Exhibit 10.7

Form of  FAO, INC.STOCK OPTION AGREEMENT(Granted under the 2001 Employee Stock Option Plan)

Option No. ***

This Stock Option Agreement (this "Agreement") is entered into as
of                        , (the
"Grant Date"), by and between FAO, Inc., a Delaware corporation (the "Company"), and ***(the
"Optionee") pursuant to the Company's 2001 Employee Stock Option Plan (the
"Plan"). All initially capitalized terms not expressly defined herein shall have the meanings assigned thereto in the Plan.

1.Grant of Option.The Company hereby grants to the Optionee an option (this
"Option") to purchase all or any portion of a total of***shares (the
"Shares") of the common stock of the Company, no par value (the "Stock") at a purchase price of
$[] per share (the "Exercise Price"), subject to the terms and
conditions set forth herein. This Option is [not] intended to qualify as an "incentive stock option" as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). [Notwithstanding such designation, however, to the extent that the aggregate Fair Market Value (determined as of the
Grant Date) of the Stock with respect to which incentive stock options, including this Option, first become exercisable by Optionee during any calendar year (under the Plan and any other incentive
stock option plan(s) of the Company or any Affiliate) exceeds $100,000, all later granted incentive stock options, including, if applicable, this Option, shall be treated as a Nonqualified Option. In
making this determination, incentive stock options shall be taken into account in the order in which they were granted.]

2.Vesting of Option.The right to exercise this Option shall vest in installments, and this Option shall be
exercisable from time to time in whole or in part as to any vested installment, as follows:



No
additional shares shall vest after the date of termination of the Optionee's employment relationship with the Company, but this Option shall continue to be exercisable in accordance with Section 3below with respect to that number of shares that have vested as of the date of termination of such employment relationship.

3.Term of Option.The Optionee's right to exercise this Option shall terminate upon the earliest of:



Whether
authorized leave of absence, absence on military or government service, or any other absence from service shall constitute a termination of the employment relationship between the Optionee and
the Company and all Affiliates shall be determined by the committee appointed by the Board of

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Directors of the Company, or, to the extent it chooses to operate as the committee, the Board of Directors of the Company (the "Committee") at the time
thereof;



A
transfer by the Optionee, without an intervening period, between the Company and a subsidiary or parent of the Company, or between subsidiaries and/or parents, shall not be considered
a termination the employment relationship between the Company and Optionee. Notwithstanding anything contained in the Plan to the contrary, in the event of severance of the employment relationship
between the Optionee and the Company and all Affiliates as described in Section 3(c) or (d), this Option shall become immediately and fully exercisable.

4.Exercise of Option.Subject toSection 3, the portion
of this Option that has vested may be exercised in whole or in part by the Optionee (or, after his or her death, by the person designated in Section 5) by delivery of the following to the Company
at its principal executive offices:



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The
Committee may permit the Optionee to elect to pay the exercise price upon exercise of this Option by authorizing a third-party broker to sell all or a portion of the shares of Stock
acquired upon exercise of this Option and remit to the Company a sufficient portion of the sale proceeds to pay the exercise price and any applicable tax withholding resulting from such exercise.

This
Option may not be exercised for a fraction of a share of Stock.

5.Non-Transferability; Death of Optionee.This Option is not transferable by the Optionee other
than by will or under the laws of descent and distribution, and is exercisable, during the Optionee's lifetime, only by him or her. In the discretion of the Committee, any attempt to transfer this
Option other than under the terms of the Plan and this Agreement may terminate this Option. After the death of the Optionee, the Optionee's executors, administrators or any person or persons to whom
this Option may be transferred by will or by the laws of descent and distribution, shall have the right, at any time prior to the termination of this Option to exercise this Option, in respect to the
number of shares that the Optionee would have been entitled to exercise if the Optionee exercised this Option prior to the Optionee's death.

6.Representations, Warranties and Acknowledgments of Optionee.



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7.Limitation of Company's Liability for Nonissuance.The Company shall not be required to sell or issue any
Stock under this Option if issuing that Stock would constitute or result in a violation by the Optionee or the Company of any provision of any law, statute or regulation of any governmental authority.
The determination by the Committee on this matter shall be final, binding and conclusive. The Company may, but shall in no event be obligated to, register any Stock covered by the Plan pursuant to
applicable securities laws of any country or any political subdivision. In the event the Stock issuable on exercise of this Option is not registered, the Company may imprint on the certificate
evidencing the Stock any legend that counsel for the Company considers necessary or advisable to comply with applicable law. The Company shall not be obligated to take any other affirmative action in
order to cause the exercise of an Option, or the issuance of shares pursuant thereto, to comply with any law or regulation of any governmental authority.

8.Adjustments Upon Changes in Capital Structure, Merger, Etc.



"Change in Control"means the occurrence during the term of the Plan of:



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Notwithstanding
the foregoing, if an Optionee's employment is terminated and the Optionee reasonably demonstrates that such termination (x) was at the request of a third party who
has indicated an intention or taken steps reasonably calculated to effect a Change in Control and who effectuates a Change in Control or (y) otherwise occurred in connection with, or in
anticipation of, a Change in Control which actually occurs, then for all purposes hereof, the date of a Change in Control with respect to the Optionee shall mean the date immediately prior to the date
of such termination of employment.

A
Change in Control shall not be deemed to occur solely because fifty percent (50%) or more of the then outstanding Voting Securities is Beneficially Owned by (x) a trustee or
other fiduciary holding securities under one or more employee benefit plans or arrangements (or any trust forming a part thereof) maintained by the Company or any Controlled Entity or (y) any
corporation which, immediately prior to its acquisition of such interest, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of stock in the
Company immediately prior to such acquisition. Notwithstanding any other provision hereof, a merger by the Company with and into a wholly-owned subsidiary shall not be deemed a Change in Control.

9.No Employment Contract Created.The granting of this Option shall not constitute an employment contract,
express or implied, nor impose upon the Company or any Affiliate any obligation to employ or continue to employ, or utilize the services of, Optionee. The right of the Company or any Affiliate to
terminate the employment of Optionee shall not be diminished or affected by reason of the fact that this Option has been granted Optionee.

10.Rights as Shareholder.The Optionee (or a Successor pursuant to Section 5) shall have no rights as a stockholder
with respect to Stock covered by this Option until the date a stock certificate is issued for
the Stock.

11.Interpretation.This Option is subject to the terms and conditions of the Plan, a copy of which is
incorporated herein by reference. In the event of inconsistency or conflict between the Plan and this Agreement, the terms and provisions of the Agreement shall control.

12.Notices.Any notice, demand or request required or permitted to be given under this Agreement shall be in
writing and shall be deemed given when delivered personally or three (3) days after being deposited in the United States mail as certified or registered mail, with postage prepaid, or one
(1) day after being delivered to a private next day delivery service, with mailing charges paid, and addressed, if to the Company, at its principal place of business, Attention: Chief Financial
Officer, and if to the Optionee, at his or her most recent address as shown in the employment or stock records of the Company.

13.Forfeiture.Notwithstanding any other provisions of the Plan, if and only if (a) the Optionee is
convicted of a felony involving moral turpitude or, (ii) the Optionee is guilty of willful gross neglect

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or continued willful gross misconduct as determined by a court of competent jurisdiction and resulting, in either case, in material economic harm to the Company, unless such act, or failure to act,
was believed by the Optionee, in good faith, to be in the best interests of the Company, then the Optionee shall forfeit this Option, and all exercised options granted under the Plan if the Company
has not yet delivered a stock certificate to the Optionee with respect thereto.

14.Legend.All certificates representing any of the shares of Stock subject to the provisions of this Agreement
may have endorsed thereon the following legend or such other legends as the Company deems necessary or desirable:



15.Registration.The Company agrees that it shall maintain a registration statement permitting the resale of
all Shares for which Optionee's exercise rights under this Option have vested unless resale is otherwise permitted pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended,
or by any successor rule.

16.Governing Law.The validity, construction, interpretation and effect of this Option shall be governed by and
determined in accordance with the laws of the State of Pennsylvania.

17.Severability.Should any provision or portion of this Agreement be held to be unenforceable or invalid for
any reason, the remaining provisions and portions of this Agreement shall be unaffected by such holding.

18.Counterparts.This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original and all of which together shall be deemed one instrument.

19.Entire Agreement.This Agreement, together with the Plan, constitutes the entire agreement between the
parties pertaining to its subject matter and supersedes all prior written or oral agreements and understandings of the parties, either expressed or implied.

[Remainder
of Page Intentionally Left Blank]

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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

| |  | FAO, INC.
| |  | ---------
| |  | By:      
| |  |          

The
Optionee hereby accepts this Option subject to all terms and provisions hereof. The Optionee hereby acknowledges receipt of a copy of the Plan. The Optionee hereby agrees to accept
as binding, conclusive and final all decisions or interpretations of the Committee regarding all questions arising under the Plan. The Optionee authorizes the Company to withhold in accordance with
applicable law from any compensation payable to him or her all taxes required to be withheld by federal, state or local law as a result of the exercise of this Option.

| |  | OPTIONEE
| |  | --------
| |  | ***     

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