PhotoWorks Inc. (OTC BB: FOTO), a Seattle-based provider of online photography services, has negotiated a $6.5 million recap round that includes financing from Sunra Capital Holdings, Orca Bay Partners and Madrona Venture Group. The deal still must be approved by shareholders. www.photoworks.com

Not sure the specifics of the recap but this may be a good PIPE investment for the VC investors (Madrona was an early investor in Amazon.com.)

PhotoWorks currently trades at 4.72M market cap and had $22M in revs last year.