Exhibit 10.3

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

EXECUTIVE EMPLOYMENT AGREEMENT, effective January 1, 2005, by and between
SPORT-HALEY, INC., a Colorado corporation (the “Company”) and MARK MALEY (the
“Executive”).

 

WHEREAS, the Executive and the Company entered into an Executive Employment
Agreement effective January 1, 2004 and the Executive and the Company wish to
enter into a new agreement, which agreement shall supersede and replace the
Agreement effective January 1, 2004;

 

WHEREAS, the Company desires to employ the Executive on a full-time basis, and
the Executive desires to be so employed by the Company, from and after the date
of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree as follows:

 

ARTICLE I

 

EMPLOYMENT DUTIES AND BENEFITS

 

Section 1.1  Employment. The Company hereby employs the Executive in the
position described on Schedule 1 hereto as an executive officer of the Company.
The Executive accepts such employment and agrees to perform the duties and
responsibilities assigned to him pursuant to this Agreement.  As of the
effective date of this Agreement, the terms and provisions of this Agreement
shall replace and supersede in all respects the Executive Employment Agreement
entered into by the Company and Executive effective January 1, 2004.

 

Section 1.2  Duties and Responsibilities. The Executive shall hold the position
with the Company which is specified on Schedule 1, which is attached hereto and
incorporated herein by reference. The Executive is employed pursuant to the
terms of this Agreement and agrees to devote full-time to the business of the
Company. The Executive shall perform the duties set forth on Schedule 1 while
employed as an executive officer, and such further duties as may be determined
and assigned to him from time-to-time by the Chief Executive Officer or the
Board of Directors of the Company.

 

Section 1.3  Working Facilities. The Executive shall be furnished with
facilities and services suitable to the position and adequate for the
performance of the Executive’s duties under this Agreement.

 

Section 1.4  Vacations. The Executive shall be entitled each year to a
reasonable vacation of not less than two weeks in accordance with the
established practices of the Company now or hereafter in effect for executive
personnel, during which time the Executive’s compensation shall be paid in full.

 

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Section 1.5  Expenses. The Executive is authorized to incur reasonable expenses
for promoting the domestic and international business of the Company in all
respects, including expenses for entertainment, travel and similar items,
provided that such expenses do not exceed the budgets established by the Company
for such items. The Company will reimburse the Executive for all such expenses
upon the presentation by the Executive, from time-to-time, of an itemized
account of such expenditures.

 

Section 1.6  Relocation Expenses. Except as set forth in this Section 1.6, until
the Executive completes his relocation to Denver, Colorado, on or before May 31,
2005 the Company shall pay to the Executive (i) all expenses incurred by the
Executive for temporary living quarters while the Executive is relocating to
Denver, Colorado, (ii) all moving and storage expenses for household goods in
connection with the Executive’s relocation, (iii)  all travel expenses of the
Executive and his spouse for up to six separate round trips related to the
Executive’s search for a residence in the Denver, Colorado area, and (iv) all
expenses incurred by Executive in the sale of Executive’s residence in Houston,
Texas, including the real estate commission paid by Executive. The Executive
shall present to the Company an itemized account of such expenditures, and
repayment of such expenses by the Company shall be amortized throughout the
effective term of this Agreement. In the event the Executive terminates his
employment without cause pursuant to Section 3.5 hereof, the non-amortized
portion of such expenses shall be reimbursed to the Company by the Executive.

 

Section 1.7  Benefit Plans. From the effective date of this Agreement, the
Executive shall be entitled to participate in all existing benefit plans
provided to the Company’s executive employees including, to the extent now or
hereafter in effect, medical, health, dental, vision, disability, life insurance
and death benefit plans, in accordance with the terms of such plans.

 

ARTICLE II

 

COMPENSATION

 

Section 2.1  Base Salary. The Company shall pay to the Executive a base salary
of not less than the amount specified on Schedule 1, subject to annual review
and raises in such base salary.  The base salary may be raised by action of the
Board of Directors, and such raises shall thereafter be included in the
Executive’s base salary as defined for purposes of this Agreement and the
Company’s bonus plan.

 

Section 2.2  Bonus and Bonus Plan Participation. The Executive shall be entitled
to receive a bonus at such time or times as may be determined by the Board of
Directors and Compensation Committee of the Company. The Executive shall also be
entitled to receive bonuses of up to 40% of the Executive’s base

 

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salary in accordance with the provisions of the Company-wide bonus plan as in
effect from time to time, at the discretion and approval of the Compensation
Committee.

 

ARTICLE III

 

TERM OF EMPLOYMENT AND TERMINATION

 

Section 3.1  Term. This Agreement shall be for a term which is specified on
Schedule 1, commencing on its effective date, subject, however, to termination
during such period as provided in this Article. Provided that the Executive is
in compliance with all of his obligations hereunder, the term of the Executive’s
employment shall be extended automatically for one additional year at the end of
each year of the term or extended term of this Agreement on the same terms and
conditions as contained in this Agreement, unless either the Company or the
Executive shall, at least 90 days prior to the expiration of the initial term or
of any renewal term, give written notice of the intention not to renew this
Agreement. If the Company gives such written notice of non-renewal, the
provisions of Section 3.3 shall apply; if the Executive gives such written
notice of non-renewal, the provisions of Section 3.5 shall apply. Automatic
renewals shall be effective in subsequent years on the same day of the same
month as the original effective day and month of this Agreement.

 

Section 3.2  Termination by the Company With Cause. The Company may terminate
the Executive, at any time, upon ten days’ written notice and opportunity for
Executive to remedy any non-compliance with the terms of this Agreement (if such
non-compliance is capable of being remedied; if not, the Company’s notice of
termination shall be effective immediately), for Cause. In such event, the Board
of Directors shall provide in writing to the Executive an opinion of the Board
of Directors, signed by each member voting in favor of termination of the
Executive, which shall specify with particularity the basis for such
termination. Upon the date of such termination, the Company’s obligation to pay
compensation and benefits shall terminate, at which time the Company shall be
responsible for compensating the Executive for any vacation time not taken.
Subject to this exception and the obligation of the Company to compensate the
Executive through the notice period, no other compensation shall be payable to
the Executive should this Agreement be terminated pursuant to this Section 3.2.

 

As used herein, the term “Cause” shall be limited to any of the following from
and after the date hereof: (i) any willful breach of any material written policy
of the Company that results in material and demonstrable liability or loss to
the Company; (ii) the engaging by Executive in conduct involving moral turpitude
that causes material and demonstrable injury, monetarily or otherwise, to the
Company, including, but not limited to, misappropriation or conversion of assets
of the Company (other than

 

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immaterial assets); (iii) conviction of or entry of a plea of nolo contendere to
a felony; or (iv) a material breach of this Agreement by engaging in action in
violation of the restrictive covenants in this Agreement. No act or failure to
act by the Executive shall be deemed “willful” if done, or omitted to be done,
by him in good faith and with the reasonable belief that his action or omission
was in the best interests of the Company.

 

Section 3.3  Termination by the Company Without Cause. The Company may terminate
the Executive’s services without cause at any time upon 90 days’ written
notice.  In such event, in addition to compensating the Executive during such
90-day notice period, the Company shall be obligated to compensate the Executive
with severance pay equal to twelve additional months’ compensation as of the
date of such termination. Accordingly, in the event the Company terminates this
Agreement without cause or chooses not to renew this Agreement upon its
expiration, the Executive shall receive an aggregate of fifteen months’ salary
from and after the date of the Executive’s receipt of a notice of termination
through and including the date of termination. In addition to the foregoing, the
Executive shall receive a bonus which shall be equivalent to 50% of the annual
bonus last received by the Executive, if any. Such bonus provision shall be in
addition to the compensation and severance package hereinabove specified.

 

Section 3.4  Termination by the Executive With Cause. The Executive may
terminate his employment with the Company at any time, upon ten days’ written
notice and opportunity for the Company to remedy any non-compliance, by reason
of (i) the Company’s material failure to perform its duties pursuant to this
Agreement, or (ii) any material diminishment in the duties and responsibilities,
working facilities, or benefits as described in Article I of this Agreement. The
Executive shall not be entitled to the severance compensation and other benefits
described in Section 3.7 below in the event of termination of this Agreement
pursuant to this Section 3.4, except as otherwise provided in Section 3.7(a),
but shall be entitled to the compensation provided in Section 3.3 upon a
determination that the Company has failed to perform its duties pursuant to this
Agreement and that such failure is material or a determination that the duties
and responsibilities, working facilities, or benefits as described herein have
been materially diminished. Such determination shall be made by the Board of
Directors in their best good faith.

 

Section 3.5  Termination by the Executive Without Cause. The Executive, without
cause, may terminate this Agreement upon 90 days’ written notice to the Company.
In such event, the Executive shall not be required to render the services
required under this Agreement following such 90-day period.  Compensation for
vacation time not taken by the Executive shall be paid to the Executive at the
date of

 

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termination. The Executive shall not be entitled to the severance compensation
and other benefits described in Section 3.7 below in the event of termination of
this Agreement pursuant to this Section 3.5, except as described in Section
3.7(a), and shall not be entitled to the compensation provided in Section 3.3.

 

Section 3.6  Termination upon Death of the Executive. In addition to any other
provision relating to termination, this Agreement shall terminate upon the
Executive’s death.  In such event, all unpaid compensation and bonuses,
compensation for vacation time not taken by the Executive and all expense
reimbursements due to the Executive shall be paid to the Executive’s estate.

 

Section 3.7  Severance Compensation and Continuation of Benefits.

 

(a) Notwithstanding any other provisions hereof, in the event of a
non-negotiated change in control of the Company and either the Executive or the
Company terminate this Agreement within 60 days of such non-negotiated change in
control, the Executive shall receive severance compensation, payable in a lump
sum within 30 days of such non-negotiated change in control, equal to three
times his annual salary and incentive or bonus payments, if any, as shall have
been paid to the Executive during the most recent 12-month period concluded
prior to the date of his termination or resignation. If the total amount of the
non-negotiated change of control compensation were to exceed three times the
Executive’s base compensation (the average annual taxable compensation of the
Executive for the five years preceding the year in which the change of control
occurs), the Company and the Executive will reduce the lump sum compensation to
be received by the Executive in order to avoid the imposition of the golden
parachute tax as provided in the Tax Reform Act of 1984, as amended by the Tax
Reform Act of 1986.  The foregoing provisions shall not apply in the event of a
negotiated change in control of the Company.

 

(b) In the event the Executive is required to hire counsel to negotiate on his
behalf in connection with his termination or a change in control of the Company,
or in order to enforce the rights and obligations as provided herein, the
Company shall reimburse to the Executive all reasonable attorney’s fees which
may be expended by the Executive in seeking to enforce the terms hereof. Such
reimbursement shall be paid by the Company every 30 days after the Executive
provides to the Company copies of invoices from the Executive’s counsel. Such
invoices may be redacted to preserve the attorney-client privilege or
attorney-client confidentiality.

 

(c) So long as the Executive is receiving severance compensation pursuant to
this Section 3.7, the Executive shall be entitled to continue to participate, at
the Company’s cost, in all existing benefit plans provided to the Company’s
executive employees at the time of the Executive’s termination or resignation.

 

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Such plans shall include, but are not limited to, then-existing medical, health,
dental, vision, disability, life insurance and death benefit plans. If the terms
of such plans expressly prohibit the Executive from continuing as a participant
in such plans following the date of resignation or termination, the Company will
provide the Executive with benefits equivalent to, or exceeding, those offered
by the then-existing benefit plans offered to the Company’s executive employees,
all at the Company’s cost, for the duration of the Executive’s right to
severance compensation hereunder.

 

Any compensation to be paid to the Executive under the foregoing provisions of
this Section 3.7 shall be subject to the Executive complying with the
non-compete provisions of Section 4.1(c) below.  In the event the Executive does
not so comply, the Company shall be released from any obligations to the
Executive under this Section 3.7.

 

Section 3.8  Options. In the event of a non-negotiated change in control of the
Company and either the Executive or the Company terminate this Agreement within
60 days of such non-negotiated change in control as provided in Section 3.7(a)
of this Agreement, any and all options granted to the Executive to purchase
Common Stock of the Company shall become fully vested and exercisable on the
date of termination of this Agreement. In the event of termination or
non-renewal by either party without cause in accordance with Sections 3.3 or 3.5
of this Agreement, any and all options granted to the Executive to purchase
Common Stock of the Company will vest and become exercisable on a pro-rated
basis from the date of grant to the date of termination of this Agreement based
on the number of months during which this Agreement has been in effect from the
date of grant and the Company’s established thirty six month vesting period. For
example, options granted to purchase 20,000 shares on the effective date of this
Agreement would become vested and exercisable at a rate of 555.55 shares per
month for each month during which this Agreement is in effect.  In the event
this Agreement is terminated by the Company for cause, options will vest and be
exercisable pursuant to the terms of the applicable Stock Option Plan or any
successor plan under which such options are granted (the “Plan”) regarding
termination of employment for cause.  This provision shall serve as a
contractual modification of any option grants or agreements between the
Executive and the Company and is hereby incorporated by reference into each such
option grant or agreement.

 

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ARTICLE IV

 

CONFIDENTIALITY AND COMPETITION

 

Section 4.1  Further Obligations of the Executive During and After Employment.

 

(a) The Executive agrees that, during the tem of his employment under this
Agreement, he will engage in no other business activities which are or may be
competitive with, or which might place him in a competing position to that of,
the Company or any subsidiary of the Company.

 

(b) The Executive realizes that during the course of his employment, the
Executive will have produced and/or have access to confidential business plans,
information, business opportunity records, notebooks, data, formula,
specifications, trade secrets, customer lists, account lists and inventions of
the Company and its affiliates. Therefore, during or subsequent to his
employment by the Company, or by an affiliate, the Executive agrees to hold in
confidence and not to directly or indirectly disclose or use or copy or make
lists of any such information, except to the extent authorized by the Company in
writing. All records, files, business plans, documents, equipment and the like,
or copies thereof, relating to Company’s business, or the business of an
affiliated company, which the Executive shall prepare, or use, or come into
contact with, shall remain the sole property of the Company, or of an affiliated
company, and shall not be removed from the Company’s or the affiliated company’s
premises without its written consent, and shall be promptly returned to the
Company upon termination or resignation of employment with the Company or its
affiliated companies.

 

(c) Because of his employment by the Company, the Executive will have access to
trade secrets and confidential information about the Company, its business
plans, its business accounts, its business opportunities, its expansion plans
into other geographic areas and its methods of doing business. The Executive
agrees that for a period of twelve months after termination or resignation of
his employment (except if the Executive terminates this Agreement for cause
under Section 3.4 hereof or without cause under Section 3.5 hereof), he will
not, directly or indirectly, compete with the Company or its affiliates in the
business of designing, merchandising, marketing or contracting for the
manufacture of men’s and women’s golf apparel and golf outerwear within the
United States. This non-compete agreement shall be void and of no further force
or effect in the event termination occurs under Section 3.3 or Section 3.7
hereof and the Company fails to pay the Executive amounts required under Section
3.3 or Section 3.7 hereof.

 

(d) In the event this Agreement is terminated by the Company without cause
pursuant to Section 3.3, then Executive shall have the right to terminate the
non-compete agreement contained in Section

 

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4.1(c) by releasing the Company from its obligation to pay Executive any
severance compensation, employee benefits or other form of compensation which
might otherwise be payable under this Agreement.  Executive shall make such
election upon five days’ written notice to the Company. The Executive’s
obligations under the non-compete agreement and the Company’s obligation to pay
severance compensation, employee benefits and other compensation shall all
terminate as of the effective date of the notice described above.

 

(e) In the event a court of competent jurisdiction finds any provision of this
Section 4.1 to be so overbroad as to be unenforceable, then such provision shall
be reduced in scope by the court, but only to the extent deemed necessary by the
court to render the provision reasonable and enforceable, it being the
Executive’s intention to provide the Company with the broadest protection
possible against harmful competition.

 

ARTICLE V

 

DISABILITY AND ILLNESS

 

Section 5.1  Disability and Salary Continuation.

 

(a) Definition of Total Disability. For purposes of this Agreement, the terms
“totally disabled” and “total disability” shall mean disability as defined in
any total disability insurance policy or policies, if any, in effect with
respect to the Executive.  If no insurance policy is in effect, “total
disability” shall mean a medically determinable physical or mental condition
which in the opinion of two independent physicians renders the Executive unable
to perform substantially all of the duties required pursuant to this Agreement.
Total disability shall be deemed to have occurred on the date of the disabling
injury or onset of the disabling illness, as determined by the two independent
physicians.

 

(b) Salary Continuation. If the Executive becomes totally disabled during the
term of this Agreement, his full salary shall be continued for 360 days from the
date of the disabling injury or onset of the disability illness.

 

Section 5.2  Illness. If the Executive is unable to perform the services
required under this Agreement by reason of illness or physical injury not
amounting to total disability, as defined in this Article, the compensation
otherwise payable to the Executive under this Agreement shall be continued in
full for the remaining term or renewed term of this Agreement, but in no event
for a period exceeding one year.

 

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ARTICLE VI

 

GENERAL MATTERS

 

Section 6.1  Governing Law. This Agreement shall be governed by the laws of the
State of Colorado and shall be construed in accordance therewith.

 

Section 6.2  No Waiver. No provision of this Agreement may be waived except by
an agreement in writing signed by the waiving party.  A waiver of any term or
provision shall not be construed as a waiver of any other term or provision.

 

Section 6.3  Amendment. This Agreement may be amended, altered or revoked at any
time, in whole or in part, by filing with this Agreement a written instrument
setting forth such changes, signed by each of the parties.

 

Section 6.4  Benefit. This Agreement shall be binding upon the Executive and the
Company, and shall not be assignable by the Company without the Executive’s
written consent.

 

Section 6.5  Construction. Throughout this Agreement the singular shall include
the plural, and the plural shall income the singular, and the masculine and
neuter shall include the feminine, wherever the context so requires.

 

Section 6.6  Text to Control. The headings of articles and sections are included
solely for convenience of reference.  If any conflict between any heading and
the text of this Agreement exists, the text shall control.

 

Section 6.7  Severability. If any provision of this Agreement is declared by any
court of competent jurisdiction to be invalid for any reason, such invalidity
shall not affect the remaining provisions. On the contrary, such remaining
provisions shall be fully severable, and this Agreement shall be construed and
enforced as if such invalid provisions had not been included in the Agreement.

 

Section 6.8  Authority. The officer executing this Agreement on behalf of the
Company has been empowered and directed to do so by the Board of Directors of
the Company.

 

Section 6.9  Effective Date. The effective date of this Agreement shall be
January 1, 2005.

 

 

SPORT-HALEY, INC.

EXECUTIVE:

 

 

 

 

By:

/s/ Donald W. Jewell

 

/s/ Mark Maley

 

 

Donald W. Jewell,

Mark Maley

 

Chief Executive Officer

 

 

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SPORT-HALEY, INC.

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

Schedule 1

 

Duties and Compensation

 

Executive:

 

Mark Maley

 

 

 

Position:

 

Vice President – Sales

 

 

 

Base Salary:

 

$135,000 per year, payable bi-weekly, plus an override of 0.2% on the Company’s
gross annualized sales, less discounted sales of more than 50% from original
suggested wholesale sales price, returns and credits

 

 

 

Bonus:

 

Participation in executive level of Company-wide bonus plan, up to 40% of annual
compensation per year, at the discretion of the Compensation Committee

 

 

 

Term:

 

January 1, 2005 through January 1, 2006, subject to automatic one (1) year
extensions described in Section 3.1 of the Executive Employment Agreement

 

 

 

Stock Options:

 

The Company’s Stock Option Plan has expired. When and if the Company creates a
new stock option plan, the Executive will be allowed to participate in such plan
and receive grants of options in amounts at the discretion and subject to
approval of the Compensation Committee. Such options to purchase shares
typically vest in increments of one-third per year and are issued with an
exercise price of not less than 85% of the fair market value of the Company’s
Common Stock on date of grant, such date to be determined by the Compensation
Committee.

 

 

 

Duties and

 

 

Responsibilities:

 

Management, supervision and coordination of all sales activities of the Company

 

 

APPROVED:

 

 

 

THE COMPANY:

EXECUTIVE:

 

 

 

 

By:

/s/ Donald W. Jewell

 

By:

/s/ Mark Maley

 

 

Donald W. Jewell, Chief Executive

 

Mark Maley, Executive

 

Officer

 

 

 

 

Date: December 2, 2004

 

Date: December 2, 2004

 

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