SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): ~~May~~January 714, ~~2007~~2008

PHOTOWORKS, INC.

(Exact name of registrant as specified in its charter)

Washington

000-15338

91-0964899

(State or other jurisdiction

(Commission File No.)

(IRS Employer

of incorporation)

Identification No.)

71 Columbia Street

Seattle, Washington 98104

(Address of principal executive office)

(206) 281-1390

(Registrant’s telephone number including area code)

~~Item 5.02. Departures~~Check ofthe ~~Directors~~appropriate orbox ~~Certain~~below ~~Officers;~~if ~~Election~~the ofForm ~~Directors;~~8-K ~~Appointment~~filing is intended to simultaneously satisfy the filing obligation of ~~Certain~~the ~~Officers;~~registrant ~~Compensatory~~under ~~Arrangements~~any of ~~Certain~~the ~~Officers~~following provisions (see General Instruction A.2. below):

~~Effective~~[ ~~May~~] 7,Written 2007, the Board of Directors of PhotoWorks, Inc. appointed Mr. David M. Douglass as its Vice President and Chief Financial Officer. Mr. Douglass is a partner of Tatum, LLC, an executive services firm that provides strategic and operating leadership in finance and information technology. In recent years as a Tatum Partner, Mr. Douglass has served as CFO of a multi-state group of heavy duty truck dealerships, a subsidiary of a publicly-traded provider of mobile data communications ~~solutions~~pursuant ~~and~~to aRule ~~tax-exempt,~~425 ~~multi-location~~under ~~air~~the ~~ambulance~~Securities ~~service~~Act ~~providing~~(17 ~~emergency~~CFR ~~medical transport~~230.425)

~~Prior~~[ to] ~~joining~~Soliciting ~~Tatum,~~material ~~Mr.~~pursuant Douglass was involved in technology startups. He served as CFO of The Cobalt Group (NASDAQ: CBLT) during its final venture capital stages and IPO process. The Cobalt Group is a leading provider of internet products and services to ~~the~~Rule ~~automotive~~14a-12 ~~industry. Prior~~under ~~to Cobalt, Mr. Douglass climbed~~ the ~~corporate~~Exchange ~~ladder~~Act ~~at PACCAR Inc~~ (~~NASDAQ:~~17 ~~PCAR),~~CFR ~~a worldwide manufacturer of transportation equipment where he held the positions of Director of Internal Audit and Managing Director of Foden Trucks, based in England~~240. 14a-12)

~~Mr.~~[ ~~Douglass~~] ~~earned~~Pre-commencement acommunications ~~B.A.~~pursuant ~~summa~~to ~~cum~~Rule ~~laude~~14d-2(b) ~~from~~under the ~~University~~Exchange ofAct ~~Puget~~(17 ~~Sound~~CFR ~~and a M~~240.~~B.A. from the University of Washington. He also attended Duke University’s Advanced Management Program at the Fuqua School of Business. He is a certified public accountant~~ 14d-2(~~inactive~~b).)

~~The~~[ ~~Company~~] ~~will~~Pre-commencement ~~pay~~communications ~~Mr.~~pursuant ~~Douglass~~to aRule ~~salary of $24,000 a month and will pay Mr. Douglass a quarterly cash bonus of $~~13e-4~~,000~~(c) aunder ~~month, with~~ the ~~goals~~Exchange ~~that~~Act ~~will~~(17 ~~warrant~~CFR ~~such quarterly bonus to be agreed upon by May 31, 2007~~240.13e-4(c))

InItem ~~addition, the Company will pay directly to Tatum LLC a fee of $6,000 a month as partial compensation for resources provided~~5. ~~The~~01. ~~Company~~Changes ~~will~~in ~~pay~~Control ~~Tatum a quarterly cash bonus~~ of ~~$1,000 a month during the term of this agreement, with the goals that will warrant such quarterly bonus to be agreed upon by Tatum and the Company by May 31, 2007~~Registrant.

~~The~~As ~~Company~~previously ~~will~~announced, ~~have~~on noNovember ~~obligation~~28, to2007, ~~provide~~PhotoWorks, MrInc. ~~Douglass any stock~~, ~~employee~~a ~~retirement~~Washington ~~and/or~~corporation ~~401~~(k“PhotoWorks”), ~~plan~~entered ~~benefits. In~~into ~~lieu~~an ofAgreement ~~Mr.~~and ~~Douglass~~Plan ~~participating~~of inMerger (the ~~Company-sponsored~~“Merger ~~employee~~Agreement”) ~~medical~~with ~~insurance~~AG.com, ~~benefit plan~~Inc., ~~the~~a ~~Company~~Delaware ~~will~~corporation ~~reimburse~~(“AG”), ~~Mr.~~which ~~Douglass~~is ~~for~~an ~~amounts~~indirect, ~~paid~~wholly-owned bysubsidiary ~~him~~of ~~for~~American ~~medical~~Greetings ~~insurance~~Corporation, ~~for~~an ~~himself~~Ohio ~~and~~corporation ~~his~~(“American ~~family. Mr.~~Greetings”), ~~Douglass’~~and ~~employment~~Photo ~~with~~Merger ~~the~~Corp., ~~Company~~a ~~may~~Washington becorporation ~~terminated~~and bya ~~either~~wholly-owned ~~party~~subsidiary atof ~~any~~AG ~~time~~(the ~~without cause~~“Purchaser”).

~~SIGNATURE~~On December 13, 2007, pursuant to the Merger Agreement, Purchaser commenced a tender offer (the “Offer”) to acquire all of the outstanding shares of PhotoWorks common stock, par value $0.01 per share (the “Shares”) at a purchase price of 59.5 cents per Share, net to sellers in cash. The Offer expired at 5:00 p.m., New York City time, on Monday, January 14, 2008. According to Mellon Investor Services LLC, the depositary for the Offer, as of such time, a total of 40,620,486 Shares (representing approximately 97% of the outstanding Shares), were tendered and not withdrawn prior to the expiration of the Offer.

~~Pursuant~~Following to the ~~requirements~~expiration of the ~~Securities~~Offer, ~~Exchange~~on ~~Act~~January of14, ~~1934~~2008, ~~the~~Purchaser ~~Company~~accepted ~~has~~for ~~duly~~payment ~~caused~~all ~~this~~Shares ~~report~~validly totendered beand ~~signed~~not onwithdrawn ~~its~~prior ~~behalf~~to bythe expiration of the ~~undersigned~~Offer. Following ~~hereunto~~such ~~duly~~acceptance, ~~authorized~~there was a change in control of PhotoWorks, and AG and Purchaser beneficially owned approximately 97% of the outstanding Shares.

~~PHOTOWORKS~~Subject to the terms and conditions in the Merger Agreement, ~~INC~~Purchaser will acquire the remaining outstanding Shares by means of a merger under Washington law (the “Merger”). In the Merger, each outstanding Share (except for the Shares purchased in the Offer and certain other Shares) will automatically be converted into the right to receive 59.5 cents per share in cash. Purchaser estimates that the total amount of funds required to purchase all outstanding Shares pursuant to the Offer and to complete the Merger and to pay related fees and expenses will be approximately $26.8 million, excluding PhotoWorks’s fees and expenses. American Greetings has available the necessary funds from its ongoing free cash flow, its affiliates or its existing revolving credit facility to complete the Offer and the Merger, and will cause Purchaser to have sufficient funds available to complete the Offer and the Merger.

~~Date:~~Item ~~May~~8.01. 9,Other ~~2007 By: /s/ Andrew Wood~~Events.

~~Andrew~~On ~~Wood~~January 15, 2008, American Greetings issued a press release announcing the completion of the Offer. A copy of such press release is attached as Exhibit 99.1 hereto and is incorporated herein by reference.

~~Chief~~Item ~~Executive~~9.01. ~~Officer~~Financial Statements and Exhibits.

(d)

Exhibits.

99.1

Press Release issued by American Greetings on January 15, 2008.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, PhotoWorks has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

PHOTOWORKS, INC.

January 18, 2008

By:

/s/ Andrew Wood

Andrew Wood

Chief Executive Officer

American Greetings Announces Completion of Tender Offer for PhotoWorks, Inc.

CLEVELAND, Jan. 15 /PRNewswire-FirstCall/ -- American Greetings Corporation (NYSE: AM) today announced the successful completion of its tender offer, through a wholly owned subsidiary, to acquire all outstanding shares of common stock of PhotoWorks, Inc. (OTC Bulletin Board: PHTW) for 59.5 cents per share or approximately $26.5 million.

The initial offering period for the tender offer ended at 5:00 p.m., New York City time, on Monday, January 14, 2008. At the close of the tender offer period approximately 40.8 million shares of PhotoWorks common stock (including approximately 10 million shares tendered under guaranteed delivery procedures) had been validly tendered and not withdrawn, representing about 97% of the outstanding shares of PhotoWorks common stock. All shares that were validly tendered and not withdrawn have been accepted for purchase.

American Greetings intends to acquire all of the remaining PhotoWorks common stock by means of a merger under Washington law at the same price per share paid in the tender offer. Upon completion of the merger, the surviving entity will become an indirect wholly owned subsidiary of American Greetings.

About American Greetings Corporation

American Greetings Corporation (NYSE: AM) is one of the world's largest manufacturers of social expression products. Along with greeting cards, its product lines include gift wrap, party goods, stationery, calendars, ornaments and electronic greetings. Located in Cleveland, Ohio, American Greetings generates annual revenue of approximately $1.7 billion. For more information on the Company, visit http://corporate.americangreetings.com.

Certain statements in this release may constitute forward-looking statements within the meaning of the Federal securities laws. These statements can be identified by the fact that they do not relate strictly to historic or current facts. They use such words as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of the proposed acquisition and future operating or financial performance of American Greetings. By their nature forward-looking statements involve risks and uncertainties that could cause actual results to materially differ from those anticipated in the statements. With respect to the proposed acquisition, these risks and uncertainties include, but are not limited to the ability to successfully complete the proposed acquisition on a timely basis and the ability to achieve the desired benefits associated with the proposed acquisition. In addition, this release contains time-sensitive information that reflects management's best analysis as of the date of this release. American Greetings does not undertake any obligation to publicly update or revise any forward- looking statements to reflect future events, information or circumstances that arise after the date of this release. Further information concerning issues that could materially affect financial performance related to forward-looking statements can be found in American Greetings' and PhotoWorks' periodic filings with the SEC, including the "Risk Factors" section of American Greetings' Annual Report on Form 10-K for the fiscal year ended February 28, 2007 and the "Risk Factors" section of PhotoWorks' Annual Report on Form 10- KSB for the fiscal year ended September 30, 2007.

SOURCE American Greetings Corporation

CONTACT: Gregory M. Steinberg, Treasurer and Director of Investor

Relations, American Greetings Corporation, +1-216-252-4864,

investor.relations@amgreetings.com

Web site: http://corporate.americangreetings.com

(AM PHTW)

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