**Exhibit 10.3**

 

**EXECUTIVE EMPLOYMENT AGREEMENT**

 

EXECUTIVEEMPLOYMENT 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 Agreementeffective January 1, 2004 and the Executive and the Company wish to enter intoa new agreement, which agreement shall supersede and replace the Agreementeffective January 1, 2004;

 

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

 

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

 

**ARTICLE I**

 

**EMPLOYMENT DUTIES AND BENEFITS**

 

**Section 1.1****  Employment.** The Company hereby employs the Executive inthe position described on Schedule 1 hereto as an executive officer of theCompany. The Executive accepts such employment and agrees to perform the dutiesand 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 allrespects the Executive Employment Agreement entered into by the Company andExecutive effective January 1, 2004.

 

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

 

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

 

**Section 1.4****  Vacations.** The Executive shall be entitled each year toa reasonable vacation of not less than two weeks in accordance with theestablished practices of the Company now or hereafter in effect for executivepersonnel, during which time the Executive’s compensation shall be paid infull.

 

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**Section 1.5****  Expenses.** The Executive is authorized to incurreasonable expenses for promoting the domestic and international business ofthe Company in all respects, including expenses for entertainment, travel andsimilar items, provided that such expenses do not exceed the budgetsestablished by the Company for such items. The Company will reimburse theExecutive for all such expenses upon the presentation by the Executive, fromtime-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 beforeMay 31, 2005 the Company shall pay to the Executive (i) all expenses incurredby the Executive for temporary living quarters while the Executive isrelocating to Denver, Colorado, (ii) all moving and storage expenses forhousehold goods in connection with the Executive’s relocation, (iii)  all travel expenses of the Executive and hisspouse for up to six separate round trips related to the Executive’s search fora residence in the Denver, Colorado area, and (iv) all expenses incurred byExecutive in the sale of Executive’s residence in Houston, Texas, including thereal estate commission paid by Executive. The Executive shall present to theCompany an itemized account of such expenditures, and repayment of suchexpenses by the Company shall be amortized throughout the effective term ofthis Agreement. In the event the Executive terminates his employment withoutcause pursuant to Section 3.5 hereof, the non-amortized portion of suchexpenses 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 plansprovided to the Company’s executive employees including, to the extent now orhereafter in effect, medical, health, dental, vision, disability, lifeinsurance and death benefit plans, in accordance with the terms of such plans.

 

**ARTICLE II**

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**COMPENSATION**

 

**Section 2.1****  Base Salary.** The Company shall pay to the Executive abase salary of not less than the amount specified on Schedule 1, subject toannual review and raises in such base salary. The base salary may be raised by action of the Board of Directors, andsuch raises shall thereafter be included in the Executive’s base salary asdefined 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 abonus at such time or times as may be determined by the Board of Directors andCompensation Committee of the Company. The Executive shall also be entitled toreceive bonuses of up to 40% of the Executive’s base

 

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

 

**ARTICLE III**

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**TERM OF EMPLOYMENT AND TERMINATION**

 

**Section 3.1****  Term.** This Agreement shall be for a term which isspecified on Schedule 1, commencing on its effective date, subject, however, totermination during such period as provided in this Article. Provided that theExecutive is in compliance with all of his obligations hereunder, the term ofthe Executive’s employment shall be extended automatically for one additionalyear at the end of each year of the term or extended term of this Agreement onthe same terms and conditions as contained in this Agreement, unless either theCompany or the Executive shall, at least 90 days prior to the expiration of theinitial term or of any renewal term, give written notice of the intention notto renew this Agreement. If the Company gives such written notice ofnon-renewal, the provisions of Section 3.3 shall apply; if the Executive givessuch 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 ofthe 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, atany time, upon ten days’ written notice and opportunity for Executive to remedyany non-compliance with the terms of this Agreement (if such non-compliance iscapable of being remedied; if not, the Company’s notice of termination shall beeffective immediately), for Cause. In such event, the Board of Directors shallprovide in writing to the Executive an opinion of the Board of Directors,signed by each member voting in favor of termination of the Executive, whichshall specify with particularity the basis for such termination. Upon the dateof such termination, the Company’s obligation to pay compensation and benefitsshall terminate, at which time the Company shall be responsible forcompensating the Executive for any vacation time not taken. Subject to thisexception and the obligation of the Company to compensate the Executive throughthe notice period, no other compensation shall be payable to the Executiveshould this Agreement be terminated pursuant to this Section 3.2.

 

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

 

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immaterial assets); (iii) conviction of orentry of a plea of nolo contendere to a felony; or (iv) a material breach ofthis Agreement by engaging in action in violation of the restrictive covenantsin 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 reasonablebelief 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’sservices without cause at any time upon 90 days’ written notice.  In such event, in addition to compensatingthe Executive during such 90-day notice period, the Company shall be obligatedto compensate the Executive with severance pay equal to twelve additionalmonths’ compensation as of the date of such termination. Accordingly, in theevent the Company terminates this Agreement without cause or chooses not torenew this Agreement upon its expiration, the Executive shall receive anaggregate of fifteen months’ salary from and after the date of the Executive’sreceipt of a notice of termination through and including the date oftermination. In addition to the foregoing, the Executive shall receive a bonuswhich shall be equivalent to 50% of the annual bonus last received by theExecutive, if any. Such bonus provision shall be in addition to thecompensation and severance package hereinabove specified.

 

**Section 3.4****  Termination by the Executive With Cause.** The Executive may terminate his employmentwith the Company at any time, upon ten days’ written notice and opportunity forthe Company to remedy any non-compliance, by reason of (i) the Company’smaterial failure to perform its duties pursuant to this Agreement, or (ii) anymaterial diminishment in the duties and responsibilities, working facilities,or benefits as described in Article I of this Agreement. The Executive shallnot be entitled to the severance compensation and other benefits described inSection 3.7 below in the event of termination of this Agreement pursuant tothis Section 3.4, except as otherwise provided in Section 3.7(a), but shall beentitled to the compensation provided in Section 3.3 upon a determination thatthe Company has failed to perform its duties pursuant to this Agreement andthat such failure is material or a determination that the duties andresponsibilities, working facilities, or benefits as described herein have beenmaterially diminished. Such determination shall be made by the Board ofDirectors in their best good faith.

 

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

 

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termination. The Executive shall not beentitled to the severance compensation and other benefits described in Section3.7 below in the event of termination of this Agreement pursuant to thisSection 3.5, except as described in Section 3.7(a), and shall not be entitledto the compensation provided in Section 3.3.

 

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

 

**Section 3.7****  Severance Compensation and Continuation ofBenefits.**

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(a)Notwithstanding any other provisions hereof, in the event of a non-negotiatedchange in control of the Company and either the Executive or the Companyterminate this Agreement within 60 days of such non-negotiated change incontrol, the Executive shall receive severance compensation, payable in a lumpsum within 30 days of such non-negotiated change in control, equal to threetimes his annual salary and incentive or bonus payments, if any, as shall havebeen paid to the Executive during the most recent 12-month period concludedprior to the date of his termination or resignation. If the total amount of thenon-negotiated change of control compensation were to exceed three times theExecutive’s base compensation (the average annual taxable compensation of theExecutive for the five years preceding the year in which the change of controloccurs), the Company and the Executive will reduce the lump sum compensation tobe received by the Executive in order to avoid the imposition of the goldenparachute tax as provided in the Tax Reform Act of 1984, as amended by the TaxReform Act of 1986.  The foregoingprovisions shall not apply in the event of a negotiated change in control ofthe Company.

 

(b)In the event the Executive is required to hire counsel to negotiate on hisbehalf in connection with his termination or a change in control of theCompany, or in order to enforce the rights and obligations as provided herein,the Company shall reimburse to the Executive all reasonable attorney’s feeswhich 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 theExecutive provides to the Company copies of invoices from the Executive’scounsel. Such invoices may be redacted to preserve the attorney-clientprivilege or attorney-client confidentiality.

 

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

 

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Such plans shall include, but are not limitedto, then-existing medical, health, dental, vision, disability, life insuranceand death benefit plans. If the terms of such plans expressly prohibit theExecutive from continuing as a participant in such plans following the date ofresignation or termination, the Company will provide the Executive withbenefits equivalent to, or exceeding, those offered by the then-existingbenefit plans offered to the Company’s executive employees, all at the Company’scost, for the duration of the Executive’s right to severance compensationhereunder.

 

Anycompensation to be paid to the Executive under the foregoing provisions of thisSection 3.7 shall be subject to the Executive complying with the non-competeprovisions of Section 4.1(c) below.  Inthe event the Executive does not so comply, the Company shall be released fromany obligations to the Executive under this Section 3.7.

 

**Section 3.8****  Options.** In the event of a non-negotiated change incontrol of the Company and either the Executive or the Company terminate thisAgreement within 60 days of such non-negotiated change in control as providedin Section 3.7(a) of this Agreement, any and all options granted to theExecutive to purchase Common Stock of the Company shall become fully vested andexercisable on the date of termination of this Agreement. In the event oftermination or non-renewal by either party without cause in accordance withSections 3.3 or 3.5 of this Agreement, any and all options granted to theExecutive to purchase Common Stock of the Company will vest and becomeexercisable on a pro-rated basis from the date of grant to the date oftermination of this Agreement based on the number of months during which thisAgreement has been in effect from the date of grant and the Company’sestablished thirty six month vesting period. For example, options granted topurchase 20,000 shares on the effective date of this Agreement would becomevested and exercisable at a rate of 555.55 shares per month for each monthduring 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 applicableStock 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 contractualmodification of any option grants or agreements between the Executive and theCompany and is hereby incorporated by reference into each such option grant oragreement.

 

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**ARTICLE IV**

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**CONFIDENTIALITY AND COMPETITION**

 

**Section 4.1****  Further Obligations of the ExecutiveDuring and After Employment.**

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(a)The Executive agrees that, during the tem of his employment under thisAgreement, he will engage in no other business activities which are or may becompetitive 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 Executivewill 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 ofthe Company and its affiliates. Therefore, during or subsequent to hisemployment by the Company, or by an affiliate, the Executive agrees to hold inconfidence and not to directly or indirectly disclose or use or copy or makelists of any such information, except to the extent authorized by the Companyin writing. All records, files, business plans, documents, equipment and thelike, or copies thereof, relating to Company’s business, or the business of anaffiliated company, which the Executive shall prepare, or use, or come intocontact with, shall remain the sole property of the Company, or of anaffiliated company, and shall not be removed from the Company’s or theaffiliated company’s premises without its written consent, and shall bepromptly returned to the Company upon termination or resignation of employmentwith the Company or its affiliated companies.

 

(c)Because of his employment by the Company, the Executive will have access totrade secrets and confidential information about the Company, its businessplans, its business accounts, its business opportunities, its expansion plansinto other geographic areas and its methods of doing business. The Executiveagrees that for a period of twelve months after termination or resignation ofhis employment (except if the Executive terminates this Agreement for causeunder Section 3.4 hereof or without cause under Section 3.5 hereof), he willnot, directly or indirectly, compete with the Company or its affiliates in thebusiness of designing, merchandising, marketing or contracting for themanufacture of men’s and women’s golf apparel and golf outerwear within theUnited States. This non-compete agreement shall be void and of no further forceor effect in the event termination occurs under Section 3.3 or Section 3.7hereof and the Company fails to pay the Executive amounts required underSection 3.3 or Section 3.7 hereof.

 

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

 

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4.1(c) by releasing the Company from itsobligation to pay Executive any severance compensation, employee benefits orother form of compensation which might otherwise be payable under thisAgreement.  Executive shall make suchelection upon five days’ written notice to the Company. The Executive’sobligations under the non-compete agreement and the Company’s obligation to payseverance compensation, employee benefits and other compensation shall allterminate as of the effective date of the notice described above.

 

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

 

**ARTICLE V**

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**DISABILITY AND ILLNESS**

 

**Section 5.1****  Disability and Salary Continuation.**

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(a)Definition of Total Disability. For purposes of this Agreement, theterms “totally disabled” and “total disability” shall mean disability asdefined in any total disability insurance policy or policies, if any, in effectwith respect to the Executive.  If noinsurance policy is in effect, “total disability” shall mean a medicallydeterminable physical or mental condition which in the opinion of twoindependent physicians renders the Executive unable to perform substantiallyall of the duties required pursuant to this Agreement. Total disability shallbe deemed to have occurred on the date of the disabling injury or onset of thedisabling illness, as determined by the two independent physicians.

 

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

 

**Section 5.2****  Illness.** If the Executive is unable to perform theservices required under this Agreement by reason of illness or physical injurynot amounting to total disability, as defined in this Article, the compensationotherwise payable to the Executive under this Agreement shall be continued infull for the remaining term or renewed term of this Agreement, but in no eventfor a period exceeding one year.

 

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**ARTICLE VI**

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**GENERAL MATTERS**

 

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

 

**Section 6.2****  No Waiver.** No provision of this Agreement may be waivedexcept by an agreement in writing signed by the waiving party.  A waiver of any term or provision shall notbe construed as a waiver of any other term or provision.

 

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

 

**Section 6.4****  Benefit.** This Agreement shall be binding upon theExecutive and the Company, and shall not be assignable by the Company withoutthe Executive’s written consent.

 

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

 

**Section 6.6****  Text to Control.** The headings of articles and sections areincluded solely for convenience of reference. If any conflict between any heading and the text of this Agreementexists, the text shall control.

 

**Section 6.7****  Severability.** If any provision of this Agreement isdeclared 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 beconstrued and enforced as if such invalid provisions had not been included in theAgreement.

 

**Section 6.8****  Authority.** The officer executing this Agreement onbehalf of the Company has been empowered and directed to do so by the Board ofDirectors of the Company.

 

**Section 6.9****  Effective Date.** The effective date of this Agreement shallbe 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.**

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**EXECUTIVE EMPLOYMENT AGREEMENT**

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**Schedule 1**

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**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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