Document:

EXHIBIT 10.7

                           OPTIONAL EXCHANGE AGREEMENT
                           ---------------------------

     This AGREEMENT is made this 2nd day of July, 2001, by and between WOW
ENTERTAINMENT, INC., a Delaware corporation (the "Company"), Carter Fortune
("Fortune") and MURPHY DEVELOPMENT, LTD. (the "LLC").

         1.       Nature of the Transaction.

                  (a) Fortune has loaned Five Hundred Thousand Dollars
         ($500,000.00) to LLC, which loan is represented by an Exchangeable
         Promissory Note of even date herewith. In addition, Fortune will loan
         up to Two Million Two Hundred Fifty Thousand Dollars ($2,250,000.00) to
         LLC, which loan is represented by an Exchangeable Line of Credit
         Promissory Note of even date herewith (collectively the "Notes").

                  (b) At the option of Fortune, all or any portion of the unpaid
         principal and accrued interest under the Notes may be exchanged into
         common stock ("Exchange Shares") of Company. This option may be elected
         at any time prior to the maturity date of the Notes. The portion of the
         unpaid principal and accrued interest elected to be exchanged shall be
         converted into that number of shares of common stock equal to the
         quotient of (i) such applicable portion of the unpaid principal and
         interest, divided by (ii) $0.407401. For example, if $500,000 of unpaid
         principal and accrued interest was converted, 1,227,292 common shares
         would be issued by Company. If Fortune desires to make this election,
         he shall notify LLC and Company, in writing, of his intent. A closing
         shall occur within thirty (30) days of such written notice. At closing,
         Fortune shall surrender the applicable note and Company shall issue the
         Exchange Shares to Fortune. If only a portion of the unpaid principal
         and accrued interest is exchanged, LLC shall issue a new note to
         Fortune in the amount of the unpaid principal and accrued interest that
         was not exchanged. The new note shall have substantially similar terms
         to the note that was surrendered.

         2.       Representations of Company. Company represents and warrants
to Fortune that:

                  (a) Company is a corporation duly organized, validly existing
         and in good standing under the laws of its state of incorporation and
         has full power and authority to enter into this Agreement and to carry
         out the transaction contemplated herein. This Agreement constitutes the
         valid and legally binding obligation of Company, enforceable in
         accordance with the terms and conditions.

                  (b) Company's authorized capital stock consists of 150,000,000
         shares of Common Stock, $.01 par value, and 1,000,000 shares of
         Preferred Stock, $0.01 par value. Company has full right and authority
         to issue to Fortune, upon the terms and conditions set forth in this
         Agreement, the shares specified by this Agreement and, pursuant to the
         terms and conditions hereof, the shares will be duly and validly issued
         as fully paid and nonassessable shares of Company's common stock.

         3.       Representations and Warranties of Fortune. Fortune represents
and warrants to Company that:

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                  (a) Lack of Restrictions. As of the date of this Agreement and
                  as of the date of any exchange, Fortune holds of record and
                  owns beneficially the Notes, free and clear of any
                  restrictions on transfer (other than any restrictions under
                  the Securities Act and state securities laws) encumbrances,
                  security interests, options, warrants, purchase rights,
                  contracts, commitments and/or equities. Fortune is not a party
                  to any option, warrant, purchase right or other contract or
                  commitment that could require Fortune to sell, transfer or
                  otherwise dispose of the Notes (other than this Agreement).

                  (b) Accredited Investor. Fortune is an "accredited investor"
                  as that term is defined in Regulation D of the Securities Act
                  and has sufficient knowledge and experience in financial and
                  business matters that he is capable of evaluating the merits
                  and risks of the transaction contemplated by this Agreement
                  and making an informed business decision.

         4.       Certificate for the Exchange Shares. Upon issuance of the
Exchange Shares, Company shall forthwith deliver a duly executed certificate
evidencing ownership of the Exchange Shares in the name of Fortune individually,
which certificate shall bear the usual restrictive legend pertaining to Rule 144
of the General Rules and Regulations promulgated under the Securities Act of
1933.

         5.       Tax Consequences. Each party represents that it/he has
consulted with its/his own tax advisors and has made has made its/his own
independent conclusion regarding the tax consequences of the intended
transaction.

         6.       Assignment. This Agreement may not be assigned nor any of the
performances hereunder delegated by operation of law or otherwise by any
party hereto, and any purported assignment or delegation shall be void.

         7.       Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, successors,
legal representatives, assigns and transferors.

         8.       Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof. There
are no representations, warranties, conditions or other obligations except as
specifically provided. Any waiver, amendment or modification hereof must be in
writing. A waiver in one instance shall not be deemed to be a continuing waiver
or waiver in any other instance.

         9.       Arbitration. Any and all disputes, claims and controversies
arising under or by reason of this Agreement shall be settled by arbitration in
accordance with the rules of the American Arbitration Association and any award
rendered in such arbitration shall be binding and conclusive upon the parties.
The arbitrators may decree specific performance or grant

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injunctions or any other equitable relief deemed proper by the arbitrators under
the circumstances. Such arbitration shall be held in Indianapolis, Indiana.
Judgment on any award may be entered and enforced in any court located in
Indianapolis, Indiana.

         10. Notices. Any written notice permitted or required hereunder shall
be effective when (a) mailed by certified United States mail, postage prepaid
with return receipt requested, or (b) sent by an overnight carrier which
provides for a return receipt, to the applicable address specified below:

                  If to LLC:         Murphy Development, Ltd.
                                     111 Monument Circle, Suite #4600
                                     Indianapolis, Indiana 46204

                  If to Company:     WOW Entertainment, Inc.
                                     111 Monument Circle, Suite #4600
                                     Indianapolis, Indiana 46204

                  If to Fortune:     Carter M. Fortune
                                     P.O. Box 70
                                     Freedom, Indiana 47431

or to such other addresses as Company, LLC or Fortune may from time to time
specify for itself/himself by notice hereunder.

         11. Governing Law. This Agreement shall be construed and interpreted
in accordance with the laws of the State of Indiana.

         12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
deemed executed upon receipt of a facsimile copy bearing signatures of the
parties, provided that a complete document bearing original signatures is
assembled within five business days of such execution.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.

                                              MURPHY DEVELOPMENT, LTD.
                                              By its Manager and Sole Member:

/s/ Carter Fortune                            /s/ Douglas E. May
-------------------------------               ---------------------------------
Carter Fortune, Individually                  Douglas E. May, CFO
                                              WOW Entertainment, Inc.
Date:  July 2, 2001

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WOW ENTERTAINMENT, INC.

By: /s/ Douglas E. May
    ----------------------------
    Douglas E. May, CFO

Date:  July 2, 2001

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                        [OUTPOST.COM LOGO APPEARS HERE]

                                                                    EXHIBIT 10.5

February 14, 2001

Mr. Darryl Peck

Dear Darryl:

I have been asked by the Compensation Committee to communicate to you the agreed
payments and benefits you are eligible to receive in connection with your role
as Chairman of the Board of Directors at Cyberian Outpost, Inc.

   .  Effective January 1, 2001, Outpost agrees to pay you $8,333 as a monthly
      Chairman fee. All taxes, withholding and Social Security payments will be
      your responsibility. You will be issued Form 1099 at calendar year end.

   .  You are eligible to participate in the Company's Medical Plan offered
      through Physician Health Services. Outpost will continue to pay all
      premiums related to this benefit.

   .  You are eligible to submit Travel & Expense reimbursement forms for
      reasonable and customary business related charges up to a maximum
      of $15,000.

   .  You will be paid a lump sum of $4,200 to continue your life insurance
      coverage with North Western Mutual. You will be issued Form 1099 at
      calendar year end.

As discussed at the Board meeting on January 9, these payments and benefits
will be reviewed annually. Enclosed, is your payment for January and February in
the amount of $16,666.00 and the above lump sum payment of $4,200.00. You can
expect your monthly payment within the first five business days of each month.

If you have any questions regarding the details of this letter please contact me
at (860) 927-8240.

Sincerely,

/s/ Micah Dowling
Micah Dowling
Executive Director, Human Resources

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