Document:

Exhibit 10.3

 

TILE SHOP HOLDINGS, INC.

FORM OF 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 2021 Omnibus Equity Compensation
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 Section 6(f)(iii) 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 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 3401(c) of the Code, 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.

 

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(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 permanently and totally disabled, within the meaning of Section 22(e)(3)
of the Code (“Disabled” or a “Disability”) 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.

 

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7.           Adjustments. The number and kind of shares of Common Stock subject to this Option and the Exercise Price for
each share of Common Stock subject to this Option shall be subject to adjustment as provided in Section 16 of the Plan.

  

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 21 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 is intended to 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 Plan. The Employee hereby acknowledges receipt of a copy of the Plan.

 

Date of Grant: [_____________]

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the Date of Grant.

 

	 	TILE SHOP HOLDINGS, INC.
	 	 	 
	 	By:	 
	 	Name: 	Cabell H. Lolmaugh
	 	Title:	 Chief Executive Officer
	 	 
	 	EMPLOYEE
	 	 
	 	[___________________]

 

    4Exhibit 10.4

 

TILE
SHOP HOLDINGS, Inc.

FORM OF STOCK RESTRICTION AGREEMENT

 

This Agreement (the “Agreement”)
is made this [_] day of [__], [202_] (the “Date of Grant”), 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 but not otherwise defined herein shall have the meaning
ascribed to such terms in the Company’s 2021 Omnibus Equity Compensation 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, the Stockholder is,
on the date hereof, an Employee, Director or Consultant of the Company or a Subsidiary; and

 

WHEREAS, pursuant to the Plan,
the Company wishes to grant a restricted stock award to the Stockholder for [____] shares (the “Restricted Shares”) of common
stock, par value $0.0001 per share, of the Company (“Common Stock”).

 

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

 

1. Restricted Shares to
be Subject to Restriction. The Stockholder agrees that the Restricted Shares shall be subject to the risks of forfeiture set forth
in Section 2 of this Agreement, to the restrictions on transfer set forth in Section 4 of this Agreement, and to any additional provisions
of the Plan applicable to such Restricted Shares during the period that such risks of forfeiture and restrictions on transfer are applicable
(the “Restriction Period”).

 

2. Vesting.

 

a. The Restricted
Shares shall be forfeitable until the risks of forfeiture lapse according to the following schedule and the satisfaction of the other
conditions set forth in this Section 2(a) (subject to such rounding conventions as may be employed by the Company from time to time):

 

i. [One-third] of
the Restricted Shares shall vest on the [first] anniversary of the Date of Grant;

 

ii. [One-third] of
the Restricted Shares shall vest on the [second] anniversary of the Date of Grant; and

 

iii. [One-third] of
the Restricted Shares shall vest on the [third] anniversary of the Date of Grant;

 

provided,
in each case, that the Stockholder remains in continuous employment or other service with the Company or a Subsidiary (“Continuous
Service”) through each such vesting date.

 

b. Any Restricted
Shares as to which the risks of forfeiture have not lapsed shall be forfeited immediately if the Stockholder’s Continuous Service
terminates for any reason or no reason, with or without cause.

 

c.
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. Stockholder Rights.
The Stockholder shall have all rights as a stockholder with respect to the Restricted Shares subject to forfeiture, including the right
to vote, except that, while any portion of the Restricted Shares remains unvested, [on each date (if any) that cash dividends are
paid to holders of Common Stock, the Company will credit the Stockholder with a whole number of additional Restricted Shares equal to
the quotient of (a) the number of unvested Restricted Shares held by the Stockholder as of the date of record for such cash dividend multiplied
by the per share cash dividend amount, divided by (b) the 30-trading day average of the closing price per share of Common Stock preceding
the cash dividend payment date (rounded down to the nearest whole share).  Any such additional Restricted Shares will be subject
to the same vesting conditions and transfer restrictions as the underlying Restricted Shares.] [any dividends paid with respect to the
unvested Restricted Shares shall be automatically deferred and accumulated by the Company in a notional bookkeeping account, and shall
be paid to the Stockholder in cash (without interest) only at such time(s) as the underlying Restricted Shares become vested in accordance
with this Agreement, with the Stockholder’s right to payment of any such dividends being subject to the same risk of forfeiture,
restrictions on transferability, and other terms of this Agreement as are the Restricted Shares with respect to which the dividends otherwise
were payable.] Further, any Shares received by the Stockholder in connection with any stock dividends or distributions payable with respect
to unvested Restricted Shares shall be subject to the same vesting conditions and transfer restrictions as the underlying Restricted Shares
and shall be subject to such adjustments as contemplated by Section 7 of this Agreement.

 

4. Restrictions on Transfer.
The Stockholder shall not, until the risks of forfeiture lapse, sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by
operation of law or otherwise, any of the Restricted Shares, or any interest therein, unless and until such are no longer subject to a
risk of forfeiture.

 

5. Effect of Prohibited
Transfer. The Company will not be required (a) to transfer on its books any Restricted 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 Restricted Shares, or to pay dividends
to, any transferee to whom any such Restricted Shares have been so sold or transferred.

 

6. Restrictive Legend.
Any certificates or book entries representing Restricted 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 a risk of forfeiture 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. The number and kind of shares of Common Stock granted to the Stockholder pursuant to this Agreement
shall be subject to adjustment as provided in Section 16 of the Plan.

 

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.

 

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10. No Rights to Employment
or Other Service. Nothing contained in this Agreement is to be construed as giving the Stockholder any right to be retained, in any
position, as an Employee, Director or Consultant of the Company or a Subsidiary.

 

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.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the Date of Grant.

 

	 	TILE SHOP HOLDINGS, INC.
	 	 
	 	By:	 
	 	Name: Cabell H. Lolmaugh
	 	Title: Chief Executive Officer
	 	 
	 	STOCKHOLDER
	 	 
	 	 
	 	[___________________]

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