Document:

Exhibit 10.10

TILE SHOP
HOLDINGS, INC.

2012 equity
award plan

 

1.     
     Purpose and Effective Date.

 

(a)          Purpose.
The Tile Shop Holdings, Inc. 2012 Equity Award Plan (the “Plan”) has several complementary purposes: (i) to promote
the growth and success of Tile Shop Holdings, Inc. (the “Company”) by linking a significant portion of Participant
compensation to the increase in value of the Company’s common stock, par value $0.0001 per share (the “Common Stock”);
(ii) to attract and retain top quality, experienced executive officers and employees by offering a competitive incentive compensation
program; (iii) to reward innovation and outstanding performance as important contributing factors to the Company 's growth and
progress; (iv) to align the interests of executive officers, employees, Directors and Consultants with those of the Company’s
shareholders by reinforcing the relationship between Participant rewards and shareholder gains obtained through the achievement
by Plan Participants of short-term objectives and long-term goals; and (iv) to encourage executive officers, employees, Directors
and Consultants to obtain and maintain an equity interest in the Company.

 

(b)          Effective
Date. The Plan will become effective, and Awards may be granted under the Plan, on and after the Effective Date; provided that
any Awards granted prior to the date the Plan is approved by the Company’s shareholders shall be contingent on such approval.

 

2.       
   Definitions. Capitalized terms used but not otherwise
defined in the Plan shall have the following meanings:

 

(a)          “10%
Stockholder” means an Participant who, as of the date that an Incentive Stock Option is granted to such individual, owns
more than ten percent (10%) of the total combined voting power of all classes of capital stock then issued by the Company or a
Subsidiary.

 

(b)          “Affiliate”
and “Associate” have the respective meanings ascribed to such terms in Rule 12b-2 under the Exchange Act. Notwithstanding
the foregoing, for purposes of determining those individuals to whom an Option may be granted, the term “Affiliate”
means any entity that, directly or through one or more intermediaries, is controlled by, controls, or is under common control with
the Company within the meaning of Code Sections 414(b) or (c); provided that, in applying such provisions, the phrase “at
least 20 percent” shall be used in place of “at least 80 percent” each place it appears therein.

 

(c)          “Award”
means a grant of Options or Restricted Stock.

 

(d)          “Board”
means the Board of Directors of the Company.

 

(e)          “Cause”
means, except as otherwise determined by the Committee and set forth in an Award agreement, such act or omission by a Participant
as is determined by the Committee to constitute cause for termination, including but not limited to any of the following: (i) a
material violation of any Company policy, including but not limited to any policy contained in the Company’s Code of Business
Conduct and Ethics; (ii) embezzlement from, or theft of property belonging to, the Company or any Affiliate; (iii) willful failure
to perform, or gross negligence in the performance of, assigned duties; or (iv) other intentional misconduct, whether related to
employment or otherwise, which has, or has the potential to have, a material adverse effect on the business conducted by the Company
or its Affiliates.

 

    	 

    	 

    

 

(f)          “Change
of Control” means (unless otherwise expressly provided in a particular Award, employment, and/or severance agreement) any
of the following:

 

(i)          a
transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement
filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons”
(as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its Subsidiaries, an
employee benefit plan maintained by the Company or any of its Subsidiaries or a “person” that, prior to such transaction,
directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company possessing more than
50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; or

 

(ii)         during
any period of two consecutive years, individuals who, at the beginning of such period, constitute the Board together with any new
director(s) (other than a director designated by a person who shall have entered into an agreement with the Company to effect a
transaction described in Section 2(f)(i) or Section 2(f)(iii)) whose election by the Board or nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the
beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason
to constitute a majority thereof; or

 

(iii)        the
consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries)
of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially
all of the Company’s assets in any single transaction or series of related transactions, in each case other than a transaction:

 

(A)         that
results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either
by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction,
controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s
assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly
or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately
after the transaction, and

 

(B)         after
which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor
Entity; provided, however, that no person or group shall be treated for purposes of this Section 2(f)(iii)(B) as beneficially
owning 50% or more of combined voting power of the Successor Entity solely as a result of the voting power held in the Company
prior to the consummation of the transaction; or

 

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(iv)        the
Company’s shareholders approve a liquidation or dissolution of the Company.

 

Notwithstanding the foregoing, with respect
to an Award that is considered deferred compensation subject to Code Section 409A, the definition of “Change of Control”
shall be amended and interpreted in a manner that allows the definition to satisfy the requirements of a change of control under
Code Section 409A solely for purposes of determining the timing of payment of such Award.

 

The Committee shall have full and final
authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control of the Company has
occurred pursuant to the above definition, and the date of the occurrence of such Change in Control and any incidental matters
relating thereto.

 

(g)          “Code”
means the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code includes any successor provision
and the regulations promulgated under such provision.

 

(h)          “Committee”
means the Compensation Committee of the Board (or a successor committee with the same or similar authority).

 

(i)          “Consultant”
means a Person or entity rendering services to the Company or an Affiliate other than as an employee of any such entity or a Director.

 

(j)          “Director”
means a member of the Board.

 

(k)          “Disability”
means, except as otherwise determined by the Committee and set forth in an Award agreement: (i) with respect to an Incentive Stock
Option, the meaning given in Code Section 22(e)(3), and (ii) with respect to all other Awards, a physical or mental incapacity
which qualifies an individual to collect a benefit under a long term disability plan maintained by the Company, or such similar
mental or physical condition which the Committee may determine to be a disability, regardless of whether either the individual
or the condition is covered by any such long term disability plan. The Committee shall make the determination of Disability and
may request such evidence of Disability as it reasonably determines.

 

(l)          “Effective
Date” means the date of the consummation of the transactions contemplated pursuant to that certain Contribution and Merger
Agreement, dated as of June 27, 2012, by and between JWC Acquisition Corp., The Tile Shop, LLC (“The Tile Shop”), ILTS,
LLC, The Tile Shop, Inc., JWTS, Inc., each of the other members of The Tile Shop is a party thereto, Nabron International Inc.,
the Company, Tile Shop Merger Sub, Inc., and Peter Jacullo.

 

(m)          “Exchange
Act” means the Securities Exchange Act of 1934, as amended. Any reference to a specific provision of the Exchange Act includes
any successor provision and the regulations and rules promulgated under such provision.

 

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(n)          “Fair
Market Value” means, per Share on a particular date, the last sales price on such date on the NASDAQ Stock Market, as reported
in The Wall Street Journal, or if no sales of Common Stock occur on the date in question, on the last preceding date on which there
was a sale on such market. If the Shares are not listed on the NASDAQ Stock Market, but are traded on a national securities exchange
or in another over-the-counter market, the last sales price (or, if there is no last sales price reported, the average of the closing
bid and asked prices) for the Shares on the particular date, or on the last preceding date on which there was a sale of Shares
on that exchange or market, will be used. If the Shares are neither listed on a national securities exchange nor traded in an over-the-counter
market, the price determined by the Committee, in its discretion, will be used.

 

(o)          “Incentive
Stock Option” means an Option that meets the requirements of Code Section 422.

 

(p)          “Non-Employee
Director” means a Director who is not an employee of the Company or any Subsidiary.

 

(q)          “Nonqualified
Stock Option” means an Option that does not meet the requirements of Code Section 422.

 

(r)          “Option”
means the right to purchase Shares at a stated price for a specified period of time.

 

(s)          “Participant”
means an individual selected by the Committee to receive an Award.

 

(t)          “Performance
Goals” means any goals the Committee establishes that relate to one or more of the following with respect to the Company
or any one or more of its Subsidiaries, Affiliates or other business units: net income; income from continuing operations; stockholder
return; stock price appreciation; earnings per share (including diluted earnings per share); net operating profit (including after-tax);
revenue growth; organic sales growth; return on equity; return on investment; return on invested capital (including after-tax);
earnings before interest, taxes, depreciation and amortization; operating income; operating margin; market share; return on sales;
asset reduction; cost reduction; return on equity; cash flow (including free cash flow); bookings; and new product releases. As
to each Performance Goal, the relevant measurement of performance shall be computed in accordance with generally accepted accounting
principles, if applicable; provided that, the Committee may, at the time of establishing the Performance Goal(s), exclude the effects
of (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a business,
(iii) changes in tax regulations or laws, or (iv) the effect of a merger or acquisition. Notwithstanding the foregoing, the calculation
of any Performance Goal established for purposes of an Award shall be made without regard to changes in accounting methods used
by the Company or in accounting standards that may be required by the Financial Accounting Standards Board after a Performance
Goal relative to an Award is established and prior to the time the compensation earned by reason of the achievement of the relevant
Performance Goal is paid to the Participant. In the case of Awards that the Committee determines will not be considered “performance-based
compensation” under Code Section 162(m), the Committee may establish other Performance Goals not listed in the Plan.
Where applicable, the Performance Goals may be expressed, without limitation, in terms of attaining a specified level of the particular
criterion or the attainment of an increase or decrease (expressed as absolute numbers or a percentage) in the particular criterion
or achievement in relation to a peer group or other index. The Performance Goals may include a threshold level of performance below
which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be paid (or specified
vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting
will occur).

 

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(u)          “Person”
has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof.

 

(v)         “Restriction
Period” means the length of time established relative to an Award during which (i) the Participant cannot sell, assign, transfer,
pledge or otherwise encumber the Common Stock subject to such Award or during which the Common Stock are subject to vesting or
a right of repurchase in favor of the Company and (ii) at the end of which the Participant obtains an unrestricted right to such
Common Stock.

 

(w)          “Restricted
Stock” means a Share that is subject to a risk of forfeiture or restrictions on transfer, or both a risk of forfeiture and
restrictions on transfer.

 

(x)          “Section 16
Participants” means Participants who are subject to the provisions of Section 16 of the Exchange Act.

 

(y)          “Share”
means a share of Common Stock.

 

(z)          “Subsidiary”
means any corporation or limited liability company (except that is treated as a partnership for U.S. income tax purposes) in an
unbroken chain of entities beginning with the Company if each of the entities (other than the last entity in the chain) owns stock
or equity interests possessing more than fifty percent (50%) of the total combined voting power of all classes of stock or equity
interests in one of the other entities in the chain.

 

3.        
  Administration.

 

(a)          Committee
Administration. The Committee shall administer the Plan. In addition to the authority specifically granted to the Committee
in the Plan, the Committee has full discretionary authority to administer the Plan, including but not limited to the authority
to: (i) interpret the provisions of the Plan; (ii) prescribe, amend and rescind rules and regulations relating to the
Plan; (iii) correct any defect, supply any omission, or reconcile any inconsistency in any Award or agreement covering an
Award in the manner and to the extent it deems desirable to carry the Plan into effect; and (iv) make all other determinations
necessary or advisable for the administration of the Plan. All Committee determinations are final and binding.

 

Notwithstanding the above statement or any
other provision of the Plan, once established, the Committee shall have no discretion to increase the amount of compensation payable
under an Award that is intended to be performance-based compensation under Code Section 162(m), although the Committee may decrease
the amount of compensation a Participant may earn under such an Award. Any action by the Committee to accelerate or otherwise amend
an Award for reasons other than retirement, death, Disability or a termination by the Company without Cause, or in connection with
a Change of Control, shall include application of a commercially reasonable discount to the compensation otherwise payable to reflect
the value of the accelerated payment.

 

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(b)          Delegation
to Other Committees or Officers. To the extent applicable law permits, the Board may delegate to another committee of the Board
or the Committee may delegate to one or more officers of the Company, any or all of the authority and responsibility of the Committee;
provided that no such delegation is permitted with respect to Awards made to Section 16 Participants at the time any such
delegated authority or responsibility is exercised. The Board may also delegate to another committee of the Board consisting entirely
of Non-Employee Directors any or all of the authority and responsibility of the Committee with respect to individuals who are Section 16
Participants. In addition, the Board may reserve for itself any and all authority or responsibility previously delegated to any
Committee. If the Board or the Committee has made such a delegation, then all references to the Committee in the Plan include the
Board, such other committee, or one or more officers to the extent of such delegation.

 

Notwithstanding anything contained
herein to the contrary, only the full Board shall have the authority to administer the Plan with respect to Awards granted to Non-Employee
Directors.

 

(c)          Indemnification.
The Company will indemnify and hold harmless each member of the Board and the Committee, and each officer or member of any other
committee to whom a delegation under Section 3(b) has been made, as to any acts or omissions with respect to the Plan or any
Award to the maximum extent that the law and the Company’s By-Laws permit.

 

4.     
     Eligibility. The Committee may designate any of
the following as a Participant from time to time, to the extent of the Committee’s authority: any executive officer,
employee, Consultant or Director of the Company or any Subsidiary. The Committee’s granting of an Award to a
Participant will not require the Committee to grant an Award to such individual at any future time. The Committee’s
granting of a particular type of Award to a Participant will not require the Committee to grant any other type of Award to
such individual.

 

5.    
     Types of Awards. Subject to the terms of the
Plan, the Committee may grant any type of Award to any Participant it selects; provided, however that only executive officers
and employees of the Company or a Subsidiary may receive grants of Incentive Stock Options. Awards may be granted alone or in
addition to, in tandem with, or in substitution for, any other Award (or any other award granted under another equity
compensation plan of the Company or any Affiliate).

 

6.     
     Shares Reserved under the Plan.

 

(a)          Plan
Reserve. Subject to adjustment as provided in Section 12, an aggregate of 2,500,000 Shares are reserved for issuance under
the Plan. On January 1 of each year beginning after the Effective Date, an additional number of Shares shall become available for
issuance under the Plan equal to the lesser of: (i) 2,500,000 Shares; (ii) six percent (6%) of the number of Shares issued and
outstanding (on an as-converted basis) as of the immediately preceding December 31; and (iii) another amount determined by the
Board. Subject to Section 6(b) and Section 12(a), all Shares reserved for issuance under the Plan may be issued as Incentive Stock
Options.

 

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(b)          Replenishment
of Shares Under the Plan. The number of Shares reserved for issuance under the Plan shall be reduced only by the number of
Shares actually delivered in payment or settlement of Awards. If Shares are forfeited under an Award, or if Shares are issued under
any Award and the Company subsequently reacquires them pursuant to rights reserved upon the issuance of the Shares, or if previously
owned Shares are delivered to the Company in payment of the exercise price or withholding taxes of an Award, then such Shares may
again be used for new Awards under the Plan under Section 6(a), but such Shares may not be issued pursuant to an Incentive Stock
Option.

 

(c)          Limitation
on Number of Shares Subject to Awards. Notwithstanding any provision in the Plan to the contrary, and subject to Section 12(a),
the maximum number of Shares with respect to one or more Awards that may be granted to (or where the value of the Award is based
on the Fair Market Value of the Shares, is with respect to) any one Participant during any calendar year shall be 2,000,000

 

7.        
  Options. Subject to the terms of the Plan, the Committee will
determine all terms and conditions of each Option, including but not limited to:

 

(a)          Whether
the Option is an Incentive Stock Option or a Nonqualified Stock Option;

 

(b)          The
number of Shares subject to the Option;

 

(c)          The
date of grant, which may not be prior to the date of the Committee’s approval of the grant;

 

(d)          The
exercise price, which may not be less than the Fair Market Value of the Shares subject to the Option as determined on the date
of grant; provided that an Incentive Stock Option granted to a 10% Stockholder must have an exercise price at least equal to 110%
of the Fair Market Value of the Shares subject to the Option as determined on the date of grant;

 

(e)          The
terms and conditions of exercise; provided, however, that, if the aggregate Fair Market Value of the Shares subject to the Option
(as determined on the date of grant of such Option) that becomes exercisable during a calendar year exceeds $100,000, then such
Option shall be treated as a Nonqualified Stock Option to the extent such $100,000 limitation is exceeded; and

 

(f)          The
term of the Option; provided, however, that each Option must terminate no later than ten (10) years after the date of grant
and each Incentive Stock Option granted to a 10% Stockholder must terminate no later than five (5) years after the date of grant.

 

In all other respects, the terms of any Incentive
Stock Option should comply with the provisions of Code Section 422 except to the extent the Committee determines otherwise.
If an Option that is intended to be an Incentive Stock Option fails to meet the requirements thereof, the Option shall automatically
be treated as a Nonqualified Stock Option to the extent of such failure.

 

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Subject to the terms and conditions of the
Award, vested Options may be exercised, in whole or in part, by giving notice of exercise to the Company in such manner as the
Company may prescribe. This notice must be accompanied by payment in full of the exercise price in cash or by use of such other
instrument as the Committee may agree to accept.

 

Payment of the exercise price, applicable
withholding taxes due upon exercise of the Option, or both may be made in the form of Common Stock already owned by the Participant,
which Common Stock shall be valued at Fair Market Value on the date the Option is exercised. A Participant who elects to make payment
in Common Stock may not transfer fractional shares or shares of Common Stock with an aggregate Fair Market Value in excess of the
Option exercise price plus applicable withholding taxes. A Participant need not present stock certificates when making payment
in Common Stock, so long as other satisfactory proof of ownership of the Common Stock tendered is provided (e.g., attestation of
ownership of a sufficient number of shares of Common Stock to pay the exercise price). The Committee shall have the discretion
to authorize or accept payment by other forms or methods or to establish a cashless exercise program, all within such limitations
as may be imposed by the Plan or any applicable law.

 

8.      
    Restricted Stock Awards. Subject to the terms of the
Plan, the Committee will determine all terms and conditions of each Award of Restricted Stock, including but not limited
to:

 

(a)          The
number of Shares and/or units to which such Award relates;

 

(b)          Whether,
as a condition for the Participant to realize all or a portion of the benefit provided under the Award, one or more Performance
Goals must be achieved during such period as the Committee specifies; and

 

(c)          The
Restriction Period with respect to Restricted Stock.

 

During the Restriction Period, the
Participant shall have all of the rights of a shareholder with respect to the Restricted Stock, including the right to vote such
Restricted Stock and, unless the Committee shall otherwise provide, the right to receive dividends paid with respect to such Restricted
Stock.

 

Except as otherwise provided in the
Plan, at such time as all restrictions applicable to an Award of Restricted Stock and the Restriction Period expires, ownership
of the Common Stock subject to such restrictions shall be transferred to the Participant free of all restrictions except those
that may be imposed by applicable law.

 

9.       
   Transferability.

 

(a)          Restrictions
on Transfer. Awards are not transferable other than by will or the laws of descent and distribution, unless and to the extent
the Committee allows a Participant to designate in writing a beneficiary to exercise the Award or receive payment under an
Award after the Participant’s death or transfer an Award as provided in Section 9(b).

 

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(b)          Permitted
Transfers. If allowed by the Committee, a Participant may transfer the ownership of some or all of the vested or earned Awards
granted to such Participant, other than Incentive Stock Options to (i) the spouse, children or grandchildren of such Participant
(the “Family Members”), (ii) a trust or trusts established for the exclusive benefit of such Family Members, or (iii)
a partnership in which such Family Members are the only partners. Notwithstanding the foregoing, vested or earned Awards may be
transferred without the Committee’s pre-approval if the transfer is made incident to a divorce as required pursuant to the
terms of a “domestic relations order” as defined in Section 414(p) of the Code; provided that no such transfer will
be allowed with respect to Incentive Stock Options if such transferability is not permitted by Code Section 422. Any such transfer
shall be without consideration and shall be irrevocable. No Award so transferred may be subsequently transferred, except by will
or applicable laws of descent and distribution. The Committee may create additional conditions and requirements applicable to the
transfer of Awards. Following the allowable transfer of a vested Option, such Option shall continue to be subject to the same terms
and conditions as were applicable to the Option immediately prior to the transfer. For purposes of settlement of the Award, delivery
of Stock upon exercise of an Option and the Plan’s Change of Control provisions, however, any reference to a Participant
shall be deemed to refer to the transferee.

 

10.     
    Termination and Amendment of Plan; Amendment, Modification or Cancellation of
Awards.

 

(a)          Term
of Plan. Unless the Board earlier terminates the Plan pursuant to Section 10(b), the Plan will terminate on the earlier of
the date all Shares reserved for issuance have been issued or the date that is ten (10) years following the Effective Date.

 

(b)          Termination
and Amendment. The Board or the Committee may amend, alter, suspend, discontinue or terminate the Plan at any time, subject
to the following limitations:

 

(i)          the
Board must approve any amendment of the Plan to the extent the Company determines such approval is required by: (A) action
of the Board, (B) applicable corporate law, or (C) any other applicable law;

 

(ii)         shareholders
must approve any amendment of the Plan to the extent the Company determines such approval is required by: (A) Section 16
of the Exchange Act, (B) the Code, (C) the listing requirements of any principal securities exchange or market on which
the Shares are then traded, or (D) any other applicable law; and

 

(iii)        shareholders
must approve any of the following Plan amendments: (A) an amendment to materially increase any number of Shares specified
in Section 6(a), 6(b) or the limits set forth in Section 6(c) (except as permitted by Section 12), (B) an amendment to
expand the group of individuals that may become Participants, or (C) an amendment that would diminish the protections afforded
by Section 10(e) or that would materially change the minimum vesting and performance requirements of an Award as required
in the Plan.

 

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(c)          Amendment,
Modification or Cancellation of Awards. Except as provided in Section 10(e) and subject to the requirements of the Plan,
the Committee may modify, amend or cancel any Award; or waive any restrictions or conditions applicable to any Award or the exercise
of the Award; provided, however, that any modification or amendment that materially diminishes the rights of the Participant,
or the cancellation of the Award, shall be effective only if agreed to by the Participant or any other Person(s) as may then have
an interest in the Award, but the Committee need not obtain Participant (or other interested party) consent for the adjustment
or cancellation of an Award pursuant to the provisions of Section 12 or the modification of an Award to the extent deemed
necessary to comply with any applicable law, the listing requirements of any principal securities exchange or market on which the
Shares are then traded, or to preserve favorable accounting or tax treatment of any Award for the Company. Notwithstanding the
foregoing, unless determined otherwise by the Committee, any such amendment shall be made in a manner that will enable an Award
intended to be exempt from Code Section 409A to continue to be so exempt, or to enable an Award intended to comply with Code Section
409A to continue to so comply.

 

(d)          Survival
of Authority and Awards. Notwithstanding the foregoing, the authority of the Board and the Committee under this Section 10
and to otherwise administer the Plan will extend beyond the date of the Plan’s termination. In addition, termination of the
Plan will not affect the rights of Participants with respect to Awards previously granted to them, and all unexpired Awards will
continue in force and effect after termination of the Plan except as they may lapse or be terminated by their own terms and conditions.

 

(e)          Repricing
and Backdating Prohibited. Notwithstanding anything in the Plan to the contrary, and except for the adjustments provided in
Section 12, neither the Committee nor any other Person may decrease the exercise price for any outstanding Option after the
date of grant nor allow a Participant to surrender an outstanding Option to the Company as consideration for the grant of a new
Option with a lower exercise price. In addition, the Committee may not make a grant of an Option with a grant date that is effective
prior to the date the Committee takes action to approve such Award.

 

(f)          Foreign
Participation. To assure the viability of Awards granted to Participants employed or residing in foreign countries, the Committee
may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy
or custom. Moreover, the Committee may approve such supplements to, or amendments, restatements or alternative versions of, the
Plan as it determines is necessary or appropriate for such purposes. Any such amendment, restatement or alternative versions that
the Committee approves for purposes of using the Plan in a foreign country will not affect the terms of the Plan for any other
country. In addition, all such supplements, amendments, restatements or alternative versions must comply with the provisions of
Section 10(b)(ii).

 

In addition, if an Award is held
by a Participant who is employed or residing in a foreign country and the amount payable or Shares issuable under such Award would
be taxable to the Participant under Code Section 457A in the year such Award is no longer subject to a substantial risk of forfeiture,
then the amount payable or Shares issuable under such Award shall be paid or issued to the Participant as soon as practicable after
such substantial risk of forfeiture lapses (or, for Awards that are not considered nonqualified deferred compensation subject to
Code Section 409A, no later than the end of the short-term deferral period permitted by Code Section 457A) notwithstanding anything
in the Plan or the Award Agreement to contrary.

 

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(g)          Code
Section 409A. The provisions of Code Section 409A are incorporated herein by reference to the extent necessary for any Award
that is subject to Code Section 409A to comply therewith.

 

11.     
    Taxes.

 

(a)          Withholding.
In the event the Company or an Affiliate of the Company is required to withhold any Federal, state or local taxes or other amounts
in respect of any income recognized by a Participant as a result of the grant, vesting, payment or settlement of an Award or disposition
of any Shares acquired under an Award, the Company may deduct (or require an Affiliate to deduct) from any payments of any kind
otherwise due to the Participant cash, or with the consent of the Committee, Shares otherwise deliverable or vesting under an Award,
to satisfy such tax obligations. Alternatively, the Company may require such Participant to pay to the Company, in cash, promptly
on demand, or make other arrangements satisfactory to the Company regarding the payment to the Company of the aggregate amount
of any such taxes and other amounts. If Shares are deliverable upon exercise or payment of an Award, the Committee may permit a
Participant to satisfy all or a portion of the Federal, state and local withholding tax obligations arising in connection with
such Award by electing to (a) have the Company withhold Shares otherwise issuable under the Award, (b) tender back Shares
received in connection with such Award or (c) deliver other previously owned Shares; provided, however, that the amount to
be withheld may not exceed the total minimum Federal, state and local tax withholding obligations associated with the transaction
to the extent needed for the Company to avoid an accounting charge. If an election is provided, the election must be made on or
before the date as of which the amount of tax to be withheld is determined and otherwise as the Committee requires. In any case,
the Company may defer making payment or delivery under any Award if any such tax may be pending unless and until indemnified to
its satisfaction.

 

(b)          No
Guarantee of Tax Treatment. Notwithstanding any provisions of the Plan, the Company does not guarantee to any Participant or
any other Person with an interest in an Award that (i) any Award intended to be exempt from Code Section 409A shall be so exempt,
(ii) any Award intended to comply with Code Section 409A or Code Section 422 shall so comply, (iii) any Award shall otherwise receive
a specific tax treatment under any other applicable tax law, nor in any such case will the Company or any Affiliate indemnify,
defend or hold harmless any Person with respect to the tax consequences of any Award.

 

(c)          Participant
Responsibilities. If a Participant shall dispose of Common Stock acquired through exercise of an Incentive Stock Option within
either (i) two (2) years after the date the Option is granted or (ii) one (1) year after the date the Option is exercised (i.e.,
in a disqualifying disposition), such Participant shall notify the Company within seven (7) days of the date of such disqualifying
disposition. In addition, if a Participant elects, under Code Section 83, to be taxed at the time an Award of Restricted Stock
(or other property subject to such Code Section) is made, rather than at the time the Award vests, such Participant shall notify
the Company within seven (7) days of the date the Restricted Stock subject to the election is awarded.

 

    	11

    	 

    

 

12.       
  Adjustment Provisions; Change of Control.

 

(a)          Adjustment
of Shares. If: (i) the Company shall at any time be involved in a merger or other transaction in which the Shares are changed
or exchanged, (ii) the Company shall subdivide or combine the Shares or the Company shall declare a dividend payable in Shares,
other securities or other property, (iii) the Company shall effect a cash dividend the amount of which, on a per Share basis, exceeds
ten percent (10%) of the Fair Market Value of a Share at the time the dividend is declared, or the Company shall effect any other
dividend or other distribution on the Shares in the form of cash, or a repurchase of Shares, that the Board determines by resolution
is special or extraordinary in nature or that is in connection with a transaction that the Company characterizes publicly as a
recapitalization or reorganization involving the Shares, or (iv) any other event shall occur, which, in the case of this clause
(iv), in the judgment of the Board or Committee necessitates an adjustment to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable
to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, adjust as
applicable: (A) the number and type of Shares subject to the Plan (including the number and type of Shares described in Sections
6(a) and (b)) and which may after the event be made the subject of Awards; (B) the number and type of Shares subject to outstanding
Awards; (C) the grant, purchase, or exercise price with respect to any Award; and (D) to the extent such discretion does not
cause an Award that is intended to qualify as performance-based compensation under Code Section 162(m) to lose its status as such,
the Performance Goals of an Award. In each case, with respect to Awards of Incentive Stock Options, no such adjustment may be authorized
to the extent that such authority would cause the Plan to violate Code Section 422(b).

 

Without limitation, in the event of any reorganization,
merger, consolidation, combination or other similar corporate transaction or event, whether or not constituting a Change of Control
(other than any such transaction in which the Company is the continuing corporation and in which the outstanding Common Stock is
not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Committee
may substitute, on an equitable basis as the Committee determines, for each Share then subject to an Award and the Shares subject
to the Plan (if the Plan will continue in effect), the number and kind of shares of stock, other securities, cash or other property
to which holders of Common Stock are or will be entitled in respect of each Share pursuant to the transaction.

 

Notwithstanding the foregoing, in the case
of a stock dividend (other than a stock dividend declared in lieu of an ordinary cash dividend) or subdivision or combination of
the Shares (including a reverse stock split), if no action is taken by the Committee, adjustments contemplated by this Section
12(a) that are proportionate shall nevertheless automatically be made as of the date of such stock dividend or subdivision or combination
of the Shares.

 

(b)          Issuance
or Assumption. Notwithstanding any other provision of the Plan, and without affecting the number of Shares otherwise reserved
or available under the Plan, in connection with any merger, consolidation, acquisition of property or stock, or reorganization,
the Committee may authorize the issuance or assumption of awards under the Plan upon such terms and conditions as it may deem appropriate.

 

    	12

    	 

    

 

(c)          Change
of Control. If the Participant has in effect an employment, retention, change of control, severance or similar agreement with
the Company or any Affiliate that discusses the effect of a Change of Control on the Participant’s Awards, then such agreement
shall control in the event of a Change of Control. In all other cases, in the event of a Change of Control, the Committee may,
in its sole discretion (i) elect to accelerate, in whole or in part, the vesting of any Award, (ii) elect to make cash payments
payable as a result of the acceleration of vesting of any Award, or (iii) elect to cancel any Options as of the date of the Change
of Control in exchange for a cash payment equal to the excess of the Change of Control price of the Shares covered by the Option
that is so cancelled over the purchase or grant price of such Shares under the Award.

 

Except as otherwise expressly provided in
any agreement between a Participant and the Company or an Affiliate, if the receipt of any payment by a Participant under the circumstances
described above would result in the payment by the Participant of any excise tax provided for in Section 280G and Section 4999
of the Code, then the amount of such payment shall be reduced to the extent required to prevent the imposition of such excise tax.

 

13.   
      Miscellaneous.

 

(a)          Other
Terms and Conditions. The grant of any Award may also be subject to other provisions (whether or not applicable to the Award
granted to any other Participant) as the Committee determines appropriate, including, without limitation, provisions for:

 

(i)          the
payment of the purchase price of Options by delivery of cash or other Shares or other securities of the Company (including by attestation)
having a then Fair Market Value equal to the purchase price of such Shares, or by delivery (including by fax) to the Company or
its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer
to sell or margin a sufficient portion of the Shares and deliver the sale or margin loan proceeds directly to the Company to pay
for the exercise price;

 

(ii)         restrictions
on resale or other disposition of Shares; and

 

(iii)        compliance
with federal or state securities laws and stock exchange requirements.

 

(b)          Employment
and Service. The issuance of an Award shall not confer upon a Participant any right with respect to continued employment or
service with the Company or any Affiliate, or the right to continue as a Director. Unless determined otherwise by the Committee,
for purposes of the Plan and all Awards, the following rules shall apply:

 

(i)          a
Participant who transfers employment between the Company and its Affiliates, or between Affiliates, will not be considered to have
terminated employment;

 

(ii)         a
Participant who ceases to be a Non-Employee Director because he or she becomes an employee of the Company or an Affiliate shall
not be considered to have ceased service as a Non-Employee Director with respect to any Award until such Participant’s termination
of employment with the Company and its Affiliates;

 

    	13

    	 

    

 

(iii)        a
Participant who ceases to be employed by the Company or an Affiliate and immediately thereafter becomes a Non-Employee Director,
a non-employee director of an Affiliate, or a consultant to the Company or any Affiliate shall not be considered to have terminated
employment until such Participant’s service as a director of, or consultant to, the Company and its Affiliates has ceased;
and

 

(iv)        a
Participant employed by an Affiliate will be considered to have terminated employment when such entity ceases to be an Affiliate.

 

Notwithstanding the foregoing, for purposes
of an Award that is subject to Code Section 409A, if a Participant’s termination of employment or service triggers the payment
of compensation under such Award, then the Participant will be deemed to have terminated employment or service upon his or her
“separation from service” within the meaning of Code Section 409A.

 

(c)          No
Fractional Shares. No fractional Shares or other securities may be issued or delivered pursuant to the Plan, and the Committee
may determine whether cash, other securities or other property will be paid or transferred in lieu of any fractional Shares or
other securities, or whether such fractional Shares or other securities or any rights to fractional Shares or other securities
will be canceled, terminated or otherwise eliminated.

 

(d)          Unfunded
Plan. This Plan is unfunded and does not create, and should not be construed to create, a trust or separate fund with respect
to the Plan’s benefits. This Plan does not establish any fiduciary relationship between the Company and any Participant or
other Person. To the extent any Person holds any rights by virtue of an Award granted under the Plan, such rights are no greater
than the rights of the Company’s general unsecured creditors.

 

(e)          Requirements
of Law and Securities Exchange. The granting of Awards and the issuance of Shares in connection with an Award are subject to
all applicable laws, rules and regulations and to such approvals by any governmental agencies or securities exchanges as may be
required. Notwithstanding any other provision of the Plan or any Award agreement, the Company has no liability to deliver any Shares
under the Plan or make any payment unless such delivery or payment would comply with all applicable laws and the applicable requirements
of any securities exchange or similar entity, and unless and until the Participant has taken all actions required by the Company
in connection therewith. The Company may impose such restrictions on any Shares issued under the Plan as the Company determines
necessary or desirable to comply with all applicable laws, rules and regulations or the requirements of any national securities
exchanges.

 

(f)          Governing
Law. This Plan, and all agreements under the Plan, will be construed in accordance with and governed by the laws of the State
of Delaware, without reference to any conflict of law principles. Any legal action or proceeding with respect to the Plan, any
Award or any award agreement, or for recognition and enforcement of any judgment in respect of the Plan, any Award or any award
agreement, may only be heard in a “bench” trial, and any party to such action or proceeding shall agree to waive its
right to a jury trial.

 

    	14

    	 

    

 

(g)          Limitations
on Actions. Any legal action or proceeding with respect to the Plan, any Award or any Award agreement, must be brought within
one (1) year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint.

 

(h)          Construction.
Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases
where they would so apply; and wherever any words are used in the singular or plural, they shall be construed as though they were
used in the plural or singular, as the case may be, in all cases where they would so apply. Title of sections are for general information
only, and the Plan is not to be construed with reference to such titles.

 

(i)          Severability.
If any provision of the Plan or any award agreement or any Award (i) is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction, or as to any Person or Award, or (ii) would disqualify the Plan, any award agreement or
any Award under any law the Committee deems applicable, then such provision should be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering
the intent of the Plan, award agreement or Award, then such provision should be stricken as to such jurisdiction, Person or Award,
and the remainder of the Plan, such award agreement and such Award will remain in full force and effect.

 

    	15

    	 

    

 

TILE SHOP HOLDINGS, INC.

 

INCENTIVE STOCK OPTION AGREEMENT

 

1.      
    Grant of Option. Tile Shop Holdings, Inc., a Delaware corporation (the “Company”),
hereby grants to
[
                                  ]
(the “Employee”), an option (the “Option”), pursuant to the Company’s 2012 Equity Award Plan
(the “Plan”), to purchase an aggregate of
[                          ]
shares (the “Underlying Shares”) of Common Stock, par value $0.0001 per share (“Common Stock”), of
the Company at a price of $[       ] per share (the “Exercise
Price”), purchasable as set forth in and subject to the terms and conditions of this Incentive Stock Option Agreement
(the “Agreement”) and the Plan. Except where the context otherwise requires, the term “Company” shall
include the parent and all subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the Internal Revenue Code
of 1986, as amended (the “Code”). Capitalized terms used but not otherwise defined herein shall have the meaning
ascribed to such terms in the Plan. To the extent that any term of this Agreement conflicts or is otherwise inconsistent with
any term of the Plan, as amended from time to time, the terms of the Plan shall take precedence and supersede any such
conflicting or inconsistent term contained herein.

 

2.       
   Incentive Stock Option. This Option is intended to qualify as an “incentive stock
option” within the meaning of Section 422 of the Code.

 

3.       
   Exercise of Option and Provisions for Termination.

 

(a)          Vesting
Schedule. [Vesting to be specified by the Compensation Committee of the Board of Directors.] Except as otherwise provided in
this Agreement, this Option may be exercised at any time prior to the tenth anniversary of the date of grant (or, in the case of
an option described in paragraph (f) of Section 7 of the Plan, prior to the fifth anniversary of the date of grant) (the “Expiration
Date”) in installments as to not more than the number of Underlying Shares then Vested pursuant to the provisions of this
Section 3(a). The right of exercise shall be cumulative so that if this Option is not exercised to the maximum extent permissible
during any exercise period it shall be exercisable, in whole or in part, with respect to all Underlying Shares not so purchased
at any time prior to the Expiration Date or the earlier termination of this Option. This Option may not be exercised at any time
after the Expiration Date.

 

(b)          Exercise
Procedure. Subject to the conditions set forth in this Agreement, the Employee may exercise this Option by delivery of notice
in a form (which may be electronic) approved by the Company to the Company or its designated Administrative Service (as defined
below) accompanied by payment of consideration in an amount equal to the aggregate Exercise Price for the Underlying Shares to
be purchased by such means as may be permitted by the Company or the Administrative Service, including, without limitation, by
electing that the Company or the Administrative Service withhold delivery of such number of Underlying Shares having an aggregate
Fair Market Value equal in amount to the aggregate Exercise Price for all Underlying Shares to be purchased plus the amount of
all applicable Federal, state and local income and employment tax withholding requirements and applicable fees. Such exercise shall
be effective upon receipt by the Company or the Administrative Service of such notice together with the required payment. The Employee
may purchase less than the number of Underlying Shares for which this Option is Vested at any point in time; provided, however,
that no partial exercise of this Option may be for any fractional shares. “Administrative Service” shall mean [ ].
or any successor third-party stock option administrator designated by the Company from time to time.

 

(c)          Continuous
Employment Required. Except as otherwise provided in this Section 3, this Option may not be exercised unless the Employee,
at the time that he or she exercises this Option, is, and has been at all times since the date of grant of this Option, an employee
of the Company. For all purposes of this Agreement: (i) “employment” shall be defined in accordance with the provisions
of Section 1.421-7(h) of the regulations promulgated under the Code or any successor regulations and (ii) if this Option shall
be assumed or a new option substituted therefor in a transaction to which Section 424(a) of the Code applies, employment by such
assuming or substituting corporation shall be considered for all purposes of this Option to be employment by the Company.

 

    	 

    	 

    

 

(d)          Exercise
Period Upon Termination of Employment. If the Employee ceases to be employed by the Company for any reason other than death
or Disability or a discharge for Cause, the right to exercise this Option shall terminate three months after such cessation (but
in no event after the Expiration Date); provided, however, that this Option shall be exercisable only to the extent that the Employee
was entitled to exercise this Option on the date of such cessation.

 

(e)          Exercise
Period Upon Death or Disability. If the Employee dies or becomes Disabled prior to the Expiration Date while he or she is an
employee of the Company, or if the Employee dies within three months after the Employee ceases to be so employed (other than as
the result of a discharge for Cause), this Option shall be exercisable, within the period of one year following the date of death
or Disability of the Employee (but in no event after the Expiration Date) by the Employee or by the person to whom this Option
is transferred by will or the laws of descent and distribution or pursuant to a qualified domestic relations order (as defined
in the Code) or Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or the rules
thereunder; provided, however, that this Option shall be exercisable only to the extent that this Option was exercisable by the
Employee on the date of his or her death or Disability. Except as otherwise indicated by the context, the term “Employee,”
as used in this Agreement, shall be deemed to include the estate of the Employee or any person who acquires the right to exercise
this Option by bequest or inheritance or otherwise by reason of the death of the Employee or pursuant to a qualified domestic relations
order (as defined in the Code) or Title I of ERISA, or the rules promulgated thereunder.

 

(f)          Discharge
for Cause. If the Employee, prior to the Expiration Date, ceases his or her employment with the Company because he or she is
discharged for Cause, the right to exercise this Option shall terminate immediately upon such termination for Cause.

 

4.     
     Non-transferability of Option. Except as provided in Section 3(e), this Option is
personal and no rights granted hereunder may be transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) nor shall any such rights be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or of such rights contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon this Option or such rights, this Option and
such rights shall, at the election of the Company, become null, void and of no further force of effect.

 

5.      
    No Special Employment Rights. Nothing contained in the Plan or this Agreement shall be
construed or deemed by any Person under any circumstances to bind the Company to continue the employment of the Employee for
the period within which this Option may be exercised. However, during the period of the Employee’s employment, the
Employee shall render diligently and faithfully the services which are assigned to the Employee from time to time by the
Board, any committee thereof, or by the executive officers of the Company and shall at no time take any action which,
directly or indirectly, would be inconsistent with the best interests of the Company.

 

6.       
   Rights as a Shareholder. The Employee shall have no rights as a shareholder with respect to any
Underlying Shares unless and until the date on which the Employee becomes the holder of record of the Underlying Shares
purchased pursuant to this Option on the books and records of the Company, as maintained by the transfer agent for the
Company’s Common Stock. No adjustment shall be made for dividends or other rights for which the record date is prior to
such date.

 

    	 

    	 

    

 

7.       
   Adjustments.

 

(a)          General.
If: (i) the Company shall at any time be involved in a merger or other transaction in which shares of Common Stock are changed
or exchanged, (ii) the Company shall subdivide or combine shares of Common Stock or the Company shall declare a dividend payable
in shares of Common Stock, other securities or other property, (iii) the Company shall effect a cash dividend the amount of which,
on a per share of Common Stock basis, exceeds 10% of the Fair Market Value of a share of Common Stock at the time the dividend
is declared, or the Company shall effect any other dividend or other distribution on shares of Common Stock in the form of cash,
or a repurchase of shares of Common Stock, that the Board determines by resolution is special or extraordinary in nature or that
is in connection with a transaction that the Company characterizes publicly as a recapitalization or reorganization involving shares
of Common Stock, or (iv) any other event shall occur, which in the judgment of the Board or Committee necessitates an adjustment
to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, adjust as applicable: (y) the number and kind of shares or other securities subject
to this Option and (z) the Exercise Price for each share of Common Stock or other security subject to this Option, without changing
the aggregate Exercise Price as to which this Option remains exercisable.

 

(b)          Board
Authority to Make Adjustments. Adjustments under this Section 7 will be made by the Committee, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final and binding. No fractional shares will be issued pursuant
to this Option on account of any such adjustments.

 

(c)          Limits
on Adjustments. No adjustment shall be made under this Section 7 which would, within the meaning of any applicable provision
of the Code, constitute a modification, extension or renewal of this Option or a grant of additional benefits to the Employee.

 

8. 
         Change of Control.

 

(a)          General.
In the event of a Change of Control, the Employee shall, with respect to this Option or any unexercised portion hereof, be entitled
to the rights and benefits, and be subject to the limitations, set forth in Section 15 of the Plan.

 

(b)          Acceleration.
In the event of a Change of Control, the Vesting schedule set forth in Section 3(a) of this Agreement may be accelerated in whole
or in part at the sole discretion of the Committee.

 

9.
          Withholding Taxes. The Company’s obligation to
deliver Underlying Shares upon the exercise of this Option shall be subject to the Employee’s satisfaction of all
applicable Federal, state and local income and employment tax withholding requirements.

 

10. 
        Limitations on Disposition of Underlying Shares. It is understood and
intended that this Option shall qualify as an “incentive stock option” as defined in Section 422 of the Code.
Accordingly, the Employee understands that in order to obtain the benefits of an incentive stock option under Section 421 of
the Code, no sale or other disposition may be made of any Underlying Shares acquired upon exercise of this Option within one
year after the day of the transfer of such shares to the Employee, nor within two years after the grant of this Option. If
the Employee disposes of any such Underlying Shares within said periods (whether by sale, exchange, gift, transfer or
otherwise), he or she will notify the Company in writing within ten days after such disposition.

 

    	 

    	 

    

 

11.     
    Miscellaneous.

 

(a)          Except
as provided herein, this Agreement may not be amended or otherwise modified unless evidenced in writing and signed by the Company
and the Employee.

 

(b)          All
notices under this Agreement shall be mailed, delivered by hand, or delivered by electronic means to the parties pursuant to the
contact information for the applicable party set forth in the records of the Administrative Service, or at such other address as
may be designated in writing by either of the parties to the other party.

 

(c)          This
Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

 

(d)          The
Employee hereby accepts, by signature or electronic means delivered to the Administrative Service, this Option and agrees to the
terms and conditions of this Agreement and the Company’s 2012 Equity Award Plan. The Employee hereby acknowledges receipt
of a copy of the Company’s 2012 Equity Award Plan.

 

	Date of Grant: [_____________]	TILE SHOP HOLDINGS, INC.
	 	 	 
	 	By:	 
	 	Name:  Robert A. Rucker
	 	Title:  President
	 	 
	 	EMPLOYEE
	 	 
	 	 
	 	[________________]

 

    	 

    	 

    

 

TILE SHOP HOLDINGS, INC.

 

NONSTATUTORY STOCK OPTION AGREEMENT

 

1.    
      Grant of Option. Tile Shop Holdings, Inc., a Delaware corporation (the
“Company”), hereby grants to [                                     ] (the “Optionee”), an option (the
“Option”), pursuant to the Company’s 2012 Equity Award Plan (the “Plan”), to purchase an
aggregate of [                       ] shares (the “Underlying Shares”) of Common Stock, par value $0.0001 per share
(“Common Stock”), of the Company at a price of $[        ] per share (the “Exercise Price”),
purchasable as set forth in and subject to the terms and conditions of this Nonstatutory Stock Option Agreement (the
“Agreement”) and the Plan. Except where the context otherwise requires, the term “Company” shall
include the parent and all subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the Internal Revenue Code
of 1986, as amended (the “Code”). Capitalized terms used but not otherwise defined herein shall have the meaning
ascribed to such terms in the Plan. To the extent that any term of this Agreement conflicts or is otherwise inconsistent with
any term of the Plan, as amended from time to time, the terms of the Plan shall take precedence and supersede any such
conflicting or inconsistent term contained herein.

 

2.       
   Nonstatutory Stock Option. This Option is not intended to qualify as an “incentive stock
option” within the meaning of Section 422 of the Code.

 

3.      
    Exercise of Option and Provisions for Termination.

 

(a)          Vesting
Schedule. [Vesting to be specified by the Compensation Committee of the Board of Directors.] Except as otherwise provided in
this Agreement, this Option may be exercised at any time prior to the tenth anniversary of the date of grant (the “Expiration
Date”) in installments as to not more than the number of Underlying Shares then Vested pursuant to the provisions of this
Section 3(a). The right of exercise shall be cumulative so that if this Option is not exercised to the maximum extent permissible
during any exercise period it shall be exercisable, in whole or in part, with respect to all Underlying Shares not so purchased
at any time prior to the Expiration Date or the earlier termination of this Option. This Option may not be exercised at any time
after the Expiration Date.

 

(b)          Exercise
Procedure. Subject to the conditions set forth in this Agreement, the Employee may exercise this Option by delivery of notice
in a form (which may be electronic) approved by the Company to the Company or its designated Administrative Service (as defined
below) accompanied by payment of consideration in an amount equal to the aggregate Exercise Price for the Underlying Shares to
be purchased by such means as may be permitted by the Company or the Administrative Service, including, without limitation, by
electing that the Company or the Administrative Service withhold delivery of such number of Underlying Shares having an aggregate
Fair Market Value equal in amount to the aggregate Exercise Price for all Underlying Shares to be purchased plus the amount of
all applicable Federal, state and local income and employment tax withholding requirements and applicable fees. Such exercise shall
be effective upon receipt by the Company or the Administrative Service of such notice together with the required payment. The Employee
may purchase less than the number of Underlying Shares for which this Option is Vested at any point in time; provided, however,
that no partial exercise of this Option may be for any fractional shares. “Administrative Service” shall mean [ ] or
any successor third-party stock option administrator designated by the Company from time to time.

 

(c)          Continuous
Engagement Required. Except as otherwise provided in this Section 3, this Option may not be exercised unless the Optionee,
at the time that he or she exercises this Option, is, and has been at all times since the date of grant of this Option, a Director
of the Company.

 

    	 

    	 

    

 

(d)          Exercise
Period Upon Termination of Engagement. If the Optionee ceases to be a Director of the Company for any reason other than death
or Disability, the right to exercise this Option shall terminate three months after such cessation (but in no event after the Expiration
Date); provided, however, that this Option shall be exercisable only to the extent that the Optionee was entitled to exercise this
Option on the date of such cessation.

 

(e)          Exercise
Period Upon Death or Disability. If the Optionee dies or becomes Disabled prior to the Expiration Date while he or she is a
Director of the Company, or if the Optionee dies within three months after the Optionee ceases to be a Director of the Company,
this Option shall be exercisable, within the period of one year following the date of death or Disability of the Optionee (but
in no event after the Expiration Date) by the Optionee or by the person to whom this Option is transferred by will or the laws
of descent and distribution or pursuant to a qualified domestic relations order (as defined in the Code) or Title I of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), or the rules thereunder; provided, however, that this
Option shall be exercisable only to the extent that this Option was exercisable by the Optionee on the date of his or her death
or Disability.

 

(f)          Discharge
for Cause. If the Optionee, prior to the Expiration Date, ceases to serve as a Director of the Company because he or she is
discharged for cause, the right to exercise this Option shall terminate immediately upon such termination for cause.

 

4.    
      Non-transferability of Option. Except as provided in Section 3(e), this Option is
personal and no rights granted hereunder may be transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) nor shall any such rights be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of this Option or of such rights contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon this Option or such rights, this Option and
such rights shall, at the election of the Company, become null, void and of no further force of effect.

 

5.      
    No Right to Serve as Director. Nothing contained in the Plan or this Agreement shall be
construed or deemed by any Person under any circumstance to bind the Company to continue to engage the Optionee as a Director
of the Company for the period within which this Option may be exercised.

 

6.     
     Rights as a Shareholder. The Optionee shall have no rights as a shareholder with respect
to any Underlying Shares unless and until the date on which the Optionee becomes the holder of record of the Underlying
Shares purchased pursuant to this Option on the books and records of the Company, as maintained by the transfer agent for the
Company’s Common Stock. No adjustment shall be made for dividends or other rights for which the record date is prior to
such date.

 

7.      
    Adjustments.

 

(a)          General.
If: (i) the Company shall at any time be involved in a merger or other transaction in which shares of Common Stock are changed
or exchanged, (ii) the Company shall subdivide or combine shares of Common Stock or the Company shall declare a dividend payable
in shares of Common Stock, other securities or other property, (iii) the Company shall effect a cash dividend the amount of which,
on a per share of Common Stock basis, exceeds 10% of the Fair Market Value of a share of Common Stock at the time the dividend
is declared, or the Company shall effect any other dividend or other distribution on shares of Common Stock in the form of cash,
or a repurchase of shares of Common Stock, that the Board determines by resolution is special or extraordinary in nature or that
is in connection with a transaction that the Company characterizes publicly as a recapitalization or reorganization involving shares
of Common Stock, or (iv) any other event shall occur, which in the judgment of the Board or Committee necessitates an adjustment
to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, adjust as applicable: (y) the number and kind of shares or other securities subject
to this Option and (z) the Exercise Price for each share of Common Stock or other security subject to this Option, without changing
the aggregate Exercise Price as to which this Option remains exercisable.

 

    	 

    	 

    

 

(b)          Board
Authority to Make Adjustments. Adjustments under this Section 7 will be made by the Committee, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final and binding. No fractional shares will be issued pursuant
to this Option on account of any such adjustments.

 

(c)          Limits
on Adjustments. No adjustment shall be made under this Section 7 which would, within the meaning of any applicable provision
of the Code, constitute a modification, extension or renewal of this Option or a grant of additional benefits to the Optionee.

 

8.      
    Change of Control.

 

(a)          General.
In the event of a Change of Control, the Optionee shall, with respect to this Option or any unexercised portion hereof, be entitled
to the rights and benefits, and be subject to the limitations, set forth in Section 15 of the Plan.

 

(b)          Acceleration.
In the event of a Change of Control, the Vesting schedule set forth in Section 3(a) of this Agreement shall be accelerated such
that this Option shall, immediately prior to consummation of such Change of Control, become Vested and exercisable as to all Underlying
Shares.

 

9.   
       Withholding Taxes. The Company’s obligation to deliver Underlying
Shares upon the exercise of this Option shall be subject to the Optionee’s satisfaction of all applicable Federal,
state and local tax withholding requirements.

 

10.    
    Miscellaneous.

 

(a)          Except
as provided herein, this Agreement may not be amended or otherwise modified unless evidenced in writing and signed by the Company
and the Optionee.

 

(b)          All
notices under this Agreement shall be mailed, delivered by hand, or delivered by electronic means to the parties pursuant to the
contact information for the applicable party set forth in the records of the Administrative Service, or at such other address as
may be designated in writing by either of the parties to the other party.

 

(c)          This
Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

 

(d)          The
Optionee hereby accepts, by signature or electronic means delivered to the Administrative Service, this Option and agrees to the
terms and conditions of this Agreement and the Company’s 2012 Equity Award Plan. The Optionee hereby acknowledges receipt
of a copy of the Company’s 2012 Equity Award Plan.

 

    	 

    	 

    

 

	Date of Grant: [_____________]	TILE SHOP HOLDINGS, INC.
	 	 	 
	 	By:	 
	 	Name:  Robert A. Rucker
	 	Title:  President
	 	 
	 	OPTIONEE
	 	 
	 	 
	 	[________________]

 

    	 

    	 

    

 

TILE
SHOP HOLDINGS, Inc.

STOCK RESTRICTION AGREEMENT

 

This Agreement (the
“Agreement”) is made this the [_____] day of [_______], 20[__], by and between Tile Shop Holdings, Inc. (the
“Company”), a Delaware corporation with its principal place of business at 14000 Carlson Parkway, Plymouth, MN 55441
and [______________], an individual having an address at [________________________________] (the “Stockholder”). Capitalized
terms used by not otherwise defined herein shall have the meaning ascribed to such terms in the Company’s 2012 Equity Award
Plan (the “Plan”). To the extent that any term of this Agreement conflicts or is otherwise inconsistent with any term
of the Plan, as amended from time to time, the terms of the Plan shall take precedence and supersede any such conflict or inconsistent
term contained herein.

 

WHEREAS, pursuant to
the Plan, the Company desires to sell to the Stockholder, and the Stockholder desires to purchase [______] shares (the “Shares”)
of Common Stock, par value $0.0001 per share, of the Company (the “Common Stock”); and

 

WHEREAS, as a condition
to the purchase and sale of the shares, the parties have agreed that the Shares shall be subject to a stock restriction agreement
containing the terms and conditions herein;

 

NOW, THEREFORE, for
valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Stockholder agree as follows:

 

1.      
    Shares to be Subject to Restriction. The Stockholder agrees that the Shares shall be subject
to the Purchase Option (as defined below) set forth in Section 2 of this Agreement, to the restrictions on transfers set
forth in Section 4 of this Agreement, and to any additional provisions of the Plan applicable to such Shares during the
Restriction Period.

 

2.      
    Purchase Option. If the Stockholder ceases to be an executive officer, employee, or Director
of, or a Consultant to, the Company for any reason or no reason, with or without cause, at any time prior to [___________]
(the “Triggering Event”), the Company or its assignee (to the extent permissible under applicable securities
laws) shall have the right and option (the “Purchase Option”) to purchase from the Stockholder, at a price of
$[_________] per share (the “Option Price”), the following number of Shares: [Repurchase schedule to be specified
by the Compensation Committee of the Board of Directors.]

 

Notwithstanding the foregoing provisions
of this Section 2, in the event of a Change of Control during the Restriction Period, the vesting schedule set forth in this Section
2 may be accelerated in whole or in part at the sole discretion of the Committee.

 

    	 

    	 

    

 

3.     
     Exercise of Purchase Option, Closing and Payment for Shares.

 

(a)          The
Company may exercise the Purchase Option by delivering or mailing to the Stockholder, in accordance with Section 11, written notice
of exercise within thirty (30) days after the Triggering Event together with a check in the amount of the aggregate Option Price
with respect to Shares purchase pursuant to the Purchase Option. The notice must specify the number of Shares to be purchased under
the Purchase Option. If and to the extent that the Purchase Option is not exercised, in whole or in part, within the thirty (30)
day period, the Purchase Option (or its unexercised part, as applicable) will automatically expire and terminate effective upon
the expiration of the thirty (30) day period.

 

(b)          Promptly
upon delivery or mailing to the Stockholder of the written notice and aggregate Option Price as set forth in Section 3(a) above,
the Company shall cause to be cancelled on its books and records all Shares held by the Stockholder and subject to the exercise
of the Purchase Option by the Company.

 

(c)          After
the time at which the Company delivers or mails to the Stockholder the written notice and aggregate Option Price as set forth in
Section 3(a) above, the Company shall not pay any dividend to the Stockholder on account of the Shares subject to the Purchase
Option so exercised or permit the Stockholder to exercise any of the privileges or rights of a Stockholder with respect to such
Shares, but shall, in so far as permitted by law, treat the Company as the owner of such Shares.

 

(d)          The
Option Price shall be payable in immediately available funds.

 

4.      
    Restrictions on Transfer. The Stockholder shall not, during the term of the Purchase Option,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise, any of the Shares, or
any interest therein, unless and until such are no longer subject to the Purchase Option.

 

5.  
        Effect of Prohibited Transfer. The Company will not be required (a) to
transfer on its books any Shares which have been sold or transferred in violation of any of the provisions set forth in this
Agreement, or (b) to treat as owner of such Shares, or to pay dividends to, any transferee to whom any such Shares have been
so sold or transferred.

 

6.     
     Restrictive Legend. All certificates representing Shares subject to this Agreement shall
bear a legend in substantially the following form, in addition to any other legends that may be required under applicable
federal or state securities laws:

 

			“The shares represented by this certificate are subject to an option to purchase and restrictions
on transfer set forth in a certain Stock Restriction Agreement between the corporation and the registered owner of this certificate,
a copy of which is available for inspection at the offices of the Secretary of the corporation.”

 

7.   
       Adjustments for Stock Splits, Stock Dividends, etc. Subject to the
provisions of Section 15 of the Plan, if from time to time during the term of the Purchase Option there is any stock
split-up, stock dividend, stock distribution or other reclassification of the Common Stock of the Company, any and all new,
substituted or additional securities to which the Stockholder is entitled by reason of its ownership of the Shares will be
immediately subject to the Purchase Option, the restrictions on transfer and the other provisions of this Agreement in the
same manner and to the same extent as the Shares, and the respective option prices shall be appropriately adjusted.

 

    	2

    	 

    

 

8.     
     Severability. The invalidity or unenforceability of any provision of this Agreement will
not affect the validity or enforceability of any other provision of this Agreement and each other provision of this Agreement
will be severable and enforceable to the extent permitted by law.

 

9.     
     Binding Effect. This Agreement is binding upon and shall inure to the benefit of the
Company and the Stockholder and their respective heirs, executors, administrators, legal representatives, successors and
assigns, as applicable, subject to the restrictions on transfer set forth in Section 4 herein.

 

10.         No
Rights to Employment. Nothing contained in this Agreement is to be construed as giving the Stockholder any right to be retained,
in any position, as an employee of the Company.

 

11.         Notice.
All notices required or permitted hereunder must be in writing and are deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail, postage prepaid, addressed to the other party to this
Agreement at the address shown above, or at such other address as one party will designate to the other in accordance with this
Section 11.

 

12.         Pronouns.
Whenever the context may require, any pronouns used in this Agreement are deemed to include the corresponding masculine, feminine
or neuter forms, and the singular form of nouns and pronouns are deemed to include the plural, and vice versa.

 

13.         Entire
Agreement. This Agreement constitutes the entire agreement between the parties, and supersedes all prior agreements and understandings,
relating to the subject matter of this Agreement.

 

14.         Amendment.
This Agreement may be amended or modified only by a written instrument executed by both the Company and the Stockholder.

 

15.         Governing
Law. This Agreement shall be construed and enforced in accordance with and governed by the General Corporation Law of the State
of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance
with the internal laws of the State of Delaware, without giving effect to the principles of conflicts of laws thereof.

 

[Next Page is Signature Page]

 

    	3

    	 

    

 

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

 

	 	TILE SHOP HOLDINGS, INC.
	 	 	 
	 	By:	 
	 	Name:  Robert A. Rucker
	 	Title:  President
	 	 
	 	STOCKHOLDER
	 	 
	 	 
	 	[________________]AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this "Agreement")
is entered into as of August 31, 2010, by and between THE TILE SHOP, LLC, a Delaware limited liability company ("Borrower"),
and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

 

RECITALS

 

Borrower and Bank are parties to that certain
Credit Agreement dated as of March 31, 2009, as amended by that certain First Amendment to Credit Agreement dated as of September
30, 2009 (the "Existing Credit Agreement"), pursuant to which Borrower executed and delivered that certain Revolving
Line of Credit Note dated as of September 30, 2009 made payable to the order of Bank in the original principal amount of $6,000,000.

 

Borrower has requested
that Bank extend or continue credit to Borrower as described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

 

NOW, THEREFORE, for valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree as follows:

 

ARTICLE I

CREDIT TERMS

 

SECTION 1.1.      LINE OF CREDIT.

 

(a)    Line of Credit. Subject to
the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time to time up to and including
August 31, 2013, not to exceed at any time the aggregate principal amount of Three Million Dollars ($3,000,000) ("Line of
Credit"), the proceeds of which shall be used to finance the purchase of real property in Virginia, and for ongoing working
capital and general corporate operations, Borrower's obligation to repay advances under the Line of Credit shall be evidenced by
a promissory note of even date herewith (as amended, replaced or supplemented from time to time, the "Line of Credit Note"),
all terms of which are incorporated herein by this reference.

 

(b)    Letter
of Credit Subfeature. As a subfeature under the Line of Credit, Bank agrees from time to time during the term thereof to
issue or cause an affiliate to issue standby and documentary letters of credit for the account of Borrower to finance its
business operations (each, a "Letter of Credit" and collectively, "Letters of Credit"); provided however,
that the aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed the amount of borrowings
permitted under the Line of Credit. The form and substance of each Letter of Credit shall be subject to approval by Bank, in
its sole discretion, Each Letter of Credit shall be issued for a term not to exceed the maturity date of the Line of Credit,
as designated by Borrower, The undrawn amount of all Letters of Credit shall be reserved under the Line of Credit and shall
not be available for borrowings thereunder. Each Letter of Credit shall be subject to the additional terms and conditions of
the Letter of Credit agreements, applications and any related documents required by Bank in connection with the issuance
thereof. Each drawing paid under a Letter of Credit shall be deemed an advance under the Line of Credit and shall be repaid by
Borrower in accordance with the terms and conditions of this Agreement applicable to such advances; provided however, that if
advances under the Line of Credit are not available, for any reason, at the time any drawing is paid, then Borrower shall
immediately pay to Bank the full amount drawn, together with interest thereon from the date such drawing is paid to the date
such amount is fully repaid by Borrower, at the rate of interest applicable to advances under the Line of Credit. In such
event Borrower agrees that Bank, in its sole discretion, may debit any account maintained by Borrower with Bank for
the amount of any such drawing.

 

    	-1-

    	 

    

 

(c)     Borrowing and Repayment. Borrower
may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow,
subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note; provided however, that
the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal amount available thereunder,
as set forth above.

 

SECTION 1.2.        INTEREST/FEES

 

(a)    Interest. The outstanding
principal balance of the Line of Credit Note shall bear interest and the amount of each drawing paid under any Letter of Credit
shall bear interest from the date such drawing is paid to the date such amount is fully repaid by Borrower at the rate of interest
set forth in the Line of Credit Note.

 

(b)    Computation and Payment.
Interest shall be computed on the basis of a 360-day year, actual days elapsed. Interest shall be payable at the times and place
set forth in each promissory note or other instrument or document required hereby.

 

(c)    Unused Commitment Fee. Borrower
shall pay to Bank a fee equal to one-tenth of one percent (0.10%) per annum (computed on the basis of a 360-day year, actual days
elapsed) on the average daily unused amount of the Line of Credit Note, which fee shall be calculated on a quarterly basis by Bank
and shall be due and payable by Borrower in arrears within ten (10) days after each billing is sent by Bank.

 

(d)    Letter of Credit Fees. Borrower
shall pay to Bank fees upon the issuance of each Letter of Credit, upon the payment or negotiation of each drawing under any Letter
of Credit and upon the occurrence of any other activity with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in accordance with Bank's standard fees and charges then
in effect for such activity.

 

SECTION 1.3.     COLLECTION OF PAYMENTS. Borrower
authorizes Bank to collect all principal, interest and fees due under each credit subject hereto by charging Borrower's deposit
account number 4171301062 with Bank, or any other deposit account maintained by Borrower with Bank, for the full amount thereof.
Should there be insufficient funds in any such deposit account to pay all such sums when due, the full amount of such deficiency
shall be immediately due and payable by Borrower.

 

SECTION 1.4.    COLLATERAL.

 

As security for all indebtedness and other
obligations of Borrower to Bank subject hereto, Borrower hereby grants to Bank security interests of first priority in all Borrower's
assets and personal property.

 

All of the foregoing shall be evidenced by and subject to
the terms of such security agreements, financing statements, deeds or mortgages, and other documents as Bank shall reasonably
require, all in form and substance satisfactory to Bank. Borrower shall pay to Bank immediately upon demand the full amount of
all charges, costs and expenses (to include fees paid to third parties and all allocated costs of Bank personnel), expended
or incurred by Bank in connection with any of the foregoing security, including without limitation, filing and recording fees
and costs of appraisals, audits and title insurance.

 

    	-2-

    	 

    

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES

 

Borrower makes the following representations
and warranties to Bank, which representations and warranties shall survive the execution of this Agreement and shall continue in
full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.

 

SECTION 2.1.     LEGAL STATUS. Borrower is a
limited liability company, duly organized and existing and in good standing under the laws of Delaware, and is qualified or licensed
to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification
or licensing is required or in which the failure to so qualify or to be so licensed could have a material adverse effect on Borrower.

 

SECTION 2.2.     AUTHORIZATION AND VALIDITY.
This Agreement and each promissory note, contract, instrument and other document required hereby or at any time hereafter delivered
to Bank in connection herewith (collectively, the "Loan Documents") have been duly authorized, and upon their execution
and delivery in accordance with the provisions hereof will constitute legal, valid and binding agreements and obligations of Borrower
or the party which executes the same, enforceable in accordance with their respective terms.

 

SECTION 2.3.     NO VIOLATION. The execution,
delivery and performance by Borrower of each of the Loan Documents do not violate any provision of any law or regulation, or contravene
any provision of the Certificate of Formation or the Limited Liability Company Agreement of Borrower, or result in any breach of
or default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower may
be bound.

 

SECTION 2.4.     LITIGATION. There are no pending,
or to the best of Borrower's knowledge threatened, actions, claims, investigations, suits or proceedings by or before any governmental
authority, arbitrator, court or administrative agency which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing prior to the date hereof.

 

SECTION 2.5.
  CORRECTNESS OF FINANCIAL STATEMENT. The annual financial statement of Borrower dated December 31, 2009, and
all interim financial statements delivered to Bank since said date, true copies of which have been delivered by Borrower to
Bank prior to the date hereof, (a) are complete and correct and present fairly the financial condition of Borrower, (b)
disclose all liabilities of Borrower that are required to be reflected or reserved against under generally accepted
accounting principles, whether liquidated or unliquidated, fixed or contingent, and (c) have been prepared in accordance with
generally accepted accounting principles consistently applied. Since the dates of such financial statements there has been no
material adverse change in the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a security
interest in or otherwise encumbered any of its assets or properties except in favor of Bank or as otherwise permitted by Bank
in writing.

 

    	-3-

    	 

    

 

 

SECTION 2.6.     INCOME TAX RETURNS. Borrower
has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year.

 

SECTION 2.7.    NO SUBORDINATION. There is
no agreement, indenture, contract or instrument to which Borrower is a party or by which Borrower may be bound that requires the
subordination in right of payment of any of Borrower's obligations subject to this Agreement to any other obligation of Borrower.

 

SECTION 2.8.    PERMITS, FRANCHISES. Borrower
possesses, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights to all trademarks,
trade names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.

 

SECTION 2.9.    ERISA.
Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act
of 1974. as amended or recodified from time to time ("ERISA"); Borrower has not violated any provision of any defined
employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no Reportable
Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its
minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations
as they come due in accordance with the Plan documents and under generally accepted accounting principles.

 

SECTION 2.10.  OTHER OBLIGATIONS. Borrower
is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment,
contract, instrument or obligation.

 

SECTION 2.11.   ENVIRONMENTAL
MATTERS. Except as disclosed by Borrower to Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any
rules or regulations adopted pursuant thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic
Substances Control Act, as any of the same may be amended, modified or supplemented from time to time. None of the operations
of Borrower is the subject of any federal or state investigation evaluating whether any remedial action involving a material
expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. Borrower has
no material contingent liability in connection with any release of any toxic or hazardous waste or substance into the
environment.

 

SECTION 2.12.    OWNERSHIP OF BORROWER. Schedule 2.12 sets
forth as of the date of this Agreement a list of all parties directly or indirectly owning any equity interests of the Borrower,
including the number and percentage of shares/units of each class of such equity.

 

    	-4-

    	 

    

 

ARTICLE III

CONDITIONS

 

SECTION 3.1.    CONDITIONS
OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend any credit contemplated by this Agreement is subject to the fulfillment
to Bank's satisfaction of all of the following conditions:

 

(a)   Approval
of Bank Counsel. All legal matters incidental to the extension of credit by Bank shall be satisfactory to Bank's counsel.

 

(b)   Documentation.
Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed:

 

	(i)	 	This Agreement and each promissory note or other instrument or document required hereby.
	(ii)	 	Amended and Restated Security Agreement.
	(iii)	 	Limited Liability Company Certificate: Borrowing.
	(iv)	 	Such other documents as Bank may require under any other Section of this Agreement.
	(v)	 	As soon as possible, but in any event within 30 days, Borrower shall deliver to Bank (1) landlord disclaimers for all distribution centers and (2) all leases related thereto.

 

(c)    Financial Condition.
There shall have been no material adverse change, as determined by Bank, in the financial condition or business of Borrower,
nor any material decline, as determined by Bank, in the market value of any collateral required hereunder or a substantial or
material portion of the assets of Borrower.

 

(d)    Insurance. Borrower shall
have delivered to Bank evidence of insurance coverage on all Borrower's property, in form, substance, amounts, covering risks and
issued by companies satisfactory to Bank, and where required by Bank, with loss payable endorsements in favor of Bank, including
without limitation, policies of fire and extended coverage insurance covering all real property collateral required hereby, with
replacement cost and mortgagee loss payable endorsements, and such policies of insurance against specific hazards affecting any
such real property, including terrorism, as may be required by governmental regulation or Bank.

 

SECTION 3.2.        CONDITIONS OF EACH EXTENSION
OF CREDIT. The obligation of Bank to make each extension of credit requested by Borrower hereunder shall be subject to the fulfillment
to Bank's satisfaction of each of the following conditions:

 

(a)   Compliance. The representations
and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date of the signing of this
Agreement and on the date of each extension of credit by Bank pursuant hereto, with the same effect as though such representations
and warranties had been made on and as of each such date, and on each such date, no Event of Default as defined herein, and no
condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default,
shall have occurred and be continuing or shall exist.

 

(b)   Documentation. Bank shall
have received all additional documents which may be required in connection with such extension of credit.

 

    	-5-

    	 

    

 

ARTICLE IV 

AFFIRMATIVE COVENANTS

 

Borrower covenants that so long as Bank
remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or
unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in writing:

 

SECTION 4.1.    PUNCTUAL PAYMENTS. Punctually
pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner
specified therein, and immediately upon demand by Bank, the amount by which the outstanding principal balance of any credit subject
hereto at any time exceeds any limitation on borrowings applicable thereto.

 

SECTION 4.2.    ACCOUNTING RECORDS. Maintain
adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit any representative
of Bank, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.

 

SECTION 4.3.    FINANCIAL STATEMENTS. Provide
to Bank all of the following, in form and detail satisfactory to Bank:

 

(a)   not later than 150 days after and
as of the end of each fiscal year, the annual audit report of the Borrower prepared in conformity with generally accepted accounting
principles consistently applied and used consistently with prior practices, consisting of at least statements of income, cash flow,
changes in financial position and stockholders' equity, and a balance sheet as at the end of such year, certified without qualification
by independent certified public accountants of recognized standing selected by the Borrower and acceptable to Bank, together with
any management letters, management reports or other supplementary comments or reports to the Borrower or its board of directors
furnished by such accountants and requested by Bank;

 

(b)   not later than 30 days after and
as of the end of each month, a financial statement of Borrower, prepared by Borrower, to include a statement of profit and loss
and surplus from the beginning of that fiscal year to the end of the month, unaudited but certified by an appropriate manager of
the Borrower;

 

(c)   not later than 30 days after and
as of the end of each calendar quarter, a compliance certificate substantially in the form attached hereto as Exhibit A;
and

 

(d)   from time to time such
other information as Bank may reasonably request.

 

SECTION 4.4.    COMPLIANCE. Preserve and maintain
all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business; and
comply with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower's continued existence
and with the requirements of all laws, rules, regulations and orders of any governmental authority applicable to Borrower and/or
its business.

 

    	-6-

    	 

    

 

SECTION 4.5.    INSURANCE. Maintain and keep
in force, for each business in which Borrower is engaged, insurance of the types and in amounts customarily carried in similar
lines of business, including but not limited to fire, extended coverage, public liability, flood, property damage and workers'
compensation, with all such insurance carried with companies and in amounts satisfactory to Bank, and deliver to Bank from time
to time at Bank's request schedules setting forth all insurance then in effect.

 

SECTION 4.6.    FACILITIES. Keep all properties
useful or necessary to Borrower's business in good repair and condition, and from time to time make necessary repairs, renewals
and replacements thereto so that such properties shall be fully and efficiently preserved and maintained.

 

SECTION 4.7.    TAXES AND OTHER LIABILITIES.
Pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal, including without
limitation federal and state income taxes and state and local property taxes and assessments, except (a) such as Borrower may in
good faith contest or as to which a bona fide dispute may arise, and (b) for which Borrower has made provision, to Bank's satisfaction,
for eventual payment thereof in the event Borrower is obligated to make such payment.

 

SECTION 4.8.    LITIGATION. Promptly give
notice in writing to Bank of any litigation pending or threatened against Borrower with a claim in excess of $500,000.

 

SECTION 4 9    FINANCIAL CONDITION. Maintain
Borrower's financial condition as follows using generally accepted accounting principles consistently applied and used consistently
with prior practices (except to the extent modified by the definitions herein):

 

(a)   Tangible Net Worth not less than
$58,000,000 at any time, with "Tangible Net Worth" defined as the aggregate of total members' equity less any intangible
assets and less any loans or advances to, or investments in, any related entities or individuals.

 

(b)   Net income before taxes, on a noncumulative
basis, of not less than $1,250,000 at the end of each calendar quarter.

 

(c)   Total Liabilities of Borrower divided
by Borrower's Tangible Net Worth shall not at any time exceed 1.25 to 1.00, with "Total Liabilities" defined as the aggregate
of current liabilities and non-current liabilities including without limitation the fair market value of Borrower's preferred stock,
and with "Tangible Net Worth" defined as set forth above.

 

SECTION 4.10.      NOTICE TO BANK.
Promptly (but in no event more than five (5) days after the occurrence of each such event or matter) give written notice to Bank
in reasonable detail of: (a) the occurrence of any Event of Default, or any condition, event or act which with the giving of notice
or the passage of time or both would constitute an Event of Default; (b) any change in the name [or the organizational structure]
of Borrower; (c) the occurrence and nature of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or cancellation of any insurance policy which Borrower is required
to maintain, or any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other
cause affecting Borrower's property in excess of an aggregate of $500,000.

 

SECTION 4.11.    DEPOSIT ACCOUNTS At all times
maintain its primary deposit accounts with Bank.

 

    	-7-

    	 

    

 

ARTICLE V 

NEGATIVE COVENANTS

 

Borrower further covenants that so long
as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated
or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written consent:

 

SECTION 5.1.     USE OF FUNDS. Use any of the
proceeds of any credit extended hereunder except for the purposes stated in Article I hereof.

 

SECTION 5.2.    CAPITAL
EXPENDITURES. Make any additional investment in fixed assets in any calendar year in excess of an aggregate of $10,000,000 in calendar
year 2010, $14,000,000 in calendar year 2011, and $18,000,000 in calendar year 2012.

 

SECTION 5.3.    OTHER INDEBTEDNESS. Create,
incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether secured
or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except (a) the liabilities of Borrower to Bank,
(b) indebtedness (including capital leases) incurred in connection with the acquisition of equipment after the date hereof in an
aggregate amount not to exceed $1,000,000 and provided the incurrence of such indebtedness does not and would not cause the Borrower
to be in default of any of the financial covenants set forth in Section 4.9 hereof (in each case herein referred to as "Purchase
Money Indebtedness"), and (c) any other liabilities of Borrower existing as of, and disclosed to Bank prior to, the date hereof.

 

SECTION 5.4.    MERGER, CONSOLIDATION, TRANSFER
OF ASSETS. Merge into or consolidate with any other entity; make any substantial change in the nature of Borrower's business as
conducted as of the date hereof; acquire all or substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower's assets except in the ordinary course of its business.

 

SECTION 5.5.    GUARANTIES. Guarantee or
become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the
ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security
for, any liabilities or obligations of any other person or entity, except any of the foregoing in favor of Bank.

 

SECTION 5.6.  LOANS,
ADVANCES, INVESTMENTS. Make any loans or advances to or investments in any person or entity, except any of the foregoing existing
as of, and disclosed to Bank prior to, the date hereof.

 

SECTION 5.7.   
DISTRIBUTIONS. Declare or pay any distributions to its members either in cash or any other property, nor redeem, retire,
repurchase or otherwise acquire any membership interest in Borrower, in excess of $10,000,000 annually; provided however,
that so long as Borrower continues to qualify for tax treatment as if it were a partnership for federal and state income tax
purposes, Borrower may pay cash distributions to its members in any year to cover its members' federal and state income tax
liability for the immediately preceding year arising as a direct result of Borrower's reported income for said year, and
Borrower shall provide to Bank, upon request, any documentation required by Bank to substantiate the appropriateness of
amounts paid or to be paid. Without limiting the forgoing, Borrower shall cease to pay any dividends in the event it is not
compliant with any covenant, representation or warranty contained herein.

 

    	-8-

    	 

    

 

SECTION 5.8.    PLEDGE OF ASSETS. Mortgage,
pledge, grant or permit to exist a security interest in, or lien upon, ail or any portion of Borrower's assets (real or personal)
now owned or hereafter acquired, except any of the foregoing in favor of Bank or which is existing as of, and disclosed to Bank
in writing prior to, the date hereof except for Permitted Liens, For purposes of this covenant, "Permitted Liens" shall
mean (i) liens for taxes not delinquent or being contested in good faith, (ii) liens created in connection with worker's compensation,
unemployment insurance and social security, or to secure the performance of bids, tenders or contracts (other than for the repayment
of borrowed money), leases, statutory obligations, surety and appeal bonds, and other obligations of like nature made in the ordinary
course of business, (iii) liens in favor of the Bank, (iv) liens to secure permitted Purchase Money Indebtedness provided such
lien encumbers only the equipment acquired by Borrower in connection therewith, and (v) existing liens disclosed in writing to
the Bank prior to the date of this Agreement.

 

ARTICLE VI 

EVENTS OF DEFAULT

 

SECTION 6.1.    The occurrence of any of the
following shall constitute an "Event of Default" under this Agreement:

 

(a)    Borrower shall fail to pay when
due any principal, interest, fees or other amounts payable under any of the Loan Documents.

 

(b)   Any financial statement or certificate
furnished to Bank in connection with, or any representation or warranty made by Borrower or any other party under this Agreement
or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made.

 

(c)   Any default in the performance of
or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those
specifically described as an "Event of Default" in this section 6.1), and with respect to any such default that by its
nature can be cured, such default shall continue for a period of twenty (20) days from its occurrence.

 

(d)   Any default in the payment or performance
of any obligation, or any defined event of default, under the terms of any contract, instrument or document (other than any of
the Loan Documents) pursuant to which Borrower has incurred any debt or other liability to any person or entity, including Bank.

 

(e)    Borrower
shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or
liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a
general assignment for the benefit of creditors; Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform
Act, Title 11 of the United States Code, as amended or recodified from time to time ("Bankruptcy Code"), or under
any state or federal law granting relief to debtors, whether now or hereafter in effect; or Borrower shall file an answer
admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower shall be
adjudicated a bankrupt, or an order for relief shall be entered against Borrower by any court of competent jurisdiction under
the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for
debtors.

 

    	-9-

    	 

    

 

(f)   The filing of a notice of judgment
lien or the entry of a judgment against Borrower or the recording of any abstract of judgment against Borrower in any county in
which Borrower has an interest in real property in each case in excess of $50,000; or the service of a notice of levy and/or of
a writ of attachment or execution, or other like process, against the assets of Borrower; or any involuntary petition or proceeding
pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief
for debtors is filed or commenced against Borrower.

 

(g)   There shall exist or occur any
event or condition that Bank in good faith believes impairs, or is substantially likely to impair, the prospect of payment or performance
by Borrower of its obligations under any of the Loan Documents.

 

(h)   The
dissolution or liquidation of Borrower; or Borrower or any of its directors, governors, stockholders or members, shall take
action seeking to effect the dissolution or liquidation of Borrower.

 

(i)   The
occurrence of an event or series of events whereby (1) the Tile Shop, Inc. and ILTS, LLC shall collectively cease to own
seventy-five percent (75%) or more of the voting power of all classes of voting equity interests of the Borrower, (2) the
Tile Shop, Inc. shall cease to own at lease twenty-five percent (25%) of the voting power of all classes of voting
equity interests of the Borrower, (3) Robert Rucker shall cease to own seventy-five percent (75%) or more of the
voting power of all classes of voting equity interests of the Tile Shop, Inc., or (4) Nabron International Inc. shall
cease to own seventy-five percent (75%) or more of the voting power of all classes of voting equity interests of ILTS,
LLC.

 

SECTION 6.2.    REMEDIES. Upon the occurrence
of any Event of Default: (a) all indebtedness of Borrower under each of the Loan Documents, any term thereof to the contrary notwithstanding,
shall at Bank's option and without notice become immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by Borrower; (b) the obligation, if any, of Bank to extend any further credit
under any of the Loan Documents shall immediately cease and terminate; and (c) Bank shall have all rights, powers and remedies
available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable
law. All rights, powers and remedies of Bank may be exercised at any time by Bank and from time to time after the occurrence of
an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided
by law or equity.

 

ARTICLE VII

MISCELLANEOUS

 

SECTION 7.1.    NO
WAIVER. No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan Documents
shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such
right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other
right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under any of
the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing.

 

    	-10-

    	 

    
 

SECTION 7.2.    NOTICES. All notices, requests
and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be
in writing delivered to each party at the following address:

 

	BORROWER:	THE TILE SHOP, LLC
	 	14000 Carlson Parkway
	 	Plymouth, MN 55441
	 	Attention: James A, Beukelman

 

	BANK:	WELLS FARGO BANK, NATIONAL ASSOCIATION
	 	Kurt von Steinbergs, MAC N9305-187
	 	90 South 7th Street, 18th Floor 
	 	Minneapolis, MN 55402-3903

 

or to such other address as any party may designate by written
notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand
delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the US
mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt.

 

SECTION 7.3.    COSTS, EXPENSES AND ATTORNEYS'
FEES. Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended
or incurred by Bank in connection with (a) the negotiation and preparation of this Agreement and the other Loan Documents, Bank's
continued administration hereof and thereof, and the preparation of any amendments and waivers hereto and thereto, (b) the enforcement
of Bank's rights and/or the collection of any amounts which become due to Bank under any of the Loan Documents, and (c) the prosecution
or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory
relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter
or motion brought by Bank or any other person) relating to Borrower or any other person or entity.

 

SECTION 7.4.    SUCCESSORS, ASSIGNMENT. This
Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors
and assigns of the parties; provided however, that Borrower may not assign or transfer its interests or rights hereunder without
Bank's prior written consent. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any
part of, or any interest in, Bank's rights and benefits under each of the Loan Documents. In connection therewith, Bank may disclose
all documents and information which Bank now has or may hereafter acquire relating to any credit subject hereto, Borrower or its
business, or any collateral required hereunder.

 

SECTION 7.5.
   ENTIRE AGREEMENT; AMENDMENT, This Agreement and the other Loan Documents constitute the entire agreement
between Borrower and Bank with respect to each credit subject hereto and supersede all prior negotiations, communications,
discussions and correspondence concerning the subject matter hereof. This Agreement may be amended or modified only in
writing signed by each party hereto.

 

    	-11-

    	 

    

 

SECTION 7.6.    AMENDMENT AND RESTATEMENT
OF EXISTING CREDIT AGREEMENT. This Agreement completely amends, restates and replaces the Existing Credit Agreement, which is no
longer of any force or effect, The Borrower warrants, acknowledges and agrees that no events have been taken place and no circumstances
exist at the date hereof which would give the Borrower a basis to assert a defense, offset or counterclaim to any claim of Lender
under the Existing Credit Agreement, this Agreement or any other loan documents related thereto, and to the extent any so exist
as of the date hereof, each is hereby absolutely and forever waived and released.

 

SECTION 7.7.    NO THIRD PARTY BENEFICIARIES.
This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted
successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause
of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party.

 

SECTION 7.8.    TIME. Time is of the essence
of each and every provision of this Agreement and each other of the Loan Documents.

 

SECTION 7.9.    SEVERABILITY OF PROVISIONS.
If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions
of this Agreement.

 

SECTION 7.10.    COUNTERPARTS. This Agreement
may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and
all of which when taken together shall constitute one and the same Agreement.

 

SECTION 7.11.    GOVERNING LAW. This Agreement
shall be governed by and construed in accordance with the taws of the State of Minnesota.

 

SECTION 7.12.  ARBITRATION.

 

(a)   Arbitration.    The parties
hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among
them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise
in any way arising out of or relating to (i) any credit subject hereto, or any of the Loan Documents, and their negotiation, execution,
collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default
or termination; or (ii) requests for additional credit.

 

(b)   Governing
Rules.    Any arbitration proceeding will (i) proceed in a location in Minnesota selected by the American Arbitration
Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted
by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's commercial
dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures
for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large,
complex commercial disputes to be referred to herein, as applicable, as the "Rules"). If there is any inconsistency
between the terms hereof and the Rules, the terms and procedures set forth herein shall control Any party who fails or
refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such
other party in compelling arbitration of any dispute Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C §91 or any similar applicable state law.

 

    	-12-

    	 

    

 

(c)   No Waiver
of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party
to (i) foreclose against real or personal property collateral; (ii) exercise seif-help remedies relating to collateral or proceeds
of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief,
attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion
does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder,
including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

 

(d)   Arbitrator Qualifications and
Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator
selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount
in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that
all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed
in the State of Minnesota or a neutral retired judge of the state or federal judiciary of Minnesota, in either case with a minimum
of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator
will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim.
In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The
arbitrator shall resolve all disputes in accordance with the substantive law of Minnesota and may grant any remedy or relief that
a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective
any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such
other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure,
the Minnesota Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional
or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy
or claim to arbitration if any other party contests such action for judicial relief.

 

(e)   Discovery In any arbitration
proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly
relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for
an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon
a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining
information is available.

 

    	-13-

    	 

    

 

(f)   Class Proceedings and Consolidations.
   No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have
executed any Loan Document, or to include in any arbitration any dispute as a representative or member of a class, or to act in
any arbitration in the interest of the general public or in a private attorney general capacity.

 

(g)   Payment Of Arbitration Costs
And Fees.    The arbitrator shall award all costs and expenses of the arbitration proceeding.

 

(h)   Miscellaneous.
   To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an
arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or regulation, If more than one
agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the dispute shall control This arbitration provision
shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the
parties.

 

[Signature page follows]

 

    	-14-

    	 

    
 

 

IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed as of the day and year first written above.

 

	
        

        THE TILE SHOP , LLC
	 	WELLS FARGO BANK,
	 	 	  NATIONAL ASSOCIATION 
	/s/ James A. Beukelman	 	
	James A. Beukelman,

Chief Financial Officer	 	

By:

Title:	
		 		

  

 

[Signature page to Amended
and Restated Credit Agreement dated as of August 31, 2010]

 

    	-15-

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