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TEAVANA HOLDINGS S 1 A Filing

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TEAVANA HOLDINGS S 1 A Filing Powered By Docstoc
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Index to Financial Statements

                                               As filed with the Securities and Exchange Commission on June 9, 2011
                                                                                                                                                              Registration No. 333-173775




                                            UNITED STATES
                                SECURITIES AND EXCHANGE COMMISSION
                                                                              Washington, D.C. 20549


                                                            Amendment No. 1
                                                                  to
                                                              FORM S-1
                                                       REGISTRATION STATEMENT
                                                                              UNDER
                                                                     THE SECURITIES ACT OF 1933


                                             TEAVANA HOLDINGS, INC.
                                                                     (Exact Name of Registrant as Specified in Its Charter)




                           Delaware                                                               5499                                                         20-1946316
                 (State or Other Jurisdiction of                                     (Primary Standard Industrial                                             (I.R.S. Employer
                Incorporation or Organization)                                        Classification Code Number)                                          Identification Number)

                                                                         3630 Peachtree Road NE, Suite 1480
                                                                                 Atlanta, GA 30326
                                                                                   (404) 995-8200
                                (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)



                                                                              Daniel P. Glennon
                                                               Executive Vice President, Chief Financial Officer
                                                                           Teavana Holdings, Inc.
                                                                    3630 Peachtree Road NE, Suite 1480
                                                                              Atlanta, GA 30326
                                                                               (404) 995-8200
                                        (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)



                                                                                              Copies to:
                              Christopher C. Paci, Esq.                                                                             Michael J. Schiavone, Esq.
                               DLA Piper LLP (US)                                                                                   Shearman & Sterling LLP
                            1251 Avenue of the Americas                                                                               599 Lexington Avenue
                               New York, NY 10020                                                                                      New York, NY 10022
                             Telephone: (212) 335-4970                                                                              Telephone: (212) 848-4000
                                Fax: (212) 884-8470                                                                                    Fax: (646) 848-7179


       Approximate date of commencement of proposed sale to the public : As soon as practicable after the effective date of this Registration Statement.
       If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following
box.      
      If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. 
      If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. 
      If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. 
      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b¬2 of the Exchange Act.

Large accelerated filer                                                                                                                                        Accelerated filer                   
Non-accelerated filer              (Do not check if a smaller reporting company)                                                                               Smaller reporting company           



                                                                 CALCULATION OF REGISTRATION FEE

                                                                                                                                                   Proposed
                                                                                                                                                   Maximum
                                                       Title Of Each Class Of                                                                      Aggregate                    Amount Of
                                                     Securities To Be Registered                                                              Offering Price (1)(2)          Registration Fee (3)
Common Stock, par value $0.0001 per share                                                                                                        $100,000,000                      $11,610


(1)   Includes shares which the underwriters have the option to purchase to cover overallotments, if any.
(2)   Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(3)   Previously paid.



     The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
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Index to Financial Statements

The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell these
securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus
is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not
permitted.

                                                   Subject to Completion, Dated June         , 2011

                                                                             Shares




                                                                 Common Stock


      This is the initial public offering of shares of common stock of Teavana Holdings, Inc.

      Teavana Holdings, Inc. is offering     shares of common stock. The selling stockholders identified in this prospectus are offering an
additional        shares of common stock. We will not receive any proceeds from the sale of shares by the selling stockholders.

      Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price
per share will be between $            and $       .

      We intend to apply to list our common stock on the New York Stock Exchange under the symbol “TEA.”


     See “ Risk Factors ” beginning on page 9 to read about factors you should consider before buying shares of
our common stock.


     Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.



                                                                                      Per Share                     Total
                    Initial public offering price                                $                           $
                    Underwriting discount                                        $                           $
                    Proceeds, before expenses, to Teavana Holdings, Inc.         $                           $
                    Proceeds, before expenses, to the selling stockholders       $                           $

      The underwriters may also exercise their option to purchase up to an additional              shares from certain of the selling stockholders, at
the public offering price, less the underwriting discount, for 30 days after the date of this prospectus to cover overallotments, if any.


      The underwriters expect to deliver the shares against payment in New York, New York on                      , 2011.

BofA Merrill Lynch                                                                                      Goldman, Sachs & Co.
                                                        Prospectus dated               , 2011.
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                                                            TABLE OF CONTENTS

                                                                                                                                           Page
Prospectus Summary                                                                                                                            1
Risk Factors                                                                                                                                  9
Special Note Regarding Forward-Looking Statements                                                                                            23
Use of Proceeds                                                                                                                              24
Dividend Policy                                                                                                                              24
Capitalization                                                                                                                               25
Dilution                                                                                                                                     27
Unaudited Pro Forma Consolidated Financial Data                                                                                              29
Selected Consolidated Financial and Other Data                                                                                               32
Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                        36
Business                                                                                                                                     57
Management                                                                                                                                   74
Compensation Discussion and Analysis                                                                                                         79
Certain Relationships and Related Party Transactions                                                                                         93
Principal and Selling Stockholders                                                                                                           96
Description of Capital Stock                                                                                                                 98
Shares Eligible for Future Sale                                                                                                             102
Material US Federal Income and Estate Tax Considerations
     for Non-US Holders of Common Stock                                                                                                     104
Underwriting                                                                                                                                107
Legal Matters                                                                                                                               113
Experts                                                                                                                                     113
Where You Can Find More Information                                                                                                         113
Index to Consolidated Financial Statements                                                                                                  F-1


      Neither we, the selling stockholders nor the underwriters have authorized anyone to provide you with information that is different from
that contained in this prospectus or any free-writing prospectus prepared by or on our behalf. We do not, and the selling stockholders and the
underwriters do not, take any responsibility for, and can provide no assurances as to, the reliability of any information that others provide to
you. We and the selling stockholders are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers
and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of the common stock.
     Until              , 2011 (25 days after the commencement of this offering), all dealers that buy, sell or trade shares of our
common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in
addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or
subscriptions.
       For investors outside the United States: Neither we, the selling stockholders nor the underwriters have done anything that would permit
this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the
United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any
restrictions relating to, the offering and the distribution of this prospectus outside of the United States.
      Some of the industry and market data contained in this prospectus are based on independent industry publications or other publicly
available information, which we believe is reliable but have not independently verified, while other information is based on our internal
sources. Certain information regarding the global tea market is derived from Mintel International Group Limited’s report entitled Tea and RTD
Teas, May 2010 and other market research conducted by Mintel and Euromonitor International.
      Our registered trademarks include Teavana ® , our Teavana logo design and the names of most of the varieties of specially blended teas
that we sell. All other registered trademarks or service marks appearing in this prospectus are trademarks or service marks of others.
     We operate on a fiscal calendar widely used in the retail industry that results in a given fiscal year consisting of a 52- or 53-week period
ending on the Sunday closest to January 31 of the following year. For example, references to “fiscal 2010” refer to the fiscal year ended
January 30, 2011. Fiscal 2008, fiscal 2009 and fiscal 2010 each consist of 52-week periods.

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                                                             PROSPECTUS SUMMARY

        This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the
  information that you should consider before deciding to invest in our common stock. You should read the entire prospectus carefully,
  including “Risk Factors” and our consolidated financial statements and notes to those consolidated financial statements, before making an
  investment decision.

  Our Company
        Teavana is a rapidly growing specialty retailer offering more than 100 varieties of premium loose-leaf teas, authentic artisanal
  teawares and other tea-related merchandise. We believe we are one of the world’s largest branded, multi-channel specialty tea retailers. We
  offer our products through 161 company-owned stores in 35 states and 19 franchised stores primarily in Mexico, as well as through our
  website, www.teavana.com. With an average transaction size of $36, we believe customers view our products as an affordable and healthy
  indulgence as they are able to purchase the best teas and teawares from around the world at relatively modest prices.

       Our mission is to establish Teavana as the most recognized and respected brand in the tea industry by expanding the culture of tea
  across the world. Key elements of our distinctive business strategy are to:
          •     develop, source and offer our customers the world’s finest assortment of premium loose-leaf teas and tea-related merchandise;
          •     create a “Heaven of Tea” retail experience in which our passionate and knowledgeable “teaologists” engage and educate
                customers about the ritual and enjoyment of tea; and
          •     locate our stores in high traffic locations within malls, lifestyle centers and other high-sales-volume retail venues.

        Teavana was founded in 1997 by our Chairman and Chief Executive Officer, Andrew Mack, and his wife, Nancy Mack, who were
  inspired by their international travels and passion for tea. In 2004 we partnered with Parallel Investment Partners to obtain equity capital,
  strategic advice and other resources to support our accelerated growth plans. With our business momentum and expanded resources we
  were able to attract an experienced senior management team that has led our growth to date and has set the foundation to execute our
  growth strategy going forward.

        We have experienced rapid sales and profit growth during the last five years. We increased our sales from $33.8 million in fiscal
  2006 to $124.7 million in fiscal 2010, representing a 38.6% compound annual growth rate. Over that same period, we more than tripled our
  store base from 47 stores to 146 stores. In fiscal 2010, our sales grew 38.2% over fiscal 2009, while our comparable store sales increased
  8.7%. Our net income was $12.0 million in fiscal 2010, representing a 126.9% growth rate over fiscal 2009. In fiscal 2010, our stores
  averaged sales per gross square foot of approximately $1,000, which we believe is higher than most specialty retail stores in the United
  States.

  Our Market Opportunity
       We participate in the global tea market which had $56.6 billion of sales in 2009, according to the latest available estimates from
  Mintel, a global provider of market intelligence. We compete specifically within the loose-leaf tea category of the overall market. Mintel
  estimates the size of the tea market in the United States to be $5.2 billion with an expected 6% compound annual growth rate through 2014.
  Tea consumption in the United States is much lower than the rest of the world, with the United States representing only 9% of the global
  tea market and ranking 22nd among other countries based on per capita loose-leaf and bagged tea consumption. We


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  believe growth of the overall US tea market will be driven primarily by an increasing consumer focus on health and wellness, growing
  consumer awareness of tea and the continuing emergence of epicurean preferences in food and beverages.

  Our Competitive Strengths
         We believe that the following strengths differentiate Teavana and create the foundation for continued rapid sales and profit growth:
         Market Defining Brand Driving Category Growth. We believe we are one of the world’s largest branded, multi-channel specialty tea
         retailers. We believe our customers associate the Teavana brand with premium tea products, a distinctive store ambiance and an “East
         Meets West” healthy living lifestyle. We view the potential growth opportunity in the United States to be substantial, as US
         consumers have not historically consumed loose-leaf tea at the same level as consumers elsewhere in the world. We believe our
         leading national presence and focus on educating consumers about the many attractive qualities of loose-leaf tea will help us drive the
         growth of the loose-leaf tea category in the United States.
         “Heaven of Tea” Retail Experience . We believe our unique “Heaven of Tea” retail environment facilitates a highly interactive,
         informative and immersive customer experience. A key element of the retail experience is our Wall of Tea, where our teaologists
         invite our customers to experience the aroma, color and texture of any of our approximately 100 varieties of single-estate and
         specially blended teas. We believe this engaging retail experience introduces new customers to the tea lifestyle, encourages product
         trial and supports repeat visits and strong customer loyalty.
         Deep-Rooted Culture Embracing a Passion for Tea and Career Development. Our culture is centered upon a passion for tea,
         extensive training, career development and individual enrichment. To ensure the continuity of our culture, and reward high
         performing team members, we typically promote from within our organization. We have historically experienced limited to no
         turnover among the members of our senior management team and our regional and area managers. We believe our culture helps build
         and support a consistent and motivated group of team members that are passionate about providing the “Heaven of Tea” retail
         experience to our customers.
         High-Quality Teas and Tea-Related Merchandise . We offer a unique selection of premium loose-leaf teas, authentic artisanal
         teawares and other tea-related merchandise in our stores and through our website. Our single-estate and specially blended teas are
         currently sourced from tea gardens, blenders and brokers in ten countries. Our compelling assortment of teawares and other
         tea-related merchandise, including Teavana-branded merchandise, is sourced from various tea communities worldwide. We believe
         our highly differentiated offering provides a foundation for our strong brand and will continue to reinforce our strong market position.
         Powerful and Consistent Store Economics . We have a proven and highly profitable store model that has produced consistent
         financial results and returns. In fiscal 2010, our stores averaged sales of approximately $1,000 per gross square foot. All of our stores
         were profitable in fiscal 2010 and new stores have historically averaged a payback period of less than one and a half years. Our
         current store base is balanced across all four regions of the country, with each region producing results in line with the company
         average. We believe our powerful store model, deep-rooted culture, highly developed store operations and rigorous store selection
         process drive our consistent store financial results.
         Proven and Experienced Senior Management Team . Andrew Mack, our Founder, Chairman and Chief Executive Officer,
         continuously sets the vision and strategic direction for Teavana and drives our growth and culture. Since 2004, Mr. Mack has
         assembled a senior management team that brings an average of over 20 years of experience across store operations, merchandising,
         finance and real estate.


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  Our Growth Strategy
         We are pursuing several strategies to continue our profitable growth, including:
         Expand Our Store Base Domestically. We believe there is a significant opportunity to expand our store base in the United States
         from 161 locations to at least 500 stores. We have identified the malls, lifestyle centers and other high-sales-volume retail venues for
         this proposed expansion. We plan to open approximately 50 stores in fiscal 2011 (including 15 stores opened in the first quarter), 60
         stores in fiscal 2012 and to expand to 500 stores by 2015. Our new and existing stores are located in high traffic areas of malls,
         lifestyle centers and other high-sales-volume retail venues.
         Drive Comparable Store Sales. We expect to continue our positive comparable store sales growth by increasing the size and
         frequency of purchases by our existing customers and attracting new customers. We intend to execute this strategy through our
         Heaven of Tea retail experience, which allows us to introduce the benefits and enjoyment of our teas and tea-related merchandise to
         new customers while encouraging our existing customers to transition to our higher-grade teas and higher-end tea-related
         merchandise.
         Expand Our Online Presence. We believe our online platform is an extension of our brand and retail stores, serving as an
         educational resource and complementary sales channel for our customers. Since fiscal 2007 our online sales have grown at a
         compound annual growth rate of 56.0% and in fiscal 2010 represented 7.0% of our net sales. We believe we have the opportunity to
         grow e-commerce sales to at least 10.0% of sales in the future.
         Increase Our Highly Attractive Margins. We have increased our operating margins from 7.5% in fiscal 2008 to 18.8% in fiscal
         2010, and we believe further opportunities exist to increase our margins. A primary driver of our expected margin expansion will
         come from the sales mix shift away from tea-related merchandise towards higher margin loose-leaf teas that our stores generally
         experience as they mature. We expect additional drivers of future margin expansion to include the leveraging of our corporate and
         other fixed costs as our sales grow and gross margin benefits from our growing scale with suppliers.
         Selectively Pursue International Expansion . Given the worldwide popularity of tea, we believe international expansion represents a
         compelling opportunity for additional growth over the long term. As of May 1, 2011, 17 Teavana stores are operated in Mexico
         through an international development agreement with our business partner, Casa Internacional. We will continue to selectively
         expand our global presence either through company-owned stores or by entering into franchise arrangements.

  Risk Factors
       Investing in our common stock involves a high degree of risk. You should carefully consider the risks described in “Risk Factors”
  before making a decision to invest in our common stock. If any of these risks actually occurs, our business, financial condition or results of
  operations would likely be materially adversely affected. In such case, the trading price of our common stock would likely decline, and you
  may lose all or part of your investment. Below is a summary of some of the principal risks we face:
          •     we may not be able to successfully implement our growth strategy if we are unable to identify suitable sites for store locations,
                negotiate acceptable lease terms, hire, train and retain personnel and maintain sufficient levels of cash flow and financing to
                support our expansion;
          •     we may not be able to effectively expand and improve our operations, including our distribution center, or manage our existing
                resources to support our planned expansion;
          •     we may not be able to maintain recent levels of comparable store sales growth or sales per comparable store;


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          •     we may lose key management personnel, which could adversely impact our business;
          •     because our business is highly concentrated in a single, discretionary product category, premium loose-leaf teas and tea-related
                merchandise, we are vulnerable to changes in consumer preferences and economic conditions that could harm our financial
                results;
          •     quality or health concerns about our teas and tea-related merchandise could have an adverse effect on our operating results; and
          •     we rely on a small number of third-party suppliers and manufacturers to produce our products, and we have limited control
                over them and may not be able to obtain quality products on a timely basis or in sufficient quantities.

  Our Principal Stockholders
        Following the consummation of this offering, Andrew Mack, our founder and Chief Executive Officer, will own approximately %
  of our outstanding common stock, or % if the underwriters exercise their overallotment option to purchase additional shares in full. As a
  result, Mr. Mack will be able to exercise control over all matters requiring stockholder approval and will have significant control over our
  management and policies. Additionally, a fund advised by Parallel Investment Partners, LLC will own approximately % of our
  outstanding common stock, or % if the underwriters exercise their overallotment option to purchase additional shares in full, following
  the consummation of this offering and will have significant influence over fundamental corporate matters and transactions by virtue of its
  representation on our Board of Directors. See “Risk Factors—Risks Related to this Offering and Ownership of Our Common Stock” and
  “Principal and Selling Stockholders.”

        In this prospectus we sometimes refer to Parallel Investment Partners, LLC and its affiliates as “Parallel Investment Partners” or
  “Parallel.” Parallel is a sector-focused, middle market private equity firm that invests in dynamic, entrepreneurial growth companies in
  North America. Since 1992, the principals of the firm have participated in investing over $600 million in over 35 companies, with a
  particular emphasis on high growth specialty retail brands, including Dollar Tree Stores, LIDS and Hibbett Sporting Goods. Founded in
  1999 as an affiliate of middle market buyout firm Saunders Karp & Megrue, Parallel is headquartered in Dallas, Texas.

  Our Corporate Information
        In this prospectus, the terms “Teavana,” “we,” “us,” “our” and “the company” refer to Teavana Holdings, Inc. and our consolidated
  subsidiaries, and the term “store support center” refers to our principal executive offices and store support center located at 3630 Peachtree
  Road NE, Suite 1480, Atlanta, GA 30326. Our website address is www.teavana.com, and the information contained on or accessible
  through our website shall not be deemed to be incorporated into this prospectus or the registration statement of which it forms a part. Our
  telephone number is (404) 995-8200.


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                                                               The Offering

  Common stock offered by us                                 shares

  Common stock offered by the selling stockholders           shares

  Common stock to be outstanding immediately after           shares
   this offering

  Use of proceeds                                    We estimate that the net proceeds to us from this offering, after deducting the
                                                     underwriting discount and estimated expenses, will be approximately
                                                     $        million, assuming an initial public offering price of $         per share, the
                                                     midpoint of the estimated price range set forth on the cover of this prospectus.

                                                     We will not receive any proceeds from the sale of shares by the selling stockholders.

                                                     We intend to use the net proceeds from this offering to redeem all outstanding shares
                                                     of our Series A redeemable preferred stock, to pay offering-related expenses, and to
                                                     repay all outstanding indebtedness under our amended revolving credit facility. In the
                                                     event that the net proceeds available to be applied to our credit facility are less than
                                                     the amount of indebtedness outstanding under it at the closing of this offering, we will
                                                     pay down that indebtedness by the amount of net proceeds available to be applied. We
                                                     intend to use any remaining net proceeds for general corporate purposes, including
                                                     working capital and capital expenditures. See “Use of Proceeds.”

  Principal stockholders                             Upon consummation of this offering, Andrew Mack, our founder and Chief Executive
                                                     Officer, and a fund advised by Parallel will own approximately % and %,
                                                     respectively, of our outstanding common stock.

                                                     We do not intend to take advantage of the “controlled company” exemption from
                                                     certain of the corporate governance listing standards of the New York Stock
                                                     Exchange.

  Dividend policy                                    We currently expect to retain future earnings for use in the operation and expansion
                                                     of our business and do not anticipate paying any cash dividends in the foreseeable
                                                     future. The declaration and payment of any dividends in the future will be at the
                                                     discretion of our Board of Directors and will depend on a number of factors,
                                                     including our earnings, capital requirements, overall financial condition, and
                                                     contractual restrictions, including under our amended revolving credit facility and
                                                     other indebtedness we may incur. See “Dividend Policy.”

  Risk factors                                       Investing in our common stock involves a high degree of risk. See “Risk Factors”
                                                     beginning on page 10 of this prospectus for a discussion of factors you should
                                                     carefully consider before deciding to invest in our common stock.

  Symbol for trading on New York Stock Exchange      “TEA”


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        The number of shares of common stock that will be outstanding after this offering is based on               shares of our common stock
  outstanding as of             , 2011 and excludes:
          •             shares of common stock issuable upon the exercise of options outstanding as of May 1, 2011 under our 2004
                Management Incentive Plan, with a weighted average exercise price of $              per share, after giving effect to the sale of
                shares in this offering acquired by certain of the selling stockholders upon exercise of options granted to them under that plan;
          •             shares of common stock reserved for issuance upon the exercise of options to be granted in connection with this
                offering under our 2011 Equity Incentive Plan, which we intend to adopt prior to this offering, such options to be granted at an
                exercise price per share equal to the initial public offering price set forth on the cover page of this prospectus and anticipated to
                represent approximately 33% of the number of shares reserved for issuance under this plan; and
          •            shares of common stock reserved for future issuance under our 2011 Equity Incentive Plan, anticipated to represent
                approximately 67% of the number of shares reserved for issuance under this plan.

         Unless otherwise indicated, the information in this prospectus assumes:
          •     the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws, which
                will occur immediately prior to the consummation of this offering;
          •     the automatic conversion of all shares of our Class B redeemable common stock into 2,431,909 shares of Class A common
                stock immediately prior to the consummation of this offering;
          •     the reclassification of our Class A common stock as common stock immediately prior to the consummation of this offering;
          •     the redemption of all shares of our Series A redeemable preferred stock for an aggregate redemption value of $10,683,333;
          •     a          to         stock split of our common stock to be effected prior to the consummation of this offering;
          •     an initial public offering price of $        per share of common stock, the midpoint of the estimated price range set forth on
                the cover of this prospectus; and
          •     no exercise by the underwriters of their option to purchase up to          additional shares of common stock from certain of the
                selling stockholders to cover overallotments, if any.


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                                                         Summary Consolidated Financial and Other Data

        The following table presents summary consolidated financial and other data for the periods and at the dates indicated. The
  consolidated statement of operations and cash flows data for the three fiscal years ended February 1, 2009, January 31, 2010 and
  January 30, 2011 and the consolidated balance sheet data as of January 31, 2010 and January 30, 2011 have been derived from audited
  consolidated financial statements included elsewhere in this prospectus. The consolidated balance sheet data as of February 1, 2009 have
  been derived from audited consolidated financial statements not included in this prospectus. The consolidated statement of operations and
  cash flows data for the thirteen weeks ended May 2, 2010 and May 1, 2011 and consolidated balance sheet data as of May 1, 2011 have
  been derived from our unaudited condensed consolidated financial statements appearing elsewhere in this prospectus. You should read
  these data along with the sections of this prospectus entitled “Selected Consolidated Financial and Other Data” and “Management’s
  Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and related notes
  included elsewhere in this prospectus. Our historical results are not necessarily indicative of results to be expected for any future period.

                                                                           Fiscal Year Ended                                                    Thirteen Weeks Ended
                                                February 1, 2009           January 31, 2010                  January 30, 2011               May 2, 2010           May 1, 2011
                                                                                                                                                      (unaudited)
                                                                              (dollars in thousands, except per share and store data)
   Consolidated Statement of
      Operations Data:
   Net sales                                $               63,861     $               90,262            $              124,701         $         25,773        $       34,939
   Cost of goods sold (exclusive of
      depreciation shown separately
      below)                                                27,193                     36,435                            46,275                   10,021                12,451

   Gross profit                                             36,668                     53,827                            78,426                   15,752                22,488
   Selling, general and administrative
      expense                                               29,242                     38,142                            50,571                   10,800                14,758
   Depreciation and amortization
      expense                                                2,666                        3,489                           4,361                      973                 1,274

   Income from operations                                    4,760                     12,196                            23,494                    3,979                 6,456
   Interest expense, net                                     2,061                      2,435                             2,585                      623                   689

   Income before income taxes                                2,699                        9,761                          20,909                    3,356                 5,767
   Provision for income taxes                                1,502                        4,470                           8,906                    1,429                 2,444

   Net income                               $                1,197     $                  5,291          $               12,003         $          1,927        $        3,323


   Net income per share:
         Basic                              $                 0.12     $                   0.53          $                 1.21         $           0.19        $         0.33
         Diluted                            $                 0.12     $                   0.53          $                 1.18         $           0.19        $         0.33
   Weighted average shares outstanding:
        Basic                                            9,924,396                  9,924,396                         9,924,396                9,924,396             9,924,396
        Diluted                                         10,017,794                 10,079,067                        10,187,864               10,119,503            10,188,824
   Pro Forma Consolidated Statement
      of Operations Data (unaudited):
   Pro forma interest expense, net (1)                                                                   $                  440                                 $           90
   Pro forma net income                                                                                                  14,147                                          3,922
   Pro forma net income per share—Basic
   Pro forma net income per share—Diluted                                                                $                                                      $

   Consolidated Balance Sheet Data
      (end of period):
   Cash and cash equivalents                $                1,168     $                1,314            $                7,901                                 $        3,740
   Total assets                                             35,353                     41,767                            64,126                                         65,802
   Series A redeemable preferred stock
      (1)                                                    9,058                     10,848                            12,992                                         13,591
   Total debt                                                5,535                      1,250                             1,000                                          1,000
   Class B redeemable common stock                          15,808                     21,888                            81,401                                         87,253
   Total stockholders’ deficit (2)          $               (7,086 )   $               (7,706 )          $              (55,059 )                               $      (57,626 )



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                                                                                 Fiscal Year Ended                                                         Thirteen Weeks Ended
                                                     February 1, 2009              January 31, 2010                  January 30, 2011                May 2, 2010             May 1, 2011
                                                                                                                                                                 (unaudited)
                                                                                       (dollars in thousands, except per share and store data)
   Pro Forma Consolidated Balance
      Sheet Data (end of period)
      (unaudited):
   Series A redeemable preferred stock (1)                                                                                                                                   $           —
   Class B redeemable common stock (2)                                                                                                                                                   —
   Total stockholders’ equity (3)                                                                                                                                            $        43,218
   Consolidated Statement of Cash
     Flows Data:
   Net cash provided by (used in):
         Operating activities                    $                 4,951         $                 11,071        $               19,397          $            (329 )         $         1,142
         Investing activities                                     (8,798 )                         (6,640 )                     (12,560 )                   (2,346 )                  (5,056 )
         Financing activities                                      4,254                           (4,285 )                        (250 )                    2,512                      (247 )

   Increase in cash and cash equivalents         $                   407         $                    146        $                6,587          $           (163 )          $        (4,161 )
   Store Data (unaudited):
   Number of stores at end of period                                  87                              108                           146                       118                          161
   Comparable store sales growth for
      period (4)                                                     3.0 %                            6.9 %                          8.7 %                    15.7 %                       6.0 %
   Average net sales per comparable store
      (in thousands) (5)                         $                   783         $                    808        $                  862          $            208            $             213
   Gross square footage at end of period
      (in thousands)                                                  77                               95                           130                       105                          145
   Sales per gross square foot (6)               $                   866         $                    935        $                  994          $            228            $             231


  (1)   Our Series A redeemable preferred stock was issued on December 15, 2004 with a mandatory redemption date upon the earlier of a public offering or December 15, 2011. The
        Series A redeemable preferred stock had an original redemption value of approximately $10.7 million with annual accretion at a rate of 5%. The cumulative annual accretion of the
        redemption value will be forgiven at the redemption date if we achieve certain targets. The Series A redeemable preferred stock is listed as a liability on our consolidated balance
        sheets and condensed consolidated balance sheets due to its mandatory redemption feature. Annual redemption value accretion and accretion of debt discount are included in
        interest expense on our consolidated statements of operations and condensed consolidated statements of operations. Pro forma interest expense, net income, and net income per
        share give effect to our redemption of the Series A redeemable preferred stock as if such redemption had occurred on February 1, 2010, and reflect the elimination of
        approximately $2.1 million of interest expense in fiscal 2010 and approximately $0.6 million during the thirteen weeks ended May 1, 2011, all of which was non-deductible, for
        income tax purposes. Pro forma Series A redeemable preferred stock at May 1, 2011 gives effect to our redemption of the Series A redeemable preferred stock as if such
        redemption had occurred on May 1, 2011 and assumes that we achieved the targets in order for the cumulative annual accretion of redemption value to be forgiven, resulting in an
        effective redemption value of $10.7 million and a reclassification of the cumulative annual accretion of redemption value to additional paid-in capital within stockholders’ equity.
        See Note 6, “Common and Preferred Stock,” in our consolidated financial statements and Note 4, “Common and Preferred Stock,” in our condensed consolidated financial
        statements.

  (2)   Because the Class B redeemable common stock is subject to redemption at the option of the holder from and after December 15, 2011 at a redemption price equal to the aggregate
        fair value of the shares being redeemed, the Class B redeemable common stock is classified on our consolidated balance sheets and condensed consolidated balance sheets as
        temporary equity, rather than stockholders’ equity, with adjustments to its fair value made at each reporting date. The increase in total stockholders’ deficit from February 1, 2009
        to May 1, 2011 reflects the increase in accumulated deficit that results from this classification of our Class B redeemable common stock. Our outstanding shares of Class B
        redeemable common stock will be automatically converted into an equivalent number of shares of our Class A Common stock upon the consummation of this offering. Pro forma
        Class B redeemable common stock at May 1, 2011 gives effect to the automatic conversion of the Class B redeemable common stock into Class A common stock, the
        corresponding reclassification of temporary equity into additional paid-in capital within stockholders’ equity, and the reclassification of all of our Class A common stock into
        common stock as if such events had occurred on May 1, 2011. See Note 6, “Common and Preferred Stock,” and Note 7, “Fair Value Measurements,” in our consolidated financial
        statements and Note 4, “Common and Preferred Stock,” in our condensed consolidated financial statements.

  (3)   Pro forma total stockholders’ equity at May 1, 2011 gives effect to the receipt of proceeds from this offering sufficient to redeem the Series A redeemable preferred stock, the
        redemption of the Series A redeemable preferred stock, the conversion of the Class B redeemable common stock into Class A common stock, the reclassification of the aggregate
        fair value of the Class B redeemable common stock from temporary equity into additional paid-in capital within stockholders’ equity, the reclassification of the cumulative annual
        accretion of redemption value to additional paid-in capital within stockholders’ equity and the resulting change from total stockholders’ deficit to total stockholders’ equity, all as
        described in notes (1) and (2) above, as if such events had occurred on May 1, 2011. See Note 6, “Common and Preferred Stock,” in our consolidated financial statements and Note
        4, “Common and Preferred Stock,” in our condensed consolidated financial statements.

  (4)   Comparable store sales include company-owned stores that have been open for at least 15 full fiscal months. Comparability is typically achieved 12 months after the initial
        three-month period from opening during which new stores typically experience higher-than-average sales volumes. The manner in which we calculate comparable store sales may
        be different from how other specialty retailers calculate comparable or “same store” sales. Accordingly, data regarding our comparable store sales may not be comparable to
        similarly titled data made available from other retailers.

  (5)   Average net sales per comparable store is calculated by dividing total sales per period for stores open 15 full fiscal months or more as of the beginning of each respective period by
        the total number of such stores. This methodology excludes the effects of the initial three-month period of higher-than-average sales volumes.

  (6)   Sales per gross square foot is calculated by dividing total net sales for all stores, comparable and non-comparable, by the average gross square footage for the period. Average
        gross square footage for the period is calculated by dividing the sum of the total gross square footage at the beginning and at the end of each period by two.



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                                                                   RISK FACTORS

      Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the
other information in this prospectus, before deciding whether to invest in shares of our common stock. If any of the following risks actually
occurs, our business, financial condition and results of operations could suffer. In this case, the trading price of our common stock would likely
decline and you might lose all or part of your investment in our common stock.

Risks Related to Our Business and Industry
We may not be able to successfully implement our growth strategy on a timely basis or at all, which could harm our results of operations.
       Our continued growth depends, in large part, on our ability to open new stores and to operate those stores successfully. We believe there
is a significant opportunity to expand our store base in the United States from 161 locations as of May 1, 2011 to at least 500 stores. We plan to
open approximately 50 stores in fiscal 2011 (including 15 stores opened in the first quarter) and 60 stores in fiscal 2012.

      Our ability to successfully open and operate new stores depends on many factors, including:
        •    the identification and availability of suitable sites for store locations, primarily in high-traffic shopping malls;
        •    the negotiation of acceptable lease terms;
        •    the maintenance of adequate distribution capacity, information systems and other operational system capabilities;
        •    the hiring, training and retention of store management and other qualified personnel;
        •    the effective management of inventory to meet the needs of our stores on a timely basis; and
        •    the availability of sufficient levels of cash flow and financing to support our expansion.

      In addition, on a selective basis, we will continue to seek franchisees to operate stores under the Teavana brand in international markets.
However, if we are unable to identify suitable franchisees or if our franchisees fail to operate their stores successfully or consistent with our
brand image, our international franchising strategy may not enhance our results of operations. New stores contemplated under our existing
international development agreement or any future such agreements may not open on the anticipated development schedule or at all.

     Accordingly, we cannot assure you that we will achieve our planned growth or, even if we are able to grow our store base as planned, that
any new stores will perform as planned. If we fail to successfully implement our growth strategy, we will not be able to sustain the rapid
growth in sales and profits growth that we expect, which would likely have an adverse impact on the price of our common stock.

The planned addition of a significant number of new stores each year will require us to expand and improve our operations and could
strain our operational, managerial and administrative resources, which may adversely affect our business.
      Our growth strategy calls for the opening of a significant number of new stores each year. Our planned expansion will place increased
demands on our operational, managerial, administrative and other resources, which may be inadequate to support our expansion. Our senior
management team has limited experience opening the number of new stores annually that we contemplate opening in fiscal 2011, 2012 and
beyond, and may be unable to effectively address challenges involved with such expansion. Managing our growth effectively will require us to
continue to enhance our store management systems, financial and management controls and

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information systems and to hire, train and retain regional directors, area managers, store general managers and other personnel. Our planned
near-term store growth will also require an expansion of our current distribution center. Implementing new systems, controls and procedures
and these additions to our infrastructure and any changes to our existing operational, managerial, administrative and other resources could
negatively impact our results of operations and financial condition.

Our ability to attract customers to our stores depends heavily on successfully locating our stores in suitable locations, and as we increase
our store base it may become more difficult to identify additional suitable sites for new stores. There is no guarantee that new stores, once
opened, will experience the same sales per square foot, increases in comparable store sales or profitability that we have experienced in the
past.
      As we continue to expand our store base, it may become more difficult to identify additional suitable sites for new stores and we will
target an increasing number of shopping malls with lower average sales per square foot than the malls in which we are currently located. The
sales per square foot and net sales from such new locations will likely be lower than our existing stores. While our average sales per
comparable store is currently $862,000, our new store model projects average sales per store of $600,000 to $700,000. Additionally, new stores
generally have lower gross margins and higher operating expenses, as a percentage of sales, than our more mature stores. New stores may not
achieve sustained sales and operating levels consistent with our mature store base on a timely basis or at all. There may be a negative impact on
our results from a lower level of gross margin contribution by our new stores, along with the impact of related pre-opening costs. Any failure to
successfully open and operate new stores in the time frames and at the sales, cost and gross margin levels estimated by us could result in a
decline in our operating results and therefore have an adverse impact on the price of our common stock.

      Further, our comparable store sales and average sales per square foot may not continue to increase at the rates achieved over the past
several years. If our future comparable store sales or average sales per square foot decline or fail to meet market expectations, the price of our
common stock could decline. A variety of factors affect comparable store sales and average sales per square foot, including current national
and regional economic conditions, pricing, inflation and weather conditions. Many retailers have been unable to sustain high levels of
comparable store sales growth during and after periods of substantial expansion.

Any decrease in customer traffic in the shopping malls or other locations in which our stores are located could cause our sales to be less
than expected.
      Our stores are located primarily in enclosed shopping malls and other shopping centers. Net sales at these stores are derived, to a
significant degree, from the volume of traffic in those shopping malls and centers and in the surrounding area. Our stores benefit from the
current popularity of shopping malls and centers as shopping destinations and their ability to generate consumer traffic in the vicinity of our
stores. Our sales volume and traffic may be adversely affected by, among other things:
        •    economic downturns nationally or regionally;
        •    high fuel prices;
        •    changes in consumer demographics;
        •    a decrease in popularity of shopping malls or of higher-end retail concepts in the shopping malls and centers in which our stores
             are located;
        •    the closing of a shopping mall’s “anchor” stores or other key tenants; or
        •    a deterioration in the financial condition of shopping mall and center operators or developers which could, for example, limit their
             ability to maintain and improve their facilities.
A reduction in consumer traffic as a result of these or any other factors could have a material adverse effect on us.

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      In addition, severe weather conditions and other catastrophic occurrences in areas in which we have stores may have a material adverse
effect on our results of operations. Such conditions may result in physical damage to our stores, loss of inventory, closure of one or more of our
stores or an insufficient labor pool in our markets. Any of these factors may disrupt our business and have a material adverse effect on our
financial condition and results of operations.

Our success depends substantially upon the continued retention of our senior management and other key personnel.
      Our future success is substantially dependent on the continued service of certain members of our senior management, including Andrew
Mack, our founder and Chief Executive Officer, Daniel Glennon, our Executive Vice President and Chief Financial Officer, and Peter
Luckhurst, our Executive Vice President of Operations. These executives have been primarily responsible for determining the strategic
direction of our business and for executing our growth strategy and are integral to our brand and culture and the positive business reputation we
enjoy with our customers and vendors. The loss of the services of any of these executives could have a material adverse effect on our business
and prospects, as we may not be able to find suitable individuals to replace them on a timely basis, if at all. In addition, any such departure
could be viewed in a negative light by investors and analysts, which could cause the price of our common stock to decline.

If we are unable to attract, assimilate and retain team members that embody our culture, including store personnel and store and area
managers and regional directors, we may not be able to grow or successfully operate our business.
      Our success depends in part upon our ability to attract, train, assimilate and retain a sufficient number of team members, including store
personnel, store managers, area managers and regional directors, who understand and appreciate our culture and are able to represent our brand
effectively and establish credibility with our customers. We have historically promoted substantially all of our store managers, area managers
and regional directors from our pool of existing team members and expect to continue to rely heavily upon such talent pool to support our
growth plans. If we are unable to hire and retain store personnel capable of consistently providing a high level of customer service, as
demonstrated by their enthusiasm for our culture, understanding of our customers and knowledge of the loose-leaf tea and tea-related
merchandise we offer, our ability to open new stores may be impaired, the performance of our existing and new stores could be materially
adversely affected and our brand image may be negatively impacted. Any failure to meet our staffing needs or any material increases in team
member turnover rates could have a material adverse effect on our business or results of operations.

We have only one distribution center, and if we encounter difficulties associated with such facility or if it were forced to shut down for any
reason, we could face shortages of inventory that would have a material adverse effect on our business operations.
       Our only distribution center is located in Stratford, Connecticut. This single distribution center currently supports our entire business.
Substantially all of our teas and tea-related merchandise are shipped to the distribution center from our vendors, and then shipped from our
distribution center to our stores and e-commerce customers. Our success depends on the timely and frequent receipt of merchandise by our
stores, often multiple times per week. The efficient flow of such merchandise requires that we have adequate capacity in our distribution center
to support our current level of operations and the anticipated increased levels that may follow from our growth plans. If the operation of our
distribution center were to be disrupted or if it were to shut down for any reason or its contents were to be destroyed or damaged, including due
to fire, severe weather or other natural disaster, we could face shortages of inventory, resulting in “out-of-stock” conditions in our stores, and
would incur additional cost to replace any destroyed or damaged product. Such an event may negatively impact our sales and may cause us to
incur significantly higher costs and longer lead times associated with delivering products to our stores and e-commerce customers. This could
have a material adverse effect on our business and harm our reputation.

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Any failure to expand our distribution center’s capacity on a timely basis would have an adverse effect on our growth strategy and results of
operations.
      We have identified the need to expand our current distribution center in order to support our near-term growth. We have signed
commitments to expand our warehouse in three separate phases to support our growth through the first quarter of 2013 and we have
commissioned a study to assess our long-term distribution needs and determine the most efficient strategy to satisfy those needs. If we are
unable to successfully implement this near-term and long-term expansion of our distribution capability, the efficient flow of our merchandise
could be disrupted, which could materially hurt our business. Our long-term need for increased distribution capacity may require us to obtain
additional financing. Appropriate locations or financing for the construction or lease of such additional real estate may not be available at
reasonable costs or at all. Our failure to secure additional distribution capacity when necessary could impede our growth plans, as a result of
which our financial condition and operating results could be adversely affected.

Because our business is highly concentrated on a single, discretionary product category, premium loose-leaf teas and tea-related
merchandise, we are vulnerable to changes in consumer preferences and in economic conditions affecting disposable income that could
harm our financial results.
       Our business is not diversified and consists primarily of developing, sourcing, marketing and selling premium loose-leaf teas and
tea-related merchandise. Consumer preferences often change rapidly and without warning, moving from one trend to another among many
retail concepts. Therefore, our business is substantially dependent on our ability to educate US consumers on the many positive attributes of
tea, anticipate shifts in consumer tastes and help drive growth of the overall US tea market. Any future shifts in consumer preferences away
from the consumption of beverages brewed from premium loose-leaf teas would also have a material adverse effect on our results of
operations.

      Consumer purchases of specialty retail products, including our products, are historically affected by economic conditions such as changes
in employment, salary and wage levels, the availability of consumer credit, inflation, interest rates, tax rates, fuel prices and the level of
consumer confidence in prevailing and future economic conditions. These discretionary consumer purchases may decline during recessionary
periods or at other times when disposable income is lower. In addition, increases in utility, fuel, commodity price and corporate income tax
levels could affect our cost of doing business, including transportation costs of our third-party service providers, causing our suppliers and such
service providers to seek to recover these increases through increased prices charged to us. Our financial performance may become susceptible
to economic and other conditions in regions or states where we have a significant number of stores. Our continued success will depend, in part,
on our ability to anticipate, identify and respond quickly to changing consumer preferences and economic conditions.

Our success depends, in part, on our ability to source, develop and market new varieties of loose-leaf teas and tea-related merchandise that
meet our high standards and customer preferences.
      We currently offer more than 100 varieties of loose-leaf teas and a wide assortment of tea-related merchandise. Our success depends in
part on our ability to continually innovate, develop, source and market new varieties of loose-leaf teas and tea-related merchandise that both
meet our standards for quality and appeal to customers’ preferences. Failure to innovate, develop, source, market and price new varieties of tea
and tea-related merchandise that consumers want to buy could lead to a decrease in our sales and profitability.

We may experience negative effects to our brand and reputation from real or perceived quality or health issues with our teas and tea-related
merchandise, which could have an adverse effect on our operating results.
      We believe our customers rely on us to provide them with premium loose-leaf teas and high-quality tea-related merchandise. Concerns
regarding the safety of our teas and tea-related merchandise or the safety and quality of our supply chain could cause shoppers to avoid
purchasing certain products from us or to seek

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alternative sources of tea, even if the basis for the concern has been addressed or is outside of our control. Adverse publicity about these
concerns, whether or not ultimately based on fact, and whether or not involving teas or tea-related merchandise sold at our stores, could
discourage consumers from buying our teas and tea-related merchandise and have an adverse effect on our brand, reputation and operating
results.

     Furthermore, the sale of tea entails a risk of product liability claims and the resulting negative publicity. Tea supplied to us may contain
contaminants that, if not detected by us, could result in illness or death upon their consumption. We cannot assure you that product liability
claims will not be asserted against us or that we will not be obligated to perform product recalls in the future.

      We may also be subject to involuntary product recalls or may voluntarily conduct a product recall, such as the recent voluntary recall of
our organic peppermint loose-leaf tea following notification by one of our suppliers of possible contamination of its product by Salmonella
. The costs associated with any future product recall could, individually and in the aggregate, be significant in any given fiscal year. In addition,
any product recall, regardless of direct costs of the recall, may harm consumer perceptions of our teas and tea-related merchandise and have a
negative impact on our future sales and results of operations.

     Any loss of confidence on the part of our customers in the safety and quality of our teas and tea-related merchandise would be difficult
and costly to overcome. Any such adverse effect could be exacerbated by our position in the market as a purveyor of premium loose-leaf teas
and high-quality tea-related merchandise and could significantly reduce our brand value. Issues regarding the safety of any teas or tea-related
merchandise sold by us, regardless of the cause, could have a substantial and adverse effect on our sales and operating results.

A shortage in the supply, a decrease in quality or an increase in the price of teas and tea-related merchandise as a result of weather
conditions, earthquakes, crop disease, pests or other natural or manmade causes outside of our control could impose significant costs and
losses on our business.
      The supply and price of tea is subject to fluctuation, depending on demand and other factors outside of our control. The supply, quality
and price of our teas and tea-related merchandise can be affected by multiple factors in tea-producing countries, including political and
economic conditions, civil and labor unrest, adverse weather conditions, including floods, drought and temperature extremes, earthquakes,
tsunamis, and other natural disasters and related occurrences. This risk is particularly true with respect to regions or countries from which we
source a significant percentage of our products. In extreme cases, entire tea harvests may be lost or production of tea-related merchandise may
be negatively impacted in some geographic areas. These factors can increase costs and decrease sales, which may have a material adverse
effect on our business, results of operations and financial condition.

      On March 11, 2011, northeastern Japan was struck by a severe earthquake, immediately followed by destructive tsunami waves. This
natural disaster has been exacerbated by radioactive contamination that resulted from the damage to certain nuclear power plants situated on the
coastline hit by the tsunami. It is difficult for us to predict whether the combination of these natural and manmade disasters will have any
long-term impact on our sourcing of teas and tea-related merchandise from Japan. If the aftermath of these events were to deteriorate further,
we could experience a disruption in the supply of products that we obtain from Japan. Public concerns about potential contamination, whether
or not based in fact, could result in a reduction in demand for our products sourced from Japan. Any of these developments could have a
material adverse effect on our business, financial condition and results of operations.

      Tea may be vulnerable to crop disease and pests, which may vary in severity and effect. The costs to control disease and pest damage
vary depending on the severity of the damage and the extent of the plantings affected. Moreover, there can be no assurance that available
technologies to control such conditions will continue to be effective. These conditions can increase costs and decrease sales, which may have a
material adverse effect on our business, results of operations and financial condition.

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Because we rely on a limited number of third-party suppliers and manufacturers to produce the majority of our teas and tea-related
merchandise, we may not be able to obtain quality products on a timely basis or in sufficient quantities.
      We rely on a limited number of vendors to supply us with single-estate and specially blended teas and tea-related merchandise on a
continuous basis. Our financial performance depends in large part on our ability to purchase tea in sufficient quantities at competitive prices
from these vendors. We do not have long-term purchase contracts or other contractual assurances of continued supply, pricing or exclusive
access to products from these vendors.

      Any of our suppliers or manufacturers could discontinue supplying us with loose-leaf tea or tea-related merchandise in sufficient
quantities for a variety of reasons. The benefits we currently experience from our supplier and manufacturer relationships could be adversely
affected if they:
        •    raise the prices they charge us;
        •    discontinue selling products to us;
        •    sell similar or identical products to our competitors; or
        •    enter into arrangements with competitors that could impair our ability to sell our suppliers’ products, including by giving our
             competitors exclusive licensing arrangements or exclusive access to tea blends and other products or limiting our access to such
             arrangements or blends or other products.

      During fiscal 2010, our two largest vendors represented 25% and 15%, respectively, of our total inventory purchases. Any disruption to
either of these relationships would have a material adverse effect on our business.

      Events that adversely affect our vendors could impair our ability to obtain inventory in the quantities that we desire. Such events include
difficulties or problems with our vendors’ businesses, finances, labor relations, ability to import raw materials, costs, production, insurance and
reputation, as well as natural disasters or other catastrophic occurrences.

       If we experience significant increased demand for our teas and tea-related merchandise, or need to replace an existing vendor, there can
be no assurance that additional supplies or additional manufacturing capacity will be available when required on terms that are acceptable to us,
or at all, or that any vendor would allocate sufficient capacity to us in order to meet our requirements, fill our orders in a timely manner or meet
our strict quality requirements. Even if our existing vendors are able to expand their capacity to meet our needs or we are able to find new
sources of supply, we may encounter delays in production, inconsistencies in quality and added costs as a result of the time it takes to train our
suppliers and manufacturers in our methods, products and quality control standards. Any delays, interruption or increased costs in the supply of
loose-leaf teas or the manufacture of our tea-related merchandise could have an adverse effect on our ability to meet customer demand for our
products and result in lower net sales and profitability both in the short and long term.

We may face increased competition from other tea and beverage retailers, which could adversely affect us and our growth plans.
      As we continue to drive growth in the loose-leaf tea category in the United States, our success, combined with relatively low barriers to
entry, may encourage new competitors to enter the market. The financial, marketing and operating resources of some of these new market
entrants may be greater than our own. We must spend significant resources to differentiate our customer experience, which is defined by a wide
selection of premium loose-leaf teas, high quality tea-related merchandise and superior customer service from experienced and knowledgeable
teaologists who are passionate about tea. Despite these efforts, our competitors may still be successful in attracting our customers.

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We rely significantly on information technology systems and any failure, inadequacy, interruption or security failure of those systems could
harm our ability to operate our business effectively.
      We rely on our information technology systems to effectively manage our business data, communications, point-of-sale, supply chain,
order entry and fulfillment, inventory and warehouse management and other business processes. The failure of our systems to perform as we
anticipate could disrupt our business and result in transaction errors, processing inefficiencies and the loss of sales, causing our business to
suffer. In addition, our information technology systems may be vulnerable to damage or interruption from circumstances beyond our control,
including fire, natural disasters, systems failures, viruses and security breaches, including breaches of our transaction processing or other
systems that could result in the compromise of confidential customer data. Any such damage or interruption could have a material adverse
effect on our business, cause us to face significant fines, customer notice obligations or costly litigation, harm our reputation with our
customers, require us to expend significant time and expense developing, maintaining or upgrading our information technology systems or
prevent us from paying our vendors or team members, receiving payments from our customers or performing other information technology,
administrative or outsourcing services on a timely basis. Recently, data security breaches suffered by well-known companies and institutions
have attracted a substantial amount of media attention, prompting new federal and state laws and legislative proposals addressing data privacy
and security, as well as increased data protection obligations imposed on merchants by credit card issuers. As a result, we may become subject
to more extensive requirements to protect the customer information that we process in connection with the purchase of our products.

      In addition, we sell merchandise over the Internet through our website, www.teavana.com. Our website operations may be affected by our
reliance on third-party hardware and software providers, technology changes, risks related to the failure of computer systems through which we
conduct our website operations, telecommunications failures, electronic break-ins and similar disruptions. Furthermore, our ability to conduct
our website operations may be affected by liability for on-line content and state and federal privacy laws.

Fluctuations in our results of operations for the fourth fiscal quarter would have a disproportionate effect on our overall financial
condition and results of operations.
      Our business is seasonal and, historically, we have realized a higher portion of our net sales, net income and operating cash flows in the
fourth fiscal quarter, due to the impact of the holiday selling season. Any factors that harm our fourth fiscal quarter operating results, including
disruptions in our supply chain, adverse weather or unfavorable economic conditions, could have a disproportionate effect on our results of
operations for the entire fiscal year.

      In order to prepare for our peak shopping season, we must order and maintain higher quantities of inventory than we would carry at other
times of the year. As a result, our working capital requirements also fluctuate during the year, increasing in the second and third fiscal quarters
in anticipation of the fourth fiscal quarter. Any unanticipated decline in demand for our loose-leaf teas and tea-related merchandise during our
peak shopping season could require us to sell excess inventory at a substantial markdown, which could diminish our brand and reduce our net
sales and gross profit.

      Our quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including the timing of new
store openings and the sales contributed by new stores. As a result, historical period-to-period comparisons of our sales and operating results
are not necessarily indicative of future period-to-period results. You should not rely on the results of a single fiscal quarter, particularly the
fourth fiscal quarter holiday season, as an indication of our annual results or our future performance.

Third-party failure to deliver merchandise from our distribution center to our stores and e-commerce customers could result in lost sales or
reduced demand for our teas and tea-related merchandise.
      We currently rely upon a national third-party transportation provider for substantially all of our product shipments from our distribution
center to our stores and e-commerce customers. Our utilization of its delivery

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services for shipments, or those of any other shipping companies we may elect to use, is subject to risks, including increases in fuel prices,
which would increase our shipping costs, and employee strikes and inclement weather, which may impact the provider’s ability to provide
delivery services that adequately meet our shipping needs. If we change shipping companies, we could face logistical difficulties that could
adversely affect deliveries, and we would incur costs and expend resources in connection with such change. Moreover, we may not be able to
obtain terms as favorable as those we receive from the national third-party transportation provider that we currently use, which in turn would
increase our costs and thereby adversely affect our operating results.

Our ability to source our teas and tea-related merchandise profitably or at all could be hurt if new trade restrictions are imposed or existing
trade restrictions become more burdensome.
      All of our loose-leaf teas are currently grown, and a substantial majority of our tea-related merchandise is currently manufactured, outside
of the United States. The United States and the countries in which our products are produced or sold internationally have imposed and may
impose additional quotas, duties, tariffs, or other restrictions or regulations, or may adversely adjust prevailing quota, duty or tariff levels.
Countries impose, modify and remove tariffs and other trade restrictions in response to a diverse array of factors, including global and national
economic and political conditions, which make it impossible for us to predict future developments regarding tariffs and other trade restrictions.
Trade restrictions, including tariffs, quotas, embargoes, safeguards and customs restrictions, could increase the cost or reduce the supply of teas
and tea-related merchandise available to us or may require us to modify our supply chain organization or other current business practices, any
of which could harm our business, financial condition and results of operations.

Fluctuations in foreign currency exchange rates may affect our price negotiations with our third-party suppliers and manufacturers.
     Substantially all of our suppliers and manufacturers are located outside of the United States, and changes in the exchange rates between
the US dollar and the Euro, Japanese yen and Chinese Renminbi may have a significant, and potentially adverse, effect on our price
negotiations with such parties. If the US dollar weakens against any such currencies, our suppliers and manufacturers may attempt to
renegotiate the terms of their arrangements with us, which may have a negative effect on our operating results.

We may not be able to protect our intellectual property adequately, which could harm the value of our brand and adversely affect our
business.
      We believe that our intellectual property has substantial value and has contributed significantly to the success of our business. In
particular, our trademarks, including our registered Teavana and Teavana logo design trademarks and the names of most of the varieties of
specially blended teas that we sell, are valuable assets that reinforce the distinctiveness of our brand and our customers’ favorable perception of
our stores.

      From time to time, third parties have used names similar to ours, have applied to register trademarks similar to ours and, we believe, have
infringed or misappropriated our intellectual property rights. Third parties have also, from time to time, opposed our trademarks and challenged
our intellectual property rights. We respond to these actions on a case-by-case basis, including where appropriate by commencing litigation.

      We cannot assure you that the steps we have taken to protect our intellectual property rights are adequate, that our intellectual property
rights can be successfully defended and asserted in the future or that third parties will not infringe upon or misappropriate any such rights. Our
trademark rights and related registrations may continue to be challenged in the future and could be canceled or narrowed. Our failure to protect
our trademarks could prevent us in the future from challenging third parties who use names and logos similar to our trademarks, which may in
turn cause customer confusion, negatively affect customers’ perception of our brand, stores and

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products, and adversely affect our sales and profitability. Moreover, intellectual property proceedings and infringement claims could result in a
significant distraction for management and have a negative impact on our business.

      In addition, although we have also taken steps to protect our intellectual property rights internationally, the laws of certain foreign
countries may not protect intellectual property to the same extent as do the laws of the United States. Other entities may have rights to
trademarks that contain portions of our marks or may have registered similar or competing marks in foreign countries. There may also be other
prior registrations in other foreign countries of which we are not aware. We may need to expend additional resources to defend our trademarks
in these countries, and the inability to defend such trademarks could impair our brand or adversely affect the growth of our business
internationally.

We are subject to the risks associated with leasing substantial amounts of space and are required to make substantial lease payments under
our operating leases. Any failure to make these lease payments when due would likely harm our business, profitability and results of
operations.
      We do not own any real estate. Instead, we lease all of our company-owned store locations, our store support center in Atlanta, Georgia
and our distribution center in Stratford, Connecticut. Our store leases typically have ten-year terms and generally require us to pay relatively
high total rent per square foot that is reflective of our small average store square footage and premium locations within the mall or center.
Many of our lease agreements have defined escalating rent provisions over the initial term and any extensions. As our stores mature and as we
expand our store base, our lease expense and our cash outlays for rent under our lease agreements will increase. Our substantial operating lease
obligations could have significant negative consequences, including:
        •    requiring that an increased portion of our cash from operations and available cash be applied to pay our lease obligations, thus
             reducing liquidity available for other purposes;
        •    increasing our vulnerability to adverse general economic and industry conditions;
        •    limiting our flexibility to plan for or react to changes in our business or in the industry in which we compete; and
        •    limiting our ability to obtain additional financing.

     We depend on cash flow from operations to pay our lease expenses, finance our growth capital requirements and fulfill our other cash
needs. If our business does not generate sufficient cash flow from operating activities to fund these requirements, we may not be able to
achieve our growth plans, fund our other liquidity and capital needs or ultimately service our lease expenses, which would harm our business.

      If an existing or future store is not profitable, and we decide to close it, we may nonetheless remain committed to perform our obligations
under the applicable lease including, among other things, paying the base rent for the balance of the lease term. Moreover, even if a lease has
an early cancellation clause, we may not satisfy the contractual requirements for early cancellation under that lease. In addition, as our leases
expire, we may fail to negotiate renewals on commercially acceptable terms or at all, which could cause us to close stores in desirable
locations. Even if we are able to renew existing leases, the terms of such renewal may not be as attractive as the expiring lease, which would
materially and adversely affect our results of operations. Of our 161 company-owned stores as of May 1, 2011, two leases expire in fiscal 2011
and two leases expire in fiscal 2012. Our inability to enter into new leases or renew existing leases on terms acceptable to us or be released
from our obligations under leases for stores that we close could materially adversely affect us.

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Our franchisees may take actions that could harm our business or brand, and franchise regulations and contracts limit our ability to
terminate or replace under-performing franchises.
      As of May 1, 2011 we had two franchise stores in the United States and 17 franchise stores in Mexico. Franchisees are independent
business operators and are not our employees or agents, and we do not exercise control over the day-to-day operations of their retail stores. We
provide training and support to franchisees and set and monitor operational standards, but the quality of franchise store operations may
fluctuate or decline due to various factors beyond our control. For example, franchisees may not operate stores in a manner consistent with our
standards and requirements, or may not hire and train qualified employees, which could harm their sales and, as a result, harm our results of
operations or our brand image.

      Franchisees, as independent business operators, may from time to time disagree with us and our strategies regarding the business or our
interpretation of our respective rights and obligations under applicable franchise agreements. This may lead to disputes with our franchisees
from time to time, regarding the collection of royalty payments or other matters related to the franchisee’s operation of the franchise store. Such
disputes could divert the attention of our management from our operations, which could cause our business, financial condition, results of
operations or cash flows to suffer.

       In addition, as a franchisor, we are subject to US federal, US state and foreign laws regulating the offer and sale of franchises. These laws
impose registration and extensive disclosure requirements on the offer and sale of franchises, frequently apply substantive standards to the
relationship between franchisor and franchisee and limit the ability of a franchisor to terminate or refuse to renew a franchise. We may
therefore be required to retain an underperforming franchise and may be unable to replace the franchisee, which could harm our results of
operations or our brand image. We cannot predict the nature and effect of any future legislation or regulation or any changes to existing
legislation or regulation on our franchise operations.

The terms of our amended revolving credit facility may restrict our current and future operations, which could adversely affect our ability
to respond to changes in our business and to manage our operations.
      Our amended revolving credit facility contains, and any additional debt financing we may incur would likely contain, covenants requiring
us to maintain or adhere to certain financial ratios or limits and covenants that restrict our operations, including limitations on our ability to
grant liens, incur additional debt, pay dividends, redeem our common stock, make certain investments and engage in certain merger,
consolidation or asset sale transactions. Complying with these covenants could adversely affect our ability to respond to changes in our
business and manage our operations. A failure by us to comply with the financial ratios and restrictive covenants contained in our amended
revolving credit facility and any future debt instruments could result in an event of default. Upon the occurrence of an event of default, the
lenders could elect to declare all amounts outstanding to be due and payable and exercise other remedies as set forth in our amended revolving
credit facility and any future debt instruments. If the indebtedness under our amended revolving credit facility and any future debt instruments
were to be accelerated, our future financial condition could be materially adversely affected.

Risks Related to this Offering and Ownership of Our Common Stock
No market currently exists for our common stock, and we cannot assure you that an active trading market will develop for such stock.
       Prior to this offering, there has been no public market for shares of our common stock. We cannot predict the extent to which investor
interest in our company will lead to the development of a trading market on the New York Stock Exchange or otherwise, or how liquid that
market might become. If an active market does not develop, you may have difficulty selling any shares of our common stock that you purchase
in this initial public offering. The initial public offering price for the shares of our common stock will be determined by negotiations between
us, certain of our selling stockholders and the representatives of the underwriters, and may not be indicative of prices that will prevail in the
open market following this offering.

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Our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or
above the initial public offering price.
      After this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been traded
publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we
cannot control, including:
        •    market conditions or trends in our industry or the economy as a whole and, in particular, in the specialty retail sales environment;
        •    the timing, performance and successful integration of any new stores that we open;
        •    seasonal fluctuations;
        •    changes in key personnel;
        •    our levels of comparable store sales;
        •    actions by competitors or other shopping mall tenants;
        •    the public’s response to press releases or other public announcements by us or third parties, including our filings with the
             Securities and Exchange Commission, or SEC;
        •    any future guidance we may provide to the public, any changes in such guidance or any difference between our guidance and
             actual results;
        •    changes in financial estimates or recommendations by any securities analysts who follow our common stock; and
        •    future sales of our common stock by our officers, directors and significant stockholders.

       In addition, the stock markets, and in particular the New York Stock Exchange, have experienced extreme price and volume fluctuations
that have affected and continue to affect the market prices of equity securities of many retail companies. In the past, stockholders have
instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur
substantial costs and our resources and the attention of management could be diverted from our business.

Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
      The market price of our common stock could decline significantly as a result of sales of a large number of shares of our common stock in
the market after this offering. The sales, or the perception that these sales might occur, could depress the market price. These sales, or the
possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that
we deem appropriate.

      Upon consummation of this offering, we will have               shares of common stock outstanding. The shares of common stock offered in
this offering will be freely tradable without restriction under the Securities Act of 1933, as amended, or the Securities Act, except for any
shares of common stock that may be held or acquired by our directors, executive officers and other affiliates, the sale of which will be restricted
under the Securities Act. In addition, shares subject to outstanding options under our 2004 Management Incentive Plan and options that we
intend to grant prior to this offering under our 2011 Equity Incentive Plan and shares reserved for future issuance under our 2011 Equity
Incentive Plan will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations. Moreover,
pursuant to the Registration Rights Agreement between us and Teavana Investment LLC, dated as of December 17, 2004, Teavana Investment
LLC has the right to require us to register under the Securities Act any shares in our company not sold by it in this offering. See “Certain
Relationships and Related Party Transactions—Investment by Teavana Investment LLC—Registration Rights Agreement.” If our existing
stockholders sell substantial amounts of our common stock in the public market, or if the public perceives that such sales could occur, this
could have an adverse impact on the market price of our common stock, even if there is no relationship between such sales and the performance
of our business.

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       In connection with this offering, we, our directors and executive officers and the selling stockholders have each agreed to lock-up
restrictions, meaning that we and they and their permitted transferees will not be permitted to sell any shares of our common stock for 180 days
after the date of this prospectus, subject to the exceptions discussed in “Shares Eligible for Future Sale,” without the prior consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman,
Sachs & Co. may, in their sole discretion, release all or any portion of the shares of our common stock from the restrictions in any of the
lock-up agreements described above. See “Underwriting.”

      Also, in the future, we may issue shares of our common stock in connection with investments or acquisitions. The amount of shares of
our common stock issued in connection with an investment or acquisition could constitute a material portion of our then outstanding shares of
our common stock.

Approximately        % of our voting power will be controlled by one principal stockholder whose interests may conflict with those of our other
stockholders.
      Upon consummation of this offering, Andrew Mack, our founder and Chief Executive Officer, will hold approximately % of our
voting power, or % if the underwriters exercise their overallotment option in full. So long as Mr. Mack continues to hold, directly or
indirectly, shares of common stock representing more than 50% of the voting power of our common stock, he will be able to exercise control
over all matters requiring stockholder approval, including the election of directors, amendment of our amended and restated certificate of
incorporation and approval of significant corporate transactions and will have significant control over our management and policies. Mr.
Mack’s control may have the effect of delaying or preventing a change in control of our company or discouraging others from making tender
offers for our shares, which could prevent stockholders from receiving a premium for their shares. These actions may be taken even if other
stockholders oppose them. The interests of Mr. Mack may not be consistent with your interests as a stockholder.

      In addition, a fund advised by Parallel will hold approximately % of our voting power, or % if the underwriters exercise their
overallotment option in full, and will have significant influence over our management and policies by virtue of its representation on our Board
of Directors.

Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have a
material adverse effect on our business and stock price.
       As a public company, we will be required to document and test our internal control procedures in order to satisfy the requirements of
Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, which will require annual and quarterly management assessments and
certifications of the effectiveness of our internal control over financial reporting and, if certain market capitalization thresholds are met, a report
by our independent registered public accounting firm that addresses the effectiveness of internal control over financial reporting. During the
course of our testing, we may identify deficiencies that we may not be able to remediate in time to meet our deadline for compliance with
Section 404. Testing and maintaining internal controls can divert our management’s attention from other matters that are important to the
operation of our business. We also expect the regulations to increase our legal and financial compliance costs, make it more difficult to attract
and retain qualified officers and members of our Board of Directors, particularly to serve on our audit committee, and make some activities
more difficult, time consuming and costly. We may not be able to conclude on an ongoing basis that we have effective internal control over
financial reporting in accordance with Section 404 or our independent registered public accounting firm may not be able or willing to issue an
unqualified report on the effectiveness of our internal control over financial reporting. If we conclude that our internal control over financial
reporting is not effective, we cannot be certain as to the timing of remediation actions and testing or their effect on our operations because there
is presently no precedent available by which to measure compliance adequacy.

     If we are unable to conclude that we have effective internal control over financial reporting, our independent auditors are unable to
provide us with an unqualified report as required by Section 404 or we are required to

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restate our financial statements, we may fail to meet our public reporting obligations and investors could lose confidence in our reported
financial information, which could have a negative effect on the trading price of our stock.

Some of our operating expenses will increase significantly as a result of operating as a public company, and our management will be
required to devote substantial time to complying with public company regulations.
      We historically have operated our business as a private company. As a public company, we will incur additional legal, accounting,
compliance and other expenses that we have not incurred as a private company. After this offering, we will become obligated to file annual and
quarterly information and other reports with the SEC that are specified in Section 13 and other sections of the Securities Exchange Act of 1934,
as amended, or the Exchange Act. In addition, we will also become subject to other reporting and corporate governance requirements, including
certain requirements of the New York Stock Exchange, which will impose significant compliance obligations upon us. We will need to institute
a comprehensive compliance function, establish internal policies, ensure that we have the ability to prepare financial statements that are fully
compliant with all SEC reporting requirements on a timely basis, design, establish, involve and retain outside counsel and accountants in the
above activities and establish an investor relations function.

      The Sarbanes-Oxley Act of 2002, the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules
subsequently implemented by the SEC and the New York Stock Exchange, have imposed increased regulation and disclosure and have required
enhanced corporate governance practices of public companies. Our efforts to comply with evolving laws, regulations and standards in this
regard are likely to result in increased administrative expenses and a diversion of management’s time and attention from revenue-generating
activities to compliance activities. These changes will require a significant commitment of additional resources. We may not be successful in
implementing these requirements, and implementing them could materially adversely affect our business, results of operations and financial
condition. If we do not implement such requirements in a timely manner or with adequate compliance, we might be subject to sanctions or
investigation by regulatory authorities, such as the SEC or the New York Stock Exchange. Any such action could harm our reputation and the
confidence of investors and customers in our company and could materially adversely affect our business and cause our share price to fall.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price
and trading volume could decline.
      The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about
us or our business. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose
visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if our operating results do
not meet the expectations of the investor community, or one or more of the analysts who cover our company downgrades our stock, our stock
price could decline.

If you purchase shares of common stock sold in this offering, you will incur immediate and substantial dilution.
      If you purchase shares of common stock in this offering, you will incur immediate and substantial dilution in the amount of $               per
share because the initial public offering price of $       is substantially higher than the pro forma net tangible book value per share of our
outstanding common stock. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public
offering price when they purchased their shares. In addition, you may also experience additional dilution upon future equity issuances or the
exercise of stock options to purchase common stock granted to our directors, management personnel and consultants under our 2004
Management Incentive Plan and 2011 Equity Incentive Plan. See “Dilution.”

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We do not expect to pay any cash dividends for the foreseeable future.
      For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not
anticipate paying any cash dividends on our common stock. Any determination to pay dividends in the future will be at the discretion of our
Board of Directors and will depend upon results of operations, financial condition, contractual restrictions, including under our amended
revolving credit facility and other indebtedness we may incur, restrictions imposed by applicable law and other factors our Board of Directors
deems relevant. Accordingly, if you purchase shares in this offering, realization of a gain on your investment will depend on the appreciation of
the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our
common stock.

Certain provisions of our corporate governing documents and Delaware law could discourage, delay or prevent a merger or acquisition at a
premium price.
     Our amended and restated certificate of incorporation and amended and restated bylaws will contain provisions that may make the
acquisition of our company more difficult without the approval of our Board of Directors. These include provisions that:
        •    authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be
             issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences
             superior to the rights of the holders of common stock;
        •    classify our Board of Directors into three separate classes with staggered terms;
        •    prohibit stockholders from acting by written consent after Mr. Mack ceases to own more than 50% of the total voting power of our
             shares, which will then require all stockholder actions to be taken at a meeting of our stockholders after such time;
        •    provide that the Board of Directors is expressly authorized to make, alter, or repeal our amended and restated bylaws; and
        •    establish advance notice requirements for nominations for elections to our Board of Directors or for proposing matters that can be
             acted upon by stockholders at stockholder meetings.

      In addition, we are governed by Section 203 of the Delaware General Corporation Law which, subject to some specified exceptions,
prohibits “business combinations” between a Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder
who becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock, for a three-year period following the date that the
stockholder became an interested stockholder. Section 203 could have the effect of delaying, deferring or preventing a change in control that
our stockholders might consider to be in their best interests.

     These and other provisions of the Delaware General Corporation Law and our amended and restated certificate of incorporation and
amended and restated bylaws could delay, defer or prevent us from experiencing a change of control or changes in our Board of Directors and
management and may adversely affect our stockholders’ voting and other rights. Any delay or prevention of a change of control transaction or
changes in our Board of Directors and management could deter potential acquirors or prevent the completion of a transaction in which our
stockholders could receive a substantial premium over the then current market price for their shares of our common stock.

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                                 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

      This prospectus includes forward-looking statements in addition to historical information. These forward-looking statements are included
throughout this prospectus, including in the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” “Business” and “Certain Relationships and Related Party Transactions,” and relate to
matters such as our industry, business strategy, goals and expectations concerning our market position, future operations, margins, profitability,
capital expenditures, liquidity and capital resources and other financial and operating information. We have used the words “anticipate,”
“assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future” and similar
terms and phrases to identify forward-looking statements in this prospectus.

      The forward-looking statements contained in this prospectus are based on management’s current expectations and are subject to
uncertainty and changes in circumstances. We cannot assure you that future developments affecting us will be those that we have anticipated.
Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business,
competitive, market, regulatory and other factors, many of which are beyond our control. We believe that these factors include those described
in “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual
results may vary in material respects from those projected in these forward-looking statements. Any forward-looking statement made by us in
this prospectus speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from
time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement,
whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.

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                                                              USE OF PROCEEDS

      Assuming an initial public offering price of $         per share (the midpoint of the estimated price range set forth on the cover page of
this prospectus), we estimate that we will receive net proceeds from this offering of approximately $           million after deducting the
underwriting discount and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of our common
stock by the selling stockholders, including any shares sold by certain of the selling stockholders in connection with the exercise of the
underwriters’ overallotment option to purchase additional shares.

      A $1.00 increase (decrease) in the assumed initial public offering price of $     per share would increase (decrease) the net proceeds
to us from this offering by approximately $       , assuming the number of shares offered, as set forth on the cover page of this prospectus,
remains the same and after deducting the underwriting discount and estimated offering expenses payable by us.

      We intend to use the net proceeds to us from this offering in the following order:
        •    to redeem all outstanding shares of our Series A redeemable preferred stock, all of which is held by Teavana Investment LLC, for
             an aggregate redemption value of $10,683,333;
        •    to pay offering-related expenses of approximately $         million; and
        •    to repay all of the outstanding indebtedness under our amended revolving credit facility with Fifth Third Bank.

      In the event that the net proceeds available to be applied to repay indebtedness outstanding under our amended revolving credit facility
are less than the total amount of debt outstanding under it at the closing of this offering, we will pay down that indebtedness by the amount of
net proceeds available to be applied. We intend to use any remaining net proceeds for general corporate purposes, including working capital
and capital expenditures.

      At May 1, 2011, the balance outstanding under our amended revolving credit facility was $1.0 million, and the interest rate with respect
to those borrowings on that date was 6.0%. Our amended revolving credit facility expires on April 22, 2016.

      The amount and timing of our actual working capital requirements and capital expenditures will depend on numerous factors related to
the implementation of our growth plan, including the number of new stores opened in each fiscal period, increased volumes purchased from our
vendors, the expansion of our distribution center and other infrastructure investments. Accordingly, our management will have broad discretion
in the amount and timing of the application of the net proceeds to our working capital and capital expenditure requirements, and investors will
be relying on the judgment of our management regarding such application of the proceeds from this offering.


                                                              DIVIDEND POLICY

       We have never declared or paid regular cash dividends on our common stock. We currently expect to retain all future earnings for use in
the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. The declaration and payment
of any dividends in the future will be determined by our Board of Directors, in its discretion, and will depend on a number of factors, including
our earnings, capital requirements, overall financial condition, and contractual restrictions, including under our amended revolving credit
facility and other indebtedness we may incur.

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                                                                                CAPITALIZATION

       The following table sets forth our cash and cash equivalents and capitalization as of May 1, 2011 on:
         •     an actual basis; and
         •     an as adjusted basis to give effect to (i) the sale of shares of common stock by us in this offering, after deducting the underwriting
               discount and estimated offering expenses payable by us, and the application of a portion of the net proceeds therefrom to redeem
               our Series A redeemable preferred stock, pay offering-related expenses and repay outstanding indebtedness under our amended
               revolving credit facility as described under “Use of Proceeds,” (ii) the conversion of our Class B redeemable common stock into
               Class A common stock, and (iii) the reclassification of all of our Class A common stock into common stock.

     You should read this table together with “Selected Consolidated Financial and Other Data,” “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and our financial statements and notes thereto included elsewhere in this prospectus.

                                                                                                                                                As of May 1, 2011
                                                                                                                                    Actual                        As Adjusted
                                                                                                                                             (unaudited, in thousands)
Cash and cash equivalents                                                                                                      $          3,470             $


Series A redeemable preferred stock, $.0001 par value; 10,683,333 shares authorized,
  issued and outstanding, actual; no shares issued and outstanding, as adjusted (1)                                            $        13,591              $
Long-term debt                                                                                                                           1,000
Class B redeemable common stock, $.0001 par value; 50,000,000 shares authorized,
  2,431,909 shares issued and outstanding, actual; no shares issued and outstanding, as
  adjusted (2)                                                                                                                          87,253
Stockholders’ (deficit)/equity:
     Class A common stock, $.0001 par value; 50,000,000 shares authorized, 7,492,487
       shares issued and outstanding, actual; no shares issued and outstanding, as adjusted                                                     1
     Common stock, $.0001 par value; no shares authorized, no shares issued and
       outstanding, actual; 100,000,000 shares authorized,                shares issued and
       outstanding, as adjusted                                                                                                            —
     Additional paid-in capital (3)                                                                                                        —
     Accumulated deficit                                                                                                               (57,627 )
             Total stockholders’ (deficit)/equity (3)                                                                                  (57,676 )
Total capitalization (3)                                                                                                       $        44,218              $


(1)   Our Series A redeemable preferred stock was issued on December 15, 2004 with a mandatory redemption date upon the earlier of a public offering or December 15, 2011. The Series A
      redeemable preferred stock had an original redemption value of approximately $10.7 million with annual accretion at a rate of 5%. The cumulative annual accretion of the redemption
      value will be forgiven at the redemption date if we achieve certain targets. The Series A redeemable preferred stock is listed as a liability on our consolidated balance sheets and
      condensed consolidated balance sheets due to its mandatory redemption feature. See Note 6, “Common and Preferred Stock,” in our consolidated financial statements and Note 4,
      “Common and Preferred Stock,” in our condensed consolidated financial statements.
(2)   Our outstanding shares of Class B redeemable common stock will be automatically converted into an equivalent number of shares of our Class A common stock upon the consummation
      of this offering. The Class B redeemable common stock is subject to redemption at the option of the holder from and after December 15, 2011 at a redemption price equal to the
      aggregate fair value of the shares being redeemed. Because of this contingent redemption feature, the Class B redeemable common stock is classified on our consolidated balance sheets
      and condensed consolidated balance sheets as temporary equity, rather than stockholders’ equity, with adjustments to its fair value made at each reporting date. See Note 6, “Common
      and Preferred Stock,” and Note 7, “Fair Value Measurements,” in our consolidated financial statements and Note 4, “Common and Preferred Stock,” in our condensed consolidated
      financial statements.

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(3)   A $1.00 increase (decrease) in the assumed initial public offering price of $          per share (the midpoint of the estimated price range set forth on the cover of this prospectus) would
      increase (decrease) each of additional paid-in capital, total stockholders’ equity and total capitalization by $        million, assuming the number of shares offered by us, as set forth on
      the cover of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable to us.

The number of shares of common stock outstanding set forth in the table above excludes:
•              shares of common stock issuable upon the exercise of options outstanding as of May 1, 2011 under our 2004 Management
        Incentive Plan, with a weighted average exercise price of $          per share, after giving effect to the sale of shares in this offering
        acquired by certain of the selling stockholders upon exercise of options granted to them under that plan;
•               shares of common stock reserved for issuance upon the exercise of options to be granted in connection with this offering under
        our 2011 Equity Incentive Plan, which we intend to adopt prior to this offering, such options to be granted at an exercise price per share
        equal to the initial public offering price set forth on the cover page of this prospectus and anticipated to represent approximately 33% of
        the number of shares reserved for issuance under this plan; and
•              shares of common stock reserved for future issuance under our 2011 Equity Incentive Plan, anticipated to represent
        approximately 67% of the number of shares reserved for issuance under this plan.

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                                                                    DILUTION

      Our pro forma consolidated net tangible book value as of May 1, 2011 was $              , or $        per share of common stock. Pro forma
consolidated net tangible book value per share represents consolidated tangible assets, less consolidated liabilities, divided by the aggregate
number of shares of common stock outstanding, assuming (i) redemption of all of our issued and outstanding shares of Series A redeemable
preferred stock, (ii) conversion of each issued and outstanding share of our Class B redeemable common stock into a share of Class A common
stock, and (iii) reclassification of each issued and outstanding share of Class A common stock into a share of common stock immediately prior
to the consummation of this offering, and after giving effect to the issuance by us of           shares of common stock upon the consummation
of this offering. Following the sale by us of the           shares of common stock in this offering at an assumed initial public offering price of
$         per share (the midpoint of the estimated price range set forth on the cover page of this prospectus) and the receipt and application of
the net proceeds to us of $          , and after deducting the underwriting discount and estimated offering expenses payable by us, our pro forma
consolidated net tangible book value at May 1, 2011, as adjusted, would have been $              , or $       per share. This represents an
immediate increase in pro forma consolidated net tangible book value to existing stockholders of $             per share and an immediate dilution
to new investors of $           per share. Dilution per share represents the difference between the price per share to be paid by new investors for
the shares of common stock sold in this offering and the pro forma consolidated net tangible book value per share immediately after this
offering. The following table illustrates this dilution on a per share basis:

Assumed initial public offering price                                                                                         $
     Pro forma consolidated net tangible book value per share as of May 1, 2011
     Increase in pro forma net tangible book value per share attributable to new investors
Pro forma consolidated net tangible book value per share, as adjusted for this offering
Dilution per share to new investors                                                                                           $


      A $1.00 increase (decrease) in the assumed initial public offering price of $        per share (the midpoint of the estimated price range
set forth on the cover page of this prospectus), would increase (decrease) our pro forma consolidated net tangible book value after this offering
by $          and the dilution per share to new investors by $       , in each case assuming the number of shares offered by us, as set forth on
the cover page of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by
us.

     The following table sets forth the number of shares of common stock purchased, the total consideration paid, or to be paid to us, and the
average price per share paid, or to be paid, by existing stockholders and by the new investors, at an assumed initial public offering price of
$         per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), before deducting the underwriting
discount and estimated offering expenses payable by us:

                                                                                                                               Average
                                                                                                                                Price
                                                     Shares Purchased                 Total Consideration                     Per Share
                                                   Numbe
                                                      r          Percent            Amount                  Percent
      Existing stockholders                                                %    $                                     %   $
      New investors in this offering
      Total                                                         100 %       $                              100 %

      Sales by the selling stockholders in this offering will reduce the number of shares held by existing stockholders to        shares, or
approximately % (              shares, or approximately %, if the underwriters exercise their overallotment option in full), and will increase
the number of shares to be purchased by new investors to             shares, or approximately    %(           shares, or approximately %, if the
underwriters exercise their overallotment option in full), of the total common stock outstanding after the offering.

                                                                           27
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      The foregoing tables exclude (i)             shares of common stock issuable upon the exercise of options outstanding as of May 1, 2011
granted under our 2004 Management Incentive Plan, with a weighted average exercise price of $                per share, after giving effect to the
sale of shares in this offering acquired by certain of the selling stockholders upon exercise of options granted to them under that plan,
(ii)          shares of common stock reserved for issuance upon the exercise of options to be granted in connection with this offering under our
2011 Equity Incentive Plan, which we intend to adopt prior to this offering, such options to be granted at an exercise price per share equal to
the initial public offering price per share, and (iii)         shares of common stock reserved for future issuance under our 2011 Equity
Incentive Plan. To the extent these options are exercised, there will be further dilution to new investors.

      If the underwriters exercise their overallotment option to purchase additional shares of common stock in full, the pro forma consolidated
net tangible book value after giving effect to this offering would be $         per share, and the dilution in pro forma consolidated net tangible
book value per share to investors in this offering would be $          per share.

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                                    UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

      The following unaudited pro forma consolidated financial data have been derived by the application of certain pro forma adjustments to
our consolidated financial statements and condensed consolidated financial statements.

      The unaudited pro forma consolidated financial data should be read in conjunction with, “Capitalization,” “Use of Proceeds”, “Selected
Consolidated Financial and Other Data,” and our consolidated financial statements and condensed consolidated financial statements and related
notes included elsewhere in this prospectus. These data may not be comparable to, or indicative of, future performance.

      The unaudited pro forma condensed consolidated financial information presented below have been prepared pursuant to the rules and
regulations of the SEC. Certain information and certain footnote disclosures normally included in financial statements prepared in accordance
with US generally accepted accounting principals have been omitted pursuant to these rules and regulations.

       The unaudited pro forma consolidated statement of operations data have been derived from our consolidated statement of operations for
the fiscal year ended January 30, 2011 and condensed consolidated statement of operations for the thirteen weeks ended May 1, 2011 and give
effect to this offering and the concurrent redemption of the Series A redeemable preferred stock as if these events had occurred on February 1,
2010. The unaudited pro forma consolidated balance sheet data have been derived from our condensed consolidated balance sheet as of May 1,
2011 and give effect to this offering and the concurrent redemption of the Series A redeemable preferred stock and reclassification of the Class
B redeemable common stock into permanent equity as if those events had occurred on May 1, 2011.

      Pro Forma Consolidated Statement of Operations Data :

                                           Fiscal Year Ended January 30, 2011                                       Thirteen Weeks Ended May 1, 2011
                                                           Pro forma             Pro forma                                          Pro forma           Pro forma
                                    Actual                adjustments             adjusted                   Actual               adjustments            adjusted
                                                          (unaudited)           (unaudited)               (unaudited)              (unaudited)         (unaudited)
                                                                        (dollars in thousands, except per share data)
Income from operations          $       23,494          $         —           $     23,494          $           6,456          $         —             $     6,456
Interest expense, net                    2,585                 (2,145 )                440                        689                   (599 )                  90
Income before income
  taxes                                 20,909                  2,145               23,054                      5,767                    599                 6,366
Provision for income
  taxes                                   8,906                   —                  8,906                      2,444                    —                   2,444
Net income                      $       12,003          $       2,145         $     14,148          $           3,323          $         599           $     3,922

Net income per share:
     Basic                      $          1.21                               $                     $             0.33                                 $
     Diluted                    $          1.18                               $                     $             0.33                                 $
Weighted average shares
  outstanding (historical
  and pro forma):
     Basic                           9,924,396                                                             9,924,396
     Diluted                        10,187,864                                                            10,188,824

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      Our Series A redeemable preferred stock was issued on December 15, 2004 with a mandatory redemption date upon the earlier of a public
offering or December 15, 2011. Annual redemption value accretion and accretion of the debt discount are included in interest expense on our
consolidated statements of operations and condensed consolidated statements of operations. Pro forma interest expense, net income, and net
income per share give effect to our redemption of the Series A redeemable preferred stock as if such redemption had occurred on February 1,
2010, and reflect the elimination of approximately $2.1 million and $0.6 million of interest expense, all of which was non-deductible for
income tax purposes, in fiscal 2010 and in the thirteen weeks ended May 1, 2011, respectively. See Note 6, “Common and Preferred Stock,” in
our consolidated financial statements and Note 4, “Common and Preferred Stock,” in our condensed consolidated financial statements.

      Pro Forma Consolidated Balance Sheet Data:

                                                                                                                May 1, 2011
                                                                                                                  Pro forma          Pro forma
                                                                                           Actual                adjustments          adjusted
                                                                                         (unaudited)             (unaudited)        (unaudited)
                                                                                                           (dollars in thousands)
Series A Redeemable Preferred Stock, $.0001 par value; 10,683,333 shares
  authorized, issued and outstanding                                                    $    13,591            $     (13,591 )      $       —
Class B Redeemable Common Stock, $.0001 par value; 50,000,000 shares
  authorized, 2,431,909 shares issued and outstanding, actual; 50,000,000 shares
  authorized,          shares issued and outstanding, pro forma                              87,253                  (87,253 )              —
Stockholders’ deficit
     Class A Common Stock, $.0001 par value; 50,000,000 shares authorized,
       7,492,487 shares issued and outstanding, actual; 50,000,000 shares
       authorized, no shares issued and outstanding, pro forma                                         1                    (1 )            —
     Common Stock, $.0001 par value; no shares authorized, no shares issued and
       outstanding, actual;          shares issued and outstanding, pro forma.                  —                         1                   1
     Additional paid-in capital                                                                 —                   100,844             100,844
     Accumulated deficit                                                                    (57,627 )                   —               (57,627 )
Total stockholders’ (deficit) equity                                                    $   (57,626 )          $    100,844         $    43,218


      The Series A redeemable preferred stock is listed as a liability on our consolidated balance sheets and condensed consolidated balance
sheets due to its mandatory redemption feature. The Series A redeemable preferred stock had an original redemption value of approximately
$10.7 million with annual accretion at a rate of 5%. The cumulative annual accretion of the redemption value will be forgiven at the redemption
date if we achieve certain targets. Pro forma Series A redeemable preferred stock gives effect to the redemption of the Series A redeemable
preferred stock as if such redemption had occurred on May 1, 2011 and assumes that the Company achieved the targets in order for the
cumulative annual accretion of redemption value to be forgiven, resulting in an effective redemption value of $10.7 million and a
reclassification of the cumulative annual accretion of redemption value to additional paid-in capital within stockholders’ equity. See Note 6,
“Common and Preferred Stock,” in our consolidated financial statements and Note 4, “Common and Preferred Stock,” in our condensed
consolidated financial statements.

       Because the Class B redeemable common stock is subject to redemption at the option of the holder from and after December 15, 2011 at a
redemption price equal to the aggregate fair value of the shares being redeemed, the Class B redeemable common stock is classified on our
consolidated balance sheets and condensed consolidated balance sheets as temporary equity, rather than stockholders’ equity, with adjustments
to its fair value made at each reporting date. Our outstanding shares of Class B redeemable common stock will be automatically converted into
an equivalent number of shares of our Class A Common stock upon the consummation of this offering. Pro forma Class B redeemable common
stock at May 1, 2011 gives effect to the automatic conversion of the Class B redeemable common stock into Class A common stock, the
corresponding reclassification of

                                                                      30
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temporary equity into additional paid-in capital within stockholders’ equity, and the reclassification of all of our Class A common stock into
common stock as if such events had occurred on May 1, 2011. See Note 6, “Common and Preferred Stock,” and Note 7, “Fair Value
Measurements,” in our consolidated financial statements and Note 4, “Common and Preferred Stock,” in our condensed consolidated financial
statements.

      Pro forma total stockholders’ equity at May 1, 2011 gives effect to the receipt of proceeds from this offering sufficient to redeem the
Series A redeemable preferred stock, the redemption of the Series A redeemable preferred stock, the conversion of the Class B redeemable
common stock into Class A common stock, the reclassification of the aggregate fair value of the Class B redeemable common stock from
temporary equity into additional paid-in capital within stockholders’ equity, the reclassification of the cumulative annual accretion of
redemption value to additional paid-in capital within stockholders’ equity and the resulting change from total stockholders’ deficit to total
stockholders’ equity, all as described above, as if such events had occurred on May 1, 2011. See Note 6, “Common and Preferred Stock,” in our
consolidated financial statements and Note 4, “Common and Preferred Stock,” in the condensed consolidated financial statements.

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                                    SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

      The following tables set forth selected consolidated financial and other data for the periods and at the dates indicated. The consolidated
statement of operations and cash flows data for the fiscal years ended February 1, 2009, January 31, 2010 and January 30, 2011 and selected
consolidated balance sheet data as of January 31, 2010 and January 30, 2011 are derived from our audited consolidated financial statements
included elsewhere in this prospectus. The consolidated statement of operations and cash flows data for the fiscal year ended February 3, 2008
and selected consolidated balance sheet data as of February 3, 2008 and February 1, 2009 are derived from our audited consolidated financial
statements not included elsewhere in this prospectus. The consolidated statement of operations and cash flows data for the fiscal year ended
January 28, 2007 and selected consolidated balance sheet data as of January 28, 2007 are derived from our unaudited consolidated financial
statements not included elsewhere in this prospectus. The consolidated statement of operations and cash flows data for the thirteen weeks ended
May 2, 2010 and May 1, 2011 and consolidated balance sheet data as of May 1, 2011 have been derived from our unaudited condensed
consolidated financial statements appearing elsewhere in this prospectus. The historical results presented below are not necessarily indicative of
the results to be expected for any future period. You should read this selected consolidated financial data in conjunction with the consolidated
and condensed consolidated financial statements and related notes and the information under “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” appearing elsewhere in this prospectus.

                                                                                                                                        Thirteen Weeks
                                                               Fiscal Year Ended                                                            Ended
                                January 28,      February 3,         February 1,          January 31,          January 30,           May 2,           May 1,
                                   2007             2008                2009                 2010                 2011               2010             2011
                                (unaudited)                                                                                               (unaudited)
                                                               (dollars in thousands, except per share and store data)
Consolidated Statement of
  Operations Data:
Net sales                       $   33,764      $    47,203        $      63,861         $     90,262         $    124,701       $ 25,773          $ 34,939
Cost of goods sold
  (exclusive of depreciation
  shown separately below)           15,930           19,972               27,193               36,435               46,275            10,021           12,451
Gross profit                        17,834           27,231               36,668               53,827               78,426            15,752           22,488
Selling, general and
  administrative expense            16,497           22,232               29,242               38,142               50,571            10,800           14,758
Depreciation and
  amortization expense                1,512            2,022               2,666                 3,489                   4,361           973            1,274
Income (loss) from
   operations                          (175 )          2,977               4,760               12,196               23,494             3,979            6,456
Interest expense, net                 1,273            1,592               2,061                2,435                2,585               623              689
Income (loss) before income
  taxes                              (1,448 )          1,385               2,699                 9,761              20,909             3,356            5,767
Provision (benefit) for
  income taxes                         (103 )          1,007               1,502                 4,470                   8,906         1,429            2,444
Net income (loss)               $    (1,345 )   $        378       $       1,197         $       5,291        $     12,003       $     1,927       $    3,323


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                                                                 Fiscal Year Ended                                                              Thirteen Weeks Ended
                            January 28,           February 3,       February 1,             January 31,                   January 30,         May 2,               May 1,
                               2007                  2008               2009                   2010                          2011             2010                  2011
                            (unaudited)                                                                                                              (unaudited)
                                                                      (dollars in thousands, except per share and store data)
Net income (loss) per
  share:
     Basic (1)          $           (0.14 )   $           0.04   $           0.12       $              0.53           $            1.21   $         0.19      $             0.33
     Diluted (1)        $           (0.14 )   $           0.04   $           0.12       $              0.53           $            1.18   $         0.19      $             0.33
Weighted average
 shares outstanding:
    Basic (1)                   9,911,547           9,924,396         9,924,396                9,924,396                    9,924,396          9,924,396           9,924,396
    Diluted (1)                 9,911,547           9,924,716        10,017,794               10,079,067                   10,187,864         10,119,503          10,188,824
Pro Forma
  Consolidated
  Statement of
  Operations Data
  (unaudited):
Pro forma interest expense, net (2)                                                                                   $            440                        $            90
Pro forma net income                                                                                                            14,147                                  3,922
Pro forma net income per share—Basic
Pro forma net income per share—Diluted                                                                                $                                       $




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                                                                                                                                                               Thirteen
                                                                            Fiscal Year Ended                                                                 Weeks Ended
                                    January 28,           February 3,             February 1,          January 31,           January 30,             May 2,                 May 1,
                                       2007                  2008                    2009                 2010                  2011                 2010                   2011
                                    (unaudited)                                                                                                               (unaudited)
                                                                              (dollars in thousands, except per share and store data)
Consolidated Balance
  Sheet Data (end of
  period):
Cash and cash
  equivalents                      $      1,070          $         761          $      1,168         $       1,314          $        7,901                              $      3,740
Total assets                             22,185                 25,535                35,353                41,767                  64,126                                    65,802
Series A redeemable
  preferred stock (2)                      6,316                 7,564                  9,058               10,848                  12,992                                    13,591
Total debt                                 1,417                   875                  5,535                1,250                   1,000                                     1,000
Class B redeemable
  common stock                           10,069                 12,160                15,808                21,888                  81,401                                    87,253
Total stockholders’
  deficit (3)                      $      (3,276 )       $      (4,842 )        $      (7,086 )      $       (7,706 )       $       (55,059 )                           $    (57,626 )
Pro Forma Balance
  Sheet Data (end of
  period) (unaudited):
Series A redeemable preferred stock (2)                                                                                                                                 $        —
Class B redeemable common stock (3)                                                                                                                                              —
Total stockholders’ equity (4)                                                                                                                                          $     43,218
Consolidated
  Statement of Cash
  Flows Data:
Net cash provided by
  (used in):
     Operating activities $                2,384         $       3,767          $       4,951        $      11,071          $        19,397      $      (329 )          $      1,142
     Investing activities                 (5,289 )              (3,529 )               (8,798 )             (6,640 )                (12,560 )         (2,346 )                (5,056 )
     Financing activities                    881                  (547 )                4,254               (4,285 )                   (250 )          2,512                    (247 )
Increase (decrease) in
  cash and cash
  equivalents                      $      (2,024 )       $         (307 )       $         407        $          146         $         6,587      $      (163 )          $     (4,161 )
Store Data
  (unaudited):
Number of stores at end
  of period                                    47                    59                     87                  108                     146              118                      161
Comparable store sales
  growth for period (5)                       3.7 %                  8.4 %                 3.0 %                 6.9 %                  8.7 %           15.7 %                     6.0 %
Average net sales per
  comparable store (in
  thousands) (6)                   $          802        $          775         $         783        $          808         $           862      $       208            $         213
Gross square footage at
  end of period (in
  thousands)                                   43                    54                     77                    95                    130              105                      145
Sales per gross square
  foot (7)                         $          869        $          860         $         866        $          935         $           994      $       228            $         231

(1)   Net income per share and weighted average shares outstanding data for the fiscal year ended February 3, 2008 are unaudited.

(2)   Our Series A redeemable preferred stock was issued on December 15, 2004 with a mandatory redemption date upon the earlier of a public offering or December 15, 2011. The Series A
      redeemable preferred stock had an original redemption value of approximately $10.7 million with annual accretion at a rate of 5%. The cumulative annual accretion of the redemption
      value will be forgiven at the redemption date if we achieve certain targets. The Series A redeemable preferred stock is listed as a liability on our consolidated balance sheets and
      condensed consolidated balance sheets due to its mandatory redemption feature. Annual redemption value accretion and accretion of debt discount are included in interest expense on
      our consolidated statements of operations and condensed consolidated statements of operations. Pro forma interest expense, net income, and net income per share give effect to our
      redemption of the Series A redeemable preferred stock as if such redemption had occurred on February 1, 2010, and reflect the elimination of approximately $2.1 million of interest
      expense in fiscal 2010 and approximately $0.6 million during the thirteen weeks ended May 1, 2011, all of which was non-deductible, for income tax purposes. Pro forma Series A
      redeemable preferred stock at May 1, 2011 gives effect to our redemption of the Series A redeemable preferred stock as if such redemption had occurred on May 1, 2011 and assumes
      that we achieved the targets in order for the cumulative annual accretion of redemption value to be forgiven, resulting in an effective redemption value of $10.7 million and a
      reclassification of the cumulative annual accretion of redemption value to additional paid-in capital within stockholders’ equity. See Note 6, “Common and Preferred Stock,” in our
      consolidated financial statements and Note 4, “Common and Preferred Stock,” in our condensed consolidated statements of operations.

(3)   Because the Class B redeemable common stock is subject to redemption at the option of the holder from and after December 15, 2011 at a redemption price equal to the aggregate fair
      value of the shares being redeemed, the Class B redeemable common stock is classified on

                                                                                            34
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      our consolidated balance sheets and condensed consolidated balance sheets as temporary equity, rather than stockholders’ equity, with adjustments to its fair value made at each
      reporting date. The increase in total stockholders’ deficit from January 28, 2007 to May 1, 2011 reflects the increase in accumulated deficit that results from this classification of our
      Class B redeemable common stock. Our outstanding shares of Class B redeemable common stock will be automatically converted into an equivalent number of shares of our Class A
      Common stock upon the consummation of this offering. Pro forma Class B redeemable common stock at May 1, 2011 gives effect to the automatic conversion of the Class B
      redeemable common stock into Class A common stock, the corresponding reclassification of temporary equity into additional paid-in capital within stockholders’ equity, and the
      reclassification of all of our Class A common stock into common stock as if such events had occurred on May 1, 2011. See Note 6, “Common and Preferred Stock,” and Note 7, “Fair
      Value Measurements,” in our consolidated financial statements and Note 4, “Common and Preferred Stock,” in our condensed consolidated financial statements.

(4)   Pro forma total stockholders’ equity at May 1, 2011 gives effect to the receipt of proceeds from this offering sufficient to redeem the Series A redeemable preferred stock, the
      redemption of the Series A redeemable preferred stock, the conversion of the Class B redeemable common stock into Class A common stock, the reclassification of the aggregate fair
      value of the Class B redeemable common stock from temporary equity into additional paid-in capital within stockholders’ equity, the reclassification of the cumulative annual accretion
      of redemption value to additional paid-in capital within stockholders’ equity and the resulting change from total stockholders’ deficit to total stockholders’ equity, all as described in
      notes (1) and (2) above, as if such events had occurred on May 1, 2011. See Note 6, “Common and Preferred Stock,” in our consolidated financial statements and Note 4, “Common and
      Preferred Stock,” in our condensed consolidated financial statements.

(5)   Comparable store sales include company-owned stores that have been open for at least 15 full fiscal months. Comparability is typically achieved 12 months after the initial three-month
      period from opening during which new stores typically experience higher-than-average sales volumes. The manner in which we calculate comparable store sales may be different from
      how other specialty retailers calculate comparable or “same store” sales. Accordingly, data regarding our comparable store sales may not be comparable to similarly titled data made
      available from other retailers.

(6)   Average net sales per comparable store is calculated by dividing total sales per period for stores open 15 full fiscal months or more as of the beginning of each respective period by the
      total number of such stores. This methodology excludes the effects of the initial three-month period of higher-than-average sales volumes.

(7)   Sales per gross square foot is calculated by dividing total net sales for all stores, comparable and non-comparable, by the average gross square footage for the period. Average gross
      square footage for the period is calculated by dividing the sum of the total gross square footage at the beginning and at the end of each period by two.

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                                         MANAGEMENT’S DISCUSSION AND ANALYSIS OF
                                      FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      You should read the following discussion together with “Selected Consolidated Financial and Other Data,” and the consolidated
financial statements and related notes included elsewhere in this prospectus. The statements in this discussion regarding expectations of our
future performance, liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking
statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk
Factors” and “Forward-Looking Statements.” Our actual results may differ materially from those contained in or implied by any
forward-looking statements.

     We operate on a fiscal calendar widely used in the retail industry that results in a given fiscal year consisting of a 52- or 53-week period
ending on the Sunday closest to January 31 of the following year. For example, references to “fiscal 2010” refer to the fiscal year ended
January 30, 2011. Fiscal 2008, fiscal 2009 and fiscal 2010 each consist of 52-week periods.

Overview
     Teavana is a rapidly growing specialty retailer offering more than 100 varieties of premium loose-leaf teas, authentic artisanal teawares
and other tea-related merchandise. We believe we are one of the world’s largest branded, multi-channel specialty tea retailers. We offer our
products through 161 company-owned stores in 35 states and 19 franchised stores primarily in Mexico, as well as through our website,
www.teavana.com.

      Teavana was founded in 1997 by our Chairman and Chief Executive Officer, Andrew Mack, and his wife, Nancy Mack, who were
inspired by their international travels and passion for tea. In 2004 we partnered with Parallel Investment Partners to obtain equity capital,
strategic advice and other resources to support our accelerated growth plans. With our business momentum and expanded resources we were
able to attract an experienced senior management team that has led our growth to date and has set the foundation to execute our growth strategy
going forward.

     We have experienced rapid sales and profit growth during the last five years. We increased our sales from $33.8 million in fiscal 2006 to
$124.7 million in fiscal 2010, representing a 38.6% compound annual growth rate. Over that same period, we more than tripled our store base
from 47 stores to 146 stores. In fiscal 2010, our sales grew 38.2% over fiscal 2009, while our comparable store sales increased 8.7%. Our net
income was $12.0 million in fiscal 2010, representing a 126.9% growth rate over fiscal 2009. In fiscal 2010, our stores averaged sales per gross
square foot of approximately $1,000, which we believe is higher than most specialty retail stores in the United States.

       We intend to continue our profitable growth in the future. We believe there is a significant opportunity to expand our store base in the
United States from 161 locations to at least 500 stores. We have identified the malls, lifestyle centers and other high-sales-volume retail venues
for this proposed expansion. As of May 1, 2011, we have executed lease agreements for the opening of 41 stores in fiscal 2011 and three stores
in fiscal 2012. We plan to open approximately 50 stores in fiscal 2011 (including 15 stores opened in the first quarter), 60 stores in fiscal 2012
and to expand to 500 stores by 2015. We expect to continue to drive our comparable store sales by increasing the size and frequency of
purchases by our existing customers and attracting new customers. We intend to expand our online presence, which we believe is an extension
of our brand and retail stores that allows us to reach new and existing customers and build brand awareness in locations where we currently do
not have stores. We expect to increase our operating margins through the continuation of our sales mix shift away from tea-related merchandise
towards higher margin loose-leaf teas that our stores generally experience as they mature. We also intend to leverage our corporate and other
fixed costs and capture gross margin benefits from our growing scale with suppliers. Finally, given the worldwide popularity of tea, we will
selectively pursue international expansion, which we believe represents a compelling opportunity for additional growth over the long term.

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       We have a proven and highly profitable store model that has produced consistent financial results and returns. We seek to open stores in
locations that reinforce the premium image of our brand by targeting high traffic locations within malls, lifestyle centers and other
high-sales-volume retail venues. All of our stores were profitable in fiscal 2010 and new stores have historically averaged a payback period of
less than one and a half years. Our current store base is balanced across all four regions of the country, with each region producing results in
line with the company average. As we continue to expand our store base, it may become more difficult to identify additional suitable sites for
new stores and we will target an increasing number of shopping malls with lower average sales per square foot than the malls in which we
currently are located. As a result, our new store model anticipates a target store size of 900 to 1,000 square feet that achieves annual sales of
$600,000 to $700,000 in the first year of operation, which is below the historical average for our new stores. Our new store model also assumes
an average new store investment of approximately $200,000 to $250,000, which is below the historical average for our new stores. Our new
store investment includes our store buildout (net of tenant allowances), inventory and cash pre-opening costs. We target an average payback
period of approximately 18 months on our new store investment.

      As the number of stores we open each year becomes a smaller percentage of our existing store base, and given that our new store model
assumes first year sales below our historical average, and that we forecast comparable same store sales to grow at less than our historical
growth rate, we anticipate that our future sales will grow at less than our historical growth rate. Similarly, although we expect our operating
margins and our leverage of corporate and other fixed costs to increase in the future, we anticipate that our profit margins will grow at less than
our historical growth rate.

      Our planned store expansion will place increased demands on our operational, managerial, administrative and other resources. Managing
our growth effectively will require us to continue to enhance our store management systems, financial and management controls and
information systems and to hire, train and retain store management and store support center personnel.

       We have recently invested capital to continue building the infrastructure necessary to support our future growth, and we expect to incur
additional capital expenditures related to expansion of our infrastructure in future periods. In fiscal 2010, we relocated and significantly
expanded our store support center. We have identified the need to expand our distribution center in order to support our near-term growth. We
have signed commitments to expand our distribution center, for a modest capital outlay, in three separate phases during fiscal 2011 and fiscal
2012 to support our planned growth through the first quarter of fiscal 2013. We have considerable experience expanding our distribution center,
having completed similar expansions successfully in fiscal 2009 and fiscal 2010. Further, we have commissioned a study to assess our
long-term distribution needs and determine the most efficient strategy to satisfy those needs, which could include the addition of a second
distribution center in another region of the United States. The timing and amount of investments in our infrastructure could affect the
comparability of our results of operations in future periods.

How We Assess the Performance of Our Business
      In assessing the performance of our business and our progress against our growth strategy, we consider a variety of performance and
financial measures. The key measures that we utilize to evaluate the performance of our business and the execution of our strategy are set forth
below:

      Net Sales

      Net sales constitute gross sales net of any returns and discounts. Net sales consist of sales from comparable stores and non-comparable
stores, and other sales.

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Index to Financial Statements

      The specialty retail industry is cyclical, and consequently our net sales are affected by general economic conditions. Purchases of
premium loose-leaf tea and tea-related merchandise can be impacted by a number of factors that influence the levels of consumer spending,
including economic conditions and the level of disposable consumer income, consumer debt, interest rates and consumer confidence.

       Our business is also seasonal and as a result, our net sales fluctuate from quarter to quarter. Net sales are traditionally highest in the fourth
fiscal quarter, which includes the holiday sales period due to holiday purchases from Thanksgiving through the end of December, and tend to
be lowest in the second and third fiscal quarters.

      Comparable store sales. Comparable store sales include net sales from all stores that have been open for at least 15 full fiscal months, as
in our experience our new stores generally open with higher than average sales volumes in the initial months following their opening. This
trend usually extends for a period of at least three months, and comparability is typically achieved 12 months after the initial three-month
period from the date of opening. There may be variations in the way in which certain other specialty retailers calculate comparable or “same
store” sales. As a result, data in this prospectus regarding our comparable store sales may not be comparable to similarly titled data made
available from other retailers.

      Measuring the change in year-over-year comparable store sales allows us to evaluate how our store base is performing. Various factors
affect comparable store sales, including:
        •    consumer preference, buying and economic trends;
        •    our ability to anticipate and respond effectively to consumer preference, buying and economic trends;
        •    our ability to provide a product offering that generates new and repeat visits to our stores;
        •    the customer experience we provide in our stores;
        •    the level of traffic near our locations in the shopping malls and centers in which we operate;
        •    the number of customer transactions and the average ticket in our stores;
        •    the pricing of our teas and tea-related merchandise;
        •    the length of time of individual store operations;
        •    our ability to obtain and distribute products efficiently;
        •    our opening of new stores in the vicinity of our existing stores; and
        •    the opening or closing of competitor stores in the vicinity of our stores.

      Non-comparable store sales. Non-comparable store sales include sales from stores not included in comparable store sales. As we pursue
our growth strategy, we expect that a significant percentage of our net sales increase will continue to come from non-comparable store sales.
Accordingly, non-comparable store sales is an additional key measure we use to assess the success of our growth strategy.

       Other sales. Other sales include sales through our website at www.teavana.com, sales related to our franchised operations, gift card
breakage revenue and, through the end of fiscal 2010, wholesale and e-commerce sales of teas and merchandise under the brand name
SpecialTeas (we ceased selling under the SpecialTeas brand name on January 30, 2011). Sales related to our franchised operations consist of:
initial franchise fees received in connection with newly franchised stores which are recognized as revenue when the obligations under the
related franchise agreement are met; continuing royalty fees; wholesale sales of our teas and tea-related merchandise to franchise stores; and
recognition of deferred revenue related to the initial development fee paid at inception by our Mexican partner.

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Index to Financial Statements

      Gross Profit

     Gross profit is equal to our net sales minus our cost of goods sold. Gross margin is gross profit as a percentage of our net sales. Cost of
goods sold includes the direct costs of our products, freight and shipping costs, distribution center costs and occupancy costs for stores in
operation. The components of cost of goods sold may not be comparable to those of other retailers.

      Our cost of goods sold is substantially higher in higher-volume quarters because cost of goods sold generally increases as net sales
increases. Changes in the product mix of sales, such as shifts in the proportion of tea to merchandise sales, may also impact our overall gross
margin. As our stores mature they have historically experienced a sales mix shift away from tea-related merchandise towards higher margin
loose-leaf teas, increasing overall gross margins. In general, this trend is the result of the evolution in our customers’ buying patterns as they
graduate from purchases with a greater focus on merchandise with which to prepare and enjoy tea towards transactions centered more on
replenishing their favorite teas and experimenting with new blends.

      Selling, General and Administrative Expense

      Selling, general and administrative expense consists primarily of store operating expenses, store pre-opening expenses and other
administrative expenses. Store operating expenses are generally the largest component of selling, general and administrative expense and
consist of all store expenses other than occupancy-related costs (which are included in cost of goods sold). Store pre-opening costs are
expensed as incurred and represent the costs at a store prior to its opening date including occupancy, payroll and other operating costs. Other
administrative expenses include professional fees, travel costs, occupancy and payroll costs (both cash and stock-based) for our store support
center and other administrative expenses.

      Selling, general and administrative expense typically does not vary proportionally with net sales to the same degree as our cost of goods
sold. Accordingly, this expense as a percentage of sales is usually higher in lower-volume quarters and lower in higher-volume quarters. We
expect that our selling, general and administrative expense will increase in future periods as we selectively add to our corporate and store
support functions to support continuing growth and, to a lesser extent, to cover additional legal, accounting, insurance and other regulatory
costs as a result of being a public company. The components of selling, general and administrative expense may not be comparable to those of
other retailers.

      Depreciation and Amortization Expense

      Depreciation and amortization expense consists primarily of depreciation of our leasehold improvements and equipment and to a lesser
extent, amortization of our finite-lived assets. We expect that depreciation expense will continue to increase as we open more stores.

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Index to Financial Statements

Results of Operations
       The following tables summarize key components of our results of operations for the periods indicated:

                                                                                   Fiscal Year Ended                                                       Thirteen Weeks Ended
                                                       February 1, 2009              January 31, 2010                 January 30, 2011                May 2, 2010            May 1, 2011
                                                                                                                                                                 (unaudited)
                                                                                                (dollars in thousands, except store data)
Consolidated Statement of
  Operations Data:
Net sales                                          $             63,861           $             90,262            $           124,701             $        25,773          $        34,939
Cost of goods sold (exclusive of
  depreciation shown separately
  below)                                                         27,193                         36,435                          46,275                     10,021                   12,451
Gross profit                                                     36,668                         53,827                          78,426                     15,752                   22,488
Selling, general and administrative
  expense                                                        29,242                         38,142                          50,571                     10,800                   14,758
Depreciation and amortization
  expense                                                         2,666                           3,489                           4,361                        973                   1,274
Income from operations                                            4,760                         12,196                          23,494                      3,979                    6,456
Interest expense, net                                             2,061                          2,435                           2,585                        623                      689
Income before income taxes                                        2,699                           9,761                         20,909                      3,356                    5,767
Provision for income taxes                                        1,502                           4,470                          8,906                      1,429                    2,444
Net income                                         $              1,197           $               5,291           $             12,003            $         1,927          $         3,323

Percentage of Net Sales:
Net sales                                                         100.0 %                         100.0 %                         100.0 %                   100.0 %                  100.0 %
Cost of goods sold                                                 42.6 %                          40.4 %                          37.1 %                    38.9 %                   35.6 %
Gross profit                                                        57.4 %                          59.6 %                         62.9 %                     61.1 %                   64.4 %
Selling, general and administrative
  expense                                                           45.7 %                          42.2 %                         40.6 %                     41.9 %                   42.2 %
Depreciation and amortization
  expense                                                             4.2 %                          3.9 %                           3.5 %                     3.8 %                     3.7 %
Income from operations                                                7.5 %                         13.5 %                         18.8 %                     15.4 %                   18.5 %
Interest expense, net                                                 3.2 %                          2.7 %                          2.1 %                      2.4 %                    2.0 %
Income before income taxes                                            4.3 %                         10.8 %                         16.8 %                     13.0 %                   16.5 %
Provision for income taxes                                            2.4 %                          4.9 %                          7.1 %                      5.5 %                    7.0 %
Net income                                                            1.9 %                          5.9 %                           9.6 %                     7.5 %                     9.5 %

Store Data (unaudited):
Number of stores at end of period                                      87                            108                            146                        118                      161
Comparable store sales growth for
  period (1)                                                          3.0 %                          6.9 %                           8.7 %                    15.7 %                     6.0 %
Average net sales per comparable
  store (in thousands) (2)                         $                 783          $                  808          $                 862           $            208         $            213
Gross square footage at end of
  period (in thousands)                                               77                              95                            130                        105                      145
Sales per gross square foot (3)                    $                 866          $                  935          $                 994           $            228         $            231

(1)   Comparable store sales include company-owned stores that have been open for at least 15 full fiscal months. Comparability is typically achieved 12 months after the initial three-month
      period from opening during which new stores typically experience higher-than-average sales volumes.
(2)   Average net sales per comparable store is calculated by dividing total sales per period for stores open 15 full fiscal months or more as of the beginning of each respective period by the
      total number of such stores. This methodology excludes the effects of the initial three-month period of higher-than-average sales volumes.
(3)   Sales per gross square foot is calculated by dividing total net sales for all stores, comparable and non-comparable, by the average gross square footage for the period. Average gross
      square footage for the period is calculated by dividing the sum of the total gross square footage at the beginning and at the end of each period by two.

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Index to Financial Statements

      The approximate percentages of net sales derived from our product categories was as follows:

                                                           Fiscal Year Ended                                       Thirteen Weeks Ended
                                   February 1, 2009          January 31, 2010         January 30, 2011        May 2, 2010          May 1, 2011
Product Categories
  (unaudited):
Tea                                               51 %                        54 %                   56 %              59 %                 60 %
Merchandise                                       44 %                        42 %                   40 %              36 %                 36 %
Beverage                                           5%                          4%                     4%                5%                   4%
                                                100 %                     100 %                    100 %              100 %                100 %

Thirteen Weeks Ended May 1, 2011 Compared to Thirteen Weeks Ended May 2, 2010
      Net Sales
     Net sales increased by 35.6%, or $9.2 million, to $34.9 million in the thirteen weeks ended May 1, 2011 from $25.7 million in the thirteen
weeks ended May 2, 2010, resulting from $7.6 million in non-comparable store sales, a $1.3 million increase in comparable store sales and a
$0.3 million increase in other sales.

      Non-comparable store sales were $7.6 million in the thirteen weeks ended May 1, 2011 due to sales from 53 stores that were not open as
of January 30, 2011 and therefore had not yet become comparable stores in the thirteen weeks ended May 2, 2010. There were 53
non-comparable stores as of May 1, 2011 compared to 33 as of May 2, 2010.

      Comparable store sales increased by 6.0%, or $1.3 million, in the thirteen weeks ended May 1, 2011 due to a 7.7% increase in the average
transaction size at our comparable stores partially offset by a 1.7% decrease in the number of transactions driven partially by our continued
de-emphasis of the beverage product category. Transaction size at our comparable stores increased to $37 in the thirteen weeks ended May 1,
2011 from $34 in the thirteen weeks ended May 2, 2010. There were 108 comparable stores open as of May 1, 2011 compared to 85 as of May
2, 2010.

      Other sales increased by $0.3 million in the thirteen weeks ended May 1, 2011 due primarily to an increase of $0.9 million in e-commerce
sales partially offset by a decrease of $0.6 million in other sales driven by the elimination of the SpecialTeas brand at the end of fiscal 2010.

      Gross Profit

      Gross profit increased by 42.8%, or $6.7 million, to $22.5 million in the thirteen weeks ended May 1, 2011 from $15.8 million in the
thirteen weeks ended May 2, 2010. Gross margin increased to 64.4% in the thirteen weeks ended May 1, 2011 from 61.1% in the thirteen
weeks ended May 2, 2010, due to an increase in product margins primarily in our merchandise category, as well as to the sales mix shift from
merchandise towards higher-margin tea that our stores generally experience as they mature.

      Selling, General and Administrative Expense

      Selling, general and administrative expense increased by 36.6%, or $4.0 million, to $14.8 million in the thirteen weeks ended May 1,
2011 from $10.8 million in the thirteen weeks ended May 2, 2010. As a percentage of net sales, selling, general and administrative expense
increased to 42.2% in the thirteen weeks ended May 1, 2011 from 41.9% in the thirteen weeks ended May 2, 2010.

      Store operating expenses increased by 39.3%, or $2.9 million, in the thirteen weeks ended May 1, 2011 due primarily to the operation of
161 stores as of this date as compared to the operation of 118 stores as of May 2, 2010. As a percentage of net sales, store operating expenses
increased to 28.8% in the thirteen weeks ended May 1, 2011 from 28.0% in the thirteen weeks ended May 2, 2010 due primarily to net sales
from stores comprising a larger percentage of our total net sales driven by the elimination of the SpecialTeas brand at the end of fiscal 2010.
Store operating expenses as a percentage of net sales from stores remained relatively flat in the thirteen weeks ended May 1, 2011 compared to
the thirteen weeks ended May 2, 2010.

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Index to Financial Statements

      Store pre-opening expenses increased by 39.1%, or $0.2 million, in the thirteen weeks ended May 1, 2011 due primarily to the timing of
the opening of 15 new stores in the thirteen weeks ended May 1, 2011 compared to the timing of opening 10 new stores in the thirteen weeks
ended May 2, 2010. As a percentage of net sales, store pre-opening expenses increased to 2.0% in the thirteen weeks ended May 1, 2011 from
1.9% in the thirteen weeks ended May 2, 2010.

      Other administrative expenses increased by 30.0%, or $0.9 million, in the thirteen weeks ended May 1, 2011 due primarily to the
increased cost to support 161 stores in this period compared to 118 stores in the thirteen weeks ended May 2, 2010, including an increase in
occupancy expense attributable to the relocation and expansion of our store support center in the third and fourth fiscal quarters of 2010. As a
percentage of net sales, other administrative expenses decreased to 11.5% in the thirteen weeks ended May 1, 2011 from 12.0% in the thirteen
weeks ended May 2, 2010.

      Depreciation and Amortization Expense

      Depreciation and amortization expense increased by 30.9%, or $0.3 million, to $1.3 million in the thirteen weeks ended May 1, 2011
from $1.0 million in the thirteen weeks ended May 2, 2010 due primarily to capital expenditures of $15.3 million incurred in the fifty-two
weeks ended May 1, 2011 to build new stores and, to a lesser extent, for leasehold improvements at our new store support center. As a
percentage of net sales, depreciation and amortization expense decreased to 3.7% in the thirteen weeks ended May 1, 2011 from 3.8% in the
thirteen weeks ended May 2, 2010.

      Interest Expense, Net

      Interest expense, net increased by 10.6%, or $0.1 million, to $0.7 million in the thirteen weeks ended May 1, 2011 from $0.6 million in
the thirteen weeks ended May 2, 2010 due primarily to an increase in accretion of our Series A redeemable preferred stock. The Series A
redeemable preferred stock will be redeemed upon the consummation of this offering. Interest incurred from our revolving credit facility
remained relatively flat period over period.

      Provision for Income Taxes

      Our provision for income taxes increased by 71.0%, or $1.0 million, to $2.4 million in the thirteen weeks ended May 1, 2011 from $1.4
million in the thirteen weeks ended May 2, 2010. The increase in our provision for income taxes was due primarily to an increase of $2.4
million in our income before income taxes. Our effective tax rates were 42.4% and 42.6% for the thirteen weeks ended May 1, 2011 and May
2, 2010, respectively. Our effective tax rate decreased slightly due primarily to non-deductible accretion related to our Series A redeemable
preferred stock representing a lower percentage of our income before income taxes in the thirteen weeks ended May 1, 2011 as compared to the
thirteen weeks ended May 2, 2010. The Series A redeemable preferred stock will be redeemed upon the consummation of this offering and will
not impact our effective tax rate subsequent to this offering.

      Net Income

     As a result of the foregoing, net income increased by 72.4%, or $1.4 million, to $3.3 million in the thirteen weeks ended May 1, 2011
from $1.9 million in the thirteen weeks ended May 2, 2010. Net income as a percentage of net sales increased to 9.5% in the thirteen weeks
ended May 1, 2011 from 7.5% in the thirteen weeks ended May 2, 2010.

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Index to Financial Statements

Fiscal 2010 Compared to Fiscal 2009
      Net Sales
      Net sales increased by 38.2%, or $34.4 million, to $124.7 million in fiscal 2010 from $90.3 million in fiscal 2009, resulting from $24.8
million in non-comparable store sales, a $6.5 million increase in comparable store sales and a $3.1 million increase in other sales.

     Non-comparable store sales were $24.8 million in fiscal 2010 due to sales from 38 new stores that were not open in fiscal 2009 and sales
from three stores that were opened in the last three fiscal months of fiscal 2009 and therefore had not yet become comparable stores in fiscal
2010. There were 41 non-comparable stores as of January 30, 2011 compared to 31 as of January 31, 2010.

     Comparable store sales increased by 8.7%, or $6.5 million, in fiscal 2010 due to an 8.1% increase in the average transaction size at our
comparable stores and a 0.6% increase in the number of transactions. Transaction size at our comparable stores increased to $36 in fiscal 2010
from $33 in fiscal 2009. There were 105 comparable stores open as of January 30, 2011 compared to 77 as of January 31, 2010.

      Other sales increased by $3.1 million due primarily to an increase of $2.6 million in e-commerce sales and to a lesser extent, increases in
sales to and royalties from franchisees and revenue from gift-card breakage.

     The increase in the tea category as a percentage of net sales and the corresponding decrease in the merchandise category in fiscal 2010
were due primarily to the sales mix shift towards tea that our stores generally experience as they mature.

      Gross Profit

      Gross profit increased by 45.7%, or $24.6 million, to $78.4 million in fiscal 2010 from $53.8 million in fiscal 2009. Gross margin
increased to 62.9% in fiscal 2010 from 59.6% in fiscal 2009, due primarily to the sales mix shift from merchandise towards higher-margin tea
that our stores generally experience as they mature. The improvement in gross margin was also driven by an increase in product margins
primarily in our merchandise category, as well as a reduction of our store occupancy costs as a percentage of net sales.

      Selling, General and Administrative Expense

       Selling, general and administrative expense increased by 32.6%, or $12.4 million, to $50.6 million in fiscal 2010 from $38.1 million in
fiscal 2009. As a percentage of net sales, selling, general and administrative expense decreased to 40.6% in fiscal 2010 from 42.2% in fiscal
2009.

       Store operating expenses increased by 32.9%, or $8.4 million, in fiscal 2010 due primarily to the operation of 146 stores as of January 30,
2011 compared to the operation of 108 stores as of January 31, 2010. As a percentage of net sales, store operating expenses decreased to 27.3%
in fiscal 2010 from 28.3% in fiscal 2009.

      Store pre-opening expenses increased by 96.0%, or $0.8 million, in fiscal 2010 due primarily to the timing of the opening of 38 new
stores in fiscal 2010 compared to the timing of the opening of 21 new stores in fiscal 2009. As a percentage of net sales, store pre-opening
expenses increased to 1.3% in fiscal 2010 from 0.9% in fiscal 2009.

       Other administrative expenses increased by 27.3%, or $3.2 million, in fiscal 2010 due primarily to the increased cost to support 146 stores
in fiscal 2010 compared to 108 stores in fiscal 2009, including an increase in occupancy expense attributable to the relocation and expansion of
our store support center in fiscal 2010. As a percentage of net sales, other administrative expenses decreased to 12.0% in fiscal 2010 from
13.0% in fiscal 2009.

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Index to Financial Statements

      Depreciation and Amortization Expense

      Depreciation and amortization expense increased by 25.0%, or $0.9 million, to $4.4 million in fiscal 2010 from $3.5 million in fiscal
2009. The increase in depreciation and amortization expense was due primarily to capital expenditures of $12.6 million incurred in fiscal 2010
to build new stores and, to a lesser extent, for leasehold improvements at our new store support center. As a percentage of net sales,
depreciation and amortization expense decreased to 3.5% in fiscal 2010 from 3.9% in fiscal 2009.

      Interest Expense, Net

      Interest expense, net increased by 6.2%, or $0.2 million, to $2.6 million in fiscal 2010 from $2.4 million in fiscal 2009 due primarily to an
increase of approximately $0.4 million in accretion from our Series A redeemable preferred stock, partially offset by a decrease in interest
expense of approximately $0.2 million on our revolving credit facility due to a lower average balance of borrowings throughout fiscal 2010.
The Series A redeemable preferred stock will be redeemed upon the consummation of this offering.

      Provision for Income Taxes

      Our provision for income taxes increased by 99.2%, or $4.4 million, to $8.9 million in fiscal 2010 from $4.5 million in fiscal 2009. The
increase in our provision for income taxes was due primarily to the $11.1 million increase in our income before income taxes. Our effective tax
rates were 42.6% and 45.8% for fiscal 2010 and fiscal 2009, respectively. Our effective tax rate decreased due primarily to non-deductible
accretion related to our Series A redeemable preferred stock representing a lower percentage of our income before income taxes in fiscal 2010
than in fiscal 2009. The Series A redeemable preferred stock will be redeemed upon the consummation of this offering and will not impact our
effective tax rate subsequent to this offering.

      Net Income

     As a result of the foregoing, net income increased by 126.9%, or $6.7 million, to $12.0 million in fiscal 2010 from $5.3 million in fiscal
2009. Net income as a percentage of net sales increased to 9.6% in fiscal 2010 from 5.9% in fiscal 2009.

Fiscal 2009 Compared to Fiscal 2008
      Net Sales
      Net sales increased by 41.3%, or $26.4 million, to $90.3 million in fiscal 2009 from $63.9 million in fiscal 2008, resulting from $20.4
million in non-comparable store sales, a $3.5 million increase in comparable store sales and a $2.5 million increase in other sales.

     Non-comparable store sales were $20.4 million in fiscal 2009 due to sales from 21 new stores that were not open in fiscal 2008 and sales
from ten stores that were opened in the last three months of fiscal 2008 and therefore had not yet become comparable stores in fiscal 2009.
There were 31 non-comparable stores open as of January 31, 2010 compared to 34 as of February 1, 2009.

      Comparable store sales increased by 6.9%, or $3.5 million, in fiscal 2009 due primarily to a 13.2% increase in the average transaction
size at our comparable stores, partially offset by a 6.3% decrease in the number of transactions. Transaction size at our comparable stores
increased to $32 in fiscal 2009 compared to $29 in fiscal 2008. The number of transactions decreased primarily due to our continued
de-emphasis of the beverage product category. There were 77 comparable stores open as of January 31, 2010 compared to 53 as of February 1,
2009.

      Other sales increased by $2.5 million due primarily to an increase of $2.2 million in e-commerce sales and, to a lesser extent, increases in
sales to and royalties from franchisees.

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Index to Financial Statements

     The increase in the tea category as a percentage of net sales and the corresponding decrease in the merchandise category in fiscal 2009
were due primarily to the sales mix shift towards tea that our stores generally experience as they mature.

      Gross Profit

      Gross profit increased by 46.8%, or $17.2 million, to $53.8 million in fiscal 2009 from $36.7 million in fiscal 2008. Gross margin
increased to 59.6% in fiscal 2009 from 57.4% in fiscal 2008, due primarily to the sales mix shift from merchandise towards higher-margin tea
that our stores generally experience as they mature. The improvement in gross margin was also driven by an increase in product margins
primarily in our merchandise category.

      Selling, General and Administrative Expense

       Selling, general and administrative expense increased by 30.4%, or $8.9 million, to $38.1 million in fiscal 2009 from $29.2 million in
fiscal 2008. As a percentage of net sales, selling, general and administrative expense decreased to 42.2% in fiscal 2009 from 45.7% in fiscal
2008.

       Store operating expenses increased by 36.6%, or $6.8 million, in fiscal 2009 due primarily to the operation of 108 stores as of January 31,
2010 compared to the operation of 87 stores as of February 1, 2009. As a percentage of net sales, store operating expenses decreased to 28.3%
in fiscal 2009 from 29.3% in fiscal 2008.

      Store pre-opening expenses decreased by 24.9%, or $0.3 million, in fiscal 2009 due primarily to the timing of the opening of 21 new
stores in fiscal 2009 compared to the timing of the opening of 28 new stores in fiscal 2008. As a percentage of net sales, store pre-opening
expenses decreased to 0.9% in fiscal 2009 from 1.8% in fiscal 2008.

       Other administrative expenses increased by 24.9%, or $2.4 million, in fiscal 2009 due primarily to the increased cost to support 108 stores
in fiscal 2009 compared to 87 stores in fiscal 2008. As a percentage of net sales, other administrative expenses decreased to 13.0% in fiscal
2009 from 14.7% in fiscal 2008.

      Depreciation and Amortization Expense

      Depreciation and amortization expense increased by 30.9%, or $0.8 million, to $3.5 million in fiscal 2009 from $2.7 million in fiscal
2008. The increase in depreciation and amortization expense was due primarily to capital expenditures of $6.6 million incurred in fiscal 2009 to
build new stores. As a percentage of net sales, depreciation and amortization expense decreased to 3.9% in fiscal 2009 from 4.2% in fiscal
2008.

      Interest Expense, Net

     Interest expense, net increased by 18.2%, or $0.3 million, to $2.4 million in fiscal 2009 from $2.1 million in fiscal 2008 due primarily to a
$0.3 million increase in accretion related to our Series A redeemable preferred stock. The Series A redeemable preferred stock will be
redeemed upon the consummation of this offering.

      Provision for Income Taxes

      Our provision for income taxes increased by 197.6%, or $3.0 million, to $4.5 million in fiscal 2009 from $1.5 million in fiscal 2008. The
increase in our provision for income taxes was due primarily to the $7.1 million increase in our income before income taxes. Our effective tax
rates were 45.8% and 55.7% for fiscal 2009 and fiscal 2008, respectively. Our effective tax rate decreased due primarily to non-deductible
accretion related to our Series A redeemable preferred stock representing a lower percentage of our income before income taxes in fiscal 2009
than in fiscal 2008. The Series A redeemable preferred stock will be redeemed upon the consummation of this offering and will not impact our
effective tax rate subsequent to this offering.

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        Net Income

     As a result of the foregoing, net income increased by $4.1 million to $5.3 million in fiscal 2009 from $1.2 million in fiscal 2008. Net
income as a percentage of net sales increased to 5.9% in fiscal 2009 from 1.9% in fiscal 2008.

Selected Quarterly and Other Financial Data
      The following table sets forth selected unaudited consolidated quarterly data for each of the four quarters in fiscal 2009 and 2010,
respectively, and the thirteen weeks ended May 1, 2011. In our opinion, the following selected unaudited consolidated quarterly statements of
operations data have been prepared on the same basis as the audited consolidated financial statements included in this prospectus and reflect all
necessary adjustments, consisting only of normal recurring adjustments, necessary for fair presentation of these data. You should read this
information together with our consolidated financial statements and related notes appearing elsewhere in this prospectus. Operating results for
any fiscal quarter are not necessarily indicative of results for the full year. Historical results are not necessarily indicative of results to be
expected for future periods.
                                                                        Fiscal 2009                                                                            Fiscal 2010                                                   Fiscal 2011
                                         First                Second                       Third             Fourth                 First                Second                   Third                Fourth                   First
                                        Quarter               Quarter                     Quarter            Quarter              Quarter                Quarter                 Quarter               Quarter                Quarter
                                                                                                                        (unaudited)
                                                                                                         (dollars in thousands, except store data)
Net sales                           $      17,990         $      17,261               $      18,693      $      36,318         $      25,773         $      22,982           $      24,746         $      51,200         $        34,939
Gross profit                               10,417                 9,818                      10,648             22,944                15,752                13,526                  14,509                34,639                  22,488
Income from operations                      1,056                   383                         635             10,122                 3,979                 1,657                   1,278                16,580                   6,456
Net income (loss)                   $         252         $        (123 )             $         (13 )    $       5,175         $       1,927         $         579           $         340         $       9,157         $         3,323
Percentage of net sales:
Net sales                                   100.0 %               100.0 %                     100.0 %             100.0 %              100.0 %                100.0 %                100.0 %               100.0 %                 100.0 %
Gross profit                                 57.9 %                56.9 %                      57.0 %              63.2 %               61.1 %                 58.9 %                 58.6 %                67.7 %                  64.4 %
Income from operations                        5.9 %                 2.2 %                       3.4 %              27.9 %               15.4 %                  7.2 %                  5.2 %                32.4 %                  18.5 %
Net income (loss)                             1.4 %                (0.7 %)                     (0.1 %)             14.2 %                7.5 %                  2.5 %                  1.4 %                17.9 %                   9.5 %
Selected store data:
Number of stores at end of period                 92                101                         107                108                   118                    128                    141                   146                      161
Comparable store sales
  growth for period (1)                           1.4 %                 5.5 %                   10.7 %                 8.7 %             15.7 %                 6.9 %                      5.9 %                 7.5 %                6.0 %


(1) Comparable store sales include company-owned stores that have been open for at least 15 full fiscal months. Comparability is typically
    achieved 12 months after the initial three-month period from opening during which new stores generally experience higher-than-average
    sales volumes.

Liquidity and Capital Resources
      Our primary sources of liquidity are cash flows from operations and borrowings under our amended revolving credit facility. Our primary
cash needs are for capital expenditures and working capital.

     Capital expenditures typically vary depending on the timing of new store openings and infrastructure-related investments. During fiscal
2011, we plan to spend approximately $16.4 million on capital expenditures. We expect to devote approximately 80% of our capital
expenditure budget to construct and open 50 new stores and renovate a small number of existing stores approaching the end of their lease
terms, with the remainder projected to be spent on expansion of our distribution center and continued investment in our information technology
systems.

      Our primary working capital requirements are for the purchase of store inventory and payment of payroll, rent and other store operating
costs. Our working capital requirements fluctuate during the year, rising in the

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second and third fiscal quarters as we take title to increasing quantities of inventory in anticipation of our peak shopping season in the fourth
fiscal quarter. Fluctuations in working capital are also driven by the timing of new store openings.

      Historically we have funded our capital expenditures and working capital requirements during the fiscal year with borrowings under our
revolving credit facility, which we have typically paid down at the end of the fiscal year with cash generated during our peak selling season in
the fourth quarter. Our utilization of our revolving credit facility, and therefore the amount of indebtedness outstanding under it, has tended to
be highest in the beginning of the fourth quarter of each fiscal year.

      We believe that our cash position, net cash provided by operating activities and availability under our amended revolving credit facility,
together with the proceeds from this offering, will be adequate to finance our planned capital expenditures and working capital requirements
for the foreseeable future.

      Cash Flows

      A summary of our cash flows from operating, investing and financing activities is presented in the following table:

                                                                    Fiscal Year Ended                                                 Thirteen Weeks Ended
                                         February 1, 2009             January 31, 2010                  January 30, 2011         May 2, 2010            May 1, 2011
                                                                                                                                            (unaudited)
                                                                                         (dollars in thousands)
Cash flows provided by
  (used in):
Operating activities                 $                4,951         $           11,071              $               19,397       $         (329 )        $      1,142
Investing activities                                 (8,798 )                   (6,640 )                           (12,560 )             (2,346 )              (5,056 )
Financing activities                                  4,254                     (4,285 )                              (250 )              2,512                  (247 )
Increases (decreases) in cash
  and cash equivalents               $                  407         $                 146           $                6,587       $         (163 )        $     (4,161 )


      Operating Activities

     Cash flows from operating activities consist primarily of net income adjusted for non-cash items, including depreciation and amortization
expense, non-cash interest expense, stock-based compensation expense, deferred taxes and the effect of working capital changes.

                                                                        Fiscal Year Ended                                                Thirteen Weeks Ended
                                               February 1, 2009           January 31, 2010                  January 30, 2011         May 2, 2010           May 1, 2011
                                                                                                                                               (unaudited)
                                                                                             (dollars in thousands)
Cash flows from operating
  activities:
Net income                                 $              1,197         $              5,291            $             12,003     $         1,927         $      3,323
Adjustments to reconcile net
  income to net cash provided by
  operating activities:
     Depreciation and amortization
       expense                                            2,666                        3,489                           4,361                 973                1,274
     Non-cash interest expense                            1,709                        1,925                           2,279                 570                  633
     Deferred income taxes                                 (610 )                        532                            (253 )               —                    —
     Stock-based compensation                               207                          169                             157                  34                   37
     Other                                                  —                            —                               130                 —                    140
     Change in working capital                             (218 )                       (335 )                           720              (3,833 )             (4,265 )
           Net cash provided by
             (used in) operating
             activities                    $              4,951         $             11,071            $             19,397     $          (329 )       $      1,142


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      Net cash provided by (used in) operating activities increased by $1.5 million to $1.2 million in cash provided by operating activities in the
thirteen weeks ended May 1, 2011 from $0.3 million in cash used in operating activities in the thirteen weeks ended May 2, 2010, due primarily
to a $1.4 million increase in net income and, to a lesser extent, a $0.5 million increase in depreciation and amortization expense, non-cash
interest expense, stock based compensation and other, partially offset by a decrease in the change in working capital of approximately $0.4
million related to increases in inventory purchases, coupled with tax payments during the thirteen weeks ended May 1, 2011.

     Net cash provided by operating activities increased by $8.3 million to $19.4 million in fiscal 2010 from $11.1 million in fiscal 2009, due
primarily to a $6.7 million increase in net income and, to a lesser extent, a $2.4 million increase in depreciation and amortization expense,
non-cash interest expense, change in working capital and other, partially offset by a decrease of approximately $0.8 million related to deferred
income taxes and stock-based compensation.

      Net cash provided by operating activities increased by $6.1 million to $11.1 million in fiscal 2009 from $5.0 million in fiscal 2008, due
primarily to a $4.1 million increase in net income and, to a lesser extent, a $2.2 million increase in depreciation, non-cash interest expense and
deferred income taxes, partially offset by a decrease of approximately $0.2 million related to stock-based compensation and changes in
working capital.

      Investing Activities

      Cash flows from investing activities consist primarily of capital expenditures for new and, to a lesser extent, existing stores, as well as for
investments in our store support center, information technology systems and our distribution center to support our planned growth.

      Capital expenditures increased by $2.7 million to $5.1 million in the thirteen weeks ended May 1, 2011 from $2.4 million in the thirteen
weeks ended May 2, 2010. This increase was due primarily to the timing and number of new store build-outs. We opened 15 new stores in the
thirteen weeks ended May 1, 2011 compared to 10 new stores in the thirteen weeks ended May 2, 2010.

     Capital expenditures increased by $6.0 million, to $12.6 million in fiscal 2010 from $6.6 million in fiscal 2009. This increase was due
primarily to the opening of 38 new stores, and to a lesser extent, to the relocation and expansion of our store support center.

      Capital expenditures decreased by $2.2 million, to $6.6 million in fiscal 2009 from $8.8 million in fiscal 2008. This decrease was due
primarily to the timing and number of new store build-outs, as well as cost savings in our average store build-out cost. We opened 21 new
stores in fiscal 2009 compared to 28 new stores in fiscal 2008.

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      Financing Activities

      Cash flows from financing activities consist primarily of borrowings and payments on our revolving credit facility and its related
financing costs, and to a lesser extent, payments on our term loan and note payable.

                                                               Fiscal Year Ended                                          Thirteen Weeks Ended
                                          February 1, 2009       January 31, 2010                January 30, 2011     May 2, 2010           May 1, 2011
                                                                                                                                (unaudited)
                                                                                    (dollars in thousands)
Cash flows from financing
  activities:
Proceeds from revolving credit
  facility                            $             50,946     $           93,980            $           132,239      $   29,815          $     35,510
Payments on revolving credit
  facility                                         (45,661 )              (98,265 )                     (132,239 )        (27,303 )            (35,510 )
Payment of initial public offering
  costs                                                —                      —                               —               —                    (247 )
Payments on note payable                               —                      —                              (250 )           —                     —
Repayment of term loan                                (625 )                  —                               —               —                     —
Cash paid for financing costs                         (406 )                  —                               —               —                     —
     Net cash provided by (used
       in) financing activities       $              4,254     $           (4,285 )          $               (250 )   $     2,512         $        (247 )


      Net cash provided by (used in) financing activities decreased by $2.8 million to $0.3 million in net cash used in financing activities in the
thirteen weeks ended May 1, 2011 from $2.5 million in net cash provided by financing activities in the thirteen weeks ended May 2, 2010. This
decrease was due primarily to the reduction in outstanding net proceeds from our revolving credit facility of $2.5 million as of May 1, 2011,
partially offset by payments related to initial public offering costs of approximately $0.3 million during the thirteen weeks ended May 1, 2011.

     Net cash used in financing activities decreased by $4.0 million to $0.3 million in fiscal 2010 from $4.3 million in fiscal 2009 due
primarily to reductions in net payments on our revolving credit facility of $4.3 million. This decrease in net cash used in financing activities
was partially offset by the payment of a $0.3 million note payable in fiscal 2010.

      Net cash provided by financing activities decreased by $8.5 million to $4.3 million in net cash used in financing activities in fiscal 2009
from $4.2 million in net cash provided by financing activities in fiscal 2008. This decrease was due primarily to the reduction in net proceeds
from our revolving credit facility of $9.6 million partially offset by reduced payments in fiscal 2009 on our term loan and for financing costs
related to our revolving credit facility of $1.0 million.

      Revolving Credit Facility

      On June 12, 2008, we entered into a loan and security agreement with Fifth Third Bank for a three-year revolving credit facility. On
April 22, 2011, we entered into an amendment to the existing loan and security agreement, which extends the maturity of this facility until
April 22, 2016.

       Under the amended revolving credit facility, our borrowing capacity is equal to the lesser of (i) the Maximum Revolving Facility (as
defined), less the undrawn face amount of any letters of credit outstanding at the time a drawdown on the revolving credit facility is made, and
(ii) the Borrowing Base (as defined). The Maximum Revolving Facility is equal to (i) prior to August 1, 2011, $40.0 million, (ii) from
August 1, 2011 to December 31, 2011, $50.0 million, and (iii) on and after December 31, 2011, $40.0 million. The Borrowing Base is defined
as the sum of (i) 200% of Consolidated EBITDA (as defined) for the most recent trailing twelve-month period for which financial statements
are available, minus (ii) the aggregate undrawn face amount of any letters of credit outstanding at the time a drawdown on the revolving credit
facility is made, minus (iii) such reserves as may be established by the lender in its Permitted Discretion (as defined) but not to exceed 35% of
the Borrowing Base. The credit facility includes a $5.0 million sublimit for the issuance of letters of credit.

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      Indebtedness incurred under the amended revolving credit facility bears interest at a rate of LIBOR (subject to a minimum level of 1.5%)
plus an applicable margin of 4.50% or at a rate of the lender’s base commercial lending rate plus an applicable margin of 3.00%. The
weighted-average interest rate on average outstanding borrowings under our revolving credit facility for fiscal 2010 was 3.5%. Our excess
borrowing capacity was $23.6 million as of January 30, 2011, with $1.0 million outstanding under our revolving credit facility and undrawn
face amounts on letters of credit of $0.4 million as of that date.

      Our weighted average borrowing rate on average outstanding borrowings under our revolving credit facility for the thirteen weeks ended
May 1, 2011 was 3.75%. Our excess borrowing capacity was $38.0 million as of May 1, 2011, with $1.0 million outstanding under our
revolving credit facility and approximately $1.0 million in undrawn face amounts on letters of credit as of that date.

      The amended loan and security agreement includes certain financial covenants. The financial covenants include the requirements to:
(i) maintain a ratio of Consolidated Free Cash Flow to Consolidated Fixed Charges (as such terms are defined); (ii) maintain a ratio of Debt (as
defined) to Consolidated EBITDA; (iii) limit our annual Consolidated Capital Expenditures (as defined); and (iv) limit our Consolidated Net
Capital Expenditures (defined as Consolidated Capital Expenditures minus a specified amount of capital expenditures related to new-store
openings determined on the basis of our Consolidated Leverage Ratio).

      The amended loan and security agreement includes customary negative and affirmative covenants. The negative covenants include,
among others, limitations on: indebtedness; the payment of dividends; liens; the disposition of assets; consolidations and mergers; loans and
investments; transactions with affiliates; restricted payments; sale-leaseback transactions; incurrence of certain restrictions by subsidiaries;
other negative pledges; and foreign assets. The affirmative covenants include, among others, the requirement to provide audited annual and
unaudited monthly financial statements, quarterly and annual compliance certificates, and other financial and operating information.

     Indebtedness incurred under both the amended loan and security agreement and the original loan and security agreement is collateralized
by substantially all of our assets.

      As of May 1, 2011, we were in compliance with the financial covenants and other covenants applicable to us under the amended loan and
security agreement.

Off-Balance Sheet Arrangements
      As of and for the three fiscal years ended January 30, 2011 and as of and for the thirteen weeks ended May 1, 2011, except for operating
leases entered into in the normal course of business, we were not party to any material off-balance sheet arrangements that are reasonably likely
to have a current or future effect on our financial condition, net sales, expenses, results of operations, liquidity, capital expenditures or capital
resources.

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Contractual Obligations and Commitments
     The following table summarizes our contractual obligations as of January 30, 2011, and the effect such obligations are expected to have
on our liquidity and cash flows in future periods.

                                                                                                                Payments due by Period
                                                                          Total
                                                                        Obligations                < 1 Year                2 - 3 Years               4 - 5 Years               Thereafter
                                                                                                                 (dollars in thousands)
Series A redeemable preferred stock (1)                             $        10,683            $       10,683           $          —             $           —             $          —
Long-term debt obligations                                                    1,000                       —                        —                         —                      1,000
Operating lease obligations (2)                                             111,250                    12,314                   25,873                    26,317                   46,746
Construction-related obligations                                              1,651                     1,651                      —                         —                        —
Purchase obligations (3)                                                     11,510                    11,510                      —                         —                        —
      Total contractual obligations                                 $       136,094            $       36,158           $       25,873           $        26,317           $       47,746


(1)   Our Series A redeemable preferred stock is subject to mandatory redemption upon the earlier of the redemption date of December 15, 2011 or a public offering. The amounts shown
      above assume that we achieve the targets required for the annual accretion of the redemption value on the Series A redeemable preferred stock to be forgiven, resulting in an effective
      redemption value of $10,683.
(2)   Operating lease obligations reflect base rent and exclude insurance, taxes, maintenance and other related leasing costs. Other related leasing costs, including insurance, taxes, and
      maintenance, comprise approximately 40% of the base rent obligation.
(3)   Purchase obligations consist primarily of inventory purchase orders. Our inventory purchase orders are cancellable with limited or no recourse available to the vendor until the inventory
      is shipped to us.

      Since January 30, 2011, we have entered into 12 new retail leases with an average term of 10 years and other lease modifications that
have future minimum lease payments of approximately $7.1 million.

Critical Accounting Policies and Estimates
       Overview
      We have identified the policies below as critical to our business operations and understanding of our results of operations. The impact and
any associated risks related to these policies on our business operations are discussed throughout “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” where such policies affect our reported and expected financial results. Our consolidated
financial statements, which have been prepared in accordance with US generally accepted accounting principles, require us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, cash flows and related disclosures. We base our
estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may
differ from these estimates. For a detailed discussion on the application of these and other accounting policies, See Note 1, “Business and
Summary of Significant Accounting Policies,” in our consolidated financial statements included elsewhere in this prospectus.

       We believe that our most critical accounting policies relate to the following:
         •      Inventory
         •      Income Taxes
         •      Self-Funded Insurance
         •      Fair Value Measurements
         •      Stock-based Compensation

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Index to Financial Statements

      Inventory

      Our inventory consists of tea and tea-related merchandise and is stated at the lower of cost (weighted-average method for stores and FIFO
for warehouse) or market (net realizable value). Market value is determined based on replacement cost. We use the reserve method to account
for obsolete inventory and inventory shrinkage. The reserve method requires judgment based on inventory balances and historical trends of
product sales and product mix. We believe that our assumptions are reasonable based on our experience, although actual results may have a
positive or negative material impact on the net realizable value of inventory. We directly import the majority of our inventory and include the
related costs of freight to our distribution center and shipping costs from our distribution center to our stores in our capitalized cost of
inventory.

      Income Taxes

       We use the asset and liability method of accounting for income taxes under which deferred tax assets and liabilities are provided on
temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements at the enacted tax rate
expected to be in effect when the taxes are actually paid. The value of our deferred tax assets assumes that we will be able to generate sufficient
future taxable income in certain tax jurisdictions, based on estimates and assumptions. If these estimates and related assumptions change in the
future, we may be required to record a valuation allowance against our deferred tax assets resulting in an increase to our provision for income
taxes.

      In January 2007, we adopted new accounting guidance for income taxes with respect to unrecognized tax positions as set forth by the
Financial Accounting Standards Board, or FASB, in Accounting Standards Codification, or ASC, 740, Accounting for Income Taxes (“ASC
740”). As a result of the new guidance, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be
sustained in a tax examination, with a tax examination being presumed to occur under ASC 740. The amount recognized is the largest amount
of tax benefit that has a greater than 50% cumulative likelihood of being realized on examination. For tax positions not meeting the “more
likely than not” test, no tax benefit is recorded. We recognize interest and penalties associated with unrecognized tax positions within our
provision for income taxes. The accounting for ASC 740-10 will continue to require significant judgment by management in accounting for
uncertainty in income taxes recognized in the financial statements. Additionally, resolution of these uncertainties in a manner inconsistent with
our expectations could have a material impact on our results of operations. See Note 1, “Business and Summary of Significant Accounting
Policies,” in our consolidated financial statements included elsewhere in this prospectus.

      Self-Funded Medical Insurance

      In fiscal 2010, we moved from a fully insured to a self-funded medical insurance plan. We contracted with an administrative service
company, or a “third party administrator,” to supervise and administer the program and act as its fiduciary and representative. We have reduced
our risk under this self-funded plan by purchasing both specific and aggregate stop-loss insurance coverage for individual claims and total
annual claims in excess of prescribed limits. We record estimates for claim liabilities based on information provided by the third-party
administrator, historical claims experience, the life cycle of claims, expected costs of claims incurred but not paid, and expected costs to settle
unpaid claims. Actual claims experience may differ from our initial estimates. This liability is subject to a total limitation that varies based on
employee enrollment and factors that are established at each annual contract renewal. Costs related to the administration of the plan and related
claims are expensed as incurred.

     As facts change, it may become necessary to make adjustments to assumptions used in the calculation of the related liability that could be
material to our results of operations and financial condition.

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      Fair Value Measurements

      The guidance for fair value measurements establishes the authoritative definition of fair value, sets out a framework for measuring fair
value and outlines the required disclosures regarding fair value measurements. Fair value is the price that would be received to sell an asset or
paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market
participants at the measurement date. We use a three-tier fair value hierarchy based upon observable and non-observable inputs as follows:
        •    Level 1: Quoted market prices in active markets for identical assets or liabilities.
        •    Level 2: Inputs other than Level 1 that are either directly or indirectly observable.
        •    Level 3: Unobservable inputs developed using the Company’s estimates and assumptions which reflect those that market
             participants would use.

     Our financial instruments consist primarily of our Class B redeemable common stock, classified as temporary equity in our consolidated
balance sheets, which is measured using Level 3 inputs.

      Significant Factors in Determining Fair Value . Because there is no public market for our common stock, determining the fair value of
our common stock requires us to make complex and subjective judgments. To determine the fair value of our common stock, we consider many
factors, including the following:
        •    our historical financial performance;
        •    our expected future financial performance;
        •    our financial condition at the valuation date;
        •    the lack of marketability of our common stock;
        •    the valuation multiples of recent merger and acquisition transactions involving comparable companies;
        •    valuation multiples of comparable publicly-traded companies;
        •    the anticipation and likelihood of a potential liquidity event such as the sale of the business or initial public offering;
        •    the condition of and outlook for our industry;
        •    the business risks inherent in our business; and
        •    capital market conditions.

       Valuation Methodologies Used in Determining Fair Value . To determine the estimated fair value of our common stock at each grant date
for option grants made under our 2004 Management Incentive Plan, we conducted a valuation analysis of our common stock considering the
facts noted above and prepared with the assistance of an investment bank that specializes in the retail and restaurant industries. We utilized a
combination of valuation methods including an income approach using an analysis of expected future discounted cash flows and a market
approach for similar private and public companies. The expected future discounted cash flows analysis identified a level of annual cash flows
for a finite number of years and a residual value at the end of the projection period. A discount rate reflecting estimates of investor-required
rates of return for similar investments was used to calculate the present value. The market approach used valuation multiples of comparable
companies which were applied to our operating results to arrive at a value. We then aggregated and analyzed the valuation results from these
valuation methodologies to estimate an expected business enterprise value which was applied to our capital structure to determine a value per
common share.

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      To determine the estimated fair value of our Class B redeemable common stock at each reporting date up to and including January 31,
2010, we applied the valuation of our common stock from the option grant date closest to each respective reporting date since these option
grants occurred, on average, within approximately two months of each reporting date.

      We did not utilize valuations of our common stock from option grant dates to determine the estimated fair value of our Class B
redeemable common stock at January 30, 2011 and May 1, 2011, since the most recent option grant date was November 1, 2009, or 15 and 18
months, respectively, earlier than these reporting dates. To determine the estimated fair value of our Class B redeemable common stock at
January 30, 2011 and May 1, 2011, we performed contemporaneous valuations using the market approach under the assumption that we would
complete an initial public offering within the first half of fiscal 2011 given we had selected investment banks to assist us in this process and had
agreed upon a timeline with these investment banks to complete an initial public offering within this timeframe. These valuations utilized the
forecasts we prepared for our selection process with investment banks and the resulting initial public offering valuation metrics and
methodologies presented to us by these investment banks. In particular, we considered the public market valuations of other high-growth
specialty retailers and the corresponding ratios of market value to variables such as current and projected net income and revenue for these
comparable companies. We applied these multiples to both our current and projected financial performance to determine our estimated
enterprise value. We did not apply a lack of marketability discount to our estimated enterprise value for our common stock given these
valuations were performed for reporting dates within six months of our estimated initial public offering date.

       The increase in the fair value per share of our common stock from $9.00 at January 31, 2010 to $33.47 at January 30, 2011 was due
primarily to a significant increase in anticipated future net income from the forecast performed as of January 31, 2010 to the forecast performed
as of January 30, 2011. This increase in future net income in our forecast was driven primarily by our net income exceeding our budgeted
amount by 39% in fiscal 2010, our net income growth of 127% from fiscal 2009 to fiscal 2010, our increase in gross and operating margins in
fiscal 2010 above our historical and budgeted amounts and our opening of 38 stores in fiscal 2010 representing a 46% increase over the highest
number of stores opened in any prior fiscal year. Our successful execution across these key metrics in fiscal 2010 led us to significantly
increase our forecasted financial performance in future years which resulted in a significant increase to our estimate of the fair value per share
of our common stock from January 31, 2010 to January 30, 2011.

      The fair value per share of our common stock at the time of our proposed initial public offering may be substantially above the fair value
at January 30, 2011 if we continue to successfully execute our strategy resulting in continued rapid growth in sales and net income and if there
is significant demand for our common stock from investors in the initial public offering.

      Stock-based Compensation

      Our stock-based awards are accounted for under the provisions of FASB ASC Topic 718— Stock Compensation . We measure and
recognize stock-based compensation expense based on the fair value measurement for all stock-based payment awards made to our employees
and directors, including stock options, over the service period for which the awards are expected to vest. We calculate the fair value of each
stock option award on the date of grant using the Black-Scholes option pricing model. The determination of the fair value of stock option
awards on the date of grant using an option-pricing model is affected by our stock price as well as a number of assumptions including expected
term, expected volatility, risk-free interest rate and dividend yield. As a result, future stock-based compensation expense may differ from our
historical amounts.

      There are significant judgments and estimates inherent in the determination of fair value. These judgments and estimates include
determinations of an appropriate valuation method and the selection of appropriate inputs to be used in the valuation model. The use of
alternative assumptions, including expected term, volatility, risk-free interest rate and dividend yield, could cause stock-based compensation to
differ significantly from what has

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been recorded in the past. Future stock-based compensation cost will increase when we grant additional equity awards to employees.
Modifications, cancellations or repurchases of awards may require us to accelerate any remaining unearned stock-based compensation cost or
incur additional cost.

Recent Accounting Pronouncements
      In addition to the recently adopted accounting pronouncements discussed above in conjunction with our critical accounting policies, we
believe the following recently adopted accounting pronouncements are important to an understanding of our consolidated financial statements.

      Recently Adopted Accounting Pronouncements

      In January 2010, the FASB issued Accounting Standards Update, or ASU, 2010-06 to Topic 820— Fair Value Measurements and
Disclosures . This update provided requirements of new disclosures of significant transfers in and out of Levels 1 and 2, and expanded
disclosure of activity in Level 3 (see Note 1, “Business and Summary of Significant Accounting Policies,” in our consolidated financial
statements). This update also clarified existing disclosures around the level of disaggregation of each class of assets and liabilities, and about
fair value inputs and valuation techniques for Level 2 and Level 3. This update was effective for interim and annual reporting periods
beginning after December 15, 2009 for existing disclosures and becomes effective for fiscal years beginning after December 15, 2010 for the
disclosures about purchases, sales, issuances and settlements in the rollforward activity in Level 3 fair value measurements. Adoption of this
update did not have a material impact on our consolidated financial statements.

      Accounting Pronouncements Not Yet Adopted

      In December 2010, the FASB issued ASU 2010-28 to Topic 350— Intangibles—Goodwill and Other: When to Perform Step 2 of the
Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. The amendments in this update modify Step 1 of the
goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform
Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. Goodwill of a reporting unit is required to
be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value
of a reporting unit below its carrying amount. This update is effective starting in the first quarter of 2011 with early adoption not permitted.
Adoption of this update did not have a material impact on our consolidated financial statements.

      There were various other accounting standards and interpretations issued during the thirteen weeks ended May 1, 2011 that we have not
yet been required to adopt, none of which are expected to have a material impact on our consolidated financial statements.

Quantitative and Qualitative Disclosures about Market Risk
      Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.
Our market risk exposure results primarily from fluctuations in interest rates, inflation and foreign currency prices in the purchase of our teas
and merchandise. In the normal course of business, we are exposed to market risks, including changes in interest rates which affect our debt, as
well as cash flows. We may also face additional exchange rate risk in the future.

      Interest Rate Risk

      Our amended revolving credit facility carries floating interest rates that are tied to LIBOR and our lender’s prime rate, and therefore, our
consolidated statements of operations and cash flows will be exposed to changes in interest rates. We do not use derivative financial
instruments for speculative or trading purposes, however, this does not preclude our adoption of specific hedging strategies in the future.

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      Foreign Exchange Risk

      We do not currently generate any portion of our net sales in any currency other than the US dollar. We currently source a portion of our
inventory of teas and tea-related merchandise in Europe and Japan and incur a limited portion of those related costs in Euro and in Japanese
yen. Historically, we have not been impacted materially by fluctuations in the US dollar/Euro and US Dollar/Japanese yen exchange rates and
do not expect to be impacted materially for the foreseeable future. However, if our purchases of inventory in Euro and in Japanese yen increase,
and to the extent that we commence generating net sales outside of the United States that are denominated in currencies other than the US
dollar, our results of operations could be adversely impacted by changes in exchange rates. We do not currently hedge foreign currency
fluctuations and do not intend to do so for the foreseeable future.

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                                                                     BUSINESS

Our Company
     Teavana is a rapidly growing specialty retailer of premium loose-leaf teas, authentic artisanal teawares and other tea-related merchandise.
We are one of the world’s largest branded, multi-channel specialty tea retailers, offering more than 100 varieties of premium loose-leaf teas,
teawares such as handcrafted cast-iron, clay and ceramic teapots, and other tea-related merchandise. We offer our products through 161
company-owned stores in 35 states and 19 franchised stores primarily in Mexico, as well as through our website, www.teavana.com.

       We believe our customers associate the Teavana brand with premium tea products, a distinctive store ambiance and an “East Meets West”
healthy living lifestyle. Our unique specialty retail environment offers new tea enthusiasts and tea connoisseurs alike a highly interactive,
informative and immersive experience in teas from around the globe. With an average transaction size of $36, we believe customers view our
products as an affordable investment in a healthy indulgence, as they are able to purchase the best teas and teawares from around the world at
relatively modest prices. We believe our focus on educating customers in the healthful qualities and pleasures of tea and our position as the
largest US specialty tea retailer have enabled us to lead the growth of the domestic loose-leaf tea market, which is a growing segment of the
broader $5.2 billion US tea market.

      Our mission is to establish Teavana as the most recognized and respected brand in the specialty tea industry by expanding the culture of
tea across the world. We have developed a distinctive strategy that we believe will continue to drive category growth, enhance our brand
awareness and encourage product sampling and customer loyalty. Key elements of our business strategy are to:
        •    develop, source and offer our customers the world’s finest assortment of premium loose-leaf teas and tea-related merchandise;
        •    create a “Heaven of Tea” retail experience in which our passionate and knowledgeable “teaologists” engage and educate customers
             about the ritual and enjoyment of tea; and
        •    locate our stores in high traffic locations within malls, lifestyle centers and other high sales volume retail venues.

      Teavana was founded in 1997 by our Chairman and Chief Executive Officer Andrew Mack, and his wife, Nancy Mack, who were
inspired by their international travels and passion for tea. Their vision was to introduce consumers to the global tea lifestyle, highlighting the
aromas, textures, tastes and healthful qualities of loose-leaf teas, while enlightening them on the origin of each tea. Since our founding, we
have developed a culture centered on a passion for tea, extensive training, career development and individual enrichment. Our distinct culture
has been, and will continue to be, a key driver of our success. To further realize our vision, in 2004 we partnered with Parallel Investment
Partners to obtain equity capital, strategic advice and other resources to support our accelerated growth plans. With our business momentum
and expanded resources we were able to attract an experienced senior management team that has led our growth to date and has set the
foundation to execute our growth strategy going forward.

     We have experienced rapid sales and profit growth during the last five years. We increased our sales from $33.8 million in fiscal 2006 to
$124.7 million in fiscal 2010, representing a 38.6% compound annual growth rate. Over that same period, we more than tripled our store base
from 47 stores to 146 stores. In fiscal 2010, our sales grew 38.2% over fiscal 2009, while our comparable store sales increased 8.7%. Our net
income was $12.0 million in fiscal 2010, representing a 126.9% growth rate over fiscal 2009. In fiscal 2010, our stores averaged sales per gross
square foot of approximately $1,000, which we believe is higher than most specialty retail stores in the United States.

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Our Market Opportunity
      We participate in the global tea market, which had $56.6 billion of sales in 2009, according to the latest available estimates from Mintel.
The global tea market includes three segments: “ready-to-drink,” which is composed of shelf-stable bottled and canned tea, “instant,” which
consists of powdered and granulated tea for mixing with water, and “loose-leaf and bagged,” which includes teas for brewing. We currently
compete in the loose-leaf and bagged tea segment of the market, and more specifically within the loose-leaf tea category. Mintel estimates the
size of the tea market in the United States is $5.2 billion. Tea consumption in the United States is much lower than the rest of the world, with
the United States representing only 9% of the global tea market and lagging significantly behind other geographies in cups of tea consumed per
capita. Additionally, the US consumer has historically consumed more tea in non-loose-leaf tea formats, which differs from many other
countries where the preference is more heavily weighted towards loose-leaf teas.

                    2009 Global Tea Sales                                           2009 Cups Per Capita Consumption




                                Source: Mintel
                                                                                       Source: Euromonitor International 2010 ©



     Mintel estimates that retail tea sales in the United States will grow at a 6% compound annual growth rate through 2014. We believe the
growth of the overall US tea market will be driven primarily by the following trends:
        •    Increasing consumer focus on health and wellness: We believe more US consumers are focused on leading healthy lifestyles. As
             the potential healthful qualities associated with tea are further recognized, we believe consumers will embrace tea as an
             opportunity to enhance health and wellness in their lives. Additionally, we believe tea demand will be driven by its continued
             emergence as an alternative to soda and other high-calorie beverages.
        •    Growing consumer awareness of tea: We believe tea awareness and therefore consumption in the United States has historically
             been at significantly lower levels than elsewhere in the world. We believe the recent growth of the US tea market has led to tea
             being more readily available to US consumers than in the past, which in turn increases tea awareness and opportunities for
             consumers to experience tea. As US consumers become more familiar with tea, we believe they will increasingly incorporate tea
             into their daily lives.
        •    Continuing emergence of epicurean preferences in food and beverages: We believe there is a growing consumer preference for
             innovative flavors in food and beverage. With tea’s diversity of unique flavors, aromas and textures and the ability to incorporate
             the latest epicurean trends into new tea blends, we believe tea appeals to the growing number of consumers focused on innovative
             tastes and ingredients.

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Our Competitive Strengths
      We believe that the following strengths differentiate Teavana and create the foundation for continued rapid sales and profit growth:
      Market Defining Brand Driving Category Growth. We believe we are one of the world’s largest branded multi-channel specialty tea
      retailers offering premium loose-leaf teas and tea-related merchandise through 161 company-owned stores in 35 states and 19 franchised
      stores primarily in Mexico as of May 1, 2011. We believe our customers associate the Teavana brand with premium tea products, a
      distinctive store ambiance and an “East Meets West” healthy living lifestyle. We view the potential growth opportunity in the United
      States to be substantial, as US consumers have not historically consumed loose-leaf tea at the same level as consumers elsewhere in the
      world, with the United States ranking 22 nd among all countries in per capita loose-leaf and bagged tea consumption. The higher per
      capita consumption of tea throughout the world highlights the potential growth opportunity that exists in the US tea market. We believe
      our leading national presence and focus on educating consumers about the many attractive qualities of loose-leaf tea positions Teavana to
      drive the continued growth of the loose-leaf tea category in the United States.
      “Heaven of Tea” Retail Experience . We believe we have created a unique “Heaven of Tea” retail environment that provides a highly
      interactive, informative and immersive customer experience. We utilize a consistent store model designed to create a warm, relaxing
      ambiance with elegant blond wood fixtures, ceramic tiled floors, soft lighting and soothing Asian music. Our teaologists explain the
      stories behind our teas and tea-related merchandise, educate our customers on the many ways to enjoy them, and assist with the selection
      of merchandise appropriate for the way that the customer would like to experience tea. A key element of the retail experience occurs at
      our Wall of Tea, a substantial display case behind our sales counter holding approximately 100 brightly colored canisters containing our
      premium single-estate and specially blended teas. As our teaologist pulls down and opens one canister after another, the customer is
      invited to experience the aroma, color and texture of the teas as each tea’s flavor, caffeine content and healthful qualities are described.
      We believe this engaging retail experience introduces new customers to the tea lifestyle, encourages product trial and supports repeat
      visits and strong customer loyalty.
      Deep-Rooted Culture Embracing a Passion for Tea and Career Development. We have developed a culture centered on a passion for
      tea, extensive training, career development and individual enrichment. To ensure the continuity of our culture and to reward high
      performing team members, we typically promote from within our organization to support our new store growth and other growth
      initiatives. In 2010, we utilized our internal talent pool to fill nearly 90% of our new store management positions. Historically, we have
      experienced limited to no turnover among the members of our senior management team and our regional and area managers. We believe
      our culture helps build and support a consistent and motivated group of team members that are passionate about providing the “Heaven of
      Tea” retail experience to our customers.
      High-Quality Teas and Tea-Related Merchandise . We offer a unique selection of premium loose-leaf teas, authentic artisanal teawares
      and other tea-related merchandise in our stores and through our website. Our single-estate and specially blended teas are currently
      sourced from tea gardens, blenders and brokers in ten countries. We have long-standing collaborative relationships with our major tea
      vendors that span on average approximately ten years. We work closely with our tea blenders to continually bring our customers a fresh
      selection of high-quality, flavored tea blends that reflect the most current epicurean trends. Our compelling assortment of teawares and
      other tea-related merchandise is sourced from various tea communities worldwide. We also collaborate with our suppliers to design and
      develop Teavana branded tea-related merchandise. We believe our highly differentiated offering provides a foundation for our strong
      brand and will continue to reinforce our market-leading position.
      Powerful and Consistent Store Economics . We have a proven and highly profitable store model that has produced consistent financial
      results and returns. In fiscal 2010, our stores averaged sales of approximately $1,000 per gross square foot. All of our stores were
      profitable in fiscal 2010 and new stores have historically averaged a payback period of less than one and a half years. Our current store
      base of 161 stores in 35 states

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      is balanced across all four regions of the country, with each region producing results in line with the company average. We believe our
      powerful store model, deep-rooted tea enthusiast culture, highly developed store operations and a rigorous store selection process drive
      our consistent store financial results.
      Proven and Experienced Senior Management Team . Since founding our company, Andrew Mack, our Chairman and Chief Executive
      Officer, has set the vision and strategic direction for Teavana and continues to drive our growth and culture. Since 2004, Mr. Mack has
      assembled a proven and experienced senior management team that has demonstrated its capabilities at executing our long-term growth
      plans. In 2005, we hired Daniel Glennon, our Executive Vice President and Chief Financial Officer, and Peter Luckhurst, our Executive
      Vice President of Operations. Our senior management team brings an average of over 20 years of experience across a broad range of
      disciplines, including store operations, merchandising, finance and real estate. We believe our senior management team is a key driver of
      our success and is well-positioned to execute our strategy.

Our Growth Strategy
We are pursuing several strategies to continue our profitable growth, including:
      Expand Our Store Base Domestically. We believe there is a significant opportunity to expand our store base in the United States from
      161 locations to at least 500 stores. We believe our disciplined approach to expansion, founded upon a rigorous site selection process
      supported by our real estate team’s deep expertise, maximizes the prospects for successful new store openings. We also utilize our
      proprietary real estate database and customized store regression model to support our site selection process. We have identified the malls,
      lifestyle centers and other high-sales-volume retail venues for this proposed expansion. As of May 1, 2011, we have executed lease
      agreements for the opening of 41 stores in fiscal 2011 and three stores in fiscal 2012. We plan to open approximately 50 stores in fiscal
      2011 (including 15 stores opened in the first quarter), 60 stores in fiscal 2012 and to expand to 500 stores by 2015.
      Our store base is balanced geographically across the four regions of the United States. We plan to continue our penetration of these four
      regions with a focus on high traffic locations within malls, lifestyle centers and other high-sales-volume retail venues. We believe the
      consistent performance of our store portfolio across geographies supports the portability of the Teavana brand and store model into a
      wide range of markets.

      Drive Comparable Store Sales. We expect to continue to drive our comparable store sales by increasing the size and frequency of
      purchases by our existing customers and attracting new customers. We expect to execute this strategy by continuing to offer a compelling
      selection of premium loose-leaf teas, authentic artisanal teawares and other tea-related merchandise. Our Heaven of Tea retail experience
      allows us to introduce the benefits and enjoyment of our teas and tea-related merchandise to new customers while encouraging our
      existing customers to transition to our higher-grade teas and higher-end tea-related merchandise.
      Expand Our Online Presence. We believe our online platform is an extension of our brand and retail stores, serving as an educational
      resource and complementary sales channel for our customers. This platform also allows us to reach new customers and build brand
      awareness in locations where we currently do not have stores. Since fiscal 2007 our online sales have grown at a compound annual
      growth rate of 56.0% and in fiscal 2010 represented 7.0% of our net sales. We believe we have the opportunity to grow e-commerce sales
      to at least 10.0% of sales in the future. To help support this growth, we recently introduced an online replenishment program which
      automatically sells and delivers any teas selected by a customer on a periodic basis as chosen by the customer. In addition, we are
      pursuing a number of initiatives to drive more traffic to our website, including expanding and leveraging our social media, in-store and
      direct marketing programs.
      Increase Our Highly Attractive Margins. We have increased our operating margins from 7.5% in fiscal 2008 to 18.8% in fiscal 2010,
      and we believe further opportunities exist to increase our margins. A primary driver of our expected margin expansion will come from the
      continuation of our sales mix shift away from

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      tea-related merchandise towards higher margin loose-leaf teas that our stores generally experience as they mature. In general, this trend is
      consistent with the evolution in our customers’ buying patterns as they graduate from purchases with a greater focus on merchandise with
      which to prepare and enjoy tea towards transactions centered more on replenishing their favorite teas and experimenting with new blends.
      We expect that additional drivers of future margin expansion will include the leveraging of our corporate and other fixed costs as our
      sales grow and gross margin benefits from our growing scale with suppliers.
      Selectively Pursue International Expansion . Given the worldwide popularity of tea, we believe international expansion represents a
      compelling opportunity for additional growth over the long term. As of May 1, 2011, 17 Teavana stores are operated in Mexico through
      an international development agreement with our business partner, Casa Internacional. We will continue to selectively expand our global
      presence either through company-owned stores or by entering into franchise arrangements.

Our Retail Platform
      We currently offer our premium loose-leaf teas and tea-related merchandise through our US retail store base, online platform, and
international and domestic franchise stores.

Our Stores
       We currently operate 161 stores in 35 states. We focus on high traffic locations in malls and lifestyle centers with top-tier co-tenants. In
fiscal 2010, our average store was approximately 888 square feet, our comparable stores averaged net sales of approximately $862,000 and our
stores averaged sales per gross square foot of approximately $1,000.

      We have aggressively pursued new store growth, having more than tripled our store base from 47 to 161 stores from fiscal 2006 to the
thirteen weeks ended May 1, 2011. The following table shows the growth in our network of stores for fiscal 2008 through the thirteen weeks
ended May 1, 2011:

                                                                                Fiscal Year                           Thirteen Weeks Ended
                                                                   2008             2009            2010                   May 1, 2011
      Stores open at beginning of year                              59                87             108                               146
           Stores opened                                            28                21              38                                15
           Stores closed                                             0                 0               0                                 0
      Stores open at end of year                                    87               108             146                               161

      Gross square footage (in thousands)                           77                95             130                               145

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      As illustrated by the following map, our store base is balanced geographically across the four regions of the United States, with each
region producing results in line with our company average.




      Additionally, we have two franchised stores in the United States. Unless otherwise approved by us, our franchisees are required to sell
only products purchased from us. Opening new franchise stores in the United States is not currently part of our future strategy.

      Distinctive Retail Experience

      Our stores offer a unique “Heaven of Tea” retail environment that provides a highly interactive, informative and immersive customer
experience. We utilize a consistent store design to create our warm, relaxing ambiance featuring elegant blond wood fixtures, ceramic tiled
floors, soft lighting and soothing Asian music. Our store atmosphere is meant to encourage customers to slow down and interact with our
teaologists around the pleasures of tea and enjoy their retail experience.

      To help drive traffic into our stores, we station a sample cart of prepared teas at the front entrance at which our teaologists encourage
passing mall shoppers to sample one of our premium teas. Our passionate teaologists then engage with the customer to encourage the customer
to enter our store. In our store, the teaologist seeks to understand the customer’s previous experience with tea and educates the customer about
our products and the stories behind them. The teaologist will often discuss with the customer the many ways to enjoy our loose-leaf teas and
tea-related merchandise and assist with merchandise selection. A key element of the retail experience occurs at our Wall of Tea, a substantial
display case behind our sales counter holding approximately 100 brightly colored tin canisters containing varieties of our premium single-estate
and specially blended teas. As our teaologist pulls down and opens one canister after another, the customer is invited to experience the aroma,
color and texture of the teas as each tea’s flavor, caffeine content and healthful qualities are described. We believe this engaging retail
experience introduces new customers to the tea lifestyle, encourages product trial and supports repeat visits and strong customer loyalty.

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      Site Selection and Expansion

      We seek to open stores in locations that reinforce the premium image of our brand and support the consistent execution of our strategy,
targeting high traffic locations within malls, lifestyle centers and other high sales-volume retail venues.

       We employ a rigorous analytical process to identify new store locations. We target locations based on market characteristics, mall
productivity, demographic characteristics, including income and education levels, the presence of key anchor stores and co-tenants, population
density and other key characteristics. We have built a proprietary retail mall database which we use for comparison purposes and employ a
proprietary regression model to evaluate projected store sales and profitability based on a number of critical inputs incorporating trade area
demographics, mall tenant productivity and total anchor sales. Members of our real estate team spend considerable time evaluating prospective
sites before bringing a proposal to our real estate committee. Our real estate committee, which includes our Chief Executive Officer, our two
Executive Vice Presidents and our Vice President, Real Estate, approves all of our locations before a lease is signed.

       We believe there is a significant opportunity to expand our store base in the United States from 161 locations to at least 500 stores. We
have identified the malls, lifestyle centers and other high-sales-volume retail venues for this proposed expansion. We plan to open
approximately 50 stores in fiscal 2011 (including 15 stores opened in the first quarter), 60 stores in fiscal 2012 and to expand to 500 stores by
2015. As we continue to expand our store base, it may become more difficult to identify additional suitable sites for new stores and we will
target an increasing number of shopping malls with lower average sales per square foot than the malls in which we currently are located. As a
result, our new store model anticipates a target store size of 900 to 1,000 square feet that achieves annual sales of $600,000 to $700,000 in the
first year of operation, which is below the historical average of our new stores. Our new store model also assumes an average new store
investment of approximately $200,000 to $250,000, which is below the historical average for our new stores. Our new store investment
includes our store buildout (net of tenant allowances), inventory and cash pre-opening costs. We target an average payback period of
approximately 18 months on our initial investment.

      Our dedicated team of new store opening trainers is exclusively focused on ensuring a consistent new store opening process. The new
store opening trainers train new team members for two weeks through the first weekend after a new store opening. The area manager then is
on-site for the next two weeks to complete the new store opening process. We believe this consistent process allows us to seamlessly open new
stores while enabling our field management team to focus on driving the performance of our existing stores.

      Store Staffing and Operations

      Each of our stores is managed by a general manager, an assistant manager and two team leads who oversee an average of eight to ten
team members in each store. Each general manager is responsible for the day-to-day operations of his or her store, including the unit’s
operating results, maintaining a clean and appealing store environment and the hiring, training and development of personnel. We also employ
area managers, who are responsible for overseeing the operations of approximately ten stores, and regional directors, who are each responsible
for overseeing approximately eight area managers and the operations of approximately 80 stores.

       We are guided by a philosophy that recognizes performance, allowing us to identify and reward team members who meet our high
performance standards. We provide our store general managers with a number of analytical tools to support our store operations and assist them
in attaining optimum store performance. These tools include production tools and labor scheduling programs, all of which ensure that we match
staffing levels to sales volume. We provide incentive bonuses to team members, assistant managers, general managers and area managers.
Bonuses for store personnel, store managers and area managers are based upon achieving specified operating and financial performance goals.

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Our Online Platform
       Our online platform is primarily comprised of our website, www.teavana.com, through which we provide educational resources for tea
consumers and the ability to purchase the full range of our teas and tea-related merchandise. We established our current online platform in
fiscal 2007 and in fiscal 2010, online sales represented 7.0% of net sales.

      To replicate our “Heaven of Tea” retail experience online, our website features our full assortment of premium loose-leaf teas, tea-related
merchandise and tea gift sets. Online customers can view our virtual Wall of Tea that allows them to select teas from our assortment and read
about the ingredients and healthful qualities that pertain to the tea they have selected. In addition to being able to purchase our premium teas on
a one-time basis, our customers can also establish automatic purchase and delivery of their favorite teas through our recently introduced online
replenishment program. To drive increased sales through our online platform, we utilize online-specific marketing and promotional programs,
such as our current offer for free shipping on orders above $50. We also utilize various social media and mobile applications as part of our
online platform, including a mobile website, iPhone and iPad applications, a Facebook fan page and a presence on Twitter. In addition, we
employ banner advertisements, search engine optimization and pay-per-click arrangements to help drive traffic to our website.

      Through our online platform, we can target a broader audience of customers and tea enthusiasts who may not live near one of our retail
locations. We believe our online platform and our stores are complementary, as our online platform provides our store customers an additional
channel through which to purchase our teas and tea-related merchandise while also helping drive awareness of and traffic to our stores.

International
     According to Mintel, the global tea market (exclusive of the United States) is $51.4 billion as compared to the US market of $5.2 billion.
We intend to participate in the international tea market by selectively expanding our global presence either through company-owned stores or
by entering into franchise arrangements with companies that have significant experience and proven success in a target country.

      We currently have 17 franchised stores in Mexico through an international development agreement with Casa Internacional del Te, S.A.
de C.V. The agreement with Casa Internacional grants the exclusive right to open franchised Teavana locations in that country for a term of 15
years. Unless otherwise approved by us, our partner is required to sell only our products. These stores carry a similar selection of tea and
tea-related merchandise but have a higher percentage of beverage sales than our domestic stores.

Our Culture
     We have developed a distinctive culture that inspires in our team members a passion for tea and the tea lifestyle. Our culture is also
focused on extensive training, career development and individual enrichment. We believe our culture allows us to attract passionate and
motivated team members who are driven to succeed and share our vision of creating in our stores a “Heaven of Tea” experience for our
customers.
      Passion for Tea . We believe our passionate team members are a major element of our “Heaven of Tea” retail experience. We seek to
      recruit, hire, train, retain and promote qualified and enthusiastic team members who share our passion for tea and strive to deliver an
      extraordinary retail experience to our customers.
      Extensive Training. We have specific training and certification requirements for all new team members, including undergoing in-store
      and classroom training that takes place over a 21-day period after the date of hire. This rigorous process helps ensure that all team
      members educate our customers and execute our standards accurately and consistently. As team members progress to the assistant
      manager and general manager levels, they undergo an additional four weeks of training in sales, operations and management at our store
      support center.

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      Career Development and Individual Enrichment. We actively track and reward team member performance, which we believe
      incentivizes excellence and helps us identify top performers and thus maintain a sufficient talent pool to support our growth. Nearly all of
      our store general managers and area managers are promoted from within our organization. We are guided by a philosophy that recognizes
      performance, allowing us to identify and reward team members who meet our high performance standards, and provide incentive bonuses
      to team members, assistant managers, general managers and area managers based upon store sales, profit and customer service standards.

      We believe our culture allows us to attract and retain committed team members, as evidenced by our low full-time team member turnover
rate. Historically, we have experienced minimal turnover among our regional and area managers. Additionally, we have had no turnover among
our senior management team. We believe the knowledge and passion of our team members is critical in enabling us to acquire new customers
at our stores and strengthen customer loyalty. We believe motivated and educated team members lead to satisfied customers who, in turn, lead
to increased net sales and profitability.

      To support the tea culture globally, we donate 1% of annual profits to the Cooperative for Assistance and Relief Everywhere, Inc., or
“CARE,” through our Teavana Equatrade program. CARE seeks to overcome poverty by funding programs supporting dignity, tolerance and
social justice. We believe that giving back to tea-growing regions worldwide helps the global tea community thrive.

Our Teas and Tea-Related Merchandise
      We offer in our stores and through our website more than 100 varieties of premium loose-leaf teas, teawares such as handcrafted
cast-iron, clay and ceramic tea pots, and other tea-related merchandise. We also offer a selection of fresh-brewed teas. With an average
transaction size of $36, we believe customers view our products as an affordable investment in a healthy indulgence as they are able to
purchase the best teas and teawares from around the world at relatively modest prices. Tea, tea-related merchandise and beverages accounted
for 56%, 40% and 4% of total net sales, respectively, in fiscal 2010.

      Teas

     We provide our customers a diverse selection of over 100 premium loose-leaf teas from around the world. Our overall tea selection is
comprised of approximately 20% single-estate teas and 80% specially blended teas. Our offering is comprised of teas from the following three
main groups:
        •    Single-estate teas . Our single-estate teas, which are teas that originate wholly from an individual tea plantation, estate or garden,
             are produced from the Camellia sinensis bush. We offer four types of single-estate teas—white, green, oolong, and black—each
             with its own distinctive characteristics arising from the climate, soil, altitude, growing conditions, when and how the tea is
             harvested, and the processing method used.
        •    Single-estate blended teas. We offer blends that combine our single-estate teas with spices, herbs, flower petals, essential oils of
             fruits and other flavorings. We work in close collaboration with third-party blenders to develop our specially blended teas, and
             spend significant amounts of time perfecting the balance of flavors, aromas and colors to create unique teas that we believe will
             appeal to our customers
        •    Herbal blended teas. Herbal teas are not technically “teas,” as they are not produced from the Camellia sinensis bush, but are
             herbal infusions generally made from other sources such as the Rooibos bush and Honeybush from South Africa, the Maté shrub
             from Argentina and other ingredients including dried fruits, herbs and even flowers. Herbal teas, aside from maté, are generally
             caffeine-free and can be brewed individually or blended with other types of tea to create an aromatic and flavorful beverage.

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      Our Wall of Tea displays our teas in seven color-coded categories. Each type of tea has its own distinctive appearance, color, flavor,
aroma, caffeine content and healthful qualities. We encourage our customers to experiment with mixing more than one type of tea together to
create their own unique blends. Once a customer has selected one or more teas, our teaologist scoops and measures the customer’s desired tea
selections from the tea canisters on the Wall of Tea. The minimum amount of tea that we sell is a two-ounce quantity. In addition to selling our
teas in loose-leaf format, we also offer our teas in prepackaged formats as part of gift collections.

      Following is a description of each of the seven categories of loose-leaf teas that we offer:

                                White teas and white tea based blends. Primarily produced in limited quantities in the Fujian province of
                                China, white teas are considered a rare delicacy and are the world’s costliest. White teas are known for their
                                subtlety, complexity, and delicacy. Unlike all other teas, white tea is unprocessed. Once gathered, the leaves
                                are withered and dried. White tea yields a clear infusion with a fresh aroma and smooth flavor. Representative
unblended white teas include Silver Needle and Silver Yin Zhen Pearls. Representative white tea based blends include Youthberry White Tea,
Strawberry Misaki White Tea, Peach Momotaro Artisan Tea, Queen of Babylon White Tea and Snow Geisha White Tea. Prices for white teas
and white tea based blends currently range from approximately $10 to $22 per two-ounce quantity.

                                 Green teas and green tea based blends. Primarily produced in China and Japan, green teas are referred to as
                                 “non-fermented” teas. The freshly picked leaves are allowed to dry and are then heat-treated to arrest any
                                 fermentation. China green teas are processed differently from their counterparts in Japan. Chinese green teas
                                 give a pale green to pale yellow infusion. In Japan, leaves are greener and more vibrant in tone than in China,
and therefore give an infusion that is brighter in color, running from jade green to light yellow. The infusion is aromatic and fresh-tasting. Our
unblended Japanese green teas include Imperial Gyokuro, the most precious and expensive variety, Matcha, a powdered tea used to make a
thick, nourishing brew, and Sencha, Japan’s most popular everyday variety. Representative unblended Chinese green teas include Huang Shan
Mao Feng Reserve Green Tea and Emperor’s Clouds and Mist. Representative green tea based blends include Golden Jade Green Tea,
Gyokuro Genmaicha Green Tea, Peachberry Jasmine Sutra Green Tea, Jasmine Dragon Phoenix Pearls Green Tea, Blackberry Mojito Green
Tea, and Fruta Bomba Green Tea. Prices for green teas and green tea based blends currently range from approximately $5 to $20 per
two-ounce quantity.

                                  Oolong teas and oolong tea based blends . Oolong teas are referred to as “semi-fermented” teas and are
                                  principally produced in China and Taiwan (commonly known as “Formosa” in the tea industry). China oolong
                                  leaves are wilted, shaken and then allowed to ferment until they achieve approximately 20% oxidation, at
                                  which point the fermentation is stopped by “firing” (heating in a hot roasting pan). Formosa oolong
leaves generally undergo a longer fermentation period (60-70%), and are therefore blacker in appearance than China oolongs. China oolong
teas yield a lighter infusion, while Formosa oolongs produce a richer liqueur. Representative unblended oolongs include Phoenix Mountain
Dan Cong Oolong Tea and Monkey Picked Oolong Tea. Representative Oolong tea based blends include Jasmine Oolong Tea, Prosperous
Peach Oolong Tea, Six Summits Oolong Tea, Anjou Pear-adise Oolong, Kamiya Papaya Oolong and Yumberry Wulong. Prices for Oolong
teas and Oolong tea based blends currently range from approximately $8 to $25 per two-ounce quantity.

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                                 Black teas and black tea based blends. Black teas are produced primarily in India, Sri Lanka and China. While
                                 the methods and varieties for producing black tea vary considerably between the different tea-growing regions,
                                 the process always involves four basic steps: withering, rolling, fermenting and firing (or drying). All black
                                 teas give a colored infusion, from pale orange to reddish brown, and range in taste from fresh and
light to strong and full-bodied. Black teas from different regions are often blended to achieve refined, balanced combinations of aroma and
strength. Representative unblended black teas include Golden Imperial Lotus Black Tea, Himalayan Splendor Black Tea and Golden Monkey
Black Tea. Representative black tea based blends include English Breakfast Black, Assam Breeze Flavored Black, Cha Yen Thai Flavored
Black, Earl Grey Crème Black and Peach Cran-Tango Flavored Black. Prices for black teas and black tea based blends currently range from
approximately $3 to $40 per two-ounce quantity.

                                Rooibos based blends. Rooibos teas are a naturally sweet and sometimes nutty herbal infusion made from the
                                South African Rooibos bush (“Red Bush” in Afrikaans) and are often referred to as Red Tea or African Red
                                Tea. The rooibos tea processing method involves harvesting the Rooibos leaves, followed by grinding and
                                bruising of the leaves. Then the Rooibos leaves are left to ferment and dried to yield a reddish brown needle-
like tea. Green Rooibos tea does not have a fermentation step and thus has a lighter taste than red Rooibos teas. Both varieties of Rooibos tea
are caffeine-free. We offer a number of Rooibos based blended infusions, including Rooibos Chai Rooibos Tea, Blueberry Bliss Rooibos Tea,
Rooibos Tropica Rooibos Tea, Tulsi Dosha Chai Rooibos Tea, Lemon Lime Kampai Rooibos Tea and Cocoa Praline Tart Rooibos Tea. Prices
for Rooibos based blended infusions currently range from approximately $5 to $8 per two-ounce quantity.

                            Maté based blends. Maté teas are made from the South American yerba mate plant. Most yerba mate comes
                            from Argentina. The leaves and stems of yerba mate are harvested and then blanched, dried, aged, and finally
                            milled or cut. The final yerba mate tea product contains a natural energy booster. A cup of Maté tea has
                            approximately the same amount of caffeine as a cup of coffee. We offer a number of Maté based blended
                            infusions, including JavaVana Maté, MateVana, My Morning Maté, Raspberry Riot
Lemon Maté and Samurai Chai Maté. Prices for Maté based blended infusions currently range from approximately $6 to $7 per two-ounce
quantity.

                             Other herbal based blends. In addition to Rooibos- and Mate-based blends, we offer herbal infusions made
                             from a variety of ingredients including dried fruits, hibiscus, and rosehips. Representative selections from our
                             assortment of herbal based blended infusions include Strawberry Lemonade Herbal Tea, Azteca Fire Herbal
                             Tea, Dokudami Umami Herbal Tea, Honeybush Vanilla Herbal Tea, Swiss Vervaine Melange Herbal
Tea and Pineapple Kona Pop Herbal Tea. Prices for our herbal based blended infusions currently range from approximately $5 to $9 per
two-ounce quantity.

      Tea-Related Merchandise

     We offer in our stores and through our website a carefully selected assortment of artisanal teawares and other tea-related merchandise that
provide our customers the ability to brew and consume our premium loose-leaf teas and more broadly experience tea cultures from around the
globe. The majority of our tea-related merchandise is Teavana-branded. We offer a selection of our teas and tea-related merchandise in the
form of prepackaged gift sets.

     Our teawares and other tea-related merchandise are grouped into five main categories: teapots, tea cups and mugs, tea accessories, tea
décor and media, and tea foods.

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Category                        Products Offered                                        Select Product Highlights
Teapots              Cast-iron, clay, bone-china,   Our teapots and teapot sets range from the traditional to the modern. Our Tetsubin teapots
                     ceramic and glass teapots      are handmade in Japan of solid cast-iron with a fully enameled inside, and are intricately
                                                    decorated with Japanese symbols. Our Yixing clay teapots, many of which are decorated
                                                    with flowers and other traditional motifs, are forged by artisans from Yixing clay, a red
                                                    clay uniquely found in the Jiangsu province of China. Crafted by artisans in Korea, our
                                                    Celadon teapots are made by layering different colors of clay using centuries-old
                                                    techniques. Our high-quality bone china teapots and teapot sets are fired multiple times for
                                                    a high gloss lustrous surface and then hand-painted and finished with gold accents. For
                                                    customers with modern tastes, we offer a line of earthenware teapots with contemporary
                                                    designs and finished with five coats of handpainted glaze, combining everyday elegance
                                                    with serviceability. Prices for our teapots and teapot sets currently range from
                                                    approximately $28 to $190.
Tea Cups and         Cast-iron, ceramic and glass   Our cast-iron cups are handcrafted and decorated by specialty artisans in Japan and match
Mugs                 tea cups; infuser mugs;        our cast-iron teapots. Our handcrafted ceramic tea cups range from traditional Yixing clay
                     travel tea cups                to modern Japanese designs. In our line of glass tea cups, our Petite Fleur Suspendu
                                                    Four-Cup Glass Tea Set consists of luminous spherical double-walled glass tea cups that
                                                    are mouth-blown by skilled artisans. Our stylish and classical Joli glass mug is made of
                                                    heat resistant borosilicate glass, and comes with a removable clear glass infuser that allows
                                                    better viewing of the expanding tea leaves as they infuse. Prices for our tea cups and mugs
                                                    currently range from approximately $7 to $30.
Tea Accessories      Teamakers; tea kettles and     Our Teavana Perfect TeaMaker, which provides an efficient, simple and clean way to steep
                     hot water dispensers; tea      tea, uses a patented drain mechanism to strain the tea into the user’s cup and keep the
                     trays; teapot trivets and      leaves in the tea maker. Among our tea kettles and hot water dispensers, we carry our own
                     coasters; teapot warmers;      brand (such as the Teavana Perfect Tea Kettle, which is made of superior quality brushed
                     tea storage tins               stainless steel) as well as third-party brands, including the Breville Variable Temperature
                                                    Kettle (which features preset temperatures for each type of tea) and the Zojirushi Hybrid
                                                    Water Heater. At the very high end of this product category, we carry the Breville One
                                                    Touch Teamaker, which heats water to the correct temperature for brewing the desired tea,
                                                    lowers the tea basket automatically into the water, and, at the correct time, auto-lifts the
                                                    basket to prevent oversteeping. Our line of handcrafted Japanese lacquerware tea trays,
                                                    cast-iron trivets and cast-iron and lacquerware comes in a wide range of colors and styles.
                                                    Prices for our tea accessories currently range from approximately $4 to $250.

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Category                        Products Offered                                         Select Product Highlights
Tea Décor and        Tea-infused aromatic            We offer a range of Asian-inspired decorations to bring the culture of tea to the home or
Media                candles; Asian-inspired         office. These include our Dancing Ganesh Resin Statue, Chinese Lion Statues, Kuan Yin
                     table statuettes; tea towels    (the goddess of mercy and compassion in Chinese Buddhism) on Rock Statue, and several
                     and napkins; books on the       varieties of Buddha statues, which are crafted of resin or cold cast bronze and individually
                     history and culture of tea;     polished, antiqued and painted with color accents and decorated with intricate details
                     global music CDs                bringing the culture of tea to your atmosphere. Among the aromatic candles we offer, our
                                                     White Ayurvedic Chai Aromatic Candle features a rare combination of expertly crafted
                                                     notes of clove bud oil, cinnamon bark, cassia, cedar wood and Brazilian orange spices that
                                                     is inspired by the ancient Hindu healing system. We also sell a selection of books related
                                                     to the history of tea, tea serving customs, and other topics related to the tea lifestyle and
                                                     tea-inspired music CDs from cultures around the world. Prices for our tea décor and media
                                                     currently range from approximately $12 to $150.
Tea Foods            Artisanal honeys; German        We offer unprocessed German rock sugar and a variety of artisanal honeys, many of them
                     rock cane sugar; tea-infused    organic, raw and/or unfiltered, to add sweetness to tea beverages brewed from our
                     cookies; tea-infused mints      loose-leaf teas. We also offer a selection of tea-infused cookies and mints to complement
                                                     the enjoyment of our loose-leaf teas. Prices for our tea foods currently range from
                                                     approximately $4 to $8.

      Beverages

     We offer made-to-order fresh-brewed teas in each of our stores. Our customers may select any of the varieties of loose-leaf single-estate
and blended teas that we offer. Customers can choose to have their beverage served hot or cold.

Product Selection, Development and Sourcing
      We select and develop an extensive offering of premium loose-leaf teas, authentic artisanal teawares and other tea-related merchandise.
Our merchandising team travels across global tea regions seeking superior teas and high quality traditional tea merchandise. Our merchandising
team consists of a vice president of merchandising and category managers, who leverage our company’s extensive experience selecting and
developing our tea and tea-related merchandise. Our product offering reflects tea communities in Japan, China, India, South Korea and Europe
and we are constantly exploring different tea cultures from which to introduce new teas and tea-related merchandise to our customers. We also
work with our supplier partners to develop special tea blends and innovative products that we sell on an exclusive basis. We believe this
combination of product selection and product development differentiates us from other specialty tea retailers and helps drive our continued
strong financial results.

      Teas

      Our merchandising team selects the highest grades of single-estate teas sourced from tea gardens and brokers in tea-producing regions
around the world. We have well established relationships with some of the industry’s most experienced and influential tea brokers and tea
gardens and work closely with these suppliers to select our single-estate teas. Multiple times a year, our merchandising team travels to
tea-growing regions worldwide to select the best harvested teas and, working through brokers or directly with growers, oversees their
preparation for shipment. Our merchandising team has spent years developing the sophisticated palate necessary to distinguish the
characteristics desired in the highest-quality teas, and tastes, or “cups,” each sample before purchasing and again before accepting delivery.
Although most tea trades in the commodity market, premium

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loose-leaf teas of the quality we seek trade on a negotiated basis at a substantial premium to commodity tea prices. Tea supply and price can be
affected by multiple factors, including weather, political and economic conditions, and currency fluctuations.

       Our merchandising team also focuses on the creation of our special tea blends using multiple varieties of single-estate teas and herbal
teas, which are combined with spices, herbs, flower petals, essential oils of fruits and other natural flavorings. Each type of tea that we sell has
a distinctive appearance, flavor, aroma, color, caffeine content and healthful qualities. We have long-standing collaborative relationships with
tea blenders from across the globe with whom we collaborate to develop our blends. Our team spends significant amounts of time cupping
blends under development to perfect the balance of flavors, aromas and colors. To provide our customers a fresh tea selection over time, we
introduce new teas at least two to three times per year, and seek to replace 10-20% of our Wall of Tea selections every year.

      Tea-Related Merchandise

     Our merchandising team selects high quality tea-related merchandise to enhance the enjoyment and experience of tea for our customers.
We travel throughout the world seeking out what we believe is the finest tea-related merchandise available. We believe that the artisanal
products that we select are best-in-class in their countries of origin.

      We develop a variety of Teavana-branded merchandise in close collaboration with numerous factories and foundries. Our branded
products are customized to our specifications and we choose only the finest, high-quality products to introduce as Teavana-branded
merchandise. We believe that by offering the finest quality products, our customers naturally associate the Teavana brand with distinction and
excellence.

      Quality Control

      As part of our quality control, we test our teas and tea-related merchandise to ensure compliance with our stringent quality standards. We
perform extensive sampling of teas during the buying process. In addition, our teas undergo rigorous testing based on specifications established
by European Union regulations for the presence of pesticides and heavy metal residues. We have implemented a program for third-party testing
of a sample of each batch of teas received at our distribution center. We also have strict quality controls around the manufacture of our
tea-related merchandise, and require certificates confirming that all such merchandise is lead-free.

      Sourcing

     We do not own or operate any tea estates, blending operations or manufacturing facilities; instead, we source our products from over 100
vendors across the globe. During fiscal 2010, our two largest vendors represented approximately 25% and 15%, respectively, of our total
purchases of inventory goods. Approximately 90% of our purchases are paid for in US dollars, with the balance being denominated primarily in
Euros and Japanese yen.

Distribution
      We distribute our loose-leaf teas and tea-related merchandise to our stores and our e-commerce customers from our distribution center in
Stratford, Connecticut. Our products are typically shipped to our stores via a third-party national transportation provider multiple times per
week.

      We have identified the need to expand our distribution center in order to support our near-term growth. We have signed commitments to
expand our distribution center, for a modest capital outlay, in three separate phases during fiscal 2011 and fiscal 2012 to support our growing
operations through the first quarter of fiscal 2013. We have considerable experience expanding our distribution center, having completed
similar expansions

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successfully in fiscal 2009 and fiscal 2010. Further, we have commissioned a study to assess our long-term distribution needs and to determine
the most efficient strategy to satisfy those needs, which could include the addition of a second distribution center in another region of the
United States.

Marketing and Advertising
      We believe that our high traffic store locations and the interactive, informative and immersive experience that we offer our customers
enable us to spend less on conventional advertising than many other retailers. Our marketing strategy currently emphasizes utilization of our
website and social media and mobile applications to create a community of tea enthusiasts, build customer loyalty and promote our brand
awareness. For example, we provide updates on teas, tea news, tea-making, tea gift ideas and related topics via our “Heaven of Tea” blog on
our website, our Facebook page and our presence on Twitter. In December 2009, we introduced our PerfecTea Touch ® application, which can
be downloaded free of charge on the Apple iPhone and iPad. This application enables customers to shop our teas and tea-related merchandise,
locate a store and obtain information on blending our teas, and provides them with built-in music-accompanied timers to help brew the perfect
cup of tea. Additionally, we utilize banner advertisements, search engine optimization and pay-per-click arrangements to help drive traffic to
our website.

       We have built an email customer database with approximately 300,000 individual customer names as of January 30, 2011, substantially
all of which belong to households that placed an Internet order with us or made a store purchase from us during the previous 24 months. We
utilize this list to send direct marketing messages via email to these customers to highlight new tea arrivals and announce promotional events.
We do not sell or provide any information from our customer database to third parties.

Management Information Systems
      Our management information systems provide a full range of business process support to our stores, our store operations and store
support center teams. We believe our systems provide us with enhanced operational efficiencies, scalability, increased management control and
timely reporting that allow us to identify and respond to trends in our business. We utilize a combination of industry standard and customized
software systems to provide various functions related to:
        •    point of sales;
        •    inventory management;
        •    warehouse management; and
        •    accounting and financial reporting.

      We believe our management information systems benefit us through enhanced customer service, more efficient operations and increased
control over our business. Through our point of sale system we are able to facilitate the operations of our stores and through our warehouse
management systems we can efficiently manage our inventory of loose-leaf teas and tea-related merchandise from our store support center.

Competition
     The US tea market is highly fragmented. We compete directly with a large number of relatively small independently-owned tea retailers.
Additionally, relatively low barriers to entry in the tea and beverage retail market may encourage other tea and beverage retailers who may
have greater financial, marketing and operating resources than we do to enter the specialty tea retail market. As we continue to expand
geographically, we expect to encounter additional regional and local competitors.

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      In the event that other tea and beverage retailers enter into the specialty tea retail market, we believe that we will differentiate ourselves
on the basis of our market-defining brand, the “Heaven of Tea” retail experience offered to customers in our stores, our deep-rooted culture
focused on a passion for tea and career development, the high quality of our teas and tea-related merchandise, and our proven and experienced
senior management team, all of which are competitive strengths that we believe contribute toward offsetting the relatively low barriers to entry
noted above.

     We also compete indirectly with other vendors of loose-leaf, bagged and ready-to-drink teas, such as supermarkets, club stores,
wholesalers and internet suppliers, as well as with houseware retailers and suppliers that offer teawares and related accessories.

      In addition, we compete with numerous other mall-based retailers for retail real estate locations for our stores.

Trademarks and Other Intellectual Property
      We regard intellectual property and other proprietary rights as important to our success. We own several trademarks and service marks
that have been registered with the US Patent and Trademark Office, including Teavana ® , and the names of most of the varieties of
single-estate teas and specially blended teas that we sell. We have also registered trademarks on our stylized logos. We have applications
pending with the US Patent and Trademark Office for a number of additional marks, including Heaven of Tea and Wall of Tea and a number of
varieties of our single-estate teas and blended teas. We also own domain names, including www.teavana.com, for our primary trademarks and
own unregistered copyright rights in our website content. In addition, we have registered or made application to register one or more of our
marks in a number of foreign countries and expect to continue to do so in the future as we expand internationally. There can be no assurance
that we can obtain the registration for the marks in every country where registration has been sought.

      We also rely upon trade secrets and know-how to develop and maintain our competitive position. We protect our intellectual property
rights through a variety of methods including trademark and trade secret laws, as well as confidentiality agreements and proprietary
information agreements with vendors, team members, consultants and others who have access to our proprietary information.

       We must constantly protect against any infringement by competitors. If a competitor infringes on our trademark rights, we may have to
litigate to protect our rights, in which case, we may incur significant expenses and divert significant attention from our business operations.

Government Regulation
     We are subject to labor and employment laws, laws governing advertising, privacy laws, safety regulations and other laws, including
consumer protection regulations that regulate retailers and/or govern the promotion and sale of merchandise and the operation of stores and
warehouse facilities. We monitor changes in these laws and believe that we are in material compliance with applicable laws.

Insurance
       We use a combination of insurance and self-insurance for a number of risk management activities including workers’ compensation,
general liability, automobile liability, and employee-related health care benefits. We believe that we have adequately reserved for our
self-insurance liability related to medical coverage of our team members. We evaluate our insurance requirements on an ongoing basis to
ensure we maintain adequate levels of coverage.

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Employees
     As of May 1, 2011, we employed 448 full-time and 1,622 part-time employees, of whom 1,961 were employed in our retail channel and
109 were employed in corporate, distribution and direct channel support functions. None of our employees is represented by a labor union. We
consider our relationship with our employees to be very good.

Properties
      We do not own any real property. Our store support center is located in Atlanta, Georgia and is leased under a lease agreement expiring in
2024. The approximately 30,000 square foot space includes a simulated store that provides a forum for planning, visual and marketing concepts
prior to their execution in our stores.

      Our approximately 80,000 square foot distribution center is located in Stratford, Connecticut. Our distribution center is leased under a
lease agreement expiring in 2016 and 2020 (as to different portions of the facility).

      As of May 1, 2011, we operated 161 stores in 35 states. All of our stores are leased from third parties and the leases typically have
ten-year terms. Some of our leases have early cancellation clauses, which permit the lease to be terminated by us or the landlord if certain sales
levels are not met in specific periods or if a shopping center does not meet specified occupancy standards. In addition to future minimum lease
payments, some of our store leases provide for additional rental payments based on a percentage of net sales if sales at the respective stores
exceed specified levels, as well as the payment of common area maintenance charges, real property insurance and real estate taxes. Many of
our lease agreements have defined escalating rent provisions over the initial term and any extensions.

Legal Proceedings
     We are subject to various legal proceedings and claims which arise in the ordinary course of our business. Although the outcome of these
and other claims cannot be predicted with certainty, management does not believe that the ultimate resolution of these matters will have a
material adverse effect on our financial condition or on our results of operations.

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                                                                MANAGEMENT

Executive Officers and Directors
     The following table sets forth information regarding our executive officers, directors and director nominees, as of the date of this
prospectus:

Name                                                   Age                                             Position
Andrew T. Mack                                           46       Chairman of the Board, Chief Executive Officer
Daniel P. Glennon                                        42       Executive Vice President, Chief Financial Officer
Peter M. Luckhurst                                       56       Executive Vice President, Operations
Juergen W. Link                                          50       Vice President, Distribution
Robert A. Shapiro                                        64       Vice President, Real Estate
F. Barron Fletcher III                                   44       Director
Michael J. Nevins                                        48       Director
Thomas A. Saunders III                                   75       Director Nominee
John E. Kyees                                            64       Director Nominee
Robert J. Dennis                                         57       Director Nominee

       Executive Officers

      Andrew T. Mack founded Teavana in 1997 and has served as our Chief Executive Officer since that time. Mr. Mack has also served as our
Chairman of the Board of Directors since 2010. Prior to founding Teavana, Mr. Mack held various management positions in the restaurant
industry. Mr. Mack is a graduate of East Tennessee State University where he received a B.B.A in Marketing. We believe that Mr. Mack is
qualified to serve on our Board of Directors due to the perspective, experience, and operational expertise in the retailing business which he has
developed as our founder and Chief Executive Officer.

     Daniel P. Glennon has served as our Executive Vice President, Chief Financial Officer since 2010 and served as our Chief Financial
Officer from 2005 through 2010. Previously, Mr. Glennon was a manager at Marakon Associates and an auditor at Arthur Andersen LLP and
served as the chief financial officer or vice president of finance of three small or early-stage corporations. Mr. Glennon graduated from the
University of Georgia with a B.B.A. in Accounting and from Harvard Business School with an M.B.A. Mr. Glennon is a certified public
accountant.

     Peter M. Luckhurst has served as our Executive Vice President, Operations since 2010 and served as our Vice President for Stores from
2005 to 2010. Previously, Mr. Luckhurst was with HMV North America for 15 years, most recently as its President. Mr. Luckhurst is a
graduate of the University of Aston in Birmingham where he received a B.Sc. in Behavioral Science.

     Juergen W. Link has served as our Vice President, Distribution since 2005. Previously, Mr. Link was the founder and President of
SpecalTeas, Inc. from 1996 to 2005. Mr. Link is a graduate of the University of Munich with a degree in Business Management.

      Robert A. Shapiro has served as our Vice President, Real Estate since 2005. Previously, Mr. Shapiro was Senior Vice President of Real
Estate & Property Development for Zale Corporation. Mr. Shapiro graduated from the University of Denver with a B.A. in International
Studies.

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      Directors and Director Nominees

      F. Barron Fletcher III has served as a Director since 2004. Mr. Fletcher is the founder of Parallel Investment Partners, where he has
served as the managing partner since 1999. Prior to founding Parallel, Mr. Fletcher was a partner with Saunders Karp & Megrue, a $1.2 billion
private equity firm focused on high growth, middle market consumer companies, where he worked actively with both Dollar Tree, Inc. and
Hibbett Sporting Goods, Inc. during the firm’s ownership. Mr. Fletcher also serves as a member of the boards of specialty retailers Mealey’s
Furniture, Inc., The Fragrance Outlet, Inc. and USA Discounters, Inc. Mr. Fletcher is a graduate of Yale University, where he received a B.A.
in both Mathematics and Economics. We believe that Mr. Fletcher is qualified to serve on our Board of Directors due to his extensive
management experience, his expertise with retailing companies, and his service on the boards of directors of a range of other companies.

      Michael J. Nevins has served as a Director since 2004. Mr. Nevins served as a Senior Vice President-Leasing for the Macerich Company
from 2005 to 2011 where he oversaw a substantial portfolio of properties. Mr. Nevins is a graduate of Kenyon College where he received a
B.A. in Economics. We believe that Mr. Nevins is qualified to serve on our Board of Directors due to his operational experience in the retailing
business and his background providing guidance and counsel to us as a Director during the company’s growth.

      Thomas A. Saunders III has been nominated, and has agreed to serve, as a member of our Board of Directors effective upon the
consummation of this offering. Mr. Saunders has been the President of Ivor & Co., LLC, a private investment company, since 2000.
Mr. Saunders was a founder of Saunders Karp & Megrue Partners, once a major investor in Dollar Tree, Inc. Before founding Saunders Karp &
Megrue Partners in 1990, Mr. Saunders was a Managing Director of Morgan Stanley & Co. from 1974 to 1989. Mr. Saunders currently serves
as a member of the boards of directors of Dollar Tree and Hibbett Sporting Goods. Mr. Saunders graduated from the Virginia Military
Academy with a B.S. in Electrical Engineering and from the University of Virginia with an M.B.A. We believe that Mr. Saunders is qualified
to serve on our Board of Directors due to his extensive background in and experience with retail companies, along with his service on the
boards of directors of other private and public companies.

      John E. Kyees has been nominated, and has agreed to serve, as a member of our Board of Directors effective upon the consummation of
this offering. Mr. Kyees served as the Chief Investor Relations Officer of Urban Outfitters, Inc. in 2010 and as Chief Financial Officer from
2003 to 2010. Mr. Kyees has over 30 years of experience as a chief financial officer, including nine years of experience serving as chief
financial officer for a public company. Mr. Kyees is currently a director and member of the audit committee of Casual Male Retail Group, Inc.,
a publicly-traded specialty retailer of men’s clothing. Mr. Kyees is also currently a director and chairman of the audit and compensation
committees of Vera Bradley, Inc., a publicly-traded luggage and handbag retailer. Mr. Kyees graduated from the University of Kansas with a
B.S. in Business Administration and from the University of Detroit with an M.B.A. We believe that Mr. Kyees is qualified to serve on our
Board of Directors due to his extensive background with retail companies, his financial expertise developed as a chief financial officer, and his
service on the boards of directors of other companies.

      Robert J. Dennis has been nominated, and has agreed to serve, as a member of our Board of Directors effective upon the consummation
of this offering. Mr. Dennis is the chairman of the board of directors of Genesco Inc., a publicly traded specialty retailer. Mr. Dennis has been
the President and Chief Executive Officer of Genesco Inc. since 2008 and served as its President and Chief Operating Officer from 2006
through 2008. He has over 25 years of experience in the retail industry, including his tenure at Genesco Inc., three years as Chief Executive
Officer of Hat World, Inc. prior to its acquisition by Genesco Inc., three years in a senior position with Asbury Automotive and 13 years with
McKinsey & Company, becoming a partner and a leader of the firm’s North American Retail Practice. Mr. Dennis graduated from Rensselaer
Polytechnic Institute with a B.S. in biochemistry and an M.S. in organic chemistry. In addition, Mr. Dennis graduated from Harvard Business
School with an M.B.A. We believe that Mr. Dennis is qualified to serve on our Board of Directors due to his broad experience and operational
background in the retail business, along with his service on the board of directors of Genesco Inc.

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Board Composition
      Our Board of Directors currently consists of three directors: Messrs. Mack, Fletcher and Nevins. Concurrently with the consummation of
this offering, Messrs. Dennis, Kyees and Saunders shall also be appointed as directors.

      We have determined that each of Messrs. Dennis, Kyees, Nevins and Saunders is an independent director within the meaning of the
applicable rules of the SEC and the New York Stock Exchange, and that each of them is also an independent director under Rule 10A-3 of the
Exchange Act for the purpose of audit committee membership. In addition, our Board of Directors has determined that Mr. Kyees is a financial
expert within the meaning of the applicable rules of the SEC and the New York Stock Exchange.

Board Committees
      Our Board of Directors has established the following committees: an audit committee, a compensation committee and a nominating and
corporate governance committee. Upon consummation of this offering, each member of these committees will be independent as defined under
the rules of the SEC and the New York Stock Exchange as currently in effect, and we intend to comply with additional requirements to the
extent they become applicable to us. Our Board of Directors may from time to time establish other committees.

      Audit Committee

      Our audit committee oversees our corporate accounting and financial reporting process. Among other matters, our audit committee:
        •    is responsible for the appointment, compensation and retention of our independent auditors and reviews and evaluates the auditors’
             qualifications, independence and performance;
        •    oversees our auditors’ audit work and reviews and pre-approves all audit and non-audit services that may be performed by them;
        •    reviews and approves the planned scope of our annual audit;
        •    monitors the rotation of partners of the independent auditors on our engagement team as required by law;
        •    reviews our financial statements and discusses with management and our independent auditors the results of the annual audit and
             the review of our quarterly financial statements;
        •    reviews our critical accounting policies and estimates;
        •    oversees the adequacy of our accounting and financial controls;
        •    annually reviews the audit committee charter and the committee’s performance;
        •    reviews and approves all related-party transactions; and
        •    establishes and oversees procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls or
             auditing matters and oversees enforcement, compliance and remedial measures under our code of conduct.

       The current members of our audit committee are Messrs. Fletcher and Nevins. Upon the consummation of this offering, our audit
committee will consist of Messrs. Kyees, Dennis and Nevins, with Mr. Kyees serving as the chairman of our audit committee and our audit
committee financial expert as currently defined under applicable SEC rules. We believe that the composition of our audit committee meets the
criteria for independence under, and the functioning of our audit committee complies with, the applicable requirements of the New York Stock
Exchange and the SEC rules and regulations.

     Our Board of Directors will adopt a written charter for our audit committee, which will be available on our website at www.teavana.com
upon the consummation of this offering.

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      Compensation Committee

      Our compensation committee reviews, recommends and approves policy relating to compensation and benefits of our officers and
directors, administers our stock option and benefit plans and reviews general policy relating to compensation and benefits. Duties of our
compensation committee include:
        •    reviewing and approving corporate goals and objectives relevant to compensation of our directors, chief executive officer and other
             executive officers;
        •    evaluating the performance of the chief executive officer and other executive officers in light of those goals and objectives;
        •    based on this evaluation, determining and approving the Chief Executive Officer’s compensation and recommending to our Board
             of Directors the proposed compensation of our other executive officers;
        •    administering the issuance of stock options and other awards to executive officers and directors under our compensation plans; and
        •    reviewing and evaluating, at least annually, the performance of the compensation committee and its members, including
             compliance of the compensation committee with its charter.

      Upon the consummation of this offering, our compensation committee will consist of Messrs. Dennis, Kyees and Nevins, with
Mr. Dennis serving as the chairman of our compensation committee. We believe that the composition of our compensation committee
following this offering will meet the criteria for independence under, and the functioning of our compensation committee will comply with, the
applicable requirements of the New York Stock Exchange and the SEC rules and regulations.

    Our Board of Directors will adopt a written charter for our compensation committee, which will be available on our website at
www.teavana.com upon the consummation of this offering.

      Nominating and Corporate Governance Committee

      We do not currently have a nominating and corporate governance committee; however, we plan to establish a nominating and corporate
governance committee prior to the consummation of this offering. Upon consummation of this offering, our nominating and corporate
governance committee will consist of Messrs. Saunders, Dennis, Kyees and Nevins, with Mr. Saunders serving as the chairman of our
nominating and corporate governance committee. Our nominating and corporate governance committee identifies individuals qualified to
become directors; recommends to our Board of Directors director nominees for each election of directors; develops and recommends to our
Board of Directors criteria for selecting qualified director candidates; considers committee member qualifications, appointment and removal;
recommends corporate governance guidelines applicable to us; and provides oversight in the evaluation of our Board of Directors and each
committee. We believe that the composition of our nominating and corporate governance committee meets the criteria for independence under,
and the functioning of our nominating and corporate governance committee complies with, the applicable requirements of the New York Stock
Exchange and the SEC rules and regulations.

     Our Board of Directors will adopt a written charter for our nominating and corporate governance committee, which will be available on
our website at www.teavana.com upon the consummation of this offering.

Compensation Committee Interlocks and Insider Participation
     None of our executive officers serves as a member of the board of directors or compensation committee of any other entity that has one or
more executive officers who serve on our Board of Directors or compensation committee.

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Code of Business Conduct and Ethics
      We will adopt a code of business conduct and ethics applicable to our principal executive, financial and accounting officers and all
persons performing similar functions. A copy of that code will be available on our website at www.teavana.com upon consummation of this
offering. We expect that any amendments to such code, or any waivers of its requirements, will be disclosed on our website.

Director Compensation
      Prior to this offering, members of our Board of Directors have not received cash compensation for their services as directors, except for
the reimbursement of reasonable and documented costs and expenses incurred by directors in connection with attending any meetings of the
Board of Directors or any committee thereof. Parallel, of which Mr. Fletcher is the founder and managing partner, has received fees from us, as
well as reimbursement of reasonable out-of-pocket expenses incurred by it, for advisory services performed by Parallel pursuant to a letter
agreement. See “Certain Relationships and Related Party Transactions—Advisory Services Agreement.” At least one of our directors has
received equity grants from us in prior fiscal years for his services provided as a director, as discussed in more detail in the next paragraph.

       We did not pay any cash or equity compensation to members of our Board of Directors during fiscal 2010 because all of our directors
other than Mr. Nevins were either employees of our company or affiliated with our stockholder, Teavana Investment LLC. In fiscal 2005 and
fiscal 2009, we granted to Mr. Nevins non-qualified stock options to purchase 10,000 shares and 5,000 shares of our Class A common stock at
exercise prices of $4.14 per share and $9.00 per share, respectively.

      After the consummation of this offering, our executive officers who are members of our Board of Directors and the directors who
continue to provide services to, or are affiliated with, Parallel or funds advised by Parallel will not receive compensation from us for their
service on our Board of Directors. Accordingly, Messrs. Mack and Fletcher will not receive compensation from us for their service on our
Board of Directors. Only those directors who are considered independent directors under the corporate governance rules of the New York
Stock Exchange will be eligible to receive compensation from us for their service on our Board of Directors. Messrs. Nevins, Saunders, Kyees
and Dennis and other independent directors will be paid quarterly in arrears the following amounts:
        •    a base annual retainer of $50,000 in cash;
        •    an additional annual retainer of $35,000 in cash to the chairman of the audit committee; and
        •    an additional annual retainer of $25,000 in cash to each of the chairmen of the compensation committee and the corporate
             governance and nominating committee.

      In addition, upon initial election to our Board of Directors, each independent director will be granted an option to purchase a number of
shares of our common stock having a fair market value of $100,000 on the date of grant. For each year of continued service thereafter, each
independent director will be granted an annual option to purchase a number of shares of our common stock having a fair market value of
$30,000 on the date of grant. Each grant will be subject to the same terms as those of our employees as described in the disclosure summarizing
our 2011 Equity Incentive Plan. See “Compensation Discussion and Analysis—Stock Option and Other Compensation Plans—2011 Equity
Incentive Plan.” We will also reimburse directors for reasonable expenses incurred to attend meetings of our Board of Directors or committees.

Director and Officer Indemnification Agreements
      We have entered into indemnification agreements with each of our current directors and executive officers. These agreements require us
to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to
us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We also intend to enter
into indemnification agreements with our future directors and executive officers.

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                                              COMPENSATION DISCUSSION AND ANALYSIS

      The following discussion describes and analyzes our executive compensation structure and our compensation for our named executive
officers for fiscal 2010, who include Andrew T. Mack, our Chairman and Chief Executive Officer (“CEO”), Daniel P. Glennon, our Executive
Vice President, Chief Financial Officer (“CFO”), and Peter M. Luckhurst, our Executive Vice President, Operations, Juergen W. Link, our
Vice President, Distribution, and Robert A. Shapiro, our Vice President, Real Estate (collectively, our “NEOs” or our “named executive
officers”). Detailed information regarding compensation paid to our named executive officers in fiscal 2010 is set forth in the “Summary
Compensation Table” below.

Compensation Philosophy and Objectives
      Our intent and philosophy in determining compensation packages at the time of hiring new executives has been based in part on
providing compensation sufficient to enable us to attract the talent necessary to further develop our business, while at the same time being
prudent in the management of our cash and equity in light of the stage of the development of our company. Compensation of our NEOs after
the initial period following their hiring has been influenced by the amounts of compensation that we initially agreed to pay them, as well as by
our evaluation of their subsequent performance, changes in their levels of responsibility, prevailing market conditions, the financial condition
and prospects of our company and our attempt to maintain some level of internal equity in the compensation of existing executives relative to
the compensation paid to more recently hired executives.

     We compensate our NEOs with a combination of base salaries, cash bonuses, long-term equity compensation and other compensation.
We think this combination of cash, bonus and equity awards is largely consistent with the forms of compensation provided by other companies
with whom we compete for executive talent, and, as such, is a package that is consistent with the expectations of our executives and of the
market for executive talent. Although we do not engage in benchmarking or use the services of an independent compensation consultant, our
Board of Directors may also consider compensation levels with comparable positions in our industry and market to evaluate the total
compensation decisions that it makes for our officers. The primary objectives of our executive compensation program are as follows:
        •    to attract and retain talented and experienced executives in our industry;
        •    to reward executives whose knowledge, skills and performance are critical to our success;
        •    to ensure fairness among the executive management team by recognizing the individual contributions each executive officer makes
             to our success; and
        •    to align the interests of our executive officers and stockholders by incentivizing executive officers to increase stockholder value
             and rewarding executive officers when stockholder value increases.

Elements of Compensation
      Our current executive compensation program consists of the following key components:

      Base salary

      The primary component of compensation of our executive officers has historically been base salary. Base salary represents the most
basic, fixed portion of our NEOs’ compensation and is an important element of designing a compensation program to attract and retain talented
executive officers. We believe that we must maintain a base salary that is sufficiently competitive to position us to attract talented and
experienced executives, and that it is important that our NEOs believe that over time they will continue to earn a salary that they regard as
competitive. Base salaries are reviewed at the end of each fiscal year by our CEO (other than with respect to his own base salary) and Board of
Directors and salary increases typically take effect at the beginning of the first quarter of the following fiscal year, unless business
circumstances require otherwise.

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      Cash bonuses

     We offer our executive officers the opportunity to participate in an annual cash bonus plan to align the financial incentives of our
executive officers, including our NEOs, with our short-term operating plan and long-term strategic objectives and the interests of the company
and our stockholders. Typically, the bonuses for our executive officers are linked to the achievement of certain of our annual financial
objectives. These bonus opportunities allow us to reward our executive officers only if we achieve the goals pre-set by our Board of Directors.

      Prior to the beginning of each fiscal year, our Board of Directors, in consultation with the CEO other than with respect to himself,
determines the financial objectives upon which annual bonuses for the fiscal year will be based, and establishes a target award for each
executive officer. After the end of the fiscal year, the Board of Directors, in consultation with the CEO (other than with respect to himself),
determines the extent to which the financial objective(s) were met, and calculates the formula payout level for each executive officer. In
addition, our CEO evaluates each executive officer’s overall individual performance (other than his own) and makes recommendations to the
Board of Directors regarding the formula bonus payout level described above. Our Board of Directors takes into account the CEO’s
recommendations and conducts the same analysis for the CEO, and determines the final bonus amounts.

      Long-term equity compensation

      Our equity program, which we have historically administered through our 2004 Management Incentive Plan, is designed to be sufficiently
competitive to allow us to attract and retain talented executives. We have historically used non-qualified stock options as the form of equity
award for executives. Because we award stock options with an exercise price equal to the fair market value of our common stock on the date of
grant, these options will have value to our NEOs only if the market price of our common stock increases after the date of grant. Our stock
option awards generally vest and become exercisable at a rate of 25% each year, commencing with the first anniversary of the grant. Our Board
of Directors believes that these stock option awards align the interests of our named executive officers with those of the company and its
stockholders, because they create the incentive to build stockholder value over the long-term. In addition, our Board of Directors believes the
vesting provisions of our equity awards enhances our ability to retain our executives. In order to attract and retain highly-qualified executives,
we generally compare our equity compensation program to compensation programs provided by other private equity-backed companies in our
market.

       We generally grant stock options to executive officers in connection with their hiring. The size of the initial stock option award is
determined based on the executive’s position with us and takes into consideration the executive’s base salary and other compensation. The
initial stock option awards are intended to provide the executive with an incentive to build value in the organization over an extended period of
time, while remaining consistent with our overall compensation philosophy. We may also grant additional stock option grants in recognition of
a commendable performance and in connection with a significant change in responsibilities, past performance and anticipated future
contributions of the executive officer, the executive’s overall compensation package and the executive’s existing equity holdings. Stock options
are granted with an exercise price equal to the fair value of our stock on the applicable date of grant. Following the consummation of this
offering, we expect to determine fair value for purposes of stock option pricing based on the most recent closing price of our common stock on
the New York Stock Exchange.

     In conjunction with this offering, we intend to adopt the 2011 Equity Incentive Plan and grant Messrs. Mack, Glennon, Luckhurst, Link
and Shapiro additional stock options, as discussed in “—Actions Taken Subsequent to Fiscal 2010.”

      Other compensation

      We also provide limited other executive benefits and perquisites and limited change in control benefits to our named executive officers as
described further under “—Fiscal 2010 Compensation Decisions” below.

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Compensation Decision Process
      Historic
      Prior to this offering, we were a privately-held company with a relatively small number of stockholders. As a result, we have not been
subject to any stock exchange listing or SEC rules requiring a majority of our Board of Directors to be independent. Since our formation, our
Board of Directors has overseen the compensation of our executive officers and our executive compensation programs and initiatives. While
we have had a Compensation Committee of the Board of Directors, this committee has acted primarily in an advisory role, assisting the Board
of Directors in compensation matters. The Board of Directors has also sought, and received, significant input from our CEO with regard to the
performance and compensation of executives other than himself. In addition, certain of our directors prior to this offering had significant
experience with private equity-backed companies and the executive compensation practices of such companies, and have applied this
knowledge and experience to their judgments regarding our compensation decisions.

      Post-offering

      Prior to the consummation of this offering, we expect our Board of Directors to adopt a charter for the Compensation Committee that is
compliant with the applicable requirements of the New York Stock Exchange and the SEC rules and regulations. In accordance with the new
charter, the Compensation Committee will determine and approve the annual compensation of our CEO and recommend to the Board of
Directors proposed compensation for our other executive officers, and will regularly report its compensation decisions to the full Board of
Directors. The Compensation Committee will also administer our equity compensation plans, including our 2011 Equity Incentive Plan, which
will become effective prior to the consummation of this offering. The Compensation Committee has not yet made significant decisions about
the process that it will employ in performing these functions. As we gain experience as a public company, we expect that the specific direction,
emphasis and components of our executive compensation program will continue to evolve. Accordingly, the compensation paid to our named
executive officers for fiscal 2010 may not necessarily be indicative of how we may compensate our named executive officers following this
offering.

Fiscal 2010 Compensation Decisions
      Base Salary
      In past years, the Board of Directors has reviewed the base salaries of our NEOs in the fourth quarter of each fiscal year, taking into
account their general knowledge of the compensation practices within our industry, our CEO’s base salary recommendations, the scope of each
NEO’s performance, individual contributions, responsibilities, experience, prior salary level and, in the case of a promotion, current position.
As part of our annual review process, our Board of Directors approved annual increases in base salary for each of our NEOs effective at the
beginning of fiscal 2010. These increases were 4.0% for all our NEOs and took into account accomplishments of each individual during the
prior fiscal year. Mr. Mack’s base salary increased from $315,000 to $327,600; Mr. Glennon’s base salary increased from $200,000 to
$208,000; Mr. Luckhurst’s base salary increased from $200,000 to $208,000; Mr. Link’s base salary increased from $180,000 to $187,200; and
Mr. Shapiro’s base salary increased from $174,500 to $181,480. During the course of fiscal 2010, the Board of Directors increased each of
Messrs. Glennon’s and Luckhurst’s base salary to $250,000 in connection with their respective promotions to Executive Vice President.

      Subsequent to this offering, we expect our Compensation Committee to conduct an annual review of each NEO’s base salary, with input
from our CEO (other than with respect to himself), and to make adjustments, including downward adjustments, as it determines to be
reasonable and necessary to reflect the scope of a NEO’s performance, individual contributions, responsibilities, experience, prior salary level,
position (in the case of a promotion) and market conditions.

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       Cash Bonus

      Our Board of Directors adopted an annual cash bonus plan for fiscal 2010 in order to reward the performance of our executive officers in
achieving our financial and strategic objectives. Under the fiscal 2010 bonus plan, our Board of Directors established threshold, target and
maximum bonus amounts (expressed as a percentage of base salary) for each of our NEOs that would become payable upon the achievement of
the applicable performance metric. The Board of Directors designed the bonus program so that the performance goals, even at the threshold
level, would require a significant level of performance, and the target and maximum bonus amounts would be substantially more difficult to
achieve. The following table shows the 2010 bonus targets as a percentage for each NEO’s base salary:

                                                                                                                                                Maximum Bonu
                                                                            Threshold Bonus                     Target Bonus                         s
       Named Executive Officer                                                  Amount                            Amount                           Amount
                                                                                                     (as a percentage of base salary)
       Andrew T. Mack                                                                      15 %                             30 %                          40 %
       Daniel P. Glennon                                                                 12.5 %                             25 %                          35 %
       Peter M. Luckhurst                                                                12.5 %                             25 %                          35 %
       Juergen W. Link                                                                     10 %                             20 %                          30 %
       Robert A. Shapiro                                                                   10 %                             20 %                          30 %

      For fiscal 2010, the Board of Directors utilized as the objective performance metric our achievement of Adjusted EBITDA targets. The
Board of Directors chose Adjusted EBITDA as the objective performance metric as this metric tracks both company earnings and cash flow
and is indicative of our overall market value. For purposes of our cash bonus plan for fiscal 2010, Adjusted EBITDA is defined as earnings
before interest, tax, depreciation and amortization, excluding fees paid to Parallel pursuant to the advisory services fee agreement with Parallel
and reimbursement of travel-related expenses incurred to attend meetings of the Board of Directors. The Board of Directors determined that use
of Adjusted EBITDA was more appropriate than EBITDA as the objective performance metric because Adjusted EBITDA excludes the impact
of certain categories of Board-related expenses over which our NEOs had no control in the period.

      For purposes of our cash bonus plan for fiscal 2010, the Adjusted EBITDA targets were set at threshold, target and maximum amounts as
follows:

                                                                                                              Adjusted EBITDA
                                                                                                         (dollar amounts in millions)
                           Threshold                                                                 $                              19.1
                           Target                                                                                                   20.1
                           Maximum                                                                   $                              24.1 (1)

(1)   Represents the maximum Adjusted EBITDA amount for all NEOs other than Mr. Mack. The maximum Adjusted EBITDA for Mr. Mack was $26.1 million.

      The Adjusted EBITDA performance metric was applied to all our NEOs, with the Board of Directors reserving the right, in the case
of Messrs. Luckhurst and Shapiro, to make a negative adjustment based on the NEO’s performance against additional specified operating
metrics. In the case of Mr. Luckhurst, the applicable operating metrics were field contributions, store payroll and other store operating costs. In
the case of Mr. Shapiro, the applicable operating metric was average capital expenditures for new stores. At the time the Adjusted EBITDA
performance metrics were set, our Board of Directors believed that the metrics were challenging and that the achievement of the performance
metrics at the target level would require superior performance.

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      In making its award decisions, the Board of Directors took into account that our actual Adjusted EBITDA for fiscal 2010 of $28.3 million
exceeded the Adjusted EBITDA target amount of $20.1 million by over $8 million, or approximately 41%. The Board of Directors determined
that because our financial performance exceeded the Adjusted EBITDA maximum amount, each of our NEOs was awarded the maximum
payout under the 2010 bonus plan. In light of Messrs. Luckhurst’s and Shapiro’s performance against their respective specified operating
metrics, the Board did not make a negative adjustment to their payouts. The actual payouts to each NEO were as follows:

                                                                                        Target Bonus             Actual Bonus
                    Named Executive Officer                                               Amount                   Amount
                    Andrew T. Mack                                                     $     98,280             $    131,040
                    Daniel P. Glennon                                                        55,029                   77,040
                    Peter M. Luckhurst                                                       55,029                   77,040
                    Juergen W. Link                                                          37,440                   56,160
                    Robert A. Shapiro                                                  $     36,960             $     54,444

      Long-Term Equity Based Compensation

      In fiscal 2010, our Board of Directors did not grant any equity awards to our executive officers.

      Other Executive Benefits and Perquisites

      We provide the following benefits to our executive officers:
        •    health, disability and life insurance;
        •    vacation, personal holidays and sick days; and
        •    a 401(k) plan.

      Unlike our other eligible employees, for our executive officers, we pay the entire amount of the health insurance premiums. We also carry
a separate disability insurance policy for our executive officers. We pay the entire premiums for our executive officers who are eligible for this
additional disability insurance policy. We believe these benefits are generally consistent with those offered by other companies with which we
compete for executive talent.

      Severance and Change in Control

      We provide limited benefits to certain of our NEOs upon termination and changes in control, as summarized below.

      Employment Agreements. We are party to existing employment agreements with Messrs. Mack and Link, which were amended and
restated as of April 22, 2011. We have entered into employment agreements with Messrs. Glennon and Luckhurst dated as of April 22, 2011.
See “—Agreements with Executives.” The amended and restated employment agreements with Messrs. Mack and Link and the employment
agreements with Messrs. Glennon and Luckhurst provide for severance and other benefits which are designed to provide economic protection
so that an executive can remain focused on our business without undue personal concern in the event that his position is eliminated or
significantly altered by us, which is particularly important in light of the executives’ leadership roles at the company. The Board of Directors
believes that providing severance or similar benefits is common among similarly situated companies and remains essential to recruiting and
retaining key executives, which is a fundamental objective of our executive compensation program. For more information regarding the
potential payments and benefits that would have been provided to our named executive officers in connection with a termination of
employment on January 30, 2011 had Messrs. Mack’s and Link’s amended and restated employment agreements and Messrs. Glennon’s and
Luckhurst’s employment agreements been in effect on such date, please see “—Potential Payments upon Termination or Change in Control,”
below.

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      Change in Control Provisions. The prospect of a change in control of the company can cause significant distraction and uncertainty for
executive officers and, accordingly, the Board of Directors believes that appropriate change in control provisions in equity award agreements
are important tools for aligning executives’ interests in change in control transactions with those of our stockholders by allowing our executive
officers to focus on strategic transactions that may be in the best interest of our stockholders without undue concern regarding the effect of such
transactions on their continued employment.

     Accordingly, upon a change in control or a qualified public offering (as such terms are defined in the applicable award agreement), any
unvested stock options granted pursuant to the 2004 Management Incentive Plan automatically and immediately vest, and the holder of such
options may exercise such options in whole or in part thereafter. This offering constitutes a qualified public offering and therefore 100% of the
unvested stock options of Mr. Link will become vested. For a discussion of the impact of a change of control on equity awards that may be
made under the 2011 Equity Incentive Plan, which we intend to adopt prior to the consummation of this offering, see “—2011 Equity Incentive
Plan—Change in Control.”

      For more information regarding the potential payments and benefits that would be provided to our named executive officers in connection
with a change in control on January 30, 2011, please see “—Potential Payments upon Termination or Change in Control,” below.

Other Compensation Practices and Policies
      Tax Considerations
      Section 162(m) of the Internal Revenue Code of 1986, as amended (“Code”), generally disallows a federal income tax deduction to public
corporations for compensation greater than $1 million paid for any fiscal year to the corporation’s Chief Executive Officer, a Chief Financial
Officer and to the three most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer. As we
are not currently publicly-traded, our Board of Directors has not previously taken the deductibility limit imposed by Section 162(m) into
consideration in setting compensation. We expect that our Compensation Committee will adopt a policy at some point in the future that, where
reasonably practicable, will seek to qualify the variable compensation paid to our executive officers for an exemption from the deductibility
limitations of Section 162(m). Until such policy is implemented, our Compensation Committee may, in its judgment, authorize compensation
payments that do not consider the deductibility limit imposed by Section 162(m) when it believes that such payments are appropriate to attract
and retain executive talent. Under a transition rule, for a limited period of time after a company becomes publicly held, the deduction limits do
not apply to any compensation paid pursuant to a compensation plan or agreement that existed when the company was not publicly held.

      Policy regarding the timing of equity awards

      As a privately-owned company, there has been no market for our common stock. Accordingly, in fiscal 2010, we had no program, plan or
practice pertaining to the timing of stock option grants to executive officers coinciding with the release of material non-public information. We
do not, as of yet, have any plans to implement such a program, plan or practice after becoming a public company. However, we intend to
implement policies to ensure that equity awards are granted at fair market value on the date of grant.

      Stock Ownership Policies

      We have not established stock ownership or similar guidelines with regard to our executive officers. All of our executive officers
currently have a direct or indirect, through their stock option holdings, equity interest in our company, and we believe that they regard the
potential returns from these interests as a significant element of their potential compensation for services to us.

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      Recoupment Policy

      We currently do not have a recoupment policy to adjust or recover bonuses or incentive compensation paid to executive officers where
such bonuses or payments were based on financial statements that were subsequently restated or otherwise amended in a manner that would
have reduced the size of such bonuses or payments. Once we are publicly traded, we will become subject to the recoupment requirements under
Sarbanes-Oxley, the Dodd-Frank Wall Street Reform and Consumer Protection Act and other applicable laws.

      Risk Considerations in Our Compensation Program

      We believe that the mix and design of the elements of our employee compensation policies and practices do not motivate imprudent risk
taking. Consequently, we are satisfied that any potential risks arising from our employee compensation policies and practices are not
reasonably likely to have a material adverse effect on the company.

Actions Taken Subsequent to Fiscal 2010
      Employment Arrangements
      With effect from April 22, 2011, we entered into amended and restated employment agreements with Messrs. Mack and Link and new
employment agreements with Messrs. Glennon and Luckhurst. The terms and conditions of these new or amended and restated employment
arrangements are set forth below.

       Amended and Restated Employment Agreements with Messrs. Mack and Link. Under Messrs. Mack’s and Link’s amended and restated
employment agreements, each of Messrs. Mack’s and Link’s term of employment will be for a period of three years, commencing on the
effective date of the amended and restated agreements, subject to automatic renewal for additional one-year terms. Under his amended and
restated agreement, Mr. Mack’s base salary is $343,980 (equivalent to his base salary for fiscal 2011). Under his amended and restated
agreement, Mr. Link’s base salary is $196,560 (equivalent to his base salary for fiscal 2011). Each of Messrs. Mack and Link will be eligible to
participate in all pension, medical, retirement and other benefit plans and programs generally available to our senior officers. Under each of the
amended and restated employment agreements, we may terminate the NEO’s employment without Cause (as defined below) at any time, upon
30 calendar days’ written notice to him and he may resign for Good Reason (as defined below), with 30 calendar days’ notice. If we terminate
such NEO without Cause, or if he resigns for Good Reason, we are required to continue to pay the NEO his base salary for 18 months
following the termination date, subject to his execution and delivery to us of a general release of claims in our favor. If we terminate either of
Messrs. Mack or Link for Cause, if he resigns other than for Good Reason, or if his employment terminates due to death or Disability (as
defined below), we are required only to pay such NEO (or his estate) his accrued but unpaid salary and unreimbursed expenses for which he is
entitled to reimbursement from us.

       Employment Agreements with Messrs. Glennon and Luckhurst. Under Messrs. Glennon’s and Luckhurst’s employment agreements, each
of Messrs. Glennon’s and Luckhurst’s term of employment will be for a period of three years, commencing on the effective date of their
agreements, subject to renewal for additional one-year terms. The initial term and each successive one-year period is referred to as the
“Employment Period.” The employment agreements will provide that Messrs. Glennon and Luckhurst will each receive an annual base salary
of $250,000 (equivalent to their respective base salaries for fiscal 2011). Each of Messrs. Glennon and Luckhurst will be eligible to participate
in all pension, medical, retirement and other benefit plans and programs generally available to our other senior officers. We may terminate the
employment of each of Mr. Glennon and Mr. Luckhurst without Cause at any time, upon 30 calendar days’ written notice to such NEO and he
may resign for Good Reason, with 30 calendar days’ notice. If we terminate either Mr. Glennon or Mr. Luckhurst without Cause, or if he
resigns for Good Reason, we are required to continue to pay such NEO his base salary for 18 months following the termination date, subject to
his execution and delivery to us of a general release of claims in our favor. If either Mr. Glennon or Mr. Luckhurst is terminated by us for
Cause, if he resigns other than for good reason or if his employment terminates due to death or disability, we are required only to pay such
NEO his accrued and unpaid salary and unreimbursed expenses for which he is entitled to reimbursement from us. As part of their respective
employment agreements, Messrs. Glennon and

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Luckhurst have also agreed to provisions relating to non-competition, non-solicitation, confidentiality and protection of our intellectual
property.

     For purposes of the amended and restated employment agreements of Messrs. Mack and Link and the employment agreements of Messrs.
Glennon and Luckhurst, the terms “Cause,” “Good Reason” and “Disability” have the meanings set forth below:

       “Cause” means (i) the failure by the employee to perform his duties in any material respect after reasonable notice and an opportunity to
cure; (ii) the conviction of the employee of any felony or the plea by the employee of nolo contendere to any felony; (iii) personally or on
behalf of another person, receipt by the employee of a benefit relating to the Company or its subsidiaries or its funds, properties, opportunities
or other assets that the Board of Directors considers to be in violation of a policy of the Company, applicable law, or constituting fraud,
embezzlement or misappropriation; (iv) the failure by the employee to comply in any material respect with any written policy of the Company
after reasonable notice and an opportunity to cure; (v) the willful material misstatement of the financial records of the Company or its
subsidiaries or complicit actions in respect thereof; (vi) the willful failure to disclose material financial or other information to the Board of
Directors; (vii) the material breach by the employee of any of the terms of the applicable employment agreement; or (viii) disparaging the
Company, its subsidiaries or its executives or employees, or engaging in any conduct that would tend to materially harm their reputation.

       “Disability”, if the Company or its subsidiary Teavana Corporation provides long-term disability insurance to its employees generally,
has the meaning set forth in the plan regarding eligibility for long-term disability insurance; otherwise, the term “Disability” means a physical
or mental incapacity as a result of which the employee becomes unable to continue to perform fully his duties for 60 consecutive calendar days
or for shorter periods aggregating 120 or more days in any 12-month period or upon the determination by a licensed medical doctor practicing
as a specialist in the area to which the alleged disability relates selected by the Company that the employee will be unable to return to work and
perform his duties on a full-time basis within 30 calendar days following the date of such determination on account of mental or physical
incapacity. The Board of Directors’ determination, in its sole discretion, as to whether a Disability exists and the initial date of Disability is
final and binding upon the parties to the employment agreements.

       “Good Reason” means the occurrence of any of the following events, without the employee’s consent: (i) the Company’s material breach
of the employee’s employment agreement; (ii) the assignment of the employee to a position, responsibilities, or duties of a materially lesser
status or degree of responsibility than his position, responsibilities, or duties as of the effective date of the agreement; or (iii) relocation of the
employee’s principal workplace to a location that is more than 50 miles away from the location on the effective date of the agreement. No
“Good Reason” exists unless (x) the employee notifies the Company in writing within 60 days after the initial existence of any condition listed
above, and the Company fails to cure the condition within 60 days after receiving notice, and (y) the employee terminates employment by no
later than 150 days after the initial existence of any condition listed above.

      Adoption of 2011 Equity Incentive Plan

      We expect our Board of Directors to adopt the 2011 Equity Incentive Plan prior to the consummation of this offering to attract, motivate,
retain and reward selected employees and other eligible persons through the grant of equity awards. We also intend to obtain approval of this
plan from our stockholders prior to the consummation of this offering. For more information on the 2011 Equity Incentive Plan, see “—Stock
Option and Other Compensation Plans—2011 Equity Incentive Plan.”

      Stock Option Grants in Conjunction with this Offering

      In conjunction with this offering, our Board of Directors intends to make one-time grants to members of our senior management team of
additional stock options under the 2011 Equity Incentive Plan to purchase a number of shares of our common stock. These options are being
granted in order to continue to provide these executives with incentive to build shareholder value over the long-term. The actual number of
stock options to be granted

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and the exercise price of such options will be determined by our Board of Directors at the time of this offering. We intend that any stock
options granted to members of our senior management team in connection with this offering will vest annually in equal 25% installments,
commencing on the first anniversary of the date of grant.

Summary Compensation Table
        The following table sets forth information regarding compensation earned by our NEOs during fiscal 2010.

                                                                                                                          Non-Equity
                                                                                                      Option             Incentive Plan
Named Executive Officer and                                                                           Awards             Compensation                   All other
Principal Position                            Year                 Salary              Bonus            (1)                   (2)                     Compensation                 Total
Andrew T. Mack                                  2010          $ 327,600                  —                 —            $        131,040              $    14,779 (3)         $ 473,419
Chairman and Chief
  Executive
Officer
Daniel P. Glennon                               2010               220,115               —                 —                       77,040                  23,098 (3)              320,253
Executive Vice President,
Chief Financial Officer
Peter M. Luckhurst                              2010               220,115               —                 —                       77,040                  23,094 (3)              320,249
Executive Vice President,
Operations
Juergen W. Link                                 2010               187,200               —                 —                       56,160                  21,651 (3)              265,011
Vice President, Distribution
Robert A. Shapiro                               2010          $ 181,480                  —                 —            $          54,444             $    16,590 (3)         $ 252,514
Vice President, Real Estate

(1)    There were no stock option grants made in fiscal 2010.
(2)    The amounts shown in this column represent annual cash incentive awards for fiscal 2010 made to the NEOs.
(3)    Represents health premium reimbursements, 401(k) matching contributions, life insurance premiums, and short-term disability premiums.


Fiscal 2010 Grants of Plan-Based Awards
     The following table sets forth certain information with respect to grants of plan-based awards for fiscal 2010 with respect to our named
executive officers. We did not grant any stock options to our named executive officers in fiscal 2010.

                                                                                                                                                          All Other
                                                                                                                                                           Option                      Grant
                                                                                                                                          All Other       Awards:                      Date
                                                                                                                                            Stock          Number                      Fair
                                                                                                                                           Awards:            of        Exercise      Value of
                                                                                                                                          Number of       Securities    or Base        Stock
                                                           Estimated Future Payouts                 Estimated Future Payouts              Shares of        Under-       Price of        and
                                                          Under Non-Equity Incentive                 Under Equity Incentive                Stock or         lying       Option        Option
Name                            Grant Date                       Plan Awards                              Plan Awards                       Units          Options      Awards        Awards
                                                                                                                               Maximu
                                                      Threshold      Target       Maximum      Threshold       Target            m
Andrew T. Mack                   January 31, 2011    $    49,140    $ 98,280      $ 131,040           —           —                —            —                 —           —             —
Daniel P. Glennon                January 31, 2011         27,514      55,029         77,040           —           —                —            —                 —           —             —
Peter M. Luckhurst               January 31, 2011         27,514      55,029         77,040           —           —                —            —                 —           —             —
Juergen W. Link                  January 31, 2011         18,720      37,440         56,160           —           —                —            —                 —           —             —
Robert A. Shapiro                January 31, 2011    $    18,148    $ 36,960      $ 55,440            —           —                —            —                 —           —             —


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Outstanding Equity Awards at Fiscal Year End
       The following table sets forth information regarding outstanding equity awards held as of January 30, 2011 by our NEOs.

                                                                                                 Number of Securities
                                                   Number of Securities                               Underlying                           Option                         Option
                                                  Underlying Unexercised                         Unexercised Options                   Exercise Price                    Expiration
Named Executive Officer                           Options (#)- Exercisable                        (#) - Unexercisable                 ($ per Share) (6)                    Date
Daniel P. Glennon                                                     75,000 (1)                                      —             $                 4.14                  8/1/2015
                                                                      10,000 (2)                                      —                               4.14                  2/1/2017
Peter M. Luckhurst                                                    75,000 (3)                                      —                               4.14                  2/1/2016
Juergen W. Link                                                        2,500 (4)                                   7,500                              9.00                 11/1/2019
Robert A. Shapiro                                                     75,000 (5)                                      —             $                 4.14                  6/1/2015


(1)   The vesting commencement date for this grant is August 1, 2005.
(2)   The vesting commencement date for this grant is February 1, 2007.
(3)   The vesting commencement date for this grant is February 1, 2006.
(4)   The vesting commencement date for this grant is November 1, 2009.
(5)   The vesting commencement date for this grant is June 1, 2005.
(6)   All options vest in the following manner: 25% on each anniversary of the grant date, commencing on the first anniversary.


Pension Benefits
       None of our NEOs participates in, or has an account balance in, a qualified or non-qualified defined benefit plan sponsored by us.

Non-Qualified Deferred Compensation
      None of our named executive officers participates in, or has account balances in, a traditional non-qualified deferred compensation plan
or other deferred compensation plans maintained by us.

Potential Payments upon Termination or Change in Control
      The following table summarizes the potential payments and benefits payable to certain of our NEOs if we terminate their employment
without “Cause” or if they terminate employment with us for “Good Reason,” as described in more detail below under “Agreements with
Executives.” The amount of severance that would be payable would be the same whether the termination occurred before or after a change in
control of the company, and would be payable over time as described below under “Agreements with Executives.” In addition, upon a change
in control of the Company, all outstanding unvested options of our NEOs would become fully vested as described below under “—Stock
Options and Other Compensation Plans—2004 Management Incentive Plan.” The table below reflects the value of accelerated vesting. No
other payments or benefits are triggered by a change in control of the Company. The table reflects estimated amounts assuming that termination
and change in control, as applicable, occurred on January 30, 2011 and that Messrs. Mack’s and Link’s amended and restated employment
agreements and Messrs. Glennon’s and Luckhurst’s employment agreements had been in effect on such date. The actual amounts that would be
paid upon an NEO’s termination of employment can be determined only at the time of such event.

                                                                                                      Severance upon                                  Value of Accelerated
                                                                                                  Termination before or                               Stock Options upon a
       Name                                                                                   after a Change in Control (1)                           Change in Control (2)
       Involuntary without cause
             Andrew T. Mack                                                               $                           491,400                                              N/A
             Daniel P. Glennon                                                                                        375,000                                              N/A
             Peter M. Luckhurst                                                                                       375,000                                              N/A
             Juergen W. Link                                                                                          280,800                                              N/A
       Vesting upon change in control
             Juergen W. Link                                                                                               N/A                    $                    387,525

(1)   The severance amounts reported for Messrs. Mack, Glennon, Luckhurst and Link represent 1.5 times base salary at January 30, 2011 assuming that Messrs. Mack’s and Link’s amended
      and restated employment agreements and Messrs. Glennon’s and Luckhurst’s employment agreements had been in effect on such date.
(2)   The amount reported for Mr. Link represents the value of the accelerated vesting of 7,500 stock options calculated based on the “spread” value between the fair market value of our
      common stock at January 30, 2011 and the exercise price of such options.

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Agreements with Executives
      Amounts paid to Messrs. Mack and Link in fiscal 2010 were based, in part, on employment agreements in place with them. Below is a
description of those agreements. We did not have in place employment agreements with Messrs. Glennon and Luckhurst during fiscal 2010.
We have amended and restated Messrs. Mack’s and Link’s employment agreements, and have entered into new employment agreements with
Messrs. Glennon and Luckhurst. For a discussion of Messrs. Mack’s and Link’s amended employment agreements and the employment
agreements that we have entered into with Messrs. Glennon and Luckhurst, see “—Actions Taken Subsequent to Fiscal 2010—Employment
Arrangements,” above.

      Andrew Mack Employment Agreement

       Mr. Mack’s original employment agreement is dated December 17, 2004 and was for a one-year term, provided that commencing on the
first day after the expiration of the first year and on each anniversary of the agreement, the agreement automatically is extended for successive
one-year periods unless either we or Mr. Mack gives written notice to the other, not less than 30 calendar days prior to the otherwise
termination date, that such party does not want the agreement to be extended. The initial term and each successive one-year period is referred to
as the “Employment Period.” The agreement provided for an initial annual salary of $150,000, which has been adjusted from time to time by
the Board of Directors and participation in all pension, medical, retirement and other benefit plans and programs generally available to our
other senior officers. We may terminate Mr. Mack’s employment without “Cause” (as such term is defined in the agreement) at any time, upon
30 calendar days’ written notice to him. If we terminate Mr. Mack without “Cause,” we are required to pay Mr. Mack the lesser of (i) the
remainder of his salary for the Employment Period or (ii) his salary for 12 months following the termination date. If Mr. Mack is terminated by
us for “Cause,” we are required to pay Mr. Mack his accrued and unpaid salary and unreimbursed expenses for which he is entitled to
reimbursement from us. If Mr. Mack dies during his Employment Period or if his employment is terminated due to “Disability” (as defined in
the agreement), we are required to pay him or his estate (or other designee) the sum of (i) his accrued but unpaid salary earned before his death
and (ii) all unreimbursed expenses for which he is entitled to reimbursement from us. Mr. Mack also agreed to provisions relating to
non-competition, non-solicitation, confidentiality and protection of our intellectual property.

      Juergen Link Employment Agreement

       Mr. Link’s original employment agreement is dated June 30, 2005 and terminates on the third anniversary of the date of the agreement,
provided that commencing on the first day after the expiration of the initial employment term and on each anniversary of the agreement, the
agreement automatically is extended for successive one-year periods unless either the Company or Mr. Link gives written notice to the other,
not less than 90 calendar days prior to the otherwise termination date, that such party does not want the agreement to be extended. The initial
term and any successive one-year period is referred to as the “Employment Period.” The agreement provided for an initial salary of $140,000
with annual increases of at least three percent and participation in all pension, medical, retirement and other benefit plans and programs
generally available to our other senior officers. We can terminate Mr. Link’s employment without “Cause” (as such term is defined in the
agreement) at any time, upon 30 calendar days’ written notice to him and he may resign for “Good Reason” (as such term is defined in the
agreement, with 10 calendar days’ notice. If we terminate Mr. Link without “Cause,” or if he resigns for “Good Reason,” we are required to
pay Mr. Link the lesser of (i) the remainder of his salary for the Employment Period or (ii) his salary for 18 months following the termination
date. If Mr. Link is terminated by us for “Cause,” we are required only to pay Mr. Link his accrued and unpaid salary and unreimbursed
expenses for which he is entitled to reimbursement from us. If Mr. Link dies during his Employment Period, we are required to pay to him or
his estate (or other designee) the sum of his accrued but unpaid salary earned before his death and all unreimbursed expenses for which he is
entitled to reimbursement from us. We have the right to terminate Mr. Link’s employment at any time upon his “Disability” (as such term is
defined in the agreement) during the Employment Period. If Mr. Link’s employment is terminated as a result of “Disability,” we are required to
pay the sum of (i) accrued but unpaid salary prior to his “Disability” and (ii) all unreimbursed expenses for which he is entitled to
reimbursement from us. As part of their respective employment agreements, Mr. Link also agreed to provisions relating to non-competition,
non-solicitation, confidentiality and protection of our intellectual property.

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Stock Option and Other Compensation Plans
2004 Management Incentive Plan
      Our Board of Directors and stockholders approved and adopted our 2004 Management Incentive Plan in December 2004. Because option
grants made through November 2009 have exhausted the number of shares reserved for issuance under the 2004 Management Incentive Plan,
we have not made, and do not intend to make, any further equity awards under that plan.

      Eligibility; Types of Awards

      Selected executive officers, directors, consultants or other independent advisors, and key employees, were eligible for awards under the
plan. The plan provides for grants of stock options only.

      Shares Subject to the Plan

      The number of shares of common stock that we may issue with respect to stock options granted under the plan will not exceed an
aggregate of 500,000 shares, as may be adjusted due to changes in capitalization, merger, reorganization, or other similar events. If any
outstanding stock options expire or are canceled without having been fully exercised, the underlying shares will become available for grant
under our 2011 Equity Incentive Plan (as described below).

      Administration

      The plan is administered by our Board of Directors or by a committee as the Board may appoint from time to time. The administrator has
the full authority and discretion to administer the plan and to take any action that is necessary or advisable in connection with the
administration of the plan, including without limitation the authority and discretion to interpret and construe any provision of the plan or any
agreement, notification or document evidencing the grant of a stock option. The administrator’s determinations will be final and conclusive.

      Stock Options

      The plan allows the administrator to grant incentive stock options, as that term is defined in section 422 of the Code or nonqualified stock
options. Only our employees or employees of our subsidiaries may receive incentive stock option awards. Options must have an exercise price
at least equal to the fair market value of the underlying shares on the date of grant. The optionholder may pay the exercise price in cash or by
check, by tendering shares of common stock, by a combination of cash and shares, or by any other means that the administrator approves.
Generally, the options have a 10 year term; however, the options will expire earlier if the optionholder’s service relationship with us terminates.
Outstanding stock options are generally subject to a four-year annual vesting schedule; however, any unvested options will become fully vested
in connection with this offering.

      Corporate Transactions

       In the event of any stock dividend, split, combination, recapitalization, merger, consolidation, spin-off, reorganization, liquidation,
distribution of assets, issuance of rights or warrants to purchase securities, or other similar corporate transactions, the administrator may, in its
discretion, require that optionholders surrender their options for some alternative consideration. Under our form of award agreement, upon a
“change in control” of the company, or a qualified initial public offering, all unvested stock options will vest and become exercisable. This
offering will constitute a qualified public offering and, accordingly, in connection with this offering all unvested stock options will vest and
become exercisable.

      Amendment and Termination

      Our Board of Directors may amend or terminate the plan at any time. Stockholder approval is required to reprice underwater options.

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2011 Equity Incentive Plan
      Our Board of Directors and stockholders intend to approve and adopt our 2011 Equity Incentive Plan prior to the consummation of this
offering.

      Purpose

     We believe that the plan will promote our long-term growth and profitability by (i) providing key personnel with incentives to improve
stockholder value and to contribute to our growth and financial success through their future services, and (ii) enabling us to attract, retain and
reward the best available personnel.

      Eligibility; Types of Awards

      Selected employees, officers, directors, and other individuals providing bona fide services to us or any of our affiliates, are eligible for
awards under the plan. The administrator may also grant awards to individuals in connection with hiring, retention, or otherwise before the date
the individual first performs services; however, those awards will not become vested or exercisable before the date the individual first performs
those services. The plan provides for grants of stock options, stock appreciation rights, restricted or unrestricted stock awards, restricted stock
units, performance awards, and other stock-based awards.

      Shares Subject to the Plan

      The number of shares of common stock that we may issue with respect to awards granted under the plan will not exceed an aggregate
of           shares plus the number of shares that are subject to stock options granted under our 2004 Management Incentive Plan that expire or
are canceled without having been fully exercised, or are settled in cash. The maximum number of shares of common stock subject to awards of
any combination that may be granted under the plan during any fiscal year to any one individual is             shares. These limits will be
adjusted to reflect any stock dividends, split-ups, recapitalizations, mergers, consolidations, share exchanges, and similar transactions. If any
award, or portion of an award, under the plan expires or terminates unexercised, becomes unexercisable, is settled in cash without delivery of
shares, or is forfeited or otherwise terminated or canceled as to any shares, the shares subject to such award will thereafter be available for
further awards under the plan other than incentive stock options.

      Administration

      The plan is administered by our Board of Directors or by a committee or committees as the Board may appoint from time to time. The
administrator has the full authority and discretion to administer the plan and to take any action that is necessary or advisable in connection with
the administration of the plan, including without limitation the authority and discretion to interpret and construe any provision of the plan or
any agreement or other documents relating to the plan. The administrator’s determinations will be final and conclusive.

      Stock Options

      The plan allows the administrator to grant incentive stock options, as that term is defined in section 422 of the Code, or nonqualified
stock options. Only our employees or employees of our subsidiaries may receive incentive stock option awards. Options must have an exercise
price at least equal to the fair market value of the underlying shares on the date of grant. The option holder may pay the exercise price in cash
or by check, by tendering shares of common stock, by a combination of cash and shares, or by any other means that the administrator approves.
Generally, the options have a 10 year term; however, the options will expire earlier if the optionee’s service relationship with us terminates.

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      Stock Appreciation Rights

      The plan allows the administrator to grant awards of stock appreciation rights which entitle the holder to receive a payment in cash, in
shares of common stock, or in a combination of both, having an aggregate value equal to the spread on the date of exercise between the fair
market value of the underlying shares on that date and the base price of the shares specified in the grant agreement, multiplied by the number of
shares specified in the award being exercised. No stock appreciation right shall have a term that exceeds ten years.

      Stock Awards

       The plan allows the administrator to grant restricted or unrestricted stock awards, awards denominated in stock-equivalent units, or
restricted stock units, to eligible participants with or without payment of consideration by the grantee. Awards denominated in stock-equivalent
units will be credited to a bookkeeping reserve account solely for accounting purposes. Stock awards and restricted stock units may be paid in
cash, in shares of common stock, or in a combination of both. Stock awards may also be denominated in other securities.

      Performance Awards

      The plan allows the administrator to grant performance awards which become payable in cash, in shares of common stock, or in a
combination of both, upon attainment of one or more performance goals established by the administrator. The administrator may establish
performance goals relating to any of the following, as it may apply to an individual, one or more business units, divisions or subsidiaries, or on
a company-wide basis, and in either absolute terms or relative to the performance of one or more comparable companies or an index covering
multiple companies: net sales (including specified types or categories thereof); net income; earnings before interest, taxes, depreciation and
amortization (EBITDA); operating income; pre- or after-tax income; cash flow (including specified types or categories thereof); cash flow per
share; net earnings; earnings per share; price-to-earnings ratio; return on equity; costs (including specified types or categories thereof);
budgeted expenses (operating and capital); inventory turns; working capital; customer satisfaction survey results; customer growth; objective
measures related to store openings, relocations and remodelings (including number, cost, timeline, productivity and operating efficiency);
objective measures related to lease arrangements (including number, cost and timeline); objective measures of productivity or operating
efficiency; gross or net profitability/profit margins; return on invested capital; return on assets; growth in assets; share price performance;
economic value added; total stockholder return; improvement in or attainment of expense levels; improvement in or attainment of working
capital levels; relative performance to a group of companies comparable to the company, and strategic business criteria consisting of one or
more objectives based on the company’s meeting specified goals relating to revenue, market penetration, business expansion, costs or
acquisitions or divestitures.

      Change in Control

      In the event of any transaction resulting in a “change in control” of the company (as defined in the plan), outstanding stock options and
other awards that are payable in or convertible into our common stock will terminate upon the effective time of the change in control unless
provision is made in connection with the transaction for the continuation, assumption, or substitution of the awards by the surviving or
successor entity or its parent. In the event of such termination the holders of stock options and other awards under the plan will be permitted
immediately before the change in control to exercise or convert all portions of awards that are exercisable or convertible or which become
exercisable or convertible upon or prior to the effective time of the change in control.

      Amendment and Termination

      No award will be granted under the plan after the close of business on the day before the tenth anniversary of the effective date of the
plan. Our Board of Directors may amend or terminate the plan at any time. Stockholder approval is required to reprice underwater options.

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                                 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Investment by Teavana Investment LLC
      In December 2004, pursuant to a contribution agreement among Andrew Mack, Nancy Mack, Teavana Corporation, Teavana Investment
LLC and North Point Advisors, LLC (a minority investor in Teavana Investment LLC), we sold 2,431,909 shares of our Class B redeemable
common stock and 10,683,333 shares of our Series A redeemable preferred stock for an aggregate amount of $10,683,333. Teavana Investment
LLC’s managing member is SKM Equity Fund III, L.P. F. Barron Fletcher III, one of our directors, is a member of SKM Partners, LLC, the
general partner of SKM Equity Fund III, L.P. Pursuant to that transaction, Teavana Investment LLC became the sole holder of our Class B
redeemable common stock and our Series A redeemable preferred stock. In connection with the closing of this offering, we will redeem the
Series A redeemable preferred stock for an aggregate redemption value of $10,683,333, and all of the shares of Class B redeemable common
stock held by Teavana Investment LLC will convert into shares of our Class A common stock at a one-to-one ratio. Immediately prior to the
consummation of this offering, all of our shares of Class A common stock will be reclassified as common stock.

      Indemnification Obligations

      Under the contribution agreement, we agreed to indemnify Teavana Investment LLC, its heirs, successors and assigns from losses to the
extent resulting from or arising out of:
        •    any failure of any representation or warranty made by us or by Andrew or Nancy Mack in the contribution agreement relating to
             corporate existence and power, corporate authorization and enforceability, capitalization, properties and sufficiency of assets, plans
             and material documents, securities compliances, authority and enforceability and tax matters in the contribution agreement; or
        •    the breach of any covenant or agreement made by us or Andrew or Nancy Mack in the contribution agreement.

      Our indemnification obligations are subject to the following limitations:
        •    we are not required to indemnify a party with respect to any claim arising out of our indemnification obligations unless the
             aggregate of all indemnifiable losses, determined without consideration of any materiality limitations in the contribution
             agreement, exceeds $200,000, in which case we are responsible to the full extent of such losses; and
        •    we are not required to indemnify any party for indemnifiable losses in excess of an aggregate of $10,683,333.

      In addition, we entered into a security agreement with Teavana Investment LLC in November 2004 pursuant to which we granted a
security interest in all of our assets as security for the payment and performance of our indemnification obligations under the contribution
agreement.

      Stockholders Agreement

      In connection with the sale of stock to Teavana Investment LLC in December 2004, we entered into a stockholders agreement with
Andrew Mack, Nancy Mack and Teavana Investment LLC and persons who become stockholders of our company from time to time relating to
our shares of common stock, preferred stock and any other equity securities that we may issue and they may hold. Among other things, the
stockholders agreement places certain restrictions on the ability of the parties thereto to transfer shares of our equity securities and provides for
certain rights of first offer and co-sale relating to our equity securities held by the parties thereto. The stockholders agreement grants to
Teavana Investment LLC the right under certain circumstances to force the other parties thereto to transfer the shares of our equity securities
held by them to a third party. In addition, under certain circumstances, the parties thereto have preemptive rights upon a sale by us of certain

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securities, including shares of our common stock. Subject to certain minimum ownership requirements, the stockholders agreement provides
that four of our directors shall be nominated by Andrew and Nancy Mack and three by Teavana Investment LLC and further grants to Teavana
Investment LLC a consent right over certain significant corporate actions. Finally, among other things, we covenanted to furnish certain reports
and financial statements to Teavana Investment LLC.

     We have entered into an amendment to the Stockholders Agreement with Andrew Mack and Teavana Investment LLC terminating such
agreement in its entirety effective upon consummation of this offering.

      Registration Rights Agreement

      In connection with the sale of the Series A redeemable preferred stock and Class B redeemable common stock to Teavana Investment
LLC in December 2004, we entered into a registration rights agreement relating to our shares of common stock held by Teavana Investment
LLC at any time. These registration rights will expire, with respect to any particular shares of common stock, when such shares may be sold
pursuant to Rule 144 of the Securities Act or a similar exemption without volume or manner of sale limitations. Under the registration rights
agreement, we are responsible, subject to certain exceptions, for the expenses of any offering of our shares of common stock held by Teavana
Investment LLC other than underwriting discounts and selling commissions. Additionally, under the registration rights agreement we may not
grant superior registration rights to any other person without the consent of Teavana Investment LLC. The registration rights agreement
contains customary indemnification provisions.

      In connection with this offering, Teavana Investment LLC has agreed not to sell or otherwise dispose of any securities for a period of 180
days after the date of this prospectus, subject to certain terms and conditions. For more information regarding such restrictions, see the section
captioned “Underwriting.”

      Demand Registration Rights

      Under the registration rights agreement, subject to certain exceptions, Teavana Investment LLC has the right to require us to register for
public sale under the Securities Act all shares of common stock that it requests be registered at any time following the expiration of the lock-up
period in connection with this offering. The request for registration must cover at least that number of shares with an anticipated gross offering
price of at least $10.0 million. If we determine that it would be seriously detrimental to our stockholders to effect such a demand registration,
we have the right to defer such registration, not more than once in any 12-month period, for a period of up to 90 days. We will not be required
to effect a demand registration if we intend to effect a primary registration of our securities within 60 days of receiving notice of a demand
registration, provided that we file such intended registration statement within the 60-day period. Additionally, we will not be required to effect
a demand registration during the period beginning with the date of filing of, and ending 120 days following the completion of, a primary
registered offering of our securities, except if Teavana Investment LLC had requested “piggyback” registration rights in connection with such
offering and less than half of the shares of common stock requested to be included in such offering were sold.

      Piggyback Registration Rights

       After the closing of this offering, if we propose to register the offer and sale of any of our securities under the Securities Act, in
connection with the public offering of such securities, Teavana Investment LLC will be entitled to certain “piggyback” registration rights
allowing it to include its shares in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file
a registration statement under the Securities Act, other than with respect to (1) a registration related to a company stock plan and (2) a
registration related to the exchange of securities in certain corporate reorganizations or certain other transactions, Teavana Investment LLC is
entitled to notice of the registration and has the right, subject to limitations that the underwriters may impose on the number of shares included
in the registration, to include its shares in the registration.

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      S-3 Registration Rights

      After the closing of this offering, Teavana Investment LLC may make a written request that we register the offer and sale of its shares on
a shelf registration statement on Form S-3 if we are eligible to file a registration statement on Form S-3 so long as the request covers at least
that number of shares with an anticipated aggregate offering price of at least $500,000. If we determine that it would be seriously detrimental to
our stockholders to effect such a registration, we have the right to defer such registration, not more than once in any 12-month period, for a
period of up to 90 days. We will not be required to effect such registration if we intend to effect a similar registration of our securities within 60
days of receiving notice of such registration, provided that we file such intended registration statement within the 60-day period. Additionally,
we will not be required to effect such registration during the period beginning with the date of filing of, and ending 120 days following the
completion of, a primary registered offering of our securities, except if Teavana Investment LLC had requested “piggyback” registration rights
in connection with such offering and less than half of the shares of common stock requested to be included in such offering were sold.

Advisory Services Agreement
      In December 2004 we entered into an advisory services agreement with SKM Growth Investors, L.P., the predecessor entity to Parallel.
Parallel manages certain investments on behalf of SKM Equity Fund III, L.P., a private-equity investment fund that holds substantially all of
the ownership interest in Teavana Investment LLC. F. Barron Fletcher III, one of our directors, is the founder and managing partner of Parallel.
Pursuant to the advisory services agreement, we agreed to pay the advisor an annual fee to be mutually agreed between the parties thereto on an
annual basis and to reimburse the advisor for all reasonable out-of-pocket expenses incurred in connection with the services provided under the
advisory services agreement. In addition, the advisory services agreement provides for customary indemnification provisions. The advisory fee
paid by us to Parallel was $250,000 in each of fiscal 2010, 2009 and 2008. We and Parallel have agreed to terminate our fee obligations under
the advisory services agreement effective upon the consummation of this offering.

Lease Arrangements
      As of January 30, 2011, we leased 16 of our store locations from The Macerich Company, or Macerich. Michael Nevins, a member of our
Board of Directors, served as Senior Vice President-Leasing for Macerich from 2005 to 2011. These leases generally have 10-year terms, with
no renewal option. Our rent expense attributable to Macerich was $0.7 million, $1.1 million and $1.5 million in 2008, 2009 and 2010,
respectively. Our future minimum lease payments to Macerich under all of our leases with them were $9.5 million as of January 30, 2011.
Mr. Nevins recused himself from any board discussions involving store locations leased in Macerich-owned malls and we believe that the
leases that we have signed to date with Macerich are on fair market terms.

Procedures for Related Party Transactions
      Our Board of Directors will adopt a written code of business conduct and ethics for our company, which will be publicly available on our
website at www.teavana.com, upon consummation of this offering. The code of conduct and ethics was not in effect when we entered into the
related party transactions discussed above. Under our code of business conduct and ethics, our employees, officers and directors will be
discouraged from entering into any transaction that may cause a conflict of interest for us. In addition, they must report any potential conflict of
interest, including related party transactions, to their managers or our corporate counsel who then reviews and summarizes the proposed
transaction for our audit committee. Pursuant to its charter, our audit committee will be required to then approve any related-party transactions,
including those transactions involving our directors. In approving or rejecting such proposed transactions, the audit committee will be required
to consider the relevant facts and circumstances available and deemed relevant to the audit committee, including the material terms of the
transactions, risks, benefits, costs, availability of other comparable services or products and, if applicable, the impact on a director’s
independence. Our audit committee will approve only those transactions that, in light of known circumstances, are in, or are not inconsistent
with, our best interests, as our audit committee determines in the good faith exercise of its discretion.

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                                                PRINCIPAL AND SELLING STOCKHOLDERS

      The following table sets forth information regarding beneficial ownership of our common stock as of May 1, 2011, by:
        •     each stockholder whom we know to own beneficially more than 5% of our common stock;
        •     each of our directors and named executive officers individually;
        •     all directors and executive officers as a group; and
        •     the selling stockholders.

       Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. These
rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting
thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. Common stock subject to options
that are currently exercisable or exercisable within 60 days of May 1, 2011 are deemed to be outstanding and beneficially owned by the person
holding the options. Shares issuable pursuant to stock options or warrants are deemed outstanding for computing the percentage ownership of
the person holding such options or warrants but are not outstanding for computing the percentage of any other person. The percentage of
beneficial ownership for the following table is based on 7,492,487 shares of our Class A common stock and 2,431,909 shares of our Class B
redeemable common stock (assuming conversion of all such shares into shares of our Class A common stock on a one-for-one basis)
outstanding as of May 1, 2011. The number of shares of common stock outstanding after this offering also includes                shares of common
stock being offered for sale by us in this offering. Unless otherwise indicated, the address for each listed stockholder is: c/o Teavana Holdings,
Inc., 3630 Peachtree Road NE, Suite 1480, Atlanta, GA 30326. To our knowledge, except as indicated in the footnotes to this table and
pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all
shares of common stock.

                                  Shares         Percentage                     Shares
                                Beneficially     Beneficially       Number      Subject
                                  Owned            Owned              of       to Over-
                                 Prior to         Prior to          Shares    Allotment         Shares Beneficially               Percentage Beneficially
                                 Offering        Offering(1)        Offered     Option         Owned After Offering               Owned After Offering(1)
                                                                                           Without                  With      Without
                                                                                            Over-                   Over-      Over-                With Over-
Name and Address of                                                                       Allotment              Allotment   Allotment               Allotment
Beneficial Owner                                                                           Option                  Option     Option                   Option
5% Stockholders:
   Teavana
      Investment LLC
      (2)                          2,431,909             23.9 %
Executive Officers and
  Directors:
     Andrew T. Mack                7,068,091             69.5 %
     Daniel P. Glennon
        (3)                            85,000                   *
     Peter M. Luckhurst
        (4)                            75,000                   *
     Juergen W. Link
        (5)                          377,938               3.7 %
     Robert A. Shapiro
        (6)                            72,480                   *
     F. Barron Fletcher
        III (2)                    2,431,909             23.9 %
     Michael J. Nevins
        (7)                            11,771                   *
All directors and
  executive officers as
  a group (7 persons)            10,122,189              97.1 %
Additional Selling
 Stockholders:
    Patrick Farrell (8)                30,208
    John M. Allen (9)                  12,083
      David A. Staels
        (10)                               21,355
      Michael T.
        Wallace (11)                       18,542
      Rocket Tea LLC
        (12)                               50,000

*     Less than 1%
(1)   The percentage of shares beneficially owned was determined based on a fraction, the numerator of which is the sum of (a) the number of outstanding shares of common stock
      beneficially owned by such owner and (b) the number of shares issuable upon exercise of options beneficially owned by such owner and exercisable within 60 days of May 1, 2011, and
      the denominator of which is the sum of (a) the aggregate number of shares of common stock outstanding on May 1, 2011 and (b) the aggregate number of shares of common stock
      issuable upon exercise of options beneficially owned by such owner and exercisable within 60 days of May 1, 2011.

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(2)  SKM Partners, LLC is the general partner of SKM Equity Fund III, L.P., the managing member of Teavana Investment LLC, and possesses voting and dispositive power over the
     2,431,909 shares of common stock held by Teavana Investment LLC. SKM Partners, LLC disclaims beneficial ownership of such shares except to the extent of its pecuniary interest
     therein. F. Barron Fletcher III is the managing member of SKM Partners, LLC and has voting and dispositive power with respect to such shares held by Teavana Investment LLC. Mr.
     Fletcher disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein.
(3) Represents 85,000 shares of common stock issuable upon exercise of vested options.
(4) Represents 75,000 shares of common stock issuable upon exercise of vested options.
(5) Includes 3,542 shares of common stock issuable upon exercise of vested options.
(6) Represents 72,480 shares of common stock issuable upon exercise of vested options.
(7) Represents 11,771 shares of common stock issuable upon exercise of vested options.
(8) Represents 30,208 shares of common stock issuable upon exercise of vested options.
(9) Represents 12,083 shares of common stock issuable upon exercise of vested options.
(10) Represents 21,355 shares of common stock issuable upon exercise of vested options.
(11) Represents 18,542 shares of common stock issuable upon exercise of vested options.
(12) Represents shares of common stock issued in connection with our buyout of Rocket Tea LLC’s franchise in 2006.

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                                                   DESCRIPTION OF CAPITAL STOCK

       The following discussion is a summary of the terms of our capital stock, our certificate of incorporation and our bylaws following certain
amendments that we intend to make in connection with this offering, as well as certain applicable provisions of Delaware law. Forms of our
amended and restated certificate of incorporation and amended and restated by-laws as they will be in effect following this offering will be
filed as exhibits to the registration statement of which this prospectus is a part.

Reclassification and Redemption
      Prior to this offering, we had two classes of common stock (our Class A common stock and our Class B redeemable common stock) and
one class of preferred stock outstanding (our Series A redeemable preferred stock). As of May 1, 2011, there were 7,492,487 shares of our
Class A common stock that were held of record by three stockholders, and 2,431,909 shares of our Class B redeemable common stock and
10,683,333 shares of our Series A redeemable preferred stock that were held of record by one stockholder. In addition, 497,480 shares of our
Class A common stock were issuable upon exercise of outstanding options granted under our 2004 Management Incentive Plan.

       In connection with this offering, each of the outstanding shares of Class B redeemable common stock will be converted into a share of
our Class A common stock. Further, immediately prior to the consummation of this offering, we will amend our existing amended and restated
certificate of incorporation and amended and restated bylaws such that they will reflect the descriptions of those charter documents below. In
accordance with our amended and restated certificate of incorporation, which will become effective immediately prior to the consummation of
this offering, each share of our outstanding Class A common stock will be reclassified automatically and without any action on the part of the
holders of those shares into shares of our common stock, par value $0.0001 per share, and our total authorized number of shares of capital stock
will increase as set forth below. The historical data presented in the accompanying financial statements have not been adjusted to give
retroactive effect to the reclassification and redemption.

      Concurrently with the consummation of this offering, we will redeem all of the 10,683,333 shares of Series A redeemable preferred stock.

Common Stock
      Following this offering, our authorized capital stock will consist of 100,000,000 shares of common stock, par value $0.0001 per share,
and there will be          shares of common stock outstanding, assuming no exercise of outstanding options other than those options being
exercised in connection with the sale of underlying common stock by certain of the selling stockholders in this offering. All outstanding shares
of common stock are fully paid and non-assessable, and the shares of common stock to be issued upon consummation of this offering will be
fully paid and non-assessable.

      Voting rights

      The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders.
Upon the consummation of this offering, holders of a majority of the shares of common stock entitled to vote in any election of directors may
elect all of the directors standing for election.

      Dividend rights

      Subject to preferences applicable to any outstanding preferred stock, holders of common stock are entitled to receive ratably any dividend
declared by the Board of Directors.

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      Rights upon liquidation

     In the event of a liquidation, dissolution or winding up of the company, holders of common stock are entitled to share ratably in the assets
remaining after payment of liabilities and the liquidation preferences of any outstanding preferred stock.

      Other rights and preferences

      Holders of our common stock have no preemptive, conversion or redemption rights. The rights, preferences and privileges of holders of
our common stock will be subject to those of the holders of any shares of our preferred stock we may issue in the future.

      Listing

      We intend to apply to list our common stock on the New York Stock Exchange under the symbol “TEA.”

      Transfer Agent and Registrar

      The transfer agent and registrar for our common stock is ComputerShare Limited.

Preferred Stock
      Following this offering, our Board of Directors will be authorized to provide for the issuance of up to               shares of preferred stock,
par value $0.0001 per share, in one or more series. Our Board of Directors is authorized to fix the preferences, powers and relative,
participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including the dividend rate, conversion
rights, voting rights, redemption rights and liquidation preference and to fix the number of shares to be included in any such series without any
further vote or action by our stockholders. Any preferred stock so issued may rank senior to our common stock with respect to the payment of
dividends or amounts upon liquidation, dissolution or winding up, or both. The issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of our company without further action by the stockholders and may adversely affect the voting and
other rights of the holders of common stock. The issuance of preferred stock with voting and conversion rights may adversely affect the voting
power of the holders of common stock, including the loss of voting control to others. Additionally, the issuance of preferred stock may
decrease the market price of our common stock. At present, we have no plans to issue any preferred stock.

Anti-Takeover Effects of Delaware Law
      Following consummation of this offering, we will be subject to the “business combination” provisions of Section 203 of the DGCL. In
general, such provisions prohibit a publicly held Delaware corporation from engaging in various “business combination” transactions with any
interested stockholder for a period of three years after the date of the transaction in which the person became an interested stockholder, unless:
        •    the transaction is approved by the Board of Directors prior to the date the interested stockholder obtained such status;
        •    upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the stockholder
             owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or
        •    on or subsequent to such date the business combination is approved by the Board of Directors and authorized at an annual or
             special meeting of stockholders by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by
             the interested stockholder.

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      A “business combination” is defined to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder.
In general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years, did own) 15% or
more of a corporation’s voting stock.

      The statute could prohibit or delay mergers or other takeover or change in control attempts with respect to us and, accordingly, may
discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above
the prevailing market price.

Anti-Takeover Effects of Certain Provisions of Our Amended and Restated Certificate of Incorporation and Bylaws
      Following the consummation of this offering, our amended and restated certificate of incorporation and/or amended and restated bylaws
(as applicable) will provide that:
        •    our Board of Directors will be expressly authorized to make, alter or repeal our bylaws;
        •    stockholders may not fill vacancies on the Board of Directors;
        •    our Board of Directors will be divided into three classes, with each class serving three-year staggered terms;
        •    directors may only be removed from the Board of Directors with cause and by an affirmative vote of 66       2   / 3 % of our common
             stock;
        •    special meetings of the stockholders may be called only by a resolution adopted by the affirmative vote of the majority of the
             directors then in office; the conduct of any business at a special meeting other than as specified in the notice for such meeting is
             prohibited; and any stockholder who wishes to bring business before an annual meeting or nominate directors must comply with
             the requirements set forth in our amended and restated bylaws;
        •    any action required or permitted to be taken by our stockholders may be effected at a duly called annual or special meeting of our
             stockholders and, following the date at which Mr. Mack ceases to own more than 50% of the total voting power of our shares, may
             not be effected by consent in writing by such stockholders;
        •    our stockholders do not have cumulative voting rights;
        •    our Board of Directors may issue shares of preferred stock and determine the price and other terms of those shares, including
             preferences and voting rights, without stockholder approval; and
        •    we will indemnify officers and directors against losses that may incur in connection with investigations and legal proceedings
             resulting from their services to us, which may include services in connection with takeover defense measures.

     These provisions may make it more difficult for stockholders to take specific corporate actions and could have the effect of delaying or
preventing a change in control of our company.

Limitation on Liability
      Our certificate of incorporation, which will be in effect upon consummation of this offering, limits the liability of our directors to the
fullest extent permitted by Delaware law. The effect of these provisions is to eliminate our rights and those of our stockholders, through
stockholders’ derivative suits on behalf of our company, to recover monetary damages from a director for breach of fiduciary duty as a director,
including breaches resulting from grossly negligent behavior. However, exculpation does not apply to any director if the director has acted in
bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper benefit from his or
her actions as a director. In addition, our amended and

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restated bylaws, which will be in effect upon consummation of this offering, provide that we will indemnify our directors and officers to the
fullest extent permitted by Delaware law. We have entered into indemnification agreements with our directors. These agreements will require
us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service
to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We also expect to
continue to maintain directors and officers liability insurance.

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                                                   SHARES ELIGIBLE FOR FUTURE SALE
      Prior to this offering, there has been no market for our common stock. Future sales of substantial amounts of our common stock in the
public market or the perception that such sales might occur could adversely affect market prices prevailing from time to time. Furthermore,
because only a limited number of shares will be available for sale shortly after this offering due to existing contractual and legal restrictions on
resale as described below, there may be sales of substantial amounts of our common stock in the public market after the restrictions lapse. This
may adversely affect the prevailing market price and our ability to raise equity capital in the future.

      Upon consummation of this offering, we will have               shares of common stock outstanding, assuming the redemption of all
outstanding shares of preferred stock and the conversion of all outstanding shares of Class B redeemable stock into common stock. Of
these          shares, the          shares sold in this offering will be freely transferable without restriction or registration under the Securities
Act, except for any shares purchased by one of our existing “affiliates,” as that term is defined in Rule 144 under the Securities Act. The
remaining shares of common stock held by our existing stockholders are “restricted securities” as defined in Rule 144. Restricted shares may be
sold in the public market only if registered under the Securities Act or if they qualify for an exemption from registration, including, among
others, the exemptions provided by Rules 144 and 701 of the Securities Act. As a result of the contractual 180-day lock-up period described in
“Underwriting” and the provisions of Rules 144 and 701, these shares will be available for sale in the public market as follows:

                                Number of Shares                                                                 Date
                                                                               On the date of this prospectus.
                                                                               After 90 days from the date of this prospectus.
                                                                               After 180 days from the date of this prospectus (subject, in some
                                                                               cases, to volume limitations).
                                                                               At various times after 180 days from the date of this prospectus
                                                                               (subject, in some cases, to volume limitations).

Rule 144
      In general, under Rule 144, an affiliate who beneficially owns shares that were purchased from us, or any affiliate, at least six months
previously, is entitled to sell, upon the expiration of the lock-up agreement described in “Underwriting” and within any three-month period
beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of 1% of our then-outstanding shares of
common stock, which will equal approximately                shares immediately after this offering, or the average weekly trading volume of our
common stock on the New York Stock Exchange during the four calendar weeks preceding the filing of a notice of the sale with the SEC. Sales
under Rule 144 are also subject to certain manner of sale provisions, notice requirements and the availability of current public information
about us.

      Following this offering, a person that is not an affiliate of ours at the time of, or at any time during the three months preceding, a sale and
who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months, may sell shares subject only to the
availability of current public information about us, and any such person who has beneficially owned restricted shares of our common stock for
at least one year may sell shares without restriction.

    We are unable to estimate the number of shares that will be sold under Rule 144 since this will depend on the market price for our
common stock, the personal circumstances of the stockholder and other factors.

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Rule 701
       In general, under Rule 701, any of our employees, directors, officers, consultants or advisors who purchased shares from us in connection
with a compensatory stock or option plan or other written agreement before the effective date of this offering is entitled to resell such shares 90
days after the effective date of this offering in reliance on Rule 144, without having to comply with the holding period requirements or other
restrictions contained in Rule 701.

      The SEC has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting
requirements of the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after the date of this
prospectus. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described above,
beginning 90 days after the date of this prospectus, may be sold by persons other than “affiliates,” as defined in Rule 144, subject only to the
manner of sale provisions of Rule 144 and by “affiliates” under Rule 144 without compliance with its one-year minimum holding period
requirement.

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                                MATERIAL US FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS
                                          FOR NON-US HOLDERS OF COMMON STOCK

      The following discussion is a general summary of the material US federal income and estate tax considerations with respect to your
acquisition, ownership and disposition of our common stock, and applies if you (1) purchase our common stock in this offering, (2) will hold
the common stock as a capital asset and (3) are a “Non-US Holder.” You are a Non-US Holder if, for US federal income tax purposes, you are
a beneficial owner of shares of our common stock other than:
        •    an individual who is a citizen or resident of the United States;
        •    a corporation or other entity taxable as a corporation created or organized in, or under the laws of, the United States, any state
             thereof or the District of Columbia;
        •    an estate, the income of which is subject to US federal income taxation regardless of its source;
        •    a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or
             more US persons have the authority to control all substantial decisions of the trust; or
        •    a trust that has a valid election in place to be treated as a US person for US federal income tax purposes.

      This summary does not address all of the US federal income and estate tax considerations that may be relevant to you in the light of your
particular circumstances or if you are a beneficial owner subject to special treatment under US federal income tax laws (such as if you are a
controlled foreign corporation, passive foreign investment company, company that accumulates earnings to avoid US federal income tax,
foreign tax-exempt organization, financial institution, broker or dealer in securities, insurance company, regulated investment company, real
estate investment trust, person who holds our common stock as part of a hedging or conversion transaction or as part of a short-sale or straddle,
US expatriate, former long-term permanent resident of the United States or partnership or other pass-through entity for US federal income tax
purposes). This summary does not discuss non-income taxes (except, to a limited extent below, US federal estate tax), any aspect of the US
federal alternative minimum tax or state, local or non-US taxation. This summary is based on current provisions of the Internal Revenue Code
of 1986, as amended (“Code”), Treasury regulations, judicial opinions, published positions of the Internal Revenue Service (“IRS”) and all
other applicable authorities (all such sources of law, “Tax Authorities”). The Tax Authorities are subject to change, possibly with retroactive
effect.

       If a partnership (or an entity or arrangement classified as a partnership for US federal income tax purposes) holds our common stock, the
tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. If you are a partner of a
partnership holding our common stock, you should consult your tax advisor.

    WE URGE PROSPECTIVE INVESTORS TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE US FEDERAL,
STATE, LOCAL AND NON-US INCOME AND OTHER TAX CONSIDERATIONS OF ACQUIRING, HOLDING AND DISPOSING OF
SHARES OF OUR COMMON STOCK.

Distributions
      In general, any distributions we make to you with respect to your shares of common stock that constitute dividends for US federal income
tax purposes will be subject to US withholding tax at a rate of 30% of the gross amount of the dividend, unless you are eligible for a reduced
rate of withholding tax under an applicable income tax treaty and you properly file with the payor an IRS Form W-8BEN, or successor form,
claiming an exemption from or reduction in withholding under the applicable income tax treaty (special certification and other requirements
may apply if our common stock is held through certain foreign intermediaries). A distribution of

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cash or other property (other than certain pro rata distributions of our common shares) in respect of our common shares will constitute a
dividend for US federal income tax purposes to the extent of our current or accumulated earnings and profits as determined under the Tax
Authorities. Any distribution not constituting a dividend will be treated first as reducing your basis in your shares of common stock and, to the
extent it exceeds your basis, as capital gain from the sale of stock as described below under the heading “—Sale or Other Disposition of Our
Common Stock.”

     Dividends we pay to you that are effectively connected with your conduct of a trade or business within the United States (and, if certain
income tax treaties apply, are attributable to a US permanent establishment or a fixed base maintained by you) generally will not be subject to
US withholding tax if you provide an IRS Form W-8ECI, or successor form, to the payor. Instead, such dividends generally will be subject to
US federal income tax, net of certain deductions, at the same graduated individual or corporate rates applicable to US persons. If you are a
corporation, effectively connected income may also be subject to a “branch profits tax” at a rate of 30% (or such lower rate as may be specified
by an applicable income tax treaty).

      A Non-US Holder that is eligible for a reduced rate of US federal withholding tax under an income tax treaty may obtain a refund or
credit of any excess amounts withheld by timely filing an appropriate claim for a refund together with the required information with the IRS.

Sale or Other Disposition of Our Common Stock
     Subject to the discussion of backup withholding below, you generally will not be subject to US federal income tax on any gain realized
upon the sale or other disposition of your shares of our common stock unless:
        •    the gain is effectively connected with your conduct of a trade or business within the United States (and, under certain income tax
             treaties, is attributable to a US permanent establishment or a fixed base you maintain);
        •    you are an individual, you are present in the United States for 183 days or more in the taxable year of disposition and you meet
             other conditions; or
        •    we are or have been a “United States real property holding corporation” for US federal income tax purposes (which we believe we
             are not and do not anticipate we will become) and you hold or have held, directly or indirectly, at any time within the five-year
             period ending on the date of disposition of our common stock, more than five percent of our common stock.

      If you are described in the first bullet above, you will be subject to US federal income tax on the gain from the sale, net of certain
deductions, at the same rates applicable to US persons and, if you are a corporation, the branch profits tax also may apply to such effectively
connected gain. If you are described in the second bullet point above, you generally will be subject to US federal income tax at a rate of 30%
on the gain realized, although the gain may be offset by certain US source capital losses realized during the same taxable year. Non-US Holders
should consult any applicable income tax or other treaties that may provide for different rules.

Information Reporting and Backup Withholding Requirements
      We must report annually to the IRS the amount of any dividends or other distributions we pay to you and the amount of tax we withhold
on these distributions regardless of whether withholding is required. A similar report will be sent to you. The IRS may make available copies of
the information returns reporting those distributions and amounts withheld to the tax authorities in the country in which you reside pursuant to
the provisions of an applicable income tax treaty or exchange of information treaty.

      The United States imposes a backup withholding tax on any dividends and certain other types of payments to US persons. You will not be
subject to backup withholding tax on dividends you receive on your shares of our common stock if you provide proper certification of your
status as a Non-US Holder or you are one of several types of entities and organizations that qualify for an exemption (an “exempt recipient”)
and neither we nor the payor has actual knowledge (or reason to know) that you are a US holder that is not an exempt recipient.

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      Information reporting and backup withholding generally are not required with respect to the amount of any proceeds from the sale of your
shares of our common stock outside the United States through a foreign office of a foreign broker that does not have certain specified
connections to the United States. If you sell your shares of common stock through a US broker or the US office of a foreign broker, however,
the broker will be required to report to the IRS the amount of proceeds paid to you, and also backup withhold on that amount, unless you
provide appropriate certification to the broker of your status as a Non-US Holder or you are an exempt recipient. Information reporting will
also apply if you sell your shares of our common stock through a foreign broker deriving more than a specified percentage of its income from
US sources or having certain other connections to the United States, unless such broker has documentary evidence in its records that you are a
Non-US Holder and certain other conditions are met, or you are an exempt recipient. Any amounts withheld with respect to your shares of our
common stock under the backup withholding rules will be refunded to you if withholding results in an overpayment of taxes or credited against
your US federal income tax liability, if any, by the IRS if the required information is furnished in a timely manner.

Recently Enacted Withholding Legislation
       Recently enacted legislation will generally impose a withholding tax of 30% on dividends and the gross proceeds of a disposition of our
shares paid to a foreign financial institution after December 31, 2012 unless such institution enters into an agreement with the US government
to withhold on certain payments and collect and provide to the US tax authorities substantial information regarding US account holders of such
institution (which would include certain account holders that are foreign entities with US owners). This legislation will also generally impose a
withholding tax of 30% on dividends and the gross proceeds of a disposition of our shares paid to a non-financial foreign entity after
December 31, 2012 unless such entity provides the withholding agent with a certification identifying the direct and indirect US owners of the
entity. Under certain circumstances, a Non-US Holder of common stock may be eligible for a refund or credit of such taxes. You should
consult your own tax advisor as to the possible implications of this legislation on your investment in shares of our common stock.

US Federal Estate Tax
      Common stock owned or treated as owned by an individual who is not a citizen or resident (as defined for US federal estate tax purposes)
of the United States at the time of his or her death will be included in the individual’s gross estate for US federal estate tax purposes and
therefore may be subject to US federal estate tax unless an applicable tax treaty provides otherwise.

     The preceding discussion of US federal income and estate tax considerations is for general information only. It is not tax advice.
Each prospective investor should consult their own tax advisor regarding the particular US federal, state, local and non-US tax
consequences of purchasing, holding and disposing of our common stock, including the consequences of any proposed change in
applicable laws.

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                                                                UNDERWRITING

      Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co. are acting as representatives of each of the underwriters
named below. We, the selling stockholders and the underwriters named below have entered into a underwriting agreement with respect to the
shares of common stock being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares of
common stock indicated in the following table.

                                                                                                                                    Number of
      Underwriters                                                                                                                   Shares
      Merrill Lynch, Pierce, Fenner & Smith
                  Incorporated
      Goldman, Sachs & Co.
            Total


      The expenses of the offering, not including the underwriting discount, are estimated at $           million and are payable by us.

     The underwriting agreement provides that the obligations of the underwriters to purchase the shares of common stock offered by this
prospectus are subject to certain conditions precedent and that the underwriters will purchase all of the shares of common stock offered by this
prospectus, other than those covered by the option to purchase additional shares described below, if any of these shares are purchased.

       Certain of the selling stockholders have granted an option to the underwriters, exercisable for 30 days after the date of this prospectus, to
purchase up to             additional shares at the public offering price, less the underwriting discount. The underwriters may exercise this option
solely to cover any overallotments. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the
underwriting agreement, to purchase a number of additional shares proportionate to that underwriter’s initial amount reflected in the above
table.

     The following table shows the per share and total underwriting discount to be paid to the underwriters by us and the selling stockholders.
Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase           additional shares of
common stock.

                                                                                                                   Total
                                                                     Per Share                    Without Option                   With Option
Public offering price                                           $                          $                                  $
Underwriting discount                                           $                          $                                  $
Proceeds, before expenses, to Teavana Holdings, Inc.            $                          $                                  $
Proceeds, before expenses, to the selling stockholders          $                          $                                  $

      Shares of common stock sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the
cover of this prospectus. Any shares of common stock sold by the underwriters to securities dealers may be sold at a discount of up to
$          per share of common stock from the initial public offering price. If all the shares of common stock are not sold at the initial public
offering price, the representatives may change the offering price and the other selling terms. The offering of the shares by the underwriters is
subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.

      We, each of our officers, directors and the selling stockholders have agreed with the underwriters not to dispose of or hedge any of the
shares of common stock or securities convertible into or exchangeable for shares of common stock without the prior written consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated and

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Goldman, Sachs & Co. during the period from the date of this prospectus continuing through the date that is 180 days after the date of this
prospectus. Specifically, we and these other persons have agreed, with certain limited exceptions, not to directly or indirectly:
        •    offer, pledge, sell or contract to sell any common stock;
        •    sell any option or contract to purchase any common stock;
        •    purchase any option or contract to sell any common stock;
        •    grant any option, right or warrant for the sale of any common stock;
        •    lend or otherwise dispose of or transfer any common stock;
        •    request or demand that we file a registration statement related to the common stock; or
        •    enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common
             stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.

       The 180-day restricted period described in the preceding paragraph will be automatically extended if: (1) during the last 17 days of the
initial 180-day restricted period we issue an earnings release or announce material news or a material event; or (2) prior to the expiration of the
initial 180-day restricted period, we announce that we will release earnings results during the 15-day period following the last day of the initial
180-day period, then in each case the initial 180-day restricted period will be automatically extended until the expiration of the 18-day period
beginning on the date of the earnings release or the announcement of the material news or material event, as applicable, unless Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co. waive, in writing, such extension.

      We intend to apply for listing of our common stock on the New York Stock Exchange under the symbol “TEA.”

       Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined through
negotiations among us, the selling stockholders and the representatives. Among the factors to be considered in determining the initial public
offering price of the shares of common stock, in addition to prevailing market conditions, will be our company’s historical performance,
estimates of the business potential and earnings prospectus of our company, an assessment of our company’s management and the
consideration of the above factors in relation to market valuation of companies in related businesses. An active trading market for the shares
may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering
price.

      The underwriters do not expect to sell more than 5% of the shares of common stock in the aggregate to accounts over which they exercise
discretionary authority.

      We and the selling stockholders have agreed to indemnify the several underwriters against certain liabilities, including liabilities under
the Securities Act, and to contribute to payments that the underwriters may be required to make for these liabilities.

      In connection with this offering, the underwriters may purchase and sell our common stock in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of shares of common stock than they are required to purchase in this offering. “Covered” short sales are sales
made in an amount not greater than the underwriters’ option to purchase additional shares of common stock in this offering. The underwriters
may close out any covered short position by either exercising their option to purchase additional shares of common stock or purchasing shares
of common stock in the open market. In determining the source of shares of common stock to close out the covered short position, the
underwriters will consider, among other

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things, the price of shares of common stock available for purchase in the open market as compared to the price at which they may purchase
additional shares of common stock pursuant to the option granted to them. “Naked” short sales are any sales in excess of that option. The
underwriters must close out any naked short position by purchasing shares of common stock in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common stock in the open
market after pricing that could adversely affect investors who purchase in this offering. Stabilizing transactions consist of various bids for or
purchases of shares of common stock made by the underwriters in the open market prior to the consummation of this offering.

     The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because the representatives have repurchased shares of common stock sold by or for the account of such
underwriter in stabilizing or short covering transactions.

      Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts,
may have the effect of preventing or retarding a decline in the market price of our common stock, and together with the imposition of the
penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may
be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time.
These transactions may be effected on the New York Stock Exchange, in the over-the-counter market or otherwise.

      In connection with the offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as
e-mail. In addition, certain underwriters may facilitate Internet distribution for this offering to certain of their Internet subscription customers.
Certain underwriters may allocate a limited number of shares for sale to their online brokerage customers. An electronic prospectus is available
on the Internet websites maintained by certain underwriters. Other than the prospectus in electronic format, the information on the websites of
such underwriters is not part of this prospectus.

Conflicts of Interest
      The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include
securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment,
hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and
may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary
fees and expenses.

      In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array
of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans)
for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or
instruments of the company. The underwriters and their respective affiliates may also make investment recommendations and/or publish or
express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they
acquire, long and/or short positions in such securities and instruments. Such investment and securities activities may involve securities and
instruments of the company.

Foreign Selling Restrictions
      Notice to Prospective Investors in the European Economic Area
   In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant
Member State”), including each Relevant Member State that has implemented the

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2010 PD Amending Directive with regard to persons to whom an offer of securities is addressed and the denomination per unit of the offer of
securities (each, an “Early Implementing Member State”), with effect from and including the date on which the Prospectus Directive is
implemented in that Relevant Member State (the “Relevant Implementation Date”), no offer of shares will be made to the public in that
Relevant Member State (other than offers (the “Permitted Public Offers”) where a prospectus will be published in relation to the shares that has
been approved by the competent authority in a Relevant Member State or, where appropriate, approved in another Relevant Member State and
notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive), except that with effect
from and including that Relevant Implementation Date, offers of shares may be made to the public in that Relevant Member State at any time:
      A.     to “qualified investors” as defined in the Prospectus Directive, including:
           (a)       (in the case of Relevant Member States other than Early Implementing Member States), legal entities which are authorized
                     or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to
                     invest in securities, or any legal entity which has two or more of (i) an average of at least 250 employees during the last
                     financial year; (ii) a total balance sheet of more than €43.0 million and (iii) an annual turnover of more than €50.0 million as
                     shown in its last annual or consolidated accounts; or
           (b)       (in the case of Early Implementing Member States), persons or entities that are described in points (1) to (4) of Section I of
                     Annex II to Directive 2004/39/EC, and those who are treated on request as professional clients in accordance with Annex II
                     to Directive 2004/39/EC, or recognized as eligible counterparties in accordance with Article 24 of Directive 2004/39/EC
                     unless they have requested that they be treated as non-professional clients; or
      B.     to fewer than 100 (or, in the case of Early Implementing Member States, 150) natural or legal persons (other than “qualified
             investors” as defined in the Prospectus Directive), as permitted in the Prospectus Directive, subject to obtaining the prior consent of
             the representatives for any such offer; or
      C.     in any other circumstances falling within Article 3(2) of the Prospectus Directive,
      provided      that no such offer of shares shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the
                    Prospectus Directive or of a supplement to a prospectus pursuant to Article 16 of the Prospectus Directive.

      Each person in a Relevant Member State (other than a Relevant Member State where there is a Permitted Public Offer) who initially
acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed that (A) it is a “qualified
investor,” and (B) in the case of any shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus
Directive, (x) the shares acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their
offer or resale to, persons in any Relevant Member State other than “qualified investors” as defined in the Prospectus Directive, or in
circumstances in which the prior consent of the Subscribers has been given to the offer or resale, or (y) where shares have been acquired by it
on behalf of persons in any Relevant Member State other than “qualified investors” as defined in the Prospectus Directive, the offer of those
shares to it is not treated under the Prospectus Directive as having been made to such persons.

     For the purpose of the above provisions, the expression “an offer to the public” in relation to any shares in any Relevant Member State
means the communication in any form and by any means of sufficient information on the terms of the offer of any shares to be offered so as to
enable an investor to decide to purchase any shares, as the same may be varied in the Relevant Member State by any measure implementing the
Prospectus Directive in the Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71 EC (including the 2010
PD Amending Directive, in the case of Early Implementing Member States) and includes any relevant implementing measure in each Relevant
Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

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      In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made
may only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional experience in
matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005,
as amended (the “Order”) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated)
falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This document must not be
acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment
activity to which this document relates is only available to, and will be engaged in with, relevant persons.

      Notice to Prospective Investors in Hong Kong

       This prospectus has not been approved by or registered with the Securities and Futures Commission of Hong Kong or the Registrar of
Companies of Hong Kong. The securities will not be offered or sold in Hong Kong other than (a) to “professional investors” as defined in the
Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do
not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an
offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the securities which is directed
at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws
of Hong Kong) has been issued or will be issued in Hong Kong or elsewhere other than with respect to securities which are or are intended to
be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and
any rules made under that Ordinance.

      Notice to Prospective Investors in Japan

      The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948,
as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others
for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations
and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the
purposes of this paragraph, “Japanese Person” shall mean any person resident in Japan, including any corporation or other entity organized
under the laws of Japan.

      Notice to Prospective Investors in Singapore

      This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any
other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the securities may not be
circulated or distributed, nor may the securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether
directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act
(Chapter 289) (the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions,
specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of
the SFA. Where the securities are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an
accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals,
each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments
and each beneficiary is an accredited investor, then securities, debentures and units of securities and debentures of that corporation or the
beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired
the securities under Section 275 except: (i) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person
pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (ii) where no consideration is given
for the transfer; or (iii) by operation of law.

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      Notice to Prospective Investors in Switzerland

      The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock
exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance
prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff.
of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor
any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available
in Switzerland.

      Neither this document nor any other offering or marketing material relating to the offering, the company or the shares has been or will be
filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be
supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of shares has not been and will not be
authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests
in collective investment schemes under the CISA does not extend to acquirers of shares.

      Notice to Prospective Investors in the Dubai International Financial Centre

      This document relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority
(“DFSA”). This document is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must
not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection
with Exempt Offers. The DFSA has not approved this document nor taken steps to verify the information set forth herein and has no
responsibility for this document. The securities to which this document relates may be illiquid and/or subject to restrictions on their resale.
Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents
of this document you should consult an authorized financial advisor.

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                                                              LEGAL MATTERS

      The validity of the issuance of the shares of common stock offered hereby will be passed upon for Teavana Holdings, Inc. by DLA Piper
LLP (US), New York, New York. The underwriters have been represented by Shearman & Sterling LLP, New York, New York, in connection
with this offering.


                                                                   EXPERTS

      The audited consolidated financial statements of Teavana Holdings, Inc. and its subsidiaries as of January 31, 2010 and January 30, 2011
and for the fiscal years ended February 1, 2009, January 31, 2010 and January 30, 2011, included in this prospectus and elsewhere in the
registration statement have been so included in reliance upon the report of Grant Thornton LLP, independent registered public accountants,
upon the authority of such firm as experts in accounting and auditing in giving said report.


                                             WHERE YOU CAN FIND MORE INFORMATION

      We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock
offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules
thereto. For further information with respect to the company and its common stock, reference is made to the registration statement and the
exhibits and any schedules filed therewith. Statements contained in this prospectus as to the contents of any contract or other document referred
to are not necessarily complete. With respect to those statements, you should refer to the corresponding exhibit to the registration statement for
a more complete description of the contract or other document referred to. A copy of the registration statement, including the exhibits and
schedules thereto, may be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on
the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an
Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The
address of that site is www.sec.gov.

      As a result of the offering, we will become subject to the full informational requirements of the Exchange Act. We will fulfill our
obligations with respect to such requirements by filing periodic reports and other information with the SEC. We intend to furnish our
stockholders with annual reports containing consolidated financial statements certified by an independent public accounting firm. We also
maintain an Internet site at www.teavana.com. Our website and the information contained therein or connected thereto shall not be deemed to
be incorporated into this prospectus or the registration statement of which it forms a part.

                                                                       113
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Index to Financial Statements

                                                     TEAVANA HOLDINGS, INC.
                                     INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                                                          Page

Report of Independent Registered Public Accounting Firm                                                                          F-2
Consolidated Balance Sheets as of January 31, 2010 and January 30, 2011                                                          F-3
Consolidated Statements of Operations for the years ended February 1, 2009, January 31, 2010 and January 30, 2011                F-4
Consolidated Statements of Changes in Redeemable Common Stock and Stockholders’ Deficit for the years ended February 1,
  2009, January 31, 2010 and January 30, 2011                                                                                    F-5
Consolidated Statements of Cash Flows for the years ended February 1, 2009, January 31, 2010 and January 30, 2011                F-6
Notes to Consolidated Financial Statements                                                                                       F-7
Condensed Consolidated Balance Sheets as of January 30, 2011 and May 1, 2011 (unaudited)                                    F-23
Condensed Consolidated Statements of Operations for the thirteen weeks ended May 2, 2010 (unaudited) and May 1, 2011
  (unaudited)                                                                                                               F-24
Condensed Consolidated Statement of Changes in Redeemable Common Stock and Stockholders’ Deficit for the thirteen weeks
  ended May 1, 2011 (unaudited)                                                                                             F-25
Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended May 2, 2010 (unaudited) and May 1, 2011
  (unaudited)                                                                                                               F-26
Notes to Condensed Consolidated Financial Statements (unaudited)                                                            F-27

                                                                   F-1
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Index to Financial Statements

                                REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Teavana Holdings, Inc. and Subsidiaries:

      We have audited the accompanying consolidated balance sheets of Teavana Holdings, Inc. and Subsidiaries (collectively, the Company)
as of January 31, 2010 and January 30, 2011, and the related consolidated statements of operations, redeemable common stock and
stockholders’ deficit, and cash flows for each of the three fiscal years in the period ended January 30, 2011. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Teavana
Holdings, Inc. and Subsidiaries as of January 31, 2010 and January 30, 2011, and the related consolidated statements of operations, redeemable
common stock and stockholders’ deficit, and cash flows for each of the three fiscal years in the period ended January 30, 2011 in conformity
with accounting principles generally accepted in the United States of America.

/s/ GRANT THORNTON LLP
Atlanta, Georgia
April 28, 2011

                                                                        F-2
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Index to Financial Statements

                                                       TEAVANA HOLDINGS, INC.
                                                 CONSOLIDATED BALANCE SHEETS
                                                 (dollars in thousands, except per share data)

                                                                                                      January 31,     January 30,
                                                                                                         2010            2011
Assets
Current assets
    Cash and cash equivalents                                                                     $         1,314     $    7,901
    Accounts receivable                                                                                       284            292
    Prepaid expenses and other assets                                                                       1,003          2,041
    Prepaid rent                                                                                            1,061          1,400
    Inventory                                                                                              11,615         16,928
    Deferred tax asset, current                                                                               772          1,629
Total current assets                                                                                       16,049         30,191
     Property and equipment, net                                                                           22,513         31,028
     Goodwill                                                                                               2,394          2,394
     Deferred tax asset, non-current                                                                          184            —
     Other non-current assets                                                                                 627            513
Total assets                                                                                      $        41,767     $   64,126

Liabilities, Redeemable Common Stock and Stockholders’ Deficit
Current liabilities
    Accounts payable                                                                              $         2,564     $     3,631
    Income taxes payable                                                                                    3,994           4,809
    Deferred revenue                                                                                        1,083           1,344
    Note payable                                                                                              250             —
    Series A Redeemable Preferred Stock, $.0001 par value; 10,683,333 shares authorized, issued
        and outstanding                                                                                       —           12,992
    Other current liabilities                                                                               3,395          5,539
Total current liabilities                                                                                  11,286         28,315
Long-term liabilities
    Deferred franchise income                                                                                 600             525
    Deferred tax liability, non-current                                                                       —               420
    Deferred rent                                                                                           3,851           7,524
    Long-term debt                                                                                          1,000           1,000
    Series A Redeemable Preferred Stock, $.0001 par value; 10,683,333 shares authorized, issued
       and outstanding                                                                                     10,848             —
Total long-term liabilities                                                                                16,299           9,469
Total liabilities                                                                                          27,585         37,784
Commitments and contingencies (Note 14)                                                                       —               —
Redeemable common stock
    Class B Redeemable Common Stock, $.0001 par value; 50,000,000 shares authorized,
      2,431,909 shares issued and outstanding                                                              21,888         81,401
Stockholders’ deficit
    Class A Common Stock, $.0001 par value; 50,000,000 shares authorized, 7,492,487 shares
      issued and outstanding                                                                                    1               1
    Additional paid-in capital                                                                                —               —
    Accumulated deficit                                                                                    (7,707 )       (55,060 )
Total stockholders’ deficit                                                                                (7,706 )       (55,059 )
Total liabilities, redeemable common stock and stockholders’ deficit                              $        41,767     $   64,126
The accompanying notes are an integral part of these Consolidated Financial Statements

                                         F-3
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Index to Financial Statements

                                                           TEAVANA HOLDINGS, INC.
                                              CONSOLIDATED STATEMENTS OF OPERATIONS
                                                  (dollars in thousands, except per share data)

                                                                                                   For the Fiscal Year Ended
                                                                                   February 1,             January 31,             January 30,
                                                                                      2009                     2010                   2011
Net sales                                                                      $         63,861        $          90,262       $        124,701
Cost of goods sold (exclusive of depreciation shown separately
  below)                                                                                 27,193                   36,435                 46,275
Gross profit                                                                             36,668                   53,827                 78,426
Selling, general and administrative expense                                              29,242                   38,142                 50,571
Depreciation and amortization expense                                                     2,666                    3,489                  4,361
Income from operations                                                                     4,760                  12,196                 23,494
Interest expense, net                                                                      2,061                   2,435                  2,585
Income before income taxes                                                                 2,699                   9,761                 20,909
Provision for income taxes                                                                 1,502                   4,470                  8,906
Net income                                                                     $           1,197       $           5,291       $         12,003

Net income per share:
         Basic                                                                 $            0.12       $            0.53       $            1.21
         Diluted                                                               $            0.12       $            0.53       $            1.18
Weighted average number of shares outstanding:
         Basic                                                                       9,924,396               9,924,396               9,924,396
         Diluted                                                                    10,017,794              10,079,067              10,187,864




                                The accompanying notes are an integral part of these Consolidated Financial Statements

                                                                         F-4
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Index to Financial Statements

                                                                 TEAVANA HOLDINGS, INC.
                         CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE COMMON STOCK
                                            AND STOCKHOLDERS’ DEFICIT
                                           (dollars in thousands, except share data)

                                                                        Total
                                                                     Redeemable                                                                     Total
                                   Class B Redeemable                 Common           Class A              Paid-in        Accumulated          Stockholders’
                                     Common Stock                      Stock        Common Stock            Capital           Deficit              Deficit
                                                                                                   Amoun
                                Shares              Amount                         Shares            t
Balance, February 3,
  2008                          2,431,909       $       12,160   $       12,160    7,492,487       $    1   $ —        $         (4,843 )   $          (4,842 )
    Net income                        —                    —                —            —             —      —                   1,197                 1,197
    Change in fair
      value of class B
      redeemable
      common stock                       —               3,648             3,648            —          —      (207 )             (3,441 )              (3,648 )
    Stock-based
      compensation                       —                —                  —              —          —       207                  —                     207

Balance, February 1,
  2009                          2,431,909               15,808           15,808    7,492,487            1      —                 (7,087 )              (7,086 )
    Net income                        —                    —                —            —             —       —                  5,291                 5,291
    Change in fair
      value of class B
      redeemable
      common stock                       —               6,080             6,080            —          —      (169 )             (5,911 )              (6,080 )
    Stock-based
      compensation                       —                —                  —              —          —       169                  —                     169

Balance, January 31,
  2010                          2,431,909               21,888           21,888    7,492,487            1      —                 (7,707 )              (7,706 )
    Net income                        —                    —                —            —             —       —                 12,003                12,003
    Change in fair
      value of class B
      redeemable
      common stock                       —              59,513           59,513             —          —      (157 )            (59,356 )             (59,513 )
    Stock-based
      compensation                       —                —                  —              —          —       157                  —                     157

Balance, January 30,
  2011                          2,431,909       $       81,401   $       81,401    7,492,487       $    1   $ —        $        (55,060 )   $         (55,059 )




                                The accompanying notes are an integral part of these Consolidated Financial Statements
F-5
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Index to Financial Statements

                                                           TEAVANA HOLDINGS, INC.
                                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                         (dollars in thousands)

                                                                                                         For the Fiscal Year ended
                                                                                         February 1,            January 31,              January 30,
                                                                                            2009                    2010                    2011
Cash flows from operating activities:
  Net income                                                                            $      1,197           $      5,291          $        12,003
    Adjustments to reconcile net income to net cash provided by operating
       activities:
       Depreciation and amortization expense                                                   2,666                  3,489                    4,361
       Non-cash interest expense                                                               1,709                  1,925                    2,279
       Deferred income taxes                                                                    (610 )                  532                     (253 )
       Stock based compensation                                                                  207                    169                      157
       Other                                                                                     —                      —                        130
       Changes in operating assets and liabilities:
         Accounts receivable                                                                     167                   (143 )                     (8 )
         Inventory                                                                            (1,810 )               (3,646 )                 (5,313 )
         Prepaid expenses and other assets                                                      (713 )                  189                   (1,106 )
         Prepaid rent                                                                           (222 )                 (276 )                   (338 )
         Accounts payable                                                                        903                 (1,558 )                    669
         Income Taxes payable                                                                   (224 )                2,772                      815
         Deferred revenue                                                                        219                    326                      260
         Deferred rent                                                                         1,066                  1,124                    3,673
         Other accrued liabilities                                                               396                    877                    2,068
           Net cash provided by operating activities                                           4,951                 11,071                   19,397
Cash flows from investing activities:
  Purchase of property and equipment                                                          (8,798 )               (6,640 )                (12,560 )
           Net cash used in investing activities                                              (8,798 )               (6,640 )                (12,560 )
Cash flows from financing activities:
  Proceeds from revolving credit facility                                                     50,946                 93,980                 132,239
  Payments on revolving credit facility                                                      (45,661 )              (98,265 )              (132,239 )
  Payment on note payable                                                                        —                      —                      (250 )
  Payments on term loan                                                                         (625 )                  —                       —
  Cash paid for financing costs                                                                 (406 )                  —                       —
              Net cash provided by (used in) financing activities                              4,254                 (4,285 )                   (250 )
           Net increase in cash and cash equivalents                                             407                    146                    6,587
Cash and cash equivalents, beginning of fiscal year                                              761                  1,168                    1,314
Cash and cash equivalents, end of fiscal year                                           $      1,168           $      1,314          $         7,901

Supplemental disclosure of cash flows information:
Cash paid for interest                                                                  $        339           $        510          $           331
Cash paid for income taxes                                                                     2,336                  1,166                    8,344
Non-cash change in fair value of Class B Redeemable Common Stock                        $      3,648           $      6,080          $        59,513




                                The accompanying notes are an integral part of these Consolidated Financial Statements

                                                                         F-6
Table of Contents

Index to Financial Statements

                                                  Notes to Consolidated Financial Statements
                                              (dollars in thousands, except per share and store data)

1.    Business and Summary of Significant Accounting Policies
      Nature of Business
      Teavana Holdings, Inc. (the “Company” or “Teavana”) is a specialty retailer of premium loose-leaf teas, authentic artisanal teawares and
      other tea-related merchandise. The Company offers its products through 146 company-owned stores in 34 states and franchised stores
      primarily in Mexico, as well as through its website.

      Segment Reporting
      The Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC” or the “Codification”) Topic 280,
      Segment Reporting (“ASC 280”), establishes standards for reporting information about a company’s operating segments. The Company
      determined its operating segments on the same basis that it uses to evaluate performance internally. The Company’s reporting segments
      are the operation of its company owned stores and its e-commerce website, which have been aggregated into one reportable financial
      segment. Management bases this aggregation on the following factors (i) the merchandise offered at stores and through the e-commerce
      business is largely the same, (ii) the majority of its e-commerce customers are also customers of retail locations, (iii) the product margins
      and sales mix of the stores and e-commerce business are similar and (iv) the distribution methods are the same for both revenue streams.
      All of the Company’s identifiable assets are located in the United States.

      Principles of Consolidation
      The Consolidated Financial Statements include all the accounts of the Company and its wholly-owned subsidiaries. All intercompany
      transactions and balances have been eliminated in consolidation.

      Fiscal Year
      The Company’s fiscal year is 52 or 53 weeks ending on the Sunday nearest to January 31 of the following year. These Consolidated
      Financial Statements include 52 weeks in each of the years ended February 1, 2009 (“Fiscal 2008” or “2008”), January 31, 2010 (“Fiscal
      2009” or “2009”) and January 30, 2011 (“Fiscal 2010” or “2010”).

      Seasonality
      Teavana’s business is seasonal and has historically realized a higher portion of the Company’s sales, net income and operating cash flows
      in the fourth fiscal quarter due primarily to the holiday selling season. As a result, the Company’s working capital requirements fluctuate
      during the year increasing in the second and third fiscal quarters in anticipation of this peak selling season.

      Use of Estimates
      The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
      contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
      reporting period. Actual results could differ from those estimates.

      Cash and cash equivalents
      Cash and cash equivalents include cash on hand, cash on deposit with banks and financial instruments with original maturities of three
      months or less.

                                                                        F-7
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Index to Financial Statements

                                                 Notes to Consolidated Financial Statements
                                              (dollars in thousands, except per share and store data)

      Concentration of Credit Risk
      The Company maintains cash balances at more than one financial institution. The Company places its cash with high credit quality
      financial institutions. The credit risk is the amount on deposit in excess of federally insured limits. The Company has not experienced any
      losses in such accounts. The Dodd-Frank Wall Street Reform and Consumer Protection Act provides temporary, unlimited deposit
      insurance coverage for non-interest bearing transaction accounts at all FDIC-insured depository institutions through December 31, 2012.
      The Company believes it is not exposed to any significant credit risks on cash since its deposits are maintained with FDIC-insured
      depository institutions in noninterest-bearing accounts.

      Vendor Concentration
      The percentage of inventory purchased from the Company’s top two vendors each fiscal year is as follows:

                                Fiscal Year                                                         % of Inventory Purchases
                                2008                                                                    25% and 15%
                                2009                                                                    16% and 14%
                                2010                                                                    25% and 15%

      Accounts Receivable
      Accounts receivable are generated primarily through sales to franchisees and retailers and are presented at estimated net realizable value
      based on a specific review of outstanding customer balances and historical customer write-off amounts. Provisions for doubtful accounts
      are charged to operations at the time management determines these accounts may become uncollectible. No allowance was provided as of
      January 31, 2010 and January 30, 2011.

      Inventory
      The Company’s inventories are stated at the lower of cost, weighted-average method for stores and first-in, first-out basis for its
      warehouse, or market, based on replacement cost. The Company records inventory purchases when title and risk of loss transfer to the
      company, which generally is at the time they are delivered to the carrier for shipment to the Company.
      The Company reviews its inventory to identify and record reserves for obsolete inventory and inventory shrinkage at each reporting date.

      Property and Equipment
      Property, plant and equipment is stated at cost less accumulated depreciation. Expenditures for replacements are capitalized, and the
      replaced items are retired. Repairs that significantly extend the lives of equipment are capitalized, while routine repairs and maintenance
      are expensed when incurred. When property and equipment are retired, sold, or otherwise disposed of, the resulting gain or loss is
      recognized in selling, general and administrative expense on our Consolidated Statement of Operations and the corresponding cost and
      accumulated depreciation is removed from our Consolidated Balance Sheet. Depreciation is computed using the straight-line method over
      the estimated lives of the related assets generally ranging from three to ten years. Leasehold improvements are depreciated over the
      shorter of the estimated useful lives of the assets or the lease term.

                                                                       F-8
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Index to Financial Statements

                                                  Notes to Consolidated Financial Statements
                                               (dollars in thousands, except per share and store data)

      Goodwill
      The Company accounts for goodwill in accordance with ASC 350, Intangibles—Goodwill and Other ( “ASC 350”). The Company does
      not amortize goodwill. Management reviews goodwill for impairment each year on October 1 and whenever events or changes in
      circumstances indicate that the carrying value may not be recoverable. In testing for impairment, management calculates the fair value of
      the reporting units to which the goodwill relates based on the fair value of the Company as a whole. The fair value of the Company is the
      amount for which the Company could be sold in a current transaction between willing parties. The Company estimates its fair value using
      the discounted cash flow method. The operating assumptions used in the discounted cash flow calculation are consistent with the
      Company’s projections and assumptions that are used in the Company’s current operating plans. Such assumptions are subject to change
      as a result of changing economic and competitive conditions. If the Company’s carrying value exceeds its fair value, goodwill is written
      down to its implied fair value. The Company has concluded that it operates in one reporting unit. No impairment losses were recorded
      during fiscal 2008, 2009 and 2010.

      Impairment of Long-Lived Assets
      The Company assesses its long-lived assets, principally property and equipment, for possible impairment whenever events or changes in
      circumstances, such as unplanned negative cash flows, indicate the carrying value of an asset or asset group may not be recoverable. If
      circumstances indicate impairment, the carrying amount of the asset is written down to fair value. The Company identified no such
      impairment losses during fiscal 2008, 2009 and 2010.

      Self-Funded Medical Insurance
      During the fiscal year ended January 30, 2011, the Company moved from a fully insured to a self-funded medical insurance plan. The
      Company contracted with an administrative service company or a “third party administrator” to supervise and administer the program and
      act as the Company’s fiduciary and representative. The Company has reduced its risk under this self-funded plan by purchasing both
      specific and aggregate stop-loss insurance coverage for individual claims and total annual claims in excess of prescribed limits. The
      Company records estimates for claim liabilities based on information provided by the third-party administrators, historical claims
      experience, the life cycle of claims, expected costs of claims incurred but not paid, and expected costs to settle unpaid claims. The
      Company monitors its estimated insurance-related liabilities on a monthly basis. As facts change, it may become necessary to make
      adjustments to these estimates that could be material to our results of operations and financial condition. This liability is subject to a total
      limitation that varies based on employee enrollment and factors that are established at each annual contract renewal. Actual claims
      experience may differ from the Company’s estimates. Costs related to the administration of the plan and related claims are expensed as
      incurred. The total liability for self-funded medical insurance was $275 as of January 30, 2011.

      Revenue Recognition
      Revenue from the sale of the Company’s products is recognized upon customer receipt of the product when collection of the associated
      receivables is reasonably assured, persuasive evidence of an arrangement exists, the sales price is fixed and determinable and ownership
      and risk of loss have been transferred to the customer, in accordance with ASC 605-10-S25, Revenue Recognition—Overall (“ASC 605”).
      Sales are recognized upon the delivery of product to customers if in stores, or upon the shipment of products to customers that are outside
      of stores. Amounts related to shipping and handling that are billed to customers

                                                                         F-9
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Index to Financial Statements

                                                 Notes to Consolidated Financial Statements
                                              (dollars in thousands, except per share and store data)

      are reflected in net sales and the related costs are reflected in cost of goods sold. The Company presents sales taxes on a net basis.
      “Tea-of-the-month” club subscription sales are carried as a liability and recognized as revenue as products are shipped to customers over
      the subscription period. Our policy is not to allow the return of tea and food products and certain merchandise items once they have been
      purchased by or delivered to the customers. A number of other merchandise items can be returned within 30 days. To date, product
      returns have been immaterial.
      The Company sells gift cards with no expiration dates or administrative fees to customers. The Company recognizes income from gift
      cards when they are redeemed by the customer. In addition, the Company recognizes income from unredeemed gift cards (“gift card
      breakage”) when it can determine that the likelihood of the gift card being redeemed is remote. The Company recognizes revenue from
      gift card breakage based on historical redemption rates. The Company accumulated sufficient historical data to determine the gift card
      breakage rate during the fiscal year ended January 30, 2011. Revenue from gift card breakage is included in net sales in the Consolidated
      Statements of Operations. During fiscal 2010, the Company recognized $249 in income before income taxes related to the initial
      recognition of revenue from gift card breakage. The deferred revenue attributable to gift cards and tea-of-the-month club subscriptions at
      January 31, 2010 and January 30, 2011 was $1,083 and $1,344, respectively.

      Franchise and Royalty Fees
      As of January 30, 2011, Teavana had 13 franchised stores in Mexico and two in the United States. The Company’s franchise agreements
      generally provide franchise rights for a period of 10 to 15 years. Initial franchise fees received in connection with newly franchised stores
      are recognized when obligations of the related franchise agreement are met. Continuing royalty fees are reported monthly when earned
      and are computed based on a certain percentage of the franchise store’s net sales. Franchise royalty income of $121, $151 and $248 for
      fiscal 2008, 2009 and 2010, respectively, is included in net sales in the Consolidated Statements of Operations. Deferred revenue
      attributable to the initial development fee for the Company’s franchise stores in Mexico at January 31, 2010 and January 30, 2011 was
      $600 and $525, respectively. Deferred revenue from this initial development fee was recognized in the amounts of $94, $38 and $75 in
      fiscal 2008, 2009 and 2010, respectively, and is included within net sales in the Consolidated Statements of Operations.

      Cost of Goods Sold
      Cost of goods sold includes the direct costs of our products, freight and shipping costs, distribution center costs and occupancy costs for
      stores in operation. Cost of goods sold excludes depreciation and amortization expenses.

      Selling, General and Administrative Expense
      Selling, general and administrative expense consists primarily of store operating expenses, store pre-opening expenses and other
      administrative expenses. Store pre-opening costs are expensed as incurred.

      Stock-based Compensation
      The Company grants stock options for a fixed number of shares to key employees and certain directors. The Company accounts for stock
      options in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”). ASC 718 requires compensation costs related
      to stock-based payments, including stock options and other equity awards, to be measured based on the grant date fair value of the awards
      expected to vest, with the cost recognized over the vesting period.

                                                                       F-10
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Index to Financial Statements

                                                 Notes to Consolidated Financial Statements
                                              (dollars in thousands, except per share and store data)

      Accrued Compensated Absences
      The Company provides its employees with paid leave that varies in duration based on years of service to the Company. After 90 days of
      service, the Company grants leave benefits to all full-time employees. The Company accrues the value of the annual leave ratably over
      the year in which the employees’ services are performed. The Company’s policy provides for a carry-forward of unused balances of up to
      40 hours as of October 31 each year. The Company had $276 and $351 accrued for paid leave as of January 31, 2010 and January 30,
      2011, respectively.

      Leases
      The Company has operating lease agreements with various landlords. These agreements generally have scheduled rent increases. The
      Company recognizes lease expenses on a straight-line basis over the lease term, beginning when the Company is granted possession of
      the leased premises. Tenant allowances are recorded as deferred rent and are amortized as a reduction of rent expense over the lease term.

      Advertising Costs
      Advertising costs consist primarily of advertising expense associated with the Company’s store leases and are expensed as incurred. Total
      advertising expense was $671, $1,354 and $2,430 for fiscal 2008, 2009 and 2010, respectively, and is included in selling, general and
      administrative expense in the Consolidated Statements of Operations.

      Capitalized Financing Costs
      Costs associated with the establishment of the revolving credit facility (see Note 5) were capitalized and amortized to interest expense
      using the straight-line method through the end of its agreement date. Interest expense recognized for capitalized financing costs amounted
      to $214, $135 and $135 in fiscal 2008, 2009 and 2010, respectively. Capitalized financing costs are included in other non-current assets in
      the Consolidated Balance Sheets.

      Income Taxes
      The Company’s income tax policy is to record the estimated future tax effects of temporary differences between the tax bases of assets
      and liabilities and amounts reported in the accompanying Consolidated Balance Sheets, as well as operating loss and tax credit
      carry-forwards. The value of the Company’s deferred tax assets assumes that the Company will be able to generate sufficient future
      taxable income in applicable tax jurisdictions, based on the Company’s estimates and assumptions. If these estimates and related
      assumptions change in the future, the Company may be required to record valuation allowances against its deferred tax assets resulting in
      an addition to the provision for income taxes in the Company’s Consolidated Statements of Operations. In assessing the realizability of
      deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be
      realized, and the Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, carry-back
      opportunities and tax-planning strategies in making this assessment. The Company assesses the need for valuation allowances quarterly.
      The calculation of income tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of
      complex tax laws. An update to ASC 740, Accounting for Income Taxes

                                                                       F-11
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Index to Financial Statements

                                                 Notes to Consolidated Financial Statements
                                              (dollars in thousands, except per share and store data)

      (“ASC 740”), provides further clarification on the accounting for uncertainty in income taxes recognized in the financial statements. The
      impact of an uncertain income tax position on an income tax return must be recognized at the largest amount that has a greater than 50%
      cumulative probability to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be
      recognized if it has less than a 50% likelihood of being sustained. The new threshold and measurement attribute prescribed by the FASB
      will continue to require significant judgment by management. The Company adopted ASC No. 740-10 Accounting for Uncertainty in
      Income Taxes , as of February 2007 with no cumulative effect adjustment recorded at adoption. As of January 30, 2011 and for all periods
      presented, the Company has no liability with respect to unrecognized tax benefits. The Company records interest and penalties associated
      with unrecognized tax positions within income tax expense in the Consolidated Statements of Operations.

      Net Income per Share
      Basic net income per share is calculated using the weighted average number of common shares outstanding for the period. Diluted net
      income per common share is calculated using the weighted average number of common shares outstanding plus the additional dilution for
      all potentially dilutive stock options using the treasury stock method.

      Recently Adopted Accounting Pronouncements
      In January 2010, FASB issued Accounting Standards Update (“ASU”) 2010-06 to Topic 820— Fair Value Measurements and
      Disclosures (“ASU 2010-06”). ASU 2010-06 provided requirements of new disclosures of significant transfers in and out of Levels 1 and
      2, and expanded disclosure of activity in Level 3 (see Note 7). ASU 2010-06 also clarified existing disclosures around the level of
      disaggregation of each class of assets and liabilities, and about fair value inputs and valuation techniques for Level 2 and Level 3. ASU
      2010-06 was effective for interim and annual reporting periods beginning after December 15, 2009 for existing disclosures and becomes
      effective for fiscal years beginning after December 15, 2010 for disclosure of purchases, sales, issuances and settlements in the
      roll-forward activity in Level 3 fair value measurements. Adoption of ASU 2010-06 did not have a material impact on the Company’s
      Consolidated Financial Statements.

      Accounting Pronouncements Not Yet Adopted
      In December 2010, the FASB issued ASU 2010-28 to Topic 350— Intangibles—Goodwill and Other: When to Perform Step 2 of the
      Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (“ASU 2010-28”). ASU 2010-28 modifies Step
      1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is
      required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. Goodwill of a
      reporting unit is required to be tested for impairment between annual tests if an event occurs or circumstances change that would more
      likely than not reduce the fair value of a reporting unit below its carrying amount. ASU 2010-28 is effective starting in the first quarter of
      2011 with early adoption not permitted. Adoption of ASU 2010-28 is not expected to have a material impact on the Company’s financial
      statements.
      There were various other accounting standards and interpretations issued during 2009 and 2010 that the Company has not yet been
      required to adopt, none of which are expected to have a material impact on the Company’s financial statements and the notes thereto.

                                                                        F-12
Table of Contents

Index to Financial Statements

                                                  Notes to Consolidated Financial Statements
                                               (dollars in thousands, except per share and store data)

2.    Property and Equipment
      Property and equipment consists of the following:

                                                                                                    January 31,         January 30,
                                                                                                       2010                2011
             Leasehold improvements                                                                 $    27,781        $    38,282
             Equipment                                                                                    4,733              6,395
                                                                                                          32,514            44,677
             Less—Accumulated depreciation                                                               (10,001 )         (13,649 )
             Property and equipment, net                                                            $    22,513        $    31,028


      Depreciation expense was $2,543, $3,407 and $4,315 for fiscal 2008, 2009 and 2010, respectively.

3.    Other Current Liabilities
      Other current liabilities consists of the following:

                                                                                                 January 31,            January 30,
                                                                                                    2010                   2011
             Accrued compensation and payroll taxes                                             $        1,805         $      2,235
             Accrued inventory in transit                                                                  576                1,441
             Other                                                                                       1,014                1,863
                                                                                                $        3,395         $      5,539



4.    Note Payable
      The Company had a note payable issued to a vendor in the amount of $250. The note did not bear any interest, did not require any
      installment payments and was due upon the earlier of 30 days after receipt of written notice of demand from the vendor, or June 1, 2012.
      The Company repaid the full amount of this note on November 11, 2010. The Company had no further obligations from this note payable
      to the vendor as of January 30, 2011.

5.    Long-term Debt
      On June 12, 2008, the Company established a three-year revolving credit facility by entering into a loan and security agreement (the
      “Credit Agreement”) with Fifth Third Bank. The Credit Agreement provides for a revolving credit facility of up to $25,000 through
      June 12, 2011. The maximum availability of the revolving credit facility is $15,000, $20,000 and $25,000 in years one, two and three,
      respectively, of the agreement, less the undrawn face amount of any letters of credit outstanding. The Credit Agreement is secured by
      substantially all of the assets of the Company. The revolving credit facility under the Credit Agreement had a balance outstanding of
      $1,000, undrawn face amounts on letters of credit of $339, and availability of $23,661 on January 30, 2011.
      The revolving credit facility in the Credit Agreement bears interest at a rate of LIBOR plus a range of 2.75% to 3.50% or at a rate of the
      lender’s base commercial lending rate plus a range of 0.25% to 1.00%. The rate used within the ranges is determined based on the
      Company’s consolidated leverage ratio, as defined, on quarterly measurement dates. The balance under the revolving credit facility on
      January 30, 2011 contained

                                                                        F-13
Table of Contents

Index to Financial Statements

                                                Notes to Consolidated Financial Statements
                                             (dollars in thousands, except per share and store data)

      $1,000 under the LIBOR pricing method (3.75% at January 30, 2011) and $0 under the base lending rate pricing method (3.01% at
      January 30, 2011).
      The Credit Agreement specifies the Company must comply with certain financial and non-financial covenants. The Credit Agreement
      does not permit the payment of any dividends and thus 100% of the Company’s net income is restricted for purposes of dividend
      payments. The Company was in compliance with these covenants on all respective measurement dates.
      On April 22, 2011 the Company entered into an amendment to the Credit Agreement that will extend the revolving credit facility for an
      additional five years through April 22, 2016 (see Note 15).

6.    Common and Preferred Stock
      The Company had 7,492,487 shares of Class A Common Stock, 2,431,909 shares of Class B Redeemable Common Stock and 10,683,333
      shares of Series A Redeemable Preferred Stock outstanding on January 30, 2011 and January 31, 2010. The Class A Common Stock and
      Class B Redeemable Common Stock entitles the holder to one vote per share. The Series A Redeemable Preferred Stock is non-voting.
      The Series A Redeemable Preferred Stock is senior to the Class A Common Stock and the Class B Redeemable Common Stock. In the
      event of a liquidation event, dissolution or winding up of the business, each holder of the Series A Redeemable Preferred Stock then
      outstanding will be entitled to be paid out of the assets of the Company, available for distribution to its stockholders, before any payment
      will be made or assets distributed to the holders of the Class A Common Stock or Class B Redeemable Common Stock. The holders of
      the Class A Common Stock and Class B Redeemable Common Stock are entitled to share ratably in the assets remaining after payment of
      liabilities and the redemption value of any outstanding preferred stock. The Series A Redeemable Preferred Stock also contains
      preferences in the declaration of dividends. The holders of the Class A Common Stock and Class B Redeemable Common Stock are
      entitled to receive dividends declared by the Board of Directors on a pro-rata basis after distribution to the holders of the Series A
      Redeemable Preferred Stock.
      The shares of Class B Redeemable Common Stock may be convertible into an equivalent number of shares of Class A Common Stock at
      any time at the option of the holder and shall automatically convert upon (i) the sale, transfer, assignment or conveyance to a competitor
      or (ii) the consummation of a qualified public offering (as defined). After December 15, 2011, each holder of shares of Class B
      Redeemable Common Stock has the right to require the Company to redeem its shares by delivery of written notice to the Company.
      Within 60 days of the notice, the Company is required to pay an amount in cash to each holder equal to the fair market value of the shares
      of the Class B Redeemable Common Stock. Due to this contingent redemption feature, the Class B Redeemable Common Stock is
      classified in the Consolidated Balance Sheets as temporary equity rather than stockholders’ equity, with adjustments to the fair value of
      the Class B Redeemable Common Stock made at each reporting date.
      The Series A Redeemable Preferred Stock was issued on December 15, 2004 with a mandatory redemption date upon the earlier of an
      initial public offering or December 15, 2011, (“Redemption Date”). The Series A Redeemable Preferred Stock contains a liquidation
      preference of $1.00 per share, with annual accretion at a rate of 5% and accretion of a debt discount from December 15, 2004 through the
      Redemption Date that are included in interest expense on the Consolidated Statements of Operations. The liquidation preference, or
      “Redemption Value,” will increase each year based on the accretion of the shares. However the annual accretion of the Redemption
      Value will be forgiven at the Redemption Date upon the Company consummating a liquidity event or public offering in respect of which
      the fair market value of the initial public offering exceeds $82,800, as specified in the Company’s Amended and Restated Certificate of
      Incorporation. In accordance with ASC 480, Distinguishing Liabilities from Equity , the Company classifies

                                                                      F-14
Table of Contents

Index to Financial Statements

                                                   Notes to Consolidated Financial Statements
                                                (dollars in thousands, except per share and store data)

      the Series A Redeemable Preferred Stock as a liability on the accompanying Consolidated Balance Sheets. The Redemption Value as of
      January 31, 2010 and January 30, 2011 was $13,722 and $14,408, respectively. Scheduled increases to the redemption value of Series A
      Redeemable Preferred Stock for the fiscal year ending January 29, 2012, are $658.

7.    Fair Value Measurements
      The guidance for fair value measurements establishes the authoritative definition of fair value, sets out a framework for measuring fair
      value and outlines the required disclosures regarding fair value measurements. Fair value is the price that would be received to sell an
      asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between
      market participants at the measurement date. The Company uses a three-tier fair value hierarchy based upon observable and
      non-observable inputs as follows:
              •       Level 1: Quoted market prices in active markets for identical assets or liabilities.
              •       Level 2: Inputs other than Level 1 that are either directly or indirectly observable.
              •       Level 3: Unobservable inputs developed using the Company’s estimates and assumptions which reflect those that market
                      participants would use.
      The Company’s financial instruments consist primarily of its Class B Redeemable Common Stock, classified as temporary equity, which
      is measured using Level 3 inputs. Changes in the observability of valuation inputs may result in transfers within the fair value
      measurement hierarchy. The Company did not identify any transfers among levels of the fair value measurements hierarchy during fiscal
      2009 and 2010.
      The Company’s assets and equity balances measured at fair value on a recurring basis consisted of the Class B Redeemable Common
      Stock as of January 31, 2010 and January 30, 2011:

                                                                                           Fair Value Hierarchy Category
                                                                       Level 1                         Level 2                        Level 3
             January 31, 2010                                     $              —               $             —                  $        21,888
             January 30, 2011                                                    —                             —                           81,401
      The following table presents the change in the estimated fair value of the Class B Redeemable Common Stock measured using significant
      unobservable inputs (Level 3):

                                                                                         February 1,                January 31,               January 30,
                                                                                            2009                       2010                      2011
      Fair value measurement at beginning of period                                  $        12,160            $        15,808           $        21,888
      Change in fair value recorded in accumulated deficit                                     3,648                      6,080                    59,513
      Fair value measurement at end of period                                        $        15,808            $        21,888           $        81,401


      The Class B Redeemable Common Stock is remeasured to fair value each reporting period. The changes in fair value are recorded
      directly to equity and are based on the change in the underlying fair value of the Company’s stock price during each fiscal year presented.
      The fair value of the stock price is the amount for which the stock price could be sold in a current transaction between willing parties. The
      Company estimates its fair value using primarily a discounted cash flow model. The operating assumptions used in the discounted cash
      flow model are generally consistent with the Company’s past performance and with the projections and assumptions that are used in the
      Company’s current operating plans. Such assumptions are subject to change as a result of changing economic and competitive conditions.

                                                                          F-15
Table of Contents

Index to Financial Statements

                                                 Notes to Consolidated Financial Statements
                                              (dollars in thousands, except per share and store data)

8.    Net income per share
      The following table sets forth the computation of basic and diluted net income per share in accordance with ASC 260, Earnings per Share
      (“ASC 260”). Basic net income per share is calculated by dividing net income by the weighted-average common shares outstanding
      during the period. Diluted net income per share is calculated by dividing net income by the weighted-average number of common shares
      plus potentially dilutive common shares, primarily consisting of the Company’s non-qualified stock options, outstanding during the
      period. The treasury stock method was used to determine the dilutive effect of the stock options. The following table details the
      calculation of basic and diluted net income per share:

                                                                                                     Year ended
                                                                           February 1,                January 31,              January 30,
                                                                              2009                       2010                     2011
      Numerator:
         Net Income                                                    $           1,197         $            5,291        $         12,003

      Denominator:
          For basic net income per share-weighted average
            shares basis                                                       9,924,396                 9,924,396                9,924,396
          Effect of dilutive stock options                                        93,398                   154,671                  263,468
            Denominator for diluted net income per
              share-adjusted weighted average shares basis                  10,017,794                  10,079,067              10,187,864

      Net income per share:
               Basic                                                   $            0.12         $             0.53        $            1.21
               Diluted                                                 $            0.12         $             0.53        $            1.18
      As of January 30, 2011, the Company had 7,492,487 and 2,431,909 shares of Class A Common stock and Class B Redeemable Common
      Stock, respectively, outstanding. The Class A Common Stock and Class B Redeemable Common Stock share equally in rights to
      dividends and undistributed earnings and also share equally in voting rights. As a result, the two class method was not required for
      computation of net income per share.
      The Company has not issued stock-based payment awards to date that meet the criteria of participating securities.

9.    Leases
      The Company has entered into operating leases for its stores, distribution center and store support center. Initial lease terms for stores are
      generally ten years with rent escalations and no renewal options. Rent expense for leases with rent escalations is recognized on a
      straight-line basis over the term of the lease. The leases are net leases under which the Company pays the taxes, insurance and common
      area maintenance costs. The leases may also provide for both minimum rent payments and contingent rentals based on a percentage of
      sales in excess of specified amounts. In certain leases, the landlord also charges the Company a portion of its marketing expense.

                                                                        F-16
Table of Contents

Index to Financial Statements

                                                       Notes to Consolidated Financial Statements
                                                    (dollars in thousands, except per share and store data)

      Total minimum and contingent rent expense were as follows:

                                                                                                  Fiscal Year ended
                                                                 February 1, 2009                  January 31, 2010                   January 30, 2011
             Minimum rentals                                 $              6,234                 $           8,464               $             11,000
             Contingent rentals                                                36                                51                                127
                    Total                                    $              6,270                 $           8,515               $             11,127


      Future minimum lease payments for noncancelable operating leases with an initial term of one year or more are as follows:

                            Fiscal year ended in:                                                                             Amount
                            2012                                                                                        $        12,314
                            2013                                                                                                 12,782
                            2014                                                                                                 13,091
                            2015                                                                                                 13,317
                            2016                                                                                                 13,000
                            Thereafter                                                                                           46,746
                                                                                                                        $       111,250



10.   Stock-Based Compensation
      Under the Company’s 2004 Management Incentive Plan (the “Plan”), adopted on December 15, 2004, up to 500,000 stock options may
      be granted to certain employees and outside directors or advisors to purchase a fixed number of shares of the Company’s Class A
      Common Stock at prices not less than 100% of the estimated fair market value at the date of grant. All stock-based awards issued under
      the plan are non-qualified stock options.
      The Company accounts for stock-based awards in accordance with ASC Topic 718, Compensation—Stock Compensation (“ASC 718”).
      ASC 718 requires measurement of compensation cost for all stock-based awards at fair value on the grant date (or measurement date, if
      different) and recognition of compensation expense, net of forfeitures, over the requisite service period for awards expected to vest.
      Stock-based compensation expense was $207, $169 and $157 for fiscal 2008, 2009 and 2010, respectively. Compensation cost is
      recognized on a pre-tax basis.
      The fair value of stock options was estimated at the date of grant using the Black-Scholes option pricing model. The Black-Scholes
      option pricing model was developed for use in estimating the fair value of traded options with characteristics not present in these
      employee stock options. Stock option pricing models require the input of highly subjective assumptions, including the expected volatility
      of the stock price. Because the Company’s stock options have characteristics significantly different from those of traded options and
      because changes in these subjective input assumptions can materially affect the fair value estimates, in management’s opinion, the
      existing models may not provide a reliable single measure of the fair value of its stock-based awards. The Company estimated the fair
      value of options with the following assumptions:

                                                                                    February 1,                 January 31,                January 30,
                                                                                       2009                        2010                      2011 (1)
             Expected life (years) (2)                                                     6.25                        6.25                        N/A
             Risk-free interest rate (3)                                              2.7% - 3.1 %                      2.3 %                      N/A
             Volatility (4)                                                            35% - 37 %                        53 %                      N/A
             Dividend yield (5)                                                                0%                         0%                       N/A

                                                                                F-17
Table of Contents

Index to Financial Statements

                                                            Notes to Consolidated Financial Statements
                                                         (dollars in thousands, except per share and store data)
        (1)   The Company did not grant stock options during fiscal 2010.
        (2)   Represents the period of time options are expected to remain outstanding. As the Company has only awarded “plain vanilla options” as described by ASC 718-10-S99,
              Compensation—Stock Compensation: Overall: SEC Materials , the Company used the “simplified method” for determining the expected life of options granted. The
              simplified method calculates the expected term as the sum of the vesting term and the original contract term divided by two. The Company will continue to use the simplified
              method until such time that it has sufficient historical data for options to estimate the expected term of stock-based awards.
        (3)   Based on the US Treasury yield curve in effect at the time of grant.
        (4)   Expected stock price volatility is based on the Company’s peer group average implied volatility.
        (5)   The Company has not paid regular dividends on its common stock and does not expect to pay dividends on its common stock in the foreseeable future.

      The following table represents stock options granted, cancelled or expired under the plan during fiscal 2008, 2009 and 2010. There were
      no options that expired or that were exercised during each of these periods:

                                                                                                                                                          Weighted
                                                                                                                                                          Average
                                                                                                                           Options                      Exercise Price
              Outstanding at February 3, 2008                                                                               364,500                 $             4.23
                  Granted                                                                                                    88,500                               6.08
                  Cancelled or expired                                                                                       (2,000 )                             5.00
              Outstanding at February 1, 2009                                                                               451,000                               4.59
                  Granted                                                                                                    49,000                               9.00
                  Cancelled or expired                                                                                          —                                  —
              Outstanding at January 31, 2010                                                                               500,000                               5.02
                  Granted                                                                                                       —                                  —
                  Cancelled or expired                                                                                          —                                  —
              Outstanding at January 30, 2011                                                                               500,000                 $             5.02


      The weighted-average grant-date fair value of stock options granted during fiscal years 2008 and 2009 was $2.43 and $4.77, per stock
      option.

                                                                                          F-18
Table of Contents

Index to Financial Statements

                                                 Notes to Consolidated Financial Statements
                                              (dollars in thousands, except per share and store data)

      Under the Plan, options generally become exercisable over a four-year period and expire ten years from the date of grant. Option grants
      generally vest 25% on each anniversary of the grant date, commencing with the first anniversary. As of January 31, 2010, the Company
      had granted all available stock options under the Plan. The following is a summary of the changes in the Company’s non-vested stock
      options for fiscal years ended February 1, 2009, January 31, 2010 and January 30, 2011:

                                                                                                                              Weighted
                                                                                                                              Average
                                                                                                       Number of             Grant-Date
                                                                                                        Shares               Fair Value
             Non-vested stock options outstanding at February 3, 2008                                       222,000         $       1.85
                 Granted                                                                                     88,500                 2.43
                 Vested                                                                                     (90,625 )               1.82
                 Cancelled or expired                                                                        (2,000 )               2.12
             Non-vested stock options outstanding at February 1, 2009                                        217,875                2.10
                 Granted                                                                                      49,000                4.77
                 Vested                                                                                     (107,125 )              1.95
                 Cancelled or expired                                                                            —                   —
             Non-vested stock options outstanding at January 31, 2010                                       159,750                 3.01
                 Granted                                                                                        —                    —
                 Vested                                                                                     (60,000 )               2.69
                 Cancelled or expired                                                                           —                    —
             Non-vested stock options outstanding at January 30, 2011                                         99,750        $       3.20


      The total fair value of vested stock options was $165, $209, and $162 during fiscal 2008, 2009 and 2010, respectively. As of January 30,
      2011, there was $247 of total unrecognized compensation cost related to non-vested stock option awards. The compensation cost is
      expected to be recognized through fiscal 2013, based on existing vesting terms with the weighted average remaining expense recognition
      period being approximately 2.6 years. Additionally, these non-vested options could vest earlier in the event of a change of control or
      initial public offering resulting in immediate recognition of unrecognized compensation cost.
      The options outstanding at January 30, 2011, are summarized below:

                                                                                                                            Average
                                                                                                                          Remaining
                           Number of                                                                                      Contractual
                             Shares                         Options                                                      Life (in Year
                           Outstanding                     Exercisable                     Exercise Price                      s)
                                    327,500                        317,500             $             4.14                    4.9
                                     35,000                         26,250                           5.00                    6.8
                                     75,000                         37,500                           6.00                    7.2
                                     13,500                          6,750                           6.50                    7.6
                                     49,000                         12,250                           9.00                    8.8
                                    500,000                        400,250                                                   5.8


      There were 400,250 options exercisable as of January 30, 2011 with a weighted average exercise price of $4.56 per share and intrinsic
      value of $790.

                                                                         F-19
Table of Contents

Index to Financial Statements

                                                     Notes to Consolidated Financial Statements
                                                  (dollars in thousands, except per share and store data)

11.   Related Party Transaction s
      In December 2007, the Company made a loan in the principal amount of $50 at an annual interest rate of 10% to an officer of the
      Company. On March 21, 2011, the Company forgave the entire principal amount of the loan, plus accrued and unpaid interest thereon, in
      consideration of the Company’s repurchase of unexercised options to purchase 2,520 shares of the Company’s Class A Common Stock
      granted in June 2005. The outstanding balance of the loan as of January 30, 2011, including principal and interest, was $75 and is
      included in prepaid expenses and other assets on our Consolidated Balance Sheets.
      The Company has employment contracts with two executive officers who are also holders of Class A Common Stock. The contracts
      provide for severance compensation if the executives are terminated.
      In December 2004, we entered into a contract to provide financial advisory and management services to the Company with SKM Growth
      Investors, L.P., the predecessor entity to Parallel Investment Partners, LLC (the “Advisor”). Parallel manages certain investments on
      behalf of SKM Equity Fund III, L.P., a private-equity investment fund that holds substantially all of the ownership interest in one of our
      stockholders. The fee was $250 for calendar years 2008, 2009 and 2010, with subsequent annual fees to be negotiated by the parties. This
      contract will expire when the Advisor and its affiliates (including, without limitation, SKM Equity Fund III, L.P.) cease to own certain
      percentages of Class B Redeemable Common Stock and Series A Redeemable Preferred stock as specified in the contract.

12.   Income Taxes
      The deferred income tax assets and liabilities as presented in the accompanying balance sheets consisted of the following amounts:

                                                                                                            January 31,     January 30,
                                                                                                               2010            2011
      Deferred income tax assets:
          Deferred rent liability                                                                           $     1,462     $     2,931
          Inventory reserve                                                                                         587           1,274
          Deferred revenue                                                                                          578             633
          Stock compensation expense                                                                                249             318
          Accrued vacation                                                                                           67              87
          Other liabilities                                                                                          43             263
                    Total deferred income tax assets                                                              2,986           5,506

      Deferred income tax liabilities:
          Book versus income tax depreciation difference                                                         (1,746 )        (3,873 )
          Prepaid expenses                                                                                         (275 )          (424 )
          Intangibles                                                                                                (9 )           —
                    Total deferred income tax liability                                                          (2,030 )        (4,297 )
                    Net deferred tax assets                                                                 $       956     $     1,209

      Deferred income tax asset, current                                                                    $       772     $     1,629
      Deferred income tax asset, non-current                                                                        184             —
      Deferred income tax liability, non-current                                                                    —              (420 )
                    Net deferred tax assets                                                                 $       956     $     1,209


                                                                           F-20
Table of Contents

Index to Financial Statements

                                                Notes to Consolidated Financial Statements
                                             (dollars in thousands, except per share and store data)

      The significant components of the provision for income taxes are as follows:

                                                                   February 1, 2009                  January 31, 2010                January 30, 2011
      Current
          Federal                                              $              1,822              $              3,106            $              7,183
          State                                                                 290                               832                           1,976
      Total current                                                           2,112                             3,938                           9,159
      Deferred
          Federal                                                              (548 )                             486                             188
          State                                                                 (62 )                              46                            (441 )
      Total deferred                                                           (610 )                             532                            (253 )
      Total                                                    $              1,502              $              4,470            $              8,906


      The provision for income taxes recorded differs from the federal statutory rate primarily due to state income tax expense and
      nondeductible expense which primarily consists of the accretion of the Series A Redeemable Preferred Stock. The reconciliation to the
      federal statutory rate is as follows:

                                                   February 1, 2009                         January 31, 2010                 January 30, 2011
      Provision at federal statutory rate      $      917                34.0 %         $   3,319               34.0 %   $    7,318             35.0 %
      State income taxes, net                         149                 5.5 %               460                4.7 %          954              4.5 %
      Series A Redeemable Preferred
        Stock accretion                               508                18.8 %               609                6.2 %          750              3.6 %
      Nondeductible business expenses,
        net                                             25                0.9 %                26                0.3 %           38              0.2 %
      Provision to return                               16                0.6 %                56                0.6 %          (65 )           (0.3 )%
      Deferred tax adjustment                         (109 )             (4.0 )%              —                  0.0 %          —                0.0 %
      Other, net                                        (4 )             (0.1 )%              —                  0.0 %          (89 )           (0.4 )%
      Effective tax rate                       $     1,502               55.7 %         $   4,470               45.8 %   $    8,906             42.6 %


      In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of
      the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
      taxable income during the periods in which those temporary differences become deductible. The Company considers projections of future
      taxable income, tax planning strategies and the reversal of temporary differences in making this assessment. The Company has
      determined that no such valuation allowance is necessary as of January 31, 2010 and January 30, 2011.
      The Company adopted ASC 740-10, as of January 29, 2007 with no cumulative effect adjustment recorded at adoption. As of January 30,
      2011, and for all periods presented, the Company has no liability with respect to unrecognized tax benefits.
      The Company files federal, state, and local income tax returns in jurisdictions with varying statutes of limitation. The Company’s tax
      years for the fiscal years ended February 3, 2008 through January 30, 2011 generally remain subject to examination by federal and most
      state tax authorities. The audit of the Company’s US income tax return for fiscal 2007 was completed in fiscal 2009.

                                                                            F-21
Table of Contents

Index to Financial Statements

                                                 Notes to Consolidated Financial Statements
                                              (dollars in thousands, except per share and store data)

13.   Employee Benefit Plan
      The Company established the Teavana Corporation Retirement Savings Plan (the “Teavana 401(k) Plan”) on July 1, 2006. Under this
      plan, employees of the Company who are 21 years of age or older and that have completed six months of service are eligible to
      participate. The Company matches 100% of participant contributions up to 1% of participant compensation and 50% of participant
      contributions from 1% to 6% of a participant’s compensation.
      Company contributions to the Teavana 401(k) Plan were $184, $334 and $416 during fiscal 2008, 2009 and 2010, respectively.

14.   Commitments and Contingencies
      The Company is involved in various legal proceedings encountered in the normal course of business. In the opinion of management, the
      resolution of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

15.   Subsequent Events
      The Company has evaluated subsequent events from the balance sheet date to April 28, 2011, the date the Consolidated Financial
      Statements were available to be issued, and identified the following items.
      On April 22, 2011, the Company entered into an amendment to the existing loan and security agreement with Fifth Third Bank, which
      extends the maturity of this facility until April 22, 2016.
      Under the amended revolving credit facility, the borrowing capacity is equal to the lesser of (i) the Maximum Revolving Facility (as
      defined), less the undrawn face amount of any letters of credit outstanding at the time a drawdown on the revolving credit facility is
      made, and (ii) the Borrowing Base (as defined). The Maximum Revolving Facility is equal to (i) prior to August 1, 2011, $40,000,
      (ii) from August 1, 2011 to December 31, 2011, $50,000, and (iii) on and after December 31, 2011, $40,000. The Borrowing Base is
      defined as the sum of (i) 200% of Consolidated EBITDA (as defined) for the most recent trailing twelve-month period for which financial
      statements are available, minus (ii) the aggregate undrawn face amount of any letters of credit outstanding at the time a drawdown on the
      revolving credit facility is made, minus (iii) such reserves as may be established by the lender in its Permitted Discretion (as defined), but
      not to exceed 35% of the Borrowing Base. The revolving credit facility includes a $5.0 million sublimit for the issuance of letters of
      credit.
      Indebtedness incurred under the amended revolving credit facility will bear interest at a rate of LIBOR (subject to a minimum level of
      1.5%) plus an applicable margin of 4.50% or at a rate of the lender’s base commercial lending rate plus an applicable margin of 3.00%.
      The amended loan and security agreement includes customary negative and affirmative covenants. Indebtedness incurred under both the
      amended loan and security agreement and the original loan and security agreement is collateralized by substantially all of our assets.

                                                                       F-22
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Index to Financial Statements

                                                         TEAVANA HOLDINGS, INC.
                                            CONDENSED CONSOLIDATED BALANCE SHEETS
                                                (dollars in thousands, except per share data)

                                                                                                           January 30,        May 1,
                                                                                                              2011             2011
                                                                                                                            (unaudited)
Assets
Current assets
    Cash and cash equivalents                                                                             $     7,901       $    3,740
    Inventory                                                                                                  16,928           18,286
    Other current assets                                                                                        5,362            5,827
Total current assets                                                                                           30,191           27,853
     Property and equipment, net                                                                               31,028           34,795
     Goodwill                                                                                                   2,394            2,394
     Other non-current assets                                                                                     513              760
Total assets                                                                                              $    64,126       $   65,802


Liabilities, Redeemable Common Stock and Stockholders’ Deficit
Current liabilities
    Income taxes payable                                                                                  $      4,809      $     2,112
    Series A Redeemable Preferred Stock, $.0001 par value; 10,683,333 shares authorized, issued
        and outstanding                                                                                        12,992           13,591
    Other current liabilities                                                                                  10,514            9,659
Total current liabilities                                                                                      28,315           25,362
Long-term liabilities
    Deferred rent                                                                                                7,524            8,943
    Long-term debt                                                                                               1,000            1,000
    Other long-term liabilities                                                                                    945              870
Total long-term liabilities                                                                                      9,469          10,813
Total liabilities                                                                                              37,784           36,175

Commitments and contingencies (Note 10)                                                                            —                —
Redeemable common stock
    Class B Redeemable Common Stock, $.0001 par value; 50,000,000 shares authorized,
      2,431,909 issued and outstanding                                                                         81,401           87,253
Stockholders’ deficit
    Class A Common Stock, $.0001 par value; 50,000,000 shares authorized, 7,492,487 issued and
      outstanding                                                                                                   1                 1
    Additional paid-in capital                                                                                    —                 —
    Accumulated deficit                                                                                       (55,060 )         (57,627 )
Total stockholders’ deficit                                                                                   (55,059 )         (57,626 )
Total liabilities, redeemable common stock and stockholders’ deficit                                      $    64,126       $   65,802




                         The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

                                                                       F-23
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Index to Financial Statements

                                                         TEAVANA HOLDINGS, INC.
                                    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                              (unaudited)
                                             (dollars in thousands, except per share data)

                                                                                                               Thirteen Weeks Ended
                                                                                                     May 2, 2010                    May 1, 2011
Net sales                                                                                        $         25,773               $         34,939
Cost of goods sold (exclusive of depreciation shown separately below)                                      10,021                         12,451
Gross profit                                                                                               15,752                         22,488
Selling, general and administrative expense                                                                10,800                         14,758
Depreciation and amortization expense                                                                         973                          1,274
Income from operations                                                                                       3,979                          6,456
Interest expense, net                                                                                          623                            689
Income before income taxes                                                                                   3,356                          5,767
Provision for income taxes                                                                                   1,429                          2,444
Net income                                                                                       $           1,927              $           3,323


Net income per share:
         Basic                                                                                   $            0.19              $            0.33
         Diluted                                                                                 $            0.19              $            0.33
Weighted average number of shares outstanding:
         Basic                                                                                         9,924,396                      9,924,396
         Diluted                                                                                      10,119,503                     10,188,824




                         The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

                                                                      F-24
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Index to Financial Statements

                                                              TEAVANA HOLDINGS, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN REDEEMABLE COMMON STOCK
                                         AND STOCKHOLDERS’ DEFICIT
                                          (unaudited, unless specified audited)
                                        (dollars in thousands, except share data)

                                                                  Total
                                                               Redeemable                                                                         Total
                                 Class B Redeemable             Common              Class A Common            Paid-in     Accumulated         Stockholders’
                                   Common Stock                  Stock                    Stock               Capital        Deficit             Deficit
                                                                                                     Amoun
                                Shares           Amount                            Shares              t
Balance, January 30,
  2011 (audited)                2,431,909      $ 81,401       $   81,401           7,492,487         $    1   $   —       $   (55,060 )   $        (55,059 )
    Net income                        —             —                —                   —               —        —             3,323                3,323
    Change in fair
      value of class B
      redeemable
      common stock                       —            5,852        5,852                    —            —         38          (5,890 )              (5,852 )
    Stock-based
      compensation                       —             —             —                      —            —         37             —                       37
    Repurchase of
      stock-based
      awards                             —             —             —                      —            —        (75 )           —                     (75 )

Balance, May 1, 2011            2,431,909      $ 87,253       $   87,253           7,492,487         $    1   $   —       $   (57,627 )   $        (57,626 )




                         The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

                                                                            F-25
Table of Contents

Index to Financial Statements

                                                          TEAVANA HOLDINGS, INC.
                                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                         (unaudited)
                                                    (dollars in thousands)

                                                                                                                  Thirteen Weeks Ended
                                                                                                             May 2,                    May 1,
                                                                                                             2010                      2011
Cash flows from operating activities:
  Net income                                                                                                    1,927              $      3,323
    Adjustments to reconcile net income to net cash provided by (used in) operating activities:
       Depreciation and amortization expense                                                                      973                     1,274
       Non-cash interest expense                                                                                  570                       633
       Stock-based compensation                                                                                    34                        37
       Other                                                                                                      —                         140
       Changes in operating assets and liabilities:
         Inventory                                                                                               (571 )                  (1,359 )
         Other current assets                                                                                     181                       (81 )
         Income taxes payable                                                                                  (4,205 )                  (2,696 )
         Deferred rent                                                                                            457                     1,419
         Other accrued liabilities                                                                                305                    (1,548 )
           Net cash provided by (used in) operating activities                                                   (329 )                   1,142
Cash flows from investing activities:
  Purchase of property and equipment                                                                           (2,346 )                  (5,056 )
           Net cash used in investing activities                                                               (2,346 )                  (5,056 )
Cash flows from financing activities:
  Proceeds from revolving credit facility                                                                      29,815                   35,510
  Payments on revolving credit facility                                                                       (27,303 )                (35,510 )
  Payment of initial public offering costs                                                                        —                       (247 )
              Net cash provided by (used in) financing activities                                               2,512                      (247 )
           Net decrease in cash and cash equivalents                                                             (163 )                  (4,161 )
Cash and cash equivalents, beginning of fiscal period                                                           1,314                     7,901
Cash and cash equivalents, end of fiscal period                                                          $      1,151              $      3,740




                         The accompanying notes are an integral part of these Condensed Consolidated Financial Statements

                                                                      F-26
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Index to Financial Statements

                                           Notes to Condensed Consolidated Financial Statements
                                                                  (unaudited)
                                            (dollars in thousands, except per share and store data)

1.    Business and Summary of Significant Accounting Policies
      Nature of Business
      Teavana Holdings, Inc. (the “Company” or “Teavana”) is a specialty retailer of premium loose-leaf teas, authentic artisanal teawares and
      other tea-related merchandise. The Company offers its products through 161 company-owned stores in 35 states and franchised stores
      primarily in Mexico, as well as through its website.
      Basis of Presentation
      The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with U.S. generally
      accepted accounting principles (“US GAAP”) for interim financial information, and the Securities and Exchange Commission’s (“SEC”)
      guidance for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required
      by US GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring
      adjustments, considered necessary for a fair presentation of the unaudited condensed consolidated financial statements have been
      recorded in the interim periods presented. These unaudited, condensed consolidated financial statements should be read in conjunction
      with the Company’s audited, consolidated financial statements and related notes as of January 30, 2011 and January 31, 2010 and for the
      years ended January 30, 2011, January 31, 2010 and February 1, 2009.
      The accompanying condensed consolidated unaudited financial statements present results of operations for the thirteen weeks ended
      May 2, 2010 and May 1, 2011, respectively. These results are not necessarily indicative of the results that may be achieved for the year
      ending January 29, 2012, or any other period. The Company has evaluated subsequent events from the balance sheet date to June 9, 2011,
      the date the Condensed Consolidated Financial Statements were available to be issued, and did not identify any event that would require
      adjustment to or disclosure in the condensed consolidated financial statements.

      Principles of Consolidation
      The Condensed Consolidated Financial Statements include all the accounts of the Company and its wholly-owned subsidiaries. All
      intercompany transactions and balances have been eliminated in consolidation.

      Fiscal Year
      The Company’s fiscal year is 52 or 53 weeks ending on the Sunday nearest to January 31 of the following year. These condensed
      consolidated financial statements include the 13 weeks in each of the quarters ending May 2, 2010 and May 1, 2011, respectively.

      Seasonality
      The Company’s business is seasonal and has historically realized a higher portion of net sales, net income and operating cash flows in the
      fourth fiscal quarter due primarily to the holiday selling season. As a result, the Company’s working capital requirements fluctuate during
      the year increasing in the second and third fiscal quarters in anticipation of this peak selling season.

      Use of Estimates
      The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that
      affect the reported amounts of assets and liabilities and disclosures of

                                                                      F-27
Table of Contents

Index to Financial Statements

                                           Notes to Condensed Consolidated Financial Statements
                                                                   (unaudited)
                                             (dollars in thousands, except per share and store data)

      contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting
      period. Actual results could differ from those estimates.

      Recently Adopted Accounting Pronouncements
      In January 2010, FASB issued Accounting Standards Update (“ASU”) 2010-06 to Topic 820— Fair Value Measurements and
      Disclosures (“ASU 2010-06”). ASU 2010-06 provided requirements of new disclosures of significant transfers in and out of Levels 1 and
      2, and expanded disclosure of activity in Level 3 (see Note 5). ASU 2010-06 also clarified existing disclosures around the level of
      disaggregation of each class of assets and liabilities, and about fair value inputs and valuation techniques for Level 2 and Level 3.
      ASU 2010-06 was effective for interim and annual reporting periods beginning after December 15, 2009 for existing disclosures and
      becomes effective for fiscal years beginning after December 15, 2010 for disclosure of purchases, sales, issuances and settlements in the
      roll-forward activity in Level 3 fair value measurements. Adoption of ASU 2010-06 did not have a material impact on the Company’s
      Condensed Consolidated Financial Statements.
      In December 2010, the FASB issued ASU 2010-28 to Topic 350— Intangibles—Goodwill and Other: When to Perform Step 2 of the
      Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (“ASU 2010-28”). ASU 2010-28 modifies Step
      1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is
      required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. Goodwill of a
      reporting unit is required to be tested for impairment between annual tests if an event occurs or circumstances change that would more
      likely than not reduce the fair value of a reporting unit below its carrying amount. ASU 2010-28 became effective starting in the first
      quarter of 2011 with early adoption not permitted. Adoption of ASU 2010-28 did not have a material impact on the Company’s
      Condensed Consolidated Financial Statements.
      There were various other accounting standards and interpretations issued during the thirteen weeks ended May 1, 2011 that the Company
      has not yet been required to adopt, none of which is expected to have a material impact on the Company’s consolidated financial
      statements and the notes thereto going forward.

2.    Property and Equipment
      Property and equipment consists of the following:

                                                                                            January 30, 2011            May 1, 2011
             Leasehold improvements                                                     $             38,282           $    42,625
             Equipment                                                                                 6,395                 7,021
                                                                                                      44,677                49,646
             Less—Accumulated depreciation                                                           (13,649 )             (14,851 )
             Property and equipment, net                                                $             31,028           $    34,795


      Depreciation expense was $952 and $1,269 for the thirteen weeks ended May 2, 2010 and May 1, 2011, respectively.

3.    Long-term Debt
      On June 12, 2008, the Company established a three-year revolving credit facility by entering into a loan and security agreement (the
      “Credit Agreement”) with Fifth Third Bank. On April 22, 2011, the Company

                                                                      F-28
Table of Contents

Index to Financial Statements

                                           Notes to Condensed Consolidated Financial Statements
                                                                   (unaudited)
                                             (dollars in thousands, except per share and store data)

      entered into an amendment to the Credit Agreement that increased the revolving credit facility and extended its term for five years
      through April 22, 2016. The Credit Agreement provides for a fluctuating revolving credit facility up to $50,000 through April 22, 2016.
      The borrowing capacity is equal to (i) the lesser of the maximum revolving facility, less the undrawn face amount of any letters of credit
      outstanding and (ii) the borrowing base. The maximum availability of the revolving credit facility is equal to (i) prior to August 1, 2011,
      $40,000, (ii) from August 1, 2011 to December 31, 2011, $50,000 and (iii) on and after December 31, 2011, $40,000. The borrowing base
      is defined as the sum of (i) 200% of Consolidated adjusted EBITDA (as defined) for the most recent twelve month trailing period for
      which financial statements are available, minus (ii) the aggregate undrawn face amount of any outstanding letters of credit at the time a
      drawdown on the revolving credit facility is made, minus (iii) such reserves as may be established by the lender in its discretion, but not
      to exceed 35% of the Borrowing Base. The revolving credit facility includes a $5,000 sublimit for the issuance of letters of credit. The
      Credit Agreement is secured by substantially all of the assets of the Company. The revolving credit facility under the Credit Agreement
      had a balance outstanding of $1,000, undrawn face amounts on letters of credit of $1,000 and availability of $38,000 on May 1, 2011.
      The revolving credit facility in the Credit Agreement bears interest at a rate of LIBOR (subject to a minimum level of 1.5%) plus an
      applicable margin of 4.50% or at a rate of the lender’s base commercial lending rate plus a margin of 3.00%. The balance under the
      revolving credit facility on May 1, 2011 contained $1,000 under the LIBOR pricing method at a rate of 6.0% and $0 under the base
      lending rate pricing method at a rate of 6.25%.
      The Credit Agreement specifies the Company must comply with certain financial and non-financial covenants. The Company was in
      compliance with these covenants on all respective measurement dates. The Credit Agreement also restricts the Company’s ability to
      declare or make any dividend payments.
      Deferred financing costs totaling $424 were incurred in connection with the amendment to the Credit Agreement and will be amortized to
      interest expense over the five-year term of the facility using the straight-line method. The unamortized loan costs from the original Credit
      Agreement will continue to be amortized over the remaining term of the amended facility. Interest expense relating to deferred financing
      costs and interest incurred on borrowings under the credit agreement totaled $34 for each of the thirteen weeks ended May 2, 2010 and
      May 1, 2011, respectively.

4.    Common and Preferred Stock
      The Company had 7,492,487 shares of Class A Common Stock, 2,431,909 shares of Class B Redeemable Common Stock and 10,683,333
      shares of Series A Redeemable Preferred Stock outstanding on January 30, 2011 and May 1, 2011. The Class A Common Stock and Class
      B Redeemable Common Stock entitles the holder to one vote per share. The Series A Redeemable Preferred Stock is non-voting. In the
      event of a liquidation event (as defined), dissolution or winding up of the business, each holder of the Series A Redeemable Preferred
      Stock then outstanding will be entitled to be paid out of the assets of the Company, available for distribution to its stockholders, before
      any payment will be made or assets distributed to the holders of the Class A Common Stock or Class B Redeemable Common Stock. The
      holders of the Class A Common Stock and Class B Redeemable Common Stock are entitled to share ratably in the assets remaining after
      payment of liabilities and the redemption value of any outstanding preferred stock. The Series A Redeemable Preferred Stock also
      contains preferences in the declaration of dividends. The holders of the Class A Common Stock and Class B Redeemable Common Stock
      are entitled to receive dividends declared by the Board of Directors on a pro-rata basis after distribution to the holders of the Series A
      Redeemable Preferred Stock.
      The shares of Class B Redeemable Common Stock may be convertible into an equivalent number of shares of Class A Common Stock at
      any time at the option of the holder and shall automatically convert upon

                                                                      F-29
Table of Contents

Index to Financial Statements

                                              Notes to Condensed Consolidated Financial Statements
                                                                      (unaudited)
                                                (dollars in thousands, except per share and store data)

      (i) the sale, transfer, assignment or conveyance to a competitor or (ii) the consummation of a liquidity event (as defined) or a public
      offering (as defined). After December 15, 2011, each holder of shares of Class B Redeemable Common Stock has the right to require the
      Company to redeem its shares by delivery of written notice to the Company. Within 60 days of the notice, the Company is required to pay
      an amount in cash to each holder equal to the fair market value of the shares of the Class B Redeemable Common Stock. Due to this
      contingent redemption feature, the Class B Redeemable Common Stock is classified in the Consolidated Balance Sheets as temporary
      equity rather than stockholders’ equity, with adjustments to the fair value of the Class B Redeemable Common Stock made at each
      reporting date.
      The Series A Redeemable Preferred Stock was issued on December 15, 2004 with a mandatory redemption date upon the earlier of a
      liquidity event (as defined) or December 15, 2011 (“Redemption Date”). The Series A Redeemable Preferred Stock contains a liquidation
      preference of $1.00 per share, with annual accretion at a rate of 5% and accretion of a debt discount from December 15, 2004 through the
      Redemption Date that are included in interest expense on the Consolidated Statements of Operations. The liquidation preference, or
      “Redemption Value,” will increase each year based on the annual accretion of the shares. However the annual accretion of the
      Redemption Value will be forgiven at the Redemption Date upon the Company consummating a liquidity event or public offering in
      respect of which the fair market value of the initial public offering exceeds $82,800, as specified in the Company’s Amended and
      Restated Certificate of Incorporation. In accordance with ASC 480, Distinguishing Liabilities from Equity , the Company classifies the
      Series A Redeemable Preferred Stock as a liability on the accompanying Condensed Consolidated Balance Sheets.

5.    Fair Value Measurements
      The guidance for fair value measurements establishes the authoritative definition of fair value, sets out a framework for measuring fair
      value and outlines the required disclosures regarding fair value measurements. Fair value is the price that would be received to sell an
      asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between
      market participants at the measurement date. The Company uses a three-tier fair value hierarchy based upon observable and
      non-observable inputs as follows:
              •       Level 1: Quoted market prices in active markets for identical assets or liabilities.
              •       Level 2: Inputs other than Level 1 that are either directly or indirectly observable.
              •       Level 3: Unobservable inputs developed using the Company’s estimates and assumptions which reflect those that market
                      participants would use.
      The Company’s financial instruments consist primarily of its Class B Redeemable Common Stock, classified as temporary equity, which
      is measured using Level 3 inputs. Changes in the observability of valuation inputs may result in transfers within the fair value
      measurement hierarchy. The Company did not identify any transfers among levels of the fair value measurements hierarchy during the
      thirteen weeks ended May 1, 2011.
      The Company’s balances measured at fair value on a recurring basis consisted of the Class B Redeemable Common Stock as of
      January 30, 2011 and May 1, 2011:

                                                                                      Fair Value Hierarchy Category
                                                                       Level 1                    Level 2                  Level 3
             January 30, 2011                                    $               —          $             —           $         81,401
             May 1, 2011                                                         —                        —                     87,253

                                                                           F-30
Table of Contents

Index to Financial Statements

                                           Notes to Condensed Consolidated Financial Statements
                                                                   (unaudited)
                                             (dollars in thousands, except per share and store data)

      The following table presents the change in the estimated fair value of the Class B Redeemable Common Stock measured using significant
      unobservable inputs (Level 3) at the end of the thirteen weeks ended May 1, 2011:
                                                                                                                                       May 1, 2011
      Fair value measurement at beginning of period                                                                                $        81,401
      Change in fair value recorded in accumulated deficit                                                                                   5,852
      Fair value measurement at end of period                                                                                      $        87,253


      The Class B Redeemable Common Stock is remeasured to fair value each reporting period. The changes in fair value are recorded
      directly to equity and are based on the change in the underlying fair value of the Company’s stock price during each fiscal period
      presented. The fair value of the stock price is the amount for which the stock price could be sold in a current transaction between willing
      parties. The Company historically has estimated its fair value using both a discounted cash flow model and a market approach. The
      operating assumptions used in these valuation calculations are generally consistent with the Company’s past performance and with the
      projections and assumptions that are used in the Company’s current operating plans. Such assumptions are subject to change as a result of
      changing economic and competitive conditions.

6.    Net income per share
      The following table sets forth the computation of basic and diluted net income per share in accordance with ASC 260, Earnings per Share
      (“ASC 260”). Basic net income per share is calculated by dividing net income by the weighted-average common shares outstanding
      during the period. Diluted net income per share is calculated by dividing net income by the weighted-average number of common shares
      plus potentially dilutive common shares, primarily consisting of the Company’s non-qualified stock options, outstanding during the
      period. The treasury stock method was used to determine the dilutive effect of the stock options. The following table details the
      calculation of basic and diluted net income per share:

                                                                                                            Thirteen Weeks Ended
                                                                                              May 2, 2010                          May 1, 2011
      Numerator:
         Net Income                                                                       $           1,927                  $               3,323

      Denominator:
          For basic net income per share-weighted average shares basis                           9,924,396                              9,924,396
          Effect of dilutive stock options                                                         195,107                                264,428
            Denominator for diluted net income per share-adjusted weighted
              average shares basis                                                             10,119,503                              10,188,824

      Net income per share:
               Basic                                                                      $            0.19                  $                 0.33
               Diluted                                                                    $            0.19                  $                 0.33
      As of May 1, 2011, the Company had 7,492,487 and 2,431,909 shares of Class A Common stock and Class B Redeemable Common
      Stock, respectively, outstanding. The Class A Common Stock and Class B Redeemable Common Stock share equally in rights to
      dividends and undistributed earnings and also share equally in voting rights. As a result, the two class method was not required for
      computation of net income per share.


                                                                      F-31
Table of Contents

Index to Financial Statements

                                                   Notes to Condensed Consolidated Financial Statements
                                                                           (unaudited)
                                                     (dollars in thousands, except per share and store data)

      The Company has not issued stock-based payment awards to date that meet the criteria of participating securities. There were no
      anti-dilutive securities as of May 2, 2010 and May 1, 2011.

7.    Leases
      The Company has entered into operating leases for its stores, distribution center and store support center. Initial lease terms for stores are
      generally ten years with rent escalations and no renewal options. Rent expense for leases with rent escalations is recognized on a
      straight-line basis over the term of the lease. The leases are net leases under which the Company pays the taxes, insurance and common
      area maintenance costs. The leases may also provide for both minimum rent payments and contingent rentals based on a percentage of
      sales in excess of specified amounts. In certain leases, the landlord also charges the Company a portion of its marketing expense.
      Total minimum and contingent rent expense were as follows:

                                                                                                     May 2, 2010               May 1, 2011
             Minimum rentals                                                                        $      2,288            $        3,016
             Contingent rentals                                                                               10                        67
                    Total                                                                           $     2,298             $       3,083


      Future minimum lease payments for non-cancelable operating leases with an initial term of one year or more are as follows as of May 1,
      2011:

                            Fiscal year ended in                                                                   Amount
                            2012 (remainder of year)                                                           $       9,744
                            2013                                                                                      13,579
                            2014                                                                                      13,928
                            2015                                                                                      14,178
                            2016                                                                                      13,889
                            Thereafter                                                                                51,874
                                                                                                               $     117,192



8.    Stock-Based Compensation
      Under the Company’s 2004 Management Incentive Plan (the “Plan”), adopted on December 15, 2004, up to 500,000 stock options may
      be granted to certain employees and outside directors or advisors to purchase a fixed number of shares of the Company’s Class A
      Common Stock at prices not less than 100% of the estimated fair market value at the date of grant. All stock-based awards issued under
      the plan are non-qualified stock options. There were no stock-based awards granted during the thirteen weeks ended May 2, 2010 and
      May 1, 2011, respectively.
      The Company accounts for stock-based awards in accordance with ASC Topic 718, Compensation—Stock Compensation (“ASC 718”).
      ASC 718 requires measurement of compensation cost for all stock-based awards at fair value on the grant date (or measurement date, if
      different) and recognition of compensation expense, net of forfeitures, over the requisite service period for awards expected to vest.
      Stock-based compensation expense was $34 and $37 for the thirteen weeks ended May 2, 2010 and May 1, 2011, respectively.
      Compensation cost is recognized on a pre-tax basis.

                                                                             F-32
Table of Contents

Index to Financial Statements

                                              Notes to Condensed Consolidated Financial Statements
                                                                      (unaudited)
                                                (dollars in thousands, except per share and store data)

      The following table represents stock options granted, repurchased or forfeited under the plan during the thirteen weeks ended May 1,
      2011. There were no options that expired or that were exercised during this period:

                                                                                                                  Weighted Average
                                                                                               Options             Exercise Price
             Outstanding at January 30, 2011                                                     500,000         $             5.02
                 Granted                                                                             —                          —
                 Repurchased                                                                      (2,520 )                     4.14
             Outstanding at May 1, 2011                                                          497,480         $             5.02


      Under the Plan, options generally become exercisable over a four-year period and expire ten years from the date of grant. Option grants
      generally vest 25% on each anniversary of the grant date, commencing with the first anniversary. The following is a summary of the
      changes in the Company’s non-vested stock options during the thirteen weeks ended May 1, 2011:

                                                                                                                  Weighted-Average
                                                                                             Number of              Grant-Date
                                                                                              Shares                 Fair Value
             Non-vested stock options outstanding at January 30, 2011                            99,750          $             3.20
                 Granted                                                                            —                           —
                 Vested                                                                         (13,281 )                      2.81
             Non-vested stock options outstanding at May 1, 2011                                 86,469          $             3.26


      The total fair value of stock options that vested during the thirteen weeks ended May 1, 2011 was $37. As of May 1, 2011, there was
      $210 of total unrecognized compensation cost related to non-vested stock option awards. The compensation cost is expected to be
      recognized through fiscal 2013, based on existing vesting terms with the weighted average remaining expense recognition period being
      approximately 1.51 years. Additionally, these non-vested options could vest earlier in the event of a change of control or initial public
      offering resulting in immediate recognition of unrecognized compensation cost.

      The options outstanding at May 1, 2011, are summarized below:

                           Number of                                                                           Average Remaining
                             Shares                          Options                      Exercise              Contractual Life
                           Outstanding                      Exercisable                    Price                   (in Years)
                                    324,980                         317,480           $       4.14                   4.60
                                     35,000                          28,438                   5.00                   6.50
                                     75,000                          42,188                   6.00                   6.90
                                     13,500                           7,594                   6.50                   7.30
                                     49,000                          15,313                   9.00                   8.50
                                    497,480                         411,011                                          5.60


                                                                          F-33
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Index to Financial Statements

                                           Notes to Condensed Consolidated Financial Statements
                                                                   (unaudited)
                                             (dollars in thousands, except per share and store data)

      There were 411,011 options exercisable as of May 1, 2011 with a weighted average exercise price of $4.62 per share and intrinsic value
      of $823.

9.    Income Taxes
      For interim financial reporting, the Company estimates the annual effective tax rate based on projected taxable income for the full year
      and adjusts as necessary for discrete events occurring in a particular period. The quarterly income tax provision is recorded in accordance
      with the estimated annual effective rate. The Company refines the estimates of taxable income throughout the year as new information,
      including year-to-date financial results, becomes available. This process often results in a change to the anticipated annual effective tax
      rate. The Company adjusts the year-to-date income tax provision to reflect the updated annual effective tax rate during the quarter in
      which the change in estimate occurs. Significant judgment is required in determining our effective tax rate and in evaluating our tax
      positions.
      The effective tax rate for the thirteen weeks ended May 2, 2010 was 42.6% compared to 42.4% for the thirteen weeks ended May 1, 2011.
      The effective tax rate differs from the federal statutory rate due to state income tax expense and nondeductible expense which primarily
      consists of the accretion of the Series A Redeemable Preferred Stock.

      In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of
      the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
      taxable income during the periods in which those temporary differences become deductible. The Company considers projections of future
      taxable income, tax planning strategies and the reversal of temporary differences in making this assessment. The Company has
      determined that no such valuation allowance is necessary as of May 2, 2010 and May 1, 2011, respectively.

      The Company recognizes income tax liabilities related to unrecognized tax benefits in accordance with ASC 740-10 and adjusts for such
      liabilities when its judgment changes as the result of the evaluation of new information. At May 1, 2011, the Company does not anticipate
      any tax position generating a significant change in our liability for unrecognized tax benefits within 12 months of this reporting date.

10.   Commitments and Contingencies
      The Company is involved in various legal proceedings encountered in the normal course of business. In the opinion of management, the
      resolution of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

                                                                      F-34
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Index to Financial Statements




                                           Shares




                                     Common Stock




                                     PROSPECTUS




                                 BofA Merrill Lynch
                                Goldman, Sachs & Co.




                                            , 2011
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Index to Financial Statements

                                                                      PART II

                                            INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

                                                                                                                              Amount
                                                                                                                             To Be Paid
             Registration fee                                                                                            $       11,610
             FINRA filing fee                                                                                            $       10,500
             New York Stock Exchange listing fee                                                                                      *
             Transfer agent’s fees                                                                                                    *
             Printing and engraving expenses                                                                                          *
             Legal fees and expenses                                                                                                  *
             Accounting fees and expenses                                                                                             *
             Blue Sky fees and expenses                                                                                               *
             Miscellaneous                                                                                                            *
             Total                                                                                                       $                *



* To be provided by amendment.

      Each of the amounts set forth above, other than the registration fee, the FINRA filing fee and the listing fee, is an estimate.

Item 14. Indemnification of Directors and Officers.
     Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person
is made a party by reason of such person being or having been a director, officer, employee or agent to the Registrant. The Delaware General
Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise. The Registrant’s amended and restated by-laws provide for
indemnification by the Registrant of its directors, officers and employees to the fullest extent permitted by the Delaware General Corporation
Law.

      Section 102(b)(7) of the Delaware General Corporation Law permits a corporation to provide in its certificate of incorporation that a
director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or
unlawful stock repurchases, redemptions or other distributions, or (iv) for any transaction from which the director derived an improper personal
benefit. The Registrant’s amended and restated certificate of incorporation provides for such limitation of liability.

      The Registrant maintains standard policies of insurance under which coverage is provided (a) to its directors and officers against loss
arising from claims made by reason of breach of duty or other wrongful act, and (b) to the Registrant with respect to payments which may be
made by the Registrant to such officers and directors pursuant to the above indemnification provision or otherwise as a matter of law.

     The proposed form of Underwriting Agreement filed as Exhibit 1 to this Registration Statement provides for indemnification of directors
and officers of the Registrant by the underwriters against certain liabilities.

                                                                         II-1
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Index to Financial Statements

Item 15. Recent Sales of Unregistered Securities.
      Since April 28, 2008, the Registrant has not sold any securities without registration under the Securities Act of 1933, as amended.

Item 16. Exhibits and Financial Statement Schedules.
      (a) The following exhibits are filed as part of this Registration Statement:

 Exhibit
 Number                                                                        Description
    1.1             Form of Underwriting Agreement*
    3.1             Form of Amended and Restated Certificate of Incorporation*
    3.2             Form of Amended and Restated By-Laws*
    4.1             Form of Common Stock Certificate*
    4.2             Registration Rights Agreement, dated December 17, 2004, among Teavana Holdings, Inc. and the parties listed therein**
    5.1             Form of Opinion of DLA Piper LLP (US)*
   10.1             2004 Management Incentive Plan**
   10.2             Form of 2004 Management Incentive Plan Option Award Agreement (Employees)**
   10.3             Form of 2004 Management Incentive Plan Option Award Agreement (Directors)**
   10.4             Teavana Holdings, Inc. 2011 Stock Incentive Plan*
   10.5             Form of Nonstatutory Stock Option Agreement under 2011 Stock Incentive Plan*
   10.6             Form of Directors’ and Officers’ Indemnity Agreement*
   10.7             Amended and Restated Employment Agreement, dated as of April 22, 2011, between Teavana Holdings, Inc. and Andrew T.
                    Mack**
   10.8             Amended and Restated Employment Agreement, dated as of April 22, 2011, between Teavana Holdings, Inc. and Juergen W.
                    Link**
   10.9             Employment Agreement, dated as of April 22, 2011, between Teavana Holdings, Inc. and Daniel P. Glennon**
   10.10            Employment Agreement, dated as of April 22, 2011, between Teavana Holdings, Inc. and Peter M. Luckhurst**
   10.11            Agreement of Lease, dated February 2, 2006, between 500 Long Beach LLC and St. Acquisition Company**
  10.12             Lease Modification Agreement, dated April 1, 2008, between 500 Long Beach LLC and St. Acquisition Company**
  10.13             Agreement of Lease, dated August 12, 2009, between 600 Long Beach LLC and St. Acquisition Company
  10.14             Lease Modification and Extension Agreement, dated April 5, 2010, between 600 Long Beach LLC and St. Acquisition
                    Company**
  10.15             Lease Agreement, dated August 5, 2010, between 3630 Peachtree Road Holdings Limited Partnership and Teavana
                    Corporation**
  10.16             Loan and Security Agreement, dated as of June 12, 2008, among Teavana Holdings, Inc., Teavana Corporation, ST Acquisition
                    Company, Teavana Franchising Corporation and Teavana International, Inc., as obligors, and Fifth Third Bank as lender

                                                                        II-2
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Index to Financial Statements

 Exhibit
 Number                                                                         Description
   10.17            Amendment No. 1 to Loan and Security Agreement, dated as of April 22, 2011, among Teavana Holdings, Inc., Teavana
                    Corporation, ST Acquisition Company, Teavana International, Inc. and Teavana Gift Company, as obligors, and Fifth Third
                    Bank as lender**
   21.1             Subsidiaries of the Registrant**
   23.1             Consent of Grant Thornton LLP
   23.2             Consent of DLA Piper LLP (US) (included in Exhibit 5.1)
   24.1             Power of Attorney (included on signature page to Registration Statement filed on April 28. 2011)**
   99.1             Consent of Director Nominee**
   99.2             Consent of Director Nominee**
   99.3             Consent of Director Nominee**

* To be filed by amendment.
** Previously filed

      (b) No financial statement schedules are provided because the information called for is not required or is shown either in the financial
statements or the notes thereto.

Item 17. Undertakings
      The undersigned hereby undertakes:
      (a) To provide to the underwriter at the closing specified in the underwriting agreement certificates in such denominations and registered
in such names as required by the underwriter to permit prompt delivery to each purchaser.

      (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions referenced in Item 14 of this Registration Statement, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the
registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

      The undersigned registrant hereby further undertakes that:
      (a) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed
as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared
effective.
       (b) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

                                                                         II-3
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Index to Financial Statements

      (c) For the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of
the securities:
            (i) that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the
      underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of
      the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such
      securities to such purchaser:
                  (A) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed
             pursuant to Rule 424;
                   (B) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or
             referred to by the undersigned registrant;
                  (C) The portion of any other free writing prospectus relating to the offering containing material information about the
             undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
                    (D) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

                                                                         II-4
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Index to Financial Statements

                                                                SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Atlanta, State of Georgia, on June 9, 2011.

                                                                                      TEAVANA HOLDINGS, INC.

                                                                                      By:        /s/ Andrew T. Mack
                                                                                      Name:      Andrew T. Mack
                                                                                      Title:     Chairman and Chief Executive Officer

     Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

                                 Signature                                               Title                                   Date


                     / S / A NDREW T. M ACK                            Chairman and Chief Executive Officer                  June 9, 2011
                          Andrew T. Mack                                    (principal executive officer)


                    / S / D ANIEL P. G LENNON                                 Chief Financial Officer                        June 9, 2011
                          Daniel P. Glennon                           (principal financial officer and principal
                                                                                   accounting officer)


                                 *                                                    Director                               June 9, 2011
                       F. Barron Fletcher III


                                *                                                     Director                               June 9, 2011
                         Michael J. Nevins


* By:                  / S / A NDREW T. M ACK
                                Andrew T. Mack
                                Attorney-in-Fact
Table of Contents

Index to Financial Statements

                                                                 EXHIBIT INDEX

 Exhibit
 Number                                                                       Description
    1.1             Form of Underwriting Agreement*
    3.1             Form of Amended and Restated Certificate of Incorporation*
    3.2             Form of Amended and Restated By-Laws*
    4.1             Form of Common Stock Certificate*
    4.2             Registration Rights Agreement, dated December 17, 2004, among Teavana Holdings, Inc. and the parties listed therein**
    5.1             Form of Opinion of DLA Piper LLP (US)*
   10.1             2004 Management Incentive Plan**
   10.2             Form of 2004 Management Incentive Plan Option Award Agreement (Employees)**
   10.3             Form of 2004 Management Incentive Plan Option Award Agreement (Directors)**
   10.4             Teavana Holdings, Inc. 2011 Stock Incentive Plan*
   10.5             Form of Nonstatutory Stock Option Agreement under 2011 Stock Incentive Plan*
   10.6             Form of Directors’ and Officers’ Indemnity Agreement*
   10.7             Amended and Restated Employment Agreement, dated as of April 22, 2011, between Teavana Holdings, Inc. and Andrew T.
                    Mack**
   10.8             Amended and Restated Employment Agreement, dated as of April 22, 2011, between Teavana Holdings, Inc. and Juergen W.
                    Link**
   10.9             Employment Agreement, dated as of April 22, 2011, between Teavana Holdings, Inc. and Daniel P. Glennon**
   10.10            Employment Agreement, dated as of April 22, 2011, between Teavana Holdings, Inc. and Peter M. Luckhurst**
   10.11            Agreement of Lease, dated February 2, 2006, between 500 Long Beach LLC and St. Acquisition Company**
  10.12             Lease Modification Agreement, dated April 1, 2008, between 500 Long Beach LLC and St. Acquisition Company**
  10.13             Agreement of Lease, dated August 12, 2009, between 600 Long Beach LLC and St. Acquisition Company
  10.14             Lease Modification and Extension Agreement, dated April 5, 2010, between 600 Long Beach LLC and St. Acquisition
                    Company**
  10.15             Lease Agreement, dated August 5, 2010, between 3630 Peachtree Road Holdings Limited Partnership and Teavana
                    Corporation**
  10.16             Loan and Security Agreement, dated as of June 12, 2008, among Teavana Holdings, Inc., Teavana Corporation, ST Acquisition
                    Company, Teavana Franchising Corporation and Teavana International, Inc., as obligors, and Fifth Third Bank as lender
   10.17            Amendment No. 1 to Loan and Security Agreement, dated as of April 22, 2011, among Teavana Holdings, Inc., Teavana
                    Corporation, ST Acquisition Company, Teavana International, Inc. and Teavana Gift Company, as obligors, and Fifth Third
                    Bank as lender**
   21.1             Subsidiaries of the Registrant**
   23.1             Consent of Grant Thornton LLP
   23.2             Consent of DLA Piper LLP (US) (included in Exhibit 5.1)
   24.1             Power of Attorney (included on signature page to Registration Statement filed on April 28, 2011)**
   99.1             Consent of Director Nominee**
   99.2             Consent of Director Nominee**
   99.3             Consent of Director Nominee**

* To be filed by amendment.
** Previously filed.
                                                                                                                         Exhibit 10.13

AGREEMENT of LEASE, made as of this 12 th day of August, 2009 , between 600 Long Beach, LLC , a Connecticut limited liability
company with an office at 300 Long Beach Boulevard, Stratford, Connecticut, hereinafter referred to as Owner, and St. Acquisition
Company. with an office at 500 Long Beach boulevard Stratford, Connecticut 06615, hereinafter referred to as Tenant,
WITNESSETH:

Owner hereby leases to Tenant and Tenant hereby hires from Owner approximately 12,900 rentable square feet of space in the
building known as 600 Long Beach Boulevard which demised premises are more specifically set forth in the floor plan annexed
hereto as Exhibit A, for the term of one (1) year five (51/2) months (or until such term shall sooner cease and expire as hereinafter
provided) as set forth in Article 33 hereof at the annual rate specified in Article 63 hereof, which Tenant agrees to pay in equal
monthly installments in advance on the first day of each month during said term, at the office of Owner or such other place as
Owner may designate, without any setoff or deduction whatsoever, except that Tenant shall pay the first monthly installment on
the execution hereof.

        The parties hereto, for themselves, their heirs, distributees, executors, administrators, legal representatives, successors
and permitted assigns, hereby covenant as follows:

         1. Peaceful Possession: The Owner covenants that the Tenant, on paying the said rental and performing the covenants
and conditions in this lease contained, shall and may peaceably and quietly have, hold and enjoy the demised premises for the
term aforesaid.

          2. Purpose: The Tenant covenants and agrees to use the demised premises for general offices, warehouse, storage
and distribution for the Tenant’s named business and for no other purpose, provided such use is in accordance with the Certificate
of Occupancy for the building, and agrees not to use or permit the premises to be used for any other purpose without the prior
written consent of the Owner.

          3. Default in Payment of Rent: The Tenant shall, without any previous demand therefore, pay to the Owner, or its
agent, the said rent at the times and in the manner above provided. In the event of the non-payment of said rent, or any
installment thereof, at the times and in the manner above provided, and if the same shall remain in default for more than fifteen
(15) days after becoming due, or if the Tenant shall be dispossessed for non-payment of rent, or if the leased premises shall be
deserted or vacated for more than fifteen (15) days, the Owner or its agents shall have the right to and may enter the said
premises as the agent of the Tenant, either by force or otherwise, without being liable for any prosecution or damages therefore,
and may relet the premises as the agent of the Tenant, and receive the rent therefore, upon such terms as shall be satisfactory to
the Owner, and all rights of the Tenant to repossess the premises under this lease shall be forfeited. Such re-entry by the Owner
shall not operate to release the Tenant from any rent to be paid or covenants to be performed hereunder during the full term of
this lease. For the purpose of reletting, the Owner shall be authorized to make such repairs or alterations in or to the leased
premises as may be necessary to place the same in good order and condition. The tenant shall be liable to the Owner for the cost
of such repairs or alterations, and all expenses of such reletting.

If the sum realized or to be realized from the reletting is insufficient to satisfy the monthly or term rent provided in this lease, the
Owner, at its option, may require the Tenant to pay such deficiency month by month, or may hold the Tenant in advance for the
entire deficiency to be realized during the term of the reletting. The Tenant shall not be entitled to any surplus accruing
as a result of the reletting. The Tenant agrees to pay, as additional rent, all attorneys’ fees and other expenses incurred by the
Owner in enforcing any of the obligations under this lease.

           4. Condition of Premises, Repairs and Alterations: The Tenant shall keep the demised premises in good condition, and
shall redecorate, paint and renovate the said premises as may be necessary to keep them in repair and good appearance. Tenant
shall at its expense, make all repairs of any nature to the demised premises or the building caused by the negligence of Tenant,
its servants, employees, invitees or licensees or caused by the moving of Tenant’s fixtures, furniture or equipment. The Tenant
shall quit and surrender the premises at the end of the demised term in as good condition as the reasonable use thereof will
permit. The Tenant shall not make any alterations, additions, or improvements to said premises without the prior written consent of
the Owner. Tenant shall, at its expense, prior to making any permitted alterations, obtain all permits, approvals and certificates
required by any applicable governmental entities and upon completion obtain certificates of final approval thereof and develop
duplicates of all such permits, approvals and certificates to Owner. All erections, alterations, additions and improvements, whether
temporary or permanent in character, which may be made upon the premises either by the Owner or the Tenant, except furniture
or moveable trade fixtures installed at the expense of the Tenant, shall be the property of the Owner and shall remain upon and be
surrendered with the premises as a part thereof at the termination of this lease, without compensation to the Tenant, unless
Owner, by notice to Tenant no later than twenty (20) days prior to the date fixed as the termination of this lease, elects to
relinquish Owner’s right thereto and to have all or some of them removed by Tenant, in which event the same shall be removed
from the demised premises by Tenant prior to the expiration of this lease, at Tenant’s expense: Tenant shall repair any damage
due to any such removal and all property remaining in the premises at the end of the term after Tenant’s removal shall be deemed
abandoned and may, at Owner’s election, either be retained as Owner’s property or removed from the premises by Owner, at
Tenant’s expense. The Tenant further agrees to keep said premises and all parts thereof in a clean and sanitary condition and
free from trash, inflammable material and other objectionable matter. If Tenant fails, after ten (10) business days notice, to
proceed with due diligence to make repairs as required hereby, the same may be made by Owner at Tenant’s expense, which
shall be collectible as additional rent. Owner shall have no liability to Tenant with respect to the failure or delay in making repairs
to the demised premises or the building or to any fixtures or equipment contained therein.

         5. Liability of Owner: The Owner shall not be responsible for the loss of or damage to property, or injury to persons,
occurring in or about the demised premises, by reason of any existing or future condition, defect, matter or thing in said demised
premises or the property of which the premises are a part, or for the acts, omissions or negligence of other persons or tenants in
and about the said property. The Tenant agrees to indemnify and save the Owner harmless from all claims and liability for losses
of or damage to property, or injuries to persons occurring in or about the demised premises.

         6. Services and Utilities: Utilities and services furnished to the demised premises for the benefit of the Tenant shall be
provided and paid for as follows: water, for ordinary lavatory purposes, by the Owner; gas by the Tenant; electricity by the Tenant;
heat by the Tenant; refrigeration by the Tenant; and hot water by the Tenant. The Owner shall not be liable for any interruption or
delay in any of the above services for any reason, except unless the delay or interruption of services is as a result of the gross
negligence of the Owner, its agents, servants or employees.
          7. Right to Inspect and Exhibit: The Owner, or its agents, shall have the right to enter the demised premises upon
reasonable advanced notice during normal business hours to examine the same, or to run telephone or other wires, or to make
such repairs, additions or alterations as it shall deem necessary for the safety, preservation or restoration of the improvements, or
for the safety or convenience of the occupants or users thereof (there being no obligation, however, on the part of the Owner to
make any such repairs, additions or alterations), or to exhibit the same to prospective purchasers and put upon the premises a
suitable “For Sale” sign. For six months prior to the expiration of the demised term, the Owner, or its agents, may similarly exhibit
the premises to prospective tenants, and may place the usual “To Let” signs thereon. Tenant shall provide Owner with keys to the
demised premises.

          8. Damage by Fire, Explosion, The Elements, or Otherwise: In the event of the destruction of the demised premises or
the building containing the said premises by fire, explosion, the elements or otherwise during the term hereby created, or previous
thereto, or such partial destruction thereof as to render the premises wholly untenantable or unfit for occupancy, or should the
demised premises be so badly injured that the same cannot be repaired within ninety (90) days from the happening of such injury,
then and in such case the term hereby created shall, at the option of the Owner, cease and become null and void from the date of
such damage or destruction, and the Tenant shall immediately surrender said premises and all the Tenant’s interest therein to the
Owner, and shall pay rent only to the damage or destruction, in which event the Owner may re-enter and re-possess the premises
thus discharged from this lease and may remove all parties therefrom. Should the demised premises be rendered untenantable
and unfit for occupancy, but yet be repairable within ninety (90) days from the happening of said injury, the Owner may enter and
repair the same with reasonable speed, and the rent shall not accrue after said injury or while repairs are being made, but shall
recommence immediately after said repairs shall be completed. But if the premises shall be so slightly injured as not to be
rendered untenantable and unfit for occupancy, then the Owner agrees to repair the same with reasonable promptness and in that
case the rent accrued and accruing shall not cease or determine. The Tenant shall immediately notify the Owner in case of fire or
other damage to the premises.

         9. Observation of Laws, Ordinances, Rules and Regulations: The Tenant agrees to observe and comply with all laws,
ordinances, rules and regulations of the Federal, State, County and Municipal authorities applicable to the business to be
conducted by the Tenant in the demised premises. The Tenant agrees not to do or permit anything to be done in said premises, or
keep anything therein, which will increase the rate of fire insurance premiums on the improvements or any part thereof, or on
property kept therein, or which will obstruct or interfere with the rights of other tenants, or conflict with the regulations of the Fire
Department or with any insurance policy upon said improvements or any part thereof. In the event of any increase in insurance
premiums resulting from the Tenant’s occupancy of the premises, or from any act or omission on the part of the Tenant, the
Tenant agrees to pay said increase in insurance premiums on the improvements or contents thereof as additional rent.

          10. Subordination to Mortgages and Deeds of Trust: This lease is subject and is hereby subordinated to all present and
future mortgages, deeds of trust and other encumbrances affecting the demised premises or the property of which said premises
are a part. The Tenant agrees to execute, at no expense to the Owner, any instrument which may be deemed necessary or
desirable by the Owner to further effect the subordination of this lease to any such mortgage, deed of trust or encumbrance.
Tenant shall attorn to the holder of any mortgage acquiring title by virtue of a conveyance or through foreclosure proceedings. See
Exhibit “F”.
          11. Rules and Regulations of Owner: The rules and regulations regarding the demised premises as set forth in Article
56, hereof, as well as any other and further reasonable rules and regulations which shall be made by the Owner, shall be
observed by the Tenant and by the Tenant’s employees, agents and customers. The Owner reserves the right to rescind any
presently existing rules applicable to the demised premises, and to make such other and further reasonable rules and regulations
as, in its judgment, may from time to time be desirable for the safety, care and cleanliness of the premises, and for the
preservation of good order therein, which rules, when so made and notice thereof given to the Tenant, shall have the same force
and effect as if originally made a part of this lease. Such other and further rules shall not, however, be inconsistent with the proper
and rightful enjoyment by the Tenant of the demised premises.

          12. Violation of Covenants, Forfeiture of Lease, Re-entry by Owner: In case of violation by the Tenant of any of the
covenants, agreements and conditions of this lease, or of the rules and regulations now or hereafter to be reasonably established
by the Owner, and upon failure to discontinue such violation within ten (10) days after notice thereof given to the Tenant or such
reasonably longer period, provided Tenant is diligently proceeding to cure such violation, this lease shall thenceforth, at the option
of the Owner, become null and void, and the Owner may re-enter without further notice or demand. The rent in such case shall
become due, be apportioned and paid on and up to the day of such re-entry, and the Tenant shall be liable for all loss or damage
resulting from such violation as aforesaid. No waiver by the Owner of any violation or breach of condition by the Tenant shall
constitute or be construed as a waiver of any other violation or breach of condition, nor shall lapse of time after breach of condition
by the Tenant before the Owner shall exercise its option under this paragraph operate to defeat the right of the Owner to declare
this lease null and void and to re-enter upon the demised premises after the said breach or violation. If Tenant shall be in default
which remains uncured under this lease prior to the date fixed for the commencement of any renewal or extension period, Owner
may cancel such renewal or extension by written notice to Tenant.

          13. Notices: All notices and demands, legal or otherwise, incidental to this lease, or the occupation of the demised
premises, shall be in writing. If the Owner or its agent desires to give or serve upon the Tenant any notice or demand, it shall be
sufficient to send a copy thereof by certified mail, addressed to the Tenant at the demised premises, or to leave a copy thereof
with a person of suitable age found on the premises. Notices from the Tenant to the Owner shall be sent by certified mail or
delivered to the Owner at the place hereinbefore designated as Owners current mailing address, or to such party or place as the
Owner may from time to time designate in writing.

          14. Bankruptcy, Insolvency, Assignment for Benefit of Creditors: It is further agreed that if at any time during the term of
this lease the Tenant shall make any assignment for the benefit of creditors, or be decreed insolvent or bankrupt according to law,
or if a receiver shall be appointed for the Tenant, then Tenant shall be deemed in default hereunder and the Owner may, at its
option terminate this lease, exercise of such option to be evidenced by notice to that effect served upon the assignee, receiver,
trustee or other person in charge of the liquidation of the property of the Tenant or the Tenant’s estate, but such termination shall
not release or discharge any payment of rent payable hereunder and then accrued, or any liability then accrued by reason of any
agreement or covenant herein contained on the part of the Tenant, or the Tenant’s legal representatives.

          15. Eminent Domain and Condemnation: If the property or any part thereof wherein the demised premises are located
shall be taken by public or quasi-public authority under any
power of eminent domain or condemnation, this lease at the option of the Owner, shall forthwith terminate and the Tenant shall
have no claim or interest in or to any award of damages for such taking.

         16. Lease Provisions Not Exclusive: The rights and remedies of Owner set forth herein are not intended to be exclusive
but as additional to all rights and remedies the Owner would otherwise have by law.

          17. Limitation re: Default in Rent: Notwithstanding anything to the contrary herein (i) Tenant shall not be deemed in
default in the payment of fixed annual rent unless Tenant fails to pay the same when due and thereafter cure such default within
ten (10) days after notice of such default from Owner; provided, however, that if Owner shall have given two such notices in any
calendar year, any subsequent failure by Tenant, during such calendar year, to pay fixed annual rent on the due date thereof shall
be deemed an immediate default hereunder without any requirement of notice nor opportunity to cure, and (ii) Tenant shall not be
deemed in default in the payment of any additional rent due hereunder unless Tenant fails to pay the same when due and
thereafter cure such default within ten (10) days after notice of such default from Owner; provided, however, that if Owner shall
have given two such notices in any calendar year, any subsequent failure by Tenant, during such calendar year to pay any
additional rent on the due date thereof shall be deemed an immediate default hereunder without any requirement of notice nor
opportunity to cure.

           18. Remedies of Owner: In the case of any default, re-entry, expiration and/or dispossession by summary proceedings
or otherwise, (a) the rent, and additional rent, shall become due thereupon and be paid up to the time of such re-entry,
dispossession and/or expiration, (b) Owner may relet the premises or any part or parts thereof, either in the name of Owner or
otherwise, for a term or terms, which may at Owner’s option be less than or exceed the period which would otherwise have
constituted the balance of the term of this lease and may grant concessions or free rent or charge a higher rental than that in this
lease, (c) Tenant or the legal representatives of Tenant shall also pay Owner as liquidated damages for the failure of Tenant to
observe and perform said Tenant’s covenants herein contained, any deficiency between the rent hereby reserved and/or
covenanted to be paid and the net amount, if any, of the rents collected on account of the subsequent lease or leases of the
demised premises for each month of the period which would otherwise have constituted the balance of the term of this lease. The
Owner must make good faith effort to re-let the premises. The failure of Owner to re-let the premises or any part or parts thereof
shall not release or affect Tenant’s liability for damages. In computing such liquidated damages there shall be added to the said
deficiency such expenses as Owner may incur in connection with re-letting, such as legal expenses, attorneys’ fees, brokerage,
advertising and for keeping the demised premises in good order or for preparing the same for re-letting. Any such liquidated
damages shall be paid in monthly installments by Tenant on the rent day specified in this lease and any suit brought to collect the
amount of the deficiency for any month shall not prejudice in any way the rights of Owner to collect the deficiency for any
subsequent month by a similar proceeding. Owner, in putting the demised premises in good order or preparing the same for
re-rental may, at Owner’s option, make such alterations, repairs, replacements, and/or decorations in the demised premises as
Owner, in Owner’s sole judgment, considers advisable and necessary for the purpose of re-letting the demised premises, and the
making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Tenant from
liability hereunder as aforesaid.
Owner shall in no event be liable in any way whatsoever for failure to re-let the demised premises, or in the event that the demised
premises are re-let, for failure to collect the rent thereof under such re-letting, and in no event shall Tenant be entitled to receive
any excess, if any, of such net rents collected over the sums payable by Tenant to Owner hereunder. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof, Owner shall have the right of injunction and the right to
invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not herein provided
for. Mention in this lease of any particular remedy, shall not preclude Owner from any other remedy, in law or in equity.

Whether or not Owner shall have collected any monthly deficiencies and expenses as set forth in Article 18 hereof, and provided
Owner shall have terminated this Lease evicted Tenant from the demised premises, Owner shall, at its sole option, be entitled to
recover from Tenant, and Tenant shall pay Owner, on demand, as and for liquidated and agreed final damages, a sum equal to
the amount by which the fixed annual rental and additional rent, payable hereunder for the period which otherwise would have
constituted the unexpired portion of the term of this lease (conclusively presuming the additional rent to be the same as was
payable for the year immediately preceding such termination or re-entry), exceeds the then fair and reasonable rental value of the
demised remises for the same period, both discounted to present worth at the rate of eight (8%) percent per annum. If, before
presentation of proof such liquidated and agreed final damages to any court, commission or tribunal, the demised premises, or
any part thereof, shall have been relet by Owner for the period which otherwise would have constituted the unexpired portion of
the term of this lease, or any part thereof, the amount of rent upon such reletting shall be deemed, prima facie, to be the fair and
reasonable rental value for the part or the whole of the demised premises so relet during the term of the reletting.

          19. Fees and Expenses: If Tenant shall default in the observance or performance of any term or covenant on Tenant’s
part to be observed or performed under or by virtue of any of the terms or provisions in any article of this lease, then, unless
otherwise provided elsewhere in this lease Owner may, not less than ten (10) days after notice to Tenant (except in cases of
emergency) and Tenant’s failure to cure such default within such ten (10) day period, or at any time thereafter perform the
obligation of Tenant thereunder. If Owner, in connection with the foregoing or in connection with any default by Tenant in the
covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money, including but not
limited to attorney’s fees, in instituting, prosecuting or defending any action or proceedings, then Tenant will reimburse Owner for
such sums so paid or obligations incurred with interest and costs. The foregoing expenses incurred by reason of Tenant’s default
shall be deemed to be additional rent hereunder and shall be paid by Tenant to Owner within fifteen (15) days of receipt of any bill
or statement to Tenant therefore. If Tenant’s lease term shall have expired at the time of making such expenditures or incurring
such obligations, such sums shall be recoverable by Owner as damages.

           20. No Representations by Owner: Neither Owner nor Owner’s agents have made any representations or promises
with respect to the physical condition of the building, the land upon which it is erected or the demised premises, the rents, leases,
expenses of operation or any other matter or thing affecting or related to the demised premises or the building except as herein
expressly set forth and no rights, easements or licenses are required by Tenant by implication or otherwise except as expressly
set forth in the provisions of this lease. Tenant has inspected the building and the demised premises and is thoroughly acquainted
with their condition and agrees to take the same “as is” on the date possession is tendered following the substantial completion of
Owner’s Work under Article 63 hereof and acknowledges that the
taking of possession of the demised premises by Tenant shall be conclusive evidence that the said premises and the building of
which the same form a part were in good and satisfactory condition at the time such possession was so taken, except as to latent
defects and punch list items.

Within thirty (30) days after possession of the demised premises is tendered following substantial completion of Owner’s Work,
Tenant shall provide a punch list to Owner of items of Owner’s Work requiring correction, and Owner shall diligently seek to
correct the items appearing on Tenant’s punch list. All understandings and agreements heretofore made between the parties
hereto are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant and
any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole
or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change,
modification, discharge or abandonment is sought.

          21. End of Term: Upon the expiration or other termination of the term of this lease, Tenant shall quit and surrender to
Owner the demised premises, broom clean, in good order and condition, ordinary wear and damages which Tenant is not required
to repair as provided elsewhere in this lease excepted, and Tenant shall remove all its property from the demised premises.
Tenant’s obligation to observe or perform this covenant shall survive the expiration or other termination of this lease. If the last day
of the term of this Lease or any renewal thereof, falls on Sunday, this lease shall expire at noon on the preceding Saturday unless
it be a legal holiday in which case it shall expire at noon on the preceding business day.

         22. Failure to Give Possession: If Owner is unable to give possession of the demised premises on the date of the
commencement of the term hereof, because of the holding-over or retention of possession of any tenant, under tenant or
occupants or if the demised premises are located in a building being constructed, because such building has not been sufficiently
completed to make the premises ready for occupancy or because of the fact that a certificate of occupancy has not been procured
or if Owner has not completed any work required to be performed by Owner, or for any other reason, Owner shall not be subject to
any liability for failure to give possession on said date and the validity of the lease shall not be impaired under such
circumstances, nor shall the same be construed in any way to extend the term of this lease, but the rent payable hereunder shall
be abated (provided Tenant is not responsible for Owner’s inability to obtain possession or complete any work required) until after
Owner shall have given Tenant notice that the premises are substantially ready for Tenant’s occupancy. If permission is given to
Tenant to enter into the possession of the demised premises or to occupy premises other than the demised premises prior to the
date specified as the commencement of the term of this lease, Tenant covenants and agrees that such occupancy shall be
deemed to be under all the terms, covenants, conditions and provisions of this lease, except as to the covenant to pay rent.

          23. No Waiver: The failure of Owner to seek redress for violation of, or to insist upon the strict performance of any
covenant or condition of this lease or of any of the Rules or Regulations, set forth or hereafter adopted by Owner, shall not prevent
a subsequent act which would have originally constituted a violation from having all the force and effect of an original violation.
The failure of Tenant to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this
lease to be observed or performed by Owner shall not prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of an original violation. The receipt by Owner of rent with knowledge of the breach of
any covenant of this lease shall not be deemed a waiver of such
breach and no provision of this lease shall be deemed to have been waived by Owner unless such waiver be in writing signed by
Owner. No payment by Tenant or receipt by Owner of a lesser amount than the monthly rent herein stipulated shall be deemed to
be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter
accompanying any check or payment as rent be deemed an accord and satisfaction, and Owner may accept such check or
payment without prejudice to Owner’s right to recover the balance of such rent or pursue any other remedy in this lease provided.
All checks tendered to Owner as and for the rent of the demised premises shall be deemed payments for the account of Tenant.
Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to operate as an attornment to Owner by the
payor of such rent or as a consent by Owner to an assignment or subletting by Tenant of the demised premises to such payor, or
as a modification of the provisions of this lease. No act or thing done by Owner or Owner’s agents during the term hereby demised
shall be deemed an acceptance of a surrender of said premises and no agreement to accept such surrender shall be valid unless
in writing signed by Owner. No employee of Owner or Owner’s agent shall have any power to accept the keys of said premises
prior to the termination of the lease and the delivery of keys to any such agent or employee shall not operate as a termination of
the lease or a surrender of the premises, except that delivery of keys to Owner’s attorney shall be deemed valid delivery.

          24. Waiver of Trial by Jury: It is mutually agreed by and between Owner and Tenant that the respective parties hereto
shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties against the
other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this
lease, the relationship of Owner and Tenant, Tenant’s use of or occupancy of said premises, and any emergency statutory or any
other statutory remedy.

         25. Inability to Perform: This lease and the obligation of Tenant to pay rent hereunder and perform all of the other
covenants and agreements hereunder on the part of Tenant to be performed shall in no way be affected, impaired or excused
because Owner is unable to fulfill any of its obligations under this lease or to supply or is delayed in supplying any service
expressly or impliedly to be supplied or is unable to make, or is delayed in making any repairs, additions, alterations or
decorations or is unable to supply or is delayed in supplying any equipment or fixtures if Owner is prevented or delayed from so
doing by reason of strike or labor troubles or any cause whatsoever beyond Owner’s sole control including, but not limited to,
government preemption in connection with a national emergency or by reason of any rule, order or regulation of any department
or subdivision thereof of any government agency or by reason of the conditions of supply and demand which have been or are
affected by war or other emergency.

          26. Water Charges: If Tenant requires, uses or consumes water for any purpose in addition to ordinary lavatory
purposes (of which fact Tenant constitutes Owner to be the sole judge) Owner may install a water meter and thereby measure
Tenant’s water consumption for all purposes. Tenant shall pay Owner for the cost of the meter and the cost of the installation,
thereof and throughout the duration of Tenant’s occupancy Tenant shall keep said meter and installation equipment in good
working order and repair at Tenant’s own cost and expense in default of which Owner may cause such meter and equipment to be
replaced or repaired and collect the cost thereof from Tenant, as additional rent. Tenant agrees to pay for water consumed, as
shown on said meter as and when bills are rendered, and on default in making such payment Owner may pay such charges and
collect the same from Tenant, as additional rent. Tenant covenants and agrees to pay, as additional rent, the sewer rent, charge
or any other tax, rent, levy or charge which now or hereafter is assessed, imposed or a lien upon the
demised premises or the realty of which they are part pursuant to law, order or regulation made or issued in connection with the
use, consumption, maintenance or supply of water, water system or sewage or sewage connection or system; however, Tenant
shall not be required to pay any such amounts with respect to the period of one year from the Commencement Date.
Independently of and in addition to any of the remedies reserved to Owner hereinabove or elsewhere in this lease, Owner may
sue for and collect any monies to be paid by Tenant or paid by Owner for any of the reasons or purposes hereinabove set forth.

           27. Sprinklers: The sprinkler system originally installed by Owner in the demised premises was installed and will be
maintained by Owner in accordance with all applicable laws and regulations, and anything elsewhere in this lease to the contrary
notwithstanding, if any bureau, department or official of the federal, state or local government recommend or require the
installation of a sprinkler system or that any changes, modifications, alterations, or additional sprinkler heads or other equipment
be made or supplied in an existing sprinkler system by reason of Tenant’s business, or the location of partitions, trade fixtures, or
other contents of the demised premises, or for any other reason due to Tenant’s operations, or if any such sprinkler system
installations, modifications, alterations, additional sprinkler heads or other such equipment, become necessary to prevent the
imposition of a penalty or charge against the full allowance for a sprinkler system in the fire insurance rate set by any said
Exchange or by any fire insurance company, Tenant shall, at Tenant’s expense, promptly make such sprinkler system
installations, changes, modifications, alterations, and supply additional sprinkler heads or other equipment as required whether the
work involved shall be structural or non-structural in nature. However, if during the final year of the initial term of this lease, or, if
Tenant extends the term of this lease as provided herein, during the final two (2) years of any extension thereof, as the case may
be, Tenant shall be required to perform any work under this Article, Tenant shall not be required to pay the cost thereof in an
amount greater than a fraction of such cost, the numerator of which shall equal the number of days remaining in the term and the
denominator of which shall equal 365.

         28. Services: Owner reserves the right to stop service of the heating, plumbing and electric systems, when necessary
by reason of accident, or emergency, or for repairs, alterations, replacements or improvements, in the judgment of Owner
desirable or necessary to be made, until said repairs, alterations, replacements or improvements shall have been completed.

         29. Captions: The Captions are inserted only as a matter of convenience and for reference and in no way define, limit
or describe the scope of this lease or the intent of any provision hereof.

          30. Adjacent Excavation: If an excavation shall be made upon land adjacent to the demised premises, or shall be
authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon
the demised premises for the purpose of doing such work as said person shall deem necessary to preserve the wall or the
building of which demised premises form a part from injury or damage and to support the same by proper foundations without an y
claim for damages or indemnity against Owner, or diminution or abatement of rent.

          31. Estoppel Certificate: Tenant, at any time, and from time to time, upon at least ten (10) days prior notice by Owner,
shall execute, acknowledge and deliver to Owner, and/or to any other person, firm or corporation specified by Owner, a statement
certifying that this Lease is unmodified in full force and effect (or, if there have been modifications, that the same is in full
force and effect as modified and stating the modifications), stating the dates to which the rent and additional rent have been paid,
and stating whether or not there exists any default by Owner under this Lease, and, if so, specifying each such default.

         32. Successors and Assigns: The covenants, conditions and agreements contained in this Lease shall bind and inure
to the benefit of Owner and Tenant and their respective heirs, distributees, executors, administrators, successors, and permitted
assigns.

          33. Commencement and Expiration of Term: The term of this Lease and the fixed annual rental payable hereunder
shall commence on a date (herein called the “Commencement Date”) which shall be August 17, 2009 and shall end January 31,
2011, which ending date is herein called the “Expiration Date” or shall end on such earlier date upon which said term may expire
or be canceled or terminated pursuant to any of the conditions or covenants of this Lease or pursuant to law. Provided the Lease
and the Lease Guaranty are executed prior to August 17, 2009 , Owner agrees to have the demised premises ready for Tenant’s
occupancy on August 17, 2009. The rent billing date shall be the first of the month. If the Commencement Date falls on a date
other than the first of the month, the initial rent invoice shall be prorated accordingly. Promptly after commencement of the term of
this lease the parties shall enter into a supplementary agreement confirming the Commencement Date and Expiration Date of the
term of this Lease.

          34. Broker: Tenant represents to Owner and Owner represents to Tenant that in the negotiation of this Lease it dealt
with no real estate broker or salesman. Each party hereby agrees to indemnify the other party and hold it harmless from any and
all losses, damages and expenses arising out of any inaccuracy or alleged inaccuracy of the above representation, including court
costs and attorney’s fees. Owner shall have no liability for brokerage commissions arising out of a permitted sublease by Tenant,
and Tenant shall and does hereby indemnify Owner and hold it harmless from any and all liability for brokerage commissions
arising out of any such sublease.

         35.   Number of Parking Spaces: Owner agrees to make available to Tenant the following parking spaces:

         (a)   Twenty (20) spaces for cars as shown on Exhibit “A”.

These spaces shall be provided in accordance with the terms and conditions of Article 37 herein.

         36. Taxes: (a) Tenant agrees to pay as additional rent 16.34 percent of the amount of real estate taxes, which may be
imposed upon the land and building of which the demised premises are a part. The Tax shall be the amount of real estate taxes
payable with respect to the land and the building of which the demised premises are a part for the tax fiscal year in which this
lease is executed. The Tax shall be adjusted so that the same shall reflect a fully assessed building. 16.34 percent is the
proportion which the rentable area of the demised premises bears to the rentable area of the building of which it is a part. This
increase shall be paid whether same results from a higher tax rate, or (except as set forth above) an increase in the assessed
valuation of the property of which the demised premises are a part, or both. A tax bill shall be sufficient evidence of the amount of
taxes and for calculations of the amount to be paid by Tenant. Tenant shall pay such additional rent within fifteen (15) days after
receipt of bill for such rent from Owner. Owner shall furnish to Tenant pertinent copies of tax bills which form the basis for such
additional rent promptly upon written request of Tenant.
          (b) In addition to the taxes payable by the Tenant pursuant to the preceding Article 36 (a), Tenant agrees to pay, as
additional rent, any increases in real estate taxes which are based on an increase in the assessed value resulting from physical
improvements to the demised premises, which improvements involve items exceeding the items included in Owner’s Work, as set
forth in Article 63 hereof.

          Such additional taxes shall be determined by multiplying the invoice value of said additional improvements by the
equalization ratio prevailing in the Town at the time such improvement was made, and then multiplying the resulting number by
the tax rate in the Town in effect on the date on which such improvements were completed. The increase in assessed value shall
be attributable to Tenant regardless of whether Tenant makes the improvement to the demised premises or whether Owner
makes the improvements to the demised premises for the benefit of the Tenant and at the request of the Tenant.

         (c) If any other tax or assessment shall be levied by the Town, County or other Municipal authority in lieu of the
aforesaid taxes, or in addition to the aforesaid taxes, and same shall be considered a real estate tax, then the increase payable
hereunder shall apply to such new or additional tax.

           37. Parking: The parking areas for trucks and delivery vehicles made available in front of loading docks or loading
areas are not to be considered parking spaces but are provided solely for the efficient loading and unloading of goods. No
vehicles may be parked in same longer than necessary, in Owner’s reasonable judgment, for the efficient discharge of such
purposes, except that Tenant may designate one (1) space in the parking area adjacent to its loading dock for the short term
overnight parking of vehicles. It is intended that Tenant shall have the right for its own use of not more than the spaces designated
in Article 35 hereof, but if Tenant, its agents, employees, licenses or invitees actually use more than said number of spaces on a
regular basis, Owner shall have the option of either requiring Tenant to pay to Owner FORTY-FIVE DOLLARS ($45.00) per month
for each additional space so used during the term hereof, or to cause Tenant to immediately cease and desist from so using sa id
additional spaces. A failure of Tenant to comply herewith shall be a violation of a substantial obligation of the terms of this lease.

          Tenant, its agents, servants, employees or invitees shall not cause or permit any of its automobiles, trucks or other motor
vehicles to be parked overnight anywhere within Executive Park, except as permitted above.

          Owner agrees to specifically designate the above described parking spaces if Tenant shall find them unavailable on a
repeated basis. It shall be the obligation of Tenant to insure that its officers and employees will park in the areas so designated
and will not obstruct the areas of other tenants nor park along road sides and other areas not specifically designated for parking.
Owner shall have the right to use any lawful means to enforce the parking regulations which have been promulgated in
accordance with the terms of this Lease, including but not limited to, the rules contained hereinbelow.

        38. Operating Expenses or Common Area Maintenance: (a) For purposes of this Article 38, “Lease Year” means any
calendar year all or any part of which falls within the Term; the first Lease Year under this Lease shall commence on the
Commencement Date and shall end on the 31st day of December following the Commencement Date.
          (b) “Operating Expenses” for each Lease Year, means all costs, expenses, and disbursements of every kind and
nature paid or incurred during such Lease Year by or on behalf of Owner (directly or by way of reimbursement by Owner to its
agents or contractors) solely with respect to the ownership, operation, repair, replacement, cleaning, safety, maintenance,
management and security of the Property including, without limitations, the following categories or expense, except to the extent
specifically excluded below:

          (i) salaries, wages, fringe benefits of every kind and nature, bonuses and the cost of any hospitalization, medical,
surgical insurance plans, welfare, pension, retirement or life insurance plans, disability or other benefits imposed by law or
otherwise with respect to employees and social security, unemployment and other payroll taxes paid or incurred by Owner
(directly or by way of reimbursement by Owner to its agents or contractors) relating to the employees of Owner and Owner’s
agents or contractors engaged in the ownership, operation, repair, replacement, cleaning, safety, maintenance, management or
security of the Property;

        (ii) the cost of electricity (except to the extent specifically excluded by Article 38(c)), gas, steam, or other fuel; security
systems; heating, cooling, air conditioning and ventilating; hot and cold water, sewer and other utilities; utility taxes, water rates
and charges and sewer rental for the common areas of the Property and not for any specific Tenant;

         (iii)   the cost of cleaning (including windows), cleaning goods and supplies, painting, security and other services;

         (iv) the cost of all insurance, including Worker’s Compensation, property, casualty, liability and fidelity insurance and
the fees and charges of insurance consultants; the cost of repairs to, and maintenance of the Building and the Property and their
respective systems to the extent same is not the primary obligation of a tenant thereof; the cost of landscaping;

         (vii) the cost of (including interest charges paid by, or allocable to, Owner), or rental charges for, machinery,
equipment, tools used in the maintenance, management or security of the Building (to the extent allocable to the Owner), and any
sales and other taxes thereon;

       (viii) management fees and expense reimbursement fees not in excess of the amount that would be paid to a property
manager for managing a comparable building in Fairfield County, Connecticut;

         (ix)    fees and charges payable under service agreements on equipment and other service contracts;

         (x)     telephone for sprinkler alarm monitoring;

         (xi)    accounting and professional fees and disbursements primarily for annual financial statement production;

       (xii) annual amortization of costs on a straight-line basis over a depreciable life selected by Owner consistent with
GAAP for any equipment, device, or capital improvement installed by Owner in the Building that are intended to reduce Operating
Expenses or that are required by federal, state, or local laws, ordinances and regulations (law) (whether or not such Law is
mandatory) together with the actual costs of financing or leasing the same;
         (xiii)   fees for costs of licenses, permits and inspections subsequent to original construction of the Building;

       (xiv)      costs of contesting the validity or applicability of any Law if a successful contest is likely to reduce Operating
Expenses;

           (xv) those taxes, duties, charges, levies, and assessments that are expended as a part of the Property’s operation,
repair, cleaning, safety, maintenance, management or security, but that are not included within Taxes, such as sales, use and
utility taxes;

         (xvi) all expenses and costs incurred by Owner as a result of or in order to comply with Laws related to the Property
(excluding the Premises), including Laws pertaining to (i) energy or natural resource conservation or environmental protection
(such as the costs of securing alternative sources of utilities, energy or other products or services and the costs of making the
Building or the Premises compatible with the use of such alternative sources), (ii) indoor air quality and (iii) recycling;

          (xvii) all charges, taxes, or surcharges imposed by any government agency or public utility as a means of conserving or
controlling the consumption of water, gas, electricity, energy sources or products, natural resources, or other products or services.

           (c) The following costs and expenses shall be excluded from Operating Expenses: (i) expenses relating to leasing
space in the Building (including tenant improvements, leasing and brokerage commissions and advertising expenses); (ii) legal
fees and disbursements incurred for collection of tenant accounts or negotiation of leases, or relating to disputes between Owner
and other tenants and occupants of the Building; (iii) the cost of electricity furnished to any vacant space in the Building (iv) new
construction and other capital expenditures not specifically included in Article 38 (b); (v) Taxes; (vi) the cost of repairs and
replacements incurred by reason of fire or other casualty or condemnation to the extent to which Owner receives compensation
through proceeds of insurance or a condemnation award; (vii) payments of principal and interest on any mortgages upon either or
both of the Land and the Building, (viii) payments of ground rent pursuant to any ground lease covering either or both of the Land
and the Building; (ix) the costs of gas, steam or other fuel; operation of elevators and security systems; heating, cooling, air
conditioning and ventilating; chilled water, hot and cold water, sewer and other utilities or any other service or facility, or level or
amount thereof, provided to any other tenant or occupant in the Building which either (A) is not supplied or furnished to Tenant or
(B) is supplied or furnished to Tenant pursuant to the terms of this Lease with separate or additional charge; (x) the cost of any
work performed for any other tenant or occupant in the Building which either (A) is not performed for Tenant or (B) is performed for
Tenant pursuant to the terms of this Lease with separate or additional charge; (xi) payments made by Owner to a company or
other entity affiliated with Owner for goods and services to the extent that such payments exceed the amounts that would have
been paid to independent third parties for goods and services of like kind in connection with the operation, repair, cleaning,
maintenance, management and security of the Building; (xii) the cost of any Owner’s Work, (xiii) the Allowance given to Tenant or
an allowance or similar financial incentive given to a tenant of other space in the Building, including without limitation, rent credits;
(xiv) fines and penalties assessed against Owner for failing to comply with Laws and (xiv) Initial capital expenditures or repairs
and replacements to any areas of the building leased to Tenant or other tenants.

        38.1 Payment of Operating Expenses: Tenant shall pay to Owner as Additional Rent for each Lease Year or fractional
Lease Year during the Term, an amount of money equal to
Tenant’s Proportional Share, as described herein, of Operating Expenses as described above, together with the Annual Fixed
Rent as stated Article 63(b). Tenant shall pay Tenant’s Proportionate Share of the Operating Expenses to Owner within
twenty-five (25) days after Owner provides Tenant with a statement of Tenant Proportionate Share of the Operating Expenses
with the computations of such Operating Expenses.

          (a) On the first business day of February of each Lease Year during the Term (or, with respect to the Lease Year in
which the Commencement Date occurs, before the Commencement Date) or as soon thereafter as is practicable, Owner shall
furnish Tenant with a statement of Owner’s reasonable estimate of Operating Expense, (the “Operating Expense Estimate”)
setting forth Owner’s reasonable estimate of Operating Expenses for the forthcoming Lease Year (or the fractional Lease Year in
which the Commencement Date occurs, as the case may be). Owners estimate for 2009 is confirmed to be $1.46 per square foot.

         (b) Estimated Statement Payments. On the first day of the month following Tenant’s receipt of an Operating Expense
Estimate, but in no event less than 20 days following Tenant’s receipt of an Operating Expense Estimate, Tenant shall pay to
Owner an amount equal to (a) the product of (i) one-twelfth (1/12th) of Tenant’s Proportionate Share based on such Operating
Expense Estimate multiplied by (ii) the number of months (and any fraction thereof), to and including the then current month, that
have elapsed or commenced since the commencement of such Lease Year less (b) the aggregate of any payments made on
account of Additional Rent for Operating Expenses for such Lease Year pursuant to this Article 38.1. On the first day of each
month thereafter until rendition of the next succeeding Operating Expense Estimate, Tenant shall pay to Owner an amount equal
to one-twelfth (1/12th) of Tenant’s Proportionate Share based on the most recent Operating Expense Estimate; provided,
however, that if a new Operating Expense Estimate is issued for such Lease Year, the monthly amount shall be changed as
provided in Article 38.1(a).

          (c) If the Commencement Date occurs on a date other than the first day of January, or if the Term ends on a date other
than the last day of December, the actual Operating Expenses for the Lease Year in which the Commencement Date or the
Expiration Date occurs, as the case may be, shall be prorated so that Tenant shall pay that portion of Tenant’s Proportionate
Share of Operating Expenses for such year represented by a fraction, the numerator of which shall be the number of days during
such fractional year falling within the Term, and denominator of which is 365 (or 366, in the case of a leap year). The provisions of
Article 38.1 shall survive the Expiration Date or any sooner termination as may be provided for in this Lease

          (d) By the first business day in April of each Lease Year during the Term (beginning on the first day of April of the
Lease Year following the Lease Year in which the Commencement Date occurs), or as soon thereafter as is practicable, Owner
shall furnish Tenant with a statement of the actual Operating Expenses for the preceding Lease year, certified by Owner. The
monthly installments paid or payable shall be adjusted between Owner and Tenant, and each party hereby agrees that Tenant
shall pay Owner or Owner shall credit Tenant’s account (or, if such adjustment is at the end of the Term, pay Tenant), within thirty
(30 days of receipt of such statement, the amount of any excess or deficiency in Tenant’s Proportionate Share of Operating
Expenses paid by Tenant to Owner during the preceding Lease Year.

         (e) In the event that the written itemized statement reflecting the actual Operating Expenses for the previous Lease
Year is not received within one hundred eighty (180) days after the end of each Lease Year, Tenant shall not be obligated to pay
Tenant’s Share of actual Operating Expenses exceeding the estimated payments made by Tenant for the previous Lease
Year. However, Tenant shall still be entitled to receive a reimbursement or credit of Tenant’s Proportionate Share of Operating
Expenses overpaid the previous Lease Year, if any.

         (f) Tenant shall have the right within sixty (60) days of receiving a statement of Operating Expenses and on fifteen
(15) business days prior written notice to Owner, to review during normal business hours, the books and records relating to such
Operating Expenses at the office of Owner at which such books and records are routinely maintained. The audit may be
conducted at Tenant’s expense by an employee of Tenant or a certified public accountant licensed in the state of Connecticut. If
Tenant’s audit reveals that the Operating Expenses charged to Tenant exceed or were less than Tenant’s Proportionate Share of
the actual Operating Expenses, and such variance is confirmed by Owner’s certified public accountant, then Owner will reimburse
Tenant for any overcharge, or Tenant will pay to Owner any undercharge, as applicable promptly after such final determination. In
the event of a confirmed overcharge of Operating Expenses to Tenant in excess of five (5%) percent of Tenant’s Proportionate
Share of actual Operating Expenses in such Lease Year, Owner shall also reimburse Tenant for the reasonable costs of Tenant’s
audit together with interest on such overcharged amount at the Default Interest Rate as such term is hereinafter defined.

            39. Insurance: (a) Liability Insurance - Tenant agrees to provide and keep in force comprehensive general public
liability insurance against claims arising out of the operation and control of the premises, in limits of not less than $1,000,000.00
per occurrence, $2,000,000 general aggregate and a $10,000,000 Umbrella Policy for combined bodily injury and property
damage. Owner may periodically review, but not more often than once every two years the adequacy of such coverage and shall
have the right to require Tenant to increase the coverage equal to the amount of coverage customarily carried by owners and/or
tenants of similar buildings in similar locations in the Stratford/Bridgeport area. The original of any such policy or certificate thereof
shall be delivered to the Owner showing that Owner has been named as an additional insured, and renewals thereof shall be
delivered to the Owner at least five (5) days before the expiration of any existing policy. All such insurance shall be with
companies of recognized responsibility licensed to do business in the State of Connecticut and shall provide that same may not be
canceled by the carrier without at least ten (10) days prior written notice to each insured. If Tenant shall not deliver evidence of the
existence of such insurance as required herein, Owner may procure such insurance, at Tenant’s expense, and Tenant shall, on
demand, reimburse Owner, as additional rent, for the cost thereof together with interest at the maximum legal rate per annum then
chargeable to individuals.

          (b) Owner agrees to provide and keep in force during the term of this Lease sufficient casualty insurance to rebuild the
building to its original condition in form and of substance that is customary for similar buildings in this area of Fairfield County
Connecticut.

         (c) Notwithstanding anything contained in Article 9 hereof, the Tenant herein shall not be obligated to pay any increase
in Owner’s insurance premium caused by an increase in rate which has been charged by the insurance company because of the
occupancy of any other tenant in the building of which the demised premises are a part. However, Tenant shall be responsible for
any increase caused by any subtenant of Tenant. The preceding sentence shall not be deemed to be an implication that Owner
consents to any subleasing of the premises unless otherwise permitted in this lease.

         (d)   Intentionally omitted.
         (e) Any failure on Tenant’s part to promptly dispose of rubbish or accumulations of flammable material on the premises
or adjacent to the premises may have the effect of increasing the insurance rate on the building and involve the Tenant herein with
additional liability.

         40. Owner’s Obligations: (a) Notwithstanding anything contained herein to the contrary in Article 4 hereof, the Tenant
shall not be obligated to make any repairs to the roof, foundation, exterior walls, load-bearing interior walls or any structural
defects (collectively, “Structural Repairs”) unless said repairs are made necessary by the carelessness, omission, neglect or
improper conduct of Tenant or Tenant’s servants, employees, invitees or licensees. Owner shall perform all Structural Repairs not
required to be made by Tenant under this subparagraph 40 (a), Tenant shall notify Owner of the same. If, within twenty (20) days
after such notice Owner fails to complete such repairs (or, if such repairs are of a nature that they cannot reasonably be
completed within such twenty (20) day period, Owner fails to commence such repairs within such twenty (20) day period and
thereafter diligently prosecute the same to completion), then Tenant may cause such repairs to be made at Owner’s reasonable
expense. If Owner in good faith disputes its obligation to make any repair, such dispute shall be resolved by arbitration in
Bridgeport, Connecticut under the auspices and rules of the American Arbitration Association. Tenant’s right to cure set forth in
the previous sentence shall be subject to any such arbitration proceeding.

         (b) Owner shall light the access roads and parking areas during the hours between 7:00 AM and 10:00 PM, (but not
after sunrise or before sunset), Monday through Friday, except on holidays. Tenant shall be responsible for lighting Tenant’s
entrances and loading areas.

         (c) Owner shall clean and remove snow and ice from the access roads and parking areas (or, if the removal of ice is
not reasonably possible, sand the same) except that Tenant shall remove snow and ice at Tenant’s entrances and on any paved
way solely for Tenant’s use, or on any steps or stoops or platforms leading to Tenant’s premises.

         (d) Owner shall not be obligated to remove snow from areas in the vicinity of Tenant’s entrances or loading areas
which were obstructed by a parked vehicle at the time Owner’s snow removal equipment was servicing the area. Owner shall not
be obligated to institute snow plowing unless the accumulation exceeds three (3) inches.

         (e) Owner shall not be required, unless otherwise agreed to in writing, to furnish any service during hours other than
those set forth in this Lease.

        (f) Owner shall maintain the access roads and parking areas in good order and repair. Tenant shall perform, at its
expense, any necessary repairs and maintenance with respect to the loading dock serving the demised premises.

         (g) Owner shall comply, at its expense, with those laws, ordinances, rules and regulations (collectively, “Laws and
Ordinances”) applicable to the building or the use and occupancy thereof, which Laws and Ordinances neither Tenant nor any
other tenant or occupant of the building is obligated to comply with.

          41. Tenant’s Obligations: (a) Tenant agrees not to employ any contractor in connection with any services, provisions,
alterations or maintenance, unless Owner has first consented in
writing to the contractor (which consent shall not be unreasonably withheld), it being the intention of Owner to limit the number of
such contractors employed in the Park.

Tenant acknowledges that it shall be reasonable for Owner to withhold consent to the contractor proposed by Tenant if the use of
such contractor would tend to cause labor problems at the building. Owner may cause to be revoked any agreements or contracts
whether written or oral if no such prior written consent has been obtained and in such event Tenant shall forthwith cancel such
contract as being invalid due to Tenant’s failure to obtain Owner’s prior consent. The categories of services referred to above shall
include but not be limited to janitorial and window cleaning services, extermination of vermin, HVAC maintenance, food services
and vending machines. Owner’s disapproval of any contractor selected by Tenant must be accompanied by the designation of one
or more contractors acceptable to Owner, whose prices must be reasonably competitive. In the event Owner does not approve or
disapprove Tenant’s contractor within seven (7) business days after receipt of written request therefore, then the contractor so
selected by Tenant shall be deemed to have been approved by Owner.

          (b) With respect to any work to be performed by the Tenant on the demised premises, in addition to any other
limitations set forth in this Lease, Owner does not consent to the reservation of any title by any conditional vendor or secured party
to any property which may be affixed to the realty so as to become a part thereof, wholly or in any portion without material injury to
the freehold.

         (c) Tenant shall promptly remove snow, litter or debris from the walkways, steps, or paved ways leading from the
common areas to Tenant’s entrances, exits and loading areas provided such walkways, steps and paved ways are for the sole
use of Tenant.

         (d) Tenant agrees, at its sole cost and expense, and throughout the term of this Lease, to maintain in good working
order (including changing of filters at least four (4) times per year), repair and replace where necessary, the heating and air
conditioning units and systems by using reputable heating and air conditioning contractors on a systematic basis, reasonably
acceptable to Owner. Tenant shall submit on demand evidence of its maintenance contracts, as aforesaid. Tenant’s obligations
under this subparagraph (d) shall be conditioned upon Owner’s initial installation of heating and air conditioning equipment
meeting the criteria of Exhibits B and C hereto.

          (e) Tenant agrees to purchase gas and electricity or any other fuel or source of energy at any time being supplied to
the demised premises from the public utility company or the appropriate vendor servicing the demised premises and shall pay
directly to the applicable utility company or the appropriate vendor the consumption of electricity and gas or other fuel referred to
above. Owner shall not in any way be liable or responsible to Tenant for any loss or damage or expense which Tenant may
sustain or incur if either the quantity or character of electrical or other such service is changed or is no longer available or suitable
for Tenant’s requirements, where such change is due to circumstances beyond Owner’s control. Owner’s responsibility shall be
solely limited to the repair of any lines or pipes outside of the demised premises, the repair of which may be the responsibility of
Owner under the terms of this lease. In no event shall Owner be held responsible for any failure on the part of the utility c ompany
to repair or service its lines if such repair is not the Owner’s responsibility or involves the line or property of the utility company.

       (f) Owner shall have the right to purchase energy or energy sources other than those available for the public utility
company or companies serving the premises provided that such
changes are mandated by public authority. Owner may apportion the cost of such energy sources reasonably among tenants,
including the debt service costs for any additional equipment required in connection with the distribution and use of such energy.
Where such allocation is not on a metered basis, but on a rent inclusion basis, the allocation payable by Tenant shall be
established by Owner’s duly qualified professional engineer. In the event Tenant disputes any such allocation, Tenant may employ
a reputable consultant to make a survey of the cost of such energy to the demised premises. The determination of such consultant
shall be promptly submitted to Owner. If Owner’s and Tenant’s consultants cannot mutually agree as to the cost of such energy,
the matter shall be submitted to arbitration in accordance with the rules of the American Arbitration Association. Pending
determination of such consultants’ reports Tenant shall continue to pay the charges as billed by Owner. Each party shall pay the
cost of its own consultant. Any final adjustment shall be made at the time of the arbitration award. Owner shall not in any way be
liable or responsible to Tenant for any loss or damage or expense which Tenant may sustain or incur if either the quantity or
character of the energy to the building is changed or is no longer available or suitable for Tenant’s requirements, except that
Owner shall diligently pursue such remedies as are reasonably consistent with the other terms of this Lease, and as are
reasonably within Owner’s control.

        (g) Tenant shall, at Tenant’s expense, keep the demised premises clean and in order, to the reasonable satisfaction of
Owner, and for that purpose shall employ the person or persons, or corporations approved by Owner in accordance with
subparagraph 41 (a) hereof.

          (h) In addition to the provisions of subparagraph 41 (c), Tenant shall pay the cost of removal of any of Tenant’s refuse
and rubbish from the building. Tenant shall independently contract for the removal of such refuse and rubbish. Owner reserves the
right to select a refuse disposal contractor to serve the entire Executive Park. The name of such contractor shall be available from
Owner upon request, and Tenant shall employ no other refuse removal or carting contractor without specific written prior approval
from Owner. The removal of such refuse and rubbish shall be subject to such rules and regulations as in the judgment of Owner
are necessary for the proper operation of the building or buildings of which demised premises form a part, and of the Executive
Park.

         (i) Window coverings are for the Tenant’s account and are discretionary except where the demised premises front onto
a roadway facing the front entranceway of Tenant’s premises. Where Tenant’s industrial, as opposed to office uses, are visible
from the outside, then in the event Tenant shall, throughout the term of this Lease, provide draperies, blinds, or other suitable
coverage satisfactory to Owner on any windows so located, except along the rear drive.

        (j) Tenant shall keep all windows in premises clean at all times. However, Tenant shall not be required to clean
windows more often than once every three (3) months.

          (k) Tenant shall replace, at the expense of Tenant, any and all plate and other glass damaged or broken from any
cause whatsoever in and/or around the demised premises, and insure and keep insured at Tenant’s expense all plate and other
glass in the demised premises for and in the name of Owner. If such insurance cannot be obtained at reasonable rates, Tenant
may self-insure.

         (l) Tenant will make application for telephone service directly to the telephone company. Owner does not initiate or
provide said service.
          42. Notwithstanding any other provisions contained in the instant Lease herein to the contrary, Owner shall have the
right, at any time (when, in Owner’s reasonable judgment,) the demised premises become substantially vacant for in cases of
emergency otherwise, if the demised premises become substantially vacant more than fifteen (15) days, to enter upon same for
the purposes of preventative maintenance or otherwise, whether or not Tenant has furnished the Owner with a key to the demised
premises prior thereto. If no key has been furnished by Tenant to Owner, and Owner is required to break the existing lock or locks
and insert new locks therein, Tenant shall reimburse Owner for the cost thereof and same shall be deemed additional rent due
hereunder.

         Owner shall furnish Tenant with keys to the demised premises at or prior to lease commencement.

         Tenant shall continue to maintain the demised premises so as to prevent damage thereto until the later of lease
expiration or the date Tenant vacates and surrenders the demised premises. Without limiting the foregoing Tenant shall continue
to supply heat to the demised premises, together with all other utilities as reasonably determined by Owner.

GENERAL

          43. It is understood and agreed that this Lease is submitted to the Tenant for signature with the understanding that it
shall not bind the Owner unless and until it has been executed by the Owner and delivered to the Tenant or Tenant’s attorney.

        44. Tenant agrees within a reasonable time after being requested to submit such financial information as may be
reasonably required by Owner’s institutional first mortgagee.

         45. Any striking out or deletion of any portion of this Lease was done as a matter of convenience for the purpose of
execution, and the language omitted is not to be given any effect whatsoever in construing this Lease.

          46. Notwithstanding anything to the contrary contained herein, the demised premises shall not be used in any manner
nor shall any hazard be permitted therein that exceeds the requirements of Section 301, Use Group B and use Group S-1, of the
Connecticut Basic Building Code.

         47. Preparation for Occupancy and Possession: (a) The demised premises shall be completed and initially prepared for
Tenant’s occupancy in the manner, and subject to the provisions of Article 63 hereto. Tenant and its contractor shall be entitled to
access to the demised premises prior to the completion of Owner’s work only so long as Tenant, its contractor and subcontractors
work in conformity with and do not materially interfere, in Owner’s reasonable judgment, with Owner, its contractors or
subcontractors in the completion of Owner’s work and provided Tenant’s subcontractors accept the administrative supervision of
Owner’s representatives.

Owner may withdraw the license granted to Tenant to perform any work within the demised premises pursuant to this
subparagraph upon twenty-four (24) hours written notice to Tenant in the event the Tenant’s work interferes with Owner’s work
and provided that Tenant does not cause a cessation of such interference within such 24 hour period. Worker’s Compensation,
public liability insurance and property damage insurance, all in amounts and with companies reasonably satisfactory to the Owner
shall be maintained by Tenant and/or its contractors and
subcontractors and certificates of such insurance shall be furnished to the Owner prior to the commencement of any Tenant work.
Tenant’s selection of all contractors and subcontractors must be in conformance with Article 41.

         (b) The demised premises shall be deemed to be substantially completed on the date on which Owner’s work in the
demised premises has been completed and the offices and warehouse are in move-in condition and ready for the normal conduct
business, notwithstanding the fact that minor or insubstantial details of construction, mechanical adjustment or decoration remain
to be performed, the noncompletion of which would not materially interfere with Tenant’s use of the demised premises.

          (c) If the substantial completion of the demised premises is delayed by reason of: (i) any act or omission of Tenant or
any of its employees, agents or contractors, including the failure of Tenant to comply with any of its obligations under the work
specifications; or (ii) any failure (not due to any act or omission of Owner or any of its employees, agents or contractors) to plan or
execute Tenant’s work with reasonable speed and diligence; or (iii) any changes by Tenant in its drawings or specifications or any
changes or substitutions requested by Tenant, then the demised premises shall be deemed substantially completed on the date
when they would have been substantially completed but for such delay.

          (d) Pending the determination of any dispute with respect to the tax and common charge rent escalations under
Articles 36 and 38 hereof, respectively, Tenant shall pay the rent as billed by Owner.

          48. Owner may bill to Tenant, and Tenant shall pay for the reasonable cost of directional signage as Tenant may desire
or authorize and as first approved by Owner. Tenant may apply to Owner for the installation of additional signage. Such requests
shall be accompanied by a sketch showing the sign desired, its size, type and manner of mounting specifying the materials and
finishes employed in the manufacture of same. Approval by Owner shall not constitute approval for purposes of complying with
rules and regulations of any public agencies applicable. It shall be Tenant’s obligation to secure such permissions or permits at
Tenant’s expense.

         49. Whenever reference is made herein to public halls, elevators, corridors, etc. and if none such are present on or
about the premises demised herein then such references shall have no relevance to the terms herein.

          50. Wherever reference is made in this Lease to “business days”, such business days shall exclude also all days
observed by unions having jurisdiction over employees of Owner, Owner’s managing agent, or Owner’s cleaning contractor as
legal holidays.

        51. The terms and provisions of this lease shall be construed in accordance with and governed by the laws of the State
of Connecticut.

         52.   Intentionally Omitted.

          53. Mechanic’s Liens: Tenant will not permit, during the term hereby granted, any mechanic’s or other lien or order for
payment of work, labor, services, or materials furnished or to be furnished to, attach to or affect the demised premises or any
portion thereof, and agrees that no such lien or order shall under any circumstances attach to or affect the fee, leasehold or other
estate of the Owner herein, or the building. The Tenant’s obligation to keep the demised
premises in repair, and its right to make alterations therein, if any, shall not be construed as the consent of the Owner to the
furnishing of any such work, labor or materials within the meaning of any present or future lien law. Notice is hereby given that the
Tenant has no power, authority or right to do any act or to make any contract which may create, or be the foundation for, any lien
upon the fee or leasehold estate of the Owner in the demised premises or upon the land or building of which they are a part of the
improvements now erected or hereafter to be erected upon the demised premises or the land or building of which the demised
premises are a part; and if any such mechanic’s or other lien or order shall be filed against the demised premises or the land or
building of which the demised premises are a part, the Tenant shall, within thirty (30) days thereafter, discharge said lien or order
by payment, deposit or by bond fixed in a proper proceeding according to law. If the Tenant shall fail to take such action, or shall
not cause such lien or order to be discharged within thirty (30) days after the filing thereof, the Owner may pay the amount of such
lien or discharge the same by deposit or bond or in any other manner according to law, and pay any judgment recovered in any
action to establish or foreclose such lien or order, and any amount so paid, together with the expenses incurred by the Owner,
including all reasonable attorney’s fees and disbursements incurred in any defense of any such action, bonding or other
proceeding, shall be deemed additional rent.

          54. Wherever reference is made to the building or the Executive Park, it shall mean the building or the Executive Park
in which the demised premises are located.

         55. Work Specifications: The plans prepared by Owner in accordance with Article 63 hereof are subject to revision
based on the rules and regulations of such reviewing agencies as the local board of inspectors, the state labor department, OSHA
and related agencies. Any changes in door swings, arrangements of exits and/or passages mandated by such agencies shall be
binding on Owner and Tenant as if they had been incorporated into the original plans as attached hereto. In the case of any
common foyers or exit passages mandated by such regulations and used by more than one tenant, the size of such areas or
passages and the rent therefore shall be apportioned among the parties in relation to the total square footage which they
proportionately occupy, and such charges shall be payable as additional rent hereunder.

         Owner shall have the right to add exits, entrances or passageways whenever necessary to comply with present or future
regulation by applicable public authority. Tenant shall pay the cost thereof where the requirement for such addition is due solely to
Tenant’s special use of premises.

         56.    Rules and Regulations :

          A. Owner shall have the right to change the shape and location of parking areas and the use of same, but no action by
Owner shall materially affect access to the leased premises, nor shall Owner do anything which would prevent the availability to
the Tenant of the parking spaces described above. Tenant and its officers, employees, agents, customers and invitees shall have
the right, in common with Owner and all others to whom Owner has granted or may hereafter grant rights, to use the common
areas as designated from time to time by Owner subject to such reasonable rules and regulations as Owner may, from time to
time, impose including the designation of special areas in which cars, trucks and other vehicles owned by the Tenant, its officers,
employees, agents, customers and invitees (including customers, shippers, etc.) must be parked. Tenant shall, upon request,
promptly furnish to Owner the license number of the cars and trucks operated by Tenant, its officers and employees. Tenant shall
not at any time interfere with the rights of Owner and other occupants of the building or buildings, their
officers, employees, agents, customers and invitees to use any part of the parking areas and other common areas not specifically
allocated to Tenant.

          B. In any location where the use of one loading dock interferes with the use of another, such as on or near interior
corners, the tenant occupying the larger space shall have priority in case of conflict but shall have no right to unreasonably
obstruct access to the tenant occupying the smaller space, or, in no event to block such access or any one period exceeding
fifteen (15) minutes in duration.

         C. Without limiting the provisions of Paragraph 35, Owner may promulgate such rules and regulations with regard to
the use of common areas as in its judgment may be desirable to improve the convenience thereof, and may close off such areas
temporarily for the purposes of making repairs, alterations, to discourage unauthorized parking, or to prevent the loss to Owner of
exclusive control over said area.

         D. It shall be Tenant’s responsibility to keep the loading areas free of all refuse and debris and to arrange promptly for
removal of any such materials which are not removed as part of Tenant’s regular refuse removal contract. If Tenant fails to
remove substances such as, but not limited to miscellaneous lumber, pallets, crates, packing materials, barrels or drums, etc.
Owner shall have the right upon three (3) days written notice to remove or to arrange for the removal of such substances, and to
charge Tenant the reasonable cost thereof, which shall constitute additional rent under the terms of this Lease. Tenant shall
promptly repair any damages to structures, paved areas and other common areas which have been damaged by Tenant, its
agents, employees, servants or licensees.

         E.   Tenant shall not store any goods outside of the building.

          F. Upon vacating the premises, Tenant shall surrender to Owner originals or duplicate copies of all contracts and
invoices in Tenant’s possession for mechanical maintenance, services for heating and air conditioning equipment, including dates
of service and nature of service performed. No security deposit (if then on deposit with Owner) shall be returnable until Tenant has
complied with the conditions hereinabove. Nothing contained in this paragraph, however, shall be deemed to give Tenant the right
to bind Owner in any way, and no service contract shall run beyond the term of this Lease as same may be terminated hereunder
unless consented to in writing by Owner.

         G.   Intentionally omitted.

        H. Tenant shall, subject to the other applicable terms of this Lease, remove, on vacating the premises, any private
telephone systems, communicating systems or security systems unless Owner has specifically consented in writing to their
remaining on the premises.

          I. Wherever Tenant shall have affixed wall coverings, wall fixtures such as wall shelving, hooks, pictures, etc. to the
walls and shall have covered, obscured or penetrated Owners standard painted finish, Tenant shall be responsible, upon removal
from the premises, to leave behind a wall surface that is intact, generally acceptable in color or type, and if not easily repaintable,
shall be removed and the surface restored to a paintable condition. Where such wall coverings are serviceable or repairable they
may be left in place, at Owner’s discretion.
         J. Tenant shall, upon vacating the premises, promptly surrender to Owner any and all keys to the premises. If keys
have not been returned, Tenant shall be liable for the cost to Owner of replacing locks and keys.

          K. No pictures, bulletin boards, notices, etc. shall be affixed to any wall except by ordinary nail or picture hanger, and
shall in no way be glued or otherwise permanently affixed in such a manner as to cause damage to the wall surface upon removal.

         L. Notwithstanding anything contained in Article 4 hereof, Tenant may, if approved by Owner in writing, which approval
shall not be unreasonably withheld, make interior nonstructural alterations provided Tenant complies with all of the following
conditions with respect to any such alteration costing in excess of $1,000.00:

                   1.   Tenant furnishes Owner a plan of the proposed alterations prior to construction for Owner’s prior written
approval;

                   2.   Tenant furnished Owner with an “as built” plan upon completion of alterations;

                   3.   Tenant will obtain all governmental permits and pay all applicable governmental fees;

                   4.   Tenant will use only contractors reasonably approved by Owner and duly licensed for such work where
applicable;

                     5. Tenant will perform all alterations in a good and workmanlike manner in accordance with standards at
least equivalent to the standard prevailing in the building or buildings of which the demised premises form a part. Any failure
partitions fronting on open ceiling space shall be taken to the underside of the roof;

                   6. Tenant accepts full responsibility for any changes in sprinklers, passages, legal exits, etc. which may be
necessitated by such alterations and shall not do any work which shall adversely affect the remainder of the building of which the
demised premises form a part;

                    7. Should such alterations result in any change in assessment due to the improvements made, Tenant will
pay all such additional taxes as may become due on account of such alterations or improvements as set forth in Article 36 (c);

                    8. Upon vacating the space, Tenant agrees to remove such alterations and to reconstitute the premises to
the condition in which they were delivered, normal wear and tear excepted, if so requested by Owner unless Owner has waived
this requirement in writing;

                    9. In the event Tenant shall be authorized by Owner to remove any partitions, Tenant shall be responsible
for any repairs to be specifically authorized to remove said partitions, whether installed by Owner or Tenant. Such partitions shall
be deemed part of the realty and shall not be removed. Nothing herein contained shall prevent Owner, however, from requiring
Tenant to remove any installation installed by or on behalf of Tenant of whatever nature whatsoever;

                    10. Tenant shall not make any installation on or through the roof, nor shall Tenant or Tenant’s agents enter
upon the roof or place objects thereon without the specific written permission of Owner’s Maintenance Department which shall
specify the time and conditions
under which such entry may be obtained. Owner’s Maintenance Department may make such rules and regulations as they deem
appropriate to govern Tenant’s use or access to the roof for any purpose whatsoever. Owner makes no representation, implied or
expressed, as to the load bearing capacity of the roof at any one point, and Tenant shall be responsible for any construction,
reconstruction or reinforcement necessary to make the roof suitable for Tenant’s purposes.

          M. Any equipment installed by Tenant or by Owner on behalf of Tenant which generates noise or vibrations shall be
first approved by Owner and shall be installed by Tenant only in locations approved by Owner in writing, and provided such
equipment shall be mounted and maintained on shock absorbing pads of a size and material suitable for the equipment so
installed. Notwithstanding such approval, Tenant shall be fully liable for the correction of any condition which causes the
transmission of sound, noise or vibration through the floor or structure of the building in such a manner as to interfere with the
reasonable comfort and enjoyment of other space in the building by other tenants, as determined by Owner.

           N. Owner will give credit for the omission carpeting in the office space towards warehouse electrical as shown on
Exhibit D. If carpeting is furnished by Owner and if credit has been given towards such carpeting for the omission of the standard
vinyl composite floor tile, then, in that event, even though Tenant may have contributed toward the cost of the carpeting, the
carpeting will remain the property of the Owner. Where Tenant has paid for carpeting in full, and where such carpeting is installed
on the top of standard vinyl composite tile, Tenant may remove carpeting upon vacating the premises provided all tackless
installation strips are removed, all floor tile has been repaired or replaced as necessary, and all vinyl base or other floor base has
been reset to the level of the tile floor, repairing whatever wall or floor damage or repainting may be necessary. Wherever
carpeting is installed by the Tenant, by Tenant’s contractors or at Tenant’s direction, no carpeting shall be installed with an integral
foam rubber backing, nor shall carpeting be installed by gluing or other forms of cementing directly to the floor. Where such
carpeting is installed in contravention to this provision, Tenant shall be liable for the costs of removing such glues or cem ents and
reconstituting the floor to its original condition, and recovering with acceptable carpet installed in an acceptable manner, or with
1/8” vinyl composite tile satisfactory to Owner.

          O. The water and wash closets and plumbing fixtures shall not be used for any purpose other than those for which they
were designed or constructed and no sweepings, rubbish, rags, acids or other substances shall be deposited therein, and the
expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the tenant who, or whose
clerks, agents, employees or visitors, shall have caused it.

         P. No tenant shall sweep or throw or permit to be swept or thrown from the demised premises any dirt or other
substances out of the doors or windows or stairways or loading docks of the building, and Tenant shall not use, keep or permit to
be used or kept any foul or noxious gas or substance in the demised premises, or permit or suffer the demised premises to be
occupied or used in a manner offensive or objectionable to Owner or other occupants of the building by reason of noise, odors
and/or vibrations, or interfere in any way with other tenants of those having business there, nor shall any animals or birds be kept
in or about the building.

        Tenant shall not bring or permit to be brought or kept in or on the demised premises any illegal amounts of inflammable,
combustible or explosive fluid, material, chemical or substance, or cause or permit any odors of cooking or other processes, or
any unusual or other objectionable odors to permeate in or emanate from the demised premises.
        Q. No awnings or other projections shall be attached to the outside walls of the building without the prior written
consent of Owner.

            R. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any Tenant on
any part of the outside of the demised premises or the building or on the inside of the demised premises if the same is visible from
the outside of the premises without the prior written consent of the Owner, except that the name of Tenant may appear on the
entrance door of the premises. In the event of the violation of the foregoing by any tenant, Owner may remove same without any
liability, and may charge the expense incurred by such removal to Tenant or Tenants violating this rule. Signs on doors shall be of
a size, color and style acceptable to Owner.

           S. Tenant’s use of electric current shall not exceed the capacity of the then existing feeders to the building or the risers
or wiring installation and Tenant may not use any electrical equipment which, in Owner’s reasonable opinion, will overload such
installations or interfere with the use thereof by other tenants of the building.

           57. If the Tenant intends to remain in possession of the premises beyond the termination of the Lease term herein, the
Tenant shall give written notice, by Certified Mail, Return Receipt Requested, to the Owner to such effect at least ninety (90) days
prior to the date on which Tenant expects to vacate the premises. For the time period which constitutes the holdover tenancy, the
monthly rental shall be one hundred and fifty percent (150%) of the total monthly rent paid during the last month of the Lease term
herein. Subsequent to the first ninety (90) days of the holdover period the rental shall be that which the Owner shall determine
from time to time.

If the Tenant fails to give written ninety (90) days notice as set forth above, and if the Tenant remains in the premises for more
than seven (7) days past the expiration of the Lease term herein, then the Tenant shall pay to Owner at least three (3) months rent
as defined above, from the date on which the Tenant first notifies Owner that it intends to remain on the premises as a holdover
tenant whether or not Tenant actually remains in possession of the premises for the full three (3) months subsequent to such
notification. If the Tenant remains on the premises as a holdover tenant without having given Owner any notice, Tenant shall pay
to Owner rent for a period of three (3) months from the time Tenant vacates the premises. For the period from the expiration of the
term until Tenant vacates, the rent shall be as determined above. All rent herein shall be due on the first day of the month. The
acceptance of any rent as set forth herein by Owner shall not be deemed to prevent the Owner from commencing a summary
proceeding to remove the Tenant as a holdover tenant and collect the aforesaid rent for use and occupancy of said premises.

         58. Tenant shall look solely to the interest of the Owner in the building for the satisfaction of Tenant’s remedies, and no
other property or assets of the Owner shall be subject to levy, execution or other enforcement procedure for the satisfaction of
Tenant’s remedies. For the purposes of this Article 58, “the interest of the Owner in the building” shall be deemed to include
Owner’s interest in the proceeds of a sale of the building or in insurance proceeds arising out of a casualty to the building.

         59.   Intentionally Omitted.
         60. Any provision of this lease which requires Owner not to unreasonably withhold its consent or approval shall never
be the basis for an award of damages or give rise to a right of setoff or termination to Tenant, but may be the basis for a
declaratory judgment or specific injunction with respect to the matter in question.

           61. If Tenant shall fail to pay when due any installment of fixed annual rental or any additional rent Tenant shall pay on
the fifth day after the due date thereof a late charge equal to five (5%) percent of the unpaid amount. In addition, if Tenant shall fail
to pay within ten (10) days after the due date, any installment of fixed annual rental or any additional rent, Tenant shall pay
interest thereon at an annual rate equal to two percent above the rate designated as its prime rate by Fleet Bank CT. (or its
successor) as of the due date, such interest being payable for the period from the due date to the date of payment. Such interest
shall be deemed additional rent.

          62. (a) Within ten (10) days after the date hereof Tenant shall deliver to Owner cash, in the amount of $9,363.25 , as
security for the faithful performance and observance by Tenant of the terms, conditions and provisions of this Lease, including
without limitation the surrender of possession of the demised premises to Owner as herein provided. Tenant’s failure to deliver the
cash within such ten (10) day period shall be deemed a default by Tenant hereunder. If Tenant defaults in respect of any of the
terms, conditions or provisions of this Lease including, but not limited to, the payment of fixed annual rental or additional rent, and
Tenant fails to cure any such default within any applicable cure period hereunder (i) Owner may, at the option of Owner (but
Owner shall not be required to) apply or retain the whole or any part of such sum so paid to it by Tenant to the extent required for
the payment of any fixed annual rental and additional rent or any other sum as to which Tenant is in default, and (ii) Owner shall
hold the remainder of such sum paid to it by the Tenant, if any, as security for the faithful performance and observance by Tenant
of the terms covenants, and conditions of this Lease on Tenant’s part to be observed and performed, with the same rights as
hereinabove set forth to apply or retain the same in the event of any further default by Tenant under this Lease. If Owner applies
or retains any part of the proceeds of the cash amount deposited by Tenant, Tenant, within five (5) days of demand, shall deposit
with Owner the amount so applied or retained so that Owner shall have the full deposit on hand at all times during the term of this
Lease (and any extension). Tenant’s failure to do so within five (5) days of receipt of such demand shall constitute a breach of this
Lease.

          (b) In the event of a sale or lease of Owner’s interest in the Building and/or the demised premises, Owner shall transfer
the cash, together with any other sums then held by Owner as such security, to the vendee or lessee, and Owner thereupon shall
be released by Tenant from all liability under this Paragraph. Tenant agrees to look solely to the new Owner for the return of the
cash or any sums collected thereunder and any other security, and it is agreed that the provisions hereof shall apply to every
transfer or assignment made of any sums collected thereunder and any other security to a new Owner. Tenant further covenants
that it shall not assign or encumber or attempt to assign or encumber any part of such security and that neither Owner nor its
successors or assigns shall be bound by any such assignment, encumbrances, attempted assignment, or attempted
encumbrance. Owner shall not be required to exhaust its remedies against Tenant before having recourse to such security held by
Owner. Recourse by Owner to such security shall not affect any remedies of Owner which are provided in this Lease or which are
available to Owner in law or equity.

        (c) Within ten (10) days after the expiration or earlier termination of this Lease and Tenant’s surrender of the demised
premises as required herein, Owner shall return to Tenant
the cash proceeds thereof and/or any sums held as security hereunder that Owner has not applied in accordance with this Article
62.

         63. Owner’s Work and Fixed Rent: (a) Upon execution of this Lease by Tenant, Owner shall prepare or cause to be
prepared plans for fit-up work to be performed by Owner in the demised premises (“Plans”), which Plans shall be consistent with
Tenant’s drawings previously submitted to Owner. Tenant’s drawings are identified as Exhibit D. The Plans shall be subject to
Tenant’s approval, which shall not be unreasonably withheld. If Tenant has not disapproved by notice to Owner (with specifics) the
Plans within five (5) business days after receipt thereof, the Plans shall be deemed approved by Tenant. Owner’s work shall be
performed in accordance with the specifications and conditions set forth in Exhibits B and C hereto. Upon substantial completion
of Owner’s work, Tenant shall promptly remit to Owner payment therefore in the amount of $0.00 , which shall be deemed
additional rent hereunder.

      (b) The annual fixed rent payable hereunder shall be as follows, with the first lease year commencing on the
Commencement Date and each subsequent lease year commencing on the first day of the thirteenth month thereafter:

                                        Annual Fixed Rent                                 Lease Year(s)

                                            $93,525.00                                          1-2

* plus additional rent due per Articles 36 and 38.

           Upon signing this Lease, Tenant will pay to Owner $9,363.25 , which represents Tenant’s first monthly rent obligation for
the first lease year of the initial term hereof. This includes the rent due per article 63.b and article 38. Taxes, per article 36 are
billed to Tenant upon occupancy (for the period September 1 thru December 31, 2009 = $4,353.11) and thereafter every June and
December. The Lease will commence on august 17, 2009 and any rent due shall begin on September 1, 2009.

          64. Options. (a) Tenant has indicated that additional space beyond the 12,900 SF being leased may be required to
support their operations. To the extent that, additional space can be provided to Tenant by either the Owner or Owner’s Managing
General Partner’s affiliates than the term indicated in this Lease can be shortened and terminated on a date mutually agreed upon
by both the Owner and Tenant. Owner represents that this Lease will be sent for approval to its current mortgage holder with a
request for approval now so that in the future should the term of this Lease be shortened as indicated above, no additional
approvals are required from Owner’s mortgage holder to terminate this Lease early. (b) Tenant shall have the right to extend the
term of this Lease until October 31, 2011 at the same terms, conditions and rental rates set in article 63.b. Any extensions beyond
that date require Owner to determine what the other tenants in the building have decided to do about their lease terms.

          65. If the demised premises are totally damaged or rendered wholly unusable by fire or other casualty within the last
year of the initial term or any extended term, Tenant may elect to terminate this lease by notice to Owner written fifteen (15) days
after such casualty; whereupon this lease shall expire as if the termination date had occurred and Tenant shall forthwith quit,
surrender and vacate the demised premises without prejudice, however, to Owner’s rights and remedies against Tenant
hereunder prior to such termination and any rent owing shall be paid to such date.
           66. In the event that Tenant shall desire to sublet the demised premises or to permit the same to be occupied by any
person other than Tenant, its officers or employees, in its entirety, Tenant shall submit in writing to Owner the name of the
proposed subtenant or occupant, the nature of and character of its business, the terms and conditions of the proposed subletting,
information as to the financial responsibility and standing of the proposed subtenant and such other information as Owner may
reasonably request. Simultaneously with such submission, Tenant shall also deliver to Owner a written agreement fully executed
and acknowledged by Tenant surrendering the demised premises to Owner. If Owner shall not execute the surrender agreement
within fifteen (15) days after receipt thereof, then Owner shall not unreasonably withhold its consent to the proposed subletting. No
such consent by Owner to Tenant’s subletting shall constitute a release by Owner of Tenant’s obligations under this Lease, and
no such consent shall be deemed to permit subtenant to further sublet any or all of the demised premises. In no event shall
Tenant be permitted to advertise the demised premises at a rental less than the prevailing or reasonable rental for similar space at
the time of the execution of such sublease. Tenant shall have the herein right to sublet the demised premises provided Tenant is
not then in default beyond any applicable cure period under the terms and conditions of this lease. The word “surrender” as used
above shall imply that if Owner accepts such surrender, Tenant shall thereafter be relieved of any further obligations under this
Lease. Tenant shall not sublet any portion of the premises nor assign, mortgage or encumber this lease without the prior written
consent of Owner in each instance. Notwithstanding the foregoing, without Owner’s consent and without Owner’s right to
recapture the Premises but upon ten (10) days’ prior notice to Owner, this Lease may be assigned, or the Premises may be
sublet, to any entity which is an Affiliate, or Successor of Tenant. Within ten (10) days after the execution of any such assignment
or sublease, Tenant shall deliver a complete copy of the documentation to Owner. For the purposes of this Section, an “ Affiliate
” means any entity controlling, controlled by or under common control with Tenant. A “ Successor ” means any entity which
acquires all or substantially all of the assets of Tenant or which survives a statutory merger or consolidation with Tenant, provided
that such entity has assets and a net worth at least equal to that of Tenant on the date of such acquisition or corporate
transaction. If thereafter the transferee shall no longer be an Affiliate of Tenant, that shall be deemed a new assignment or
sublease, as the case may be, subject to this paragraph.

       67. Except in case of emergency, any entry by Owner into the demised premises as permitted hereunder shall be
made upon reasonable prior notice to Tenant, which may include notice by telephone.

         68.   ENVIRONMENTAL REQUIREMENTS FOR HAZARDOUS WASTE AND MATERIALS:

A. No activity shall be undertaken on the demised premises or property of which it is a part (“Premises”) which would cause (i) the
premises to become a hazardous waste treatment, storage or disposal facility in violation of the Solid Waste Disposal Act, as
amended, 42 U.S.C. 6901 et seq., as the same may be amended, from time to time (“RCRA”), or deemed a Generator of
hazardous materials as defined and governed by the Connecticut Transfer Act or any similar state laws, regulations or local
ordinances, (ii) a release or threatened release of any hazardous substance from the premises which would cause Owner to incur
response costs under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. 9601-9657, as the same may be amended from time to time (“CERCLA”), or any similar state laws, regulations or local
ordinances, (iii) the discharge of pollutants into any waters of the United States, or the emission of any air pollutant, in violation of
either the Clean Water Act, as amended, 33 U.S.C. 1251 et seq., or the Clean Air Act, as amended, 42 U.S.A.
7401, et seq., or any similar state laws, regulations or local ordinances, or (iv) the manufacture, processing, distribution in
commerce, use, or disposal of any chemical substance or mixture in violation of the Toxic Substances Control Act, 15 U.S.C.
Section 2601, et seq. (the “Act”);

B. Tenant shall comply strictly and in all respects with the requirements of the Environmental Laws and shall notify Owner
promptly in the event of any violation upon the Premises, and shall promptly forward to Owner copies of all orders, notices,
permits, applications or other communications and reports in connection with any such violation or any other matters relating to
the Environmental Laws as they may affect the Premises;

C. Tenant shall indemnify Owner and hold Owner harmless from and against all loss, liability, damage and expense, including
attorney’s fees, suffered or incurred by Owner, its successors or assigns (i) under or on account of the Environmental Laws,
including the assertion of any lien thereunder; (ii) with respect to any violation affecting the premises; and (iii) with respect to any
other matter affecting the premises or any interest therein and governed by the provisions of the Environmental Laws or involving
directly or indirectly, the use, generation, treatment or storage or disposal of any hazardous or toxic chemical, material substance
or waste;

D. In the event of any violation affecting the premises, if Tenant shall fail to comply with any of the requirements of the
Environmental Laws, Owner may at its election, but without the obligation to do so, give such notices and/or cause such work to
be performed at the premises and/or take any and all other actions as Owner shall deem necessary or advisable in order to
remedy said violation or cure said failure of compliance, and any amounts paid as a result thereof, together with interest thereon
at the interest rate after default set forth in the Lease from the date of payment by Owner, shall be immediately due and payable
by Tenant to Owner as additional rent and shall to the extent permitted by law have the benefit of any lien hereby created as a
part of this Lease. The occurrence, presence or discharge of any pollutants or hazardous waste shall not constitute an Event of
Default under this Lease so long as Tenant complies with the requirements of Environmental Laws as provided above.

          Whenever the Environmental Law statute or regulation requires the “owner or operator” to do any act, or obtain a permit,
Tenant shall do such act or obtain such permit at its sole cost and expense, it being the intention of the parties hereto that Owner
shall be free of all expenses and obligations arising from or in connection with compliance therewith and that Tenant shall fulfill all
such obligations and pay all such expenses.

         The Tenant shall promptly notify the Owner in writing of any order or pending or threatened action by any regulatory
agency or other governmental body, or any claims made by any third party, relating to Hazardous Materials on, or emanations
from, the premises, and shall promptly furnish the Owner with copies of any correspondence of legal pleadings in connection
therewith.

          In addition, the Owner shall have the right, but shall not be obligated, to notify any state, federal or local governmental
authority of information which may come to its attention with respect to Hazardous Materials on or emanating from the premises
and Tenant irrevocably releases Owner from any claims of loss, damage, liability, expense or injury relating to or arising from,
directly or indirectly, any such disclosure.

          Following (i) any spill affecting the premises, (ii) any claim of any violation of the Environmental Laws with respect to the
premises, (iii) any order, action or threatened action by any regulatory agency or other governmental body, or any claim made by
any third party,
relating to Hazardous Materials on, or emanations from the premises, (iv) or at such other time or times as may under the
circumstances be reasonable during the term of this Lease, or at any time following the occurrence of an Event of Default, the
Owner may require the Tenant to provide the Owner, at the expense of the Tenant, an inspection or audit of the premises,
prepared by a qualified consultant approved by Owner, certifying as to the presence or absence of Hazardous Materials, or to
permit the Owner to so inspect or audit the premises at the Tenant’s expense, and Tenant hereby grants Owner, its employees,
agents, and independent contractors, the right to enter upon the premises for the purpose of conducting tests, soil borings, the
installation of monitoring wells and such other tests as Mortgagee deems necessary or desirable.

E. Survival of Lease Expiration. Tenant agrees that each and every provision of these provisions shall survive the expiration or
earlier termination of the term of this lease, the parties hereto expressly acknowledging and agreeing that Owner would not enter
into this lease but for the provisions of these provisions and the aforesaid survival thereof.

        69. Guaranty. In August, 2009, the Owner received a Guaranty from Teavana Holdings, Inc a Delaware corporation.
This Guaranty is attached to the Lease as Exhibit “G”. This Guaranty is hereby ratified and confirmed to be in full force and effect.
IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed this lease as of the day and year first above
written.

FOR:      600 LONG BEACH, LLC

         BY:      Stratford Land Development Company Limited Partnership
                    Its: Managing Member

         BY:      The Stratford Industrial Corporation
                    Its: General Partner

         BY:
                  James R. Caissy
                  Its: President

FOR:     St Acquisition Company

         BY:
                  Jurgen Link
                  Its:

STATE OF CONNECTICUT                 )
                                     )
COUNTY OF                            )

The foregoing instrument was acknowledged before me this _ day of August 2009 by Juergen Link, [              title] on behalf of
St. Acquisition Company a Connecticut corporation, on behalf of the corporation.


                                                                            Notary Public
                                                                            My Commission Expires:

STATE OF CONNECTICUT)
                                       ) ss: Stratford
COUNTY OF FAIRFIELD )
          On this        day of August , 2009, before me personally appeared James R. Caissy signer and sealer of the foregoing
instrument and acknowledged the same to be his free act and deed, before me as a duly authorized officer of The Stratford
Industrial Corporation .

        IN WITNESS WHEREOF, I hereunder set my hand and official seal.


Yolanda Mitchell
Notary Public
My Commission Expires: May 31, 2010
EXHIBIT A
                                                            EXHIBIT B

                                              STRATFORD EXECUTIVE PARK
                                            BUILDING STANDARD WORK LETTER

STRATFORD EXECUTIVE PARK consists of attractive campus-type office and flexible use buildings. Glass front entrance doors
are provided as necessary. Discretely concealed loading docks and delivery doors are provided in the rear of the building. Parking
in provided along the front elevation and in the rear delivery areas. The entire perimeter is attractively landscaped. Grounds and
the building roof and structure will be maintained by the Owner.

Some of the following items are already existing and in place. Owner agrees at its sole expense and without charge to Tenant to
do the work shown on Exhibit “D” (Owner’s Work) per the following Standard Work Letter in the demised premises within 600
Long Beach Boulevard .

WINDOWS:              Tinted double-glazed insulating glass set in square tubing.

FLOOR SLAB:           Concrete slab on grade with wire mesh reinforcement. Load capacity 350 lbs/psf +/-.

INTERIOR:             As per agreed by lessor & lessee. See Exhibit D, PARTITIONS.

DOORS:                Solid core 3’0” x 7’0” doors (lesser widths for closets, rest rooms and other special areas. Doors shall be
                      provided as per exhibit D. Doors to be paint grade and undercut for air movement.

CEILINGS:             Office areas: 5/8” acoustical mineral board, 2’x4” tiles in a suspended T-grid system. Unfinished areas will
                      have open ceilings.

LIGHTING:             Office area: recessed 2’x4’, 4 lamp, 40 watt fluorescent fixtures with acrylic lenses, approximately one
                      fixture for each 80 square feet of ceiling area. Unfinished area: 400 watt metal halide fixtures set on bar
                      joists, approximately one fixture for each 750 square feet of floor space.

OUTLETS:              In the office areas, duplex convenience outlets will be supplied at the rate of approximately one outlet for
                      each 125 square feet.

SWITCHES:             Wall switches will be provided in each private office and at entrance to open areas.

PLUMBING:             Copper water lines. Plastic storm drains and plastic sanitary sewer lines.

FLOORS:               Office areas, carpeting or 1/8” 12 x 12 vinyl composite floor tile. Other areas, concrete.

COLUMNS:              Structural steel. Average bay size: 39’6” x 50’.

LAVATORIES:           As per Exhibit “D”. Semigloss paint on walls and VCT flooring. Multiple W.C.’s enclosed in floor mounted
                      metal partitions. Standard white
                        fixtures include: water closets, urinals, sinks, flushometers, miscellaneous toilet accessories, mirrors, and
                        exhaust fans.

HVAC:                   Office areas: combination rooftop heating and air conditioning units with full ducted delivery system.
                        Heating is gas fired. Unfinished areas are furnished with gas fired unit heaters.

PAINTING:               All partitions will be painted with eggshell finish latex paint. Exposed metal surfaces, such as convector
                        enclosure, metal doors and bucks will be pained with semi-gloss enamel. Colors to be selected from
                        Owner’s standard Color Chart.

ELECTRIC
SERVICE:                4 wire, 3 phase, 277/480 volt service. Separate meter or sub-meter installed on premises.

GAS SERVICE:            Heat supplied by gas unit; separate meter or sub-meter installed on premises.

HOT WATER:              Individual electrical hot water heater.

SPRINKLER
SYSTEM:                 Automatic wet pipe system installed throughout.

CEILING
HEIGHT:                 Office area hung ceiling: approximately 10’. Unfinished areas: to joists, 24’ clear +/-.

DELIVERY
SYSTEM:                 Docks and/or Drive-in Doors as per Exhibit D.

ENTRANCES:              Individual aluminum glass entry door in office area.

ROOFING:                Exposed metal decking painted white with a three-ply roof System, equivalent R-19 insulation, Fiberglass
                        base sheet and fabric laminated with hot asphalt.

SUBSTITU-               Tenant may substitute like items for Building Standard items but no credits for building items so
TIONS:                  substituted. No credit will be given for building items not utilized by Tenant.

The following items pertinent to tenant’s space are not furnished by Owner and will be at Tenant’s initiative and expense.


TELEPHONES:             Tenant shall make arrangements for installation of telephone service. Owner will not provide or initiate
                        such service.

ENTRY ALARM             Tenant shall make arrangements for installation of alarm system, or use of any existing one already on the
SYSTEM:                 premises.
OPTIONAL   Wall, ceiling and floor finishes other than standard, including accent colors, and more than one color per room.
ITEMS:     Glass and sound conditioned partitions. Extra width and full height doors. Dedicated electric circuits and
           electric outlets other than in office areas.
                                                           EXHIBIT C

                                                   WORK SPECIFICATIONS

Utility-Warehouse Area

Heating is provided by means of gas-fired suspended warm air furnaces, to maintain 60-degree F. when outside temperature is
zero degrees F. with a maximum wind velocity of 15 MPH, providing tenant is not exhausting heated air in which case tenant shall
provide fresh air make-up heater. At truck bay, heating system will maintain 50-degrees F. (at 0-degrees outside with a 15 MPH
wind velocity) based on intermittent use of outside doors.

Office Area

Entire office area is heated and air conditioned by a roof-mounted combination heating/cooling unit and a duct system to maintain,
for heating, 70`F. inside when outside temperature is 0`F., with a maximum wind velocity of 15 MPH and, for cooling inside 80`F.
dry bulb with a 50% relative humidity when outside temperature is 95`F. dry bulb and 75`F. wet bulb. Air conditioning
specifications are designed on the basis of doors and windows being closed, as well as all areas in the air conditioned premises
being provided with Venetian blinds, shades or drapes which shall be closed, depending on the position of the sun.

Electric Service

Electric service furnished to the premises shall be 200 Amperes 277/480V, 3 phase 4 wire.

Floor Load

Floors are rated for a maximum load of 350 lbs. per square foot.

Rest Rooms

2 rest rooms with 1 lavatory and 1 water closet. 2 rest rooms with 1 lavatory and 1 water closet upon notice from Tenant that a
portion of the demised premises has been subleased and sub-tenant requires the additional toilets. (w.c. enclosed in flush-type
floor-mounted metal compartment). Plumbing fixtures to be white.

All selections or designations to be made by tenant are to be made within five (5) business days after request by Owner. If tenant
has not made designations or selections within said period, the Owner shall be authorized to do so on behalf of the tenant.
EXHIBIT D
                                                      EXHIBIT G
                                                      GUARANTY
        GUARANTY made this 4th day of August, 2009, by Teavana Holdings, Inc., a Delaware corporation with its
principal office at One Live Oak Center, 3475 Lenox Road, Suite 960, Atlanta, GA 30326 (“ Guarantor ”), to 600 Long
Beach LLC, a Connecticut limited liability company with its principal office at 300 Long Beach Boulevard, Stratford,
CT 06615 (“ Owner ”).
                                            PRELIMINARY STATEMENT
         In order to induce Owner to enter into a lease dated the date hereof (the “ Lease ”) with ST Acquisition
Company (“ Tenant ”), a wholly-owned subsidiary of Guarantor, covering the premises at 600 Long Beach Boulevard,
Stratford, Connecticut, and for other good and valuable consideration, receipt of which is hereby acknowledged,
Guarantor agrees as follows:

1.    Guaranty .
         Guarantor guarantees that all sums stated in the Lease to be payable by Tenant will be promptly paid in full
when due, whether at maturity, by acceleration or otherwise, in accordance with the provisions thereof, and that Tenant
will perform and observe each and every covenant, agreement, term and condition in the Lease to be performed or
observed by Tenant. Guarantor also guarantees those representations made by Tenant in the Lease.

2.    Absolute Nature; Costs of Collection .
         This Guaranty shall be irrevocable, unconditional and absolute, and if for any reason any such sums, or any
part thereof, shall not be paid by Tenant promptly when due, Guarantor shall immediately pay the same to Owner
pursuant to and in accordance with the provisions of the Lease, regardless of any defenses or rights of set-off or
counterclaim which Tenant may have or assert; regardless of whether Landlord shall have taken any steps to enforce
any rights against Tenant or any other person to collect such, or any part thereof; and regardless of any other condition
or contingency. Guarantor shall also pay to Landlord such further amount as shall be sufficient to cover the reasonable
cost and expense of collecting such sums, or part thereof, or of otherwise enforcing the Lease or this Guaranty,
including without limitation, in any case, reasonable counsel fees, court costs and other litigation expenses. Upon
Tenant’s failure to perform or observe any covenant, agreement, term or condition in the Lease to be performed or
observed by Tenant, Guarantor will promptly perform and observe the same or cause the same promptly to be
performed or observed.

3.    No Release; Bankruptcy .
         (a) The obligations, covenants, agreements and duties of Guarantor under this Guaranty shall in no way be
affected or impaired by reason of the happening from time to time of any of the following, although without notice to
or the further consent of Guarantor:
                 (i) the waiver by Owner of the performance or observance by Tenant or Guarantor of any of the
agreements, covenants, terms or conditions contained in the Lease or this Guaranty;
                  (ii) the extension, in whole or in part, of the time for payment by Tenant or Guarantor of any sums
owning or payable under the Lease or this Guaranty, or of any other sums or obligations under or arising out of or on
account of the Lease or this Guaranty;
                  (iii)   any assignment of the Lease or subletting of the demised premises thereunder or any part
thereof;
                 (iv) the modification or amendment (whether material or otherwise) of any of the obligations of
Tenant or Guarantor under the Lease or this Guaranty;
                  (v) the renewal, extension or renegotiation of the term of the Lease;
                 (vi) any failure, omission or delay on the part of Owner to enforce, assert or exercise any right,
power or remedy conferred on or available to it in or by the Lease or this Guaranty, or any action on the part of Owner
granting indulgence or extension in any form whatsoever;
                   (vii) the voluntary or involuntary liquidation, dissolution, sale of all or substantially all of the
assets, marshaling of assets and liabilities, receivership, conservatorship, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment of, or other similar proceeding affecting,
Tenant or any of its assets;
                 (viii) the release of Tenant from the performance or observance of any of the agreements,
covenants, terms or conditions contained in the Lease by operation of law;
                  (ix) the inability of Owner to enforce any provision of the Lease for any reason;
                  (x) the disposition by Guarantor of part or all of the outstanding stock of Tenant; or
                  (xi) the death, disability or termination of partnership status of one or more of the persons
constituting Guarantor.
          (b) Owner’s recovery against Guarantor hereunder shall not be affected by the amount of any allowable
claim in a bankruptcy proceeding involving Tenant or any other proceeding of the type described in subparagraph
(a)(vii) herein and involving Tenant (except to the extent of any amounts actually recovered in such a proceeding).

4.    Assumption of Obligations .
         In the event of the rejection or disaffirmance of the Lease by Tenant or Tenant’s trustee in bankruptcy pursuant
to the federal bankruptcy law or any other law affecting creditors’ rights, Guarantor will, and does hereby (without the
necessity of any further agreement or act), assume
all obligations and liabilities of Tenant under the Lease, to the same extent as if (a) it were originally named Tenant
under the Lease, and (b) there had been no such rejection or disaffirmance. Guarantor will confirm such assumption in
writing, at the request of Owner, upon or after such rejection or disaffirmance, and Guarantor shall upon such
assumption (to the extent permitted by law) have all rights of Tenant under the Lease.

5.    Waiver of Rights to Subrogation and Reimbursement .
         Following any payment or payments made by Guarantor hereunder, or any application by Owner of any
security deposit under the Lease, Guarantor shall not assert or exercise any rights of Owner against Tenant to recover
the amount of any such payment by such Guarantor hereunder or the value of any such collateral by way of
subrogation, reimbursement, contribution, indemnity or otherwise arising by contract or operation of law; and
Guarantor shall not have any right of recourse to or any claim against assets or property of Tenant, whether or not the
obligations hereunder have been satisfied, all of such rights being herein expressly waived by Guarantor. If any amount
shall nevertheless be paid to Guarantor by Tenant, such amount shall be held in trust for the benefit of Owner and shall
forthwith be paid to Owner to be credited and applied to the obligations hereunder, whether matured or unmatured. The
provisions of this Paragraph shall survive the termination of this Guaranty and any satisfaction and discharge of Tenant
by virtue of any payment, court order or any federal or state law.

6.    Separate Action .
        Guarantor agrees that all of its obligations under this Guaranty are independent of the obligations of Tenant
under the Lease and that a separate action may be brought against it, whether or not an action is commenced against
Tenant under the Lease.
7.    Applicable Law; Jurisdiction . This Guaranty shall be construed in accordance with the laws of the State of
Connecticut. Guarantor hereby consents that suit may be brought against it under this Guaranty in any federal, state or
local court in the State of Connecticut. Guarantor hereby submits to personal jurisdiction in the State of Connecticut
and hereby waives any immunity from jurisdiction, process or attachment, with respect to itself or its property.
Guarantor consents that service of process in any action or proceeding may be made by personal service upon
Guarantor wherever Guarantor may be then located or by certified or registered mail directed to Guarantor at
Guarantor’s last known address.
8. Miscellaneous . This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their
respective successors, assigns, heirs and personal representatives. This Guaranty may not be modified or amended
except by a written agreement duly executed by Guarantor and Owner.
        IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed by its officer thereunto duly
authorized.


                                                                      For: Teavana Holdings, Inc.

                                                                      By

                                                                               Andrew Mack

                                                                      Its
STATE OF                                              )
                                                     )
COUNTY OF                                            )
The foregoing instrument was acknowledged before me this     by Andrew Mack , its              on behalf of Teavana Holdings,
Inc. a Delaware corporation, on behalf of the corporation.



                                                                      Notary Public
                                                                      My Commission Expires:
                                     Exhibit 10.16
                                   Execution Copy




  LOAN AND SECURITY AGREEMENT
              among
      TEAVANA CORPORATION,
     ST ACQUISITION COMPANY,
      TEAVANA HOLDINGS, INC.,
TEAVANA FRANCHISING CORPORATION,
   TEAVANA INTERNATIONAL, INC.,
            as Obligors,
               and
        FIFTH THIRD BANK,
              as Bank


     DATED AS OF JUNE 12, 2008
                                           TABLE OF CONTENTS

                                                                                  Page
1.   DEFINITIONS                                                                     1
     1.1      General Terms                                                          1
     1.2      Accounting Terms                                                      20
     1.3      Other Terms Defined in New York Uniform Commercial Code               20
     1.4      Other Definitional Provisions                                         20
2.   CREDIT                                                                         20
     2.1      Revolving Loan Facility                                               20
     2.2      Letter of Credit Facility                                             21
     2.3      Mandatory Payments; Prepayments                                       21
     2.4      Loan Account                                                          22
     2.5      Statements                                                            22
     2.6      Interest and Fees                                                     22
     2.7      Location; Method for Making Payments                                  24
     2.8      Termination of Revolving Commitment                                   24
     2.9      Loan Types                                                            25
     2.10     Continuation of LIBOR Rate Advances; Conversion of Loan Types         25
     2.11     Determination of Interest Period                                      25
     2.12     Additional Costs, Etc. With Respect to LIBOR Rate Advances            26
     2.13     Indemnification for Losses                                            27
     2.14     Payments to be Free of Deductions                                     28
     2.15     Capital Adequacy                                                      28
     2.16     Certificate                                                           28
3.   CONDITIONS OF ADVANCES                                                         29
     3.1      Borrowers’ Written Request - Revolving Loan and Letters of Credit     29
     3.2      No Event of Default                                                   29
     3.3      Representations and Warranties True and Correct                       29
     3.4      Regulatory Information                                                29
     3.5      Conditions to Initial Extension of Credit                             30
     3.6      Other Requirements                                                    30
4.   REPRESENTATIONS AND WARRANTIES                                                 30
     4.1      Existence and Power                                                   30
                                        TABLE OF CONTENTS
                                            (continued)

                                                                Page
     4.2    Authorization; No Contravention                       30
     4.3    Governmental Authorization                            31
     4.4    Binding Effect                                        31
     4.5    Litigation                                            31
     4.6    No Default                                            32
     4.7    ERISA Compliance                                      32
     4.8    Use of Proceeds; Margin Regulations                   32
     4.9    Title to Properties                                   32
     4.10   Taxes                                                 33
     4.11   Financial Condition                                   33
     4.12   Environmental Matters                                 33
     4.13   Collateral Documents and Related Documents            34
     4.14   Regulated Entities                                    34
     4.15   Labor Relations                                       35
     4.16   Copyrights, Patents, Trademarks and Licenses, Etc     35
     4.17   Subsidiaries                                          35
     4.18   Brokers’ Fees; Transaction Fees                       35
     4.19   Insurance                                             36
     4.20   Full Disclosure                                       36
     4.21   Collateral                                            36
     4.22   Solvency                                              37
     4.23   Legal Status                                          37
     4.24   Other Corporate Names                                 37
     4.25   Anti-Terrorism Laws                                   37
     4.26   Material Contracts                                    38
     4.27   Deposit Accounts                                      38
     4.28   Survival                                              38
5.   AFFIRMATIVE COVENANTS                                        38
     5.1    Financial Statements                                  38
     5.2    Certificates; Other Information                       40
                                                  -ii-
                                           TABLE OF CONTENTS
                                               (continued)

                                                                               Page
     5.3    Notices                                                              41
     5.4    Preservation of Existence, Etc                                       42
     5.5    Maintenance of Property                                              42
     5.6    Obligor’s Property Insurance and Business Interruption Insurance     42
     5.7    Payment of Liabilities                                               44
     5.8    Compliance with Laws                                                 45
     5.9    Inspection of Property and Books and Records                         45
     5.10   Use of Proceeds                                                      45
     5.11   Further Assurances                                                   45
     5.12   Interest Rate Protection                                             46
     5.13   Locations of Collateral                                              46
     5.14   Bank’s Costs and Expenses as Additional Liabilities                  46
     5.15   [Intentionally Omitted]                                              47
     5.16   Supervening Illegality                                               47
     5.17   Landlord Consents and Waivers                                        47
     5.18   Primary Depository                                                   47
     5.19   Remittance and Lock Box Accounts                                     48
     5.20   Anti-Terrorism Laws                                                  48
6.   NEGATIVE COVENANTS                                                          48
     6.1    Encumbrances                                                         48
     6.2    Debt                                                                 49
     6.3    Disposition of Assets                                                50
     6.4    Consolidations, Conversions and Mergers                              50
     6.5    Loans and Investments                                                50
     6.6    Transactions with Affiliates                                         50
     6.7    Use of Proceeds                                                      51
     6.8    Contingent Obligations                                               51
     6.9    Compliance with ERISA                                                51
     6.10   Restricted Payments                                                  51
     6.11   Change in Business                                                   52
                                                  -iii-
                                          TABLE OF CONTENTS
                                              (continued)

                                                                                        Page
     6.12   Change in Structure                                                         52
     6.13   Accounting Changes                                                          52
     6.14   Environmental                                                               52
     6.15   Legal Status                                                                52
     6.16   Fiscal Year                                                                 52
     6.17   Subsidiaries                                                                52
     6.18   Third Party Goods                                                           53
     6.19   Sale-Leaseback Transactions                                                 53
     6.20   Limitations on Certain Restrictions                                         53
     6.21   No Other Negative Pledges                                                   53
     6.22   Related Documents                                                           53
     6.23   Foreign Assets                                                              53
7.   FINANCIAL COVENANTS                                                                53
     7.1    Consolidated Fixed Charge Coverage Ratio                                    54
     7.2    Consolidated Leverage Ratio                                                 54
     7.3    Consolidated Capital Expenditures                                           54
8.   COLLATERAL                                                                         54
     8.1    Security Interest                                                           54
     8.2    Preservation of Collateral and Perfection of Security Interests Therein     54
     8.3    Loss of Value of Collateral                                                 55
     8.4    Setoff                                                                      55
     8.5    Cash Collateral                                                             56
     8.6    Verification of Accounts                                                    56
     8.7    Notification to Account Debtors and Other Persons Obligated on Collateral   56
     8.8    Inventory Records                                                           57
     8.9    Equipment Records                                                           57
     8.10   Safekeeping                                                                 57
     8.11   Other Actions                                                               57
     8.12   Real Property                                                               59
                                                    -iv-
                                          TABLE OF CONTENTS
                                              (continued)

                                                                           Page
      8.13    Inventory Covenants                                          60
      8.14    Account Covenants                                            61
      8.15    Collection of Accounts and Payments                          61
      8.16    Collateral Protection Expenses; Preservation of Collateral   62
9.    DEFAULT, RIGHTS AND REMEDIES OF BANK                                 62
      9.1     Defaults                                                     62
      9.2     Rights and Remedies Generally                                66
      9.3     Entry Upon Premises and Access to Information                66
      9.4     Sale or Other Disposition of Collateral by Bank              67
      9.5     Waiver of Demand                                             67
      9.6     Appointment of Bank as each Obligor’s Attorney-in-Fact       67
      9.7     Standards for Exercising Rights and Remedies                 68
      9.8     WAIVER OF NOTICE                                             69
10.   MISCELLANEOUS                                                        69
      10.1    Waiver                                                       69
      10.2    Costs and Attorneys’ Fees                                    69
      10.3    Expenditures by Bank                                         69
      10.4    Custody and Preservation of Collateral                       70
      10.5    Reliance by Bank                                             70
      10.6    Parties                                                      70
      10.7    CHOICE OF LAW                                                70
      10.8    CONSENT TO JURISDICTION                                      70
      10.9    SERVICE OF PROCESS                                           71
      10.10   WAIVER OF JURY TRIAL AND BOND                                71
      10.11   ADVICE OF COUNSEL                                            72
      10.12   Severability                                                 72
      10.13   Application of Payments                                      72
      10.14   Marshaling; Payments Set Aside                               72
      10.15   Titles                                                       72
      10.16   Continuing Effect; Survival                                  73
                                                       -v-
                                    TABLE OF CONTENTS
                                        (continued)

                                                            Page
10.17   Notices                                             73
10.18   Equitable Relief                                    74
10.19   Indemnification                                     74
10.20   Counterparts; Integration                           75
10.21   Patriot Act Notice                                  76
10.22   Interest Rate Limitation                            76
10.23   Joint and Several                                   76
10.24   Appointment and Authorization of Borrowers’ Agent   79

                                            -vi-
Exhibits

Exhibit 2.1      Form of Revolving Note
Exhibit 2.10     Form of Notice of Conversion/Continuation
Exhibit 3.1      Form of Notice of Borrowing
Exhibit 3.5      Conditions to Initial Credit Extension
Exhibit 5.2(b)   Form of Borrowing Base Certificate
Exhibit 5.2(c)   Form of Compliance Certificate
Exhibit 5.2(d)   Form of Pricing Certificate
Exhibit 5.6      Form of Loss Payee Endorsement

Schedules

Schedule 4.2     Organizational Authorization; No Contravention
Schedule 4.3     Government Authorization
Schedule 4.5     Litigation
Schedule 4.7     ERISA Compliance
Schedule 4.9     Real Property
Schedule 4.16    Copyrights, Patents, Trademarks and Licenses, Etc.
Schedule 4.18    Broker’s Fees; Transaction Fees
Schedule 4.21    Locations of Collateral
Schedule 4.26    Material Contracts
Schedule 4.27    Deposit Accounts
Schedule 6.1     Permitted Liens
Schedule 6.2     Indebtedness
Schedule 6.6     Transactions with Affiliates
Schedule 6.18    Third Party Goods
Schedule 8.1     Commercial Tort Claims
Schedule 8.12    Real Property
                                                   -vii-
                                          LOAN AND SECURITY AGREEMENT

      THIS LOAN AND SECURITY AGREEMENT, together with all exhibits and schedules attached hereto and
hereby made a part hereof, is made as of June 12, 2008 among TEAVANA CORPORATION, a Georgia corporation
(the “ Company ”), ST ACQUISITION COMPANY, a Connecticut corporation (“ ST ”; the Company and ST are
referred to herein, collectively, as the “ Borrowers ” and, individually, as a “ Borrower ”), TEAVANA HOLDINGS,
INC. , a Delaware corporation (“ Holdings ”), TEAVANA FRANCHISING CORPORATION, a Georgia
corporation (“ TFC ”), TEAVANA INTERNATIONAL, INC. , a Georgia corporation (“ TI ”), and FIFTH THIRD
BANK , an Ohio banking corporation (“ Bank ”).
                                                       RECITALS:

       WHEREAS , Borrowers desire to borrow from Bank, and Bank is willing to make certain loans and to extend
credit to Borrowers, upon the terms and conditions, and up to the amounts, set forth herein;
      NOW, THEREFORE , in consideration of the terms and conditions contained herein, and of any loans or
extensions of credit heretofore, now or hereafter made to or for the benefit of any one or more of Borrowers by Bank,
and for other consideration the receipt and adequacy of which are hereby acknowledged, each Obligor and Bank hereby
agree as follows:
      1.   DEFINITIONS .
               1.1    General Terms . When used herein, the following terms shall have the following meanings:
                        Account Debtor means the party who is obligated on or under an Account.
                        Accounts means, collectively, all accounts (as defined in the UCC) and all other present and
future rights of Obligors, and, with respect to each Obligor, all accounts (as defined in the UCC) and all other present
and future rights of such Obligor, to payment for goods sold or leased or for services rendered, that are not evidenced
by instruments or chattel paper, and whether or not they have been earned by performance.
                         Acquisition means any transaction or series of related transactions for the purpose of or
resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any
business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests or
equity of any Person or otherwise causing any Person to become a Subsidiary of any Obligor, or (c) a merger or
consolidation or any other combination with another Person.
                         Advisory Agreement means that certain letter agreement among Holdings, the Company and
Parallel (as successor in interest to SKM Growth Investors, L.P.), dated as of December 17, 2004.
             Affiliate means, as to any Person, any other Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and
policies of the other Person, whether through the ownership of voting securities, by contract or otherwise. Without
limitation, any director, executive officer or beneficial owner of 5% or more of the equity of a Person shall, for the
purposes of this Agreement, be deemed to control the other Person. Notwithstanding the foregoing, Bank shall not be
deemed an “Affiliate” of any Obligor or of any Subsidiary of any Obligor. Unless the context otherwise requires,
references herein to one or more Affiliates shall be deemed to refer to Affiliates of each Borrower (including Sponsor,
Andrew Mack and Nancy Mack (for such time as such Person is a director or executive officer of any Obligor or is a
beneficial owner of 5% or more of the Equity Interests of any Obligor) and each Obligor and Subsidiary).
            Agreement means this Loan and Security Agreement, together with all exhibits and schedules attached
hereto.
            Anti Terrorism Laws shall have the meaning given such term in Section 4.25 .
           Applicable Margin means, for the period commencing on the Closing Date and ending on the First
Adjustment Date, with respect to the Revolving Loans: (a) for Base Rate Advances, 0.75% per annum, and (b) for
LIBOR Rate Advances, 3.25% per annum commencing on the First Adjustment Date and thereafter, the Applicable
Margin shall equal the percentage per annum in effect from time to time determined as set forth below based upon the
Loan Type and the Consolidated Leverage Ratio then in effect pursuant to the appropriate column of the table below:

 Consolidated Leverage Ratio:                                                      Applicable Margin:
                                                                             LIBOR Rate            Base Rate
                                                                              Advances:           Advances:
 Less than 0.60 to 1.00                                                             2.75 %               0.25 %
 Greater than or equal to 0.60 to 1.00 but less than 1.40 to 1.00                   3.00 %               0.50 %
 Greater than or equal to 1.40 to 1.00 but less than 2.20 to 1.00                   3.25 %               0.75 %
 Greater than or equal to 2.20 to 1.00                                              3.50 %               1.00 %
The Applicable Margin shall be adjusted from time to time upon receipt by Bank of the monthly financial statements of
Obligors and their Subsidiaries for the Fiscal Month ending October 31, 2008 and for each Fiscal Month ending on
January 31 st and July 31 st of each Fiscal Year thereafter which are required to be delivered pursuant to Section 5.1(b)
accompanied by a Pricing Certificate including a written calculation of the Consolidated Leverage Ratio certified on
behalf of Borrowers by a Responsible Officer for the period of twelve (12) consecutive Fiscal Months ending on the
last day of such Fiscal Month. If such calculation indicates that, based on
                                                           -2-
the Consolidated Leverage Ratio, the Applicable Margin shall increase or decrease, then, on the tenth (10th) day
following the date of receipt of such financial statements and Pricing Certificate, the Applicable Margin shall be
adjusted in accordance therewith; provided, however, that if Borrowers shall fail to deliver any such financial
statements and Pricing Certificate, then, at Bank’s election, effective as of the tenth day after the date such financial
statements and Pricing Certificate were to have been delivered, and continuing through the tenth day after the date (if
ever) such financial statements and such Pricing Certificate are finally delivered, the Applicable Margin shall be
conclusively presumed to equal the highest Applicable Margin specified in the table set forth above in this definition of
Applicable Margin.
            Availability means, at any time, the lesser of (a)(i) the Maximum Revolving Facility, minus (ii) the sum of
the aggregate amount of Revolving Loans outstanding at such time and (b)(i) the Borrowing Base, minus (ii) the sum of
the aggregate amount of Revolving Loans outstanding at such time.
             Bank shall have the meaning given such term in the preamble hereto.
           Bankruptcy Code means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. § 101, et seq. ), as
amended, reformed or modified from time to time and any rules or regulations issued from time to time thereunder.
             Bankruptcy Default shall have the meaning given such term in Section 9.1 .
            Base Rate means for any day the greater of: (i) the rate of interest announced by Bank from time to time as
its “prime rate” as in effect on such day, with any change in the Base Rate resulting from a change in said prime rate to
be effective as of the date of the relevant change in said prime rate (it being acknowledged that such rate may not be
Bank’s best or lowest rate) and (ii) the sum of (x) the Federal Funds Rate, plus (y) 1/2 of 1%. Bank’s prime rate is a
reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Bank may
make commercial loans or other loans at rates of interest at, above or below its prime rate. Any change in Bank’s prime
rate and the Base Rate shall be effective for purposes of this Agreement on the date of such change without notice to
any Obligor.
           Base Rate Advance means that portion of the Revolving Loan bearing interest calculated by reference to
the Base Rate.
             Books and Records means all books, records and information of each Obligor that relate primarily to the
Properties, including, without limitation, all financial, accounting and operating data and records in any Obligor’s
possession, including all books, records, notes, sales and sales promotional data, advertising materials, credit
information, cost and pricing information, equipment maintenance data, purchasing records and information, supplier
lists, business plans, reference catalogs, purchase orders, sales forms, labels, catalogs, brochures, artwork, photographs,
product display and other similar property, rights and information.
             Borrowers shall have the meaning given such term in the preamble hereto and Borrower means any of
Borrowers.
             Borrowers’ Agent shall have the meaning given such term in Section 10.24 .
                                                            -3-
             Borrowing Base means at any time the sum of the following at such time (a) 200% of Consolidated
EBITDA for the most recent Computation Period for which Bank has received the financial statements required to be
delivered to it pursuant to Section 5.1(b) , minus (b) the sum of the undrawn face amount of any Letters of Credit
outstanding at the time any particular advance is made, minus (c) such reserves as Bank in its Permitted Discretion
elects to establish; provided, however , that the aggregate amount of such reserves shall not at any time exceed 35% of
the amount determined pursuant to the foregoing clause (a) for the most recent Computation Period for which Bank has
received the financial statements required to be delivered to it pursuant to Section 5.1(b) .
            Borrowing Base Certificate shall have the meaning given such term in Section 5.2(b).
            Business Day means any day other than a Saturday, Sunday or other day on which commercial banks in
Chicago, Illinois are authorized or required by law to close and, if the applicable Business Day relates to any LIBOR
Rate Advance, a day on which dealings are carried on in the London interbank market.
           Capital Lease means, as to any Person, any leasing or similar arrangement which, in accordance with
GAAP, is required to be classified and accounted for as a capital lease on the balance sheet of such Person.
           Capital Lease Obligations means, as to any Person, all monetary obligations of such Person under any
Capital Leases.
             Cash Equivalents means: (a) securities issued or fully guaranteed or insured by the United States
Government or any agency thereof having maturities of not more than six (6) months from the date of acquisition;
(b) certificates of deposit, time deposits, repurchase agreements, reverse repurchase agreements, or bankers’
acceptances, having in each case a tenor of not more than six (6) months, issued by Bank, or by any U.S. commercial
bank or any branch or agency of a non-U.S. bank licensed to conduct business in the U.S. having combined capital and
surplus of not less than $250,000,000; and (c) commercial paper of an issuer rated at least A-1 by Standard & Poor’s
Corporation or P-1 by Moody’s Investors Service Inc. and in either case having a tenor of not more than three
(3) months.
             Change in Control means the occurrence of any one or more of the following: (a) the Sponsor Group shall
cease to own and control, directly and beneficially, at least 80% of the issued and outstanding Equity Interests of each
class or type of Sponsor (as determined on a fully diluted basis), (b) the Sponsor shall cease to own and control,
directly and beneficially, at least 80% of the issued and outstanding preferred and Class B common Equity Interests of
Holdings (as determined on a fully diluted basis), (c) Andrew Mack or Nancy Mack shall cease to own and control,
directly and beneficially, at least 35% and 35%, respectively, of the issued and outstanding Class A common Equity
Interests of Holdings (as determined on a fully diluted basis), (d) the Sponsor shall cease to have the right to designate
three (3) of the members of the board of directors of Holdings, or Andrew Mack and Nancy Mack, collectively, shall
cease to have the right to designate four (4) of the members of the board of directors of Holdings, or the number of the
members of the board of directors of Holdings shall exceed nine (9) at any time,
                                                           -4-
(e) Holdings shall cease to directly and beneficially own and control 100% of the issued and outstanding Equity
Interests of each class of the Company, (f) the Company shall cease to directly and beneficially own and control 100%
of the issued and outstanding Equity Interests of each class of all Subsidiaries (other than the Company as a Subsidiary
of Holdings), (g) any merger, consolidation or other transaction involving any Obligor or Subsidiary, or (h) any sale of
all or substantially all of the assets of any Obligor or Subsidiary.
            Change in Law means the occurrence, after the date of this Agreement, of any of the following: (i) the
adoption or taking effect of any Requirement of Law, (ii) any change in any Requirement of Law or in the
administration, interpretation or application thereof by any Governmental Authority or (iii) the making or issuance of
any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.
          Claims Act means the Assignment of Claims Act of 1940 (31 U.S.C. §3727 and 41 U.S.C. §15), as
amended and in effect from time to time, and any rules and regulations issued from time to time thereunder.
            Closing Date means the date on which the initial loan or advance is made hereunder.
            Code means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to
time, and any rules or regulations issued from time to time thereunder.
            Collateral means all Property and interests in Property and proceeds thereof now owned or hereafter arising
or acquired by any Obligor or any other Person and their respective Subsidiaries in or upon which a Lien now or
hereafter exists in favor of Bank, whether under this Agreement or under any other documents executed by any such
Persons and delivered to Bank to secure any part or all of the Liabilities.
             Collateral Documents means, collectively, this Agreement, any Mortgages, the Guaranty, the Pledge
Agreements, any deposit account control agreements, any patent, copyright, license and trademark security agreements,
any landlord agreements, any assignment of life insurance policies as collateral, and all other security agreements, lease
assignments, control agreements, guarantees and other similar agreements, and all amendments, restatements,
modifications or supplements thereof or thereto, now or hereafter delivered to Bank pursuant to or in connection with
the transactions contemplated hereby, and all financing statements (or comparable documents now or hereafter filed in
accordance with the UCC or comparable law) against any Obligor or its Subsidiaries, as debtor, in favor of Bank, as
secured party, in each case as amended, restated, supplemented or otherwise modified from time to time.
            Company shall have the meaning given such term in the preamble hereto.
            Compliance Certificate shall have the meaning given such term in Section 5.2(c).
           Computation Period means each period of twelve (12) consecutive Fiscal Months ending on the last day of
a Fiscal Month.
                                                           -5-
             Consolidated Capital Expenditures means all expenditures which, in accordance with GAAP, would be
required to be capitalized and shown on the consolidated balance sheet of Obligors and their Subsidiaries, including
Capital Leases, but excluding expenditures made in connection with the replacement, substitution or restoration of
assets to the extent financed (a) from insurance proceeds (or other similar recoveries) paid on account of the loss of or
damage to the assets being replaced or restored or (b) with awards of compensation arising from the taking by eminent
domain or condemnation of the assets being replaced.
            Consolidated EBITDA means, for any period, (a) Consolidated Net Income for such period, plus (b) to the
extent deducted in determining such Consolidated Net Income for such period (and without duplication),
(i) Consolidated Interest Expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) non-cash expenses
incurred upon the issuance or vesting of stock options, (v) the aggregate amount of all board advisory fees paid in cash
to Parallel pursuant to the Advisory Agreement, but only to the extent permitted by Section 6.10 , (vi) accrued
dividends on the Preferred Stock, and (vii) Consolidated Pre-Store Opening Expenses (other than Consolidated
Pre-Store Opening Expenses related to Stores located outside of the United States), provided, however, that the
aggregate amount added-back to Consolidated Net Income pursuant to this clause (vii) shall not exceed 10% of
Consolidated EBITDA for such period before giving effect to this clause (vii), minus (c) cash payments with respect to
stock options, minus (d) 100% of the portion of the amount determined pursuant to the foregoing clauses (a) through
(c) that is attributable to Stores located outside of the United States, all as determined for Obligors and their
Subsidiaries on a consolidated basis in accordance with GAAP.
            Consolidated Fixed Charge Coverage Ratio means, for any period, the ratio of (a) Consolidated Free Cash
Flow, to (b) Consolidated Fixed Charges for such period, all as determined for Obligors and their Subsidiaries on a
consolidated basis in accordance with GAAP.
            Consolidated Fixed Charges means, for any period, the sum of, without duplication, (a) Consolidated
Interest Expense, plus (b) scheduled or required payments of principal on Debt (other than payments of Revolving
Loans and payments required under Section 2.3(b) of this Agreement), plus (c) scheduled payments on Capital Leases,
each as paid or payable, and all as determined for Obligors and their Subsidiaries on a consolidated basis for such
period in accordance with GAAP.
            Consolidated Free Cash Flow means, for any period, the sum of the following for such period:
(a) Consolidated EBITDA, less (b) the sum of the following for such period (i) Consolidated Capital Expenditures
(other than Consolidated New Store Capital Expenditures), plus (ii) the sum of income taxes paid in cash, plus (iii) the
sum of all dividends, distributions and other Restricted Payments in each case paid in cash, plus (iv) the aggregate
amount of all advisory fees paid in cash, all as determined for Obligors and their Subsidiaries on a consolidated basis in
accordance with GAAP.
           Consolidated Interest Expense means, for any period, interest expense (including all imputed interest on
Capital Leases and in any event excluding all accrued dividends on the Preferred Stock), including expenses (and net of
income) associated with Rate Contracts, all as
                                                           -6-
determined for Obligors and their Subsidiaries on a consolidated basis in accordance with GAAP.
              Consolidated Leverage Ratio means, as of the last day of any Computation Period, without duplication, the
ratio of (a) the sum of Debt (excluding the Preferred Stock) to (b) Consolidated EBITDA for such Computation Period,
all as determined for Obligors and their Subsidiaries on a consolidated basis in accordance with GAAP.
             Consolidated Net Income means, for any period, net income (or loss) for such period; provided, however,
that in determining Consolidated Net Income hereunder, the following items shall be excluded to the extent otherwise
included in the determination thereof: (a) gains or losses from the sale or disposition of assets not in the Ordinary
Course of Business, (b) gains or losses from discontinued operations, and (c) other extraordinary gains or losses,
provided, however , that all gains or losses excluding non-cash rent expense related to the closing of Stores shall not be
excluded from Consolidated Net Income pursuant to the foregoing clauses (a), (b) and (c), all as determined for
Obligors and their Subsidiaries on a consolidated basis in accordance with GAAP.
            Consolidated New Store Capital Expenditures means, collectively, as to all Stores for any period, the
amounts expended for Capital Expenditures for each such Store during such period prior to the initial opening for
business of such Store, all as determined for Obligors and their Subsidiaries for such period on a consolidated basis in
accordance with GAAP.
            Consolidated POS Capital Expenditures means Capital Expenditures made after the Closing Date for a
point of sale computer system, all as determined for Obligors and their Subsidiaries for such period on a consolidated
basis in accordance with GAAP.
            Consolidated Pre-Store Opening Expenses means, for any period with respect to the opening of a new
Store, non-cash rent or occupancy charges incurred prior to the opening of such new Store, plus the lesser of
(a) $20,000, and (b) cash training expenses, cash supply expenses (other than as to inventory held for sale), and cash
rent or occupancy expenses, in each case incurred by Borrowers in opening such new Store on or before the day of the
opening of such new Store, all as determined for such period for Obligors and their Subsidiaries on a consolidated basis
in accordance with GAAP.
             Contingent Obligation means, as to any Person, any direct or indirect liability, contingent or otherwise, of
such Person: (a) with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary
purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the
obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect
thereto; (b) with respect to any letter of credit issued for the account of such Person or as to which such Person is
otherwise liable for reimbursement of drawings; (c) under any Rate Contracts; (d) to make take-or-pay or similar
payments if required regardless of nonperformance by any other party or parties to an agreement; or (e) for the
obligations of another through any agreement to purchase, repurchase or otherwise acquire such obligation or any
Property constituting security therefor, to provide funds for the payment or discharge of such obligation or
                                                           -7-
to maintain the solvency, financial condition or any balance sheet item or level of income of another Person. The
amount of any Contingent Obligation shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if not a fixed and determined amount, the maximum amount so guaranteed or supported.
           Contractual Obligations means, as to any Person, any provision of any security issued by such Person or of
any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its Property is bound.
            Controlled Group means each Obligor, each Subsidiary, and all Persons (whether or not incorporated),
trades or businesses under common control or treated as a single employer with any Obligor or Subsidiary pursuant to
Section 414 of the Code.
            Credit Extension shall have the meaning given such term in Article 3 .
            “ Credit Parties ” means, collectively, Obligors, Pledgors, any Person who now or hereafter guaranties all
or any portion of the Liabilities, and Subsidiaries, and “ Credit Party ” means any of the Credit Parties.
             Debt of any Person means, without duplication: (a) all indebtedness for borrowed money; (b) all
obligations issued, undertaken or assumed as the deferred purchase price of Property or services (other than trade
payables incurred in the Ordinary Course of Business or accrued expenses paid on customary terms in the Ordinary
Course of Business), including amounts payable by such Person after closing in connection with any Acquisition (other
than amounts payable at closing), whether as deferred purchase price, earnout, similar obligations or otherwise; (c) all
reimbursement or payment obligations (whether or not contingent) with respect to letters of credit, surety bonds and
other similar instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of Property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing
(including any synthetic lease, tax retention operating lease or similar off-balance sheet financing product), in either
case with respect to Property acquired by such Person (even though the rights and remedies of the seller or the Person
providing financing under such agreement in the event of default are limited to repossession or sale of such Property);
(f) all Capital Lease Obligations; (g) Redeemable Equity Interests; (h) all obligations under Rate Contracts; (i) all Debt
and obligations referred to in clauses (a) through (h) above (i) of any partnership or unincorporated joint venture in
which such Person is a general partner or joint venturer to the extent such Person is liable therefor or (ii) secured by (or
for which the holder of such Debt or obligations has an existing right, contingent or otherwise, to be secured by) any
Lien upon or in Property (including accounts and contracts rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Debt or obligations; and (j) all Contingent Obligations described
in clause (a) of the definition thereof in respect of Debt or obligations of others of the kinds referred to in clauses
(a) through (i) above.
            Default means the occurrence or existence of any one or more of the events described in Section 9.1 hereof.
                                                            -8-
           Designated Portion means, at any particular time, that portion of the Revolving Loan selected by
Borrowers’ Agent for any single Interest Period to bear interest based on a LIBOR Rate, which shall be in a minimum
amount of $50,000 and in integral multiples of $10,000 in excess thereof.
             Disposition means (a) the sale, lease, conveyance or other disposition of Property (excluding sales, leases
or other dispositions expressly permitted under Sections 6.3(a) and (c) ), and (b) the sale or transfer by any Obligor or
any Subsidiary of any Obligor of any Equity Interests issued by any Subsidiary and held by such transferor Person, but
specifically excluding (i) the granting of Liens to the extent otherwise permitted under Section 6.1 and (ii) the making
or liquidation of Investments to the extent permitted under Section 6.5 .
            Dollars , dollars and $ each mean lawful money of the United States of America.
           Employment Agreements means, collectively, (a) that certain Employment Agreement dated as of
December 17, 2004 between Holdings and Andrew Mack, and (b) that certain Employment Agreement dated as of
December 17, 2004 between Holdings and Nancy Mack, in each case together with any and all agreements, documents
and instruments executed and delivered thereunder.
              Environmental Claims means all claims by any Governmental Authority or other Person alleging potential
liability or responsibility for violation of any Environmental Law, or for release or injury to the environment or threat
to public health, personal injury (including sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or otherwise), cleanup, removal, remedial or
response costs, restitution, civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based
upon the presence, placement, discharge, emission or release (including intentional and unintentional, negligent and
non-negligent, sudden or non-sudden, accidental or non-accidental, placement, spills, leaks, discharges, emissions or
releases) of any Hazardous Material at, in, or from Property, whether or not owned by any Obligor or Subsidiary.
            Environmental Laws means all applicable federal, state or local laws, statutes, common law duties, rules,
regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to
environmental, health, safety and land use matters and the control, shipment, storage or disposal of Hazardous
Materials, pollutants, environmental contaminants or other toxic or hazardous substances; including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Clean Air Act, the Federal Water Pollution
Control Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and Recovery Act, the Toxic
Substances Control Act, and/or the Emergency Planning and Community Right-to-Know Act, in each case as amended
from time to time.
            Environmental Permits shall have the meaning given such term in Section 4.12 .
            Equipment means, collectively, all of the equipment and fixtures (as such terms are defined in the UCC) of
Obligors, and, with respect to each Obligor, all of such Obligor’s
                                                            -9-
equipment and fixtures (as such terms are defined in the UCC), together with any and all accessions, parts and
appurtenances thereto, in each case whether presently owned or hereafter acquired by such Obligor.
             Equity Interests means the membership interests, partnership interests, capital stock of any class or any
other equity interest of any Person and options, warrants and other rights to acquire membership interests, partnership
interests, capital stock of any class or any other equity interest of such Person.
            Equity Sale means any issuance, sale, conveyance, transfer or other disposition of any Equity Interests by
any Person or any other change in the capital structure of such Person (other than Debt), including all capital
contributions to such Person.
            ERISA means the Employee Retirement Income Security Act of 1974, as amended, reformed or modified
from time to time, and any rules or regulations issued from time to time thereunder.
            ERISA Affiliate means any member of the Controlled Group.
             ERISA Event means (a) a Reportable Event with respect to a Plan or a Multiemployer Plan; (b) a
withdrawal by any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA); (c) a complete or partial withdrawal by any ERISA
Affiliate from a Multiemployer Plan; (d) the filing of a notice of intent to terminate with the PBGC, the treatment of a
plan amendment as a termination under Section 4041 or 4041A of ERISA or the commencement of proceedings by the
PBGC to terminate, a Plan or Multiemployer Plan subject to Title IV of ERISA; (e) a failure by any ERISA Affiliate to
make required contributions to a Qualified Plan or Multiemployer Plan; (f) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan or Multiemployer Plan; (g) the imposition of any liability under Title IV of ERISA,
other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any ERISA Affiliate; (h) an
application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code with
respect to any Qualified Plan; (i) a non-exempt prohibited transaction occurs with respect to any Qualified Plan for
which any ERISA Affiliate may be directly or indirectly liable; (j) the failure of a Qualified Plan or any trust thereunder
to qualify for tax exempt status under Section 401(a)or 501(a) of the Code; or (k) a violation of the applicable
requirements of Section 404 or 405 of ERISA or the exclusive benefit rule under Section 401(a)(2) of the Code by any
fiduciary or disqualified person with respect to any Qualified Plan for which any ERISA Affiliate may be directly or
indirectly liable.
           Event of Default means a Default or an event which through the passage of time or the giving of notice or
both would mature into a Default.
           Event of Loss means, with respect to any Property, any of the following: (a) any loss, destruction or
damage of such Property; or (b) any actual condemnation, seizure or taking,
                                                           -10-
by exercise of the power of eminent domain or otherwise, of such Property, or confiscation of such Property or the
requisition of the use of such Property.
            Executive Order shall have the meaning given such term in Section 4.25 .
             Existing Vendor Loan shall mean that certain loan from Gebrueder Wollenhaupt GmbH to ST in the
current aggregate principal amount of $250,000 evidenced by that certain Wollenhaupt Amended and Restated Loan
Agreement dated as of June 30, 2005 between ST and Gebrueder Wollenhaupt GmbH with a maturity date of the
earlier of (a) thirty days after receipt of written notice of demand or (b) June 1, 2012.
            Federal Funds Rate means for any day the rate determined by Bank to be the average rounded upward, if
necessary, to the next higher 1/100 of 1% of the rates per annum quoted to Bank at approximately 10:00 a.m.
(Cincinnati time) (or as soon thereafter as is practicable) on such day (or, if such day is not a Business Day, on the
immediately preceding Business Day) by two or more Federal funds brokers selected by Bank for sale to Bank at face
value of Federal funds in the secondary market in an amount equal or comparable to the principal amount owed to
Bank for which such rate is being determined.
           Federal Reserve Board means the Board of Governors of the Federal Reserve System, or any entity
succeeding to any of its principal functions.
            Field Exam means reports and other information prepared by Bank or another Person showing the results of
analyses, appraisals, or field examinations, audits or other actions pertaining to any Obligor’s assets from information
furnished by or on behalf of any Obligor or from any inspection or other actions taken by Bank or its agents pursuant to
this Agreement.
             Financing Agreements means this Agreement, the Revolving Note, the Collateral Documents, the
Guaranty, the Perfection Certificates, the Advisory Agreement, the Subordination Agreement, any Rate Contracts
entered into by any Obligor with Bank or any Affiliate of Bank and all documents, instruments, agreements and
certificates delivered to Bank in connection therewith, in each case as amended, restated, supplemented or otherwise
modified from time to time.
            First Adjustment Date means the tenth (10 th ) day following the date on which the monthly financial
statements of Obligors and their Subsidiaries shall have been delivered to Bank pursuant to Section 5.1(b) for the Fiscal
Month ending on October 31, 2008, accompanied by a Pricing Certificate including a written calculation of the
Consolidated Leverage Ratio for the period of twelve (12) consecutive Fiscal Months ending on the last day of such
Fiscal Month.
            Fiscal Month means each 4 or 5 week period comprising a fiscal month of Obligors.
           Fiscal Quarter means a fiscal quarter of a Fiscal Year ending on or about April 30, July 31, October 31 or
January 31 of each Fiscal Year and comprised of three (3) Fiscal Months.
             Fiscal Year means the fiscal year of each Obligor ending on or about January 31 of each year comprised of
four (4) Fiscal Quarters.
                                                          -11-
            GAAP means generally accepted accounting principles set forth from time to time in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), which are applicable to the circumstances as of the
date of determination, applied in a manner consistent with those used in the preparation of audited annual financial
statements of Holdings and its Subsidiaries for February 3, 2008 and heretofore delivered to Bank.
            General Intangibles means, collectively, all general intangibles (as such term is defined in the UCC),
choses in action, causes of action and all other intangible personal Property of any Obligor of every kind and nature
(other than Accounts) now owned or hereafter arising or acquired by Obligors, and, with respect to each Obligor, all
general intangibles (as such term is defined in the UCC), choses in action, causes of action and all other intangible
personal property of such Obligor of every kind, and nature (other than Accounts) now owned or hereafter arising or
acquired by such Obligor, including in each case, corporate, limited liability company, partnership or other business
records, inventions, designs, patents, patent applications, service marks, trademarks, trademark applications, trade
names, trade styles, trade secrets, goodwill, registrations, computer software, domain names, operational manuals,
product formulas, blueprints, drawings, copyrights, copyright applications, licenses, franchises, customer lists, tax
refunds, tax refund claims, rights and claims against carriers and shippers, rights to indemnification and the like,
wherever located, and proceeds of insurance covering the lives of key employees on which any Obligor is beneficiary.
             Governmental Authority means any nation or government, any state or other political subdivision thereof,
any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing.
           Guaranty means that certain Guaranty Agreement dated as of June 12, 2008 made by Obligors in favor of
Bank.
             Hazardous Materials means all those substances which are regulated by, or which may form the basis of
liability under, any Environmental Law.
           Holdings shall have the meaning given such term in the preamble hereto.
           Indemnified Matters shall have the meaning given such term in Section 10.19 .
           Indemnitees shall have the meaning given such term in Section 10.19 .
           Interest Period means any period relating to LIBOR Rate Advances, the commencement of which shall be
determined in accordance with Section 2.11 and expiring one, two or three months thereafter, as specified by
Borrowers’ Agent or a Borrower in accordance with Section 2.10 .
                                                         -12-
            Inventory means, collectively, all inventory (as defined in the UCC) and any and all other goods, including
goods in transit, wheresoever located, whether now owned or hereafter acquired by Obligors, and, with respect to each
Obligor, all inventory (as defined in the UCC) and any and all other goods, including goods in transit, wheresoever
located, whether now owned or hereafter acquired by such Obligor, in each case which are held for sale or lease,
furnished under any contract of service or held as raw materials, work in process or supplies, and all materials used or
consumed in such Obligor’s business, and shall include such Property the sale or other disposition of which has given
rise to Accounts and which has been returned to or repossessed or stopped in transit by such Obligor.
            Investments shall have the meaning given such term in Section 6.5 .
            L/C Facility shall have the meaning given such term in Section 2.2 .
            L/C Fee shall have the meaning given such term in Section 2.6(f) .
             Lending Affiliate means (a) Bank, (b) each office and branch of Bank, and (c) each other entity which,
directly or indirectly, is controlled by or under common control with Bank or which controls Bank and each office and
branch thereof.
            Letters of Credit means any letters of credit which are now or at any time hereafter issued by Bank at the
request of and for the account of one or more Borrowers and which have not expired or been revoked or terminated.
             Liabilities means, collectively, all of each Obligor’s liabilities, obligations, and indebtedness (including
interest accruing after the filing of a petition or commencement of a case by or with respect to any Obligor or
Subsidiary seeking relief under any applicable federal and state laws pertaining to bankruptcy, reorganization,
arrangement, moratorium, readjustment of debts, dissolution, liquidation or other debtor relief, specifically including
the Bankruptcy Code and any fraudulent transfer and fraudulent conveyance laws, whether or not the claim for such
interest is allowed in such proceeding) to Bank or any of its Affiliates of any and every kind and nature, whether
heretofore, now or hereafter owing, arising, due or payable and howsoever evidenced, created, incurred, acquired, or
owing, whether individually or collectively, direct or indirect, joint or several, absolute or contingent, primary or
secondary, fixed or otherwise (including obligations of performance) and whether arising or existing under any
Financing Agreement or any other written agreement, oral agreement or operation of law, including all of each
Obligor’s reimbursement obligations, whether contingent or liquidated, with respect to any Letter of Credit and all of
each Obligor’s other indebtedness and obligations to Bank or any of its Affiliates under or in respect of any of this
Agreement and the other Financing Agreements, and any Rate Contract among any one or more of Obligors and Bank
or an Affiliate of Bank.
             LIBOR means, for each Interest Period, the offered rate per annum for deposits of Dollars for the
applicable Interest Period that appears on Reuters Screen LIBOR01 (or any successor pages) as of 11:00a.m. (London,
England time) two (2) Business Days prior to the first day in such Interest Period; provided, however , if more than one
rate is specified on Reuters Screen LIBOR01 Page, the applicable rate shall be the arithmetic mean of all such rates If
no such offered rate exists, such rate will be the rate of interest per annum, as determined by Bank
                                                          -13-
(rounded upwards, if necessary, to the nearest 1/16th of 1%) at which deposits of Dollars in immediately available
funds are offered at 11:00a.m. (London, England time) two (2) Business Days prior to the first day in such Interest
Period by major financial institutions reasonably satisfactory to Bank in the London interbank market for such Interest
Period for the applicable principal amount on such date of determination as reasonably determined by Bank.
           LIBOR Rate means the annual rate of interest, rounded upward to the nearest 1/16th of 1% determined by
Bank with respect to an Interest Period, in accordance with the following formula:
     LIBOR Rate                           =                                        LIBOR
                                                                                   (1—Reserve Rate)
           LIBOR Rate Advances means that portion of the Revolving Loan bearing interest calculated by reference
to the LIBOR Rate.
            Lien means any mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preference, priority or other security interest or preferential arrangement of
any kind or nature whatsoever (including, but not limited to, those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of a lessor under a Capital Lease, any financing lease
having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming
the owner of the asset to which such lien relates as debtor, under the UCC or any comparable law), and any contingent
or other agreement to provide any of the foregoing, but not including the interest of a lessor under a lease that is not a
Capital Lease.
            Loan Account shall have the meaning given such term in Section 2.4 .
            Loan Types shall have the meaning given such term in Section 2.9 .
            Loans means the Revolving Loans.
            Lock Box shall have the meaning given such term in Section 5.19 .
            Loss shall have the meaning given such term in Section 9.1(f) .
            Margin Stock means “margin stock” as such term is defined in Regulation T, U or X of the Federal Reserve
Board.
              Material Adverse Effect means (a) a material adverse change in, or a material adverse effect upon, the
operations, business, properties or financial condition of any Borrower, or of Obligors and their Subsidiaries taken as a
whole; (b) a material impairment of the ability of any Borrower, or of Obligors and their Subsidiaries taken as a whole,
to perform in any material respect its obligations under any Financing Agreement; or (c) a material adverse effect upon
(i) the legality, validity, binding effect or enforceability of any Financing Agreement, or (ii) the perfection or priority of
any Lien granted to Bank on any material Property under any Collateral Document.
                                                            -14-
            Material Contracts shall have the meaning given such term in Section 4.26.
           Maximum Revolving Facility means (a) from the Closing Date to and including June 12, 2009,
$15,000,000, (b) after June 12, 2009 and to and including June 12, 2010, $20,000,000, and (c) after June 12, 2010,
$25,000,000.
            Mortgages shall have the meaning given such term in Section 8.12 .
            Multiemployer Plan means a “multiemployer plan” (within the meaning of Section 4001(a)(3) of ERISA)
to which any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding three
calendar years, has made, or been obligated to make, contributions.
             Net Proceeds means proceeds in cash, checks or other cash equivalent financial instruments (including
Cash Equivalents) as and when received by the Person making a Disposition, net of: (a) the direct costs relating to such
Disposition excluding amounts payable to any Obligor, and (b) sales, use or other transaction taxes paid or payable as a
result thereof. “Net Proceeds” shall also include proceeds received on account of any Event of Loss net of (i) all money
actually applied to repair, reconstruct or replace the damaged Property or Property affected by the Event of Loss, (ii) all
of the costs and expenses reasonably incurred in connection with the collection of such proceeds, award or other
payments, (iii) any amounts retained by or paid to parties having superior rights to such proceeds, awards or other
payments and (iv) any taxes (including income, transfer, stamp, duty, customs, withholding and other taxes) paid or
payable in respect of amounts so received on account of such Event of Loss. “Net Proceeds” shall also include the
aggregate cash proceeds paid or payable to any Person in connection with any Equity Sale, after deduction of all
documented fees, costs and expenses paid to any third party in connection with such Equity Sale.
             Obligors means, collectively, Borrowers, Holdings, TFC, TI and any other Subsidiaries of Holdings that are
parties to this Agreement and Obligor means any of Obligors.
            OFAC shall have the meaning given such term in Section 4.25 .
           Ordinary Course of Business means, in respect of any transaction involving any Obligor or Subsidiary, the
ordinary course of such Person’s business, as conducted by any such Person in accordance with past practice, in each
case undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in any
Financing Agreement.
             Organization Documents means, (a) for any corporation, the certificate or articles of incorporation, the
bylaws, any certificate of designation or instrument relating to the rights of shareholders of such corporation, any
shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such
corporation, (b) for any partnership, the partnership agreement and, if applicable, certificate of limited partnership, or
(c) for any limited liability company, the operating agreement and articles or certificate of formation, and all applicable
resolutions of the board of managers (or any committee thereof) of such limited liability company.
            Other Deposit Accounts shall have the meaning given such term in Section 5.18 .
                                                           -15-
           Parallel means Parallel Investment Partners, LP, a Delaware limited partnership.
            PBGC means the Pension Benefit Guaranty Corporation or any entity succeeding to any of its principal
functions under ERISA.
           Perfection Certificates means, collectively, each Perfection Certificate dated as of June 12, 2008 executed
by an Obligor in favor of Bank.
           Permitted Discretion means a determination made by Bank in good faith (as such term is defined in Article
1 of the UCC) and in the exercise of its reasonable (from the perspective of a secured lender) business judgment.
           Permitted Liens shall have the meaning given such term in Section 6.1 .
           Permitted Mechanics Liens shall have the meaning given such term in Section 6.1 .
           Person means an individual, partnership, corporation, limited liability company, business trust, joint stock
company, trust, unincorporated association, joint venture or Governmental Authority.
            Plan means any defined benefit plan (as defined in Section 3(35) of ERISA), that any ERISA Affiliate
sponsors or maintains or to which any ERISA Affiliate makes, is making or is obligated to make contributions.
            Pledge Agreements means, collectively, (a) that certain Pledge Agreement dated as of June 12, 2008
entered into by Holdings in favor of Bank, (b) that certain Pledge Agreement dated as of June 12, 2008 entered into by
the Company in favor of Bank, and (c) any other pledge agreement entered into by any other Pledgor in favor of Bank.
           Pledged Collateral means the “Collateral” as such term is defined in the Pledge Agreements.
             Pledgors means, collectively, Holdings, the Company and any other Person that from time to time may own
any equity interests, or warrants, options or other rights to acquire, or exercisable or convertible into, any Equity
Interests, of any Obligor (other than Holdings).
           Post-Default Rate shall have the meaning given such term in Section 2.6(a) .
           Preferred Stock Documents means, collectively, the Amended and Restated Certificate of Incorporation of
Holdings dated as of December 12, 2004 and the Amended and Restated Stockholders Agreement dated as of June 30,
2005 by and among Holdings, Sponsor, Andrew Mack and Nancy Mack.
           Prepayment Fee shall have the meaning given such term in Section 2.6(e) .
           Preferred Stock means Holdings’ Series A Redeemable Participating Preferred Stock.
                                                         -16-
            Pricing Certificate shall have the meaning given such term in Section 5.2(d) .
            Property means any property or any interest of any type in any kind of property or asset, whether real,
personal or mixed, and whether tangible or intangible.
             Qualified Plan means a pension plan (as defined in Section 3(2) of ERISA) intended to be tax-qualified
under Section 401(a) of the Code and that any ERISA Affiliate sponsors, maintains, or to which any ERISA Affiliate
makes, is making or is obligated to make contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding period covering at
least five (5) plan years, but excluding any Multiemployer Plan.
            Quarterly Computation Period means a Computation Period ending with the last day of a Fiscal Quarter.
            Rate Contracts means swap agreements (as such term is defined in Section 101 of the Bankruptcy Code)
and any other agreements or arrangements designed to provide protection against fluctuations in interest or currency
exchange rates including any agreement or arrangement that is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest
rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction,
currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction
(including any option with respect to any of these transactions) or any combination thereof, whether linked to one or
more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.
             Redeemable Equity Interests means, as to any Person, any Equity Interest of such Person that, either by its
terms, by the terms of any security into which it is convertible or exchangeable or otherwise, (a) is or upon the
happening of an event or passage of time would be required to be redeemed in whole or in part (except for
consideration comprised of Equity Interests which are not Redeemable Equity Interests) at any time on or prior to
October 31, 2011, (b) is redeemable in whole or in part at the option of the holder thereof (except for consideration
comprised of Equity Interests which are not Redeemable Equity Interests) at any time prior to such date or (c) is
convertible into or exchangeable (in whole or in part) for Debt of such Person or any of its Subsidiaries at any time
prior to such date; provided that any Equity Interests that would constitute Redeemable Equity Interests solely because
the holders thereof have the right to require such Person to repurchase such Equity Interests upon certain events shall
not constitute Redeemable Equity Interests if the terms of such Equity Interests provide that such Person may not
repurchase or redeem any such Equity Interests pursuant thereto unless (i) such repurchase or redemption is permitted
in accordance with the terms of this Agreement and any successor credit agreement providing for the extension of
credit to such Person or (ii) all Liabilities have been repaid in full and the Revolving Commitment has been terminated
under this Agreement and all Debt under any successor credit agreement providing for the extension of credit to such
Person has been repaid in full.
            Related Documents means, collectively, the Employment Agreements, the Advisory Agreement, and the
Preferred Stock Documents.
                                                          -17-
            Related Parties means, with respect to any Person, such Person’s Affiliates and the partners, directors,
officers, employees, agents and advisors of such Person and of such Person’s Affiliates.
            Remittance Account shall have the meaning given such term in Section 5.19 .
            Reportable Event means, as to any Plan, (a) any of the events set forth in Section 4043(c) of ERISA or the
regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC, (b) a withdrawal from a Plan described in Section 4063 of ERISA, or (c) a
cessation of operations described in Section 4062(e) of ERISA.
             Requirement of Law means, as to any Person, any law (statutory or common), ordinance, treaty, rule,
regulation, order, policy, other legal requirement or determination of an arbitrator or of a Governmental Authority, in
each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its
Property is subject.
            Reserve Rate means the maximum reserve rate (including supplemental, marginal and emergency reserve
requirements), expressed as a decimal, determined by Bank to be the rate which would be applicable to the relevant
Interest Period under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or
similar regulation relating to such reserve requirements) with respect to eurocurrency funding (currently referred to as
“Eurocurrency Liabilities” in Regulation D) of a member of the Federal Reserve System, whether or not such fundings
were outstanding.
             Responsible Officer means the chief executive officer, the president, the chief financial officer, the
treasurer, the controller and the secretary of each Obligor, or any other officer having substantially the same authority
and responsibility; or, with respect to compliance with financial covenants or delivery of financial information, the
chief financial officer or the treasurer of each Obligor, or any other officer having substantially the same authority and
responsibility.
            Restricted Payments shall have the meaning given such term in Section 6.10 .
            Revolving Commitment shall have the meaning given such term in Section 2.1 .
            Revolving Loan shall have the meaning given such term in Section 2.1 .
            Revolving Note shall have the meaning given such term in Section 2.1 .
            Sponsor means Teavana Investment LLC, a Delaware limited liability company.
            Sponsor Group means Parallel and its Affiliates.
            ST shall have the meaning given such term in the preamble hereto.
          Store means a retail store owned by the Company operating in the Ordinary Course of Business of the
Company as in effect on the date hereof.
                                                          -18-
            Subordination Agreement means that certain Subordination Agreement dated as of June 12, 2008 between
Parallel and Bank, acknowledged by Obligors.
             Subsidiary means, with respect to any Person, any corporation, limited liability company, partnership,
association or other business entity of which (a) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person or a combination thereof, or (b) if a limited liability company, partnership, association or other business
entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company,
partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited
liability company, partnership, association or other business entity gains or losses or shall be or control (or have the
power to be or control) a managing director, manager or general partner of such limited liability company, partnership,
association or other business entity. Unless the context otherwise requires, references herein to one or more
Subsidiaries shall be deemed to refer to Subsidiaries of each Obligor.
            Term shall have the meaning given such term in Section 2.8 .
            Termination Date shall have the meaning given such term in Section 2.8 .
            TFC shall have the meaning given such term in the preamble hereto.
            TI shall have the meaning given such term in the preamble hereto.
            UCC shall have the meaning given such term in Section 1.3 .
            UFCA shall have the meaning given such term in Section 4.22 .
            UFTA shall have the meaning given such term in Section 4.22 .
             Unfunded Pension Liabilities means the excess of a Plan’s benefit liabilities under Section 4001(a)(16) of
ERISA, over the current value of that Plan’s assets, determined in accordance with the assumptions used by the Plan’s
actuaries for funding the Plan pursuant to Section 412 of the Code for the applicable plan year.
            United States and U.S. each means the United States of America.
            Unused Fee shall have the meaning given such term in Section 2.6(d) .

            USA Patriot Act shall have the meaning given such term in Section 4.25.
            Withdrawal Liabilities means, as of any determination date, the aggregate amount of the liabilities, if any,
pursuant to Section 4201 of ERISA if all ERISA Affiliates made a
                                                           -19-
complete withdrawal from all Multiemployer Plans and any increase in contributions pursuant to Section 4243 of
ERISA.
      1.2 Accounting Terms . Calculations and determinations of financial and accounting terms used and not
otherwise specifically defined under this Agreement shall be made and determined, both as to classification of items
and as to amount, in accordance with GAAP. If any changes in accounting principles or practices from GAAP are
occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial
Accounting Standards Board or the American Institute of Certified Public Accountants (or any successor thereto or
agencies with similar functions), which results in a change in the method of accounting in the calculation of financial
covenants, standards or terms contained in this Agreement or any other Financing Agreement, the parties hereto agree
to enter into negotiations to amend such provisions so as equitably to reflect such changes to the end that the criteria for
evaluating each Obligor’s financial condition and performance will be the same after such changes as they were before
such changes; and if the parties fail to agree on the amendment of such provisions, each Obligor shall continue to
provide calculations for all financial covenants, perform all financial covenants and otherwise observe all financial
standards and terms in the Financing Agreements in accordance with GAAP in effect immediately prior to such
changes.
      1.3     Other Terms Defined in New York Uniform Commercial Code . All other terms contained in this
Agreement (and which are not otherwise specifically defined herein) shall have the meanings provided in the Uniform
Commercial Code as the same is in effect on the date hereof in the State of New York (the “ UCC ”) to the extent the
same are used or defined therein. However, if a term is defined in Article 9 of the UCC differently than in another
Article of the UCC, then such term shall have the meaning specified in Article 9 of the UCC.
       1.4    Other Definitional Provisions . Whenever the context so requires, the neuter gender includes the
masculine and feminine, the singular number includes the plural, and vice versa. The words “include,” “includes” and
“including” shall in any event be deemed to be followed by the phrase “without limitation.” All references in this
Agreement to “this Agreement”, “herein”, “hereunder”, “hereof” shall be deemed to refer to this Agreement and the
Exhibits hereto (including their annexes) unless the context requires otherwise. All references in this Agreement to
Articles, Sections, Exhibits, Annexes and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits, Annexes and Schedules to, this Agreement unless the context requires otherwise. Any definition of or
reference to any agreement, instrument or other document shall be construed as referring to such agreement, instrument
or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any
restrictions on such amendments, restatements, supplements or modifications set forth herein or in any other Financing
Agreement).

2. C
REDIT
.
       2.1 Revolving Loan Facility . Subject to the provisions of Section 3 below and subject to the other provisions
and conditions of this Agreement, Bank shall advance to Borrowers from time to time prior to the Termination Date on
a revolving credit basis (the “ Revolving Loan ”) in an aggregate outstanding principal amount not to exceed the lesser
of (a) the Maximum Revolving Facility minus the sum of the undrawn face amount of any Letters of Credit
                                                           -20-
outstanding at the time any particular advance is made, and (b) the Borrowing Base (such commitment being referred
to herein as the “ Revolving Commitment ”). Bank, in its sole and absolute discretion, may elect to make advances to
Borrowers in excess of the amount available pursuant to the definition of the term Borrowing Base. Each advance to
Borrowers under this Section 2.1 shall be in a minimum amount of $5,000 and in integral multiples of $5,000 in excess
thereof (or such other amounts as Bank may agree in its sole discretion), subject to Section 2.9 regarding LIBOR Rate
Advances, and shall, on the day of such advance, be deposited in immediately available funds in the Company’s
demand deposit account with Bank, or in such other account as Borrowers’ Agent may, from time to time, designate.
The Revolving Loan made by Bank under this Section 2.1 shall be evidenced, in part, by a promissory note of even
date herewith in the form attached hereto as Exhibit 2.1 (the “ Revolving Note ”) with the blanks appropriately filled.
The Liabilities evidenced by the Revolving Note shall become immediately due and payable as provided in Section 9.1
hereof, and, without notice or demand, upon the termination of the Revolving Commitment pursuant to Section 2.8
hereof.
      2.2 Letter of Credit Facility . Subject to the provisions of Section 3 hereof and subject to the other provisions
and conditions of this Agreement, Bank may in its sole discretion and at Borrowers’ Agent’s request and for the
account of any one or more of Borrowers, issue one or more Letters of Credit in an aggregate undrawn face amount
outstanding at any one time of up to $1,500,000 (the “ L/C Facility ”). The L/C Facility is a sublimit of the Maximum
Revolving Facility. The Letters of Credit shall be in form and substance acceptable to Bank. Borrowers jointly and
severally agree to reimburse Bank, immediately upon demand, for any payments made by Bank to any Person with
respect to any Letter of Credit and for any other out-of-pocket costs, fees and expenses incurred by Bank in connection
with the application for, issuance of or amendment to any Letter of Credit, and until Bank shall be so reimbursed by
Borrowers, such payments by Bank shall be deemed to be part of the Revolving Loan. Each Borrower shall execute
Bank’s standard form of application and reimbursement agreement for each Letter of Credit. In the event of any
conflict between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by any one or more of Borrowers to, or entered into by any one or more of
Borrowers with, Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.
     2.3    Mandatory Payments; Prepayments .
             (a) The aggregate outstanding principal balance of the Revolving Loan shall not at any time exceed the
lesser of (i) the Maximum Revolving Facility minus the sum of the undrawn face amount of any Letters of Credit
outstanding, and (ii) the amount of the Borrowing Base. Borrowers jointly and severally agree, if at any time any such
excess shall arise, to promptly pay to Bank such amount for application to the Revolving Loan as may be necessary to
eliminate the excess.
            (b) If any Obligor or Subsidiary shall at any time or from time to time make or agree to make any Equity
Sale, a Disposition or suffer an Event of Loss and the aggregate amount of the Net Proceeds received by any Obligor or
Subsidiary in connection with such Equity Sale, such Disposition or Event of Loss and all other Equity Sales,
Dispositions and Events of Loss occurring during the then current Fiscal Year exceeds $100,000, then (i) Borrowers
shall promptly notify Bank of such proposed Equity Sale, Disposition or Event of
                                                         -21-
Loss (including the amount of the estimated Net Proceeds to be received by Borrowers in respect thereof) and
(ii) promptly upon receipt by such Obligor or Subsidiary of the Net Proceeds of such Equity Sale, such Disposition or
such Event of Loss, Borrowers jointly and severally agree to deliver such Net Proceeds which exceed $100,000 for the
then current Fiscal Year to Bank as a prepayment of the Loans, which prepayment shall be applied in accordance with
Section 2.3(c) hereof.
            (c) Any proceeds of any key-man life insurance received by Bank and any prepayments pursuant to
Sections 2.3(b) shall be applied to the Liabilities in the following order: first , to prepay the principal amount of the
Revolving Loan with a corresponding reduction of the Revolving Commitment and the Maximum Revolving Facility;
and second , to the payment of any other Liabilities as provided herein. To the extent permitted by the foregoing
sentence, amounts prepaid shall be applied first to any Base Rate Advances then outstanding and then to outstanding
LIBOR Rate Advances with the shortest Interest Periods remaining.
             (d) Subject to Sections 2.6(e) and 2.13(d) , any Borrower may voluntarily prepay the principal and
interest on the Loans and any Unused Fee in full or in part upon three (3) days’ prior irrevocable written notice to Bank
for LIBOR Rate Advances and upon the same day as irrevocable written notice is provided to Bank for Base Rate
Advances, provided, however, that to the extent the same is not received by Bank together with notice thereof prior to
2:00 p.m. (Chicago time) on a Business Day, the same shall be deemed to be received on the following Business Day.
       2.4 Loan Account . Bank shall maintain a loan account (the “ Loan Account ”) on its internal data control
system in which shall be recorded (a) all Loans made by Bank pursuant to this Agreement, including all payments
made by Bank under any Letter of Credit, (b) all payments made by any Borrower on all such Loans and advances, and
(c) all other appropriate debits and credits as provided in this Agreement, including all fees, charges, expenses and
interest. All entries in the Loan Account shall be made in accordance with Bank’s customary accounting practices as in
effect from time to time. Borrowers jointly and severally agree to pay to Bank the amount reflected as owing by
Borrowers under the Loan Account, and all of its other obligations hereunder and under any other Financing
Agreements as such amounts become due or are declared due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) pursuant to the terms of this Agreement and the other Financing Agreements.
      2.5 Statements . All advances and other financial accommodations to Borrowers, and all other debits and
credits provided for in this Agreement, shall be evidenced by entries made by Bank in its internal data control systems
showing the date, amount and reason for each such debit or credit. Until such time as Bank shall have rendered to
Borrowers written statements of account as provided herein, the balance in the Loan Account, as set forth on Bank’s
most recent printout, shall be rebuttably presumptive evidence of the amounts due and owing Bank by Borrowers.
      2.6   Interest and Fees .
            (a) Interest . Borrowers jointly and severally agree to pay to Bank interest on the outstanding principal
balance of each Loan, other than the outstanding principal amount of
                                                          -22-
LIBOR Rate Advances, at a per annum rate equal to the Base Rate plus the Applicable Margin for Base Rate Advances
as to such Loan. Borrowers jointly and severally agree to pay to Bank interest on the outstanding balance of all other
Liabilities (other than the Loans) at a per annum rate equal to the Base Rate plus the Applicable Margin for Base Rate
Advances under the Revolving Loan. Borrowers jointly and severally agree to pay to Bank interest on the outstanding
principal balance of each LIBOR Rate Advances at a per annum rate equal to the LIBOR Rate for the Interest Period
applicable to such Advance plus the Applicable Margin. Interest shall be computed by charging for the first day in each
Interest Period but not for the last day in such Interest Period. Interest shall be payable jointly and severally by
Borrowers (i) monthly in arrears beginning on July 1, 2008, and on the first day of each calendar month thereafter,
(ii) with respect to the Revolving Loan, upon termination of the Revolving Commitment, and (iii) at any time after the
occurrence and during the continuance of an Event of Default, upon demand. All interest and fees provided for under
this Agreement shall be computed on the basis of a 360-day year for the actual number of days elapsed. Following the
occurrence of a Default and during the continuance thereof, Borrowers jointly and severally agree to pay to Bank
interest from the date of such Default at a rate (the “ Post-Default Rate ”) equal to the applicable rate set forth above for
each of the Liabilities plus 2% per annum on the outstanding principal balance of all of the Liabilities; provided that if
no Bankruptcy Default has occurred, the Post-Default Rate shall not be applicable unless Bank has elected to apply the
Post-Default Rate upon notice to Borrowers’ Agent.
           (b) Closing Fee . Borrowers jointly and severally agree to pay to Bank a non-refundable closing fee of
$200,000, which shall be paid upon the execution of this Agreement, less the unused portion of any deposit held by
Bank on the Closing Date.
            (c) Audit Fee . Borrowers jointly and severally agree to pay to Bank on demand (i) with respect to any
Field Exam performed by Bank (x) an audit fee in the amount of $850 per day for each Person employed by Bank or
engaged by Bank, as applicable, to perform such Field Exam, plus (y) all reasonable out-of-pocket costs and expenses
(including costs and expenses related to travel) incurred by Bank or any such Person in the performance of such Field
Exam, and (ii) with respect to any Field Exam performed by an independent contractor for the benefit of Bank, (x) the
charges of such independent contractor to perform such Field Exam, plus (y) all reasonable out-of-pocket costs and
expenses (including costs and expenses related to travel) incurred by such independent contractor in the performance of
such Field Exam. Notwithstanding the foregoing, unless an Event of Default has occurred and is continuing, Borrowers
shall only be required to pay the foregoing fees, costs and expenses with respect to no more than one of such Field
Exams of Obligors during any Fiscal Year.
             (d) Unused Fee . Borrowers jointly and severally agree to pay to Bank an unused fee (the “ Unused Fee
”) at a per annum rate equal to 0.375% on the amount by which (i) the Maximum Revolving Facility exceeds (ii) the
sum of (x) the average amount of the outstanding principal balance of the Revolving Loan during any month, and
(y) the average amount of the undrawn face amount of any Letters of Credit outstanding during any month. The Unused
Fee shall be payable (i) monthly in arrears beginning on July 1, 2008, and on the first day of each calendar month
thereafter, (ii) upon termination of the Revolving Commitment, and (iii) at any time after the occurrence and during the
continuance of an Event of Default, upon
                                                            -23-
demand. The Unused Fee shall be computed on the basis of a 360-day year for the actual number of days elapsed.
            (e) Prepayment Fee . In the event of any prepayment in full of the Loans by Borrowers on or before
June 12, 2010, or in the event of expiration of the Term or earlier termination of the Revolving Commitment on or
before June 12, 2010, Borrowers jointly and severally agree to pay to Bank on the date of such prepayment, expiration
or termination, in addition to any other amounts required to be paid under this Agreement, a prepayment fee (the “
Prepayment Fee ”) equal to the product of 1.50% ( provided that such percentage shall reduce to 0.75% on June 12,
2009), multiplied by the sum of the amount of the Maximum Revolving Facility. The Prepayment Fee shall be fully
earned and due and payable on the date that any such prepayment is made or any such expiration or termination occurs.
Borrowers shall not be required to pay the Prepayment Fee if (i) the Loans are prepaid in full by Borrowers with the
proceeds of loans made by Bank to Borrowers, or (ii) at the time of the related prepayment, reserves established
pursuant to clause (b) of the definition of “Borrowing Base” exist in an aggregate amount in excess of 15% of the
amount determined pursuant to clause (a) of the definition of “Borrowing Base” for the most recent Computation
Period for which Bank has received the financial statements required to be delivered to it pursuant to Section 5.1(b) .
             (f) L/C Fee . For each Letter of Credit, Borrowers jointly and severally agree to pay to Bank a fee (the “
L/C Fee ”) equal to (i) either (x) 3.00% per annum with respect to standby Letters of Credit, or (y) 2.75% per annum
with respect to commercial Letters of Credit, plus (ii) at any time after the occurrence and during the continuance of an
Event of Default, 2% per annum, of the undrawn face amount of such Letter of Credit; provided, however, that the L/C
Fee shall not be less than $500 for any such Letter of Credit. The L/C Fee shall be payable monthly in arrears on the
first day of each calendar month, upon the occurrence of the Termination Date or earlier termination of the Revolving
Commitment and, after the occurrence and during the continuance of an Event of Default, upon demand of Bank. The
L/C Fee shall be computed on the basis of a 360 day year for the actual number of days elapsed. In addition to the L/C
Fee, Borrowers jointly and severally agree to pay to Bank all of Bank’s customary charges for out-of-pocket and
administrative expenses upon the issuance of any Letter of Credit.
       2.7 Location; Method for Making Payments . All payments under this Agreement are to be made to Bank at
its offices in Chicago, Illinois. Unless otherwise agreed in writing from time to time hereafter, all payments which any
Obligor is required to make to Bank under this Agreement or under any of the other Financing Agreements shall be
made by appropriate debits to account no. 7024079779 of the Company with Bank. Bank may in its sole discretion
elect to bill any one or more of Borrowers for such amounts in which case the amount shall be immediately due and
payable with interest thereon as provided herein.
       2.8 Termination of Revolving Commitment . The Revolving Commitment shall be effective until, and shall
terminate on, June 12, 2011 unless sooner terminated by Borrowers or otherwise (the “ Term ”). Upon expiration of the
Term or earlier termination of the Revolving Commitment, including pursuant to Section 9.1 (the “ Termination Date
”), all of the Liabilities shall become immediately due and payable without notice or demand. Notwithstanding any
termination, until all of the Liabilities shall have been fully paid and satisfied, the Revolving Commitment has been
terminated, and all of the Letters of Credit shall have expired, been
                                                          -24-
canceled, terminated or fully cash collateralized (in amounts, on terms and subject to agreements satisfactory to Bank
in its discretion) and all Financing Agreements shall have been terminated, all of Bank’s rights and remedies under this
Agreement and the other Financing Agreements shall survive and Bank shall be entitled to retain its Liens on and to all
existing and future Collateral. All of Bank’s rights and remedies under this Agreement and all of Bank’s Liens shall
survive such termination until all of the Liabilities have been fully paid and satisfied (including the termination,
expiration or full cash collateralization (in amounts, on terms and subject to agreements satisfactory to Bank in its
discretion) of all Liabilities in connection with Letters of Credit, the presentment of all drafts issued or accepted
thereunder and the termination or expiration of all Rate Contracts with Bank and its Affiliates) and all Financing
Agreements shall have been terminated.
       2.9 Loan Types . The Revolving Loan shall consist of either Base Rate Advances or LIBOR Rate Advances
(the “ Loan Types ”), as duly requested by Borrowers’ Agent or any one or more of Borrowers pursuant to this
Agreement. In addition, at any time other than after the occurrence and during the continuance of an Event of Default,
Borrowers’ Agent or any one or more of Borrowers may request the conversion of any portion of the Revolving Loan
from one Loan Type to another pursuant to this Agreement; provided, however, that conversions of all or any portion of
a LIBOR Rate Advance may be made only as of the last date of the Interest Period applicable thereto; provided, further
, that such conversion would not violate any other provisions of this Agreement. LIBOR Rate Advances, and any
conversions to LIBOR Rate Advances, shall be in a minimum aggregate principal amount of $50,000 and in integral
multiples of $10,000 in excess thereof (or such other amount as Bank may agree in its discretion).
       2.10 Continuation of LIBOR Rate Advances; Conversion of Loan Types . Continuation of any LIBOR Rate
Advance or conversion of any portion of the Revolving Loan from one Loan Type to another may be made upon
irrevocable (except in the case of a determination by Bank that the LIBOR Rate Advances are unavailable due to
illegality or increased costs) written notice in the form of Exhibit 2.10 given to Bank by Borrowers’ Agent or any one
or more of Borrowers no later than 10:00 a.m. (Chicago time) three (3) Business Days prior to the commencement of
the Interest Period specified in such notice, which notice shall specify, as to conversions, the Designated Portion
relating thereto, as to new LIBOR Rate Advances, the requested principal amount thereof, and in any case the
applicable Interest Period and the first day of the Interest Period, which shall be a Business Day. In the event that Base
Rate Advances are to be converted to LIBOR Rate Advances, such conversion shall be automatic on the date specified
in such notice. LIBOR Rate Advances shall automatically convert to Base Rate Advances at the end of the applicable
Interest Period unless Borrowers’ Agent or any one or more of Borrowers gives the requisite notice in accordance with
the procedures set forth above to continue the same as LIBOR Rate Advances. Borrowers shall not be entitled to elect
any Interest Period with respect to a LIBOR Rate Advance if the provisions of this Agreement would require the
repayment or prepayment of any portion of such LIBOR Rate Advance prior to the end of such Interest Period.
      2.11 Determination of Interest Period . By giving notice to Bank as set forth in Section 2.10 above with
respect to a borrowing of a LIBOR Rate Advance, or with respect to a conversion into or continuation of a LIBOR Rate
Advance, Borrowers’ Agent or any one or more of Borrowers shall, subject to the other provisions of this Section 2 ,
specify the applicable
                                                          -25-
Interest Period. The determination of the Interest Period shall be subject to the following provisions:
          (a) the initial Interest Period for any LIBOR Rate Advance shall commence on the date of such LIBOR
Rate Advance which shall be a Business Day and each Interest Period (if any) occurring thereafter for such LIBOR
Rate Advance shall commence on the day on which the next preceding Interest Period for such LIBOR Rate Advance
expires;
            (b) if any Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period
shall expire on the next succeeding Business Day; provided, however, that if any such Interest Period would otherwise
expire on a day that is after the last Business Day of the last month of such Interest Period, such Interest Period shall
expire on the next preceding Business Day;
             (c) there shall be no more than four (4) Interest Periods in the aggregate in effect at any one time; and
             (d) no Interest Period may be selected which extends beyond the Term.
      2.12    Additional Costs, Etc. With Respect to LIBOR Rate Advances .
             (a) If, in the reasonable determination of Bank, any applicable “law,” which expression, as used in this
Section 2 , includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by
any governmental or other regulatory body or official charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued
to Bank or any Lending Affiliate by any central bank or other fiscal, monetary, or other authority (whether or not
having the force of law) adopted, becoming effective, or any change in the interpretation or administration thereof, or
compliance by Bank or any Lending Affiliate maintaining any LIBOR Rate Advance, in each case after the date hereof,
shall in the case of LIBOR Rate Advances:
                 (i) subject Bank or any Lending Affiliate to any tax, levy, impost, duty, charge, fee, deduction or
withholding of any nature with respect to LIBOR Rate Advances (other than taxes imposed on or measured by the
overall net income of Bank), or
                 (ii) change the taxation of payments to Bank of principal or interest on or any other amount relating
to any LIBOR Rate Advances (other than taxes imposed on or measured by the overall net income or capital of Bank
and doing business and franchise taxes), or
                    (iii) impose or increase or render applicable any special deposit, assessment, insurance charge,
reserve or liquidity or other similar requirement (whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans by Bank or any Lending Affiliate, or
              (iv) impose on Bank or any Lending Affiliate any other conditions or requirements with respect to
LIBOR Rate Advances, and the result of any of the foregoing is:
                                                           -26-
                 (x) to increase the cost to Bank of making, funding or maintaining its LIBOR Rate Advances, or
                (y) to reduce the amount of principal, interest or other amount payable to Bank hereunder on
           account of LIBOR Rate Advances, or
                (z) to require Bank to make any payment or to forego any interest or other sum payable under this
           Agreement,
then, and in each such case, Borrowers jointly and severally agree to, upon demand made by Bank at any time and from
time to time and as often as the occasion therefor may arise, pay to Bank such additional amounts as will be sufficient
to compensate Bank (including lost profits) for such additional cost, reduction, payment or foregone interest or other
sum. The foregoing shall not be deemed to apply to any change in the Reserve Rate applied in the calculation of the
LIBOR Rate.
             (b) Bank shall not in any event be responsible to any Obligor in any way if Bank is not able for any
reason beyond its control to quote a LIBOR Rate with respect to any proposed Interest Period. If, on any proposed date
of determination of a LIBOR Rate, Bank shall reasonably determine (which determination shall be conclusive and
binding on each Obligor) that it is unable to determine the requested LIBOR Rate with respect to any proposed Interest
Period, Bank shall promptly notify Borrowers’ Agent of such determination. In such event, any then pending notice
requesting the making of a LIBOR Rate Advance, or conversion of any portion of a Loan to a LIBOR Rate Advance,
shall be deemed and shall constitute a request for the making of a Base Rate Advance or the conversion of such portion
of the applicable Loan to a Base Rate Advance, as the case may be.
             (c) If Bank reasonably determines that either maintenance of a LIBOR Rate Advance would violate any
applicable law, or that deposits of a type and maturity appropriate to match fund any LIBOR Rate Advance do not
accurately reflect the cost of making or maintaining such a LIBOR Rate Advance, then Bank shall suspend the
availability of proposed LIBOR Rate Advances for the affected Interest Period so long as any such condition exists,
and Borrowers jointly and severally agree to immediately repay all affected LIBOR Rate Advances outstanding upon
notice to Borrowers’ Agent from Bank to do so; provided, however, that if otherwise permitted under this Agreement,
Borrowers may reborrow, as a Base Rate Advance, an amount equal to the principal amount of all such affected
LIBOR Rate Advances so repaid.
       2.13 Indemnification for Losses . Without limiting any of the other provisions of this Agreement, Borrowers
jointly and severally agree to, on demand by Bank, at any time and from time to time and as often as the occasion
therefor may arise, indemnify Bank against any losses, costs or expenses which Bank may at any time or from time to
time sustain or incur with respect to LIBOR Rate Advances as a consequence of:
           (a) the failure to borrow any LIBOR Rate Advance on the date of borrowing designated by Borrowers’
Agent or any one or more of Borrowers, or
            (b) the failure by Borrowers to pay, punctually on the due date thereof, any amount payable by Borrowers
under this Agreement, or
                                                         -27-
            (c) the accelerated payment of Borrowers’ obligations under this Agreement as a result of a Default, or
            (d) any voluntary repayment or prepayment of any principal of any LIBOR Rate Advance, or the
conversion of such LIBOR Rate Advance, on a date other than the last day of the Interest Period relating to the
principal so repaid or prepaid or so converted.
            Such losses, costs or expenses will include, but will not be limited to, the reimbursement for any loss,
expense or cost in liquidating or employing deposits acquired to fund any affected LIBOR Rate Advance.
      2.14 Payments to be Free of Deductions . All payments by any Obligor on the Liabilities (including LIBOR
Rate Advances) shall be made without setoff or counterclaim, and free and clear of and without deduction for any
taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of
any nature now or hereafter imposed or levied by any country or any political subdivision thereof or taxing or other
authority therein unless an Obligor is required by law to make such deduction or withholding. If any such obligation is
imposed upon any Obligor with respect to any amount payable by it hereunder, Borrowers jointly and severally agree
to pay to Bank on the date on which such amount becomes due and payable hereunder and in United States Dollars,
such additional amount as shall be necessary to enable Bank to receive the same net amount which it would have
received on such due date had no such obligation been imposed. If any Obligor shall be required by law to make such
deduction or withholding it will deliver to Bank tax receipts or other appropriate evidence of payment.
       2.15 Capital Adequacy . If, after the date hereof, either (a) any Change in Law or (b) compliance by Bank
with any guideline or request from any central bank or other Governmental Authority (whether or not having the force
of law) (i) affects or would affect the amount of capital required or expected to be maintained by Bank or any Lending
Affiliate and Bank reasonably determines that the amount of such capital is increased by or based upon the existence of
the LIBOR Rate Advances then, upon notice and demand to Borrowers’ Agent by Bank, Borrowers jointly and
severally agree to immediately pay to Bank, from time to time as specified by Bank, additional amounts sufficient to
compensate Bank in light of such circumstances, to the extent that Bank reasonably determines such increase in capital
to be allocable to the existence of LIBOR Rate Advances or (ii) has or would have the effect of reducing the rate of
return on the capital or assets of Bank or any Person controlling Bank as a consequence of, as determined by Bank in
its discretion, the existence of Bank’s commitments or obligations under this Agreement or any of the other Financing
Agreements, then, upon demand by Bank, Borrowers jointly and severally agree to immediately pay to Bank, from time
to time as specified by Bank, additional amounts sufficient to compensate Bank in light of such circumstances.
      2.16 Certificate . A certificate signed by an officer of Bank, setting forth any additional amount required to be
paid by Obligors to Bank under any provision of Sections 2.12 through 2.15 and the computations made by Bank to
determine such additional amount, shall be submitted by Bank to Obligors in connection with each demand made at
any time by Bank upon Obligors under any of such provisions. Such certificate, in the absence of manifest error, shall
                                                         -28-
be conclusive as to the additional amount owed. Failure or delay on the part of Bank to demand compensation pursuant
to Sections 2.12 through 2.15 shall not constitute a waiver of Bank’s right to demand that compensation.
3.    CONDITIONS OF ADVANCES .
           Notwithstanding any other provisions contained in this Agreement, the making of any Loan or advance and
the issuance of any Letter of Credit (each, a “Credit Extension”), including the continuation of any LIBOR Rate
Advance from one Interest Period to another or conversion of one Loan Type into another Loan Type, shall be
conditioned upon the following:
       3.1 Borrowers’ Written Request—Revolving Loan and Letters of Credit . (a) As to any LIBOR Rate Advance
(including the continuation of any LIBOR Rate Advance and the conversion of a Base Rate Advance to a LIBOR Rate
Advance), Bank shall have received written notice of the type required by Section 2.10 prior to the time specified in
Section 2.10 , (b) as to any Base Rate Advance, Bank shall have received by 1:00 p.m. (Chicago time) on the date such
advance is to be made a written request (or telephonic request promptly confirmed in writing) from Borrowers’ Agent
or a Borrower for such an advance specifying the principal amount thereof, and (c) with respect to a request by
Borrowers’ Agent or a Borrower for a Letter of Credit to be issued hereunder, Bank shall have received not later than
five (5) Business Days prior to the Business Day the Letter of Credit is to be issued, a written request therefor from a
Responsible Officer of Borrowers’ Agent or such Borrower in a specific amount accompanied by Bank’s form of
application and reimbursement agreement, duly completed and executed by such Borrower or Borrowers’ Agent. In
addition, prior to making any Credit Extension, Bank shall have received copies of all documents required to have been
delivered to Bank pursuant to this Agreement. Advances under the Revolving Loan may be made upon irrevocable
written notice in the form of Exhibit 3.1 given to Bank by Borrowers’ Agent or a Borrower for Base Rate Advances, no
later than 1:00 p.m. (Chicago time) on the date such advance is to be made, and for LIBOR Rate Advances, no later
than 1:00 p.m. (Chicago time) three (3) Business Days prior to the commencement of the Interest Period specified
therein.
     3.2 No Event of Default . There shall not have occurred any Event of Default that is then continuing, nor shall
any Event of Default occur after giving effect to such Credit Extension.
       3.3 Representations and Warranties True and Correct . The representations and warranties of each Obligor
contained in this Agreement shall be true and correct in all material respects (or, in the case of any such representation
or warranty that is qualified as to materiality or Material Adverse Effect, incorrect in any respect) on and as of the date
of (a) any Credit Extension, and (b) each notice given pursuant to Section 2.10 , as though made on and as of such date
(except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be
true and correct in all material respects as of such earlier date).
      3.4 Regulatory Information . Bank shall have received all documentation and other information required by
bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations,
including the USA Patriot Act, as Bank shall have reasonably requested.
                                                           -29-
     3.5 Conditions to Initial Extension of Credit . Prior to the initial Credit Extension, each of the conditions
precedent set forth on annexed Exhibit 3.5 shall have been satisfied.
       3.6 Other Requirements . Bank shall have received, in form and substance reasonably satisfactory to Bank, all
certificates, orders, authorities, consents, affidavits, applications, schedules, opinions, instruments, security agreements,
financing statements, mortgages and other documents which are provided for hereunder or under the Financing
Agreements, or which Bank may at any time reasonably request.
Each request by Borrowers’ Agent or one or more of Borrowers for a Credit Extension shall be deemed to be a
representation and warranty that all of the conditions set forth in Sections 3.2 and 3.3 have been satisfied on and as of
the date of such Credit Extension. Bank shall be entitled to rely and act upon any notices (including telephonic requests
for a Credit Extension) purportedly given by or on behalf of Borrowers’ Agent or any or all Borrowers even if (i) such
notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other
form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation
thereof. Borrowers jointly and severally agree to indemnify Bank from all losses, costs, expenses and liabilities
resulting from the reliance by such Person on each notice purportedly given by or on behalf of Borrowers’ Agent or any
one or more of Borrowers. All telephonic notices to and other telephonic communications with Bank may be recorded
by Bank, and each of the parties hereto hereby consents to such recording.
4.    REPRESENTATIONS AND WARRANTIES .
            Each Obligor jointly and severally represents and warrants with the other Obligors that as of the date of the
execution of this Agreement, as of the date of each Credit Extension, and continuing so long as any Liabilities remain
outstanding, and (even if there shall be no Liabilities outstanding) so long as this Agreement remains in effect as
follows:
      4.1 Existence and Power . Each Obligor and Subsidiary: (a) is a corporation, limited liability company or
limited partnership, as applicable, duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, as applicable; (b) has the corporate, limited liability company or limited
partnership, as applicable, power and authority and all governmental licenses, authorizations, consents and approvals to
own its assets, carry on its business and execute, deliver, and perform its obligations under, the Financing Agreements
to which it is a party; (c) is duly qualified as a foreign corporation, limited liability company or limited partnership, as
applicable, and licensed and in good standing, under the laws of each jurisdiction where its ownership, lease or
operation of Property or the conduct of its business requires such qualification or license; and (d) is in compliance with
all Requirements of Law; except, in each case referred to in clauses (c) and (d), to the extent that the failure to do so
could not reasonably be expected to have a Material Adverse Effect.
      4.2 Authorization; No Contravention . (a) The execution, delivery and performance by each Obligor of this
Agreement, and each Obligor and Subsidiary of any other Financing Agreement to which such Person is party, have
been duly authorized by all necessary action, and do not: (i) contravene the terms of any of such Person’s Organization
Documents; (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, any
document
                                                            -30-
evidencing any Contractual Obligation (other than the creation of Liens under the Financing Agreements and, on or
before the thirtieth (30th) day after the Closing Date, any conflict with the penultimate sentence of Section 10.07 of that
certain Shopping Center Lease dated as of September 18, 2002 between Tysons Corner LLC, as landlord, and the
Company, as assignee of Elephant Tea Corporation) to which such Person is a party or any order, injunction, writ or
decree of any Governmental Authority to which such Person or its Property is subject; or (iii) violate any Requirement
of Law.
             (b) Schedule 4.2 sets forth the authorized Equity Interests of each Obligor and its Subsidiaries. All
issued and outstanding Equity Interests of each Obligor and its Subsidiaries are duly authorized and validly issued,
fully paid, non-assessable and free and clear of all Liens other than, with respect to the Equity Interests of each Obligor
and its Subsidiaries, those in favor of Bank, and such securities were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. As of the Closing Date, all of the issued and outstanding Equity
Interests of each Obligor and each Subsidiary are owned by the Persons and in the amounts set forth in Schedule 4.2 .
Except as set forth in Schedule 4.2 , there are no pre-emptive or other outstanding rights, options, warrants, conversion
rights or other similar agreements or understandings for the purchase or acquisition of any shares of Equity Interests of
any such Person.
      4.3 Governmental Authorization . Except as set forth on Schedule 4.3 , no approval, consent, authorization, or
other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, such Obligor or any of its Subsidiaries of this
Agreement, or any other Financing Agreement except (a) for recordings and filings in connection with the Liens
granted to Bank under the Collateral Documents, and (b) those obtained or made on or prior to the Closing Date. Each
Obligor and Subsidiary is in compliance with all laws, orders, regulations and ordinances of all Governmental
Authorities relating to its business, operations and assets, except for laws, orders, regulations and ordinances the
violation of which could not, in the aggregate, have a Material Adverse Effect.
      4.4 Binding Effect . This Agreement and each other Financing Agreement to which such Obligor or any of its
Subsidiaries is a party constitute the legal, valid and binding obligations of such Obligor and each Subsidiary that is a
party thereto, enforceable against such Person in accordance with their respective terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors’ rights generally
or by equitable principles relating to enforceability.
       4.5 Litigation . Except as specifically disclosed in Schedule 4.5 , there are no actions, suits, proceedings,
claims or disputes pending, or to the knowledge of such Obligor, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against such Obligor, its Subsidiaries or any of their respective
Properties which: (a) purport to affect or pertain to this Agreement, any other Financing Agreement, or any of the
transactions contemplated hereby or thereby; or (b) could reasonably be expected to result in equitable relief or
monetary judgment(s) against any Obligor or Subsidiary, individually or in the aggregate, in excess of $50,000. No
injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain
                                                           -31-
the execution, delivery or performance of this Agreement, or any other Financing Agreement, or directing that the
transactions provided for herein or therein not be consummated as herein or therein provided.
      4.6 No Default . No Event of Default exists or would result from the incurring of any Liabilities by such
Obligor or the grant or perfection of Bank’s Liens on the Collateral. Neither such Obligor nor any Subsidiary is in
default under or with respect to any Contractual Obligation in any respect which, individually or together with all such
defaults, could reasonably be expected to have a Material Adverse Effect or that could, if such default had occurred
after the Closing Date, create an Event of Default. No Obligor knows of any dispute regarding any Contractual
Obligation that could reasonably be expected to have a Material Adverse Effect.
      4.7 ERISA Compliance . Schedule 4.7 lists all Qualified Plans. None of Obligors and their Subsidiaries
participates or has participated in, or has any liability, including contingent liability, to, any Multiemployer Plans. Each
of Obligors and their Subsidiaries is in compliance with all requirements of each Qualified Plan, and each Qualified
Plan complies, and is operated in compliance, with all applicable provisions of law. No Obligor is aware, after due
inquiry, of any item of non-compliance that could potentially result in the loss of a Qualified Plan’s qualified or
tax-exempt status, or give rise to a material excise tax or other penalty imposed by a Governmental Authority. No
proceeding, claim, lawsuit and/or investigation is pending concerning any Qualified Plan. All material contributions
have been and will be made in accordance with the provisions of each Qualified Plan and, if applicable, each
Multiemployer Plan, and with respect to any ERISA Affiliate, there are, and have been, no material Unfunded Pension
Liabilities or Withdrawal Liabilities. No ERISA Event has occurred or could reasonably be expected to occur with
respect to any Qualified Plan or, if applicable, any Multiemployer Plan. Each ERISA Affiliate currently complies and
has complied with the notice and continuation coverage requirements of Section 4980B of the Code.
      4.8 Use of Proceeds; Margin Regulations . The proceeds of the Loans are intended to be and shall be used
solely for the purposes set forth in and permitted by Section 5.10 , and are intended to be and shall be used in
compliance with this Agreement. Neither such Obligor nor any Subsidiary is generally engaged in the business of
purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock.
Proceeds of the Loans shall not be used for the purpose of purchasing or carrying Margin Stock.
      4.9 Title to Properties . Such Obligor and each of its Subsidiaries have (i) good record and marketable title in
fee simple to, or valid leasehold interests in, all real Property necessary or used in the ordinary conduct of their
respective businesses, except for Permitted Liens and (ii) good title to all of its other material properties and assets
reflected in the most recent financial statements referred to in Section 5.1(b) (except as sold or otherwise disposed of
since the date thereof in the Ordinary Course of Business), in each case free and clear of Liens other than Permitted
Liens. No Property of any Obligor or Subsidiary is subject to Liens, other than Permitted Liens. Schedule 4.9 lists, as of
the Closing Date, all real property of each Obligor and Subsidiary, indicating in each case the identity of the owner, the
address of the property, the nature of the use of the premises, and whether such interest is a leasehold or fee owning
interest.
                                                           -32-
       4.10 Taxes . Each Obligor and Subsidiary has filed all Federal and other material tax returns and reports
required to be filed, and have paid all Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their Properties, income or assets otherwise due and payable, except those
which are being contested in good faith by appropriate proceedings diligently prosecuted and for which adequate
reserves have been provided in accordance with GAAP. Such returns accurately reflect in all material respects all
liability for taxes of each Obligor and Subsidiary for the periods covered thereby. As of the Closing Date, there is no
ongoing audit or examination or, to the knowledge of any Obligor, other investigation by any Governmental Authority
of the tax liability of any Obligor or Subsidiary, and there is no material unresolved claim by any Governmental
Authority concerning the tax liability of any Obligor or Subsidiary for any period for which tax returns have been or
were required to have been filed, other than unsecured claims for which adequate reserves have been established in
accordance with GAAP. As of the Closing Date, no Obligor or Subsidiary has waived or extended or has been
requested to waive or extend the statute of limitations relating to the payment of any taxes. There is no proposed tax
assessment against such Obligor or any of its Subsidiaries which, if the assessment was made, could reasonably be
expected to have a Material Adverse Effect.
      4.11 Financial Condition . Obligors’ and their Subsidiaries’ audited balance sheet dated February 3, 2008 and
the related audited statements of income, changes in partner’s capital and cash flows for the Fiscal Year then ended
were prepared in accordance with GAAP consistently applied and present fairly Obligors’ and their Subsidiaries’
financial condition as of the date thereof and results of income or operations and cash flows for the periods covered
thereby. Obligors’ and their Subsidiaries’ balance sheets dated as of April 30, 2008 and the related statements of
income, changes in partner’s capital and cash flows for the three (3) Fiscal Month period then ended present fairly
Obligors’ and their Subsidiaries’ financial condition as of the date thereof and results of income or operations and cash
flows for the period covered thereby. Except as fully reflected in the most recent financial statements referred to above
and the notes thereto, Obligors are not aware of any material liabilities or obligations of any nature whatsoever
(whether absolute, contingent or otherwise and whether or not due) that are required in accordance with GAAP to be
reflected in such financial statements and that are not so reflected. Since February 3, 2008, there has been no Material
Adverse Effect and no Obligor or Subsidiary has entered into or consummated any transaction not in the Ordinary
Course of Business, other than those contemplated by the Financing Agreements, or as otherwise consented to by Bank.
Since the Closing Date, there has been no Material Adverse Effect and, to the knowledge of such Obligor, there exists
no event, condition or state of facts that could reasonably be expected to result in a Material Adverse Effect. No
Obligor or Subsidiary has any Debt (other than Debt permitted pursuant to Section 6.2) or any Contingent Obligations
(other than Contingent Obligations permitted pursuant to Section 6.8 ).
      4.12 Environmental Matters . The operations of such Obligor and each of its Subsidiaries comply in all
respects with all Environmental Laws, except such non-compliance that could not (if enforced in accordance with
applicable law) reasonably be expected to result in, either individually or in the aggregate, a Material Adverse Effect.
Such Obligor and each of its Subsidiaries have obtained all agreements with Governmental Authorities, licenses,
permits, authorizations and registrations required under any Environmental Law (“ Environmental Permits ”) and
necessary for their respective Ordinary Course of Business, all such
                                                          -33-
Environmental Permits are in good standing, such Obligor and each of its Subsidiaries are in compliance with all
material terms and conditions of such Environmental Permits, except where the failure to obtain, to maintain in good
standing, or to be in compliance with such Environmental Permits could not reasonably be expected to result in
material liability to such Obligor or any of its Subsidiaries and could not reasonably be expected to result in, either
individually or in the aggregate, a Material Adverse Effect. None of such Obligor, any of its Subsidiaries or any of their
respective Property or operations, is subject to any outstanding written order from or agreement with any Governmental
Authority, nor subject to any judicial or docketed administrative proceeding, respecting any Environmental Law,
Environmental Claim or Hazardous Material. There are no Hazardous Materials or other conditions or circumstances
existing with respect to any Property owned, leased or operated by any Obligor or Subsidiary, or, to such Obligor’s
knowledge, arising from operations thereon prior to the Closing Date, that could reasonably be expected to result, either
individually or in the aggregate, in a Material Adverse Effect. In addition, neither such Obligor nor any Subsidiary has
any underground storage tanks that are (a) not properly registered or permitted under applicable Environmental Laws or
(b) to such Obligor’s knowledge, leaking or releasing Hazardous Materials.
       4.13 Collateral Documents and Related Documents . Borrower has heretofore furnished to Bank true and
complete copies of the Related Documents, in each case together with all schedules and exhibits referred to therein or
delivered pursuant thereto and all amendments, modifications and waivers relating thereto. Each Related Document is
in full force and effect and no Obligor or Subsidiary (nor, to the knowledge of any Obligor, any other party thereto) is
in default thereunder or in breach thereof. All representations and warranties of such Obligor, any of its Subsidiaries or
any other party (other than Bank) to any Collateral Document or any Related Document contained in any Collateral
Document or any Related Document are true and correct in all material respects (except to the extent such
representations and warranties expressly refer to a specific date, in which case they shall be true and correct in all
material respects as of such date). The provisions of each of the Collateral Documents (whether executed and delivered
prior to or on the Closing Date or thereafter) are and will be effective to create in favor of Bank a valid and enforceable
security interest in and Lien upon all right, title and interest of each Obligor and Subsidiary that is a party thereto in and
to the Collateral purported to be pledged by it thereunder and described therein, and upon (i) the initial extension of
credit hereunder, (ii) the filing of appropriately completed Uniform Commercial Code financing statements and
continuations thereof in the jurisdictions specified therein, (iii) if applicable, the filing of appropriately completed
short-form assignments in the U.S. Patent and Trademark Office and the U.S. Copyright Office, as applicable, and
(iv) the possession by Bank of any certificates evidencing the securities pledged thereby, duly endorsed or
accompanied by duly executed stock powers, such security interest and Lien shall constitute a fully perfected first
priority security interest in and Lien upon such right, title and interest of each Obligor and Subsidiary in and to such
Collateral, to the extent that such security interest and Lien can be perfected by such filings, actions and possession,
subject only to Permitted Liens.
      4.14 Regulated Entities . None of such Obligor, any Person controlling such Obligor, or any Subsidiary of
such Obligor, is (a) an “investment company” or required to be registered as an “investment company” within the
meaning of the Investment Company Act of 1940, or is subject to regulation thereunder; or (b) subject to regulation
under the Federal Power Act, the
                                                            -34-
Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its
ability to incur Debt.
      4.15 Labor Relations . There are no strikes, lockouts or other labor disputes against such Obligor or any of its
Subsidiaries, or, to such Obligor’s knowledge, threatened against or affecting such Obligor or any of its Subsidiaries, in
any case that could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect
and no significant unfair labor practice complaint is pending against such Obligor or any of its Subsidiaries or, to the
knowledge of such Obligor, threatened against any of them before any Governmental Authority in any case which
could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. Such Obligor
has at all times operated its business in compliance with all applicable provisions of the federal Fair Labor Standards
Act, as amended.
       4.16 Copyrights, Patents, Trademarks and Licenses, Etc. Schedule 4.16 identifies all United States and
foreign patents, trademarks, service marks, trade names and copyrights, and all registrations and applications for
registration thereof and all licenses thereof (other than rights arising from the purchase or license of “off the shelf” or
“mass markets” products with a standard end user license agreement) owned or held by such Obligor or any of its
Subsidiaries on the Closing Date, and identifies the jurisdictions in which such registrations and applications have been
filed. Except as otherwise disclosed in Schedule 4.16 , as of the Closing Date, such Obligor and its Subsidiaries are the
sole beneficial owners of, or have the right to use, free from any Liens or other restrictions, claims, rights,
encumbrances or burdens, the intellectual property identified on Schedule 4.16 and all other processes, designs,
formulas, computer programs, computer software packages, trade secrets, inventions, product manufacturing
instructions, technology, research and development, know-how and all other intellectual property that are necessary for
the operation of such Obligor’s and its Subsidiaries’ businesses as being operated on the Closing Date. Each patent,
trademark, service mark, trade name, copyright and license listed on Schedule 4.16 is in full force and effect except to
the extent the failure to be in effect will not and could not reasonably be expected to have a Material Adverse Effect.
Except as set forth in Schedule 4.16 , to the knowledge of such Obligor, as of the Closing Date (a) none of the present
or contemplated products or operations of such Obligor or its Subsidiaries infringes any patent, trademark, service
mark, trade name, copyright, license of intellectual property or other right owned by any other Person, and (b) there is
no pending or threatened claim or litigation against or affecting such Obligor or any of its Subsidiaries contesting the
right of any of them to manufacture, process, sell or use any such product or to engage in any such operation except for
claims and/or litigation which will not and could not reasonably be expected to have a Material Adverse Effect. None
of the trademark registrations set forth on Schedule 4.16 is an “intent-to-use” registration.
      4.17 Subsidiaries . Holdings’ only direct Subsidiaries are the Company, TI and ST, and Holdings has no other
Subsidiaries or equity investments in any other Person. The Company’s only Subsidiary is TFC, and the Company has
no Subsidiaries or equity investments in any other Person. None of TFC, TI nor ST has any Subsidiaries or equity
investments in any Person.
     4.18     Brokers’ Fees; Transaction Fees . Except as specifically disclosed in Schedule 4.18 , neither such
Obligor nor any Subsidiary has any obligation to any Person in respect of any
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finder’s, broker’s or investment banker’s fee in connection with the transactions contemplated hereby.
      4.19    Insurance . Each Obligor and Subsidiary, and each of their respective Properties, is insured with
financially sound and reputable insurance companies which are not Affiliates of such Obligor or such Subsidiary, in
such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in
similar businesses and owning similar Properties in localities where such Obligor or such Subsidiary operates. A true
and complete listing of such insurance, including issuers, coverages and deductibles, has been provided to Bank.
      4.20    Full Disclosure . None of the representations or warranties made by such Obligor or any of its
Subsidiaries in the Financing Agreements as of the date such representations and warranties were made or deemed
made, and none of the statements contained in each exhibit, report, statement or certificate furnished by or on behalf of
such Obligor or any of its Subsidiaries in connection with the Financing Agreements (including the offering and
disclosure materials, if any, delivered by or on behalf of any Obligor or Subsidiary to Bank prior to the Closing Date),
contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they were made, not misleading as of the
time when made or delivered in light of the circumstances at the time made; provided, that with respect to any
projections delivered to Bank, the Obligors represent only that such information was prepared in good faith based upon
assumptions believed to be fair and reasonable at the time in light of current market conditions and that such
projections are not to be viewed as facts, and that the actual results during such period or periods covered by any such
projections may differ significantly from projected results.
      4.21 Collateral . Such Obligor is the owner of its respective Collateral, free from any right or claim of any
Person or any Lien, except for Permitted Liens. All of such Obligor’s Collateral is and will continue to be owned by
such Obligor, except as provided in Section 6.3 . Such Obligor holds no commercial tort claim except as indicated on
the applicable Perfection Certificate. None of the Collateral constitutes, or is the proceeds of, “farm products” as
defined in Section 9-102(a)(34) of the UCC. None of the Account Debtors or other Persons obligated on any of the
Collateral is a Governmental Authority covered by the Claims Act or like federal, state or local statute or rule in respect
of such Collateral. The applicable Perfection Certificate accurately sets forth such Obligor’s places of business and its
chief executive office and all information set forth on the applicable Perfection Certificate pertaining to such Obligor is
accurate and complete in all material respects. There has been no change in any information provided in any Perfection
Certificate since the date on which it was executed by such Obligor. The Collateral is located at the locations set forth
on Schedule 4.21 (as amended from time to time pursuant to Section 5.13 ), except for Inventory in transit. There are
no statutory or regulatory restrictions, prohibitions or limitations on the granting to Bank of a security interest or other
Lien or in any of the Collateral pursuant to this Agreement and the other Financing Agreements or (except for the
provisions of the Claims Act and applicable securities laws) on the exercise by Bank of its rights and remedies
hereunder (including any foreclosure upon or collection of the Collateral), and there are no contractual restrictions on
any such Person’s ability so to grant such Lien and security interest.
                                                           -36-
      4.22 Solvency . Before and after giving effect to the transactions to occur on or before the Closing Date and
each Loan or Advance, no Obligor or Subsidiary (a) is “insolvent” as that term is defined in Section 101(32) of the
Bankruptcy Code (11 U.S.C. § 101(32)), Section 2 of the Uniform Fraudulent Transfer Act (“ UFTA ”) or Section 2 of
the Uniform Fraudulent Conveyance Act (“ UFCA ”), (b) has “unreasonably small capital,” as that term is used in
Section 548 (a)(2)(B)(ii) of the Bankruptcy Code or Section 5 of the UFCA, (c) is engaged or about to engage in a
business or a transaction for which its remaining Property is “unreasonably small” in relation to such business or
transaction as that term is used in Section 4 of the UFTA, (d) is unable to pay its debts as they mature or become due,
within the meaning of Section 548(a)(2)(B) (iii) of the Bankruptcy Code, Section 4 of the UFTA and Section 6 of the
UFCA, and (e) now owns assets having a value both at “fair valuation” and at “present fair salable value” less than the
amount required to pay such Person’s “debts” as such terms are used in Section 2 of the UFTA and Section 2 of the
UFCA. No Obligor or Subsidiary shall be rendered insolvent (as defined above) by the execution and delivery of this
Agreement or any of the other Financing Agreements or by the transactions contemplated hereunder or thereunder.
      4.23     Legal Status . (a) Such Obligor’s exact legal name is that indicated on the applicable Perfection
Certificate and on the signature page of this Agreement, and (b) such Obligor is an organization of the type, and is
organized in the jurisdiction, and has the federal tax identification number and (if applicable) organizational
identification set forth in the applicable Perfection Certificate.
      4.24 Other Corporate Names . Except as disclosed on the applicable Perfection Certificate, such Obligor has
not used in the past five (5) years any corporate or fictitious name other than the name shown for such Obligor in the
preamble to this Agreement.
      4.25 Anti-Terrorism Laws . No Obligor, Subsidiary or, to such Obligor’s knowledge, Affiliate, nor, to such
Obligor’s knowledge, any brokers or other agents of any such Person acting or benefiting in any capacity in connection
with the Loans hereunder, (a) is in violation of any laws of the United States or any state thereof relating to terrorism or
money laundering (“ Anti-Terrorism Laws ”), including Executive Order No. 13224 on Terrorist Financing, effective
September 24, 2001 (the “ Executive Order ”), and the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, signed into law October 26, 2001
(the “ USA Patriot Act ”); (b) is a Person (i) that is listed in the annex to, or is otherwise subject to the provisions of,
the Executive Order, (ii) owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to,
or is otherwise subject to the provisions of the Executive Order, (iii) with which Bank is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law, (iv) that commits, threatens or conspires to commit
or supports “terrorism” as defined in the Executive Order, or (v) that is named as a “specially designated national and
blocked person” on the most current list published by the USA Treasury Department Office of Foreign Assets Control
(“ OFAC ”) at its official website or any replacement website or other replacement official publication of such list;
(c) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the
benefit of any Person described in clause (b) above; (d) deals in, or otherwise engages in any transaction relating to,
any property or interests in property blocked pursuant to the Executive Order; or (e) engages in or conspires to engage
in
                                                           -37-
any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in any Anti-Terrorism Law.
       4.26 Material Contracts . Schedule 4.26 lists, as of the Closing Date, each agreement to which any Obligor or
Subsidiary is a party, by which any Obligor or Subsidiary or its properties is bound or to which any Obligor or
Subsidiary is subject, in each instance the breach or termination of which could reasonably be expected to impose any
material liability or material additional cost on any Obligor or Subsidiary or any Material Adverse Effect (collectively,
“ Material Contracts ”), and also indicates the parties thereto. As of the Closing Date and after giving effect to the
Transactions, (i) each Material Contract is in full force and effect and is enforceable by each Obligor and Subsidiary
that is a party thereto in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors’ rights generally, by general or equitable principles
or by principles of good faith and fair dealing, and (ii) no Obligor or Subsidiary or, to the knowledge of Obligors, any
other party thereto is in breach of or default under any Material Contract in any material respect or has given notice of
termination or cancellation of any Material Contract.
     4.27 Deposit Accounts . Schedule 4.27 lists, as of the Closing Date, all deposit accounts maintained by any
Obligor or Subsidiary at any bank or other financial institution located in the United States, and lists in each case the
name in which the account is held, the name of the depository institution, the type of account and the account number.
     4.28 Survival . All representations and warranties contained in this Agreement or any of the other Financing
Agreements shall survive the execution and delivery of this Agreement.

5.    AFFIRMATIVE COVENANTS .
           Each Obligor jointly and severally with the other Obligors covenants and agrees that, so long as Bank shall
have any Revolving Commitment hereunder, or any Liability shall remain unpaid or unsatisfied, unless Bank waives
compliance in writing:
      5.1   Financial Statements .
            (a) Each Obligor shall maintain, and shall cause each of its Subsidiaries to maintain, a system of
accounting established and administered in accordance with sound business practices to permit the preparation of
financial statements in conformity with GAAP; provided, however, that monthly financial statements shall not be
required to have footnote disclosure and are subject to normal year-end adjustments.
            (b) Each Obligor shall deliver to Bank in form and detail reasonably satisfactory to Bank:
            (i) as soon as available, but not later than 120 days after the end of each Fiscal Year, a copy of the audited
      consolidated and consolidating balance sheets of Obligors and each of their Subsidiaries as at the end of such
      Fiscal Year and the related consolidated and consolidating statements of income or operations, equityholders’
      equity and cash flows for such Fiscal Year, setting forth in each case in comparative form, the figures for the
      previous Fiscal Year (if any), and accompanied by the opinion of any
                                                          -38-
      nationally or regionally recognized independent public accounting firm reasonably acceptable to Bank which
      report shall state that such consolidated and consolidating financial statements present fairly in all material
      respects the financial position for the periods indicated in conformity with GAAP applied on a basis consistent
      with prior years. Such opinion shall not be qualified or limited because of a restricted or limited examination by
      such accountant, beyond an accountant’s standard limitation for an audit conducted in accordance with GAAP;
      and
            (ii) as soon as available, but not later than 30 days after the end of each Fiscal Month, a copy of the
      unaudited, consolidated and consolidating balance sheets of Obligors and each of their Subsidiaries as of the end
      of such Fiscal Month, and consolidated and consolidating statements of income, equityholders’ equity and cash
      flows as of the end of such Fiscal Month and for the portion of the Fiscal Year then ended, setting forth in each
      case comparisons to Obligors’ most recent projections and comparisons to the corresponding periods in the
      preceding Fiscal Year, all certified on behalf of Obligors by an appropriate Responsible Officer as being
      complete and correct and fairly presenting in all material respects, in accordance with GAAP, the financial
      position and the results of operations of Obligors and their Subsidiaries, subject to normal year-end adjustments
      and absence of footnote disclosure.
            (c) Bank shall exercise reasonable efforts to keep such information, and all information acquired as a
result of any inspection conducted in accordance with Section 5.9 hereof, confidential; provided, however, that Bank
may communicate such information and any other information received pursuant to this Agreement and the other
Financing Agreements (i) to any other Person in accordance with the customary practices of commercial banks relating
to routine trade inquiries, for the purposes of obtaining league table credit or similar rankings, and in the ordinary
course of business in a manner consistent with the public disclosures by such Persons in respect of similar financings
subject to similar confidentiality restrictions, (ii) to any regulatory authority having or claiming jurisdiction over or
authority to regulate Bank or the corporate parent or Affiliates of Bank to the extent such disclosures are required by
such authority, (iii) to any other Person in connection with Bank’s sale or prospective sale of any participations in the
Liabilities or assignment of any rights and obligations of Bank under this Agreement and the other Financing
Agreements, provided that such disclosure shall not be made unless the Person to whom such disclosure is made has
agreed to keep such information confidential as set forth herein, (iv) to any other Person in connection with the exercise
of Bank’s rights hereunder or under any of the other Financing Agreements, (v) to any Person in any litigation in which
Bank is a party, (vi) to any Person if Bank believes in its discretion that disclosure is necessary or appropriate to
comply with any applicable law, rule or regulation or in response to a subpoena, order or other legal process or
informal investigative demand, whether issued by a court, judicial or administrative or legislative body or committee or
other Governmental Authority, (vii) as consented to by any Obligor, or (viii) as Bank deems necessary or appropriate to
Bank’s legal counsel or accountants or investors (including outside auditors and legal counsel of Bank’s accountants or
investors) or to Bank’s employees, officers, directors or Affiliates, so long as such parties are notified of the
confidential nature of such information. Notwithstanding the foregoing, information shall not be deemed to be
confidential to the extent such information (x) is available in the public domain or becomes available in the public
domain, in either case, other than as a result of unauthorized disclosure by Bank, or (y) is acquired from a
                                                          -39-
Person not known by Bank to be in breach of an obligation of confidentiality to Obligors. Each Obligor authorizes
Bank to discuss the financial condition of any Obligor with any Obligor’s independent certified public accountants and
agrees that such discussion or communication shall be without liability to either Bank or any Obligor’s independent
certified public accountants.
      5.2    Certificates; Other Information . Borrowers shall furnish to Bank:
            (a) [Intentionally Deleted];
             (b) concurrently with the delivery of the financial statements referred to in clause (ii) of Section 5.1(b) for
each Fiscal Month, a fully and properly completed Borrowing Base Certificate in the form of Exhibit 5.2(b) (each a “
Borrowing Base Certificate ”), certified on behalf of Obligors by a Responsible Officer, which Borrowing Base
Certificate shall report that portion of Consolidated EBITDA that is attributable to Stores located outside of the United
States;
             (c) concurrently with the delivery of the financial statements referred to in clause (ii) of Section 5.1(b) for
any Fiscal Month that is the last Fiscal Month of a Fiscal Quarter, a fully and properly completed Compliance
Certificate in the form of Exhibit 5.2(c) (each a “ Compliance Certificate ”) certified on behalf of Obligors by a
Responsible Officer;
             (d) concurrently with the delivery of the financial statements referred to in clause (ii) of Section 5.1(b) for
the Fiscal Month ending October 31, 2008 and for each Fiscal Month ending January 31st and July 31st of each Fiscal
Year thereafter, a fully and properly completed certificate in the form of Exhibit 5.2(d) (each a “ Pricing Certificate ”),
certified on behalf of Obligors by a Responsible Officer;
          (e) promptly after the same are sent, copies of all regular, periodic or special reports which any Obligor
may make to, or file with, the Securities and Exchange Commission;
            (f) concurrently with the delivery of the financial statements referred to in clause (ii) of Section 5.1(b) for
each Fiscal Month (i) monthly financial and sales report in the form heretofore furnished to Bank, including data such
as same store sales data, and (ii) a report setting forth in comparative form the corresponding figures for the
corresponding periods of the previous Fiscal Year and the corresponding figures from the most recent projections for
the current Fiscal Year delivered pursuant to Section 5.2(f) and discussing the reasons for any significant variations;
             (g) as soon as available and in any event no later than 60 days after to the last day of each Fiscal Year of
Obligors, projections of Obligors’ and their Subsidiaries’ consolidated and consolidating financial performance for the
forthcoming two Fiscal Years (prepared on a month by month basis for the succeeding Fiscal Year and on an annual
basis for the second Fiscal Year);
            (h) promptly upon receipt thereof, copies of any reports submitted by Obligors’ certified public
accountants in connection with each annual, interim or special audit or review of any type of the financial statements or
internal control systems of any Obligor or any
                                                           -40-
of its Subsidiaries made by such accountants, including any comment letters submitted by such accountants to
management of any Obligor in connection with their services;
            (i) from time to time, but not more than once each Fiscal Year at any time when no Event of Default has
occurred and is continuing, if Bank reasonably determines that obtaining appraisals is necessary in order for Bank to
comply with applicable laws or regulations, and at any time if an Event of Default shall have occurred and be
continuing, Bank may, or may require any Obligor to, in any such case at such Obligor’s expense, obtain appraisals in
form and substance and from appraisers reasonably satisfactory to Bank stating the then current fair market value of all
or any portion of the real or personal property of such Obligor or any of its Subsidiaries;
             (j) promptly upon receipt thereof, copies of any notices (including notices of any acceleration event, any
default or any event of default and other material deliveries) under any Related Document; and
            (k) promptly, such additional business, financial, corporate affairs and other information as Bank may
from time to time reasonably request.
       5.3 Notices . Such Obligor shall promptly notify Bank of any of the following (and in no event later than three
(3) Business Days after a Responsible Officer becoming aware thereof): (a) the occurrence or existence of any Event of
Default; (b) any other breach or non-performance of, or any default under, any Contractual Obligation of such Obligor
or any of its Subsidiaries, or any violation of, or non-compliance with, any Requirement of Law, which, in either case,
could reasonably be expected to result, either individually or in the aggregate, in a Material Adverse Effect, including a
description of such breach, non-performance, default, violation or non-compliance and the steps, if any, such Obligor
or such Subsidiary has taken, is taking or proposes to take in respect thereof; (c) any dispute, litigation, investigation,
notice of noncompliance with Requirements of Law, proceeding or suspension which exists at any time between such
Obligor or any of its Subsidiaries and any Governmental Authority which could reasonably be expected to result, either
individually or in the aggregate, in a Material Adverse Effect; (d) the commencement of, or any material development
in, any litigation or proceeding affecting such Obligor or any Subsidiary (i) in which the amount of damages claimed is
$50,000 (or its equivalent in another currency or currencies) or more, (ii) in which injunctive or similar relief is sought
and that could reasonably be expected to have a Material Adverse Effect, or (iii) in which the relief sought is an
injunction or other stay of the performance of this Agreement, any Financing Agreement or any Related Document;
(e) any of the following if the same could reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect: (i) any enforcement, cleanup, removal or other governmental or regulatory actions instituted,
completed or threatened against such Obligor or any of its Subsidiaries or any of their respective Properties pursuant to
any applicable Environmental Laws, (ii) any other Environmental Claims, and (iii) any environmental or similar
condition on any real Property adjoining the Property of such Obligor or any Subsidiary that could reasonably be
anticipated to cause such Obligor’s or any of its Subsidiaries’ Property or any part thereof to be subject to any material
restrictions on the ownership, occupancy, transferability or use of such Property under any Environmental Laws;
(f) any of the following if the same could reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect, together with a copy of
                                                           -41-
any notice with respect to such event that may be required to be filed with a Governmental Authority and any notice
delivered by a Governmental Authority to any ERISA Affiliate with respect to such event: (i) an ERISA Event; (ii) the
adoption of any new or the commencement of contributions to any Qualified Plan that is subject to Title IV of ERISA
or Section 412 of the Code by any ERISA Affiliate; (iii) the adoption of any amendment to a Qualified Plan that is
subject to Title IV of ERISA or Section 412 of the Code, if such amendment results in a material increase in benefits or
unfunded liabilities; or (iv) the commencement of contributions by any ERISA Affiliate to any Qualified Plan that is
subject to Title IV of ERISA or Section 412 of the Code; (g) any Material Adverse Effect subsequent to the date of the
most recent audited financial statements of such Obligor delivered to Bank pursuant to this Agreement; (h) any material
change in accounting policies or financial reporting practices by such Obligor or any of its Subsidiaries; (i) any labor
controversy resulting in or threatening to result in any strike, work stoppage, boycott, shutdown or other labor
disruption against or involving such Obligor or any of its Subsidiaries if the same could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect; (j) the creation, establishment or acquisition of
any Subsidiary; and (k) any material change to any of the information contained in any Perfection Certificate. Each
notice pursuant to this Section shall be accompanied by a written statement by a Responsible Officer on behalf of such
Obligor setting forth details of the occurrence referred to therein, and stating what action such Obligor proposes to take
with respect thereto and at what time. Each notice of an Event of Default shall describe with particularity any and all
clauses or provisions of this Agreement or other Financing Agreement that have been breached or violated.
      5.4 Preservation of Existence, Etc . Such Obligor shall, and shall cause each of its Subsidiaries to: (a) preserve
and maintain in full force and effect its corporate, partnership, limited liability company or other existence and good
standing under the laws of its state or jurisdiction of incorporation or formation; (b) preserve and maintain in full force
and effect all rights, privileges, qualifications, permits, licenses and franchises necessary in the normal conduct of its
business and except as could not reasonably be expected to have, either individually or in the aggregate, a Material
Adverse Effect; (c) preserve its business organization; and (d) preserve or renew all of its registered trademarks, trade
names and service marks, the non-preservation of which could reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect.
       5.5   Maintenance of Property . Such Obligor shall maintain and preserve, and shall cause each of its
Subsidiaries to maintain and preserve, all its Property that is used or useful in its business in good working order and
condition (ordinary wear and tear excepted) and make all necessary repairs thereto and renewals and replacements
thereof, except, in each case, where the failure to do so could not reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect.
      5.6   Obligor’s Property Insurance and Business Interruption Insurance .
            (a) Such Obligor shall maintain, and such Obligor shall cause each of its Subsidiaries to maintain, at its
expense, such public liability and third party property damage insurance with financially sound and reputable insurers
in such amounts and with such deductibles as is customarily carried by companies engaged in similar businesses in
similar localities where such Obligor or such Subsidiary operates. Such Obligor shall, and such Obligor
                                                           -42-
shall cause each of its Subsidiaries to, keep and maintain, at such Obligor’s expense, business interruption insurance (in
amounts reasonably satisfactory to Bank) and keep and maintain its Property insured against loss or damage by fire,
theft, burglary, pilferage, loss in transit, explosion, spoilage and all other hazards and risks ordinarily insured against by
other owners or users of such properties in similar businesses, in an amount at least equal to the greater of the full
insurable value of all such Property or the amount which is necessary to avoid the application of co-insurance
provisions. All such policies of insurance shall be in form and substance reasonably satisfactory to Bank and such
Obligor shall not, and such Obligor shall not permit any of its Subsidiaries to, amend or otherwise change any such
policies in any way which may adversely affect Bank without the prior written consent of Bank. Such Obligor shall
deliver to Bank the original (or a certified) copy of each policy of insurance and evidence of payment of all premiums
therefor. Such policies of property insurance shall contain an endorsement, in the form of Exhibit 5.6 hereto or in
another form acceptable to Bank in its reasonable discretion, showing all loss payable to Bank as provided below in this
Section 5.6 and such policies of liability insurance shall name Bank as an additional insured. Such Obligor hereby
directs all insurers under such policies of insurance to pay all proceeds of insurance policies directly to Bank. Such
Obligor irrevocably makes, constitutes and appoints Bank (and all officers, employees or agents designated by Bank) as
such Obligor’s true and lawful attorney-in-fact for the purpose of making, settling and adjusting claims as to the
Collateral under all such policies of insurance, endorsing the name of such Obligor on any check, draft, instrument or
other item of payment pertaining to the Collateral received by such Obligor or Bank pursuant to any such policies of
insurance and for making all determinations and decisions with respect to such policies of insurance as they relate to
the Collateral. Without limiting the foregoing, such Obligor shall, and such Obligor shall cause each of its Subsidiaries
to, (i) keep all of its physical Property insured with casualty or physical hazard insurance on an “all risks” basis, with
broad form flood and earthquake coverages and electronic data processing coverage, with a full replacement cost
endorsement and an “agreed amount” clause in an amount equal to 100% of the full replacement cost of such property,
(ii) maintain all such workers’ compensation or similar insurance as may be required by law, (iii) maintain, in amounts
and with deductibles equal to those generally maintained by businesses engaged in similar activities in similar
geographic areas, general public liability insurance against claims of bodily injury, death or property damage occurring,
on, in or about the Properties of such Obligor or Subsidiary, and (iv) maintain product liability insurance. All policies
of insurance shall provide for at least 30 days prior written cancellation notice to Bank. Each Obligor shall furnish
Bank with certificates of insurance and certified copies of policies evidencing compliance with this Section 5.6 .
             (b) If the proceeds of insurance insuring any Collateral or a condemnation award with respect to any
Collateral exceed $50,000, Bank is authorized to collect such proceeds or award and, at Bank’s option: (1) apply the
proceeds of all insurance against the Revolving Loan and the other Liabilities, whether or not then due, or (2) allow
Obligors to use such money, or a part thereof, to repair any damage or restore, replace or rebuild the property that was
the subject of such proceeds or award; provided, however, that notwithstanding the foregoing provisions, as to proceeds
of insurance or condemnation awards for Equipment constituting Collateral or real property if all of the following
conditions are satisfied (i) no Event of Default has occurred and is continuing, (ii) in the reasonable judgment of Bank
the damaged Collateral or asset constitutes real property or Equipment that can be repaired, restored, replaced or rebuilt
to an architectural and economical unit of the same character and not less valuable than such
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Collateral or asset was prior to such damage and destruction with the proceeds of the insurance or condemnation award
held by Bank, and (iii) the Liabilities will at all times be collateralized to the same extent as prior to such damage and
destruction, then Bank shall hold the proceeds of such insurance or condemnation award as to Equipment or real
property as Collateral and (provided that no Event of Default has occurred and is continuing or occurs, at which time
Bank may in its discretion apply such proceeds to the Liabilities) make them available to Obligors for repair,
restoration, replacement or rebuilding of such property, provided in either case such repaired, restored, replaced or
rebuilt property shall be free and clear of all Liens except Permitted Liens, and subject to such other terms and
conditions as Bank may reasonably determine (including terms and conditions customarily applicable to the making of
advances under a construction loan); and further provided that while in possession of such funds Bank shall not be
required to invest the same (except in a commercial money market account of Bank in which Bank has a first priority
perfected security interest) or to hold such funds separate and apart from Bank’s other funds. Notwithstanding anything
herein to the contrary, at any time when an Event of Default has occurred and is continuing, if Bank receives proceeds
of insurance or condemnation awards or is holding proceeds of insurance or condemnation awards theretofore received
by Bank, Bank may apply the same to the Liabilities at any time and from time to time as it may determine. If no Event
of Default has occurred and is continuing and Obligors have been permitted to apply insurance proceeds or
condemnation awards to repair, restore, replace or rebuild property, then Bank will return any insurance proceeds or
condemnation awards to Obligors which Bank continues to hold after any such repair, restoration, replacement or
rebuilding of such property is completed to Bank’s satisfaction.
            (c) Unless each Obligor provides Bank with evidence of the insurance coverage required by this
Agreement, or if Obligors, at any time or times hereafter, shall fail to obtain or maintain any of the policies of insurance
required above or to pay any premium in whole or in part relating thereto, then Bank, without waiving or releasing any
obligation or default by Obligors hereunder, may at any time or times thereafter (but shall be under no obligation to do
so) purchase and maintain such policies of insurance and pay such premiums and take any other action with respect
thereto which Bank reasonably deems advisable. This insurance may, but need not, protect the interests of any Obligor
or Bank. The coverage that Bank purchases may not pay any claim that any Obligor or Bank may make or any claim
that is made against any Obligor in connection with the Collateral. Obligors may later cancel any insurance purchased
by Bank, but only after providing Bank with evidence that Obligors have obtained insurance as required by this
Agreement. If Bank purchases insurance for the Collateral, each Obligor will be responsible for the costs of that
insurance, including interest and any other charges Bank may impose in connection with the placement of the
insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be
added to Borrowers’ total outstanding balance or obligation. The costs of the insurance may be more than the cost of
insurance each Obligor may be able to obtain on its own.
      5.7 Payment of Liabilities . Such Obligor shall, and shall cause its Subsidiaries to, pay, discharge and perform
as the same shall become due and payable or required to be performed, all its respective obligations and liabilities,
including: (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets,
unless the same are being contested in good faith by appropriate proceedings diligently prosecuted which stay the
enforcement of any Lien and for which adequate reserves in accordance with GAAP are
                                                           -44-
being maintained by such Obligor or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a
Lien (other than Permitted Liens) upon its Property unless the same are being contested in good faith by appropriate
proceedings diligently prosecuted which stay the imposition or enforcement of the Lien and for which adequate
reserves in accordance with GAAP are being maintained by such Obligor; (c) all Debt, as and when due and payable,
but subject to any restrictions contained in this Agreement or any instrument or agreement evidencing such Debt; and
(d) the performance of all obligations under any Contractual Obligation to which such Obligor or any of its Subsidiaries
is bound, or to which it or any of its Properties is subject, to the extent that the failure to perform any of the obligations
described under this clause (d) could have a Material Adverse Effect.
       5.8 Compliance with Laws . Such Obligor shall comply, and shall cause each of its Subsidiaries to comply, in
all respects, with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business
(including all Environmental Laws), except (a) such as may be contested in good faith by appropriate proceedings
diligently prosecuted without risk of loss of any material portion of the Collateral, (b) as to which a bona fide dispute
exists, (c) for which appropriate reserves have been established on such Obligor’s financial statements, or (d) where the
failure to comply could not reasonably be expected to have, either individually or in the aggregate, a Material Adverse
Effect.
      5.9 Inspection of Property and Books and Records . Such Obligor shall maintain and shall cause each of its
Subsidiaries to maintain proper books of record and account, in which full, true and correct entries in conformity with
GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of
such Obligor and such Subsidiaries. Such Obligor shall, and shall cause each of its Subsidiaries to, permit
representatives and independent contractors of Bank to visit and inspect any of their respective Properties, to examine
their respective organizational, corporate, limited liability company or partnership, as applicable, financial and
operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective directors, officers, and independent public accountants, at such reasonable times during
normal business hours and as often as may be reasonably desired.
      5.10 Use of Proceeds . Borrowers shall use the proceeds of the Loans received on or before the Closing Date
solely as follows: (i) to repay outstanding Debt of Borrowers, and (ii) to pay transaction costs and fees in connection
with the Loans. Borrowers shall use the proceeds of the Revolving Loans made after the Closing Date for working
capital and other general corporate purposes not in contravention of any Requirement of Law and not in violation of
this Agreement.
       5.11   Further Assurances . Such Obligor shall ensure that all written information, exhibits and reports
furnished to Bank do not and will not contain any untrue statement of a material fact and do not and will not omit to
state any material fact necessary to make the statements contained therein not misleading in light of the circumstances
in which made, and will promptly disclose to Bank and correct any defect or error that may be discovered therein or in
any Financing Agreement or in the execution, acknowledgment or recordation thereof, provided that such Obligor shall
ensure that any projections furnished to Bank are prepared in good faith based upon assumptions believed to be fair and
reasonable at the time in light of then current market conditions. Promptly upon request by Bank, such Obligor shall
(and shall cause
                                                            -45-
each of its Subsidiaries to) take such additional actions as Bank may reasonably require from time to time in order
(a) to carry out more effectively the purposes of this Agreement or any other Financing Agreement, (b) to subject to the
Liens created by any of the Collateral Documents any of the Properties, rights or interests covered by any of the
Collateral Documents, (c) to perfect and maintain the validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby, and (d) to better assure, convey, grant, assign, transfer,
preserve, protect and confirm to Bank the rights granted or now or hereafter intended to be granted to Bank under any
Financing Agreement or under any other document executed in connection therewith. Without limiting the generality of
the foregoing and except as otherwise approved in writing by Bank, (i) such Obligor shall cause each of its Subsidiaries
to guaranty the Liabilities and to cause each such Subsidiary to grant to Bank a security interest in all of such
Subsidiary’s property to secure such guaranty and (ii) except as otherwise approved in writing by Bank, such Obligor
shall pledge the stock or other equity interest of each of its Subsidiaries to Bank to secure the Liabilities. In connection
with each pledge of stock or other equity interests, such Obligor shall deliver, or cause to be delivered, to Bank, such
documents, instruments and agreements as Bank may reasonably require.
      5.12 Interest Rate Protection . Within 60 days of Bank’s request, Borrowers shall enter into Rate Contracts
providing protection against fluctuations in interest rates in the amount of at least $3,000,000, which Rate Contracts
shall provide for not less than a term ending on June 1, 2011 and contain such other terms as are customary and are
reasonably satisfactory to Bank.
      5.13     Locations of Collateral . Such Obligor shall maintain all Collateral (other than Collateral with an
aggregate book value of not more than $100,000) in the United States or Canada at the locations listed on Schedule
4.21 or, with respect to Inventory, at any other location in the United States or Canada as to which Borrowers have
given Bank 30 days’ prior written notice thereof, or that is in-transit to Borrowers or Borrowers’ Account Debtors in
the Ordinary Course of Business, provided that no Event of Default shall occur as a result of the addition of such
location. After such 30-day period and notice, each location as to which Bank has received such notice shall be deemed
to be added to Schedule 4.21 , so long as no Event of Default shall occur as a result of the addition of such location.
      5.14 Bank’s Costs and Expenses as Additional Liabilities . Borrowers jointly and severally agree to reimburse
Bank on demand for all reasonable expenses and fees paid or incurred in connection with (a) the analysis,
documentation, negotiation and closing of the Loans and other extensions of credit described herein, (b) any
amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), and (c) in connection with any assignment of or participation in the Loans, in
each case including lien search, filing and recording fees and the fees and reasonable expenses of Bank’s attorneys and
paralegals and consultants (whether such attorneys and paralegals are employees of Bank or are separately engaged by
Bank), whether such expenses and fees are incurred prior to or after the date hereof. Borrowers jointly and severally
agree to reimburse Bank on demand for all costs and expenses incurred by Bank with respect to the enforcement,
collection and protection (and any negotiations and documentation in connection therewith) of Bank’s interests in the
Collateral and rights under the Financing Agreements, including all such costs and expenses incurred during any
workout or restructuring in respect of the Loans (and any negotiations and documentation in connection therewith). All
amounts due
                                                           -46-
under this Section 5.14 shall be additional Liabilities of Borrowers to Bank, payable on demand, repaid as provided in
Section 2.7 hereof and secured by the Collateral.
      5.15    [Intentionally Omitted] .
      5.16 Supervening Illegality . If, at any time or times hereafter, there shall become effective any amendment
to, deletion from or revision, modification or other change in any provision of any statute, or any rule, regulation or
interpretation thereunder or any similar law or regulation, affecting, in Bank’s reasonable determination, Bank’s
extension of credit described in this Agreement or the selling of participations therein, Borrowers shall, at Borrowers’
option, either (a) pay to Bank the then outstanding balance of the Liabilities, and hold Bank harmless from and against
any and all obligations, fees, liabilities, losses, penalties, costs, expenses and damages, of every kind and nature,
imposed upon or incurred by Borrowers by reason of Bank’s failure or inability to comply with the terms of this
Agreement or any of the other Financing Agreements, or (b) indemnify and hold Bank harmless from and against any
and all obligations, fees, liabilities, losses, penalties, costs, expenses and damages, of every kind and nature, imposed
upon or incurred by Bank by reason of such amendment, deletion, revision, modification, or other change. The
obligations of Borrowers under this Section 5.16 shall survive payment of the Liabilities and termination of this
Agreement.
       5.17 Landlord Consents and Waivers . Each Borrower shall use reasonable efforts to obtain and deliver to
Bank (i) on or before the Closing Date with respect to each lease in effect on the date hereof, and (ii) on or before the
date of execution of any lease of premises to such Borrower with respect to any lease in effect thereafter, a landlord’s
waiver (including, upon Bank’s request therefor, a consent to a leasehold mortgage) executed by the lessor of each
location leased to such Borrower. Each landlord’s waiver so delivered shall be in form and substance satisfactory to
Bank. Such Obligor shall promptly notify Bank of any breach of, or default under, any such lease and shall pay all of
its obligations under such leases of real property when due.
       5.18 Primary Depository . Such Obligor shall cause Bank to act as such Obligor’s and each Subsidiary’s
primary depository and remittance bank and shall cause average monthly demand deposit balances to be in an amount
necessary to cover the fees and charges for services provided by Bank to such Obligor or such Subsidiary. Bank’s fees
and charges for such services shall be in accordance with Bank’s customary charges and balance credit formula. If
average demand deposit balances fall short of the required level in any given calendar month, Bank may charge the
deficiency in the cost of services to such Obligor’s and each Subsidiary’s operating accounts, as Bank shall determine
in its sole discretion. Such Obligor agrees that it will not maintain any deposit, investment, custodial or other account of
any kind whatsoever with any other bank, brokerage house or financial institution; provided, however, that such
Obligor may maintain with any other bank, brokerage house or financial institution (collectively, the “ Other Deposit
Accounts ”): (a) deposit accounts specially and exclusively used for payroll, payroll taxes and other employee wage
and benefit payments to or for the benefit of any Obligor’s employees, if the aggregate balance in all such deposit
accounts does not to exceed, at any time, the sum of all accrued payroll, payroll taxes and other employee wage and
benefit obligations then payable by such Obligor on its next regular payroll, payroll tax or other employee wage and
benefit payment date, (b) deposit accounts specially and exclusively used for petty cash needs of each
                                                           -47-
Store, if a local branch of Bank is not conveniently located near such Store and if the aggregate balance in all such
deposit accounts related to such Store does not exceed, at any time, $15,000; and (c) on or before the 90 days after the
Closing Date, deposit accounts listed on Schedule 4.27 which are not specially and exclusively used for petty cash
needs of a Store and which are maintained with PNC Bank, National Association, Bank of America, N.A. and
JPMorgan Chase Bank, N.A. so long as (x) all amounts on deposit in such deposit accounts are transferred to the
Remittance Account on a periodic basis acceptable to Bank but in any event no less than once per week, and (y) the
aggregate balance in all such deposit accounts does not exceed, at any time, $1,000,000.
      5.19 Remittance and Lock Box Accounts . Each Obligor shall establish (a) an account (hereinafter referred to
as the “ Remittance Account ”) with Bank for receipt of payments on Accounts and other proceeds of Collateral and
into which each Obligor shall directly deposit all cash, payments and other proceeds such Obligor receives from credit
card processors, and (b) upon the request of Bank after the occurrence and during the continuance of an Event of
Default, a lock box (the “ Lock Box ”) with Bank for such payments and, cause all such Account Debtors to directly
remit all payments on such Accounts to the Lock Box for credit to the Remittance Account. Each Obligor will on a
daily basis immediately deposit to the Remittance Account all cash and other payments made on Accounts or for
Inventory and other payments constituting proceeds of its Collateral that such Obligor receives directly in the identical
form in which each such payment was made, whether by cash or check. Each Obligor directs, and shall cause, all credit
card processors to transfer all proceeds of credit card sales and other amounts payable to such Obligor directly to such
Obligor’s Remittance Account.
      5.20 Anti-Terrorism Laws . Each Obligor shall ensure, and shall cause its Subsidiaries to use reasonable
efforts to ensure, that no person that owns a controlling interest in or otherwise controls any Obligor or Subsidiary is or
shall be listed in any of the listings described in Section 4.25 , not use or permit the use of the proceeds of the Loans to
violate any of the foreign asset control regulations of OFAC or any enabling statute or order relating thereto or the
Executive Order, and comply in all material respects with all applicable laws and regulations under the Bank Secrecy
Act.
6.    NEGATIVE COVENANTS .
     Each Obligor jointly and severally with the other Obligors covenants and agrees that, so long as Bank shall have
any Revolving Commitment hereunder, or any Liability shall remain unpaid or unsatisfied, such Obligor shall not, and
such Obligor shall not permit any Subsidiary to directly or indirectly:
      6.1 Encumbrances . Create, incur, assume or suffer to exist any Lien on any of its assets, including the
Collateral, other than the following (collectively, “ Permitted Liens ”): (a) liens securing the payment of taxes, fees,
assessments, or other governmental charges or levies either not yet delinquent or the validity of which is being
contested in good faith by appropriate proceedings, and as to which such Obligor shall, if appropriate under GAAP,
have set aside on its books and records adequate reserves; (b) deposits under workmen’s compensation, unemployment
insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than
for the repayment of borrowed money) or to secure
                                                           -48-
indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the
repayment of borrowed money) or to secure statutory obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the Ordinary Course of Business; (c) the Liens in favor of Bank; (d) Liens which
arise by operation of law, other than Liens which arise by operation of Environmental Laws, incurred in the Ordinary
Course of Business (for sums not constituting borrowed money) that are not delinquent for a period of more than 30
days or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP (if so required); (e) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of real Property that do not secure monetary obligations and do not materially impair the
use of such Property for its intended purposes or the value thereof; (f) Liens described on Schedule 6.1 hereof, provided
that such Liens shall secure only those obligations which they secure on the Closing Date and extensions, renewals and
replacements thereof that do not increase the outstanding principal amount thereof; (g) purchase money security
interests on equipment of Borrowers securing Capital Leases or purchase money Debt in each case permitted by
Section 6.2(b) ; and (h) mechanics’, materialmen’s, suppliers’, repairmen’s or other like Liens arising in the Ordinary
Course of Business (for sums not constituting borrowed money) that are not delinquent for a period of more than 30
days or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP (if so required); provided , that the aggregate amount secured by such
mechanics’, materialmen’s, suppliers’, repairmen’s or other like Liens shall not exceed $300,000 at any time (the Liens
referred to in this clause (h) are referred to herein as “ Permitted Mechanics Liens ”). Such Obligor shall not, and such
Obligor shall not permit any of its Subsidiaries to, permit the filing of any financing statement naming such Obligor or
any Subsidiary as debtor, except for financing statements filed with respect to Liens expressly permitted by this
Agreement.
       6.2 Debt . Incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any
obligations, payables or Debt, except for any of the following: (a) the Liabilities; (b) Capital Leases and purchase
money Debt (including, Capital Leases and purchase money Debt listed on Schedule 6.2 ) at any time outstanding not
to exceed $250,000 in the aggregate; (c) trade obligations and normal accruals in the Ordinary Course of Business not
yet due and payable, or with respect to which such Obligor is contesting in good faith the amount or validity thereof by
appropriate proceedings, and then only to the extent that such Obligor has set aside on its books adequate reserves
therefor, if appropriate under GAAP; (d) the Existing Vendor Loan, provided that (i) the aggregate principal amount of
such Debt does not exceed $250,000 at any time, and (ii) no cash interest is payable by any Obligor at any time with
respect to such Debt; (e) Debt described on Schedule 6.2 ; and (f) Debt incurred in connection with Rate Contracts
required pursuant to Section 5.12 . Except as otherwise permitted by this Agreement, such Obligor shall not, and such
Obligor shall not permit any of its Subsidiaries to, pay any obligations or Debt before the same is due, except for the
early payment of trade obligations in the Ordinary Course of Business. Any Debt that is subordinated to the Liabilities
shall continue to be subordinated to the Liabilities on terms and conditions that are at least as favorable to Bank as are
in effect on the date hereof or otherwise on terms and conditions reasonably satisfactory to Bank. Notwithstanding any
provision herein to the contrary, no Obligor or Subsidiary may incur any Debt that is senior in any respect in right of
payment to any of the Liabilities.
                                                          -49-
      6.3 Disposition of Assets . Sell, assign, license, lease, convey, transfer or otherwise dispose of (whether in one
or a series of transactions) any Property (including accounts and notes receivable, with or without recourse) or enter
into any agreement to do any of the foregoing (and Bank does not authorize such Obligor to do so), except:
            (a) dispositions of Inventory in the Ordinary Course of Business;
            (b) dispositions of Equipment and real Property (including, without limitation, dispositions of obsolete
Property or Property that is no longer used or useful in the Ordinary Course of Business of Obligors) not otherwise
permitted hereunder which are made for fair market value and the mandatory prepayment in the amount of the Net
Proceeds of such disposition is made to the extent required pursuant to Section 2.3(b) ; provided that (i) at the time of
any disposition, no Event of Default shall exist or shall result from such disposition, (ii) the aggregate sales price from
such disposition shall be paid in cash, and (iii) the aggregate value of all assets so sold by such Obligor and its
Subsidiaries, together, shall not exceed $100,000 in any Fiscal Year; and (iv) after giving effect to such disposition,
such Obligor is in compliance on a pro forma basis with the covenants set forth in Section 7 recomputed as of the last
day of the most recent month for which financial statements have been delivered; and
           (c) the sale or discount, in each case without recourse, of accounts receivable past due arising in the
Ordinary Course of Business, but only in connection with the compromise or collection thereof.
      6.4 Consolidations, Conversions and Mergers . Do any of the following: (a) convert its status as a type of
Person (e.g., corporation, limited liability company, partnership) or the jurisdiction in which it is organized, formed or
created, (b) merge or consolidate with or into, any Person, (c) convey, transfer, lease or otherwise dispose of (whether
in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter
acquired) to or in favor of any Person, (d) liquidate, windup or dissolve, or (e) agree to do any of the foregoing.
       6.5 Loans and Investments . Do any of the following: (a) purchase or acquire, or make any commitment for,
any Equity Interest, or any evidence of Debt or obligations or other securities of, or any interest in, any Person,
including the establishment or creation of a Subsidiary or enter into any joint ventures, or (b) make or commit to make
any Acquisitions, or any other acquisition of all or substantially all of the assets of another Person, or of any business or
division of any Person, including by way of merger, consolidation or other combination, or (c) make or commit to
make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including
any Affiliate of such Obligor (the items described in clauses (a), (b) and (c) are referred to as “ Investments ”), except
for: (i) Investments in cash and Cash Equivalents; and (ii) loans and advances to employees in the Ordinary Course of
Business not to exceed $100,000 in the aggregate at any time outstanding.
      6.6 Transactions with Affiliates . Except as specifically described on Schedule 6.6 and except for Restricted
Payments permitted by Section 6.10 , enter into any transaction with any Affiliate. The term “Affiliate” as used in this
Section 6.6 shall have the meaning given in Section 1.1 and also shall include (a) any member, equity holder, officer,
director or manager of
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(i) each Obligor, (ii) any Subsidiary of each Obligor, (iii) any Affiliate of each Obligor, and (iv) any Affiliate of any
Subsidiary of each Obligor, and (b) any Person related to any such Person within the third degree of consanguinity.
Such Obligor shall not, and shall not suffer or permit any of its Subsidiaries to, enter into any transaction with any
employee unless it is entered into in the Ordinary Course of Business and upon fair and reasonable terms no less
favorable to such Obligor than such Obligor would obtain in a comparable arms-length transaction.
     6.7 Use of Proceeds . Use any portion of the Loan proceeds, directly or indirectly, to purchase or carry Margin
Stock or repay or otherwise refinance Debt of such Obligor or others incurred to purchase or carry Margin Stock, or
otherwise in any manner which is in contravention of any Requirement of Law or in violation of this Agreement.
      6.8 Contingent Obligations . Create, incur, assume or suffer to exist any Contingent Obligations except in
respect of the Liabilities and except: (a) endorsements for collection or deposit in the Ordinary Course of Business;
(b) Rate Contracts entered into in the Ordinary Course of Business to hedge Borrowers’ interest rate exposure or
pursuant to Section 5.12 ; (c) Contingent Obligations incurred in the Ordinary Course of Business with respect to surety
and appeal bonds, performance bonds and other similar obligations; (d) Contingent Obligations arising under indemnity
agreements to title insurers to cause such title insurers to issue to Bank title insurance policies; and (e) guaranties or any
other obligation in favor of Bank.
       6.9 Compliance with ERISA . Do any of the following or suffer or permit any of their ERISA Affiliates to do
any of the following: (a) terminate any Plan subject to Title IV of ERISA so as to result in any material liability to such
Obligor; (b) permit to exist any ERISA Event or any other event or condition, that could reasonably be expected to
have a Material Adverse Effect; (c) make a complete or partial withdrawal (within the meaning of ERISA
Section 4201) from any Multiemployer Plan so as to result in any material liability to such Obligor; (d) enter into any
new Qualified Plan or modify any existing Qualified Plan so as to increase its obligations thereunder that could
reasonably be expected to have a Material Adverse Effect, unless such modification is required by ERISA or the Code;
or (e) permit the present value of all nonforfeitable accrued benefits under any Plan (using the actuarial assumptions
utilized by the PBGC upon termination of a Plan) materially to exceed the fair market value of Plan assets allocable to
such benefits, all determined as of the most recent valuation date for each such Plan.
       6.10 Restricted Payments . Do any of the following: (a) pay any management, advisory, consulting or similar
fees to any Affiliate of such Obligor or to any officer, director or employee of such Obligor or any of its Subsidiaries or
any Affiliate of such Obligor, (b) pay any “earnouts” or similar payment obligations under merger, acquisition,
purchase or similar or related agreements, (c) declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account of any shares of any class of its capital stock, partnership
interests, membership interests or other Equity Interests (including warrants), or (d) purchase, redeem or otherwise
acquire for value any shares of its capital stock, partnership interests, membership interests or other Equity Interests or
any warrants, rights or options to acquire such shares, interests or securities now or hereafter outstanding (the items
described in clauses (a), (b), (c) and (d) are referred to as “ Restricted Payments ”), except (i) payment of reasonable
compensation to officers and employees for actual services rendered to such Obligor and its Subsidiaries in the
Ordinary Course of Business, and (ii) so long as no
                                                            -51-
Event of Default has occurred and is continuing or would occur as a result thereof and subject to the provisions of the
Subordination Agreement, Holdings and the Company may make payments to Parallel of advisory fees when due and
payable pursuant to the Advisory Agreement in an aggregate amount not to exceed $75,000 (exclusive of expense
reimbursements) in any Fiscal Quarter.
      6.11 Change in Business . Engage in any material line of business substantially different from those lines of
business carried on by it on the date hereof. Holdings shall not engage in any trade or business, or own any assets (other
than Equity Interests of the other Borrowers) or incur any Debt (other than the Liabilities and the Existing Vendor
Loan).
      6.12 Change in Structure . Amend any of its Organization Documents in any material respect or make any
changes in its equity capital structure (including in the terms of its outstanding Equity Interests) except for changes in
the capital structure of Holdings upon 10 days prior written notice to Bank to the extent such changes could not
individually or in the aggregate be material.
     6.13     Accounting Changes . Make any significant change in accounting treatment or reporting practices,
except as required by GAAP or to make consistent with GAAP.
       6.14    Environmental . Fail to conduct its business so as to comply in all material respects with all
Environmental Laws and Environmental Permits in all jurisdictions in which it is or may at any time be doing business,
if any such failure could, individually or in the aggregate with all such other failures, reasonably be expected to result
in a Material Adverse Effect; provided, however, that nothing contained in this Section 6.18 shall prevent such Obligor
or such Subsidiary from contesting, in good faith by appropriate legal proceedings, any such law, regulation,
interpretation thereof or application thereof, provided, further, that such Obligor or such Subsidiary shall not fail to
comply in any material respect with the order of any court or other Governmental Authority of applicable jurisdiction
relating to such laws unless such Obligor or such Subsidiary shall currently be prosecuting an appeal or proceedings for
review and shall have secured a stay of enforcement or execution or other arrangement postponing enforcement or
execution pending such appeal or proceedings for review.
      6.15 Legal Status . Without providing at least 30 days prior written notice to Bank, change its name, its
principal place of business or, if more than one, chief executive office, the locations of its property (including the
Collateral) or its mailing address or organizational identification number if it has one; or change its type of
organization, jurisdiction of organization or other legal structure. If such Obligor does not have an organizational
identification number and later obtains one, such Obligor shall promptly notify Bank of such organizational
identification number.
      6.16    Fiscal Year . Change its Fiscal Year.
     6.17 Subsidiaries . Form, acquire or permit to exist any Subsidiaries (other than the Company, TI and ST as
Subsidiaries of Holdings and TFC as a Subsidiary of the Company).
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     6.18 Third Party Goods . Except as set forth on Schedule 6.18 , hold or accept any raw materials, work in
process or finished goods owned by other Persons in such Obligor’s possession, whether on a consignment basis or
otherwise.
      6.19 Sale-Leaseback Transactions . Become or remain liable as lessee or as guarantor or other surety with
respect to any lease, whether an operating lease or a Capital Lease, of any property (whether real, personal or mixed,
and whether now owned or hereafter acquired) (i) that any Obligor or Subsidiary has sold or transferred (or is to sell or
transfer) to a Person that is not a Subsidiary or (ii) that any Obligor or Subsidiary intends to use for substantially the
same purpose as any other property that, in connection with such lease, has been sold or transferred by any Obligor or
Subsidiary to another Person.
      6.20 Limitations on Certain Restrictions . Create or otherwise cause or suffer to exist or become effective any
contractual restriction on the ability of any Obligor or Subsidiary to perform and comply with their respective
obligations under the Financing Agreements.
       6.21 No Other Negative Pledges . Enter into or suffer to exist any agreement or restriction that, directly or
indirectly, prohibits or conditions the creation, incurrence or assumption of any Lien upon or with respect to any part of
its property or assets, whether now owned or hereafter acquired, or agree to do any of the foregoing, except for such
agreements or restrictions existing under or by reason of (i) this Agreement and the other Financing Agreements,
(ii) applicable Requirements of Law, (iii) any agreement or instrument creating a Permitted Lien (but only to the extent
such agreement or restriction applies to the assets subject to such Permitted Lien), (iv) customary provisions in leases
and licenses of real or personal property entered into by any Borrower or any Subsidiary as lessee or licensee in the
Ordinary Course of Business, restricting the granting of Liens therein or in property that is the subject thereof, and
(v) customary restrictions and conditions contained in any agreement relating to the sale of assets pending such sale,
provided that such restrictions and conditions apply only to the assets being sold and such sale is permitted under this
Agreement.
      6.22    Related Documents . Without the prior written consent of Bank (a) enter into or consent to any
modification or alteration of any Related Document or otherwise amend, modify, cancel or supplement any provisions
of any Related Document or any document related thereto, or (b) fail to comply with its obligations and liabilities under
any Related Document.
      6.23 Foreign Assets . Permit the aggregate book value of all assets of Obligors and their Subsidiaries which
are located outside of the United States to exceed at any time 5% of the aggregate book value of all assets of Obligors
and their Subsidiaries, all as determined for Obligors and their Subsidiaries on a consolidated basis in accordance with
GAAP.

7.    FINANCIAL COVENANTS .
          Each Obligor jointly and severally with the other Obligors covenants and agrees that, so long as Bank shall
have any Revolving Commitment hereunder, or any Liability shall remain unpaid or unsatisfied, Obligors shall not
permit:
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     7.1 Consolidated Fixed Charge Coverage Ratio . The Consolidated Fixed Charge Coverage Ratio for any
Quarterly Computation Period ending after the date hereof to be less than 1.30 to 1.0.
    7.2 Consolidated Leverage Ratio . The Consolidated Leverage Ratio as of the last day of any Quarterly
Computation Period set forth below to exceed the applicable ratio set forth below for such Computation Period:
                    Quarterly Computation Periods
                                Ending                                                 Maximum Consolidated Leverage
                  on or about (all dates are inclusive):                                      Ratio (to 1.0):
April 30, 2008 through October 31, 2010                                                                           2.50
After 2010                                                                                                        2.30

      7.3 Consolidated Capital Expenditures . The aggregate amount of (a) all Consolidated Capital Expenditures
(other than Consolidated New Store Capital Expenditures and Consolidated POS Capital Expenditures) made (i) during
the period beginning on the Closing Date and ending on February 1, 2009, to exceed $666,667, or (ii) in any Fiscal
Year ending on or after December 31, 2009, to exceed $1,000,000, or (b) all Consolidated POS Capital Expenditures
made on or after the Closing Date to exceed $1,500,000.

8.     COLLATERAL .
       8.1 Security Interest . To secure payment and performance in full of all of the Liabilities, such Obligor hereby
grants to Bank a right of setoff against and a continuing security interest in and to, and each Obligor pledges and
assigns to Bank, all of the real and personal Property, and interests in the real and personal Property of such Obligor,
whether now owned or hereafter acquired or arising and wheresoever located, including the following: (a) Accounts,
contract rights, General Intangibles, payment intangibles, health care insurance receivables, tax refunds, letters of
credit, letter of credit rights (whether or not the letter of credit is evidenced by a writing), supporting obligations,
instruments (including promissory notes), chattel paper (whether tangible or electronic), documents, notes and
documents of title; (b) commercial tort claims set forth on Schedule 8.1 ; (c) Inventory; (d) Equipment, fixtures and
other goods; (e) deposit accounts (general or special); (f) financial assets, securities, investment property and money;
(g) any and all other Property and interests in Property of such Obligor , now or hereafter coming into the actual
possession, custody or control of Bank or any agent or affiliate of Bank in any way or for any purpose (whether for
safekeeping, deposit, custody, pledge, transmission, collection or otherwise); (h) all insurance proceeds of or relating to
any of the foregoing; (i) insurance proceeds relating to any key-man life insurance policy covering the life of any
director, officer, employee or former director, officer or employee of such Obligor; (j) insurance proceeds relating to
business interruption insurance; (k) all other personal Property; (l) all books and records relating to any of the
foregoing; and (m) all accessions and additions to, substitutions for, and replacements, products and proceeds of any of
the foregoing.
      8.2 Preservation of Collateral and Perfection of Security Interests Therein . Each Obligor hereby irrevocably
authorizes Bank at any time, and from time to time, to file in any jurisdiction any initial financing statements and
amendments thereto that (a) indicate the
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Collateral (i) as all assets of such Obligor or words of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the Uniform Commercial Code of the jurisdiction
wherein such financing statement or amendment is filed, or (ii) as being of an equal or lesser scope or within greater
detail, and (b) contain any other information required by Section 5 of Article 9 of the Uniform Commercial Code of the
jurisdiction wherein such financing statement or amendment is filed regarding the sufficiency or filing office
acceptance of any financing statement or amendment, including (i) whether such Obligor is an organization, the type of
organization and any organization identification number issued to such Obligor, and (ii) in the case of a financing
statement filed as a fixture filing or indicating Collateral as as-extracted collateral or timber to be cut, a sufficient
description of real Property to which the Collateral relates. Each Obligor agrees to furnish any such information to
Bank promptly upon its request. Without limiting the generality of the foregoing, to perfect and keep, as a first priority
perfected security interest, the security interest and Liens in the Collateral granted by each Obligor to Bank to secure
the payment and performance of all of the Liabilities, and to otherwise protect and preserve the Collateral and Bank’s
security interest and Liens therein or to enforce Bank’s security interests and Liens in the Collateral, each Obligor
(x) shall execute and deliver to Bank, concurrently with the execution of this Agreement, and at any time or times
hereafter, at the request of Bank, all instruments or other documents (and pay the cost of filing or recording the same in
all public offices deemed necessary by Bank) and do such acts as Bank may request, in a form and substance
reasonably satisfactory to Bank, and (y) irrevocably authorizes Bank at any time, and from time to time, to file (and if
necessary to execute) in any jurisdiction any financing statements and any amendment to any financing statement. Each
Obligor further ratifies and affirms its authorization for any financing statements and/or amendments thereto filed by
Bank in any jurisdiction on or prior to the date of this Agreement.
     8.3 Loss of Value of Collateral . Each Obligor shall immediately notify Bank of any loss or depreciation in an
amount in excess of $100,000 in the aggregate in the value of the Collateral promptly upon such Obligor’s obtaining
knowledge thereof, other than loss or depreciation occurring in the Ordinary Course of Business.
      8.4 Setoff . Each Obligor agrees that Bank has all rights of setoff and banker’s lien provided by applicable law
and, in addition thereto, each Obligor agrees that (in addition to Bank’s rights with respect to proceeds of Collateral) at
any time (a) any amount owing by it under this Agreement or any other Financing Agreement is then due or (b) any
Default exists, Bank may apply to the payment of the Liabilities any and all balances, credits, deposits, accounts or
monies of such Obligor then or thereafter with Bank. Without limitation of the foregoing and in addition to Bank’s
rights with respect to the proceeds of the Collateral, each Obligor agrees that upon and after the occurrence and during
the continuance of a Default, Bank and each of its branches and offices is hereby authorized, at any time and from time
to time, without notice, (i) to setoff against, and to appropriate and apply to the payment of, the Liabilities (whether
matured or unmatured, fixed or contingent or liquidated or unliquidated) any and all amounts owing by Bank or any
such office or branch to such Obligor (whether matured or unmatured, and, in the case of deposits, whether general or
special, time or demand and however evidenced) and (ii) pending any such action, to the extent necessary, to hold such
amounts as collateral to secure such Liabilities and to return as unpaid for insufficient funds any and all checks and
other items drawn against any deposits so held as Bank may elect in its sole discretion.
                                                           -55-
       8.5 Cash Collateral . In the event that Bank has issued any Letters of Credit, Bank may, at any time after
(a) the occurrence and during the continuance of a Default, (b) demand by Bank for payment of the Liabilities as
provided in Section 9.1 hereof, (c) there exists no unpaid principal balance of the Liabilities, (d) this Agreement shall
terminate for any reason pursuant to Section 2.8 hereof, or (e) the amount of (i) the aggregate outstanding principal
balance of the Revolving Loan plus the sum of the undrawn face amount of any Letters of Credit outstanding shall
exceed the amount of (ii) the Borrowing Base plus the sum of the undrawn face amount of any Letters of Credit
outstanding, request of Borrowers’ Agent, and Borrowers thereupon shall jointly and severally deliver to Bank, cash
collateral for any Letter of Credit in an amount equal to 105% of the aggregate undrawn face amount of such Letter of
Credit. If Borrowers fail to deliver such cash to Bank promptly upon Bank’s request therefor, Bank may, without
limiting Bank’s rights or remedies arising from such failure to deliver cash, retain, as cash collateral, cash proceeds of
the Collateral in an amount equal to the aggregate undrawn face amount of all Letters of Credit then outstanding. Bank
may at any time apply any or all of such cash and cash collateral to the payment of any or all of the Liabilities,
including to the payment of any or all of any Obligor’s reimbursement obligations with respect to any Letter of Credit.
Pending such application, Bank may (but shall not be obligated to) (x) invest the same in a savings account, under
which deposits are available for immediate withdrawal, with Bank or such other bank as Bank may, in its sole
discretion, select, or (y) hold the same as a credit balance in an account with Bank in an Obligor’s name. Interest
payable on any such savings account described in the foregoing sentence shall be collected by Bank and shall be paid to
such Obligor as it is received by Bank, less any fees owing by any Obligor to Bank with respect to any Letter of Credit
and less any amounts necessary to pay any of the Liabilities which may be due and payable at such time. Bank shall
have no obligation to pay interest on any credit balances in any account opened for any Obligor pursuant to this
Agreement.
      8.6 Verification of Accounts . Bank shall have the right, at any time or times after the Closing Date, in Bank’s
name or in the name of a nominee of Bank, to verify the validity, amount or any other matter relating to any Accounts,
by mail, telephone, telegraph or otherwise and to sign any Obligor’s name on any verification of Accounts and notices
thereof to Account Debtors.
       8.7 Notification to Account Debtors and Other Persons Obligated on Collateral . If a Default shall have
occurred and be continuing, each Obligor shall, at the request and option of Bank, notify Account Debtors and other
Persons obligated on any of the Collateral of the Liens of Bank in any Account, chattel paper, general intangible,
instrument or other Collateral and that payment thereof is to be made directly to Bank or to any financial institution
designated by Bank as Bank’s agent therefor, and Bank may itself, if a Default shall have occurred and be continuing,
without notice to or demand upon any Obligor, so notify Account Debtors and other Persons obligated on Collateral.
After the making of such a request or the giving of any such notification, each Obligor shall hold any proceeds of
collection of Accounts, chattel paper, general intangibles, instruments and other Collateral received by such Obligor as
trustee for Bank without commingling the same with other funds of such Obligor and shall turn the same over to Bank
in the identical form received, together with any necessary endorsements or assignments. Bank shall apply the proceeds
of collection of Accounts, chattel paper, general intangibles, instruments and other Collateral received by Bank to the
Liabilities as provided in
                                                          -56-
this Agreement, such proceeds to be immediately credited after final payment in cash or other immediately available
funds of the items giving rise to them.
      8.8 Inventory Records . Each Obligor shall at all times hereafter maintain a perpetual inventory, keeping
correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, and such
Obligor’s cost therefor and daily withdrawals therefrom and additions thereto, all of which records shall be available
during such Obligor’s usual business hours at the request of any of Bank’s officers, employees or agents. Each Obligor
shall conduct a physical count of the Inventory at least once each year (and, following the occurrence and during the
continuance of a Default, each Obligor shall promptly make such additional counts as may be requested by Bank).
Promptly following any such counts of Inventory, Obligors shall supply Bank with a report in a form and with such
specificity as may be satisfactory to Bank concerning such physical count of the Inventory.
      8.9 Equipment Records . Each Obligor shall at all times hereafter keep correct and accurate records itemizing
and describing the kind, type, age and condition of Equipment, such Obligor’s cost therefor and accumulated
depreciation thereof; and retirements, sales or other dispositions thereof, all of which records shall be available during
such Obligor’s usual business hours on demand to any of the officers, employees or agents of Bank. All Equipment is
and shall be kept at the locations specified on Schedule 4.21 .
      8.10 Safekeeping . Bank shall not be responsible for: (a) the safekeeping of the Collateral, (b) any loss of or
damage to the Inventory, (c) any diminution in the value of the Collateral, or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, any repairman, bailee or any other Person with respect to the Collateral. All
risk of loss, damage, destruction or diminution in value of the Collateral shall be borne by Obligors.
      8.11 Other Actions . To further the attachment, perfection and first priority of, and the ability of Bank to
enforce, Bank’s Liens in or on the Collateral, and without limitation on any Obligor’s other obligations in this
Agreement,