committee and approved by the
Board of Directors, with input from Management. In your capacity as CEO, you
will participate in establishing the metrics in this bonus plan. The current
fiscal year began on September 29, 2003, and we would like to establish the
metrics for this year's bonus program as soon as reasonably possible. You will
be eligible to earn up to 60% of your initial base salary upon achievement of
the metrics established in the bonus plan (or 50% of the adjusted base salary if
the escalation has occurred, with the total bonus amount to be paid to be
computed on a pro-rated basis from the month after the escalation conditions are
satisfied). Bonuses are paid annually, after the annual audit is completed at
the end of the fiscal year. To be eligible, you must be employed on the last day
of the fiscal year.

<PAGE>

Mr. Philippe Sanchez
December 22, 2003
Page 2 of 5

While it is our intention to maintain a performance-based incentive plan in the
future, the plan is subject to changes and amendments as the Board of Directors
may determine.

Total Cash Compensation

Taking together the salary and performance bonus outlined above, your total
annual potential cash compensation will be up to $360,000, subject to increase
based on the salary escalation provisions outlined above.

Stock Sign-on Grant (approved October 28, 2003)

You will receive a Non-Qualified stock option grant for 250,000 shares of
PhotoWorks' Common Stock at an exercise price of $.01 and will expire seven
years from date of grant. The shares granted under this option will vest on the
one-year anniversary from the date of grant. If you terminate your employment
with the Company, or the Company terminates your employment with cause, prior to
the first anniversary of the grant date, you will forfeit your vesting of these
shares.

Equity Participation

PhotoWorks has established an employee stock option plan for the issuance of
stock option grants. A copy of the PhotoWorks, Inc. Stock Incentive Compensation
Plan is enclosed for reference.

We view your participation in the Company's Stock Incentive Option Plan as a
significant component of your compensation, particularly in light of the
Company's current valuation and the great upside potential.

In addition to the stock shares granted as a sign-on bonus, you will receive a
Nonqualified Stock Option grant for 750,000 shares of Common Stock at an
exercise price equal to the fair market value of the shares on the date the
option is granted. These shares will be granted as an employment incentive and
will be granted outside of our option plans. The Company will register the
shares on an S-8 filing with the Securities and Exchange Commission.

The 1,000,000 shares included in the grant and options described above, in
aggregate, represent approximately 6% of the total number of Company shares
currently issued and outstanding. This percentage is based on shares outstanding
(which does not include any unexercised option grants or Series A conversion, or
warrants exercisable by other parties).

Your stock options (as opposed to the sign-on grant) will be subject to a
vesting schedule of four years, in which 25% of shares vest after one year and
the remaining shares vest uniformly over the remaining three years, on a
quarterly basis. The term of the option will be 7 years.

After the second anniversary of your start date, upon Board approval and at your
expense, you may establish a SEC Rule 10b5-1 trading plan.

The Board will review your stock position on the second anniversary of your
start date and may, at its discretion, grant additional options at that time.
<PAGE>

Mr. Philippe Sanchez
December 22, 2003
Page 3 of 5

Vesting of the stock options is subject to your continued employment with
PhotoWorks, Inc. Vesting may accelerate in certain instances such that all stock
options you hold at that time may be 100% vested and exercisable. Section 14.2
of the Plan specifically addresses Dissolution, Liquidation or Change in Control
Transactions. See below for additional provisions related to vesting
acceleration.

Benefits

Your compensation package also includes full participation in all benefits
generally offered to PhotoWorks employees and executives. Current benefits
include medical, dental and vision insurance, a 401(k) plan, tuition
reimbursement, paid vacation (as specified below), holidays and personal days.
The costs to provide insurance benefits to spouse and dependants will be paid
100% by PhotoWorks. More specific information is provided by the enclosed
benefits summary documents. Your benefits will commence on your start date.

During your employment, you will be able to take vacation time in an amount that
is consistent with the best interests of the Company. If, at the Board's sole
discretion, it is determined that the amount of vacation time you have taken is
not consistent with the best interests of the Company, you and the Board will
negotiate a more specific vacation policy. No vacation time will be accrued and
in the event of termination of your employment you will not receive any pay
related to vacation.

Policies and practices, including the compensation and benefits we provide, are
subject to changes and exceptions without prior notice, at the Board of
Directors' discretion.

PhotoWorks will pay for a $500,000 life insurance policy for each of you and
your wife. The payment will be grossed up to cover taxes. We understand that it
may be logical for PhotoWorks to assume the policy previously paid for by your
current employer, and will look forward to further exploring this option.

OTHER TERMS

Start Date

Upon acceptance of this offer, you agree to give timely notice to your present
employer and set a starting date with PhotoWorks of October 20, 2003.

Board Seat

The Board of Directors will appoint you to the Company's Board of Directors. You
will need to stand for election at the Annual Shareholder Meeting (currently
scheduled for February 3, 2004).

Expenses

The Company will reimburse your reasonable legal costs related to your
consideration of employment with PhotoWorks, up to $3,000. The Company will
reimburse your costs from the purchase of the Lyra Report (which shall become
Company property) and other reasonable costs arising from your CEO candidacy,
estimated to be approximately $2,000.
<PAGE>

Mr. Philippe Sanchez
December 22, 2003
Page 4 of 5

Termination Agreement

The employment opportunity we are offering is of indefinite duration and will
continue as long as both you and PhotoWorks consider it of mutual benefit. The
Company is an at-will employer, and neither you nor PhotoWorks are bound to
continue the employment relationship if either chooses, at its will, to end the
relationship at any time for any lawful reason, subject only to the following
provision:

In the event PhotoWorks terminates your employment without cause or
constructively terminates you PhotoWorks will pay you an amount upon your
termination, less lawfully required withholdings, subject to your execution of a
Release of Claims Agreement provided by the Company at that time. The
termination payment amount will be paid in 12 equal monthly installments and the
total amount will vary based on the Company's cash balance at the time of your
termination, as follows: less than $2,500,000 - payments totaling $125,000;
$2,500,000 - $4,000,000 - payments totaling $175,000; $4,000,001 or more -
payments totaling $250,000. The amount of these payments will be reduced by one
dollar for each dollar in income that you earn (including any deferred signing
bonus or the like) from other activities during the 12 month payment period.
Your health benefits will continue during the 12 months after termination by
PhotoWorks, so long as you have not accepted full-time employment with another
firm that typically provides health benefits to its employees.

The stock options described above will have vesting acceleration terms that will
provide for 100% vesting in the case of a change of control. For the purposes of
this agreement, "change of control" means any transaction in which PhotoWorks is
acquired, merged, consolidated, or liquidated such that there is a change in
control of the Company.

For purposes of this Agreement, "termination without cause" means involuntary
termination for reasons other than the following:

      (i)   A clear refusal to carry out any material lawful duties of the
            Executive or any reasonable directions of the Board, provided the
            Executive has been given reasonable notice and opportunity to
            correct any such failure;

      (ii)  Violation by the Executive of a state or federal criminal law
            involving the commission of a crime against the Company or any of
            its subsidiaries;

      (iii) Deception, fraud, misrepresentation or dishonesty by the Executive,
            or any incident or conduct materially compromising the Executive's
            reputation or ability to represent the Company with investors,
            customers or the public; or

      (iv)  Unauthorized use or disclosure of confidential information or trade
            secrets.

      (v)   Executive's inability to perform the duties of his job due to
            physical or mental disability for a period in excess of 60 days
            consecutively or 90 days cumulatively during any twelve month
            period.

For purposes of this Agreement, "constructive termination" means forced
relocation of more than 50 miles; material reduction in authority, title,
responsibilities, or reporting relationship; or non-assumption of employment
contract by a successor entity such that these severance provisions are no
longer in force.

<PAGE>

Mr. Philippe Sanchez
December 22, 2003
Page 5 of 5

Contingencies

This offer is contingent upon completion a background check and completion of
any additional reference checks we deem necessary to complete our due diligence,
as well as our satisfaction with the results thereof.

It is also a condition of this offer that, upon commencing employment, you sign
an Employee Confidentiality, Inventions and Noncompetition Agreement which
contains additional requirements for the protection of PhotoWorks' secret,
confidential and proprietary information. Enclosed is our standard form of this
agreement. Prior to your start date, you will sign a modified form of this
agreement that relaxes the non-competition provisions in cases where you are
terminated without cause, are constructively terminated, or are terminated
subsequent to a change of control.

Other Agreements

You have represented to the Company that you have no arrangements or
restrictions that would be violated by you accepting employment with the Company
under the terms of this letter.

Compliance with Immigration Law

On your first day with PhotoWorks, please remember to bring acceptable
identification (example: Social Security card, current drivers license,
passport) as proof that you are eligible to work in the United States. This is a
standard, Federally-mandated procedure for all new employees.

Philippe, the Board of Directors, the executive team at PhotoWorks and I are
delighted with the prospect of having you join the Company and look forward to
your acceptance of this offer. To formalize your acceptance, please sign where
indicated below and return a signed copy in the envelope provided.

If I can be of further assistance, please let me know right away.

Very truly yours,

/s/ Matt Kursh

Matt Kursh, Member
Board of Directors                                 AGREED TO AND ACCEPTED:

                                                   By: /s/ Philippe Sanchez
                                                           Philippe Sanchez

Enclosures Date October 3, 2003

cc:   Compensation Committee
      Mr. Kenneth R. Greger

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