10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File Number: 001-38632

SELECT INTERIOR CONCEPTS, INC.

(Exact name of Registrant as specified in its Charter)

Delaware	47-4640296
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
400 Galleria Parkway, Suite 1760 Atlanta, Georgia	30339
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (888) 701-4737

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	SIC	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes  ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on The Nasdaq Stock Market on June 30, 2020, was $87.0 million.

The number of shares of Registrant’s Common Stock outstanding as of March 1, 2021 was 25,510,926.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Registrant’s Definitive Proxy Statement relating to its 2021 Annual Meeting of Stockholders (to be filed with the U.S. Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report) are incorporated by reference into Part III of this Annual Report on Form 10-K, as indicated herein.

Table of Contents

		Page
PART I
Item 1.	Business	3
Item 1A.	Risk Factors	7
Item 1B.	Unresolved Staff Comments	22
Item 2.	Properties	22
Item 3.	Legal Proceedings	22
Item 4.	Mine Safety Disclosures	22
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 6.	Selected Financial Data	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 8.	Financial Statements and Supplementary Data	40
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	40
Item 9A.	Controls and Procedures	40
Item 9B.	Other Information	40
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	41
Item 11.	Executive Compensation	41
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	41
Item 13.	Certain Relationships and Related Transactions, and Director Independence	41
Item 14.	Principal Accounting Fees and Services	41
PART IV
Item 15.	Exhibits, Financial Statement Schedules	42
Item 16	Form 10-K Summary	45

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Special Note Regarding Forward-Looking Statements and Information

This Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (which we refer to as this “Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and, as such, may involve known and unknown risks, uncertainties and assumptions. Forward-looking statements relate to expectations, beliefs, projections, forecasts, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts.  Some of the forward-looking statements may be identified by the use of words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue,” and other forms of these words or similar words or expressions or the negatives thereof. Forward-looking statements are based on historical information available at the time the statements are made and are based on management’s reasonable belief or expectations with respect to future events. These forward-looking statements are subject to risks, contingencies, and uncertainties that are beyond our control. Further, new factors emerge from time to time that may cause our business not to develop as we expect, and it is not possible for us to predict all of them. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at or by which such performance or results will be achieved. Forward-looking statements speak only as of the date on which they are made and the Company undertakes no obligation to update any forward-looking statement to reflect future events, developments or otherwise, except as may be required by applicable law. Factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following:

• the cyclical nature of our businesses and the seasonality of the building products supply and services industry;

• our dependency upon the homebuilding industry, repair and remodel activity, the economy, the credit markets, and other important factors;

• general economic and financial conditions;

• competition in our highly fragmented industry and the markets in which we operate;

• exposure to warranty, casualty, construction defect and various other claims and litigation;

• product shortages, loss of key suppliers, our dependence on third-party suppliers and manufacturers, and the development of alternatives to distributors in the supply chain;

• changes in the costs of the products we install;

• ability to implement our business strategies and achieve our growth objectives;

• acquisition and integration risks;

• increased operating costs;

• the impact of inflation and deflation;

• our inability to attract and retain highly skilled employees and subcontractors;

• adverse credit and financial markets events and conditions;

• credit sale risks;

• retention of key personnel;

• performance of individual locations;

• environmental, health and safety laws and regulations;

• the impact of federal, state and local regulations;

• computer data processing systems;

• our inability to cancel before the end of the term or renew many of the leases for our facilities;

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• the loss of our significant customers or a reduction in the quantity of products they purchase;

• requirements of being a public company;

• the COVID-19 pandemic;

• risks related to our internal controls;

• the possibility of securities litigation;

• restrictions relating to our operations in our current and future financing arrangements;

• our inability to obtain additional capital on acceptable terms, if at all;

• increases in interest rates; and

• risks related to other factors discussed under “Risk Factors” and elsewhere in this Annual Report.

You should read this Annual Report completely and with the understanding that actual future results may be materially different from expectations expressed in any forward-looking statements. All forward-looking statements made in this Annual Report are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this Annual Report, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, or changes in future operating results over time or otherwise.

These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of our operations, including statements about potential acquisition or merger targets; business strategies; future cash flows; financing plans; plans and objectives of management; the ongoing impact of the COVID-19 pandemic; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results, and any other statements that are not historical facts.

Comparisons of results for current and any prior periods are not intended to express any future trends, or provide indications of future performance, and should only be viewed as historical data.

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PART I

Item 1. Business.

Company Overview

Select Interior Concepts, Inc. (collectively with all of its subsidiaries, “SIC,” the “Company,” “we,” “us” and “our”) is an installer and nationwide distributor of interior building products with market positions in residential interior design services. 

Through our Residential Design Services (which we refer to as “RDS”) operating segment, we serve national and regional homebuilders by providing an integrated, outsourced solution for the design, consultation, sourcing, distribution and installation needs of their homebuyer customers. Through our 17 design centers, our designers work closely with homebuyers in the selection of a broad array of interior products and finishes, including flooring, cabinets, countertops, wall tile, and related interior items, primarily for newly constructed homes. We then coordinate the ordering, fulfillment and installation of many of these interior products to provide a streamlined experience for the homebuyer. With our design centers and our product sourcing and installation capabilities, we enable our homebuilder customers to outsource critical aspects of their business to us, thereby increasing their sales, profitability, and return on capital.  

We also have leading market positions in the selection and importation of natural and engineered stone slabs for kitchen and bathroom countertops and specialty tiles through our Architectural Surfaces Group (which we refer to as “ASG”) operating segment. ASG sources natural and engineered stone from a global supply base, and markets these materials through a national network of distribution centers and showrooms at 21 different locations. In addition to serving the new residential and commercial construction markets with these materials, we also distribute them to the repair and remodel (which we refer to as “R&R”) market.

Our History

The SIC platform originated in September 2014, when affiliates of Trive Capital Management LLC (which we refer to as “Trive Capital”) acquired RDS, which in turn acquired the assets of PT Tile Holdings, LP (which we refer to as “Pinnacle”) in February 2015, and 100% of the equity interests in Greencraft Holdings, LLC (which we refer to as “Greencraft”) in December 2017. RDS then acquired the assets of Summit Stoneworks, LLC (which we refer to as “Summit”) in August 2018, 100% of the equity interests in T.A.C. Ceramic Tile Co. (which we refer to as “TAC”) in December 2018, and acquired the assets of Intown Design, Inc., Intown Granite of Charlotte, Inc., and Granitec, LLC, (collectively, “Intown”) in March 2019.

Affiliates of Trive Capital also formed a consolidation platform in the stone countertop market by acquiring 100% of the equity interests in Architectural Granite & Marble, LLC in June 2015, which in turn acquired the assets of Bermuda Import-Export, Inc. (which we refer to as “Modul”) in July 2016, 100% of the equity interests in Pental Granite and Marble, LLC (which we refer to as “Pental”) in February 2017, and the assets of Cosmic Stone & Tile Distributors, Inc. (which we refer to as “Cosmic”) in October 2017, and these acquired businesses were combined to form ASG. ASG then acquired the assets of Elegant Home Design, LLC (which we refer to as “Bedrock”) in January 2018, the assets of NSI, LLC (which we refer to as “NSI”) in March 2018, and the assets of The Tuscany Collection, LLC (which we refer to as “Tuscany”) in August 2018.  

November 2017 Restructuring Transactions

In November 2017, Select Interior Concepts, Inc. and the former equity holders of RDS and ASG completed a series of restructuring transactions (collectively, the “November 2017 restructuring transactions”) pursuant to which Select Interior Concepts, Inc. acquired all of the outstanding equity interests in each of RDS and ASG, including all of their respective wholly-owned subsidiaries.  Following the November 2017 restructuring transactions, Select Interior Concepts, Inc. became a holding company that wholly owns RDS and ASG.

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Residential Design Services

RDS enters into exclusive service agreements with homebuilders at the beginning of certain new community development projects to provide them with a single-source solution for the design center operations, consultation, sourcing, fulfillment, and installation phases of the homebuilding process. At our design centers, our design staff work directly with homebuyers to help them achieve their design, styling, and product needs, leveraging our web-based preference analysis and proprietary software system to enable real-time pricing of interior options. 

During the initial design phase of a new residential development, RDS often assists builders with upfront planning of design elements and interior options. These alternatives then become the standard packages and design options which are the basis from which the new homebuyer makes upgrade selections. During the initial construction phase, RDS offers a full suite of interior customization options to homebuyers in its design centers, providing the opportunity to upgrade to higher priced options that are not part of the homebuilder’s standard package. These upgrades result in higher revenue and profitability for both RDS and the homebuilder, who shares in the incremental revenue from any upgrades. RDS also provides installation services, ensuring that the finished product meets the homebuyer’s specifications.

RDS’ collection of design options enables homebuyers to customize their homes with high quality interior finishes and provides homebuilders with a single partner to handle the majority of the interior design elements in a new home. RDS offers numerous interior surface categories which includes flooring, cabinets, countertops and wall tile.

Architectural Surfaces Group

Our ASG segment imports and distributes natural and engineered stone slabs, as well as tile, through 21 strategically positioned showrooms and warehouse locations across the United States. Our stone slabs include marble, granite, porcelain and quartz, for use as kitchen and bathroom countertops, and our tiles consist of ceramic and porcelain for flooring, backsplash, and wall tile applications. We provide our services throughout markets in the Northeast, Southeast, Southwest, Midwest, Mountain West, and West Coast regions of the United States and offer a targeted merchandising strategy, including displaying our products in customer-oriented showrooms that cater to professional interior designers and architects as well as homeowners. Our product lines are tailored to the specific geographic regions that we serve.

We have relationships with a wide array of stone slab quarries, manufacturers and distributors around the world and offer our customers a broad and consistent selection of high-quality stone slabs from a global supply chain.

Competition

Our markets are highly fragmented and competitive. We face competition from large home improvement stores, national and regional interior surface retailers and distributors, and independent design centers. Some of our competitors are organizations that are larger, are better capitalized, have operated longer, have product offerings that extend beyond our product suite, and have a more established market presence with substantially greater financial, marketing, personnel, and other resources than we have. In addition, while we believe that there is a relatively low threat of new internet-only entrants due to the nature of our products, the growth opportunities presented by e-commerce could outweigh these challenges and result in increased competition.

Suppliers

We purchase materials from both domestic and foreign suppliers.  We have relationships with qualified suppliers who allow us to access products in a timely and efficient manner and have not historically experienced significant disruption in supply of the products we purchase. In some instances, we have agreements with our suppliers, but these agreements are generally terminable by either party without notice or on limited notice. Many of our suppliers also offer us favorable terms based on the volume of our purchases.

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Backlog

For our RDS segment, backlog represents the transaction price for contracts for which work has not been performed and excludes unexercised contract options and potential modifications. Backlog is not a guarantee of future revenue as contractual commitments may change. There can be no assurance that backlog will result in revenue within the expected timeframe, if at all. We estimate our backlog was $548.7 million as of December 31, 2020 and $574.3 million as of December 31, 2019.

Customer Concentration

There were no customers that accounted for over 10.0% of total net revenue for the year ended December 31, 2020 or 2019.  For the year ended December 31, 2018, the Company recognized revenue from one customer which accounted for 11.4% of total net revenue.  There were no customers that accounted for 10.0% or more of total accounts receivable, as of December 31, 2020 or 2019.

Cyclicality and Seasonality

Our businesses are both cyclical and seasonal based on the homebuilding industry in the markets we serve. Because of the timing of installation of our major product lines, which are mainly installed near the end of the construction process, as well as overall housing seasonality for our RDS segment, our sales activity for the RDS segment is normally weighted toward the second half of the calendar year.

Homebuilding-based businesses are also generally cyclical. Our financial performance will be impacted by economic changes nationally and locally in the markets we serve. The building products supply industry is dependent on new home construction and subject to cyclical market pressures. Our operations are subject to fluctuations arising from changes in supply and demand, national and international economic conditions, labor costs, competition, government regulation, trade policies, and other factors that affect the homebuilding industry such as demographic trends, interest rates, single-family housing starts, employment levels, consumer confidence, and the availability of credit to homebuilders, contractors and homeowners.

After the dramatic recession that ran from 2007 to 2009, there have been over ten years of relatively steady growth. While we believe that the underlying fundamentals of demand for new housing units and residential investment are indicative of continued growth into the future, there can be no assurance that macroeconomic or other factors will not change unexpectedly and cause a downturn in housing construction.

Human Capital

We employ approximately 1,300 employees serving in 53 distinct locations across the nation.  These employees perform a number of functions, from supply, delivery, and installation of our products to administrative and back office roles to ensure the business functions as efficiently as possible.  Our employees are integral to our business and its success, as many have specialized knowledge concerning building products, techniques, supply chain, and in many instances, trade-specific knowledge such as flooring, carpentry, or countertop installation that allows our Company to successfully perform.  A key focus and objective for the Company is that we attract and retain highly qualified individuals while fostering an unwavering commitment toward inclusion and diversity.  To this end, the Company offers competitive pay, health and wellness benefits, and employee development and training programs.  Additionally, over the last year, the Company has developed and deployed a management training program which aims to identify, train, and promote employees and prospective employees with demonstrated leadership potential and business acumen to further enhance the Company’s talent base.  The program will place trainees in varying positions in the business for 3-month terms over the course of a year, followed by a capstone project and presentation to the Company’s senior leadership.  The intent of the program is to develop the skills and business understanding of each of the Managers-in-Training (“MIT”), resulting in a formal job offer at the end of the program.  

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Finally, employee safety remains one of the Company’s highest priorities.  In this regard, the Company has an on-going safety training program, conducts regular safety assessments, and has created a multi-disciplinary COVID-19 Response Team to address safety concerns presented by the recent novel coronavirus pandemic.  Because our operations were deemed essential to the critical infrastructure, a large portion of our workforce continued operating in place throughout the COVID-19 pandemic.  Recognizing this fact, and as evidence of the Company’s focus on safety, the Company made several significant operational adjustments to address potential safety concerns.  This included modifying attendance policies to allow many employees to work remotely, implementation of daily self-assessments to safeguard our employees working on job sites or in the office, requiring face coverings to be worn in all locations, providing access to personal protective equipment and limiting domestic and international travel.  

We are proud of our employees and continue to make significant investments and review measures to promote diversity, and attract and retain talented employees, while ensuring a safe workplace at each of our operating sites.

Executive Officers

See Item 10. Directors, Executive Officers of the Registrant, and Corporate Governance.

Government Regulation

We are subject to various federal, state and local laws and regulations applicable to our businesses generally in the jurisdictions in which we operate, including those relating to employment, import and export, public health and safety, work place safety, product safety, transportation, zoning, and the environment. We operate our businesses in accordance with standards and procedures designed to comply with applicable laws and regulations, and we believe that we are in compliance in all material respects with such laws and regulations.

Insurance and Risk Management

We use a combination of insurance policies specific to particular purposes to provide us with protection against potential liability for workers’ compensation, general liability, product liability, director and officers’ liability, employer’s liability, property damage, auto liability, and other casualty and property risks. Changes in legal trends and interpretations, variability in inflation rates, changes in workers’ compensation and general liability premiums and deductibles, changes in the nature and method of claims settlement, benefit level changes due to changes in applicable laws, insolvency of insurance carriers, and changes in discount rates could all affect ultimate settlements of claims. We evaluate our insurance requirements on an ongoing basis to ensure we maintain adequate levels of coverage.

Legal Proceedings

From time to time, we are involved in various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. While the outcomes of these matters are generally not presently determinable, we do not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on our financial position, results of operations or cash flows.

Intellectual Property

We possess proprietary knowledge and software programs, as well as registered trademarks that are important to our businesses. We make, and will continue to make, efforts to protect our intellectual property rights; however, the actions taken by us may be inadequate to prevent others from using similar intellectual property. In addition, third parties may assert claims against our use of intellectual property and we may be unable to successfully resolve such claims.

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Available information

Our internet website address is www.selectinteriorconcepts.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge through our website as soon as reasonably practicable after we electronically file them with or furnish them to the SEC. Our Code of Business Conduct and Ethics and the charters of the Audit, Compensation, and Nominating and Corporate Governance Committees of our Board of Directors are also posted on our website. Each of these documents is also available in print to any stockholder who requests it.  

Item 1A. Risk Factors.

Our business, results of operations, and financial condition are subject to numerous risks and uncertainties. In connection with any investment decision with respect to our securities, you should carefully consider the following risk factors, as well as the other information contained in this report and our other filings with the SEC. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. Should any of these risks materialize, our business, results of operations, financial condition and future prospects could be negatively impacted, which in turn could affect the trading value of our securities. You should read these Risk Factors in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our consolidated financial statements and related notes in Item 8.

Business and Industry Risks

The COVID-19 pandemic has adversely affected, and we expect it to continue to adversely affect, our business, financial condition, and results of operations.

The COVID-19 pandemic has adversely impacted economic activity and conditions worldwide, including workforces, liquidity, capital markets, consumer behavior, supply chains, and macroeconomic conditions, which in turn has materially impacted our business. While we expect the COVID-19 pandemic to continue to impact our business in the near term, particularly in regions where we derive a significant amount of our revenue or profit or where our suppliers and customers are located, the extent and duration of the continued effects of the COVID-19 pandemic on our business and results of operation is unknown and will depend on future developments, which are highly uncertain and outside our control.  These developments include the scope, duration and severity of the pandemic (including the possibility of further surges or variations of COVID-19), the timing and efficacy of the vaccination program in the U.S., further actions taken by governmental authorities, including future stimulus programs, in response to the pandemic and changing consumer and supplier behavior.  It is also possible that the pandemic and its aftermath will lead to a prolonged economic slowdown or recession in the U.S. economy.  The current COVID-19 pandemic has impacted and may continue to impact our industry and cause disruptions to our operations, including as a result of decreased demand for our products and services or disruption to our supply chain, all of which could materially and adversely affect our business, financial condition and results of operations.

While we have taken significant precautions to ensure the health and safety of our team members and customers throughout the pandemic, our operations could be disrupted if any of our employees or employees of our suppliers or customers were suspected or confirmed of having COVID-19 or other illnesses and such illness required us or our suppliers or customers to quarantine some or all such employees or disinfect our locations.  Also, a number of our administrative employees are working remotely.  Remote working may heighten cybersecurity, information security and operational risks and affect the productivity of our employees.

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The COVID-19 pandemic has caused, and may continue to cause disruptions in our supply chain. The inability of our suppliers to meet our supply needs in a timely manner or our quality standards could cause delays to delivery date requirements of our customers. Such failures could result in the cancellation of orders, customers’ refusal to accept deliveries, a reduction in purchase prices, and ultimately, termination of customer relationships, any of which could have a material adverse effect on our business, financial condition, results of operations and liquidity. In that case, we may be required to seek alternative sources of materials or products. Although we believe that we can manage our exposure to these risks, we cannot be certain that we will be able to identify such alternative materials or sources without delay or without greater cost to us. Our inability to identify and secure alternative sources of supply in this situation could have a material adverse effect on our ability to satisfy customer orders.  While we have largely been able to manage these supply chain disruptions to date, there is no guarantee that we will be able to do so in the future.  

We also have faced, and will continue to face, business interruptions as a result of the COVID-19 pandemic.  While only some of our locations were temporarily closed in the states or counties where construction activities were temporarily prohibited or where more broad business closures were mandated, we could be adversely affected if government authorities impose further mandatory closures, seek voluntary closures or impose restrictions on our operations. Even if such measures are not further implemented and a virus or other disease does not spread significantly, the perceived risk of infection or health risk may adversely affect our business and operating results.

We cannot predict the duration or scope of the COVID-19 pandemic or when or how our business, financial conditions and results of operations will be impacted by it, including as a result of the recent deterioration in the U.S. economy and any related impact on the residential homebuilding industry, and based on the duration and scope, such impact could be material. Historically, in times of an economic recession, new home construction in the United States has slowed considerably. Any significant downturn in new home construction as a result of the economic impact of the COVID-19 pandemic could have an adverse effect on our business, financial condition and results of operations.

To the extent the COVID-19 pandemic adversely affects our business, financial conditions and results of operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.

The industry in which we operate is dependent upon the U.S. residential homebuilding industry, repair and remodel activity, the economy, the credit markets, and other important factors, many of which are beyond our control.

The building products supply and services industry in the United States is highly dependent on new home construction and the R&R market, which in turn are dependent upon a number of factors, including interest rates, consumer confidence, employment rates, wage rates, foreclosure rates, housing inventory levels, housing demand, the availability of land, local zoning and permitting processes, the availability of construction financing, skilled construction labor and the health of the economy and mortgage markets. Unfavorable changes in demographics, credit markets, consumer confidence, health care costs, housing affordability, housing inventory levels, a weakening of the national economy or of any regional or local economy in which we operate and other factors beyond our control could adversely affect consumer spending, result in decreased demand for homes and adversely affect our businesses.

We also rely on home R&R activity. High unemployment levels, high mortgage delinquency and foreclosure rates, lower home prices, limited availability of mortgage and home improvement financing, and significantly lower housing turnover may restrict consumer spending, particularly on discretionary items such as home improvement projects, and affect consumer confidence levels leading to reduced spending in the R&R end market. Furthermore, with even a slight decline in the economy, nationally or in any of the markets in which we operate, consumer preferences and purchasing practices and the strategies of our customers may adjust in a manner that could result in changes to the nature and prices of products demanded by the end consumer and our customers and could adversely affect our businesses and results of operations.

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A significant portion of our, and in particular RDS’s, business is in the state of California. A slowdown in the economy or a decline in homebuilding activity in California, or the occurrence of a natural disaster, could have a disproportionately negative effect on our business, financial condition, operating results, and cash flows.

A significant portion of RDS’s business is in the state of California. In 2020 and 2019, we derived approximately 36% and 39%, respectively, of our consolidated net revenue, and RDS derived approximately 50% and 52%, respectively, of its net revenue, from customers in California, and we expect this trend to continue in the future. As such, we are more susceptible to adverse developments in California than competitors with more diversified operations or if RDS had a more geographically diverse business. A slowdown in California’s economy, including as a result of the COVID-19 pandemic and government responses thereto, a decline in the state’s homebuilding activity, or the occurrence of a natural disaster within the state, such as an earthquake, wildfire, drought or mudslide, all of which could be made worse by climate change, or civil disturbance, could have a disproportionately negative effect on our business, financial condition, operating results and cash flows.

Our businesses are cyclical and significantly affected by changes in general and local economic conditions.

The building products supply and services industry is subject to cyclical market pressures. Demand for our products and services is highly sensitive to general and local economic conditions over which we have no control, including changes in (i) the number of new home and commercial building construction starts, (ii) the production schedules of our homebuilder customers, (iii) short- and long-term interest rates, (iv) inflation, (v) employment levels and job and personal income growth, (vi) housing demand from population growth, household formation and other demographic changes, (vii) availability and pricing of mortgage financing for homebuyers and commercial financing for developers of multi-family homes and subcontractors, (viii) consumer confidence generally and the confidence of potential homebuyers in particular, (ix) U.S. and global financial and political system and credit market stability, (x) private party and government mortgage loan programs and federal and state regulation, oversight and legal action regarding lending, appraisal, foreclosure and short sale practices, (xi) federal and state personal income tax rates and provisions, including provisions for the deduction of mortgage loan interest payments, real estate taxes and other expenses, (xii) federal, state and local energy efficiency programs, regulations, codes and standards, or (xiii) general economic conditions in the markets in which we compete.

Unfavorable changes in these conditions could adversely affect consumer spending, result in decreased demand for homes, and adversely affect our businesses generally. Any deterioration in economic conditions or increased uncertainty regarding economic conditions could have a material adverse effect on our businesses, financial condition, results of operations, and prospects.

The building products supply and services industry is seasonal and affected by weather-related conditions.

Our industry is seasonal. Seasonal changes and other weather-related conditions can adversely affect our businesses and operations through a decline in both the use of our products and demand for our services. Although weather patterns affect our operating results throughout the year, our first and fourth quarters have historically been the most adversely affected by weather patterns in some of our markets, causing reduced construction activity. To the extent that severe weather conditions, such as unusually prolonged cold conditions, hurricanes, severe storms, earthquakes, floods, fires, droughts, other natural disasters or similar events occur in the markets in which we operate, construction or installation activity could be reduced, delayed or halted and our businesses may be adversely affected. Furthermore, climate change could increase the frequency and severity of these weather events.

In addition, the levels of fabrication, distribution, and installation of our products generally follow activity in the construction industry, which typically occurs in the spring, summer and fall. Warmer and drier weather during the second half of the year typically result in higher activity and revenue levels during those periods. Markets in which we operate that are impacted by winter weather, such as snow storms and extended periods of rain, experience a slowdown in construction activity during the beginning and the end of each calendar year, and this winter slowdown contributes to traditionally lower sales in our first quarter.

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Our industry and the markets in which we operate are highly fragmented and competitive, and increased competitive pressure may adversely affect our businesses, financial condition, results of operations, and cash flows.

The building products supply and services industry is highly fragmented and competitive. We face significant competition from local, regional and national building materials chains, design centers, fabricators, and subcontractors, as well as from privately-owned single-site enterprises. Competition varies depending on product line, type of customer and geographic area. Any of these competitors may (i) foresee the course of market development more accurately than we do, (ii) offer products and services that are deemed superior to ours, (iii) have the ability to produce or supply similar products and services at a lower cost, (iv) install building products at a lower cost, (v) develop stronger relationships with suppliers, fabricators, homebuilders, and other customers in our markets, (vi) develop a superior network of distribution centers in our markets, (vii) adapt more quickly to new technologies, new installation techniques, or evolving customer requirements, or (viii) have access to financing on more favorable terms than we can obtain. As a result, we may not be able to compete successfully with our competitors. If we are unable to compete effectively with our existing competitors or new competitors enter the markets in which we operate, our financial condition, results of operations, and cash flows may be adversely affected.

We are exposed to warranty, casualty, construction defect, contract, tort, employment and other claims, and legal proceedings related to our businesses, the products we distribute, the services we provide, and services provided for us by third parties.

In the ordinary course of business, we are subject to various claims and litigation. Any such claims, whether with or without merit, could be time consuming and expensive to defend and could divert management’s attention and resources. As a subcontractor, we are regularly subject to construction defect claims on various housing tracts. We may not always be able to successfully defend or be excused from the lawsuits related to these claims and could be subject to substantial losses.

We are also from time to time subject to casualty, contract, tort and other claims relating to our businesses, the products we have distributed in the past or may in the future distribute, and the services we have provided in the past or may in the future provide, either directly or through third parties. If any such claim were adversely determined, our financial condition, results of operations, and cash flows could be adversely affected if we were unable to seek indemnification for such claims or were not adequately insured for such claims.

In addition, we are exposed to potential claims arising from the conduct of our employees, builders and their subcontractors, and third-party installers for which we may be liable. We and they are subject to regulatory requirements and risks applicable to general contractors, which include management of licensing, permitting and quality of third-party installers. If we fail to manage these processes effectively or provide proper oversight of these services, we could suffer lost sales, fines and lawsuits, as well as damage to our reputation, which could adversely affect our businesses and results of operations.

Product shortages, loss of key suppliers or failure to develop relationships with qualified suppliers, our dependence on third-party suppliers and manufacturers, or the development of alternatives to distributors in the supply chain, could adversely affect our businesses, financial condition, results of operations, and cash flows.

Our ability to offer a wide variety of products to our customers is dependent upon our ability to obtain adequate product supply from manufacturers and other suppliers. Generally, our products are obtainable from various sources and in sufficient quantities to meet our operating needs. However, the loss of, or a substantial decrease in the availability of, products from our suppliers or the loss of key supplier arrangements could adversely impact our businesses, financial condition, results of operations, and cash flows. In prior downturns in the housing industry, manufacturers have reduced capacity by closing plants and production lines within plants. Even if such capacity reductions are not permanent, there may be a delay in manufacturers’ ability to increase capacity in times of rising demand. If the demand for products from manufacturers and other suppliers exceeds the available supply, we may be unable to source additional products in sufficient quantity or quality in a timely manner and the prices for the products that we install could rise. These developments could affect our ability to take advantage of market opportunities and limit our growth prospects.

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Our ability to continue to identify and develop relationships with qualified suppliers who can satisfy our high standards for quality and our need to access products in a timely and efficient manner is a significant challenge. Our ability to access products also can be adversely affected by the financial instability of suppliers, suppliers’ non-compliance with applicable laws, tariffs and import duties, supply disruptions, shipping interruptions or costs, and other factors beyond our control, including disruptions related to the COVID-19 pandemic. The loss of, or a substantial decrease in the availability of, products from our suppliers or the loss of key supplier arrangements could adversely impact our financial condition, results of operations, and cash flows.

Although in some instances we have agreements with our suppliers, these agreements are generally terminable by either party without notice or on limited notice. Many of our suppliers also offer us favorable terms based on the volume of our purchases. However, the failure by our suppliers to continue to supply us with products on favorable terms, commercially reasonable terms, or at all, could put pressure on our operating margins or have a material adverse effect on our financial condition, results of operations, and cash flows.

In addition, our larger customers, such as homebuilders, fabricators, and dealers, could begin purchasing more of their product needs directly from manufacturers, which would result in decreases in our net sales and earnings. Our suppliers could invest in infrastructure to expand their own sales forces and sell more products directly to our customers, which also would negatively impact our businesses. These changes in the supply chain could adversely affect our financial condition, results of operations, and cash flows.

A material disruption at one of our suppliers’ facilities or loss of a supplier relationship could prevent us from meeting customer demand, reduce our sales and negatively affect our overall financial results.

Any of the following events could cease or limit our or our suppliers’ operations unexpectedly: fires, floods, earthquakes, hurricanes, on-site or off-site environmental incidents or other catastrophes; utility and transportation infrastructure disruptions; labor difficulties; other operational problems; war, and acts of terrorism; pandemics, including the COVID-19 pandemic, and other global health crises; or other unexpected events. Any downtime or facility damage at our suppliers could prevent us from meeting customer demand for our products or require us to make more expensive purchases from a competing supplier. If our suppliers were to incur significant downtime, our ability to satisfy customer requirements could be impaired, resulting in customers seeking products from other distributors as well as decreased customer satisfaction and lower sales and operating income. In addition, a loss of a supplier relationship could harm our operations. Because we purchase from a limited number of suppliers, the effects of any particular shutdown or facility damage or loss of a supplier relationship could be significant to our operations.

In addition, our suppliers’ inability to produce or procure the necessary raw materials to supply finished goods to us may adversely impact our results of operations, cash flows, and financial position.

If we fail to qualify for supplier rebates or are unable to maintain or adequately renegotiate our rebate arrangements, our gross margins and income could be adversely affected.

Many of our products, such as flooring, tile and finish carpentry, are purchased pursuant to rebate arrangements that entitle us to receive a rebate based on the volume of our purchases. Such arrangements generally require us to purchase minimum quantities in certain geographies or product categories and result in higher rebates with increased quantities of purchases. These rebates effectively reduce the cost of our products and we manage our businesses to take advantage of these programs. When assessing the desirability of acquisitions, we consider the effects of such acquisitions on our ability to qualify for rebates. Rebate arrangements are subject to renegotiation with our suppliers from time to time. In addition, consolidation of suppliers may result in the reduction or elimination of rebate programs in which we participate. If we are unable to qualify for these rebates, are unable to renew rebate programs on desirable terms or are unable to obtain the expected rebate benefits of our acquisitions, or a supplier materially reduces or stops offering rebates, our costs could increase and our gross margins and income could be adversely affected.

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Changes in product mix or the costs of the products we install can decrease our profit margins.

The principal building products that we distribute and install have been subject to price changes in the past, some of which have been significant. Our operating results for individual quarterly periods can be, and have been, adversely affected by a delay between when building product cost increases are implemented and when we are able to increase prices for our products and services, if at all. Our supplier purchase prices often depend on volume requirements. If we do not meet these volume requirements, our costs could increase and our margins may be adversely affected. In addition, while we have been able to achieve cost savings through volume purchasing and our relationships with suppliers, we may not be able to continue to receive advantageous pricing for the products that we supply, which could have a material adverse effect on our financial condition, results of operations, and cash flows.

Our profitability is also impacted by the mix of products that we install and sell. Recent trends indicate more of our homebuilder customers are moving to entry- to mid-level homes with fewer upgrades. There can be no assurance that the current product mix will continue, and any shift to options with lower profit margin could adversely impact our businesses, financial condition, results of operations, and cash flows.

Political and economic uncertainty and unrest in foreign countries where our suppliers are located could adversely affect our operating results.

A significant number of our suppliers are located in foreign countries and therefore, we are subject to risks and uncertainties associated with changing economic and political conditions in these or other foreign countries in which we source, or in the future may source, any of our products, such as (i) increased import duties, tariffs, trade restrictions, and quotas, (ii) work stoppages, (iii) economic uncertainties (including inflation), (iv) adverse foreign government regulations, government control, or sudden changes in laws and regulations, (v) wars, fears of war, and terrorist attacks, (vi) pandemics, including the COVID-19 pandemic, and other global crises, and (vii) organizing activities and political unrest.

We cannot predict if, when, or the extent to which, the countries in which we source our products will experience any of the above events. Any event causing a disruption, delay or cessation of imports from foreign locations would likely increase the cost or reduce the supply of products available to us, and cause us to seek alternative sources for our products, which may only be available on less advantageous terms, and would adversely affect our operating results.

The importation of building materials into the United States could expose us to additional risk.

A significant portion of the building materials that we distribute and/or install come from foreign jurisdictions outside North America. Such materials may be imported because they may not be available for domestic purchase in the United States or because there may be a shortfall of inventory available locally. Despite our efforts to ensure the merchantability of these products, such products may not adhere to U.S. standards or laws. In addition, pricing of these products can be impacted by changes to the relative value of the U.S. dollar over the applicable foreign currency in the long-term, which could negatively impact our margins. Importation of such building materials could subject us to greater risk, including currency risk, and lawsuits by customers or governmental entities.

We may be unable to effectively manage our inventory and working capital as our sales volume increases or the prices of the products we distribute fluctuate, which could have a material adverse effect on our businesses, financial condition, and results of operations.

We purchase certain materials, including wood and laminate flooring, natural and engineered stone, and tile for wall and flooring applications, from manufacturers or quarries, which are then sold to customers as an installed product or as a prefabricated and installed product. We must maintain and have adequate working capital to purchase sufficient inventory to meet customer demand. Due to the lead times required by our suppliers, we order products in advance of expected sales. As a result, we are required to forecast our sales and purchase accordingly. In periods characterized by significant changes in economic growth and activity in the commercial and residential construction and home R&R end markets, it can be especially difficult to forecast our sales accurately. We must also manage our working capital to fund our inventory purchases. Excessive increases in the market prices of certain products can put negative pressure on our operating cash flows by requiring us to invest more in inventory. In the future, if we are unable to effectively manage our inventory and working capital as we attempt to expand our

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businesses, or if we make changes to how we manage our payments to suppliers, our cash flows may be negatively affected, which could have a material adverse effect on our businesses, financial condition, and results of operations.

We are subject to significant pricing pressures from homebuilders, contractors, fabricators, dealers and other customers.

Large homebuilders, contractors, fabricators, and dealers have historically been able to exert significant pressure on their outside suppliers and distributors to keep prices low in the highly fragmented building products supply and services industry. In addition, continued consolidation in the residential homebuilding industry and changes in builders’ purchasing policies and payment practices could result in even further pricing pressure. For example, there has been a recent trend of large publicly-traded homebuilders acquiring other large homebuilders, which increases their market share and buying power. Our homebuilder customers may be acquired by other homebuilders that we do not currently have relationships with, which may make it difficult for us to maintain our current market share and margins. A decline in the selling prices of the products we distribute and the services we provide could adversely impact our operating results. To the extent that our inventory at the time was purchased at higher costs, this could result in lower margins. Alternatively, due to the rising market price environment, our suppliers may increase prices or reduce discounts on the products we distribute and we may be unable to pass on any cost increase to our customers, thereby resulting in reduced margins and profits.

The loss of any of our significant customers or a reduction in the quantity of products they purchase could affect our financial health.

Our ten largest customers generated approximately 30% of our consolidated net revenue for the year ended December 31, 2020. No one customer generated more than 10% of our consolidated net revenue for the year ended December 31, 2020.  We cannot guarantee that we will maintain or improve our relationships with these customers or that we will continue to supply these customers at historical levels.

Continued consolidation among homebuilders could also result in a loss of some of our present customers to our competitors. The loss of one or more of our significant customers or deterioration in our existing relationships with any of our customers could adversely affect our financial condition, results of operations, and cash flows. Furthermore, our customers are not required to purchase any minimum amount of product from us. Should our customers purchase the products we distribute or install in significantly lower quantities than they have in the past, or should the customers of any business that we acquire purchase products from us in significantly lower quantities than they had prior to our acquisition of such business, such decreased purchases could have a material adverse effect on our financial condition, results of operations, and cash flows.

RDS’s customers may be affected by shortages in labor supply, increased labor costs or labor disruptions, which could have a material adverse effect on our financial condition, results of operations, and cash flows.

Our customers require a qualified labor force to build homes and communities, and we require a qualified labor force to install our products in those homes. Access to qualified labor and subcontractors by our customers and us may be affected by circumstances beyond their or our control, including (i) shortages of qualified trades people, such as flooring, tile and cabinet installers, carpenters, roofers, electricians and plumbers, especially in key markets, (ii) changes in immigration laws and trends in labor force migration, and (iii) increases in subcontractor and professional services costs.

Labor shortages can be further exacerbated if demand for housing increases. Any of these circumstances could also give rise to delays in the start or completion of, or could increase the cost of, building homes. Such delays and cost increases would also have an effect on our ability to generate sales from homebuyers and could have a material adverse effect on our businesses, financial condition, results of operations, and cash flows.

Our backlog estimates for our RDS segment may not be accurate and may not generate expected levels of future revenue or translate into profits.

Our backlog estimates of potential future revenue for our RDS segment require substantial judgment and are based on a number of assumptions, including management’s current assessment of customer contracts that exist as of the date the estimates are made and the expected revenue to be derived from sales related to remaining housing

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lots to be fulfilled under existing service agreements for active residential developments. A number of factors could result in actual revenue being less than the amounts reflected in our estimates, such as upgrade rates or upgrade amounts being lower than expected, or modification or cancellation of contracts by homebuilders. Actual rates and amounts may differ from historical experiences used to estimate potential future revenue. Accordingly, there can be no assurance that we will actually generate the specified revenue or that the actual revenue will be generated within the estimated period. If such revenue fails to materialize, we could experience a reduction in revenue and a decline in profitability, which could result in a deterioration of our financial position and liquidity.

We may not timely identify or effectively respond to consumer needs, expectations or trends, which could adversely affect our relationship with customers, the demand for our products and services and our market share.

It is difficult to accurately predict the products and services our customers will demand. The success of our businesses depends in part on our ability to identify and respond promptly to changes in demographics, consumer preferences, expectations, needs and weather conditions, while also managing inventory levels. In general, the products we sell are affected by style trends, customer preferences and changes thereto. Failure to identify timely or effectively respond to changing consumer preferences, expectations, and building product needs could possibly result in obsolete or devalued inventory, and adversely affect our relationship with customers, the demand for our products and services, and our market share.

The success of our businesses depends, in part, on our ability to execute on our growth strategy, which includes opening new branches and pursuing strategic acquisitions.

Our long-term business strategy depends in part on increasing our sales and growing our market share through opening new branches, including through our greenfield initiatives, and strategic acquisitions. A significant portion of our historical growth has occurred through acquisitions, and our business plan provides for continued growth through acquisitions in the future. We are presently evaluating, and we expect to continue to evaluate on an ongoing basis, a variety of possible acquisition transactions, including both smaller and larger acquisitions. We cannot predict the timing of any contemplated transactions, and there can be no assurances that we will identify suitable acquisition opportunities or, if we do identify such opportunities, that any transaction can be consummated on acceptable terms. If such transactions are consummated on acceptable terms, we may not be able to successfully integrate the acquired business into our existing business or may not be able to do so in a timely, efficient and cost-effective manner. Our inability to complete the integration of new businesses in a timely and orderly manner could increase costs and lower profits. In addition, our recent growth and our acquisition strategy have placed, and will continue to place, significant demands on our management’s time, which may divert their attention from our businesses, and may lead to significant due diligence and other expenses regardless of whether we pursue or consummate any acquisition. Failure to identify suitable transaction partners and to consummate transactions on acceptable terms, as well as the commitment of time and resources in connection with such transactions, could have a material adverse effect on our businesses, financial condition, and results of operations. Additionally, we may not be able to finance acquisitions through acceptable financing terms or at all.

We may not be able to expand into new geographic markets, which may impact our ability to grow our businesses.

We intend to continue to pursue our growth strategy to expand into new geographic markets for the foreseeable future. Our expansion into new geographic markets may present competitive, distribution and other challenges that differ from the challenges we currently face. In addition, we may be less familiar with the customers in these markets and may ultimately face different or additional risks, as well as increased or unexpected costs, compared to those we experience in our existing markets. We may also be unfamiliar with the labor force in these markets and may have difficulty finding and retaining necessary skilled or qualified workers on acceptable terms, or at all. Expansion into new geographic markets may also expose us to direct competition with companies with whom we have limited or no past experience as competitors. Furthermore, some of our customer and supplier agreements may restrict the markets where we are able to distribute certain products, and these limitations could negatively impact our ability to achieve success in new markets. To the extent we rely upon expanding into new geographic markets and do not meet, or are unprepared for, any new challenges posed by such expansion, our future sales growth could be negatively impacted, our operating costs could increase, and our businesses, operations, and financial results could be negatively affected.

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We occupy many of our facilities under long-term non-cancellable leases, and we may be unable to renew our leases at the end of their terms.

Many of our facilities and distribution centers are located on leased premises. Many of our current leases are non-cancellable and typically have initial terms ranging from one to 12 years, and most provide options to renew for specified periods of time. If we close or idle a facility, we would most likely remain committed to perform our obligations under the applicable lease, which would include, among other things, payment of the base rent, insurance, taxes and other expenses on the leased property for the balance of the lease term. In some circumstances when idling a facility, we may attempt to sublease a facility to assist in partially offsetting these non-cancellable lease costs. The inability to terminate leases when idling a facility or exiting a geographic market can have a significant adverse impact on our financial condition, results of operations, and cash flows.

In addition, at the end of the lease term and any renewal period for a facility, we may be unable to renew the lease without substantial additional cost, if at all. In addition, we may not be able to secure a replacement facility in a location that is as commercially viable as the lease we are unable to renew and we may incur substantial costs with respect to such a replacement facility. Additionally, the net revenue and profit, if any, generated at a relocated facility may not equal the net revenue and profit generated at the existing one.

Natural or man-made disruptions to our facilities may adversely affect our businesses and operations.

We currently maintain a broad network of distribution facilities throughout the United States. Any widespread disruption to our facilities or those of our suppliers resulting from fire, earthquake, weather-related events, an act of terrorism or any other cause could damage a significant portion of our facilities and inventory and could materially impair our ability to distribute our products to customers. We could incur significantly higher costs and longer lead times associated with distributing our products to our customers during the time that it takes for us to reopen or replace a damaged facility. In addition, any shortages of fuel or significant fuel cost increases could disrupt our ability to distribute products to our customers. Disruptions to the national or local transportation infrastructure systems, including those related to a domestic terrorist attack, may also affect our ability to keep our operations and services functioning properly. If any of these events were to occur, our financial condition, results of operations, and cash flows could be materially adversely affected.

The implementation of new initiatives related to our operating software systems and related technology could disrupt our operations, and these initiatives might not provide the anticipated benefits or might fail.

We have made, and we plan to continue to make, significant investments in our operating software systems and related technology. These initiatives are designed to streamline our operations to allow our employees to continue to provide high quality service to our customers, while simplifying customer interaction and providing our customers with a more interconnected purchasing experience. The cost and potential problems and interruptions associated with the implementation of these initiatives, including those associated with managing third-party service providers and employing new web-based tools and services, could disrupt or reduce the efficiency of our operations. In the event that we continue to grow, there can be no assurance that we will be able to keep up, expand or adapt our IT infrastructure to meet evolving demand on a timely basis and at a commercially reasonable cost, or at all. In addition, our new and upgraded technology might cost more than anticipated or might not provide the anticipated benefits, or it might take longer than expected to realize the anticipated benefits or the initiatives might fail altogether. Because the success of our growth strategy depends in part on our IT infrastructure, problems with any related initiatives may adversely affect our businesses, operations, and results of operations.

We are subject to cybersecurity risks, and a disruption or breach of our IT systems could adversely impact our businesses and operations.

We rely on the accuracy, capacity and security of our IT systems, some of which are managed or hosted by third parties, and our ability to continually update these systems in response to the changing needs of our businesses. We have incurred costs and may incur significant additional costs in order to implement security measures that we feel are appropriate to protect our IT systems. Our security measures are focused on the prevention, detection and remediation of damage from computer viruses, natural or man-made disasters, unauthorized access, cyberattacks and other similar disruptions. Despite our security measures, our IT systems and infrastructure may be vulnerable to

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attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any attacks on our IT systems could result in our systems or data being breached or damaged by computer viruses or unauthorized physical or electronic access, which could lead to delays in receiving inventory and supplies or filling customer orders, and adversely affect our customer service and relationships. Such a breach could result in not only business disruption, but also theft of our intellectual property or other competitive information or unauthorized access to controlled data and any personal information stored in our IT systems. To the extent that any data is lost or destroyed, or any confidential information is inappropriately disclosed or used, it could adversely affect our competitive position or customer relationships. In addition, any such access, disclosure or other loss of information could result in legal claims or proceedings, damage our reputation, and cause a loss of confidence in our businesses, products and services, which could adversely affect our businesses, financial condition, profitability, and cash flows.

As cyber-attacks become more sophisticated generally, we may be required to incur significant costs to strengthen our systems from outside intrusions and/or maintain insurance coverage related to the threat of such attacks. While we have implemented administrative and technical controls and taken other preventive actions to reduce the risk of cyber incidents and protect our IT, they may be insufficient to prevent physical and electronic break-ins, cyber-attacks, or other security breaches to our computer systems.

RDS’s business and results of operations are significantly dependent on the availability and skill of subcontractors.

We engage subcontractors to perform the installation of the products that we sell to our customers. Accordingly, the timing and quality of our installations depends on the availability and skill of our subcontractors. While we believe that our relationships with subcontractors are good, we generally do not have long-term contractual commitments with any subcontractors, and we can provide no assurance that skilled subcontractors will continue to be available at reasonable rates in our markets. The inability to contract with skilled subcontractors at reasonable rates and on a timely basis could have a material adverse effect on our business, results of operations, and financial condition.

Moreover, despite our quality control efforts, we may discover that our subcontractors have failed to adhere to proper construction practices or improperly installed materials in the homes of our customers. The adverse costs of satisfying our warranty and other legal obligations in these instances may be significant and we may be unable to recover the costs of warranty-related repairs from subcontractors, suppliers and insurers, which could have a material impact on our business, results of operations, and financial condition.

If any of RDS’s subcontractors are characterized as employees, we would be subject to employment and withholding liabilities.

We structure our relationships with our subcontractors in a manner that we believe results in an independent contractor relationship, not an employee relationship. An independent contractor is generally distinguished from an employee by his or her degree of autonomy and independence in providing services. A high degree of autonomy and independence is generally indicative of a contractor relationship, while a high degree of control is generally indicative of an employment relationship. Although we believe that our subcontractors are properly characterized as independent contractors, tax or other regulatory authorities may in the future challenge our characterization of these relationships. If such regulatory authorities or state, federal or foreign courts were to determine that our subcontractors are employees, and not independent contractors, we would be required to withhold income taxes, to withhold and pay social security, Medicare and similar taxes, and to pay unemployment and other related payroll taxes. We would also be liable for unpaid past taxes and subject to penalties. As a result, any determination that these subcontractors are employees could have a material adverse effect on our business, financial condition, and results of operations

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Financial and Liquidity Risks

We may use additional leverage in executing our business strategy, which may adversely affect our businesses.

As of December 31, 2020, the principal amount of our total indebtedness was approximately $170.7 million, consisting of (i) $9.9 million under the SIC revolving credit facility, (ii) $152.8 million under the ASG term loan, and (iii) $8.1 million of vehicle and equipment loans and capital leases. Additionally, as of December 31, 2020, there was also $0.6 million of outstanding letters of credit.  We had the ability to access approximately $67.4 million of unused borrowings available under the SIC revolving credit facility as of December 31, 2020, and, as part of our growth strategy, we may incur a significant amount of additional debt in the future. Our existing indebtedness is recourse to us and we anticipate that future indebtedness will likewise be recourse. If new debt is added to our current debt levels, the related risk that we now face could intensify.

Our board of directors will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets and the ability of particular assets, and our company as a whole, to generate cash flow to cover the expected debt service. As a means of sustaining our long-term financial health and limiting our exposure to unforeseen dislocations in the debt and financing markets, we currently expect to remain conservatively capitalized; however, our charter does not contain a limitation on the amount of debt we may incur and our board of directors may change our target debt levels at any time without the approval of our stockholders.

Incurring a substantial amount of debt could have important consequences for our businesses, including (i) making it more difficult for us to satisfy our obligations with respect to our debt or to our trade or other creditors, (ii) increasing our vulnerability to adverse economic or industry conditions, (iii) limiting our ability to obtain additional financing on acceptable terms, or at all, to fund capital expenditures and acquisitions, particularly when the availability of financing in the capital markets is limited, (iv) requiring a substantial portion of our cash flows from operations for the payment of interest on our debt and reducing our ability to use our cash flows to fund working capital, capital expenditures, acquisitions, and general corporate requirements, (v) limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, and (vi) placing us at a competitive disadvantage to less leveraged competitors.

We cannot assure you that our businesses will generate sufficient cash flow from operations or that future borrowings will be available to us through capital markets financings or under our credit facilities or otherwise in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. We cannot assure you that we will be able to refinance any of the indebtedness that we will incur on commercially reasonable terms, or at all. In addition, we may incur additional indebtedness in order to finance our operations or to repay our indebtedness. If we cannot service our indebtedness, we may have to take actions such as selling assets, seeking additional debt or equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances. We cannot assure you that any such actions, if necessary, could be effected on commercially reasonable terms, or at all, or on terms that would be advantageous to our stockholders or on terms that would not require us to breach the terms and conditions of our existing or future financing arrangements.

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Our current financing arrangements contain, and our future financing arrangements likely will contain, restrictive covenants relating to our operations.

Our current financing arrangements contain, and the financing arrangements we enter into in the future likely will contain, covenants (financial and otherwise) affecting our ability to incur additional debt, incur liens, make certain investments, sell our shares, reduce liquidity below certain levels, make distributions to our stockholders and otherwise affect our operating policies. The restrictions contained in our financing arrangements could also limit our ability to plan for or react to market conditions, meet capital needs or make acquisitions or otherwise restrict our activities or business plans. If we fail to meet or satisfy any of these covenants in our financing arrangements, we would be in default under these arrangements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their respective interests against existing collateral. In addition, our financing arrangements may contain cross-default provisions. As a result, if we default in our payment or performance obligations under one of our financing arrangements and, in some cases, if the amount due thereunder is accelerated, other financing arrangements, if any, may be declared in default and accelerated even though we are meeting payment and performance obligations on those other arrangements. If this occurs, we may not have sufficient available cash to pay all amounts that are then due and payable under our financing arrangements, and we may have to seek additional debt or equity financing, which may not be available on acceptable terms. If alternative financing is not available, we may have to curtail our investment activities and/or sell assets in order to obtain the funds required to make the accelerated payments or seek ways to restructure the loan obligations. If we default on several of our financing arrangements or any single significant financing arrangement, it could have a material adverse effect on our businesses, prospects, liquidity, financial condition, and results of operations.

Interest expense on debt we will incur may limit our cash available to fund our growth strategies.

Our current financing arrangements have, and any additional debt we subsequently incur may have, a floating rate of interest. Higher interest rates could increase debt service requirements on our current floating rate debt and on any floating rate debt we subsequently incur, and could reduce funds available for operations, future business opportunities or other purposes. If we need to repay debt during periods of rising interest rates, we could be required to refinance our then-existing debt on unfavorable terms or liquidate one or more of our assets to repay such debt at times which may not permit realization of the maximum return on such assets and could result in a loss. The occurrence of either or both of such events could materially and adversely affect our cash flows and results of operations.

We may require additional capital in the future and may not be able to secure adequate funds on terms acceptable to us.

The expansion and development of our businesses may require significant capital, which we may be unable to obtain, to fund our capital expenditures, operating expenses, working capital needs, and potential strategic acquisitions. In accordance with our growth strategy, we may opportunistically raise additional debt capital to help fund the growth of our businesses, subject to market and other conditions, but such debt capital may not be available to us on a timely basis, or at all, to meet our cash requirements. Further, our capital requirements may vary materially from those currently planned if, for example, our revenue does not reach expected levels or we have to incur unforeseen capital expenditures and make investments to maintain our competitive position. If this is the case, we may require additional financing sooner than anticipated or we may have to delay or abandon some or all of our development and expansion plans or otherwise forego market opportunities.

To a large extent, our cash flow generation ability is subject to general economic, financial, competitive, legislative and regulatory factors and other factors that are beyond our control, including as a result of the COVID-19 pandemic. We cannot assure you that our businesses will generate cash flow from operations in an amount sufficient to enable us to fund our liquidity needs. As a result, we may need to refinance all or a portion of our debt on or before its maturity or obtain additional equity or debt financing. We cannot assure you that we will be able to do so on favorable terms, if at all. Any inability to generate sufficient cash flow, refinance our debt or incur additional debt on favorable terms could adversely affect our financial condition and could cause us to be unable to service our debt and may delay or prevent the expansion of our businesses.

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A significant decline in the general economy or the new home construction or R&R markets, and/or a deterioration in expectations regarding the homebuilding market, could cause us to record significant non-cash impairment charges, which could negatively affect our earnings and reduce stockholders’ equity.

A significant decline in the general economy or the new home construction or R&R markets, and/or a deterioration in expectations regarding the homebuilding market, could cause us to record significant non-cash, pre-tax impairment charges for goodwill or other long-lived assets, which are not determinable at this time and which could negatively affect our earnings and reduce stockholders’ equity. In addition, as a result of our acquisition strategy, we have recorded goodwill and may incur impairment charges in connection with prior and future acquisitions. If the value of goodwill or other intangible assets is impaired, our earnings and stockholders’ equity would be adversely affected.

Organizational and Structural Risks

Our amended and restated bylaws provide that the state and federal courts located within the State of Delaware will be the exclusive forum for certain legal actions between the Company and its stockholders, which could increase costs to bring a claim, discourage claims or limit the ability of the Company’s stockholders to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with the Company or the Company’s directors, officers or other employees.

Our amended and restated bylaws provide that unless the Company consents in writing to the selection of an alternative forum, the state and federal courts located within the State of Delaware will be the sole and exclusive forum for any (i) derivative action or proceeding brought on our behalf, (ii) action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) action asserting a claim arising pursuant to any provision of the DGCL, (iv) civil action to interpret, apply, enforce or determine the validity of the provisions of our charter or our bylaws, or (v) action asserting a claim governed by the internal affairs doctrine. The choice of forum provision may increase costs to bring a claim, discourage claims or limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or the Company’s directors, officers or other employees, which may discourage such lawsuits against the Company or the Company’s directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in the Company’s amended and restated bylaws to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions. The exclusive forum provision in the Company’s amended and restated bylaws will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws including the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the Securities Act of 1933, as amended (the “Securities Act”), or the respective rules and regulations promulgated thereunder.

We are an “emerging growth company” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, our Class A Common Stock may be less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (which we refer to as the “JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, a requirement to present only two years of audited financial statements in the registration statement for the emerging growth company’s initial public offering of common equity securities, an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act of 2002 (which we refer to as the “Sarbanes-Oxley Act”), reduced disclosure about executive compensation arrangements pursuant to the rules applicable to smaller reporting companies, no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements and not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding a supplement to the auditor’s report providing additional information about the audit and the financial statements. We have elected to adopt these reduced disclosure requirements. Although under the JOBS Act we are exempt from such disclosure requirements, we are required, among other things, to maintain internal control over financial reporting and to report any material weaknesses in such internal control. If we are unable to maintain effective internal control over financial reporting or if, in the future, we identify other control deficiencies or material weaknesses in our accounting and financial reporting processes, or if our independent registered public accounting firm is unable to express an opinion as to the

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effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A Common Stock could be negatively affected, and we could become subject to litigations or investigations by the SEC, the Nasdaq Stock Market or other regulatory authorities, or derivative or securities lawsuits from shareholders, which could require additional financial and management resources.

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act are required to comply with the new or revised financial accounting standards. In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised financial accounting standards. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result, our financial statements may not be comparable to companies that comply with public company effective dates.

Operation on multiple Enterprise Resource Planning (which we refer to as “ERP”) information systems may negatively impact our operations.

We are highly dependent on our information systems infrastructure to process orders, purchase materials, track inventory, ship products in a timely manner, prepare invoices to our customers, maintain internal controls, produce financial data, and otherwise carry on our businesses in the ordinary course. Our RDS segment is continuing to implement a system that will further enhance its ability to scale rapidly. While we believe we have the experience, skill and management abilities, as well as access to the necessary experts and consultants, to plan and execute these projects without significant disruption to our businesses, ERP implementations and conversions are very complex and inherently subject to risks and uncertainty. There is no assurance that the projects will succeed or that failures in the design, programming, software or implementation of these projects will not cause significant disruption to our businesses. Such a disruption could cause project cost overruns, which may be significant, losses in revenue, increases in operating costs, and reduced customer satisfaction, all of which would lead to a decline in profitability over the short term and possibly the long term. In addition, as the Company continues to pursue inorganic growth opportunities through acquisitions, our ability to integrate newly acquired businesses onto our existing ERP systems is critical to maximizing the value and realizing the synergies of those newly acquired businesses into our existing segments.

General Risks

A trading market for our Class A Common Stock may not be sustained and our Class A Common Stock prices could decline.

Although our Class A Common Stock is currently listed for trading on the Nasdaq Capital Market under the symbol “SIC,” an active trading market for the shares of our Class A Common Stock may not be sustained.  Accordingly, no assurance can be given as to (i) the likelihood that an active trading market for shares of our Class A Common Stock will be sustained, (ii) the liquidity of any such market, (iii) the ability of our stockholders to sell their shares of Class A Common Stock, or (iv) the price that our stockholders may obtain for their Class A Common Stock.

In addition, the securities markets in general and our Class A Common Stock have experienced price and volume volatility over the past year.  The market price and volume of our Class A Common Stock may continue to experience fluctuations not only due to general stock market conditions but also due to government regulatory action, tax laws, interest rates and a change in sentiment in the market regarding our industry, operations or business prospects.  In addition to the other risk factors discussed in this section, the price and volume volatility of our Class A Common Stock may be affected by (i) actual or anticipated variations in our quarterly operating results, (ii) changes in market valuations of similar companies, (iii) adverse market reaction to the level of our indebtedness, (iv) additions or departures of key personnel, (v) actions by stockholders (vi) speculation in the press or investment

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community, (vii) negative publicity regarding us specifically or our businesses generally, (viii) general market, economic and political conditions, including an economic slowdown or dislocation in the global credit markets, (ix) our operating performance and the performance of other similar companies, (x) changes in accounting principles, (xi) passage of legislation or other regulatory developments that adversely affect us or the building products supply and services industry, or (xii) inaccurate or unfavorable research or reports about the Company published by securities or industry analysts, or the cessation of coverage or regular reports by such analysts.

If an active market is not maintained, or if our Class A Common Stock continues to experience price and volume volatility, the market price of our Class A Common Stock may decline.

Changes in legislation and government policy may have a material adverse effect on our businesses in the future.

Dynamic changes in legislation and government policy may have a material adverse effect on our business.  Specifically, with the new Biden presidential administration, proposed legislation and regulatory changes could have a material impact on us including, but not limited to, modifications to international trade policy and increased regulation. Furthermore, existing tariffs imposed on goods imported from abroad that are used in our businesses may be removed by executive order or expanded upon the action of President Biden.  Similarly, the uncertain geopolitical relationships between the United States and other countries, including India, Turkey, Spain, Vietnam, the European Union, and China could result in additional disruptions impacting the operations of the Company.

In addition, actions before the U.S. Department of Commerce (which we refer to as the “DOC”) and the U.S. International Trade Commission (which we refer to as the “ITC”) continue to present risk to the operations of the Company.  A risk exists that additional future actions before the ITC and DOC could disrupt the operations of the Company.

We are currently unable to predict the extent of the changes to existing legislative and regulatory environments relevant to our businesses, or how those and potential future changes would impact our businesses. To the extent that such changes have a negative impact on us or the industries we serve, including the imposition of additional duties or tariffs discussed above or otherwise, these changes may materially and adversely impact our businesses, financial condition, results of operations, and cash flows. 

We depend on key personnel and our inability to continue to attract and retain highly skilled employees could adversely affect our businesses.

Our success depends to a significant degree upon the contributions of certain key personnel and other members of our management team, each of whom would be difficult to replace. Further, the process of attracting and retaining suitable replacements for key personnel whose services we may lose would result in transition costs and would divert the attention of other members of our senior management from our existing operations. The loss of services from key personnel or a limitation in their availability could materially and adversely impact our businesses, prospects, liquidity, financial condition and results of operations.

In addition, in executing our growth plan, we must attract and retain highly qualified personnel. We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications, such as build tradesmen for finish carpentry and for installation of tile, flooring and cabinets. Many of the companies with which we compete for experienced personnel have greater resources than us. If we fail to attract new personnel or fail to retain and motivate our current personnel, our businesses and future growth prospects could be adversely affected.

Furthermore, the employment agreements we have with many of our senior level executives contain severance obligations which may require us to pay significant amounts of severance compensation to such employees upon the termination of their employment under certain circumstances.

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Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We have 53 distinct locations, each of which is leased. Our corporate headquarters are located at 400 Galleria Parkway, Suite 1760, Atlanta, Georgia 30339.

The locations and uses of our top 20 branches, which comprise approximately 84% of our net revenue, are as follows:

Location	Segment	Purpose
Anaheim, CA	RDS	Design Center / Office / Warehouse
Atlanta, GA	RDS	Office / Fabrication / Warehouse
Austin, TX	ASG	Showroom / Distribution / Office / Warehouse
Buda, TX	RDS	Office / Fabrication / Warehouse
Denver, CO	ASG	Showroom / Distribution / Office / Warehouse
Elkridge, MD	RDS	Design Center / Office / Warehouse
Escondido, CA	RDS	Design Center / Distribution / Office / Warehouse
Fairfield, CA	RDS	Office / Warehouse
Livermore, CA	RDS	Design Center / Distribution / Office / Warehouse
Los Angeles, CA	ASG	Design Center / Office / Warehouse
Manassas, VA	RDS	Design Center / Office / Warehouse
New Brunswick, NJ	ASG	Showroom / Distribution / Office / Warehouse
Oklahoma City, OK	ASG	Showroom / Distribution / Office / Warehouse
Phoenix, AZ	RDS	Design Center / Office / Warehouse
Portland, OR	ASG	Showroom / Distribution / Office / Warehouse
Sacramento, CA	RDS	Office / Warehouse
Seattle, WA	ASG	Showroom / Distribution / Office / Warehouse
Simi Valley, CA	RDS	Office / Warehouse
Sun Valley, CA	ASG	Showroom / Distribution / Office / Warehouse
Tacoma, WA	ASG	Showroom / Distribution / Office / Warehouse

Item 3. Legal Proceedings.

From time to time, we are involved in various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. While the outcomes of these matters are generally not presently determinable, we do not believe that any of these proceedings, individually or in the aggregate, would be expected to have a material adverse effect on our financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our Class A Common Stock is traded on the Nasdaq Capital Market under the ticker symbol “SIC.” The range of high and low sale prices of our common stock as reported by the Nasdaq is set forth in the table below:

	1st Qtr		2nd Qtr		3rd Qtr		4th Qtr
Fiscal Year 2020
High	$	9.40	$	4.70	$	7.25	$	8.00
Low	$	1.25	$	1.61	$	3.31	$	6.05
Fiscal Year 2019
High	$	14.73	$	14.00	$	13.76	$	13.10
Low	$	7.25	$	9.95	$	10.57	$	8.80

Holders

On March 1, 2021, there were 249 stockholders of record of our Class A Common Stock.

Dividends

We have never paid any cash dividends on our capital stock and have no current plans to pay any cash dividends. Our current policy is to retain any earnings for future use in our business.

Securities Authorized for Issuance Under Equity Compensation Plans

The information regarding securities authorized for issuance under equity compensation plans will be set forth in our 2021 Proxy Statement under the heading “Securities Authorized for Issuance under Equity Compensation,” which is incorporated herein by reference.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding the repurchase of our common stock for the three months ended December 31, 2020:

Period	Total Number of Shares Purchased(1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
October 1, 2020 — October 31, 2020		13,205	$	7.06		—		—
November 1, 2020 — November 30, 2020		502		7.66		—		—
December 1, 2020 — December 31, 2020		—		—		—		—
Total		13,707	$	7.08		—		—

(1) Represents shares surrendered to the Company by employees to satisfy tax withholding obligations arising in connection with the vesting of 44,322 shares of restricted stock awarded under our 2017 Plan.

Performance Graph

The graph below compares the cumulative total returns of our Class A Common Stock with that of the Nasdaq Composite Index, Russell 2000 Index and the S&P Small Cap 600 Index, for the period commencing on August 16, 2018 (the date our Class A Common Stock commenced trading on the Nasdaq Capital Market) and ending on December 31, 2020. All values assume an initial investment of $100 on August 16, 2018 and reinvestment of

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dividends. Following the commencement period of August 16, 2018, the data on the graph represents month-end values based on the last trading day of each month. The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our Class A Common Stock.

Comparison of Cumulative Total Return
among Select Interior Concepts, Inc., Nasdaq Composite Index, Russell 2000 Index,
and S&P Small Cap 600 Index

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Item 6. Selected Financial Data.

The following table summarizes certain financial data for the periods presented:

	Year Ended December 31,
(in thousands, except share data)	2020			2019			2018			2017
Statements of Operations Data:
Total revenue, net	$	554,025		$	610,373		$	489,757		$	352,952
Gross profit		135,209			164,074			133,454			103,889
Gross margin		24.4	%		26.9	%		27.2	%		29.4	%
Income from operations	$	3,382		$	19,258		$	12,097		$	6,162
Total other expense, net		16,209			10,753			13,583			14,189
Income (loss) before provision (benefit) for income taxes	$	(12,827	)	$	8,505		$	(1,486	)	$	(8,026	)
Provision (benefit) for income taxes		(2,974	)		1,521			989			3,320
Net income (loss)	$	(9,853	)	$	6,984		$	(2,475	)	$	(11,346	)
Balance Sheet Data (end of year):
Cash, cash equivalents and restricted cash	$	2,974		$	5,002		$	6,362		$	5,547
Accounts receivable, net		67,881			63,419			63,601			45,284
Inventory		98,982			104,741			108,270			87,629
Total assets		405,008			420,275			416,014			320,246
Accounts payable		47,246			42,734			37,265			38,491
Accrued expenses and other current liabilities		20,353			16,661			27,620			19,840
Line of credit		9,623			21,871			36,706			19,269
Long-term debt, net of current portion and financing fees		134,526			141,299			142,442			86,897
Total liabilities		250,817			259,000			267,320			172,159
Stockholders' equity		154,191			161,275			148,694			148,088
Supplemental Financial Data:
Cash provided by (used in):
Operating activities	$	20,604		$	30,955		$	12,212		$	(8,367	)
Investing activities		(3,258	)		(24,641	)		(80,624	)		(118,836	)
Financing activities		(19,374	)		(10,674	)		72,227			128,024
Net income (loss) per common share:
Basic	$	(0.39	)	$	0.28		$	(0.10	)	$	(0.22	)
Diluted	$	(0.39	)	$	0.27		$	(0.10	)	$	(0.22	)
Weighted average number of common shares outstanding:
Basic		25,337,249			25,296,955			25,634,342			25,614,626
Diluted		25,337,249			25,431,677			25,634,342			25,614,626

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with Item 6. “Selected Financial Data” above and the accompanying consolidated financial statements and related notes included in this Annual Report.

The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this Annual Report, particularly in the sections entitled “Special Note Regarding Forward-Looking Statements and Information” and “Risk Factors” included elsewhere in this Annual Report.

Overview

Select Interior Concepts, Inc. (collectively with all of its subsidiaries, “SIC,” the “Company,” “we,” “us” and “our”) is an installer and nationwide distributor of interior building products with market positions in residential interior design services. Through our Residential Design Services (which we refer to as “RDS”) operating segment, we serve national and regional homebuilders by providing an integrated, outsourced solution for the design, consultation, sourcing, distribution and installation needs of their homebuyer customers. Through our 17 design centers, our designers work closely with homebuyers in the selection of a broad array of interior products and finishes, including flooring, cabinets, countertops, wall tile, and related interior items, primarily for newly constructed homes. We then coordinate the ordering, fulfillment and installation of many of these interior product categories to provide for the homebuyer. With our design centers and our product sourcing and installation capabilities, we enable our homebuilder customers to outsource critical aspects of their business to us, thereby increasing their sales, profitability, and return on capital. We also have leading market positions in the selection and importation of natural and engineered stone slabs for kitchen and bathroom countertops and specialty tiles through our other operating segment, Architectural Surfaces Group (which we refer to as “ASG”). ASG sources natural and engineered stone slabs from a global supply base and markets these materials through a national network of 21 distribution centers and showrooms. In addition to serving the new residential and commercial construction markets with these materials, we also distribute them to the repair and remodel (which we refer to as “R&R”) market.

Operating Segments

We have defined each of our operating segments based on the nature of its operations and its management structure and product offerings. Our management decisions are made by our Chief Executive Officer, whom we have determined to be our Chief Operating Decision Maker. Our two reportable segments are described below.

Residential Design Services

RDS, our interior design and installation segment, is a service business that provides design center operation, interior design, product sourcing, and installation services to homebuilders, homeowners, general contractors and property managers. Products sold and installed by RDS include flooring, countertops, cabinets, and wall tile.  New single-family and multi-family construction are the primary end markets, although we intend to explore growth opportunities in other markets, such as the R&R market.

Architectural Surfaces Group

ASG, our natural and engineered stone countertop distribution segment, distributes granite, marble, porcelain and quartz slabs for countertop and other uses, and ceramic and porcelain tile for flooring and backsplash and wall tile applications. Primary end markets are new residential and commercial construction and the R&R market.

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Key Factors Affecting Operating Results

Our operating results are impacted by changes in the levels of new residential construction and of the demand for products and services in the R&R market. These are in turn affected by a broad range of macroeconomic factors including the rate of economic growth, unemployment, job and wage growth, interest rates, multi-family project financing, and residential mortgage lending conditions. Other important underlying factors include demographic variables such as household formation, immigration and aging trends, housing stock and vacant inventory levels, changes in the labor force, raw materials prices, the legal environment, and local and regional development and construction regulation.

Material Costs

The materials that we distribute and install are sourced through a wide array of quarries, manufacturers, and distributors located in North America, South America, Europe, Africa and Asia. As demand for these products continues to grow with housing demand, we expect that we may be subject to cost increases from time to time. There is no guarantee that our relationships with our customers will be such that we can pass these increases on to our customers. Affordability issues in new residential construction could temper our homebuilder customers’ ability to raise their prices, which could in turn limit our ability to increase prices to compensate for increases in our costs of materials. We believe, however, that over the long term, these same forces affecting housing prices would also limit our suppliers’ ability to increase prices, which would help us maintain our margins.

Labor Costs

Installation labor is a significant component of our aggregate labor force of approximately 1,300 employees. There is no guarantee that we will be able to attract the type and quality of skilled labor that we need in sufficient quantities to accomplish our growth plans. Correspondingly, we expect that tight labor markets will continue to lead to upward pressure on wages and could impact our gross profit margin and overall profitability negatively.

We believe, however, that our scale will continue to give us the ability to provide steady work, an attractive benefits package, and a beneficial work environment, particularly as compared to our smaller competitors. Over time, we expect that the combination of these factors will gradually increase our relative advantage over smaller and less sophisticated competitors.

Selling, General and Administrative Costs

We incur costs related to the operation and administration of our businesses that are reported as period expenses separately from Cost of Goods Sold. These expenses include, but are not limited to, project management, customer service, human resources, accounting, information technology, general management, public company costs, and others. These costs will likely continue to grow as our businesses grow, but we believe that, overall, they will grow more slowly than the rate at which our gross profit grows due to improved utilization rates of these resources and the fact that we have implemented and intend to continue to implement scalable technology and process improvements that increase the efficiency of our operations.

Non-GAAP Measures

In addition to the results reported in accordance with United States generally accepted accounting principles (which we refer to as “GAAP”), we have provided information in this Report relating to EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin. We have provided definitions below for these non-GAAP financial measures and have provided tables to reconcile these non-GAAP financial measures to the comparable GAAP financial measures.

We believe that these non-GAAP financial measures provide valuable information regarding our earnings and business trends by excluding specific items that we believe are not indicative of the ongoing operating results of our businesses, providing a useful way for investors to make a comparison of our performance over time and against other companies in our industry.

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We have provided these non-GAAP financial measures as supplemental information to our GAAP financial measures and believe these non-GAAP measures provide investors with additional meaningful financial information regarding our operating performance and cash flows. Our management and board of directors also use these non-GAAP measures as supplemental measures to evaluate our businesses and the performance of management, including the determination of performance-based compensation, to make operating and strategic decisions, and to allocate financial resources. We believe that these non-GAAP measures also provide meaningful information for investors and securities analysts to evaluate our historical and prospective financial performance. These non-GAAP measures should not be considered a substitute for or superior to GAAP results. Furthermore, the non-GAAP measures presented by us may not be comparable to similarly titled measures of other companies.

EBITDA is defined as consolidated net income (loss) before interest, taxes and depreciation and amortization. Adjusted EBITDA is defined as consolidated net income (loss) before (i) interest expense, (ii) income tax expense (benefit), (iii) depreciation and amortization expense, (iv) equity-based compensation expense, and (v) other costs that are deemed to be transitional in nature or not related to our core operations, including employee related reorganization costs, purchase accounting fair value adjustments, acquisition and integration related costs, other non-recurring costs, integration and savings initiatives costs, facility closures and divestitures, legal settlements, strategic alternatives costs, and other non-operating costs. Adjusted EBITDA margin is calculated as a percentage of our net revenue. EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin are non-GAAP financial measures used by us as supplemental measures in evaluating our operating performance.

Key Components of Results of Operations

Net Revenue.   Net revenue at our RDS segment is recognized over time based on the terms of the performance obligations with the homebuilder or other contracted customer. In our ASG segment, net revenue is derived from the sale of our products and is recognized at a point in time when such products have been accepted at the customer’s designated location and the performance obligation is completed.

Cost of Revenue.   Cost of revenue consists of the direct costs associated with revenue earned by the sale and installation of our interior products in the case of our RDS segment, or by delivering product in the case of our ASG segment. In our RDS segment, cost of revenue includes direct material costs associated with each project, the direct labor costs associated with installation (including taxes, benefits and insurance), rent, utilities and other period costs associated with warehouses and fabrication shops, depreciation associated with warehouses, material handling, fabrication and delivery costs, and other costs directly associated with delivering and installing product in our customers’ projects, offset by vendor rebates. In our ASG segment, cost of revenue includes direct material costs, inbound and outbound freight costs, overhead (such as rent, utilities and other period costs associated with product warehouses), depreciation associated with fixed assets used in warehousing, material handling and warehousing activities, warehouse labor, taxes, benefits and other costs directly associated with receiving, storing, handling and delivering product to customers in revenue earning transactions.

Gross Profit and Gross Margin.   Gross profit is net revenue less the associated cost of revenue. Gross margin is gross profit divided by net revenue.

Selling, General and Administrative Expenses.   Selling, general and administrative (“SG&A”) expenses include overhead costs such as general management, project management, purchasing, sales, customer service, accounting, finance, human resources, depreciation and amortization, information technology, public company costs and all other forms of wage and salary cost associated with operating our businesses, and the taxes and benefits associated with those costs. We also include other general-purpose expenses, including, but not limited to, office supplies, office rents, legal, consulting, insurance, and non-cash stock compensation costs. Professional services expenses, including audit and legal, and transaction costs are also included in SG&A expenses.

Depreciation and Amortization.   Depreciation and amortization expenses represent the estimated decline over time of the value of tangible assets such as vehicles, equipment and leasehold improvements, and intangible assets such as customer lists and trade names. We recognize the expenses on a straight-line basis over the estimated economic life of the asset in question, or over the shorter of the estimated economic life or the remaining lease term for leasehold improvements.

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Interest Expense.   Interest expense represents amounts paid to or which have become due during the period to lenders and lessors under credit agreements and capital leases, as well as the amortization of debt issuance costs.

Income Taxes.   Income taxes are recorded using the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the deferred tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those differences are expected to be recovered or settled.

Results of Operations

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Net Revenue. For the year ended December 31, 2020, net revenue decreased by $56.3 million, or 9.2%, to $554.0 million, from $610.4 million for the year ended December 31, 2019. Net revenue for the years ended December 31, 2020 and 2019 is adjusted for the elimination of intercompany sales of $2.0 million and $3.0 million, respectively.

In our RDS segment, net revenue decreased by $36.1 million, or 9.8%, to $332.5 million for the year ended December 31, 2020, from $368.6 million for the year ended December 31, 2019. The decrease was due in part to volume declines in the Eastern Region, primarily attributable to the COVID-19 pandemic, divestiture and discontinuation of certain ancillary product lines, as well as product mix shifts in certain markets resulting from the increase of entry- to mid-level homebuilding and multi-family work as a percentage of our project activity in our markets.  Stay at home orders, particularly in the second quarter and early part of the third quarter heavily impacted our business with new safety measures and restrictions lowering productivity at RDS job sites.  RDS design center activity was also limited due to lockdowns and customer and employee concerns relating to in-person interaction.  The decline in organic volume was partially offset by increased sales from the acquisition of Intown in March 2019.

In our ASG segment, net revenue decreased by $21.2 million, or 8.7%, to $223.6 million for the year ended December 31, 2020, from $244.8 million for the year ended December 31, 2019. This decrease was due to a decrease in volume of all products sold.  The decrease in overall volume, which peaked in the second quarter, was primarily due to the COVID-19 pandemic.   Stay at home orders heavily impacted our business in Washington.  ASG showrooms were limited to appointment only sales.  Additionally, our fabricator customers were unable to execute in-residence installations due to stay at home orders at many of our locations combined with homeowner concerns about the pandemic.  Sales were also impacted by the closure of two branches.  Volume decreases were partially offset by increases from price/mix, most of which came from sales of quartz products.

Cost of Revenue. For the year ended December 31, 2020, cost of revenue decreased by $27.5 million, or 6.2%, to $418.8 million, from $446.3 million for the year ended December 31, 2019. Cost of revenue for the year ended December 31, 2020 and 2019 is adjusted for the elimination of intercompany sales of $2.0 million and $3.1 million, respectively.

In our RDS segment, cost of revenue decreased by $14.0 million, or 5.2%, to $255.9 million for the year ended December 31, 2020, from $269.8 million for the year ended December 31, 2019. This was primarily associated with the decrease in sales for the year ended December 31, 2020.

In our ASG segment, cost of revenue decreased by $14.6 million, or 8.1%, to $165.0 million for the year ended December 31, 2020, from $179.5 million for the year ended December 31, 2019. This was primarily associated with the decrease in sales for the year ended December 31, 2020.

Gross Profit and Margin. For the year ended December 31, 2020, gross profit decreased by $28.9 million, or 17.6%, to $135.2 million, from $164.1 million for the year ended December 31, 2019. For the year ended December 31, 2020, gross margin decreased by 2.5 percentage points to 24.4%, from 26.9% for the year ended December 31, 2019.    

In our RDS segment, gross margin decreased by 3.8 percentage points to 23.0% for the year ended December 31, 2020, from 26.8% for the year ended December 31, 2019. This decrease is primarily due to unabsorbed fixed costs on our lower revenue base during the year and an unfavorable change in product mix.

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In our ASG segment, gross margin decreased by 0.5 percentage points to 26.2% for the year ended December 31, 2020, from 26.7% for the year ended December 31, 2019, primarily due to unabsorbed fixed costs on our lower revenue base during the year and a slight decline in product margin.

SG&A Expenses. For the year ended December 31, 2020, SG&A expenses decreased by $13.0 million, or 9.0%, to $131.8 million, from $144.8 million for the year ended December 31, 2019. SG&A expenses as a percentage of net revenue were 23.8% and 23.7% for the years ended December 31, 2020 and 2019, respectively.

In our RDS segment, SG&A expenses decreased by $6.2 million to $75.0 million for the year ended December 31, 2020, from $81.2 million for the year ended December 31, 2019. This decrease was related to furloughs, savings from position eliminations, lower sales commissions and other cost reduction initiatives.

In our ASG segment, SG&A expenses decreased by $6.0 million to $39.4 million for the year ended December 31, 2020, from $45.4 million for the year ended December 31, 2019. This decrease was related to furloughs, savings from position eliminations, lower sales commissions and other cost reduction initiatives.

The remaining $0.9 million of the decrease in SG&A expenses was primarily the result of a decrease in equity-based compensation costs, partially offset by an increase in professional services fees related to improvements in strategic sourcing, organizational design and productivity, insurance programs, and facility footprint optimization initiatives.

Depreciation and Amortization. For the year ended December 31, 2020, depreciation and amortization expenses decreased by $1.3 million, or 5.3%, to $22.9 million, from $24.2 million for the year ended December 31, 2019.

In our RDS segment, depreciation and amortization expenses decreased by $1.3 million, or 10.2%, to $11.6 million for the year ended December 31, 2020, from $12.9 million for the year ended December 31, 2019, which was primarily due to certain RDS customer list intangibles that fully amortized during third quarter 2019, partially offset by additional assets in-service, including the new ERP system at RDS.

In our ASG segment, depreciation and amortization expenses remained consistent at $11.2 million for the years ended December 31, 2020 and 2019.

Interest Expense. For the year ended December 31, 2020, interest expense decreased by $2.7 million, or 15.4%, to $14.6 million, from $17.2 million for the year ended December 31, 2019. This decrease is primarily due to decreased interest rates during the year as well as lower borrowings.

Income Taxes. For the year ended December 31, 2020, we recognized an income tax benefit of $3.0 million, a decrease of $4.5 million from income tax expense of $1.5 million for the year ended December 31, 2019.  The decrease in income taxes is due primarily to the decrease in pre-tax income in 2020 compared to 2019.

Net (Loss) Income.  For the year ended December 31, 2020, net income decreased by $16.8 million to a $9.9 million loss, from $7.0 million of income for the year ended December 31, 2019.

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Adjusted EBITDA.  For the year ended December 31, 2020, Adjusted EBITDA decreased by $19.7 million to $40.2 million from $59.9 million for the year ended December 31, 2019, primarily as a result of the factors discussed above.

	For the Year Ended December 31,
(in thousands)	2020			2019
Consolidated net income (loss)	$	(9,853	)	$	6,984
Income tax expense (benefit)		(2,974	)		1,521
Interest expense		14,568			17,220
Depreciation and amortization		22,867			24,157
EBITDA		24,608			49,882
Equity-based compensation		2,796			5,740
Purchase accounting fair value adjustments		-			(6,029	)
Acquisition and integration related costs		1,401			2,862
Employee related reorganization costs		2,995			1,762
Other non-recurring costs		-			2,776
Integration and savings initiatives costs		2,974			-
Facility closures and divestitures		2,117			-
Legal settlements		976			-
Strategic alternatives costs		1,541			2,880
Other non-operating costs		790			-
Adjusted EBITDA	$	40,198		$	59,873

Adjusted EBITDA Margin.  For the year ended December 31, 2020, Adjusted EBITDA margin decreased to 7.3%, from 9.8% for the year ended December 31, 2019, primarily as a result of the factors discussed above.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Net Revenue. For the year ended December 31, 2019, net revenue increased by $120.6 million, or 24.6%, to $610.4 million, from $489.8 million for the year ended December 31, 2018. Net revenue for the years ended December 31, 2019 and 2018 is adjusted for the elimination of intercompany sales of $3.0 million and $2.6 million, respectively.

In our RDS segment, net revenue increased by $100.2 million, or 37.3%, to $368.6 million for the year ended December 31, 2019, from $268.4 million for the year ended December 31, 2018. The increase was primarily due to the acquisitions of Summit, TAC, and Intown, which accounted for $104.1 million of the growth in RDS revenue. During the year, revenue from organic sales decreased $3.9 million as we continue to face softening in the Southern California housing market of the Western region, which is our largest market.

In our ASG segment, net revenue increased by $20.8 million, or 9.3%, to $244.8 million for the year ended December 31, 2019, from $224.0 million for the year ended December 31, 2018. The increase was due to the acquisitions of Bedrock, NSI, and Tuscany, which collectively accounted for $8.0 million of ASG growth, with the remainder of the growth of $12.8 million in our ASG segment attributable to increased revenue from organic volume, price and product mix and new locations started in 2018.

Cost of Revenue. For the year ended December 31, 2019, cost of revenue increased by $90.0 million, or 25.3%, to $446.3 million, from $356.3 million for the year ended December 31, 2018. Cost of revenue for the year ended December 31, 2019 and 2018 is adjusted for the elimination of intercompany sales of $3.1 million and $2.5 million, respectively.

In our RDS segment, cost of revenue increased by $75.3 million, or 38.8%, to $269.8 million for the year ended December 31, 2019, from $194.5 million for the year ended December 31, 2018. The acquisitions of Summit, TAC and Intown were primarily responsible for this increase, contributing $74.6 million. The remaining increase of $0.8 million is due to additional costs in the organic business.

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In our ASG segment, cost of revenue increased by $15.2 million, or 9.2%, to $179.5 million for the year ended December 31, 2019, from $164.3 million for the year ended December 31, 2018. This was partially due to the acquisitions of Bedrock, NSI, and Tuscany, which contributed $5.8 million of the increase, with the remaining increase due to costs associated with organic growth.

Gross Profit and Margin. For the year ended December 31, 2019, gross profit increased by $30.6 million, or 22.9%, to $164.1 million, from $133.5 million for the year ended December 31, 2018. For the year ended December 31, 2019, gross margin decreased by 0.3 percentage points to 26.9%, from 27.2% for the year ended December 31, 2018.    

In our RDS segment, gross margin decreased by 0.7 percentage points to 26.8% for the year ended December 31, 2019, from 27.5% for the year ended December 31, 2018. This decrease is due to an unfavorable product mix primarily due to entry- to mid-level homebuilding comprising a larger share of project activity in our markets.

In our ASG segment, gross margin remained consistent, increasing by only 0.1 percentage points to 26.7% for the year ended December 31, 2019, from 26.6% for the year ended December 31, 2018, due to the non-recurrence of non-cash inventory expenses that were recorded in the prior year, offset by higher supply chain related costs and lower margin sales in the full year 2019.

SG&A Expenses. For the year ended December 31, 2019, SG&A expenses increased by $23.5 million, or 19.3%, to $144.8 million, from $121.4 million for the year ended December 31, 2018.

In our RDS segment, SG&A expenses increased by $21.6 million to $81.2 million for the year ended December 31, 2019, from $59.6 million for the year ended December 31, 2018. This increase was primarily related to the acquisitions of Summit, TAC, and Intown.

In our ASG segment, SG&A expenses decreased by $2.3 million to $45.4 million for the year ended December 31, 2019, from $47.7 million for the year ended December 31, 2018. This decrease was due to one-time non-recurring expenses related to the Bedrock and Tuscany acquisitions, and expenses related to the opening of new locations incurred during the year ended December 31, 2018.

The remaining $4.2 million of the increase in SG&A expenses was related to an increase in the amount of equity-based compensation awarded in 2019 in the amount of $3.1 million, as well as other overhead costs at the corporate level that were in place for a full year in 2019 compared to only a partial year in 2018.

Depreciation and Amortization. For the year ended December 31, 2019, depreciation and amortization expenses increased by $3.7 million, or 17.9%, to $24.2 million, from $20.5 million for the year ended December 31, 2018.

In our RDS segment, depreciation and amortization expenses increased by $3.3 million, or 33.9%, to $12.9 million for the year ended December 31, 2019, from $9.6 million for the year ended December 31, 2018, which was primarily due to depreciation and amortization associated with the assets acquired in the Summit, TAC, and Intown acquisitions.

In our ASG segment, depreciation and amortization expenses increased by $0.3 million, or 3.0%, to $11.2 million for the year ended December 31, 2019 from $10.8 million for the year ended December 31, 2018, which is primarily due to amortization associated with the Tuscany acquisition.

Interest Expense. For the year ended December 31, 2019, interest expense increased by $5.8 million, or 50.7%, to $17.2 million, from $11.4 million for the year ended December 31, 2018. This increase is primarily due to the borrowings associated with funding the TAC and Intown acquisitions offset by lower interest rates.

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Income Taxes. For the year ended December 31, 2019, we recognized income tax expense of $1.5 million, an increase of $0.5 million from income tax expense of $1.0 million for the year ended December 31, 2018.  The increase in income taxes is due primarily to the increase in pre-tax income in 2019 compared to 2018.

Net (Loss) Income.  For the year ended December 31, 2019, net income increased by $9.5 million to $7.0 million, from a net loss of $2.5 million for the year ended December 31, 2018.

Adjusted EBITDA.  For the year ended December 31, 2019, Adjusted EBITDA increased by $5.5 million to $59.9 million from $54.4 million for the year ended December 31, 2018, primarily as a result of the factors discussed above.

	For the Year Ended December 31,
(in thousands)	2019			2018
Consolidated net income (loss)	$	6,984		$	(2,475	)
Income tax expense		1,521			989
Interest expense		17,220			11,468
Depreciation and amortization		24,157			20,487
EBITDA		49,882			30,469
Equity-based compensation		5,740			2,626
Purchase accounting fair value adjustments		(6,029	)		2,109
Acquisition and integration related costs		2,862			5,018
Employee related reorganization costs		1,762			1,807
Other non-recurring costs		2,776			8,326
IPO and public readiness costs		—			4,066
Strategic alternatives costs		2,880			—
Adjusted EBITDA	$	59,873		$	54,421

Adjusted EBITDA Margin.  For the year ended December 31, 2019, Adjusted EBITDA margin decreased to 9.8%, from 11.1% for the year ended December 31, 2018, primarily as a result of the factors discussed above.

Liquidity and Capital Resources

Working capital is the largest element of our capital needs, as inventory and receivables are our most significant investments. We also require funding for acquisitions, to cover ongoing operating expenses, and to meet required obligations related to financing, such as lease payments and principal and interest payments.

Our capital resources primarily consist of cash from operations and borrowings under our revolving credit facilities, capital equipment leases, and operating leases. As our revenue and profitability have improved, we have used increased borrowing capacity under our revolving credit facilities to fund working capital needs. We have utilized capital leases and secured equipment loans to finance our vehicles and equipment needed for both replacement and expansion purposes.

As of December 31, 2020, we had $3.0 million of cash and cash equivalents and $67.4 million of available borrowing capacity under our revolving credit facilities. Based on our positive historical cash flow, our ability to effectively manage working capital needs, and available borrowing capacity, we believe that we have sufficient funding available to finance our operations.

Financing Sources; Debt

SIC Credit Facility

In June 2018, the Company and certain of its subsidiaries entered into an amended and restated loan, security and guaranty agreement, dated as of June 28, 2018, which was amended on December 11, 2018, July 23, 2019 and August 19, 2019 (which we refer to as the “SIC Credit Facility”), with Bank of America, N.A. The SIC Credit Facility is used by the Company, including both RDS and ASG, for operational purposes. Pursuant to the SIC Credit Facility, the Company has a borrowing-base-governed revolving credit facility that provides for borrowings of up to

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an aggregate of $100 million (after it was increased by $10 million through the amendment entered into on August 19, 2019).

All revolving loans under the SIC Credit Facility are due and payable in full on June 28, 2023, subject to acceleration upon certain conditions.

The Company is required to meet certain financial and nonfinancial covenants pursuant to the SIC Credit Facility.  The Company was in compliance with all financial and nonfinancial covenants as of December 31, 2020.

As of December 31, 2020, $9.9 million of indebtedness was outstanding under the SIC Credit Facility. The Company also had $0.6 million of outstanding letters of credit under the SIC Credit Facility at December 31, 2020.  

Term Loan Facility

On February 28, 2017, AG&M and Pental, as the borrowers, entered into a financing agreement, as amended, with third party lenders (which we refer to as the “Term Loan Facility”), which initially provided for a $105.0 million term loan facility. The Term Loan Facility was amended in June 2018 to define the borrowers as Select Interior Concepts, Inc. and its subsidiaries. The Term Loan Facility was subsequently amended in December 2018 to increase the borrowing capacity to $174.2 million and in July 2019 to amend certain covenants. On August 19, 2019, the Term Loan Facility was further amended, resulting in an adjusted rate of interest payable on borrowings under the Term Loan Facility.  

All term loans under the Term Loan Facility are due and payable in full on February 28, 2023, subject to acceleration upon certain conditions.

The Company is required to meet certain financial and nonfinancial covenants pursuant to the Term Loan Facility. The Company was in compliance with all financial and nonfinancial covenants as of December 31, 2020.

As of December 31, 2020, approximately $152.8 million of indebtedness was outstanding under the Term Loan Facility.

Vehicle and Equipment Financing

We have used various secured loans and leases to finance our acquisition of vehicles and equipment. As of December 31, 2020, approximately $8.1 million of indebtedness was outstanding under vehicle and equipment loans and capital leases.

Historical Cash Flow Information

Working Capital

Inventory and accounts receivable represent approximately 73% of our tangible assets as of December 31, 2020, and accordingly, management of working capital is important to our businesses. Working capital (defined as current assets less current liabilities, excluding debt and cash) totaled $113.1 million at December 31, 2020, compared to $113.4 million at December 31, 2019. Working capital levels have remained consistent primarily due to the increase in accounts receivable and unbilled amounts, offset by a decrease in inventory and an increase in accounts payable.

In our RDS segment, for the year ended December 31, 2020, working capital increased by $11.2 million to $45.9 million, compared to $34.7 million for the year ended December 31, 2019. This increase is primarily due to the increase in accounts receivable and contract assets, offset by an increase in accounts payable.

In our ASG segment, for the year ended December 31, 2020, working capital decreased by $13.0 million to $66.7 million, compared to $79.7 million for the year ended December 31, 2019. This decrease was largely due to decreases in inventory and accounts receivable.

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Cash Flows Provided by Operating Activities

Net cash provided by operating activities was $20.6 million and $31.0 million for the years ended December 31, 2020 and 2019, respectively. Net income (loss) was $(9.9) million and $7.0 million for the years ended December 31, 2020 and 2019, respectively.

Adjustments for noncash expenses included in the calculation of net cash provided by operating activities, including amortization and depreciation, changes in deferred income taxes and other noncash items, totaled $28.2 and $23.1 million for the years ended December 31, 2020 and 2019, respectively.  Changes in operating assets and liabilities resulted in net cash provided of $2.2 million and $0.9 million for the years ended December 31, 2020 and 2019, respectively.

Cash Flows Used in Investing Activities

For the year ended December 31, 2020, cash flow used in investing activities was $3.3 million, due to capital expenditures for property and equipment, net of proceeds from disposals. For the year ended December 31, 2019, cash flow used in investing activities was $24.6 million, with $11.5 million resulting from our investments in acquisitions, $1.0 million for the indemnity payment related to the Bedrock acquisition, and $3.0 million for the escrow payment related to the Greencraft acquisition. Capital expenditures for property and equipment, net of proceeds from disposals, totaled $9.1 million.

Cash Flows Used in Financing Activities

Net cash used in financing activities was $19.4 million and $10.7 million for the years ended December 31, 2020 and 2019, respectively.

For the year ended December 31, 2020, we made principal payments of $1.1 million on term debt. During the year ended December 31, 2020, aggregate net payments on the SIC Credit Facility were $12.3 million and payments on notes payable and capital leases were $3.2 million. We also received $0.4 million in an ERP financing transaction and purchased $0.9 million of treasury stock.    

For the year ended December 31, 2019, we borrowed an additional $11.5 million in term debt to fund the Intown acquisition and made principal payments of $1.9 million, for a net increase in term debt of $9.6 million.  We also received $2.7 million in an ERP financing transaction.  During the year ended December 31, 2019, aggregate net payments on the SIC Credit Facility were $14.9 million and payments on notes payable were $1.9 million. We also classified $5.8 million of the total $8.0 million Greencraft earn-out payment as a financing activity, as this was the fair value of the contingent liability accrued at purchase.  

Contractual Obligations

In the table below, we set forth our enforceable and legally binding obligations as of December 31, 2020. Some of the amounts included in the table are based on management’s estimates and assumptions about these obligations, including their duration, the possibility of renewal, anticipated actions by third parties, and other factors. Because these estimates and assumptions are necessarily subjective, our actual payments may vary from those reflected in the table.

	Payments due by period
(in thousands)	Total		Less than 1 year		1 to 3 years		3 - 5 years		More than 5 years
Long-Term Debt Obligations(1)	$	152,914	$	16,902	$	136,012	$	—	$	—
Capital Lease Obligations(2)		8,789		3,042		3,985		1,262		500
Operating Lease Obligations(3)		47,712		15,444		22,232		6,938		3,098
Purchase Obligations(4)		630,444		86,500		224,023		319,921		—
Total	$	839,859	$	121,888	$	386,252	$	328,121	$	3,598

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(1) Long-term debt obligations include principal payments on our term loans as well as our notes payable. Long-term debt obligations presented do not include interest due or fees on the unused portion of our revolving letters of credit or financing fees associated with the issuance of debt.  The interest rate assessed at December 31, 2020 on the Term Loan Facility, which comprises all of the balance with the exception of $0.1 million, was 7.5%.

(2) Capital lease obligations include minimum lease payments on capital leases for vehicles and equipment purchased.

(3) We lease certain locations, including, but not limited to, corporate offices, warehouses, fabrication shops, and design centers. For additional information, see Note 11—Commitments and Contingencies to our consolidated financial statements included in this Annual Report.

(4) These amounts take into account a contract with a supplier of engineered stone on an exclusive basis in certain states within the United States. As part of the terms of the exclusive right to distribute the products provided under the contract, we are obligated to take delivery of a certain minimum amount of product from this supplier. If we fall short of these minimum purchase requirements in any given calendar year, we have agreed to negotiate with the supplier to arrive at a mutually acceptable resolution. There are no financial penalties to us if such commitments are not met; however, in such a case, the supplier has reserved the right, under the contract, to withdraw the exclusive distribution rights granted to us. The amount of the payment is estimated by multiplying the minimum quantity required under the contract by the average price paid in 2020.  See Note 11—Commitments and Contingencies to our condensed consolidated financial statements included in this Report for a further discussion of these minimum purchase requirements.

In addition to the contractual obligations set forth above, as of December 31, 2020, we had an aggregate of approximately $9.9 million of indebtedness outstanding under the SIC Credit Facility.

Off-Balance Sheet Arrangements

As of December 31, 2020, with the exception of operating leases that we typically use in the ordinary course of business, we were not party to any material off-balance sheet financial arrangements that are reasonably likely to have a current or future effect on our financial condition or operating results. We do not have any relationship with unconsolidated entities or financial partnerships for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Certain accounting policies involve judgments and uncertainties to such an extent that there is a reasonable likelihood that materially different amounts could have been reported using different assumptions or under different conditions. We evaluate our estimates and assumptions on a regular basis. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of our assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions used in preparation of our consolidated financial statements.

Revenue Recognition

The Company’s revenue derived from the sale of imported granite, marble, and related items, primarily in our ASG operating segment, is recognized at a point in time when control over a product is transferred to a customer. This transfer occurs primarily when goods are picked up by a customer at the branch or when goods are delivered to a customer location.

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The Company’s contracts with its home builder customers within our RDS operating segment are usually short-term in nature and will generally range in length from several days to several weeks.  The Company’s contracts related to multi-family and commercial projects are generally long-term in nature.  We recognize revenue from both short-term and long-term contracts for each distinct performance obligation identified over time on a percentage-of-completion basis of accounting, utilizing the output method as a measure of progress, as we believe this represents the best measure of when goods and services are transferred to the customer.  

Revenue is measured at the transaction price, which is based on the amount of consideration the Company expects to receive in exchange for transferring the promised goods or services to the customer. The transaction price will include estimates of variable consideration, such as any returns and sales incentives. Applicable customer sales taxes, when remitted, are recorded as a liability and excluded from revenue on a net basis.  

In the fourth quarter of 2019, the Company adopted ASU 2014-09, the new accounting standard under ASC Topic 606, using the modified retrospective method as of January 1, 2019.  

Cost of Revenue

RDS’s cost of revenue is comprised of the costs of materials and labor to purchase and install products for our customers.

ASG’s cost of revenue primarily consists of purchased materials, sourcing fees for inventory procurement, and freight costs.

RDS and ASG also include payroll taxes and benefits, workers’ compensation insurance, vehicle-related expenses and overhead costs, including rent, depreciation, utilities, property taxes, repairs and maintenance costs in the cost of revenue.

Our cost of revenue is reduced by rebates provided by suppliers in the period the rebate is earned.

Accounts Receivable

Accounts receivable are recorded at net realizable value. We continually assess the collectability of outstanding customer invoices; and if deemed necessary, maintain an allowance for estimated losses resulting from the non-collection of customer receivables. In estimating this allowance, we consider factors such as: historical collection experience, a customer’s current creditworthiness, customer concentrations, personal guarantees, credit insurance, age of the receivable balance both individually and in the aggregate and general economic conditions that may affect a customer’s ability to pay. We have the ability to place liens against a significant amount of RDS customers in order to secure receivables.  Actual customer collections could differ from our estimates. At December 31, 2020 and 2019, the allowance for doubtful accounts was $0.5 million and $0.8 million, respectively.

Inventories

Inventories consist of stone slabs, tile and sinks, and include the costs to acquire the inventories and transport the respective inventories to its location. Inventory also includes flooring, cabinets, doors and trim, glass, and countertops, which have not yet been installed, as well as labor and related costs for installations in process. Inventory is valued at the lower of cost (using the specific identification and first-in, first-out methods) or net realizable value.

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Intangible Assets

Intangible assets consist of customer relationships, trade names and non-compete agreements. We consider all our intangible assets to have definite lives and such intangible assets are amortized on the straight-line method over the estimated useful lives of the respective assets or on an accelerated basis based on the expected cash flows generated by the existing customers as follows:

	Range of estimated useful lives	Weighted average useful life
Customer relationships	2 years – 15 years	10 years
Trade names	3 years – 11 years	8 years
Non-compete agreements	Life of agreement	4 years

Business Combinations

We record business combinations using the acquisition method of accounting. Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values. The excess of the purchase price over the estimated fair value is recorded as goodwill. Changes in the estimated fair values of net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will adjust the amount of the purchase price allocable to goodwill. Measurement period adjustments are reflected in the period in which they occur.

Goodwill

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. We account for goodwill in accordance with FASB ASC topic 350, Intangibles-Goodwill and Other Intangible Assets, which among other things, addresses financial accounting and reporting requirements for acquired goodwill and other intangible assets having indefinite useful lives. ASC topic 350 requires goodwill to be carried at cost, prohibits the amortization of goodwill and requires us to test goodwill for impairment at least annually. We test for impairment of goodwill annually during the fourth quarter or more frequently if events or changes in circumstances indicate that the goodwill may be impaired. Events or changes in circumstances which could trigger an impairment review include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations. We identified RDS and ASG as reporting units and determined each reporting unit’s fair value substantially exceeded such reporting unit’s carrying value. There were no impairment charges related to goodwill for the years ended December 31, 2020 and 2019.

Equity-based compensation

We account for equity-based awards by measuring the awards at the date of grant and recognizing the grant-date fair value as an expense using either straight-line or accelerated attribution, depending on the specific terms of the award agreements over the requisite service or performance period, which is usually equivalent to the vesting period.

Income Taxes

The provision for income taxes is accounted for under the asset and liability method prescribed by ASC 740 (Topic 740, Income Taxes). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the tax rate changes are enacted.

38

We recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

On December 22, 2017, the Tax Cuts and Jobs Act (which we refer to as the “Tax Act”) was adopted into law. The Tax Act makes broad and complex changes to the Internal Revenue Code of 1986, including, but not limited to, (i) reducing the U.S. federal corporate tax rate from 35% to 21%; (ii) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits are realized; (iii) creating a new limitation on deductible interest expense; and (iv) changing rules related to uses and limitation of net operating loss carryforwards created in tax years beginning after December 31, 2017.

Our policy is to recognize interest and/or penalties related to all tax positions as income tax expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. We have recognized less than ($0.1) million in combined interest and penalties related to uncertain tax positions for the year ended December 31, 2020. We recognized $0.4 million in combined interest and penalties related to uncertain tax positions for the year ended December 31, 2019.

Recent Accounting Pronouncements

See Note 1 – Organization and Business Description to our audited consolidated financial statements included in this Annual Report for a description of recent accounting pronouncements issued.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We borrow from lenders using financial instruments such as revolving lines of credit, term loans, and notes payable. In many cases, the interest costs we incur under these agreements is calculated using a variable rate that will fluctuate with changes in a published short-term market interest rate index, such as LIBOR. Accordingly, there is no guarantee as to what our interest payments and expense will be in the future.  In an economic environment where short term rates (under one year) may increase or continue to increase at any time, there can be no assurance that interest rates will not be higher in the future and have an adverse effect on our financial soundness.  At December 31, 2020, we had outstanding variable rate borrowings of approximately $162.6 million. Assuming the current level of borrowing under the variable rate debt facilities, a hypothetical one-percentage point increase (decrease) in interest rates on our variable rate debt would increase (decrease) our annual interest expense by approximately $1.6 million.

For variable rate debt, interest rate changes generally do not affect the fair value of the debt instrument, but do impact future earnings and cash flows, assuming other factors are held constant.  We did not utilize swaps, forward or option contracts on interest rates or commodities, or other types of derivative financial instruments during the years ended December 31, 2020, 2019, and 2018.  We have not entered into and currently do not hold derivatives for trading or speculative purposes.

The United Kingdom’s Financial Conduct Authority has announced the intent to phase out the use of LIBOR by the end of 2021. If LIBOR is discontinued, we may need to renegotiate the terms of certain of credit instruments which utilize LIBOR as a benchmark in determining the interest rate, to replace LIBOR with the new standard that is established. As a result, we may incur incremental costs in transitioning to a new standard, and interest rates on our current or future indebtedness may be adversely affected by the new standard. There is currently no definitive information regarding the future utilization of LIBOR or any particular replacement rate. As such, the potential effect of any such event on our cost of capital cannot yet be determined, but we do not expect it to have a material impact on our consolidated financial condition, results of operations, or cash flows.

Foreign Currency Exchange Rate Risk

We purchase materials from both domestic and foreign suppliers.  While predominantly all of the suppliers receive payments in U.S. dollars and, as such, we are not currently exposed to foreign currency exchange rate risk,

39

there can be no assurance that the payments to suppliers in the future will not be affected by exchange fluctuations between the U.S. dollar and the local currencies of these foreign suppliers.

Item 8. Financial Statements and Supplementary Data.

The information required by this Item is incorporated herein by reference to the financial statements set forth in Item 15 (Exhibits, Financial Statement Schedules) of Part IV of this Annual Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer (which we refer to as, together, the “Certifying Officers”), evaluated the effectiveness of our disclosure controls and procedures, as defined by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2020. Based on the evaluation of our disclosure controls and procedures, our Certifying Officers concluded that our disclosure controls and procedures were effective as of December 31, 2020

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Controls Over Financial Reporting

We are responsible for establishing and maintaining internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).  Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.  Our management, including our Certifying Officers, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on their assessment, our Certifying Officers concluded that our internal control over financial reporting was effective as of December 31, 2020 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm due to an exemption established by rules of the SEC for emerging growth companies as defined in the JOBS Act.

Item 9B. Other Information

On March 10, 2021, AG&M and Pental entered into that certain Tenth Amendment to Financing Agreement (the “Tenth Amendment”) with the financial institutions party thereto, as lenders, and Cerberus Business Finance, LLC, as agent for the lenders, which further amends the Term Loan Facility.  The Tenth Amendment, among other things, increases the Leverage Ratio (as defined in the Term Loan Facility) required to be satisfied for each fiscal quarter ending on or after March 31, 2021 from 3.75:1.00 to 4.00:1.00.

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PART III

Item 10. Directors, Executive Officers of the Registrant and Corporate Governance

The information required by this Item will be set forth in our definitive proxy statement (which we refer to as our “2021 Proxy Statement”) to be filed in connection with our 2021 Annual Meeting of Stockholders (which Proxy Statement will be filed with the SEC within 120 days of December 31, 2020).  The information required by this Item to be contained in our 2021 Proxy Statement under the headings “Election of Directors,” “Executive Compensation” and “Section 16(a) Beneficial Ownership Reporting Compliance” is incorporated herein by reference.

Our Code of Business Conduct and Ethics is available in the “Investors—Corporate Governance—Governance Highlights—Governance Documents” section of our website located at www.selectinteriorconcepts.com.  To the extent required by applicable rules of the SEC and the Nasdaq Stock Market, we intend to disclose on our website any amendments to, or waivers from, any provision of our Code of Business Conduct and Ethics that apply to our Company's directors and executive officers, including our principal executive officer, principal financial officer or controller, or persons performing similar functions.

Item 11. Executive Compensation

The information required by this Item will be set forth in our 2021 Proxy Statement under the heading “Executive Compensation,” which information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item will be set forth in our 2021 Proxy Statement under the heading “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Equity Compensation Plan Information,” which is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this Item will be set forth in our 2021 Proxy Statement under the heading “Related Transactions and Director Independence” which information is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this Item will be set forth in our 2021 Proxy Statement under the heading “Fees Paid to Our Independent Registered Accounting Firm,” which information is incorporated herein by reference.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)        The following documents are filed as part of this Annual Report on Form 10-K: Exhibits.

1.          Financial Statements. The following financial statements of the Company are included in a separate section of this Annual Report on Form 10-K commencing on the page numbers specified below:

Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Changes in Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7

2.          Financial Statements Schedules.  See “Schedule I – SIC’s Condensed Parent Company Only Financial Statements” beginning on page F-43.

3.          Exhibits.  The following exhibits are either filed herewith or incorporated herein by reference:

Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the initial filing of the Company’s Registration Statement on Form S-1 (File No. 333-226101), filed with the SEC on July 9, 2018).
3.2	Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-226101), filed with the SEC on July 25, 2018).
4.1*	Description of Securities
10.1 †	2017 Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the initial filing of the Company’s Registration Statement on Form S-1 (File No. 333-226101), filed with the SEC on July 9, 2018).
10.2 †	2019 Incentive Compensation Plan (incorporated by reference to Appendix A of the Company’s Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 filed with the SEC on April 5, 2019).
10.3 †	Employment Agreement, dated as of July 27, 2020, by and between the Company and Patrick Dussinger (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended on September 30, 2020, filed with the SEC on November 5, 2020).
10.4 †	Employment Agreement, dated as of August 17, 2018, by and between the Company and Nadeem Moiz (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 17, 2018).
10.5 †	Employment Agreement, dated as of June 8, 2020, by and between the Company and L.W. Varner, Jr. (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended on June 30, 2020, filed with the SEC on August 6, 2020).
10.6 †	Employment Agreement, dated as of October 22, 2018, by and between the Company and Shawn Baldwin (incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 12, 2020).
10.7 †	Form of Indemnification Agreement between the Company and each of its directors and executive officers (incorporated by reference to Exhibit 10.7 to the initial filing of the Company’s Registration Statement on Form S-1 (File No. 333-226101), filed with the SEC on July 9, 2018).

42

10.8 †	Amendment to Employment Agreement, dated as of July 12, 2019, by and between the Company and Shawn Baldwin (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, filed with the SEC on August 8, 2019).
10.9 †	Amendment to Employment Agreement, dated as of July 12, 2019, by and between the Company and Nadeem Moiz (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, filed with the SEC on August 8, 2019).
10.10 †	Form of Time-Based Restricted Stock Unit Agreement for use with the 2017 Incentive Compensation Plan (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended on September 30, 2020, filed with the SEC on November 5, 2020).
10.11 †	Form of Performance-Based Restricted Stock Unit Agreement for use with the 2017 Incentive Compensation Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended on September 30, 2020, filed with the SEC on November 5, 2020).
10.12 †	Board Designee Agreement dated November 21, 2019 by and between Select Interior Concepts, Inc. and B. Riley Financial, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on November 22, 2019).
10.13 †*	Second Amendment to Employment Agreement, dated as of June 30, 2020, by and between the Company and Nadeem Moiz.
10.14 †*	Second Amendment to Employment Agreement, dated as of June 30, 2020, by and between the Company and Shawn Baldwin.
10.15 †*	Separation Agreement, dated as of June 8, 2020, by and between the Company and Tyrone Johnson.
10.16 †*	Separation Agreement, dated as of June 8, 2020, by and between the Company and Kendall Hoyd.
10.17	Amended and Restated Loan, Security and Guaranty Agreement, dated as of June 28, 2018, by and among the Company and the Company’s subsidiaries party thereto, as borrowers and obligors, as applicable, and Bank of America, N.A., as lender (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, filed with the SEC on September 6, 2018).
10.18	Financing Agreement, dated as of February 28, 2017, among Architectural Granite & Marble, LLC and Pental Granite and Marble, LLC, as borrowers, the financial institutions party thereto as lenders, and Cerberus Business Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.14 to the initial filing of the Company’s Registration Statement on Form S-1 (File No. 333-226101), filed with the SEC on July 9, 2018).
10.19	First Amendment to Financing Agreement, dated as of November 22, 2017, among Architectural Granite & Marble, LLC and Pental Granite and Marble, LLC, as borrowers, the financial institutions party thereto as lenders, and Cerberus Business Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.15 to the initial filing of the Company’s Registration Statement on Form S-1 (File No. 333-226101), filed with the SEC on July 9, 2018).
10.20	Second Amendment to Financing Agreement, dated as of December 29, 2017, by and among Architectural Granite & Marble, LLC and Pental Granite and Marble, LLC, as borrowers, the financial institutions party thereto, as lenders, and Cerberus Business Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, filed with the SEC on September 6, 2018).
10.21	Third Amendment to Financing Agreement, dated as of June 28, 2018, by and among Architectural Granite & Marble, LLC and Pental Granite and Marble, LLC, as borrowers, the financial institutions party thereto, as lenders, and Cerberus Business Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, filed with the SEC on September 6, 2018).

43

10.22	Fourth Amendment to Financing Agreement, dated as of August 31, 2018, by and among Architectural Granite & Marble, LLC and Pental Granite and Marble, LLC, as borrowers, the financial institutions party thereto, as lenders, and Cerberus Business Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on September 7, 2018).
10.23	Fifth Amendment to Financing Agreement, dated as of December 31, 2018, by and among Architectural Granite & Marble, LLC and Pental Granite and Marble, LLC, as borrowers, the financial institutions party thereto, as lenders, and Cerberus Business Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on January 4, 2019).
10.24	Sixth Amendment to Financing Agreement, dated as of July 15, 2019, by and among Architectural Granite & Marble, LLC and Pental Granite and Marble, LLC, as borrowers, the financial institutions party thereto, as lenders, and Cerberus Business Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, filed with the SEC on August 8, 2019).
10.25	Second Amendment to Amended and Restated Loan, Security, and Guaranty Agreement, dated as of July 23, 2019, by Select Interior Concepts, Inc., and subsidiaries, as borrowers, and Bank of America, N.A. as lenders (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, filed with the SEC on August 8, 2019).
10.26	Seventh Amendment to Financing Agreement, dated as of August 19, 2019, by and among Architectural Granite & Marble, LLC and Pental Granite and Marble, LLC, as borrowers, the financial institutions party thereto, as lenders, and Cerberus Business Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on August 21, 2019).
10.27	Third Amendment to Amended and Restated Loan, Security and Guaranty Agreement, dated as of August 19, 2019, by and among Select Interior Concepts, Inc. and each of its subsidiaries, as obligors, and Bank of America, N.A., as lender (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on August 21, 2019).
10.28	Eighth Amendment to Financing Agreement, dated as of February 7, 2020, by and among Architectural Granite & Marble, LLC and Pental Granite and Marble, LLC, as borrowers, the financial institutions party thereto, as lenders, and Cerberus Business Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on March 19, 2020).
10.29	Ninth Amendment to Financing Agreement, dated as of April 8, 2020, by and among Architectural Granite & Marble, LLC and Pental Granite and Marble, LLC, as borrowers, the financial institutions party thereto, as lenders, and Cerberus Business Finance, LLC, as agent for the lenders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on April 13, 2020).
10.30*	Tenth Amendment to Financing Agreement, dated as of March 10, 2021, by and among Architectural Granite & Marble, LLC and Pental Granite and Marble, LLC, as borrowers, the financial institutions party thereto, as lenders, and Cerberus Business Finance, LLC, as agent for the lenders.
21.1*	Subsidiaries of Select Interior Concepts, Inc.
23.1*	Consent of Independent Registered Public Accounting Firm
31.1*	Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

44

101.INS	Inline XBRL Instance Document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document.
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* Filed herewith.

† Management contract or compensatory plan or arrangement.

Item 16. Form 10-K Summary

None.

45

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Select Interior Concepts, Inc.
Date: March 16, 2021	By:	/s/ L.W. Varner, Jr.
		L.W. Varner, Jr.
		Chief Executive Officer and Director (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Signature	Title	Date
/s/ L.W. Varner, Jr.	Chief Executive Officer and Director	March 16, 2021
L.W. Varner, Jr.	(Principal Executive Officer)
/s/ Nadeem Moiz	Chief Operating Officer and Chief Financial Officer	March 16, 2021
Nadeem Moiz	(Principal Financial Officer)
/s/ Lance D. Brown	Vice President, Chief Accounting Officer	March 16, 2021
Lance D. Brown	(Principal Accounting Officer)
/s/ Brett G. Wyard	Chairman of the Board of Directors	March 16, 2021
Brett G. Wyard
/s/ Donald F. McAleenan	Director	March 16, 2021
Donald F. McAleenan
/s/ Robert Scott Vansant	Director	March 16, 2021
Robert Scott Vansant
/s/ S. Tracy Coster	Director	March 16, 2021
S. Tracy Coster
/s/ Bryant Riley	Director	March 16, 2021
Bryant Riley

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Index to Consolidated Financial Statements

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3
Consolidated Statements of Operations	F-4
Consolidated Statements of Changes in Equity	F-5
Consolidated Statements of Cash Flows	F-6
Notes to Consolidated Financial Statements	F-7
Schedule I – SIC’s Condensed Financial Statements	F-43

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Select Interior Concepts, Inc.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Select Interior Concepts, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2017.

Los Angeles, California

March 16, 2021

F-2

Select Interior Concepts Consolidated Financial Statements

Select Interior Concepts, Inc. and Subsidiaries

Consolidated Balance Sheets

As of December 31, 2020 and 2019

	As of December 31,
(in thousands, except share data)	2020			2019
Assets
Current assets
Cash	$	2,974		$	5,002
Accounts receivable, net of allowance for doubtful accounts of $489 and $849 at    December 31, 2020 and 2019, respectively		67,881			63,419
Inventories		98,982			104,741
Prepaid expenses and other current assets		17,372			11,083
Income taxes receivable		4,617			2,184
Total current assets		191,826			186,429
Property and equipment, net of accumulated depreciation of $30,387 and $21,020 at    December 31, 2020 and 2019, respectively		21,056			26,494
Deferred tax assets, net		8,877			10,550
Goodwill		99,789			99,789
Customer relationships, net of accumulated amortization of $57,540 and $48,251 at    December 31, 2020 and 2019, respectively		62,700			71,989
Intangible assets, net of accumulated amortization of $10,916 and $7,471 at    December 31, 2020 and 2019, respectively		15,314			18,759
Other assets		5,446			6,265
Total assets	$	405,008		$	420,275
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	47,246		$	42,734
Accrued expenses and other current liabilities		20,353			16,661
Customer deposits		8,144			8,627
Current portion of long-term debt, net of financing fees of $1,279 and $511 at    December 31, 2020 and 2019, respectively		15,623			11,749
Current portion of capital lease obligations		2,700			2,395
Total current liabilities		94,066			82,166
Line of credit		9,623			21,871
Long-term debt, net of current portion and financing fees of $1,486 and $1,107 at    December 31, 2020 and 2019, respectively		134,526			141,299
Long-term capital lease obligations		5,235			6,907
Other long-term liabilities		7,367			6,757
Total liabilities		250,817			259,000
Commitments and contingencies (see Note 11)
Stockholders' equity
Class A common stock, par value $0.01 per share; 100,000,000 shares authorized;    25,609,758 shares issued and 25,449,025 outstanding at December 31, 2020 and    25,139,542 shares issued and 25,106,402 outstanding at December 31, 2019		256			251
Treasury stock, 160,733 shares at December 31, 2020 and 33,140 shares at    December 31, 2019, at cost		(1,279	)		(391	)
Additional paid-in capital		165,048			161,396
Retained earnings (accumulated deficit)		(9,834	)		19
Total stockholders’ equity		154,191			161,275
Total liabilities and stockholders' equity	$	405,008		$	420,275

See accompanying notes to consolidated financial statements.

F-3

Select Interior Concepts, Inc. and Subsidiaries

Consolidated Statements of Operations

For the Years Ended December 31, 2020, 2019 and 2018

	Year Ended December 31,
(in thousands, except share data)	2020			2019			2018
Revenue, net	$	554,025		$	610,373		$	489,757
Cost of revenue		418,816			446,299			356,303
Gross profit		135,209			164,074			133,454
Selling, general and administrative expenses		131,827			144,816			121,357
Income from operations		3,382			19,258			12,097
Other expense:
Interest expense		14,568			17,220			11,426
Loss on extinguishments of debt		—			—			42
Other expense (income), net		1,641			(6,467	)		2,115
Total other expense, net		16,209			10,753			13,583
Income (loss) before provision (benefit) for income taxes		(12,827	)		8,505			(1,486	)
Provision (benefit) for income taxes		(2,974	)		1,521			989
Net income (loss)	$	(9,853	)	$	6,984		$	(2,475	)
Income (loss) per basic and diluted share of common stock
Basic common stock	$	(0.39	)	$	0.28		$	(0.10	)
Diluted common stock	$	(0.39	)	$	0.27		$	(0.10	)
Weighted average shares outstanding
Basic common stock		25,337,249			25,296,955			25,634,342
Diluted common stock		25,337,249			25,431,677			25,634,342

See accompanying notes to consolidated financial statements.

F-4

Select Interior Concepts, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

For the Years Ended December 31, 2020, 2019 and 2018

	Class A Stockholders						Class B Stockholders
(in thousands, except share data)	Class A Common Stock Shares			Class A Common Stock			Class B Common Stock Shares			Class B Common Stock			Treasury Stock, at Cost			Total Additional Paid-in Capital			Total Retained Earnings (Accumulated Deficit)			Total
Balance as of December 31, 2017		21,750,000		$	217			3,864,626		$	39		$	—		$	153,520		$	(5,689	)	$	148,087
Equity-based compensation		27,646			—			—			—			—			2,528			—			2,528
Issuances of Class A and Class B Stock		752			1			39,645						—			553			—			554
Special stock dividend and Class B cancellation		226,511			2			(226,511	)		(2	)		—			—			—			—
Conversion of Class B Stock to Class A Stock		3,677,760			37			(3,677,760	)		(37	)		—			—			—			—
Net loss		—			—			—			—			—			—			(2,475	)		(2,475	)
Balance as of December 31, 2018		25,682,669			257			—			—			—			156,601			(8,164	)		148,694
Cumulative effect adjustment (Note 3)		—			—			—			—			—			—			1,199			1,199
Equity-based compensation		—			—			—			—			—			4,797			—			4,797
Issuance of Class A common stock due to restricted stock vesting		256,873			2			—			—			—			(2	)		—			—
Repurchase of Class A common stock		—			—			—			—			(391	)		—			—			(391	)
Retirement of Class A common stock		(800,000	)		(8	)		—			—			—			—			—			(8	)
Net income		—			—			—			—			—			—			6,984			6,984
Balance as of December 31, 2019		25,139,542			251			—			—			(391	)		161,396			19			161,275
Equity-based compensation		—			—			—			—			—			2,789			—			2,789
Issuance of Class A common stock awards		117,345			1			—			—			—			863			—			864
Issuance of Class A common stock due to restricted stock vesting		352,871			4			—			—			—			—			—			4
Repurchase of Class A common stock		—			—			—			—			(888	)		—			—			(888	)
Net loss		—			—			—			—			—			—			(9,853	)		(9,853	)
Balance as of December 31, 2020		25,609,758		$	256			—		$	—		$	(1,279	)	$	165,048		$	(9,834	)	$	154,191

See accompanying notes to consolidated financial statements.

F-5

Select Interior Concepts, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2020, 2019 and 2018

	Year Ended December 31,
(in thousands)	2020			2019			2018
Cash flows provided by operating activities
Net income (loss)	$	(9,853	)	$	6,984		$	(2,475	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		22,867			24,157			20,487
Change in fair value of earn-out liabilities		—			(6,029	)		2,109
Equity-based compensation		2,789			5,740			2,528
Deferred provision for (benefit from) income taxes		1,673			(1,494	)		(4,186	)
Amortized interest on deferred debt issuance costs		1,182			610			663
Loss on extinguishment of debt		—			—			42
Provision for doubtful accounts		(322	)		349			283
Loss (gain) on disposal of property and equipment, net		104			(223	)		(139	)
Other		(70	)		—			—
Changes in operating assets and liabilities:
Accounts receivable		(4,140	)		1,225			(4,370	)
Inventories		5,704			979			1,209
Prepaid expenses and other current assets		(7,025	)		(3,012	)		151
Other assets		(305	)		(12	)		(174	)
Accounts payable		4,625			5,194			(11,891	)
Accrued expenses and other current liabilities		4,559			(2,212	)		3,847
Income taxes receivable		(2,433	)		(1,905	)		1,240
Customer deposits		(484	)		(1,281	)		2,888
Other long-term liabilities		1,733			1,885			—
Net cash provided by operating activities		20,604			30,955			12,212
Cash flows used in investing activities
Purchase of property and equipment		(3,436	)		(9,169	)		(8,507	)
Proceeds from disposal of property and equipment		178			65			6
Acquisition of T.A.C. Ceramic Tile Co., net of cash acquired		—			—			(40,189	)
Acquisition of Summit Stoneworks, LLC		—			—			(16,000	)
Acquisition of The Tuscany Collection, LLC		—			—			(4,152	)
Acquisition of NSI, LLC		—			—			(290	)
Acquisition of Elegant Home Design, LLC (Indemnity payment in 2019)		—			(1,000	)		(11,492	)
Escrow release payment related to acquisition of Greencraft Holdings, LLC		—			(3,000	)		—
Acquisition of Intown Design, Inc.		—			(11,537	)		—
Net cash used in investing activities		(3,258	)		(24,641	)		(80,624	)
Cash flows provided by (used in) financing activities
Payment of Greencraft Holdings, LLC earn-out liability		—			(5,794	)		—
Proceeds from ERP financing		376			2,725			—
Proceeds from issuance of equity		—			—			553
Proceeds from (payments on) line of credit, net		(12,347	)		(14,934	)		17,886
Proceeds from term loan		—			11,500			57,250
Term loan deferred issuance costs		(2,230	)		—			(958	)
Purchase of treasury stock		(888	)		(399	)		—
Payments on notes payable and capital leases		(3,235	)		(1,921	)		(1,454	)
Principal payments on long-term debt		(1,050	)		(1,851	)		(1,050	)
Net cash provided by (used in) financing activities		(19,374	)		(10,674	)		72,227
Net increase (decrease) in cash and restricted cash		(2,028	)		(4,360	)		3,815
Cash and restricted cash, beginning of period		5,002			9,362		$	5,547
Cash and restricted cash, end of period	$	2,974		$	5,002		$	9,362
Supplemental disclosures of cash flow information
Cash paid for interest	$	13,313		$	16,411		$	10,445
Cash paid (received) for income taxes, net of refunds	$	(1,090	)	$	4,899		$	3,845
Supplemental disclosures of non-cash investing and financing activities
Measurement period adjustment related to acquisition of Greencraft Holdings, LLC	$	—		$	—		$	317
Measurement period adjustment related to acquisition of T.A.C. Ceramic Tile Co.	$	—		$	498		$	—
Earn-out purchase price adjustment for Summit Stoneworks, LLC	$	—		$	—		$	1,851
Earn-out purchase price adjustment for T.A.C. Ceramic Tile Co.	$	—		$	—		$	2,265
Earn-out purchase price adjustment for Intown Design, Inc.	$	—		$	2,010		$	—
Acquisition of Elegant Home Design, LLC, indemnity holdback	$	—		$	—		$	1,000
Acquisition of equipment and vehicles with long-term debt and capital leases	$	1,169		$	8,251		$	1,804

See accompanying notes to consolidated financial statements.

F-6

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Organization and Business Description

Organization and Nature of Operations

These financial statements reflect the consolidated operations of Select Interior Concepts, Inc. (“SIC” or the “Company”).

SIC is a Delaware corporation that was restructured in November 2017 to be a holding company to consolidate diversified building products and services companies. Through its two primary operating subsidiaries and segments, Residential Design Services, LLC (f/k/a TCFI LARK LLC) (“RDS”) and Architectural Surfaces Group, LLC (f/k/a TCFI G&M LLC) (“ASG”), the Company imports and distributes natural and engineered stone slabs for kitchen and bathroom countertops, operates design centers that merchandise interior products, and provides installation services. RDS interior product offerings include flooring, cabinets, countertops, and wall tile. RDS operates throughout the United States, including in California, Nevada, Arizona, Texas, Virginia, Maryland, North Carolina, and Georgia. ASG has operations in the Northeast, Southeast, Southwest, Midwest, Mountain West, and West Coast regions of the United States.

The SIC platform originated in September 2014, when affiliates of Trive Capital Management LLC (“Trive Capital”) acquired RDS, which in turn acquired the assets of PT Tile Holdings, LP (“Pinnacle”) in February 2015, and 100% of the equity interests in Greencraft Holdings, LLC (“Greencraft”) in December 2017.  RDS then acquired the assets of Summit Stoneworks, LLC (“Summit”) in August 2018,  100% of the equity interests in T.A.C. Ceramic Tile Co. (which we refer to as “TAC”) in December 2018, and acquired the assets of Intown Design, Inc., Intown Granite of Charlotte, Inc., and Granitec, LLC, (collectively, “Intown”) in March 2019.

Affiliates of Trive Capital also formed a consolidation platform in the stone countertop market by establishing TCFI G&M LLC, a Delaware limited liability company formed on May 26, 2015. TCFI G&M LLC acquired 100% of the equity interests in Architectural Granite & Marble, LLC in June 2015, which in turn acquired the assets of Bermuda Import-Export, Inc. (“Modul”) in July 2016, 100% of the equity interests in Pental Granite and Marble, LLC (“Pental”) in February 2017, and the assets of Cosmic Stone & Tile Distributors, Inc. (“Cosmic”) in October 2017. On January 17, 2018, TCFI G&M LLC changed its name to Architectural Surfaces Group, LLC (a/k/a ASG).  ASG then acquired the assets of Elegant Home Design, LLC (Bedrock”) in January 2018, the assets of NSI, LLC (“NSI”) in March 2018, and the assets of The Tuscany Collection, LLC (“Tuscany”) in August 2018.

Reorganization

On November 22, 2017, SIC and the former equity holders of RDS and ASG completed a series of restructuring transactions (collectively, the “November 2017 Restructuring Transactions”) whereby (i) certain former equity holders of RDS and ASG (collectively referred to as the “Rollover Stockholders”) contributed a certain amount of equity interests in RDS and ASG to SIC in exchange for shares of Class B common stock, par value $0.01 per share, of SIC (“Class B Common Stock”) (such transaction referred to as the “Contribution and Exchange”), (ii) SIC used a certain amount of proceeds from the November 2017 Private Offering and Private Placement (described below) to purchase from certain former equity holders of RDS and ASG the remaining equity interests in each of RDS and ASG (that were not initially contributed to SIC as part of the Contribution and Exchange), and (iii) after the preceding transactions, RDS and ASG became wholly-owned subsidiaries of SIC. SIC was wholly owned by Trive Capital and was inactive until the November 2017 Restructuring Transactions. Prior to the November 2017 Restructuring Transactions, SIC, RDS, and ASG were all under the common control of Trive Capital.

F-7

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. Organization and Business Description (Continued)

Concurrent with the November 2017 Restructuring Transactions, SIC completed a private offering and private placement of 18,750,000 shares of its Class A common stock, par value $0.01 per share (“Class A Common Stock”), to new investors, at a public offering price of $12.00 per share for gross proceeds of approximately $225 million (prior to payment of discounts and fees to the initial purchaser and placement agent and offering expenses) (the “November 2017 Private Offering and Private Placement”). The net proceeds from the November 2017 Private Offering and Private Placement were primarily used by SIC to (i) repurchase 2,379,486 shares of Class B Common Stock from Trive Capital for approximately $26.6 million, (ii) purchase, from certain Rollover Stockholders, the remaining outstanding equity interests in each of RDS and ASG (that were not initially contributed to SIC as part of the Contribution and Exchange) for approximately $62.7 million, and (iii) repay outstanding indebtedness totaling $112.8 million to third-party lenders and pay $0.3 million of lending related fees. The remainder of the net proceeds was used by SIC for transaction expenses related to the November 2017 Private Offering and Private Placement, working capital and general corporate purposes.

In accordance with the terms of the November 2017 Private Offering and Private Placement, in December 2017, SIC completed an additional sale of 3,000,000 shares of Class A Common Stock to new investors at an offering price of $12.00 per share for total gross proceeds of approximately $36.0 million (prior to payment of discounts and fees to the initial purchaser and placement agent and offering expenses). These net proceeds were used by SIC to repurchase an additional 3,000,000 shares of Class B Common Stock from certain Rollover Stockholders.

Transition to Public Company

On August 13, 2018, the SEC declared effective the Company’s Registration Statement on Form S-1, which contained a prospectus pursuant to which certain selling stockholders of the Company may offer and sell shares of Class A Common Stock.  On August 16, 2018, the Company’s Class A Common Stock commenced trading on the Nasdaq Capital Market under the ticker symbol “SIC.”

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include the accounts of SIC, its wholly owned subsidiaries RDS and ASG, and their wholly owned subsidiaries, and are presented using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All significant intercompany accounts and transactions have been eliminated in combination. References to the “ASC” hereafter refer to the Accounting Standards Codification established by the Financial Accounting Standards Board (“FASB”) as the source of authoritative U.S. GAAP.

F-8

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

2. Summary of Significant Accounting Policies (Continued)

Earnings (Loss) per Common Share

For the years ended December 31, 2020, 2019 and 2018, basic earnings per share for common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding.  For the years ended December 31, 2020, 2019 and 2018, common stock consists of only Class A Common Stock, since in August 2018, each then remaining share of Class B Common Stock was automatically converted into one share of Class A Common Stock, resulting in no shares of Class B Common Stock left outstanding.  Diluted earnings per share for common stock is computed by dividing net income (loss) plus the dilutive effect of restricted stock-based awards using the treasury stock method.

The following table sets forth the computation of basic and diluted loss per share for the years ended December 31, 2020, 2019 and 2018:

(in thousands, except share and per share data)	Year Ended December 31, 2020			Year Ended December 31, 2019		Year Ended December 31, 2018
Net income (loss)	$	(9,853	)	$	6,984	$	(2,475	)
Weighted average shares of common stock outstanding:
Basic common stock		25,337,249			25,296,955		25,634,342
Diluted common stock		25,337,249			25,431,677		25,634,342
Earnings (loss) per share of common stock:
Basic common stock	$	(0.39	)	$	0.28	$	(0.10	)
Diluted common stock	$	(0.39	)	$	0.27	$	(0.10	)

All restricted stock awards outstanding totaling 2,797,419 at December 31, 2020, and 825,976 at December 31, 2018, were excluded from the computation of diluted earnings per share in 2020 and 2018 because the Company reported a net loss and the effect of inclusion would have been antidilutive.

Use of Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingencies at the date of the consolidated financial statements and the reported net revenue and expenses. Actual results may vary materially from the estimates that were used. The Company’s significant accounting estimates include the determination of allowances for doubtful accounts, valuation of inventory, the lives and methods for recording depreciation and amortization on property and equipment, the fair value of reporting units and indefinite life intangible assets, deferred income taxes, revenue recognition, warranties, returns and the purchase price allocations used in the Company’s acquisitions.

F-9

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

2. Summary of Significant Accounting Policies (Continued)

Restricted Cash

No amount of restricted cash is held as of December 31, 2020 or 2019.

Fair Value Measurement

ASC 820-10 requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.

The three levels of the fair value hierarchy are as follows:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2—Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3—Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The level of the fair value hierarchy in which the fair value measurement falls is determined by the lowest level input that is significant to the fair value measurement.

The Company records contingent consideration, or earn-outs, associated with certain acquisitions.  These earn-outs are adjusted to fair value at each reporting period and any change to fair value based on a change in certain factors, such as the risk adjusted rate or estimates for the outcome of specified milestone goals, will result in an adjustment to the fair value of the liability. These adjustments are recorded to income/expense as a measurement period adjustment.  

The earn-out liability associated with the acquisition of Summit Stoneworks, LLC (“Summit”) in August 2018 was reduced to zero as of December 31, 2019 and was no longer a Level 3 fair value estimate as the underlying inputs were known and the earn-out target criteria were not met as of December 31, 2019.  Adjustments reducing the fair value of the earn-out liability by $1.9 million were recorded within other (income) expense for the year ended December 31, 2019.

The earn-out liability associated with the acquisition of T.A.C. Ceramic Tile Co, LLC (“TAC”) in December 2018 was reduced to zero as of December 31, 2019 and was no longer a Level 3 fair value estimate as the underlying inputs were known and the earn-out target criteria were not met as of December 31, 2019.  Adjustments reducing the fair value of the earn-out liability by $2.3 million were recorded within other (income) expense for the year ended December 31, 2019.

The earn-out liability associated with the acquisition of Intown Design, Inc., Intown Granite of Charlotte, Inc., and Granitec, LLC, (collectively, “Intown”) in March 2019 had a recorded fair value of zero at December 31, 2019 and is no longer a Level 3 fair value estimate as of December 31, 2020, as the underlying inputs are known and the earn-out target criteria were not met as of December 31, 2020. An adjustment decreasing the fair value of the earn-out liability by $2.0 million was recorded within other (income) expense for the year ended December 31, 2019.

F-10

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

2. Summary of Significant Accounting Policies (Continued)

At December 31, 2020 and December 31, 2019, the carrying value of the Company’s cash, accounts receivable, accounts payable, and short-term obligations approximate their respective fair values because of the short maturities of these instruments. The recorded values of the line of credit, term loans, and notes payable approximate their fair values, as interest rates approximate market rates. The Company recognizes transfers between levels at the end of the reporting period as if the transfers occurred on the last day of the reporting period. There were no transfers during 2020 or 2019, other than the Intown earn-out liability out of Level 3 during 2020 and the Summit and TAC earn-out liabilities out of Level 3 during 2019 due to the availability of observable and known inputs to calculate the fair value of the liabilities as of December 31, 2020 and 2019, respectively.  

Accounts Receivable

Accounts receivable are recorded at net realizable value. The Company continually assesses the collectability of outstanding customer invoices; and if deemed necessary, maintains an allowance for estimated losses resulting from the non-collection of customer receivables. In estimating this allowance, the Company considers factors such as: historical collection experience, a customer’s current creditworthiness, customer concentrations, personal guarantees, credit insurance, age of the receivable balance both individually and in the aggregate and general economic conditions that may affect a customer’s ability to pay. The Company also has the ability to place liens against a significant amount of RDS customers in order to secure receivables.  Actual customer collections could differ from the Company’s estimates. At December 31, 2020 and 2019, the Company’s allowance for doubtful accounts was $0.5 million and $0.8 million, respectively.

Inventories

Inventories consist of stone slabs, tile and sinks, and include the costs to acquire the inventories and transport the respective inventories to its location. Inventory also includes flooring, cabinets, doors and trim, glass, and countertops, which have not yet been installed, as well as labor and related costs for installations in process. Inventory is valued at the lower of cost (using the specific identification and first-in, first-out methods) or net realizable value.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. The Company capitalizes internal-use software as property and equipment under ASC 350-40, Internal-Use Software.  Depreciation and amortization are provided for on a straight-line basis over the estimated useful lives of the related assets as follows:

	Range of estimated useful lives
Machinery and equipment	5 - 7 years
Vehicles	3 - 7 years
Furniture and fixtures	3 - 7 years
Computer equipment	3 - 5 years
Leasehold improvements	Shorter of 15 years or the remaining lease term

F-11

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

2. Summary of Significant Accounting Policies (Continued)

Intangible Assets

Intangible assets consist of customer relationships, trade names and non-compete agreements. The Company considers all its intangible assets to have definite lives and are being amortized on the straight-line method over the estimated useful lives of the respective assets or on an accelerated basis based on the expected cash flows generated by the existing customers as follows:

	Range of estimated useful lives	Weighted average useful life
Customer relationships	2 years – 15 years	10 years
Trade names	3 years – 11 years	8 years
Non-compete agreements	Life of agreement	4 years

Business Combinations

The Company records business combinations using the acquisition method of accounting. Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values. The excess of the purchase price over the estimated fair value is recorded as goodwill. Changes in the estimated fair values of net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will adjust the amount of the purchase price allocable to goodwill. Measurement period adjustments are reflected in the period in which they occur.

Impairment of Long-Lived Assets

The Company reviews the recoverability of its long-lived assets, such as property and equipment and intangible assets, whenever events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable, or at least annually. The assessment for possible impairment is based on the Company’s ability to recover the carrying value of the asset or asset group from the expected future undiscounted cash flows of the related operations. If the aggregate of these cash flows is less than the carrying value of such assets, an impairment loss is recognized for the difference between the estimated fair value and the carrying value. The measurement of impairment requires management to estimate future cash flows and the fair value of long-lived assets. There were no impairment losses on long-lived assets for the years ended December 31, 2020 and 2019.

Goodwill

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. The Company accounts for goodwill in accordance with FASB ASC topic 350, Intangibles-Goodwill and Other Intangible Assets, which among other things, addresses financial accounting and reporting requirements for acquired goodwill and other intangible assets having indefinite useful lives. ASC topic 350 requires goodwill to be carried at cost, prohibits the amortization of goodwill and requires the Company to test goodwill for impairment at least annually. The Company tests for impairment of goodwill annually during the fourth quarter or more frequently if events or changes in circumstances indicate that the goodwill may be impaired. Events or changes in circumstances which could trigger an impairment review include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations. Impairment indicators existed as of March 31, 2020 surrounding the decrease in the Company’s stock price, significant adverse changes in the business climate and other macroeconomic conditions resulting from the COVID-19 pandemic. The Company performed a goodwill impairment test as of March 31, 2020. The Company identified RDS and ASG as reporting units and determined each reporting unit’s fair value significantly exceeded such reporting unit’s carrying value. As part of its annual impairment testing, the Company identified RDS and ASG as reporting units and determined each reporting unit’s fair value exceeded each reporting unit’s carrying value. There were no impairment charges related to goodwill for the years ended December 31, 2020 and 2019. (See Note 8).

F-12

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

2. Summary of Significant Accounting Policies (Continued)

Debt Issuance Costs

Debt issuance costs related to a recognized debt liability are deferred and amortized over the related term of the debt as non-cash interest expense and are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the related debt liability. Debt issuance costs are amortized using the effective interest method or on a straight-line basis when it approximates the effective interest method.

Sales Tax

The Company’s policy is to present taxes collected from customers and remitted to governmental authorities on a net basis. The Company records the amounts collected as a current liability and relieves such liability upon remittance to the taxing authority without impacting revenue or expenses.

Warranty Obligations

The Company offers supplier-specific product warranties to its customers. In estimating future warranty obligations, the Company considers various relevant factors, including its warranty policies and practices and those of its suppliers, the historical frequency of claims, the cost to replace products under warranty, and the amounts expected to be reimbursed by suppliers. On certain products, customer warranty claims are covered directly by the manufacturer of the product. Management estimates its warranty obligation at December 31, 2020 and 2019, to be minimal, and therefore, the Company has not recorded a significant provision for accrued warranty costs.

Operating Leases

The Company accounts for rent expense for its operating leases on a straight-line basis in accordance with authoritative guidance on accounting for leases. The Company leases its corporate, administrative, retail and manufacturing facilities over terms expiring between 2021 and 2029. The Company also leases certain office and warehouse equipment over terms expiring between 2021 and 2025. The term of the lease is considered its initial obligation period, which does not include option periods. The leases may have renewal clauses exercisable at the option of the Company and contain rent holidays and/or rent escalation clauses. The Company includes scheduled rent holidays and rent escalation clauses for the purposes of recognizing straight-line rent over the lease term.

Capital Leases

The Company finances the acquisition of certain vehicles and equipment with capital leases. The acquisition costs are recognized as property, plant and equipment (“PP&E”) on the consolidated balance sheets at fair value at the inception of the lease, or, if lower, at the present value of the minimum lease payments as determined at the inception of the lease. The acquisition costs are amortized over the useful life on the same basis as owned vehicles or, where shorter, the term of the capital lease. Amortization expense is recorded as accumulated amortization on the consolidated balance sheets. The capital lease liability owed to the lessor is included in the consolidated balance sheets as a capital lease obligation. Lease payments are apportioned between interest expense and a reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

Revenue Recognition

The Company’s revenue derived from the sale of imported granite, marble, and related items, primarily in our ASG operating segment, is recognized at a point in time when control over a product is transferred to a customer. This transfer occurs primarily when goods are picked up by a customer at the branch or when goods are delivered to a customer location.

The Company’s contracts with its home builder customers within our RDS operating segment are usually short-term in nature and will generally range in length from several days to several weeks.  The Company’s contracts related to multi-family and commercial projects are generally long-term in nature. We recognize revenue from both short-term and long-term contracts for each distinct performance obligation identified over time on a percentage-of-completion basis of accounting, utilizing the output method as a measure of progress, as we believe this represents the best measure of when goods and services are transferred to the customer.  

F-13

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

2. Summary of Significant Accounting Policies (Continued)

Revenue is measured at the transaction price, which is based on the amount of consideration the Company expects to receive in exchange for transferring the promised goods or services to the customer. The transaction price will include estimates of variable consideration, such as any returns and sales incentives. Applicable customer sales taxes, when remitted, are recorded as a liability and excluded from revenue on a net basis.  

In the fourth quarter of 2019, the Company adopted ASU 2014-09, the new accounting standard under ASC Topic 606, using the modified retrospective method as of January 1, 2019.  (See Note 3)

Cost of Revenue

RDS’ cost of revenue is comprised of the costs of materials and labor to purchase and install products for the Company’s customers.

ASG’s cost of revenue primarily consists of purchased materials, sourcing fees for inventory procurement, and freight costs.

RDS and ASG also include payroll taxes and benefits, workers’ compensation insurance, vehicle-related expenses and overhead costs, including rent, depreciation, utilities, property taxes, repairs and maintenance costs in the cost of revenue.

The Company’s cost of revenue is reduced by rebates provided by suppliers in the period the rebate is earned.

Shipping and Handling Charges

Fees charged to customers for shipping and handling of product are included in revenue. The costs for shipping and handling of product are recorded as a component of cost of revenue.  Additionally, we consider shipping and handling costs charged to a customer as a fulfillment cost rather than a promised service and expense as incurred.

Advertising

The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2020, 2019, and 2018 totaled $0.6 million, $1.2 million and $2.5 million, respectively.

Equity-based compensation

The Company accounts for equity-based awards by measuring the awards at the date of grant and recognizing the grant-date fair value as an expense using either straight-line or accelerated attribution, depending on the specific terms of the award agreements over the requisite service or performance period, which is usually equivalent to the vesting period. Forfeitures are recognized as they occur. (See Note 12)

Income Taxes

The provision for income taxes is accounted for under the asset and liability method prescribed by ASC 740 (Topic 740, Income Taxes). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the tax rate changes are enacted.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

F-14

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

2. Summary of Significant Accounting Policies (Continued)

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was adopted into law. The Tax Act makes broad and complex changes to the Internal Revenue Code of 1986, including, but not limited to, (i) reducing the U.S. federal corporate tax rate from 35% to 21%; (ii) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits are realized; (iii) creating a new limitation on deductible interest expense; and (iv) changing rules related to uses and limitation of net operating loss carryforwards created in tax years beginning after December 31, 2017.  

The Company’s policy is to recognize interest and/or penalties related to all tax positions as income tax expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. The Company has recognized less than ($0.1) million in combined interest and penalties related to uncertain tax positions for the year ended December 31, 2020. The Company recognized $0.4 million in combined interest and penalties related to uncertain tax positions for the year ended December 31, 2019.

Segment Reporting

In accordance with ASC 280-10-50-1, an operating segment is a component of an entity that has all the following characteristics:

a. It engages in business activities from which it may earn revenues and incur expenses.

b. Its discrete financial information is available.

c. Its operating results are regularly reviewed by the public entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.

The Company has identified two operating segments that meet all three of the criteria, RDS and ASG. Each of these operating segments provides products and services that generate revenue and incur expenses as they engage in business activities and maintains discrete financial information. Additionally, the Company’s chief operating decision maker, the Chief Executive Officer, reviews financial performance, approves budgets and allocates resources at the RDS and ASG operating segment level.

Recently Issued and Adopted Accounting Pronouncements

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. The Company has elected to use the extended transition period for complying with new or revised accounting standards under Section 107 of the JOBS Act. This election allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU establishes a comprehensive revenue recognition standard for virtually all industries in U.S. GAAP, including those that previously followed industry-specific guidance, such as the real estate, construction, and software industries. The ASU core principal is to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. During 2014-2016, the FASB issued various amendments to this topic and the amendments clarified certain positions and extended the implementation date until annual periods beginning after December 15, 2018. During the quarter ended December 31, 2019, the Company adopted this guidance on a modified retrospective basis. For contracts which were not completed as of January 1, 2019, revenue related to our short-term contracts with homebuilder customers, primarily in our RDS operating segment, are now recognized over time based on the extent of progress towards completion of the individual performance obligations, instead of under the completed contract method, because of continuous transfer of control to the customer.  There was no material impact on our revenue recognition for our multi-family contracts that are currently recognized under the existing percentage-of-completion method of accounting, due to the comparable methodology of revenue recognition under the updated guidance. There was also no material impact from adoption related to our sales of imported granite, marble, and related items of our ASG operating segment, as the Company has concluded that it has substantially similar performance obligations and recognition timing under the amended guidance.  We recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings on January 1, 2019 of approximately $1.2 million. (See Note 3).  

F-15

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

2. Summary of Significant Accounting Policies (Continued)

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework (ASU 2018-13). The updated guidance improves the disclosure requirements for fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  The adoption of ASU 2018-13 did not have a material impact on our consolidated financial statements.

Accounting Pronouncements Issued but Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous standards. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of asset not to recognize lease assets and lease liabilities. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, and in June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, to defer the effective date of ASU No.2016-02 for certain entities. For the Company, the new standard is effective for annual periods beginning January 1, 2022.  The Company is currently evaluating the impact of the provisions of ASU 2016-02 on the presentation of its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” (ASU 2016-03) which amends ASC 326 “Financial Instruments—Credit Losses.”  Subsequent to the issuance of ASU 2016-13, ASC 326 was amended by various updates that amend and clarify the impact and implementation of the aforementioned update.  The new guidance introduces the current expected credit loss (CECL) model, which will require an entity to record an allowance for credit losses for certain financial instruments and financial assets, including trade receivables, based on expected losses rather than incurred losses.  Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument.  In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates which delays the effective date of ASU 2016-13 until fiscal years beginning after December 15, 2022.  The Company is currently evaluating the impact of the provisions of ASU 2016-13 on the presentation of its consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the goodwill impairment test by eliminating the step 2 requirement to determine the fair value of its assets and liabilities at the impairment testing date. ASU 2017-04 is effective for annual periods beginning after December 15, 2021. The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.

F-16

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

2. Summary of Significant Accounting Policies (Continued)

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) No. 2018-15 Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15). ASU 2018-15 provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post implementation stages are expensed as the activities are performed. ASU 2018-15 is effective for fiscal years beginning after December 15, 2020. Early adoption of the amendments in ASU 2018-15 is permitted, including adoption in any interim period, for all entities. The amendments in ASU 2018-15 should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently assessing the effect this guidance may have on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” which amends ASC 740 “Income Taxes” (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021.  The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted.  The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.

3. Revenue

In the fourth quarter of 2019, the Company adopted ASU 2014-09, the new accounting standard under ASC Topic 606, using the modified retrospective method as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the previous standard, Topic 605.

The Company recorded a $1.2 million cumulative effect adjustment as an increase to opening retained earnings due to the impact of adopting Topic 606, with the impact primarily related to the change in accounting for certain of the RDS short-term home builder contracts that were previously accounted for on a completed contract basis, whereas, under ASC 606, the Company now recognizes revenue associated with these contracts for the individual performance obligations over time as the service is performed and the transfer of control occurs. There was no impact upon adoption on long-term multi-family or commercial contracts that were already recognized under the percentage-of-completion method of accounting under Topic 605.  Additionally, there was no material impact related to the sales of imported granite, marble, and related items of the ASG operating segment, due to similar performance obligations and recognition timing under the amended guidance.

F-17

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

3. Revenue (Continued)

Impact of Topic 606 Revenue Recognition Standard on 2019 Financial Statement Line Items

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on the Company’s Consolidated Statement of Operations and Consolidated Balance Sheet was as follows (in thousands):

	For the year ended December 31, 2019
Consolidated Statement of Operations	As Reported		Balances without Adoption		Impact of Adoption
Revenue, net	$	610,373	$	609,899	$	474
Cost of revenue		446,299		445,890		409
Selling, general, and administrative expenses		144,816		144,832		(16	)
Provision for income taxes		1,521		1,500		21
Net income		6,984		6,924		60

Contract Balances

The timing of revenue recognition, billings, and cash collections results in billed accounts receivable, revenue in excess of billings, customer deposits, and billings in excess of revenue recognized in the Company’s Consolidated Balance Sheets.

Contract assets

The Company’s contract assets consist of unbilled amounts typically resulting from sales under contracts when the revenue recognized exceeds the amount billed to the customer, generally in the RDS operating segment revenue derived from homebuilders and commercial and multifamily projects. Contract assets are recorded in other current assets in the Company’s Consolidated Balance Sheets.  The Company had contract assets of $12.8 million and $5.7 million as of December 31, 2020 and 2019, respectively.  The Company’s contract assets generally become unconditional and are reclassified to receivables in the quarter subsequent to each balance sheet date.

Contract liabilities

The Company records contract liabilities when it receives payment prior to fulfilling a performance obligation or has billings in excess of revenue recognized. Contract liabilities related to revenue are recorded in customer deposits in the Company’s Consolidated Balance Sheets. The Company had total contract liabilities of $8.1 million and $8.6 million as of December 31, 2020 and 2019, respectively.  Contract liabilities are normally recognized to net sales within three to six months subsequent to each balance sheet date.

F-18

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

3. Revenue (Continued)

Remaining Performance Obligations

Remaining performance obligations related to ASC 606 represent the aggregate transaction price allocated to performance obligations with an original contract term greater than one year which are fully or partially unsatisfied at the end of the period, and relate primarily to multi-family or commercial revenue.  For the years ended December 31, 2020 and 2019, multi-family and commercial projects accounted for approximately 4.5% and 2.8% of the Company’s combined net revenue, respectively.  As of December 31, 2020 and 2019, the aggregate amount of the transaction price allocated to remaining uncompleted contracts was $3.2 million and $4.5 million, respectively. The Company expects to satisfy remaining performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 12 months.  The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Revenue from contracts with customers is disaggregated differently for each reporting segment as this is how management evaluates the nature, amount, timing and uncertainty of revenue and cash flows as affected by economic factors.  RDS operating segment net revenue is disaggregated by geographic area within the United States.  ASG operating segment net revenue is disaggregated by product category.

The following table presents net revenue for the RDS operating segment disaggregated by geographical area for the years ended December 31, 2020 and 2019:

RDS
(in thousands)	2020		%			2019		%
East	$	77,889		24	%	$	93,274		25	%
Central		20,500		6	%		17,100		5	%
West		234,100		70	%		258,200		70	%
	$	332,489		100	%	$	368,574		100	%

The East consists of Virginia, Maryland, North Carolina and Georgia; the Central consists of Texas, and the West consists of California, Nevada and Arizona.

The following table presents net revenue for the ASG operating segment disaggregated by product category for the years ended December 31, 2020 and 2019:

ASG
(in thousands)	2020		%			2019		%
Quartz	$	134,797		60	%	$	138,500		57	%
Stone		67,225		30	%		75,511		31	%
Tile		13,936		6	%		20,211		8	%
Other		7,609		4	%		10,567		4	%
	$	223,567		100	%	$	244,789		100	%

4. Concentrations, Risks and Uncertainties

The Company maintains cash balances primarily at one commercial bank. The accounts are insured by the Federal Deposit Insurance Corporation up to $0.25 million. The amounts held at this financial institution generally exceed the federally insured limit. Management believes that this financial institution is financially sound and the risk of loss is minimal.

Credit is extended for some customers and is based on financial condition, and generally, collateral is not required. Credit losses are provided for in the consolidated financial statements and consistently have been within management’s expectations.

For the year ended December 31, 2018, the Company recognized revenue from one customer which accounted for 11.4% of total net revenue. For the years ended December 31, 2020 and 2019, there were no customers which accounted for 10.0% or more of the Company’s total net revenue, receptively. There were no customers which accounted for 10.0% or more of total accounts receivable as of December 31, 2020 and 2019.

F-19

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

5. Acquisitions

Intown Acquisition

On March 1, 2019, RDS acquired the assets of Intown Design, Inc., Intown Granite of Charlotte, Inc., and Granitec, LLC, (collectively, “Intown”), an installer of residential and light commercial countertops and cabinets, for total cash consideration of $10.7 million at closing and an additional $0.8 million of purchase price adjustments that were funded in June 2019.  The purchase agreement also provided for potential earn-out consideration to the former shareholders of Intown in connection with the achievement of certain 2019 and 2020 financial milestones. The final earn-out payment had no maximum limit, but if certain targets were not met, there would be no earn-out payment. The contingent earn-out consideration had an estimated purchase price fair value of $2.0 million as of March 31, 2019.  As of December 31, 2019, the fair value of the earn-out was reduced to zero.  This adjustment of $2.0 million was recorded within other (income) expense as of December 31, 2019.

The upfront cash paid for the Intown acquisition was financed with additional borrowings from the Company’s third-party financing agreement described in Note 10. The Intown acquisition was accounted for under the acquisition method of accounting, and the assets acquired and liabilities assumed, including identifiable intangible assets, were recorded based on their respective fair values as of the acquisition date. The total purchase price consisted of the following:

(in thousands)	Amount
Cash consideration	$	11,537
Fair value of earn-out		2,010
	$	13,547

RDS acquired Intown to further diversify RDS’ geographic mix and channel strength. The goodwill recorded reflects the strategic value of the acquisition beyond the net value of its assets acquired less liabilities assumed. Goodwill of $0.1 million is deductible for tax purposes.

The Company incurred approximately $0.4 million in direct acquisition costs, all of which were expensed as incurred, and are included in general and administrative expenses in the consolidated statements of operations. The Company has performed a valuation of the acquired assets and assumed liabilities of Intown. Using the total consideration for the acquisition, the Company has estimated the allocations to such assets and liabilities. The following table summarizes the allocation of the purchase price as of the transaction’s closing date.

(in thousands)	Amount
Accounts receivable	$	1,392
Inventory		1,155
Property and equipment		1,092
Goodwill		4,698
Other intangible assets		5,310
Total assets acquired	$	13,647
Total liabilities		100
Total consideration	$	13,547

An adjustment of approximately $0.8 million was recorded in the fourth quarter of 2019 to reduce the fair value of inventory and to increase the value of goodwill.  From the date of acquisition to December 31, 2019, Intown generated net revenue of $17.8 million and net income of $2.2 million, which are included in the Company’s Condensed consolidated statements of operations. For the year ended December 31, 2020, Intown generated net revenue of $20.2 million and net income of $0.2 million.

Pro Forma Results

The following unaudited pro forma information for the year ended December 31, 2019 and 2018 has been prepared to give effect to the acquisition of Intown as if the acquisition had occurred on January 1, 2018. The pro forma information takes into account the preliminary purchase price allocation. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the Intown acquisition occurred on such date, nor does it purport to predict the results of operations for future periods.

F-20

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

5. Acquisitions (Continued)

	Year Ended December 31,
	2019		2018
(in thousands)	(unaudited)
Pro Forma:
Total revenue, net	$	613,225	$	510,465
Net income (loss)	$	6,787	$	(1,736	)

Our pro forma assumptions are as follows:

• Revenues and costs of sales were based on actual results for the years ended December 31, 2019 and 2018.

• General and administrative expenses were based on actual results adjusted by $0.1 million and $0.7 million for the years ended December 31, 2019 and 2018, respectively, for the impact of the amortization expense of the intangible assets acquired with the acquisition.

• Actual interest expense was adjusted by $0.2 million and $1.1 million for the years ended December 31, 2019 and 2018, respectively, for the imputed interest on the acquired debt issued to fund the acquisition.

• Income taxes were adjusted to impute the Company’s corporate rate during the period on the pro forma income before taxes.

Bedrock Acquisition

On January 31, 2018, ASG acquired the assets of a slab and tile distributor, Elegant Home Design, LLC (“Bedrock”), for total consideration of $12.5 million with cash consideration of $11.5 million and $1.0 million accrued liability recorded as security for and source of payment of sellers’ obligations that occur within one year subsequent to the acquisition. The outstanding balance remaining of $1.0 million was paid in cash to the sellers in 2019. In addition to the consideration paid for Bedrock, the Company agreed to pay up to an additional $3.0 million to be allocated among three individuals, subject to Bedrock meeting certain financial conditions defined in the purchase agreement and such individuals maintaining continuous employment with the Company through January 31, 2019.  These financial conditions were not met and accordingly, no payout was made to these individuals.  The Company did not record any compensation expense associated with this provision in 2019 or 2018.

The Bedrock acquisition was financed with $6.25 million of borrowing from the Company’s term loan described in Note 10 and the remainder from ASG’s line of credit described in Note 9. The Bedrock acquisition was accounted for under the acquisition method of accounting, and the assets acquired and liabilities assumed, including identifiable intangible assets, were recorded based on their respective estimated fair values as of the acquisition date.

ASG acquired Bedrock to further expand its distribution presence in the Midwest, and to gain access to new geographies, supply chains, products, and distribution rights. The goodwill recorded reflects the strategic value of the acquisition beyond the net value of its assets acquired less liability assumed. The goodwill is deductible for tax purposes.

The Company incurred approximately $0.1 million in direct acquisition costs, all of which were expensed as incurred, and are included in general and administrative expenses in the consolidated statements of operations. The Company has performed a valuation of the acquired assets and assumed liabilities of Bedrock. The following table summarizes the allocation of the purchase price as of the transaction’s closing date:

F-21

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

5. Acquisitions (Continued)

(in thousands)	Amount
Accounts receivable	$	2,543
Inventory		13,425
Other current assets		163
Property and equipment		374
Goodwill		381
Other intangible assets		1,505
Other assets		60
Total assets acquired	$	18,451
Total liabilities		5,959
Total consideration	$	12,492

From the date of the Bedrock acquisition to December 31, 2018, Bedrock generated net revenue of $27.7 million and net income of $1.9 million, which are included in the Company’s consolidated statements of operations.

Pro Forma Results

The following unaudited pro forma information for the year ended December 31, 2018 has been prepared to give effect to the acquisition of Bedrock as if the acquisition had occurred on January 1, 2018. The pro forma information takes into account the purchase price allocation. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the Bedrock acquisition occurred on such date, nor does it purport to predict the results of operations for future periods.

	Year Ended December 31,
	2018
(in thousands)	(unaudited)
Pro Forma:
Total revenue, net	$	491,984
Net (loss)	$	(2,445	)

Pro forma assumptions are as follows:

• Revenues and costs of sales were based on actual results for the years ended December 31, 2018.

• Selling, general and administrative expenses were based on actual results adjusted by $0.02 million for the year ended December 31, 2018, for the impact of the amortization expense of the intangible assets acquired with the acquisition.

• Actual interest expense was adjusted by $0.05 million for the year ended December 31, 2018, for the imputed interest on the acquired debt issued to fund the acquisition.

• Income taxes were adjusted to impute the Company’s corporate effective rate during the period on the pro forma income before taxes.

NSI Acquisition

On March 19, 2018, ASG acquired the assets of NSI, LLC, a Maryland limited liability company (“NSI”), for approximately $0.3 million in cash. The NSI acquisition and related transaction costs were financed by ASG’s line of credit described in Note 9. The NSI acquisition was accounted for under the acquisition method of accounting, and the assets acquired and liabilities assumed, including identifiable intangible assets, were recorded based on their respective estimated fair values as of the acquisition date.

F-22

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

5. Acquisitions (Continued)

The Company performed a valuation of the acquired assets and assumed liabilities of NSI.  The goodwill is deductible for tax purposes. The following table summarizes the estimated allocation of the preliminary purchase price as of the transaction’s closing date:

(in thousands)	Amount
Accounts receivable	$	251
Inventory		689
Goodwill		390
Total assets acquired	$	1,330
Total liabilities		1,040
Total consideration	$	290

From the date of the NSI acquisition to December 31, 2018, net revenue and net income generated by NSI was not significant. Pro forma net revenue and net income for the year ended December 31, 2018, was not significant. There were no significant direct acquisition costs associated with the NSI acquisition.

Tuscany Acquisition

On August 22, 2018, ASG acquired the assets of The Tuscany Collection, LLC (“Tuscany”), a distributor of natural stone, quartz and tile in Las Vegas, Nevada, for approximately $4.2 million in cash. The Tuscany acquisition and related transaction costs were financed by the Company’s line of credit described in Note 9. The Tuscany acquisition was accounted for under the acquisition method of accounting and the assets acquired and liabilities assumed, including identifiable intangible assets, were recorded based on their respective estimated fair values as of the acquisition date.

The Company incurred approximately $0.1 million in direct acquisition costs, all of which were expensed as incurred, and are included in general and administrative expenses in the consolidated statements of operations. The Company has performed a valuation of the acquired assets and assumed liabilities of Tuscany. The following table summarizes the estimated allocation of the purchase price as of the transaction’s closing date:

(in thousands)	Amount
Accounts receivable	$	167
Inventory		2,258
Goodwill		1,081
Other intangible assets		2,685
Other current assets		161
Total assets acquired	$	6,352
Total liabilities		2,200
Total consideration	$	4,152

Total goodwill deductible for tax purposes is $1.1 million.  From the date of the Tuscany acquisition to December 31, 2018, net revenue and net income generated by Tuscany was not significant. Pro forma net revenue and net income for the period ended December 31, 2018, was not significant.

Summit Acquisition

On August 31, 2018, RDS acquired the assets of Summit Stoneworks, LLC (“Summit”), which is located in Austin, Texas, and is engaged in builder design services and the fabrication and installation of stone products for commercial and residential applications, for $16 million in cash. The agreement also provides for potential earn-out consideration of up to $3.5 million to the former shareholders of Summit for the achievement of certain 2018 and 2019 financial milestones. The contingent earn-out consideration had an estimated fair value of $1.9 million at the date of acquisition and at December 31, 2018, which was subsequently reduced to zero during 2019. During the year ended December 31, 2019, no payments were made on the earn-out as the financial milestones were not met. An adjustment of $1.9 million was recorded within other (income) expense as of December 31, 2019.  The Summit acquisition was financed from the Company’s term loan described in Note 10. The Summit acquisition was accounted for under the acquisition method of accounting and the assets acquired and liabilities assumed, including identifiable intangible assets, were recorded based on their respective fair values as of the acquisition date.

F-23

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

5. Acquisitions (Continued)

The total purchase price consisted of the following:

(in thousands)	Amount
Cash consideration	$	16,000
Fair value of earn-out		1,851
	$	17,851

The Company incurred approximately $0.3 million in direct acquisition costs, all of which were expensed as incurred, and are included in general and administrative expenses in the consolidated statements of operations.  The Company performed a valuation of the acquired assets and assumed liabilities of Summit.

The acquisition expands the scale of the RDS segment into Austin and San Antonio, Texas markets.  The goodwill recorded reflects the strategic value of the acquisition beyond the net value of its assets acquired less liability assumed.

The following table summarizes the allocation of the purchase price as of the transaction’s closing date:

(in thousands)	Amount
Accounts receivable	$	1,249
Inventory		1,059
Property and equipment		1,042
Goodwill		8,304
Other intangible assets		8,280
Other assets		14
Total assets acquired	$	19,948
Total liabilities		2,097
Total consideration	$	17,851

Total goodwill deductible for tax purposes is $6.4 million.  From the date of the Summit acquisition to December 31, 2018, Summit generated net revenue of $5.8 million and net income of $0.4 million, which are included in the Company’s consolidated statements of operations.

Pro Forma Results

The following unaudited pro forma information for the year ended December 31, 2018 has been prepared to give effect to the acquisition of Summit as if the acquisition had occurred on January 1, 2018. The pro forma information takes into account the purchase price allocation. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the Summit acquisition occurred on such date, nor does it purport to predict the results of operations for future periods.

	Year Ended December 31,
	2018
(in thousands)	(unaudited)
Pro Forma:
Total revenue, net	$	500,785
Net (loss)	$	(3,954	)

F-24

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

5. Acquisitions (Continued)

Pro forma assumptions are as follows:

• Revenues and costs of sales were based on actual results for the year ended December 31, 2018.

• Selling, general and administrative expenses were based on actual results adjusted by $0.8 million for the year ended December 31, 2018, for the impact of the amortization expense of the intangible assets acquired with the acquisition.

• Actual interest expense was adjusted by $0.6 million for the year ended December 31, 2018, for the imputed interest on the acquired debt issued to fund the acquisition.

• Income taxes were adjusted to impute the Company’s corporate effective rate during the period on the pro forma income before taxes.

TAC Acquisition

On December 31, 2018, RDS purchased 100% of the issued and outstanding equity interests of T.A.C. Ceramic Tile Co. (“TAC”), which is located in Manassas, Virginia, and specializes in design center selections and installation of all types of interior flooring surfaces, including tile, hardwood and carpet, for cash consideration of $41.2 million.

The agreement also provided for potential earn-out consideration to the former shareholders of TAC for the achievement of certain 2019 financial milestones. The contingent earn-out consideration had an estimated fair value of $2.3 million at the date of acquisition which was reduced to zero as of December 31, 2019. During the year ended December 31, 2019, no payments were made on the earn-out as the financial milestones were not met.  This adjustment of $2.3 million was recorded within other (income) expense for the year ended December 31, 2019.  The TAC acquisition was financed from the Company’s term loan described in Note 10. The TAC acquisition was accounted for under the acquisition method of accounting and the assets acquired and liabilities assumed, including identifiable intangible assets, were recorded based on their respective fair values as of the acquisition date.

The total purchase price consisted of the following:

(in thousands)	Amount
Cash consideration	$	41,210
Fair value of earn-out		2,265
	$	43,475

The Company incurred approximately $0.7 million in direct acquisition costs, all of which were expensed as incurred, and are included in general and administrative expenses in the consolidated statements of operations. Additionally, $0.4 million of deferred issuance costs incurred were capitalized. The Company has performed a valuation of the acquired assets and assumed liabilities of TAC. Using the total consideration for the TAC acquisition, the Company has estimated the allocations to such assets and liabilities.

The acquisition expands the scale of the RDS and diversifies RDS across geography, channel and product line, including the East region.  The acquisition will also assist in introducing a range of additional products to customers, including countertops and cabinets.  These factors are the basis for the excess purchase price paid over the value of the assets acquired and liabilities assumed, resulting in goodwill.

F-25

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

5. Acquisitions (Continued)

The following table summarizes the estimated allocation of the purchase price as of the transaction’s closing date:

(in thousands)	Amount
Cash	$	1,217
Accounts receivable		6,966
Inventory		4,093
Other current assets		87
Property and equipment		943
Goodwill		18,292
Other intangible assets		19,865
Other assets		4,873
Total assets acquired	$	56,336
Current liabilities		1,895
Deferred income taxes		6,099
Other long-term liabilities		4,867
Total liabilities	$	12,861
Total consideration	$	43,475

A purchase price adjustment of approximately $0.5 million was recorded in the fourth quarter of 2019 to reduce the fair value of inventory and fixed assets and to increase the value of goodwill.  Included in other long-term liabilities at the date of acquisition is an estimated uncertain tax position of $4.4 million, as well as $0.5 million of combined interest and penalties, which is offset by a corresponding indemnification receivable recorded in other assets, as all tax liabilities pre-acquisition are indemnified by the former owners. As TAC was acquired on December 31, 2018, no net revenue or net income generated by TAC was included in the Company’s 2018 consolidated statements of operations.

Pro Forma Results

The following unaudited pro forma information for the year ended December 31, 2018 has been prepared to give effect to the acquisition of TAC as if the acquisition had occurred on January 1, 2018. The pro forma information takes into account the preliminary purchase price allocation. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the TAC acquisition occurred on such date, nor does it purport to predict the results of operations for future periods.

	Year Ended December 31,
	2018
(in thousands)	(unaudited)
Pro Forma:
Total revenue, net	$	562,219
Net (loss)	$	(2,793	)

Pro forma assumptions are as follows:

• Revenues and costs of sales were based on actual results for the year ended December 31, 2018

• Selling, general and administrative expenses were based on actual results adjusted by $1.8 million for the year ended December 31, 2018, for the impact of the amortization expense of the intangible assets acquired with the acquisition. Selling, general and administrative expenses were also adjusted by $4.4 million for the year ended December 31, 2018, for the impact of significant nonrecurring charges.

• Actual interest expense was adjusted by $0.6 million for the year ended December 31, 2018, for the imputed interest on the acquired debt issued to fund the acquisition.

• Income taxes were adjusted to impute the Company’s corporate effective rate during the period on the pro forma income before taxes.

F-26

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

6. Inventories

Inventories are valued at the lower of cost (using specific identification and first-in first-out methods) or net realizable value. The significant components of inventory consisted of the following at:

(in thousands)	December 31, 2020		December 31, 2019
Raw materials	$	97,988	$	102,438
Installations in process		994		2,303
	$	98,982	$	104,741

7. Property and equipment, net

Property and equipment consisted of the following at:

(in thousands)	December 31, 2020			December 31, 2019
Vehicles	$	10,948		$	10,759
Machinery and equipment		9,588			9,672
Leasehold improvements		9,040			8,962
Furniture and fixtures		8,031			6,906
Computer equipment and internal-use software		11,879			10,167
Other		1,957			1,048
	$	51,443		$	47,514
Less: accumulated depreciation and amortization		(30,387	)		(21,020	)
Property and equipment, net	$	21,056		$	26,494

Depreciation and amortization expense of property and equipment totaled $10.1 million, $8.4 million and $6.6 million for the years ended December 31, 2020, 2019, and 2018, respectively. For the year ended December 31, 2020, $4.2 million and $5.9 million of depreciation and amortization expense was included in cost of goods sold and general and administrative expense, respectively.  For the year ended December 31, 2019, $3.7 million and $4.7 million of depreciation and amortization expense was included in cost of goods sold and general and administrative expense, respectively. For the year ended December 31, 2018, $3.7 million and $2.9 million of depreciation and amortization expense was included in cost of goods sold and general and administrative expense, respectively.

8. Goodwill and Intangible Assets

Goodwill

The change in carrying amount of goodwill by reporting unit was as follows:

(in thousands)	ASG		RDS		Total Goodwill
December 31, 2018	$	45,564	$	49,029	$	94,593
Intown Acquisition		—		4,698		4,698
TAC measurement period adjustment		—		498		498
December 31, 2019	$	45,564	$	54,225	$	99,789
2020 activity		—		—		—
December 31, 2020	$	45,564	$	54,225	$	99,789

F-27

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

8. Goodwill and Intangible Assets (Continued)

Intangibles Assets

The following table provides the gross carrying amount, accumulated amortization and net book value for each class of intangible assets by reporting unit as of December 31, 2020:

(in thousands)	Gross Carrying Amount	ASG		RDS		Total Gross Carrying Amount
Customer relationships		$	60,180	$	60,060	$	120,240
Trade names			7,740		18,090		25,830
Non-Compete agreements			50		350		400
		$	67,970	$	78,500	$	146,470

(in thousands)	Accumulated Amortization	ASG			RDS			Total Accumulated Amortization
Customer relationships		$	(25,548	)	$	(31,992	)	$	(57,540	)
Trade names			(3,139	)		(7,522	)		(10,661	)
Non-Compete agreements			(33	)		(222	)		(255	)
		$	(28,720	)	$	(39,736	)	$	(68,456	)

(in thousands)	Net Book Value	ASG		RDS		Total Net Book Value
Customer relationships		$	34,632	$	28,068	$	62,700
Trade names			4,601		10,568		15,169
Non-Compete agreements			17		128		145
		$	39,250	$	38,764	$	78,014

The following table provides the gross carrying amount, accumulated amortization and net book value for each class of intangible assets by reporting unit as of December 31, 2019:

(in thousands)	Gross Carrying Amount	ASG		RDS		Total Gross Carrying Amount
Customer relationships		$	60,180	$	60,060	$	120,240
Trade names			7,740		18,090		25,830
Non-Compete agreements			50		350		400
		$	67,970	$	78,500	$	146,470

(in thousands)	Accumulated Amortization	ASG			RDS			Total Accumulated Amortization
Customer relationships		$	(19,410	)	$	(28,841	)	$	(48,251	)
Trade names			(2,300	)		(5,013	)		(7,313	)
Non-Compete agreements			(21	)		(137	)		(158	)
		$	(21,731	)	$	(33,991	)	$	(55,722	)

(in thousands)	Net Book Value	ASG		RDS		Total Net Book Value
Customer relationships		$	40,770	$	31,219	$	71,989
Trade names			5,440		13,077		18,517
Non-Compete agreements			29		213		242
		$	46,239	$	44,509	$	90,748

F-28

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

8. Goodwill and Intangible Assets (Continued)

Amortization expense on intangible assets totaled $12.7 million, $15.8 million, and $13.9 million during the years ended December 31, 2020, 2019, and 2018, respectively.

The estimated annual amortization expense for the next five years and thereafter is as follows:

Year Ending December 31:
2021	$	12,603
2022		12,401
2023		12,038
2024		10,313
2025		9,580
Thereafter		21,079
	$	78,014

9. Lines of Credit

SIC Credit Facility

In June 2018, the Company and certain of its subsidiaries entered into an amended and restated loan, security and guaranty agreement, dated as of June 28, 2018, which was amended on December 11, 2018, July 23, 2019 and August 19, 2019 (“SIC Credit Facility”), with a commercial bank, which amended and restated each of the RDS credit agreement and the ASG credit agreement in their entirety.  The SIC Credit Facility will be used by the Company, including both RDS and ASG, for operational purposes.  Pursuant to the SIC Credit Facility, the Company has a borrowing-base-governed revolving credit facility that provides for borrowings up to an aggregate of $90 million, which was increased to $100 million through amendment entered into on August 19, 2019.

Under the terms of the SIC Credit Facility, the Company has the ability to request the issuance of letters of credit up to a maximum aggregate stated amount of $15 million. The ability to borrow revolving loans under the SIC Credit Facility is reduced on a dollar-for-dollar basis by the aggregate stated amount of all outstanding letters of credit. The indebtedness outstanding under the SIC Credit Facility is secured by substantially all of the assets of the Company and its subsidiaries.

The revolving loans under the SIC Credit Facility bear interest at a floating rate equal to an index rate (which the Company can elect between an index based on a LIBOR based rate or an index based on a Prime, Federal Funds or LIBOR based rate) plus an applicable margin. The applicable margin is determined quarterly based on the borrowers’ average daily availability (calculated by reference to their accounts receivable and inventory that comprise their borrowing base) during the immediately preceding fiscal quarter. Upon the occurrence of certain events of default under the SIC Credit Facility, the interest rate applicable to the obligations thereunder may be increased by two hundred basis points (2.00%).  The weighted average interest rate assessed during 2020 on the SIC Credit Facility was 2.7%. All revolving loans under the SIC Credit Facility are due and payable in full on June 28, 2023, subject to earlier acceleration upon certain conditions.  Letter of credit obligations under the SIC Credit Facility are due and payable on the date set forth in the respective loan documents or upon demand by the lender.

Under the SIC Credit Facility, the Company and its subsidiaries are required to comply with certain customary restrictive covenants that, among other things and with certain exceptions, limit the ability of the Company and its subsidiaries, as applicable, to (i) incur additional indebtedness and liens in connection therewith, (ii) pay dividends and make certain other restricted payments, (iii) effect mergers or consolidations, (iv) enter into transactions with affiliates, (v) sell or dispose of property or assets, and (vi) engage in unrelated lines of business.  

As of December 31, 2020, $9.9 million was outstanding under the SIC Credit Facility.  The Company also has $0.6 million in letters of credit outstanding at December 31, 2020. The SIC Credit Facility is subject to certain financial covenants. At December 31, 2020, the Company was in compliance with the financial covenants.

F-29

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

9. Lines of Credit (Continued)

The Company incurred debt issuance costs of $0.5 million in connection with the SIC Credit Facility. These costs will be amortized to non-cash interest expense over the term of the agreement on a straight-line basis which approximates the effective interest method. Non-cash interest expense related to these costs was $0.1 million for each of the years ended December 31, 2020 and 2019, and $0.05 million for the year ended December 31, 2018.  At December 31, 2020 and 2019, SIC had $0.2 million and $0.3 million, respectively, of unamortized debt issuance costs related to the SIC Credit Facility. These costs are shown as a direct deduction of the line of credit liability in the accompanying Company’s consolidated balance sheets.

10. Long-Term Debt

Long-term debt consisted of the following at:

(in thousands)	December 31, 2020			December 31, 2019
RDS equipment and vehicle notes	$	141		$	489
ASG term loans		152,773			154,177
		152,914			154,666
Unamortized debt issuance costs		(2,765	)		(1,618	)
Total long-term debt		150,149			153,048
Current portion of long-term debt, net of financing fees	$	15,623		$	11,749
Long-term debt, net of current portion and financing fees	$	134,526		$	141,299

RDS Equipment and Vehicle Notes

RDS has financed the acquisition of certain vehicles, property, and equipment with notes payable that mature at various times through May 2023.  As of December 31, 2020 and 2019, the outstanding balance on equipment and vehicle notes payable, totaled $0.1 million and $0.5 million, respectively. These notes are secured by the vehicles and equipment that were financed and require monthly interest and principal payments. The aggregate of the monthly payments was approximately $0.01 million and $0.03 million at December 31, 2020 and 2019, respectively. The interest rates on the notes ranged from 0.00% to 8.85% per annum for 2020 and 2019, and the weighted-average interest rate on the outstanding balances at December 31, 2020 and 2019, was 5.30% and 5.12% respectively.

ASG Term Loans

In December 2015, ASG entered into a loan agreement with a financial institution offering a term loan in the aggregate amount of $1.7 million to finance the purchase of equipment. Amounts due under the term loan bear interest at 3.75% per annum with interest payable monthly. Principal payments are due in monthly installments beginning April 8, 2016 through maturity (March 8, 2021). ASG paid off the remaining balance of the loan during 2020. At December 31, 2019, ASG had $0.4 million outstanding on this loan.

On February 28, 2017, AG&M and Pental, as the borrowers, entered into a financing agreement, as amended, with the lenders party thereto and Cerberus Business Finance, LLC, as the agent for the lenders (“Term Loan Facility”), which initially provided for a $105.0 million term loan facility.  The Term Loan Facility was amended in June 2018 to define the borrowers as Select Interior Concepts, Inc. and its subsidiaries, was amended in August 2018 to adjust the borrowing capacity to $101.4 million, and was amended in December 2018 to increase the borrowing capacity to $174.2 million.  The Company borrowed an additional $11.5 million under the Term Loan Facility to fund the acquisition of Intown on March 1, 2019.  In July 2019, the agreement was amended to revise certain covenants.  On August 19, 2019, the Term Loan Facility was further amended, resulting in an adjusted rate of interest payable on borrowings under the Term Loan Facility.  Additionally, the August 19, 2019 amendment imposed a prepayment premium with respect to an optional prepayment of the term loans under the Financing Agreement occurring within fifteen months of August 19, 2019 (other than prepayments in connection with a change of control) in an amount equal to 1.50% of any such principal amount prepaid.  

F-30

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

10. Long-Term Debt (Continued)

Subsequent to the August 2019 amendment, borrowings under the Term Loan Facility bear interest per year equal to either: (i) the base rate plus 4.75% for a base rate loan, or (ii) the LIBOR rate plus 6.75% for a LIBOR loan in the event the Leverage Ratio is greater than 2.40 to 1:00.  In the event the leverage ratio is less than 2.40 to 1.00, the rates decrease to either (i) the base rate plus 4.25% for a base rate loan, or (ii) the LIBOR rate plus 6.25% for a LIBOR loan.  The base rate is the greater of the publicly announced interest rate by the reference bank as its reference rate, the base commercial lending rate or prime rate, and 3.5% per annum. The interest rate assessed as of December 31, 2020 was 7.5%.  Interest is payable monthly with principal payments due in quarterly installments beginning July 1, 2017 through maturity (February 28, 2023).  

Following the delivery of audited annual financial statements for each fiscal year, the Term Loan Facility requires the Company to prepay amounts outstanding under the Term Loan Facility with (i) 75% of the excess cash flow of the Company minus the aggregate principal amount of all optional prepayments made in such preceding fiscal year, if the leverage ratio is greater than 3.25:1.00, or (ii) 50% of the excess cash flow of the Company minus the aggregate principal amount of all optional prepayments made in such preceding fiscal year, if the leverage ratio is less than or equal to 3.25:1.00.

In addition, the Term Loan Facility also requires the Company to prepay amounts outstanding, subject to certain exceptions (and, with respect to clauses (i) and (ii) below, certain limited reinvestment rights), with: (i) 100% of the net proceeds of any asset disposition in excess of $0.75 million in any fiscal year, (ii) 100% of any insurance or condemnation awards that are greater than $2.5 million, (iii) 100% of the net proceeds of any equity issuances, (iv) 100% of the net proceeds of any issuance of indebtedness (other than certain permitted indebtedness), and (v) 100% of any net cash proceeds received outside the ordinary course of business.  The estimated prepayment amount due under the terms of the agreement in 2021 is $15.7 million, which is classified within the current portion of long-term debt on the consolidated balance sheet as of December 31, 2020.

All term loans under the Term Loan Facility are due and payable in full on February 28, 2023, subject to earlier acceleration upon certain conditions.

Under the Term Loan Facility, the Company is required to comply with certain customary restrictive covenants that, among other things and with certain exceptions, limit the ability of the Company to (i) incur additional indebtedness and liens, (ii) pay dividends and make certain other distributions, (iii) sell or dispose of property or assets, (iv) make loans, (v) make payment of certain debt, (vi) make fundamental changes, (vii) enter into transactions with affiliates, and (viii) engage in any new businesses. The Term Loan Facility also contains certain customary representations and warranties, affirmative covenants, and reporting obligations.

On April 8, 2020, the Term Loan Facility was further amended to provide the Company with relief from certain covenants throughout the remainder of 2020 in light of the economic uncertainty resulting from the COVID-19 pandemic. The amendment, among other things, (i) waived the requirement that the Company prepay the Term Loans with Excess Cash Flow (as defined in the Term Loan Facility) due for payment during the year ending December 31, 2020, (ii) amended the Fixed Charge Coverage Ratio (as defined in the Term Loan Facility) covenant applicable to the fiscal year ending December 31, 2020 to be tested on a monthly basis and requires the Company and its subsidiaries to maintain a reduced Fixed Charge Coverage Ratio (as defined in the Term Loan Facility) of not less than 1.00:1.00 for each month during such fiscal year, and (iii) does not require the Company to test the Total Leverage (as defined in the Term Loan Facility) covenant effective as of the execution date of April 8, 2020 through and including December 31, 2020 for any fiscal quarter end during such period, for so long as the Company and its subsidiaries maintain Financial Covenant Availability (as defined in the Term Loan Facility) of not less than $35 million at all times during such fiscal quarter. This covenant relief expires at the end of 2020 and there is no guarantee that we will be able to negotiate additional covenant relief or maintain compliance with such covenants once the covenant relief expires.  If we are unable to extend this covenant relief or maintain compliance with such covenants we would be in default under this facility, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their respective interests against existing collateral. 

On March 10, 2021, the Term Loan Facility was amended to adjust the required leverage ratio (as defined in the Term Loan Facility).  The required leverage ratio as of March 31, 2021 and each fiscal quarter ending thereafter was increased from 3.75:1.00 to 4.00:1.00.

F-31

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

10. Long-Term Debt (Continued)

As of December 31, 2020 and 2019, the Company had $152.8 million and $153.8 million outstanding, respectively, under the Term Loan Facility.

Substantially all of the Company’s assets are collateral for these loans except assets collateralized by the SIC Credit Facility which hold a senior position.  These assets include all of the Company’s accounts receivable and inventory.  The Company is also restricted from paying dividends to its stockholders.  Additionally, substantially all of the net assets of the Company’s subsidiaries are restricted by the Term Loan Facility from providing loans, advances and dividends to the SIC parent company. The Company is required to meet certain financial covenants pursuant to these term loans. The Company was in compliance with all financial covenants as of December 31, 2020.

ASG incurred debt issuance costs in connection with its term loans. These costs are being amortized to non-cash interest expense over the terms of the related notes on a straight-line basis, which approximates the effective interest rate method. Non-cash interest expense related to these costs was $1.1 million for the year ended December 31, 2020, and $0.5 million for each of the years ended December 31, 2019 and 2018. At December 31, 2020 and 2019, the unamortized debt issuance costs related to the term loans totaled $2.8 million and $1.6 million, respectively, and are shown as a direct deduction from the liability on the accompanying consolidated balance sheets.

Future Maturities

At December 31, 2020, the future maturities of the Company’s long-term debt for each of the next five years and thereafter are as follow:

2021	$	16,902
2022		1,040
2023		134,972
	$	152,914
Unamortized balance remaining of financing fees		(2,765	)
Total long-term debt net of financing fees		150,149
Current portion of long-term debt net of financing fees		(15,623	)
Long term debt net of financing fees	$	134,526

11. Commitments and Contingencies

Leases

The Company leases certain vehicles and equipment under leases classified as capital leases. The leased vehicles are included as property, plant and equipment and amortized to accumulated amortization on a straight line basis over the life of the lease, typically four years. The total acquisition cost included in PP&E related to the leased vehicles is $12.3 million and $11.2 million at December 31, 2020 and 2019, respectively. Total accumulated amortization related to the leased vehicles is $3.7 million and $1.6 million at December 31, 2020 and 2019, respectively, with amortization expense totaling $2.1 million, $1.1 million and $0.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. Included in the capital lease balances is approximately $3.1 million of assets that were sold and subsequently leased back during 2020 and 2019 related to certain ERP software and equipment.  The transaction did not qualify for sale-leaseback accounting and no sale was recognized.  Proceeds from the transaction were reported as a financing activity in the statement of cash flows for the years ended December 31, 2020 and 2019.

RDS leases its corporate, administrative, fabrication and warehousing facilities under long-term non-cancelable operating lease agreements expiring at various dates through January 2025. The monthly rents are subject to annual increases and generally require the payment of utilities, real estate taxes, insurance and repairs. Three of RDS’ facility leases are with a company owned by a Company stockholder and five other facilities are leased from current employees, contractors or former owners of acquired businesses.

F-32

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

11. Commitments and Contingencies (Continued)

RDS also has operating leases for certain office equipment and vehicles under long-term lease agreements expiring at various dates through September 2022.

ASG leases its facilities and equipment under long-term non-cancellable operating lease agreements expiring at various dates through December 2029. The facility leases contain predetermined fixed escalations of the minimum rentals. One of ASG’s facility leases is with a related party.

SIC leases its corporate facilities under a long-term non-cancelable operating lease through October 2022.

The Company recognizes rent expense on a straight-line basis and records the difference between the recognized rent expense and amounts payable under the lease as deferred rent. Aggregate deferred rent at December 31, 2020 and 2019 was $1.9 million and $2.2 million, respectively. Aggregate rent expense for the years ended December 31, 2020, 2019, and 2018 totaled $19.6 million, $19.1 million and $14.3 million, respectively.

Aggregate future minimum payments under capital leases and noncancelable operating leases at December 31, 2020 are as follows:

(in thousands)	Capital Lease Obligations			Related Party Operating Lease Obligations		Third Party Operating Lease Obligations		Net Lease Commitments
2021	$	3,042		$	2,051	$	13,393	$	18,486
2022		2,611			1,702		11,587		15,900
2023		1,374			986		7,957		10,317
2024		962			—		3,905		4,867
2025		300			—		3,033		3,333
Thereafter		500			—		3,098		3,598
Total minimum lease payments	$	8,789		$	4,739	$	42,973	$	56,501
Less: amount representing interest		(854	)
Present value of net minimum lease payments		7,935
Less: current maturities of capital lease obligations		(2,700	)
Long-term capital lease obligations	$	5,235

Litigation

The Company experiences routine litigation in the normal course of its business. Production residential builders are primarily sued for alleged construction defects. As a practice, residential builders name all subcontractors in the lawsuit whether or not the subcontractor has any connection, direct or indirect, with the alleged defect. The Company, as a subcontractor, is involved in these lawsuits as a result. The Company generally has no or minimal liability in the majority of these lawsuits. The Company’s insurance policies’ self-insured retention (“SIR”) or/deductible typically ranges from $0.01 million to $0.02 million. In the event that the Company has exposure beyond its SIR/deductible, the Company’s general liability policy is triggered and the general liability insurance and the insurance carrier defends the Company in the lawsuit and is responsible for additional exposure up to policy limits. The Company has consistently maintained general liability insurance with $2.0 million aggregate and $1.0 million per occurrence limits. Management does not believe that any pending or threatened litigation will have a material adverse effect on the Company’s combined business, financial condition, results of operations, and/or cash flows.

F-33

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

11. Commitments and Contingencies (Continued)

Indemnification

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications, including to lessors of office and warehouse space for certain actions arising during the Company’s tenancy and to the Company’s customers. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations.

Exclusive Distributor Rights

A main quartz supplier of ASG’s Pental business has granted ASG exclusive distribution rights in 23 states in the United States. To maintain these rights, ASG must meet certain minimum purchase requirements. ASG is required to purchase 645 containers per quarter during 2021, increasing up to 1,332 containers per quarter during 2025.

Using an estimated price per container based on the 2020 average price per container the future minimum purchases to maintain the exclusive rights as of December 31, 2020 are as follows:

(in thousands)	Amount
2021	$	84,500
2022		102,186
2023		121,837
2024		145,419
2025		174,502
	$	628,444

If ASG does not purchase at least eighty percent (80%) of the minimum purchase volumes for two consecutive quarters, or at least ninety percent (90%) of the minimum purchase volumes in any calendar year, the supplier has the right to terminate ASG’s exclusive distribution rights. There are no financial penalties to ASG if such commitments are not met; however, the supplier reserves the right to terminate the exclusive distribution rights.  For the year ended December 31, 2020, ASG did not meet the eighty percent (80%) minimum purchase volume threshold in light of the current economic environment.  ASG and the supplier have discussed the impact of the current economic environment on the minimum purchase volumes and have reached an informal understanding around reduced purchase volumes.  The supplier must give 60 days notice to terminate this exclusivity arrangement, which has not been received by the Company. While ASG maintains good relationships with this supplier and believes that it would be unlikely that such supplier would terminate the exclusive relationship, there is no guarantee that such supplier will not terminate the exclusive relationship in the future due to ASG’s failure to purchase the minimum volumes.  In the event the supplier were to terminate ASG’s distribution rights it could have a material impact on ASG’s supply chain and ASG may be unable to find an alternative source for quartz in a timely manner or on favorable terms.

Purchase Commitments

The Company also has contracted to minimum purchase commitments with certain suppliers.  RDS has committed to purchase $2.0 million in products annually for each of the calendar years 2020 and 2021 with a certain supplier. The minimum purchase commitment for the year 2020 was achieved. Financial penalties for not achieving the minimum purchase commitment amount are equal to 15% of the shortfall amount.

F-34

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

12. Stock Compensation

On November 22, 2017, the Company adopted the Select Interior Concepts, Inc. 2017 Incentive Compensation Plan (the “2017 Plan”). Upon the adoption of the 2017 Plan, the maximum aggregate number of shares issuable thereunder was 2,561,463 shares. As of December 31, 2020, there were 1,447,419 shares of the Company’s common stock subject to outstanding awards under the 2017 Plan and 318,914 shares of the Company’s common stock were reserved and available for future awards under the 2017 Plan.  As of December 31, 2020, there were 1,350,000 shares of the Company’s common stock subject to outstanding inducement awards, further discussed below.

On March 26, 2019, the board of directors adopted the Select Interior Concepts, Inc. 2019 Long-Term Incentive Plan (the “2019 Incentive Plan”), which was approved at the 2019 Annual Meeting of Stockholders on May 15, 2019.  The 2019 Incentive Plan serves as the successor to the 2017 Plan; however, shares continue to be available for award grants under the 2017 plan following the effectiveness of the 2019 plan.  The maximum aggregate number of shares issuable under the 2019 plan is 1,700,000.  No awards had been issued under the 2019 Incentive Plan as of December 31, 2020. 

The 2017 Plan and the 2019 Incentive Plan (collectively, “the Plans”), permit the grant of incentive stock options to employees and the grant of nonstatutory stock options, performance awards, restricted stock, restricted stock units, stock appreciation rights, and other stock-based awards to the Company’s employees, directors and consultants at the sole discretion of the Company’s board of directors.

Stock Options

The Company has not granted any stock options under the Plans.

Restricted Stock

Restricted stock awards and restricted stock unit awards are grants of shares of the Company’s common stock or rights to receive shares of the Company’s common stock that are subject to various restrictions, including restrictions on transferability, vesting and forfeiture provisions. Recipients of restricted stock awards generally will have voting and dividend rights with respect to such shares prior to vesting, subject to such awards’ forfeiture provisions, unless the board of directors provides otherwise. Recipients of restricted stock unit awards generally will not have voting and dividend rights unless and until shares of common stock are issued with respect to such awards. Shares of restricted stock that do not vest for any reason will be forfeited by the recipient and will revert to the Company.

For the year ended December 31, 2020, 1,347,877 restricted stock units were granted under the 2017 Plan to certain directors, executives, and key employees. Certain of these restricted stock units included a market condition under ASC 718 “Compensation – Stock Compensation.”

During the three months ended March 31, 2019, restricted stock units were granted to certain executives and include both a service and a performance condition. The performance condition is achievement of a 2021 earnings target and the level of achievement of the earnings target determines the number of shares that will be issued.  In the first quarter of 2020, the performance condition for these shares that was deemed probable of vesting as of December 31, 2019, was determined to be no longer probable of vesting.  This resulted in a reversal of stock compensation expense of approximately $1.6 million recorded during the three months ended March 31, 2020.  In the third quarter of 2020, the majority of these performance awards were cancelled and forfeited.  

In connection with the appointment of L. W. Varner, Jr. as the new Chief Executive Officer of the Company in June 2020, Mr. Varner received a one-time grant of 500,000 time-based restricted stock units and

F-35

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

500,000 performance-based restricted stock units.  Additionally, the Company appointed a new President of ASG and a new Chief Human Resources Officer in the third quarter of 2020 who each received one-time grants totaling a combined 175,000 time-based restricted stock units and 175,000 performance-based restricted stock units. All of these restricted stock units were granted to these new executives as inducement awards in accordance with NASDAQ Listing Rule 5635(c)(4) and were not granted under the Plans.  The time-based restricted stock units vest in equal annual installments over four years, subject to continued employment with the Company.  The performance-based restricted stock units contain market conditions based on the closing price of the Company’s common stock exceeding specific price hurdles for 20 consecutive trading days, and subject to continued employment with the Company.

12. Stock Compensation (Continued)

The Company estimated the fair value of all shares granted on the date the shares were granted and recognizes the resulting fair value over the requisite service period. The grant date fair value for the restricted stock units issued during the year ended December 31, 2020 was determined using the closing share price on the date of grant.  For shares issued with a market condition, the Monte Carlo simulation model was used to determine the fair value of the award.  Inputs into the Monte Carlo simulation model for applicable awards during the year ended December 31, 2020 included a dividend yield of 0%, an expected volatility rate ranging from 48.06% to 54.69%, and a risk-free rate ranging from 0.18% to 0.37%.

A summary of the restricted stock activity for the Plans for the years ended December 31, 2020, 2019 and 2018 is as follows:

(in thousands)	Nonvested Shares Outstanding			Weighted Average Grant Date Fair Value
Nonvested shares at December 31, 2017		356,368		$	12.00
Granted		779,016		$	11.83
Forfeited		(281,762	)	$	12.00
Vested		(27,646	)	$	12.00
Nonvested shares at December 31, 2018		825,976		$	11.84
Granted		1,453,205		$	12.99
Forfeited		(197,185	)	$	12.00
Vested		(256,873	)	$	11.79
Nonvested shares at December 31, 2019		1,825,123		$	12.75
Granted		1,347,877		$	4.25
Forfeited		(1,255,365	)	$	11.93
Vested		(470,216	)	$	10.64
Nonvested shares at December 31, 2020		1,447,419		$	5.33

As of December 31, 2020, total remaining equity-based compensation expense for unvested restricted stock is $10.3 million, which is expected to be recognized over a weighted average remaining period of 2.9 years.  Equity-based compensation expense recognized for restricted stock for the years ended December 31, 2020, 2019 and 2018 was $2.8 million, $4.7 million and $2.5 million, respectively, and is recorded within SG&A expenses.  The recognized tax benefit for stock compensation expense for the years ended December 31, 2020, 2019, and 2018 was $0.5 million, $0.4 million and $1.0 million, respectively.

Management awarded 2019 annual compensation bonuses in equity shares instead of cash.  These bonuses were settled in the first quarter of 2020 at fixed amounts using the stock price 2 days prior to the date of settlement.  The number of shares awarded to executives and key employees upon settlement in 2020 was 117,345 shares.  The compensation expense associated with these awards was $0.9 million for the year ended December 31, 2019.  The related liability associated with these bonuses was recorded in accrued expenses and other current liabilities as of December 31, 2019.

Phantom Stock

Phantom stock awards are grants of phantom stock with respect to shares of the Company’s common stock that are settled in cash and subject to various restrictions, including restrictions on transferability, vesting and forfeiture provisions. Shares of phantom stock that do not vest for any reason will be forfeited by the recipient and will revert to the Company. All shares of phantom stock have vested and there are no outstanding shares of phantom stock. As a result of the cash-settlement feature of these awards, the Company considers these awards to be liability awards, which are measured at fair value at each reporting date and the pro-rata vested portion of the award is recognized as a liability.  

The Company recorded phantom stock-based compensation expense of $0.01 million related to these shares for each of the years ended December 31, 2020, 2019 and 2018, respectively.

F-36

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

13. Provision for Income Taxes

At December 31, 2020, 2019 and 2018, the components of the provision for income taxes reflected on the consolidated statements of operations are as follows:

(in thousands)	2020			2019			2018
Current:
Federal	$	(4,302	)	$	1,728		$	3,604
State		(345	)		1,287			1,571
Total current		(4,647	)		3,015			5,175
Deferred:
Federal		671			618			(2,871	)
State		1,002			(2,112	)		(1,315	)
Total deferred		1,673			(1,494	)		(4,186	)
Provision (benefit) for income taxes	$	(2,974	)	$	1,521		$	989

The Company does not have any foreign operations and derives all of its pre-tax income from domestic sources, and all income tax expense is related to domestic tax jurisdictions.

The following is a reconciliation of expected income tax expense (computed by applying the federal statutory income tax rate to income before taxes) to actual income tax expense.

(in thousands)	2020			2019			2018
Income taxes at federal statutory rate	$	(2,694	)	$	1,786		$	(280	)
State income taxes, net of federal benefit		387			(651	)		148
Transaction costs		—			—			968
TAC earn-out		—			(476	)		—
Equity-based compensation		—			134			—
Permanent items		852			298			294
State rate changes		364			(293	)		(27	)
162(m) limitation		—			345			—
Other, net		90			378			(114	)
Uncertain tax position		(1,123	)		—			—
Rate differential on carryback		(850	)		—			-
Provision (benefit) for income taxes	$	(2,974	)	$	1,521		$	989

At December 31, 2020, the Company’s effective income tax rate is different from what would be expected if the federal rate were applied to net income before taxes primarily due to permanent adjustments, uncertain tax positions related to the TAC acquisition, state income taxes and the Federal NOL carryback allowed by the CARES Act. At December 31, 2019, the Company's effective income tax rate is different from what would be expected if the federal statutory rate were applied to net income before taxes primarily due to permanent adjustments, equity-based compensation, uncertain tax positions related to TAC provision, and state income taxes. At December 31, 2018, the Company’s effective income tax rate is different from what would be expected if the federal statutory rate were applied to net income before taxes primarily due to permanent adjustments, capitalized transaction costs, and state income taxes.

F-37

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

13. Provision for Income Taxes (Continued)

The components of deferred tax assets and liabilities are as follows as of December 31, 2020 and 2019:

(in thousands)	2020			2019
Deferred tax assets
Accrued liabilities	$	2,627		$	1,555
State income taxes		—			103
Intangible assets		4,285			4,919
Net operating loss		682			994
Inventory		3,981			4,351
Equity-based compensation		772			999
Other, net		555			902
Interest limitation		66			676
Total deferred tax assets		12,968			14,499
Deferred tax liabilities
Property and equipment		(3,343	)		(2,562	)
Prepaids		(91	)		(370	)
ASC 606 method change		(657	)		(1,017	)
Total deferred tax liabilities		(4,091	)		(3,949	)
Net deferred tax assets	$	8,877		$	10,550

Deferred income taxes reflect the net effects of temporary differences between the amounts of assets and liabilities for financial reporting purposes. The Company has not provided for a valuation allowance against any of its deferred tax assets, as management has determined it is more likely than not that these deferred tax assets will be realized. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment.

On December 22, 2017, the President of the United States signed into law the Tax Act. The Tax Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Act reduced the corporate tax rate from a maximum of 35% to a flat 21% rate. The rate reduction was effective on January 1, 2018. In December 2017, the SEC issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for the income tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting relating to the Tax Act under Accounting Standards Codification Topic 740. Income Taxes (ASC 740). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for Tax Act-related income tax effects is incomplete, but the company is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. The Company completed its evaluation of the Act of 2017 on its December 31, 2018 financial statements and adjusted its provision for the year ended December 31, 2018 accordingly.

In response to the global impacts of COVID-19 on U.S. companies and citizens, the U.S. federal government enacted the CARES Act on March 27, 2020.  The CARES Act included several temporary tax relief provisions for companies, including modifications to the interest deduction limitation and a five-year net operating loss carryback.  In response to these tax relief provisions, the Company has adjusted its deferred tax asset related to the interest limitation and anticipates carrying back its net operating loss generated in 2020 to prior periods.  The Company has recorded a tax benefit related to net operating loss carrybacks of $0.8 million.

F-38

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

13. Provision for Income Taxes (Continued)

As of December 31, 2020, the Company had gross federal net operating loss carryforwards of $1.9 million, carrying forward indefinitely. As of December 31, 2020, the Company also had gross state net operating loss carryforwards of $4.9 million, with carryforward periods ranging from 5 years to indefinite. As of December 31, 2019, the Company had gross state net operating loss carryforwards of $21.9 million. As of December 31, 2020, unrecognized tax benefits relate entirely to pre-acquisition TAC tax returns. Assessments related to TAC for tax years through the December 31, 2018 transaction date are the responsibility of former TAC management. The Company is fully indemnified for income taxes prior to the acquisition, as well as any related interest and penalties. The Company does not expect any significant increases or decreases to the Company’s unrecognized tax benefits within the next 12 months. The Company is subject to examinations by federal taxing authorities for the tax years 2017 – 2020 and by state taxing authorities for the tax years 2016—2020. The Company is not currently under any tax examinations. The Company analyzes filing positions in all federal and state jurisdictions where it is required to file income tax returns, and all open tax years in these jurisdictions to determine if there are any uncertain tax positions on its tax returns.

A reconciliation of the beginning and ending amounts of unrecognized tax positions are as follows:

(in thousands)	2020			2019
Unrecognized tax positions, beginning of year	$	3,998		$	4,364
Gross increase - prior period tax positions		—			298
Gross decrease - prior period tax positions		—			(395	)
Expiration of statute of limitations		(1,092	)		(269	)
Unrecognized tax positions, end of year	$	2,906		$	3,998

Of the Company’s total unrecognized tax benefits of $2.9 million, there would be no impact to the annual effective tax rate if recognized as the uncertain tax positions are fully indemnified. The Company’s policy is to recognize interest and/or penalties related to all tax positions as income tax expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. Accrued interest and penalties were $0.9 million and $0.9 million as of December 31, 2020 and 2019, respectively. If recognized, there would be no impact to the effective tax rate as the interest and penalties are fully indemnified. The Company recognized an insignificant amount of interest and penalties related to uncertain tax positions for the year ended December 31, 2020. The Company recognized $0.2 million in interest and $0.2 million in penalties related to uncertain tax positions for the year ended December 31, 2019. For the year ended December 31, 2018, the Company recognized $0.2 million in interest and $0.3 million in penalties related to uncertain tax positions. 

Pursuant of Internal Revenue Code Sections 382, annual use of the Company’s net operating loss carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period.  

F-39

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

14. Employee Benefit Plan

The Company maintains a qualified 401(k) plan for the benefit of its employees. Substantially all employees are eligible to participate in the plan. Under the plan, eligible participants are permitted to make salary deferral contributions to the plan. In addition, the plan provides for employer matching. During the years ended December 31, 2020, 2019 and 2018, the Company contributed $0.6 million, $1.5 million, and $0.9 million to the plan, respectively.

15. Related Party Transactions

Facility Rent

RDS leases three of its facilities from a trust affiliated with a Company stockholder. Additionally, as a result of recent acquisitions, RDS also leased five of its facilities during 2020 from current employees, contractors, or former owners of acquired businesses.  Rent expense under all these leases totaled $1.9 million during the year ended December 31, 2020, $2.2 million during the year ended December 31, 2019, and $0.8 million during the year ended December 31, 2018. No amounts were unpaid at December 31, 2020 and 2019. (See Note 11).

ASG leases office space from 521 Digiulian Boulevard, LLC, a company owned by a current employee. Rent expense under this lease was $0.1 million for the years ended December 31, 2020, 2019 and 2018. No amounts were unpaid under this lease at December 31, 2020 and 2019. (See Note 11).

Subcontractors and Suppliers

Two of RDS employees have family members that have an ownership interest in a flooring subcontracting company that does business with RDS. During the years ended December 31, 2020, 2019, and 2018, this company performed a total of $0.9 million, $1.2 million, and $1.6 million in subcontract work for RDS, respectively. Amounts due and recorded as accounts payable at December 31, 2020 and 2019 were less than $0.1 million and $0.1 million, respectively.

Design services were also provided to RDS by designers affiliated with current Greencraft employees.  During the years ended December 31, 2020, 2019 and 2018, expenses incurred with this design company were $0.02 million, $0.1 million and $0.08 million, respectively.  No amounts were unpaid at December 31, 2020 and 2019.

Other Consulting Services

A consulting firm affiliated with a former officer of the Company has performed various consulting services for the Company related to human resources, accounting, and project management. During the years ended December 31, 2020, 2019, and 2018, the Company incurred approximately $0.2 million, $0.3 million, and $0.2 million of costs with this consulting firm, respectively. Amounts due and recorded as accounts payable at December 31, 2020, were less than $0.01 million. No amounts were unpaid at December 31, 2019.

16. Segment Information

The Company’s operations are classified into two operating segments: RDS and ASG. Under RDS, the Company offers interior design and installation services, and under ASG, the Company performs natural and engineered surfaces distribution. These operating segments represent strategic business areas which, although they operate separately and provide their own distinctive services, enables the Company to more effectively offer the complete line of interior design and selection services, merchandising, and complex supply chain management. While individual acquisitions, for a time, may have discrete financial information before being fully integrated, RDS and ASG are the only operating and reporting segments for which both discrete financial information is available and is reviewed by management for the purpose of making operating decisions and assessing financial performance.

Inter-segment eliminations result, primarily, from the sale of ASG inventory to the RDS segment, including the related profit margin, as well as some intercompany borrowings recorded in the form of intercompany payables and receivables.  

In addition, certain costs incurred at a corporate level or at the reporting unit level that benefit the segments are not allocated. These costs include: corporate payroll costs, legal, professional service fees, interest expense, including amortization of deferred financing costs, and taxes and equity-based compensation.

F-40

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

16. Segment Information (Continued)

The Company evaluates performance of the respective segments based upon revenue and operating income. Information for the years presented is provided below:

	For the Years Ended December 31,
(in thousands)	2020			2019			2018
Revenue, net:
RDS	$	332,489		$	368,574		$	268,362
ASG		223,567			244,789			223,971
Elimination of intercompany sales		(2,031	)		(2,990	)		(2,576	)
Consolidated total	$	554,025		$	610,373		$	489,757
Operating income:
RDS	$	1,615		$	17,544		$	14,252
ASG		19,173			19,860			11,925
Elimination of intercompany activity		(23	)		96			(46	)
Unallocated corporate operating loss		(17,383	)		(18,242	)		(14,034	)
Consolidated total	$	3,382		$	19,258		$	12,097
Capital expenditures:
RDS	$	2,324		$	7,155		$	1,684
ASG		1,104			1,986			6,539
Unallocated corporate capital expenditures		8			28			284
Consolidated total	$	3,436		$	9,169		$	8,507
Depreciation and amortization:
RDS	$	11,578		$	12,896		$	9,634
ASG		11,185			11,159			10,833
Unallocated corporate depreciation and amortization		104			102			20
Consolidated total	$	22,867		$	24,157		$	20,487
	As of December 31,
(in thousands)	2020			2019
Goodwill:
RDS	$	54,225		$	54,225
ASG		45,564			45,564
Consolidated total	$	99,789		$	99,789
Other intangible assets, net:
RDS	$	38,764		$	44,509
ASG		39,250			46,239
Consolidated total	$	78,014		$	90,748
Total assets:
RDS	$	193,488		$	182,754
ASG		198,341			217,655
Consolidation entries		40			36
Unallocated assets, including corporate		13,139			19,830
Consolidated total	$	405,008		$	420,275

F-41

Select Interior Concepts, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

17. Selected Quarterly Financial Data (Unaudited)

Selected summarized quarterly financial information is as follows for the periods presented:

(In thousands, except per share data)	Quarter Ended
Fiscal 2020	December 31			September 30		June 30			March 31
Total revenue, net	$	144,155		$	150,050	$	125,442		$	134,378
Gross profit		35,225			38,590		30,700			30,694
Income (loss) from operations		248			5,144		(37	)		(1,973	)
Net income (loss)		(3,203	)		531		(3,179	)		(4,002	)
Basic EPS	$	(0.13	)	$	0.02	$	(0.13	)	$	(0.16	)
Diluted EPS	$	(0.13	)	$	0.02	$	(0.13	)	$	(0.16	)
Fiscal 2019 (a)
Total revenue, net	$	155,242		$	159,395	$	158,342		$	136,920
Gross profit		38,770			42,338		44,168			38,733
Income from operations		2,952			6,209		6,750			3,266
Net income		3,177			2,458		1,162			127
Basic EPS	$	0.13		$	0.10	$	0.05		$	0.00
Diluted EPS	$	0.13		$	0.10	$	0.05		$	0.00

(a) The 2019 quarterly results presented will not sum to 2019 annual results due to the adoption of ASU 2014-19 during the quarter ended December 31, 2019.  The quarters in 2019 are presented under the previous standard, ASC Topic 605.

18. Subsequent Events

Events occurring after December 31, 2020, have been evaluated for possible adjustment to the consolidated financial statements or disclosure as of March 16, 2021, which is the date the consolidated financial statements were available to be issued.  On March 10, 2021, the Company entered into an amendment on the Term Loan Facility.  See Note 10.  Additionally, the Company continues to evaluate the impact of COVID-19 on its operations, although the ultimate extent to which COVID-19 impacts our business, results of operations, liquidity and financial condition will depend on future developments, which are highly uncertain.  

F-42

Schedule I – SIC’s Condensed Parent Company Only Financial Statements

Select Interior Concepts, Inc.

Parent Company Only

Condensed Balance Sheets

(in thousands, except share data)	As of December 31, 2020			As of December 31, 2019
Assets
Investment in wholly owned subsidiaries	$	195,101		$	187,571
Other assets		237			397
Total assets	$	195,338		$	187,968
Liabilities and stockholders' equity
Due to subsidiaries	$	37,024		$	23,466
Accrued and other liabilities		4,123			3,227
Total liabilities		41,147			26,693
Stockholders' equity:
Class A common stock, par value $0.01 per share; 100,000,000 shares authorized;    25,609,758 shares issued and 25,449,025 outstanding at December 31, 2020 and    25,139,542 shares issued and 25,106,402 outstanding at December 31, 2019		256			251
Treasury stock, 160,733 shares at December 31, 2020 and 33,140 shares at    December 31, 2019, at cost		(1,279	)		(391	)
Additional paid-in capital		165,048			161,396
Retained earnings (accumulated deficit)		(9,834	)		19
Total stockholders' equity		154,191			161,275
Total liabilities and stockholders' equity	$	195,338		$	187,968

See Notes to Condensed Parent Company Only Financial Statements

F-43

Select Interior Concepts, Inc.

Parent Company Only

Condensed Statements of Operations

(in thousands)	Year Ended December 31, 2020			Year Ended December 31, 2019			Year Ended December 31, 2018
Equity in net income of subsidiaries	$	7,530		$	25,226		$	11,559
Selling, general and administrative expenses		(17,383	)		(18,242	)		(14,034	)
Net income (loss)	$	(9,853	)	$	6,984		$	(2,475	)

See Notes to Condensed Parent Company Only Financial Statements

F-44

Select Interior Concepts, Inc.

Parent Company Only

Condensed Statements of Cash Flows

(in thousands)	Year Ended December 31, 2020			Year Ended December 31, 2019			Year Ended December 31, 2018
Cash flows used in operating activities:
Net income (loss)	$	(9,853	)	$	6,984		$	(2,475	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Equity in net income of subsidiaries		(7,530	)		(25,226	)		(11,559	)
Depreciation and amortization		107			102			21
Equity-based compensation		2,789			5,740			2,528
Changes in assets and liabilities:
Changes in operating assets		63			(3	)		(204	)
Changes in accrued expenses		1,762			547			677
Net cash used in operating activities	$	(12,662	)	$	(11,856	)	$	(11,012	)
Cash flows used in investing activities:
Purchase of equipment		(8	)		(28	)		(284	)
Net cash used in investing activities	$	(8	)	$	(28	)	$	(284	)
Cash flows provided by financing activities:
Purchase of treasury stock		(888	)		(399	)		—
Borrowings from subsidiaries		13,558			12,283			10,743
Proceeds from issuance of equity		—			—			553
Net cash provided by financing activities	$	12,670		$	11,884		$	11,296
Net change in cash and cash equivalents		—			—			—
Cash and cash equivalents:
Beginning		—			—			—
Ending	$	—		$	—		$	—

See Notes to Condensed Parent Company Only Financial Statements

F-45

Notes to Condensed Parent Company Only Financial Statements

Note 1. Description of Select Interior Concepts, Inc.

These financial statements reflect the consolidated operations of Select Interior Concepts, Inc. (“SIC”).  SIC is a Delaware corporation that was restructured in November 2017 to be a holding company on which to consolidate diversified building products and services companies with a primary focus on the interiors of all types of buildings.  SIC owns 100% of its two primary operating subsidiaries and segments, Residential Design Services and Architectural Surfaces Group. SIC has no significant operations or assets other than its ownership in Residential Design Services and Architectural Surfaces Group. Accordingly, SIC is dependent upon its subsidiaries to fund its obligations.

Note 2. Basis of Presentation

The accompanying Condensed Parent Only Financial Statements include the amounts of SIC and its investment in its subsidiaries under the equity method, and do not present the financial statements of SIC and its subsidiaries on a consolidated basis. Under the equity method, investments in subsidiaries are stated at cost plus contributions and equity in undistributed income (loss) of subsidiaries less distributions received since the date of acquisition. There have been no distributions in 2020, 2019 and 2018.  Income tax considerations were evaluated under the separate return method, resulting in no net tax benefits for SIC as a separate entity. These Condensed Parent Company Only Financial Statements should be read in conjunction with the consolidated financial statements of Select Interior Concepts, Inc. and subsidiaries and the accompanying Notes to the consolidated financial statements.  

F-46

EX-4.1

Exhibit 4.1

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES

EXCHANGE ACT OF 1934

As of December 31, 2020, Select Interior Concepts, Inc. (“we,” “our,” “us,” or the “Company”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): our Class A common stock. There are no Class B Common Stock or Preferred Shares issued or outstanding.

General

The following description summarizes information about our capital stock. You can obtain more comprehensive information about our capital stock by consulting our amended and restated certificate of incorporation (which we refer to as our “charter”) and our amended and restated bylaws (which we refer to as our “bylaws”), as well as the General Corporation Law of the State of Delaware (which we refer to as the “DGCL”). Under our charter, our authorized capital stock consists of 100,000,000 shares of Class A Common Stock, par value $0.01 per share, 15,000,000 shares of Class B Common Stock, par value $0.01 per share, and 50,000,000 shares of preferred stock, par value $0.01 per share.

Class A Common Stock

Dividend Rights.  Holders of shares of our Class A Common Stock and Class B Common Stock are entitled to ratably receive dividends when and if declared by our board ofdirectors out of funds legally available for that purpose, subject to any statutory or contractual restrictions on the payment of dividends and to any prior rights and preferences that may be applicable to any outstanding preferred stock.

Voting Rights.  Holders of shares of our Class A Common Stock are entitled to one vote per share held of record on all matters to be voted upon by our stockholders. Holders of shares of our Class A Common Stock do not have cumulative voting rights in the election of directors. Holders of shares of our Class A Common Stock and Class B Common Stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except with respect to the amendment of certain provisions of our charter that would alter or change the powers, preferences or special rights of holders of our Class A Common Stock so as to affect them adversely, which amendments must be approved by holders of at least 80% of the issued and outstanding shares of our Class A Common Stock, voting as a separate class, or as otherwise required by applicable law.

Liquidation Rights.  Upon our liquidation, dissolution, distribution of assets or other winding up, holders of shares of our Class A Common Stock and Class B Common Stock are entitled to receive ratably the assets available for distribution to the stockholders after payment of liabilities and any liquidation preference of any outstanding preferred stock.

Other Matters.  The shares of our Class A Common Stock have no preemptive rights and are not subject to further calls or assessment by us. There are no redemption or sinking fund provisions applicable to our Class A Common Stock. All outstanding shares of our Class A Common Stock are fully paid and non-assessable.

Listing.  Our Class A Common Stock is currently listed on the NASDAQ Capital Market under the symbol “SIC.”

Class B Common Stock

Dividend Rights.  Holders of shares of our Class B Common Stock and Class A Common Stock are entitled to ratably receive dividends when and if declared by our board of directors out of funds legally available for that purpose, subject to any statutory or contractual restrictions on the payment of dividends and to any prior rights and preferences that may be applicable to any outstanding preferred stock.

Voting Rights.  Holders of shares of our Class B Common Stock are entitled to one vote per share held of record on all matters to be voted upon by the stockholders. Holders of shares of our Class B Common Stock do not

have cumulative voting rights in the election of directors. Holders of shares of our Class B Common Stock and Class A Common Stock vote together as a single class on all matters presented to our stockholders for their vote or approval, except with respect to the amendment of certain provisions of our charter that would alter or change the powers, preferences or special rights of holders of our Class A Common Stock so as to affect them adversely, which amendments must be approved by holders of at least 80% of the issued and outstanding shares of our Class A Common Stock, voting as a separate class, or as otherwise required by applicable law.

Liquidation Rights.  Upon our liquidation, dissolution, distribution of assets or other winding up, holders of shares of our Class B Common Stock and Class A Common Stock are entitled to receive ratably the assets available for distribution to the stockholders after payment of liabilities and any liquidation preference of any outstanding preferred stock.

Conversion.   All of the then outstanding shares of Class B Common Stock were converted into shares of Class ACommon Stock, based on the registration statement having been declared effective by the SEC on August 13, 2018, and the shares of our Class A Common Stock being listed on the NASDAQ Capital Market on August 16, 2018.

Other Matters.  The shares of our Class B Common Stock have no preemptive or conversion rights and are not subject to further calls or assessment by us. There are no redemption or sinking fund provisions applicable to our Class B Common Stock. All outstanding shares of our Class B Common Stock are fully paid and non-assessable.

Preferred Stock

Our charter provides that our board of directors is expressly authorized to provide for the issuance of shares of preferred stock in one or more series, and to fix the number of shares constituting such series, the designation of such series, the powers (including voting powers), if any, of the shares of such series, the preferences and relative, participating, optional, special or other rights, if any, of the shares of such series, and the qualifications, limitations or restrictions, if any, of the shares of such series, as shall be stated and expressed in the resolution or resolutions of our board of directors providing for the issuance of such series and as may be permitted by the DGCL.

Certain Provisions of Delaware Law and of our Charter and Bylaws

The following summary of certain provisions of the DGCL and of our charter and bylaws does not purport to be complete and is subject to and qualified in its entirety by reference to the DGCL and our charter and bylaws, copies of which have been filed as exhibits to our Annual Report on Form 10-K.

Our Board of Directors

Our charter and bylaws provide that our board of directors shall consist of not less than three nor more than 12 members, the exact number of which shall be fixed from time to time exclusively by action of our board of directors. Our bylaws provide that, unless otherwise required by applicable law and subject to the rights, if any, of holders of any series of our preferred stock, any vacancy arising through death, resignation, removal, or an increase in the number of directors constituting our board of directors may only be filled by the majority vote of the remaining directors in office, even if less than a quorum is present, or by the sole remaining director.

Pursuant to our bylaws, each member of our board of directors who is elected at our annual meeting of our stockholders, and each director who is elected in the interim to fill vacancies and newly created directorships, will hold office for a one (1) year term or until the next annual meeting of our stockholders, and until his or her successor is elected and qualified, or until their earlier death, resignation or removal. Pursuant to our bylaws, directors will be elected by a plurality of votes cast by the shares present in person or by proxy at a meeting of stockholders and entitled to vote thereon, a quorum being present at such meeting.

Removal of Directors

Our bylaws provide that, subject to the rights, if any, of holders of Class A common stock, and unless otherwise required by applicable law, any director may be removed from office, but only for cause, and by the affirmative vote of the holders of at least a majority of the voting power of our capital stock entitled to vote generally in the election of directors. This provision, when coupled with the exclusive power of our board of directors to fill vacant directorships, precludes stockholders from removing incumbent directors except with the affirmative vote of the holders of at least a majority of the voting power of our capital stock entitled to vote generally in the election of directors and from filling the vacancies created by such removal.

Meetings of Stockholders

Pursuant to our bylaws, an annual meeting of our stockholders for the purpose of the election of directors and the transaction of any other business will be held on a date and at the time and place, if any, determined by our board of directors. Each of our directors is elected by our stockholders to serve for a one (1) year term or until the next annual meeting, and until his or her successor is duly elected and qualified, or until their earlier death, resignation or removal. In addition, the chairman of our board of directors, our chief executive officer, our president, or a majority of our board of directors may call a special meeting of our stockholders for any purpose, but business transacted at any special meeting of our stockholders shall be limited to the purposes stated in the notice of such meeting.

Elimination of Stockholder Action by Written Consent

Pursuant to Section 228 of the DGCL, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of stock entitled to vote thereon were present and voted, unless the company’s certificate of incorporation provides otherwise. Our charter expressly eliminates the right of our stockholders to act by written consent. Stockholder action must take place at the annual or a special meeting of our stockholders.

Charter Amendments

Unless a higher vote is required by its certificate of incorporation, the affirmative vote of a majority of the outstanding stock entitled to vote is required to amend a Delaware corporation’s certificate of incorporation. However, amendments which make changes relating to the capital stock by increasing or decreasing the par value or the aggregate number of authorized shares of a class, or by altering or changing the powers, preferences or special rights of a class so as to affect them adversely, also require the affirmative vote of a majority of the outstanding shares of such class, even though such class would not otherwise have voting rights.

Pursuant to our charter, in addition to any votes required by applicable law and subject to the express rights, if any, of the holders of any series of preferred stock, the affirmative vote of the holders of at least 66 2/3 % of the voting power of our capital stock entitled to vote generally in the election of directors shall be required to amend, alter or repeal any provision, or adopt any new or additional provision, in a manner inconsistent with our charter provisions relating to the management of our Company by our board of directors, the calling of special meetings of our stockholders, the prohibition against stockholder action by written consent, and amendment of our charter. In addition, pursuant to our charter, we reserve the right at any time and from time to time to amend, alter, change or repeal any provision contained in our charter, and any other provision authorized by Delaware law in force at such time may be added in the manner prescribed by our charter or by applicable law, and all rights, preferences and privileges conferred upon stockholders, directors or any other persons pursuant to the charter are granted subject to the foregoing reservation of rights. Notwithstanding the foregoing, no amendment, alteration or repeal to our charter provisions relating to indemnification or the exculpation of directors shall adversely affect any right or protection existing under our charter immediately prior to such amendment, modification or repeal.

Bylaw Amendments

Our board of directors has the power to alter, amend, or repeal our bylaws or adopt any new provision authorized by the laws of the State of Delaware in force at such time. Under our charter, the stockholders have the power to amend, alter or repeal our bylaws, or adopt any new provision authorized by the laws of the State of Delaware in force at such time, at a duly called meeting of the stockholders, solely with, notwithstanding any other provisions of our bylaws or any provision of law which might otherwise permit a lesser vote or no vote, the affirmative vote of at least 66 2/3 % of the voting power of our capital stock enabled to vote thereon.

Advance Notice of Director Nominations and New Business

Our bylaws provide that, with respect to an annual meeting of stockholders, the proposal of any business to be considered by our stockholders at an annual meeting of stockholders (other than nominations for election to the board of directors) may be made only (i) pursuant to the notice of the meeting (or any supplement thereto) given by or at the direction of our board of directors (or any duly authorized committee thereof), (ii) otherwise properly brought before an annual meeting of stockholders by or at the direction of our board of directors (or any duly authorized committee thereof), or (iii) otherwise properly brought before an annual meeting of stockholders by a stockholder who is a stockholder of record on the date of the giving of such notice and who is entitled to vote at such meeting and who complies with the notice procedures set forth in our bylaws, including a requirement to provide certain information about the stockholder and its affiliates and the business proposal.

With respect to special meetings of stockholders, only the business specified in our notice of meeting may be brought before the meeting. Nominations of persons for election to our board of directors may be made at an annual or special meeting of stockholders at which directors are to be elected only (i) pursuant to our notice of the meeting (or any supplement thereto), provided, however, that reference in our notice of meeting to the election of directors or the election of members of the board of directors shall not include or be deemed to include nominations for election to the board of directors, (ii) by or at the direction of our board of directors (or any duly authorized committee thereof), or (iii) by a stockholder who is a stockholder of record on the date of the giving of such notice and who is entitled to vote at such meeting and who complies with the notice procedures set forth in our bylaws, including a requirement to provide certain information about the stockholder and its affiliates and the nominee.

Anti-Takeover Provisions

Our charter and bylaws and Delaware law contain provisions that may delay or prevent a transaction or a change in control of our Company that might involve a premium paid for shares of our common stock or otherwise be in the best interests of our stockholders, which could adversely affect the market price of our common stock. Certain of these provisions are described below.

Selected Provisions of our Charter and Bylaws.    Our charter and/or bylaws contain anti-takeover provisions that:

• authorize our board of directors, without further action by the stockholders, to issue up to 50,000,000 shares of preferred stock in one or more series, and with respect to each such series, to fix the number of shares constituting that series, the powers, rights and preferences of the shares of that series, and the qualifications, limitations and restrictions of that series;

• require that, subject to the express rights, if any, of the holders of any series of preferred stock, actions to be taken by our stockholders may be taken only at an annual or special meeting of our stockholders and not by written consent;

• specify that special meetings of our stockholders can be called only by the chairman of our board of directors, our chief executive officer, our president, or the majority of our board of directors;

• provide that our bylaws may be amended by our board of directors without stockholder approval;

• provide that, subject to the express rights, if any, of the holders of any series of preferred stock, directors may be removed from office only by the affirmative vote of the holders of at least a majority of the voting power of our capital stock entitled to vote generally in the election of directors;

• provide that vacancies on our board of directors or newly created directorships resulting from an increase in the number of our directors may be filled only by a vote of a majority of directors then in office, even though less than a quorum;

• provide that, subject to the express rights, if any, of the holders of any series of preferred stock, any amendment, alteration or repeal of our charter provisions, or the adoption of any new or additional provision, inconsistent with our charter provisions relating to the management of our Company by our board of directors, the calling of special meetings of our stockholders, the prohibition against stockholder action by written consent, and amendment of our charter, requires the affirmative vote of the holders of at least 66 2/3 % of the voting power of our capital stock entitled to vote generally in the election of directors;

• provide that the stockholders may amend, alter or repeal our bylaws, or adopt new or additional provisions of our bylaws, only with the affirmative vote of at least 66 2/3 % of the voting power of our capital stock entitled to vote generally; and

• establish advance notice procedures for stockholders to submit nominations of candidates for election to our board of directors and other proposals to be brought before a stockholders meeting.

Delaware Anti-Takeover Statute.    In our charter we elected to be subject to Section 203 of the DGCL, an anti-takeover statute. In general, Section 203 of the DGCL prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder, unless the business combination or the acquisition of shares that resulted in a stockholder becoming an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns 15% or more of a corporation’s voting stock or is our affiliate or associate and was the owner of 15% or more of our outstanding voting stock at any time within the three-year period immediately before the date of determination. The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including discouraging attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

Choice of Forum

Our bylaws provide that the state or federal courts located within the State of Delaware will be the exclusive forum for: (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, (iv) any civil action to interpret, apply, enforce or determine the validity of the provisions of our charter or our bylaws, or (v) any action asserting a claim governed by the internal affairs doctrine. Our bylaws also provide that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Furthermore, our bylaws provide that any person or entity purchasing or otherwise acquiring any interest in any of our securities will be deemed to have notice of and consented to the choice of forum provisions of our bylaws described above. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that such stockholder finds favorable for disputes with us or any of our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees. The enforceability of similar choice of forum provisions in other companies’ bylaws has been challenged in legal proceedings, and it is possible that, in connection with one or more actions or proceedings described above, a court could find the choice of forum provisions contained in our bylaws to be inapplicable or unenforceable.

Limitations on Liability, Indemnification of Directors and Officers, and Insurance

The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties as directors, subject to certain exceptions, by provision of the corporation’s certificate of incorporation. Our charter contains a provision eliminating the personal liability of our directors to the fullest extent permitted by the DGCL. In addition, our bylaws include provisions that require us to indemnify, to the fullest extent allowable under the DGCL, our directors and officers for monetary damages for actions taken as our director or officer, or for serving at our request as a director or officer or another position at another corporation or enterprise, as the case may be. Our bylaws also provide that we must advance reasonable expenses to our directors and officers, subject to our receipt of an undertaking from the indemnified party as may be required under the DGCL.

We are also expressly authorized by the DGCL to carry directors’ and officers’ insurance to protect us, our directors, officers and certain employees for some liabilities. The limitation of liability and indemnification and advancements provisions in our charter and bylaws, respectively, may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. However, our charter provision eliminating the personal liability of our directors to the fullest extent permitted by the DGCL does not limit or eliminate our rights, or those of any stockholder, to seek non-monetary relief such as injunction or rescission in the event of a breach of a director’s fiduciary duties, including the duty of care. The indemnification provisions will not alter the liability of directors under the federal securities laws. In addition, your investment may be adversely affected to the extent that, in a derivative or direct suit, we pay the litigation costs of our directors and officers and the costs of settlement and damage awards against directors and officers pursuant to these indemnification and advancements provisions. There is currently no pending material litigation or proceeding against any of our directors, officers or employees for which indemnification or advancement is sought.

We maintain standard policies of insurance that provide coverage (i) to our directors and officers against losses arising from claims made by reason of breach of duty or other wrongful act, and (ii) to us with respect to indemnification and advancement payments that we may make to such directors and officers.

We have entered into indemnification agreements with each of our directors and executive officers. These indemnification agreements will require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We believe that the limitation of liability provision in our charter and the indemnification agreements will facilitate our ability to continue to attract and retain qualified individuals to serve as directors and officers.

Insofar as the above described indemnification provisions permit indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we understand that in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Authorized but Unissued Shares

Our authorized but unissued shares of common stock will be available for future issuance without your approval. We may use additional shares for a variety of purposes, including future offerings to raise additional capital, to fund acquisitions and as employee compensation. The existence of authorized but unissued shares of common stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Transfer Agent and Registrar

American Stock Transfer & Trust Company, LLC is the transfer agent and registrar for our common stock.

EX-10.13

Exhibit 10.13

SECOND AMENDMENT TO

EMPLOYMENT AGREEMENT

This SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) is made and entered into as of this 30^th day of June, 2020, by and between Select Interior Concepts, Inc., a Delaware corporation (the “Company”), and Nadeem Moiz (the “Executive”). The above parties are referred to together herein as the “Parties,” and individually as a “Party.”

RECITALS

WHEREAS, the Company and the Executive are parties to that certain Employment Agreement dated as of August 17, 2018, as amended (the “Employment Agreement”), pursuant to which the Company agreed to employ the Executive, and the Executive agreed to accept employment with the Company, on the terms and subject to the conditions set forth therein;

WHEREAS, the Parties desire to amend the Employment Agreement on the terms and conditions set forth herein.

AGREEMENT

NOW THEREFORE, in consideration of the promises, terms and conditions contained herein and such other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each Party hereby agrees as follows:

A.Defined Terms and Recitals. Except as otherwise defined herein, all capitalized terms used herein but not otherwise defined herein shall have the meanings set forth in the Employment Agreement. The Parties hereby agree that the recitals set forth hereinabove are true and correct and incorporated into this Amendment.

B.Modifications to Employment Agreement. The Parties agree that from and after the date of this Amendment, the Employment Agreement shall be modified as follows:

1.Section 3(e) is amended by adding a new subsection (iv) thereto, which shall read as follows:  “a relocation of Executive’s principal place of employment more than 100 miles from its current location without his consent.”

2.Section 5(a)(i)A is amended by deleting subsection (y) and replacing it with the following:  “one (1) times the sum of the Executive’s Base Salary and Target Bonus, in each case payable in a lump sum (the “Base Severance”).”

3.Section 7 shall be deleted in its entirety and replaced with the following:

“7. Protective Covenants.

(a)General.  Executive and the Company understand and agree that the purpose of the provisions of this Section 7 is to protect legitimate business interests of the Company, as

more fully described below, and is not intended to impair or infringe upon Executive’s right to work, earn a living, or acquire and possess property from the fruits of his labor.  Executive hereby acknowledges that Executive has received good and valuable consideration for the post-employment restrictions set forth in this Section 7 in the form of the compensation and benefits provided for herein, including the Base Severance (as modified by this Amendment), an award of time-based and performance-based stock units to be granted on or about the effective date of this Amendment) and any acceleration in vesting of any Restricted Stock Units that occurs in connection with a Change in Control.  Executive hereby further acknowledges that the post-employment restrictions set forth in this Section 7 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement.  

In addition, the parties acknowledge: (A) that Executive’s services under this Agreement require unique expertise and talent in the provision of Competitive Services and that Executive will have substantial contacts with customers, suppliers, advertisers and vendors of the Company; (B) that pursuant to this Agreement, Executive will be placed in a position of trust and responsibility and he will have access to a substantial amount of Confidential Information and Trade Secrets and that the Company is placing him in such position and giving him access to such information in reliance upon his agreement to abide by the covenants set forth in this Section 7; (C) that due to Executive’s unique experience and talent, the loss of Executive’s services to the Company under this Agreement cannot reasonably or adequately be compensated solely by damages in an action at law; (D) that Executive is capable of competing with the Company; and (E) that Executive is capable of obtaining gainful and desirable employment that does not violate the restrictions contained in this Agreement.  

Therefore, Executive shall be subject to the restrictions set forth in this Section 7.

(b)Definitions. The following capitalized terms used in this Agreement shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms:

(i)“Competitive Services” means (A) the business of selecting, importing, selling and/or installing natural and engineered stone slabs for kitchen and bathroom countertops and specialty tiles for new residential and commercial construction markets and/or the repair and remodel market; and (B) the business of providing any other activities, products, or services of the type conducted, authorized, offered, or provided by the Company as of the Date of Termination, or during the one (1) year immediately prior to the Date of Termination.

(ii)“Confidential Information” means any and all data and information relating to the Company, its activities, business, or customers that (A) was disclosed to Executive or of which Executive became aware as a consequence of his employment with the Company; (B) has value to the Company; and (C) is not generally known outside of the Company.  “Confidential Information” shall include, but is not limited to the following types of information regarding, related to, or concerning the Company: trade secrets (as defined by applicable law); financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; pricing information; product development techniques or plans; customer lists; customer files, data and financial information; details of customer contracts; current and anticipated customer requirements; identifying and

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other information pertaining to business referral sources; past, current and planned research and development; computer aided systems, software, strategies and programs; business acquisition plans; management organization and related information (including, without limitation, data and other information concerning the compensation and benefits paid to officers, directors, employees and management); personnel and compensation policies; new personnel acquisition plans; and other similar information.  “Confidential Information” also includes combinations of information or materials which individually may be generally known outside of the Company, but for which the nature, method, or procedure for combining such information or materials is not generally known outside of the Company.  In addition to data and information relating to the Company, “Confidential Information” also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Company by such third party, and that the Company has a duty or obligation to keep confidential.  This definition shall not limit any definition of “confidential information” or any equivalent term under state or federal law.  “Confidential Information” shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company.

(iii)“Material Contact” means (A) having dealings with a customer or potential customer on behalf of the Company; (B) coordinating or supervising dealings with a customer or potential customer on behalf of the Company; or (C) obtaining Confidential Information about a customer or potential customer in the ordinary course of business as a result of Executive’s employment with the Company.

(iv)“Person” means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.

(v)“Principal or Representative” means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.

(vi)“Protected Customer” means any Person to whom the Company has sold its products or services or actively solicited to sell its products or services, and with whom Executive has had Material Contact on behalf of the Company during his employment with the Company.

(vii)“Protective Covenants” means the restrictive covenants contained in Sections 7(c) through (g) hereof.

(viii) “Restricted Period” means any time during Executive’s employment with the Company, as well as two (2) years from Executive’s Date of Termination.

(ix)“Restricted Territory” means (A) the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio,

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Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming; and (B) any other territory where Employee is working on behalf of the Company during the one (1) year preceding the conduct in question (if the conduct occurs while Employee is still employed by the Company) or the Termination Date (if the conduct occurs after Employee’s Termination), as applicable.

(x)“Termination” means the termination of Executive’s employment with the Company, for any reason, whether with or without cause, upon the initiative of either party.

(c)Restriction on Disclosure and Use of Confidential Information.  Executive agrees that Executive shall not, directly or indirectly, use any Confidential Information on Executive’s own behalf or on behalf of any Person other than Company, or reveal, divulge, or disclose any Confidential Information to any Person not expressly authorized by the Company to receive such Confidential Information.  This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information.  Executive further agrees that he shall fully cooperate with the Company in maintaining the Confidential Information to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company’s rights or Executive’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices.  Anything herein to the contrary notwithstanding, Executive shall not be restricted from: (i) disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided, however, that in the event such disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive; (ii) reporting possible violations of federal, state, or local law or regulation to any governmental agency or entity, or from making other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation, and Executive shall not need the prior authorization of the Company to make any such reports or disclosures and shall not be required to notify the Company that Executive has made such reports or disclosures.  In addition, and anything herein to the contrary notwithstanding, Executive is hereby given notice that Executive shall not be criminally or civilly liable under any federal or state trade secret law for: (iii) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, in either event solely for the purpose of reporting or investigating a suspected violation of law; or (iv) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

(d)Non-Competition.  Executive agrees that, during the Restricted Period, he will not, without prior written consent of the Company, directly or indirectly (i) carry on or engage in Competitive Services within the Restricted Territory on his own or on behalf of any Person or any Principal or Representative of any Person, or (ii) own, manage, operate, join, control or participate in the ownership, management, operation or control, of any business, whether in corporate, proprietorship or partnership form or otherwise where such business is engaged in the provision of Competitive Services within the Restricted Territory.

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(e)Non-Solicitation of Protected Customers.  Executive agrees that, during the Restricted Period, he shall not, without the prior written consent of the Company, directly or indirectly, on his own behalf or as a Principal or Representative of any Person, solicit, divert, take away, or attempt to solicit, divert, or take away a Protected Customer for the purpose of engaging in, providing, or selling Competitive Services.

(f)Non-Recruitment of Employees and Independent Contractors.  Executive agrees that during the Restricted Period, he shall not, directly or indirectly, whether on his own behalf or as a Principal or Representative of any Person, recruit, solicit, or induce or attempt to recruit, solicit or induce any employee or independent contractor of the Company to terminate his or her employment or other relationship with the Company or to enter into employment or any other kind of business relationship with the Executive or any other Person.

(g)Return of Materials.  Executive agrees that on or prior to the Date of Termination, he returned any and all property of the Company that was in his possession or subject to his control by virtue of his position as an executive of the Company, including, but not limited to, customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, email, documents, diskettes, CDs, tapes, keys, access cards, credit cards, identification cards, equipment, computers, mobile devices, other electronic media, all other files and documents relating to the Company and its business (regardless of form, but specifically including all electronic files and data of the Company), together with all Confidential Information belonging to the Company or that Executive received from or through his employment with the Company.  Executive will not make, distribute, or retain copies of any such information or property.  To the extent that Executive has electronic files or information in his possession or control that belong to the Company or contain Confidential Information (specifically including but not limited to electronic files or information stored on personal computers, mobile devices, electronic media, or in cloud storage), on or prior to the Date of Termination, or at any other time the Company requests, Executive shall (i) provide the Company with an electronic copy of all of such files or information (in an electronic format that readily accessible by the Company); (ii) after doing so, delete all such files and information, including all copies and derivatives thereof, from all non-Company-owned computers, mobile devices, electronic media, cloud storage, and other media, devices, and equipment, such that such files and information are permanently deleted and irretrievable; and (iii) provide a written certification to the Company that the required deletions have been completed and specifying the files and information deleted and the media source from which they were deleted.

(h)Enforcement of Protective Covenants.

(i)Rights and Remedies Upon Breach.  The parties specifically acknowledge and agree that the remedy at law for any breach of the Protective Covenants will be inadequate, and that in the event Executive breaches, or threatens to breach, any of the Protective Covenants, the Company shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Protective Covenants and to have the Protective Covenants specifically enforced by any court of competent jurisdiction or arbitrator, it being agreed that any breach or threatened breach of the Protective Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company.  Such rights

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and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity.  The parties understand and agree that, if the parties become involved in legal action regarding the enforcement of the Protective Covenants, the prevailing party in such legal action shall be entitled, in addition to any other remedy, to recover from the other party its reasonable costs and attorneys’ fees incurred in connection with such litigation.  The Company’s ability to enforce its rights under the Protective Covenants or applicable law against Executive shall not be impaired in any way by the existence of a claim or cause of action on the part of Executive based on, or arising out of, this Agreement or any other event or transaction.

(ii)Severability and Modification of Covenants.  Executive acknowledges and agrees that each of the Protective Covenants is reasonable and valid in time and scope and in all other respects.  The parties agree that it is their intention that the Protective Covenants be enforced in accordance with their terms to the maximum extent permitted by law.  Each of the Protective Covenants shall be considered and construed as a separate and independent covenant.  Should any part or provision of any of the Protective Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Protective Covenant.  If any of the provisions of the Protective Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Company’s legitimate business interests and may be enforced by the Company to that extent in the manner described above and all other provisions of this Agreement shall be valid and enforceable.

4.Exhibit A to the Employment Agreement is amended by deleting subsection (c) and replacing it with the following:  ““Person” means any individual, entity or group, within the meaning of Section 3(a)(9) of the 1934 Act and as used in Section 13(d)(3) or 14(d)(2) of the 1934 Act, other thanGateway Securities Holdings, LLC and B. Riley FBR, Inc. and their respective affiliates.”

C.No Further Modification. Except to the extent set forth herein, the Employment Agreement remains unmodified and in full force and effect. In the event of any inconsistency between the provisions of the Employment Agreement and this Amendment, the terms of this Amendment shall control.

D.Counterparts and Facsimile. This Amendment may be executed in two or more counterparts, which when taken together shall constitute one and the same instrument. The Parties contemplate that they may be executing counterparts of this Amendment transmitted by facsimile or email in PDF format and agree and intend that a signature by either facsimile machine or email in PDF format shall bind the Party so signing with the same effect as though the signature were an original signature.

IN WITNESS WHEREOF, the Parties have executed this Amendment to Employment Agreement as of the date first written above.

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COMPANY:

SELECT INTERIOR CONCEPTS, INC.

By: /s/ L.W. Varner, Jr.

      Name: L.W. Varner, Jr.

      Title: Chief Executive Officer

EXECUTIVE:

/s/ Nadeem Moiz  

Nadeem Moiz

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EX-10.14

Exhibit 10.14

SECOND AMENDMENT TO

EMPLOYMENT AGREEMENT

This SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) is made and entered into as of this 30^th day of June, 2020, by and between Select Interior Concepts, Inc., a Delaware corporation (the “Company”), and Shawn Baldwin (the “Executive”). The above parties are referred to together herein as the “Parties,” and individually as a “Party.”

RECITALS

WHEREAS, the Company and the Executive are parties to that certain Employment Agreement dated as of October 22, 2018, as amended (the “Employment Agreement”), pursuant to which the Company agreed to employ the Executive, and the Executive agreed to accept employment with the Company, on the terms and subject to the conditions set forth therein;

WHEREAS, the Parties desire to amend the Employment Agreement on the terms and conditions set forth herein.

AGREEMENT

NOW THEREFORE, in consideration of the promises, terms and conditions contained herein and such other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each Party hereby agrees as follows:

A.Defined Terms and Recitals. Except as otherwise defined herein, all capitalized terms used herein but not otherwise defined herein shall have the meanings set forth in the Employment Agreement. The Parties hereby agree that the recitals set forth hereinabove are true and correct and incorporated into this Amendment.

B.Modifications to Employment Agreement. The Parties agree that from and after the date of this Amendment, the Employment Agreement shall be modified as follows:

1.Section 3(e) is amended by adding a new subsection (iv) thereto, which shall read as follows:  “a relocation of Executive’s principal place of employment more than 100 miles from its current location without his consent.”

2.Section 5(a)(i)A is amended by deleting subsection (B) and replacing it with the following:  “one (1) times the sum of the Executive’s Base Salary and Target Bonus, in each case payable in a lump sum (the “Base Severance”).”

3.Section 7 shall be deleted in its entirety and replaced with the following:

“7. Protective Covenants.

(a)General.  Executive and the Company understand and agree that the purpose of the provisions of this Section 7 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to impair or infringe upon Executive’s right to work, earn a living, or acquire and possess property from the fruits of his labor.  Executive hereby acknowledges that Executive has received good and valuable consideration for the post-employment restrictions set forth in this Section 7 in the form of the compensation and benefits provided for herein, including the Base Severance (as modified by this Amendment), an award of time-based and performance-based stock units to be granted on or about the effective date of this Amendment) and any acceleration in vesting of any Restricted Stock Units that occurs in connection with a Change in Control.  Executive hereby further acknowledges that the post-employment restrictions set forth in this Section 7 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement.  

In addition, the parties acknowledge: (A) that Executive’s services under this Agreement require unique expertise and talent in the provision of Competitive Services and that Executive will have substantial contacts with customers, suppliers, advertisers and vendors of the Company; (B) that pursuant to this Agreement, Executive will be placed in a position of trust and responsibility and he will have access to a substantial amount of Confidential Information and Trade Secrets and that the Company is placing him in such position and giving him access to such information in reliance upon his agreement to abide by the covenants set forth in this Section 7; (C) that due to Executive’s unique experience and talent, the loss of Executive’s services to the Company under this Agreement cannot reasonably or adequately be compensated solely by damages in an action at law; (D) that Executive is capable of competing with the Company; and (E) that Executive is capable of obtaining gainful and desirable employment that does not violate the restrictions contained in this Agreement.  

Therefore, Executive shall be subject to the restrictions set forth in this Section 7.

(b)Definitions. The following capitalized terms used in this Agreement shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms:

(i)“Competitive Services” means (A) the business of selecting, importing, selling and/or installing natural and engineered stone slabs for kitchen and bathroom countertops and specialty tiles for new residential and commercial construction markets and/or the repair and remodel market; and (B) the business of providing any other activities, products, or services of the type conducted, authorized, offered, or provided by the Company as of the Date of Termination, or during the one (1) year immediately prior to the Date of Termination.

(ii)“Confidential Information” means any and all data and information relating to the Company, its activities, business, or customers that (A) was disclosed to Executive or of which Executive became aware as a consequence of his employment with the Company; (B) has value to the Company; and (C) is not generally known outside of the Company.  “Confidential Information” shall include, but is not limited to the following types of information regarding, related to, or concerning the Company: trade secrets (as defined by applicable law); financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; pricing information; product

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development techniques or plans; customer lists; customer files, data and financial information; details of customer contracts; current and anticipated customer requirements; identifying and other information pertaining to business referral sources; past, current and planned research and development; computer aided systems, software, strategies and programs; business acquisition plans; management organization and related information (including, without limitation, data and other information concerning the compensation and benefits paid to officers, directors, employees and management); personnel and compensation policies; new personnel acquisition plans; and other similar information.  “Confidential Information” also includes combinations of information or materials which individually may be generally known outside of the Company, but for which the nature, method, or procedure for combining such information or materials is not generally known outside of the Company.  In addition to data and information relating to the Company, “Confidential Information” also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Company by such third party, and that the Company has a duty or obligation to keep confidential.  This definition shall not limit any definition of “confidential information” or any equivalent term under state or federal law.  “Confidential Information” shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company.

(iii)“Material Contact” means (A) having dealings with a customer or potential customer on behalf of the Company; (B) coordinating or supervising dealings with a customer or potential customer on behalf of the Company; or (C) obtaining Confidential Information about a customer or potential customer in the ordinary course of business as a result of Executive’s employment with the Company.

(iv)“Person” means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.

(v)“Principal or Representative” means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.

(vi)“Protected Customer” means any Person to whom the Company has sold its products or services or actively solicited to sell its products or services, and with whom Executive has had Material Contact on behalf of the Company during his employment with the Company.

(vii)“Protective Covenants” means the restrictive covenants contained in Sections 7(c) through (g) hereof.

(viii) “Restricted Period” means any time during Executive’s employment with the Company, as well as two (2) years from Executive’s Date of Termination.

(ix)“Restricted Territory” means (A) the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland,

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Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming; and (B) any other territory where Employee is working on behalf of the Company during the one (1) year preceding the conduct in question (if the conduct occurs while Employee is still employed by the Company) or the Termination Date (if the conduct occurs after Employee’s Termination), as applicable.

(x)“Termination” means the termination of Executive’s employment with the Company, for any reason, whether with or without cause, upon the initiative of either party.

(c)Restriction on Disclosure and Use of Confidential Information.  Executive agrees that Executive shall not, directly or indirectly, use any Confidential Information on Executive’s own behalf or on behalf of any Person other than Company, or reveal, divulge, or disclose any Confidential Information to any Person not expressly authorized by the Company to receive such Confidential Information.  This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information.  Executive further agrees that he shall fully cooperate with the Company in maintaining the Confidential Information to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company’s rights or Executive’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices.  Anything herein to the contrary notwithstanding, Executive shall not be restricted from: (i) disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided, however, that in the event such disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive; (ii) reporting possible violations of federal, state, or local law or regulation to any governmental agency or entity, or from making other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation, and Executive shall not need the prior authorization of the Company to make any such reports or disclosures and shall not be required to notify the Company that Executive has made such reports or disclosures.  In addition, and anything herein to the contrary notwithstanding, Executive is hereby given notice that Executive shall not be criminally or civilly liable under any federal or state trade secret law for: (iii) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, in either event solely for the purpose of reporting or investigating a suspected violation of law; or (iv) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

(d)Non-Competition.  Executive agrees that, during the Restricted Period, he will not, without prior written consent of the Company, directly or indirectly (i) carry on or engage in Competitive Services within the Restricted Territory on his own or on behalf of any Person or any Principal or Representative of any Person, or (ii) own, manage, operate, join, control or participate in the ownership, management, operation or control, of any business, whether in corporate, proprietorship or partnership form or otherwise where such business is engaged in the provision of Competitive Services within the Restricted Territory.

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(e)Non-Solicitation of Protected Customers.  Executive agrees that, during the Restricted Period, he shall not, without the prior written consent of the Company, directly or indirectly, on his own behalf or as a Principal or Representative of any Person, solicit, divert, take away, or attempt to solicit, divert, or take away a Protected Customer for the purpose of engaging in, providing, or selling Competitive Services.

(f)Non-Recruitment of Employees and Independent Contractors.  Executive agrees that during the Restricted Period, he shall not, directly or indirectly, whether on his own behalf or as a Principal or Representative of any Person, recruit, solicit, or induce or attempt to recruit, solicit or induce any employee or independent contractor of the Company to terminate his or her employment or other relationship with the Company or to enter into employment or any other kind of business relationship with the Executive or any other Person.

(g)Return of Materials.  Executive agrees that on or prior to the Date of Termination, he returned any and all property of the Company that was in his possession or subject to his control by virtue of his position as an executive of the Company, including, but not limited to, customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, email, documents, diskettes, CDs, tapes, keys, access cards, credit cards, identification cards, equipment, computers, mobile devices, other electronic media, all other files and documents relating to the Company and its business (regardless of form, but specifically including all electronic files and data of the Company), together with all Confidential Information belonging to the Company or that Executive received from or through his employment with the Company.  Executive will not make, distribute, or retain copies of any such information or property.  To the extent that Executive has electronic files or information in his possession or control that belong to the Company or contain Confidential Information (specifically including but not limited to electronic files or information stored on personal computers, mobile devices, electronic media, or in cloud storage), on or prior to the Date of Termination, or at any other time the Company requests, Executive shall (i) provide the Company with an electronic copy of all of such files or information (in an electronic format that readily accessible by the Company); (ii) after doing so, delete all such files and information, including all copies and derivatives thereof, from all non-Company-owned computers, mobile devices, electronic media, cloud storage, and other media, devices, and equipment, such that such files and information are permanently deleted and irretrievable; and (iii) provide a written certification to the Company that the required deletions have been completed and specifying the files and information deleted and the media source from which they were deleted.

(h)Enforcement of Protective Covenants.

(i)Rights and Remedies Upon Breach.  The parties specifically acknowledge and agree that the remedy at law for any breach of the Protective Covenants will be inadequate, and that in the event Executive breaches, or threatens to breach, any of the Protective Covenants, the Company shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Protective Covenants and to have the Protective Covenants specifically enforced by any court of competent jurisdiction or arbitrator, it being agreed that any breach or threatened breach of the Protective Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company.  Such rights

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and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity.  The parties understand and agree that, if the parties become involved in legal action regarding the enforcement of the Protective Covenants, the prevailing party in such legal action shall be entitled, in addition to any other remedy, to recover from the other party its reasonable costs and attorneys’ fees incurred in connection with such litigation.  The Company’s ability to enforce its rights under the Protective Covenants or applicable law against Executive shall not be impaired in any way by the existence of a claim or cause of action on the part of Executive based on, or arising out of, this Agreement or any other event or transaction.

(ii)Severability and Modification of Covenants.  Executive acknowledges and agrees that each of the Protective Covenants is reasonable and valid in time and scope and in all other respects.  The parties agree that it is their intention that the Protective Covenants be enforced in accordance with their terms to the maximum extent permitted by law.  Each of the Protective Covenants shall be considered and construed as a separate and independent covenant.  Should any part or provision of any of the Protective Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Protective Covenant.  If any of the provisions of the Protective Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Company’s legitimate business interests and may be enforced by the Company to that extent in the manner described above and all other provisions of this Agreement shall be valid and enforceable.

4.Section 8(e), which is the choice of law provision, is amended by deleting the word “California” and replacing it with “Georgia” (and all references to California law in Section 8(b) are hereby removed).

5.Exhibit A to the Employment Agreement is amended by deleting subsection (c) and replacing it with the following:  ““Person” means any individual, entity or group, within the meaning of Section 3(a)(9) of the 1934 Act and as used in Section 13(d)(3) or 14(d)(2) of the 1934 Act, other thanGateway Securities Holdings, LLC and B. Riley FBR, Inc. and their respective affiliates.”

C.No Further Modification. Except to the extent set forth herein, the Employment Agreement remains unmodified and in full force and effect. In the event of any inconsistency between the provisions of the Employment Agreement and this Amendment, the terms of this Amendment shall control.

D.Counterparts and Facsimile. This Amendment may be executed in two or more counterparts, which when taken together shall constitute one and the same instrument. The Parties contemplate that they may be executing counterparts of this Amendment transmitted by facsimile or email in PDF format and agree and intend that a signature by either facsimile machine or email in PDF format shall bind the Party so signing with the same effect as though the signature were an original signature.

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IN WITNESS WHEREOF, the Parties have executed this Amendment to Employment Agreement as of the date first written above.

COMPANY:

SELECT INTERIOR CONCEPTS, INC.

By: /s/ L.W. Varner, Jr.

      Name: L.W. Varner, Jr.

      Title: Chief Executive Officer

EXECUTIVE:

/s/ Shawn Baldwin  

Shawn Baldwin

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EX-10.15

Exhibit 10.15

CONFIDENTIAL SEPARATION AGREEMENT

THIS CONFIDENTIAL SEPARATION AGREEMENT (the “Agreement”) is entered into as of the Effective Date, as defined in Section 5 hereof, by and between Select Interior Concepts, Inc., a Delaware corporation (the “Company”), and Tyrone Johnson (“Executive”). Together, the Company and Executive may be referred to hereinafter as the “Parties.”

In consideration of the payments, covenants and releases described below, and in consideration of other good and valuable consideration, the receipt and sufficiency of all of which is hereby acknowledged, the Company and Executive agree as follows:

1.Separation from Employment.  Executive resigned from any and all offices, positions, titles in and employment by the Company and its affiliates, effective as of June 8, 2020 (the “Termination Date”).  To the extent not already paid to Executive, within thirty (30) days after the Termination Date, the Company shall pay to Executive (a) all accrued but unpaid base salary through the Termination Date; (b) reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the Termination Date; and (c) cash in lieu of any accrued but unused vacation through the Termination Date.  Additionally, the Company shall timely pay to Executive any benefits accrued or payable to Executive under the Company’s benefit plans (in accordance with the terms of such benefit plans and subject to Section 12 hereof).  Executive will receive by separate letter information regarding Executive’s rights regarding continuation of health insurance under Section 4980B of the Internal Revenue Code (“COBRA”), and to the extent that Executive has such rights, nothing in this Agreement will change or impair those rights.

2.Separation Obligations of the Company.  In consideration of Executive’s promises contained in this Agreement, the Company agrees as follows:

(a)Base Severance.  The Company will pay to Executive a total gross amount equal to Executive’s current base salary of Six Hundred Forty Thousand Dollars ($640,000), less legally required withholdings, to be paid in a single lump sum by the later of (i) June 30, 2020, or (ii) five (5) days after the Effective Date.

(b)2020 Pro Rata Target Annual Bonus.  The Company will pay to Executive a total gross amount of Two Hundred Eighty Thousand Eight Hundred Eighty Nine Dollars ($280,889) (such amount representing a pro-rata annual incentive for 2020 through the Termination Date at target), less legally required withholdings, to be paid in a single lump sum by the later of (i) June 30, 2020, or (ii) five (5) days after the Effective Date.

(c)Retention Agreement Payment.  The Company will pay to Executive a total gross amount of Three Hundred Twenty Thousand Dollars($320,000), less legally required withholdings, to be paid in a single lump sum by the later of (i) June 30, 2020, or (ii) five (5) days after the Effective Date.

(d)COBRA Stipend.  By the later of (i) June 30, 2020, or (ii) five (5) days after the Effective Date, the Company will pay to Executive a total gross amount of Nineteen Thousand Nine Hundred Twenty Five Dollars and sixty-four cents ($19,925.64), less legally required

LEGAL02/39850397v2

withholdings, to assist Executive in paying COBRA premiums (the “COBRA Benefit”).  Executive shall remain responsible for timely electing COBRA continuation coverage and making all premium payments associated therewith.

(e)Company Vehicle.  As soon as practicable following the Effective Date, the Company shall exercise its option to purchase the vehicle leased by the Company for the use of the Executive from the rental company, and shall facilitate the transfer of title of the vehicle to the Executive.  The Executive shall assume all responsibility for the vehicle following the transfer of title of the vehicle to the Executive.

(f)Financial  Counseling.  By the later of (i) June 30, 2020, or (ii) five (5) days after the Effective Date, the Company will pay a $10,000 Counseling Fee to Ayco Company, L.P. (“Ayco”) pursuant to the Terms and Conditions of that certain Comprehensive Financial Counseling Program Agreement between the Company and Ayco, effective January 1, 2018.

(g)Treatment of Outstanding Stock Awards.  The outstanding stock awards held by Executive as of the Effective Date will be treated as follows:

(i)Restricted Stock Award granted November 22, 2017:  All outstanding restricted shares granted on November 22, 2017 (totaling 10,672 shares) will become fully vested as of the Effective Date.

(ii)Time-Based Restricted Stock Units granted March 4, 2019:  23,983 time-based restricted stock units granted on March 4, 2019 will become fully vested and convert to shares of common stock as of the Effective Date, and 23,983 time-based restricted stock units granted on March 4, 2019 will be forfeited for no consideration.

(iii)Time-Based Restricted Stock Units granted May 13, 2020:  8,854 time-based restricted stock units granted on May 13, 2020 will become fully vested and convert to shares of common stock as of the Effective Date, and 17,708 time-based restricted stock units granted on May 13, 2020 will be forfeited for no consideration.

(iv)Performance-Based Restricted Stock Units granted on March 4, 2019 and May 13, 2020:  All outstanding performance-based restricted stock units will be forfeited for no consideration.

(h)The payments and benefits set forth in Section 2(a) through 2(g) above are referred to herein collectively as the “Consideration.”  The Parties acknowledge and agree that the Consideration exceeds any and all actions, pay, and benefits that the Company might otherwise have owed to Executive by contract or law, and that the Consideration constitutes good, valuable, and sufficient consideration for Executive’s release and agreements herein.  The Company’s obligation to provide the Consideration is expressly contingent upon Executive (i) executing and not revoking this Agreement pursuant to Section 5 below; and (ii) complying with his obligations under the terms of this Agreement.

Tyrone Johnson Separation Agreement (FINAL)

3. General Release of Claims and Covenant Not To Sue.  

(a)Executive’s General Release of Claims.  In consideration of the Consideration, Executive on behalf of himself and his agents and successors in interest, hereby UNCONDITIONALLY RELEASES AND DISCHARGES the Company, its successors, subsidiaries, parent companies and its affiliates and each of their respective partners, equityholders, principals and employees, shareholders, assigns, joint ventures, and affiliated companies and all of their respective agents, legal representatives, shareholders, attorneys, employees, members, managers, officers, directors and affiliates (collectively, the “Releasees”)fromALLCLAIMS,LIABILITIES,DEMANDSANDCAUSESOFACTION which he may by law release, whether known or unknown, fixed or contingent, that he may have or claim to have against any Releasee for any reason as of the date of Executive’s execution of this Agreement.  Executive specifically acknowledges and agrees that he is releasing any and all rights under federal, state and local employment laws including without limitation the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 1981, the Americans With Disabilities Act, the Family and Medical Leave Act, the Genetic Information Nondiscrimination Act, the anti-retaliation provisions of the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Equal Pay Act, the Occupational Safety and Health Act, the Worker Adjustment and Retraining Notification Act, the Employee Polygraph Protection Act, the Fair Credit Reporting Act, and any and all other local, state, and federal law claims arising under statute or common law. It is agreed that this is a general release and it is to be broadly construed as a release of all claims, except as set forth in Section 3(c) below.

(b)Company’s Release of Claims. In exchange for the release and protective covenants agreed to by Executive by virtue of this Agreement and other valid consideration herein, the Companyreleasesandwaivesallclaims, liabilities, demands, and causes of actiononbehalfofthe Company, its successors, subsidiaries, parent companies and its affiliates and each of their respective partners, equityholders, principals and employees, shareholders, assigns, joint ventures, and affiliated companies and all of their respective agents, legal representatives, shareholders, attorneys, employees, members, managers, officers, directors and affiliates,againstExecutive and his heirs, assigns, agents, and representativewhichhavearisenuptoandincludingthedateonwhichthe Company executes thisAgreement, except for claims, losses, and liabilities arising out of Executive’s intentional or willful misconduct or gross negligence.

(c)Exceptions to General Release.  Nothing in this Agreement is intended as, or shall be deemed or operate as, a release by Executive of (i) any rights of Executive under this Agreement; (ii) any other benefits under any agreements with the Company or Company-sponsored benefit plans (e.g., 401(k) benefits); (iii) any rights or claims of Executive for indemnificationor related duties by the Company under any written indemnification agreement, the self-governance documents of the Company, or under applicable law; (iv) any rights to coverage under any director and officer liability insurance or other insurance policies or any run-off policy thereto; (v) any rightsunder COBRA or similar state law; (vi) any recovery to which Executive may be entitled pursuant to workers’ compensation and unemployment insurance laws; (vii) Executive’s right to challenge the validity of his release of claims under the ADEA; (viii) any rights or claims under federal or state law that cannot, as a matter of law, be waived by private agreement; and (ix) any claims arisingafter the date on which Executive executes thisAgreement.

Tyrone Johnson Separation Agreement (FINAL)

(d)Covenant Not to Sue.  Except as expressly set forth in Section 3(g) below, Executive further hereby AGREES NOT TO FILE A LAWSUIT or other legal claim or charge against any of the Releasees concerning any claim released by this Agreement.  

(e)Acknowledgement Regarding Payments and Benefits.  Except as expressly provided herein, Executive acknowledges and agrees that Executive has been paid all wages and accrued benefits to which Executive is entitled through the date of execution of this Agreement.  Other than the payments set forth in this Agreement, the Parties agree that the Company owes no additional amounts to Executive for wages, back pay, severance pay, bonuses, damages, accrued vacation, benefits, insurance, sick leave, other leave, or any other reason.  The Parties further agree that all outstanding equity awards granted by the Company and held by Executive, shall be forfeited as of the Termination Date without consideration and without further action by either of the Parties, to the extent such forfeiture is not in conflict or inconsistent with the provisions of this Agreement or the terms of any such outstanding equity award.

(f)Other Representations and Acknowledgements.  This Agreement is intended to and does settle and resolve all claims of any nature that Executive might have against the Company arising out of their employment relationship or the termination of employment or relating to any other matter, except as set forth in Section 3(c).  By signing this Agreement, Executive acknowledges that Executive is doing so knowingly and voluntarily, that Executive understands that Executive may be releasing claims Executive may not know about, and that Executive is waiving all rights Executive may have had under any law that is intended to protect Executive from waiving unknown claims.  Executive warrants that Executive has not filed any lawsuits of any kind whatsoever against the Company or any of the Releasees as of the date of execution of this Agreement.  This Agreement shall not in any way be construed as an admission by the Company or any of the Releasees of wrongdoing or liability or that Executive has any rights against the Company or any of the Releasees.  Executive represents and agrees that Executive has not transferred or assigned, to any person or entity, any claim that Executive is releasing in this Section 3.

(g)Protected Rights.  Executive understands that nothing contained in this Agreement limits Executive’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Securities and Exchange Commission, or any other federal, state or local governmental agency or commission (“Government Agencies”).  Executive further understands that this Agreement does not limit Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agencies in connection with any charge or complaint, whether filed by Executive, on Executive’s behalf, or by any other individual.  However, based on Executive’s release of claims set forth in this Agreement, Executive understands that Executive is releasing all claims that Executive may have, as well as, to the extent permitted by applicable law, Executive’s right to recover monetary damages or obtain other relief that is personal to Executive in connection with any claim Executive is releasing under this Agreement.

Tyrone Johnson Separation Agreement (FINAL)

(h)Representations by the Company.  The Company represents that it is not currently aware of any facts that would form the basis of any legal claims against Executive by the Company, and that the Company has no present intention of initiating any legal proceedings against Executive.

4.Acknowledgment.  The Company hereby advises Executive to consult with an attorney prior to executing this Agreement and Executive acknowledges and agrees that the Company has advised, and hereby does advise, Executive of Executive’s opportunity to consult an attorney or other advisor and has not in any way discouraged Executive from doing so.  Executive expressly acknowledges and agrees that Executive has been offered at least twenty-one (21) days to consider this Agreement before signing it, that Executive has read this Agreement and Release carefully, that Executive has had sufficient time and opportunity to consult with an attorney or other advisor of Executive’s choosing concerning the execution of this Agreement.  Executive acknowledges and agrees that Executive fully understands that the Agreement is final and binding, that it contains a full release of all claims and potential claims, and that the only promises or representations Executive has relied upon in signing this Agreement are those specifically contained in the Agreement itself.  Executive acknowledges and agrees that Executive is signing this Agreement voluntarily, with the full intent of releasing the Company from all claims covered by Section 3.

5.Revocation and Effective Date.  The Parties agree Executive may revoke the Agreement at will within seven (7) days after Executive executes the Agreement by giving written notice of revocation to Company.  Such notice must be delivered to Shawn K. Baldwin, General Counsel of Select Interior Concepts, and must actually be received by him at or before the above-referenced seven-day deadline.  The Agreement may not be revoked after the expiration of the seven-day deadline.  In the event that Executive revokes the Agreement within the revocation period described in this Section 5, this Agreement shall not be effective or enforceable, and all rights and obligations hereunder shall be void and of no effect.  Assuming that Executive does not revoke this Agreement within the revocation period described above, the effective date of this Agreement (the “Effective Date”) shall be the eighth (8^th) day after the day on which Executive executes this Agreement.

6.Status of Other Agreements.  Executive acknowledges and agrees that the Employment Agreement executed by the Parties on or about November 22, 2017, as amended (the “Employment Agreement”) is hereby terminated as of the Effective Date, without further action by the Parties, as of the Termination Date and that Executive is not entitled to any payments or benefits from the Company other than what is provided in this Separation Agreement; provided, however, that this Separation Agreement does not invalidate the other obligations set forth in Section 7 of the Employment Agreement, all of which shall remain in full force and effect in accordance with their terms; provided that Section 7(c)(iii) of the Employment Agreement shall be void and of no force and effect.

7.Confidentiality of Agreement.  Executive agrees not to disclose the terms, amount, or existence of this Agreement or the benefits Executive is receiving under this Agreement to anyone other than a member of Executive’s immediate family, attorney, or other professional advisor and, even as to such a person, only if the person agrees to honor this confidentiality

Tyrone Johnson Separation Agreement (FINAL)

requirement.  Such a person’s violation of this confidentiality requirement will be treated as a violation of this Agreement by Executive.  This Section 7 does not prohibit Executive from disclosing the terms, amount, or existence of this Agreement to the extent necessary legally to enforce this Agreement or to disclose the terms of the protective covenants contained in Section 8 for the benefit of a new employer.  Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing information that is required to be disclosed by law, court order, other valid and appropriate legal process, or a valid request by a Government Agency.

8.Protective Covenants.

a.Acknowledgments.  

i.Consideration.  Executive acknowledges and agrees that he has received good and valuable consideration for entering into this Agreement, including, without limitation, the Company’s provision to him of the Consideration set forth in Section 2 above.

ii.Potential Unfair Competition:  Executive acknowledges and agrees that as a result of his employment with the Company, his knowledge of and access to Confidential Information, and his relationships with the Company’s customers and employees, Executive would have an unfair competitive advantage if Executive were to engage in activities in violation of this Agreement.

iii.No Undue Hardship:  Executive acknowledges and agrees that he possesses marketable skills and abilities that will enable Executive to find suitable employment without violating the covenants set forth in this Agreement.

iv.Voluntary Execution:  Executive acknowledges and affirms that he is executing this Agreement voluntarily, that he has read this Agreement carefully and had a full and reasonable opportunity to consider this Agreement (including an opportunity to consult with legal counsel), and that he has not been pressured or in any way coerced, threatened or intimidated into signing this Agreement.

b.Definitions.  The following capitalized terms used in this Agreement shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms:

i.“Competitive Services” means the business of selecting, importing, distributing, selling and/or installing products for flooring, countertops, kitchen, bathrooms, and patios, including but not limited to tiles or slabs consisting of porcelain, ceramic, granite, marble, onyx, quartz, quartzite, soapstone, coral, shell, limestone, or other similar natural and engineered material.

ii.“Confidential Information” means any and all data and information relating to the Company, its activities, business, or customers that (A) was disclosed to Executive or of which Executive became aware as a consequence of his employment with the Company; (B) has value to the Company; and (C) is not generally known outside of the Company.  “Confidential Information” shall include, but is not limited to the following types of information regarding,

Tyrone Johnson Separation Agreement (FINAL)

related to, or concerning the Company: trade secrets (as defined by applicable law); financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; pricing information; product development techniques or plans; customer lists; customer files, data and financial information; details of customer contracts; current and anticipated customer requirements; identifying and other information pertaining to business referral sources; past, current and planned research and development; computer aided systems, software, strategies and programs; business acquisition plans; management organization and related information (including, without limitation, data and other information concerning the compensation and benefits paid to officers, directors, employees and management); personnel and compensation policies; new personnel acquisition plans; and other similar information.  “Confidential Information” also includes combinations of information or materials which individually may be generally known outside of the Company, but for which the nature, method, or procedure for combining such information or materials is not generally known outside of the Company.  In addition to data and information relating to the Company, “Confidential Information” also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Company by such third party, and that the Company has a duty or obligation to keep confidential.  This definition shall not limit any definition of “confidential information” or any equivalent term under state or federal law.  “Confidential Information” shall not include information that (1) has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company; (2) was available to the Executive on a non-confidential basis prior to its disclosure; (3) becomes available to the Executive from a source other than the Company, provided that the source is not prohibited from disclosing such information to the Executive by a contractual, legal or fiduciary obligation to the Company; or (4) the Executive has independently developed with no reliance on or access to any of the information provided directly or indirectly by the Company.

iii.“Material Contact” means (A) having dealings with a customer or potential customer on behalf of the Company; (B) coordinating or supervising dealings with a customer or potential customer on behalf of the Company; or (C) obtaining Confidential Information about a customer or potential customer in the ordinary course of business as a result of Executive’s employment with the Company.

iv.“Person” means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.

v.“Principal or Representative” means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.

vi.“Protected Customer” means any Person to whom the Company has sold its products or services or actively solicited to sell its products or services, and with whom Executive has had Material Contact on behalf of the Company during his employment with the Company.

vii.“Protective Covenants” means the restrictive covenants contained in Sections 8(c) through (g) hereof.

Tyrone Johnson Separation Agreement (FINAL)

viii.“Restricted Period” means one (1) year from Executive’s Termination Date.

ix.“Termination” means the termination of Executive’s employment with the Company.

c.Restriction on Disclosure and Use of Confidential Information.  Executive agrees that Executive shall not, directly or indirectly, use any Confidential Information on Executive’s own behalf or on behalf of any Person other than Company, or reveal, divulge, or disclose any Confidential Information to any Person not expressly authorized by the Company to receive such Confidential Information.  This obligation shall remain in effect until the earlier of (i) the information or materials in question are no longer Confidential Information as defined herein, or (ii) five (5) years from the Effective Date.  Executive further agrees that he shall fully cooperate with the Company in maintaining the Confidential Information to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company’s rights or Executive’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices.  Anything herein to the contrary notwithstanding, Executive shall not be restricted from: (i) disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided, however, that in the event such disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive; (ii) reporting possible violations of federal, state, or local law or regulation to any governmental agency or entity, or from making other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation, and Executive shall not need the prior authorization of the Company to make any such reports or disclosures and shall not be required to notify the Company that Executive has made such reports or disclosures.  In addition, and anything herein to the contrary notwithstanding, Executive is hereby given notice that Executive shall not be criminally or civilly liable under any federal or state trade secret law for: (iii) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, in either event solely for the purpose of reporting or investigating a suspected violation of law; or (iv) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

d.Non-Solicitation of Protected Customers.  Executive agrees that, during the Restricted Period, he shall not, without the prior written consent of the Company, directly or indirectly, on his own behalf or as a Principal or Representative of any Person, solicit or divert,  or attempt to solicit or divert, a Protected Customer for the purpose of engaging in, providing, or selling Competitive Services.

e.Non-Recruitment of Employees and Independent Contractors.  Executive agrees that during the Restricted Period, he shall not, directly or indirectly, whether on his own behalf or as a Principal or Representative of any Person, recruit, solicit, or induce or attempt to recruit, solicit or induce any employee or independent contractor of the Company to terminate his

Tyrone Johnson Separation Agreement (FINAL)

or her employment or other relationship with the Company or to enter into employment or any other kind of business relationship with the Executive or any other Person.

f.Return of Materials.  Executive agrees that on or prior to the Termination Date, he returned any and all property of the Company that was in his possession or subject to his control by virtue of his position as an executive of the Company, including, but not limited to, customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, email, documents, diskettes, CDs, tapes, keys, access cards, credit cards, identification cards, equipment, computers, mobile devices, other electronic media, all other files and documents relating to the Company and its business (regardless of form, but specifically including all electronic files and data of the Company), together with all Confidential Information belonging to the Company or that Executive received from or through his employment with the Company.  Executive will not make, distribute, or retain copies of any such information or property.  To the extent that Executive has electronic files or information in his possession or control that belong to the Company or contain Confidential Information (specifically including but not limited to electronic files or information stored on personal computers, mobile devices, electronic media, or in cloud storage), on or prior to the Termination Date, or at any other time the Company requests, Executive shall (i) provide the Company with access to all devices containing such files or information, so that the Company may search such devices for Company information and delete relevant files and data; and (ii) provide a written certification to the Company that Executive has no other electronic devices or media containing Confidential Information.  

g.Enforcement of Protective Covenants.

i.Rights and Remedies Upon Breach.  The parties specifically acknowledge and agree that the remedy at law for any breach of the Protective Covenants will be inadequate, and that in the event Executive breaches, or threatens to breach, any of the Protective Covenants, the Company shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Protective Covenants and to have the Protective Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Protective Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company.  Executive understands and agrees that if he violates any of the obligations set forth in the Protective Covenants, the period of restriction applicable to each obligation violated shall cease to run during the pendency of any litigation over such violation, provided that such litigation was initiated during the period of restriction.  Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity.  The parties agree that, if the Parties become involved in legal action regarding the enforcement of the Protective Covenants, the prevailing party will be entitled to recover from the other party its reasonable costs and attorneys’ fees incurred in connection with such litigation regarding the Protective Covenants.  The Company’s ability to enforce its rights under the Protective Covenants or applicable law against

Tyrone Johnson Separation Agreement (FINAL)

Executive shall not be impaired in any way by the existence of a claim or cause of action on the part of Executive based on, or arising out of, this Agreement or any other event or transaction.

ii.Severability and Modification of Covenants.  Executive acknowledges and agrees that each of the Protective Covenants is reasonable and valid in time and scope and in all other respects.  The parties agree that it is their intention that the Protective Covenants be enforced in accordance with their terms to the maximum extent permitted by law.  Each of the Protective Covenants shall be considered and construed as a separate and independent covenant.  Should any part or provision of any of the Protective Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Protective Covenant.  If any of the provisions of the Protective Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Company’s legitimate business interests and may be enforced by the Company to that extent in the manner described above and all other provisions of this Agreement shall be valid and enforceable.

9.Final Agreement.  This Agreement contains the entire agreement between the Company and Executive with respect to the subject matter hereof, and supersedes all prior agreements between the Parties, except as set forth in Section 6 above. The Parties agree that this Agreement may not be modified except by a written document signed by both Parties.  The Parties agree that this Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

10.Governing Law and Jurisdiction.  This Agreement shall be governed by and construed in accordance with the laws of Georgia, without giving effect to its conflict of law principles.  The parties further agree to the state and Federal courts located in Fulton County, Georgia as the exclusive jurisdiction and venue for any dispute arising out of this Agreement and irrevocably waive any claim that such venue is an inconvenient forum.

11.Waiver.  The failure of either party to enforce any of the provisions of this Agreement shall in no way be construed to be a waiver of any such provision.  Any waiver of any provision of this Agreement must be in a writing signed by the party making such waiver.  No waiver of any breach of this Agreement shall be held to be a waiver of any other or subsequent breach.

12.Code Section 409A.This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder.  The tax treatment of the benefits provided under the Agreement is not warranted or guaranteed to Executive, who is responsible for all taxes assessed on any payments made pursuant to this Agreement, whether under Section 409A of the Code or otherwise.  Neither the Company nor its directors, officers, employees or advisers shall be held

Tyrone Johnson Separation Agreement (FINAL)

liable for any taxes, interest, penalties or other monetary amounts owed by Executive as a result of the application of Section 409A of the Code.  Executive’s right to receive any installment payments shall be treated as a right to receive separate and distinct payments for purposes of Section 409A of the Code.

(Signatures on next page)

Tyrone Johnson Separation Agreement (FINAL)

The Parties hereby signify their agreement to these terms by their signatures below.

EXECUTIVE

/s/ Tyrone Johnson

Tyrone Johnson

Date: 06/19/20

SELECT INTERIOR CONCEPTS, INC.

By: /s/ Shawn K Baldwin

Shawn K Baldwin

Title:General Counsel and Corporate Secretary

Date: June 19, 2020

Tyrone Johnson Separation Agreement (FINAL)

EX-10.16

Exhibit 10.16

CONFIDENTIAL SEPARATION, CONSULTING AND RELEASE AGREEMENT

THIS CONFIDENTIAL SEPARATION, CONSULTING AND RELEASE AGREEMENT (the “Agreement”) is effective as of the Effective Date, as defined in Section 6 hereof, by and between Select Interior Concepts, Inc., a Delaware corporation (the “Company”), and Kendall Hoyd (“Executive”). Together, the Company and Executive may be referred to hereinafter as the “Parties.”

RECITALS

WHEREAS, Executive currently serves as President – RDS of the Company;

WHEREAS, the Executive and the Company are currently parties to that certain Employment Agreement dated as of November 22, 2017, as amended (the “Employment Agreement”);

WHEREAS, the Parties have been engaged in negotiations regarding Executive’s separation from service with the Company, and desire to settle all matters between and among them by entering into this Agreement on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the payments, covenants and releases described below, and in consideration of other good and valuable consideration, the receipt and sufficiency of all of which is hereby acknowledged, the Company and Executive agree as follows:

1.Separation from Employment.  Executive hereby resigns from any and all offices, positions, titles in and employment by the Company and its affiliates, effective as of January 4, 2021 (the “Termination Date”).  Until such time, the Employment Agreement will remain in effect except to the extent amended by this Separation Agreement. To the extent not already paid to Executive, within thirty (30) days after the Termination Date, the Company shall pay to Executive (a) all accrued but unpaid base salary through the Termination Date; (b) reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the Termination Date; and (c) cash in lieu of any accrued but unused vacation through the Termination Date.  Additionally, the Company shall timely pay to Executive any benefits accrued or payable to Executive under the Company’s benefit plans (in accordance with the terms of such benefit plans and subject to Section 14 hereof).  Executive will receive by separate letter information regarding Executive’s rights regarding continuation of health insurance under Section 4980B of the Internal Revenue Code (“COBRA”), and to the extent that Executive has such rights, nothing in this Agreement will change or impair those rights.

2.Separation Obligations of the Company.  In consideration of Executive’s promises contained in this Agreement and the Supplemental Release (as defined below), the Company agrees as follows:

(a)Base Severance.  The Company will pay to Executive a total gross amount equal to Executive’s current base salary of Three Hundred Seventy Thousand Four Hundred Seventy Five Dollars ($370,475), less legally required withholdings.  Such amount shall be paid

by the Company to the Executive in twelve (12) equal payments, with the first payment to be made on or about the first day of the next calendar month immediately following the Termination Date, and continuing monthly thereafter on or about the first day of each calendar month until all such payments have been made.

(b)2020 Pro Rata Target Annual Bonus.  On or before March 15, 2021, but not sooner than the Termination Date, the Company will pay to Executive any annual bonus (the “Annual Bonus”) for 2020 that is awarded to the Executive by the Company’s Compensation Committee, which shall be based on actual achievement of established individual, business unit, and Company performance objectives applicable to the Executive.  The Annual Bonus shall be pro-rated for the number of days of the year that the Executive is employed by the Company in 2020.

(c)COBRA Stipend.  The Company shall pay to the executive, each month for twelve (12) months following the Termination Date, an amount equal to the amount the Company would have paid for its share of the premiums for the Executive and his dependents coverage under the Company’s medical plan as if the Executive’s employment had not terminated, less legally required withholdings (the “COBRA Benefit”).  Executive shall remain responsible for timely electing COBRA continuation coverage and making all premium payments associated therewith.

(d)Treatment of Outstanding Stock Awards.  The outstanding stock awards held by Executive as of the Effective Date will be treated as follows:

(i)Restricted Stock Award granted November 22, 2017:  All outstanding restricted shares granted on November 22, 2017 (totaling 6,403 shares) will become fully vested as of the Termination Date.

(ii)Time-Based Restricted Stock Units granted March 4, 2019:  7,782 time-based restricted stock units granted on March 4, 2019 will become fully vested and convert to shares of common stock as of the Termination Date, and 7,781 time-based restricted stock units granted on March 4, 2019 will be forfeited for no consideration.

(iii)Time-Based Restricted Stock Units granted May 13, 2020:  2,917 time-based restricted stock units granted on May 13, 2020 will become fully vested and convert to shares of common stock as of the Termination Date, and 5,833 time-based restricted stock units granted on May 13, 2020 will be forfeited for no consideration.

(iv)Performance-Based Restricted Stock Units granted on March 4, 2019 and May 13, 2020:  All outstanding performance-based restricted stock units will be forfeited for no consideration.

(e)The payments and benefits set forth in Section 2(a) through 2(d) above are referred to herein collectively as the “Consideration.”  The Parties acknowledge and agree that the Consideration exceeds any and all actions, pay, and benefits that the Company might otherwise have owed to Executive by contract or law, and that the Consideration constitutes good, valuable, and sufficient consideration for Executive’s release and agreements herein.  The Company’s obligation to provide the Consideration is expressly contingent upon Executive (i) executing and

not revoking this Agreement pursuant to Section 6 below; (ii) executing and not revoking the Supplemental Release as set forth in Section 7; and (ii) complying with his obligations under the terms of this Agreement.

3. Consulting Engagement.

(a)Engagement as an Independent Contractor.  The Company hereby engages Executive as an independent contractor, and Executive hereby accepts such engagement as an independent contractor, upon the terms and conditions set forth in this Agreement, for the twelve-month period beginning on the Termination Date and ending on the one-year anniversary of the Termination Date (the “Consulting Period”).

(b)Consulting Services.  Unless otherwise agreed in writing by the parties, Executive shall perform and provide advisory consulting services and advice (the “Consulting Services”) as the Company may request in writing from time to time.  Executive shall perform and provide Consulting Services as requested by the Company’s CEO, CFO and/or General Counsel only.  Executive shall perform the Consulting Services in a professional and competent manner. Additionally, during the Consulting Period, Executive agrees to promote the best interest of the Company and to take no actions that in any way damage the public image or reputation of the Company or its affiliates.  In no event will Executive be required to provide Consulting Services at a level that exceeds more than 20% of the average level of bona fide services Executive performed as an employee of the Company prior to the Effective Date.  

(c)Consulting Fees.  During the Consulting Period, the Company will pay Executive monthly consulting fees in the amount of $7,500 per month, subject to Executive’s continued compliance with the obligations under Section 7 of the Employment Agreement and Section 10 of this Agreement.  Company shall also reimburse Executive reasonable travel and incidental expenses that are pre-approved by the Company, and are incurred by Executive in compliance with the Company’s expense reimbursement policies.  

(d)Independent Contractor Relationship.  The parties acknowledge and intend that the relationship of Executive to the Company under this Agreement during the Consulting Period shall be that of an independent contractor.  In performing the Consulting Services under this Agreement, Executive shall complete the Consulting Services according to his own means and methods of work which shall be in the exclusive charge and control of Executive and which shall not be subject to the control or supervision of the Company, except as to the results of the Consulting Services.  Executive shall determine his own working hours and schedule; diligently perform the Consulting Services in a professional and ethical manner; and abide by the Company’s then-current policies or guidelines while at the Company’s facilities (including, without limitation, strict adherence to all Company policies or guidelines with respect to COVID-19).  Executive shall be entirely and solely responsible for his actions or inactions and the actions or inactions of his agents, employees or subcontractors, if any, while performing Consulting Services hereunder.  Executive agrees that he shall not, in any form or fashion, maintain, hold out, represent, state or imply to any other individual or entity that an employer/employee relationship exists between the Company and Executive, his agents and employees, or between the Company and any subcontractor or its agents and employees, and Executive is not granted nor shall he represent that he is granted any right or authority to make any representation or warranty or assume or create any

obligation or responsibility, express or implied, for, on behalf or in the name of the Company, to incur debts for the Company or to bind the Company in any manner whatsoever.

(e)Taxes and Company Benefits.  The parties agree that during the Consulting Period, Executive shall be serving as an independent contractor of the Company, and therefore unless required by law, the Company shall not deduct any federal, state or local taxes or other withholdings from any sums paid Executive hereunder, and Executive hereby agrees to fully and timely pay, and indemnify and hold harmless the Company and each of its affiliates from, any liability for any and all federal, state and local taxes or assessments of any kind arising out of any payment made by the Company to Executive hereunder.  Executive shall be responsible for all tax reporting, tax payments, withholdings, insurance and other payments, expenses and filings required to be made or paid by his agents or employees.  Further, neither Executive nor any of his agents or employees shall be entitled to any benefits provided by the Company to any of its employees, including, without limitation, any retirement plan, insurance program, disability plan, medical benefits plan or any other fringe benefit program sponsored and maintained by the Company for its employees.

4. General Release of Claims and Covenant Not To Sue.  

(a)Executive’s General Release of Claims.  In consideration of the Consideration, Executive on behalf of himself and his agents and successors in interest, hereby UNCONDITIONALLY RELEASES AND DISCHARGES the Company, its successors, subsidiaries, parent companies and its affiliates and each of their respective partners, equity holders, principals and employees), shareholders, assigns, joint ventures, and affiliated companies and all of their respective agents, legal representatives, shareholders, attorneys, employees, members, managers, officers, directors and affiliates (collectively, the “Releasees”)fromALLCLAIMS,LIABILITIES,DEMANDSANDCAUSESOFACTION which he may by law release, whether known or unknown, fixed or contingent, that he may have or claim to have against any Releasee for any reason as of the date of Executive’s execution of this Agreement.  Executive specifically acknowledges and agrees that he is releasing any and all rights under federal, state and local employment laws including without limitation the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 1981, the Americans With Disabilities Act, the Family and Medical Leave Act, the Genetic Information Nondiscrimination Act, the anti-retaliation provisions of the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Equal Pay Act, the Occupational Safety and Health Act, the Worker Adjustment and Retraining Notification Act, the Employee Polygraph Protection Act, the Fair Credit Reporting Act, and any and all other local, state, and federal law claims arising under statute or common law. It is agreed that this is a general release and it is to be broadly construed as a release of all claims, except as set forth in Section 4(b) below.

(b)Exceptions to General Release.  Nothing in this Agreement is intended as, or shall be deemed or operate as, a release by Executive of (i) any rights of Executive under this Agreement; (ii) any other benefits under any agreements with the Company or Company-sponsored benefit plans (e.g., 401(k) benefits); (iii) any rights or claims of Executive for indemnificationor related duties by the Company under any written indemnification agreement, the self-governance documents of the Company, or under applicable law; (iv) any rights to coverage

under any director and officer liability insurance or other insurance policies or any run-off policy thereto; (v) any rightsunder COBRA or similar state law; (vi) any recovery to which Executive may be entitled pursuant to workers’ compensation and unemployment insurance laws; (vii) Executive’s right to challenge the validityof his release of claims under the ADEA; (viii) any rights or claims under federal or state law that cannot, as a matter of law, be waived by private agreement; and (ix) any claims arisingafter the date on which Executive executes thisAgreement.

(c)Covenant Not to Sue.  Except as expressly set forth in Section 4(f) below, Executive further hereby AGREES NOT TO FILE A LAWSUIT or other legal claim or charge against any of the Releasees concerning any claim released by this Agreement.  

(d)Acknowledgement Regarding Payments and Benefits.  Except as expressly provided herein, Executive acknowledges and agrees that Executive has been paid all wages and accrued benefits to which Executive is entitled through the date of execution of this Agreement.  Other than the payments set forth in this Agreement, the Parties agree that the Company owes no additional amounts to Executive for wages, back pay, severance pay, bonuses, damages, accrued vacation, benefits, insurance, sick leave, other leave, or any other reason.  The Parties further agree that all outstanding equity awards granted by the Company and held by Executive, shall be forfeited as of the Termination Date without consideration and without further action by either of the Parties.

(e)Other Representations and Acknowledgements.  This Agreement is intended to and does settle and resolve all claims of any nature that Executive might have against the Company arising out of their employment relationship or the termination of employment or relating to any other matter, except as set forth in Section 4(b).  By signing this Agreement, Executive acknowledges that Executive is doing so knowingly and voluntarily, that Executive understands that Executive may be releasing claims Executive may not know about, and that Executive is waiving all rights Executive may have had under any law that is intended to protect Executive from waiving unknown claims.  Executive warrants that Executive has not filed any lawsuits of any kind whatsoever against the Company or any of the Releasees as of the date of execution of this Agreement.  This Agreement shall not in any way be construed as an admission by the Company or any of the Releasees of wrongdoing or liability or that Executive has any rights against the Company or any of the Releasees.  Executive represents and agrees that Executive has not transferred or assigned, to any person or entity, any claim that Executive is releasing in this Section 4.

(f)Protected Rights.  Executive understands that nothing contained in this Agreement limits Executive’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Securities and Exchange Commission, or any other federal, state or local governmental agency or commission (“Government Agencies”).  Executive further understands that this Agreement does not limit Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agencies in connection with any charge or complaint, whether filed by Executive, on Executive’s behalf, or by any other individual.  However, based on Executive’s release of claims set forth in this Agreement, Executive understands that Executive is releasing all claims that Executive may have, as well as,

to the extent permitted by applicable law, Executive’s right to recover monetary damages or obtain other relief that is personal to Executive in connection with any claim Executive is releasing under this Agreement.

5.Acknowledgment.  The Executive acknowledges that he has had a full and complete opportunity to consult with counsel and other advisors of his own choosing concerning the terms, enforceability and implications of this agreement, and that the Company advised and encouraged Executive to do so prior to executing this Agreement.  The Executive hereby represents and warrants that he was in fact individually represented by legal counsel in negotiating the terms of this Agreement, having sought and received formal advice from Jeffrey D. Easley, a California-barred attorney, with respect to terms, enforceability and implications of this Amendment, and without limiting the foregoing, specifically with respect to the choice of law and arbitration clauses of this Agreement.  Executive expressly acknowledges and agrees that Executive has been offered at least twenty-one (21) days to consider this Agreement before signing it, that Executive has read this Agreement and Release carefully, that Executive has had sufficient time and opportunity to consult with an attorney or other advisor of Executive’s choosing concerning the execution of this Agreement.  Executive acknowledges and agrees that Executive fully understands that the Agreement is final and binding, that it contains a full release of all claims and potential claims, and that the only promises or representations Executive has relied upon in signing this Agreement are those specifically contained in the Agreement itself.  Executive acknowledges and agrees that Executive is signing this Agreement voluntarily, with the full intent of releasing the Company from all claims covered by Section 4.  

6.Revocation and Effective Date.  The Parties agree Executive may revoke the Agreement at will within seven (7) days after Executive executes the Agreement by giving written notice of revocation to Company.  Such notice must be delivered to Shawn K. Baldwin, General Counsel of Select Interior Concepts, and must actually be received by him at or before the above-referenced seven-day deadline.  The Agreement may not be revoked after the expiration of the seven-day deadline.  In the event that Executive revokes the Agreement within the revocation period described in this Section 6, this Agreement shall not be effective or enforceable, and all rights and obligations hereunder shall be void and of no effect.  Assuming that Executive does not revoke this Agreement within the revocation period described above, the effective date of this Agreement (the “Effective Date”) shall be the eighth (8^th) day after the day on which Executive executes this Agreement.

7.Supplemental Release.  In addition to signing this Agreement, Executive agrees that, on the Termination Date or within seven (7) days after the Termination Date, he will sign an additional Supplemental Release of Claims, attached hereto as Exhibit A (the “Supplemental Release”).  The Company’s provision of the Consideration described in Section 2 above is contingent on Executive signing and not revoking both this Agreement and the attached Supplemental Release.

8.Status of Other Agreements.  Executive acknowledges and agrees that the Employment Agreement shall be terminated, without further action by the Parties, as of the Termination Date and that Executive is not entitled to any payments or benefits from the Company

other than what is provided in this Separation Agreement; provided, however, that this Separation Agreement does not invalidate the other obligations set forth in Section 7 of the Employment Agreement, all of which shall remain in full force and effect in accordance with their terms.

9.Confidentiality of Agreement.  Executive agrees not to disclose the terms, amount, or existence of this Agreement or the benefits Executive is receiving under this Agreement to anyone other than a member of Executive’s immediate family, attorney, or other professional advisor and, even as to such a person, only if the person agrees to honor this confidentiality requirement.  Such a person’s violation of this confidentiality requirement will be treated as a violation of this Agreement by Executive.  This Section 9 does not prohibit Executive from disclosing the terms, amount, or existence of this Agreement to the extent necessary legally to enforce this Agreement.  Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing information that is required to be disclosed by law, court order, other valid and appropriate legal process, or a valid request by a Government Agency.

10.Protective Covenants.

a.Acknowledgments.  

i.Consideration.  Executive acknowledges and agrees that he has received good and valuable consideration for entering into this Agreement, including, without limitation, the Company’s provision to him of the Consideration set forth in Section 2 above.

ii.Potential Unfair Competition:  Executive acknowledges and agrees that as a result of his employment with the Company, his knowledge of and access to Confidential Information, and his relationships with the Company’s customers and employees, Executive would have an unfair competitive advantage if Executive were to engage in activities in violation of this Agreement.

iii.No Undue Hardship:  Executive acknowledges and agrees that he possesses marketable skills and abilities that will enable Executive to find suitable employment without violating the covenants set forth in this Agreement.

iv.Voluntary Execution:  Executive acknowledges and affirms that he is executing this Agreement voluntarily, that he has read this Agreement carefully and had a full and reasonable opportunity to consider this Agreement (including an opportunity to consult with legal counsel), and that he has not been pressured or in any way coerced, threatened or intimidated into signing this Agreement.

b.Definitions.  The following capitalized terms used in this Agreement shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms:

i.“Competitive Services” means (A) the business of selecting, importing, distributing, selling and/or installing products for flooring, countertops, kitchen, bathrooms, and patios, including but not limited to tiles or slabs consisting of porcelain, ceramic, granite, marble, onyx, quartz, quartzite, soapstone, coral, shell, limestone, or other similar natural

and engineered material, and (B) the business of providing any other activities, products, or services of the type conducted, authorized, offered, or provided by the Company as of the Termination Date and/or the end of the Consulting Period.

ii.“Confidential Information” means any and all data and information relating to the Company, its activities, business, or customers that (A) was disclosed to Executive or of which Executive became aware as a consequence of either (i) his employment with the Company or (ii) his provision of the Consulting Services; (B) has value to the Company; and (C) is not generally known outside of the Company.  “Confidential Information” shall include, but is not limited to the following types of information regarding, related to, or concerning the Company: trade secrets (as defined by applicable law); financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; pricing information; product development techniques or plans; customer lists; customer files, data and financial information; details of customer contracts; current and anticipated customer requirements; identifying and other information pertaining to business referral sources; past, current and planned research and development; computer aided systems, software, strategies and programs; business acquisition plans; management organization and related information (including, without limitation, data and other information concerning the compensation and benefits paid to officers, directors, employees and management); personnel and compensation policies; new personnel acquisition plans; and other similar information.  “Confidential Information” also includes combinations of information or materials which individually may be generally known outside of the Company, but for which the nature, method, or procedure for combining such information or materials is not generally known outside of the Company.  In addition to data and information relating to the Company, “Confidential Information” also includes any and all data and information relating to or concerning a third party that otherwise meets the definition set forth above, that was provided or made available to the Company by such third party, and that the Company has a duty or obligation to keep confidential.  This definition shall not limit any definition of “confidential information” or any equivalent term under state or federal law.  “Confidential Information” shall not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company.

iii.“Material Contact” means (A) having dealings with a customer or potential customer on behalf of the Company; (B) coordinating or supervising dealings with a customer or potential customer on behalf of the Company; or (C) obtaining Confidential Information about a customer or potential customer in the ordinary course of business as a result of Executive’s employment with the Company or through Executive’s provision of the Consulting Services.

iv.“Person” means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.

v.“Principal or Representative” means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.

vi.“Protected Customer” means any Person to whom the Company has sold its products or services or actively solicited to sell its products or services, and with whom Executive has had Material Contact on behalf of the Company during his employment with the Company or during the Consulting Period.

vii.“Protective Covenants” means the restrictive covenants contained in Sections 10(c) through (g) hereof.

viii.“Restricted Period” means the period beginning on the day after the Executive’s Termination Date and ending (i) with respect to Section 10(d) Non-Competition below, six months after the end of the Consulting Period; and (ii) with respect to Section 10(e) Non-Solicitation of Protected Customers, and Section 10(f) Non-Recruitment of Employees and Independent Contractors below, twelve (12) months after the end of the Consulting Period.

ix.“Restricted Territory”means (A) the following states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming; and (B) any other territory where Employee is working on behalf of the Company during the one (1) year preceding the conduct in question (if the conduct occurs while Employee is still employed by the Company).

x.“Termination” means the termination of Executive’s employment with the Company.

c.Restriction on Disclosure and Use of Confidential Information.  Executive agrees that Executive shall not, directly or indirectly, use any Confidential Information on Executive’s own behalf or on behalf of any Person other than Company, or reveal, divulge, or disclose any Confidential Information to any Person not expressly authorized by the Company to receive such Confidential Information.  This obligation shall remain in effect for as long as the information or materials in question retain their status as Confidential Information.  Executive further agrees that he shall fully cooperate with the Company in maintaining the Confidential Information to the extent permitted by law. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company’s rights or Executive’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices.  Anything herein to the contrary notwithstanding, Executive shall not be restricted from: (i) disclosing information that is required to be disclosed by law, court order or other valid and appropriate legal process; provided, however, that in the event such disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive; (ii) reporting possible violations of federal, state, or local law or regulation to any governmental agency or entity, or from making other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation, and Executive shall not need the prior authorization of the Company to make any such reports or disclosures and shall not be required to

notify the Company that Executive has made such reports or disclosures.  In addition, and anything herein to the contrary notwithstanding, Executive is hereby given notice that Executive shall not be criminally or civilly liable under any federal or state trade secret law for: (iii) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, in either event solely for the purpose of reporting or investigating a suspected violation of law; or (iv) disclosing a trade secret (as defined by 18 U.S.C. § 1839) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

d.Non-Competition.  Executive agrees that, during the Restricted Period, he will not, without prior written consent of the Company, directly or indirectly (i) carry on or engage in Competitive Services within the Restricted Territory on his own or on behalf of any Person or any Principal or Representative of any Person, or (ii) own, manage, operate, join, control or participate in the ownership, management, operation or control, of any business, whether in corporate, proprietorship or partnership form or otherwise where such business is engaged in the provision of Competitive Services within the Restricted Territory.

e.Non-Solicitation of Protected Customers.  Executive agrees that, during the Restricted Period, he shall not, without the prior written consent of the Company, directly or indirectly, on his own behalf or as a Principal or Representative of any Person, solicit, divert, take away, or attempt to solicit, divert, or take away a Protected Customer for the purpose of engaging in, providing, or selling Competitive Services.

f.Non-Recruitment of Employees and Independent Contractors.  Executive agrees that during the Restricted Period, he shall not, directly or indirectly, whether on his own behalf or as a Principal or Representative of any Person, recruit, solicit, or induce or attempt to recruit, solicit or induce any employee or independent contractor of the Company to terminate his or her employment or other relationship with the Company or to enter into employment or any other kind of business relationship with the Executive or any other Person.

g.Return of Materials.  Executive agrees that on or prior to the Termination Date, he returned any and all property of the Company that was in his possession or subject to his control by virtue of his position as an executive of the Company, including, but not limited to, customer files and information, papers, drawings, notes, manuals, specifications, designs, devices, code, email, documents, diskettes, CDs, tapes, keys, access cards, credit cards, identification cards, equipment, computers, mobile devices, other electronic media, all other files and documents relating to the Company and its business (regardless of form, but specifically including all electronic files and data of the Company), together with all Confidential Information belonging to the Company or that Executive received from or through his employment with the Company.  Executive will not make, distribute, or retain copies of any such information or property.  To the extent that Executive has electronic files or information in his possession or control that belong to the Company or contain Confidential Information (specifically including but not limited to electronic files or information stored on personal computers, mobile devices, electronic media, or in cloud storage), on or prior to the Termination Date, or at any other time the Company requests, Executive shall (i) provide the Company with an electronic copy of all of such files or information (in an electronic format that readily accessible by the Company); (ii) after doing so, delete all such files and information, including all copies and derivatives thereof, from all non-Company-owned

computers, mobile devices, electronic media, cloud storage, and other media, devices, and equipment, such that such files and information are permanently deleted and irretrievable; and (iii) provide a written certification to the Company that the required deletions have been completed and specifying the files and information deleted and the media source from which they were deleted.  During the Consulting Period, Executive will not, except as required by law or court order, use any Confidential Information for any purpose whatsoever other than the performance of the Consulting Services, or disclose the Confidential Information to any third party.  Upon the termination of the Consulting Services for any reason, or upon Company’s earlier request, Executive will deliver to Company all of Company’s property or Confidential Information that Executive may have in his possession or control.

h.Enforcement of Protective Covenants.

i.Rights and Remedies Upon Breach.  The parties specifically acknowledge and agree that the remedy at law for any breach of the Protective Covenants will be inadequate, and that in the event Executive breaches, or threatens to breach, any of the Protective Covenants, the Company shall have the right and remedy, without the necessity of proving actual damage or posting any bond, to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Protective Covenants and to have the Protective Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Protective Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company.  Executive understands and agrees that if he is found by a court of competent jurisdiction to have violated any of the obligations set forth in the Protective Covenants, the period of restriction applicable to each obligation violated shall cease to run during the pendency of any litigation over such violation, provided that such litigation was initiated during the period of restriction.  Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity.  Executive understands and agrees that, if the Parties become involved in legal action regarding the enforcement of the Protective Covenants and if the Company prevails in such legal action, the prevailing party will be entitled, in addition to any other remedy, to recover from the other party its reasonable costs and attorneys’ fees incurred in enforcing such covenants.  The Company’s ability to enforce its rights under the Protective Covenants or applicable law against Executive shall not be impaired in any way by the existence of a claim or cause of action on the part of Executive based on, or arising out of, this Agreement or any other event or transaction.

ii.Severability and Modification of Covenants.  Executive acknowledges and agrees that each of the Protective Covenants is reasonable and valid in time and scope and in all other respects.  The parties agree that it is their intention that the Protective Covenants be enforced in accordance with their terms to the maximum extent permitted by law.  Each of the Protective Covenants shall be considered and construed as a separate and independent covenant.  Should any part or provision of any of the Protective Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Protective Covenant.  If any of the provisions of the Protective Covenants should ever be held by a court of competent jurisdiction to exceed the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Company’s legitimate business interests and may be enforced by the

Company to that extent in the manner described above and all other provisions of this Agreement shall be valid and enforceable.

11.Final Agreement.  This Agreement and the Supplemental Release contains the entire agreement between the Company and Executive with respect to the subject matter hereof, and supersedes all prior agreements between the Parties, except as set forth in Section 8 above. The Parties agree that this Agreement may not be modified except by a written document signed by both Parties.  The Parties agree that this Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

12.Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of Georgia, without giving effect to its conflict of law principles.  This Agreement and the legal relations thus created between the parties hereto shall be governed by and construed under and in accordance with the laws of the State of Georgia.  Executive agrees that the exclusive forum for any action seeking temporary or preliminary injunctive relief in accordance with Section 10(h) above shall be the Superior Court of Cobb County, Georgia or the United States District Court for the Northern District of Georgia, Atlanta Division.  With respect to any such court action, Executive and Company hereby (i) irrevocably submit to the personal jurisdiction of such courts; (ii) consents to service of process; (iii) consents to venue; and (iv) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction, service of process, or venue.  Executive and Company further agree that such courts are convenient forums for any dispute that may arise herefrom and that he/it shall raise as a defense that such courts are not convenient forums.

13.Waiver.  This Agreement may be amended only by an instrument in writing signed by the parties hereto, and any provision hereof may be waived only by an instrument in writing signed by the party or parties against whom or which enforcement of such waiver is sought. The failure of any party hereto at any time to require the performance by any other party hereto of any provision hereof shall in no way affect the full right to require such performance at any time thereafter, nor shall the waiver by any party hereto of a breach of any provision hereof be taken or held to be a waiver of any succeeding breach of such provision or a waiver of the provision itself or a waiver of any other provision of this Agreement.

14.Code Section 409A.This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder.  The tax treatment of the benefits provided under the Agreement is not warranted or guaranteed to Executive, who is responsible for all taxes assessed on any payments made pursuant to this Agreement, whether under Section 409A of the Code or otherwise.  Neither the Company nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by Executive as a result of the application of Section 409A of the Code.  Executive’s right to receive any installment payments shall be treated as a right to receive separate and distinct payments for purposes of Section 409A of the Code.

15. Notices.  Any notice or other communication required or permitted under this Agreement shall be effective only if it is in writing and shall be deemed to be given when delivered personally or four (4) days after it is mailed by registered or certified mail, postage prepaid, return receipt requested or one (1) day after it is sent by a reputable overnight courier service and, in each case, addressed as follows (or if it is sent through any other method agreed upon by the parties):

If to the Company:Select Interior Concepts, Inc.

400 Galleria Parkway, Suite 1760

Atlanta, Georgia

ATTN: General Counsel

If to the Executive:Kendall Hoyd

21521 Snag Island Dr. E.

Lake Tapps, WA 98391

or to such other address as any party hereto may designate by notice to the others.

16. Arbitration. To the fullest extent allowed by law, any controversy, claim or dispute between the Executive and the Company (and/or any of its owners, directors, officers, employees, affiliates, or agents) relating to or arising out of the Executive’s employment or the cessation of that employment will be submitted to final and binding arbitration in Cobb County, Georgia in accordance with the American Arbitration Association’s (“AAA”) National Rules for the Resolution of Employment Disputes (which may be found at https://www.adr.org/sites/default/files/Employment%20Rules.pdf), as the exclusive remedy for such controversy, claim or dispute. In any such arbitration, the parties may conduct discovery in accordance with the Federal Rules of Civil Procedure, except that the arbitrator shall have the authority to order and permit discovery as the arbitrator may deem necessary and appropriate in accordance with applicable state or federal discovery statutes. The arbitrator shall issue a reasoned, written decision, and shall have full authority to award all remedies which would be available in court. The arbitrators’ fees and expenses and all administrative fees and expenses associated with the filing of the arbitration shall be borne by Company. Any judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Possible disputes covered by the above include (but are not limited to) unpaid wages, breach of contract, torts, violation of public policy, discrimination, harassment, or any other employment-related claims under laws including but not limited to, Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Age Discrimination in Employment Act, and any other statutes or laws relating to an employee’s relationship with his/her employer, regardless of whether such dispute is initiated by the employee or the Company. Thus, this bilateral arbitration provision applies to any and all claims that the Company may have against the Executive, including, but not limited to, claims for misappropriation of Company property, disclosure of proprietary information or trade secrets, interference with contract, trade libel, gross negligence, or any other claim for alleged wrongful conduct or breach of the duty of loyalty by the Executive. However, nothing herein shall prevent Executive from filing and pursuing proceedings before the United States Equal Employment Opportunity Commission (although if Executive chooses to pursue a claim following the exhaustion of such administrative remedies, that claim would be subject to the provisions of this Agreement). Notwithstanding anything to the contrary contained herein, the Company and the

Executive shall have their respective rights to seek and obtain temporary or preliminary injunctive relief from a court of competent jurisdiction with respect to any controversy, claim or dispute to the extent permitted by applicable law. BY AGREEING TO THIS BINDING ARBITRATION PROVISION, BOTH EXECUTIVE AND THE COMPANY GIVE UP ALL RIGHTS TO TRIAL BY JURY. This arbitration provision is to be construed as broadly as is permissible under applicable law. Executive and Company acknowledge and agree that their obligations to arbitrate under this Agreement survive the termination of this Agreement and continue after the termination of the employment relationship between Executive and Company.

17.Agreement Negotiated. The parties hereto acknowledge and agree that each party has reviewed and negotiated the terms and provisions of this Agreement and has had the opportunity to contribute to its revision. Accordingly, the rule of construction to the effect that ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Agreement. Rather, the terms of this Agreement shall be construed fairly as to both parties hereto and not in favor or against either party.

18.Counterparts; Headings. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. A facsimile or PDF of a signature shall be deemed to be and have the effect of an original signature.  The headings in this Agreement are inserted for convenience of reference only and shall not be a part of or control or affect the meaning of any provision hereof.

(Signatures on next page)

The Parties hereby signify their agreement to these terms by their signatures below.

EXECUTIVE

/s/ Kendall Hoyd

Kendall Hoyd

Date: 11/04/2020

SELECT INTERIOR CONCEPTS, INC.

By: /s/ Shawn K Baldwin

Title:General Counsel

Date: 11/04/2020

Exhibit A

SUPPLEMENTAL RELEASE OF CLAIMS

1.General Release of Claims.   This Supplemental Release of Claims (the “Supplemental Release”) releases all claims against Select Interior Concepts, Inc. (the “Company”) that may have arisen between the date Executive signed the CONFIDENTIAL SEPARATION, CONSULTING AND RELEASE AGREEMENT on November [ ], 2020 (the “Agreement”), and the Termination Date (as defined in the Agreement).  By signing this Supplemental Release, and in return for the Consideration set forth in Section 2 of the Agreement, Executive on behalf of himself and his agents and successors in interest, hereby UNCONDITIONALLY RELEASES AND DISCHARGES the Company, its successors, subsidiaries, parent companies and its affiliates and each of their respective partners, equity holders, principals and employees), shareholders, assigns, joint ventures, and affiliated companies and all of their respective agents, legal representatives, shareholders, attorneys, employees, members, managers, officers, directors and affiliates (collectively, the “Releasees”)fromALLCLAIMS,LIABILITIES,DEMANDSANDCAUSESOFACTION which he may by law release, whether known or unknown, fixed or contingent, that he may have or claim to have against any Releasee for any reason as of the date of Executive’s execution of this Supplemental Release.  Executive specifically acknowledges and agrees that he is releasing any and all rights under federal, state and local employment laws including without limitation the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 1981, the Americans With Disabilities Act, the Family and Medical Leave Act, the Genetic Information Nondiscrimination Act, the anti-retaliation provisions of the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Equal Pay Act, the Occupational Safety and Health Act, the Worker Adjustment and Retraining Notification Act, the Employee Polygraph Protection Act, the Fair Credit Reporting Act, and any and all other local, state, and federal law claims arising under statute or common law. It is agreed that this is a general release and it is to be broadly construed as a release of all claims, except as set forth in Section 2 below.

2.Exceptions to General Release.  Nothing in this Supplemental Release is intended as, or shall be deemed or operate as, a release by Executive of (i) any rights of Executive under the Agreement; (ii) any other benefits under any agreements with the Company or Company-sponsored benefit plans (e.g., 401(k) benefits); (iii) any rights or claims of Executive for indemnificationor related duties by the Company under any written indemnification agreement, the self-governance documents of the Company, or under applicable law; (iv) any rights to coverage under any director and officer liability insurance or other insurance policies or any run-off policy thereto; (v) any rightsunder COBRA or similar state law; (vi) any recovery to which Executive may be entitled pursuant to workers’ compensation and unemployment insurance laws; (vii) Executive’s right to challenge the validity of his release of claims under the ADEA; (viii) any rights or claims under federal or state law that cannot, as a matter of law, be waived by private agreement; and (ix) any claims arisingafter the date on which Executive executes thisSupplemental Release.

3.Covenant Not to Sue.  Except as expressly set forth in Section 6 below, Executive further hereby AGREES NOT TO FILE A LAWSUIT or other legal claim or charge against any of the Releasees concerning any claim released by this Supplemental Release.

4.Acknowledgement Regarding Payments and Benefits.  Except as expressly provided herein, Executive acknowledges and agrees that Executive has been paid all wages and accrued benefits to which Executive is entitled through the date of execution of this Supplemental Release.  Other than the payments set forth in the Agreement, the Parties agree that the Company owes no additional amounts to Executive for wages, back pay, severance pay, bonuses, damages, accrued vacation, benefits, insurance, sick leave, other leave, or any other reason.  Other than as set forth in the Agreement, the Parties further agree that all outstanding equity awards granted by the Company and held by Executive, shall be forfeited as of the Termination Date without consideration and without further action by either of the Parties.

5.Other Representations and Acknowledgements.  The Agreement and this Supplemental Release are intended to and do settle and resolve all claims of any nature that Executive might have against the Company arising out of their employment relationship or the termination of employment or relating to any other matter, except as set forth in Section 2 above.  By signing this Supplemental Release, Executive acknowledges that Executive is doing so knowingly and voluntarily, that Executive understands that Executive may be releasing claims Executive may not know about, and that Executive is waiving all rights Executive may have had under any law that is intended to protect Executive from waiving unknown claims.  Executive warrants that Executive has not filed any lawsuits of any kind whatsoever against the Company or any of the Releasees as of the date of execution of this Supplemental Release.  This Supplemental Release shall not in any way be construed as an admission by the Company or any of the Releasees of wrongdoing or liability or that Executive has any rights against the Company or any of the Releasees.  Executive represents and agrees that Executive has not transferred or assigned, to any person or entity, any claim that Executive is releasing in this Supplemental Release.

6.Protected Rights.  Executive understands that nothing contained in this Supplemental Release limits Executive’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Securities and Exchange Commission, or any other federal, state or local governmental agency or commission (“Government Agencies”).  Executive further understands that this Supplemental Release does not limit Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agencies in connection with any charge or complaint, whether filed by Executive, on Executive’s behalf, or by any other individual.  However, based on Executive’s release of claims set forth in this Supplemental Release, Executive understands that Executive is releasing all claims that Executive may have, as well as, to the extent permitted by applicable law, Executive’s right to recover monetary damages or obtain other relief that is personal to Executive in connection with any claim Executive is releasing under this Supplemental Release.

7.Acknowledgment.  The Executive acknowledges that he has had a full and complete opportunity to consult with counsel and other advisors of his own choosing concerning the terms, enforceability and implications of this Supplemental Release, and that the Company advised and encouraged Executive to do so prior to executing this Supplemental Release.  Executive expressly acknowledges and agrees that Executive has been offered at least twenty-one (21) days to consider this Supplemental Release before

signing it, that Executive has read the Agreement and this Supplemental Release carefully, that Executive has had sufficient time and opportunity to consult with an attorney or other advisor of Executive’s choosing concerning the execution of this Supplemental Release.  Executive acknowledges and agrees that Executive fully understands that this Supplemental Release is final and binding, that it contains a full release of all claims and potential claims, and that the only promises or representations Executive has relied upon in signing this Supplemental Release are those specifically contained in the Agreement and this Supplemental Release.  Executive acknowledges and agrees that Executive is signing this Supplemental Release voluntarily, with the full intent of releasing the Company from all claims covered by this Supplemental Release.  

8.Revocation and Effective Date.  The Parties agree Executive may revoke this Supplemental Release at will within seven (7) days after Executive executes the Supplemental Release by giving written notice of revocation to Company.  Such notice must be delivered to Shawn K. Baldwin, General Counsel of Select Interior Concepts, and must actually be received by him at or before the above-referenced seven-day deadline.  The Supplemental Release may not be revoked after the expiration of the seven-day deadline.  In the event that Executive revokes the Supplemental Release within the revocation period described in this Section 8, this Supplemental Release shall not be effective or enforceable, and all rights and obligations hereunder shall be void and of no effect.  Assuming that Executive does not revoke this Supplemental Release within the revocation period described above, the effective date of this Supplemental Release shall be the eighth (8^th) day after the day on which Executive executes this Supplemental Release.

Accepted and agreed to:

Print Name:

Signature:  

Dated:

EX-10.30

Exhibit 10.30

EXECUTION VERSION

TENTH AMENDMENT
TO FINANCING AGREEMENT

TENTH AMENDMENT TO FINANCING AGREEMENT, dated as of March 10, 2021 (this "Amendment"), to the Financing Agreement, dated as of February 28, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the "Financing Agreement"), by and among ARCHITECTURAL GRANITE & MARBLE, LLC, a Delaware limited liability company ("AGM"), PENTAL GRANITE AND MARBLE, LLC, a Washington limited liability company ("Pental" and together with AGM and each Subsidiary of Ultimate Parent (as defined therein) that executes a joinder agreement and becomes a "Borrower" thereunder, each a "Borrower" and collectively, the "Borrowers"), the financial institutions from time to time party thereto as lenders (collectively, the "Lenders") and CERBERUS BUSINESS FINANCE, LLC ("Cerberus"), as agent for the Lenders (in such capacity, the "Agent").

WHEREAS, the Obligors have requested that the Agent and the Lenders amend certain terms and conditions of the Financing Agreement;

WHEREAS, the Agent and the Lenders are willing to amend such terms and conditions of the Financing Agreement on the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.   Definitions.  All terms used herein that are defined in the Financing Agreement and not otherwise defined herein shall have the meanings assigned to them in the Financing Agreement.  

2.   Amendments.  The Financing Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example:  stricken text) and to add the bold and double-underlined text (indicated textually in the same manner as the following example:  bold and double-underlined text) as set forth on the pages of the Financing Agreement attached as Annex A hereto.

3.   Representations and Warranties.  Each Obligor hereby represents and warrants to the Agent and the Lenders as follows:

(a)   Representations and Warranties; No Event of Default.  The representations and warranties of Borrower and each other Obligor contained herein and in Section 8 of the Financing Agreement or any other Loan Document are true and correct in all material respects (except that any such representations and warranties that are subject to materiality or Material Adverse Effect qualifiers shall be true and correct in all respects) on and as of the Tenth Amendment Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (except that any such representations and warranties that are subject to materiality or Material Adverse Effect qualifiers shall be true and correct in all respects) as of such earlier date, and no Default or Event of Default shall have occurred and be continuing on the

Tenth Amendment Effective Date or would result from this Amendment becoming effective in accordance with its terms.

(b)   Organization, Good Standing, Etc.Each Obligor and its Subsidiaries, is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing under the laws of the state or jurisdiction of its organization.  Each Obligor and its Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except (solely for the purposes of this subclause) where the failure to be so qualified and in good standing could not reasonably be expected to have a Material Adverse Effect

(c)   Authorization, Etc.  Each Obligor and its Subsidiaries are duly authorized to execute, deliver and perform this Amendment and each other Loan Document to which it is or will be a party.  The execution, delivery and performance of the Financing Agreement, as amended hereby, and each other Loan Documents have been duly authorized by all necessary action, and do not (a) require any consent or approval of any holders of Equity Interests of any Obligor or any Subsidiary of an Obligor, except those already obtained; (b) contravene the Organic Documents of any Obligor or any Subsidiary of an Obligor; (c) violate or cause a default under any Applicable Law or Material Contract; or (d) result in or require the imposition of a Lien (other than Permitted Liens) on Borrower's Property.

(d)   Enforceability of Loan Documents.  This Amendment, the Financing Agreement as amended by this Amendment, and each other Loan Document to which any Obligor is a party, when delivered hereunder, will be, a legal, valid and binding obligation of each Obligor party thereto, enforceable against such Obligor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally.

4.   Conditions to Effectiveness of the Amendment.  This Amendment shall become effective only upon the satisfaction in full, in a manner reasonably satisfactory to the Agent, of the following conditions precedent (the first date upon which all such conditions shall have been satisfied (or waived) being hereinafter referred to as the "Tenth Amendment Effective Date"):

(a)   Payment of Fees, Etc.  The Borrowers shall have paid on or before the Tenth Amendment Effective Date all fees, costs, expenses and taxes required to paid pursuant to Sections 3.2 and 3.4 of the Financing Agreement.

(b)   Representations and Warranties.  The representations and warrantiesof Borrower and each other Obligor contained in this Amendment and in Section 8 of the Financing Agreement or any other Loan Document are true and correct in all material respects (except that any such representations and warranties that are subject to materiality or Material Adverse Effect qualifiers shall be true and correct in all respects) on and as of the Tenth Amendment Effective Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material

respects (except that any such representations and warranties that are subject to materiality or Material Adverse Effect qualifiers shall be true and correct in all respects) as of such earlier date.

(c)   No Default; Event of Default.  No Default or Event of Default shall have occurred and be continuing on the Tenth Amendment Effective Date or would result from this Amendment becoming effective in accordance with its terms.

(d)   Delivery of Documents.  The Agent shall have received on or before the Tenth Amendment Effective Date the following, each in form and substance reasonably satisfactory to the Agent and, unless indicated otherwise, dated the Tenth Amendment Effective Date:

(i)this Amendment, duly executed by the Obligors, each Agent and each Lender; and

(ii)a certificate of an Authorized Officer of AGM, for itself and on behalf of the other Obligors, certifying as to the matters set forth in subsections (b) and (c) of this Section 4.

5.   Continued Effectiveness of the Financing Agreement and Other Loan Documents.  

(a)   Each Obligor confirms that all of its Obligations under the Financing Agreement and the Loan Documents (each as amended by this Amendment) are in full force and effect and are performable in accordance with their respective terms without setoff, defense, counter-claim or claims in recoupment.  Each Obligor hereby ratifies and confirms the Liens and security interests granted under the Financing Agreement and the Loan Documents and further ratifies and agrees that such Liens and security interests secure all obligations and indebtedness now, hereafter or from time to time made by, owing to or arising in favor of the Agent pursuant to the Financing Agreement and the Loan Documents (as now, hereafter or from time to time amended).

(b)   Each Obligor agrees that at any time and from time to time, upon the written request of Agent, such Obligor will execute and deliver such further documents and do such further acts and things as the Agent may reasonably request in order to effect the provisions of this Amendment.

(c)   Upon the effectiveness of this Amendment, each reference in the Financing Agreement to "this Financing Agreement," "hereunder," "hereof," "herein" or words of similar import shall mean and be a reference to the Financing Agreement as amended hereby.

6.   No Novation.  Nothing herein contained shall be construed as a substitution or novation of the Obligations outstanding under the Financing Agreement or instruments securing the same, which shall remain in full force and effect, except as modified hereby.  

7.   No Representations by Agent or Lenders.  Each Obligor hereby acknowledges that it has not relied on any representation, written or oral, express or implied, by

any Agent or any Lender, other than those expressly contained herein, in entering into this Amendment.

8.   Release.  Each Obligor hereby acknowledges and agrees that:  (a) neither it nor any of its Subsidiaries has any claim or cause of action against any Agent or any Lender (or any of the directors, officers, employees, Agent, attorneys or consultants of any of the foregoing) and (b) the Agent and the Lenders have heretofore properly performed and satisfied in a timely manner all of their obligations to the Obligors, and all of their Subsidiaries and Affiliates.  Notwithstanding the foregoing, the Agent and the Lenders wish (and the Obligors agree) to eliminate any possibility that any past conditions, acts, omissions, events or circumstances would impair or otherwise adversely affect any of their rights, interests, security and/or remedies.  Accordingly, for and in consideration of the agreements contained in this Amendment and other good and valuable consideration, each Obligor (for itself and its Subsidiaries and Affiliates and the successors, assigns, heirs and representatives of each of the foregoing) (collectively, the "Releasors") does hereby fully, finally, unconditionally and irrevocably release, waive and forever discharge the Agent and the Lenders, together with their respective Affiliates and Related Funds, and each of the directors, officers, employees, Agent, attorneys and consultants of each of the foregoing (collectively, the "Released Parties"), from any and all debts, claims, allegations, obligations, damages, costs, attorneys' fees, suits, demands, liabilities, actions, proceedings and causes of action, in each case, whether known or unknown, contingent or fixed, direct or indirect, and of whatever nature or description, and whether in law or in equity, under contract, tort, statute or otherwise, which any Releasor has heretofore had or now or hereafter can, shall or may have against any Released Party by reason of any act, omission or thing whatsoever done or omitted to be done, in each case, on or prior to the Tenth Amendment Effective Date directly arising out of, connected with or related to this Amendment, the Financing Agreement or any other Loan Document, or any act, event or transaction related or attendant thereto, or the agreements of any Agent or any Lender contained therein, or the possession, use, operation or control of any of the assets of any Obligor, or the making of any Loans or other advances, or the management of such Loans or other advances or the Collateral.  Each Obligor represents and warrants that it has no knowledge of any claim by any Releasor against any Released Party or of any facts or acts or omissions of any Released Party which on the date hereof would be the basis of a claim by any Releasor against any Released Party which would not be released hereby.  

9.   Further Assurances. The Obligors shall execute any and all further documents, agreements and instruments, and take all further actions, as may be required under Applicable Law or as any Agent may reasonably request, in order to effect the purposes of this Amendment.

10.   Miscellaneous.

(a)   This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of this Amendment by facsimile or electronic mail shall be equally effective as delivery of an original executed counterpart of this Amendment.  

(b)   Section and paragraph headings herein are included for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

(c)   This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.

(d)   Each Obligor hereby acknowledges and agrees that this Amendment constitutes a "Loan Document" under the Financing Agreement.  Accordingly, it shall be an Event of Default under the Financing Agreement, as and when provided in Section 10.1 of the Financing Agreement, if (i) any representation or warranty made by a Obligor under or in connection with this Amendment shall have been incorrect in any material respect when made, or (ii) a Obligor shall fail to perform or observe any term, covenant or agreement contained in this Amendment.

(e)   Any provision of this Amendment that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

(f)   The Borrowers hereby affirm their obligation under, and to the extent contemplated by, Section 3.4 of the Financing Agreement to reimburse Agent for all reasonable and documented out-of-pocket expenses incurred by Agent in connection with the preparation, negotiation, execution and delivery of this Amendment, including but not limited to legal costs and expenses with respect thereto.

[Remainder of page intentionally left blank.]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered as of the date set forth on the first page hereof.

BORROWERS:
ARCHITECTURAL GRANITE & MARBLE, LLC
By:	Architectural Surfaces Group, LLC, its Sole Member
	By:	SIC Intermediate, Inc., its Sole Member
By:	/s/ Nadeem Moiz
	Name:		Nadeem Moiz
	Title:		Chief Financial Officer
PENTAL GRANITE & MARBLE, LLC
By:	Architectural Granite & Marble, LLC, its Sole Member
	By:		Architectural Surfaces Group, LLC, its Sole Member
			By:	SIC Intermediate, Inc., its Sole Member
By:	/s/ Nadeem Moiz
	Name:		Nadeem Moiz
	Title:		Chief Financial Officer

[Tenth Amendment to Financing Agreement]

AGENT:
CERBERUS BUSINESS FINANCE, LLC
By:	/s/ Daniel E. Wolf
	Name: Daniel E. Wolf
	Title: Chief Executive Officer

LENDERS:
CERBERUS AUS LEVERED II LP
By:	CAL II GP LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Vice President
CERBERUS CAVALIERS LEVERED II LLC
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Vice President
CERBERUS FSBA LEVERED LLC
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Vice President
CERBERUS ICQ OFFSHORE LEVERED LP
By:	Cerberus ICQ Offshore GP LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS LOAN FUNDING XVIII L.P.
By:	Cerberus LFGP XVIII, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS LOAN FUNDING XIX L.P.
By:	Cerberus LFGP XIX, LLC
Its:	General Partner

By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS LOAN FUNDING XX L.P.
By:	Cerberus LFGP XX, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS LOAN FUNDING XXI L.P.
By:	Cerberus LFGP XXI, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS LOAN FUNDING XXII L.P.
By:	Cerberus LFGP XXII, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS LOAN FUNDING XXIII L.P.
By:	Cerberus LFGP XXIII, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS LOAN FUNDING XXIV L.P.
By:	Cerberus LFGP XXIV, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director

CERBERUS LOAN FUNDING XXV LP
By:	Cerberus LFGP XXV, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS LOAN FUNDING XXVI L.P.
By:	Cerberus LFGP XXVI, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS LOAN FUNDING XXVII L.P.
By:	Cerberus LFGP XXVII, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS LOAN FUNDING XXIX L.P.
By:	Cerberus LFGP XXIX, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS LOAN FUNDING XXX L.P.
By:	Cerberus LFGP XXX, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS ND LEVERED LLC
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Vice President

CERBERUS N-1 FUNDING LLC
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Vice President
CERBERUS OFFSHORE LEVERED III LP
By:	COL III GP Inc.
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Vice President
CERBERUS OFFSHORE LEVERED LOAN
OPPORTUNITIES MASTER FUND III, L.P.
By:	Cerberus Offshore Levered Opportunities III GP, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
CERBERUS ONSHORE LEVERED III LLC
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Vice President
CERBERUS STEPSTONE LEVERED LLC
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Vice President
CERBERUS SWC LOAN OPPORTUNITIES MASETER FUND II, L.P.
By:	Cerberus SWC Loan Opportunities II GP, LLC
Its:	General Partner
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director

CERBERUS SWC LEVERED II LLC
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Vice President
Reliance Standard Life Insurance Company
By:	CBF-D Manager, LLC
Its:	Investment Manager
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director
SAFETY NATIONAL CASUALTY CORPORATION
By:	CBF-D Manager, LLC
Its:	Investment Manager
By:	/s/ Daniel E. Wolf
Name:	Daniel E. Wolf
Title:	Senior Managing Director

ANNEX A

Amended Financing Agreement

(To be attached)

Signature Page to Loan and Security Agreement

#31311017

FINANCING AGREEMENT

Dated as of February 28, 2017

ARCHITECTURAL GRANITE & MARBLE, LLC AND EACH OF

ITS SUBSIDIARIES LISTED AS A BORROWER ON THE

SIGNATURE PAGES HERETO,

as Borrowers,

the financial institutions party hereto from time to time as lenders,

and

CERBERUS BUSINESS FINANCE, LLC,

as Agent

Signature Page to Loan and Security Agreement

#31311017

Table of Contents

Page

1.		DEFINITIONS; RULES OF CONSTRUCTION	1
	1.1	Definitions	1
	1.2	Accounting Terms	35
	1.3	Uniform Commercial Code	35
	1.4	Certain Matters of Construction	35
	1.5	Time of Day	36
	1.6	Effectiveness of Borrowers	36
2.		CREDIT FACILITIES	36
	2.1	Term Loan Commitment	36
3.		INTEREST, FEES AND CHARGES	38
	3.1	Interest	38
	3.2	Fees	39
	3.3	Computation of Interest, Fees, Yield Protection	40
	3.4	Reimbursement Obligations	40
	3.5	Illegality	40
	3.6	Inability to Determine Rates	40
	3.7	Increased Costs; Capital Adequacy	40
	3.8	Mitigation Obligations; Replacement of Lenders	42
	3.9	Funding Losses	43
	3.10	Maximum Interest	43
4.		LOAN ADMINISTRATION	44
	4.1	Intentionally Omitted	44
	4.2	Defaulting Lender	44
	4.3	Intentionally Omitted	44
	4.4	One Obligation	44
	4.5	Effect of Termination	45
5.		PAYMENTS	45
	5.1	General Payment Provisions	45
	5.2	Repayment of Term Loans	45
	5.3	Payment of Other Obligations	48
	5.4	Intentionally Omitted	48
	5.5	Marshaling; Payments Set Aside	48
	5.6	Application of Payments	48
	5.7	Account Stated	49
	5.8	Taxes	49
	5.9	Lender Tax Information	51

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Table of Contents

(continued)

Page

6.		CONDITIONS PRECEDENT.	53
	6.1	Conditions Precedent to Initial Term Loans	53
	6.2	Conditions Precedent to All Credit Extensions	53
	6.3	Conditions Precedent to Additional Term Loans	53
	6.4	Conditions Precedent to Second Additional Term Loans	54
	6.5	Conditions Precedent to Third Additional Term Loans	54
7.		CERTAIN COLLATERAL/FURTHER ASSURANCES	54
	7.1	Real Estate Collateral	54
	7.2	Cash Collateral	54
	7.3	Extent of Liens	54
8.		REPRESENTATIONS AND WARRANTIES	55
	8.1	General Representations and Warranties	55
	8.2	Complete Disclosure	62
9.		COVENANTS AND CONTINUING AGREEMENTS	62
	9.1	Affirmative Covenants	62
	9.2	Negative Covenants	67
	9.3	Financial Covenants	73
10.		EVENTS OF DEFAULT; REMEDIES ON DEFAULT	74
	10.1	Events of Default	74
	10.2	Remedies upon Default	77
	10.3	License	77
	10.4	Setoff	78
	10.5	Remedies Cumulative; No Waiver	78
11.		AGENT	78
	11.1	Appointment, Authority and Duties of Agent	78
	11.2	Agreements Regarding Collateral and Borrower Materials	80
	11.3	Reliance by Agent	80
	11.4	Action Upon Default	81
	11.5	Ratable Sharing	81
	11.6	Indemnification	81
	11.7	Limitation on Responsibilities of Agent	81
	11.8	Successor Agent and Co-Agents	82
	11.9	Due Diligence and Non-Reliance	82
	11.10	Remittance of Payments and Collections	83
	11.11	Individual Capacities	83
	11.12	Titles	84

-ii-

Table of Contents

(continued)

Page

	11.13	No Third-Party Beneficiaries	84
12.		BENEFIT OF AGREEMENT; ASSIGNMENTS	84
	12.1	Successors and Assigns	84
	12.2	Participations	84
	12.3	Assignments	85
	12.4	Replacement of Certain Lenders	87
13.		MISCELLANEOUS	87
	13.1	Amendments and Waivers	87
	13.2	Power of Attorney	88
	13.3	Indemnity	88
	13.4	Notices and Communications	88
	13.5	Performance of Borrowers' Obligations	90
	13.6	Credit Inquiries	90
	13.7	Severability	90
	13.8	Cumulative Effect; Conflict of Terms	90
	13.9	Counterparts; Execution	90
	13.10	Entire Agreement	91
	13.11	Relationship with Lenders	91
	13.12	No Control; No Advisory or Fiduciary Responsibility	91
	13.13	Confidentiality	91
	13.14	[Reserved]	92
	13.15	GOVERNING LAW	92
	13.16	Consent to Forum	92
	13.17	Waivers by Borrowers	93
	13.18	Patriot Act Notice	93
	13.19	Intercreditor Agreement	93
	13.20	NO ORAL AGREEMENT	94

-iii-

LIST OF SCHEDULES

Schedule 2.1	Term Loan Commitments
Schedule 8.1.4	Names and Capital Structure
Schedule 8.1.10	Brokerage Commission
Schedule 8.1.11	Patents, Trademarks, Copyrights and Licenses
Schedule 8.1.13	Environmental Matters
Schedule 8.1.14	Restrictive Agreements
Schedule 8.1.15	Litigation
Schedule 8.1.17	Pension Plans
Schedule 8.1.27	Material Contracts
Schedule 9.1.9	Deposit Accounts
Schedule 9.1.10	Business Locations
Schedule 9.2.2	Existing Liens
Schedule 9.2.17	Existing Affiliate Transactions

-iv-

EXHIBITS

Exhibit A-1	Assignment and Acceptance
Exhibit A-2	Assignment Notice
Exhibit B	Form of Compliance Certificate
Exhibit C	Conditions Precedent
Exhibit D	Financial Reporting
Exhibit E	Notice Requirements
Exhibit F	Post Closing
Exhibit G	Form of Joinder Agreement
Exhibit H	Additional Term Loan Conditions Precedent
Exhibit I	Post Fifth Amendment Effective Date Obligations
Exhibit J	Second Additional Term Loan Conditions Precedent
Exhibit K	Third Additional Term Loan Conditions Precedent

-v-

FINANCING AGREEMENT

THIS FINANCING AGREEMENT is dated as of February 28, 2017, among ARCHITECTURAL GRANITE & MARBLE, LLC, a Delaware limited liability company ("AGM"), as the initial borrower, and immediately upon the consummation of the Pental Acquisition (as defined herein), PENTAL GRANITE AND MARBLE, LLC, a Washington limited liability company ("Pental" and together with AGM and each Subsidiary of Ultimate Parent (as defined herein) that executes a joinder agreement and becomes a "Borrower" hereunder, each a “Borrower” and collectively, the "Borrowers"), the financial institutions party hereto from time to time as lenders (collectively, the "Lenders") and CERBERUS BUSINESS FINANCE, LLC ("Cerberus"), as agent for the Lenders (in such capacity, the "Agent").  

R E C I T A L S:

Borrowers have requested that Lenders provide a credit facility to Borrowers to finance their business.  Lenders are willing to provide the credit facility on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, for valuable consideration hereby acknowledged, the parties agree as follows:

11.   DEFINITIONS; RULES OF CONSTRUCTION

(a)   Definitions.  As used herein, the following terms have the meanings set forth below:

ABL Priority Collateral: has the meaning specified therefor in the Intercreditor Agreement.

ABL Priority Collateral Proceeds: the Proceeds of the ABL Priority Collateral.

A&I:  means collectively, Accents & Interiors, Inc., a Washington corporation and A&I Stone, Inc., a Washington corporation.

A&I Acquisition:  the consummation of the acquisition by Lark of the A&I Acquisition Assets pursuant to the terms of the A&I Acquisition Agreement and the transactions in connection therewith.

A&I Acquisition Agreement: that certain Asset Purchase Agreement between Lark, A&I, and the equityholders of A&I party thereto, together with all exhibits, schedules and annexes thereto.

A&I Acquisition Assets: shall have the meaning of “ Purchased Assets” as set forth in the A&I Acquisition Agreement.

A&I Acquisition Documents:  the A&I Acquisition Agreement, together with all other material agreements, instruments and other documents entered into or delivered in connection with the A&I Acquisition.

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A&I Collateral Assignment: the Collateral Assignment of A&I Acquisition Documents, dated as of the date hereof, reasonably satisfactory to the Agent, made by Lark in favor of the Agent.

Additional Term Loan: a loan made pursuant to Section 2.1.2.

Additional Term Loan Commitment:  for any Lender, the obligation of such Lender to make an Additional Term Loan hereunder, up to the principal amount shown on Schedule 2.1.

Additional Term Loan Commitment Expiry Date: January 31, 2018.

Additional Term Loan Commitments: means the aggregate amount of such commitments of all Lenders.

Additional Term Loan Funding Date: has the meaning specified therefor in Section 3.2(c).

Adjusted Working Capital: means the remainder of (a) the consolidated current assets of the Obligors minus the amount of cash and cash equivalents included in such consolidated current assets, minus (b) the consolidated current liabilities of the Obligors minus the amount of consolidated short-term Debt (including current maturities of long-term Debt) of the Obligors included in such consolidated current liabilities.

Affiliate: with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.  "Control" means either (a) the power to vote, or the beneficial ownership of, 10% or more of the voting Stock of such Person (either directly or through the ownership of Stock Equivalents) having ordinary voting power for the election of directors or managers or for material transactions or (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  "Controlling" and "Controlled" have correlative meanings.  Notwithstanding anything herein to the contrary, unless expressly stated otherwise, in no event shall any portfolio company of any Sponsor (other than the Obligors and their respective Subsidiaries and any direct or indirect parent company of any such Obligor or Subsidiary) be considered an "Affiliate" of any Obligor.

Agent Indemnitees: Agent and its officers, directors, employees, Affiliates, agents and attorneys.

Agent Professionals: attorneys, accountants, appraisers, auditors, business valuation experts, environmental engineers or consultants, turnaround consultants, and other professionals and experts retained Agent.

AGM:  has the meaning specified therefor in the preamble hereto.

Agreement: this Financing Agreement, including all amendments, modifications and supplements and any exhibits or schedules to any of the foregoing, and shall refer to the Agreement as the same may be in effect at the time such reference becomes operative.

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Anti-Terrorism Law: any law relating to terrorism or money laundering, including the Patriot Act.

Applicable Law: all laws, rules, regulations and legally binding governmental guidelines applicable to the Person, conduct, transaction, agreement or matter in question, including all applicable statutory law, common law principles, as well as provisions of constitutions, treaties, statutes, rules, code, regulations, ordinances, orders and decrees of Governmental Authorities.

Applicable Margin:  means, as of any date of determination, with respect to the interest rate of the Term Loan (or any portion thereof):

(a)From the Seventh Amendment Effective Date until September 30, 2019 (the "Initial Applicable Margin Period"), the relevant Applicable Margin shall be set at Level I in the table below.

(b)After the Initial Applicable Margin Period, the relevant Applicable Margin shall be set at the respective level indicated below based upon the Leverage Ratio set forth opposite thereto, which ratio shall be calculated as of the end of the most recent fiscal quarter of the Parent and its Subsidiaries for which quarterly financial statements and a certificate of an authorized officer of the Parent are received by the Agent and the Lenders in accordance with clause (c) of Exhibit D and clause (d) of Exhibit D:

Level	Leverage Ratio	Base Rate Loans	LIBOR Loans
		Term Loan	Term Loan
I	Greater than or equal to 2.40 to 1:00	4.75%	__6.75%
II	Less than 2.40 to 1.00	4.25%	6.25%

(c)Subject to clause (d) below, the adjustment of the Applicable Margin (if any) will occur 2 Business Days after the date the Agent receives the quarterly financial statements and a certificate of an authorized officer of the Parent in accordance with clause (c) of Exhibit D and clause (d) of Exhibit D.

(d)  Notwithstanding the foregoing:

(i)the Applicable Margin shall be set at Level I in the table above (x) upon the occurrence and during the continuation of an Event of Default, or (y) if for any period, the Agent does not receive the financial statements and certificates described in clause (c) above, for the period commencing on the date such financial statements and certificate were required to be delivered through the date on which such financial statements and certificate are actually received by the Agent and the Lenders; and

(ii)in the event that any financial statement or certificate described in clause (c) above is inaccurate (regardless of whether this Agreement is in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any fiscal period, then the Applicable Margin for such fiscal period shall be adjusted retroactively (to the effective date of the determination of the Applicable

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Margin that was based upon the delivery of such inaccurate financial statement or certificate) to reflect the correct Applicable Margin, and the Borrowers shall promptly make payments to the Agent and the Lenders to reflect such adjustment.

Approved Fund: any Person (other than a natural Person) engaged in making, purchasing, holding or otherwise investing in commercial loans in its ordinary course of activities.

Artisan Company Agreement: the Company Agreement of Artisan SG, LLC d/b/a The Artisan Group, LLC, a Texas limited liability company, dated as of September 30, 2007, as the same may be amended, restated, supplemented or modified from time to time in accordance with this Agreement.

ASG Intercreditor Agreement: that certain Intercreditor Agreement, dated as of February 28, 2017 by and among Agent, in its capacity as agent for the Term Creditors (as defined therein), Bank of America, N.A., and acknowledged by the Obligors, as amended from time to time in accordance with the terms thereof.

ASG Revolver Debt:  all Borrowed Money owed to the ABL Creditors (as defined in the ASG Intercreditor Agreement) pursuant to the ASG Revolver Debt Documents.

ASG Revolver Debt Documents:  (i) the ASG Revolver Loan Agreement and (ii) each of the other agreements, instruments and other documents with respect to the ASG Revolver Debt, all as in effect on the date hereof or as may be amended, modified, or supplemented from time to time in accordance with the ASG Intercreditor Agreement.

ASG Revolver Loan Agreement: that certain Amended and Restated Loan, Security and Guaranty Agreement, dated as of June 28, 2018, by and among Ultimate Parent, AGM, Pental, Lark, Greencraft Holdings, LLC, Greencraft Interiors, LLC, Casa Verde Services, LLC, Greencraft Stone and Tile LLC, Architectural Surfaces Group, LLC, Residential Design Services, LLC, SPV, SIC Intermediate, Inc. and Bank of America, N.A. as in effect on the date hereof or as may be amended, modified, or supplemented from time to time in accordance with the ASG Intercreditor Agreement.

Assignment and Acceptance:  an assignment agreement between a Lender and Eligible Assignee, in the form of Exhibit A-1 or otherwise satisfactory to Agent.

Availability: has the meaning assigned thereto in the Revolver Loan Agreement.

Bank Product: has the meaning assigned thereto in the Revolver Loan Agreement on the Closing Date.

Bank Product Debt: has the meaning assigned thereto in the Revolver Loan Agreement on the Closing Date.

Bankruptcy Code: Title 11 of the United States Code.

Base Rate:  on any day, the greater of (i) the rate of interest publicly announced by the Reference Bank in New York, New York from time to time as its reference rate, base

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commercial lending rate or prime rate and (ii) 3.50% per annum.  The reference rate, base commercial lending rate or prime rate is determined from time to time by the Reference Bank as a means of pricing some loans to its borrowers and neither is tied to any external rate of interest or index nor necessarily reflects the lowest rate of interest actually charged by the Reference Bank to any particular class or category of customers.  Each change in the Reference Rate shall be effective from and including the date such change is publicly announced as being effective.  

Base Rate Loan: any portion of the Term Loan that bears interest based on the Base Rate.

Bedrock: means Elegant Home Design, LLC, a Kansas limited liability company.

Bedrock Acquisition: the consummation of the acquisition by AGM of the Bedrock Acquisition Assets pursuant to the terms of the Bedrock Acquisition Agreement and the transactions in connection therewith.  

Bedrock Acquisition Agreement: that certain Asset Purchase Agreement between AGM, Elegant Home Design, LLC and the holders of Elegant Home Design, LLC, together with all exhibits, schedules and annexes thereto.

Bedrock Acquisition Documents:  the Bedrock Acquisition Agreement, together with all other agreements, instruments and other documents entered into or delivered in connection with the Bedrock Acquisition.

Bedrock Acquisition Assets: shall have the meaning of “Assets” as set forth in the Bedrock Acquisition Agreement.

Board of Governors: the Board of Governors of the Federal Reserve System.

Borrowed Money: with respect to any Obligor, without duplication, its (a) Debt that (i) arises from the lending of money by any Person to such Obligor; (ii) is evidenced by notes, drafts, bonds, debentures, credit documents or similar instruments; (iii) accrues interest or is a type upon which interest charges are customarily paid (excluding trade payables owing in the Ordinary Course of Business); or (iv) was issued or assumed as full or partial payment for Property; (b) Capital Leases; (c) reimbursement obligations with respect to letters of credit; and (d) guaranties of any Debt of the foregoing types owing by another Person.    For purposes of clarification, the Revolver Debt shall constitute Borrowed Money.

Borrowers:  has the meaning specified therefor in the preamble hereto.

Borrower Materials:  Compliance Certificates and other information, reports, financial statements and other materials prepared and delivered by any Borrower or its representatives hereunder, as well as other Reports and information prepared and delivered by any Borrower or its representatives and provided by Agent to Lenders.

Borrowing: a group of Loans that are made or converted together on the same day and have the same interest option and, if applicable, Interest Period.

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Borrowing Base Certificate: has the meaning assigned thereto in the Revolver Loan Agreement.

Business Day: any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, New York and Texas, and if such day relates to a LIBOR Loan, any such day on which dealings in Dollar deposits are conducted between banks in the London interbank Eurodollar market.

Capital Expenditures: all liabilities incurred or expenditures made by Borrowers or their Subsidiaries for the acquisition of fixed assets, or any improvements, replacements, substitutions or additions thereto with a useful life of more than one year.

Capital Lease: any lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

Casa Verde: Casa Verde Services, LLC, a Delaware limited liability company.

Cash Collateral: cash, and any interest or other income earned thereon, that is delivered to Agent to Cash Collateralize any Obligations.

Cash Collateral Account: a demand deposit, money market or other account established by an Obligor at Bank of America, N.A. or such other financial institution as Agent may select in its discretion, which account shall be subject to a Lien in favor of Agent.

Cash Collateralize: the delivery of cash to Agent, as security for the payment of any inchoate or other contingent Obligations, in an amount equal to 103% of the amount due or to become due, including fees, expenses and indemnification hereunder.  "Cash Collateralization" has a correlative meaning.

Cash Equivalents: (a) marketable obligations issued or unconditionally guaranteed by, and backed by the full faith and credit of, the United States government, maturing within 12 months of the date of acquisition; (b) certificates of deposit, time deposits and bankers' acceptances maturing within 12 months of the date of acquisition, and overnight bank deposits, in each case which are issued by a commercial bank organized under the laws of the United States or any state or district thereof, rated A-1 (or better) by S&P or P-1 (or better) by Moody's at the time of acquisition, and (unless issued by a Lender) not subject to offset rights; (c) repurchase obligations with a term of not more than 30 days for underlying investments of the types described in clauses (a) and (b) entered into with any bank described in clause (b); (d) commercial paper rated A-1 (or better) by S&P or P-1 (or better) by Moody's, and maturing within nine months of the date of acquisition; and (e) shares of any money market fund that has substantially all of its assets invested continuously in the types of investments referred to above, has net assets of at least $500,000,000 and has the highest rating obtainable from either Moody's or S&P.

Cash Management Services: services relating to operating, collections, payroll, trust, or other depository or disbursement accounts, including automated clearinghouse, e-payable, electronic funds transfer, wire transfer, controlled disbursement, overdraft, depository, information reporting, lockbox and stop payment services.

6

CECAFE: CECAFE SERVICOS ADMINISTRATIVOS LTDA. ME.

Cerberus: has the meaning specified therefor in the preamble hereto.

CERCLA: the Comprehensive Environmental Response Compensation and Liability Act (42 U.S.C. § 9601 et seq.).

Change in Law: the occurrence, after the date hereof, of (a) the adoption, taking effect or phasing in of any law, rule, regulation or treaty; (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof; or (c) the making, issuance or application of any request, guideline, requirement or directive (whether or not having the force of law) by any Governmental Authority; provided, however, that "Change in Law" shall include, regardless of the date enacted, adopted or issued, all requests, rules, guidelines, requirements or directives (i) under or relating to the Dodd-Frank Wall Street Reform and Consumer Protection Act, or (ii) promulgated pursuant to Basel III by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any similar authority) or any other Governmental Authority.

Change of Control: (a) Ultimate Parent ceases to own and control, beneficially and of record, directly or indirectly, all Equity Interests in Parent; (b) Ultimate Parent ceases to own and control, beneficially and of record, directly or indirectly, all Equity Interests in RDS Parent; (c) Parent ceases to own and control, beneficially and of record, directly or indirectly, all Equity Interests in AGM; (d) AGM ceases to own and control, beneficially and of record, directly or indirectly, all Equity Interests in Pental (other than a merger of Pental with and into AGM in accordance with Section 9.2.9), (e) RDS Parent ceases to own and control, beneficially and of record, directly or indirectly, all Equity Interests in Lark; (f) AGM ceases to own and control, beneficially and of record, directly or indirectly, all Equity Interests in SPV; (g) any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934 (as amended), or any successor provision) including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Securities Exchange Act of 1934 (as amended), or any successor provision), other than any of the Sponsors, acquires directly or indirectly, in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision), more than 35% of the total voting power of the voting Equity Interests of Ultimate Parent or any direct or indirect parent of Ultimate Parent; or (h) the sale or transfer of all or substantially all assets of an Obligor.

Claims: all claims, liabilities, obligations, losses, damages, penalties, judgments, proceedings, interest, costs and expenses of any kind (including remedial response costs, reasonable attorneys' fees and Extraordinary Expenses) at any time (including after Full Payment of the Obligations or replacement of Agent or any Lender) incurred by any Indemnitee or asserted against any Indemnitee by any Obligor or other Person, in any way relating to (a) any Loans, Loan Documents, Borrower Materials or the use thereof or transactions relating thereto; (b) any action taken or omitted in connection with any Loan Documents; (c) the existence or perfection of any Liens, or realization upon any Collateral; (d) exercise of any rights or remedies under any Loan Documents or Applicable Law; or (e) failure by any Obligor to perform or

7

observe any terms of any Loan Document, in each case including all costs and expenses relating to any investigation, litigation, arbitration or other proceeding (including an Insolvency Proceeding or appellate proceedings), whether or not the applicable Indemnitee is a party thereto.

Closing Date: as defined in Section 6.1.

Closing Date Dividend: means one or more dividend payments or distributions paid in cash by AGM to Parent and by Parent to Trive Capital Fund I LP, Trive Affiliated Coinvestors I LP and Trive Capital Fund II (Offshore) Subsidiary, LP on or within two (2) days of the Closing Date in an aggregate amount not to exceed $12,226,398.50, the proceeds of which shall be used to repay the Existing Bridge Equity.

Code: the Internal Revenue Code of 1986, as amended.

Collateral: all Property described in Section 7.1, all Property described in any Security Documents as security for any Obligations, and all other Property that now or hereafter secures (or is intended to secure) any Obligations.  

Commitment:  for any Lender, the amount of such Lender's Term Loan Commitment.  

Commitments: means the aggregate amount of all Term Loan Commitments.

Commodity Exchange Act:  the Commodity Exchange Act (7 U.S.C. § 1 et seq.).

Compliance Certificate: a certificate substantially in the form of Exhibit B, and satisfactory to Agent in all respects, by which Ultimate Parent certifies compliance with Sections 9.3.1 and 9.3.2.

Connection Income Taxes: Other Connection Taxes that are imposed on or measured by net income (however denominated), or are franchise or branch profits Taxes.

Consolidated Net Debt:  as of any date of determination, the Borrowed Money of Ultimate Parent and its Subsidiaries as of such date less the amount of Qualified Cash of Ultimate Parent and its Subsidiaries as of such date.

Contingent Obligation: any obligation of a Person arising from a guaranty, indemnity or other assurance of payment or performance of any Debt, lease, dividend or other obligation ("primary obligations") of another obligor ("primary obligor") in any manner, whether directly or indirectly, including any obligation of such Person under any (a) guaranty, endorsement, co‑making or sale with recourse of an obligation of a primary obligor; (b) obligation to make take-or-pay or similar payments regardless of nonperformance by any other party to an agreement; and (c) arrangement (i) to purchase any primary obligation or security therefor, (ii) to supply funds for the purchase or payment of any primary obligation, (iii) to maintain or assure working capital, equity capital, net worth or solvency of the primary obligor, (iv) to purchase Property or services for the purpose of assuring the ability of the primary obligor to perform a primary obligation, or (v) otherwise to assure or hold harmless the holder of any primary obligation against loss in respect thereof.  The amount of any Contingent Obligation shall be deemed to be the stated or determinable amount of the primary obligation (or, if less, the

8

maximum amount for which such Person may be liable under the instrument evidencing the Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability with respect thereto.

Controlled Investment Affiliate: as to any Person, any other Person that (a) directly or indirectly, is in Control of, is Controlled by, or is under common Control with, such Person and (b) is organized by such Person primarily for the purpose of making equity or debt investments in one or more companies.  For purposes of this definition, "Control" of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

Cost Savings Cap: has the meaning specified therefor in the definition of “Pro Forma Cost Savings”.

CWA: the Clean Water Act (33 U.S.C. §§ 1251 et seq.).

Debt: as applied to any Person, without duplication, (a) all items that would be included as liabilities on a balance sheet in accordance with GAAP, including Capital Leases, but excluding trade payables incurred and being paid in the Ordinary Course of Business; (b) all Contingent Obligations; (c) all reimbursement obligations in connection with letters of credit issued for the account of such Person; and (d) in the case of Borrowers, the Obligations.  The Debt of a Person shall include any recourse Debt of any partnership in which such Person is a general partner or joint venture, unless expressly made non-recourse to such Person and only to the extent of the direct payment liability of such Person.

Default: an event or condition that, with the lapse of time or giving of notice, would constitute an Event of Default.

Defaulting Lender:  any Lender that (a) has failed to comply with its funding obligations hereunder, and such failure is not cured within two Business Days; (b) has notified Agent or any Borrower that such Lender does not intend to comply with its funding obligations hereunder or under any other credit facility, or has made a public statement to that effect; (c) has failed, within three Business Days following request by Agent or any Borrower, to confirm in a manner satisfactory to Agent and Borrowers that such Lender will comply with its funding obligations hereunder; or (d) has, or has a direct or indirect parent company that has, become the subject of an Insolvency Proceeding (including reorganization, liquidation, or appointment of a receiver, custodian, administrator or similar Person by the Federal Deposit Insurance Corporation or any other regulatory authority); provided, however, that a Lender shall not be a Defaulting Lender solely by virtue of a Governmental Authority's ownership of an equity interest in such Lender or parent company unless the ownership provides immunity for such Lender from jurisdiction of courts within the United States or from enforcement of judgments or writs of attachment on its assets, or permits such Lender or Governmental Authority to repudiate or otherwise to reject such Lender's agreements.

Default Rate: for any Obligation (including, to the extent permitted by law, interest not paid when due), 2% per annum plus the interest rate otherwise applicable thereto.

9

Deposit Account Control Agreement: a control agreement satisfactory to Agent executed by an institution maintaining a Deposit Account for an Obligor, to perfect Agent's Lien on such account.

Distribution: any declaration or payment of a distribution, interest or dividend on any Equity Interest (other than payment-in-kind); distribution, advance or repayment of Debt to a holder of Equity Interests; or purchase, redemption, or other acquisition or retirement for value of any Equity Interest.

Dollars: lawful money of the United States.

EBITDA: determined for any period, on a consolidated basis for Ultimate Parent and its Subsidiaries, the sum of, without duplication, (a) net income, calculated before interest expense, provision for income taxes, depreciation and amortization expense, gains or losses arising from the sale of capital assets, gains arising from the write-up or write-down of assets, and any extraordinary gains or losses (in each case, to the extent included in determining net income), (b) any cost savings, operating expense reductions, operating improvements and synergies permitted to be added back to this definition pursuant to the definition of “Pro Forma Cost Savings” so long as the amounts added back pursuant to this clause (b) do not exceed the Cost Savings Cap, (c) expenses for such period that are covered by insurance or have been reimbursed to an Obligor in cash by a third party who is not an Affiliate of an Obligor to the extent such reimbursement is not already reflected in the calculation of net income; (d) amounts reimbursed pursuant to an Obligor’s business interruption insurance policies; and (e) non-cash compensation consisting of Equity Interests to the extent expensed under GAAP it being agreed that for purposes of calculating any financial ratio or test under the Loan Documents, EBITDA shall be calculated, without duplication, giving effect to the trailing twelve (12) month pro forma results for acquisitions and Investments permitted hereunder (including the commencement of activities constituting such business) and dispositions permitted hereunder (including the termination or discontinuance of activities constituting such business) of business entities or properties or assets, constituting a division or line of business of any business entity, division or line of business that is the subject of any such acquisition, and operational changes permitted hereunder, and any financial ratio or test shall, without duplication, give effect to the trailing twelve (12) month results for any permitted retirement, extinguishment or repayment of Debt and any Debt incurred or assumed by Ultimate Parent or any of its Subsidiaries in connection with such pro forma transaction (and all Debt so incurred or assumed shall be deemed to have borne interest (x) in the case of fixed rate Debt, at the rate applicable thereto or (y) in the case of floating rate Debt, at the rates which were or would have been applicable thereto during the period when such Debt was or was deemed to be outstanding), in each case, as if any such transaction occurred at the beginning of the applicable period.

Eighth Amendment:  means that certain Eighth Amendment to Financing Agreement, dated as of February 7, 2020, by and among the parties to this Agreement.

Eighth Amendment Effective Date:  has the meaning set forth in the Eighth Amendment.

Eligible Assignee:  a Person that is (a) a Lender or an Affiliate or Related Fund of a Lender; (b) an Approved Fund approved by Agent and AGM (which approval shall not be

10

unreasonably withheld (it being acknowledged that the withholding of consent by AGM with respect to an Approved Fund that is a vulture fund or distressed debt purchaser shall not be considered unreasonable) or delayed, and shall be deemed given if no objection is made within ten Business Days after notice of the proposed assignment); and (c) during an Event of Default, any Person.

Enforcement Action: any action to enforce any Obligations or Loan Documents or to realize upon any Collateral (whether by judicial action, self-help, notification of Account Debtors, setoff or recoupment, credit bid, action in an Obligor's Insolvency Proceeding or otherwise).

Environmental Laws:  Applicable Laws (including administrative orders, licenses, authorizations and permits of any Governmental Authority) relating to public health (other than occupational safety and health regulated under OSHA, or public health and safety regulated by the U.S. Food and Drug Administration) or the protection or pollution of the environment, including CERCLA, RCRA and CWA.

Environmental Notice: a notice (whether written or oral) from any Governmental Authority or other Person of any possible noncompliance with, investigation of a possible violation of, litigation relating to, or potential fine or liability under any Environmental Law, or with respect to any Environmental Release,  including any complaint, summons, citation, order, claim, demand or request for correction, remediation or otherwise.

Environmental Release: any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of Hazardous Materials into the environment.

Equity Cure Contributions:  as defined in Section 9.3.3.

Equity Cure Period:  as defined in Section 9.3.3.

Equity Interest: the interest of any (a) shareholder in a corporation; (b) partner in a partnership (whether general, limited, limited liability or joint venture); (c) member in a limited liability company; or (d) other Person having any other form of equity security or ownership interest.

ERISA: the Employee Retirement Income Security Act of 1974, as amended.

ERISA Affiliate: any trade or business (whether or not incorporated) under common control with an Obligor within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

ERISA Event: (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Obligor or ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Obligor or ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of

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intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) the determination that any Pension Plan or Multiemployer Plan is considered an at risk plan or a plan in critical or endangered status under the Code, ERISA or the Pension Protection Act of 2006; (f) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (g) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Obligor or ERISA Affiliate; or (h) failure by an Obligor to meet all applicable requirements under the Pension Funding Rules in respect of a Pension Plan, whether or not waived, or to make a required contribution to a Multiemployer Plan.

Event of Default: as defined in Section 10.

Excess Cash Flow: with respect to any Person for any period and determined on a consolidated basis for any Fiscal Year (or the portion thereof following the Closing Date), (a) EBITDA of Ultimate Parent and its Subsidiaries for such period, minus (b) the sum of, without duplication, (for such Fiscal Year) (i) cash interest expense, the Loan Servicing Fee, amendment fees paid in cash during such period, and cash taxes paid; (ii) Capital Expenditures (except those financed with Borrowed Money other than Revolver Loans); (iii) scheduled and mandatory principal (and premium) payments made on Borrowed Money, Subordinated Debt and Capital Leases by Borrowers and their Subsidiaries (including (x) optional repayments of the Revolver Debt that are accompanied by a permanent reduction of the Revolver Debt facility but excluding (y) any prepayment of the Loan made (A) with Equity Cure Contributions pursuant to Section 9.3 or (B) pursuant to Section 5.2.2(a)); (iv) Distributions made in cash (to the extent permitted hereunder) by Borrowers and their Subsidiaries, (v) any increase (or plus the decrease) in Adjusted Working Capital so as long as any working capital payments and receipts are consistent with normal business practices; (vi) any earnouts paid by Borrowers or their Subsidiaries in connection with Permitted Acquisitions and the Pental Acquisition; (vii) the aggregate amount of cash payments for management fees and expenses made during such Fiscal Year to the extent added back in the determination of EBITDA; (viii) one-time documented expenses incurred before March 31, 2017 in connection with the transactions contemplated by the Pental Acquisition, this Agreement and the Revolver Debt Documents to the extent added back in the determination of EBITDA; (ix) one-time documented third-party costs and expenses of Borrowers in connection with the implementation of operational changes related to the Pental Acquisition to the extent added back in the determination of EBITDA; (x) costs with respect to the addition of two Greenfield branch locations to the extent added back in the determination of EBITDA; (xi) costs or expenses reimbursed by a third party or insurance; and (xii) the proceeds of business interruption insurance to the extent added back in the determination of EBITDA.  For purposes of calculating Excess Cash Flow for any Excess Cash Flow period, (x) the EBITDA of a target of any Permitted Acquisition shall be included and (y) any payments made by the target of any Permitted Acquisition shall be excluded, in such calculation, in each case, only from and after the date of the consummation of such Permitted Acquisition.  

Excluded Account: (i) a deposit account used exclusively used for payroll, payroll taxes or employee benefits, or (ii) a petty cash account containing not more than $150,000 individually at any time or $400,000 in the aggregate for all such petty cash accounts.

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Excluded Tax: means any of the following Taxes imposed on or with respect to any Recipient or required to be withheld or deducted from a payment to a Recipient (a) Taxes imposed on or measured by a Recipient's net income (however denominated), franchise Taxes and branch profit Taxes in each case (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of a Lender, its Lending Office located in, the jurisdiction imposing such Tax (or political subdivision thereof), or (ii) constituting Other Connection Taxes; (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a Law in effect on the date on which; (i) such Lender acquires such interest in the Loan or Commitment (except pursuant to an assignment request by AGM or Agent under Section 3.8 or 12.4); or (ii) such Lender changes its Lending Office, except in each case to the extent that, pursuant to Section 5.9, amounts with respect to such Taxes were payable either to such Lender's assignor immediately before such Lender became a party hereto or to such Lender immediately before it changes its Lender Office ; (c) Taxes attributable to Recipient's failure to comply with Section 5.9.7and (d) any withholding Taxes imposed pursuant to FATCA.  

Existing A&I Lender: means Columbia Bank.

Existing A&I Loan Facility: that certain Promissory Note, dated as of August 1, 2018 (as amended, restated, supplemented or otherwise modified from time to time), by and among A&I and the Existing A&I Lender, together with all other documents and instruments relating thereto.

Existing Bridge Equity: means the equity contribution made by the Sponsors to AGM on or about July 21, 2016 in connection with the consideration to be paid pursuant to that certain Asset Purchase Agreement dated as of July 21, 2016 among AGM, Bermuda Import-Export, Inc., Osep Tokat and Vahe Akpulat.

Existing Intown Design Lender: means JPMorgan Chase Bank.

Existing Intown Design Loan Facility: that certain Promissory Note, dated as of September 15, 2015 (as amended, restated, supplemented or otherwise modified from time to time), by and among Intown Design and the Existing Intown Design Lender, together with all other documents and instruments relating thereto.

Existing Pental Lender: means JPMorgan Chase Bank, N.A.

Existing Pental Loan Facility: that certain Credit Agreement, dated as of June 2, 2014 (as amended, restated, supplemented or otherwise modified from time to time), by and among Pental and the Existing Pental Lender, together with all other documents and instruments relating thereto.

Existing T. A. C. Ceramic Lender: means The Fauquier Bank.

Existing T. A. C. Ceramic Loan Facilities: collectively, (i) that certain Credit Agreement, dated as of February 2016 (as amended, restated, supplemented or otherwise modified from time to time), by and among T. A. C. Ceramic and the Existing T. A. C. Ceramic Lender, together with all other documents and instruments relating thereto, (ii) that certain Second Credit

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Agreement, dated as of February 2016 (as amended, restated, supplemented or otherwise modified from time to time), by and among T. A. C. Ceramic and the Existing T. A. C. Ceramic Lender, together with all other documents and instruments relating thereto and (iii) that certain Revolving Demand Commercial Note, dated as of May 29, 2002 (as amended, restated, supplemented or otherwise modified from time to time), by and among T. A. C. Ceramic and the Existing T. A. C. Ceramic Lender, together with all other documents and instruments relating thereto.

Existing Term Loan Agent: Monroe Capital Management Advisors, LLC.

Existing Term Loan Facility: that certain Loan Agreement and Security Agreement, dated as of June 23, 2015 (as amended, restated, supplemented or otherwise modified from time to time), by and among AGM, the Existing Term Loan Lenders and the Existing Term Loan Agent, together with all other documents and instruments relating thereto.

Existing Term Loan Lenders: the lenders party to the Existing Term Loan Facility.

Expansion Capital Expenditures: Capital Expenditures in connection with the expansion of the Borrowers' business for the purpose of building the two Greenfield branch locations in an amount not to exceed $1,000,000 per branch and $2,000,000 in the aggregate.

Extraordinary Expenses: all out-of-pocket costs, expenses or advances that Agent and each Lender may incur during the continuance of an Event of Default, or during the pendency of an Insolvency Proceeding of an Obligor, including those relating to (a) any audit, inspection, repossession, storage, repair, appraisal, insurance, manufacture, preparation or advertising for sale, sale, collection, or other preservation of or realization upon any Collateral; (b) any action, arbitration or other proceeding (whether instituted by or against Agent, any Obligor, any representative of creditors of an Obligor or any other Person) in any way relating to any Collateral (including the validity, perfection, priority or avoidability of Agent's Liens with respect to any Collateral), Loan Documents or Obligations, including any lender liability or other Claims; (c) the exercise of any rights or remedies of Agent and each Lender in, or the monitoring of, any Insolvency Proceeding; (d) settlement or satisfaction of any taxes, charges or Liens with respect to any Collateral; (e) any Enforcement Action; and (f) negotiation and documentation of any modification, waiver, workout, restructuring or forbearance with respect to any Loan Documents or Obligations.  Such out-of-pocket costs, expenses and advances include transfer fees, storage fees, insurance costs, permit fees, utility reservation and standby fees, legal fees (limited to fees of one outside counsel for the Agent and one outside counsel for the Lenders, taken as a whole, and one local counsel to the Agent and one local counsel to the Lenders, taken as a whole, in any material jurisdiction), appraisal fees, brokers' and auctioneers' fees and commissions, accountants' fees, environmental study fees, wages and salaries paid to employees of any Obligor or independent contractors in liquidating any Collateral, and travel expenses (but excluding any and all Taxes); provided, however, that fees of third party professionals shall be limited to one professional or firm for the Agent and  one professional or firm for the Lenders, taken as a whole.

Extraordinary Receipts:  any cash received by or paid to or for the account of any Obligor not in the ordinary course of business, including without limitation amounts received in respect

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of foreign, United States, state or local tax refunds and pension plan reversions and excluding amounts received in respect of business interruption insurance; provided, that Extraordinary Receipt shall exclude working capital adjustments in connection with the Pental Acquisition and any Permitted Acquisition.

FATCA:  Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations, any agreement entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.

Federal Funds Rate:  for any day, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Agent from three Federal funds brokers of recognized standing selected by Agent.  Agent's determination of such rate shall be binding and conclusive absent manifest error.

Financial Statements: (a) the audited consolidated balance sheet of Parent and its Subsidiaries for the Fiscal Year ended December 31, 2015, and the related consolidated statement of operations, shareholders' equity and cash flows for the Fiscal Year then ended, (b) the reviewed consolidated balance sheet of Pental for the Fiscal Year ended December 31, 2015, and the related consolidated statement of operations, shareholders' equity and cash flows for the Fiscal Year then ended, and (c) the unaudited consolidated balance sheet of Parent and its Subsidiaries for the twelve (12) months ended December 31, 2016, and the related consolidated statement of operations, shareholder's equity and cash flows for the twelve (12) months then ended.  

Fifth Amendment:  means that certain Fifth Amendment to Financing Agreement, dated as of December 31, 2018, by and among the parties to this Agreement.

Fifth Amendment Effective Date:  has the meaning set forth in the Fifth Amendment.

Fifth Amendment Perfection Certificate: a certificate in form and substance satisfactory to the Agent providing information with respect to the property and assets acquired pursuant to the T. A. C. Ceramic Acquisition.

Financial Covenant Availability: means, for any Fiscal Quarter, the sum of Availability plus Qualified Cash, in each case measured at the end of each day during such period.

Financial Covenant Trigger Event: means delivery of a Compliance Certificate pursuant to clauses (c) and (d) of Exhibit D that demonstrates that Financial Covenant Availability at any time during the most recently ended Fiscal Quarter is less than $35,000,000.

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Financial Covenant Trigger Test Date: means (i) for the period commencing on the Ninth Amendment Effective Date up to and including December 31, 2020, the last day of any Fiscal Quarter during which a Financial Covenant Trigger Event has occurred and (ii) thereafter, the last day of any Fiscal Quarter.

First Amendment:  means that certain First Amendment to Financing Agreement, dated as of November 22, 2017, by and among the parties to this Agreement.

First Amendment Effective Date:  the meaning set forth in the First Amendment.

Fiscal Quarter: each period of three months, commencing on the first day of a Fiscal Year.

Fiscal Year: the fiscal year of Borrower and Subsidiaries for accounting and tax purposes, ending on December 31 of each year.

Fixed Charge Coverage Ratio:  the ratio, determined as of any date of determination and determined on a consolidated basis for Ultimate Parent and its Subsidiaries, of (a) EBITDA for the trailing twelve-month period then ending minus  unfinanced Capital Expenditures, minus cash taxes paid or payable during such period, to (b) Fixed Charges, in each case, during the same period.  In determining the Fixed Charge Coverage Ratio for a particular period (1) pro forma effect will be given to:  (x) the incurrence, repayment or retirement of any Debt by Ultimate Parent and its Subsidiaries since the first day of such period as if such Debt were incurred, repaid or retired on the first day of such period and (y) the acquisition (whether by purchase, merger or otherwise) or disposition (whether by sale, merger or otherwise) of any property or assets acquired or disposed of by Ultimate Parent and its Subsidiaries since the first day of such period, as if such acquisition or disposition occurred on the first day of such period; (2) in calculating interest expense in respect of any Debt included on a pro forma basis (x) interest on Debt bearing a floating interest rate will be computed as if the rate at the time of computation had been the applicable rate for the entire period (y) if such Debt bears, at the option of such Person and its Subsidiaries, a fixed or floating rate of interest, interest thereon will be computed by applying, at the option of such Person, either the fixed or floating rate and (z) the amount of Debt under a revolving credit facility will be based upon the amount of such Debt at the end of the applicable fiscal month; and (3) the calculation of the tax liabilities of Ultimate Parent and its Subsidiaries described in clause (a) above shall be made without giving effect to any tax refunds, net operating losses or other net tax benefits that were received during such period on account of any prior periods (but only to the extent such tax refunds, net operating losses or other net tax benefits, or a portion thereof, were not previously accounted for or reasonably expected to be applicable in such period by Ultimate Parent and its Subsidiaries).  

Fixed Charges:  with respect to any period, the sum of (a) cash interest, plus (b) regularly scheduled principal payments made on Borrowed Money (excluding (i) Excess Cash Flow payments and (ii) mandatory and voluntary payments permitted under the Intercreditor Agreement, plus Distributions (other than Tax Distributions) made during such period.

Flow of Funds Agreement:  a Flow of Funds Agreement, in form and substance reasonably satisfactory to the Agent, by and among the Obligors, the Agent, the Lenders and the

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other Persons party thereto, and the related funds flow memorandum describing the sources and uses of all cash payments in connection with the consummation of the Pental Acquisition and the transactions contemplated by this Agreement.

FLSA: the Fair Labor Standards Act of 1938.

Foreign Lender: any Lender that is not a U.S. Person.

Foreign Plan: any employee benefit plan or arrangement maintained or contributed to by any Obligor or Subsidiary that is (a) not subject to the laws of the United States; or (b) mandated by a government other than the United States for employees of any Obligor or Subsidiary.

Foreign Subsidiary: (a) a Subsidiary that is a “controlled foreign corporation” under Section 957 of the Code, (a “CFC”) (b) a Subsidiary of a CFC and (c) any Subsidiary (including a Subsidiary that is a U.S. Person) substantially all of the assets of which consist of Equity Interests in a CFC.

Fourth Amendment:  means that certain Fourth Amendment to Financing Agreement, dated as of August 31, 2018, by and among the parties to this Agreement.

Fourth Amendment Effective Date:  has the meaning set forth in the Fourth Amendment.

Full Payment: with respect to any Obligations, (a) the full cash payment thereof, including any interest, fees and other charges accruing during an Insolvency Proceeding (whether or not allowed in the proceeding); and (b) if such Obligations are inchoate or contingent in nature, Cash Collateralization thereof.

GAAP:  generally accepted accounting principles in effect in the United States from time to time consistent with those used in the preparation of the Financial Statements.

Greencraft Holdings: Greencraft Holdings, LLC, an Arizona limited liability company.

Greencraft Interiors: Greencraft Interiors, LLC, an Arizona limited liability company.

Greencraft Stone: Greencraft Stone and Tile LLC, a Delaware limited liability company.

Governmental Approvals: all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and required reports to, all Governmental Authorities.

Governmental Authority: any federal, state, local, foreign or other agency, authority, body, commission, court, instrumentality, political subdivision, central bank, or other entity or officer exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions for any governmental, judicial, investigative, regulatory or self-regulatory authority (including the Financial Conduct Authority, the Prudential RegulationAuthority, any supra-national bodies such as the European Union or European Central Bank).

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Guarantors: Ultimate Parent, Parent, RDS Parent, Lark, SPV, Greencraft Holdings, Greencraft Interiors, Greencraft Stone, Casa Verde, Intermediate Holdco and each other Person that guarantees payment or performance of Obligations; provided, that no Foreign Subsidiary shall be a Guarantor.

Guaranty and Collateral Agreement:  the Guarantee and Collateral Agreement dated as of the Closing Date by each Obligor signatory thereto in favor of Agent and Lenders.

Hazardous Material: any pollutant, contaminant, chemical or substance defined as or included in the definition of "hazardous wastes," "hazardous materials," "acutely hazardous wastes," "hazardous substances ," "extremely hazardous substances," "toxic substances," "toxic chemicals," "toxic pollutants," or words of similar import under any Environmental Law, including, without limitation, (i) any petroleum, petroleum products, or fractions or derivatives thereof, (ii) natural or synthetic gas, (iii) any asbestos and asbestos containing material, polychlorinated biphenyls or radon gas, and (iv) any radioactive materials, substances or waste.

Hedging Agreement: any "swap agreement" as defined in Section 101(53B)(A) of the Bankruptcy Code.

Identified Acquisitions: collectively, the A&I Acquisition, the T. A. C. Ceramic Acquisition and the Intown Design Acquisition.

Indemnified Taxes: (a) Taxes, other than Excluded Taxes, imposed on or relating to any payment of an Obligation; and (b) to the extent not otherwise described in clause (a), Other Taxes.

Indemnitees:  Agent Indemnities and Lender Indemnitees.

Initial Term Loan: a loan made pursuant to Section 2.1.1.

Initial Term Loan Commitment:  for any Lender, the obligation of such Lender to make a Initial Term Loan hereunder, up to the principal amount shown on Schedule 2.1.  

Initial Term Loan Commitments: means the aggregate amount of such commitments of all Lenders.

Insolvency Proceeding: any case or proceeding commenced by or against a Person under any state, federal or foreign law for, or any agreement of such Person to, (a) the entry of an order for relief under the Bankruptcy Code, or any other insolvency, debtor relief or debt adjustment law; (b) the appointment of a receiver, trustee, liquidator, administrator, conservator or other custodian for such Person or any part of its Property; or (c) an assignment or trust mortgage for the benefit of creditors.

Intellectual Property: as defined in the Guaranty and Collateral Agreement.

Intellectual Property Claim:  any claim or assertion (whether in writing, by suit or otherwise) that a Borrower's or Subsidiary's ownership, use, marketing, sale or distribution of

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any Inventory, Equipment, Intellectual Property or other Property violates another Person's Intellectual Property.

Intercompany Subordination Agreement: an Intercompany Subordination Agreement made by the Ultimate Parent and its Subsidiaries in favor of the Agent for the benefit of the Agent.

Intercreditor Agreement: means the ASG Intercreditor Agreement.

Interest Period: as to any LIBOR Loan, a period of 30, 60, or 90 days commencing on the date such Loan is borrowed and thereafter commencing on the day on which the immediately preceding period expires; provided that, (a) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the following Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (b) any Interest Period that begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period shall end on the last Business Day of the calendar month at the end of such Interest Period; and (c) no Interest Period shall extend beyond the Term Loan Maturity Date.

Intermediate Holdco: SIC Intermediate, Inc., a Delaware corporation.

Intown Design:  collectively, Intown Design, Inc., a Georgia corporation, Intown Granite of Charlotte, Inc., a Georgia corporation and Granitec, LLC, a North Carolina limited liability company.

Intown Design Acquisition:  the consummation of the acquisition by Lark of the Intown Design Assets pursuant to the terms of the Intown Design Acquisition Agreement and the transactions in connection therewith.

Intown Design Acquisition Assets: shall have the meaning of “Purchase Assets” as set forth in the Intown Design Acquisition Agreement.

Intown Design Acquisition Agreement: that certain Asset Purchase Agreement between Lark, Intown Design, and the equityholders of Intown Design party thereto, together with all exhibits, schedules and annexes thereto.

Intown Design Acquisition Documents:  the Intown Design Acquisition Agreement, together with all other material agreements, instruments and other documents entered into or delivered in connection with the Intown Design Acquisition.

Intown Design Collateral Assignment: the Collateral Assignment of Intown Design Acquisition Documents, dated as of the date hereof, reasonably satisfactory to the Agent, made by Lark in favor of the Agent.

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Investment:

(a)a transaction or series of transactions resulting in (i) acquisition of a business division or substantially all assets of a Person; (ii) record or beneficial ownership of 50% or more of the Equity Interests of a Person; or (iii) merger, consolidation or combination of an Obligor or Subsidiary with another Person;

(b)an acquisition of record or beneficial ownership of any Equity Interests of a Person; or

(c)an advance or capital contribution to or other investment in a Person.

IP Assignment: a collateral assignment or security agreement pursuant to which an Obligor grants a Lien on its Intellectual Property to Agent, as security for the Obligations.

IRG: means Integrated Resources Group, Inc., a California Corporation.

IRG Acquisition: the consummation of the acquisition by AGM of the IRG Acquisition Assets pursuant to the terms of the IRG Acquisition Agreement and the transactions in connection therewith.  

IRG Acquisition Agreement: that certain Asset Purchase Agreement among AGM, IRG and the shareholders of IRG, together with all exhibits, schedules and annexes thereto.

IRG Acquisition Documents:  the IRG Acquisition Agreement, together with all other agreements, instruments and other documents entered into or delivered in connection with the IRG Acquisition.

IRG Acquisition Assets: shall have the meaning of “Assets” as set forth in the IRG Acquisition Agreement.

IRS: the United States Internal Revenue Service.

Joinder Agreement:  a Joinder Agreement, substantially in the form of Exhibit G, duly executed by a Subsidiary of an Obligor made a party hereto pursuant to Section 9.1.11.

Lark: means L.A.R.K. Industries, Inc, a California corporation.

Lending Office: the office designated as such by the applicable Lender at the time it becomes party to this Agreement or thereafter by notice to Agent and Borrowers.

Leverage Ratio:  with respect to any Person and its Subsidiaries for any period, the ratio of (a) Consolidated Net Debt of such Person and its Subsidiaries as of the end of such period, to (b) EBITDA of such Person and its Subsidiaries for such period.

LIBOR: for any Interest Period, with respect to any Loan, a rate per annum equal to (a) (i) the London Interbank Offered Rate with a term equivalent to such Interest Period as reported in The Wall Street Journal (or other authoritative source selected by Agent in its sole

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discretion) as of the first day of such Interest Period for such Loan, divided by (ii) a number determined by subtracting from 1.00 the then stated maximum reserve percentage for determining reserves to be maintained by member banks of the Federal Reserve System for Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D), or (b) if the rate described in clause (a) is unavailable for any reason, as LIBOR is otherwise determined by Agent in its reasonable discretion consistent with treatment of other borrowers.  Notwithstanding anything contained in this Agreement to the contrary, LIBOR shall not be less than 0.75% per annum.  Agent's determination of the LIBOR shall be conclusive, absent demonstrable error.

LIBOR Loan: each portion of a Term Loan having a common length and commencement of Interest Period that bears interest based on LIBOR.

License: any license or agreement under which an Obligor is authorized to use Intellectual Property in connection with any manufacture, marketing, distribution or disposition of Collateral, any use of Property or any other conduct of its business.

Licensor: any Person from whom an Obligor obtains the right to use any Intellectual Property.

Lien: any lien, security interest, pledge, hypothecation, assignment, easement, right-of-way, or other title exception or encumbrance.

Lien Waiver: an agreement, in form and substance reasonably satisfactory to Agent, by which (a) for any material Collateral located on leased premises, the lessor waives or subordinates any Lien it may have on the Collateral, and agrees to permit Agent to enter upon the premises and remove the Collateral or to use the premises to store or dispose of the Collateral; (b) for any Collateral held by a warehouseman, processor, shipper, customs broker or freight forwarder, such Person waives or subordinates any Lien it may have on such Collateral, agrees to hold any Documents in its possession relating to such Collateral as agent for Agent, and agrees to deliver such Collateral to Agent upon request; (c) for any Collateral held by a repairman, mechanic or bailee, such Person acknowledges Agent's Lien, waives or subordinates any Lien it may have on such Collateral, and agrees to deliver such Collateral to Agent upon request; and (d) for any Collateral subject to a Licensor's Intellectual Property rights, the Licensor grants to Agent the right, vis-à-vis such Licensor, to enforce Agent's Liens with respect to such Collateral, including the right to dispose of it with the benefit of the Intellectual Property, whether or not a default exists under any applicable License.

Loan: a Term Loan.

Loan Documents: collectively, as may be amended, modified or supplemented from time to time, this Agreement, the Other Agreements and the Security Documents.

Margin Stock: as defined in Regulation U of the Board of Governors.

Material Adverse Effect: the effect of any event or circumstance that, taken alone or in conjunction with other events or circumstances, (a) has or could be reasonably expected to have a material adverse effect on the business, operations, material Properties, or financial condition

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of the Obligors, taken as a whole, or on the value of any material Collateral, on the enforceability of any Loan Documents, or on the validity or priority of Agent's Liens on any material portion of the Collateral; (b) impairs the ability of the Obligors, taken as a whole, to perform their material obligations under the Loan Documents, including repayment of any Obligations; or (c) otherwise impairs the ability of Agent or any Lender to enforce or collect any Obligations or to realize upon a  material portion of the Collateral.

Material Contract: with respect to any Person, (a) the Revolver Debt Documents, (b) each contract or agreement to which such Person or any of its Subsidiaries is a party involving aggregate consideration payable to or by such Person or such Subsidiary of $5,000,000 or more in any Fiscal Year (other than purchase orders in the ordinary course of the business of such Person or such Subsidiary and other than contracts that by their terms may be terminated by such Person or Subsidiary in the ordinary course of its business upon less than 60 days' notice without penalty or premium) and (c) all other contracts or agreements as to which the breach, nonperformance, cancellation or failure to renew by any party thereto could reasonably be expected to have a Material Adverse Effect.

Moody's: Moody's Investors Service, Inc., and its successors.

Mortgage: any mortgage, deed of trust or similar instrument in which any Obligor grants a Lien on its Real Estate  to Agent, for the benefit of the Secured Parties, as security for any Obligations.

Multiemployer Plan:  any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which any Obligor or ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

Multiple Employer Plan: a Plan that has two or more contributing sponsors, including an Obligor or ERISA Affiliate, at least two of whom are not under common control, as described in Section 4064 of ERISA.

Net Proceeds: with respect to any disposition of Property, proceeds (including, when received, any deferred or escrowed payments) received by Borrower or its Subsidiary in cash from such disposition, net of (a) reasonable costs and expenses actually incurred in connection therewith, including legal fees and sales commissions; (b) amounts applied to repayment of Debt secured by a Permitted Lien senior to Agent's Liens on Collateral sold; (c) transfer or similar taxes; and (d) reserves for indemnities, income tax, and such other customary reserves, until such reserves are no longer needed.

Ninth Amendment:  means that certain Ninth Amendment to Financing Agreement, dated as of April [__]8, 2020, by and among the parties to this Agreement.

Ninth Amendment Effective Date:  has the meaning set forth in the Ninth Amendment.

Obligations: collectively, all (a) principal of and premium, if any, on the Loans; (b) interest, expenses, fees, indemnification obligations, Extraordinary Expenses and other

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amounts payable by Obligors under Loan Documents; and (c) other Debt, obligations and liabilities of any kind owing by any Obligor to Agent or any Lender under any Loan Document; in each case, whether now existing or hereafter arising, whether evidenced by a note or other writing, whether allowed in any Insolvency Proceeding, and whether direct or indirect, absolute or contingent, due or to become due, primary or secondary, or joint or several.

Obligor: each Borrower and each Guarantor.

OFAC:  Office of Foreign Assets Control of the U.S. Treasury Department.

Ordinary Course of Business: the ordinary course of business of Borrowers or their Subsidiaries, undertaken in good faith and consistent with Applicable Law and past practices.

Organic Documents: with respect to any Person, its charter, certificate or articles of incorporation, bylaws, articles of organization, limited liability agreement, operating agreement, members agreement, shareholders agreement, partnership agreement, certificate of partnership, certificate of formation, voting trust agreement, or similar agreement or instrument governing the formation or operation of such Person.

OSHA: the Occupational Safety and Hazard Act of 1970.

Other Agreements: collectively, the ASG Intercreditor Agreement, the Compliance Certificate, the Flow of Funds Agreement, any Perfection Certificate, the Intercompany Subordination Agreement, any Joinder Agreement, any Guaranties, or any other document, instrument or agreement (other than this Agreement or a Security Document) now or hereafter delivered by an Obligor to Agent or any Lender in connection with any transactions relating hereto.

Other Connection Taxes:  Taxes imposed on a Recipient due to a present or former connection between it and the taxing jurisdiction (other than connections arising from the Recipient having executed, delivered, become party to, performed obligations or received payments under, received or perfected a Lien or other security interest or engaged in any other transaction pursuant to, enforced, or sold or assigned an interest in, any Loan or Loan Document).

Other Taxes: all present or future stamp, court, documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a Lien under, or otherwise with respect to, any Loan Document, except Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 3.8 or Section 12.4).

Participant: as defined in Section 12.2.1.

Participant Register:  as defined in Section 12.2.3.

Parent:  TCFI G&M LLC, a Delaware limited liability company.

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Patriot Act: the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001).

Payment Conditions: as defined in the Revolver Loan Agreement on the date hereof.

Payment Item: each check, draft or other item of payment payable to Borrower, including those constituting proceeds of any Collateral.

PBGC: the Pension Benefit Guaranty Corporation.

Pension Funding Rules: Code and ERISA rules regarding minimum required contributions (including installment payments) to Pension Plans set forth in, for plan years ending prior to the Pension Protection Act of 2006 effective date, Section 412 of the Code and Section 302 of ERISA, both as in effect prior to such act, and thereafter, Sections 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.

Pension Plan: any employee pension benefit plan (as defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Obligor or ERISA Affiliate or to which the Obligor or ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the preceding five plan years.

Pental:  has the meaning specified therefor in the preamble hereto.

Pental Acquisition:  the consummation of the acquisition of membership interests of Pental by AGM pursuant to the terms of the Pental Acquisition Agreement and the transactions in connection therewith.

Pental Acquisition Agreement: that certain Securities Purchase Agreement, dated as of February 28, 2017, among AGM, as purchaser, PGM, Aquarius Seller, Inc., a Washington corporation (the "Seller") and Parminder Pental and Ravinder Pental (together with Parminder Pental, the "Pentals" and together with the Seller, the "Selling Parties"), together with all exhibits, schedules and annexes thereto.

Pental Acquisition Documents:  the Pental Acquisition Agreement, together with all other agreements, instruments and other documents entered into or delivered in connection with the Pental Acquisition.

Pental Collateral Assignment: the Collateral Assignment of Pental Acquisition Documents, dated as of the date hereof, reasonably satisfactory to the Agent, made by the AGM in favor of the Agent.

Perfection Certificate: a certificate in form and substance satisfactory to the Agent providing information with respect to the property of each Obligor.

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Permitted Acquisition: the Specified Acquisitions, the Identified Acquisitions and an Investment by a Borrower of the type described in clauses (a) and (b) of such definition so long as

(i)no Default or Event of Default shall have occurred and be continuing or would result from the consummation of the proposed acquisition;

(ii)such acquisition shall be consensual and shall have been approved by the board of directors of the Person whose Equity Interests or assets are proposed to be acquired and shall not have been preceded by an unsolicited tender offer for such Equity Interests by, or proxy contest initiated by, Ultimate Parent or any of its Subsidiaries or an Affiliate thereof;

(iii)the assets, business or Person being acquired is useful or engaged in the business of Obligors and is located or organized within the United States;

(iv)no Debt or Liens are assumed or incurred, except as permitted by Sections 9.2.1 and 9.2.2;

(v)the Payment Conditions are satisfied at the time of such Investment (and a Senior Officer of a Borrower shall certify to Agent, not less than five days prior to the date of such Investment, that all Payment Conditions have been satisfied);

(vi)after giving effect to such Investment and the incurrence of any Loans, other Debt or Contingent Obligations in connection therewith, the Obligors shall be in compliance on a pro forma basis with the covenants set forth in Sections 9.3.1 and 9.3.2 each recomputed for the most recently ended month of the Obligors for which information regarding the business being acquired is available with adjustments calculated by Borrowers and approved by Agent;

(vii)the assets being acquired or the Person or Persons whose Equity Interests are being acquired (the "Target") did not, on a consolidated basis have EBITDA less than -$1,000,000 during the 12 consecutive month period most recently concluded prior to the date of the proposed acquisition, and such Target must be a Subsidiary upon the consummation of such acquisition;

(viii)any such Subsidiary (and its equityholders) shall execute and deliver the agreements, instruments and other documents required by Section 9.1.11 on or prior to the date of the consummation of such acquisition; and

(ix)the purchase price payable in respect of (i) any single acquisition or series of related acquisitions shall not exceed $5,000,000 in the aggregate and (ii) all acquisitions (including the proposed acquisition in such Permitted Acquisition) shall not exceed $10,000,000 in the aggregate, in each case during any Fiscal Year.

Permitted Discretion: a determination made in the exercise, in good faith, of reasonable business judgment (from the perspective of a secured lender providing for a secured facility of the type set forth herein and based on the applicable circumstances as of the applicable date of determination).

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Permitted Distributions: with respect to any Obligor, so long as no Event of Default exists or would result from the making of such distribution,

(a)the payment of dividends or any other distributions on an Obligor's Equity Interests to another Obligor (other than Ultimate Parent) or the payment of any indebtedness owed to an Obligor (other than Ultimate Parent),

(b)the making of any loans or advances to an Obligor (other than Ultimate Parent),

(c)the transfer of any property or assets to an Obligor (other than Ultimate Parent),

(d)payments to enable Obligors to repurchase any Equity Interest issued by such Obligor or warrants, options or other similar rights granted by such Obligor, from any officer, director or employee, not to exceed $1,000,000 in the aggregate during any Fiscal Year,

(e)to the extent Ultimate Parent or Borrower, as applicable is treated as a partnership or disregarded entity for U.S. federal income tax purposes or Borrower is part of an affiliated group filing consolidated income tax returns, Tax Distributions,

(f)Borrowers may make distributions to Parent (and Parent may make any subsequent Distributions to Ultimate Parent) for the purpose of allowing Ultimate Parent to (x) pay management fees to the Sponsors or their Affiliates in accordance with the Management Agreement in an aggregate amount not to exceed $400,000 in any Fiscal Year provided such management fees are permitted to be paid pursuant to Section 9.2.22, (y) to reimburse Sponsors or their Affiliates for reasonable costs and expenses related to monitoring Sponsors’ investment in Ultimate Parent, including, reasonable costs and expenses for travel by officers and agents of Sponsors or their Affiliates, and (z) pay reasonable expenses incurred in connection with the maintenance of its existence as a holding company, and

(g)the Closing Date Dividend.

Permitted Investments:

(a)an Investment by an Obligor in (i) payroll, travel, commission, entertainment, relocation and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the Ordinary Course of Business, (ii) consideration received in connection with any sale, lease, transfer or other disposition permitted under this Agreement, (iii) deposit accounts,

(b)Investments made by an Obligor in the nature of immaterial pledges or deposits with respect to leases or utilities provided to third parties in the Ordinary Course of Business,

(c)Permitted Acquisitions;  

(d)the RDS Intercompany Loan; and

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(e)the Summit Acquisition.  

Permitted Lien: as defined in Section 9.2.2.

Permitted Refinancing: with respect to any Debt, the extension of maturity, refinancing or modification of the terms thereof; provided, that (i) such extension, refinancing or modification is pursuant to terms that are not less favorable to the Obligors and the Lenders in any material respect (taken as a whole) than the terms of the Debt being extended, refinanced or modified, (ii) after giving effect to such extension, refinancing or modification, the amount of such Debt (or accreted value, if applicable) is not greater than the amount of Debt (plus accrued interest and premiums thereon (including tender premiums) and underwriting discounts, defeasance costs and all fees and expenses incurred for such refinancing, extension or modification) outstanding immediately prior to such extension, refinancing or modification, and (iii) no Obligor or Subsidiary of a Obligor that was not liable with respect to the Debt prior to its refinancing or modification shall be liable with respect to such Debt after giving effect to its refinancing or modification.

Person: any individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization, Governmental Authority or other entity.

Plan: any employee benefit plan (as such term is defined in Section 3(3) of ERISA) established by an Obligor or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, an ERISA Affiliate.

Platform: as defined in Section 13.4.3.

Projections: financial projections of the Parent and its Subsidiaries delivered pursuant to Section 8.1.7, as updated from time to time pursuant to clause (e) of Exhibit D.

Properly Contested: with respect to any obligation of an Obligor, (a) the obligation is subject to a bona fide dispute regarding amount or the Obligor's liability to pay; (b) the obligation is being properly contested in good faith by appropriate proceedings promptly instituted and diligently pursued; (c) appropriate reserves have been established in accordance with GAAP; (d) non-payment could not reasonably be expected to have a Material Adverse Effect, nor result in forfeiture or sale of any assets of the Obligor; (e) no Lien is imposed on assets of the Obligor, unless bonded and stayed to the satisfaction of Agent; and (f) if the obligation results from entry of a judgment or other order, such judgment or order is stayed pending appeal or other judicial review.

Pro Forma Cost Savings: an amount equal to the amount of cost savings, operating expense reductions, operating improvements (including the entry into any material contract or arrangement) and acquisition synergies, in each case, projected in good faith to be realized (calculated on a pro forma basis as though such items had been realized on the first day of such period) as a result of actions taken on or prior to, or to be taken by Ultimate Parent or its Subsidiaries within 18 months of, the date of such pro forma calculation, net of the amount of actual benefits realized or expected to be realized during such period that are otherwise included in the calculation of EBITDA from such action; provided that (a) such cost savings, operating expense reductions, operating improvements and synergies are factually supportable, reasonably

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identifiable and determined in good faith (as certified in a reasonable level of detail reasonably acceptable to Agent by a responsible financial or accounting officer, in his or her capacity as such and not in his or her personal capacity, of Borrower) and are reasonably anticipated to be realized within 18 months after the date of such pro forma calculation and (b) no cost savings, operating expense reductions, operating improvements and synergies shall be added pursuant to this definition to the extent duplicative of any expenses or charges otherwise added to EBITDA, whether through a pro forma adjustment or otherwise, for such period; provided, further, that (i) the aggregate amount added in respect of the foregoing proviso (or otherwise added to EBITDA) shall not exceed with respect to any four quarter period 10% of EBITDA for such period (such limitation, the “Cost Savings Cap”) and (ii) the aggregate amount added in respect of the foregoing proviso (or otherwise added to EBITDA) shall no longer be permitted to be added back to the extent the cost savings, operating expense reductions, operating improvements and synergies have not been achieved within 18 months of the action or event giving rise to such cost savings, operating expense reductions, operating improvements and synergies.

Pro Rata:  with respect to any Lender, a percentage (rounded to the ninth decimal place) determined  by dividing the amount of such Lender's Term Loan by the aggregate outstanding Term Loans or, if all Loans have been paid in full, by dividing such Lender's and its Affiliates' remaining Obligations by the aggregate remaining Obligations.

Property: any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

Purchase Money Debt: (a) Debt (other than the Obligations) for payment of any of the purchase price of fixed assets; (b) Debt (other than the Obligations) incurred within 10 Business Days before or after acquisition of any fixed assets, for the purpose of financing any of the purchase price thereof; (c) Debt constituting obligations incurred pursuant to any Capital Lease; and (d) any renewals, extensions or refinancings (but not increases) thereof.

Purchase Money Lien: a Lien that secures Purchase Money Debt, encumbering only the fixed assets acquired with such Debt and constituting a Capital Lease or a purchase money security interest under the UCC.

Qualified Cash: as of any day, the aggregate amount of unrestricted cash and Cash Equivalents of Ultimate Parent or any other Subsidiary that is held in any Deposit Account subject to a Deposit Account Control Agreement in favor of the Agent, for the benefit of the Lenders.

RCRA: the Resource Conservation and Recovery Act (42 U.S.C. §§ 6991-6991i).

RDS Intercompany Loan: means an Investment by an Obligor consisting of loans made by AGM to Lark as evidenced by the RDS Note.

RDS Note: that certain Subordinated Promissory Note issued by AGM in favor of Lark. in the aggregate principal amount of $13,500,000, in form and substance reasonably satisfactory to the Agent (no provision of which shall be amended or otherwise modified or waived in a manner that is adverse to the Lenders' interests without the prior written consent of the Agent).

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RDS Parent: Residential Design Services, LLC (f/k/a TCFI LARK LLC),  a Delaware limited liability company.

Real Estate: all right, title and interest (whether as owner, lessor or lessee) in any real Property or any buildings, structures, parking areas or other improvements thereon.

Recipient:  Agent, any Lender or any other recipient of a payment to be made by an Obligor under a Loan Document or on account of an Obligation.

Reference Bank: JPMorgan Chase Bank, its successors or any other commercial bank designated by the Agent to the Borrowers from time to time.

Register: as defined in Section 12.3.4.

Related Fund: with respect to any Person, an Affiliate of such Person, or a fund or account managed by such Person or an Affiliate of such Person.

Related Real Estate Documents:  with respect to any Real Estate subject to a Mortgage, the following, all in form and substance reasonably satisfactory to Agent:  (a) a mortgagee title policy (or binder therefor) covering Agent's interest under the Mortgage, by an insurer reasonably acceptable to Agent, which must be fully paid on such effective date; (b) such assignments of leases, estoppel letters, attornment agreements, consents, waivers and releases as Agent may reasonably require with respect to other Persons having an interest in the Real Estate; (c) a current, as-built survey of the Real Estate, containing a metes-and-bounds property description and certified by a licensed surveyor acceptable to Agent; (d) a life-of-loan flood hazard determination and, if the Real Estate is located in a special flood hazard area, an acknowledged notice to borrower and flood insurance by an insurer acceptable to Agent; and (e) such other documents, instruments or agreements as Agent may reasonably require with respect to any environmental risks regarding the Real Estate.

Report:  as defined in Section 11.2.3.

Reportable Event: any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

Required Lenders:  Secured Parties holding more than 50% of the aggregate outstanding Term Loans or, if all Term Loans have been paid in full, the aggregate remaining Obligations; provided, however, that Term Loans and other Obligations held by a Defaulting Lender and its Affiliates shall be disregarded in making such calculation.

Restricted Investment: any Investment by any Obligor or its Subsidiaries, other than (a) Investments in Subsidiaries to the extent existing on the Closing Date; (b) Cash Equivalents that are subject to Agent's Lien and control, pursuant to documentation in form and substance reasonably satisfactory to Agent; (c) loans and advances permitted under Section 9.2.7, and (d) Permitted Investments.

Restrictive Agreement: an agreement (other than a Loan Document or an agreement executed in connection with the Revolver Debt, Subordinated Debt or Borrowed Money

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otherwise permitted pursuant to the Loan Documents) that conditions or restricts the right of a Borrower, any Subsidiary or other Obligor to incur or repay Borrowed Money, to grant Liens on any assets, to declare or make Distributions, to modify, extend or renew any agreement evidencing Borrowed Money, or to repay any intercompany Debt.

Revolver Debt:  means the ASG Revolver Debt.

Royalties: all royalties, fees, expense reimbursement and other amounts payable by a Borrower under a License.

S&P: Standard & Poor's Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc., and any successors thereto.

Sanction: any international economic sanction administered or enforced by the United States Government (including OFAC), the United Nations Security Council, the European Union, Her Majesty's Treasury or other relevant sanctions authority.

Second Additional Term Loan: a loan made pursuant to Section 2.1.3.

Second Additional Term Loan Commitment:  for any Lender, the obligation of such Lender to make a Second Additional Term Loan hereunder, up to the principal amount shown on Schedule 2.1.

Second Additional Term Loan Commitments: means the aggregate amount of such commitments of all Lenders.

Second Amendment:  means that certain Second Amendment to Financing Agreement, dated as of December 29, 2017, by and among the parties to this Agreement.

Second Amendment Effective Date:  the meaning set forth in the Second Amendment.

Secured Parties: Agent and Lenders.

Security Documents: collectively, the Guaranty and Collateral Agreement, IP Assignments, Mortgages, Deposit Account Control Agreements, the Pental Collateral Assignment, and all other documents, instruments and agreements now or hereafter securing (or given with the intent to secure) any Obligations.

Select Interior Proceeds:  means the proceeds of the sale of Equity Interests of Ultimate Parent pursuant to that certain Purchase/Placement Agreement, to be dated on or about November 15, 2017, by and among Ultimate Parent and B. Riley FBR, Inc.

Select Interior Transactions:  means (a) the amendment and restatement of the operating agreement of Parent in the form attached to the officer's certificate of Parent delivered to Agent pursuant to the First Amendment, (b) all holders of the Parent's Equity Interests will transfer such Equity Interests to Ultimate Parent resulting in Parent being a wholly-owned Subsidiary of Ultimate Parent, (c) the Sponsors ceasing to own and control at least 51% of the voting and economic Equity Interests of Parent, (d) the prepayment of not less than $30,300,000.00 of the

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Term Loans to the extent funded solely with the Select Interior Proceeds and (e) the amendment of the Revolving Loan Agreement pursuant to an amendment in the form attached to the officer's certificate of Parent delivered to Agent pursuant to the First Amendment.

Select Interior Transaction Documents:  means the agreements and documents pursuant to which the Select Interior Transactions are to be consummated.

Senior Officer: the chairman of the board, president, chief executive officer or chief financial officer of a Borrower or, if the context requires, an Obligor.

Seventh Amendment:  means that certain Seventh Amendment to Financing Agreement, dated as of August 19, 2019, by and among the parties to this Agreement.

Seventh Amendment Effective Date:  has the meaning set forth in the Seventh Amendment.

Sixth Amendment:  means that certain Sixth Amendment to Financing Agreement, dated as of July 15, 2019, by and among the parties to this Agreement.

Sixth Amendment Effective Date:  has the meaning set forth in the Sixth Amendment.

Solvent: as to any Person, such Person (a) owns Property whose fair salable value is greater than the amount required to pay all of its debts (including contingent, subordinated, unmatured and unliquidated liabilities); (b) owns Property whose present fair salable value (as defined below) is greater than the probable total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such Person as they become absolute and matured; (c) is able to pay all of its debts as they mature; (d) has capital that is not unreasonably small for its business and is sufficient to carry on its business and transactions and all business and transactions in which it is about to engage; (e) is not "insolvent" within the meaning of Section 101(32) of the Bankruptcy Code; and (f) has not incurred (by way of assumption or otherwise) any obligations or liabilities (contingent or otherwise) under any Loan Documents, or made any conveyance in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of such Person or any of its Affiliates.  "Fair salable value" means the amount that could be obtained for assets within a reasonable time, either through collection or through sale under ordinary selling conditions by a capable and diligent seller to an interested buyer who is willing (but under no compulsion) to purchase. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.  

Specified Acquisition: collectively, the IRG Acquisition, the Tutto Marmo Acquisition and the Bedrock Acquisition.

Specified Transaction: collectively, a Specified Acquisition and the RDS Intercompany Loan.

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Sponsors: collectively, Trive Capital Fund I LP, Trive Capital Fund I (Offshore) LP, and Trive Affiliated Coinvestors I LP.

SPV: means AG Holdco (SPV) LLC, a Delaware limited liability company.

Subordinated Debt: all Debt incurred by Borrower that is expressly subordinate and junior in right of payment to Full Payment of all Obligations, and is on terms (including maturity, interest, fees, repayment, covenants and subordination) reasonably satisfactory to Agent.

Subsidiary: any entity at least 50% of whose voting securities or Equity Interests is owned by a Borrower or combination of Borrowers (including indirect ownership through other entities in which the Borrowers directly or indirectly own 50% of the voting securities or Equity Interests).

Summit: means Summit Stonework, LLC, a Texas limited liability company.

Summit Acquisition: the consummation of the acquisition by AGM of the Summit Acquisition Assets pursuant to the terms of the Summit Acquisition Agreement and the transactions in connection therewith.  

Summit Acquisition Agreement: that certain Asset Purchase Agreement between AGM and Summit, together with all exhibits, schedules and annexes thereto.

Summit Acquisition Documents:  the Summit Acquisition Agreement, together with all other agreements, instruments and other documents entered into or delivered in connection with the Summit Acquisition.

Summit Acquisition Assets: shall have the meaning of “Assets” as set forth in the Summit Acquisition Agreement.

T. A. C. Ceramic:  means T. A. C. Ceramic Tile Co., a Virginia corporation.

T. A. C. Ceramic Acquisition:  the consummation of the acquisition by Lark of the equity interests of T. A. C. Ceramic pursuant to the terms of the T. A. C. Ceramic Acquisition Agreement and the transactions in connection therewith.

T. A. C. Ceramic Acquisition Agreement: that certain Stock Purchase Agreement, dated as of December 31, 2018, between Lark, T. A. C. Ceramic, Callaway Distributors, Inc. and the equityholders of T. A. C. Ceramic party thereto, together with all exhibits, schedules and annexes thereto.

T. A. C. Ceramic Acquisition Documents:  the T. A. C Ceramic Acquisition Agreement, together with all other material agreements, instruments and other documents entered into or delivered in connection with the T. A. C Ceramic Acquisition.

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T. A. C Ceramic Collateral Assignment: the Collateral Assignment of T. A. C. Ceramic Acquisition Documents, dated as of the date hereof, reasonably satisfactory to the Agent, made by Lark in favor of the Agent.

Tax Distributions: so long as Parent or a Borrower, as applicable, is treated as a partnership or disregarded entity for United States federal income tax purposes or part of an affiliated group filing U.S. consolidated income tax returns, quarterly tax distributions on April 10, June 10, September 10 and December 10 of each Fiscal Year by Parent or such Borrower, as applicable, to its members with respect to each Fiscal Year, which, in the aggregate, are in an amount equal to the amount necessary to pay such members' estimated state and United States federal income tax liabilities in respect of the income earned by Parent or such Borrower, as applicable (which taxable income will include the taxable income of subsidiaries of Parent or such Borrower, as applicable, that are similarly classified as partnerships or disregarded entities for U.S. federal income tax purposes or otherwise treated as part of an affiliated group filing U.S. consolidated income tax returns), calculated as an amount equal to the product of (A) the net taxable income of the Parent or such Borrower, as applicable, minus any previous net taxable loss of the Parent or such Borrower, as applicable, that is usable by the members of the Parent or such Borrower, as applicable, to offset net taxable income of the Parent or such Borrower, as applicable, and taking into account the characterization of the income of Parent or such Borrower, as applicable, as ordinary income or capital gains and the deductibility of state and local income taxes for federal purposes, as appropriate, and (B) the highest marginal federal income tax rate applicable to any member of Parent or such Borrower, as applicable, (including under Section 1411 of the Code) and a 15% assumed state and local tax rate; provided however, that to the extent the actual tax liability of members in respect of Parent or such Borrower, as applicable, for a taxable year is less than the sum of the estimated payments described above for the year, then the excess will be deducted from the next quarterly tax distribution.

Taxes: all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup witholdings), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

Tenth Amendment:  means that certain Tenth Amendment to Financing Agreement, dated as of March [10], 2021, by and among the parties to this Agreement.

Tenth Amendment Effective Date:  has the meaning set forth in the Tenth Amendment.

Term Loan: means, collectively, the Initial Term Loan, any Additional Term Loan, the Second Additional Term Loan and any Third Additional Term Loan.

Term Loan Commitment:  for any Lender, the Initial Term Loan Commitment and/or the Additional Term Loan Commitment and/or the Second Additional Term Loan Commitment and/or the Third Additional Term Loan Commitment.  

Term Loan Commitments: means the aggregate amount of such commitments of all Lenders.

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Term Loan Maturity Date: the earlier to occur of (a) February 28, 2023, or (b) such other date on which the Obligations become due and payable pursuant to Section 10.

Term Priority Collateral: has the meaning specified therefor in the Intercreditor Agreement.

Term Priority Collateral Proceeds: the Proceeds of the Term   Priority Collateral.

Third Additional Term Loans: one or more term loans made from time to time pursuant to Section 2.1.4.

Third Additional Term Loan Commitment:  for any Lender, the obligation of such Lender to make a Third Additional Term Loan hereunder, up to the principal amount shown on Schedule 2.1.

Third Additional Term Loan Commitment Expiry Date: February 28, 2019.

Third Additional Term Loan Commitments: means the aggregate amount of such commitments of all Lenders.

Third Additional Term Loan Funding Date: has the meaning specified therefor in Section 3.2(e).

Third Amendment:  means that certain Third Amendment to Financing Agreement, dated as of June  28, 2018, by and among the parties to this Agreement.

Third Amendment Effective Date:  the meaning set forth in the Third Amendment.

Third Amendment Perfection Certificate: a certificate in form and substance satisfactory to the Agent providing information with respect to the property of each of Ultimate Parent, RDS Parent and Lark.

Tutto Marmo:  means Tutto Marmo, Inc., a California corporation.

Tutto Marmo Acquisition:  the consummation of the acquisition by AGM the Tutto Marmo Acquisition Assets pursuant to the terms of the Tutto Marmo Acquisition Agreement and the transactions in connection therewith.

Tutto Marmo Acquisition Agreement: that certain Asset Purchase Agreement among AGM, Tutto Marmo and the shareholders of Tutto Marmo.

Tutto Marmo Acquisition Assets: shall have the meaning of “Assets” as set forth in the Tutto Marmo Acquisition Agreement.

Tutto Marmo Acquisition Documents:  the Tutto Marmo Acquisition Agreement, together with all other agreements, instruments and other documents entered into or delivered in connection with the Tutto Marmo Acquisition.

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UCC: the Uniform Commercial Code as in effect in the State of New York or, when the laws of any other jurisdiction govern the perfection or enforcement of any Lien, the Uniform Commercial Code of such jurisdiction.

Ultimate Parent:  means Select Interior Concepts, Inc., a Delaware corporation.

Unfunded Pension Liability: the excess of a Pension Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to the Code, ERISA or the Pension Protection Act of 2006 for the applicable plan year.

U.S. Person:  "United States Person" as defined in Section 7701(a)(30) of the Code.

U.S. Tax Compliance Certificate:  as defined in Section 5.9.2(b)(iii).

Value:  has the meaning assigned thereto in the Revolver Loan Agreement.

(b)   Accounting Terms.  Under the Loan Documents (except as otherwise specified herein), all accounting terms shall be interpreted, all accounting determinations shall be made, and all applicable financial statements shall be prepared, in accordance with GAAP applied on a basis consistent with those used in preparing the Financial Statements and using the same inventory valuation method as used in the Financial Statements, except for any change required or permitted by GAAP if Borrowers' certified public accountants concur in such change, the change is disclosed to Agent, and all relevant provisions of the Loan Documents are amended in a manner reasonably satisfactory to Required Lenders to take into account the effects of the change.  All financial statements delivered hereunder shall be prepared without giving effect to any election under Statement of Financial Accounting Standards 159 (or any similar accounting principle) permitting a Person to value its financial liabilities at the fair value thereof.  Notwithstanding anything in this Agreement to the contrary, any change in GAAP or the application or interpretation thereof that would require operating leases to be treated similarly as a capital lease shall not be given effect for purposes of the provisions hereof.

(c)   Uniform Commercial Code.  As used herein, the following terms are defined in accordance with the UCC in effect in the State of New York from time to time: "Account", "Account Debtor," "Chattel Paper," "Commercial Tort Claim," "Deposit Account," "Document," "Electronic Chattel Paper," "Equipment," "Fixtures," "General Intangibles," "Goods," "Instrument," "Inventory," "Investment Property," "Letter-of-Credit Right" and "Supporting Obligation."

(d)   Certain Matters of Construction.  The terms "herein," "hereof," "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision.  Any pronoun used shall be deemed to cover all genders.  In the computation of periods of time from a specified date to a later specified date, "from" means "from and including," and "to" and "until" each mean "to but excluding."  The terms "including" and "include" shall mean "including, without limitation" and, for purposes of each Loan Document, the parties agree that the rule of ejusdem generis shall not be applicable to limit any provision.  Section titles appear as a matter of convenience only and shall not affect the interpretation of any Loan Document.  All references to (a) laws include all related regulations,

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interpretations, supplements, amendments and successor provisions; (b) any document, instrument or agreement includes any modifications, extensions or renewals (to the extent permitted by the Loan Documents); (c) any section mean, unless the context otherwise requires, a section of this Agreement; (d) any exhibits or schedules mean, unless the context otherwise requires, exhibits and schedules attached hereto, which are hereby incorporated by reference; (e) any Person includes successors and assigns; (f) time of day means the time of day at Agent's notice address under Section 13.4.1; or (g) discretion of Agent mean its sole and absolute discretion unless expressly provided otherwise.  All references to Loans, Obligations and other amounts herein shall be denominated in Dollars, unless expressly provided otherwise, and all determinations (including calculations of financial covenants) made from time to time under the Loan Documents shall be made in light of the circumstances existing at such time.  No provision of any Loan Documents shall be construed against any party by reason of such party having, or being deemed to have, drafted the provision.  Reference to a Borrower's "knowledge" or similar concept means actual knowledge of a Senior Officer, or knowledge that a Senior Officer would have obtained if he or she had engaged in good faith and diligent performance of his or her duties, including reasonably specific inquiries of employees or agents and a good faith attempt to ascertain the matter.

(e)   Time of Day.  Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

(f)   Effectiveness of Borrowers.  

(a)AGM shall be the initial Borrower.  Immediately upon the consummation of the Pental Acquisition, the execution and delivery of the signature pages of Pental and each of its Subsidiaries listed on the signature pages hereto pursuant to this Agreement shall become effective and Pental and each of its Subsidiaries listed on the signature pages hereto shall become a Borrower, and party to this Agreement.

12.   CREDIT FACILITIES

(a)   Term Loan Commitment.

(a)Initial Term Loans.  Each Lender agrees, severally on a Pro Rata basis up to its Initial Term Loan Commitment, on the terms set forth herein, to make its portion of the Initial Term Loan to the Borrowers.  The Initial Term Loan shall be funded by Lenders on the Closing Date.  The Initial Term Loan Commitment of each Lender shall expire upon the funding by Lenders of the Initial Term Loan on the Closing Date.  Once repaid, whether such repayment is voluntary or required, Initial Term Loans may not be reborrowed.

(b)Additional Term Loans. Subject to the terms and conditions and relying upon the representations and warranties herein set forth:

(i)the Borrowers may, from time to time by written notice to the Agent, no later than three (3) Business Days prior to the consummation of any Specified Transaction (unless otherwise agreed by the Lenders), request to borrow an Additional Term Loan.  

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(ii)each Lender agrees, severally on a Pro Rata basis up to its Additional Term Loan Commitment, on the terms set forth herein, to make its portion of the Additional Term Loan to the Borrowers.  

(iii)each Additional Term Loan shall be funded by the Lenders at any time on or after the Second Amendment Effective Date and prior to the Additional Term Loan Commitment Expiry Date or until the reduction of its Additional Term Loan Commitment to zero in accordance with the terms hereof.  Once repaid, whether such repayment is voluntary or required, the Additional Term Loan may not be reborrowed.

(iv)each Additional Term Loan shall be in an amount not to exceed (i) in the case of a Specified Acquisition, 50% of the purchase price of any single Specified Acquisition or (ii) in the case of the RDS Intercompany Loan, $13,500,000; provided that the original aggregate principal amount of the Additional Term Loans shall not exceed the Additional Term Loan Commitments.

(c)Second Additional Term Loans.  Each Lender agrees, severally on a Pro Rata basis up to its Second Additional Term Loan Commitment, on the terms set forth herein, to make its portion of the Second Additional Term Loan to the Borrowers.  The Second Additional Term Loan shall be funded by the Lenders on the Fourth Amendment Effective Date.  The Second Additional Term Loan Commitment of each Lender shall expire upon the funding by Lenders of the Second Additional Term Loan on the Fourth Amendment Effective Date.  Once repaid, whether such repayment is voluntary or required, Second Additional Term Loans may not be reborrowed.

(d)Third Additional Term Loans. Subject to the terms and conditions and relying upon the representations and warranties herein set forth:

(i)the Borrowers may, from time to time by written notice to the Agent, no later than three (3) Business Days prior to the consummation of any Identified Acquisition (unless otherwise agreed by the Lenders), request to borrow a Third Additional Term Loan.  

(ii)each Lender agrees, severally on a Pro Rata basis up to its Third Additional Term Loan Commitment, on the terms set forth herein, to make its portion of the Third Additional Term Loan to the Borrowers.  

(iii)each Third Additional Term Loan shall be funded by the Lenders at any time on or after the Fifth Amendment Effective Date and prior to the Third Additional Term Loan Commitment Expiry Date or until the reduction of its Third Additional Term Loan Commitment to zero in accordance with the terms hereof.  Once repaid, whether such repayment is voluntary or required, the Additional Term Loan may not be reborrowed.

(e)the original aggregate principal amount of the Third Additional Term Loans shall not exceed the Third Additional Term Loan Commitments.

(f)Term Loan Records.  The Term Loan made by each Lender and interest accruing thereon shall be evidenced by the records of Agent and such Lender.

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(g)Use of Proceeds.  

(i)The proceeds of the Initial Term Loan made on the Closing Date shall be used by the Borrowers solely (a) to refinance existing Debt of AGM under the Existing Term Loan Facility; (b) to refinance existing Debt of Pental under the Existing Pental Loan Facility; (c) to fund the Closing Date Dividend; (d) to repay existing Revolver Debt of AGM under the Revolver Loan Agreement in an amount equal to $11,000,000; (e) to pay a portion of the purchase price under the Pental Acquisition Agreement; (f) to pay fees and expenses in connection with the transactions contemplated by this Agreement; and (g) for working capital and general corporate purposes of the Borrowers.  

(ii)The proceeds of the Additional Term Loan shall be used by the Borrowers solely (a) to pay a portion of the purchase price with respect to a Specified Acquisition; (b) to repay existing Debt of any entity or asset acquired under a Specified Acquisition; (c) to fund a portion of the RDS Intercompany Loan; and (d) to pay fees and expenses in connection with the transactions contemplated by the Second Amendment.

(iii)The proceeds of the Second Additional Term Loan made on the Fourth Amendment Effective Date shall be used by the Borrowers solely (a) to pay a portion of the purchase price under the Summit Acquisition Agreement; and (b) to pay fees and expenses in connection with the transactions contemplated by the Fourth Amendment.

(iv) The proceeds of the Third Additional Term Loans shall be used by the Borrowers solely (a) to pay a portion of the purchase price with respect to an Identified  Acquisition; (b) to repay existing Debt of any entity or asset acquired under an Identified Acquisition; and (c) to pay fees and expenses in connection with the transactions contemplated by the Fifth Amendment and any of the Identified Acquisitions.

13.   INTEREST, FEES AND CHARGES

(a)   Interest.

(a)Rates and Payment of Interest.

(i)The Obligations shall bear interest (i) if a Base Rate Loan, at the Base Rate in effect from time to time, plus the Applicable Margin; (ii) if a LIBOR Loan, at LIBOR for the applicable Interest Period, plus the Applicable Margin; and (iii) if any other Obligation (including, to the extent permitted by law, interest not paid when due), at the LIBOR in effect from time to time, plus the Applicable Margin for LIBOR Loans.

(ii)During an Insolvency Proceeding with respect to any Obligor, or during any other Event of Default if Required Lenders in their discretion so elect, Obligations shall bear interest at the Default Rate (whether before or after any judgment).  Borrowers acknowledge that the cost and expense to Agent and Lenders due to an Event of Default are difficult to ascertain and that the Default Rate is fair and reasonable compensation for this.

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(iii)Interest shall accrue from the date a Loan is advanced or Obligation is incurred or payable, until paid in full by Borrowers.  Interest accrued on the Loans shall be due and payable in arrears, (i) on the first Business Day of each month; (ii) on any date of prepayment, with respect to the principal amount of Loans being prepaid; and (iii) on the Term Loan Maturity Date.  Interest accrued on any other Obligations shall be due and payable as provided in the Loan Documents and, if no payment date is specified, shall be due and payable on demand.  Notwithstanding the foregoing, interest accrued at the Default Rate shall be due and payable on demand.

(b)   Fees.  

(i)Closing Fee.  On or prior to the Closing Date, the Borrowers shall pay to the Agent for the account of the Lenders, in accordance with a written agreement among the Agent and the Lenders, a non‑refundable closing fee (the "Closing Fee") equal to $2,100,000, which shall be deemed fully earned when paid.

(ii)Loan Servicing Fee.  From and after the Closing Date and until the Term Loan Maturity Date, the Borrowers shall pay to the Agent for the account of the Agent, a non‑refundable loan servicing fee (the "Loan Servicing Fee") equal to an aggregate amount of $6,000 each month, which shall be deemed fully earned when paid and which shall be pro rated for any partial month and payable monthly in arrears on the first day of each calendar month, commencing on April 1, 2017.

(iii)Additional Term Loan Funding Fee.  On or prior to date of any funding of an Additional Term Loan pursuant to the terms of this Agreement (each, an "Additional Term Loan Funding Date"), the Borrowers shall pay to the Agent for the account of the Lenders, in accordance with a written agreement among the Agent and the Lenders, a non‑refundable fee equal to 0.50% of the principal amount of the Additional Term Loan funded on such Additional Term Loan Funding Date, which shall be deemed fully earned on the Additional Term Loan Funding Date to which it relates.

(iv)Second Additional Term Loan Funding Fee.  On or prior to the Fourth Amendment Effective Date, the Borrowers shall pay to the Agent for the account of the Lenders, in accordance with a written agreement among the Agent and the Lenders, a non‑refundable fee equal to 0.50 % of the principal amount of the Second Additional Term Loan funded on the Fourth Amendment Effective Date, which shall be deemed fully earned on the Fourth Amendment Effective Date.

(v)Third Additional Term Loan Funding Fee.  On or prior to the date of any funding of a Third Additional Term Loan pursuant to the terms of this Agreement (each, a "Third Additional Term Loan Funding Date"), the Borrowers shall pay to the Agent for the account of the Lenders, in accordance with a written agreement among the Agent and the Lenders, a non‑refundable fee equal to 1.00% of the principal amount of the Third Additional Term Loan funded on such Third Additional Term Loan Funding Date, which shall be deemed fully earned on the Third Additional Term Loan Funding Date to which it relates.

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(vi)Eighth Amendment Fee.  On or prior to the Eighth Amendment Effective Date, the Borrowers shall pay to the Agent for the account of the Lenders, in accordance with their Pro Rata shares, a non‑refundable amendment fee (the "Eighth Amendment Fee") equal to $230,342.25, which shall be deemed fully earned when paid.

(vii)Ninth Amendment Fee.  On or prior to the Ninth Amendment Effective Date, the Borrowers shall pay to the Agent for the account of the Lenders, in accordance with their Pro Rata shares, a non‑refundable amendment fee (the "Ninth Amendment Fee") equal to $2,000,000, which shall be deemed fully earned when paid.

(a)Tenth Amendment Fee.  On or prior to the Tenth Amendment Effective Date, the Borrowers shall pay to the Agent for the account of the Lenders, in accordance with their Pro Rata shares, a non‑refundable amendment fee (the "Tenth Amendment Fee") equal to $250,000, which shall be deemed fully earned when paid.

(c)Computation of Interest, Fees, Yield Protection.  All interest, fees and other charges calculated on a per annum basis, shall be computed for the actual days elapsed, based on a year of 360 days.  Each determination by Agent of any interest, fees or interest rate hereunder shall be final, conclusive and binding for all purposes, absent manifest error.  All fees shall be fully earned when due and shall not be subject to rebate, refund or proration.  All fees payable under Section 3.2 are compensation for services and are not, and shall not be deemed to be, interest or any other charge for the use, forbearance or detention of money.  A certificate as to amounts payable by Borrowers under Section 3.4, 3.6, 3.7, 3.9 or 5.8, submitted to Borrowers by Agent or the affected Lender shall be final, conclusive and binding for all purposes, absent manifest error, and Borrowers shall pay such amounts to the appropriate party within 30 days following receipt of such certificate.

(d)Reimbursement Obligations.  Borrowers shall pay all Extraordinary Expenses promptly upon request.  Borrowers also shall reimburse Agent for all reasonable and documented out-of-pocket legal, accounting, appraisal, consulting, and other fees, costs and expenses incurred by it in connection with (a) negotiation and preparation of any Loan Documents, including any amendment or other modification thereof; (b) administration of and actions relating to any Collateral, Loan Documents and transactions contemplated thereby, including any actions taken to perfect or maintain priority of Agent's Liens on any Collateral, to maintain any insurance required hereunder or to verify Collateral; and (c) subject to the limits of Section 9.1.1(b), each examination, inspection, audit or appraisal with respect to any Obligor or Collateral, whether prepared by Agent's personnel or a third party.  All legal, accounting and consulting fees shall be charged to Borrowers by Agent Professionals at their full hourly rates, regardless of any alternative fee arrangements that Agent, any Lender or any of their Affiliates may have with such professionals that otherwise might apply to this or any other transaction.  Borrowers acknowledge that counsel may provide Agent with a benefit (such as a discount, credit or accommodation for other matters) based on counsel's overall relationship with Agent, including fees paid hereunder.  All amounts payable by Borrowers under this Section shall be due on demand.  

(e)Illegality.  If any Lender determines that any change in Applicable Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful,

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for such Lender or its applicable Lending Office to make, maintain or fund LIBOR Loans, or to determine or charge interest rates based upon LIBOR, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to Borrowers, any obligation of such Lender to make or continue LIBOR Loans shall be suspended until such Lender notifies Borrowers that the circumstances giving rise to such determination no longer exist.  Upon delivery of such notice, Borrowers shall convert all LIBOR Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain LIBOR Loans to such day, or immediately, if such Lender may not lawfully continue to maintain LIBOR Loans.  Upon any such prepayment or conversion, Borrowers shall also pay accrued interest on the amount so prepaid or converted.

(f)Inability to Determine Rates.  Agent will promptly notify Borrowers and Lenders if in connection with any Loan (a) Agent determines that (i) Dollar deposits are not being offered to banks in the London interbank Eurodollar market for the applicable Loan amount or Interest Period or (ii) adequate and reasonable means do not exist for determining LIBOR for the applicable Interest Period, or (c) Agent or Required Lenders determine for any reason that LIBOR for the Interest Period does not adequately and fairly reflect the cost to Lenders of funding the Loan.  Thereafter, Lenders' obligations to make or maintain affected LIBOR Loans and utilization of the LIBOR component (if affected) in determining Base Rate shall be suspended until Agent (upon instruction by Required Lenders) revokes the notice.  Upon receipt of such notice, Borrowers may revoke any pending request for a Borrowing or continuation of a LIBOR Loan or, failing that, will be deemed to have submitted a request for a Base Rate Loan.

(g)Increased Costs; Capital Adequacy.

(a)Increased Costs Generally.  If any Change in Law shall:  

(i)impose, modify or deem applicable any reserve, liquidity, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement reflected in LIBOR);

(ii)subject any Recipient to Taxes (other than (i) Indemnified Taxes, (ii) Taxes described in clauses (b) through (d) of the definition of Excluded Taxes, and (iii) Connection Income Taxes) with respect to any Loan, Commitment or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii)impose on any Lender or any interbank market any other condition, cost or expense (other than Taxes) affecting any Loan, Commitment or Loan Document;

and the result in clause (a), (b) or (c) above shall be to increase the cost to any Lender of making or maintaining any Loan or Commitment, or converting to or continuing any interest option for a Loan or to reduce the amount of any sum received or receivable by a Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, Borrowers will pay

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to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.  Notwithstanding anything contrary in this Agreement or any of the Loan Documents, Borrower shall not be required to compensate or pay additional or increased amounts pursuant to Section 3.5 or this Section 3.7 that arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of any Lender or any company or Person controlling any such Lender and any participant of any such Lender’s rights hereunder or any successors or assignees thereof.

(b)Capital Requirements.  If a Lender determines that a Change in Law affecting such Lender or any Lending Office of such Lender or such Lender's holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender's, or holding company's capital as a consequence of this Agreement, or such Lender's Commitments or Loans to a level below that which such Lender or such holding company could have achieved but for such Change in Law (taking into consideration its policies with respect to capital adequacy), then from time to time Borrowers will pay to such Lender such additional amounts as will compensate it or its holding company for the reduction suffered.

(c)LIBOR Loan Reserves.  If any Lender is required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits, Borrowers shall pay additional interest to such Lender on each LIBOR Loan equal to the costs of such reserves allocated to the Loan by the Lender (as determined by it in good faith, which determination shall be conclusive).  The additional interest shall be due and payable on each interest payment date for the Loan; provided, however, that if the Lender notifies Borrowers (with a copy to Agent) of the additional interest less than 10 days prior to the interest payment date, then the additional interest shall be payable 10 days after Borrowers' receipt of the notice.

(d)Compensation.  Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of its right to demand such compensation, but Borrowers shall not be required to compensate such Lender for any increased costs or reductions suffered more than six months (plus any period of retroactivity of the Change in Law giving rise to the demand) prior to the date that the Lender notifies Borrowers of the applicable Change in Law and of such Lender's intention to claim compensation therefor.

(h)Mitigation Obligations; Replacement of Lenders.  

(a)Designation of a Different Lending Office. If any Lender gives a notice under Section 3.5 or requests compensation under Section 3.7, or if Borrowers are required to pay any Indemnified Taxes or additional amounts with respect to a Lender under Section 5.8, then at the request of Borrowers, such Lender shall use reasonable efforts to designate a different Lending Office or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the judgment of such Lender, such designation or assignment (a) would eliminate the need for such notice or eliminate or reduce amounts payable or to be withheld in the future, as applicable; and (b) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to it or unlawful.  Borrowers shall pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

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(b)Replacement of Lenders. If any Lender gives a notice under Section 3.5 or requests compensation under Section 3.7 or if Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 5.9 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 3.8.1, then Borrower may, at its sole expense and effort, upon notice to such Lender, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 12.1.1, all of its interests, rights (other than its existing rights to payments pursuant to Section 3.5, Section 3.7 or Section 5.9) and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that:

(a)such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 5.9) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

(b)in the case of any such assignment resulting from a claim for compensation under Section 3.7 or payments required to be made pursuant to Section 5.9, such assignment will result in a reduction in such compensation or payments thereafter; and

(c)such assignment does not conflict with Applicable Law.

Prior to the effective date of such assignment, the assigning Lender shall execute and deliver an Assignment and Acceptance, subject only to the conditions set forth above.  

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling Borrower to require such assignment and delegation cease to apply.

(i)   Funding Losses.  If for any reason (a) any repayment or conversion of a LIBOR Loan occurs on a day other than the end of its Interest Period, (b) Borrowers fail to repay a LIBOR Loan when required hereunder, or (c) a Lender (other than a Defaulting Lender) is required to assign a LIBOR Loan prior to the end of its Interest Period pursuant to Section 12.4, then Borrowers shall pay to Agent its customary administrative charge and to each Lender all resulting losses and expenses, including loss of anticipated profits and any loss, expense or fee arising from redeployment of funds or termination of match fundings (but excluding any and all Taxes).  For purposes of calculating amounts payable under this Section, each Lender shall be deemed to have funded a LIBOR Loan by a matching deposit or other borrowing in the London interbank market for a comparable amount and period, whether or not the Loan was in fact so funded.

(j)   Maximum Interest.  Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by Applicable Law ("maximum rate").  If Agent or any Lender shall receive interest in an amount that exceeds

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the maximum rate, the excess interest shall be applied to the principal of the Obligations or, if it exceeds such unpaid principal, refunded to Borrowers.  In determining whether the interest contracted for, charged or received by Agent or a Lender exceeds the maximum rate, such Person may, to the extent permitted by Applicable Law, (a) characterize any payment that is not principal as an expense, fee or premium rather than interest; (b) exclude voluntary prepayments and the effects thereof; and (c) amortize, prorate, allocate and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

14.   LOAN ADMINISTRATION

(a)   Intentionally Omitted.

(b)   Defaulting Lender.  Notwithstanding anything herein to the contrary.  

(a)Reallocation of Pro Rata Share; Amendments.  For purposes of determining Lenders' obligations or rights to fund, participate in or receive collections with respect to Loans, Agent may in its discretion reallocate Pro Rata shares by excluding the Commitments and Loans of a Defaulting Lender from the calculation of such shares.  A Defaulting Lender shall have no right to vote on any amendment, waiver or other modification of a Loan Document, except as provided in Section 13.1.1(c).

(b)Payments; Fees.  Agent may, in its Permitted Discretion, receive and retain any amounts payable to a Defaulting Lender under the Loan Documents, and a Defaulting Lender shall be deemed to have assigned to Agent such amounts until all Obligations owing to Agent, non-Defaulting Lenders and other Secured Parties have been paid in full in cash.  Agent may use such amounts to cover the Defaulting Lender's defaulted obligations or to readvance the amounts to Borrowers.  A Lender shall not be entitled to receive any fees accruing hereunder during the period in which it is a Defaulting Lender.

(c)Status; Cure.  Agent may determine in its Permitted Discretion that a Lender constitutes a Defaulting Lender and the effective date of such status shall be conclusive and binding on all parties, absent manifest error.  Borrowers and Agent may agree in writing that a Lender has ceased to be a Defaulting Lender, whereupon Pro Rata shares shall be reallocated without exclusion of the reinstated Lender's Commitments and Loans among Lenders and settled by Agent (with appropriate payments by the reinstated Lender, including payment of any breakage costs for reallocated LIBOR Loans) in accordance with the readjusted Pro Rata shares.  Unless expressly agreed by Borrowers and Agent, no reinstatement of a Defaulting Lender shall constitute a waiver or release of claims against such Lender.  The failure of any Lender to fund a Loan or otherwise to perform obligations hereunder shall not relieve any other Lender of its obligations under any Loan Document, and no Lender shall be responsible for default by another Lender.

(c)   Intentionally Omitted.

(d)   One Obligation.  The Loans and other Obligations shall constitute one general obligation of Borrowers and are secured by Agent's Lien on all Collateral.

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(e)   Effect of Termination.  Until Full Payment of the Obligations, all undertakings of Borrowers contained in the Loan Documents shall continue, and Agent shall retain its Liens in the Collateral and all of its rights and remedies under the Loan Documents.  Agent shall not be required to terminate its Liens unless it receives Cash Collateral or a written agreement, in each case satisfactory to it, protecting Agent and Lenders from dishonor or return of any Payment Item previously applied to the Obligations.  Sections 3.4, 3.6, 3.7, 3.9, 5.5, 5.7, 5.8, 5.9, 11, 13.3, this Section, and each indemnity or waiver given by an Obligor in any Loan Document, shall survive Full Payment of the Obligations.

15.   PAYMENTS

(a)   General Payment Provisions.  Subject to Section 5.9, all payments of Obligations shall be made in Dollars, without offset, counterclaim or defense of any kind, and in immediately available funds, not later than 12:00 noon on the due date.  Any payment after such time shall be deemed made on the next Business Day.  Any payment of a LIBOR Loan prior to the end of its Interest Period shall be accompanied by all amounts due under Section 3.9.  Borrowers agree that Agent shall have the continuing, exclusive right to apply and reapply payments and proceeds of Collateral against Obligations, in such manner as Agent deems advisable, but whenever possible, any prepayment of Loans shall be applied first to Base Rate Loans and then to LIBOR Loans.

(b)   Repayment of Term Loans.  

(a)Payment of Principal.  The principal amount of the Term Loan shall be repayable in consecutive quarterly installments, equal to $262,500 per quarter, each such installment to be due and payable, in arrears, on the first day of the following Fiscal Quarter, with the first such payment payable on July 1, 2017.  On the Term Loan Maturity Date, all unpaid principal, interest and other amounts owing with respect to the Term Loans shall be due and payable in full.  Each installment shall be paid to Agent for the Pro Rata benefit of Lenders.  Once repaid, whether such repayment is voluntary or required, Term Loans may not be reborrowed.

(b)Mandatory Prepayments.

(i)Within five days after delivery to Agent of Borrowers' audited annual financial statements pursuant to Section 9.1.2 (the "ECF Payment Date"), commencing with the delivery to Agent of the audited annual financial statements for the Fiscal Year ending December 31, 2020, Borrowers shall (i) deliver to Agent a written calculation of Excess Cash Flow for such Fiscal Year, certified by a Senior Officer of the Ultimate Parent, and (ii) (A) if the Leverage Ratio is greater than 3.25:1.00 as of the last day of such Fiscal Year, prepay the outstanding principal amount of the Term Loans in an amount equal to the result of (to the extent positive) (1) 75% of the Excess Cash Flow of the Ultimate Parent and its Subsidiaries for such Fiscal Year minus (2) the aggregate principal amount of all payments made by the Borrowers pursuant to Section 5.2.3 for such Fiscal Year or, at the option of the Borrowers, prior to the ECF Payment Date, so long as, to the extent any deduction is made pursuant to the foregoing clause (2) after such Fiscal Year and prior to when such Excess Cash Flow prepayment is due, such prepayment shall not be deducted with respect to the Excess Cash Flow prepayment for the succeeding Fiscal Year, or (B) if the Leverage Ratio is less than or equal to 3.25:1.00 as of the last day of such Fiscal Year, prepay the outstanding principal amount of the Term Loans in an amount equal to the result of (to the extent positive) (1) 50% of the Excess Cash Flow of the Ultimate Parent and its Subsidiaries for such Fiscal Year minus (2) the aggregate principal amount of all payments made by the Borrowers pursuant to Section 5.2.3 for such Fiscal Year or, at the option of the Borrowers, prior to the ECF Payment Date, so long as, to the extent any deduction is made pursuant to the foregoing clause (2) after such Fiscal Year and prior to when such Excess Cash Flow prepayment is due, such prepayment shall not be deducted with respect to the Excess Cash

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Flow prepayment for the succeeding Fiscal Year (the "Excess Cash Flow Payment Amount"); provided, that if the Payment Conditions are not satisfied at the time such payment is due, Borrowers shall pay such portion of the Excess Cash Flow Payment Amount permitted to be paid on such date, if any, and shall on the first day of each month thereafter, pay such portion of the unpaid amount of the Excess Cash Flow Payment Amount permitted to be paid such that the Payment Conditions are satisfied until such time as the entire Excess Cash Flow Payment Amount has been paid in full;

(ii)Concurrently with any disposition of assets of an Obligor in excess of $750,000 in any Fiscal Year (excluding the sale or other transfer of Inventory and Accounts in the Ordinary Course of Business), Borrowers shall prepay the Term Loan in an amount equal to the Net Proceeds of such disposition; provided that so long as no Event of Default shall have occurred and be continuing, the recipient of any such Net Proceeds may reinvest such Net Proceeds within (i) 180 days of such disposition in replacement assets performing the same or similar functions; or (ii) within 270 days of such disposition if Borrowers have entered into a binding commitment to make such reinvestment in replacement assets performing the same or similar functions within the 180 day period referred to in clause (i) provided that, (A) to the extent such disposition relates to ABL Priority Collateral, such ABL Priority Collateral Proceeds shall be applied (i) first, to Revolver Debt until paid in full and (ii) second, to the Term Loans until paid in full and (B) to the extent such disposition relates to Term Priority Collateral, such Term Priority Collateral Proceeds shall be applied (i) first, to the Term Loan until paid in full and (ii) second, to the  Revolver Debt until paid in full;

(iii)Concurrently with the receipt by any Obligor of any proceeds of any insurance or condemnation award in excess of $2,500,000, the recipient of such proceeds shall prepay the Term Loan in an amount equal to such proceeds; provided that so long as no Event of Default shall have occurred and be continuing, the recipient of any such proceeds may reinvest such proceeds (only to the extent that the aggregate amount of such proceeds from any single casualty or condemnation award do not exceed $7,000,000) within (i) 180 days of such disposition in replacement assets performing the same or similar functions or (ii) within 270 days of such disposition if Borrowers have entered into a binding commitment to make such reinvestment in replacement assets performing the same or similar functions within the 180 day period referred to in clause (i); provided that, (A) to the extent such proceeds of insurance or condemnation award relates to ABL Priority Collateral, such ABL Priority Collateral Proceeds shall be applied (i) first, to Revolver Debt until paid in full and (ii) second, to the Term Loans until paid in full and (B) to the extent such proceeds of insurance or condemnation award relates to Term Priority Collateral, such Term Priority Collateral Proceeds shall be applied (i) first, to the Term Loan until paid in full and (ii) second, to the  Revolver Debt until paid in full;

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(iv)Concurrently with any issuance of Equity Interests (including issuances of Equity Interests constituting Equity Cure Contributions, but excluding issuances of Equity Interests constituting "Equity Cure Contributions" (as defined in the Revolver Loan Agreement)) by any Obligor, Borrowers shall prepay the Term Loan in an amount equal to the net proceeds of such issuance;

(v)Concurrently with any issuance of Debt (other than Debt permitted by Section 9.2.1) by any Obligor, Borrowers shall prepay the Term Loan in an amount equal to the net proceeds of such issuance;

(vi)[reserved];

(vii)Concurrently with the receipt of any Extraordinary Receipts by any Obligor, Borrowers shall prepay Term Loans in an amount equal to such proceeds; provided that to the extent such proceeds relates to ABL Priority Collateral, such ABL Priority Collateral Proceeds shall be applied (i) first, to Revolver Debt until paid in full and (ii) second, to the Term Loans until paid in full.

(c)Optional Prepayments.  Borrowers may, at their option, upon two Business Days prior written notice to Agent, from time to time, prepay the Term Loans, which prepayment must be at least $250,000, plus any increment of $100,000 in excess thereof.  Borrowers shall give written notice to Agent of an intended prepayment of Term Loans, which notice shall specify the amount of the prepayment, shall be irrevocable once given.

(d)Premium; Interest; Application of Prepayments.  (a) Any optional prepayment of the Term Loans pursuant to Section 5.2.3 (other than a prepayment arising in connection with a Change of Control or the sale of all or substantially all assets of the Borrowers), shall, be accompanied by a prepayment premium equal to:  (A) with respect to any such prepayments made prior to the date that is the fifteen month anniversary of the Seventh Amendment Effective Date, 1.50% of the principal amount of the Term Loans so prepaid and (B) thereafter, zero.  Each prepayment of Term Loans pursuant to Section 5.2 shall be accompanied by all interest accrued thereon and any amounts payable under Section 3.9, and shall be applied to principal in inverse order of maturity.  

(b)In the event of the termination of this Agreement and repayment of the Term Loans at any time prior to the date that is the fifteen month anniversary of the Seventh Amendment Effective Date as a result of (i) termination upon the election of the Required Lenders to terminate after the occurrence and during the continuation of an Event of Default, (ii) foreclosure and sale of all of the Collateral, (iii) sale of the Collateral in any Insolvency Proceeding, or (iv) restructuring, reorganization, or compromise of the Obligations by the confirmation of a plan of reorganization or any other plan of compromise, restructuring, or arrangement in any Insolvency Proceeding, then the Borrowers shall pay to the Agent, for the account of the Lenders, the prepayment premium specified in Section 5.2.4(a), if any, measured as of the date of such repayment.

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(c)   Payment of Other Obligations.  Obligations other than Loans, including Extraordinary Expenses, shall be paid by Borrowers as provided in the Loan Documents or, if no payment date is specified, on demand.

(d)   Intentionally Omitted.

(e)   Marshaling; Payments Set Aside.  None of Agent or Lenders shall be under any obligation to marshal any assets in favor of any Obligor or against any Obligations.  If any payment by or on behalf of Borrowers is made to Agent or any Lender, or if Agent or any Lender exercises a right of setoff, and any of such payment or setoff is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Agentor a Lender in its discretion) to be repaid to a trustee, receiver or any other Person, then the Obligation originally intended to be satisfied, and all Liens, rights and remedies relating thereto, shall be revived and continued in full force and effect as if such payment or setoff had not occurred.

(f)   Application of Payments.  

(a)Application.  Payments made by Borrowers hereunder shall be applied:  (a) first, as specifically required hereby; (b) second, to Obligations then due and owing; (c) third, to other Obligations specified by Borrowers; and (d) fourth, as determined by Agent in its discretion.  

(b)Post-Default Allocation.  Subject to the Intercreditor Agreement, after the occurrence and during the continuance of an Event of Default, the Agent may, and upon the direction of the Agent or the Required Lenders shall, apply all payments in respect of any Obligations and all proceeds of the Collateral as follows:

(i)except to the extent provided in clause (b) below, (A) first, ratably to pay the Obligations in respect of any fees, expense reimbursements, indemnities and other amounts then due and payable to the Agent until paid in full; (B) second, ratably to pay the Obligations in respect of any fees (excluding any fees or premiums owed pursuant to Section 5.2.4 hereunder), expense reimbursements and indemnities then due and payable to the Lenders until paid in full; (C) third, ratably to pay interest then due and payable in respect of the Term Loan until paid in full; (D) fourth, ratably to pay principal of the Term Loan until paid in full; (E) fifth, ratably to pay any fees or premiums owed pursuant to Section 5.2.4 hereunder then due and payable until paid in full; (F) sixth, to the ratable payment of all other Obligations then due and payable until paid in full; and

(ii)with respect to the Proceeds of any disposition of all or substantially all of the assets or Equity Interests of any Person or any insurance, which disposition or proceeds of insurance includes both (x) ABL Priority Collateral and (y) Term Priority Collateral, such Proceeds and payments using such Proceeds shall be applied in a manner mutually determined by the Agent and the Revolver Agent acting reasonably and in good faith.

Amounts shall be applied to payment of each category of Obligations only after Full Payment of amounts payable from time to time under all preceding categories.  If amounts are insufficient to

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satisfy a category, they shall be paid ratably among outstanding Obligations in the category.  The allocations set forth in clauses (a) and (b) above in this Section are solely to determine the rights and priorities among Secured Parties, and may be changed by agreement of the affected Secured Parties, without the consent of any Obligor.  Clauses (a) and (b) above in this Section are not for the benefit of or enforceable by any Obligor, and each Obligor irrevocably waives the right to direct the application of any payments or Collateral proceeds subject to this Section.

(c)Erroneous Application.  Agent shall not be liable for any application of amounts made by it in good faith and, if any such application is subsequently determined to have been made in error, the sole recourse of any Lender or other Person to which such amount should have been made shall be to recover the amount from the Person that actually received it (and, if such amount was received by a Secured Party, the Secured Party agrees to return it).

(g)   Account Stated.  Agent shall maintain, in accordance with its customary practices, loan account(s) evidencing the Debt of Borrowers hereunder.  Any failure of Agent to record anything in a loan account, or any error in doing so, shall not limit or otherwise affect the obligation of Borrowers to pay any amount owing hereunder.  Entries made in a loan account shall constitute presumptive evidence of the information contained therein.  If any information contained in a loan account is provided to or inspected by any Person, the information shall be conclusive and binding on such Person for all purposes absent manifest error, except to the extent such Person notifies Agent in writing within 30 days after receipt or inspection that specific information is subject to dispute.

(h)   Taxes.

(a)Payments Free of Taxes; Obligation to Withhold; Tax Payment.  Any and all payments by or on account of any Obligation of any Obligor under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by Applicable Law.  If any Applicable Law (as determined in the good faith discretion of the Obligor) requires the deduction or withholding of any Tax from any such payment by the Obligor, then the Obligor shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the Obligor shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(b)Payment of Other Taxes.  Without  limiting the foregoing, Obligors shall timely pay to the relevant Governmental Authority in accordance with Applicable Law or, at Agent's option, timely reimburse Agent for payment of any Other Taxes.

(c)Tax Indemnification.  

(i)Obligors shall indemnify and hold harmless, on a joint and several basis, each Recipient against any Indemnified Taxes (including those imposed or asserted

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on or attributable to amounts payable under this Section) payable or paid by a Recipient or required to be withheld or deducted from a payment to a Recipient, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  Each Obligor shall make payment within 10 days after demand for any amount or liability payable under this Section.  A certificate as to the amount of such payment or liability delivered to Borrowers by a Lender (with a copy to Agent) or by Agent on its own behalf or on behalf of any Recipient, shall be conclusive absent manifest error.

(ii)Each Lender shall indemnify and hold harmless, on a several basis, Agent against (i) any Indemnified Taxes attributable to such Lender (but only to the extent any Obligor has not already paid or reimbursed Agent therefor and without limiting the Obligors' obligation to do so), (ii) any Taxes attributable to such Lender's maintenance of a Participant Register as required hereunder, and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by Agent in connection with any Obligations, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  Each Lender shall make payment within 10 days after demand for any amount or liability payable under this Section 5.8.3(b).  A certificate as to the amount of such payment or liability delivered to any Lender by Agent shall be conclusive absent manifest error.  Each Lender hereby authorizes the Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Agent to the Lender from any other source against any amount due to the Agent under this Section 5.8.3(b).

(d)Evidence of Payments.  As soon as practicable after any payment of Taxes by an Obligor to a Governmental Authority pursuant to this Section, such Obligor shall deliver to the Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Agent.

(e)Treatment of Certain Refunds.  Unless required by Applicable Law, at no time shall Agent have any obligation to file for or otherwise pursue on behalf of a Lender, nor have any obligation to pay to any Lender, any refund of Taxes withheld or deducted from funds paid for the account of a Lender.  If a Recipient determines in its discretion that it has received a refund of any Taxes as to which it has been indemnified by an Obligor or with respect to which an Obligor has paid additional amounts pursuant to this Section, it shall pay the indemnifying Obligor an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by such Obligor with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) incurred by such Recipient, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that each Obligor agrees, upon request by the Recipient, to repay the amount paid over to such Obligor (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Recipient if the Recipient is required to repay such refund to the Governmental Authority.  Notwithstanding anything in this Section 5.8.5 to the contrary, no Recipient shall be required to pay any amount to any Obligor if such payment would place the Recipient in a less favorable net after-Tax position than it would have been in if the Tax subject to indemnification and giving rise to such refund had not been

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deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  In no event shall Agent or any Recipient be required to make its Tax returns (or any other information relating to its Taxes that it deems confidential) available to any Obligor or other Person.

(f)Survival.  Each party's obligations under Sections 5.8 and 5.9 shall survive the resignation or replacement of Agent or any assignment of rights by or replacement of a Lender, the termination of the Commitments, and the repayment, satisfaction, discharge or Full Payment of any Obligations.

(g)Defined Terms.  For purposes of Section 5.8 and 5.9, references to the term "Applicable Law" include FATCA.

(i)   Lender Tax Information.

(a)Status of Lenders.  Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to AGM, at the time or times reasonably requested by AGM such properly completed and executed documentation reasonably requested by AGM as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, any Lender, if reasonably requested by AGM, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by AGM as will enable AGM to determine whether or not such Lender is subject to backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Sections 5.9.2(a), (b) and (d)) shall not be required if a Lender reasonably believes such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(b)Documentation.  Without limiting the generality of the foregoing, if any Borrower is a U.S. Person,

(i)Any Lender that is a U.S. Person shall deliver to Borrower and Agent on or about the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of Borrower or Agent), executed copies of IRS Form W-9 (or applicable successor form) certifying that such Lender is exempt from U.S. federal backup withholding tax;

(ii)Any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrowers and Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender hereunder (and from time to time thereafter upon reasonable request of Borrowers or Agent), whichever of the following is applicable:

(A)in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party, (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable (or applicable successor form),  establishing an exemption

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from or reduction of U.S. federal withholding Tax pursuant to the "interest" article of such tax treaty, and (y) with respect to other payments under the Loan Documents, IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable (or applicable successor form), establishing an exemption from or reduction of U.S. federal withholding Tax pursuant to the "business profits" or "other income" article of such tax treaty;

(B)executed originals of IRS Form W-8ECI (or applicable successor form);

(C)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate in form satisfactory to Agent to the effect that such Foreign Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, a "10 percent shareholder" of a Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a "controlled foreign corporation" described in Section 881(c)(3)(C) of the Code ("U.S. Tax Compliance Certificate"), and (y) executed originals of IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable (or applicable successor form); or

(D)to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, (or applicable successor form), a U.S. Tax Compliance Certificate in form satisfactory to Agent, IRS Form W-9 (or applicable successor form), and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate on behalf of each such direct and indirect partner;

(iii)any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrowers and Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender hereunder (and from time to time thereafter upon the reasonable request of Borrowers or Agent), executed originals of any other form prescribed by Applicable Law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by Applicable Law to permit Borrowers or Agent to determine the withholding or deduction required to be made; and

(iv)if payment of an Obligation made to a Lender would be subject to U.S. Tax or a penalty imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to Borrowers and Agent at the time(s) prescribed by law and at such times or times reasonably requested by Borrowers or other Obligors or Agent such documentation prescribed by Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrowers, Obligors or Agent as may be necessary for them to comply with their obligations under FATCA and to determine that such Lender has complied with its obligations under FATCA or to determine the amount, if any, to deduct and withhold from such payment.  Solely

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for purposes of this clause (d), "FATCA" shall include any amendments made to FATCA after the date hereof.

(c)Redelivery of Documentation.  If any form or certification previously delivered by a Lender pursuant to this Section expires or becomes obsolete or inaccurate in any respect, such Lender shall promptly update the form or certification or notify Borrowers and Agent in writing of its inability to do so.

16.   CONDITIONS PRECEDENT.

(a)   Conditions Precedent to Initial Term Loans.  In addition to the conditions set forth in Section 6.2, Lenders shall not be required to fund any requested Initial Term Loan or otherwise extend credit to Borrowers hereunder, until the date ("Closing Date") that each of the conditions precedent set forth on Exhibit C has been satisfied.

(b)   Conditions Precedent to All Credit Extensions.  Agent and Lenders shall not be required to fund any Loans after the Closing Date  or grant any other accommodation to or for the benefit of Borrowers, unless the following conditions are satisfied:

(i)No Default or Event of Default shall have occurred and be continuing on the applicable Additional Term Loan Funding Date or on the Fourth Amendment Effective Date, as applicable, or would result from this Agreement or the other Loan Documents becoming effective in accordance with its or their respective terms.

(ii)The representations and warranties of each Obligor in each Loan Document, certificate or other writing delivered to any Secured Party pursuant hereto or thereto on or prior to the applicable Additional Term Loan Funding Date or on the Fourth Amendment Effective Date, as applicable, shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations or warranties that already are qualified or modified as to materiality or "Material Adverse Effect" in the text thereof, which representations and warranties shall be true and correct in all respects subject to such qualification) on and as of the applicable Additional Term Loan Funding Date or on the Fourth Amendment Effective Date, as applicable, as though made on and as of such date, except to the extent that any such representation or warranty expressly relates solely to an earlier date (in which case such representation or warranty shall be true and correct on and as of such earlier date); and

(iii)No event shall have occurred or circumstance exist that has or could reasonably be expected to have a Material Adverse Effect.

Each request (or deemed request) by Borrowers for funding of an Additional Term Loan or the Second Additional Term Loan shall constitute a representation by Borrowers that the foregoing conditions are satisfied on the date of such request and on the date of such funding.  

(c)   Conditions Precedent to Additional Term Loans.  In addition to the conditions set forth in Section 6.2, Lenders shall not be required to fund any requested Additional Term Loan or otherwise extend credit to Borrowers hereunder, until the date that each of the conditions precedent set forth on Exhibit H has been satisfied.

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(d)   Conditions Precedent to Second Additional Term Loans.  In addition to the conditions set forth in Section 6.2, Lenders shall not be required to fund the Second Additional Term Loan or otherwise extend credit to Borrowers hereunder, until the date that each of the conditions precedent set forth on Exhibit J has been satisfied.

(e)   Conditions Precedent to Third Additional Term Loans.  In addition to the conditions set forth in Section 6.2, Lenders shall not be required to fund any requested Third Additional Term Loan or otherwise extend credit to Borrowers hereunder, until the date that each of the conditions precedent set forth on Exhibit K has been satisfied.

17.   CERTAIN COLLATERAL/FURTHER ASSURANCES

(a)   Real Estate Collateral.

(a)Lien on Real Estate.  If any Obligor hereafter acquires any interest in Real Estate with a value in excess of $1,000,000, such Obligor shall, within 60 days (or such later date in Agent's reasonable discretion), execute, deliver and record a Mortgage sufficient to create a first priority Lien in favor of Agent on such Real Estate, and shall deliver all Related Real Estate Documents.

(b)Collateral Assignment of Leases.  To further secure the prompt payment and performance of its Obligations, each Obligor hereby transfers and assigns to Agent all of such Obligor's right, title and interest in, to and under all now or hereafter existing leases of real Property to which such Obligor is a party, whether as lessor or lessee, and all extensions, renewals, modifications and proceeds thereof.

(b)   Cash Collateral.Cash Collateral may be invested, at Agent's discretion (and with the prior written consent of Borrowers, as long as no Event of Default exists), but Agent shall have no duty to do so, regardless of any agreement or course of dealing with Borrowers, and shall have no responsibility for any investment or loss.  As security for their Obligations, Borrowers hereby grant to Agent, for the benefit of Secured Parties, a security interest in and Lien upon all Cash Collateral held from time to time and all proceeds thereof, whether held in a Cash Collateral Account or otherwise.  Agent may apply Cash Collateral to the payment of Obligations as they become due, in such order as Agent may elect.  Each Cash Collateral Account and all Cash Collateral shall be under the sole dominion and control of Agent, and neither Borrowers nor any other Person (other than the applicable depository bank) shall have any right to any Cash Collateral, until Full Payment of the Obligations.

(c)   Extent of Liens.All Liens granted to Agent under the Loan Documents are for the benefit of Secured Parties.  Borrowers authorize Agent to file any financing statement that describes the Collateral as "all assets" or "all personal property" of Borrowers, or words to similar effect, and ratifies any action taken by Agent before the Closing Date to effect or perfect its Lien on any Collateral.  

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18.   REPRESENTATIONS AND WARRANTIES

(a)   General Representations and Warranties.To induce Agent and Lenders to enter into this Agreement and to make available the Commitments and Loans, each Borrower represents and warrants to Agent and Lenders that:

(a)Organization and Qualification.  Each Obligor and its Subsidiaries, is a corporation, limited liability company or limited partnership duly organized, validly existing and in good standing under the laws of the state or jurisdiction of its organization.  Each Obligor and its Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except (solely for the purposes of this subclause) where the failure to be so qualified and in good standing could not reasonably be expected to have a Material Adverse Effect.

(b)Power and Authority.  Each Obligor and its Subsidiaries are duly authorized to execute, deliver and perform each Loan Document to which it is or will be a party.  The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary action, and do not (a) require any consent or approval of any holders of Equity Interests of any Obligor or any Subsidiary of an Obligor, except those already obtained; (b) contravene the Organic Documents of any Obligor or any Subsidiary of an Obligor; (c) violate or cause a default under any Applicable Law or Material Contract; or (d) result in or require the imposition of a Lien (other than Permitted Liens) on Borrower's Property.

(c)Enforceability.  This Agreement is, and each other Loan Document to which any Obligor is or will be a party, when delivered hereunder, will be, a legal, valid and binding obligation of each Obligor party thereto, enforceable against such Obligor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors' rights generally.

(d)Capital Structure.  On the Third Amendment Effective Date, after giving effect to the transactions contemplated hereby to occur on the Third Amendment Effective Date, Schedule 8.1.4 shows, for Ultimate Parent and its Subsidiaries, its name, jurisdiction of organization, authorized and issued Equity Interests, holders of its Equity Interests, and agreements binding on such holders with respect to such Equity Interests.  Except as disclosed on Schedule 8.1.4, in the five years preceding the Closing Date, no Borrower or Subsidiary has acquired any substantial assets from any other Person nor been the surviving entity in a merger or combination.  Each Borrower has good title to its Equity Interests in its Subsidiaries (if any), subject only to Agent's Lien and Liens securing the Revolver Debt, and all such Equity Interests are duly issued, fully paid and non-assessable.  Except as set forth on Schedule 8.1.4, there are no outstanding purchase options, warrants, subscription rights, agreements to issue or sell, convertible interests, phantom rights or powers of attorney relating to Equity Interests of Borrowers or their Subsidiaries.

(e)Title to Properties; Priority of Liens.  Each of the Borrowers and their Subsidiaries has good and marketable title to (or valid leasehold interests in) all of its material Real Estate, and good title to all of its personal Property reflected in any financial

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statements delivered to Agent or Lenders except for defects in title that do not materially interfere with its ability to conduct its business, in each case free of Liens except Permitted Liens.  Each the Borrowers and their Subsidiaries has paid and discharged all lawful claims (other than such claims Properly Contested) that, if unpaid, could become a Lien on its Properties, other than Permitted Liens.  All Liens of Agent in the Collateral are duly perfected, first priority Liens, subject only to Permitted Liens.

(f)Accounts.  Borrowers warrant, with respect to each Account at the time it is shown as an Eligible Account (as defined in the Revolver Loan Agreement) in a Borrowing Base Certificate, that:  (a) it is genuine and enforceable in accordance with its terms and is not evidenced by a judgment;  (b) it arises out of a completed, bona fide sale and delivery of goods or rendition of services in the Ordinary Course of Business, and substantially in accordance with any purchase order, contract or other document relating thereto; (c) it is for a sum certain, maturing as stated in the invoice covering such sale or rendition of services, a copy of which has been furnished or is available to Agent on request; (d) it is not subject to any offset, Lien (other than Permitted Liens), deduction, defense, dispute, counterclaim or other adverse condition except as arising in the Ordinary Course of Business and disclosed to Agent; (e) no purchase order, agreement, document or Applicable Law restricts assignment of the Account to Agent (regardless of whether, under the UCC, the restriction is ineffective); (f) no extension, compromise, settlement, modification, credit, deduction or return has been authorized with respect to the Account, except discounts or allowances granted in the Ordinary Course of Business for prompt payment that are reflected on the face of the invoice related thereto and in the reports submitted to Agent hereunder and (g) to the best of Borrowers' knowledge, (i) there are no facts or circumstances that are reasonably likely to impair the enforceability or collectability of such Account; (ii) the Account Debtor had the capacity to contract when the Account arose, is not subject to an Insolvency Proceeding, and has not failed, or suspended or ceased doing business; and (iii) there are no proceedings or actions threatened or pending against any Account Debtor that could reasonably be expected to have a material adverse effect on the Account Debtor's financial condition, as reasonably determined by the Borrowers in good faith.

(g)Financial Statements.  

(i)The Financial Statements, copies of which have been delivered to Agent and each Lender, fairly present the consolidated financial condition of the Ultimate Parent and its Subsidiaries as at the respective dates thereof and the consolidated results of operations of the Parent and its Subsidiaries for the fiscal periods ended on such respective dates, all in accordance with GAAP.  All material indebtedness and other liabilities (including, without limitation, Debt, liabilities for taxes, long-term leases and other unusual forward or long-term commitments), direct or contingent, of the Ultimate Parent and its Subsidiaries are set forth in the Financial Statements.  Since December 31, 2015 no event or development has occurred with respect to Parent and its Subsidiaries (other than Pental) that has had or could reasonably be expected to have a Material Adverse Effect.  Since December 31, 2016 no event or development has occurred with respect to Pental and its Subsidiaries that has had or could reasonably be expected to have a Material Adverse Effect.

(ii)The Parent has heretofore furnished to Agent (i) projected quarterly balance sheets, income statements and statements of cash flows of the Parent and its

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Subsidiaries, on a consolidated basis, for the period from January 1, 2017, through December 31, 2021, and (ii) projected annual balance sheets, income statements and statements of cash flows of the Parent and its Subsidiaries, on a consolidated basis, for the Fiscal Years ending in December 31, 2017 through December 31, 2021, which projected financial statements shall be updated from time to time pursuant to clause (e) of Exhibit D.The forecasted balance sheets, income statements and statements of cash flows of Ultimate Parent and its Subsidiaries delivered pursuant to this Agreement were prepared in good faith on the basis of the assumptions stated therein, which assumptions were fair and reasonable in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, Ultimate Parent's reasonable estimate of its future financial condition and performance (it being understood and agreed that (x) any financial or business projections or forecasts furnished are subject to significant uncertainties and contingencies, which may be beyond the control of any such Obligor, (y) no assurance is given by any such Obligor that the results or forecast in any such projections will be realized and (z) the actual results may differ from the forecast results set forth in such projections and such differences may be material).

(h)Surety Obligations.  Neither Borrowers nor their Subsidiaries are obligated as surety or indemnitor under any bond or other contract that assures payment or performance of any obligation of any Person, except as permitted hereunder.

(i)Taxes.  Borrowers and their Subsidiaries have filed all federal and other material tax returns and other material reports that it is required by law to file, and has paid, or made provision for the payment of, all Taxes upon it, its income and its Properties that are due and payable, except to the extent being Properly Contested.  The provision for Taxes on the books of Borrowers and their Subsidiaries is adequate for all years not closed by applicable statutes, and for their current Fiscal Year.

(j)Brokers.  Other than as set forth on Schedule 8.1.10, there are no brokerage commissions, finder's fees or investment banking fees payable in connection with any transactions contemplated by the Loan Documents.

(k)Intellectual Property.

(i)The Obligors own or have the right to use all Intellectual Property necessary for the conduct of its business, without conflict with any rights of others.  

(ii)There is no pending or, to Borrowers' actual knowledge, threatened Intellectual Property Claim with respect to Borrowers, any Subsidiary or any of their Property (including any Intellectual Property).  Except as disclosed on Schedule 8.1.11, neither Borrowers nor their Subsidiaries pay or owe any Royalty or other compensation to any Person with respect to any Intellectual Property.  

(iii)All Intellectual Property owned or licensed (except for non-exclusive licenses of Intellectual Property granted in the ordinary course of business) by, or otherwise subject to any interests of, Borrowers or their Subsidiaries is shown on Schedule 8.1.11 (as amended from time to time).

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(iv)Except as set forth in Schedule 8.1.11, and except for non-exclusive licenses of Intellectual Property granted in the ordinary course of business (to the extent constituting a Permitted Lien), none of the Intellectual Property of any Obligor is the subject of any licensing or franchise agreement pursuant to which such Obligor is the licensor or franchisor.  

(v)To each Obligor's actual knowledge, no holding, decision or judgment has been rendered by any governmental authority against any Obligor which limits, cancels or questions the validity of, or any Obligor's ownership interest in, any Intellectual Property owned by any Obligor in any material respect.

(l)Governmental Approvals.  To each of their actual knowledge, Borrowers and their Subsidiaries have, are in material compliance with, and are in good standing with respect to, all Governmental Approvals necessary to conduct its business and to own, lease and operate all of its material Properties, except where noncompliance (or failure to be in good standing) could not reasonably be expected to have a Material Adverse Effect.  All necessary import, export or other licenses, permits or certificates for the import or handling of any goods or other Collateral have been procured and are in effect, and Borrowers and their Subsidiaries have complied with all foreign and domestic laws with respect to the shipment and importation of any goods or Collateral, except where noncompliance could not reasonably be expected to have a Material Adverse Effect.

(m)Compliance with Laws.  To their actual knowledge, except as disclosed on Schedule 8.1.13:(i) Borrowers and their Subsidiaries have duly complied, and their Properties and business operations are in compliance, in all material respects, with all Applicable Law, except where noncompliance could not reasonably be expected to have a Material Adverse Effect.; (ii) no Inventory has been produced in violation of Applicable Law, including the FLSA; (iii) no Borrower's or Subsidiary's present operations (or to Borrowers' knowledge, past operations), Real Estate or other Properties are subject to any federal, state or local investigation to determine whether any remedial action is needed to address any Environmental Release; (iv) no Borrower or Subsidiary has received any Environmental Notice; (v) to Borrowers' knowledge, there are no Environmental Releases or Hazardous Materials on any Real Estate now owned, leased or operated by Borrowers or their Subsidiaries which would result in material liability arising under any Environmental Law.

(n)Burdensome Contracts.  Neither Borrowers nor any of their Subsidiaries is party or subject to any Restrictive Agreement, except as shown on Schedule 8.1.14.  No such Restrictive Agreement prohibits the execution, delivery or performance of any Loan Document by Borrowers.

(o)Litigation.  Except as shown on Schedule 8.1.15, there are no proceedings or investigations pending or, to the actual knowledge of any Obligor, threatened in writing against any Obligor or any Subsidiary of an Obligor, or any of their businesses, operations, Properties, prospects or conditions, that could reasonably be expected to have a Material Adverse Effect if determined adversely to Ultimate Parent or its Subsidiaries.  Except as shown on Schedule 8.1.15, no Obligor has a Commercial Tort Claim (other than, as long as no Event of Default exists, a Commercial Tort Claim for less than $4,000,000).  No Borrower or

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Subsidiary is in default with respect to any order, injunction or judgment of any Governmental Authority.

(p)No Defaults.  No event or circumstance has occurred or exists that constitutes a Default or Event of Default.  No Borrower is in material default, and no event or circumstance has occurred or exists that with the passage of time or giving of notice could constitute a material default, under any Material Contract other than as is being Properly Contested.

(q)ERISA.  Except as disclosed on Schedule 8.1.17:

(i)Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code, and other federal and state laws.  Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter (or opinion letter) from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the actual knowledge of Borrowers, nothing has occurred which would prevent, or cause the loss of, such qualification.  Each Obligor and ERISA Affiliate has met, in all material respects all applicable requirements under the Code, ERISA and the Pension Protection Act of 2006, and no application for a waiver of the minimum funding standards or an extension of any amortization period has been made with respect to any Plan.

(ii)There are no pending or, to the actual knowledge of Borrowers, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect.  There has been no non-exempt prohibited transaction or, to the actual knowledge of Borrowers violation of the fiduciary responsibility rules with respect to any Plan that has resulted in or could reasonably be expected to have a Material Adverse Effect.

(iii)Except as could not reasonably be expected to have a Material Adverse Effect (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) no Obligor or ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iii) no Pension Plan has any Unfunded Pension Liability; (iv) no Obligor or ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; (v) no Obligor or ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA; (vi) as of the most recent valuation date for any Pension Plan or Multiemployer Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is at least 60%, and no Obligor or ERISA Affiliate knows of any fact or circumstance that could reasonably be expected to cause the funding target attainment percentage for any such plan to drop below 60% as of such date.

(r)Ultimate Parent; Parent and SPV.  (a) Ultimate Parent has not engaged in any activities other than acting as a holding company and transactions and activities incidental thereto, entering into and performing its obligations under the Loan Documents and does not hold any assets other than all of the issued and outstanding Equity Interests of Borrowers and proceeds thereof and contractual rights pursuant to the Loan Documents, (b) Parent has not engaged in any activities other than acting as a holding company and transactions and activities incidental thereto, entering into and performing its obligations under the Loan Documents and

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does not hold any assets other than all of the issued and outstanding Equity Interests of Borrowers and proceeds thereof and contractual rights pursuant to the Loan Documents and (c) SPV has not engaged in any activities other than entering into and performing its obligations under the Revolver Debt Documents and the Artisan Company Agreement and does not hold any assets other than (i) membership interests under the Artisan Company Agreement and (ii) fifty (50) quotas, representing a one percent (1%) equity ownership interest, of CECAFE.

(s)Trade Relations.  To the actual knowledge of Borrowers, there exists no actual or threatened termination of any business relationship between Borrowers or any of their Subsidiaries and any customer or supplier, or any group of customers or suppliers, who individually or in the aggregate are material to the business of Borrowers or such Subsidiary.  

(t)Labor Relations.  Neither Borrowers nor their Subsidiaries are party to or bound by any collective bargaining agreement.  There are no material grievances, disputes or controversies with any union or other organization of Borrowers' or their Subsidiaries' employees, or, to Borrowers' knowledge, any asserted or threatened strikes, work stoppages or demands for collective bargaining that could reasonably be expected to have a Material Adverse Effect.

(u)Payable Practices.  Borrowers have not made any material change in their historical accounts payable practices that would have an adverse impact on Borrowers from those in effect on the Closing Date.

(v)Not a Regulated Entity.  No Borrower is an "investment company" or a "person directly or indirectly controlled by or acting on behalf of an investment company" within the meaning of the Investment Company Act of 1940; or (b) subject to regulation under the Federal Power Act, the Interstate Commerce Act, any public utilities code or any other Applicable Law regarding its authority to incur Debt.

(w)Margin Stock.  No Borrower is engaged, principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock.  No Loan proceeds will be used by any Borrower to purchase or carry, or to reduce or refinance any Debt incurred to purchase or carry, any Margin Stock or for any related purpose governed by Regulations T, U or X of the Board of Governors.

(x)OFAC.  Neither Borrowers nor, to the actual knowledge of Borrowers, any director, officer, employee, agent, affiliate or representative thereof, is an individual or entity currently the subject of any Sanctions.  Borrowers are not located, organized or resident in a Designated Jurisdiction.  No part of the proceeds of the Loan will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official

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capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

(y)Deposit Accounts.  Schedule 9.1.9 (as amended from time to time) sets forth all Deposit Accounts (other than Excluded Accounts) maintained by Borrowers, Lark, Ultimate Parent, Parent, Intermediate Holdco, Greencraft Holdings, Greencraft Interiors, Greencraft Stone.

(z)Anti-Corruption Laws.  Each Obligor and its respective Subsidiaries has conducted its business in accordance with applicable anti-corruption laws and has instituted and maintained policies and procedures designed to promote and achieve compliance with such laws.

(aa)Material Contracts.  Set forth on Schedule 8.1.27 is a complete and accurate list as of the Closing Date of all Material Contracts of each Obligor, showing the parties and subject matter thereof and amendments and modifications thereto.  Each such Material Contract is in full force and effect and is binding upon and enforceable against each Obligor that is a party thereto and, to the actual knowledge of such Obligor, all other parties thereto in accordance with its terms, except, in each case, as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general principles of equity.

(bb)Customers and Suppliers.  There exists no actual or threatened (in writing) termination or cancellation of the business relationship between (i) any Obligor, on the one hand, and any customer or any group thereof, on the other hand, whose agreements with any Obligor are governed by a Material Contract, or (ii) any Obligor, on the one hand, and any supplier or any group thereof, on the other hand, whose agreements with any Obligor are governed by a Material Contract.

(cc)Pental Acquisition Documents.  The Parent has delivered to the Agent a complete and correct copy of the Pental Acquisition Documents as of the Closing Date, including all schedules and exhibits thereto.  Each Pental Acquisition Document sets forth the entire agreement and understanding of the parties thereto relating to the subject matter thereof, and there are no other agreements, arrangements or understandings, written or oral, relating to the matters covered thereby not delivered to the Agent.  The execution, delivery and performance of the Pental Acquisition Agreement has been duly authorized by all necessary action (including, without limitation, the obtaining of any consent of stockholders or other holders of Equity Interests required by law or by any applicable corporate or other organizational documents) on the part of the Borrowers.  Each Pental Acquisition Document is the legal, valid and binding obligation of the Borrowers that are parties thereto, enforceable against such Borrowers in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general principles of equity.

(dd)Solvency.  After giving effect to the transactions contemplated by this Agreement and the making of the Term Loan, the Obligors on a consolidated basis are Solvent.

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(b)   Complete Disclosure.  No Loan Document contains any untrue statement of a material fact, nor fails to disclose any material fact necessary to make the statements contained therein not materially misleading.  There is no fact or circumstance that any Obligor has failed to disclose to Lender in writing that could reasonably be expected to have a Material Adverse Effect.

19.   COVENANTS AND CONTINUING AGREEMENTS

(a)   Affirmative Covenants.  So long as any principal of or interest on any Loan or any other Obligations (other than contingent obligations against which no claim has been asserted) are outstanding, each Borrower  shall, and shall cause each Subsidiary to:

(a)Inspections; Appraisals.

(i)Permit Agent no more than two (2) times per Fiscal Year, subject to reasonable notice (except when an Event of Default exists) and during normal business hours, to visit and inspect the Properties of Borrowers or their Subsidiaries, inspect, audit and make extracts from Borrowers' or their Subsidiaries' books and records, and discuss with its officers, employees, agents, advisors and independent accountants such Borrower's or Subsidiary's business, financial condition, assets, prospects and results of operations. Lenders may participate in any such visit or inspection, at their own expense.  Neither Agent nor any Lender shall have any duty to Borrowers to make any inspection, or to share any results of any inspection, appraisal or report with Borrowers; provided, Borrowers shall provide Agent with copies of the results of any inspection, appraisal or report obtained by Bank of America, N.A. in connection with the Revolver Debt Documents.  Borrowers acknowledge that all inspections, appraisals and reports are prepared by Agent and Lenders for their purposes, and Borrowers shall not be entitled to rely upon them.

(ii)Reimburse Agent for its reasonable charges, costs and expenses in connection with (i) examinations of any Obligor's books and records or any other financial or Collateral matters as Agentdeems reasonably appropriate, up to one time per Fiscal Year; and (ii) appraisals of Inventory, up to one time per Fiscal Year; provided, that, that if an examination or appraisal is initiated during an Event of Default, all reasonable charges, costs and expenses therefor shall be reimbursed by Borrowers without regard to such limits.  Subject to and without limiting the foregoing, Borrowers agree to pay Agent's then standard charges for examination activities, including the standard charges of Agent's internal examination and appraisal groups, as well as the charges of any third party used for such purposes.  

(b)Financial and Other Information.  Keep adequate records and books of account with respect to its business activities, in which proper entries are made in accordance with GAAP reflecting all financial transactions; and furnish to Agent all financial statements, reports and other items set forth on Exhibit D no later than the time specified therein.

(c)Intentionally Omitted.

(d)Notices.  Notify Agent in writing of any of the items set forth on Exhibit E that affects an Obligor no later than the time specified therein.

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(e)Compliance with Laws.  Comply with all Applicable Laws, including ERISA, Environmental Laws, FLSA, OSHA, Anti-Terrorism Laws, and laws regarding collection and payment of Taxes, and maintain all Governmental Approvals necessary to the ownership of its Properties or conduct of its business, unless failure to comply (other than failure to comply with Anti-Terrorism Laws or the United States Foreign Corrupt Practices Act of 1977, as amended) or maintain could not reasonably be expected to have a Material Adverse Effect.  Without limiting the generality of the foregoing, if any Environmental Release from Borrowers' operations requiring reporting under Environmental Law occurs at or on any Properties of Borrowers or any of their Subsidiaries, it shall report such Environmental Release to Agent and act promptly and diligently to investigate and report to all Governmental Authorities the extent of  such Environmental Release as required by Applicable Law, and to make appropriate remedial action to investigate and remediate, such Environmental Release to the extent required under Environmental Law to be performed by Borrowers.

(f)Taxes.  Pay and discharge all Taxes prior to the date on which they become delinquent or penalties attach, unless such Taxes are being Properly Contested.  If an Account of Obligor includes a charge for any Taxes, Agent is authorized, in its discretion and subject to Section 4.1.1(b), to pay the amount thereof to the proper taxing authority for the account of Obligor and to charge Obligor therefor; provided, however, that neither Agent nor Lenders shall be liable for any Taxes that may be due from Obligor or with respect to any Collateral.

(g)Insurance.

(i)Maintain insurance with respect to the Collateral, covering casualty, hazard, theft, malicious mischief, flood and other risks, in amounts, with endorsements and with insurers (with a Best Rating of at least A-, unless otherwise approved by Agent in its Permitted Discretion) satisfactory to Agent.  All proceeds under each policy shall be payable to an account at the Agent.  From time to time upon the reasonable request, Borrowers shall deliver to Agent the originals or certified copies of its insurance policies.  Unless Agent shall agree otherwise, each policy shall include satisfactory endorsements (i) showing Agent as lender's loss payee; (ii) requiring 30 days’ prior written notice to Agent in the event of cancellation of the policy for any reason whatsoever; and (iii) specifying that the interest of Agent shall not be impaired or invalidated by any act or neglect of Borrowers or the owner of the Property, nor by the occupation of the premises for purposes more hazardous than are permitted by the policy.  If Borrowers fail to provide and pay for any insurance, Agent may, at its option, but shall not be required to, procure the insurance and charge Borrowers therefor.  Borrowers agree to deliver to Agent, promptly as rendered, copies of all reports made to insurance companies.  While no Event of Default exists, Borrowers may settle, adjust or compromise any insurance claim, as long as the proceeds are delivered to an account at the Agent.  If an Event of Default exists, only Agent shall be authorized to settle, adjust and compromise such claims.

(ii)Without limiting clause (a) above, maintain insurance with insurers (with a Best Rating of at least A-, unless otherwise approved by Agent in its Permitted Discretion) reasonably satisfactory to Agent, with respect to the Properties and business of Borrowers and Subsidiaries of such type (including product liability, workers' compensation,

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larceny, embezzlement, or other criminal misappropriation insurance), in such amounts, and with such coverages and deductibles as are customary for companies similarly situated.

(h)Licenses.  Keep each material License affecting any Collateral (including the manufacture, distribution or disposition of Inventory) or any other material Property of Borrowers and Subsidiaries in full force and effect and pay all Royalties when due, except to the extent such License is replaced by a License that is comparable or more favorable to Borrowers or such License matures or expires in accordance with the terms of such License.

(i)Deposit Accounts; Depository Bank.  Take all actions necessary to establish Agent's control of each Deposit Account maintained by an Obligor (other than Excluded Accounts).  The applicable Obligor shall be the sole account holder of each Deposit Account and shall not allow any other Person (other than Agent and Bank of America, N.A., as lender under the Revolver Loan Agreement) to have control over a Deposit Account or any Property deposited therein.  Borrowers shall promptly notify Agent of any opening or closing of a Deposit Account and, with the consent of Agent, will amend Schedule 9.1.9 to reflect same.  Borrowers hereby authorize the financial institutions at which Borrowers or any other Obligor maintain a deposit account to provide the Agent with such information with respect to such deposit account as the Agent may from time to time reasonably request, and Borrowers hereby consent to such information being provided to the Agent.  

(j)Other Collateral Covenants.  Comply with the following additional covenants related to Collateral:

(i)All tangible items of Collateral, other than Inventory in transit, shall at all times be kept by Borrowers at the business locations set forth in Schedule 9.1.10, except that Borrowers may (a) make sales or other dispositions of Collateral in accordance with Section 9.2.6; and (b) move Collateral to another location in the United States, upon 30 Business Days’ prior written notice to Agent.

(ii)All reasonable and documented expenses of protecting, storing, warehousing, insuring, handling, maintaining and shipping any Collateral, all Taxes payable with respect to any Collateral (including any sale thereof), and all other payments required to be made by Agent to any Person to realize upon any Collateral, shall be borne and paid by Borrowers.  Agent shall not be liable or responsible in any way for the safekeeping of any Collateral, for any loss or damage thereto (except for reasonable care in its custody while Collateral is in Agent's actual possession), for any diminution in the value thereof, or for any act or default of any warehouseman, carrier, forwarding agency or other Person whatsoever, except for such loss or damage caused by the negligence or misconduct of the Agent.

(iii)Each Obligor shall defend, in accordance with its reasonable business judgment, its title to Collateral and Agent's Liens therein against all Persons, claims and demands, except Permitted Liens.

(iv)Upon reasonable written request, each Obligor shall provide Agent with copies of all existing agreements, and promptly after execution thereof provide Agent with copies of all agreements executed after the Closing Date, between an Obligor

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and any landlord, warehouseman, processor, shipper, bailee or other Person that owns any premises at which any Collateral that is currently included on a Borrowing Base Certificate is kept or that otherwise may possess or handle any Collateral that is currently included on a Borrowing Base Certificate.

(v)Borrowers shall use, store and maintain all Inventory with reasonable care and caution, in accordance with applicable standards of any insurance and in conformity with all Applicable Law, and shall make current rent payments (within applicable grace periods provided for in leases) at all locations where material Collateral is located.

(k)Future Subsidiaries.  Cause:

(i)each Subsidiary of any Obligor not in existence on the Closing Date, to execute and deliver to the Agent promptly and in any event within 10 Business Days after the formation, acquisition or change in status thereof, (i) a Joinder Agreement, pursuant to which such Subsidiary shall be made a party to this Agreement as a Borrower, (ii) a supplement to the Guaranty and Collateral Agreement, together with (A) certificates evidencing all of the Equity Interests of any Person owned by such Subsidiary required to be pledged under the terms of the Guaranty and Collateral Agreement, (B) undated stock powers for such Equity Interests executed in blank with signature guaranteed, and (C) such opinions of counsel as the Agent may reasonably request, (iii) to the extent required under the terms of this Agreement, one or more Mortgages creating on the real property of such Subsidiary a perfected, first priority Lien (in terms of priority, subject only to Permitted Liens) on such real property and such other Related Real Estate Documents as may be reasonably required by the Agent with respect to each such real property, and (iv) to the extent required under the terms of this Agreement, such other agreements, instruments, approvals or other documents reasonably requested by the Agent in order to create, perfect, establish the first priority of or otherwise protect any Lien purported to be covered by any such Guaranty and Collateral Agreement or Mortgage or otherwise to effect the intent that such Subsidiary shall become bound by all of the terms, covenants and agreements contained in the Loan Documents and that all property and assets of such Subsidiary (other than Excluded Assets (as defined in the Guaranty and Collateral Agreement)) shall become Collateral for the Obligations.

(ii)each owner of the Equity Interests of any such Subsidiary to execute and deliver promptly and in any event within 10 Business Days after the formation or acquisition of such Subsidiary a Pledge Amendment (as defined in the Guaranty and Collateral Agreement), together with (i) certificates evidencing all of the Equity Interests of such Subsidiary required to be pledged under the terms of the Guaranty and Collateral Agreement, (ii) undated stock powers or other appropriate instruments of assignment for such Equity Interests executed in blank with signature guaranteed, (iii) such opinions of counsel as the Agent may reasonably request and (iv) such other agreements, instruments, approvals or other documents reasonably requested by the Agent.

(iii)Notwithstanding the foregoing, no Foreign Subsidiary shall be required to become an Obligor (and, as such, shall not be required to deliver the documents required by clause (i) above or become a Guarantor; provided, however, that if the Equity Interests of a Foreign Subsidiary are owned by an Obligor, such Obligor shall deliver all such

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documents, instruments, agreements (including, without limitation, at the reasonable request of the Agent, a pledge agreement governed by the laws of the jurisdiction of the organization of such Foreign Subsidiary) and certificates described in clause (ii) above to the Agent, and take all commercially reasonable actions reasonably requested by the Agent or otherwise necessary to grant and to perfect a first‑priority Lien (subject to Permitted Liens) in favor of the Agent, for the benefit of the Agents and the Lenders, in 65% of the voting Equity Interests of such Foreign Subsidiary and 100% of all other Equity Interests of such Foreign Subsidiary owned by such Obligor but in no event shall such Foreign Subsidiary become a Guarantor under this Agreement or any of the other Loan Documents.

(l)Anti-Corruption Laws.  Conduct its business in compliance with applicable anti-corruption laws and maintain policies and procedures designed to promote and achieve compliance with such laws.

(m)Further Assurances.  Take such action and execute, acknowledge and deliver, and cause each of its Subsidiaries to take such action and execute, acknowledge and deliver, at its sole cost and expense, such agreements, instruments or other documents as any Agent may reasonably require from time to time in order (a) to carry out more effectively the purposes of this Agreement and the other Loan Documents, (b) to subject to valid and perfected first priority Liens any of the Collateral, (c) to establish and maintain the validity and effectiveness of any of the Loan Documents and the validity, perfection and priority of the Liens intended to be created thereby, and (d) to grant, and confirm unto each Secured Party the rights now or hereafter intended to be granted to it under this Agreement or any other Loan Document.  In furtherance of the foregoing, to the maximum extent permitted by applicable law, each Obligor (i) authorizes Agent upon the occurrence and during the continuance of an Event of Default, to execute any such agreements, instruments or other documents in such Obligor's name and to file such agreements, instruments or other documents in any appropriate filing office, all to establish and/or perfect the Agent's interests in the Collateral, (ii) authorizes each Agent to file any financing statement required hereunder or under any other Loan Document, and any continuation statement or amendment with respect thereto, in any appropriate filing office without the signature of such Obligor, and (iii) ratifies the filing of any financing statement, and any continuation statement or amendment with respect thereto, filed without the signature of such Obligor prior to the date hereof.  Notwithstanding anything else contained herein to the contrary, (w) the foregoing shall not apply to any Excluded Assets (as defined in the Guaranty and Collateral Agreement), (x) any such documents and deliverables shall be governed by laws of the State of New York or such other State of the United States as may be reasonably agreed by the Agent and the Borrowers based upon the type and location of the particular Collateral and for the avoidance of doubt, no foreign-law governed documents shall be required for any Collateral, including with respect to any Intellectual Property registered in any non-U.S. jurisdiction, and (y) no leasehold mortgages, landlord waivers, tenant estoppels, or collateral access letters shall be required to be entered into unless the same are entered into with respect to the Revolver Debt.

(n)Post-Closing.  Comply with the requirements on Exhibit F.

(o)Post-Fifth Amendment.  Comply with the requirements on Exhibit I.

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(b)   Negative Covenants.So long as any principal of or interest on any Loan or any other Obligations (other than contingent obligations against which no claim has been asserted) are outstanding, each Borrower shall not, and shall cause each Subsidiary not to:

(a)Permitted Debt.  Create, incur, assume, guarantee or suffer to exist, or otherwise become or remain liable with respect to any Debt other than:

(i)the Obligations;

(ii)Subordinated Debt;

(iii)Purchase Money Debt of Borrowers and Subsidiaries that is unsecured or secured only by a Purchase Money Lien, as long as the aggregate amount does not exceed $16,000,000at any time;

(iv)Bank Product Debt incurred in the Ordinary Course of Business;

(v)Contingent Obligations (i) arising from endorsements of Payment Items for collection or deposit in the Ordinary Course of Business; (ii) arising from Hedging Agreements permitted hereunder; (iii) existing on the Closing Date, and any extension or renewal thereof that does not increase the amount of such Contingent Obligation when extended or renewed; (iv) incurred in the Ordinary Course of Business with respect to surety, appeal or performance bonds, or other similar obligations; (v) arising from customary indemnification obligations in favor of purchasers in connection with dispositions of Equipment permitted hereunder; or (vi) arising under the Loan Documents;

(vi)the Revolver Debt, subject to the limitations set forth in the Intercreditor Agreement;

(vii)Debt acquired or assumed in connection with Permitted Acquisitions in an amount not to exceed $3,000,000 in the aggregate at any time outstanding;

(viii)Debt arising as a direct result of judgments, orders, awards or decrees against any Obligor, in each case not constituting an Event of Default; and

(ix)Debt that is not included in any of the preceding clauses of this Section, is not secured by a Lien (other than  Permitted Lien) and does not exceed $16,000,000 in the aggregate at any time.

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(b)Permitted Liens.  Create, incur, assume or suffer to exist any Lien upon or with respect to any of its Property, whether now owned or hereafter acquired, file or authorize the filing under the Uniform Commercial Code or any Requirement of Law of any jurisdiction, a financing statement (or the equivalent thereof) that names it or any of its Subsidiaries as debtor; sign any security agreement authorizing any secured party thereunder to file such financing statement (or the equivalent thereof) other than, as to all of the above, the following (collectively, "Permitted Liens"):  

(i)Liens in favor of Agent;

(ii)Liens securing Debt that is permitted under Section 9.2.1(c);

(iii)Liens for Taxes not yet due or being Properly Contested;

(iv)statutory Liens (other than Liens for Taxes or imposed under ERISA) arising in the Ordinary Course of Business, but only if (i) payment of the obligations secured thereby is not yet due or is being Properly Contested, and (ii) such Liens do not materially impair the value or use of the Property or materially impair operation of the business of Borrowers or their Subsidiaries;

(v)Liens incurred or deposits made in the Ordinary Course of Business to secure the performance of government tenders, bids, contracts, statutory obligations and other similar obligations, as long as such Liens are at all times junior to Agent's Liens and are required or provided by law;

(vi)Liens arising in the Ordinary Course of Business that are subject to Lien Waivers;

(vii)Liens arising by virtue of a judgment or judicial order against Borrowers or their Subsidiaries, or any Property of Borrowers or their Subsidiaries, as long as such Liens are (i) in existence for less than 20 consecutive days or being Properly Contested, and (ii) at all times junior to Agent's Liens;

(viii)easements, rights-of-way, restrictions, covenants or other agreements of record, and other similar charges or encumbrances on Real Estate, that do not secure any monetary obligation and do not interfere with the Ordinary Course of Business;

(ix)normal and customary rights of setoff upon deposits in favor of depository institutions, and Liens of a collecting bank on Payment Items in the course of collection; and

(x)carriers', warehousemen's, landlord's, mechanics, materialmen's, repairmen's or other like Liens arising in the Ordinary Course of Business that secure obligations that are not overdue for a period of more than 30 days or are being Properly Contested;

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(xi)Liens securing the Debt that is permitted under Section 9.2.1(f); provided that such Liens are at all times subject to the terms of the Intercreditor Agreement;

(xii)Liens in favor of customs and revenue authorities arising as a matter of law which secure payment of customs duties in connection with the importation of goods, but only to the extent such Liens secure amounts not yet due;

(xiii)existing Liens shown on Schedule 9.2.2 and replacement Liens on the property subject to such Liens, but only to the extent that the amount of debt secured thereby, and the property secured thereby, shall not be increased; and

(xiv)Liens in favor of Borrower in respect of its consignment interests encumbering its Consigned Inventory (as defined in the Revolver Loan Agreement).

(c)[Intentionally Omitted].  

(d)Distributions; Upstream Payments.  Declare or make any Distributions, except Permitted Distributions when no Event of Default exists, or create or suffer to exist any encumbrance or restriction on the ability of a Subsidiary to make any Distribution to Borrower, except for restrictions under the Loan Documents, under Applicable Law or in effect on the Closing Date as shown on Schedule 8.1.14.

(e)Restricted Investments.  Make any Restricted Investment.

(f)Disposition of Assets.  Sell, lease, license, consign, transfer or otherwise dispose of any Property of an Obligor or a Subsidiary of an Obligor, whether now owned or hereafter acquired, including a disposition of Property in connection with a sale-leaseback transaction or synthetic lease, except:

(i)a sale of Inventory in the Ordinary Course of  Business;

(ii)as long as no Event of Default exists and all Net Proceeds are in cash and remitted to a Deposit Account of a Borrower subject to a Deposit Account Control Agreement, a disposition of Property of an Obligor that is (i) a disposition of Equipment; or (ii) a disposition of Inventory that is obsolete, unmerchantable or otherwise unsalable in the Ordinary Course of Business;

(iii)replacement of Equipment that is worn, damaged or obsolete with Equipment of like function and value, if the replacement Equipment is acquired substantially contemporaneously with such disposition and is free of Liens;

(iv)a transfer of Property by another Obligor to a Borrower;

(v)the use of cash in the ordinary course of its business;

(vi)the granting of Liens not prohibited under this Agreement; and

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(vii)the conveyance of Property (other than Accounts and Goods) not otherwise permitted above; provided that, the aggregate book value of all such Property so conveyed in any Fiscal Year of Parent under this clause (g) shall not exceed $2,000,000.

(g)Loans.  Make or commit or agree to make any loans or other advances of money to any Person, except:

(i) advances to an officer or employee for salary, travel expenses, commissions and similar items in the Ordinary Course of Business;

(ii)any loans or other advances to customers in the Ordinary Course of Business not to exceed $2,500,000in the aggregate at any time; and

(iii)the RDS Intercompany Loan.

(h)Restrictions on Payment of Certain Debt.  Make any payments (whether voluntary or mandatory, or a prepayment, redemption, retirement, defeasance or acquisition) with respect to any:

(i)Subordinated Debt, except to the extent expressly permitted under any subordination agreement relating to such Debt (and a Senior Officer of a Borrower shall certify to Agent, not less than five Business Days prior to the date of payment, that all conditions under such agreement have been satisfied; provided that, failure to provide such notice shall not result in an Event of Default);

(ii)earnout payments owing pursuant to the Pental Acquisition Agreement, the Summit Acquisition Agreement, the Specified Acquisitions or the Identified Acquisitions unless at the time of such payment, the Payment Conditions are satisfied (and a Senior Officer of a Borrower shall certify to Agent, not less than two Business Days prior to the date of payment, that all Payment Conditions have been satisfied; provided that, failure to provide such notice shall not result in an Event of Default); or

(iii)subject to clause (a) above, any Borrowed Money (other than (x) the Obligations, the Revolver Debt, Debt that is permitted under Section 9.2.1(c) or (d) and so long as the Leverage Ratio is greater than 2.00:1.00 after giving pro forma effect to such payment, Debt that is permitted under Sections 9.2.1(g) and (i) or (y) the Permitted Refinancing of any Debt that is permitted under Sections 9.2.1(c), (g) and (i)) prior to its due date under the agreements evidencing such Debt as in effect on the Closing Date (or as such due date is amended thereafter with the written consent of Agent).

(i)Fundamental Changes.  Change its name or conduct business under any fictitious name; change its tax (unless required by Applicable Law), charter or other organizational identification number; change its form or state of organization; wind-up, liquidate or dissolve, or merge, consolidate or amalgamate with any Person whether in a single transaction or in a series of related transactions, provided, however, that any wholly-owned Subsidiary of any Obligor (other than a Borrower) may be merged into such Obligor or another wholly-owned Subsidiary of such Obligor, or may consolidate or amalgamate with another wholly-owned

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Subsidiary of such Loan Obligor, so long as (A) no other provision of this Agreement would be violated thereby, (B) such Obligor gives the Agent at least 30 days' prior written notice of such merger, consolidation or amalgamation accompanied by true, correct and complete copies of all material agreements, documents and instruments relating to such merger, consolidation or amalgamation, including, without limitation, the certificate or certificates of merger or amalgamation to be filed with each appropriate Secretary of State (with a copy as filed promptly after such filing), (C) no Default or Event of Default shall have occurred and be continuing either before or after giving effect to such transaction, (D) the Lenders' rights in any Collateral (other than Collateral merged out of existence), including, without limitation, the existence, perfection and priority of any Lien thereon, are not adversely affected by such merger, consolidation or amalgamation and (E) the surviving Subsidiary, if any, if not already an Obligor, is joined as an Obligor hereunder pursuant to a Joinder Agreement and is a party to the Guaranty and Collateral Agreement and the Equity Interests of such Subsidiary is the subject the Guaranty and Collateral Agreement, in each case, which is in full force and effect on the date of and immediately after giving effect to such merger, consolidation or amalgamation.

(j)Subsidiaries. Permit any existing Subsidiary to issue any additional Equity Interests except directors' qualifying shares.

(k)Organic Documents.  Amend, modify or otherwise change any of its Organic Documents, except (a) with respect to Subsidiaries other than SPV, in connection with a transaction permitted under Section 9.2.9., (b) pursuant to the Select Interior Transaction or (c) in connection with a name change so long as the Agent shall receive (i) three (3) Business Day’s prior written notice of such amendment and (ii) a true and complete copy of the amendment filed by the appropriate official in its jurisdiction of formation within three (3) Business Days of such filing.

(l)Tax Consolidation.  File or consent to the filing of any consolidated income tax return with any Person other than Borrowers and Subsidiaries.

(m)Accounting Changes.  Make any material change in accounting treatment or reporting practices, except as required by GAAP and in accordance with Section 1.2; or change its Fiscal Year.

(n)Restrictive Agreements.  Become a party to any Restrictive Agreement, except a Restrictive Agreement (a) in effect on the Closing Date and listed on Schedule 8.1.14; (b) relating to secured Debt permitted hereunder, as long as the restrictions apply only to collateral for such Debt; or (c) constituting customary restrictions on assignment in leases and other contracts.

(o)Hedging Agreements.  Enter into any Hedging Agreement, except to hedge risks arising in the Ordinary Course of Business and not for speculative purposes.

(p)Conduct of Business.  Engage in any business, other than its business as conducted on the Closing Date and any activities incidental thereto.

(q)Affiliate Transactions.  Enter into, renew, extend or be a party to any transaction or series of related transactions (including, without limitation, the purchase, sale,

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lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any Affiliate, except:

(i) transactions expressly permitted by the Loan Documents;

(ii)payment of reasonable compensation to officers and employees for services actually rendered, and payment of customary directors' and managers' fees and indemnities; and

(iii)transactions with Affiliates in the Ordinary Course of Business (including those consummated prior to the Closing Date and shown on Schedule 9.2.17) so long as such transactions are upon fair and reasonable terms fully disclosed to Agent and no less favorable than would be obtained in a comparable arm's-length transaction with a non-Affiliate and that are disclosed to the Agent prior to the consummation thereof, if they involve one or more payments by the Parent or any of its Subsidiaries in excess of $500,000 for any single transaction or series of related transactions.

(r)Plans.  Become party to any Multiemployer Plan or Foreign Plan, other than (i) any in existence on the Closing Date or (ii) the non-satisfaction of the liabilities thereunder would not have a Material Adverse Effect.

(s)Modifications of Debt.  Amend, modify, supplement or otherwise change (or permit the amendment, modification or other change in any manner of) any provision of any of its Subordinated Debt or of any instrument or agreement (including, without limitation, any purchase agreement, indenture, loan agreement or security agreement) relating to any such Subordinated Debt if such amendment, modification or change would shorten the final maturity or average life to maturity of, or require any payment to be made earlier than the date originally scheduled on, such Subordinated Debt, would change the subordination provision of such Subordinated Debt, or would otherwise be adverse to the Lenders or the issuer of such Subordinated Debt in any material respect.

(t)Returns of Inventory; Affixed Equipment.  Return any Inventory to a supplier, vendor or other Person, whether for cash, credit or otherwise, unless (a) such return is in the Ordinary Course of Business; (b) no Event of Default or Overadvance (as defined in the Revolver Loan Agreement) exists or would result therefrom; (c) Agent is promptly notified if the aggregate Value of all Inventory returned in any calendar month exceeds $500,000; and (d) any payment received by Borrowers for a return is promptly remitted to Agent for application to the Obligations.  Borrowers shall not permit any commercially financed Equipment with a  value in excess of $150,000 to become affixed to real Property unless any landlord or mortgagee delivers a Lien Waiver.

(u)Acquisition, Sale and Maintenance of Inventory.  Acquire or accept any Inventory on consignment or approval, and Borrowers shall take all steps to assure that all Inventory is produced in accordance with Applicable Law, including the FLSA.

(v)Management Fee.  Pay any management fee, consulting fee, or similar fee to the Sponsors, any of its equity holders, or any Affiliate thereof.

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(w)Investment Company Act of 1940.  Engage in any business, enter into any transaction, use any securities or take any other action or permit any of its Subsidiaries to do any of the foregoing, that would cause it or any of its Subsidiaries to become subject to the registration requirements of the Investment Company Act of 1940, as amended, by virtue of being an "investment company" or a company "controlled" by an "investment company" not entitled to an exemption within the meaning of such Act.

(c)   Financial Covenants.  So long as any principal of or interest on any Loan or any other Obligation (whether or not due) shall remain unpaid or any Lender shall have any Commitment hereunder, each Obligor shall not:

(a)Fixed Charge Coverage Ratio.  

(i)As of the last day of a calendar month, permit the Fixed Charge Coverage Ratio of Ultimate Parent and its Subsidiaries for the trailing twelve month period then ending, commencing with the calendar month ending April 30, 2020 through and including the calendar month ending December 31, 2020, to be less than 1.00:1.00.

(ii)As of the last day of a Fiscal Quarter, permit the Fixed Charge Coverage Ratio of Ultimate Parent and its Subsidiaries for the trailing twelve month period then ending, commencing with the Fiscal Quarter ending March 31, 2021 and on the last day of each Fiscal Quarter thereafter, to be less than 1.60.100.  

(b)Maximum Total Leverage.  On any Financial Covenant Trigger Test Date, permit the Leverage Ratio of Ultimate Parent and its Subsidiaries to be greater than the ratio set forth opposite such date:

Each Fiscal Quarter Ending	Ratio
March 31, 2020 through and including December 31, 2020	3.90:1.00
March 31, 2021 and each Fiscal Quarter ending thereafter	3.754.00:1.00

(c)Obligor's Right to Cure.  Notwithstanding anything to the contrary contained in Section 10.1, in the event of any Event of Default under Section 10.1(c) that results from a breach of Section 9.3.1 or Section 9.3.2, and until the expiration of the tenth (10th) Business Day after the earlier of (x) the date of delivery by the Borrowers of the financial statements required by Exhibit D (clause (b)) or (y) the date by which such financial statements are required to have been delivered (the "Equity Cure Period"), Ultimate Parent or Sponsors may, as applicable, pursuant to written notice to Agent prior to the receipt of such proceeds by Borrowers or Ultimate Parent, as applicable, issue equity interests in Borrowers or Ultimate Parent, as applicable, to its then existing equity investors in return for cash or otherwise receive a cash capital contribution from one or more of such Persons, and Borrowers or Ultimate Parent, as applicable, may apply the amount of the net proceeds therefrom to increase EBITDA with

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respect to such applicable Fiscal Quarter and in the calculation of EBITDA for any subsequent financial covenant tests including the Fiscal Quarter that includes the date of such contribution (the "Equity Cure Contributions"); provided that (i) any such proceeds received by Ultimate Parent are contributed by Ultimate Parent to Borrowers, (ii) 100% of the net proceeds of such Equity Cure Contribution are applied to prepay outstanding principal under the Loan in accordance with Section 5.2.2(d), provided that for purposes of determining the financial covenants for the fiscal quarter with respect to which the Equity Cure Contribution is being made, the amount of the Loan shall not be reduced by such prepayments but such debt reduction shall be taken into account for purposes of determining compliance with the financial covenants for any period in which such Equity Cure Contribution is included in the calculation of EBITDA starting with the fiscal quarter immediately following the fiscal quarter being cured, (iii) in each four Fiscal Quarter period, no more than two Equity Cure Contributions may be made and Equity Cure Contributions may not be made in consecutive Fiscal Quarters, (iv) not more than four Equity Cure Contributions may be made during the term of this Agreement, (v) the amount of any Equity Cure Contributions made pursuant to this Section 9.3.3 shall not exceed in any Fiscal Quarter the lesser of (x)  the amount required to cause Borrowers to be in compliance with the applicable financial covenants as at the end of such Fiscal Quarter and (y) 2.5% of EBITDA for the trailing four Fiscal Quarter period ending on the last day of such Fiscal Quarter and (vi) the aggregate amount of all Equity Cure Contributions during the term of this Agreement shall not exceed 7.5% of EBITDA for the trailing four Fiscal Quarter period ending on the last day of such Fiscal Quarter.  If, after giving effect to the foregoing pro forma adjustment, Ultimate Parent is in compliance with the financial covenants set forth in Section 9.3.1 and 9.3.2, Ultimate Parent t shall be deemed to have satisfied the requirements of such Sections as of the relevant date of determination with the same effect as though there had been no failure to comply on such date, and the applicable breach or default of such Section 9.3.1 or 9.3.2 that had occurred shall be deemed cured for purposes of this Agreement. If (a) an Equity Cure Contribution is permitted for any Fiscal Quarter and (b) notice has been delivered to the Agent of an anticipated Equity Cure Contribution, then from the last day of the Fiscal Quarter related to such cure notice until the earlier to occur of the required date for receipt of the Equity Cure Contribution and the date on which the Agent is notified that the Equity Cure Contribution will not be made, no Default or Event of Default shall have occurred under the Loan Documents with respect to any default under Section 9.3 for which such cure notice was delivered. The parties hereby acknowledge that this Section may not be relied on for purposes of calculating any financial ratios other than as applicable to Sections 9.3.1 and 9.3.2.  Notwithstanding the foregoing, for purposes of calculating Excess Cash Flow, EBITDA shall not include the amount of any Equity Cure Contributions.

20.   EVENTS OF DEFAULT; REMEDIES ON DEFAULT

(a)   Events of Default.  Each of the following shall be an "Event of Default" if it occurs for any reason whatsoever, whether voluntary or involuntary, by operation of law or otherwise:

(i)Borrowers (or any other Obligor, if applicable) fail to pay (i) any principal of any Loan when due (whether at stated maturity, on demand, upon acceleration or otherwise) or (ii) any interest, fee, indemnity or other amount payable under this Agreement or any other Loan Document within 2 Business Days after the date when due;

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(ii)Any representation or warranty of an Obligor made in any Loan Documents or transactions contemplated thereby is incorrect or misleading in any material respect when made or deemed made;

(iii)Borrowers breach or fail to perform any covenant contained in Section 7.2, 7.3, 9.1.1, 9.1.2 (but only as to the covenants described in (a), (b) and (c) of Exhibit D), 9.1.7, 9.1.10, 9.1.11, 9.1.12, 9.1.13, 9.2, 9.3.1 or 9.3.2; provided that, solely with respect to a breach of Section 9.3.1 or 9.3.2, such breach continues after the expiration of the applicable Equity Cure Period;

(iv)An Obligor breaches or fails to perform any other covenant contained in any Loan Documents, and such breach or failure is not cured within 30 days after a Senior Officer of such Obligor has knowledge thereof (less, in the case of Section 9.1.4, the number of days between the date such Senior Officer obtained knowledge of such failure and the date that notice thereof is given pursuant to Section 9.1.4) or receives notice thereof from Agent, whichever is sooner; provided, however, that such notice and opportunity to cure shall not apply if the breach or failure to perform is not capable of being cured within such period or is a willful breach by an Obligor;

(v)A Guarantor repudiates, revokes or attempts to revoke its guaranty; an Obligor or third party denies or contests the validity or enforceability of any Loan Documents or Obligations, or the perfection or priority of any Lien granted to Agent and covering a material portion of the Collateral; or any Loan Document ceases to be in full force or effect for any reason (other than a waiver or release by, or any other action or inaction of, Agent and Lenders);

(vi)Any breach, default or the occurrence and continuation of any "Event of Default" (or any comparable term) of an Obligor occurs under (i) one or more Hedging Agreements in an aggregate principal amount exceeding $1,000,000 (the "obligations" of any Obligor in respect of any Hedge Agreement at any time shall be the maximum aggregate amount (after giving effect to any netting agreements) that such Obligor would be required to pay if such Hedge Agreement were terminated at such time); (ii) the Revolver Loan Agreement or any other documentation evidencing or executed in connection with the Revolver Debt or (iii) any instrument or agreement to which it is a party or by which it or any of its Properties is bound, relating to any Debt (other than the Obligations or the Revolver Debt) in excess of $2,500,000, in each case, if the maturity of or any payment with respect to such Debt may be accelerated or demanded due to such breach;

(vii)Any judgment, order or award (or any settlement of any litigation or other proceeding that, if breached, could result in a judgment, order or award) for the payment of money is entered against an Obligor in an amount that exceeds, individually or cumulatively with all unsatisfied judgments or orders against all Obligors, $2,500,000 (net of insurance coverage therefor that has not been denied by the insurer), and (i) enforcement proceedings shall have been commenced by any creditor upon any such judgment, order, award or settlement or (ii) there shall be a period of 10 consecutive days after entry thereof during which (A) a stay of enforcement thereof is not in effect or (B) the same is not vacated, discharged, stayed or bonded pending appeal;

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(viii)A loss, theft, damage or destruction occurs with respect to any Inventory if the amount not covered by insurance exceeds $2,500,000;

(ix)Any Obligor is enjoined, restrained or in any way prevented by any Governmental Authority from conducting any material part of its business; an Obligor suffers the loss, revocation or termination of any material license, permit, lease or agreement necessary to its business; there is a cessation of any material part of an Obligor's business for more than 15 days; any material Collateral or Property of an Obligor is taken or impaired through condemnation; an Obligor agrees to or commences any liquidation, dissolution or winding up of its affairs; or an Obligor is not Solvent;

(x)Any Obligor (i) shall institute any proceeding or voluntary case seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for any such Person or for any substantial part of its property, (ii) shall be generally not paying its debts as such debts become due or shall admit in writing its inability to pay its debts generally, (iii) shall make a general assignment for the benefit of creditors, or (iv) shall take any action to authorize or effect any of the actions set forth above in this subsection (j);

(xi)any proceeding shall be instituted against any Obligor seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution, liquidation, winding up, reorganization, arrangement, adjustment, protection, relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for any such Person or for any substantial part of its property, and either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against any such Person or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property) shall occur;

(xii)An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan that has resulted or could reasonably be expected to result in liability of an Obligor to a Pension Plan, Multiemployer Plan or PBGC that could reasonably be expected to result in a Material Adverse Effect, or an Obligor or ERISA Affiliate fails to pay when due any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan and such failure could reasonably be expected to result in a Material Adverse Effect; or any event similar to the foregoing occurs or exists with respect to a Foreign Plan that could reasonably be expected to result in a Material Adverse Effect;

(xiii)An Obligor or any of its Senior Officers is criminally indicted or convicted for (i) a felony committed in the conduct of the Obligor’s business, or (ii) violating any state or federal law (including the Controlled Substances Act, Money Laundering Control Act of 1986 and Illegal Exportation of War Materials Act) that could cause or result in a Material Adverse Effect;

(xiv)A Change of Control occurs; or

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(xv)SPV breaches or fail to perform any covenant contained in Section 5.11 of the Guarantee and Collateral Agreement and such breach or failure is not cured within 10 Business Days after a Senior Officer of SPV has knowledge thereof or receives notice thereof from Agent, whichever is sooner; provided, however, that such notice and opportunity to cure shall not apply if the breach or failure to perform is not capable of being cured within such period or is a willful breach by SPV.

(b)   Remedies upon Default.  If an Event of Default described in Section 10.1(j) or (k) occurs, then to the extent permitted by Applicable Law, all Obligations shall become automatically due and payable and all Commitments shall terminate, without any action by Agent or notice of any kind.  In addition, or if any other Event of Default exists, Agent may in its discretion (and shall upon written direction from Required Lenders) do any one or more of the following from time to time:

(i)declare any Obligations immediately due and payable, whereupon they shall be due and payable without diligence, presentment, demand, protest or notice of any kind, all of which are hereby waived by Borrowers to the fullest extent permitted by law;

(ii)terminate, reduce or condition any Commitment;

(iii)require Obligors to Cash Collateralize their Obligations that are contingent or not yet due and payable; and

(iv)exercise any and all rights or remedies afforded under any agreement, by law, at equity or otherwise, including the rights and remedies of a secured party under the UCC.  Such rights and remedies include the rights to (i) take possession of any Collateral; (ii) require Borrowers to assemble Collateral, at Borrowers' expense, and make it available to Agent at a place designated by Agent; (iii) enter any premises where Collateral is located and store Collateral on such premises until sold (and if the premises are owned or leased by Borrowers, Borrowers agree not to charge for such storage); and (iv) sell or otherwise dispose of any Collateral in its then condition, or after any further manufacturing or processing thereof, at public or private sale, with such notice as may be required by Applicable Law, in lots or in bulk, at such locations, all as Agent, in its discretion, deems advisable.  Borrowers agree that 10 days' notice of any proposed sale or other disposition of Collateral by Agent shall be reasonable, and that any sale conducted on the internet or to a licensor of Intellectual Property shall be commercially reasonable.  Agent may conduct sales on any Obligor's premises, without charge, and any sales may be adjourned from time to time in accordance with Applicable Law.  Agent shall have the right to sell, lease or otherwise dispose of any Collateral for cash, credit or any combination thereof, and Agent may purchase any Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of the purchase price, may set off the amount of such price against the Obligations.

(c)   License.  For the sole purpose of enabling Agent to exercise its rights and remedies as to the Collateral under this Agreement and Applicable Law, Agent is hereby granted an irrevocable, non-exclusive license or other right to use, license or sub-license (without payment of royalty or other compensation to any Person) any Intellectual Property of

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Obligors, computer hardware and software, brochures, customer lists, promotional and advertising materials, labels, packaging materials and other Property, in advertising for sale, marketing, selling, collecting, completing manufacture of, or otherwise exercising any rights or remedies with respect to, any Collateral.  For clarity, this license is effective only while an Event of Default exists and is irrevocable until the termination of this Agreement.  Each Obligor’s rights and interests under Intellectual Property shall inure to Agent’s benefit.

(d)   Setoff.  At any time during the continuance of an Event of Default, Agent, Lenders and any of their Affiliates are authorized, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by Agent, such Lender or such Affiliate to or for the credit or the account of an Obligor against its Obligations, whether or not Agent, such Lender or such Affiliate shall have made any demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or are owed to a branch or office of Agent, such Lender or such Affiliate different from the branch or office holding such deposit or obligated on such indebtedness.  The rights of Agent, each Lender and each such Affiliate under this Section are in addition to other rights and remedies (including other rights of offset) that such Person may have.

(e)   Remedies Cumulative; No Waiver.

(a)Cumulative Rights.  All agreements, warranties, guaranties, indemnities and other undertakings of Obligors under the Loan Documents are cumulative and not in derogation of each other.  The rights and remedies of Agent and Lenders under the Loan Documents are cumulative, may be exercised at any time and from time to time, concurrently or in any order, and are not exclusive of any other rights or remedies available by agreement, by law, at equity or otherwise.  All such rights and remedies shall continue in full force and effect until Full Payment of all Obligations.

(b)Waivers.  No waiver or course of dealing shall be established by (a) the failure or delay of Agent or any Lender to require strict performance by any Obligor under any Loan Document, or to exercise any rights or remedies with respect to Collateral or otherwise; (b) the making of any Loan during a Default, Event of Default or other failure to satisfy any conditions precedent; or (c) acceptance by Agent or any Lender of any payment or performance by an Obligor under any Loan Documents in a manner other than that specified therein.  Except as set forth in this Agreement, any failure to satisfy a financial covenant on a measurement date shall not be cured or remedied by satisfaction of such covenant on a subsequent date.

21.   AGENT

(a)   Appointment, Authority and Duties of Agent.

(a)Appointment and Authority.  Each Secured Party appoints and designates Cerberus as Agent under all Loan Documents.  Agent may, and each Secured Party authorizes Agent to, enter into all Loan Documents to which Agent is intended to be a party and

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accept all Security Documents.  Any action taken by Agent in accordance with the provisions of the Loan Documents, and the exercise by Agent of any rights or remedies set forth therein, together with all other powers reasonably incidental thereto, shall be authorized by and binding upon all Secured Parties.  Without limiting the generality of the foregoing, Agent shall have the sole and exclusive authority to (a) act as the disbursing and collecting agent for Lenders with respect to all payments and collections arising in connection with the Loan Documents; (b) execute and deliver as Agent each Loan Document, including any intercreditor or subordination agreement, and accept delivery of each Loan Document; (c) act as collateral agent for Secured Parties for purposes of perfecting and administering Liens under the Loan Documents, and for all other purposes stated therein; (d) manage, supervise or otherwise deal with Collateral; and (e) take any Enforcement Action or otherwise exercise any rights or remedies with respect to any Collateral or under any Loan Documents, Applicable Law or otherwise.

(b)Duties.  The title of "Agent" is used solely as a matter of market custom and the duties of Agent are administrative in nature only.  Agent has no duties except those expressly set forth in the Loan Documents, and in no event does Agent have any agency, fiduciary or implied duty to or relationship with any Secured Party or other Person by reason of any Loan Document or related transaction.  The conferral upon Agent of any right shall not imply a duty to exercise such right, unless instructed to do so by Lenders in accordance with this Agreement.

(c)Agent Professionals.  Agent may perform its duties through agents and employees.  Agent may consult with and employ Agent Professionals, and shall be entitled to act upon, and shall be fully protected in any action taken in good faith reliance upon and in accordance with, any advice given by an Agent Professional.  Agent shall not be responsible for the negligence or misconduct of any agents, employees or Agent Professionals selected by it with reasonable care.

(d)Instructions of Required Lenders.  The rights and remedies conferred upon Agent under the Loan Documents may be exercised without the necessity of joining any other party, unless required by Applicable Law.  In determining compliance with a condition for any action hereunder, including satisfaction of any condition in Section 6, Agent may presume that the condition is satisfactory to a Secured Party unless Agent has received notice to the contrary from such Secured Party before Agent takes the action.  Agent may request instructions from Required Lenders or other Secured Parties with respect to any act (including the failure to act) in connection with any Loan Documents or Collateral, and may seek assurances to its satisfaction from Secured Parties of their indemnification obligations against Claims that could be incurred by Agent.  Agent may refrain from any act until it has received such instructions or assurances, and shall not incur liability to any Person by reason of so refraining.  Instructions of Required Lenders shall be binding upon all Secured Parties, and no Secured Party shall have any right of action whatsoever against Agent as a result of Agent acting or refraining from acting pursuant to instructions of Required Lenders.  Notwithstanding the foregoing, instructions by and consent of specific parties shall be required to the extent provided in Section 13.1.1.  In no event shall Agent be required to take any action that it determines in its Permitted Discretion is contrary to Applicable Law or any Loan Documents or could subject any Agent Indemnitee to liability.

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(b)   Agreements Regarding Collateral and Borrower Materials.

(a)Lien Releases; Care of Collateral.  Secured Parties authorize Agent to release any Lien with respect to any Collateral:  (a) upon Full Payment of the Obligations; (b) that is the subject of a disposition or Lien that any Borrower certifies in writing is a Permitted Asset Disposition or a Permitted Lien entitled to priority over Agent's Liens (and Agent may rely conclusively on any such certificate without further inquiry); (c) that does not constitute a material part of the Collateral; or (d) subject to Section 13.1, with the consent of Required Lenders.  Secured Parties authorize Agent to subordinate its Liens to any Purchase Money Lien or other Lien entitled to priority hereunder.  Agent has no obligation to assure that any Collateral exists or is owned by an Obligor, or is cared for, protected or insured, nor to assure that Agent's Liens have been properly created, perfected or enforced, or are entitled to any particular priority, nor to exercise any duty of care with respect to any Collateral.

(b)Possession of Collateral.  Agent and Secured Parties appoint each Lender as agent (for the benefit of Secured Parties) for the purpose of perfecting Liens in any Collateral held or controlled by such Lender, to the extent such Liens are perfected by possession or control.  If any Lender obtains possession or control of any Collateral, it shall notify Agent thereof and, promptly upon Agent's request, deliver such Collateral to Agent or otherwise deal with it in accordance with Agent's instructions.

(c)Reports.  Agent shall promptly provide to Lenders, when complete, any field examination, audit or appraisal report prepared for Agent with respect to any Obligor or Collateral ("Report").  Reports and other Borrower Materials may be made available to Lenders by providing access to them on the Platform, but Agent shall not be responsible for system failures or access issues that may occur from time to time.  Each Lender agrees (a) that Reports are not intended to be comprehensive audits or examinations, and that Agent or any other Person performing an audit or examination will inspect only limited information and will rely significantly upon Borrowers' books, records and representations; (b) that Agent makes no representation or warranty as to the accuracy or completeness of any Borrower Materials and shall not be liable for any information contained in or omitted from any Borrower Materials, including any Report; and (c) to keep all Borrower Materials confidential and strictly for such Lender's internal use, not to distribute any Report or other Borrower Materials (or the contents thereof) to any Person (except to such Lender's Participants, attorneys and accountants that have been advised of the confidential nature of the Borrower Materials), and to use all Borrower Materials solely for administration of the Obligations.  Each Lender shall indemnify and hold harmless Agent and any other Person preparing a Report from any action such Lender may take as a result of or any conclusion it may draw from any Borrower Materials, as well as from any Claims arising as a direct or indirect result of Agent furnishing same to such Lender, via the Platform or otherwise.

(c)   Reliance by Agent.  Agent shall be entitled to rely, and shall be fully protected in relying, upon any certification, notice or other communication (including those by telephone, telex, telegram, telecopy or e-mail) believed by it to be genuine and correct and to have been signed, sent or made by the proper Person.  Agent shall have a reasonable and practicable amount of time to act upon any instruction, notice or other communication under any Loan Document, and shall not be liable for any delay in acting.

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(d)   Action Upon Default.  Agent shall not be deemed to have knowledge of any Default or Event of Default, or of any failure to satisfy any conditions in Section 6, unless it has received written notice from Borrowers or Required Lenders specifying the occurrence and nature thereof.  If any Lender acquires knowledge of a Default, Event of Default or failure of such conditions, it shall promptly notify Agent and the other Lenders thereof in writing.  Each Secured Party agrees that, except as otherwise provided in any Loan Documents or with the written consent of Agent and Required Lenders, it will not take any Enforcement Action, accelerate Obligations or assert any rights relating to any Collateral.

(e)   Ratable Sharing.  If any Lender obtains any payment or reduction of any Obligation, whether through set-off or otherwise, in excess of its ratable share of such Obligation, such Lender shall forthwith purchase from Secured Parties  participations in the affected Obligation as are necessary to share the excess payment or reduction on a Pro Rata basis or in accordance with Section 5.6.2, as applicable.  If any of such payment or reduction is thereafter recovered from the purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.  Notwithstanding the foregoing, if a Defaulting Lender obtains a payment or reduction of any Obligation, it shall immediately turn over the full amount thereof to Agent for application under Section 4.2.2 and it shall provide a written statement to Agent describing the Obligation affected by such payment or reduction.

(f)   Indemnification.  EACH SECURED PARTY SHALL INDEMNIFY AND HOLD HARMLESS AGENT INDEMNITEES TO THE EXTENT NOT REIMBURSED BY OBLIGORS, ON A PRO RATA BASIS, AGAINST ALL CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY SUCH INDEMNITEE, PROVIDED THAT ANY CLAIM AGAINST AN AGENT INDEMNITEE RELATES TO OR ARISES FROM ITS ACTING AS OR FOR AGENT (IN THE CAPACITY OF AGENT).  In Agent's Permitted Discretion, it may reserve for any Claims made against an Agent Indemnitee, and may satisfy any judgment, order or settlement relating thereto, from proceeds of Collateral prior to making any distribution of Collateral proceeds to Secured Parties.  If Agent is sued by any receiver, trustee or other Person for any alleged preference or fraudulent transfer, then any monies paid by Agent in settlement or satisfaction of such proceeding, together with all interest, costs and expenses (including attorneys' fees) incurred in the defense of same, shall be promptly reimbursed to Agent by each Secured Party to the extent of its Pro Rata share.

(g)   Limitation on Responsibilities of Agent.  Agent shall not be liable to any Secured Party for any action taken or omitted to be taken under the Loan Documents, except for losses directly and solely caused by Agent's gross negligence or willful misconduct.  Agent does not assume any responsibility for any failure or delay in performance or any breach by any Obligor, Lender or other Secured Party of any obligations under the Loan Documents.  Agent does not make any express or implied representation, warranty or guarantee to Secured Parties with respect to any Obligations, Collateral, Liens, Loan Documents or Obligor.  No Agent Indemnitee shall be responsible to Secured Parties for any recitals, statements, information, representations or warranties contained in any Loan Documents or Borrower Materials; the execution, validity, genuineness, effectiveness or enforceability of any Loan Documents; the genuineness, enforceability, collectability, value, sufficiency, location or existence of any Collateral, or the validity, extent, perfection or priority of any Lien therein; the

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validity, enforceability or collectability of any Obligations; or the assets, liabilities, financial condition, results of operations, business, creditworthiness or legal status of any Obligor or Account Debtor.  No Agent Indemnitee shall have any obligation to any Secured Party to ascertain or inquire into the existence of any Default or Event of Default, the observance by any Obligor of any terms of the Loan Documents, or the satisfaction of any conditions precedent contained in any Loan Documents.

(h)   Successor Agent and Co-Agents.

(a)Resignation; Successor Agent.  Agent may resign at any time by giving at least 30 days' written notice thereof to Lenders and Borrowers.  Required Lenders may appoint a successor to replace the resigning Agent, which successor shall be (a) a Lender or an Affiliate of a Lender; or (b) a financial institution with an office in the United States, or an Affiliate of any such financial institution with an office in the United States reasonably acceptable to Required Lenders and (provided no Default or Event of Default exists) Borrowers.  If no successor agent is appointed prior to the effective date of Agent's resignation, then Agent may appoint a successor agent that is a financial institution with an office in the United States, or an Affiliate of any such financial institution with an office in the United States acceptable to it (which shall be a Lender unless no Lender accepts the role) or in the absence of such appointment, Required Lenders shall on such date assume all rights and duties of Agent hereunder.  Upon acceptance by any successor Agent of its appointment hereunder, such successor Agent shall thereupon succeed to and become vested with all the powers and duties of the retiring Agent without further act.  On the effective date of its resignation, the retiring Agent shall be discharged from its duties and obligations hereunder but shall continue to have all rights and protections under the Loan Documents with respect to actions taken or omitted to be taken by it while Agent, including the indemnification set forth in Sections 11.6 and 13.3, and all rights and protections under this Section 11.  Any successor to Cerberus by merger or acquisition of stock or this loan shall continue to be Agent hereunder without further act on the part of any Secured Party or Obligor.

(b)Co-Collateral Agent.  If appropriate under Applicable Law, Agent may appoint a Person to serve as a co-collateral agent or separate collateral agent under any Loan Document.  Each right, remedy and protection intended to be available to Agent under the Loan Documents shall also be vested in such agent.  Secured Parties shall execute and deliver any instrument or agreement that Agent may request to effect such appointment.  If any such agent shall die, dissolve, become incapable of acting, resign or be removed, then all the rights and remedies of the agent, to the extent permitted by Applicable Law, shall vest in and be exercised by Agent until appointment of a new agent.

(i)   Due Diligence and Non-Reliance.  Each Lender acknowledges and agrees that it has, independently and without reliance upon Agent or any other Lenders, and based upon such documents, information and analyses as it has deemed appropriate, made its own credit analysis of each Obligor and its own decision to enter into this Agreement and to fund Loans hereunder.  Each Secured Party has made such inquiries as it feels necessary concerning the Loan Documents, Collateral and Obligors.  Each Secured Party acknowledges and agrees that the other Secured Parties have made no representations or warranties concerning any Obligor, any Collateral or the legality, validity, sufficiency or enforceability of any Loan Documents or

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Obligations.  Each Secured Party will, independently and without reliance upon any other Secured Party, and based upon such financial statements, documents and information as it deems appropriate at the time, continue to make and rely upon its own credit decisions in making Loans and in taking or refraining from any action under any Loan Documents.  Except for notices, reports and other information expressly requested by a Lender, Agent shall have no duty or responsibility to provide any Secured Party with any notices, reports or certificates furnished to Agent by any Obligor or any credit or other information concerning the affairs, financial condition, business or Properties of any Obligor (or any of its Affiliates) which may come into possession of Agent or its Affiliates.

(j)   Remittance of Payments and Collections.

(a)Remittances Generally.  All payments by any Lender to Agent shall be made by the time and on the day set forth in this Agreement, in immediately available funds.  If no time for payment is specified or if payment is due on demand by Agent and request for payment is made by Agent by 12:00 p.m. on a Business Day, payment shall be made by Lender not later than 2:00 p.m. on such day, and if request is made after 12:00 p.m., then payment shall be made by 10:00 a.m. on the next Business Day.  Payment by Agent to any Secured Party shall be made by wire transfer, in the type of funds received by Agent.  Any such payment shall be subject to Agent's right of offset for any amounts due from such payee under the Loan Documents.

(b)Failure to Pay.  If any Secured Party fails to pay any amount when due by it to Agent pursuant to the terms hereof, such amount shall bear interest, from the due date until paid in full, at the rate determined by Agent as customary for interbank compensation for two Business Days and thereafter at the Default Rate for LIBOR Loans.  In no event shall Borrowers be entitled to receive credit for any interest paid by a Secured Party to Agent, nor shall any Defaulting Lender be entitled to interest on any amounts held by Agent pursuant to Section 4.2.

(c)Recovery of Payments.  If Agent pays an amount to a Secured Party in the expectation that a related payment will be received by Agent from an Obligor and such related payment is not received, then Agent may recover such amount from the Secured Party.  If Agent determines that an amount received by it must be returned or paid to an Obligor or other Person pursuant to Applicable Law or otherwise, then Agent shall not be required to distribute such amount to any Secured Party.  If any amounts received and applied by Agent to Obligations held by a Secured Party are later required to be returned by Agent pursuant to Applicable Law, such Secured Party shall pay to Agent, on demand, its share of the amounts required to be returned.

(k)   Individual Capacities.  As a Lender, Cerberus shall have the same rights and remedies under the Loan Documents as any other Lender, and the terms "Lenders," "Required Lenders" or any similar term shall include Cerberus in its capacity as a Lender.  In their individual capacities, Agent, Lenders and their Affiliates may receive information regarding Obligors, their Affiliates and their Account Debtors (including information subject to confidentiality obligations), and shall have no obligation to provide such information to any Secured Party.

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(l)   Titles.  Each Lender, other than Cerberus, that is designated (on the cover page of this Agreement or otherwise) by Cerberus as an "Arranger," "Bookrunner" or "Agent" of any type shall have no right, power or duty under any Loan Documents other than those applicable to all Lenders, and shall in no event have any fiduciary duty to any Secured Party.

(m)   No Third-Party Beneficiaries.  This Section 11 is an agreement solely among Secured Parties and Agent, and shall survive Full Payment of the Obligations.  This Section 11 does not confer any rights or benefits upon any Obligor or any other Person.  As between Obligors and Agent, any action that Agent may take under any Loan Documents or with respect to any Obligations shall be conclusively presumed to have been authorized and directed by Secured Parties

22.   BENEFIT OF AGREEMENT; ASSIGNMENTS

(a)   Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of Obligors, Agent, Lenders, Secured Parties, and their respective successors and assigns, except that (a) no Obligor shall have the right to assign its rights or delegate its obligations under any Loan Documents; (b) any assignment by a Lender must be made in compliance with Section 12.3 and (c) any participation by Lender must be in accordance with Section 12.2 (any other attempted transfer or assignment by any party hereto shall be null and void).  Agent may treat the Person which made any Loan as the owner thereof for all purposes until such Person makes an assignment in accordance with Section 12.3.  Any authorization or consent of a Lender shall be conclusive and binding on any subsequent transferee or assignee of such Lender.

(b)   Participations.

(a)Permitted Participants; Effect.  Subject to Section 12.3.3, any Lender may sell to a financial institution ("Participant") a participating interest in the rights and obligations of such Lender under any Loan Documents; provided that each Lender shall provide Borrowers with prior written notice of any participation and if the proposed Participant is a vulture fund or distressed debt purchaser the consent of Borrowers shall be required for such sale (which consent shall be deemed given if no objection is made by Borrowers within ten Business Days after receipt of notice of the proposed participation) unless an Event of Default has occurred and is continuing in which case the Borrowers' consent shall not be required.  Despite any sale by a Lender of participating interests to a Participant, such Lender's obligations under the Loan Documents shall remain unchanged, it shall remain solely responsible to the other parties hereto for performance of such obligations, it shall remain the holder of its Loans and Commitments for all purposes, all amounts payable by Borrowers shall be determined as if it had not sold such participating interests, and Borrowers and Agent shall continue to deal solely and directly with such Lender in connection with the Loan Documents.  Each Lender shall be solely responsible for notifying its Participants of any matters under the Loan Documents, and Agent and the other Lenders shall not have any obligation or liability to any such Participant.  The Borrowers agree that each Participant shall be entitled to the benefits of Sections 3.7, 3.9, 5.8 and 5.9 (subject to the requirements and limitations therein, including the requirements under Section 5.9, it being understood that the documentation required under Section 5.9 shall be

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delivered to the participating Lender) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.3; provided that such Participant (A) agrees to be subject to the provisions of Sections 3.8 and 12.4 as if it were an assignee under Section 12.3; and (B) shall not be entitled to receive any greater payment under Section 3.7 or 5.8, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation.

(b)Voting Rights.  Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, waiver or other modification of a Loan Document other than that which forgives principal, interest or fees, reduces the stated interest rate or fees payable with respect to any Loan or Commitment in which such Participant has an interest, postpones the Term Loan Maturity Date or any date fixed for any regularly scheduled payment of principal, interest or fees on such Loan or Commitment, or releases Borrowers, any Guarantor or substantially all Collateral.

(c)Participant Register.  Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of Borrowers, maintain a register in which it enters the Participant's name and address and the principal amounts of and stated interest on the Participant's interest in the Commitments and Loans the "Participant Register").  Entries in the Participant Register shall be conclusive, absent manifest error, and such Lender shall treat each Person recorded in the Participant Register as the owner of the applicable participation for all purposes, notwithstanding any notice to the contrary.  No Lender shall have an obligation to disclose any information in the Participant Register except to the extent necessary to establish that a Participant's interest is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.  For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register.

(d)Benefit of Setoff.  Borrowers agree that each Participant shall have a right of set-off in respect of its participating interest to the same extent as if such interest were owing directly to a Lender, and each Lender shall also retain the right of set-off with respect to any participating interests sold by it.  By exercising any right of set-off, a Participant agrees to share with Lenders all amounts received through its set-off, in accordance with Section 11.5 as if such Participant were a Lender

(c)   Assignments.

(a)Permitted Assignments.  A Lender may assign to an Eligible Assignee any of its rights and obligations under the Loan Documents, as long as (a) each assignment is of a constant, and not a varying, percentage of the transferor Lender's rights and obligations under the Loan Documents and, in the case of a partial assignment, is in a minimum principal amount of  (i) so long as no Default or Event of Default shall have occurred and be continuing, $5,000,000 (unless otherwise mutually agreed by Agent and Borrowers in their discretion) or (ii) during the existence of an Event of Default, $1,000,000 (unless otherwise agreed by Agent in its discretion), and in each case in integral multiples of $1,000,000 in excess of that amount; (b) except in the case of an assignment in whole of a Lender's rights and obligations, the aggregate amount of the Commitments retained by the transferor Lender is at

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least (i) so long as no Default or Event of Default shall have occurred and be continuing, $5,000,000 (unless otherwise mutually agreed by Agent and Borrowers in their discretion) or (ii) during the existence of an Event of Default, $1,000,000 (unless otherwise agreed by Agent in its discretion); and (c) the parties to each such assignment shall execute and deliver to Agent, for its acceptance and recording, an Assignment and Acceptance.  Nothing herein shall limit the right of a Lender to pledge or assign any rights under the Loan Documents to secure obligations of such Lender, including a pledge or assignment to a Federal Reserve Bank; provided, however, that no such pledge or assignment shall release the Lender from its obligations hereunder nor substitute the pledge or assignee for such Lender as a party hereto.

(b)Effect; Effective Date.  Upon delivery to Agent of an assignment notice in the form of Exhibit A-2 and a processing fee of $3,500 (unless otherwise agreed by Agent in its Permitted Discretion), the assignment shall become effective as specified in the notice, if it complies with this Section 12.3.  From such effective date, the Eligible Assignee shall for all purposes be a Lender under the Loan Documents, and shall have all rights and obligations of a Lender thereunder.  Upon consummation of an assignment, the transferor Lender, Agent and Borrowers shall make appropriate arrangements for issuance of replacement and/or new notes, if applicable.  The transferee Lender shall comply with Section 5.9 and deliver, upon request, an administrative questionnaire satisfactory to Agent

(c)Certain Assignees.  No assignment or participation may be made to an Obligor, Affiliate of an Obligor, Defaulting Lender or natural person.  So long as no Default or Event of Default has occurred and is continuing, no assignment or participation may be made to any Person that is a direct commercial competitor of the Obligors.  Any assignment by a Defaulting Lender shall be effective only upon payment by the Eligible Assignee or Defaulting Lender to Agent of an aggregate amount sufficient, upon distribution (through direct payment, purchases of participations or other compensating actions as Agent deems appropriate), to satisfy all funding and payment liabilities then owing by the Defaulting Lender hereunder.  If an assignment by a Defaulting Lender shall become effective under Applicable Law for any reason without compliance with the foregoing sentence, then the assignee shall be deemed a Defaulting Lender for all purposes until such compliance occurs.

(d)Register.  Notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, any notes or other writings issued under the Loan Documents shall be registered as to both principal and any stated interest. Agent, acting solely for this purpose as a non-fiduciary agent of Borrowers, shall maintain at one of its offices (a) a copy (or electronic equivalent) of each Assignment and Acceptance delivered to it, and (b) a register (the "Register") for recordation of the names and addresses of the Lenders and the Commitments of, and principal amounts of and stated interest on the Loans owing to, each Lender pursuant to the terms hereof from time to time.  Entries in the Register shall be conclusive, absent manifest error, and the Borrowers, Agent and Lenders shall treat each Person recorded in the Register pursuant to the terms hereof as a Lender for all purposes under the Loan Documents, notwithstanding any notice to the contrary.  The Register shall be available for inspection by Borrowers or any Lender, at any reasonable time and from time to time upon reasonable notice.

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(d)   Replacement of Certain Lenders.  If a Lender (a) within the last 120 days failed to give its consent to any amendment, waiver or action for which consent of all Lenders was required and Required Lenders consented, (b) is a Defaulting Lender, or (c) within the last 120 days gave a notice under Section 3.5 or requested payment or compensation under Section 3.7 or 5.9 (and has not designated a different Lending Office pursuant to Section 3.8), then Agent or Borrowers may, upon 10 days' notice to such Lender, require it to assign its rights and obligations under the Loan Documents to Eligible Assignee(s) willing to acquire such rights and obligations, pursuant to appropriate Assignment and Acceptance(s), within 20 days after the notice.  Agent is irrevocably appointed as attorney-in-fact to execute any such Assignment and Acceptance if the Lender fails to execute it.  Such Lender shall be entitled to receive, in cash, concurrently with such assignment, all amounts owed to it under the Loan Documents through the date of assignment.

23.   MISCELLANEOUS

(a)   Amendments and Waivers.

(a)Amendments and Other Modifications.  No modification of any Loan Document, including any extension or amendment of a Loan Document or any waiver of a Default or Event of Default, shall be effective without the prior written agreement of Agent (with the consent of Required Lenders) and each Obligor party to such Loan Document; provided, however, that:

(i)without the prior written consent of Agent, no modification shall alter any provision in a Loan Document that relates to any rights, duties or discretion of Agent;

(ii)Intentionally Omitted.

(iii)without the prior written consent of each affected Lender, including a Defaulting Lender, no modification shall (i) increase the Commitment of such Lender; (ii) reduce the amount of, or waive or delay payment of, any principal, interest or fees payable to such Lender (except as provided in Section 4.2); (iii) extend the Term Loan Maturity Date applicable to such Lender's Obligations; or (iv) amend this clause (c); and

(iv)without the prior written consent of all Lenders (except any Defaulting Lender), no modification shall (i) alter Section 5.6.2, 7.1 (except to add Collateral) or 13.1.1; (ii) amend the definition of Pro Rata or Required Lenders; (iii) release all or substantially all Collateral; or (iv) except in connection with a merger, disposition or similar transaction expressly permitted hereby, release any Obligor from liability for any Obligations.

(b)Limitations.  The agreement of any Obligor shall not be required for any modification of a Loan Document that deals solely with the rights and duties of Lenders and/or Agent as among themselves.  Only the consent of the parties to any agreement relating to fees shall be required for modification of such agreement.  Any waiver or consent granted by Agent or Lenders hereunder shall be effective only if in writing and only for the matter specified.

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(c)Payment for Consents.  No Borrower will, directly or indirectly, pay any remuneration or other thing of value, whether by way of additional interest, fee or otherwise, to any Lender (in its capacity as a Lender hereunder) as consideration for agreement by such Lender with any modification of any Loan Documents, unless such remuneration or value is concurrently paid, on the same terms, on a Pro Rata basis to all Lenders providing their consent.

(b)   Power of Attorney.  Borrowers hereby irrevocably constitute and appoint Agent (and all Persons designated by Agent) as Borrowers' true and lawful attorney (and agent-in-fact) for the purposes provided in this Section.  Agent, or Agent's designee, may, without notice and in either its or any Borrower's name, but at the cost and expense of Borrowers:

(i)Endorse any Borrower's name on any Payment Item or other proceeds of Collateral (including proceeds of insurance) that come into Agent's possession or control; and

(ii)During the continuance of an Event of Default, (i) notify any Account Debtors of the assignment of their Accounts, demand and enforce payment of Accounts, by legal proceedings or otherwise, and generally exercise any rights and remedies with respect to Accounts; (ii) settle, adjust, modify, compromise, discharge or release any Accounts or other Collateral, or any legal proceedings brought to collect Accounts or Collateral; (iii) collect, liquidate and receive balances in Deposit Accounts or investment accounts, and take control, in any manner, of proceeds of Collateral; (iv) receive, open and dispose of mail addressed to Borrowers, and notify postal authorities to deliver any such mail to an address designated by Lender; (v) use any Borrower's stationery and sign its name to verifications of Accounts and notices to Account Debtors; (vi) use information contained in any data processing, electronic or information systems relating to Collateral; (vii) make and adjust claims under insurance policies; and (viii) do all other things necessary to carry out the intent and purpose of this Agreement.

(c)   Indemnity.  BORROWERS SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES AGAINST ANY CLAIMS THAT MAY BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE, INCLUDING CLAIMS ASSERTED BY ANY OBLIGOR OR OTHER PERSON OR ARISING FROM THE NEGLIGENCE OF AN INDEMNITEE.  In no event shall any party to a Loan Document have any obligation thereunder to indemnify or hold harmless an Indemnitee with respect to a Claim that is determined in a final, non-appealable judgment by a court of competent jurisdiction to result from the gross negligence or willful misconduct of such Indemnitee.  This Section 13.3 shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

(d)   Notices and Communications.

(a)Notice Address.  All notices and other communications by or to a party hereto shall be in writing and shall be given to Borrowers, at AGM's address shown on the signature pages hereof, and to any other Person at its address shown on the signature pages

88

hereof (or, in the case of a Person who becomes a Lender after the Closing Date, at the address shown on its Assignment and Acceptance), or at such other address as a party may hereafter specify by notice in accordance with this Section 13.4.  Each communication shall be effective only (a) if given by facsimile transmission, when transmitted to the applicable facsimile number, if confirmation of receipt is received; (b) if given by mail, three Business Days after deposit in the U.S. mail, with first-class postage pre-paid, addressed to the applicable address; or (c) if given by personal delivery, when duly delivered to the notice address with receipt acknowledged.  Notwithstanding the foregoing, no notice to Agent pursuant to Section 5.2.3 shall be effective until actually received by the individual to whose attention at Agent such notice is required to be sent.  Any written communication that is not sent in conformity with the foregoing provisions shall nevertheless be effective on the date actually received by the noticed party.  

(b)Electronic Communications; Voice Mail.  Electronic mail and internet websites may be used only for routine communications, such as delivery of Borrower Materials, administrative matters and distribution of Loan Documents.  Agent and Lenders make no assurances as to the privacy and security of electronic communications.  Electronic and voice mail may not be used as effective notice under the Loan Documents.

(c)Platform.  Borrower Materialsshall be delivered by Borrowers pursuant to procedures approved by Agent, including electronic delivery (if possible) upon request by Agent to an electronic system maintained by it ("Platform").  Borrowers shall notify Agent of each posting of reports or other information on the Platform.  All information shall be deemed received by Agent only upon its receipt of such notice.  Borrower Materials and other information relating to this credit facility may be made available to Secured Parties on the Platform, and Obligors and Secured Parties acknowledge that "public" information is not segregated from material non-public information on the Platform.  The Platform is provided "as is" and "as available." Agent does not warrant the accuracy or completeness of any information on the Platform nor the adequacy or functioning of the Platform, and expressly disclaims liability for any errors or omissions in the Borrower Materials or any issues involving the Platform.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS, OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY AGENT WITH RESPECT TO BORROWER MATERIALS OR THE PLATFORM.  Secured Parties acknowledge that Borrower Materials may include material non-public information of Obligors and should not be made available to any personnel who do not wish to receive such information or who may be engaged in investment or other market-related activities with respect to any Obligor's securities.  No Agent Indemnitee shall have any liability to Borrowers,  Secured Parties or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) relating to use by any Person of the Platform or delivery of Borrower Materials and other information through the platform or over the internet.

(d)Non-Conforming Communications.  Agent and Lenders may rely upon any communications purportedly given by or on behalf of Borrowers even if they were not made in a manner specified herein, were incomplete or were not confirmed, or if the terms thereof, as understood by the recipient, varied from a later confirmation.  Borrowers shall

89

indemnify and hold harmless each Indemnitee from any liabilities, losses, costs and expenses arising from any electronic or telephonic communication purportedly given by or on behalf of Borrowers.

(e)   Performance of Borrowers' Obligations.  Agent may, in its discretion at any time and from time to time, at Borrowers' expense, pay any amount or do any act required of Borrowers under any Loan Documents or otherwise lawfully requested by Agent to (a) enforce any Loan Documents or collect any Obligations; (b) protect, insure, maintain or realize upon any Collateral; or (c) defend or maintain the validity or priority of Agent's Liens in any Collateral, including any payment of a judgment, insurance premium, warehouse charge, finishing or processing charge, or landlord claim, or any discharge of a Lien.  All payments, costs and expenses (including Extraordinary Expenses) of Agent under this Section shall be reimbursed by Borrowers, on demand, with interest from the date incurred until paid in full, at the Default Rate applicable to LIBOR Loans.  Any payment made or action taken by Agent under this Section shall be without prejudice to any right to assert an Event of Default or to exercise any other rights or remedies under the Loan Documents.

(f)   Credit Inquiries. Agent may (but shall have no obligation) to respond to usual and customary credit inquiries from third parties concerning any Obligor or Subsidiary.

(g)   Severability.  Wherever possible, each provision of the Loan Documents shall be interpreted in such manner as to be valid under Applicable Law.  If any provision is found to be invalid under Applicable Law, it shall be ineffective only to the extent of such invalidity and the remaining provisions of the Loan Documents shall remain in full force and effect.

(h)   Cumulative Effect; Conflict of Terms.  The provisions of the Loan Documents are cumulative.  The parties acknowledge that the Loan Documents may use several limitations or measurements to regulate similar matters, and they agree that these are cumulative and that each must be performed as provided.  Except as otherwise provided in another Loan Document (by specific reference to the applicable provision of this Agreement), if any provision contained herein is in direct conflict with any provision in another Loan Document, the provision herein shall govern and control.

(i)   Counterparts; Execution.  Any Loan Document may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement shall become effective when Agent has received counterparts bearing the signatures of all parties hereto.  Delivery of a signature page of any Loan Document by telecopy or other electronic means shall be effective as delivery of a manually executed counterpart of such agreement.  Any electronic signature, contract formation on an electronic platform and electronic record-keeping shall have the same legal validity and enforceability as a manually executed signature or use of a paper-based recordkeeping system to the fullest extent permitted by Applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any similar state law based on the Uniform Electronic Transactions Act.

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(j)   Entire Agreement.  Time is of the essence with respect to all Loan Documents and Obligations.  The Loan Documents constitute the entire agreement, and supersede all prior understandings and agreements, among the parties relating to the subject matter thereof.

(k)   Relationship with Lenders.  The obligations of each Lender hereunder are several, and no Lender shall be responsible for the obligations or Commitments of any other Lender.  Amounts payable hereunder to each Lender shall be a separate and independent debt.  It shall not be necessary for Agent or any other Lender to be joined as an additional party in any proceeding for such purposes.  Nothing in this Agreement and no action of Agent, Lenders or any other Secured Party pursuant to the Loan Documents or otherwise shall be deemed to constitute Agent and any Secured Party to be a partnership, joint venture or similar arrangement, nor to constitute control of any Obligor.

(l)   No Control; No Advisory or Fiduciary Responsibility.  Nothing in any Loan Document and no action of Agent or any Lender pursuant to any Loan Document shall be deemed to constitute control of any Obligor by Agent or any Lender.  In connection with all aspects of each transaction contemplated by any Loan Document, Borrowers acknowledge and agree that (a)(i) this credit facility and all related services by Agent, any Lender or any of the their Affiliates are arm's-length commercial transactions between Borrowers and such Person; (ii) Borrowers have consulted their own legal, accounting, regulatory and tax advisors to the extent they have deemed appropriate; and (iii) Borrowers are capable of evaluating, and understand and accept, the terms, risks and conditions of the transactions contemplated by the Loan Documents; (b) each of Agent, Lenders their Affiliates is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for Borrowers, their Affiliates or any other Person, and has no obligation with respect to the transactions contemplated by the Loan Documents except as expressly set forth therein; and (c) Agent, Lenders and their Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of Borrowers and their Affiliates, and have no obligation to disclose any of such interests to Borrowers or their Affiliates.  To the fullest extent permitted by Applicable Law, Borrowers hereby waive and release any claims that they may have against Agent, Lender and their Affiliates with respect to any breach of agency or fiduciary duty in connection with any transaction contemplated by a Loan Document.

(m)   Confidentiality.  Agent and each Lender agrees to maintain the confidentiality of all Information (as defined below), except that Information may be disclosed (a) to its Affiliates, and its and their partners, directors, officers, employees, agents, advisors and representatives (provided they are informed of the confidential nature of the Information and instructed to keep it confidential); (b) to the extent requested by any governmental, regulatory or self-regulatory authority purporting to have jurisdiction over it or its Affiliates; (c) to the extent required by Applicable Law or by any subpoena or other legal process; (d) to any other party hereto; (e) in connection with any action or proceeding relating to any Loan Documents or Obligations; (f) subject to an agreement containing provisions substantially the same as this Section, to any potential or actual transferee of any interest in a Loan Document or any actual or prospective party (or its advisors) to any Bank Product or to any swap, derivative or other transaction under which payments are to be made by reference to an Obligor or Obligor's

91

obligations; (g) with the consent of Borrowers; or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) is available to Agent, any Lender or any of their Affiliates on a nonconfidential basis from a source other than Borrowers.  Notwithstanding the foregoing, Agent and Lenders may publish or disseminate general information concerning this credit facility, and may use Borrowers' logos, trademarks or product photographs in advertising materials.  As used herein, "Information" means all information received from an Obligor or Subsidiary relating to it or its business.  A Person required to maintain the confidentiality of Information pursuant to this Section shall be deemed to have complied if it exercises a degree of care similar to that accorded its own confidential information.  Agent and each Lender acknowledges that (i) Information may include material non-public information; (ii) it has developed compliance procedures regarding the use of such information; and (iii) it will handle the material non-public information in accordance with Applicable Law

(n)   [Reserved].

(o)   GOVERNING LAW.  UNLESS EXPRESSLY PROVIDED IN ANY LOAN DOCUMENT, THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL CLAIMS, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES EXCEPT FEDERAL LAWS RELATING TO NATIONAL BANKS.

(p)   Consent to Forum.

(a)Forum.  BORROWERS HEREBY CONSENT TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN OR WITH JURISDICTION OVER NEW YORK COUNTY, NEW YORK AND THE SOUTHERN DISTRICT OF NEW YORK,IN ANY DISPUTE, ACTION, LITIGATION OR OTHER PROCEEDING RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES THAT ANY DISPUTE, ACTION, LITIGATION OR OTHER PROCEEDING SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT.  BORROWERS IRREVOCABLY AND UNCONDITIONALLY WAIVE ALL CLAIMS, OBJECTIONS AND DEFENSES THAT THEY MAY HAVE REGARDING ANY SUCH COURT'S PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM.  EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 13.4.1.  A final judgment in any proceeding of any such court shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or any other manner provided by Applicable Law.

(b)Other Jurisdictions.  Nothing herein shall limit the right of Agent or any Lender to bring proceedings against any Obligor in any other court, nor limit the right of any party to serve process in any other manner permitted by Applicable Law.  Nothing in this Agreement shall be deemed to preclude enforcement by Agent or any Lender of any judgment or order obtained in any forum or jurisdiction.

92

(c)Judicial Reference.  If any action, litigation or proceeding relating to any Obligations or Loan Documents is filed in a court sitting in or applying the laws of California, the court shall, and is hereby directed to, make a general reference pursuant to Cal. Civ. Proc. Code §638 to a referee (who shall be an active or retired judge) to hear and determine all issues in such case (whether fact or law) and to report a statement of decision.  Nothing in this Section shall limit the right of Agent or any other Secured Party to exercise self-help remedies, such as setoff, foreclosure or sale of any Collateral or to obtain provisional or ancillary remedies from a court of competent jurisdiction before, during or after any judicial reference.  The exercise of a remedy does not waive the right of any party to resort to judicial reference.  At Agent's option, foreclosure under a mortgage or deed of trust may be accomplished either by exercise of power of sale thereunder or by judicial foreclosure.

(q)   Waivers by Borrowers.  To the fullest extent permitted by Applicable Law, each Borrower waives (a) the right to trial by jury (which Agent hereby also waives) in any proceeding or dispute of any kind relating in any way to any Loan Documents, Obligations or Collateral; (b) presentment, demand, protest, notice of presentment, default, non-payment, maturity, release, compromise, settlement, extension or renewal of any commercial paper, accounts, documents, instruments, chattel paper and guaranties at any time held by Agent on which such Borrower may in any way be liable, and hereby ratifies anything Agent may do in this regard; (c) notice prior to taking possession or control of any Collateral; (d) any bond or security that might be required by a court prior to allowing Agent to exercise any rights or remedies; (e) the benefit of all valuation, appraisement and exemption laws; (f) any claim against Agent or any Lender, on any theory of liability, for special, indirect, consequential, exemplary or punitive damages (as opposed to direct or actual damages) in any way relating to any Enforcement Action, Obligations, Loan Documents or transactions relating thereto; and (g) notice of acceptance hereof.  Each Borrower acknowledges that the foregoing waivers are a material inducement to Agent and Lenders entering into this Agreement and that they are relying upon the foregoing in its dealings with Borrowers.  Each Borrower has reviewed the foregoing waivers with its legal counsel and has knowingly and voluntarily waived its jury trial and other rights following consultation with legal counsel.  In the event of litigation, this Agreement may be filed as a written consent to a trial by the court.

(r)   Patriot Act Notice.  Agent and lenders hereby notify Borrowers that pursuant to the PATRIOT Act, Agent and Lenders are required to obtain, verify and record information that identifies each Borrower, including its legal name, address, tax ID number and other information that will allow Agent and Lenders to identify it in accordance with the PATRIOT Act.  Agent and Lenders will also require information regarding each personal guarantor, if any, and may require information regarding Borrowers' management and owners, such as legal name, address, social security number and date of birth.  Borrowers shall, promptly upon request, provide all documentation and other information as Agent or any Lender may request from time to time in order to comply with any obligations under "know your customer," anti-money laundering or other requirements of Applicable Law.

(s)   Intercreditor Agreement.  Notwithstanding anything to the contrary in this Agreement, to the extent the terms of this Agreement and the ASG Intercreditor Agreement conflict, the terms of the ASG Intercreditor Agreement shall control.  

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(t)   NO ORAL AGREEMENT.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.  THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.

[Remainder of page intentionally left blank; signatures begin on following page]

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IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date set forth above.

BORROWERS:
ARCHITECTURAL GRANITE & MARBLE, LLC
By:
Name:
Title:
Address:
	c/o Trive Capital 2021 McKinney Avenue, Suite 1200 Dallas, TX  75201
	Attn:
	Telecopy:
PENTAL GRANITE & MARBLE, LLC
By:
Name:
Title:
Address:
	[____________________________]
	[____________________________]
	[____________________________]
	[____________________________]
	Attn:
	Telecopy:

95

AGENT:
CERBERUS BUSINESS FINANCE, LLC
By:
Name:
Title:
Address:
	875 Third Avenue New York, NY 10022
	Attn:	Daniel Wolf
	Telecopy:

96

LENDERS:
CERBERUS LEVERED LOAN OPPORTUNITIES FUND III, L.P.
By:	Cerberus Levered Opportunities III GP, LLC
Its:	General Partner
By:
	Name:
	Title:
CERBERUS NJ CREDIT OPPORTUNITIES FUND, L.P.
By:	Cerberus NJ Credit Opportunities GP, LLC
Its:	General Partner
By:
	Name:
	Title:
CERBERUS ASRS HOLDINGS LLC
By:
	Name:
	Title:
CERBERUS KRS LEVERED LOAN
OPPORTUNITIES FUND, L.P.
By:	Cerberus KRS Levered Opportunities GP, LLC
Its:	General Partner
By:
	Name:
	Title:

CERBERUS PSERS LEVERED
LOAN OPPORTUNITIES FUND, L.P.
By:	Cerberus PSERS Levered Opportunities GP, LLC
Its:	General Partner
By:
	Name:
	Title:
CERBERUS FSBA HOLDINGS LLC
By:
	Name:
	Title:
CERBERUS ND CREDIT HOLDINGS LLC
By:
	Name:
	Title:
CERBERUS OFFSHORE LEVERED III LP
By:	COL III GP Inc.
Its:	General Partner
By:
	Name:
	Title:
CERBERUS REDWOOD LEVERED LOAN OPPORTUNITIES FUND B, L.P.
By:	Cerberus Redwood Levered Opportunities GP B, LLC
Its:	General Partner
By:
	Name:
	Title:

CERBERUS ICQ OFFSHORE LEVERED LP
By:	Cerberus ICQ Offshore GP LLC
Its:	General Partner
By:
	Name:
	Title:
CERBERUS ONSHORE LEVERED III LLC
By:
	Name:
	Title:
CERBERUS LOAN FUNDING XX L.P.
By:	Cerberus LFGP XX, LLC
Its:	General Partner
By:
	Name:
	Title:
CERBERUS REDWOOD LEVERED A LLC
By:
	Name:
	Title:
CERBERUS AUS LEVERED II LP
By:	CAL II GP, LLC
Its:	General Partner
By:
	Name:
	Title:

CERBERUS REDWOOD LEVERED B LLC
By:
	Name:
	Title:
CERBERUS ICQ LEVERED LLC
By:
	Name:
	Title:
CERBERUS LOAN FUNDING XIX L.P.
By:	Cerberus LFGP XIX, LLC
Its:	General Partner
By:
	Name:
	Title:
CERBERUS ICQ LEVERED LOAN
OPPORTUNITIES FUND, L.P.
By:	Cerberus ICQ Levered Opportunities GP, LLC
Its:	General Partner
By:
	Name:
	Title:
CERBERUS FSBA LEVERED LLC
By:
	Name:
	Title:
CERBERUS SWC LEVERED II LLC
By:
	Name:
	Title:

CERBERUS LOAN FUNDING XVI LP
By:	Cerberus PSERS GP, LLC
Its:	General Partner
By:
	Name:
	Title:
CERBERUS LOAN FUNDING XVIII L.P.
By:	Cerberus LFGP XVIII, LLC
Its:	General Partner
By:
	Name:
	Title:
CERBERUS ASRS FUNDING LLC
By:
	Name:
	Title:
CERBERUS LOAN FUNDING XXI L.P.
By:	Cerberus LFGP XXI, LLC
Its:	General Partner
By:
	Name:
	Title:

SCHEDULE 2.1
to
Financing Agreement

COMMITMENTS OF LENDERS¹

¹ Updated schedule attached to the Fifth Amendment

1

SCHEDULE 8.1.4
to
Financing Agreement

NAMES AND CAPITAL STRUCTURE

1. The corporate names, jurisdictions of incorporation, and authorized and issued Equity Interests of Ultimate Parent and its Subsidiaries are as follows:

Name Jurisdiction Number and Class
of Authorized Shares Number and Class
of Issued Shares

2. The record holders of Equity Interests of Ultimate Parent and its Subsidiaries are as follows:

Name Class of Stock Number of Shares Record Owner

3. All agreements binding on holders of Equity Interests of Ultimate Parent and its Subsidiaries with respect to such interests are as follows:

4. In the five years preceding the Closing Date, neither Ultimate Parent nor any of its Subsidiaries has acquired any substantial assets from any other Person nor been the surviving entity in a merger or combination, except:

5. There are no outstanding purchase options, warrants, subscription rights, agreements to issue or sell, convertible interests, phantom rights or powers of attorney relating to Equity Interests of Ultimate Parent or any of its Subsidiaries, except:

.

1

SCHEDULE 8.1.10
to
Financing Agreement

BROKERAGE COMMISSION

None

1

SCHEDULE 8.1.11
to
Financing Agreement

PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES

1. Borrowers' and Subsidiaries' patents:

Patent Owner Status in
Patent Office Federal
Registration No. Registration
Date

2. Borrowers' and Subsidiaries' trademarks:

Trademark Owner Status in Trademark Office Federal Registration No. Registration Date

3. Borrowers' and Subsidiaries' copyrights:

Copyright Owner Status in
Copyright Office Federal
Registration No. Registration
Date

4. Borrowers' and Subsidiaries' licenses (other than routine business licenses, authorizing them to transact business in local jurisdictions):

1

SCHEDULE 8.1.13
to
Financing Agreement

ENVIRONMENTAL MATTERS

1

SCHEDULE 8.1.14
to
Financing Agreement

RESTRICTIVE AGREEMENTS

Entity Agreement Restrictive Provisions

1

SCHEDULE 8.1.15
to
Financing Agreement

LITIGATION

1.Proceedings and investigations pending against Obligors or Subsidiaries:

2.Threatened (in writing) proceedings or investigations of which any Obligor or Subsidiary is aware:

3.Pending Commercial Tort Claim of any Obligor:

1

SCHEDULE 8.1.17
to
Financing Agreement

PENSION PLAN DISCLOSURES

1

SCHEDULE 8.1.27
to
Financing Agreement

Material contracts

1

SCHEDULE 9.1.9
to
Financing Agreement

DEPOSIT ACCOUNTS

Depository Bank Type of Account Account Number

1

SCHEDULE 9.1.10
to
Financing Agreement

BUSINESS LOCATIONS

1. Obligors currently have the following business locations, and no others:

Chief Executive Office:

Other Locations:

2. In the five years preceding the Closing Date, Obligors have had no office or place of business located in any county other than as set forth above, except:

3. Each Subsidiary currently has the following business locations, and no others:

Chief Executive Office:

Other Locations:

4. The following bailees, warehouseman, similar parties and consignees hold inventory of Borrower or Subsidiary:

Name and Address of Party Nature of
Relationship Amount of Inventory Owner of Inventory

1

SCHEDULE 9.2.2
to
Financing Agreement

EXISTING LIENS

	File Number	Effective Date	Secured Party	Collateral
1.
2.

1

SCHEDULE 9.2.17
to
Financing Agreement

EXISTING AFFILIATE TRANSACTIONS

1

EXHIBIT A-1

ASSIGNMENT AND ACCEPTANCE

ASSIGNMENT AND ACCEPTANCE

Reference is made to the Financing Agreement, dated as of February__, 2017 (as amended, restated or otherwise modified from time to time, the "Loan Agreement"), by and among Architectural Granite & Marble, LLC, a Delaware limited liability company, ("AGM"),  Pental Granite and Marble, LLC, a Washington limited liability company ("Pental" and together with AGM and each Subsidiary of AGM  that executes a joinder agreement and becomes a "Borrower" thereunder, each a "Borrower" and collectively, the "Borrowers"), Cerberus Business Finance, LLC, as agent ("Agent") for the financial institutions from time to time party to the Loan Agreement ("Lenders"), and such Lenders.  Terms are used herein as defined in the Loan Agreement.

______________________________________ ("Assignor") and ________________  ("Assignee") agree as follows:

1.Assignor hereby assigns to Assignee and Assignee hereby purchases and assumes from Assignor a principal amount of $________ of Assignor's outstanding Term Loan (the "Assigned Interest"), together with an interest in the Loan Documents corresponding to the Assigned Interest.  This Agreement shall be effective as of the date ("Effective Date") indicated in the corresponding Assignment Notice delivered to Agent, provided such Assignment Notice is executed by Assignor, Assignee, Agent and AGM, if applicable.  From and after the Effective Date, Assignee hereby expressly assumes, and undertakes to perform, all of Assignor's obligations in respect of the Assigned Interest, and all principal, interest, fees and other amounts which would otherwise be payable to or for Assignor's account in respect of the Assigned Interest shall be payable to or for Assignee's account, to the extent such amounts accrue on or after the Effective Date.

2.Assignor (a) represents that as of the date hereof, prior to giving effect to this assignment, the outstanding balance of its Term Loans is $__________; (b) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement or any other instrument or document furnished pursuant thereto, other than that Assignor is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; and (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrowers or the performance by Borrowers of their obligations under the Loan Documents.  [Assignor is attaching the promissory note[s] held by it and requests that Agent exchange such note[s] for new promissory notes payable to Assignee [and Assignor].]

3.Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance; (b) confirms that it has received copies of the Loan Agreement and such other Loan Documents and information as it has deemed appropriate to make its own credit

A-1-1

analysis and decision to enter into this Assignment and Acceptance; (c) agrees that it shall, independently and without reliance upon Assignor and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents; (d) confirms that it is an Eligible Assignee; (e) appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under the Loan Agreement as are delegated to Agent by the terms thereof, together with such powers as are incidental thereto; (f) agrees that it will observe and perform all obligations that are required to be performed by it as a "Lender" under the Loan Documents; and (g) represents and warrants that the assignment evidenced hereby will not result in a non-exempt "prohibited transaction" under Section 406 of ERISA.

4.This Agreement shall be governed by the laws of the State of New York.  If any provision is found to be invalid under Applicable Law, it shall be ineffective only to the extent of such invalidity and the remaining provisions of this Agreement shall remain in full force and effect.

5.Each notice or other communication hereunder shall be in writing, shall be sent by messenger, by telecopy or facsimile transmission, or by first-class mail, shall be deemed given when sent and shall be sent as follows:

(a) If to Assignee, to the following address (or to such other address as Assignee may designate from time to time):

__________________________

__________________________

__________________________

(b) If to Assignor, to the following address (or to such other address as Assignor may designate from time to time):

__________________________

__________________________

__________________________

__________________________

Payments hereunder shall be made by wire transfer of immediately available Dollars as follows:

If to Assignee, to the following account (or to such other account as Assignee may designate from time to time):

______________________________

______________________________

ABA No._______________________

______________________________

Account No.____________________

Reference:  _____________________

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If to Assignor, to the following account (or to such other account as Assignor may designate from time to time):

______________________________

______________________________

ABA No._______________________

______________________________

Account No.____________________

Reference:  _____________________

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IN WITNESS WHEREOF, this Assignment and Acceptance is executed as of _____________.

("Assignee")
By
	Name:
	Title:
("Assignor")
By
	Name:
	Title:

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EXHIBIT A-2

ASSIGNMENT NOTICE

ASSIGNMENT NOTICE

Reference is made to (1) the Financing Agreement, dated as of February 28, 2017 (as amended, restated or otherwise modified from time to time, the "Loan Agreement"), by and among Architectural Granite & Marble, LLC, a Delaware limited liability company, ("AGM"),  Pental Granite and Marble, LLC, a Washington limited liability company ("Pental" and together with AGM and each Subsidiary of AGM  that executes a joinder agreement and becomes a "Borrower" thereunder, each a "Borrower" and collectively, the "Borrowers"), Cerberus Business Finance, LLC, as agent ("Agent") for the financial institutions from time to time party to the Loan Agreement ("Lenders"), and such Lenders; and (2) the Assignment and Acceptance dated as of ____________, 20__ ("Assignment Agreement"), between __________________ ("Assignor") and ____________________ ("Assignee").  Terms are used herein as defined in the Loan Agreement.

Assignor hereby notifies Borrowers and Agent of Assignor's intent to assign to Assignee pursuant to the Assignment Agreement a principal amount of $________ of Assignor's outstanding Term Loan (the "Assigned Interest"), together with an interest in the Loan Documents corresponding to the Assigned Interest.  This Agreement shall be effective as of the date ("Effective Date") indicated below, provided this Assignment Notice is executed by Assignor, Assignee, Agent and AGM, if applicable.  Pursuant to the Assignment Agreement, Assignee has expressly assumed all of Assignor's obligations under the Loan Agreement to the extent of the Assigned Interest, as of the Effective Date.

The address of Assignee to which notices and information are to be sent under the terms of the Loan Agreement is:

________________________

________________________

________________________

________________________

The address of Assignee to which payments are to be sent under the terms of the Loan Agreement is shown in the Assignment Agreement.

This Notice is being delivered to Borrowers and Agent pursuant to Section 13.3 of the Loan Agreement.  Please acknowledge your acceptance of this Notice by executing and returning to Assignee and Assignor a copy of this Notice.

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IN WITNESS WHEREOF, this Assignment Notice is executed as of _____________.

	("Assignee")
	By
		Name:
		Title:
	("Assignor")
	By
		Name:
		Title:
ACKNOWLEDGED AND AGREED, AS OF THE DATE SET FORTH ABOVE: *
ARCHITECTURAL GRANITE & MARBLE, LLC,
as a Borrower
By
Name:
Title:
* No signature required if Assignee is a Lender, Affiliate of a Lender or if an Event of Default exists.
CERBERUS BUSINESS FINANCE, LLC,
as Agent
By
Name:
Title:

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EXHIBIT B

COMPLIANCE CERTIFICATE

In accordance with the terms of the Financing Agreement, dated as of February 28, 2017 (as amended, restated or otherwise modified from time to time, the "Loan Agreement"; terms are used herein as defined in the Loan Agreement), by and among Architectural Granite & Marble, LLC, a Delaware limited liability company, ("AGM"), Pental Granite and Marble, LLC, a Washington limited liability company ("Pental" and together with AGM and each Subsidiary of AGM  that executes a joinder agreement and becomes a "Borrower" thereunder, each a "Borrower" and collectively, the "Borrowers"), the financial institutions from time to time party thereto ("Lenders") and Cerberus Business Finance, LLC, as agent ("Agent") for and such Lenders, I hereby certify that:

1.I am the [President] [Chief Financial Officer] of Ultimate Parent;

2.The enclosed financial statements are prepared in accordance with generally accepted accounting principles;

3.No Default or any event which, upon the giving of notice or passing of time or both, would constitute such an Event of Default, has occurred.

4.Borrowers are in compliance with the financial covenants set forth in Sections 9.3.1 and 9.3.2 of the Loan Agreement, as demonstrated by the calculations contained in Schedule I, attached hereto and made a part hereof.

ARCHITECTURAL GRANITE & MARBLE, LLC, as Borrower

By:

Name:

Title:  

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SCHEDULE I TO COMPLIANCE CERTIFICATE

[Borrowers to provide detailed calculations of financial covenants]

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EXHIBIT C

CONDITIONS PRECEDENT

(a)Each Loan Document shall have been duly executed and delivered to Agent by each of the signatories thereto, and each Obligor shall be in compliance with all terms thereof.

(b)Except as set forth in Exhibit F, Agent shall have made all filings or recordations necessary to perfect its Liens in the Collateral.

(c)Agent shall have received results of Lien searches, listing all effective financing statements which name as debtor any Obligor and which are filed in the offices referred to in the Guaranty and Collateral Agreement, together with copies of such financing statements, none of which, except as otherwise agreed in writing by the Agent and Permitted Liens, shall cover any of the Collateral and the results of searches for any tax Lien and judgment Lien filed against such Person or its property, which results, except as otherwise agreed to in writing by the and Permitted Liens, shall not show any such Liens;

(d)Agent shall have received certificates, in form and substance satisfactory to it, from a knowledgeable Senior Officer of AGM certifying that, after giving effect to the making of the Term Loans and the transactions contemplated  hereunder, (i) Borrowers are Solvent; (ii) no Default or Event of Default has occurred and is continuing; (iii) the representations and warranties set forth in Section 8 are true and correct in all material respects (without duplication of any materiality qualifier therein); (iv) no litigation, investigation or proceeding before or by any arbitrator or Governmental Authority shall be continuing or threatened against any Obligor which could, in the reasonable opinion of Lender, have a Material Adverse Effect on the Collateral, or any Obligor; and (v) each Borrower has complied with all agreements and conditions to be satisfied by it under the Loan Documents.

(e)Agent shall have received a certificate of a duly authorized officer of each Obligor, certifying (i) that attached copies of such Obligor's Organic Documents are true and complete, and in full force and effect, without amendment except as shown; (ii) that an attached copy of resolutions authorizing execution and delivery of the Loan Documents is true and complete, and that such resolutions are in full force and effect, were duly adopted, have not been amended, modified or revoked, and constitute all resolutions adopted with respect to this credit facility; and (iii) to the title, name and signature of each Person authorized to sign the Loan Documents.  Agent may conclusively rely on this certificate until it is otherwise notified by the applicable Obligor in writing.

(f)Agent shall have received a written opinion of Haynes & Boone, LLP, as well any local counsel to Borrowers, in form and substance satisfactory to Agent.

(g)Agent shall have received copies of the charter documents of each Obligor, certified by the Secretary of State or other appropriate official of such Obligor's jurisdiction of organization.  Agent shall have received good standing certificates for each Obligor, issued by the Secretary of State or other appropriate official of such Obligor's jurisdiction of organization

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and each jurisdiction where such Obligor's conduct of business or ownership of Property necessitates qualification.

(h)Agent shall have received evidence of the insurance coverage with respect to the business and operations of the Obligors as the Agent may reasonably request.

(j)Borrowers shall have paid on or before the Closing Date all fees and expenses to be paid to Agent and Lenders, including without limitation, all fees and expenses required to be paid pursuant to Sections 3.2 and 3.4.

(k)Agent shall have received a Borrowing Base Certificate as of January 31, 2017.  Upon giving effect to the making of the Term Loan and the payment by Borrowers of all fees and expenses incurred in connection herewith, Availability shall be at least $4,000,000.  The Borrowers shall deliver to the Agent a certificate of the chief financial officer of AGM certifying as to the matters set forth above and containing the calculation of Availability.

(l)Concurrently with the making of the Term Loan on the Closing Date, the Pental Acquisition shall have been consummated on terms and conditions acceptable to Agent and Agent shall be satisfied with the corporate, capital and ownership structures of the Obligors after giving effect to the Pental Acquisition.  AGM shall have received all consents necessary to permit the effectuation of the transactions contemplated by the Pental Acquisition, this Agreement and the Revolver Loan Agreement and Agent shall have received such consents and waivers of such Persons as Agent shall deem necessary in its Permitted Discretion.  The Pental Acquisition Documents shall be in full force and effect and Agent shall have received fully executed copies of the Pental Acquisition Documents, each of which shall be certified by a duly authorized officer of AGM as being true, correct and complete.

(m)Concurrently with the making of the Term Loan, AGM shall have amended the Revolver Loan Agreement to provide for revolving loans of up to $40,000,000of which no more than $25,000,000 will be outstanding on the Closing Date, and such agreement shall be in full force and effect and Agent shall have received a fully executed copy of the Revolver Debt Documents, each of which shall be certified by a duly authorized officer of AGM as being true, correct and complete.

(n)Concurrently with the making of the Term Loan, Agent shall have received evidence of the payment in full of all Debt under the Existing Term Loan Facility, together with (A) a termination and release agreement with respect to the Existing Term Loan Facility and all related documents, duly executed by the Obligors, the Existing Term Loan Agent and the Existing Term Loan Lenders, (B) a termination of security interest in intellectual property for each assignment for security recorded by the Existing Term Loan Agent and/or the Existing Term Loan Lenders at the United States Patent and Trademark Office or the United States Copyright Office and covering any intellectual property of the Obligors, and (C) UCC‑3 termination statements for all UCC-1 financing statements authorized to be filed by the Existing Term Loan Agent and the Existing Term Loan Lenders and covering any portion of the Collateral;

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(o)Concurrently with the making of the Term Loan, Agent shall have received evidence of the payment in full of all Debt under the Existing Pental Loan Facility, together with (A) a termination and release agreement with respect to the Existing Pental Loan Facility and all related documents, duly executed by the Obligors and the Existing Pental Lender, (B) a termination of security interest in intellectual property for each assignment for security recorded by the Existing Pental Lender at the United States Patent and Trademark Office or the United States Copyright Office and covering any intellectual property of the Obligors, and (C) UCC‑3 termination statements for all UCC-1 financing statements authorized to be filed by the Existing Pental Lender and covering any portion of the Collateral;

(p)Agent shall have received a quality of earnings report prepared by Sprock Capital Advisory, LLC all of which shall be in form and substance satisfactory to Agent.

(q)Agent shall have received reasonably satisfactory evidence that AGM shall have received, directly or indirectly, no less than $10,000,000 of proceeds in the form of rollover equity from certain management investors of Pental to effect the consummation the Pental Acquisition Agreement.  On or prior to the Closing Date, there shall have been delivered to the Agent true and correct copies of all documents evidencing the contribution described above, as in effect on the Closing Date, and all material terms and provisions of such documents as in effect on the Closing Date shall be in form and substance reasonably satisfactory to the Agent.

(r)Agent shall have received a certificate of a Senior Officer of the Parent (i) setting forth in reasonable detail the calculations required to establish compliance, on a pro forma basis after giving effect to the Loans, with each of the financial covenants contained in Section 9.3.1 and 9.3.2 (as if the covenants applicable to the quarter ending March 31, 2017 applied on the Closing Date), (ii) certifying that all tax returns required to be filed by any Obligor have been filed and all taxes upon the Loan Parties or their properties, assets, and income (including real property taxes and payroll taxes) have been paid, except to the extent contested in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof on the Financial Statements in accordance with GAAP and (iii) attaching a copy of the Financial Statements and the Projections described in Section 8.1.7(b) hereof and certifying as to the compliance in all material respects with the representations and warranties set forth in Section 8.1.7(a) and section 8.1.7(b).

(s)Agent shall have received such other agreements, instruments, approvals, opinions and other documents, each satisfactory to the Agent in form and substance, as Agent may reasonably request.

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EXHIBIT D

FINANCIAL REPORTING

As long as any Commitment or Obligations are outstanding, Borrowers shall, and shall cause each Subsidiary to furnish to Agent:

(a)as soon as available, and in any event within 120 days after the end of each Fiscal Year of the Parent and its Subsidiaries, consolidated statements of operations and consolidated balance sheets and retained earnings and statements of cash flows of the Ultimate Parent and its Subsidiaries as at the end of such Fiscal Year, setting forth in each case in comparative form the figures for the corresponding date or period set forth in (A) the financial statements for the immediately preceding Fiscal Year, and (B) the Projections, all in reasonable detail and prepared in accordance with GAAP, and accompanied by a report and an opinion with respect to the financial statements, prepared in accordance with generally accepted auditing standards, of independent certified public accountants of recognized standing selected by the Ultimate Parent and satisfactory to the Agent (which opinion shall be without (1) a "going concern" or like qualification or exception, (2) any qualification or exception as to the scope of such audit, or (3) any qualification which relates to the treatment or classification of any item and which, as a condition to the removal of such qualification, would require an adjustment to such item, the effect of which would be to cause any noncompliance with the provisions ofSection 9.3), together with a written statement of such accountants (x) to the effect that, in making the examination necessary for their certification of such financial statements, they have not obtained any knowledge of the existence of an Event of Default or a Default under Section 9.3 and (y) if such accountants shall have obtained any knowledge of the existence of an Event of Default or such Default, describing the nature thereof;

(b)as soon as available, and in any event within 30 days (or, with respect to the first 4 months after the Closing Date, 45 days) after the end of each fiscal month of the Ultimate Parent and its Subsidiaries commencing with the first fiscal month of the Ultimate Parent and its Subsidiaries ending after the Closing Date, internally prepared (x) consolidated statements of operations and consolidated balance sheets and retained earnings and statements of cash flows as at the end of such fiscal month (y) statements of profit and loss of AGM and Pental, and (z) for the period commencing at the end of the immediately preceding Fiscal Year and ending with the end of such fiscal month, setting forth in each case in comparative form the figures for the corresponding date or period set forth in (A) the financial statements for the immediately preceding Fiscal Year and (B) the Projections, all in reasonable detail and certified by a Senior Officer of the Ultimate Parent as fairly presenting, in all material respects, the financial position of the Ultimate Parent and its Subsidiaries as at the end of such fiscal month and the results of operations, retained earnings and cash flows of the Ultimate Parent and its Subsidiaries, on a consolidated basis, for such fiscal month and for such year-to-date period, in accordance with GAAP applied in a manner consistent with that of the most recent audited financial statements furnished to the Agent and the Lenders, subject to the absence of footnotes and normal year-end adjustments;

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(c)as soon as available and in any event within 45 days after the end of each fiscal quarter of the Ultimate Parent t and its Subsidiaries commencing with the first fiscal quarter of the Ultimate Parent and its Subsidiaries ending after the Closing Date, (w) consolidated statements of operations and consolidated balance sheets and retained earnings and statements of cash flows of the Ultimate Parent and its Subsidiaries as at the end of such quarter, (x) statements of profit and loss of AGM and Pental, (y) statements of profit and loss of Lark, (z) and for the period commencing at the end of the immediately preceding Fiscal Year and ending with the end of such quarter, setting forth in each case in comparative form the figures for the corresponding date or period set forth in (A) the financial statements for the immediately preceding Fiscal Year and (B) the Projections, all in reasonable detail and certified by Senior Officer of the Ultimate Parent as fairly presenting, in all material respects, the financial position of the Ultimate Parent and its Subsidiaries as of the end of such quarter and the results of operations and cash flows of the Ultimate Parent and its Subsidiaries, on a consolidated basis, for such quarter and for such year-to-date period, in accordance with GAAP applied in a manner consistent with that of the most recent audited financial statements of the Ultimate Parent and its Subsidiaries furnished to the Agent and the Lenders, subject to the absence of footnotes and normal year-end adjustments;

(d) concurrently with delivery of financial statements under clauses (a), (b) and (c) above, or more frequently if requested by Agent while a Default or Event of Default exists, a Compliance Certificate executed by a Senior Officer of Ultimate Parent;

(e)as soon as available and in any event not later than 30 days after the end of each Fiscal Year, a certificate of an Senior Officer of the Ultimate Parent (A) attaching Projections for the Ultimate Parent and its Subsidiaries, supplementing and superseding the Projections previously required to be delivered pursuant to this Agreement, prepared on a monthly basis and otherwise in form and substance reasonably satisfactory to the Agent, for the immediately succeeding Fiscal Year for the Ultimate Parent and its Subsidiaries and (B) certifying that the representations and warranties set forth in Section 8.1.7 are true and correct with respect to the Projections; and

(f)concurrent with the delivery thereof to the Revolver Agent, a copy of each Borrowing Base Certificate, borrowing base report or similar collateral valuation report so delivered in accordance with the Revolver Loan Agreement.

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EXHIBIT E

NOTICE REQUIREMENTS

(a)promptly after the sending or filing thereof, copies of any annual report to be filed in connection with each Plan or Foreign Plan;

(b)promptly upon knowledge of any violation or asserted violation of any Applicable Law (including ERISA, OSHA, FLSA, or any Environmental Laws) that could reasonably be expected to have a Material Adverse Effect;

(c)promptly after the date on which an Obligor commences any proceeding alleging any Commercial Tort Claim alleging damages in excess of $1,000,000, a brief description of such Commercial Tort Claim and grant of a security interest therein to the Collateral Agent in accordance with the Guaranty and Collateral Agreement;

(d)as soon as possible and in any event within 5 Business Days of the occurrence of any ERISA Event;

(e)promptly upon request such other reports and information (financial or otherwise) as Agent may reasonably request from time to time in connection with any Collateral or Borrowers', any of their Subsidiaries' or other Obligor's financial condition or business (provided, however, such reports and information shall not include any board minutes or any board materials or management notes of Borrowers or any other Obligor);

(f)to the extent permitted by Applicable Law, promptly after submission to any Governmental Authority, all documents and information furnished to such Governmental Authority in connection with any material investigation of any Obligor other than routine inquiries by such Governmental Authority;

(g)as soon as possible, and in any event within 5 Business Days after an Obligor receives knowledge of the occurrence of an Event of Default or the occurrence of any event or development that could reasonably be expected to have a Material Adverse Effect or other event or development having a Material Adverse Effect and the action which the affected Obligor proposes to take with respect thereto;

(h)promptly after the commencement thereof but in any event not later than 5 Business Days after service of process with respect thereto on, or the obtaining of knowledge thereof by, any Obligor, notice of each action, suit or proceeding before any court or other Governmental Authority or other regulatory body or any arbitrator which could reasonably be expected to have a Material Adverse Effect;

(i)as soon as possible and in any event within 5 Business Days after execution, receipt or delivery thereof, copies of any material default or termination notices that any Obligor executes or receives in connection with any Material Contract;

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(j)promptly upon request, such other information concerning the condition or operations, financial or otherwise, of any Obligor as the Agent may from time to time reasonably request; and

(k)promptly upon receipt thereof, copies of any default notices from Bank of America, N.A. in respect of Revolver Debt.

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EXHIBIT F

POST CLOSING

(a) Within 20 days following the Closing Date (or such later date as the Agent may agree to at its sole option), deliver (i) a lender loss payable endorsement with respect to the Borrowers' property insurance, (ii) an additional insured endorsement with respect to the Borrowers' liability insurance and (iii) an endorsement providing for thirty (30) days' notice of cancellation of all insurance policies, in each case, duly endorsed to Agent and in form and substance reasonably satisfactory to Agent.

(b) Within 30 days following the Closing Date (or such later date as the Agent may agree to at its sole option), deliver a fully executed Collateral Assignment of Business Interruption Insurance Proceeds, duly executed by each of the parties named therein.

(c) Within 60 days following the Closing Date (or such later date as the Agent may agree to at its sole option), deliver evidence, in form and substance reasonably satisfactory to Agent that Borrowers have duly perfected its consignment interest in all Consigned Inventory (as defined in the Revolver Loan Agreement) held by each of the following consignees: (i) Global Granite, Inc. and (ii) GDS Countertops Inc.; provided, failure to delivery such evidence shall not result in an Event of Default.

(d) Within 60 days following the Closing Date (or such later date as the Agent may agree to at its sole option), deliver a Deposit Account Control Agreement with respect to each Deposit Account  (other than any Excluded Account) listed on Schedule 9.1.9, among the Agent, the Revolver Agent, the applicable Obligor and the Depository Bank, each in form and substance reasonably satisfactory to the Agent.

F-1

(e) Within 60 days following the Closing Date (or such later date as the Agent may agree to at its sole option), use commercially reasonable efforts to deliver fully executed Lien Waivers for the following locations:

Obligor	Address	Landlord
AG&M	4200 Kenilwood Drive, Nashville, Davidson County, Tennessee 37204	Chaucer Investments, LLC
AG&M	8861 San Fernando Road, Sun Valley, Los Angeles County, California 91352	8861 San Fernando, Inc.
AG&M	4850 East La Palma Ave., Anaheim, Orange County, California 92801	Ajax LaPalma Investors, LLC
AG&M	5032 Sirona Dr #100, Charlotte, Mecklenburg County, North Carolina 28273	Liberty Property Limited Partnership
Pental Granite and Marble	725 Fidalgo Street and 770 S. Michigan Street, Seattle, Washington, King County 98108	CSDV, Limited Partnership
Pental Granite and Marble	549 B South Dawson Street, Seattle, Washington	CSHV NWCP Seattle, LLC
Pental Granite and Marble	3551 NW Yeon, Portland, Multnomah County, Oregon, 97210	CSHV NWCP Portland, LLC
Pental Granite and Marble	3600-D Industry Drive East, Fife, Pierce County, Washington 98424	Prologis Targeted U.S. Logistics Fund, L.P.
Pental Granite and Marble	3900A Industry Drive East, Fife, Pierce County, Washington 98424	AMB Partners II, L.P.
Pental Granite and Marble	7050 Valjean Avenue, Van Nuys, Los Angeles County, California 91406	BPR Investment
Pental Granite and Marble	10000 – 10300 East 40th Avenue, Denver, Denver County, Colorado 80038	United Properties of Colorado LLC
Pental Granite and Marble	4700 South Highland Drive, Suite A, Unit #046, Salt Lake City, Utah	SLC Storage LLC
Pental Granite and Marble	2211 N. Harvard Road, Unit 57, Liberty Lake, Washington	Storage Solutions Liberty Lake, LLC
Pental Granite and Marble	405 N. Gilbert Road, Unit 729, Gilbert Arizona	Gilbert/Heather Self-Storage Investors, LLC d.b.a. Gilbert Road Self Storage
Pental Granite and Marble	6218 W. Sahara Ave., Unit D92, Las Vegas, Nevada	Central Self Storage - Sahara
Pental Granite and Marble	6401 Oak Canyon, Space D1003, Irving, California	Extra Space Management, Inc.

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EXHIBIT H

ADDITIONAL TERM LOANS CONDITIONS PRECEDENT

(a)Borrowers shall have paid on or before the applicable Additional Term Loan Funding Date all fees and expenses to be paid to Agent and Lenders, including without limitation, all fees and expenses required to be paid pursuant to Sections 3.2 and 3.4;

(b) the receipt by the Agent of a certificate delivered by an Authorized Officer of the Borrower certifying to the Agents and the Lenders that the proceeds of such Additional Term Loan are being used for a Specified Transaction and attaching thereto a detailed sources and uses statement in form and substance reasonably satisfactory to the Agent;

(c)certificates, in form and substance satisfactory to the Agent, from a knowledgeable Senior Officer of Parent certifying that, after giving effect to the making of the Additional Term Loan and the transactions contemplated  hereunder, (i) Borrowers are Solvent; (ii) no Default or Event of Default has occurred and is continuing; (iii) the representations and warranties set forth in Section 8 are true and correct in all material respects (without duplication of any materiality qualifier therein); (iv) no litigation, investigation or proceeding before or by any arbitrator or Governmental Authority shall be continuing or threatened against any Obligor which could, in the reasonable opinion of Lender, have a Material Adverse Effect on the Collateral, or any Obligor; and (v) each Borrower has complied with all agreements and conditions to be satisfied by it under the Loan Documents;

(d)the receipt by the Agent of a certificate delivered by an Authorized Officer of the Borrower certifying to the Agents and the Lenders that such Specified Transaction (other than the RDS Intercompany Loan) shall satisfy clauses (i), (ii), (iii), (iv) and (vii) of the definition of Permitted Acquisition;

(e)solely with respect to the RDS Intercompany Loan, the receipt by Agent of the following documents:

(i)the RDS Note (no provision of which shall have been amended or otherwise modified or waived in a manner that is adverse to the Lenders' interests without the prior written consent of the Agent) as in effect on the Second Amendment Effective Date, certified as a true and correct copy thereof by an Authorized Officer of AGM stating that such agreement remains in full force and effect and that none of the Obligors has breached or defaulted in any of its obligations under such agreements;

(ii)a Pledge Amendment, substantially in the form of Annex III to the Guarantee and Collateral Agreement, duly executed by AGM, together with the original RDS Note required to be pledged thereunder and an allonge in respect thereto; and

(iii)appropriate financing statements on Form UCC‑1, naming L.A.R.K. Industries, Inc. as debtor, AGM as assignor and the Agent, on behalf of the Secured Parties, as secured party/total assignee, duly filed in such office or offices as may be necessary or, in the

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opinion of the Agent, desirable to perfect the security interests purported to be created by the Guarantee and Collateral Agreement.

(f)solely with respect to the IRG Acquisition:

(i)a certificate, in form and substance satisfactory to the Agent, from a knowledgeable Senior Officer of Parent certifying that, concurrently with the making of the Additional Term Loan to fund the IRG Acqusition, the IRG Acquisition shall have been consummated on terms and conditions acceptable to Agent and (x) Agent shall be satisfied with the corporate, capital and ownership structures of the Obligors after giving effect to the IRG Acquisition and (y) AGM shall become the owner, free and clear of all Liens (other than Permitted Liens), of all of the IRG Acquisition Assets.  IRG shall have received all consents necessary to permit the effectuation of the transactions contemplated by the IRG Acquisition.  The IRG Acquisition Documents shall be in full force and effect and Agent shall have received fully executed copies of the IRG Acquisition Documents, each of which shall be certified by a duly authorized officer of IRG as being true, correct and complete; and

(ii)Agent shall have received evidence of the payment in full of all Debt under the Existing IRG Facility, together with (A) a termination and release agreement with respect to the Existing IRG Facility and all related documents, duly executed by the Obligors and the Existing IRG Lender, (B) a termination of security interest in intellectual property for each assignment for security recorded by the Existing IRG Lender at the United States Patent and Trademark Office or the United States Copyright Office and covering any intellectual property of the Obligors, and (C) UCC‑3 termination statements for all UCC-1 financing statements authorized to be filed by the Existing IRG Lender and covering any portion of the Collateral;

(g)solely with respect to the Tutto Marmo Acquisition:

(i)a certificate, in form and substance satisfactory to the Agent, from a knowledgeable Senior Officer of Parent certifying that, concurrently with the making of the Additional Term Loan to fund the Tutto Marmo Acquisition, the Tutto Marmo Acquisition shall have been consummated on terms and conditions acceptable to Agent and (x) Agent shall be satisfied with the corporate, capital and ownership structures of the Obligors after giving effect to the Tutto Marmo Acquisition and (y) AGM shall become the owner, free and clear of all Liens (other than Permitted Liens), of all of the Tutto Marmo Acquisitions Assets.  Tutto Marmo shall have received all consents necessary to permit the effectuation of the transactions contemplated by the Tutto Marmo Acquisition.  The Tutto Marmo Acquisition Documents shall be in full force and effect and Agent shall have received fully executed copies of the Tutto Marmo Acquisition Documents, each of which shall be certified by a duly authorized officer of Tutto Marmo as being true, correct and complete; and

(ii)Agent shall have received evidence of the payment in full of all Debt under the Existing Tutto Marmo Facility, together with (A) a termination and release agreement with respect to the Existing Tutto Marmo Facility and all related documents, duly executed by the Obligors and the Existing Tutto Marmo Lender, (B) a termination of security interest in intellectual property for each assignment for security recorded by the Existing Tutto Marmo Lender at the United States Patent and Trademark Office or the United States Copyright Office

H-2

and covering any intellectual property of the Obligors, and (C) UCC‑3 termination statements for all UCC-1 financing statements authorized to be filed by the Existing Tutto Marmo Lender and covering any portion of the Collateral;

(h)solely with respect to the Bedrock Acquisition:

(i)a certificate, in form and substance satisfactory to the Agent, from a knowledgeable Senior Officer of Parent certifying that, concurrently with the making of the Additional Term Loan to fund the Bedrock Acquisition, the Bedrock Acquisition shall have been consummated on terms and conditions acceptable to Agent and (x) Agent shall be satisfied with the corporate, capital and ownership structures of the Obligors after giving effect to the Bedrock Acquisition and (y) AGM shall become the owner, free and clear of all Liens (other than Permitted Liens), of all of the Bedrock Acquisitions Assets.  Bedrock shall have received all consents necessary to permit the effectuation of the transactions contemplated by the Bedrock Acquisition.  The Bedrock Acquisition Documents shall be in full force and effect and Agent shall have received fully executed copies of the Bedrock Acquisition Documents, each of which shall be certified by a duly authorized officer of Bedrock as being true, correct and complete; and

(ii)Agent shall have received evidence of the payment in full of all Debt under the Existing Bedrock Facility, together with (A) a termination and release agreement with respect to the Existing Bedrock Facility and all related documents, duly executed by the Obligors and the Existing Bedrock Lender, (B) a termination of security interest in intellectual property for each assignment for security recorded by the Existing Bedrock Lender at the United States Patent and Trademark Office or the United States Copyright Office and covering any intellectual property of the Obligors, and (C) UCC‑3 termination statements for all UCC-1 financing statements authorized to be filed by the Existing Bedrock Lender and covering any portion of the Collateral; and

(i)Agent shall have received such other agreements, instruments, approvals, opinions and other documents, each satisfactory to the Agent in form and substance, as Agent may reasonably request.

H-3

EXHIBIT I

POST FIFTH AMENDMENT EFFECTIVE DATE OBLIGATIONS

(a) Within 20 days following the Fifth Amendment Effective Date (or such later date as the Agent may agree to at its sole option), deliver evidence of the insurance coverage with respect to the business and operations of T. A. C. Ceramic as the Agent may reasonably request.

(b) Within 30 days following the Fifth Amendment Effective Date (or such later date as the Agent may agree to at its sole option), deliver (i) a lender loss payable endorsement with respect to T. A. C. Ceramic's property insurance, (ii) an additional insured endorsement with respect to the T. A. C. Ceramic's' liability insurance and (iii) an endorsement providing for thirty (30) days' notice of cancellation of all insurance policies, in each case, duly endorsed to Agent and in form and substance reasonably satisfactory to Agent.

(c) Within 60 days following the Fifth Amendment Effective Date (or such later date as the Agent may agree to at its sole option), deliver a Deposit Account Control Agreement with respect to each Deposit Account  (other than any Excluded Account) listed on Schedule 9.1.9, among the Agent, the Revolver Agent, T. A. C Ceramic and the Depository Bank, each in form and substance reasonably satisfactory to the Agent.

(e) Within 60 days following the Fifth Amendment Effective Date (or such later date as the Agent may agree to at its sole option), use commercially reasonable efforts to deliver fully executed Lien Waivers for the following locations:

Obligor	Address	Landlord
T. A. C. Ceramic	11951 TAC Ct, Manassas, VA, 20109
T. A. C. Ceramic	11991 TAC Ct, Manassas, VA, 20109
T. A. C. Ceramic	7397 Washington Blvd., Suites 101, 102, 103, Elkridge, MD 21075
T. A. C. Ceramic	7395 Washington Blvd., Suite 105, Elkridge, MD 21075

I-1

EXHIBIT J

SECOND ADDITIONAL TERM LOANS CONDITIONS PRECEDENT

(a)Agent shall have received results of Lien searches, listing all effective financing statements which name as debtor any Obligor and which are filed in the offices referred to in the Guaranty and Collateral Agreement, together with copies of such financing statements, none of which, except as otherwise agreed in writing by the Agent and Permitted Liens, shall cover any of the Collateral and the results of searches for any tax Lien and judgment Lien filed against such Person or its property, which results, except as otherwise agreed to in writing by the and Permitted Liens, shall not show any such Liens;

(b)Agent shall have received a certificate of a duly authorized officer of each Obligor, certifying (i) that attached copies of such Obligor's Organic Documents are true and complete, and in full force and effect, without amendment except as shown; (ii) that an attached copy of resolutions authorizing execution and delivery of the Loan Documents entered into in connection with the Summit Acquisition is true and complete, and that such resolutions are in full force and effect, were duly adopted, have not been amended, modified or revoked, and constitute all resolutions adopted with respect to this credit facility; and (iii) to the title, name and signature of each Person authorized to sign the Loan Documents.  Agent may conclusively rely on this certificate until it is otherwise notified by the applicable Obligor in writing.

(c)Agent shall have received a written opinion of Greenberg Traurig, LLP, as well any local counsel to Borrowers, in form and substance satisfactory to Agent.

(d)Agent shall have received copies of the charter documents of each Obligor, certified by the Secretary of State or other appropriate official of such Obligor's jurisdiction of organization.  Agent shall have received good standing certificates for each Obligor, issued by the Secretary of State or other appropriate official of such Obligor's jurisdiction of organization and each jurisdiction where such Obligor's conduct of business or ownership of Property necessitates qualification.

(e)Agent shall have received evidence of the insurance coverage with respect to the business and operations of the Obligors as the Agent may reasonably request.

(f)Borrowers shall have paid on or before the Fourth Amendment Effective Date all fees and expenses to be paid to Agent and Lenders, including without limitation, all fees and expenses required to be paid pursuant to Sections 3.2 and 3.4;

(g)certificates, in form and substance satisfactory to the Agent, from a knowledgeable Senior Officer of Ultimate Parent certifying that, after giving effect to the making of the Second Additional Term Loan and the transactions contemplated  hereunder, (i) Borrowers Obligors are, on a consolidated basis Solvent; (ii) no Default or Event of Default has occurred and is continuing; (iii) the representations and warranties set forth in Section 8 are true and correct in all material respects (without duplication of any materiality qualifier therein); (iv) no litigation, investigation or proceeding before or by any arbitrator or Governmental Authority shall be continuing or threatened against any Obligor which could, in the reasonable opinion of

J-1

Lender, have a Material Adverse Effect on the Collateral, or any Obligor; and (v) each Borrower has materially complied with all agreements and conditions to be satisfied by it under the Loan Documents; and

(h)a certificate, in form and substance satisfactory to the Agent, from a knowledgeable Senior Officer of Ultimate Parent certifying that, concurrently with the making of the Second Additional Term Loan to fund the Summit Acquisition, the Summit Acquisition shall have been consummated on terms and conditions acceptable to Agent and (x) Agent shall be satisfied with the corporate, capital and ownership structures of the Obligors after giving effect to the Summit Acquisition and (y) a Subsidiary of Ultimate Parent shall become the owner, free and clear of all Liens (other than Permitted Liens), of all of the Summit Acquisitions Assets.  Summit shall have received all consents necessary to permit the effectuation of the transactions contemplated by the Summit Acquisition.  The Summit Acquisition Documents shall be in full force and effect and Agent shall have received fully executed copies of the Summit Acquisition Documents, each of which shall be certified by a duly authorized officer of Summit as being true, correct and complete.

J-2

EXHIBIT K

THIRD ADDITIONAL TERM LOANS CONDITIONS PRECEDENT

(a)Borrowers shall have paid on or before the applicable Third Additional Term Loan Funding Date all fees and expenses to be paid to Agent and Lenders, including without limitation, all fees and expenses required to be paid pursuant to Sections 3.2 and 3.4;

(b)Agent shall have received a certificate delivered by an Authorized Officer of the Borrower certifying to the Agents and the Lenders that the proceeds of such Third Additional Term Loan are being used for an Identified Acquisition and attaching thereto a detailed sources and uses statement in form and substance reasonably satisfactory to the Agent;

(c)Agent shall have received a written opinion of Alston & Bird, LLP, as well as local counsel to Borrowers, in form and substance reasonably satisfactory to Agent.

(d)Agent shall have received certificates, in form and substance satisfactory to the Agent, from a knowledgeable Senior Officer of Ultimate Parent certifying that, after giving effect to the making of such Third Additional Term Loan and the transactions contemplated  hereunder, (i) Borrowers are Solvent; (ii) no Default or Event of Default has occurred and is continuing; (iii) the representations and warranties set forth in Section 8 are true and correct in all material respects (without duplication of any materiality qualifier therein); (iv) no litigation, investigation or proceeding before or by any arbitrator or Governmental Authority shall be continuing or threatened against any Obligor which could, in the reasonable opinion of Lender, have a Material Adverse Effect on the Collateral, or any Obligor; and (v) each Borrower has complied with all agreements and conditions to be satisfied by it under the Loan Documents;

(e)Agent shall have received of a certificate delivered by an Authorized Officer of the Borrower certifying to the Agents and the Lenders that such Identified Acquisition shall satisfy clauses (i), (ii), (iii), (iv) and (vii) of the definition of Permitted Acquisition;  

(f)solely with respect to the Intown Design Acquisition:

(i)Concurrently with the making of such Third Additional Term Loan to fund the Intown Design Acquisition, the Intown Design Acquisition shall have been consummated, in all material respects, in accordance with the terms of the Intown Design Acquisition Documents which shall be on terms and conditions reasonably acceptable to Agent.  The Agent shall have received a certificate, in form and substance reasonably satisfactory to the Agent, from a knowledgeable Senior Officer of Ultimate Parent certifying that, concurrently with the making of such Third Additional Term Loan to fund the Intown Design Acquisition, the Intown Design Acquisition shall have been consummated, in all material respects, in accordance with the terms of the Intown Design Acquisition Documents and Lark shall become the owner, free and clear of all Liens (other than Permitted Liens), of Intown Design Assets.  Intown Design shall have received all consents necessary to permit the effectuation of the transactions contemplated by the Intown Design Acquisition (unless the receipt of such consents has been waived by Lark).  The Intown Design Acquisition Documents shall be in full force and effect

and Agent shall have received fully executed copies of the Intown Design Acquisition Documents, each of which shall be certified by a duly authorized officer of Intown Design as being true, correct and complete;

(ii)Agent shall have received the Intown Design Collateral Assignment, duly executed by the parties thereto; and

(iii)Agent shall have received evidence reasonably satisfactory to it of the payment in full of all Debt under the Existing Intown Design Loan Facility, together with (A) a termination and release agreement with respect to the Existing Intown Design Loan Facility and all related documents, duly executed by the Obligors and the Existing Intown Design Lender, (B) a termination of security interest in intellectual property for each assignment for security recorded by the Existing Intown Design Lender at the United States Patent and Trademark Office or the United States Copyright Office and covering any intellectual property of the Obligors, and (C) UCC‑3 termination statements for all UCC-1 financing statements authorized to be filed by the Existing Intown Design Lender and covering any portion of the Collateral.

(g)solely with respect to the A&I Acquisition:

(i)Concurrently with the making of such Third Additional Term Loan to fund the A&I Acquisition, the A&I Acquisition shall have been consummated, in all material respects, in accordance with the terms of the A&I Acquisition Documents which shall be on terms and conditions reasonably acceptable to Agent.  The Agent shall have received a certificate, in form and substance reasonably satisfactory to the Agent, from a knowledgeable Senior Officer of Ultimate Parent certifying that, concurrently with the making of such Third Additional Term Loan to fund the A&I Acquisition, the A&I Acquisition shall have been consummated, in all material respects, in accordance with the terms of the A&I Acquisition Documents and Lark shall become the owner, free and clear of all Liens (other than Permitted Liens), of the T. A. C. Ceramic Assets.  T. A. C. Ceramic shall have received all consents necessary to permit the effectuation of the transactions contemplated by the T. A. C. Ceramic Acquisition (unless the receipt of such consents has been waived by Lark).  The T. A. C. Ceramic Acquisition Documents shall be in full force and effect and Agent shall have received fully executed copies of the T. A. C. Ceramic Acquisition Documents, each of which shall be certified by a duly authorized officer of Lark as being true, correct and complete.

(ii)Agent shall have received the A&I Collateral Assignment, duly executed by the parties thereto; and

(iii)Agent shall have received evidence reasonably satisfactory to it of the payment in full of all Debt under the Existing A&I Loan Facility, together with (A) a termination and release agreement with respect to the Existing A&I Loan Facility and all related documents, duly executed by the Obligors and the Existing A&I Lender, (B) a termination of security interest in intellectual property for each assignment for security recorded by the Existing A&I Lender at the United States Patent and Trademark Office or the United States Copyright Office and covering any intellectual property of the Obligors, and (C) UCC‑3 termination statements for all UCC-1 financing statements authorized to be filed by the Existing A&I Lender and covering any portion of the Collateral; and

(h)Agent shall have received such other agreements, instruments, approvals, opinions and other documents, each satisfactory to the Agent in form and substance, as Agent may reasonably request.

EX-21.1

Exhibit 21.1

SELECT INTERIOR CONCEPTS, INC.

List of Subsidiaries

Name of Subsidiary	State of Formation, Organization, or Incorporation
AG Holdco (SPV) LLC	Delaware
Architectural Granite & Marble, LLC	Delaware
Architectural Surfaces Group, LLC	Delaware
Casa Verde Services, LLC	Delaware
Greencraft Holdings, LLC	Arizona
Greencraft Interiors, LLC	Arizona
Greencraft Stone and Tile, LLC	Arizona
L.A.R.K. Industries, Inc.	California
Pental Granite and Marble, LLC	Washington
Residential Design Services, LLC	Delaware
SIC Intermediate, Inc.	Delaware
T.A.C. Ceramic Tile Co.	Virginia

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated March 16, 2021 with respect to the consolidated financial statements and financial statement schedule included in the Annual Report of Select Interior Concepts, Inc. on Form 10-K for the year ended December 31, 2020.  We consent to the incorporation by reference of said report in the Registration Statements of Select Interior Concepts, Inc. on Form S-8 (File No. 333-227510 and File No. 333-233169).

/s/ GRANT THORNTON LLP

Los Angeles, California

March 16, 2021

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, L.W. Varner, Jr., certify that:

1.I have reviewed this Annual Report on Form 10-K of Select Interior Concepts, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 16, 2021	/s/ L.W. Varner, Jr.
	L.W. Varner, Jr.
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Nadeem Moiz, certify that:

1.I have reviewed this Annual Report on Form 10-K of Select Interior Concepts, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 16, 2021	/s/ Nadeem Moiz
	Nadeem Moiz
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Select Interior Concepts, Inc. (the “Company”) for the fiscal year ended December 31, 2020, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Annual Report”), I, L.W. Varner, Jr., Chief Executive Officer (Principal Executive Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. the Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 16, 2021	/s/ L.W. Varner, Jr.
	L.W. Varner, Jr.
	Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Select Interior Concepts, Inc. (the “Company”) for the fiscal year ended December 31, 2020, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Annual Report”), I, Nadeem Moiz, Chief Financial Officer (Principal Financial Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1. the Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 16, 2021	/s/ Nadeem Moiz
	Nadeem Moiz
	Chief Financial Officer
	(Principal Financial Officer)

XML

Document and Entity Information - USD ($)
$ in Millions

12 Months Ended

Dec. 31, 2020

Mar. 01, 2021

Jun. 30, 2020

Cover [Abstract]

Entity Registrant Name

SELECT INTERIOR CONCEPTS, INC.

Entity Central Index Key

0001723866

Current Fiscal Year End Date

--12-31

Entity Filer Category

Accelerated Filer

Entity Shell Company

false

Entity Small Business

false

Entity Emerging Growth Company

true

Entity Ex Transition Period

false

Entity Current Reporting Status

Yes

Trading Symbol

SIC

Document Fiscal Year Focus

2020

Document Fiscal Period Focus

FY

Document Type

10-K

Amendment Flag

false

Document Period End Date

Dec. 31, 2020

Entity Common Stock, Shares Outstanding

25,510,926

Entity File Number

001-38632

Entity Tax Identification Number

47-4640296

Entity Address, Address Line One

400 Galleria Parkway

Entity Address, Address Line Two

Suite 1760

Entity Address, City or Town

Atlanta

Entity Address, State or Province

GA

Entity Address, Postal Zip Code

30339

City Area Code

888

Local Phone Number

701-4737

Entity Interactive Data Current

Yes

Document Annual Report

true

Document Transition Report

false

Entity Incorporation, State or Country Code

DE

Title of 12(b) Security

Class A Common Stock, par value $0.01 per share

Security Exchange Name

NASDAQ

Entity Well-known Seasoned Issuer

No

Entity Voluntary Filers

No

Entity Public Float

$ 87.0

ICFR Auditor Attestation Flag

false

Documents Incorporated by Reference

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Registrant’s Definitive Proxy Statement relating to its 2021 Annual Meeting of Stockholders (to be filed with the U.S. Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Annual Report) are incorporated by reference into Part III of this Annual Report on Form 10-K, as indicated herein.

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Current assets
Cash	$ 2,974	$ 5,002
Accounts receivable, net of allowance for doubtful accounts of $489 and $849 at December 31, 2020 and 2019, respectively	67,881	63,419
Inventories	98,982	104,741
Prepaid expenses and other current assets	17,372	11,083
Income taxes receivable	4,617	2,184
Total current assets	191,826	186,429
Property and equipment, net of accumulated depreciation of $30,387 and $21,020 at December 31, 2020 and 2019, respectively	21,056	26,494
Deferred tax assets, net	8,877	10,550
Goodwill	99,789	99,789
Intangible assets, net	78,014	90,748
Other assets	5,446	6,265
Total assets	405,008	420,275
Current liabilities
Accounts payable	47,246	42,734
Accrued expenses and other current liabilities	20,353	16,661
Customer deposits	8,144	8,627
Current portion of long-term debt, net of financing fees of $1,279 and $511 at December 31, 2020 and 2019, respectively	15,623	11,749
Current portion of capital lease obligations	2,700	2,395
Total current liabilities	94,066	82,166
Line of credit	9,623	21,871
Long-term debt, net of current portion and financing fees of $1,486 and $1,107 at December 31, 2020 and 2019, respectively	134,526	141,299
Long-term capital lease obligations	5,235	6,907
Other long-term liabilities	7,367	6,757
Total liabilities	250,817	259,000
Commitments and contingencies (see Note 11)
Stockholders' equity
Treasury stock, 160,733 shares at December 31, 2020 and 33,140 shares at December 31, 2019, at cost	(1,279)	(391)
Additional paid-in capital	165,048	161,396
Retained earnings (accumulated deficit)	(9,834)	19
Total stockholders’ equity	154,191	161,275
Total liabilities and stockholders' equity	405,008	420,275
Customer Relationships
Current assets
Intangible assets, net	62,700	71,989
Intangible assets
Current assets
Intangible assets, net	15,314	18,759
Class A
Stockholders' equity
Common stock	256	251
Total stockholders’ equity	$ 256	$ 251

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Allowance for doubtful accounts	$ 489	$ 849
Accumulated depreciation	30,387	21,020
Accumulated amortization	68,456	55,722
Current portion of long-term debt, net of financing fees	1,279	511
Non current portion of long-term debt, net of financing fees	$ 1,486	$ 1,107
Treasury stock, shares	160,733	33,140
Customer Relationships
Accumulated amortization	$ 57,540	$ 48,251
Intangible assets
Accumulated amortization	$ 10,916	$ 7,471
Class A
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	25,609,758	25,139,542
Common stock, shares outstanding	25,449,025	25,106,402

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Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Income Statement [Abstract]
Revenue, net	$ 554,025	$ 610,373	$ 489,757
Cost of revenue	418,816	446,299	356,303
Gross profit	135,209	164,074	133,454
Selling, general and administrative expenses	131,827	144,816	121,357
Income from operations	3,382	19,258	12,097
Other expense:
Interest expense	14,568	17,220	11,426
Loss on extinguishments of debt			42
Other expense (income), net	1,641	(6,467)	2,115
Total other expense, net	16,209	10,753	13,583
Income (loss) before provision (benefit) for income taxes	(12,827)	8,505	(1,486)
Provision (benefit) for income taxes	(2,974)	1,521	989
Net income (loss)	$ (9,853)	$ 6,984	$ (2,475)
Income (loss) per basic and diluted share of common stock
Basic common stock	$ (0.39)	$ 0.28	$ (0.10)
Diluted common stock	$ (0.39)	$ 0.27	$ (0.10)
Weighted average shares outstanding
Basic common stock	25,337,249	25,296,955	25,634,342
Diluted common stock	25,337,249	25,431,677	25,634,342

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Consolidated Statements of Changes in Equity - USD ($) $ in Thousands	Total	Cumulative Effect Period of Adoption Adjustment	Revision of Prior Period Adjustment Cumulative Effect Period of Adoption Adjustment	Class A	Class B	Treasury Stock, at Cost	Total Additional Paid-in Capital	Total Retained Earnings (Accumulated Deficit)	Total Retained Earnings (Accumulated Deficit) Revision of Prior Period Adjustment Cumulative Effect Period of Adoption Adjustment
Beginning balance at Dec. 31, 2017	$ 148,087			$ 217	$ 39		$ 153,520	$ (5,689)
Beginning balance, shares at Dec. 31, 2017				21,750,000	3,864,626
Equity-based compensation	2,528						2,528
Equity based compensation, Shares				27,646
Issuance of Class A and Class B common stock awards	554			$ 1			553
Issuance of Class A and Class B common stock awards, shares				752	39,645
Special stock dividend and cancellation of common stock				$ 2	$ (2)
Special stock dividend and cancellation of common stock, shares				226,511	(226,511)
Conversion of Class B Stock to Class A Stock				$ 37	$ (37)
Conversion of Class B Stock to Class A Stock, shares				3,677,760	(3,677,760)
Net income (loss)	(2,475)							(2,475)
Ending balance at Dec. 31, 2018	148,694			$ 257			156,601	(8,164)
Ending balance, shares at Dec. 31, 2018				25,682,669
Equity-based compensation	4,797						4,797
Issuance of Class A common stock due to restricted stock vesting				$ 2			(2)
Issuance of Class A common stock due to restricted stock vesting, shares				256,873
Repurchase of Class A common stock	(391)					$ (391)
Retirement of Class A common stock	(8)			$ (8)
Retirement of Class A common stock, shares				(800,000)
Net income (loss)	6,984							6,984
Ending balance at Dec. 31, 2019	161,275			$ 251		(391)	161,396	19
Ending balance, shares at Dec. 31, 2019				25,139,542
Retained earnings (accumulated deficit)	19		$ 1,199						$ 1,199
Equity-based compensation	2,789						2,789
Issuance of Class A common stock due to restricted stock vesting	4			$ 4
Issuance of Class A common stock due to restricted stock vesting, shares				352,871
Issuance of Class A and Class B common stock awards	864			$ 1			863
Issuance of Class A and Class B common stock awards, shares				117,345
Repurchase of Class A common stock	(888)					(888)
Net income (loss)	(9,853)							(9,853)
Ending balance at Dec. 31, 2020	154,191			$ 256		$ (1,279)	$ 165,048	$ (9,834)
Ending balance, shares at Dec. 31, 2020				25,609,758
Retained earnings (accumulated deficit)	$ (9,834)	$ 1,200

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Cash flows provided by operating activities
Net income (loss)	$ (9,853)	$ 6,984	$ (2,475)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	22,867	24,157	20,487
Change in fair value of earn-out liabilities		(6,029)	2,109
Equity-based compensation	2,789	5,740	2,528
Deferred provision for (benefit from) income taxes	1,673	(1,494)	(4,186)
Amortized interest on deferred debt issuance costs	1,182	610	663
Loss on extinguishments of debt			42
Provision for doubtful accounts	(322)	349	283
Loss (gain) on disposal of property and equipment, net	104	(223)	(139)
Other	(70)
Changes in operating assets and liabilities:
Accounts receivable	(4,140)	1,225	(4,370)
Inventories	5,704	979	1,209
Prepaid expenses and other current assets	(7,025)	(3,012)	151
Other assets	(305)	(12)	(174)
Accounts payable	4,625	5,194	(11,891)
Accrued expenses and other current liabilities	4,559	(2,212)	3,847
Income taxes receivable	(2,433)	(1,905)	1,240
Customer deposits	(484)	(1,281)	2,888
Other long-term liabilities	1,733	1,885
Net cash provided by operating activities	20,604	30,955	12,212
Cash flows used in investing activities
Purchase of property and equipment	(3,436)	(9,169)	(8,507)
Proceeds from disposal of property and equipment	178	65	6
Net cash used in investing activities	(3,258)	(24,641)	(80,624)
Cash flows provided by (used in) financing activities
Payment of Greencraft Holdings, LLC earn-out liability		(5,794)
Proceeds from ERP financing	376	2,725
Proceeds from issuance of equity			553
Proceeds from (payments on) line of credit, net	(12,347)	(14,934)	17,886
Proceeds from term loan		11,500	57,250
Term loan deferred issuance costs	(2,230)		(958)
Purchase of treasury stock	(888)	(399)
Payments on notes payable and capital leases	(3,235)	(1,921)	(1,454)
Principal payments on long-term debt	(1,050)	(1,851)	(1,050)
Net cash provided by (used in) financing activities	(19,374)	(10,674)	72,227
Net increase (decrease) in cash and restricted cash	(2,028)	(4,360)	3,815
Cash and restricted cash, beginning of period	5,002	9,362	5,547
Cash and restricted cash, end of period	2,974	5,002	9,362
Supplemental disclosures of cash flow information
Cash paid for interest	13,313	16,411	10,445
Cash paid (received) for income taxes, net of refunds	(1,090)	4,899	3,845
Supplemental disclosures of non-cash investing and financing activities
Acquisition of equipment and vehicles with long-term debt and capital leases	$ 1,169	8,251	1,804
T.A.C. Ceramic Tile Co.
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Change in fair value of earn-out liabilities		2,300
Cash flows used in investing activities
Acquisition of business, net of cash acquired			(40,189)
Supplemental disclosures of non-cash investing and financing activities
Acquisitions measurement period adjustments		498
Earn-out purchase price adjustment			2,265
Summit Stoneworks, LLC
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Change in fair value of earn-out liabilities		1,900
Cash flows used in investing activities
Acquisition of business, net of cash acquired			(16,000)
Supplemental disclosures of non-cash investing and financing activities
Earn-out purchase price adjustment			1,851
Tuscany Collection, LLC
Cash flows used in investing activities
Acquisition of business, net of cash acquired			(4,152)
NSI, LLC
Cash flows used in investing activities
Acquisition of business, net of cash acquired			(290)
Elegant Home Design, LLC
Cash flows used in investing activities
Acquisition of business, net of cash acquired		(1,000)	(11,492)
Supplemental disclosures of non-cash investing and financing activities
Acquisition of Elegant Home Design, LLC, indemnity holdback			1,000
Greencraft Holdings, LLC.
Cash flows used in investing activities
Acquisition of business, net of cash acquired		(3,000)
Supplemental disclosures of non-cash investing and financing activities
Acquisitions measurement period adjustments			$ 317
Intown Design Inc.
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Change in fair value of earn-out liabilities		2,000
Cash flows used in investing activities
Acquisition of business, net of cash acquired		(11,537)
Supplemental disclosures of non-cash investing and financing activities
Earn-out purchase price adjustment		$ 2,010

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Organization and Business Description

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Organization and Business Description

1. Organization and Business Description

Organization and Nature of Operations

These financial statements reflect the consolidated operations of Select Interior Concepts, Inc. (“SIC” or the “Company”).

SIC is a Delaware corporation that was restructured in November 2017 to be a holding company to consolidate diversified building products and services companies. Through its two primary operating subsidiaries and segments, Residential Design Services, LLC (f/k/a TCFI LARK LLC) (“RDS”) and Architectural Surfaces Group, LLC (f/k/a TCFI G&M LLC) (“ASG”), the Company imports and distributes natural and engineered stone slabs for kitchen and bathroom countertops, operates design centers that merchandise interior products, and provides installation services. RDS interior product offerings include flooring, cabinets, countertops, and wall tile. RDS operates throughout the United States, including in California, Nevada, Arizona, Texas, Virginia, Maryland, North Carolina, and Georgia. ASG has operations in the Northeast, Southeast, Southwest, Midwest, Mountain West, and West Coast regions of the United States.

The SIC platform originated in September 2014, when affiliates of Trive Capital Management LLC (“Trive Capital”) acquired RDS, which in turn acquired the assets of PT Tile Holdings, LP (“Pinnacle”) in February 2015, and 100% of the equity interests in Greencraft Holdings, LLC (“Greencraft”) in December 2017.  RDS then acquired the assets of Summit Stoneworks, LLC (“Summit”) in August 2018,  100% of the equity interests in T.A.C. Ceramic Tile Co. (which we refer to as “TAC”) in December 2018, and acquired the assets of Intown Design, Inc., Intown Granite of Charlotte, Inc., and Granitec, LLC, (collectively, “Intown”) in March 2019.

Affiliates of Trive Capital also formed a consolidation platform in the stone countertop market by establishing TCFI G&M LLC, a Delaware limited liability company formed on May 26, 2015. TCFI G&M LLC acquired 100% of the equity interests in Architectural Granite & Marble, LLC in June 2015, which in turn acquired the assets of Bermuda Import-Export, Inc. (“Modul”) in July 2016, 100% of the equity interests in Pental Granite and Marble, LLC (“Pental”) in February 2017, and the assets of Cosmic Stone & Tile Distributors, Inc. (“Cosmic”) in October 2017. On January 17, 2018, TCFI G&M LLC changed its name to Architectural Surfaces Group, LLC (a/k/a ASG).  ASG then acquired the assets of Elegant Home Design, LLC (Bedrock”) in January 2018, the assets of NSI, LLC (“NSI”) in March 2018, and the assets of The Tuscany Collection, LLC (“Tuscany”) in August 2018.

Reorganization

On November 22, 2017, SIC and the former equity holders of RDS and ASG completed a series of restructuring transactions (collectively, the “November 2017 Restructuring Transactions”) whereby (i) certain former equity holders of RDS and ASG (collectively referred to as the “Rollover Stockholders”) contributed a certain amount of equity interests in RDS and ASG to SIC in exchange for shares of Class B common stock, par value $0.01 per share, of SIC (“Class B Common Stock”) (such transaction referred to as the “Contribution and Exchange”), (ii) SIC used a certain amount of proceeds from the November 2017 Private Offering and Private Placement (described below) to purchase from certain former equity holders of RDS and ASG the remaining equity interests in each of RDS and ASG (that were not initially contributed to SIC as part of the Contribution and Exchange), and (iii) after the preceding transactions, RDS and ASG became wholly-owned subsidiaries of SIC. SIC was wholly owned by Trive Capital and was inactive until the November 2017 Restructuring Transactions. Prior to the November 2017 Restructuring Transactions, SIC, RDS, and ASG were all under the common control of Trive Capital.

1. Organization and Business Description (Continued)

Concurrent with the November 2017 Restructuring Transactions, SIC completed a private offering and private placement of 18,750,000 shares of its Class A common stock, par value $0.01 per share (“Class A Common Stock”), to new investors, at a public offering price of $12.00 per share for gross proceeds of approximately $225 million (prior to payment of discounts and fees to the initial purchaser and placement agent and offering expenses) (the “November 2017 Private Offering and Private Placement”). The net proceeds from the November 2017 Private Offering and Private Placement were primarily used by SIC to (i) repurchase 2,379,486 shares of Class B Common Stock from Trive Capital for approximately $26.6 million, (ii) purchase, from certain Rollover Stockholders, the remaining outstanding equity interests in each of RDS and ASG (that were not initially contributed to SIC as part of the Contribution and Exchange) for approximately $62.7 million, and (iii) repay outstanding indebtedness totaling $112.8 million to third-party lenders and pay $0.3 million of lending related fees. The remainder of the net proceeds was used by SIC for transaction expenses related to the November 2017 Private Offering and Private Placement, working capital and general corporate purposes.

In accordance with the terms of the November 2017 Private Offering and Private Placement, in December 2017, SIC completed an additional sale of 3,000,000 shares of Class A Common Stock to new investors at an offering price of $12.00 per share for total gross proceeds of approximately $36.0 million (prior to payment of discounts and fees to the initial purchaser and placement agent and offering expenses). These net proceeds were used by SIC to repurchase an additional 3,000,000 shares of Class B Common Stock from certain Rollover Stockholders.

Transition to Public Company

On August 13, 2018, the SEC declared effective the Company’s Registration Statement on Form S-1, which contained a prospectus pursuant to which certain selling stockholders of the Company may offer and sell shares of Class A Common Stock.  On August 16, 2018, the Company’s Class A Common Stock commenced trading on the Nasdaq Capital Market under the ticker symbol “SIC.”

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include the accounts of SIC, its wholly owned subsidiaries RDS and ASG, and their wholly owned subsidiaries, and are presented using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All significant intercompany accounts and transactions have been eliminated in combination. References to the “ASC” hereafter refer to the Accounting Standards Codification established by the Financial Accounting Standards Board (“FASB”) as the source of authoritative U.S. GAAP.

2. Summary of Significant Accounting Policies (Continued)

Earnings (Loss) per Common Share

For the years ended December 31, 2020, 2019 and 2018, basic earnings per share for common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding.  For the years ended December 31, 2020, 2019 and 2018, common stock consists of only Class A Common Stock, since in August 2018, each then remaining share of Class B Common Stock was automatically converted into one share of Class A Common Stock, resulting in no shares of Class B Common Stock left outstanding.  Diluted earnings per share for common stock is computed by dividing net income (loss) plus the dilutive effect of restricted stock-based awards using the treasury stock method.

The following table sets forth the computation of basic and diluted loss per share for the years ended December 31, 2020, 2019 and 2018:

(in thousands, except share and per share data)	Year Ended December 31, 2020			Year Ended December 31, 2019		Year Ended December 31, 2018
Net income (loss)	$	(9,853	)	$	6,984	$	(2,475	)
Weighted average shares of common stock outstanding:
Basic common stock		25,337,249			25,296,955		25,634,342
Diluted common stock		25,337,249			25,431,677		25,634,342
Earnings (loss) per share of common stock:
Basic common stock	$	(0.39	)	$	0.28	$	(0.10	)
Diluted common stock	$	(0.39	)	$	0.27	$	(0.10	)

All restricted stock awards outstanding totaling 2,797,419 at December 31, 2020, and 825,976 at December 31, 2018, were excluded from the computation of diluted earnings per share in 2020 and 2018 because the Company reported a net loss and the effect of inclusion would have been antidilutive.

Use of Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingencies at the date of the consolidated financial statements and the reported net revenue and expenses. Actual results may vary materially from the estimates that were used. The Company’s significant accounting estimates include the determination of allowances for doubtful accounts, valuation of inventory, the lives and methods for recording depreciation and amortization on property and equipment, the fair value of reporting units and indefinite life intangible assets, deferred income taxes, revenue recognition, warranties, returns and the purchase price allocations used in the Company’s acquisitions.

2. Summary of Significant Accounting Policies (Continued)

Restricted Cash

No amount of restricted cash is held as of December 31, 2020 or 2019.

Fair Value Measurement

ASC 820-10 requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.

The three levels of the fair value hierarchy are as follows:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2—Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3—Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The level of the fair value hierarchy in which the fair value measurement falls is determined by the lowest level input that is significant to the fair value measurement.

The Company records contingent consideration, or earn-outs, associated with certain acquisitions.  These earn-outs are adjusted to fair value at each reporting period and any change to fair value based on a change in certain factors, such as the risk adjusted rate or estimates for the outcome of specified milestone goals, will result in an adjustment to the fair value of the liability. These adjustments are recorded to income/expense as a measurement period adjustment.  

The earn-out liability associated with the acquisition of Summit Stoneworks, LLC (“Summit”) in August 2018 was reduced to zero as of December 31, 2019 and was no longer a Level 3 fair value estimate as the underlying inputs were known and the earn-out target criteria were not met as of December 31, 2019.  Adjustments reducing the fair value of the earn-out liability by $1.9 million were recorded within other (income) expense for the year ended December 31, 2019.

The earn-out liability associated with the acquisition of T.A.C. Ceramic Tile Co, LLC (“TAC”) in December 2018 was reduced to zero as of December 31, 2019 and was no longer a Level 3 fair value estimate as the underlying inputs were known and the earn-out target criteria were not met as of December 31, 2019.  Adjustments reducing the fair value of the earn-out liability by $2.3 million were recorded within other (income) expense for the year ended December 31, 2019.

The earn-out liability associated with the acquisition of Intown Design, Inc., Intown Granite of Charlotte, Inc., and Granitec, LLC, (collectively, “Intown”) in March 2019 had a recorded fair value of zero at December 31, 2019 and is no longer a Level 3 fair value estimate as of December 31, 2020, as the underlying inputs are known and the earn-out target criteria were not met as of December 31, 2020. An adjustment decreasing the fair value of the earn-out liability by $2.0 million was recorded within other (income) expense for the year ended December 31, 2019.

2. Summary of Significant Accounting Policies (Continued)

At December 31, 2020 and December 31, 2019, the carrying value of the Company’s cash, accounts receivable, accounts payable, and short-term obligations approximate their respective fair values because of the short maturities of these instruments. The recorded values of the line of credit, term loans, and notes payable approximate their fair values, as interest rates approximate market rates. The Company recognizes transfers between levels at the end of the reporting period as if the transfers occurred on the last day of the reporting period. There were no transfers during 2020 or 2019, other than the Intown earn-out liability out of Level 3 during 2020 and the Summit and TAC earn-out liabilities out of Level 3 during 2019 due to the availability of observable and known inputs to calculate the fair value of the liabilities as of December 31, 2020 and 2019, respectively.  

Accounts Receivable

Accounts receivable are recorded at net realizable value. The Company continually assesses the collectability of outstanding customer invoices; and if deemed necessary, maintains an allowance for estimated losses resulting from the non-collection of customer receivables. In estimating this allowance, the Company considers factors such as: historical collection experience, a customer’s current creditworthiness, customer concentrations, personal guarantees, credit insurance, age of the receivable balance both individually and in the aggregate and general economic conditions that may affect a customer’s ability to pay. The Company also has the ability to place liens against a significant amount of RDS customers in order to secure receivables.  Actual customer collections could differ from the Company’s estimates. At December 31, 2020 and 2019, the Company’s allowance for doubtful accounts was $0.5 million and $0.8 million, respectively.

Inventories

Inventories consist of stone slabs, tile and sinks, and include the costs to acquire the inventories and transport the respective inventories to its location. Inventory also includes flooring, cabinets, doors and trim, glass, and countertops, which have not yet been installed, as well as labor and related costs for installations in process. Inventory is valued at the lower of cost (using the specific identification and first-in, first-out methods) or net realizable value.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. The Company capitalizes internal-use software as property and equipment under ASC 350-40, Internal-Use Software.  Depreciation and amortization are provided for on a straight-line basis over the estimated useful lives of the related assets as follows:

	Range of estimated useful lives
Machinery and equipment	5 - 7 years
Vehicles	3 - 7 years
Furniture and fixtures	3 - 7 years
Computer equipment	3 - 5 years
Leasehold improvements	Shorter of 15 years or the remaining lease term

2. Summary of Significant Accounting Policies (Continued)

Intangible Assets

Intangible assets consist of customer relationships, trade names and non-compete agreements. The Company considers all its intangible assets to have definite lives and are being amortized on the straight-line method over the estimated useful lives of the respective assets or on an accelerated basis based on the expected cash flows generated by the existing customers as follows:

	Range of estimated useful lives	Weighted average useful life
Customer relationships	2 years – 15 years	10 years
Trade names	3 years – 11 years	8 years
Non-compete agreements	Life of agreement	4 years

Business Combinations

The Company records business combinations using the acquisition method of accounting. Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values. The excess of the purchase price over the estimated fair value is recorded as goodwill. Changes in the estimated fair values of net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will adjust the amount of the purchase price allocable to goodwill. Measurement period adjustments are reflected in the period in which they occur.

Impairment of Long-Lived Assets

The Company reviews the recoverability of its long-lived assets, such as property and equipment and intangible assets, whenever events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable, or at least annually. The assessment for possible impairment is based on the Company’s ability to recover the carrying value of the asset or asset group from the expected future undiscounted cash flows of the related operations. If the aggregate of these cash flows is less than the carrying value of such assets, an impairment loss is recognized for the difference between the estimated fair value and the carrying value. The measurement of impairment requires management to estimate future cash flows and the fair value of long-lived assets. There were no impairment losses on long-lived assets for the years ended December 31, 2020 and 2019.

Goodwill

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. The Company accounts for goodwill in accordance with FASB ASC topic 350, Intangibles-Goodwill and Other Intangible Assets, which among other things, addresses financial accounting and reporting requirements for acquired goodwill and other intangible assets having indefinite useful lives. ASC topic 350 requires goodwill to be carried at cost, prohibits the amortization of goodwill and requires the Company to test goodwill for impairment at least annually. The Company tests for impairment of goodwill annually during the fourth quarter or more frequently if events or changes in circumstances indicate that the goodwill may be impaired. Events or changes in circumstances which could trigger an impairment review include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations. Impairment indicators existed as of March 31, 2020 surrounding the decrease in the Company’s stock price, significant adverse changes in the business climate and other macroeconomic conditions resulting from the COVID-19 pandemic. The Company performed a goodwill impairment test as of March 31, 2020. The Company identified RDS and ASG as reporting units and determined each reporting unit’s fair value significantly exceeded such reporting unit’s carrying value. As part of its annual impairment testing, the Company identified RDS and ASG as reporting units and determined each reporting unit’s fair value exceeded each reporting unit’s carrying value. There were no impairment charges related to goodwill for the years ended December 31, 2020 and 2019. (See Note 8).

2. Summary of Significant Accounting Policies (Continued)

Debt Issuance Costs

Debt issuance costs related to a recognized debt liability are deferred and amortized over the related term of the debt as non-cash interest expense and are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the related debt liability. Debt issuance costs are amortized using the effective interest method or on a straight-line basis when it approximates the effective interest method.

Sales Tax

The Company’s policy is to present taxes collected from customers and remitted to governmental authorities on a net basis. The Company records the amounts collected as a current liability and relieves such liability upon remittance to the taxing authority without impacting revenue or expenses.

Warranty Obligations

The Company offers supplier-specific product warranties to its customers. In estimating future warranty obligations, the Company considers various relevant factors, including its warranty policies and practices and those of its suppliers, the historical frequency of claims, the cost to replace products under warranty, and the amounts expected to be reimbursed by suppliers. On certain products, customer warranty claims are covered directly by the manufacturer of the product. Management estimates its warranty obligation at December 31, 2020 and 2019, to be minimal, and therefore, the Company has not recorded a significant provision for accrued warranty costs.

Operating Leases

The Company accounts for rent expense for its operating leases on a straight-line basis in accordance with authoritative guidance on accounting for leases. The Company leases its corporate, administrative, retail and manufacturing facilities over terms expiring between 2021 and 2029. The Company also leases certain office and warehouse equipment over terms expiring between 2021 and 2025. The term of the lease is considered its initial obligation period, which does not include option periods. The leases may have renewal clauses exercisable at the option of the Company and contain rent holidays and/or rent escalation clauses. The Company includes scheduled rent holidays and rent escalation clauses for the purposes of recognizing straight-line rent over the lease term.

Capital Leases

The Company finances the acquisition of certain vehicles and equipment with capital leases. The acquisition costs are recognized as property, plant and equipment (“PP&E”) on the consolidated balance sheets at fair value at the inception of the lease, or, if lower, at the present value of the minimum lease payments as determined at the inception of the lease. The acquisition costs are amortized over the useful life on the same basis as owned vehicles or, where shorter, the term of the capital lease. Amortization expense is recorded as accumulated amortization on the consolidated balance sheets. The capital lease liability owed to the lessor is included in the consolidated balance sheets as a capital lease obligation. Lease payments are apportioned between interest expense and a reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

Revenue Recognition

The Company’s revenue derived from the sale of imported granite, marble, and related items, primarily in our ASG operating segment, is recognized at a point in time when control over a product is transferred to a customer. This transfer occurs primarily when goods are picked up by a customer at the branch or when goods are delivered to a customer location.

The Company’s contracts with its home builder customers within our RDS operating segment are usually short-term in nature and will generally range in length from several days to several weeks.  The Company’s contracts related to multi-family and commercial projects are generally long-term in nature. We recognize revenue from both short-term and long-term contracts for each distinct performance obligation identified over time on a percentage-of-completion basis of accounting, utilizing the output method as a measure of progress, as we believe this represents the best measure of when goods and services are transferred to the customer.  

2. Summary of Significant Accounting Policies (Continued)

Revenue is measured at the transaction price, which is based on the amount of consideration the Company expects to receive in exchange for transferring the promised goods or services to the customer. The transaction price will include estimates of variable consideration, such as any returns and sales incentives. Applicable customer sales taxes, when remitted, are recorded as a liability and excluded from revenue on a net basis.  

In the fourth quarter of 2019, the Company adopted ASU 2014-09, the new accounting standard under ASC Topic 606, using the modified retrospective method as of January 1, 2019.  (See Note 3)

Cost of Revenue

RDS’ cost of revenue is comprised of the costs of materials and labor to purchase and install products for the Company’s customers.

ASG’s cost of revenue primarily consists of purchased materials, sourcing fees for inventory procurement, and freight costs.

RDS and ASG also include payroll taxes and benefits, workers’ compensation insurance, vehicle-related expenses and overhead costs, including rent, depreciation, utilities, property taxes, repairs and maintenance costs in the cost of revenue.

The Company’s cost of revenue is reduced by rebates provided by suppliers in the period the rebate is earned.

Shipping and Handling Charges

Fees charged to customers for shipping and handling of product are included in revenue. The costs for shipping and handling of product are recorded as a component of cost of revenue.  Additionally, we consider shipping and handling costs charged to a customer as a fulfillment cost rather than a promised service and expense as incurred.

Advertising

The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2020, 2019, and 2018 totaled $0.6 million, $1.2 million and $2.5 million, respectively.

Equity-based compensation

The Company accounts for equity-based awards by measuring the awards at the date of grant and recognizing the grant-date fair value as an expense using either straight-line or accelerated attribution, depending on the specific terms of the award agreements over the requisite service or performance period, which is usually equivalent to the vesting period. Forfeitures are recognized as they occur. (See Note 12)

Income Taxes

The provision for income taxes is accounted for under the asset and liability method prescribed by ASC 740 (Topic 740, Income Taxes). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the tax rate changes are enacted.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

2. Summary of Significant Accounting Policies (Continued)

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was adopted into law. The Tax Act makes broad and complex changes to the Internal Revenue Code of 1986, including, but not limited to, (i) reducing the U.S. federal corporate tax rate from 35% to 21%; (ii) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits are realized; (iii) creating a new limitation on deductible interest expense; and (iv) changing rules related to uses and limitation of net operating loss carryforwards created in tax years beginning after December 31, 2017.  

The Company’s policy is to recognize interest and/or penalties related to all tax positions as income tax expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. The Company has recognized less than ($0.1) million in combined interest and penalties related to uncertain tax positions for the year ended December 31, 2020. The Company recognized $0.4 million in combined interest and penalties related to uncertain tax positions for the year ended December 31, 2019.

Segment Reporting

In accordance with ASC 280-10-50-1, an operating segment is a component of an entity that has all the following characteristics:

a. It engages in business activities from which it may earn revenues and incur expenses.

b. Its discrete financial information is available.

c. Its operating results are regularly reviewed by the public entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.

The Company has identified two operating segments that meet all three of the criteria, RDS and ASG. Each of these operating segments provides products and services that generate revenue and incur expenses as they engage in business activities and maintains discrete financial information. Additionally, the Company’s chief operating decision maker, the Chief Executive Officer, reviews financial performance, approves budgets and allocates resources at the RDS and ASG operating segment level.

Recently Issued and Adopted Accounting Pronouncements

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. The Company has elected to use the extended transition period for complying with new or revised accounting standards under Section 107 of the JOBS Act. This election allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU establishes a comprehensive revenue recognition standard for virtually all industries in U.S. GAAP, including those that previously followed industry-specific guidance, such as the real estate, construction, and software industries. The ASU core principal is to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. During 2014-2016, the FASB issued various amendments to this topic and the amendments clarified certain positions and extended the implementation date until annual periods beginning after December 15, 2018. During the quarter ended December 31, 2019, the Company adopted this guidance on a modified retrospective basis. For contracts which were not completed as of January 1, 2019, revenue related to our short-term contracts with homebuilder customers, primarily in our RDS operating segment, are now recognized over time based on the extent of progress towards completion of the individual performance obligations, instead of under the completed contract method, because of continuous transfer of control to the customer.  There was no material impact on our revenue recognition for our multi-family contracts that are currently recognized under the existing percentage-of-completion method of accounting, due to the comparable methodology of revenue recognition under the updated guidance. There was also no material impact from adoption related to our sales of imported granite, marble, and related items of our ASG operating segment, as the Company has concluded that it has substantially similar performance obligations and recognition timing under the amended guidance.  We recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings on January 1, 2019 of approximately $1.2 million. (See Note 3).  

2. Summary of Significant Accounting Policies (Continued)

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework (ASU 2018-13). The updated guidance improves the disclosure requirements for fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  The adoption of ASU 2018-13 did not have a material impact on our consolidated financial statements.

Accounting Pronouncements Issued but Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous standards. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of asset not to recognize lease assets and lease liabilities. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, and in June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, to defer the effective date of ASU No.2016-02 for certain entities. For the Company, the new standard is effective for annual periods beginning January 1, 2022.  The Company is currently evaluating the impact of the provisions of ASU 2016-02 on the presentation of its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” (ASU 2016-03) which amends ASC 326 “Financial Instruments—Credit Losses.”  Subsequent to the issuance of ASU 2016-13, ASC 326 was amended by various updates that amend and clarify the impact and implementation of the aforementioned update.  The new guidance introduces the current expected credit loss (CECL) model, which will require an entity to record an allowance for credit losses for certain financial instruments and financial assets, including trade receivables, based on expected losses rather than incurred losses.  Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument.  In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates which delays the effective date of ASU 2016-13 until fiscal years beginning after December 15, 2022.  The Company is currently evaluating the impact of the provisions of ASU 2016-13 on the presentation of its consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the goodwill impairment test by eliminating the step 2 requirement to determine the fair value of its assets and liabilities at the impairment testing date. ASU 2017-04 is effective for annual periods beginning after December 15, 2021. The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.

2. Summary of Significant Accounting Policies (Continued)

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) No. 2018-15 Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15). ASU 2018-15 provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post implementation stages are expensed as the activities are performed. ASU 2018-15 is effective for fiscal years beginning after December 15, 2020. Early adoption of the amendments in ASU 2018-15 is permitted, including adoption in any interim period, for all entities. The amendments in ASU 2018-15 should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently assessing the effect this guidance may have on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” which amends ASC 740 “Income Taxes” (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021.  The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted.  The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.

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Revenue

12 Months Ended

Dec. 31, 2020

Revenue From Contract With Customer [Abstract]

Revenue

3. Revenue

In the fourth quarter of 2019, the Company adopted ASU 2014-09, the new accounting standard under ASC Topic 606, using the modified retrospective method as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the previous standard, Topic 605.

The Company recorded a $1.2 million cumulative effect adjustment as an increase to opening retained earnings due to the impact of adopting Topic 606, with the impact primarily related to the change in accounting for certain of the RDS short-term home builder contracts that were previously accounted for on a completed contract basis, whereas, under ASC 606, the Company now recognizes revenue associated with these contracts for the individual performance obligations over time as the service is performed and the transfer of control occurs. There was no impact upon adoption on long-term multi-family or commercial contracts that were already recognized under the percentage-of-completion method of accounting under Topic 605.  Additionally, there was no material impact related to the sales of imported granite, marble, and related items of the ASG operating segment, due to similar performance obligations and recognition timing under the amended guidance.

3. Revenue (Continued)

Impact of Topic 606 Revenue Recognition Standard on 2019 Financial Statement Line Items

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on the Company’s Consolidated Statement of Operations and Consolidated Balance Sheet was as follows (in thousands):

	For the year ended December 31, 2019
Consolidated Statement of Operations	As Reported		Balances without Adoption		Impact of Adoption
Revenue, net	$	610,373	$	609,899	$	474
Cost of revenue		446,299		445,890		409
Selling, general, and administrative expenses		144,816		144,832		(16	)
Provision for income taxes		1,521		1,500		21
Net income		6,984		6,924		60

Contract Balances

The timing of revenue recognition, billings, and cash collections results in billed accounts receivable, revenue in excess of billings, customer deposits, and billings in excess of revenue recognized in the Company’s Consolidated Balance Sheets.

Contract assets

The Company’s contract assets consist of unbilled amounts typically resulting from sales under contracts when the revenue recognized exceeds the amount billed to the customer, generally in the RDS operating segment revenue derived from homebuilders and commercial and multifamily projects. Contract assets are recorded in other current assets in the Company’s Consolidated Balance Sheets.  The Company had contract assets of $12.8 million and $5.7 million as of December 31, 2020 and 2019, respectively.  The Company’s contract assets generally become unconditional and are reclassified to receivables in the quarter subsequent to each balance sheet date.

Contract liabilities

The Company records contract liabilities when it receives payment prior to fulfilling a performance obligation or has billings in excess of revenue recognized. Contract liabilities related to revenue are recorded in customer deposits in the Company’s Consolidated Balance Sheets. The Company had total contract liabilities of $8.1 million and $8.6 million as of December 31, 2020 and 2019, respectively.  Contract liabilities are normally recognized to net sales within three to six months subsequent to each balance sheet date.

3. Revenue (Continued)

Remaining Performance Obligations

Remaining performance obligations related to ASC 606 represent the aggregate transaction price allocated to performance obligations with an original contract term greater than one year which are fully or partially unsatisfied at the end of the period, and relate primarily to multi-family or commercial revenue.  For the years ended December 31, 2020 and 2019, multi-family and commercial projects accounted for approximately 4.5% and 2.8% of the Company’s combined net revenue, respectively.  As of December 31, 2020 and 2019, the aggregate amount of the transaction price allocated to remaining uncompleted contracts was $3.2 million and $4.5 million, respectively. The Company expects to satisfy remaining performance obligations and recognize revenue on substantially all of these uncompleted contracts over the next 12 months.  The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Revenue from contracts with customers is disaggregated differently for each reporting segment as this is how management evaluates the nature, amount, timing and uncertainty of revenue and cash flows as affected by economic factors.  RDS operating segment net revenue is disaggregated by geographic area within the United States.  ASG operating segment net revenue is disaggregated by product category.

The following table presents net revenue for the RDS operating segment disaggregated by geographical area for the years ended December 31, 2020 and 2019:

RDS
(in thousands)	2020		%			2019		%
East	$	77,889		24	%	$	93,274		25	%
Central		20,500		6	%		17,100		5	%
West		234,100		70	%		258,200		70	%
	$	332,489		100	%	$	368,574		100	%

The East consists of Virginia, Maryland, North Carolina and Georgia; the Central consists of Texas, and the West consists of California, Nevada and Arizona.

The following table presents net revenue for the ASG operating segment disaggregated by product category for the years ended December 31, 2020 and 2019:

ASG
(in thousands)	2020		%			2019		%
Quartz	$	134,797		60	%	$	138,500		57	%
Stone		67,225		30	%		75,511		31	%
Tile		13,936		6	%		20,211		8	%
Other		7,609		4	%		10,567		4	%
	$	223,567		100	%	$	244,789		100	%

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Concentrations, Risks and Uncertainties

12 Months Ended

Dec. 31, 2020

Risks And Uncertainties [Abstract]

Concentrations, Risks and Uncertainties

4. Concentrations, Risks and Uncertainties

The Company maintains cash balances primarily at one commercial bank. The accounts are insured by the Federal Deposit Insurance Corporation up to $0.25 million. The amounts held at this financial institution generally exceed the federally insured limit. Management believes that this financial institution is financially sound and the risk of loss is minimal.

Credit is extended for some customers and is based on financial condition, and generally, collateral is not required. Credit losses are provided for in the consolidated financial statements and consistently have been within management’s expectations.

For the year ended December 31, 2018, the Company recognized revenue from one customer which accounted for 11.4% of total net revenue. For the years ended December 31, 2020 and 2019, there were no customers which accounted for 10.0% or more of the Company’s total net revenue, receptively. There were no customers which accounted for 10.0% or more of total accounts receivable as of December 31, 2020 and 2019.

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Acquisitions

12 Months Ended

Dec. 31, 2020

Business Combinations [Abstract]

Acquisitions

5. Acquisitions

Intown Acquisition

On March 1, 2019, RDS acquired the assets of Intown Design, Inc., Intown Granite of Charlotte, Inc., and Granitec, LLC, (collectively, “Intown”), an installer of residential and light commercial countertops and cabinets, for total cash consideration of $10.7 million at closing and an additional $0.8 million of purchase price adjustments that were funded in June 2019.  The purchase agreement also provided for potential earn-out consideration to the former shareholders of Intown in connection with the achievement of certain 2019 and 2020 financial milestones. The final earn-out payment had no maximum limit, but if certain targets were not met, there would be no earn-out payment. The contingent earn-out consideration had an estimated purchase price fair value of $2.0 million as of March 31, 2019.  As of December 31, 2019, the fair value of the earn-out was reduced to zero.  This adjustment of $2.0 million was recorded within other (income) expense as of December 31, 2019.

The upfront cash paid for the Intown acquisition was financed with additional borrowings from the Company’s third-party financing agreement described in Note 10. The Intown acquisition was accounted for under the acquisition method of accounting, and the assets acquired and liabilities assumed, including identifiable intangible assets, were recorded based on their respective fair values as of the acquisition date. The total purchase price consisted of the following:

(in thousands)	Amount
Cash consideration	$	11,537
Fair value of earn-out		2,010
	$	13,547

RDS acquired Intown to further diversify RDS’ geographic mix and channel strength. The goodwill recorded reflects the strategic value of the acquisition beyond the net value of its assets acquired less liabilities assumed. Goodwill of $0.1 million is deductible for tax purposes.

The Company incurred approximately $0.4 million in direct acquisition costs, all of which were expensed as incurred, and are included in general and administrative expenses in the consolidated statements of operations. The Company has performed a valuation of the acquired assets and assumed liabilities of Intown. Using the total consideration for the acquisition, the Company has estimated the allocations to such assets and liabilities. The following table summarizes the allocation of the purchase price as of the transaction’s closing date.

(in thousands)	Amount
Accounts receivable	$	1,392
Inventory		1,155
Property and equipment		1,092
Goodwill		4,698
Other intangible assets		5,310
Total assets acquired	$	13,647
Total liabilities		100
Total consideration	$	13,547

An adjustment of approximately $0.8 million was recorded in the fourth quarter of 2019 to reduce the fair value of inventory and to increase the value of goodwill.  From the date of acquisition to December 31, 2019, Intown generated net revenue of $17.8 million and net income of $2.2 million, which are included in the Company’s Condensed consolidated statements of operations. For the year ended December 31, 2020, Intown generated net revenue of $20.2 million and net income of $0.2 million.

Pro Forma Results

The following unaudited pro forma information for the year ended December 31, 2019 and 2018 has been prepared to give effect to the acquisition of Intown as if the acquisition had occurred on January 1, 2018. The pro forma information takes into account the preliminary purchase price allocation. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the Intown acquisition occurred on such date, nor does it purport to predict the results of operations for future periods.

5. Acquisitions (Continued)

	Year Ended December 31,
	2019		2018
(in thousands)	(unaudited)
Pro Forma:
Total revenue, net	$	613,225	$	510,465
Net income (loss)	$	6,787	$	(1,736	)

Our pro forma assumptions are as follows:

• Revenues and costs of sales were based on actual results for the years ended December 31, 2019 and 2018.

• General and administrative expenses were based on actual results adjusted by $0.1 million and $0.7 million for the years ended December 31, 2019 and 2018, respectively, for the impact of the amortization expense of the intangible assets acquired with the acquisition.

• Actual interest expense was adjusted by $0.2 million and $1.1 million for the years ended December 31, 2019 and 2018, respectively, for the imputed interest on the acquired debt issued to fund the acquisition.

• Income taxes were adjusted to impute the Company’s corporate rate during the period on the pro forma income before taxes.

Bedrock Acquisition

On January 31, 2018, ASG acquired the assets of a slab and tile distributor, Elegant Home Design, LLC (“Bedrock”), for total consideration of $12.5 million with cash consideration of $11.5 million and $1.0 million accrued liability recorded as security for and source of payment of sellers’ obligations that occur within one year subsequent to the acquisition. The outstanding balance remaining of $1.0 million was paid in cash to the sellers in 2019. In addition to the consideration paid for Bedrock, the Company agreed to pay up to an additional $3.0 million to be allocated among three individuals, subject to Bedrock meeting certain financial conditions defined in the purchase agreement and such individuals maintaining continuous employment with the Company through January 31, 2019.  These financial conditions were not met and accordingly, no payout was made to these individuals.  The Company did not record any compensation expense associated with this provision in 2019 or 2018.

The Bedrock acquisition was financed with $6.25 million of borrowing from the Company’s term loan described in Note 10 and the remainder from ASG’s line of credit described in Note 9. The Bedrock acquisition was accounted for under the acquisition method of accounting, and the assets acquired and liabilities assumed, including identifiable intangible assets, were recorded based on their respective estimated fair values as of the acquisition date.

ASG acquired Bedrock to further expand its distribution presence in the Midwest, and to gain access to new geographies, supply chains, products, and distribution rights. The goodwill recorded reflects the strategic value of the acquisition beyond the net value of its assets acquired less liability assumed. The goodwill is deductible for tax purposes.

The Company incurred approximately $0.1 million in direct acquisition costs, all of which were expensed as incurred, and are included in general and administrative expenses in the consolidated statements of operations. The Company has performed a valuation of the acquired assets and assumed liabilities of Bedrock. The following table summarizes the allocation of the purchase price as of the transaction’s closing date:

5. Acquisitions (Continued)

(in thousands)	Amount
Accounts receivable	$	2,543
Inventory		13,425
Other current assets		163
Property and equipment		374
Goodwill		381
Other intangible assets		1,505
Other assets		60
Total assets acquired	$	18,451
Total liabilities		5,959
Total consideration	$	12,492

From the date of the Bedrock acquisition to December 31, 2018, Bedrock generated net revenue of $27.7 million and net income of $1.9 million, which are included in the Company’s consolidated statements of operations.

Pro Forma Results

The following unaudited pro forma information for the year ended December 31, 2018 has been prepared to give effect to the acquisition of Bedrock as if the acquisition had occurred on January 1, 2018. The pro forma information takes into account the purchase price allocation. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the Bedrock acquisition occurred on such date, nor does it purport to predict the results of operations for future periods.

	Year Ended December 31,
	2018
(in thousands)	(unaudited)
Pro Forma:
Total revenue, net	$	491,984
Net (loss)	$	(2,445	)

Pro forma assumptions are as follows:

• Revenues and costs of sales were based on actual results for the years ended December 31, 2018.

• Selling, general and administrative expenses were based on actual results adjusted by $0.02 million for the year ended December 31, 2018, for the impact of the amortization expense of the intangible assets acquired with the acquisition.

• Actual interest expense was adjusted by $0.05 million for the year ended December 31, 2018, for the imputed interest on the acquired debt issued to fund the acquisition.

• Income taxes were adjusted to impute the Company’s corporate effective rate during the period on the pro forma income before taxes.

NSI Acquisition

On March 19, 2018, ASG acquired the assets of NSI, LLC, a Maryland limited liability company (“NSI”), for approximately $0.3 million in cash. The NSI acquisition and related transaction costs were financed by ASG’s line of credit described in Note 9. The NSI acquisition was accounted for under the acquisition method of accounting, and the assets acquired and liabilities assumed, including identifiable intangible assets, were recorded based on their respective estimated fair values as of the acquisition date.

5. Acquisitions (Continued)

The Company performed a valuation of the acquired assets and assumed liabilities of NSI.  The goodwill is deductible for tax purposes. The following table summarizes the estimated allocation of the preliminary purchase price as of the transaction’s closing date:

(in thousands)	Amount
Accounts receivable	$	251
Inventory		689
Goodwill		390
Total assets acquired	$	1,330
Total liabilities		1,040
Total consideration	$	290

From the date of the NSI acquisition to December 31, 2018, net revenue and net income generated by NSI was not significant. Pro forma net revenue and net income for the year ended December 31, 2018, was not significant. There were no significant direct acquisition costs associated with the NSI acquisition.

Tuscany Acquisition

On August 22, 2018, ASG acquired the assets of The Tuscany Collection, LLC (“Tuscany”), a distributor of natural stone, quartz and tile in Las Vegas, Nevada, for approximately $4.2 million in cash. The Tuscany acquisition and related transaction costs were financed by the Company’s line of credit described in Note 9. The Tuscany acquisition was accounted for under the acquisition method of accounting and the assets acquired and liabilities assumed, including identifiable intangible assets, were recorded based on their respective estimated fair values as of the acquisition date.

The Company incurred approximately $0.1 million in direct acquisition costs, all of which were expensed as incurred, and are included in general and administrative expenses in the consolidated statements of operations. The Company has performed a valuation of the acquired assets and assumed liabilities of Tuscany. The following table summarizes the estimated allocation of the purchase price as of the transaction’s closing date:

(in thousands)	Amount
Accounts receivable	$	167
Inventory		2,258
Goodwill		1,081
Other intangible assets		2,685
Other current assets		161
Total assets acquired	$	6,352
Total liabilities		2,200
Total consideration	$	4,152

Total goodwill deductible for tax purposes is $1.1 million.  From the date of the Tuscany acquisition to December 31, 2018, net revenue and net income generated by Tuscany was not significant. Pro forma net revenue and net income for the period ended December 31, 2018, was not significant.

Summit Acquisition

On August 31, 2018, RDS acquired the assets of Summit Stoneworks, LLC (“Summit”), which is located in Austin, Texas, and is engaged in builder design services and the fabrication and installation of stone products for commercial and residential applications, for $16 million in cash. The agreement also provides for potential earn-out consideration of up to $3.5 million to the former shareholders of Summit for the achievement of certain 2018 and 2019 financial milestones. The contingent earn-out consideration had an estimated fair value of $1.9 million at the date of acquisition and at December 31, 2018, which was subsequently reduced to zero during 2019. During the year ended December 31, 2019, no payments were made on the earn-out as the financial milestones were not met. An adjustment of $1.9 million was recorded within other (income) expense as of December 31, 2019.  The Summit acquisition was financed from the Company’s term loan described in Note 10. The Summit acquisition was accounted for under the acquisition method of accounting and the assets acquired and liabilities assumed, including identifiable intangible assets, were recorded based on their respective fair values as of the acquisition date.

5. Acquisitions (Continued)

The total purchase price consisted of the following:

(in thousands)	Amount
Cash consideration	$	16,000
Fair value of earn-out		1,851
	$	17,851

The Company incurred approximately $0.3 million in direct acquisition costs, all of which were expensed as incurred, and are included in general and administrative expenses in the consolidated statements of operations.  The Company performed a valuation of the acquired assets and assumed liabilities of Summit.

The acquisition expands the scale of the RDS segment into Austin and San Antonio, Texas markets.  The goodwill recorded reflects the strategic value of the acquisition beyond the net value of its assets acquired less liability assumed.

The following table summarizes the allocation of the purchase price as of the transaction’s closing date:

(in thousands)	Amount
Accounts receivable	$	1,249
Inventory		1,059
Property and equipment		1,042
Goodwill		8,304
Other intangible assets		8,280
Other assets		14
Total assets acquired	$	19,948
Total liabilities		2,097
Total consideration	$	17,851

Total goodwill deductible for tax purposes is $6.4 million.  From the date of the Summit acquisition to December 31, 2018, Summit generated net revenue of $5.8 million and net income of $0.4 million, which are included in the Company’s consolidated statements of operations.

Pro Forma Results

The following unaudited pro forma information for the year ended December 31, 2018 has been prepared to give effect to the acquisition of Summit as if the acquisition had occurred on January 1, 2018. The pro forma information takes into account the purchase price allocation. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the Summit acquisition occurred on such date, nor does it purport to predict the results of operations for future periods.

	Year Ended December 31,
	2018
(in thousands)	(unaudited)
Pro Forma:
Total revenue, net	$	500,785
Net (loss)	$	(3,954	)

5. Acquisitions (Continued)

Pro forma assumptions are as follows:

• Revenues and costs of sales were based on actual results for the year ended December 31, 2018.

• Selling, general and administrative expenses were based on actual results adjusted by $0.8 million for the year ended December 31, 2018, for the impact of the amortization expense of the intangible assets acquired with the acquisition.

• Actual interest expense was adjusted by $0.6 million for the year ended December 31, 2018, for the imputed interest on the acquired debt issued to fund the acquisition.

• Income taxes were adjusted to impute the Company’s corporate effective rate during the period on the pro forma income before taxes.

TAC Acquisition

On December 31, 2018, RDS purchased 100% of the issued and outstanding equity interests of T.A.C. Ceramic Tile Co. (“TAC”), which is located in Manassas, Virginia, and specializes in design center selections and installation of all types of interior flooring surfaces, including tile, hardwood and carpet, for cash consideration of $41.2 million.

The agreement also provided for potential earn-out consideration to the former shareholders of TAC for the achievement of certain 2019 financial milestones. The contingent earn-out consideration had an estimated fair value of $2.3 million at the date of acquisition which was reduced to zero as of December 31, 2019. During the year ended December 31, 2019, no payments were made on the earn-out as the financial milestones were not met.  This adjustment of $2.3 million was recorded within other (income) expense for the year ended December 31, 2019.  The TAC acquisition was financed from the Company’s term loan described in Note 10. The TAC acquisition was accounted for under the acquisition method of accounting and the assets acquired and liabilities assumed, including identifiable intangible assets, were recorded based on their respective fair values as of the acquisition date.

The total purchase price consisted of the following:

(in thousands)	Amount
Cash consideration	$	41,210
Fair value of earn-out		2,265
	$	43,475

The Company incurred approximately $0.7 million in direct acquisition costs, all of which were expensed as incurred, and are included in general and administrative expenses in the consolidated statements of operations. Additionally, $0.4 million of deferred issuance costs incurred were capitalized. The Company has performed a valuation of the acquired assets and assumed liabilities of TAC. Using the total consideration for the TAC acquisition, the Company has estimated the allocations to such assets and liabilities.

The acquisition expands the scale of the RDS and diversifies RDS across geography, channel and product line, including the East region.  The acquisition will also assist in introducing a range of additional products to customers, including countertops and cabinets.  These factors are the basis for the excess purchase price paid over the value of the assets acquired and liabilities assumed, resulting in goodwill.

5. Acquisitions (Continued)

The following table summarizes the estimated allocation of the purchase price as of the transaction’s closing date:

(in thousands)	Amount
Cash	$	1,217
Accounts receivable		6,966
Inventory		4,093
Other current assets		87
Property and equipment		943
Goodwill		18,292
Other intangible assets		19,865
Other assets		4,873
Total assets acquired	$	56,336
Current liabilities		1,895
Deferred income taxes		6,099
Other long-term liabilities		4,867
Total liabilities	$	12,861
Total consideration	$	43,475

A purchase price adjustment of approximately $0.5 million was recorded in the fourth quarter of 2019 to reduce the fair value of inventory and fixed assets and to increase the value of goodwill.  Included in other long-term liabilities at the date of acquisition is an estimated uncertain tax position of $4.4 million, as well as $0.5 million of combined interest and penalties, which is offset by a corresponding indemnification receivable recorded in other assets, as all tax liabilities pre-acquisition are indemnified by the former owners. As TAC was acquired on December 31, 2018, no net revenue or net income generated by TAC was included in the Company’s 2018 consolidated statements of operations.

Pro Forma Results

The following unaudited pro forma information for the year ended December 31, 2018 has been prepared to give effect to the acquisition of TAC as if the acquisition had occurred on January 1, 2018. The pro forma information takes into account the preliminary purchase price allocation. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the TAC acquisition occurred on such date, nor does it purport to predict the results of operations for future periods.

	Year Ended December 31,
	2018
(in thousands)	(unaudited)
Pro Forma:
Total revenue, net	$	562,219
Net (loss)	$	(2,793	)

Pro forma assumptions are as follows:

• Revenues and costs of sales were based on actual results for the year ended December 31, 2018

• Selling, general and administrative expenses were based on actual results adjusted by $1.8 million for the year ended December 31, 2018, for the impact of the amortization expense of the intangible assets acquired with the acquisition. Selling, general and administrative expenses were also adjusted by $4.4 million for the year ended December 31, 2018, for the impact of significant nonrecurring charges.

• Actual interest expense was adjusted by $0.6 million for the year ended December 31, 2018, for the imputed interest on the acquired debt issued to fund the acquisition.

• Income taxes were adjusted to impute the Company’s corporate effective rate during the period on the pro forma income before taxes.

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Inventories

12 Months Ended

Dec. 31, 2020

Inventory Disclosure [Abstract]

Inventories

6. Inventories

Inventories are valued at the lower of cost (using specific identification and first-in first-out methods) or net realizable value. The significant components of inventory consisted of the following at:

(in thousands)	December 31, 2020		December 31, 2019
Raw materials	$	97,988	$	102,438
Installations in process		994		2,303
	$	98,982	$	104,741

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Property and Equipment

12 Months Ended

Dec. 31, 2020

Property Plant And Equipment [Abstract]

Property and Equipment

7. Property and equipment, net

Property and equipment consisted of the following at:

(in thousands)	December 31, 2020			December 31, 2019
Vehicles	$	10,948		$	10,759
Machinery and equipment		9,588			9,672
Leasehold improvements		9,040			8,962
Furniture and fixtures		8,031			6,906
Computer equipment and internal-use software		11,879			10,167
Other		1,957			1,048
	$	51,443		$	47,514
Less: accumulated depreciation and amortization		(30,387	)		(21,020	)
Property and equipment, net	$	21,056		$	26,494

Depreciation and amortization expense of property and equipment totaled $10.1 million, $8.4 million and $6.6 million for the years ended December 31, 2020, 2019, and 2018, respectively. For the year ended December 31, 2020, $4.2 million and $5.9 million of depreciation and amortization expense was included in cost of goods sold and general and administrative expense, respectively.  For the year ended December 31, 2019, $3.7 million and $4.7 million of depreciation and amortization expense was included in cost of goods sold and general and administrative expense, respectively. For the year ended December 31, 2018, $3.7 million and $2.9 million of depreciation and amortization expense was included in cost of goods sold and general and administrative expense, respectively.

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Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

8. Goodwill and Intangible Assets

Goodwill

The change in carrying amount of goodwill by reporting unit was as follows:

(in thousands)	ASG		RDS		Total Goodwill
December 31, 2018	$	45,564	$	49,029	$	94,593
Intown Acquisition		—		4,698		4,698
TAC measurement period adjustment		—		498		498
December 31, 2019	$	45,564	$	54,225	$	99,789
2020 activity		—		—		—
December 31, 2020	$	45,564	$	54,225	$	99,789

8. Goodwill and Intangible Assets (Continued)

Intangibles Assets

The following table provides the gross carrying amount, accumulated amortization and net book value for each class of intangible assets by reporting unit as of December 31, 2020:

(in thousands)	Gross Carrying Amount	ASG		RDS		Total Gross Carrying Amount
Customer relationships		$	60,180	$	60,060	$	120,240
Trade names			7,740		18,090		25,830
Non-Compete agreements			50		350		400
		$	67,970	$	78,500	$	146,470

(in thousands)	Accumulated Amortization	ASG			RDS			Total Accumulated Amortization
Customer relationships		$	(25,548	)	$	(31,992	)	$	(57,540	)
Trade names			(3,139	)		(7,522	)		(10,661	)
Non-Compete agreements			(33	)		(222	)		(255	)
		$	(28,720	)	$	(39,736	)	$	(68,456	)

(in thousands)	Net Book Value	ASG		RDS		Total Net Book Value
Customer relationships		$	34,632	$	28,068	$	62,700
Trade names			4,601		10,568		15,169
Non-Compete agreements			17		128		145
		$	39,250	$	38,764	$	78,014

The following table provides the gross carrying amount, accumulated amortization and net book value for each class of intangible assets by reporting unit as of December 31, 2019:

(in thousands)	Gross Carrying Amount	ASG		RDS		Total Gross Carrying Amount
Customer relationships		$	60,180	$	60,060	$	120,240
Trade names			7,740		18,090		25,830
Non-Compete agreements			50		350		400
		$	67,970	$	78,500	$	146,470

(in thousands)	Accumulated Amortization	ASG			RDS			Total Accumulated Amortization
Customer relationships		$	(19,410	)	$	(28,841	)	$	(48,251	)
Trade names			(2,300	)		(5,013	)		(7,313	)
Non-Compete agreements			(21	)		(137	)		(158	)
		$	(21,731	)	$	(33,991	)	$	(55,722	)

(in thousands)	Net Book Value	ASG		RDS		Total Net Book Value
Customer relationships		$	40,770	$	31,219	$	71,989
Trade names			5,440		13,077		18,517
Non-Compete agreements			29		213		242
		$	46,239	$	44,509	$	90,748

8. Goodwill and Intangible Assets (Continued)

Amortization expense on intangible assets totaled $12.7 million, $15.8 million, and $13.9 million during the years ended December 31, 2020, 2019, and 2018, respectively.

The estimated annual amortization expense for the next five years and thereafter is as follows:

Year Ending December 31:
2021	$	12,603
2022		12,401
2023		12,038
2024		10,313
2025		9,580
Thereafter		21,079
	$	78,014

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Lines of Credit

12 Months Ended

Dec. 31, 2020

Line Of Credit Facility [Abstract]

Lines of Credit

9. Lines of Credit

SIC Credit Facility

In June 2018, the Company and certain of its subsidiaries entered into an amended and restated loan, security and guaranty agreement, dated as of June 28, 2018, which was amended on December 11, 2018, July 23, 2019 and August 19, 2019 (“SIC Credit Facility”), with a commercial bank, which amended and restated each of the RDS credit agreement and the ASG credit agreement in their entirety.  The SIC Credit Facility will be used by the Company, including both RDS and ASG, for operational purposes.  Pursuant to the SIC Credit Facility, the Company has a borrowing-base-governed revolving credit facility that provides for borrowings up to an aggregate of $90 million, which was increased to $100 million through amendment entered into on August 19, 2019.

Under the terms of the SIC Credit Facility, the Company has the ability to request the issuance of letters of credit up to a maximum aggregate stated amount of $15 million. The ability to borrow revolving loans under the SIC Credit Facility is reduced on a dollar-for-dollar basis by the aggregate stated amount of all outstanding letters of credit. The indebtedness outstanding under the SIC Credit Facility is secured by substantially all of the assets of the Company and its subsidiaries.

The revolving loans under the SIC Credit Facility bear interest at a floating rate equal to an index rate (which the Company can elect between an index based on a LIBOR based rate or an index based on a Prime, Federal Funds or LIBOR based rate) plus an applicable margin. The applicable margin is determined quarterly based on the borrowers’ average daily availability (calculated by reference to their accounts receivable and inventory that comprise their borrowing base) during the immediately preceding fiscal quarter. Upon the occurrence of certain events of default under the SIC Credit Facility, the interest rate applicable to the obligations thereunder may be increased by two hundred basis points (2.00%).  The weighted average interest rate assessed during 2020 on the SIC Credit Facility was 2.7%. All revolving loans under the SIC Credit Facility are due and payable in full on June 28, 2023, subject to earlier acceleration upon certain conditions.  Letter of credit obligations under the SIC Credit Facility are due and payable on the date set forth in the respective loan documents or upon demand by the lender.

Under the SIC Credit Facility, the Company and its subsidiaries are required to comply with certain customary restrictive covenants that, among other things and with certain exceptions, limit the ability of the Company and its subsidiaries, as applicable, to (i) incur additional indebtedness and liens in connection therewith, (ii) pay dividends and make certain other restricted payments, (iii) effect mergers or consolidations, (iv) enter into transactions with affiliates, (v) sell or dispose of property or assets, and (vi) engage in unrelated lines of business.  

As of December 31, 2020, $9.9 million was outstanding under the SIC Credit Facility.  The Company also has $0.6 million in letters of credit outstanding at December 31, 2020. The SIC Credit Facility is subject to certain financial covenants. At December 31, 2020, the Company was in compliance with the financial covenants.

9. Lines of Credit (Continued)

The Company incurred debt issuance costs of $0.5 million in connection with the SIC Credit Facility. These costs will be amortized to non-cash interest expense over the term of the agreement on a straight-line basis which approximates the effective interest method. Non-cash interest expense related to these costs was $0.1 million for each of the years ended December 31, 2020 and 2019, and $0.05 million for the year ended December 31, 2018.  At December 31, 2020 and 2019, SIC had $0.2 million and $0.3 million, respectively, of unamortized debt issuance costs related to the SIC Credit Facility. These costs are shown as a direct deduction of the line of credit liability in the accompanying Company’s consolidated balance sheets.

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Long-Term Debt

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Long-Term Debt

10. Long-Term Debt

Long-term debt consisted of the following at:

(in thousands)	December 31, 2020			December 31, 2019
RDS equipment and vehicle notes	$	141		$	489
ASG term loans		152,773			154,177
		152,914			154,666
Unamortized debt issuance costs		(2,765	)		(1,618	)
Total long-term debt		150,149			153,048
Current portion of long-term debt, net of financing fees	$	15,623		$	11,749
Long-term debt, net of current portion and financing fees	$	134,526		$	141,299

RDS Equipment and Vehicle Notes

RDS has financed the acquisition of certain vehicles, property, and equipment with notes payable that mature at various times through May 2023.  As of December 31, 2020 and 2019, the outstanding balance on equipment and vehicle notes payable, totaled $0.1 million and $0.5 million, respectively. These notes are secured by the vehicles and equipment that were financed and require monthly interest and principal payments. The aggregate of the monthly payments was approximately $0.01 million and $0.03 million at December 31, 2020 and 2019, respectively. The interest rates on the notes ranged from 0.00% to 8.85% per annum for 2020 and 2019, and the weighted-average interest rate on the outstanding balances at December 31, 2020 and 2019, was 5.30% and 5.12% respectively.

ASG Term Loans

In December 2015, ASG entered into a loan agreement with a financial institution offering a term loan in the aggregate amount of $1.7 million to finance the purchase of equipment. Amounts due under the term loan bear interest at 3.75% per annum with interest payable monthly. Principal payments are due in monthly installments beginning April 8, 2016 through maturity (March 8, 2021). ASG paid off the remaining balance of the loan during 2020. At December 31, 2019, ASG had $0.4 million outstanding on this loan.

On February 28, 2017, AG&M and Pental, as the borrowers, entered into a financing agreement, as amended, with the lenders party thereto and Cerberus Business Finance, LLC, as the agent for the lenders (“Term Loan Facility”), which initially provided for a $105.0 million term loan facility.  The Term Loan Facility was amended in June 2018 to define the borrowers as Select Interior Concepts, Inc. and its subsidiaries, was amended in August 2018 to adjust the borrowing capacity to $101.4 million, and was amended in December 2018 to increase the borrowing capacity to $174.2 million.  The Company borrowed an additional $11.5 million under the Term Loan Facility to fund the acquisition of Intown on March 1, 2019.  In July 2019, the agreement was amended to revise certain covenants.  On August 19, 2019, the Term Loan Facility was further amended, resulting in an adjusted rate of interest payable on borrowings under the Term Loan Facility.  Additionally, the August 19, 2019 amendment imposed a prepayment premium with respect to an optional prepayment of the term loans under the Financing Agreement occurring within fifteen months of August 19, 2019 (other than prepayments in connection with a change of control) in an amount equal to 1.50% of any such principal amount prepaid.  

10. Long-Term Debt (Continued)

Subsequent to the August 2019 amendment, borrowings under the Term Loan Facility bear interest per year equal to either: (i) the base rate plus 4.75% for a base rate loan, or (ii) the LIBOR rate plus 6.75% for a LIBOR loan in the event the Leverage Ratio is greater than 2.40 to 1:00.  In the event the leverage ratio is less than 2.40 to 1.00, the rates decrease to either (i) the base rate plus 4.25% for a base rate loan, or (ii) the LIBOR rate plus 6.25% for a LIBOR loan.  The base rate is the greater of the publicly announced interest rate by the reference bank as its reference rate, the base commercial lending rate or prime rate, and 3.5% per annum. The interest rate assessed as of December 31, 2020 was 7.5%.  Interest is payable monthly with principal payments due in quarterly installments beginning July 1, 2017 through maturity (February 28, 2023).  

Following the delivery of audited annual financial statements for each fiscal year, the Term Loan Facility requires the Company to prepay amounts outstanding under the Term Loan Facility with (i) 75% of the excess cash flow of the Company minus the aggregate principal amount of all optional prepayments made in such preceding fiscal year, if the leverage ratio is greater than 3.25:1.00, or (ii) 50% of the excess cash flow of the Company minus the aggregate principal amount of all optional prepayments made in such preceding fiscal year, if the leverage ratio is less than or equal to 3.25:1.00.

In addition, the Term Loan Facility also requires the Company to prepay amounts outstanding, subject to certain exceptions (and, with respect to clauses (i) and (ii) below, certain limited reinvestment rights), with: (i) 100% of the net proceeds of any asset disposition in excess of $0.75 million in any fiscal year, (ii) 100% of any insurance or condemnation awards that are greater than $2.5 million, (iii) 100% of the net proceeds of any equity issuances, (iv) 100% of the net proceeds of any issuance of indebtedness (other than certain permitted indebtedness), and (v) 100% of any net cash proceeds received outside the ordinary course of business.  The estimated prepayment amount due under the terms of the agreement in 2021 is $15.7 million, which is classified within the current portion of long-term debt on the consolidated balance sheet as of December 31, 2020.

All term loans under the Term Loan Facility are due and payable in full on February 28, 2023, subject to earlier acceleration upon certain conditions.

Under the Term Loan Facility, the Company is required to comply with certain customary restrictive covenants that, among other things and with certain exceptions, limit the ability of the Company to (i) incur additional indebtedness and liens, (ii) pay dividends and make certain other distributions, (iii) sell or dispose of property or assets, (iv) make loans, (v) make payment of certain debt, (vi) make fundamental changes, (vii) enter into transactions with affiliates, and (viii) engage in any new businesses. The Term Loan Facility also contains certain customary representations and warranties, affirmative covenants, and reporting obligations.

On April 8, 2020, the Term Loan Facility was further amended to provide the Company with relief from certain covenants throughout the remainder of 2020 in light of the economic uncertainty resulting from the COVID-19 pandemic. The amendment, among other things, (i) waived the requirement that the Company prepay the Term Loans with Excess Cash Flow (as defined in the Term Loan Facility) due for payment during the year ending December 31, 2020, (ii) amended the Fixed Charge Coverage Ratio (as defined in the Term Loan Facility) covenant applicable to the fiscal year ending December 31, 2020 to be tested on a monthly basis and requires the Company and its subsidiaries to maintain a reduced Fixed Charge Coverage Ratio (as defined in the Term Loan Facility) of not less than 1.00:1.00 for each month during such fiscal year, and (iii) does not require the Company to test the Total Leverage (as defined in the Term Loan Facility) covenant effective as of the execution date of April 8, 2020 through and including December 31, 2020 for any fiscal quarter end during such period, for so long as the Company and its subsidiaries maintain Financial Covenant Availability (as defined in the Term Loan Facility) of not less than $35 million at all times during such fiscal quarter. This covenant relief expires at the end of 2020 and there is no guarantee that we will be able to negotiate additional covenant relief or maintain compliance with such covenants once the covenant relief expires.  If we are unable to extend this covenant relief or maintain compliance with such covenants we would be in default under this facility, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their respective interests against existing collateral. 

On March 10, 2021, the Term Loan Facility was amended to adjust the required leverage ratio (as defined in the Term Loan Facility).  The required leverage ratio as of March 31, 2021 and each fiscal quarter ending thereafter was increased from 3.75:1.00 to 4.00:1.00.

10. Long-Term Debt (Continued)

As of December 31, 2020 and 2019, the Company had $152.8 million and $153.8 million outstanding, respectively, under the Term Loan Facility.

Substantially all of the Company’s assets are collateral for these loans except assets collateralized by the SIC Credit Facility which hold a senior position.  These assets include all of the Company’s accounts receivable and inventory.  The Company is also restricted from paying dividends to its stockholders.  Additionally, substantially all of the net assets of the Company’s subsidiaries are restricted by the Term Loan Facility from providing loans, advances and dividends to the SIC parent company. The Company is required to meet certain financial covenants pursuant to these term loans. The Company was in compliance with all financial covenants as of December 31, 2020.

ASG incurred debt issuance costs in connection with its term loans. These costs are being amortized to non-cash interest expense over the terms of the related notes on a straight-line basis, which approximates the effective interest rate method. Non-cash interest expense related to these costs was $1.1 million for the year ended December 31, 2020, and $0.5 million for each of the years ended December 31, 2019 and 2018. At December 31, 2020 and 2019, the unamortized debt issuance costs related to the term loans totaled $2.8 million and $1.6 million, respectively, and are shown as a direct deduction from the liability on the accompanying consolidated balance sheets.

Future Maturities

At December 31, 2020, the future maturities of the Company’s long-term debt for each of the next five years and thereafter are as follow:

2021	$	16,902
2022		1,040
2023		134,972
	$	152,914
Unamortized balance remaining of financing fees		(2,765	)
Total long-term debt net of financing fees		150,149
Current portion of long-term debt net of financing fees		(15,623	)
Long term debt net of financing fees	$	134,526

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

11. Commitments and Contingencies

Leases

The Company leases certain vehicles and equipment under leases classified as capital leases. The leased vehicles are included as property, plant and equipment and amortized to accumulated amortization on a straight line basis over the life of the lease, typically four years. The total acquisition cost included in PP&E related to the leased vehicles is $12.3 million and $11.2 million at December 31, 2020 and 2019, respectively. Total accumulated amortization related to the leased vehicles is $3.7 million and $1.6 million at December 31, 2020 and 2019, respectively, with amortization expense totaling $2.1 million, $1.1 million and $0.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. Included in the capital lease balances is approximately $3.1 million of assets that were sold and subsequently leased back during 2020 and 2019 related to certain ERP software and equipment.  The transaction did not qualify for sale-leaseback accounting and no sale was recognized.  Proceeds from the transaction were reported as a financing activity in the statement of cash flows for the years ended December 31, 2020 and 2019.

RDS leases its corporate, administrative, fabrication and warehousing facilities under long-term non-cancelable operating lease agreements expiring at various dates through January 2025. The monthly rents are subject to annual increases and generally require the payment of utilities, real estate taxes, insurance and repairs. Three of RDS’ facility leases are with a company owned by a Company stockholder and five other facilities are leased from current employees, contractors or former owners of acquired businesses.

11. Commitments and Contingencies (Continued)

RDS also has operating leases for certain office equipment and vehicles under long-term lease agreements expiring at various dates through September 2022.

ASG leases its facilities and equipment under long-term non-cancellable operating lease agreements expiring at various dates through December 2029. The facility leases contain predetermined fixed escalations of the minimum rentals. One of ASG’s facility leases is with a related party.

SIC leases its corporate facilities under a long-term non-cancelable operating lease through October 2022.

The Company recognizes rent expense on a straight-line basis and records the difference between the recognized rent expense and amounts payable under the lease as deferred rent. Aggregate deferred rent at December 31, 2020 and 2019 was $1.9 million and $2.2 million, respectively. Aggregate rent expense for the years ended December 31, 2020, 2019, and 2018 totaled $19.6 million, $19.1 million and $14.3 million, respectively.

Aggregate future minimum payments under capital leases and noncancelable operating leases at December 31, 2020 are as follows:

(in thousands)	Capital Lease Obligations			Related Party Operating Lease Obligations		Third Party Operating Lease Obligations		Net Lease Commitments
2021	$	3,042		$	2,051	$	13,393	$	18,486
2022		2,611			1,702		11,587		15,900
2023		1,374			986		7,957		10,317
2024		962			—		3,905		4,867
2025		300			—		3,033		3,333
Thereafter		500			—		3,098		3,598
Total minimum lease payments	$	8,789		$	4,739	$	42,973	$	56,501
Less: amount representing interest		(854	)
Present value of net minimum lease payments		7,935
Less: current maturities of capital lease obligations		(2,700	)
Long-term capital lease obligations	$	5,235

Litigation

The Company experiences routine litigation in the normal course of its business. Production residential builders are primarily sued for alleged construction defects. As a practice, residential builders name all subcontractors in the lawsuit whether or not the subcontractor has any connection, direct or indirect, with the alleged defect. The Company, as a subcontractor, is involved in these lawsuits as a result. The Company generally has no or minimal liability in the majority of these lawsuits. The Company’s insurance policies’ self-insured retention (“SIR”) or/deductible typically ranges from $0.01 million to $0.02 million. In the event that the Company has exposure beyond its SIR/deductible, the Company’s general liability policy is triggered and the general liability insurance and the insurance carrier defends the Company in the lawsuit and is responsible for additional exposure up to policy limits. The Company has consistently maintained general liability insurance with $2.0 million aggregate and $1.0 million per occurrence limits. Management does not believe that any pending or threatened litigation will have a material adverse effect on the Company’s combined business, financial condition, results of operations, and/or cash flows.

11. Commitments and Contingencies (Continued)

Indemnification

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications, including to lessors of office and warehouse space for certain actions arising during the Company’s tenancy and to the Company’s customers. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future but have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations.

Exclusive Distributor Rights

A main quartz supplier of ASG’s Pental business has granted ASG exclusive distribution rights in 23 states in the United States. To maintain these rights, ASG must meet certain minimum purchase requirements. ASG is required to purchase 645 containers per quarter during 2021, increasing up to 1,332 containers per quarter during 2025.

Using an estimated price per container based on the 2020 average price per container the future minimum purchases to maintain the exclusive rights as of December 31, 2020 are as follows:

(in thousands)	Amount
2021	$	84,500
2022		102,186
2023		121,837
2024		145,419
2025		174,502
	$	628,444

If ASG does not purchase at least eighty percent (80%) of the minimum purchase volumes for two consecutive quarters, or at least ninety percent (90%) of the minimum purchase volumes in any calendar year, the supplier has the right to terminate ASG’s exclusive distribution rights. There are no financial penalties to ASG if such commitments are not met; however, the supplier reserves the right to terminate the exclusive distribution rights.  For the year ended December 31, 2020, ASG did not meet the eighty percent (80%) minimum purchase volume threshold in light of the current economic environment.  ASG and the supplier have discussed the impact of the current economic environment on the minimum purchase volumes and have reached an informal understanding around reduced purchase volumes.  The supplier must give 60 days notice to terminate this exclusivity arrangement, which has not been received by the Company. While ASG maintains good relationships with this supplier and believes that it would be unlikely that such supplier would terminate the exclusive relationship, there is no guarantee that such supplier will not terminate the exclusive relationship in the future due to ASG’s failure to purchase the minimum volumes.  In the event the supplier were to terminate ASG’s distribution rights it could have a material impact on ASG’s supply chain and ASG may be unable to find an alternative source for quartz in a timely manner or on favorable terms.

Purchase Commitments

The Company also has contracted to minimum purchase commitments with certain suppliers.  RDS has committed to purchase $2.0 million in products annually for each of the calendar years 2020 and 2021 with a certain supplier. The minimum purchase commitment for the year 2020 was achieved. Financial penalties for not achieving the minimum purchase commitment amount are equal to 15% of the shortfall amount.

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Stock Compensation

12 Months Ended

Dec. 31, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Compensation

12. Stock Compensation

On November 22, 2017, the Company adopted the Select Interior Concepts, Inc. 2017 Incentive Compensation Plan (the “2017 Plan”). Upon the adoption of the 2017 Plan, the maximum aggregate number of shares issuable thereunder was 2,561,463 shares. As of December 31, 2020, there were 1,447,419 shares of the Company’s common stock subject to outstanding awards under the 2017 Plan and 318,914 shares of the Company’s common stock were reserved and available for future awards under the 2017 Plan.  As of December 31, 2020, there were 1,350,000 shares of the Company’s common stock subject to outstanding inducement awards, further discussed below.

On March 26, 2019, the board of directors adopted the Select Interior Concepts, Inc. 2019 Long-Term Incentive Plan (the “2019 Incentive Plan”), which was approved at the 2019 Annual Meeting of Stockholders on May 15, 2019.  The 2019 Incentive Plan serves as the successor to the 2017 Plan; however, shares continue to be available for award grants under the 2017 plan following the effectiveness of the 2019 plan.  The maximum aggregate number of shares issuable under the 2019 plan is 1,700,000.  No awards had been issued under the 2019 Incentive Plan as of December 31, 2020. 

The 2017 Plan and the 2019 Incentive Plan (collectively, “the Plans”), permit the grant of incentive stock options to employees and the grant of nonstatutory stock options, performance awards, restricted stock, restricted stock units, stock appreciation rights, and other stock-based awards to the Company’s employees, directors and consultants at the sole discretion of the Company’s board of directors.

Stock Options

The Company has not granted any stock options under the Plans.

Restricted Stock

Restricted stock awards and restricted stock unit awards are grants of shares of the Company’s common stock or rights to receive shares of the Company’s common stock that are subject to various restrictions, including restrictions on transferability, vesting and forfeiture provisions. Recipients of restricted stock awards generally will have voting and dividend rights with respect to such shares prior to vesting, subject to such awards’ forfeiture provisions, unless the board of directors provides otherwise. Recipients of restricted stock unit awards generally will not have voting and dividend rights unless and until shares of common stock are issued with respect to such awards. Shares of restricted stock that do not vest for any reason will be forfeited by the recipient and will revert to the Company.

For the year ended December 31, 2020, 1,347,877 restricted stock units were granted under the 2017 Plan to certain directors, executives, and key employees. Certain of these restricted stock units included a market condition under ASC 718 “Compensation – Stock Compensation.”

During the three months ended March 31, 2019, restricted stock units were granted to certain executives and include both a service and a performance condition. The performance condition is achievement of a 2021 earnings target and the level of achievement of the earnings target determines the number of shares that will be issued.  In the first quarter of 2020, the performance condition for these shares that was deemed probable of vesting as of December 31, 2019, was determined to be no longer probable of vesting.  This resulted in a reversal of stock compensation expense of approximately $1.6 million recorded during the three months ended March 31, 2020.  In the third quarter of 2020, the majority of these performance awards were cancelled and forfeited.  

In connection with the appointment of L. W. Varner, Jr. as the new Chief Executive Officer of the Company in June 2020, Mr. Varner received a one-time grant of 500,000 time-based restricted stock units and

500,000 performance-based restricted stock units.  Additionally, the Company appointed a new President of ASG and a new Chief Human Resources Officer in the third quarter of 2020 who each received one-time grants totaling a combined 175,000 time-based restricted stock units and 175,000 performance-based restricted stock units. All of these restricted stock units were granted to these new executives as inducement awards in accordance with NASDAQ Listing Rule 5635(c)(4) and were not granted under the Plans.  The time-based restricted stock units vest in equal annual installments over four years, subject to continued employment with the Company.  The performance-based restricted stock units contain market conditions based on the closing price of the Company’s common stock exceeding specific price hurdles for 20 consecutive trading days, and subject to continued employment with the Company.

12. Stock Compensation (Continued)

The Company estimated the fair value of all shares granted on the date the shares were granted and recognizes the resulting fair value over the requisite service period. The grant date fair value for the restricted stock units issued during the year ended December 31, 2020 was determined using the closing share price on the date of grant.  For shares issued with a market condition, the Monte Carlo simulation model was used to determine the fair value of the award.  Inputs into the Monte Carlo simulation model for applicable awards during the year ended December 31, 2020 included a dividend yield of 0%, an expected volatility rate ranging from 48.06% to 54.69%, and a risk-free rate ranging from 0.18% to 0.37%.

A summary of the restricted stock activity for the Plans for the years ended December 31, 2020, 2019 and 2018 is as follows:

(in thousands)	Nonvested Shares Outstanding			Weighted Average Grant Date Fair Value
Nonvested shares at December 31, 2017		356,368		$	12.00
Granted		779,016		$	11.83
Forfeited		(281,762	)	$	12.00
Vested		(27,646	)	$	12.00
Nonvested shares at December 31, 2018		825,976		$	11.84
Granted		1,453,205		$	12.99
Forfeited		(197,185	)	$	12.00
Vested		(256,873	)	$	11.79
Nonvested shares at December 31, 2019		1,825,123		$	12.75
Granted		1,347,877		$	4.25
Forfeited		(1,255,365	)	$	11.93
Vested		(470,216	)	$	10.64
Nonvested shares at December 31, 2020		1,447,419		$	5.33

As of December 31, 2020, total remaining equity-based compensation expense for unvested restricted stock is $10.3 million, which is expected to be recognized over a weighted average remaining period of 2.9 years.  Equity-based compensation expense recognized for restricted stock for the years ended December 31, 2020, 2019 and 2018 was $2.8 million, $4.7 million and $2.5 million, respectively, and is recorded within SG&A expenses.  The recognized tax benefit for stock compensation expense for the years ended December 31, 2020, 2019, and 2018 was $0.5 million, $0.4 million and $1.0 million, respectively.

Management awarded 2019 annual compensation bonuses in equity shares instead of cash.  These bonuses were settled in the first quarter of 2020 at fixed amounts using the stock price 2 days prior to the date of settlement.  The number of shares awarded to executives and key employees upon settlement in 2020 was 117,345 shares.  The compensation expense associated with these awards was $0.9 million for the year ended December 31, 2019.  The related liability associated with these bonuses was recorded in accrued expenses and other current liabilities as of December 31, 2019.

Phantom Stock

Phantom stock awards are grants of phantom stock with respect to shares of the Company’s common stock that are settled in cash and subject to various restrictions, including restrictions on transferability, vesting and forfeiture provisions. Shares of phantom stock that do not vest for any reason will be forfeited by the recipient and will revert to the Company. All shares of phantom stock have vested and there are no outstanding shares of phantom stock. As a result of the cash-settlement feature of these awards, the Company considers these awards to be liability awards, which are measured at fair value at each reporting date and the pro-rata vested portion of the award is recognized as a liability.  

The Company recorded phantom stock-based compensation expense of $0.01 million related to these shares for each of the years ended December 31, 2020, 2019 and 2018, respectively.

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Provision for Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Provision for Income Taxes

13. Provision for Income Taxes

At December 31, 2020, 2019 and 2018, the components of the provision for income taxes reflected on the consolidated statements of operations are as follows:

(in thousands)	2020			2019			2018
Current:
Federal	$	(4,302	)	$	1,728		$	3,604
State		(345	)		1,287			1,571
Total current		(4,647	)		3,015			5,175
Deferred:
Federal		671			618			(2,871	)
State		1,002			(2,112	)		(1,315	)
Total deferred		1,673			(1,494	)		(4,186	)
Provision (benefit) for income taxes	$	(2,974	)	$	1,521		$	989

The Company does not have any foreign operations and derives all of its pre-tax income from domestic sources, and all income tax expense is related to domestic tax jurisdictions.

The following is a reconciliation of expected income tax expense (computed by applying the federal statutory income tax rate to income before taxes) to actual income tax expense.

(in thousands)	2020			2019			2018
Income taxes at federal statutory rate	$	(2,694	)	$	1,786		$	(280	)
State income taxes, net of federal benefit		387			(651	)		148
Transaction costs		—			—			968
TAC earn-out		—			(476	)		—
Equity-based compensation		—			134			—
Permanent items		852			298			294
State rate changes		364			(293	)		(27	)
162(m) limitation		—			345			—
Other, net		90			378			(114	)
Uncertain tax position		(1,123	)		—			—
Rate differential on carryback		(850	)		—			-
Provision (benefit) for income taxes	$	(2,974	)	$	1,521		$	989

At December 31, 2020, the Company’s effective income tax rate is different from what would be expected if the federal rate were applied to net income before taxes primarily due to permanent adjustments, uncertain tax positions related to the TAC acquisition, state income taxes and the Federal NOL carryback allowed by the CARES Act. At December 31, 2019, the Company's effective income tax rate is different from what would be expected if the federal statutory rate were applied to net income before taxes primarily due to permanent adjustments, equity-based compensation, uncertain tax positions related to TAC provision, and state income taxes. At December 31, 2018, the Company’s effective income tax rate is different from what would be expected if the federal statutory rate were applied to net income before taxes primarily due to permanent adjustments, capitalized transaction costs, and state income taxes.

13. Provision for Income Taxes (Continued)

The components of deferred tax assets and liabilities are as follows as of December 31, 2020 and 2019:

(in thousands)	2020			2019
Deferred tax assets
Accrued liabilities	$	2,627		$	1,555
State income taxes		—			103
Intangible assets		4,285			4,919
Net operating loss		682			994
Inventory		3,981			4,351
Equity-based compensation		772			999
Other, net		555			902
Interest limitation		66			676
Total deferred tax assets		12,968			14,499
Deferred tax liabilities
Property and equipment		(3,343	)		(2,562	)
Prepaids		(91	)		(370	)
ASC 606 method change		(657	)		(1,017	)
Total deferred tax liabilities		(4,091	)		(3,949	)
Net deferred tax assets	$	8,877		$	10,550

Deferred income taxes reflect the net effects of temporary differences between the amounts of assets and liabilities for financial reporting purposes. The Company has not provided for a valuation allowance against any of its deferred tax assets, as management has determined it is more likely than not that these deferred tax assets will be realized. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment.

On December 22, 2017, the President of the United States signed into law the Tax Act. The Tax Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Act reduced the corporate tax rate from a maximum of 35% to a flat 21% rate. The rate reduction was effective on January 1, 2018. In December 2017, the SEC issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance on accounting for the income tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting relating to the Tax Act under Accounting Standards Codification Topic 740. Income Taxes (ASC 740). In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for Tax Act-related income tax effects is incomplete, but the company is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. The Company completed its evaluation of the Act of 2017 on its December 31, 2018 financial statements and adjusted its provision for the year ended December 31, 2018 accordingly.

In response to the global impacts of COVID-19 on U.S. companies and citizens, the U.S. federal government enacted the CARES Act on March 27, 2020.  The CARES Act included several temporary tax relief provisions for companies, including modifications to the interest deduction limitation and a five-year net operating loss carryback.  In response to these tax relief provisions, the Company has adjusted its deferred tax asset related to the interest limitation and anticipates carrying back its net operating loss generated in 2020 to prior periods.  The Company has recorded a tax benefit related to net operating loss carrybacks of $0.8 million.

13. Provision for Income Taxes (Continued)

As of December 31, 2020, the Company had gross federal net operating loss carryforwards of $1.9 million, carrying forward indefinitely. As of December 31, 2020, the Company also had gross state net operating loss carryforwards of $4.9 million, with carryforward periods ranging from 5 years to indefinite. As of December 31, 2019, the Company had gross state net operating loss carryforwards of $21.9 million. As of December 31, 2020, unrecognized tax benefits relate entirely to pre-acquisition TAC tax returns. Assessments related to TAC for tax years through the December 31, 2018 transaction date are the responsibility of former TAC management. The Company is fully indemnified for income taxes prior to the acquisition, as well as any related interest and penalties. The Company does not expect any significant increases or decreases to the Company’s unrecognized tax benefits within the next 12 months. The Company is subject to examinations by federal taxing authorities for the tax years 2017 – 2020 and by state taxing authorities for the tax years 2016—2020. The Company is not currently under any tax examinations. The Company analyzes filing positions in all federal and state jurisdictions where it is required to file income tax returns, and all open tax years in these jurisdictions to determine if there are any uncertain tax positions on its tax returns.

A reconciliation of the beginning and ending amounts of unrecognized tax positions are as follows:

(in thousands)	2020			2019
Unrecognized tax positions, beginning of year	$	3,998		$	4,364
Gross increase - prior period tax positions		—			298
Gross decrease - prior period tax positions		—			(395	)
Expiration of statute of limitations		(1,092	)		(269	)
Unrecognized tax positions, end of year	$	2,906		$	3,998

Of the Company’s total unrecognized tax benefits of $2.9 million, there would be no impact to the annual effective tax rate if recognized as the uncertain tax positions are fully indemnified. The Company’s policy is to recognize interest and/or penalties related to all tax positions as income tax expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. Accrued interest and penalties were $0.9 million and $0.9 million as of December 31, 2020 and 2019, respectively. If recognized, there would be no impact to the effective tax rate as the interest and penalties are fully indemnified. The Company recognized an insignificant amount of interest and penalties related to uncertain tax positions for the year ended December 31, 2020. The Company recognized $0.2 million in interest and $0.2 million in penalties related to uncertain tax positions for the year ended December 31, 2019. For the year ended December 31, 2018, the Company recognized $0.2 million in interest and $0.3 million in penalties related to uncertain tax positions. 

Pursuant of Internal Revenue Code Sections 382, annual use of the Company’s net operating loss carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period.  

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Employee Benefit Plan

12 Months Ended

Dec. 31, 2020

Compensation And Retirement Disclosure [Abstract]

Employee Benefit Plan

14. Employee Benefit Plan

The Company maintains a qualified 401(k) plan for the benefit of its employees. Substantially all employees are eligible to participate in the plan. Under the plan, eligible participants are permitted to make salary deferral contributions to the plan. In addition, the plan provides for employer matching. During the years ended December 31, 2020, 2019 and 2018, the Company contributed $0.6 million, $1.5 million, and $0.9 million to the plan, respectively.

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Related Party Transactions

12 Months Ended

Dec. 31, 2020

Related Party Transactions [Abstract]

Related Party Transactions

15. Related Party Transactions

Facility Rent

RDS leases three of its facilities from a trust affiliated with a Company stockholder. Additionally, as a result of recent acquisitions, RDS also leased five of its facilities during 2020 from current employees, contractors, or former owners of acquired businesses.  Rent expense under all these leases totaled $1.9 million during the year ended December 31, 2020, $2.2 million during the year ended December 31, 2019, and $0.8 million during the year ended December 31, 2018. No amounts were unpaid at December 31, 2020 and 2019. (See Note 11).

ASG leases office space from 521 Digiulian Boulevard, LLC, a company owned by a current employee. Rent expense under this lease was $0.1 million for the years ended December 31, 2020, 2019 and 2018. No amounts were unpaid under this lease at December 31, 2020 and 2019. (See Note 11).

Subcontractors and Suppliers

Two of RDS employees have family members that have an ownership interest in a flooring subcontracting company that does business with RDS. During the years ended December 31, 2020, 2019, and 2018, this company performed a total of $0.9 million, $1.2 million, and $1.6 million in subcontract work for RDS, respectively. Amounts due and recorded as accounts payable at December 31, 2020 and 2019 were less than $0.1 million and $0.1 million, respectively.

Design services were also provided to RDS by designers affiliated with current Greencraft employees.  During the years ended December 31, 2020, 2019 and 2018, expenses incurred with this design company were $0.02 million, $0.1 million and $0.08 million, respectively.  No amounts were unpaid at December 31, 2020 and 2019.

Other Consulting Services

A consulting firm affiliated with a former officer of the Company has performed various consulting services for the Company related to human resources, accounting, and project management. During the years ended December 31, 2020, 2019, and 2018, the Company incurred approximately $0.2 million, $0.3 million, and $0.2 million of costs with this consulting firm, respectively. Amounts due and recorded as accounts payable at December 31, 2020, were less than $0.01 million. No amounts were unpaid at December 31, 2019.

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Segment Information

12 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Segment Information

16. Segment Information

The Company’s operations are classified into two operating segments: RDS and ASG. Under RDS, the Company offers interior design and installation services, and under ASG, the Company performs natural and engineered surfaces distribution. These operating segments represent strategic business areas which, although they operate separately and provide their own distinctive services, enables the Company to more effectively offer the complete line of interior design and selection services, merchandising, and complex supply chain management. While individual acquisitions, for a time, may have discrete financial information before being fully integrated, RDS and ASG are the only operating and reporting segments for which both discrete financial information is available and is reviewed by management for the purpose of making operating decisions and assessing financial performance.

Inter-segment eliminations result, primarily, from the sale of ASG inventory to the RDS segment, including the related profit margin, as well as some intercompany borrowings recorded in the form of intercompany payables and receivables.  

In addition, certain costs incurred at a corporate level or at the reporting unit level that benefit the segments are not allocated. These costs include: corporate payroll costs, legal, professional service fees, interest expense, including amortization of deferred financing costs, and taxes and equity-based compensation.

16. Segment Information (Continued)

The Company evaluates performance of the respective segments based upon revenue and operating income. Information for the years presented is provided below:

	For the Years Ended December 31,
(in thousands)	2020			2019			2018
Revenue, net:
RDS	$	332,489		$	368,574		$	268,362
ASG		223,567			244,789			223,971
Elimination of intercompany sales		(2,031	)		(2,990	)		(2,576	)
Consolidated total	$	554,025		$	610,373		$	489,757
Operating income:
RDS	$	1,615		$	17,544		$	14,252
ASG		19,173			19,860			11,925
Elimination of intercompany activity		(23	)		96			(46	)
Unallocated corporate operating loss		(17,383	)		(18,242	)		(14,034	)
Consolidated total	$	3,382		$	19,258		$	12,097
Capital expenditures:
RDS	$	2,324		$	7,155		$	1,684
ASG		1,104			1,986			6,539
Unallocated corporate capital expenditures		8			28			284
Consolidated total	$	3,436		$	9,169		$	8,507
Depreciation and amortization:
RDS	$	11,578		$	12,896		$	9,634
ASG		11,185			11,159			10,833
Unallocated corporate depreciation and amortization		104			102			20
Consolidated total	$	22,867		$	24,157		$	20,487
	As of December 31,
(in thousands)	2020			2019
Goodwill:
RDS	$	54,225		$	54,225
ASG		45,564			45,564
Consolidated total	$	99,789		$	99,789
Other intangible assets, net:
RDS	$	38,764		$	44,509
ASG		39,250			46,239
Consolidated total	$	78,014		$	90,748
Total assets:
RDS	$	193,488		$	182,754
ASG		198,341			217,655
Consolidation entries		40			36
Unallocated assets, including corporate		13,139			19,830
Consolidated total	$	405,008		$	420,275

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Selected Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2020

Quarterly Financial Data [Abstract]

Selected Quarterly Financial Data (Unaudited)

17. Selected Quarterly Financial Data (Unaudited)

Selected summarized quarterly financial information is as follows for the periods presented:

(In thousands, except per share data)	Quarter Ended
Fiscal 2020	December 31			September 30		June 30			March 31
Total revenue, net	$	144,155		$	150,050	$	125,442		$	134,378
Gross profit		35,225			38,590		30,700			30,694
Income (loss) from operations		248			5,144		(37	)		(1,973	)
Net income (loss)		(3,203	)		531		(3,179	)		(4,002	)
Basic EPS	$	(0.13	)	$	0.02	$	(0.13	)	$	(0.16	)
Diluted EPS	$	(0.13	)	$	0.02	$	(0.13	)	$	(0.16	)
Fiscal 2019 (a)
Total revenue, net	$	155,242		$	159,395	$	158,342		$	136,920
Gross profit		38,770			42,338		44,168			38,733
Income from operations		2,952			6,209		6,750			3,266
Net income		3,177			2,458		1,162			127
Basic EPS	$	0.13		$	0.10	$	0.05		$	0.00
Diluted EPS	$	0.13		$	0.10	$	0.05		$	0.00

(a) The 2019 quarterly results presented will not sum to 2019 annual results due to the adoption of ASU 2014-19 during the quarter ended December 31, 2019.  The quarters in 2019 are presented under the previous standard, ASC Topic 605.

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Subsequent Events

12 Months Ended

Dec. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

18. Subsequent Events

Events occurring after December 31, 2020, have been evaluated for possible adjustment to the consolidated financial statements or disclosure as of March 16, 2021, which is the date the consolidated financial statements were available to be issued.  On March 10, 2021, the Company entered into an amendment on the Term Loan Facility.  See Note 10.  Additionally, the Company continues to evaluate the impact of COVID-19 on its operations, although the ultimate extent to which COVID-19 impacts our business, results of operations, liquidity and financial condition will depend on future developments, which are highly uncertain.  

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Schedule I - Condensed Parent Company Only Financial Statements

12 Months Ended

Dec. 31, 2020

Condensed Financial Information Of Parent Company Only Disclosure [Abstract]

Schedule I - Condensed Parent Company Only Financial Statements

Schedule I – SIC’s Condensed Parent Company Only Financial Statements

Select Interior Concepts, Inc.

Parent Company Only

Condensed Balance Sheets

(in thousands, except share data)	As of December 31, 2020			As of December 31, 2019
Assets
Investment in wholly owned subsidiaries	$	195,101		$	187,571
Other assets		237			397
Total assets	$	195,338		$	187,968
Liabilities and stockholders' equity
Due to subsidiaries	$	37,024		$	23,466
Accrued and other liabilities		4,123			3,227
Total liabilities		41,147			26,693
Stockholders' equity:
Class A common stock, par value $0.01 per share; 100,000,000 shares authorized;    25,609,758 shares issued and 25,449,025 outstanding at December 31, 2020 and    25,139,542 shares issued and 25,106,402 outstanding at December 31, 2019		256			251
Treasury stock, 160,733 shares at December 31, 2020 and 33,140 shares at    December 31, 2019, at cost		(1,279	)		(391	)
Additional paid-in capital		165,048			161,396
Retained earnings (accumulated deficit)		(9,834	)		19
Total stockholders' equity		154,191			161,275
Total liabilities and stockholders' equity	$	195,338		$	187,968

See Notes to Condensed Parent Company Only Financial Statements

Select Interior Concepts, Inc.

Parent Company Only

Condensed Statements of Operations

(in thousands)	Year Ended December 31, 2020			Year Ended December 31, 2019			Year Ended December 31, 2018
Equity in net income of subsidiaries	$	7,530		$	25,226		$	11,559
Selling, general and administrative expenses		(17,383	)		(18,242	)		(14,034	)
Net income (loss)	$	(9,853	)	$	6,984		$	(2,475	)

See Notes to Condensed Parent Company Only Financial Statements

Condensed Statements of Cash Flows

(in thousands)	Year Ended December 31, 2020			Year Ended December 31, 2019			Year Ended December 31, 2018
Cash flows used in operating activities:
Net income (loss)	$	(9,853	)	$	6,984		$	(2,475	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Equity in net income of subsidiaries		(7,530	)		(25,226	)		(11,559	)
Depreciation and amortization		107			102			21
Equity-based compensation		2,789			5,740			2,528
Changes in assets and liabilities:
Changes in operating assets		63			(3	)		(204	)
Changes in accrued expenses		1,762			547			677
Net cash used in operating activities	$	(12,662	)	$	(11,856	)	$	(11,012	)
Cash flows used in investing activities:
Purchase of equipment		(8	)		(28	)		(284	)
Net cash used in investing activities	$	(8	)	$	(28	)	$	(284	)
Cash flows provided by financing activities:
Purchase of treasury stock		(888	)		(399	)		—
Borrowings from subsidiaries		13,558			12,283			10,743
Proceeds from issuance of equity		—			—			553
Net cash provided by financing activities	$	12,670		$	11,884		$	11,296
Net change in cash and cash equivalents		—			—			—
Cash and cash equivalents:
Beginning		—			—			—
Ending	$	—		$	—		$	—

See Notes to Condensed Parent Company Only Financial Statements

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Description of Select Interior Concepts Inc

12 Months Ended

Dec. 31, 2020

Parent Company

Description of Select Interior Concepts Inc.

Note 1. Description of Select Interior Concepts, Inc.

These financial statements reflect the consolidated operations of Select Interior Concepts, Inc. (“SIC”).  SIC is a Delaware corporation that was restructured in November 2017 to be a holding company on which to consolidate diversified building products and services companies with a primary focus on the interiors of all types of buildings.  SIC owns 100% of its two primary operating subsidiaries and segments, Residential Design Services and Architectural Surfaces Group. SIC has no significant operations or assets other than its ownership in Residential Design Services and Architectural Surfaces Group. Accordingly, SIC is dependent upon its subsidiaries to fund its obligations.

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Basis of Presentation

12 Months Ended

Dec. 31, 2020

Parent Company

Basis of Presentation

Note 2. Basis of Presentation

The accompanying Condensed Parent Only Financial Statements include the amounts of SIC and its investment in its subsidiaries under the equity method, and do not present the financial statements of SIC and its subsidiaries on a consolidated basis. Under the equity method, investments in subsidiaries are stated at cost plus contributions and equity in undistributed income (loss) of subsidiaries less distributions received since the date of acquisition. There have been no distributions in 2020, 2019 and 2018.  Income tax considerations were evaluated under the separate return method, resulting in no net tax benefits for SIC as a separate entity. These Condensed Parent Company Only Financial Statements should be read in conjunction with the consolidated financial statements of Select Interior Concepts, Inc. and subsidiaries and the accompanying Notes to the consolidated financial statements.  

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include the accounts of SIC, its wholly owned subsidiaries RDS and ASG, and their wholly owned subsidiaries, and are presented using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All significant intercompany accounts and transactions have been eliminated in combination. References to the “ASC” hereafter refer to the Accounting Standards Codification established by the Financial Accounting Standards Board (“FASB”) as the source of authoritative U.S. GAAP.

Earnings (Loss) per Common Share

Earnings (Loss) per Common Share

For the years ended December 31, 2020, 2019 and 2018, basic earnings per share for common stock is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding.  For the years ended December 31, 2020, 2019 and 2018, common stock consists of only Class A Common Stock, since in August 2018, each then remaining share of Class B Common Stock was automatically converted into one share of Class A Common Stock, resulting in no shares of Class B Common Stock left outstanding.  Diluted earnings per share for common stock is computed by dividing net income (loss) plus the dilutive effect of restricted stock-based awards using the treasury stock method.

The following table sets forth the computation of basic and diluted loss per share for the years ended December 31, 2020, 2019 and 2018:

(in thousands, except share and per share data)	Year Ended December 31, 2020			Year Ended December 31, 2019		Year Ended December 31, 2018
Net income (loss)	$	(9,853	)	$	6,984	$	(2,475	)
Weighted average shares of common stock outstanding:
Basic common stock		25,337,249			25,296,955		25,634,342
Diluted common stock		25,337,249			25,431,677		25,634,342
Earnings (loss) per share of common stock:
Basic common stock	$	(0.39	)	$	0.28	$	(0.10	)
Diluted common stock	$	(0.39	)	$	0.27	$	(0.10	)

All restricted stock awards outstanding totaling 2,797,419 at December 31, 2020, and 825,976 at December 31, 2018, were excluded from the computation of diluted earnings per share in 2020 and 2018 because the Company reported a net loss and the effect of inclusion would have been antidilutive.

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingencies at the date of the consolidated financial statements and the reported net revenue and expenses. Actual results may vary materially from the estimates that were used. The Company’s significant accounting estimates include the determination of allowances for doubtful accounts, valuation of inventory, the lives and methods for recording depreciation and amortization on property and equipment, the fair value of reporting units and indefinite life intangible assets, deferred income taxes, revenue recognition, warranties, returns and the purchase price allocations used in the Company’s acquisitions.

Restricted Cash

Restricted Cash

No amount of restricted cash is held as of December 31, 2020 or 2019.

Fair Value Measurement

Fair Value Measurement

ASC 820-10 requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet for which it is practicable to estimate fair value. ASC 820-10 defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.

The three levels of the fair value hierarchy are as follows:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2—Valuations based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.

Level 3—Valuations based on inputs that are unobservable, supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The level of the fair value hierarchy in which the fair value measurement falls is determined by the lowest level input that is significant to the fair value measurement.

The Company records contingent consideration, or earn-outs, associated with certain acquisitions.  These earn-outs are adjusted to fair value at each reporting period and any change to fair value based on a change in certain factors, such as the risk adjusted rate or estimates for the outcome of specified milestone goals, will result in an adjustment to the fair value of the liability. These adjustments are recorded to income/expense as a measurement period adjustment.  

The earn-out liability associated with the acquisition of Summit Stoneworks, LLC (“Summit”) in August 2018 was reduced to zero as of December 31, 2019 and was no longer a Level 3 fair value estimate as the underlying inputs were known and the earn-out target criteria were not met as of December 31, 2019.  Adjustments reducing the fair value of the earn-out liability by $1.9 million were recorded within other (income) expense for the year ended December 31, 2019.

The earn-out liability associated with the acquisition of T.A.C. Ceramic Tile Co, LLC (“TAC”) in December 2018 was reduced to zero as of December 31, 2019 and was no longer a Level 3 fair value estimate as the underlying inputs were known and the earn-out target criteria were not met as of December 31, 2019.  Adjustments reducing the fair value of the earn-out liability by $2.3 million were recorded within other (income) expense for the year ended December 31, 2019.

The earn-out liability associated with the acquisition of Intown Design, Inc., Intown Granite of Charlotte, Inc., and Granitec, LLC, (collectively, “Intown”) in March 2019 had a recorded fair value of zero at December 31, 2019 and is no longer a Level 3 fair value estimate as of December 31, 2020, as the underlying inputs are known and the earn-out target criteria were not met as of December 31, 2020. An adjustment decreasing the fair value of the earn-out liability by $2.0 million was recorded within other (income) expense for the year ended December 31, 2019.

2. Summary of Significant Accounting Policies (Continued)

At December 31, 2020 and December 31, 2019, the carrying value of the Company’s cash, accounts receivable, accounts payable, and short-term obligations approximate their respective fair values because of the short maturities of these instruments. The recorded values of the line of credit, term loans, and notes payable approximate their fair values, as interest rates approximate market rates. The Company recognizes transfers between levels at the end of the reporting period as if the transfers occurred on the last day of the reporting period. There were no transfers during 2020 or 2019, other than the Intown earn-out liability out of Level 3 during 2020 and the Summit and TAC earn-out liabilities out of Level 3 during 2019 due to the availability of observable and known inputs to calculate the fair value of the liabilities as of December 31, 2020 and 2019, respectively.  

Accounts Receivable

Accounts Receivable

Accounts receivable are recorded at net realizable value. The Company continually assesses the collectability of outstanding customer invoices; and if deemed necessary, maintains an allowance for estimated losses resulting from the non-collection of customer receivables. In estimating this allowance, the Company considers factors such as: historical collection experience, a customer’s current creditworthiness, customer concentrations, personal guarantees, credit insurance, age of the receivable balance both individually and in the aggregate and general economic conditions that may affect a customer’s ability to pay. The Company also has the ability to place liens against a significant amount of RDS customers in order to secure receivables.  Actual customer collections could differ from the Company’s estimates. At December 31, 2020 and 2019, the Company’s allowance for doubtful accounts was $0.5 million and $0.8 million, respectively.

Inventories

Inventories

Inventories consist of stone slabs, tile and sinks, and include the costs to acquire the inventories and transport the respective inventories to its location. Inventory also includes flooring, cabinets, doors and trim, glass, and countertops, which have not yet been installed, as well as labor and related costs for installations in process. Inventory is valued at the lower of cost (using the specific identification and first-in, first-out methods) or net realizable value.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. The Company capitalizes internal-use software as property and equipment under ASC 350-40, Internal-Use Software.  Depreciation and amortization are provided for on a straight-line basis over the estimated useful lives of the related assets as follows:

	Range of estimated useful lives
Machinery and equipment	5 - 7 years
Vehicles	3 - 7 years
Furniture and fixtures	3 - 7 years
Computer equipment	3 - 5 years
Leasehold improvements	Shorter of 15 years or the remaining lease term

Intangible Assets

Intangible Assets

Intangible assets consist of customer relationships, trade names and non-compete agreements. The Company considers all its intangible assets to have definite lives and are being amortized on the straight-line method over the estimated useful lives of the respective assets or on an accelerated basis based on the expected cash flows generated by the existing customers as follows:

	Range of estimated useful lives	Weighted average useful life
Customer relationships	2 years – 15 years	10 years
Trade names	3 years – 11 years	8 years
Non-compete agreements	Life of agreement	4 years

Business Combinations

Business Combinations

The Company records business combinations using the acquisition method of accounting. Under the acquisition method of accounting, identifiable assets acquired and liabilities assumed are recorded at their acquisition date fair values. The excess of the purchase price over the estimated fair value is recorded as goodwill. Changes in the estimated fair values of net assets recorded for acquisitions prior to the finalization of more detailed analysis, but not to exceed one year from the date of acquisition, will adjust the amount of the purchase price allocable to goodwill. Measurement period adjustments are reflected in the period in which they occur.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

The Company reviews the recoverability of its long-lived assets, such as property and equipment and intangible assets, whenever events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable, or at least annually. The assessment for possible impairment is based on the Company’s ability to recover the carrying value of the asset or asset group from the expected future undiscounted cash flows of the related operations. If the aggregate of these cash flows is less than the carrying value of such assets, an impairment loss is recognized for the difference between the estimated fair value and the carrying value. The measurement of impairment requires management to estimate future cash flows and the fair value of long-lived assets. There were no impairment losses on long-lived assets for the years ended December 31, 2020 and 2019.

Goodwill

Goodwill

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. The Company accounts for goodwill in accordance with FASB ASC topic 350, Intangibles-Goodwill and Other Intangible Assets, which among other things, addresses financial accounting and reporting requirements for acquired goodwill and other intangible assets having indefinite useful lives. ASC topic 350 requires goodwill to be carried at cost, prohibits the amortization of goodwill and requires the Company to test goodwill for impairment at least annually. The Company tests for impairment of goodwill annually during the fourth quarter or more frequently if events or changes in circumstances indicate that the goodwill may be impaired. Events or changes in circumstances which could trigger an impairment review include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business, significant negative industry or economic trends, or significant underperformance relative to expected historical or projected future results of operations. Impairment indicators existed as of March 31, 2020 surrounding the decrease in the Company’s stock price, significant adverse changes in the business climate and other macroeconomic conditions resulting from the COVID-19 pandemic. The Company performed a goodwill impairment test as of March 31, 2020. The Company identified RDS and ASG as reporting units and determined each reporting unit’s fair value significantly exceeded such reporting unit’s carrying value. As part of its annual impairment testing, the Company identified RDS and ASG as reporting units and determined each reporting unit’s fair value exceeded each reporting unit’s carrying value. There were no impairment charges related to goodwill for the years ended December 31, 2020 and 2019. (See Note 8).

Debt Issuance Costs

Debt Issuance Costs

Debt issuance costs related to a recognized debt liability are deferred and amortized over the related term of the debt as non-cash interest expense and are presented on the consolidated balance sheets as a direct deduction from the carrying amount of the related debt liability. Debt issuance costs are amortized using the effective interest method or on a straight-line basis when it approximates the effective interest method.

Sales Tax

Sales Tax

The Company’s policy is to present taxes collected from customers and remitted to governmental authorities on a net basis. The Company records the amounts collected as a current liability and relieves such liability upon remittance to the taxing authority without impacting revenue or expenses.

Warranty Obligations

Warranty Obligations

The Company offers supplier-specific product warranties to its customers. In estimating future warranty obligations, the Company considers various relevant factors, including its warranty policies and practices and those of its suppliers, the historical frequency of claims, the cost to replace products under warranty, and the amounts expected to be reimbursed by suppliers. On certain products, customer warranty claims are covered directly by the manufacturer of the product. Management estimates its warranty obligation at December 31, 2020 and 2019, to be minimal, and therefore, the Company has not recorded a significant provision for accrued warranty costs.

Operating Leases

Operating Leases

The Company accounts for rent expense for its operating leases on a straight-line basis in accordance with authoritative guidance on accounting for leases. The Company leases its corporate, administrative, retail and manufacturing facilities over terms expiring between 2021 and 2029. The Company also leases certain office and warehouse equipment over terms expiring between 2021 and 2025. The term of the lease is considered its initial obligation period, which does not include option periods. The leases may have renewal clauses exercisable at the option of the Company and contain rent holidays and/or rent escalation clauses. The Company includes scheduled rent holidays and rent escalation clauses for the purposes of recognizing straight-line rent over the lease term.

Capital Leases

Capital Leases

The Company finances the acquisition of certain vehicles and equipment with capital leases. The acquisition costs are recognized as property, plant and equipment (“PP&E”) on the consolidated balance sheets at fair value at the inception of the lease, or, if lower, at the present value of the minimum lease payments as determined at the inception of the lease. The acquisition costs are amortized over the useful life on the same basis as owned vehicles or, where shorter, the term of the capital lease. Amortization expense is recorded as accumulated amortization on the consolidated balance sheets. The capital lease liability owed to the lessor is included in the consolidated balance sheets as a capital lease obligation. Lease payments are apportioned between interest expense and a reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

Revenue Recognition

Revenue Recognition

The Company’s revenue derived from the sale of imported granite, marble, and related items, primarily in our ASG operating segment, is recognized at a point in time when control over a product is transferred to a customer. This transfer occurs primarily when goods are picked up by a customer at the branch or when goods are delivered to a customer location.

The Company’s contracts with its home builder customers within our RDS operating segment are usually short-term in nature and will generally range in length from several days to several weeks.  The Company’s contracts related to multi-family and commercial projects are generally long-term in nature. We recognize revenue from both short-term and long-term contracts for each distinct performance obligation identified over time on a percentage-of-completion basis of accounting, utilizing the output method as a measure of progress, as we believe this represents the best measure of when goods and services are transferred to the customer.  

2. Summary of Significant Accounting Policies (Continued)

Revenue is measured at the transaction price, which is based on the amount of consideration the Company expects to receive in exchange for transferring the promised goods or services to the customer. The transaction price will include estimates of variable consideration, such as any returns and sales incentives. Applicable customer sales taxes, when remitted, are recorded as a liability and excluded from revenue on a net basis.  

In the fourth quarter of 2019, the Company adopted ASU 2014-09, the new accounting standard under ASC Topic 606, using the modified retrospective method as of January 1, 2019.  (See Note 3)

Cost of Revenue

Cost of Revenue

RDS’ cost of revenue is comprised of the costs of materials and labor to purchase and install products for the Company’s customers.

ASG’s cost of revenue primarily consists of purchased materials, sourcing fees for inventory procurement, and freight costs.

RDS and ASG also include payroll taxes and benefits, workers’ compensation insurance, vehicle-related expenses and overhead costs, including rent, depreciation, utilities, property taxes, repairs and maintenance costs in the cost of revenue.

The Company’s cost of revenue is reduced by rebates provided by suppliers in the period the rebate is earned.

Shipping and Handling Charges

Shipping and Handling Charges

Fees charged to customers for shipping and handling of product are included in revenue. The costs for shipping and handling of product are recorded as a component of cost of revenue.  Additionally, we consider shipping and handling costs charged to a customer as a fulfillment cost rather than a promised service and expense as incurred.

Advertising

Advertising

The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2020, 2019, and 2018 totaled $0.6 million, $1.2 million and $2.5 million, respectively.

Equity-based Compensation

Equity-based compensation

The Company accounts for equity-based awards by measuring the awards at the date of grant and recognizing the grant-date fair value as an expense using either straight-line or accelerated attribution, depending on the specific terms of the award agreements over the requisite service or performance period, which is usually equivalent to the vesting period. Forfeitures are recognized as they occur. (See Note 12)

Income Taxes

Income Taxes

The provision for income taxes is accounted for under the asset and liability method prescribed by ASC 740 (Topic 740, Income Taxes). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the tax rate changes are enacted.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement.

2. Summary of Significant Accounting Policies (Continued)

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was adopted into law. The Tax Act makes broad and complex changes to the Internal Revenue Code of 1986, including, but not limited to, (i) reducing the U.S. federal corporate tax rate from 35% to 21%; (ii) eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits are realized; (iii) creating a new limitation on deductible interest expense; and (iv) changing rules related to uses and limitation of net operating loss carryforwards created in tax years beginning after December 31, 2017.  

The Company’s policy is to recognize interest and/or penalties related to all tax positions as income tax expense. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. The Company has recognized less than ($0.1) million in combined interest and penalties related to uncertain tax positions for the year ended December 31, 2020. The Company recognized $0.4 million in combined interest and penalties related to uncertain tax positions for the year ended December 31, 2019.

Segment Reporting

Segment Reporting

In accordance with ASC 280-10-50-1, an operating segment is a component of an entity that has all the following characteristics:

a. It engages in business activities from which it may earn revenues and incur expenses.

b. Its discrete financial information is available.

c. Its operating results are regularly reviewed by the public entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.

The Company has identified two operating segments that meet all three of the criteria, RDS and ASG. Each of these operating segments provides products and services that generate revenue and incur expenses as they engage in business activities and maintains discrete financial information. Additionally, the Company’s chief operating decision maker, the Chief Executive Officer, reviews financial performance, approves budgets and allocates resources at the RDS and ASG operating segment level.

Recently Issued and Adopted Accounting Pronouncements

Recently Issued and Adopted Accounting Pronouncements

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. The Company has elected to use the extended transition period for complying with new or revised accounting standards under Section 107 of the JOBS Act. This election allows the Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies.

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). The ASU establishes a comprehensive revenue recognition standard for virtually all industries in U.S. GAAP, including those that previously followed industry-specific guidance, such as the real estate, construction, and software industries. The ASU core principal is to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. During 2014-2016, the FASB issued various amendments to this topic and the amendments clarified certain positions and extended the implementation date until annual periods beginning after December 15, 2018. During the quarter ended December 31, 2019, the Company adopted this guidance on a modified retrospective basis. For contracts which were not completed as of January 1, 2019, revenue related to our short-term contracts with homebuilder customers, primarily in our RDS operating segment, are now recognized over time based on the extent of progress towards completion of the individual performance obligations, instead of under the completed contract method, because of continuous transfer of control to the customer.  There was no material impact on our revenue recognition for our multi-family contracts that are currently recognized under the existing percentage-of-completion method of accounting, due to the comparable methodology of revenue recognition under the updated guidance. There was also no material impact from adoption related to our sales of imported granite, marble, and related items of our ASG operating segment, as the Company has concluded that it has substantially similar performance obligations and recognition timing under the amended guidance.  We recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings on January 1, 2019 of approximately $1.2 million. (See Note 3).  

2. Summary of Significant Accounting Policies (Continued)

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) - Disclosure Framework (ASU 2018-13). The updated guidance improves the disclosure requirements for fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  The adoption of ASU 2018-13 did not have a material impact on our consolidated financial statements.

Accounting Pronouncements Issued but Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous standards. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of asset not to recognize lease assets and lease liabilities. In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, and in June 2020, the FASB issued ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, to defer the effective date of ASU No.2016-02 for certain entities. For the Company, the new standard is effective for annual periods beginning January 1, 2022.  The Company is currently evaluating the impact of the provisions of ASU 2016-02 on the presentation of its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” (ASU 2016-03) which amends ASC 326 “Financial Instruments—Credit Losses.”  Subsequent to the issuance of ASU 2016-13, ASC 326 was amended by various updates that amend and clarify the impact and implementation of the aforementioned update.  The new guidance introduces the current expected credit loss (CECL) model, which will require an entity to record an allowance for credit losses for certain financial instruments and financial assets, including trade receivables, based on expected losses rather than incurred losses.  Under this update, on initial recognition and at each reporting period, an entity will be required to recognize an allowance that reflects the entity’s current estimate of credit losses expected to be incurred over the life of the financial instrument.  In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates which delays the effective date of ASU 2016-13 until fiscal years beginning after December 15, 2022.  The Company is currently evaluating the impact of the provisions of ASU 2016-13 on the presentation of its consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the goodwill impairment test by eliminating the step 2 requirement to determine the fair value of its assets and liabilities at the impairment testing date. ASU 2017-04 is effective for annual periods beginning after December 15, 2021. The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.

2. Summary of Significant Accounting Policies (Continued)

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40) No. 2018-15 Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15). ASU 2018-15 provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement that is a service contract. The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post implementation stages are expensed as the activities are performed. ASU 2018-15 is effective for fiscal years beginning after December 15, 2020. Early adoption of the amendments in ASU 2018-15 is permitted, including adoption in any interim period, for all entities. The amendments in ASU 2018-15 should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently assessing the effect this guidance may have on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes” which amends ASC 740 “Income Taxes” (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021.  The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted.  The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Schedule of Computation of Basic and Diluted Loss per Share

The following table sets forth the computation of basic and diluted loss per share for the years ended December 31, 2020, 2019 and 2018:

(in thousands, except share and per share data)	Year Ended December 31, 2020			Year Ended December 31, 2019		Year Ended December 31, 2018
Net income (loss)	$	(9,853	)	$	6,984	$	(2,475	)
Weighted average shares of common stock outstanding:
Basic common stock		25,337,249			25,296,955		25,634,342
Diluted common stock		25,337,249			25,431,677		25,634,342
Earnings (loss) per share of common stock:
Basic common stock	$	(0.39	)	$	0.28	$	(0.10	)
Diluted common stock	$	(0.39	)	$	0.27	$	(0.10	)

Schedule of Estimated Useful Lives of Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. The Company capitalizes internal-use software as property and equipment under ASC 350-40, Internal-Use Software.  Depreciation and amortization are provided for on a straight-line basis over the estimated useful lives of the related assets as follows:

	Range of estimated useful lives
Machinery and equipment	5 - 7 years
Vehicles	3 - 7 years
Furniture and fixtures	3 - 7 years
Computer equipment	3 - 5 years
Leasehold improvements	Shorter of 15 years or the remaining lease term

Schedule of Estimated Useful Lives Definite Lived Intangible Assets

The Company considers all its intangible assets to have definite lives and are being amortized on the straight-line method over the estimated useful lives of the respective assets or on an accelerated basis based on the expected cash flows generated by the existing customers as follows:

	Range of estimated useful lives	Weighted average useful life
Customer relationships	2 years – 15 years	10 years
Trade names	3 years – 11 years	8 years
Non-compete agreements	Life of agreement	4 years

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Revenue (Tables)

12 Months Ended

Dec. 31, 2020

Residential Design Services

Disaggregation Of Revenue [Line Items]

Summary of Net Revenue Disaggregated by Geographical Area and Product Category

The following table presents net revenue for the RDS operating segment disaggregated by geographical area for the years ended December 31, 2020 and 2019:

RDS
(in thousands)	2020		%			2019		%
East	$	77,889		24	%	$	93,274		25	%
Central		20,500		6	%		17,100		5	%
West		234,100		70	%		258,200		70	%
	$	332,489		100	%	$	368,574		100	%

Architectural Surfaces Group

Disaggregation Of Revenue [Line Items]

Summary of Net Revenue Disaggregated by Geographical Area and Product Category

The following table presents net revenue for the ASG operating segment disaggregated by product category for the years ended December 31, 2020 and 2019:

ASG
(in thousands)	2020		%			2019		%
Quartz	$	134,797		60	%	$	138,500		57	%
Stone		67,225		30	%		75,511		31	%
Tile		13,936		6	%		20,211		8	%
Other		7,609		4	%		10,567		4	%
	$	223,567		100	%	$	244,789		100	%

ASU 2014-09

Disaggregation Of Revenue [Line Items]

Summary of Impact of Topic 606 on Financial Statements

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on the Company’s Consolidated Statement of Operations and Consolidated Balance Sheet was as follows (in thousands):

	For the year ended December 31, 2019
Consolidated Statement of Operations	As Reported		Balances without Adoption		Impact of Adoption
Revenue, net	$	610,373	$	609,899	$	474
Cost of revenue		446,299		445,890		409
Selling, general, and administrative expenses		144,816		144,832		(16	)
Provision for income taxes		1,521		1,500		21
Net income		6,984		6,924		60

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Acquisitions (Tables)

12 Months Ended

Dec. 31, 2020

Intown Design Inc.

Purchase Price

The total purchase price consisted of the following:

(in thousands)	Amount
Cash consideration	$	11,537
Fair value of earn-out		2,010
	$	13,547

Summary of Estimated Purchase Price Allocation of Assets Acquired and Liabilities Assumed

The following table summarizes the allocation of the purchase price as of the transaction’s closing date.

(in thousands)	Amount
Accounts receivable	$	1,392
Inventory		1,155
Property and equipment		1,092
Goodwill		4,698
Other intangible assets		5,310
Total assets acquired	$	13,647
Total liabilities		100
Total consideration	$	13,547

Pro Forma Results of Operations

The following unaudited pro forma information for the year ended December 31, 2019 and 2018 has been prepared to give effect to the acquisition of Intown as if the acquisition had occurred on January 1, 2018. The pro forma information takes into account the preliminary purchase price allocation. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the Intown acquisition occurred on such date, nor does it purport to predict the results of operations for future periods.

5. Acquisitions (Continued)

	Year Ended December 31,
	2019		2018
(in thousands)	(unaudited)
Pro Forma:
Total revenue, net	$	613,225	$	510,465
Net income (loss)	$	6,787	$	(1,736	)

Elegant Home Design, LLC

Summary of Estimated Purchase Price Allocation of Assets Acquired and Liabilities Assumed

The following table summarizes the allocation of the purchase price as of the transaction’s closing date:

(in thousands)	Amount
Accounts receivable	$	2,543
Inventory		13,425
Other current assets		163
Property and equipment		374
Goodwill		381
Other intangible assets		1,505
Other assets		60
Total assets acquired	$	18,451
Total liabilities		5,959
Total consideration	$	12,492

Pro Forma Results of Operations

The following unaudited pro forma information for the year ended December 31, 2018 has been prepared to give effect to the acquisition of Bedrock as if the acquisition had occurred on January 1, 2018. The pro forma information takes into account the purchase price allocation. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the Bedrock acquisition occurred on such date, nor does it purport to predict the results of operations for future periods.

	Year Ended December 31,
	2018
(in thousands)	(unaudited)
Pro Forma:
Total revenue, net	$	491,984
Net (loss)	$	(2,445	)

NSI, LLC

Summary of Estimated Purchase Price Allocation of Assets Acquired and Liabilities Assumed

The following table summarizes the estimated allocation of the preliminary purchase price as of the transaction’s closing date:

(in thousands)	Amount
Accounts receivable	$	251
Inventory		689
Goodwill		390
Total assets acquired	$	1,330
Total liabilities		1,040
Total consideration	$	290

Tuscany Collection, LLC

Summary of Estimated Purchase Price Allocation of Assets Acquired and Liabilities Assumed

The following table summarizes the estimated allocation of the purchase price as of the transaction’s closing date:

(in thousands)	Amount
Accounts receivable	$	167
Inventory		2,258
Goodwill		1,081
Other intangible assets		2,685
Other current assets		161
Total assets acquired	$	6,352
Total liabilities		2,200
Total consideration	$	4,152

Summit Stoneworks, LLC

Purchase Price

5. Acquisitions (Continued)

The total purchase price consisted of the following:

(in thousands)	Amount
Cash consideration	$	16,000
Fair value of earn-out		1,851
	$	17,851

Summary of Estimated Purchase Price Allocation of Assets Acquired and Liabilities Assumed

The following table summarizes the allocation of the purchase price as of the transaction’s closing date:

(in thousands)	Amount
Accounts receivable	$	1,249
Inventory		1,059
Property and equipment		1,042
Goodwill		8,304
Other intangible assets		8,280
Other assets		14
Total assets acquired	$	19,948
Total liabilities		2,097
Total consideration	$	17,851

Pro Forma Results of Operations

The following unaudited pro forma information for the year ended December 31, 2018 has been prepared to give effect to the acquisition of Summit as if the acquisition had occurred on January 1, 2018. The pro forma information takes into account the purchase price allocation. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the Summit acquisition occurred on such date, nor does it purport to predict the results of operations for future periods.

	Year Ended December 31,
	2018
(in thousands)	(unaudited)
Pro Forma:
Total revenue, net	$	500,785
Net (loss)	$	(3,954	)

T.A.C. Ceramic Tile Co.

Purchase Price

The total purchase price consisted of the following:

(in thousands)	Amount
Cash consideration	$	41,210
Fair value of earn-out		2,265
	$	43,475

Summary of Estimated Purchase Price Allocation of Assets Acquired and Liabilities Assumed

5. Acquisitions (Continued)

The following table summarizes the estimated allocation of the purchase price as of the transaction’s closing date:

(in thousands)	Amount
Cash	$	1,217
Accounts receivable		6,966
Inventory		4,093
Other current assets		87
Property and equipment		943
Goodwill		18,292
Other intangible assets		19,865
Other assets		4,873
Total assets acquired	$	56,336
Current liabilities		1,895
Deferred income taxes		6,099
Other long-term liabilities		4,867
Total liabilities	$	12,861
Total consideration	$	43,475

Pro Forma Results of Operations

The following unaudited pro forma information for the year ended December 31, 2018 has been prepared to give effect to the acquisition of TAC as if the acquisition had occurred on January 1, 2018. The pro forma information takes into account the preliminary purchase price allocation. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the TAC acquisition occurred on such date, nor does it purport to predict the results of operations for future periods.

	Year Ended December 31,
	2018
(in thousands)	(unaudited)
Pro Forma:
Total revenue, net	$	562,219
Net (loss)	$	(2,793	)

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Inventories (Tables)

12 Months Ended

Dec. 31, 2020

Inventory Disclosure [Abstract]

Summary of Significant Components of Inventory

The significant components of inventory consisted of the following at

(in thousands)	December 31, 2020		December 31, 2019
Raw materials	$	97,988	$	102,438
Installations in process		994		2,303
	$	98,982	$	104,741

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Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2020

Property Plant And Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment consisted of the following at:

(in thousands)	December 31, 2020			December 31, 2019
Vehicles	$	10,948		$	10,759
Machinery and equipment		9,588			9,672
Leasehold improvements		9,040			8,962
Furniture and fixtures		8,031			6,906
Computer equipment and internal-use software		11,879			10,167
Other		1,957			1,048
	$	51,443		$	47,514
Less: accumulated depreciation and amortization		(30,387	)		(21,020	)
Property and equipment, net	$	21,056		$	26,494

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Summary of Changes in Carrying Amount of Goodwill

The change in carrying amount of goodwill by reporting unit was as follows:

(in thousands)	ASG		RDS		Total Goodwill
December 31, 2018	$	45,564	$	49,029	$	94,593
Intown Acquisition		—		4,698		4,698
TAC measurement period adjustment		—		498		498
December 31, 2019	$	45,564	$	54,225	$	99,789
2020 activity		—		—		—
December 31, 2020	$	45,564	$	54,225	$	99,789

Schedule of Gross Carrying Amount, Accumulated Amortization and Net Book Value of Intangible Assets

The following table provides the gross carrying amount, accumulated amortization and net book value for each class of intangible assets by reporting unit as of December 31, 2020:

(in thousands)	Gross Carrying Amount	ASG		RDS		Total Gross Carrying Amount
Customer relationships		$	60,180	$	60,060	$	120,240
Trade names			7,740		18,090		25,830
Non-Compete agreements			50		350		400
		$	67,970	$	78,500	$	146,470

(in thousands)	Accumulated Amortization	ASG			RDS			Total Accumulated Amortization
Customer relationships		$	(25,548	)	$	(31,992	)	$	(57,540	)
Trade names			(3,139	)		(7,522	)		(10,661	)
Non-Compete agreements			(33	)		(222	)		(255	)
		$	(28,720	)	$	(39,736	)	$	(68,456	)

(in thousands)	Net Book Value	ASG		RDS		Total Net Book Value
Customer relationships		$	34,632	$	28,068	$	62,700
Trade names			4,601		10,568		15,169
Non-Compete agreements			17		128		145
		$	39,250	$	38,764	$	78,014

The following table provides the gross carrying amount, accumulated amortization and net book value for each class of intangible assets by reporting unit as of December 31, 2019:

(in thousands)	Gross Carrying Amount	ASG		RDS		Total Gross Carrying Amount
Customer relationships		$	60,180	$	60,060	$	120,240
Trade names			7,740		18,090		25,830
Non-Compete agreements			50		350		400
		$	67,970	$	78,500	$	146,470

(in thousands)	Accumulated Amortization	ASG			RDS			Total Accumulated Amortization
Customer relationships		$	(19,410	)	$	(28,841	)	$	(48,251	)
Trade names			(2,300	)		(5,013	)		(7,313	)
Non-Compete agreements			(21	)		(137	)		(158	)
		$	(21,731	)	$	(33,991	)	$	(55,722	)

(in thousands)	Net Book Value	ASG		RDS		Total Net Book Value
Customer relationships		$	40,770	$	31,219	$	71,989
Trade names			5,440		13,077		18,517
Non-Compete agreements			29		213		242
		$	46,239	$	44,509	$	90,748

Schedule of Estimated Annual Amortization Expense

The estimated annual amortization expense for the next five years and thereafter is as follows:

Year Ending December 31:
2021	$	12,603
2022		12,401
2023		12,038
2024		10,313
2025		9,580
Thereafter		21,079
	$	78,014

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Long-Term Debt (Tables)

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Schedule of Long-Term Debt

Long-term debt consisted of the following at:

(in thousands)	December 31, 2020			December 31, 2019
RDS equipment and vehicle notes	$	141		$	489
ASG term loans		152,773			154,177
		152,914			154,666
Unamortized debt issuance costs		(2,765	)		(1,618	)
Total long-term debt		150,149			153,048
Current portion of long-term debt, net of financing fees	$	15,623		$	11,749
Long-term debt, net of current portion and financing fees	$	134,526		$	141,299

Schedule of future maturities of long-term debt

At December 31, 2020, the future maturities of the Company’s long-term debt for each of the next five years and thereafter are as follow:

2021	$	16,902
2022		1,040
2023		134,972
	$	152,914
Unamortized balance remaining of financing fees		(2,765	)
Total long-term debt net of financing fees		150,149
Current portion of long-term debt net of financing fees		(15,623	)
Long term debt net of financing fees	$	134,526

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2020

Commitments And Contingencies Disclosure [Abstract]

Aggregate Future Minimum Payments Under Capital Leases and Noncancelable Operating Leases

Aggregate future minimum payments under capital leases and noncancelable operating leases at December 31, 2020 are as follows:

(in thousands)	Capital Lease Obligations			Related Party Operating Lease Obligations		Third Party Operating Lease Obligations		Net Lease Commitments
2021	$	3,042		$	2,051	$	13,393	$	18,486
2022		2,611			1,702		11,587		15,900
2023		1,374			986		7,957		10,317
2024		962			—		3,905		4,867
2025		300			—		3,033		3,333
Thereafter		500			—		3,098		3,598
Total minimum lease payments	$	8,789		$	4,739	$	42,973	$	56,501
Less: amount representing interest		(854	)
Present value of net minimum lease payments		7,935
Less: current maturities of capital lease obligations		(2,700	)
Long-term capital lease obligations	$	5,235

Schedule of Future Minimum Purchases for Maintain Exclusive Rights

Using an estimated price per container based on the 2020 average price per container the future minimum purchases to maintain the exclusive rights as of December 31, 2020 are as follows:

(in thousands)	Amount
2021	$	84,500
2022		102,186
2023		121,837
2024		145,419
2025		174,502
	$	628,444

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Stock Compensation (Tables)

12 Months Ended

Dec. 31, 2020

Restricted Stock

Summary of Restricted Stock Activity and Phantom Stock Activity

A summary of the restricted stock activity for the Plans for the years ended December 31, 2020, 2019 and 2018 is as follows:

(in thousands)	Nonvested Shares Outstanding			Weighted Average Grant Date Fair Value
Nonvested shares at December 31, 2017		356,368		$	12.00
Granted		779,016		$	11.83
Forfeited		(281,762	)	$	12.00
Vested		(27,646	)	$	12.00
Nonvested shares at December 31, 2018		825,976		$	11.84
Granted		1,453,205		$	12.99
Forfeited		(197,185	)	$	12.00
Vested		(256,873	)	$	11.79
Nonvested shares at December 31, 2019		1,825,123		$	12.75
Granted		1,347,877		$	4.25
Forfeited		(1,255,365	)	$	11.93
Vested		(470,216	)	$	10.64
Nonvested shares at December 31, 2020		1,447,419		$	5.33

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Provision for Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Components of Provision for Income Taxes Reflected on Consolidated Statements of Operations

At December 31, 2020, 2019 and 2018, the components of the provision for income taxes reflected on the consolidated statements of operations are as follows:

(in thousands)	2020			2019			2018
Current:
Federal	$	(4,302	)	$	1,728		$	3,604
State		(345	)		1,287			1,571
Total current		(4,647	)		3,015			5,175
Deferred:
Federal		671			618			(2,871	)
State		1,002			(2,112	)		(1,315	)
Total deferred		1,673			(1,494	)		(4,186	)
Provision (benefit) for income taxes	$	(2,974	)	$	1,521		$	989

Reconciliation of Expected Income Tax Expense (Computed by Applying Federal Statutory Income Tax Rate to Income Before Taxes) to Actual Income Tax Expense

The following is a reconciliation of expected income tax expense (computed by applying the federal statutory income tax rate to income before taxes) to actual income tax expense.

(in thousands)	2020			2019			2018
Income taxes at federal statutory rate	$	(2,694	)	$	1,786		$	(280	)
State income taxes, net of federal benefit		387			(651	)		148
Transaction costs		—			—			968
TAC earn-out		—			(476	)		—
Equity-based compensation		—			134			—
Permanent items		852			298			294
State rate changes		364			(293	)		(27	)
162(m) limitation		—			345			—
Other, net		90			378			(114	)
Uncertain tax position		(1,123	)		—			—
Rate differential on carryback		(850	)		—			-
Provision (benefit) for income taxes	$	(2,974	)	$	1,521		$	989

Components of Deferred Tax Assets and Liabilities

The components of deferred tax assets and liabilities are as follows as of December 31, 2020 and 2019:

(in thousands)	2020			2019
Deferred tax assets
Accrued liabilities	$	2,627		$	1,555
State income taxes		—			103
Intangible assets		4,285			4,919
Net operating loss		682			994
Inventory		3,981			4,351
Equity-based compensation		772			999
Other, net		555			902
Interest limitation		66			676
Total deferred tax assets		12,968			14,499
Deferred tax liabilities
Property and equipment		(3,343	)		(2,562	)
Prepaids		(91	)		(370	)
ASC 606 method change		(657	)		(1,017	)
Total deferred tax liabilities		(4,091	)		(3,949	)
Net deferred tax assets	$	8,877		$	10,550

Reconciliation of Beginning and Ending Amounts of Unrecognized Tax Positions

A reconciliation of the beginning and ending amounts of unrecognized tax positions are as follows:

(in thousands)	2020			2019
Unrecognized tax positions, beginning of year	$	3,998		$	4,364
Gross increase - prior period tax positions		—			298
Gross decrease - prior period tax positions		—			(395	)
Expiration of statute of limitations		(1,092	)		(269	)
Unrecognized tax positions, end of year	$	2,906		$	3,998

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Performance of Segment based upon Revenues, Operating Income and Assets

16. Segment Information (Continued)

The Company evaluates performance of the respective segments based upon revenue and operating income. Information for the years presented is provided below:

	For the Years Ended December 31,
(in thousands)	2020			2019			2018
Revenue, net:
RDS	$	332,489		$	368,574		$	268,362
ASG		223,567			244,789			223,971
Elimination of intercompany sales		(2,031	)		(2,990	)		(2,576	)
Consolidated total	$	554,025		$	610,373		$	489,757
Operating income:
RDS	$	1,615		$	17,544		$	14,252
ASG		19,173			19,860			11,925
Elimination of intercompany activity		(23	)		96			(46	)
Unallocated corporate operating loss		(17,383	)		(18,242	)		(14,034	)
Consolidated total	$	3,382		$	19,258		$	12,097
Capital expenditures:
RDS	$	2,324		$	7,155		$	1,684
ASG		1,104			1,986			6,539
Unallocated corporate capital expenditures		8			28			284
Consolidated total	$	3,436		$	9,169		$	8,507
Depreciation and amortization:
RDS	$	11,578		$	12,896		$	9,634
ASG		11,185			11,159			10,833
Unallocated corporate depreciation and amortization		104			102			20
Consolidated total	$	22,867		$	24,157		$	20,487
	As of December 31,
(in thousands)	2020			2019
Goodwill:
RDS	$	54,225		$	54,225
ASG		45,564			45,564
Consolidated total	$	99,789		$	99,789
Other intangible assets, net:
RDS	$	38,764		$	44,509
ASG		39,250			46,239
Consolidated total	$	78,014		$	90,748
Total assets:
RDS	$	193,488		$	182,754
ASG		198,341			217,655
Consolidation entries		40			36
Unallocated assets, including corporate		13,139			19,830
Consolidated total	$	405,008		$	420,275

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Selected Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2020

Quarterly Financial Data [Abstract]

Summary of Selected Quarterly Financial Information

Selected summarized quarterly financial information is as follows for the periods presented:

(In thousands, except per share data)	Quarter Ended
Fiscal 2020	December 31			September 30		June 30			March 31
Total revenue, net	$	144,155		$	150,050	$	125,442		$	134,378
Gross profit		35,225			38,590		30,700			30,694
Income (loss) from operations		248			5,144		(37	)		(1,973	)
Net income (loss)		(3,203	)		531		(3,179	)		(4,002	)
Basic EPS	$	(0.13	)	$	0.02	$	(0.13	)	$	(0.16	)
Diluted EPS	$	(0.13	)	$	0.02	$	(0.13	)	$	(0.16	)
Fiscal 2019 (a)
Total revenue, net	$	155,242		$	159,395	$	158,342		$	136,920
Gross profit		38,770			42,338		44,168			38,733
Income from operations		2,952			6,209		6,750			3,266
Net income		3,177			2,458		1,162			127
Basic EPS	$	0.13		$	0.10	$	0.05		$	0.00
Diluted EPS	$	0.13		$	0.10	$	0.05		$	0.00

(a) The 2019 quarterly results presented will not sum to 2019 annual results due to the adoption of ASU 2014-19 during the quarter ended December 31, 2019.  The quarters in 2019 are presented under the previous standard, ASC Topic 605.

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Organization and Business Description - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended	12 Months Ended
	Nov. 22, 2017	Dec. 31, 2017	Dec. 31, 2020	Dec. 31, 2018	Dec. 31, 2019	Dec. 29, 2017	Feb. 28, 2017	Jun. 30, 2015
Organization and Business Description [Line Items]
Gross proceeds from issuance common stock				$ 553
Payment of lending related fees			$ 2,230	$ 958
November 2017 Private Offering and Private Placement | RDS and ASG
Organization and Business Description [Line Items]
Purchase amount of equity interests	$ 62,700
Repayment of outstanding indebtedness	112,800
Payment of lending related fees	$ 300
Class B
Organization and Business Description [Line Items]
Number of shares of common stock issued and sold to new investors				39,645
Class A
Organization and Business Description [Line Items]
Common stock, par value			$ 0.01		$ 0.01
Number of shares of common stock issued and sold to new investors			117,345	752
November 2017 Restructuring Transactions | Class B
Organization and Business Description [Line Items]
Common stock, par value	$ 0.01
November 2017 Restructuring Transactions | Class B | November 2017 Private Offering and Private Placement
Organization and Business Description [Line Items]
Common stock repurchased, shares		3,000,000
November 2017 Restructuring Transactions | Class B | Affiliates of Trive Capital | November 2017 Private Offering and Private Placement
Organization and Business Description [Line Items]
Common stock repurchased, shares	2,379,486
Common stock repurchased, value	$ 26,600
November 2017 Restructuring Transactions | Class A | November 2017 Private Offering and Private Placement
Organization and Business Description [Line Items]
Common stock, par value	$ 0.01
Number of shares of common stock issued and sold to new investors	18,750,000	3,000,000
Public offering price per share	$ 12.00	$ 12.00
Gross proceeds from issuance common stock	$ 225,000	$ 36,000
Greencraft Holdings, LLC.
Organization and Business Description [Line Items]
Equity interests acquired						100.00%
T.A.C. Ceramic Tile Co.
Organization and Business Description [Line Items]
Equity interests acquired				100.00%
Architectural Granite and Marble, LLC
Organization and Business Description [Line Items]
Equity interests acquired								100.00%
Pental Granite and Marble, LLC
Organization and Business Description [Line Items]
Equity interests acquired							100.00%

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Summary of Significant Accounting Policies - Additional Information (Details)	12 Months Ended
	Dec. 31, 2020 USD ($) Segment shares	Dec. 31, 2019 USD ($) shares	Dec. 31, 2018 USD ($) shares	Mar. 31, 2019 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Restricted cash	$ 0	$ 0
Adjustment (decreasing) increasing the fair value of earn-out other (income) expense		(6,029,000)	$ 2,109,000
Fair value transfers between levels	0	0
Allowance for doubtful accounts	489,000	849,000
Impairment losses on long-lived assets	0	0
Impairment charges on goodwill	0	0
Advertising expense	$ 600,000	1,200,000	$ 2,500,000
Combined interest and penalties accrued		400,000
Number of operating segments | Segment	2
Estimated adjustment to opening retained earnings as result of implementation of ASU	$ (9,834,000)	19,000
Cumulative Effect Period of Adoption Adjustment
Summary Of Significant Accounting Policies [Line Items]
Estimated adjustment to opening retained earnings as result of implementation of ASU	1,200,000
Maximum
Summary Of Significant Accounting Policies [Line Items]
Combined interest and penalties accrued	$ 100,000
Corporate, Administrative, Retail and Manufacturing Facilities | Minimum
Summary Of Significant Accounting Policies [Line Items]
Operating lease expiration year	2021
Corporate, Administrative, Retail and Manufacturing Facilities | Maximum
Summary Of Significant Accounting Policies [Line Items]
Operating lease expiration year	2029
Office Equipment | Minimum
Summary Of Significant Accounting Policies [Line Items]
Operating lease expiration year	2021
Office Equipment | Maximum
Summary Of Significant Accounting Policies [Line Items]
Operating lease expiration year	2025
Summit Stoneworks, LLC
Summary Of Significant Accounting Policies [Line Items]
Adjustment (decreasing) increasing the fair value of earn-out other (income) expense		1,900,000
Summit Stoneworks, LLC | Level 3
Summary Of Significant Accounting Policies [Line Items]
Earn-out liability with a fair value		0
T.A.C. Ceramic Tile Co.
Summary Of Significant Accounting Policies [Line Items]
Adjustment (decreasing) increasing the fair value of earn-out other (income) expense		2,300,000
T.A.C. Ceramic Tile Co. | Level 3
Summary Of Significant Accounting Policies [Line Items]
Earn-out liability with a fair value		0
Intown Design Inc.
Summary Of Significant Accounting Policies [Line Items]
Earn-out liability with a fair value				$ 2,000,000.0
Adjustment (decreasing) increasing the fair value of earn-out other (income) expense		2,000,000.0
Intown Design Inc. | Level 3
Summary Of Significant Accounting Policies [Line Items]
Earn-out liability with a fair value		$ 0
Restricted Stock
Summary Of Significant Accounting Policies [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount | shares	2,797,419		825,976
Class B
Summary Of Significant Accounting Policies [Line Items]
Common stock, shares outstanding | shares	0
Class A
Summary Of Significant Accounting Policies [Line Items]
Common stock, shares outstanding | shares	25,449,025	25,106,402
Number of securities called by each shares | shares	1

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Summary of Significant Accounting Policies - Schedule of Computation of Basic and Diluted Loss per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Net income (loss)	$ (9,853)	$ 6,984	$ (2,475)
Weighted average shares of common stock outstanding:
Basic common stock	25,337,249	25,296,955	25,634,342
Diluted common stock	25,337,249	25,431,677	25,634,342
Income (loss) per basic and diluted share of common stock
Basic common stock	$ (0.39)	$ 0.28	$ (0.10)
Diluted common stock	$ (0.39)	$ 0.27	$ (0.10)

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Summary of Significant Accounting Policies - Schedule of Estimated Useful Lives of Property and Equipment (Details)	12 Months Ended
	Dec. 31, 2020
Machinery and Equipment | Minimum
Property Plant And Equipment [Line Items]
Estimated useful lives of property and equipment	5 years
Machinery and Equipment | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives of property and equipment	7 years
Vehicles | Minimum
Property Plant And Equipment [Line Items]
Estimated useful lives of property and equipment	3 years
Vehicles | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives of property and equipment	5 years
Furniture and Fixtures | Minimum
Property Plant And Equipment [Line Items]
Estimated useful lives of property and equipment	3 years
Furniture and Fixtures | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives of property and equipment	7 years
Computer and Office Equipment | Minimum
Property Plant And Equipment [Line Items]
Estimated useful lives of property and equipment	3 years
Computer and Office Equipment | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives of property and equipment	5 years
Leasehold Improvements
Property Plant And Equipment [Line Items]
Estimated useful lives of property and equipment, description	Shorter of 15 years or the remaining lease term
Leasehold Improvements | Maximum
Property Plant And Equipment [Line Items]
Estimated useful lives of property and equipment	15 years

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Summary of Significant Accounting Policies - Schedule of Estimated Useful Lives Definite Lived Intangible Assets (Details)	12 Months Ended
	Dec. 31, 2020
Customer Relationships
Finite Lived Intangible Assets [Line Items]
Weighted average useful life	10 years
Customer Relationships | Minimum
Finite Lived Intangible Assets [Line Items]
Range of estimated useful lives	2 years
Customer Relationships | Maximum
Finite Lived Intangible Assets [Line Items]
Range of estimated useful lives	15 years
Trade Names
Finite Lived Intangible Assets [Line Items]
Weighted average useful life	8 years
Trade Names | Minimum
Finite Lived Intangible Assets [Line Items]
Range of estimated useful lives	3 years
Trade Names | Maximum
Finite Lived Intangible Assets [Line Items]
Range of estimated useful lives	11 years
Non-compete Agreements
Finite Lived Intangible Assets [Line Items]
Range of estimated useful lives	Life of agreement
Weighted average useful life	4 years

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Revenue - Additional Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Jan. 01, 2019
Disaggregation Of Revenue [Line Items]
Retained earnings (accumulated deficit)	$ (9,834)	$ 19
Contract assets	12,800	5,700
Customer deposits	8,144	8,627
Revenue remaining performance obligation	$ 3,200	$ 4,500
Multi-family or Commercial Arrangements | Revenue Benchmark | Product Concentration Risk
Disaggregation Of Revenue [Line Items]
Concentration risk, percentage	4.50%	2.80%
ASU 2014-09 | Adjustments due to 606 Adoption
Disaggregation Of Revenue [Line Items]
Retained earnings (accumulated deficit)			$ 1,200

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Revenue - Summary of Impact of Topic 606 on Consolidated Statement of Operations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Revenue, net	$ 554,025	$ 610,373	$ 489,757
Cost of revenue	418,816	446,299	356,303
Selling, general and administrative expenses	131,827	144,816	121,357
Provision for income taxes	(2,974)	1,521	989
Net income (loss)	$ (9,853)	6,984	$ (2,475)
ASU 2014-09 | Balances Without Adoption
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Revenue, net		609,899
Cost of revenue		445,890
Selling, general and administrative expenses		144,832
Provision for income taxes		1,500
Net income (loss)		6,924
ASU 2014-09 | Impact of Adoption
New Accounting Pronouncements Or Change In Accounting Principle [Line Items]
Revenue, net		474
Cost of revenue		409
Selling, general and administrative expenses		(16)
Provision for income taxes		21
Net income (loss)		$ 60

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Revenue - Additional Information 1 (Details)	Dec. 31, 2020	Dec. 31, 2019
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2020-01-01
Disaggregation Of Revenue [Line Items]
Revenue remaining performance obligation, expected timing of satisfaction, period		12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2021-01-01
Disaggregation Of Revenue [Line Items]
Revenue remaining performance obligation, expected timing of satisfaction, period	12 months

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Revenue - Summary of Net Revenue Disaggregated by Geographical Area and Product Category (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Disaggregation Of Revenue [Line Items]
Revenue, net	$ 554,025	$ 610,373	$ 489,757
Residential Design Services
Disaggregation Of Revenue [Line Items]
Revenue, net	$ 332,489	$ 368,574
Residential Design Services | Revenue Benchmark | Geographic Concentration Risk
Disaggregation Of Revenue [Line Items]
Concentration risk, percentage	100.00%	100.00%
Residential Design Services | East
Disaggregation Of Revenue [Line Items]
Revenue, net	$ 77,889	$ 93,274
Residential Design Services | East | Revenue Benchmark | Geographic Concentration Risk
Disaggregation Of Revenue [Line Items]
Concentration risk, percentage	24.00%	25.00%
Residential Design Services | Central
Disaggregation Of Revenue [Line Items]
Revenue, net	$ 20,500	$ 17,100
Residential Design Services | Central | Revenue Benchmark | Geographic Concentration Risk
Disaggregation Of Revenue [Line Items]
Concentration risk, percentage	6.00%	5.00%
Residential Design Services | West
Disaggregation Of Revenue [Line Items]
Revenue, net	$ 234,100	$ 258,200
Residential Design Services | West | Revenue Benchmark | Geographic Concentration Risk
Disaggregation Of Revenue [Line Items]
Concentration risk, percentage	70.00%	70.00%
Architectural Surfaces Group
Disaggregation Of Revenue [Line Items]
Revenue, net	$ 223,567	$ 244,789
Architectural Surfaces Group | Stone
Disaggregation Of Revenue [Line Items]
Revenue, net	67,225	75,511
Architectural Surfaces Group | Quartz
Disaggregation Of Revenue [Line Items]
Revenue, net	134,797	138,500
Architectural Surfaces Group | Tile
Disaggregation Of Revenue [Line Items]
Revenue, net	13,936	20,211
Architectural Surfaces Group | Other
Disaggregation Of Revenue [Line Items]
Revenue, net	$ 7,609	$ 10,567
Architectural Surfaces Group | Revenue Benchmark | Product Concentration Risk
Disaggregation Of Revenue [Line Items]
Concentration risk, percentage	100.00%	100.00%
Architectural Surfaces Group | Revenue Benchmark | Product Concentration Risk | Stone
Disaggregation Of Revenue [Line Items]
Concentration risk, percentage	30.00%	31.00%
Architectural Surfaces Group | Revenue Benchmark | Product Concentration Risk | Quartz
Disaggregation Of Revenue [Line Items]
Concentration risk, percentage	60.00%	57.00%
Architectural Surfaces Group | Revenue Benchmark | Product Concentration Risk | Tile
Disaggregation Of Revenue [Line Items]
Concentration risk, percentage	6.00%	8.00%
Architectural Surfaces Group | Revenue Benchmark | Product Concentration Risk | Other
Disaggregation Of Revenue [Line Items]
Concentration risk, percentage	4.00%	4.00%

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Concentrations, Risks and Uncertainties - Additional Information (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($) Customer	Dec. 31, 2019 Customer	Dec. 31, 2018 Customer
Concentration Risk [Line Items]
Accounts are insured by the Federal Deposit Insurance Corporation | $	$ 250
Revenues | Customer Concentration Risk
Concentration Risk [Line Items]
Number of customers	0	0	1
Concentration of risk, percentage	10.00%	10.00%	11.40%
Accounts Receivable | Customer Concentration Risk
Concentration Risk [Line Items]
Number of customers	0	0
Concentration of risk, percentage	10.00%	10.00%

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Acquisitions - Additional Information (Details) - USD ($)						1 Months Ended		3 Months Ended	4 Months Ended	10 Months Ended	11 Months Ended	12 Months Ended
	Mar. 01, 2019	Dec. 31, 2018	Aug. 22, 2018	Mar. 19, 2018	Jan. 31, 2018	Jun. 30, 2019	Aug. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Mar. 31, 2019
Business Acquisition [Line Items]
Adjustment (decreasing) increasing the fair value of earn-out other (income) expense													$ (6,029,000)	$ 2,109,000
Net income (loss)												$ (9,853,000)	6,984,000	(2,475,000)
Interest and penalties included in other long-term liabilities								$ 900,000		$ 900,000		900,000	900,000
Intown Design Inc.
Business Acquisition [Line Items]
Cash consideration	$ 10,700,000
Accrued liability recorded	2,010,000					$ 800,000
Contingent earn-out consideration preliminary estimated purchase purchase															$ 2,000,000.0
Payments for earn out													0
Adjustment (decreasing) increasing the fair value of earn-out other (income) expense													2,000,000.0
Goodwill deductible for tax purposes	100,000
Direct acquisition costs	400,000
Purchase price, inventory	1,155,000
Net revenue										17,800,000		20,200,000
Net income (loss)										2,200,000		$ 200,000
Pro forma adjustments, general and administrative expense													100,000	700,000
Pro forma adjustments, accrued interest expense													200,000	1,100,000
Purchase consideration	11,537,000
Earn-out with a fair value															$ 2,000,000.0
Reduction in fair value of inventory and fixed assets	$ 13,647,000
Intown Design Inc. | Purchase Price Adjustment
Business Acquisition [Line Items]
Purchase price, inventory								(800,000)		(800,000)			(800,000)
Increase in value of goodwill								800,000
Elegant Home Design, LLC
Business Acquisition [Line Items]
Cash consideration					$ 11,500,000
Accrued liability recorded					1,000,000.0
Contingent earn-out consideration preliminary estimated purchase purchase		$ 0			3,000,000.0				$ 0		$ 0			0
Direct acquisition costs					100,000
Purchase price, inventory					13,425,000
Net revenue											27,700,000
Net income (loss)											1,900,000
Pro forma adjustments, general and administrative expense														20,000.00
Pro forma adjustments, accrued interest expense														50,000.00
Purchase consideration					12,500,000
Outstanding balance remaining paid in cash to sellers													1,000,000.0
Earn-out with a fair value		0			3,000,000.0				0		0			0
Compensation expense associated with provision		0						0	0	0	0		0	0
Reduction in fair value of inventory and fixed assets					18,451,000
Elegant Home Design, LLC | ASG term loans
Business Acquisition [Line Items]
Line of credit , additional borrowings					$ 6,250,000
NSI, LLC
Business Acquisition [Line Items]
Direct acquisition costs				$ 0
Purchase price, inventory				689,000
Purchase consideration				300,000
Reduction in fair value of inventory and fixed assets				$ 1,330,000
Tuscany Collection, LLC
Business Acquisition [Line Items]
Goodwill deductible for tax purposes			$ 1,100,000
Direct acquisition costs			100,000
Purchase price, inventory			2,258,000
Purchase consideration			4,200,000
Reduction in fair value of inventory and fixed assets			$ 6,352,000
Summit Stoneworks, LLC
Business Acquisition [Line Items]
Accrued liability recorded							$ 1,851,000						0	1,900,000
Payments for earn out													0
Adjustment (decreasing) increasing the fair value of earn-out other (income) expense													1,900,000
Direct acquisition costs							300,000
Purchase price, inventory							1,059,000
Net revenue									5,800,000
Net income (loss)									400,000
Pro forma adjustments, general and administrative expense														800,000
Pro forma adjustments, accrued interest expense														600,000
Purchase consideration							16,000,000
Goodwill deductible for tax purposes		6,400,000							6,400,000		6,400,000			6,400,000
Reduction in fair value of inventory and fixed assets							19,948,000
Summit Stoneworks, LLC | Maximum
Business Acquisition [Line Items]
Potential earn-out consideration							$ 3,500,000
T.A.C. Ceramic Tile Co.
Business Acquisition [Line Items]
Cash consideration		41,200,000
Accrued liability recorded		2,265,000											0
Payments for earn out													0
Adjustment (decreasing) increasing the fair value of earn-out other (income) expense													2,300,000
Direct acquisition costs		700,000							700,000		700,000			700,000
Purchase price, inventory		4,093,000							$ 4,093,000		$ 4,093,000			4,093,000
Increase in value of goodwill													498,000
Net revenue														0
Net income (loss)														0
Pro forma adjustments, general and administrative expense														1,800,000
Pro forma adjustments, accrued interest expense														$ 600,000
Purchase consideration		$ 41,210,000
Equity interests acquired		100.00%							100.00%		100.00%			100.00%
Deferred issuance costs incurred were capitalized														$ 400,000
Reduction in fair value of inventory and fixed assets		$ 56,336,000							$ 56,336,000		$ 56,336,000			56,336,000
Estimated uncertain tax position included in other long-term liabilities														4,400,000
Interest and penalties included in other long-term liabilities		$ 500,000							$ 500,000		$ 500,000			500,000
Pro forma adjustments, general and administrative expense														$ 4,400,000
T.A.C. Ceramic Tile Co. | Purchase Price Adjustment
Business Acquisition [Line Items]
Increase in value of goodwill								500,000
T.A.C. Ceramic Tile Co. | Purchase Price Adjustment | Inventory and Fixed Assets
Business Acquisition [Line Items]
Reduction in fair value of inventory and fixed assets								$ (500,000)		$ (500,000)			$ (500,000)

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Acquisitions - Summary of Total Purchase Price (Details) - USD ($)			1 Months Ended		12 Months Ended
	Mar. 01, 2019	Dec. 31, 2018	Jun. 30, 2019	Aug. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Intown Design Inc.
Business Acquisition [Line Items]
Cash consideration	$ 11,537,000
Fair value of earn-out	2,010,000		$ 800,000
Total purchase price	$ 13,547,000
Summit Stoneworks, LLC
Business Acquisition [Line Items]
Cash consideration				$ 16,000,000
Fair value of earn-out				1,851,000	$ 0	$ 1,900,000
Total purchase price				$ 17,851,000
T.A.C. Ceramic Tile Co.
Business Acquisition [Line Items]
Cash consideration		$ 41,210,000
Fair value of earn-out		2,265,000			$ 0
Total purchase price		$ 43,475,000

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Acquisitions - Summary of Estimated Purchase Price Allocation of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Mar. 01, 2019	Dec. 31, 2018	Aug. 31, 2018	Aug. 22, 2018	Mar. 19, 2018	Jan. 31, 2018
Business Acquisition [Line Items]
Goodwill	$ 99,789	$ 99,789		$ 94,593
Intown Design Inc.
Business Acquisition [Line Items]
Accounts receivable			$ 1,392
Inventory			1,155
Property and equipment			1,092
Goodwill			4,698
Other intangible assets			5,310
Total assets acquired			13,647
Total liabilities			100
Total consideration			$ 13,547
Elegant Home Design, LLC
Business Acquisition [Line Items]
Accounts receivable								$ 2,543
Inventory								13,425
Other current assets								163
Property and equipment								374
Goodwill								381
Other intangible assets								1,505
Other assets								60
Total assets acquired								18,451
Total liabilities								5,959
Total consideration								$ 12,492
NSI, LLC
Business Acquisition [Line Items]
Accounts receivable							$ 251
Inventory							689
Goodwill							390
Total assets acquired							1,330
Total liabilities							1,040
Total consideration							$ 290
Tuscany Collection, LLC
Business Acquisition [Line Items]
Accounts receivable						$ 167
Inventory						2,258
Other current assets						161
Goodwill						1,081
Other intangible assets						2,685
Total assets acquired						6,352
Total liabilities						2,200
Total consideration						$ 4,152
Summit Stoneworks, LLC
Business Acquisition [Line Items]
Accounts receivable					$ 1,249
Inventory					1,059
Property and equipment					1,042
Goodwill					8,304
Other intangible assets					8,280
Other assets					14
Total assets acquired					19,948
Total liabilities					2,097
Total consideration					$ 17,851
T.A.C. Ceramic Tile Co.
Business Acquisition [Line Items]
Cash				1,217
Accounts receivable				6,966
Inventory				4,093
Other current assets				87
Property and equipment				943
Goodwill				18,292
Other intangible assets				19,865
Other assets				4,873
Total assets acquired				56,336
Current liabilities				1,895
Deferred income taxes				6,099
Other long-term liabilities				4,867
Total liabilities				12,861
Total consideration				$ 43,475

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Acquisitions - Pro Forma Results of Operations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Intown Design Inc.
Pro Forma:
Total revenue, net	$ 613,225	$ 510,465
Net income (loss)	$ 6,787	(1,736)
Elegant Home Design, LLC
Pro Forma:
Total revenue, net		491,984
Net income (loss)		(2,445)
Summit Stoneworks, LLC
Pro Forma:
Total revenue, net		500,785
Net income (loss)		(3,954)
T.A.C. Ceramic Tile Co.
Pro Forma:
Total revenue, net		562,219
Net income (loss)		$ (2,793)

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Inventories - Summary of Significant Components of Inventory (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Raw materials	$ 97,988	$ 102,438
Installations in process	994	2,303
Inventories	$ 98,982	$ 104,741

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Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 51,443	$ 47,514
Less: accumulated depreciation and amortization	(30,387)	(21,020)
Property and equipment, net	21,056	26,494
Vehicles
Property Plant And Equipment [Line Items]
Property and equipment, gross	10,948	10,759
Machinery and Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	9,588	9,672
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and equipment, gross	9,040	8,962
Furniture and Fixtures
Property Plant And Equipment [Line Items]
Property and equipment, gross	8,031	6,906
Computer Equipment and Internal-Use Software
Property Plant And Equipment [Line Items]
Property and equipment, gross	11,879	10,167
Other
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 1,957	$ 1,048

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Property and Equipment - Additional Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Property Plant And Equipment [Line Items]
Depreciation and amortization expense	$ 10.1	$ 8.4	$ 6.6
Cost of Goods Sold
Property Plant And Equipment [Line Items]
Depreciation and amortization expense	4.2	3.7	3.7
General and Administrative Expense
Property Plant And Equipment [Line Items]
Depreciation and amortization expense	$ 5.9	$ 4.7	$ 2.9

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Goodwill and Intangible Assets - Summary of Changes in Carrying Amount of Goodwill (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($)
Goodwill [Line Items]
Goodwill, beginning balance	$ 94,593
Goodwill, ending balance	99,789
Intown Acquisition
Goodwill [Line Items]
Acquisition	4,698
TAC
Goodwill [Line Items]
Measurement period adjustment to goodwill	498
ASG
Goodwill [Line Items]
Goodwill, beginning balance	45,564
Goodwill, ending balance	45,564
RDS
Goodwill [Line Items]
Goodwill, beginning balance	49,029
Goodwill, ending balance	54,225
RDS | Intown Acquisition
Goodwill [Line Items]
Acquisition	4,698
RDS | TAC
Goodwill [Line Items]
Measurement period adjustment to goodwill	$ 498

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Goodwill and Intangible Assets - Schedule of Gross Carrying Amount, Accumulated Amortization and Net Book Value of Intangible Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 146,470	$ 146,470
Accumulated Amortization	(68,456)	(55,722)
Net Book Value	78,014	90,748
ASG
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	67,970	67,970
Accumulated Amortization	(28,720)	(21,731)
Net Book Value	39,250	46,239
RDS
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	78,500	78,500
Accumulated Amortization	(39,736)	(33,991)
Net Book Value	38,764	44,509
Customer Relationships
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	120,240	120,240
Accumulated Amortization	(57,540)	(48,251)
Net Book Value	62,700	71,989
Customer Relationships | ASG
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	60,180	60,180
Accumulated Amortization	(25,548)	(19,410)
Net Book Value	34,632	40,770
Customer Relationships | RDS
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	60,060	60,060
Accumulated Amortization	(31,992)	(28,841)
Net Book Value	28,068	31,219
Trade Names
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	25,830	25,830
Accumulated Amortization	(10,661)	(7,313)
Net Book Value	15,169	18,517
Trade Names | ASG
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	7,740	7,740
Accumulated Amortization	(3,139)	(2,300)
Net Book Value	4,601	5,440
Trade Names | RDS
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	18,090	18,090
Accumulated Amortization	(7,522)	(5,013)
Net Book Value	10,568	13,077
Non-compete Agreements
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	400	400
Accumulated Amortization	(255)	(158)
Net Book Value	145	242
Non-compete Agreements | ASG
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	50	50
Accumulated Amortization	(33)	(21)
Net Book Value	17	29
Non-compete Agreements | RDS
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	350	350
Accumulated Amortization	(222)	(137)
Net Book Value	$ 128	$ 213

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Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Goodwill And Intangible Assets Disclosure [Abstract]
Amortization expense on intangible assets	$ 12.7	$ 15.8	$ 13.9

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Goodwill and Intangible Assets - Schedule of Estimated Annual Amortization Expense (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Goodwill And Intangible Assets Disclosure [Abstract]
2021	$ 12,603
2022	12,401
2023	12,038
2024	10,313
2025	9,580
Thereafter	21,079
Amortization expense	$ 78,014	$ 90,748

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Lines of Credit - Additional Information (Details) - SIC Line Of Credit - USD ($)		12 Months Ended
	Jun. 28, 2018	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Aug. 19, 2019
Line Of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity	$ 90,000,000				$ 100,000,000
Letter of credit facility maximum aggregate stated amount	$ 15,000,000
Increase in floating interest rate, basis points	2.00%
Description of debt instrument variable rate basis		LIBOR based rate or an index based on a Prime, Federal Funds or LIBOR based rate) plus an applicable margin. The applicable margin is determined quarterly based on the borrowers’ average daily availability (calculated by reference to their accounts receivable and inventory that comprise their borrowing base) during the immediately preceding fiscal quarter.
Line of credit maturity date	Jun. 28, 2023
Weighted average interest rate		2.70%
Line of credit, outstanding amount		$ 9,900,000
Amount of outstanding letters of credit		600,000
Debt issuance costs		500,000
Non-cash interest expense		100,000	$ 100,000	$ 50,000.00
Unamortized debt issuance costs related to the RDS and ASG credit agreement		$ 200,000	$ 300,000

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Long-Term Debt - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Long-term Debt, Gross	$ 152,914	$ 154,666
Unamortized debt issuance costs	(2,765)	(1,618)
Total long-term debt	150,149	153,048
Current portion of long-term debt, net of financing fees	15,623	11,749
Long-term debt, net of current portion and financing fees	134,526	141,299
RDS equipment and vehicle notes
Debt Instrument [Line Items]
Long-term Debt, Gross	141	489
ASG term loans
Debt Instrument [Line Items]
Long-term Debt, Gross	152,773	154,177
Unamortized debt issuance costs	$ (2,800)	$ (1,600)

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Long-Term Debt - Additional Information (Details) - USD ($)			1 Months Ended		12 Months Ended
	Sep. 01, 2019	Aug. 19, 2019	Mar. 31, 2021	Dec. 31, 2015	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Apr. 08, 2020	Mar. 01, 2019	Aug. 31, 2018	Feb. 28, 2017
Debt Instrument [Line Items]
Outstanding balance					$ 152,914,000	$ 154,666,000
Outstanding on loan					150,149,000	153,048,000
Unamortized debt issuance costs					2,765,000	1,618,000
RDS equipment and vehicle notes
Debt Instrument [Line Items]
Outstanding balance					$ 141,000	489,000
Debt instrument, maturity date					May 31, 2023
Debt Instrument, Aggregate Monthly payment					$ 10,000.00	$ 30,000.00
Debt, Weighted Average Interest Rate					5.30%	5.12%
RDS equipment and vehicle notes | Minimum
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Ranged					0.00%	0.00%
RDS equipment and vehicle notes | Maximum
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Ranged					8.85%	8.85%
December 2015, ASG loan agreement
Debt Instrument [Line Items]
Aggregate amount				$ 1,700,000
Debt instrument, interest rate				3.75%
Debt instrument, maturity date range, start				Apr. 08, 2016
Debt instrument, maturity date range, end				Mar. 08, 2021
Outstanding on loan						$ 400,000
February 2017, ASG financing agreement
Debt Instrument [Line Items]
Debt instrument, maturity date range, start					Jul. 01, 2017
Debt instrument, maturity date range, end					Feb. 28, 2023
Outstanding on loan					$ 152,800,000	153,800,000			$ 11,500,000
Line of credit facility, maximum borrowing capacity							$ 174,200,000			$ 101,400,000	$ 105,000,000.0
Percentage of pre prepayment premium with respect to an optional prepayment of the term loans		1.50%
Interest rate assessed					7.50%
Percentage of net proceeds of asset disposition					100.00%
Percentage of insurance or condemnation awards					100.00%
Percentage of net proceeds of equity issuances					100.00%
Percentage of net proceeds of issuance of indebtedness					100.00%
Percentage of net cash proceeds received outside the ordinary course of business					100.00%
February 2017, ASG financing agreement | Current portion of long-term debt
Debt Instrument [Line Items]
Estimated prepayment amount due					$ 15,700,000
February 2017, ASG financing agreement | Prime Rate
Debt Instrument [Line Items]
Debt instrument, interest rate	3.50%
February 2017, ASG financing agreement | Leverage Ratio Greater Than 2.40 | Base Rate
Debt Instrument [Line Items]
Debt instrument margin basis point	4.75%
February 2017, ASG financing agreement | Leverage Ratio Greater Than 2.40 | LIBOR
Debt Instrument [Line Items]
Debt instrument margin basis point	6.75%
February 2017, ASG financing agreement | Leverage Ratio Less Than 2.40 | Base Rate
Debt Instrument [Line Items]
Debt instrument margin basis point	4.25%
February 2017, ASG financing agreement | Leverage Ratio Less Than 2.40 | LIBOR
Debt Instrument [Line Items]
Debt instrument margin basis point	6.25%
February 2017, ASG financing agreement | Leverage Ratio Greater Than 3.25
Debt Instrument [Line Items]
Percentage of excess cash flow					75.00%
February 2017, ASG financing agreement | Leverage Ratio Less Than 3.25
Debt Instrument [Line Items]
Percentage of excess cash flow					50.00%
February 2017, ASG financing agreement | Minimum
Debt Instrument [Line Items]
Net proceeds of asset disposition					$ 750,000
Gain (loss) on condemnation					$ 2,500,000
February 2017, ASG financing agreement | Minimum | Leverage Ratio Greater Than 2.40
Debt Instrument [Line Items]
Debt instrument leverage ratio	2.40%
February 2017, ASG financing agreement | Minimum | Leverage Ratio Greater Than 3.25
Debt Instrument [Line Items]
Debt instrument leverage ratio					3.25%
February 2017, ASG financing agreement | Maximum | Leverage Ratio Less Than 2.40
Debt Instrument [Line Items]
Debt instrument leverage ratio	2.40%
February 2017, ASG financing agreement | Maximum | Leverage Ratio Less Than 3.25
Debt Instrument [Line Items]
Debt instrument leverage ratio					3.25%
ASG term loans
Debt Instrument [Line Items]
Outstanding balance					$ 152,773,000	154,177,000
Non-cash interest expense					1,100,000	500,000	$ 500,000
Unamortized debt issuance costs					$ 2,800,000	$ 1,600,000
ASG term loans | Minimum
Debt Instrument [Line Items]
Financial covenant availability								$ 35,000,000
ASG term loans | Minimum | Subsequent Event
Debt Instrument [Line Items]
Debt instrument leverage ratio			3.75%
ASG term loans | Maximum | Subsequent Event
Debt Instrument [Line Items]
Debt instrument leverage ratio			4.00%

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Long-Term Debt - Schedule of Future Maturities of Long-Term Debt (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Debt Disclosure [Abstract]
2021	$ 16,902
2022	1,040
2023	134,972
Total Long-term Debt	152,914	$ 154,666
Unamortized balance remaining of financing fees	(2,765)
Total long-term debt	150,149	153,048
Current portion of long-term debt net of financing fees	(15,623)
Long term debt net of financing fees	$ 134,526	$ 141,299

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Commitments and Contingencies - Additional Information (Details)	12 Months Ended
	Dec. 31, 2020 USD ($) Facility State Container	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Lessor Lease Description [Line Items]
Acquisition cost included in PP&E related to capital leases	$ 21,056,000	$ 26,494,000
Accumulated amortization related to capital leases	30,387,000	21,020,000
Assets that were sold and subsequently leased back	3,100,000	3,100,000
Sale-leaseback accounting sale recognized	$ 0
Long-term non-cancelable operating lease agreements expiration month and year	2022-10
Aggregate deferred rent	$ 1,900,000	2,200,000
Aggregate rent expense	19,600,000	19,100,000	$ 14,300,000
Aggregate general liability	2,000,000.0
General liability retention limit per occurrence	1,000,000.0
2021	84,500,000
Minimum
Lessor Lease Description [Line Items]
Self insurance retention	10,000.00
Maximum
Lessor Lease Description [Line Items]
Self insurance retention	20,000.00
Residential Design Services
Lessor Lease Description [Line Items]
2020	2,000,000.0
2021	$ 2,000,000.0
Finance penalties for not meeting minimum purchase commitment requirements	15.00%
Architectural Surfaces Group
Lessor Lease Description [Line Items]
Long-term non-cancelable operating lease agreements expiration month and year	2029-12
Number of facility leases | Facility	1
Minimum purchase volume per quarter during 2021 | Container	645
Minimum purchase volume per quarter during 2025 | Container	1,332
Minimum purchase volume commitment percentage for two consecutive quarters	80.00%
Minimum purchase volume commitment percentage for calendar year	90.00%
Financial penalties if commitments are not met	$ 0
Minimum purchase volume threshold percentage not met	80.00%
Notice period given by supplier to terminate exclusivity arrangement	60 days
Architectural Surfaces Group | Pental Granite and Marble, LLC | United States
Lessor Lease Description [Line Items]
Number of states exclusive distribution rights | State	23
Vehicles and Equipment
Lessor Lease Description [Line Items]
Leased vehicles, depreciation method	straight line basis
Life of lease	4 years
Acquisition cost included in PP&E related to capital leases	$ 12,300,000	11,200,000
Accumulated amortization related to capital leases	3,700,000	1,600,000
Amortization expense of capital leases	$ 2,100,000	$ 500,000	$ 1,100,000
Corporate, Administrative, Fabrication and Warehousing Facilities | Company Shareholder | Residential Design Services
Lessor Lease Description [Line Items]
Long-term non-cancelable operating lease agreements expiration month and year	2025-01
Number of facility leases | Facility	3
Corporate, Administrative, Fabrication and Warehousing Facilities | Current Employees or Contractors | Residential Design Services
Lessor Lease Description [Line Items]
Number of facility leases | Facility	5
Office Equipment and Vehicles | Residential Design Services
Lessor Lease Description [Line Items]
Long-term non-cancelable operating lease agreements expiration month and year	2022-09

XML

Commitments and Contingencies - Aggregate Future Minimum Payments Under Capital Leases and Noncancelable Operating Leases (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Commitments And Contingencies Disclosure [Abstract]
2021	$ 3,042
2022	2,611
2023	1,374
2024	962
2025	300
Thereafter	500
Total minimum lease payments	8,789
Less: amount representing interest	(854)
Present value of net minimum lease payments	7,935
Less: current maturities of capital lease obligations	(2,700)	$ (2,395)
Long-term capital lease obligations	5,235	$ 6,907
2021	2,051
2022	1,702
2023	986
Total minimum lease payments	4,739
2021	13,393
2022	11,587
2023	7,957
2024	3,905
2025	3,033
Thereafter	3,098
Total minimum lease payments	42,973
2021	18,486
2022	15,900
2023	10,317
2024	4,867
2025	3,333
Thereafter	3,598
Total minimum lease payments	$ 56,501

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Commitments and Contingencies - Schedule of Future Minimum Purchases for Maintain Exclusive Rights (Details) $ in Thousands	Dec. 31, 2020 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2021	$ 84,500
2022	102,186
2023	121,837
2024	145,419
2025	174,502
Future minimum purchase	$ 628,444

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Stock Compensation - Additional Information (Details)	1 Months Ended	3 Months Ended	12 Months Ended
	Jun. 30, 2020 shares	Sep. 30, 2020 shares	Dec. 31, 2020 USD ($) Day shares	Dec. 31, 2019 USD ($) shares	Dec. 31, 2018 USD ($) shares	Mar. 26, 2019 shares	Dec. 31, 2017 shares	Nov. 22, 2017 shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Recognized tax benefit for stock compensation expense | $			$ 500,000	$ 400,000	$ 1,000,000.0
Inducement Awards
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation, common stock outstanding			1,350,000
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Incentive stock options granted pursuant terms			The performance condition is achievement of a 2021 earnings target and the level of achievement of the earnings target determines the number of shares that will be issued.  In the first quarter of 2020, the performance condition for these shares that was deemed probable of vesting as of December 31, 2019, was determined to be no longer probable of vesting.  This resulted in a reversal of stock compensation expense of approximately $1.6 million recorded during the three months ended March 31, 2020.  In the third quarter of 2020, the majority of these performance awards were cancelled and forfeited.
Reversal of stock compensation expense | $			$ 1,600,000
Dividend yield rate			0.00%
Expected volatility rate, Minimum			48.06%
Expected volatility rate, Maximum			54.69%
Risk free rate, Minimum			0.18%
Risk free rate, Maximum			0.37%
Restricted Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Total remaining stock-based compensation expense for unvested stock | $			$ 10,300,000
Total remaining stock-based compensation expense for unvested stock, excepted weighted average remaining recognition period			2 years 10 months 24 days
Restricted Stock | Selling, General and Administrative Expenses
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense | $			$ 2,800,000	4,700,000	2,500,000
Restricted Stock | Directors, Executives and Key Employees
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares of common stock granted			117,345
Stock-based compensation expense | $				900,000
Phantom Stock Outstanding
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock-based compensation expense | $			$ 10,000.00	$ 10,000.00	$ 10,000.00
The Plans
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options granted			0
The Plans | Restricted Stock
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares of common stock granted			1,347,877	1,453,205	779,016
Nonvested shares outstanding			1,447,419	1,825,123	825,976		356,368
2017 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Maximum aggregate number of shares issuable								2,561,463
Share based compensation, common stock outstanding			1,447,419
Common stock reserved and available for future awards			318,914
2017 Plan | Restricted Stock | Directors, Executives and Key Employees
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares of common stock granted			1,347,877
2019 Long-Term Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Maximum aggregate number of shares issuable						1,700,000
Shares of common stock granted			0
One-time Grant | Time-based Restricted Stock Units | Chief Executive Officer
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares of common stock granted	500,000	175,000
Vesting period			4 years
Vesting period description			The time-based restricted stock units vest in equal annual installments over four years, subject to continued employment with the Company.
One-time Grant | Performance-based Restricted Stock Units | Chief Executive Officer
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares of common stock granted	500,000	175,000
Vesting period description			The performance-based restricted stock units contain market conditions based on the closing price of the Company’s common stock exceeding specific price hurdles for 20 consecutive trading days, and subject to continued employment with the Company.
Number of consecutive trading days on which performance based units vest | Day			20

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Stock Compensation - Summary of Restricted Stock Activity for the Plans (Details) - The Plans - Restricted Stock - $ / shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Nonvested Shares Outstanding
Nonvested shares, Beginning Balance	1,825,123	825,976	356,368
Granted	1,347,877	1,453,205	779,016
Forfeited	(1,255,365)	(197,185)	(281,762)
Vested	(470,216)	(256,873)	(27,646)
Nonvested shares, Ending Balance	1,447,419	1,825,123	825,976
Weighted Average Grant Date Fair Value
Nonvested shares, Beginning Balance	$ 12.75	$ 11.84	$ 12.00
Granted	4.25	12.99	11.83
Forfeited	11.93	12.00	12.00
Vested	10.64	11.79	12.00
Nonvested shares, Ending Balance	$ 5.33	$ 12.75	$ 11.84

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Provision for Income Taxes - Components of Provision for Income Taxes Reflected on Consolidated Statements of Operations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Current:
Federal	$ (4,302)	$ 1,728	$ 3,604
State	(345)	1,287	1,571
Total current	(4,647)	3,015	5,175
Deferred:
Federal	671	618	(2,871)
State	1,002	(2,112)	(1,315)
Total deferred	1,673	(1,494)	(4,186)
Provision (benefit) for income taxes	$ (2,974)	$ 1,521	$ 989

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Provision for Income Taxes - Reconciliation of Expected Income Tax Expense (Computed by Applying Federal Statutory Income Tax Rate to Income Before Taxes) to Actual Income Tax Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Income taxes at federal statutory rate	$ (2,694)	$ 1,786	$ (280)
State income taxes, net of federal benefit	387	(651)	148
Transaction costs			968
TAC earn-out		(476)
Equity-based compensation		134
Permanent items	852	298	294
State rate changes	364	(293)	(27)
162(m) limitation		345
Other, net	90	378	(114)
Uncertain tax position	(1,123)
Rate differential on carryback	(850)
Provision (benefit) for income taxes	$ (2,974)	$ 1,521	$ 989

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Provision for Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Deferred tax assets
Accrued liabilities	$ 2,627	$ 1,555
State income taxes		103
Intangible assets	4,285	4,919
Net operating loss	682	994
Inventory	3,981	4,351
Equity-based compensation	772	999
Other, net	555	902
Interest limitation	66	676
Total deferred tax assets	12,968	14,499
Deferred tax liabilities
Property and equipment	(3,343)	(2,562)
Prepaids	(91)	(370)
ASC 606 method change	(657)	(1,017)
Total deferred tax liabilities	(4,091)	(3,949)
Net deferred tax assets	$ 8,877	$ 10,550

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Provision for Income Taxes - Additional Information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Income Taxes [Line Items]
Statutory federal corporate tax rate	21.00%
Net operating loss carryback	$ 800,000
Unrecognized tax benefits	2,906,000	$ 3,998,000	$ 4,364,000
Unrecognized tax positions, interest expense recognized		200,000	200,000
Unrecognized tax positions, penalties recognized		200,000	$ 300,000
Accrued interest or penalties	$ 900,000	900,000
Cumulative change in ownership percentage	50.00%
Federal
Income Taxes [Line Items]
Operating loss carryforwards	$ 1,900,000
Federal | Earliest Tax Year
Income Taxes [Line Items]
Tax year subject to examinations	2017
Federal | Latest Tax Year
Income Taxes [Line Items]
Tax year subject to examinations	2020
State
Income Taxes [Line Items]
Operating loss carryforwards	$ 4,900,000	$ 21,900,000
State | Earliest Tax Year
Income Taxes [Line Items]
Tax year subject to examinations	2016
State | Latest Tax Year
Income Taxes [Line Items]
Tax year subject to examinations	2020
Maximum
Income Taxes [Line Items]
Statutory federal corporate tax rate				35.00%
Minimum | State
Income Taxes [Line Items]
Operating loss carryforwards, expiration period	5 years

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Provision for Income Taxes - Reconciliation of Beginning and Ending Amounts of Unrecognized Tax Positions (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Reconciliation Of Unrecognized Tax Benefits Excluding Amounts Pertaining To Examined Tax Returns Roll Forward
Unrecognized tax positions, beginning of year	$ 3,998	$ 4,364
Gross increase - prior period tax positions		298
Gross decrease - prior period tax positions		(395)
Expiration of statute of limitations	(1,092)	(269)
Unrecognized tax positions, end of year	$ 2,906	$ 3,998

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Employee Benefit Plan - Additional Information (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
401 (k) Plan
Defined Contribution Plan Disclosure [Line Items]
Contribution amount	$ 0.6	$ 1.5	$ 0.9

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Related Party Transactions - Additional Information (Details)	12 Months Ended
	Dec. 31, 2020 USD ($) Executive Facility	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Related Party Transaction [Line Items]
Aggregate rent expense	$ 19,600,000	$ 19,100,000	$ 14,300,000
RDS | Subcontractors and Supplier
Related Party Transaction [Line Items]
Number of family members have ownership interest | Executive	2
Related party transaction, amounts of transaction	$ 900,000	1,200,000	1,600,000
RDS | Subcontractors and Supplier | Greencraft Holdings, LLC.
Related Party Transaction [Line Items]
Related party unpaid amount	0	0
Related party transaction cost	20,000.00	100,000	80,000.00
RDS | Subcontractors and Supplier | Maximum
Related Party Transaction [Line Items]
Related party accounts payable	$ 100,000	100,000
Trust Affiliated with Stockholder | RDS | Facility Rent
Related Party Transaction [Line Items]
Number of facilities leases | Facility	3
Aggregate rent expense	$ 2,200,000	800,000	800,000
Related party unpaid amount	$ 0	0
Current Employees, Contractors or Former Owners | RDS | Facility Rent
Related Party Transaction [Line Items]
Number of facilities leases | Facility	5
521 Digiulian Boulevard, LLC | ASG | Facility Rent
Related Party Transaction [Line Items]
Aggregate rent expense	$ 100,000	100,000	100,000
Related party unpaid amount	0	0
Officer | Other Consulting Services
Related Party Transaction [Line Items]
Related party unpaid amount		0
Related party transaction cost	$ 200,000	$ 300,000	$ 200,000

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Segment Information - Additional Information (Details)	12 Months Ended
	Dec. 31, 2020 Segment
Segment Reporting [Abstract]
Number of operating segments	2

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Segment Information - Performance of Segment based upon Revenues and Operating Income (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Revenue, net:
Net revenue	$ 554,025	$ 610,373	$ 489,757
Operating income:
Operating income	3,382	19,258	12,097
Capital expenditures:
Capital expenditures	3,436	9,169	8,507
Depreciation and amortization:
Depreciation and amortization	22,867	24,157	20,487
RDS
Revenue, net:
Net revenue	332,489	368,574
ASG
Revenue, net:
Net revenue	223,567	244,789
Operating Segments | RDS
Revenue, net:
Net revenue	332,489	368,574	268,362
Operating income:
Operating income	1,615	17,544	14,252
Capital expenditures:
Capital expenditures	2,324	7,155	1,684
Depreciation and amortization:
Depreciation and amortization	11,578	12,896	9,634
Operating Segments | ASG
Revenue, net:
Net revenue	223,567	244,789	223,971
Operating income:
Operating income	19,173	19,860	11,925
Capital expenditures:
Capital expenditures	1,104	1,986	6,539
Depreciation and amortization:
Depreciation and amortization	11,185	11,159	10,833
Elimination
Revenue, net:
Net revenue	(2,031)	(2,990)	(2,576)
Operating income:
Operating income	(23)	96	(46)
Unallocated
Operating income:
Operating income	(17,383)	(18,242)	(14,034)
Capital expenditures:
Capital expenditures	8	28	284
Depreciation and amortization:
Depreciation and amortization	$ 104	$ 102	$ 20

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Segment Information - Summary of Segment Assets to Consolidated (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Goodwill:
Goodwill	$ 99,789	$ 99,789	$ 94,593
Other intangible assets, net:
Net Book Value	78,014	90,748
Assets
Assets	405,008	420,275
Operating Segments | RDS
Goodwill:
Goodwill	54,225	54,225
Other intangible assets, net:
Net Book Value	38,764	44,509
Assets
Assets	193,488	182,754
Operating Segments | ASG
Goodwill:
Goodwill	45,564	45,564
Other intangible assets, net:
Net Book Value	39,250	46,239
Assets
Assets	198,341	217,655
Consolidation Entries
Assets
Assets	40	36
Unallocated
Assets
Assets	$ 13,139	$ 19,830

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Selected Quarterly Financial Data (Unaudited) - Summary of Selected Quarterly Financial Data (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Quarterly Financial Data [Line Items]
Revenue, net									$ 554,025	$ 610,373	$ 489,757
Gross profit									135,209	164,074	133,454
Income (loss) from operations									3,382	19,258	12,097
Net income (loss)									$ (9,853)	$ 6,984	$ (2,475)
Basic common stock									$ (0.39)	$ 0.28	$ (0.10)
Diluted common stock									$ (0.39)	$ 0.27	$ (0.10)
Under ASC Topic 605
Quarterly Financial Data [Line Items]
Revenue, net	$ 144,155	$ 150,050	$ 125,442	$ 134,378	$ 155,242	$ 159,395	$ 158,342	$ 136,920
Gross profit	35,225	38,590	30,700	30,694	38,770	42,338	44,168	38,733
Income (loss) from operations	248	5,144	(37)	(1,973)	2,952	6,209	6,750	3,266
Net income (loss)	$ (3,203)	$ 531	$ (3,179)	$ (4,002)	$ 3,177	$ 2,458	$ 1,162	$ 127
Basic common stock	$ (0.13)	$ 0.02	$ (0.13)	$ (0.16)	$ 0.13	$ 0.10	$ 0.05	$ 0.00
Diluted common stock	$ (0.13)	$ 0.02	$ (0.13)	$ (0.16)	$ 0.13	$ 0.10	$ 0.05	$ 0.00

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Schedule I - Condensed Balance Sheets (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
Assets
Other assets	$ 5,446	$ 6,265
Total assets	405,008	420,275
Liabilities and stockholders’ equity
Total liabilities	250,817	259,000
Stockholders' equity:
Treasury stock, 160,733 shares at December 31, 2020 and 33,140 shares at December 31, 2019, at cost	(1,279)	(391)
Additional paid-in capital	165,048	161,396
Retained earnings (accumulated deficit)	(9,834)	19
Total stockholders’ equity	154,191	161,275	$ 148,694	$ 148,087
Total liabilities and stockholders' equity	405,008	420,275
Class A
Stockholders' equity:
Common stock	256	251
Total stockholders’ equity	256	251	$ 257	$ 217
Parent Company
Assets
Investment in wholly owned subsidiaries	195,101	187,571
Other assets	237	397
Total assets	195,338	187,968
Liabilities and stockholders’ equity
Due to subsidiaries	37,024	23,466
Accrued and other liabilities	4,123	3,227
Total liabilities	41,147	26,693
Stockholders' equity:
Treasury stock, 160,733 shares at December 31, 2020 and 33,140 shares at December 31, 2019, at cost	(1,279)	(391)
Additional paid-in capital	165,048	161,396
Retained earnings (accumulated deficit)	(9,834)	19
Total stockholders’ equity	154,191	161,275
Total liabilities and stockholders' equity	195,338	187,968
Parent Company | Class A
Stockholders' equity:
Common stock	$ 256	$ 251

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Schedule I - Condensed Balance Sheets (Parenthetical) (Details) - $ / shares	Dec. 31, 2020	Dec. 31, 2019
Treasury stock, shares	160,733	33,140
Class A
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	25,609,758	25,139,542
Common stock, shares outstanding	25,449,025	25,106,402
Parent Company
Treasury stock, shares	160,733	33,140
Parent Company | Class A
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	25,609,758	25,139,542
Common stock, shares outstanding	25,449,025	25,106,402

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Schedule 1 - Condensed Statements of Operations (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Condensed Income Statements Captions [Line Items]
Selling, general and administrative expenses	$ (131,827)	$ (144,816)	$ (121,357)
Net income (loss)	(9,853)	6,984	(2,475)
Parent Company
Condensed Income Statements Captions [Line Items]
Equity in net income of subsidiaries	7,530	25,226	11,559
Selling, general and administrative expenses	(17,383)	(18,242)	(14,034)
Net income (loss)	$ (9,853)	$ 6,984	$ (2,475)

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Schedule I- Condensed Statements of Cash Flows (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Cash flows used in operating activities:
Net income (loss)	$ (9,853)	$ 6,984	$ (2,475)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization	22,867	24,157	20,487
Equity-based compensation	2,789	5,740	2,528
Changes in assets and liabilities:
Net cash provided by operating activities	20,604	30,955	12,212
Cash flows used in investing activities:
Purchase of equipment	(3,436)	(9,169)	(8,507)
Net cash used in investing activities	(3,258)	(24,641)	(80,624)
Cash flows provided by financing activities:
Purchase of treasury stock	(888)	(399)
Proceeds from issuance of equity			553
Net cash provided by (used in) financing activities	(19,374)	(10,674)	72,227
Net increase (decrease) in cash and restricted cash	(2,028)	(4,360)	3,815
Cash and cash equivalents:
Cash and restricted cash, beginning of period	5,002	9,362	5,547
Cash and restricted cash, end of period	2,974	5,002	9,362
Parent Company
Cash flows used in operating activities:
Net income (loss)	(9,853)	6,984	(2,475)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Equity in net income of subsidiaries	(7,530)	(25,226)	(11,559)
Depreciation and amortization	107	102	21
Equity-based compensation	2,789	5,740	2,528
Changes in assets and liabilities:
Changes in operating assets	63	(3)	(204)
Changes in accrued expenses	1,762	547	677
Net cash provided by operating activities	(12,662)	(11,856)	(11,012)
Cash flows used in investing activities:
Purchase of equipment	(8)	(28)	(284)
Net cash used in investing activities	(8)	(28)	(284)
Cash flows provided by financing activities:
Purchase of treasury stock	(888)	(399)
Borrowings from subsidiaries	13,558	12,283	10,743
Proceeds from issuance of equity			553
Net cash provided by (used in) financing activities	$ 12,670	$ 11,884	$ 11,296

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Description of Select Interior Concepts Inc - Additional Information (Details)	2 Months Ended	12 Months Ended
	Dec. 31, 2017 Segment Subsidiary	Dec. 31, 2020 Segment
Description Of Company [Line Items]
Number of operating segments		2
Parent Company
Description Of Company [Line Items]
Number of operating subsidiaries | Subsidiary	2
Number of operating segments	2
Parent Company | RDS and ASG
Description Of Company [Line Items]
Percentage of ownership interest	100.00%

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Basis of Presentation - Additional Information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Parent Company
Basis Of Presentation [Line Items]
Distributions	$ 0	$ 0	$ 0

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Label	Element	Value
Residential Design Services Limited Liability Company [Member]
Goodwill	us-gaap_Goodwill	$ 54,225,000
Architectural Surfaces Group Limited Liability Company [Member]
Goodwill	us-gaap_Goodwill	$ 45,564,000