Document:

SCHEDULE OF HOLDERS TO FORM OF WARRANT
<TABLE>
<CAPTION>
     Holder                                                 Number of Shares
-----------------------------                              -----------------
<S>                                                              <C>
The Tahoma Fund, L.L.C.                                          410,526

Madrona Venture Fund I-A, L.P                                    212,210

Orca Bay Capital Corporation                                     104,211

Madrona Managing Director Fund, LLC                               26,474

Madrona Venture Fund I-B, L.P.                                    24,474

Tim and Alexa Carver                                               5,263

Stanley McCammon                                                   5,263

Aaron Singleton                                                    1,053

</TABLE>
<PAGE>

THIS WARRANT AND THE SHARES OF COMMON  STOCK THAT MAY BE  PURCHASED  PURSUANT TO
THE EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED  UNDER  THE  SECURITIES  ACT OF 1933,  AS  AMENDED  (THE  "ACT"),  OR
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD,  OFFERED FOR
SALE,  PLEDGED,  HYPOTHECATED OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
UNLESS THE TRANSFER IS IN ACCORDANCE  WITH RULE 144 OR A SIMILAR RULE AS THEN IN
EFFECT  UNDER  THE ACT,  OR  APPLICABLE  STATE  SECURITIES  LAWS OR  UNLESS  THE
CORPORATION  RECEIVES AN OPINION OF COUNSEL REASONABLY  ACCEPTABLE TO IT STATING
THAT SUCH  SALE OR  TRANSFER  IS EXEMPT  FROM THE  REGISTRATION  AND  PROSPECTUS
DELIVERY REQUIREMENTS OF THE ACT.

                                                    Void after February 14, 2005

No.____                          PHOTOWORKS, INC.

                                     WARRANT
                            ________________________

     THIS CERTIFIES  THAT, for $125.00 and other value  received,  _____________
(together with its permitted  assignees,  the "Holder") is entitled to subscribe
for and purchase  ________ shares (as adjusted  pursuant to Section 3 hereof) of
the fully paid and  nonassessable  Common Stock,  par value $0.01 per share (the
"Shares"), of PhotoWorks, Inc., a Washington corporation (the "Company"), at the
price of $6.00 per  share  (the  "Exercise  Price")  (as  adjusted  pursuant  to
Section 3  hereof),  subject to the provisions and upon the terms and conditions
hereinafter set forth.

     1. Method of Exercise; Payment.

     (a) Cash  Exercise.  Subject  to  Section 8  hereof,  the  purchase  rights
represented by this Warrant may be exercised by the Holder from time to time, in
whole or in part,  by the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A duly executed) at the principal  office of the
Company,  and by payment to the Company, by certified,  cashier's or other check
acceptable to the Company, of an amount equal to the aggregate Exercise Price of
the shares being purchased.

<PAGE>

     (b) Net Issue Exercise.

     (i) in lieu of  exercising  this  Warrant,  the Holder may elect to receive
shares  equal  to the  value  of this  Warrant  (or the  portion  thereof  being
cancelled) by surrender of this Warrant at the  principal  office of the Company
together with notice of such election, in which event the Company shall issue to
the Holder a number of shares of the Company's  Common Stock  computed using the
following formula:

                           X = Y (A-B)
                               -------
                                  A

Where   X = the number of shares of Common Stock to be issued to the Holder.

        Y = the number of shares of Common Stock purchasable under this Warrant.

        A = the fair market value of one share of the Company's Common Stock.

        B = the Exercise Price (as adjusted to the date of such calculation).

     (ii) This Warrant shall automatically be exercised pursuant to Section 1(b)
hereof  immediately  before its expiration  pursuant to Section 9  hereof unless
Holder notifies the Company in writing to the contrary before such termination.

     (c) Fair Market  Value.  For  purposes of this  Section 1,  the fair market
value of the Company's Common Stock shall mean:

     (i) The average of the closing bid and asked prices of the Company's Common
Stock quoted in the NASDAQ National Market System or the closing price quoted on
any exchange on which the Common Stock is listed,  whichever is  applicable,  as
published in the Western Edition of The Wall Street Journal for the five trading
days prior to the date of determination of fair market value;

     (ii) If the  Company's  Common  Stock is not  traded  in the  Nasdaq  Stock
Market,  over-the-counter market or on an exchange, the fair market value of the
Common  Stock per share  shall be the price  per share  that the  Company  could
obtain from a willing buyer for shares sold by the Company from  authorized  but
unissued  shares of Common  Stock as such price  shall be agreed by the  parties
hereto,  or if  agreement  cannot be reached  within five (5)  business  days of
delivery of the notice pursuant to Section 1(b)  hereof,  as shall be determined
by a panel of  appraisers.  One appraiser  shall be selected by the Holder,  one
appraiser shall be chosen by the Company and the third appraiser shall be chosen
by the first two appraisers.  If the appraisers cannot reach agreement as to the
fair market value on the foregoing  basis on or before the thirtieth  (30th) day
following the Holder's notice of election  pursuant to  Section 1(b),  then each

                                       2

<PAGE>

appraiser  shall deliver its  appraisal  and the appraisal  which is neither the
highest  nor the  lowest  shall be the fair  market  value of a share of  Common
Stock.  In the event that the Holder  fails to choose an  appraiser or the three
appraisers  fail to deliver an appraisal on or before the  thirtieth  (30th) day
after such notice,  the appraisal of the appraiser selected by the Company shall
control and shall be fair market  value for the  purposes of this  Warrant.  The
cost of the  appraiser  selected  by each party shall be borne by that party and
the cost of the third  appraiser  shall be borne  one-half  (1/2) by each party.
Appraisers selected under this Section 1(c) must be unaffiliated with the Holder
and the Company and must have  reasonable  professional  qualifications  for the
appraisal.

     (d)  Stock  Certificates.  In the  event  of  any  exercise  of the  rights
represented by this Warrant,  certificates  for the Shares so purchased shall be
delivered to the Holder  within a reasonable  time and,  unless this Warrant has
been fully exercised or has expired, a new Warrant  representing the shares with
respect to which this Warrant shall not have been exercised shall also be issued
to the Holder within such time.

     2. Stock Fully Paid; Reservation of Shares. All of the Shares issuable upon
the exercise of the rights  represented by this Warrant will,  upon issuance and
receipt of the Exercise Price  therefor,  be fully paid and  nonassessable,  and
free from all  preemptive  rights,  rights of first  refusal,  taxes,  liens and
charges with respect to the issue  thereof.  During the period  within which the
rights  represented  by this Warrant may be exercised,  the Company shall at all
times have authorized and reserved for issuance  sufficient shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant.

     3.  Adjustment  of  Exercise  Price and  Number of  Shares.  Subject to the
provisions of Section 8 hereof,  the number and kind of  securities  purchasable
upon the  exercise of this  Warrant and the  Exercise  Price  therefor  shall be
subject to adjustment  from time to time upon the occurrence of certain  events,
as follows:

     (a) Reference Price. The price upon which adjustments to the Exercise Price
and  number of Shares  pursuant  to  Section  3(d)  below  shall be based  shall
initially be $4.75 (the "Reference Price"). The initial Reference Price shall be
subject to adjustment as provided in accordance with this Section 3.

     (b)  Adjustments  for Dividends,  Splits,  Subdivisions,  Combinations,  or
Consolidation  of Common Stock. If the outstanding  shares of Common Stock shall
be  increased  by  stock  dividend   payable  in  Common  Stock,   stock  split,
subdivision,  or other  similar  transaction  occurring  after  the date of this
Warrant into a greater number of shares of Common Stock,  concurrently  with the
effectiveness of such event, the number of Shares issuable upon exercise of this
Warrant  shall be  increased in  proportion  to the  percentage  increase in the
outstanding  number  of  shares  of  Common  Stock  and the  Exercise  Price and

                                       3

<PAGE>

Reference Price shall proportionately be decreased. If the outstanding shares of
Common  Stock  shall  be  decreased   by  reverse   stock  split,   combination,
consolidation,  or other similar  transaction  occurring  after the date of this
Warrant into a lesser  number of shares of Common Stock,  concurrently  with the
effectiveness of such event, the number of shares issuable upon exercise of this
Warrant  shall be  decreased in  proportion  to the  percentage  decrease in the
outstanding  number  of  shares  of  Common  Stock  and the  Exercise  Price and
Reference Price shall be proportionately increased.

     (c) Adjustments for  Reclassification,  Exchange and  Substitution.  If the
Common Stock shall be changed  into the same or a different  number of shares of
any  other  class or  classes  of  stock,  whether  by  capital  reorganization,
reclassification,  or otherwise  (other than a  subdivision  or  combination  of
shares  provided  for above or in  connection  with a merger of the  Company  as
provided  in  Section  8 below),  concurrently  with the  effectiveness  of such
reorganization  or  reclassification,  this  Warrant  shall  be  proportionately
adjusted  such that upon  exercise,  the Holder  shall  receive,  in lieu of the
number of shares of Common  Stock which the holders  would  otherwise  have been
entitled to receive,  a number of shares of such other class or classes of stock
equivalent  to the number of shares of Common  Stock that the Holder  would have
received had this Warrant been exercised immediately before that change.

     (d) Adjustments on Issuance of Additional Stock. If the Company shall issue
"Additional  Stock" (as defined below) for a  consideration  per share less than
the Reference Price in effect on the date and  immediately  prior to such issue,
then and in such event, each of the Reference Price and the Exercise Price shall
be reduced  concurrently with such issue to a price (calculated to three decimal
places)  determined by multiplying such price by a fraction (i) the numerator of
which  shall be the  number of shares of Common  Stock  outstanding  immediately
prior to such  issue  plus the  number  of  shares  of  Common  Stock  which the
aggregate  consideration  received by the Company for the total number shares of
Additional  Stock so issued  (or  deemed to be  issued)  would  purchase  at the
Reference Price; and (ii) the denominator of which shall be the number of shares
of Common Stock  outstanding  immediately prior to such issue plus the number of
shares of Additional Stock so issued; provided that for purposes of this Section
3(d), all shares of Common Stock issuable (a) upon conversion of the outstanding
Series A Preferred Stock,  (b) upon exercise of warrants or options  outstanding
as of the  date of this  Warrant  or  which  are  otherwise  excluded  from  the
definition of "Additional Stock" below, (c) pursuant to any stock option,  stock
purchase or other stock incentive  plan,  provided such plan or the amendment to
such plan under which such shares are  available  has been approved by the Board
of  Directors  as of the  date of this  Warrant  or such  shares  are  otherwise
excluded from the definition of "Additional  Stock" below, and (d) upon exercise
or  conversion  of  any  other  security  or  debt  instrument  of  the  Company
outstanding  as of the date of this Warrant or which is otherwise  excluded from
the  definition of  "Additional  Stock" below shall be deemed to be Common Stock
outstanding.

                                       4

<PAGE>

     Upon any adjustment in the Exercise Price pursuant to this  subsection (d),
the number of Shares  purchasable  upon the  exercise of this  Warrant  shall be
adjusted to the number  obtained by (i) multiplying the number of Shares subject
to this Warrant by the Exercise Price,  each as in effect  immediately  prior to
such  adjustment and (ii) dividing the product so obtained by the Exercise Price
in effect immediately after such adjustment.

     For  purposes of this  subsection  (d)  "Additional  Stock"  shall mean all
Common  Stock  issued (or deemed to be issued  upon the  issuance  of Options or
Convertible  Securities as provided below) by the Company after the date of this
Warrant,  other  than  Common  Stock  issued  or  issuable  at any time (a) upon
conversion of the Series A Preferred; (b) to officers,  directors, and employees
of, and consultants or contractors to, the Company pursuant to any stock option,
stock  purchase  or  other  stock  incentive  plan,  provided  such  plan or the
amendment to such plan under which such shares are  available  has been approved
by the Board of Directors as of the date of this  Warrant;  (c) as a dividend or
distribution  with  respect  to  the  Series  A  Preferred;   (d)  to  financial
institutions  or lessors in  connection  with  commercial  credit  arrangements,
equipment  financings,  leasing  arrangements  or similar  transactions;  (e) in
connection with a merger of the Company with or into another  corporation or the
acquisition by the Company of another entity; (f) at any time by way of dividend
or other  distribution on shares of Common Stock excluded from the definition of
Additional  Shares of Common Stock;  (g) upon exercise of the warrants issued to
the original  purchasers  of the Series A Preferred;  (h) that is  designated as
excluded from the definition of Additional  Stock by the vote or written consent
(before or after the date of issuance or deemed issuance) of holders of at least
a majority of the then outstanding shares of Series A Preferred;  or (i) that is
described in subsections (b) or (c) of this Section 3.

     For the purpose of making any  adjustment  in the  Reference  Price and the
Exercise Price as provided above, the consideration  received by the Company for
any issue or sale of Additional Stock will be computed as follows:

     (i) to the extent it  consists of cash,  as the amount of cash  received by
the Company before deduction of any offering expenses payable by the Company and
any underwriting or similar  commissions,  compensation,  or concessions paid or
allowed by the Company in connection with such issue or sale;

     (ii) to the extent it  consists of  property  other than cash,  at the fair
market value of that property as determined in good faith by the Company's Board
of Directors; and

                                       5

<PAGE>

     (iii) if Common  Stock is  issued  or sold  together  with  other  stock or
securities or other assets of the Company for a consideration which covers both,
as  the  portion  of the  consideration  so  received  that  may  be  reasonably
determined  in good  faith by the Board of  Directors  to be  allocable  to such
Common Stock.

     If the Company (1) grants any rights or options to subscribe for, purchase,
or  otherwise   acquire  shares  of  Common  Stock  or  Convertible   Securities
(collectively,  "Options"), or (2) issues or sells any security convertible into
or  exchangeable  for  shares  of  Common  Stock   (collectively,   "Convertible
Securities"),  then, in each case,  the maximum number of shares of Common Stock
issuable  upon the  exercise of such Options or  conversion  or exchange of such
Convertible  Securities  shall be deemed to be Additional Stock issued as of the
time such Options or  Convertible  Securities  are issued  (except to the extent
excluded from the definition of Additional Stock) above, and the Reference Price
and Exercise  Price will be adjusted as above  provided to reflect (on the basis
of the  determination  of the price per share as  provided  below)  the issue or
sale.  In such  event,  the  price per share or  Common  Stock  issuable  on the
exercise  of the  Options  or the  conversion  or  exchange  of the  Convertible
Securities will be determined by dividing the total amount,  if any, received or
receivable  by the Company as  consideration  for the granting of the Options or
the issue or sale of the  Convertible  Securities,  plus the  minimum  aggregate
amount of  additional  consideration  payable to the  Company on exercise of the
Options or conversion of the  Convertible  Securities,  by the maximum number of
shares of Common  Stock  issuable  on the  exercise  or  conversion.  No further
adjustment of the  Reference or Exercise  Prices will be made as a result of the
actual  issuance of shares of Common Stock on the exercise of any such rights or
options or the conversion of any such convertible securities.

     Upon the  redemption  or  repurchase  of any such  Options  or  Convertible
Securities  or the  expiration  or  termination  of the right to  convert  into,
exchange  for, or exercise  with respect to,  Common  Stock,  the  Reference and
Exercise Prices will be readjusted to such price as would have been obtained had
the adjustment made upon their issuance been made upon the basis of the issuance
of only the number of such Options or  Convertible  Securities  as were actually
converted  into,  exchanged for, or exercised with respect to, Common Stock.  If
the  purchase  price or  conversion  or exchange  rate  provided for in any such
Option or  Convertible  Security  changes at any time,  then,  upon such  change
becoming  effective,  the Reference Price and Exercise Price then in effect will
be readjusted to such price as would have been obtained had the adjustment  made
upon the issuance of such Options or Convertible  Securities  been made upon the
basis of (1) the issuance of only the number of shares of Common Stock  actually
delivered  upon  the  conversion,  exchange  or  exercise  of  such  Options  or
Convertible  Securities,  and the total consideration received therefor, and (2)
the  granting or issuance,  at the time of such  change,  of any such Options or
Convertible  Securities then still  outstanding for the  consideration,  if any,
received by the Company therefor and to be received on the basis of such changed
price or rate.

                                       6

<PAGE>

     (e) Adjustments. Whenever the number of Shares purchasable hereunder or the
Exercise  Price  thereof  shall be adjusted  pursuant to Section 3  hereof,  the
Company shall provide  notice to the holder of this Warrant  setting  forth,  in
reasonable  detail,  the  event  requiring  the  adjustment,  the  amount of the
adjustment,  the method by which such adjustment was calculated,  and the number
of Shares which may be purchased and the Exercise  Price  therefor  after giving
effect to such adjustment.

     4. Fractional  Shares.  No fractional shares of Common Stock will be issued
in connection with any exercise hereunder. In lieu of such fractional shares the
Company shall make a cash payment therefor based upon the Exercise Price then in
effect.

     5. Restrictions Upon Transfer.

     (a) The Company  need not  register a transfer of this  Warrant  unless the
conditions  specified  in the  legend on the front page  hereof  are  satisfied.
Subject to the satisfaction of such conditions, any transfer of this Warrant and
all rights  hereunder,  in whole or in part, shall be registered on the books of
the Company to be maintained for such purpose, upon surrender of this Warrant at
the principal office of the Company,  or the office or agency  designated by the
Company, together with a written assignment of this Warrant substantially in the
form of Exhibit C hereto duly  executed  by Holder or its agent or attorney  and
funds  sufficient  to pay any  transfer  taxes  payable  upon the making of such
transfer. Upon such surrender and, if required, such payment, the Company shall,
subject to the  conditions  set forth in the  legend,  execute and deliver a new
Warrant  or  Warrants  in the  name  of the  assignee  or  assignees  and in the
denomination specified in such instrument of assignment,  and shall issue to the
assignor a new Warrant  evidencing  the portion of this Warrant not so assigned,
and this War-rant shall promptly be canceled.  A Warrant,  if properly assigned,
may be exercised by a new Holder for the purchase of Shares without having a new
Warrant issued.

     (b) Subject to the conditions set forth in the legend,  this Warrant may be
divided  or  combined  with  other  Warrants  upon  presentation  hereof  at the
aforesaid  office or  agency  of the  Company,  together  with a written  notice
specifying the names and  denominations  in which new Warrants are to be issued,
signed by  Holder or its agent or  attorney.  Subject  to  compliance  with this
Section 6  as to any  transfer  which  may  be  involved  in  such  division  or
combination,  the Company shall execute and deliver a new Warrant or Warrants in
exchange  for the Warrant or  Warrants  to be divided or combined in  accordance
with such notice.

     (c) The Company shall prepare,  issue and deliver at its own expense (other
than transfer taxes) the new Warrant or Warrants under this Section 5.

     (d) The Company  agrees to  maintain,  at its  aforesaid  office or agency,
books for the registration and the registration of transfer of the Warrants.

                                       7

<PAGE>

     6. Restrictive Legend.

     (a) The Shares  issuable upon exercise of this Warrant  (unless  registered
under the Act) shall be stamped or imprinted with a legend in substantially  the
following form:

     THE  SHARES   REPRESENTED  BY  THIS  CERTIFICATE  HAVE  BEEN  ACQUIRED  FOR
     INVESTMENT AND HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933,
     AS  AMENDED  (THE  "ACT"),  OR  APPLICABLE  STATE  SECURITIES  LAWS.  THESE
     SECURITIES  MAY NOT BE SOLD,  OFFERED FOR SALE,  PLEDGED,  HYPOTHECATED  OR
     TRANSFERRED IN THE ABSENCE OF SUCH  REGISTRATION  UNLESS THE TRANSFER IS IN
     ACCORDANCE WITH RULE 144 OR A SIMILAR RULE AS THEN IN EFFECT UNDER THE ACT,
     OR APPLICABLE STATE  SECURITIES LAWS OR UNLESS THE CORPORATION  RECEIVES AN
     OPINION OF COUNSEL  REASONABLY  ACCEPTABLE  TO IT STATING THAT SUCH SALE OR
     TRANSFER  IS  EXEMPT  FROM  THE   REGISTRATION   AND  PROSPECTUS   DELIVERY
     REQUIREMENTS OF THE ACT.

     (b) The  Company  need not  register  a  transfer  of  Shares  bearing  the
restrictive legend set forth in this Section 5, unless the conditions  specified
in such legend are  satisfied.  The Company may also instruct its transfer agent
not to  register  the  transfer  of the  Shares,  unless  one of the  conditions
specified in the legend set forth in this Section 5 is satisfied.

     7. Rights of Shareholders.  No holder of this Warrant shall be entitled, as
a Warrant holder, to vote or receive dividends or be deemed the holder of Common
Stock or any other  securities  of the Company which may at any time be issuable
on the exercise hereof for any purpose,  nor shall anything  contained herein be
construed to confer upon the holder of this Warrant,  as such, any of the rights
of a  shareholder  of the  Company  or any  right  to vote for the  election  of
directors or upon any matter  submitted to shareholders at any meeting  thereof,
or to give or  withhold  consent  to any  corporate  action  (whether  upon  any
recapitalization,  issuance of stock,  reclassification  of stock, change of par
value, consolidation,  merger, conveyance, or otherwise) or to receive notice of
meetings,  or to receive dividends or subscription rights or otherwise until the
Warrant shall have been exercised and the Shares  purchasable  upon the exercise
hereof shall have become deliverable, as provided herein.

     8. Expiration of Warrant.  This Warrant shall expire and shall no longer be
exercisable upon the first to occur of the following:

     (a) at 5:00 p.m., Washington local time, on February 14, 2005; and

                                       8

<PAGE>

     (b) the  closing of any sale of all or  substantially  all of the assets of
the  Company  or  acquisition  of this  Company  by  another  entity by means of
consolidation,  corporate  reorganization or merger in which the shareholders of
the Company  immediately  prior such  transaction  possess  less than 50% of the
outstanding voting power of the Company after the transaction; provided that the
Company shall provide at least 20 days' prior written  notice of the date of any
such event to the Holder.

     9. Notices,  Etc. All notices and other  communications from the Company to
the Holder and from the Holder to the Company  shall be delivered  personally or
by  nationally-recognized  overnight  courier  at such  address as may have been
furnished to the Company in writing by the Holder or by the Holder in writing to
the Company.

     10. Governing Law,  Headings.  This Warrant is being delivered in the State
of  Washington  and shall be  construed  and  enforced  in  accordance  with and
governed  by the  laws of such  State.  The  headings  in this  Warrant  are for
purposes of reference  only, and shall not limit or otherwise  affect any of the
terms hereof.

         Issued this ________ day of _____________________, 2000.

                                     PHOTOWORKS, INC.

                                     By: _____________________
                                     Title:___________________

                                       9--------------------------------------------------------------------------------

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                                PhotoWorks, INC.

                          SERIES A PREFERRED STOCK AND
                           WARRANT PURCHASE AGREEMENT

--------------------------------------------------------------------------------

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<PAGE>

                                TABLE OF CONTENTS

1. Purchase and Sale of Series A Preferred Stock and Issuance of Warrants...1
   1.1      Issuance of Series A Preferred Stock and Warrants...............1
   1.2      Closing.........................................................1
2. Definitions..............................................................2
   2.1      Commission......................................................2
   2.2      Intellectual Property...........................................2
   2.3      Incentive Plans.................................................2
   2.4      Material Adverse Event..........................................2
   2.5      Material Contracts..............................................2
   2.6      Rights Agreement................................................3
   2.7      Schedule of Exceptions..........................................3
   2.8      Securities Act..................................................3
   2.9      SEC Reports.....................................................3
   2.10     Subsidiary......................................................3
   2.11     Transactional Agreements........................................3
3. Representations and Warranties of the Company to Investors...............3
   3.1      Corporate Organization and Authority............................3
   3.2      Capitalization..................................................3
   3.3      Subsidiaries....................................................4
   3.4      Corporate Power.................................................4
   3.5      Financial Statements............................................5
   3.6      Authorization...................................................5
   3.7      Validity of Shares..............................................5
   3.8      Changes in Condition............................................6
   3.9      Litigation......................................................6
   3.10     Patents and Other Proprietary Rights............................7
   3.11     Taxes...........................................................8
   3.12     Company's Contracts.............................................8
   3.13     Compliance With Other Agreements................................9
   3.14     Employees.......................................................9
   3.15     Transactions with Affiliates...................................10
   3.16     Governmental and Third Party Consents..........................10
   3.17     Compliance with Laws; Permits..................................10
   3.18     Registration Rights............................................11
   3.19     Offering Valid.................................................11
   3.20     Brokers and Finders............................................11
   3.21     SEC Reports....................................................11
   3.22     Environmental..................................................11
   3.23     Properties.....................................................12

<PAGE>

4. Representations and Warranties of the Investors.........................12
   4.1      Authorization..................................................12
   4.2      Investment.....................................................12
   4.3      No Public Market...............................................12
   4.4      Limitations on Transferability.................................13
   4.5      Experience; Receipt of Information.............................13
   4.6      Accredited Investor............................................14
   4.7      Confidentiality................................................14
   4.8      Brokers and Finders............................................14
5. Legends.................................................................15
6. Conditions of Investors'Obligations at Closing..........................15
   6.1      Representations and Warranties.................................15
   6.2      Performance....................................................15
   6.3      Proceedings Satisfactory; Compliance Certificate...............16
   6.4      Rights Agreement...............................................16
   6.5      Articles of Amendment..........................................16
   6.6      Opinion of the Company's Counsel...............................16
   6.7      Approvals and Consents.........................................16
   6.8      Agreement as to Registration Rights............................16
7. Conditions of the Company's Obligations at Closing......................16
   7.1      Representations and Warranties.................................16
   7.2      Payment of Purchase Price......................................17
   7.3      Articles of Amendment..........................................17
   7.4      Rights Agreement...............................................17
8. Covenants of the Company................................................17
   8.1      Use of Proceeds................................................17
   8.2      Management.....................................................17
9. Miscellaneous...........................................................17
   9.1      Governing Law..................................................17
   9.2      Counterparts...................................................17
   9.3      Headings.......................................................17
   9.4      Notices........................................................17
   9.5      Amendment of Agreement.........................................18
   9.6      Expenses.......................................................18
   9.7      Entire Agreement; Successors and Assigns.......................18
   9.8      Severability...................................................18

<PAGE>

                                PHOTOWORKS, INC.
             SERIES A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT

     THIS  SERIES  A  PREFERRED  STOCK  AND  WARRANT  PURCHASE   AGREEMENT  (the
"Agreement")  is made as of January  31,  2000,  by and among  PhotoWorks,  Inc.
(f/k/a Seattle FilmWorks,  Inc.), a Washington corporation (the "Company"),  and
the entities  listed on the attached  Exhibit A who become  signatories  to this
Agreement (collectively, the "Investors").

                                    RECITALS

     A. The Board of  Directors  of the  Company  has  adopted  the  Articles of
Amendment (the "Articles of Amendment") in the form attached hereto as Exhibit B
which, among other matters, establish the rights, preferences, and privileges of
the Company's $0.01 par value Series A Preferred Stock (the "Series A  Preferred
Stock").

     B. The Company  desires to sell up to 15,000  shares of Series A  Preferred
Stock to the Investors and to issue warrants to purchase up to 789,474 shares of
the  Company's  $0.01 par value Common  Stock at an exercise  price of $6.00 per
share,  substantially  in the form of Exhibit C attached hereto (the "Warrants")
to the  Investors,  and the Investors  desire to purchase up to 15,000 shares of
Series A Preferred Stock from the Company and be issued the Warrants, subject to
the terms and conditions set forth in this Agreement.

     THE PARTIES AGREE AS FOLLOWS:

     1.  Purchase  and  Sale  of  Series A   Preferred  Stock  and  Issuance  of
Warrants.

     1.1  Issuance of Series A  Preferred  Stock and  Warrants. Subject  to the
terms and conditions of this Agreement,  the Company shall issue and sell to the
Investors and the Investors  shall  purchase from the Company,  a total of up to
15,000  shares of  Series A  Preferred  Stock (the  "Shares")  and  Warrants  to
purchase up to a total of 789,474 shares of Common Stock (the "Warrant Shares"),
at the purchase  price of $1,000 per unit.  The number of Shares,  the number of
Warrant  Shares  issuable  upon  exercise of the Warrant to be purchased by each
Investor is set forth opposite the name of each Investor on Exhibit A.

     1.2  Closing.  The  closing  of the  purchase  and sale of the  Shares  and
Warrants  shall take place at the offices of Heller  Ehrman  White &  McAuliffe,
6100 Columbia Center, 701 Fifth Avenue, Seattle, WA 98104-7098,  on February 14,
2000, at 3:00 p.m. local time (the "Closing") or at such other place and time as

<PAGE>

the Company and the Investors  may agree.  At the Closing,  each Investor  shall
purchase  that number of Shares and a Warrant for that number of Warrant  Shares
designated  opposite such Investor's name on Exhibit A in exchange for the total
purchase price set forth on Exhibit A.  At the Closing, the Company will deliver
to each  Investor a  certificate  representing  the Shares and a Warrant for the
number of Warrant  Shares which that Investor is obtaining  against  delivery to
the Company by such Investor at the Closing of (a) an  executed  counterpart  of
this Agreement, and (b) the issue price of such Shares and Warrants as set forth
on Exhibit A by wire transfer or by a check payable to the Company.  The date on
which the Closing occurs is referred to herein as the "Closing Date."

     2.  Definitions.  For  purposes of this Agreement the following terms shall
have the following meanings:

     2.1 "Commission" shall mean the Securities and Exchange Commission.

     2.2  "Intellectual  Property"  shall  mean  patents,  patent  applications,
trademarks,  service marks, mask works, trade names, copyrights,  trade secrets,
information, proprietary rights and processes.

     2.3 "Incentive  Plans" shall mean  collectively  the Incentive Stock Option
Plan as amended and restated as of April 1, 1996, the 1987 Stock Option Plan, as
amended and restated as of April 1, 1996, the 1993 Employee Stock Purchase Plan,
as amended and restated as of May 31, 1995,  the 1999 Employee Stock Option Plan
dated October 20, 1999 and the 1999 Stock Incentive  Compensation Plan, approved
by the Company's board of directors on November 23, 1999.

     2.4 "Material Adverse Event" shall mean any change, event or effect that is
materially  adverse  to  the  general  affairs,  business,  operations,  assets,
condition  (financial  or otherwise) or results of operations of the Company and
its Subsidiaries taken as a whole;  provided,  however, that the following shall
not be taken into account in  determining a "Material  Adverse  Event":  (a) 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 (b) any adverse
change,  event or effect that is directly  attributable to conditions  affecting
the Company's industry generally,  unless such conditions  adversely affect such
party in a materially disproportionate manner.

     2.5 "Material  Contracts"  shall have the meaning  ascribed to such term in
Section 3.12.

                                       2

<PAGE>

     2.6  "Rights  Agreement"  shall  mean  the  Investor  Rights  Agreement  in
substantially the form attached as Exhibit 6.4 hereto.

     2.7 "Schedule of  Exceptions"  shall mean the schedule of exceptions to the
representations  and  warranties  of the Company in  Section 3.  The Schedule of
Exceptions is attached as Exhibit 3 hereto.

     2.8 "Securities  Act" shall mean the Securities Act of 1933, as amended and
the rules and regulations of the Commission promulgated thereunder.

     2.9 "SEC Reports"  shall have the meaning  ascribed to such term in Section
3.21.

     2.10 "Subsidiary"  shall mean any corporation,  partnership or other entity
more than 50% of whose equity interests (measured by virtue of voting rights) in
the aggregate is owned by the Company.

     2.11  "Transactional  Agreements"  shall mean this Agreement and the Rights
Agreement.

     3. Representations and Warranties of the Company to  Investors.  Except  as
set forth in the  Schedule of  Exceptions,  the Company  hereby  represents  and
warrants to each Investor that:

     3.1 Corporate Organization and Authority.  The Company:

     (a) is a corporation  duly organized and validly existing under the laws of
the State of Washington;

     (b) has the corporate power and corporate  authority to own and operate its
properties  and to carry  on its  business  as now  conducted  and as  currently
proposed to be conducted; and

     (c) is qualified as a foreign  corporation  in all  jurisdictions  in which
such  qualification  is required,  other than those  jurisdictions  in which its
failure to so qualify would not constitute a Material Adverse Event.

     3.2 Capitalization.  The authorized capital of the Company consists of:

     (a) Preferred Stock.  2,000,000 shares of Preferred Stock, $0.01 par value,
of which 105,000 shares have been designated  Series RP Preferred Stock (none of
which  are  outstanding)  and  15,000  shares  will be  designated  as  Series A
Preferred Stock upon filing of the Articles of Amendment, (none of which will be
issued or outstanding prior to the Closing).

                                       3

<PAGE>

     (b) Common Stock.  101,250,000  shares of Common Stock, $0.01 par value, of
which  16,347,890  shares  are  duly  and  validly  issued  (including,  without
limitation,  issued in compliance with applicable  federal and state  securities
laws), fully paid, and nonassessable.

     (c) Other  Securities.  The  Company  has  reserved:  (a) 15,000  shares of
Series A  Preferred Stock for issuance  pursuant to the terms of this Agreement;
(b) 3,157,895  shares  of Common  Stock  for  issuance  upon  conversion  of the
Series A  Preferred  Stock;  (c) 105,000  shares of Series RP  Preferred  Stock,
(d) 789,474  shares of Common Stock for issuance  upon exercise of the Warrants;
and (e)  2,953,187  shares of  Common  Stock for  issuance  under the  Company's
Incentive  Plans.  Except for  (i) the  conversion  privileges  of the  Series A
Preferred  Stock to be issued  under this  Agreement,  (ii) the  Warrants  to be
issued under this  Agreement,  (iii) the  options and other rights granted under
the Company's  Incentive  Plans,  and (iv) the preferred  share purchase  rights
issued as a dividend on the  Company's  Common Stock,  there are no  outstanding
rights of first refusal,  preemptive rights or other rights, warrants,  options,
conversion  privileges,  subscriptions,  or other rights or  agreements,  either
directly or  indirectly,  to purchase or  otherwise  acquire or issue any equity
securities of the Company.

     3.3 Subsidiaries.  The  Company does not presently own, have any investment
in, or control,  directly or indirectly,  any  Subsidiaries,  other than Seattle
FilmWorks Manufacturing Company, OptiColor, Inc. and FilmWorks Express Inc. Each
of the Subsidiaries:

     (a) is duly organized,  validly  existing and in good standing in the state
of its incorporation;

     (b) has the corporate power and corporate  authority to own and operate its
properties  and to carry  on its  business  as now  conducted  and as  currently
proposed to be conducted; and

     (c) is qualified as a foreign  corporation  in all  jurisdictions  in which
such  qualification  is required,  other than those  jurisdictions  in which its
failure to qualify would not constitute a Material Adverse Event.

     3.4  Corporate  Power.  The  Company  will  have at the  Closing  Date  all
requisite  legal and  corporate  power and  authority to execute and deliver the
Transactional  Agreements,  to sell and issue the Shares hereunder, to issue the
Common Stock issuable upon conversion of the Shares (the  "Conversion  Shares"),
to issue and sell the  Warrants  hereunder,  to issue the  Warrant  Shares  upon
exercise of the Warrants, and to carry out and perform its obligations under the
terms of the Transactional Agreements.

                                       4

<PAGE>

     3.5 Financial Statements. The financial statements of the Company as of and
for the period ended  September 25, 1999 and the unaudited  balance sheet of the
Company as of December 25, 1999 and the unaudited  statement of  operations  for
the  three-month  period then ended (which have been provided to the  Investors)
are  complete  and  correct in all  material  respects,  have been  prepared  in
accordance with generally accepted accounting principles applied on a consistent
basis  throughout  the  periods  indicated  and  fairly  present  the  Company's
financial  position as of those dates and the results of operations  and changes
in its financial  position for such periods then ended;  provided however,  that
the unaudited  financial  statements  are subject to normal  recurring  year-end
adjustments  (which are not  expected  to be  material),  and do not contain all
footnotes required under generally accepted accounting principles. Except as set
forth in the unaudited balance sheet of the Company as of December 25, 1999, the
Company has no material  liabilities except for current liabilities  incurred in
the ordinary course of business  subsequent to December 25,  1999 which are not,
either individually or in the aggregate,  materially adverse to the Company. The
Company has no material  contingent  obligations  which are not disclosed in the
SEC Reports.

     3.6  Authorization.  All  corporate action on the part of the Company,  its
officers and directors necessary for the authorization, execution, delivery, and
performance of all obligations under the Transactional  Agreements,  and for the
authorization,  issuance, and delivery of the Shares, the Conversion Shares, the
Warrants and the Warrant  Shares has been taken.  The  Transactional  Agreements
constitute  legally binding and valid obligations of the Company  enforceable in
accordance  with  their  respective  terms,  except  to  the  extent  that  such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
arrangement,  moratorium, fraudulent conveyance or other laws or court decisions
relating to or affecting the rights of creditors generally, and such enforcement
may be limited by equitable principles of general applicability.

     3.7 Validity of Shares.  The  Shares,  when issued,  sold, and delivered in
accordance with the terms and for the consideration expressed in this Agreement,
will be duly and  validly  issued  (including,  without  limitation,  issued  in
compliance   with   applicable   federal   and   state   securities   laws)  and
non-assessable.  The  Conversion  Shares and  Warrant  Shares have been duly and
validly  reserved and,  assuming the Conversion  Shares are issued in accordance
with the Articles of Amendment  and the Warrant  Shares are issued in accordance
with the terms of the  Warrants,  will be duly and  validly  issued  (including,
without  limitation,  issued in compliance with all applicable federal and state
securities  laws)  and   non-assessable  and  will  be  free  of  any  liens  or
encumbrances other than any liens or encumbrances  created by or imposed thereon
by the holders; provided,  however, that the Shares, Conversion Shares, Warrants
and Warrant  Shares  shall be subject to  restrictions  on transfer  under state
and/or federal  securities  laws. The Shares,  Conversion  Shares,  Warrants and
Warrant  Shares  are not  subject  to any  preemptive  rights or rights of first
refusal, except as otherwise so agreed to by the holders thereof.

                                       5

<PAGE>

     3.8  Changes  in  Condition.  Except  as  specifically  set  forth  in this
Agreement or in the SEC Reports,  since September 25,  1999, (a) the Company has
not  entered  into any  transaction  which  was not in the  ordinary  course  of
business,  (b) there has been no Material Adverse Event, (c) the Company has not
incurred  any material  tax  liability,  (d) there  has been no  resignation  or
termination  of  employment  of any  executive  officer or key  employee  of the
Company  and  the  Company  does  not  know  of  any  impending  resignation  or
termination  of employment  of any such officer or key  employee,  (e) there has
been no labor dispute  involving the Company or any of its respective  employees
and, to the Company's  knowledge,  none is pending or threatened,  (f) there has
been no waiver by the  Company  of a  valuable  right or of a debt  owing to the
Company,  (g) there has not been any  satisfaction  or discharge of any material
lien,  claim or  encumbrance  or any payment of any material  obligation  by the
Company except in the ordinary course of business,  (h) there has been no direct
or indirect loans made by the Company to any shareholder,  employee,  officer or
director of the Company,  other than  advances  made in the  ordinary  course of
business,  (i) there has been no material change in any compensation arrangement
or agreement with any executive officer,  director, key employee or shareholder,
(j) the  Company has not declared or paid any dividend or other  distribution of
assets of the Company,  (k) there has not been any sale,  assignment or transfer
of any  Intellectual  Property  other than in the  ordinary  course of business,
(l) the Company has not incurred,  assumed or guaranteed any debt, obligation or
liability except for immaterial amounts and for current liabilities  incurred in
the ordinary  course of  business,  and  (m) there  has not been any change in a
Material  Contract to which the Company is a party or by which it is bound which
would result in a Material Adverse Event.

     3.9  Litigation.  There  is no  action,  proceeding,  or, to the  Company's
knowledge,  investigation pending or threatened,  or any basis therefor known to
the Company, that questions the validity of the Transactional  Agreements or the
right of the Company to enter into the Transactional Agreements or to consummate
the transactions  contemplated thereby or that would result, either individually
or in the  aggregate,  in any  Material  Adverse  Event.  There is no  judgment,
decree,  or order of any court in effect  against the Company and the Company is
not in default with respect to any order of any governmental  authority to which
the  Company  is a party or by  which it is  bound.  There is no  action,  suit,
proceeding,  or  investigation  by the  Company  currently  pending or which the
Company presently intends to initiate.

                                       6

<PAGE>

     3.10 Patents and Other Proprietary Rights.

     (a) To the  Company s  knowledge  the  Company  has  sufficient  title  and
ownership of or sufficient right to use all Intellectual  Property necessary for
its  business as now  conducted,  and  believes it can obtain,  on  commercially
reasonable   terms,  any  additional   rights  necessary  for  its  business  as
contemplated at the Closing.

     (b) No claims have been asserted by any person with respect to the validity
of the Company's ownership or right to use the Intellectual Property.

     (c) The  Company  does not have any  knowledge  of, and the Company has not
given or received any notice of, any pending  conflicts with or  infringement of
the rights of others with respect to any  Intellectual  Property or with respect
to any license of  Intellectual  Property  which are material to the business of
the Company.

     (d) No  action,  suit,  arbitration,  or  legal,  administrative  or  other
proceeding,  or  investigation  is  pending,  or, to the best  knowledge  of the
Company, threatened, which involves any Intellectual Property and the Company is
not subject to any judgment,  order, writ,  injunction or decree of any court or
any Federal, state, local, foreign or other governmental department, commission,
board,  bureau,   agency  or  instrumentality,   domestic  or  foreign,  or  any
arbitrator,  and has not entered  into or is not a party to any  contract  which
restricts or impairs the use of any such Intellectual Property in a manner which
would result in Material Adverse Event.

     (e)  The  Company  has  not  entered  into  any  consent,  indemnification,
forbearance to sue or settlement agreement with respect to Intellectual Property
other than in the  ordinary  course of business or which does not  restrict  its
business as presently proposed to be conducted.

     (f) The Company is not aware that any of its  employees is obligated  under
any contract  (including  licenses,  covenants or  commitments of any nature) or
other  agreement,  or subject to any  judgment,  decree or order of any court or
administrative  agency,  that would  conflict  with the  Company's  business  as
proposed to be conducted.

     (g) The Company  has not  received  any  communications  alleging  that the
Company  or its  employees  has  violated  or  infringed  any  of  the  patents,
trademarks,  service marks, trade names,  copyrights,  or trade secrets,  or any
proprietary rights of any other person or entity.

                                       7

<PAGE>

     (h) The Company has taken reasonable measures to protect the value (and, to
the extent  applicable,  the  confidentiality  and security) of all Intellectual
Property  used in its  products,  services and  business.  The Company has taken
reasonable  steps to ensure that employees and consultants  who, either alone or
in concert with others, developed, invented, discovered,  derived, programmed or
designed  Intellectual   Property,  or  who  have  knowledge  of  or  access  to
information  about  Intellectual   Property,   have  entered  into  an  Employee
Confidentiality, Inventions, and Non-Competition Agreement, substantially in the
form of Exhibit 3.10 to this Agreement.

     (i) The Company has reviewed its operations to evaluate the extent to which
the  business or  operations  of the  Company  will be affected by the Year 2000
Problem  (as defined  below).  As a result of such  review,  the Company has not
noted any  material  Year 2000  Problems  which would  prevent its  products and
systems from being capable of correctly interpreting dates beyond the year 1999.
Based on the  Company's  testing to date,  the  Company has no reason to believe
that Year 2000 Problems caused by its own products or internal  operations would
have a Material  Adverse Event. The "Year 2000 Problem" as used herein means any
significant  risk  that  computer  hardware  or  software  used in the  receipt,
transmission,  processing,  manipulation,  storage, retrieval, retransmission or
other  utilization  of data or in the  operation  of  mechanical  or  electrical
systems  of any kind will not,  in the case of dates or time  periods  occurring
after  December 31,  1999,  function at least as  effectively  as in the case of
dates or time periods occurring prior to January 1, 2000.

     3.11 Taxes.

     (a) (i) All federal,  state,  local, and foreign tax returns required to be
filed by the Company have been filed and are true in all  material  respects and
(ii) (A) all taxes,  assessments,  fees, and other governmental charges upon the
Company,  or upon any of its properties,  income,  or franchises,  shown in such
returns  to be due and  payable,  (B) any  assessments  imposed,  and (C) to the
Company's knowledge,  all other taxes due and payable by the Company,  have been
paid or will be paid prior to the time they become  delinquent,  except for such
failures to file or to pay as would not in the  aggregate  constitute a Material
Adverse Event.

     (b) The Company has not been  advised  (i) that any of its tax returns have
been or are being  audited as of the date  hereof or (ii) of any  deficiency  in
assessment  related to its  federal,  state or other  taxes.  The Company has no
knowledge  of any  liability  for any tax to be imposed upon its  properties  or
assets as of the date of this Agreement that is not adequately provided for.

                                       8

<PAGE>

     3.12 Company's Contracts.

     (a) Legality of  Contracts.  Except as  disclosed  in the SEC Reports,  the
Company is not a party to or bound by any contract,  commitment or understanding
which (i) is a material  contract (as defined in Item  601(b)(10)  of Regulation
S-K of  the  Commission)  which  is to be  performed  after  the  date  of  this
Agreement,  (ii) involves  a license  or grant of rights to or from the  Company
involving  Intellectual  Property  applicable  to the  business of the  Company,
(iii) contains   provisions   restricting   the   development,   manufacture  or
distribution   of  the  Company's   products  or  services,   or   (iv) provides
indemnification  by the Company with  respect to  infringements  of  proprietary
rights to which the Company or any Subsidiary is a party (collectively "Material
Contracts").  All such contracts and agreements are legally binding,  valid, and
in full force and effect in all material respects.

     (b) Dividends;  Indebtedness.  Except as disclosed in the SEC Reports,  the
Company has not  (i) incurred  any  indebtedness for money borrowed in excess of
$1,000,000  (either  individually or in the  aggregate),  (ii) made any loans or
advances  to any  person,  other than  ordinary  advances  for travel  expenses,
(iii) sold,  exchanged or  otherwise  disposed of any of its assets or rights or
entered into any agreement or arrangement with respect  thereto,  other than the
sale of its inventory in the ordinary course of business,  or  (iv) declared  or
paid any dividends,  or authorized any distribution  upon or with respect to any
class or series of its capital stock.

     3.13 Compliance With Other Agreements.  The  Company is not in violation of
(i) any term or provision of its articles of incorporation or bylaws, each as in
effect as of the Closing,  (ii) any  material  term or provision of any Material
Contract (iii) to the Company's knowledge,  any decree,  order, statute, rule or
regulation  applicable to the Company,  in each case, or in the  aggregate,  the
violation of which would  constitute a Material  Adverse  Event.  The execution,
delivery and performance of the Transactional Agreements by the Company will not
result in any violation of, be in conflict  with, or constitute a default under,
with or without the passage of time or the giving of notice:

     (a) any provision of the Company's articles of incorporation or bylaws;

     (b) any provision of any judgment,  decree or order to which the Company is
a party or by which it is bound;

     (c) any Material Contract to which the Company is a party or by which it is
bound; or

     (d)  to  the  Company's  knowledge,   any  statute,  rule  or  governmental
regulation applicable to the Company.

     3.14 Employees.  The Company  believes its relations with its employees are
satisfactory.  The Company's  employees are not  represented by any labor unions
nor, to the Company's knowledge, is any union organization campaign in progress.
The Company is not aware that any of its  executive  officers  or key  employees
intends to terminate  employment nor does the Company have any present intention
to terminate the employment of any thereof.

                                       9

<PAGE>

     3.15 Transactions with Affiliates.  Except as disclosed in the SEC Reports,
no  employee,  officer,  or  director  of the  Company  or  member of his or her
immediate  family is indebted to the  Company,  nor is the Company  indebted (or
committed to make loans or extend or guarantee credit) to any of them other than
(i) for  payment  of  salary  and  services  rendered,   (ii) reimbursement  for
reasonable  expenses  incurred on behalf of the  Company,  and  (iii) for  other
standard employee benefits made generally available to all employees  (including
stock option agreements outstanding under any Incentive Plans). To the Company's
knowledge, none of such persons has any direct or indirect ownership interest in
any firm or  corporation  with which the Company is affiliated or with which the
Company has a business  relationship,  or any firm or corporation  that competes
with the Company,  except that employees,  officers, or directors of the Company
and  members  of their  immediate  families  may own  stock in  publicly  traded
companies that may compete with the Company.  No member of the immediate  family
of any officer or director of the Company is directly or  indirectly  interested
in any Material  Contract with the Company.  Except for  agreements  between the
Company and its  employees  pertaining  to the terms of their  employment or the
purchase  of shares of Common  Stock  under the  Incentive  Plans,  there are no
agreements,  understandings or proposed transactions between the Company and any
of its officers, directors or affiliates.

     3.16 Governmental and Third Party Consents.  Subject to the accuracy of the
Investors' representations in Section 4 of this Agreement, no consent, approval,
order,  or  authorization  of,  or  registration,   qualification,  designation,
declaration,   or  filing  with,  any  federal,   state,  local,  or  provincial
governmental authority on the part of the Company is required in connection with
the consummation of the transactions contemplated by this Agreement,  except for
filings as are required by federal and state securities laws.

     3.17 Compliance with Laws; Permits. To its knowledge, the Company is not in
violation of any  applicable  statute,  rule,  regulation or  restriction of any
government,  administrative  agency or instrumentality in respect of the conduct
of its business or the ownership of its properties, the violation of which would
constitute a Material  Adverse Event.  The Company has all franchises,  permits,
licenses,  and any similar  governmental  authority necessary for the conduct of
its  business  as now being  conducted  by it and as  currently  proposed  to be
conducted,  the lack of which would  constitute a Material  Adverse  Event.  The
Company is not in default under any of such  franchises,  permits,  license,  or
other similar authority except for such defaults as will not, individually or in
the aggregate, constitute a Material Adverse Event.

                                       10

<PAGE>

     3.18  Registration  Rights.  Except  as  required  pursuant  to the  Rights
Agreement,  the  Company  is not  presently  under any  obligation,  and has not
granted  any  rights to  register  any of the  Company's  presently  outstanding
securities or any securities that may hereinafter be issued under the Securities
Act.

     3.19  Offering  Valid.  Assuming  the accuracy of the  representations  and
warranties of the Investors  contained in Section 4 hereof,  the offer, sale and
issuance  of the  Shares  and the  Conversion  Shares  will be  exempt  from the
registration requirements of the Securities Act and will have been registered or
qualified  or  are  exempt  from  registration  and   qualification   under  the
registration,  permit or  qualification  requirements  of all  applicable  state
securities  laws.  Neither the Company nor any agent on its behalf will take any
action that would cause the loss of any such exemption.

     3.20  Brokers and  Finders.  The Company has not  retained  any  investment
banker,  broker or finder in connection  with the  transactions  contemplated by
this Agreement.

     3.21 SEC Reports.  The Company has filed with the  Commission  all required
forms, reports, registration statements and documents required to be filed by it
with the Commission and made all  disclosures  required by the Securities Act or
the Exchange Act (collectively,  the "SEC Reports"), all of which complied as to
form when filed in all material  respects with the applicable  provisions of the
Securities  Act and  the  Securities  Exchange  Act of  1934,  as  amended  (the
"Exchange  Act"),  as the case may be.  Accurate and complete  copies of the SEC
reports  have been  available  to Buyer.  As of their  respective  dates the SEC
Reports (including all exhibits and schedules thereto and documents incorporated
by reference therein) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the  statements  therein,  in light of the  circumstances  under which they were
made, not misleading.

     3.22  Environmental.  Except  as would  not,  singly  or in the  aggregate,
reasonably be expected to have a Material  Adverse Event,  (A) the Company is in
compliance with all applicable  Environmental  Laws (as defined below),  (B) the
Company  has all  permits,  authorizations  and  approvals  required  under  any
applicable Environmental Laws and is in compliance with the requirements of such
permits  authorizations  and approvals,  and (C) there are no pending or, to the
best  knowledge  of the Company,  threatened  Environmental  Claims  against the
Company.

For purposes of this  Agreement,  the  following  terms shall have the following
meanings:  "Environmental  Law"  means any United  States  (or other  applicable
jurisdiction's)   Federal,   state,  local  or  municipal  statute,  law,  rule,
regulation,  ordinance,  code,  policy or rule of common law and any judicial or
administrative  interpretation thereof, including any judicial or administrative

                                       11

<PAGE>

order, consent decree or judgement, relating to the environment,  health, safety
or any chemical, material or substance, exposure to which is prohibited, limited
or regulated by any governmental authority. "Environmental Claims" means any and
all  administrative,  regulatory or judicial  actions,  suits,  demands,  demand
letters, claims, liens, notices of noncompliance or violation, investigations or
proceedings relating in any way to any Environmental Law.

     3.23 Properties.  The Company does not own any real property. The Company's
personal  properties are, in the aggregate,  in good repair (reasonable wear and
tear  excepted),  suitable for their  respective  uses, and free from any liens,
charges  or  encumbrances,  other  than those  imposed  in  connection  with the
Company's  credit  facilities or capital leases  disclosed in the SEC Reports or
the Schedule of Exceptions.  Any real properties held under lease by the Company
are held by them  under  valid,  subsisting  and  enforceable  leases  with such
exceptions  as are not  material  and do not  interfere  with the conduct of the
business of the Company.

     4.  Representations  and  Warranties  of  the  Investors.  Each   Investor,
severally and not jointly, represents and warrants to the Company as follows:

     4.1  Authorization.  When  executed  and  delivered  by the  Investor,  and
assuming  execution and delivery by the Company,  the  Transactional  Agreements
will  each  constitute  a  valid  obligation  of the  Investor,  enforceable  in
accordance with its terms.

     4.2 Investment.  This  Agreement is made with the Investor in reliance upon
its  representation  to the Company,  which by the Investor's  execution of this
Agreement Investor hereby confirms, that the Shares, the Warrant and the Warrant
Shares to be  received  by the  Investor  will be acquired  for  investment  for
Investor's  own account,  not as a nominee or agent,  and not with a view to the
sale or distribution  of any part thereof,  and that the Investor has no present
intention of selling,  granting any participation in, or otherwise  distributing
any of the Shares,  the  Warrants  or the  Warrant  Shares.  By  executing  this
Agreement, the Investor further represents that it has no contract, undertaking,
agreement,   or  arrangement  with  any  person  to  sell,  transfer,  or  grant
participation to such person or to any third person,  with respect to any of the
Shares, the Warrant or the Warrant Shares.

     4.3 No Public Market.  The  Investor  understands and acknowledges that the
offering of the Shares,  the  Warrant  and the Warrant  Shares  pursuant to this
Agreement  will not be registered  under the  Securities Act on the grounds that
the offering and sale of securities  contemplated  by this  Agreement are exempt
from  registration  pursuant to Section 4(2) of the Securities Act, and that the
Company's   reliance  upon  such   exemption  is  predicated   upon   Investor's
representations as set forth in this Agreement. The Investor further understands
that no public market now exists for any of the securities issued by the Company
and that the  Company  has given no  assurances  that a public  market will ever
exist for the Company's securities.

                                       12

<PAGE>

     4.4  Limitations on  Transferability.  Investor  covenants that in no event
will it dispose of any of the Shares,  the Warrant or the Warrant  Shares (other
than pursuant to Rule 144 promulgated by the Commission under the Securities Act
("Rule  144") or any  similar or  analogous  rule or  pursuant  to an  effective
registration  statement  under the  Securities  Act)  unless  and until  (a) the
Investor shall have notified the Company of the proposed  disposition  and shall
have furnished the Company with a statement of the circumstances surrounding the
proposed  disposition,  and (b) if requested by the Company,  the Investor shall
have furnished the Company with an opinion of counsel  satisfactory  in form and
substance to the Company and the  Company's  counsel to the effect that (i) such
disposition  will  not  require   registration  under  the  Securities  Act  and
(ii) appropriate action necessary for compliance with the Securities Act and any
applicable  state,  local,  or foreign law has been taken.  Notwithstanding  the
limitations  set  forth  in  the  foregoing  sentence,  if  the  Investor  is  a
partnership or limited liability company, it may transfer Shares, the Warrant or
the Warrant Shares to its  constituent  partners or members or a retired partner
or member of such  partnership or Company who retires after the date hereof,  or
to the  estate of any such  partner,  member  or  retired  partner  or member or
transfer  by gift,  will,  or  intestate  succession  to any such  partner's  or
member's  spouse or lineal  descendants  or ancestors  without the  necessity of
registration  or opinion of  counsel if the  transferee  agrees in writing to be
subject to the terms of this  Agreement  to the same  extent if such  transferee
were an Investor;  provided,  however,  that  Investor  hereby  covenants not to
effect such transfer if such transfer  either would  invalidate  the  securities
laws exemptions  pursuant to which the Shares, the Warrant or the Warrant Shares
were  originally  offered and sold or would itself require  registration  and/or
qualification under the Securities Act or applicable state securities laws. Each
certificate evidencing the Shares, the Warrant or the Warrant Shares transferred
as above provided  shall bear the  appropriate  restrictive  legend set forth in
Section 5 below,  except that such certificate shall not bear such legend if the
transfer  was made in  compliance  with  subsection (k)  of  Rule 144  or if the
opinion of counsel  referred to above is to the further  effect that such legend
is not  required in order to establish  compliance  with any  provisions  of the
Securities Act.

     4.5 Experience;  Receipt of  Information.  The  Investor  represents  that:
(a) it has such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of its  prospective  investment in
the Shares, the Warrant and the Warrant Shares;  (b) it believes it has received
all the information it has requested from the Company and considers necessary or
appropriate  for  deciding  whether to obtain the  Shares,  the  Warrant and the
Warrant  Shares;  (c) it  has had  the  opportunity  to  discuss  the  Company's

                                       13

<PAGE>

business,  management,  and  financial  affairs with the  Company's  management;
(d) it has the ability to bear the economic risks of its prospective investment;
and (e) it is able, without  materially  impairing its financial  condition,  to
hold the Shares,  the Warrant and the Warrant Shares for an indefinite period of
time and to suffer a complete loss on its investment.

     4.6 Accredited  Investor.  The  Investor presently qualifies and will as of
the Closing Date  qualify,  as an  "accredited  investor"  within the meaning of
Regulation D of the rules and regulations promulgated under the Securities Act.

     4.7  Confidentiality.  The  Investor agrees that it will keep  confidential
and will not use,  disclose or divulge for a period of two years after  receipt,
any  information  which such  Investor may obtain from the Company,  pursuant to
financial  statements,  reports and other materials  submitted by the Company as
required  hereunder  or under any other  documents,  or pursuant to  information
rights  granted under the Rights  Agreement or any other  documents  unless such
information is known,  or until such  information  becomes known,  to the public
through no fault of such Investor or its agents,  or unless the President of the
Company gives his written consent to the Investor's release of such information,
except that no such written  consent shall be required  (and  Investor  shall be
free to release  such  information)  if such  information  is to be  provided to
Investor's counsel or accountant, or to an officer,  director,  general partner,
limited partner, shareholder, investment counselor or advisor, or employee of an
Investor with a need to know such  information;  provided that any such counsel,
accountant,  officer, director,  general partner, limited partner,  shareholder,
investment counselor or advisor, or employee shall be bound by the provisions of
this  Section 4.7.  Notwithstanding  the foregoing,  this Section 4.7  shall not
apply (a) to  information  which an Investor  learns from a third party with the
right to make such disclosure,  provided Investor complies with the restrictions
imposed by the third party, (b) to information which is in Investor's possession
prior to the time of  disclosure  by the  Company  and not  acquired by Investor
under a confidentiality obligation,  (c) to the minimum extent (after requesting
and pursuing  confidential  treatment  to the extent  reasonably  possible)  the
Investor  is  required to disclose  such  information  by law or a  governmental
regulatory  authority,  (d) to the minimum extent (after requesting and pursuing
confidential  treatment to the extent reasonably  possible) Investor is required
to disclose such information by court order.

     4.8 Brokers and Finders.  The  Investor  has not  retained  any  investment
banker,  broker,  or finder in connection with the transactions  contemplated by
this Agreement.

                                       14

<PAGE>

     5. Legends.

     5.1 The Warrants  and  certificates  for the Shares and the Warrant  Shares
shall bear such  restrictive  legends as the Company and the  Company's  counsel
deem necessary or advisable under  applicable law or pursuant to this Agreement,
including, without limitation, the following:

     "THE  SECURITIES  REPRESENTED  HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND
     HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
     "ACT"),  OR APPLICABLE  STATE  SECURITIES LAWS. THESE SECURITIES MAY NOT BE
     SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR TRANSFERRED IN THE ABSENCE
     OF SUCH REGISTRATION  UNLESS THE TRANSFER IS IN ACCORDANCE WITH RULE 144 OR
     A  SIMILAR  RULE AS THEN IN  EFFECT  UNDER  THE ACT,  OR  APPLICABLE  STATE
     SECURITIES  LAWS OR UNLESS THE  CORPORATION  RECEIVES AN OPINION OF COUNSEL
     REASONABLY  ACCEPTABLE  TO IT STATING  THAT SUCH SALE OR TRANSFER IS EXEMPT
     FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT."

     5.2 The Warrants  and  certificates  evidencing  the Shares and the Warrant
Shares  shall also bear any legend  required  pursuant to any state,  local,  or
foreign law governing such securities.

     6.  Conditions of Investors'  Obligations at  Closing.  The  obligations of
each Investor under  Section 1 of this Agreement are subject to the  fulfillment
at or before the Closing of each of the following  conditions,  any of which may
be waived in writing by such Investor:

     6.1 Representations and Warranties.  The  representations and warranties of
the Company contained in Section 3 shall be true in all material respects on and
as of the  Closing  with the same  effect  as if made on and as of the  Closing,
except (a) to the extent such  representations  and warrants speak of an earlier
date, in which case, they shall be true and correct in all material  respects as
of such earlier date and (b) for representations qualified by materiality, which
shall be correct in all respects.

     6.2  Performance.  The  Company  shall have  performed  or fulfilled in all
material respects all agreements,  obligations,  and conditions contained herein
required to be performed or fulfilled by the Company before the Closing.

                                       15

<PAGE>

     6.3 Proceedings Satisfactory;  Compliance  Certificate.  All  corporate and
legal  proceedings  taken by the  Company in  connection  with the  transactions
contemplated  by this  Agreement and all  documents and papers  relating to such
transactions  shall be reasonably  satisfactory  to the  Investors.  The Company
shall have  delivered to the  Investors a  certificate  dated as of the Closing,
signed by the Company's CEO and  President,  certifying  that the conditions set
forth in Sections 6.1 and 6.2 have been satisfied.

     6.4 Rights  Agreement.  The  Company and the  Investors  shall have entered
into the Rights Agreement in substantially the form attached as Exhibit 6.4.

     6.5 Articles of  Amendment.  The  Company  shall have filed its Articles of
Amendment with the Secretary of State of the State of Washington, which Articles
of Amendment shall be in full force and effect on the Closing Date.

     6.6 Opinion of the Company's  Counsel.  The  Investors  shall have received
from Heller  Ehrman White & McAuliffe  LLP,  legal  counsel for the Company,  an
opinion dated the Closing Date, substantially in the form of Exhibit 6.6 hereto.

     6.7 Approvals  and  Consents.  All transfers of permits or licenses and all
approvals of or notices to public agencies,  federal,  state,  local or foreign,
the  granting or  delivery of which is  necessary  for the  consummation  of the
transactions contemplated hereby, including, if applicable, approvals or notices
required  by  the  Hart-Scott-Rodino  Antitrust  Improvements  Act of  1976,  as
amended,  or for  the  continued  operation  of the  Company,  shall  have  been
obtained, and all waiting periods specified by law shall have passed.

     6.8 Agreement as to Registration  Rights.  The  Investors,  the Company and
Sam  Rubinstein  shall have  reached a mutually  acceptable  agreement as to the
priority  between  Mr.  Rubinstein  and the  Investors  with  respect  to  their
respective  rights to  include  shares  in a  registration  of shares  under the
Securities Act effected by the Company.

     7. Conditions of the Company's Obligations at Closing.  The  obligations of
the Company under  Section 1 of this Agreement are subject to the fulfillment at
or before the Closing of each of the following  conditions,  any of which may be
waived in writing by the Company.

     7.1 Representations and Warranties.  The  representations and warranties of
the Investors  contained in Section 4 shall be true in all material  respects on
and as of the Closing with the same effect as if made on and as of the Closing.

                                       16

<PAGE>

     7.2 Payment of Purchase  Price.  Each  Investor shall have delivered to the
Company in accordance  with Section 1.2 the purchase price  specified in Section
1.1.

     7.3 Articles of Amendment.  The Articles of Amendment shall have been filed
with the  Secretary  of State of the  State of  Washington  and shall be in full
force and effect on the Closing Date.

     7.4 Rights  Agreement.  The  Company and the  Investors  shall have entered
into the Rights Agreement in substantially the form attached as Exhibit 6.4.

     8. Covenants of the Company.

     8.1 Use of Proceeds.  The Company  shall use the proceeds  from the sale of
the Series A Preferred Stock under this Agreement to hire additional  members of
the Company's  management team, build the Company's  Internet-related  business,
and for marketing and general corporate purposes.

     8.2  Management.  From and after the date of this  Agreement,  the  Company
shall use its reasonable best efforts, including, without limitation,  retaining
recruiting  firms,  making its management  available for interviews and offering
stock  option  packages  deemed  necessary  and  appropriate  by  the  Board  of
Directors,  to recruit a Chief Operating Officer and such additional officers as
the Board of Directors deems advisable.

     9. Miscellaneous.

     9.1 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.

     9.2 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.

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

     9.4 Notices.  Any  notice required or permitted hereunder shall be given in
writing  and  shall be  conclusively  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

                                       17

<PAGE>

Company's  name on the  signature  page of this  Agreement,  and  (ii) if  to an
Investor,  at such Investor's address as set forth below such Investor's name on
the signature page to this 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.

     9.5  Amendment  of  Agreement.  Any  provision  of  this  Agreement  may be
amended,  and the  obligations of the Company under this Agreement may be waived
(either  generally  or in a  particular  instance  and either  retroactively  or
prospectively) by a written  instrument signed by the Company and by persons who
after the Closing will hold at least a majority of the aggregate of (a) the then
outstanding  Shares;  and (b) the then  outstanding  Common Stock into which the
Shares have been  converted,  other than Common Stock which has been sold to the
public.  Any amendment,  modification  or waiver  pursuant to, and in accordance
with,  this  Section  9.5 shall be binding on the  Company,  all  holders of any
securities  purchased  under this Agreement at the time  outstanding  (including
securities into which such securities are convertible) 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.

     9.6  Expenses.  The Company and the  Investors  will bear their  respective
legal and  other  fees and  expenses  with  respect  to this  Agreement  and the
transactions  contemplated hereby; provided,  however, if the sale of the Shares
is  consummated,  the  Company  shall pay the  reasonable  fees and  expenses of
counsel to Investors in an amount not to exceed an aggregate maximum of $20,000.

     9.7 Entire  Agreement;  Successors  and Assigns.  This  Agreement  (and the
Exhibits and Schedules  hereto) and the Rights  Agreement  constitute the entire
contract  between the Company and the Investors  relative to the subject  matter
hereof. Any prior and contemporaneous  agreement,  discussion,  understanding or
correspondence  between the Company and the Investors  regarding the purchase of
capital  stock of the Company is  superseded  by this  Agreement  and the Rights
Agreement.  Subject to the exceptions  specifically set forth in this Agreement,
the terms and conditions of this Agreement  shall inure to the benefit of and be
binding upon the respective executors,  administrators,  heirs, successors,  and
assigns of the parties.

     9.8  Severability.  If one or more provisions of this Agreement are held to
be  unenforceable  under  applicable  law, such provision shall be excluded from
this Agreement and the balance of the Agreement  shall be interpreted as if such
provision was so excluded and shall be enforceable in accordance with its terms.

                                       18

<PAGE>

     IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed  this  Series A
Preferred  Stock and  Warrant  Purchase  Agreement  as of the date  first  above
written.

Company:                   PHOTOWORKS, INC., a Washington corporation

                           By:  /s/ Gary Christophersen
                                Gary Christophersen, President and CEO

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

Investors:                 ORCA BAY PARTNERS

                           By:      /s/ Ross K. Chapin

                           Name:    Ross K. Chapin

                           Title:   Managing Member

                           Address: P.O. Box 21749
                                    Seattle, WA  98111

                                       19

  [Signature Page for Series A Preferred Stock and Warrant Purchase Agreement]

<PAGE>

                           MADRONA VENTURE FUND I-A, L.P.
                           By Madrona Investment Partners, LLC,
                           its General Partner

                           By:          /s/ Paul Goodrich

                           Name:        Paul Goodrich

                           Title:       Managing Director

                           Address:     1000 Second Avenue, Suite 3700
                                        Seattle, WA  98104

                           MADRONA VENTURE FUND I-B, L.P.
                           By Madrona Investment Partners, LLC,
                           its General Partner

                           By:          /s/ Paul Goodrich

                           Name:        Paul Goodrich

                           Title:       Managing Director

                           Address:     1000 Second Avenue, Suite 3700
                                        Seattle, WA  98014

                                      20

  [Signature Page for Series A Preferred Stock and Warrant Purchase Agreement]

<PAGE>

                           MADRONA MANAGING DIRECTOR FUND, LLC

                           By:          /s/ Paul Goodrich

                           Name:        Paul Goodrich

                           Title:       Managing Director

                           Address:     1000 Second Avenue, Suite 3700
                                        Seattle, WA  98014

                                      21

  [Signature Page for Series A Preferred Stock and Warrant Purchase Agreement]

<PAGE>

                           THE TAHOMA FUND, L.L.C.

                           By:          /s/ Ross Chapin

                           Name:        Ross Chapin

                           Title:       Managing Member

                           Address:     P.O. Box 21749
                                        Seattle, WA  98111

                           ORCA BAY CAPITAL CORPORATION

                           By:          /s/ Stanley McCammon

                           Name:        John E. McCaw, Jr.

                           Title:       Trustee

                           Address:     P.O. Box 21749
                                        Seattle, WA  98111

                                      22

  [Signature Page for Series A Preferred Stock and Warrant Purchase Agreement]

<PAGE>

                           TIM and ALEXA CARVER

                           By:          /s/ Tim Carver

                           Name:        Tim Carver

                           By:          /s/ Alexa Carter

                           Name:        Alexa Carver

                           Address:     P.O. Box 21749
                                        Seattle, WA  98111

                           STANLEY McCAMMON

                           By:          /s/ Stanley McCammon

                           Name:        Stanley McCammon

                           Address:     P.O. Box 21749
                                        Seattle, WA 98111

                           AARON SINGLETON

                           By:          /s/ Aaron Singleton

                           Name:        Aaron Singleton

                           Address:     P.O. Box 21749
                                        Seattle, WA  98111

                                      23

  [Signature Page for Series A Preferred Stock and Warrant Purchase Agreement]

<PAGE>

                                    EXHIBIT A

                              SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
                                     Number of                 Number of                  Total
            Name                  Shares Purchased          Warrant Shares            Purchase Price
            ----                  ----------------          --------------            --------------
<S>                               <C>                       <C>                       <C>
The Tahoma Fund, L.L.C.                    7,800                   410,526                $7,800,000

Orca Bay Capital Corporation               1,980                   104,211                $1,980,000

Tim and Alexa Carver                         100                     5,263                  $100,000

Stanley McCammon                             100                     5,263                  $100,000

Aaron Singleton                               20                      1053                   $20,000

Madrona Venture Fund I-A,
L.P.                                       4,032                   212,210                $4,032,000

Madrona Venture Fund I-B,
L.P.                                         465                    24,474                  $465,000

Madrona Managing Director
Fund, LLC                                    503                    26,474                  $503,000
                                          ------                   -------                ----------
Total                                     15,000                   789,474               $15,000,000

</TABLE>

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