**Exhibit 10.1**

 

**EMPLOYMENT AGREEMENT**

 

EMPLOYMENT AGREEMENT, effective February 7,2006, by and between SPORT-HALEY, INC., a Colorado corporation (the “Company”)and Michael D. Doris (the “Employee”).

 

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

 

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

 

**ARTICLE I**

**EMPLOYMENT DUTIES AND BENEFITS**

 

**Section 1.1**** Employment.**The Company hereby employs the Employee in the position described on Schedule 1hereto as an Employee of the Company. The Employee accepts such employment andagrees to perform the duties and responsibilities assigned to him pursuantto this Agreement.

 

**Section 1.2**** Duties and Responsibilities.** The Employee shall hold the position with the Company which isspecified on Schedule 1, which is attached hereto and incorporated hereinby reference. The Employee is employed pursuant to the terms of this Agreementand agrees to devote full-time to the business of the Company. The Employeeshall perform the duties set forth on Schedule 1 while employed as anEmployee, and such further duties as may be determined and assigned to himfrom time-to-time by the Chief Executive Officer and/or the Board of Directorsof the Company. The Employee shall at all times perform, faithfully,industriously, and to the best of the Employee’s ability, experience, andtalent, all duties that may be required of the employee pursuant to theexpress and implicit terms of this Agreement, to the reasonable satisfaction ofthe Company. In spite of anything in this agreement to the contrary, it isexpressly understood and agreed that the Employee shall not have the authorityto enter into any contracts or commitments on behalf of the Company, except forcommitments to established sales customers in the ordinary course of business,without the written consent of the Chief Executive Officer of the Company.

 

**Section 1.3**** Working Facilities.** The Employee shall be furnished with facilities and services suitableto the position and adequate for the performance of the Employee’s duties underthis Agreement.

 

**Section 1.4**** Vacations.** TheEmployee shall be entitled each year to a reasonable vacation of not less thantwo weeks in accordance with the established practices of the Company now orhereafter in effect for Employee personnel, during which time the Employee’scompensation shall be paid in full.

 

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**Section 1.5**** Expenses.** TheEmployee may incur reasonable expenses for promoting the domestic andinternational business of the Company in all respects, including expenses forentertainment, travel and similar items, provided that such expenses do notexceed the budgets established by the Company for such items. The Company willreimburse the Employee for all such expenses upon the presentation by theEmployee, from time-to-time, of an itemized account of such expenditures.

 

**Section 1.6****Benefit Plans**. From the effective date of this Agreement,the Employee shall be entitled to participate in all existing benefit plansprovided to the Company’s employees at a similar level within the Company’shierarchy including, to the extent now or hereafter in effect, medical, health,dental, vision, disability, life insurance, death benefit plans, and 401(k)retirement plans, in accordance with the terms of such plans. Employee shall beresponsible for paying for such benefits for his spouse and/or other eligiblefamily members.

 

**ARTICLE II**

**COMPENSATION**

 

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

 

**Section 2.2****  Bonus and Bonus Plan Participation.** The Employee shall be entitled to receive abonus at such time or times as may be determined by the Board of Directorsand Compensation Committee of the Company, in their sole discretion.

 

**ARTICLE III**

**TERM OF EMPLOYMENT ANDTERMINATION**

 

**Section 3.1**** Term.** ThisAgreement shall be for a term which is specified on Schedule 1, commencingon its effective date, subject, however, to termination during such period asprovided in this Article. Provided that the Employee is in compliance with allof his obligations hereunder, at the expiration of the initial term, unlesseither the Company or the Employee shall, at least 90 days prior to theexpiration of the initial term or of any renewal term, give written notice ofthe intention not to renew this Agreement, this Agreement will be extended fora renewed term of one year, on the same terms and conditions as contained inthis Agreement. If the Company gives such written notice of non-renewal, theprovisions of Section 3.3 shall apply; if the Employee gives such writtennotice of non-renewal, the provisions of Section 3.5 shall apply. Renewedterms shall be effective in subsequent years on the same day of the same monthas the original effective day and month of this Agreement.

 

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**Section 3.2**** Termination by the Company With Cause.** The Company may terminate the Employee,at any time, upon ten days’ written notice and opportunity for Employee toremedy any non-compliance with the terms of this Agreement (if such non-complianceis capable of being remedied; if not, the Company’s notice of termination shallbe effective immediately), for Cause. In such event, the Board of Directorsshall provide in writing to the Employee an opinion of the Board of Directors,signed by each member voting in favor of termination of the Employee, 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 Employee for any vacation time not taken. Subject to thisexception and the obligation of the Company to compensate the Employee throughthe notice period, no other compensation shall be payable to the Employeeshould this Agreement be terminated pursuant to this Section 3.2.

 

As used herein, the term “Cause” shall be limited toany of the following from and after the date hereof: (i) any willfulbreach of any material written policy of the Company that results in materialand demonstrable liability or loss to the Company; (ii) the engaging byEmployee in conduct involving moral turpitude that causes material anddemonstrable injury, monetarily or otherwise, to the Company, including, butnot limited to, misappropriation or conversion of assets of the Company (otherthan immaterial assets); (iii) conviction of or entry of a plea of nolocontendere to a felony; or (iv) a material breach of this Agreement byengaging in action in violation of the restrictive covenants in this Agreement.No act or failure to act by the Employee shall be deemed “willful” if done, oromitted to be done, by him in good faith and with the reasonable belief thathis 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 Employee’sservices without cause at any time upon 90 days’ written notice. In such event,in addition to compensating the Employee during such 90-day notice period, theCompany shall be obligated to compensate the Employee with severance pay equalto three additional months’ compensation as of the date of such termination.Accordingly, in the event the Company terminates this Agreement without causeor chooses not to renew this Agreement upon its expiration, the Employee shallreceive an aggregate of six months’ salary from and after the date of theEmployee’s receipt of a notice of termination through and including the date oftermination.

 

**Section 3.4**** Termination by the Employee With Cause.** The Employee may terminate hisemployment with the Company at any time, upon ten days’ written notice andopportunity for the Company to remedy any non-compliance, by reason of (i) theCompany’s material failure to perform its

 

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dutiespursuant to this Agreement, or (ii) any material diminishment in theduties and responsibilities, working facilities, or benefits as described in Article Iof this Agreement. The Employee shall not be entitled to the severancecompensation and other benefits described in Section 3.7 below in theevent of termination of this Agreement pursuant to this Section 3.4,except as otherwise provided in Section 3.7(a), but shall be entitled tothe compensation provided in Section 3.3 upon a determination that theCompany 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 Employee Without Cause.** The Employee, without cause, may terminatethis Agreement upon 90 days’ written notice to the Company. In such event, theEmployee shall not be required to render the services required under thisAgreement following such 90-day period. Compensation for vacation time nottaken by the Employee shall be paid to the Employee at the date of termination.The Employee shall not be entitled to the severance compensation and otherbenefits described in Section 3.7 below in the event of termination ofthis 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 Employee.** In addition to any other provision relatingto termination, this Agreement shall terminate upon the Employee’s death. Insuch event, all unpaid compensation and bonuses, compensation for vacation timenot taken by the Employee and all expense reimbursements due to the Employeeshall be paid to the Employee’s estate.

 

**Section 3.7**** Severance Compensation and Continuation of Benefits.**

 

(a) Notwithstanding any other provisionshereof, in the event of a non-negotiated change in control of the Company andeither the Employee or the Company terminate this Agreement within 60 days ofsuch non-negotiated change in control, the Employee shall receive severancecompensation, payable in a lump sum within 30 days of such non-negotiatedchange in control, equal to three times his annual salary and incentive orbonus payments, if any, as shall have been paid to the Employee during the mostrecent 12-month period concluded prior to the date of his termination orresignation. If the total amount of the non-negotiated change of controlcompensation were to exceed three times the Employee’s base compensation (theaverage annual taxable compensation of the Employee for the five yearspreceding the year in which the change of control occurs), the Company and theEmployee will reduce the lump sum compensation to be received by the Employeein order to avoid the imposition of the golden

 

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parachutetax as provided in the Tax Reform Act of 1984, as amended by the Tax Reform Actof 1986. The foregoing provisions shall not apply in the event of a negotiatedchange in control of the Company.

 

(b) In the event the Employee is required tohire counsel to negotiate on his behalf in connection with his termination or achange in control of the Company, or in order to enforce the rights andobligations as provided herein, the Company shall reimburse to the Employee allreasonable attorney’s fees which may be expended by the Employee inseeking to enforce the terms hereof. Such reimbursement shall be paid by theCompany every 30 days after the Employee provides to the Company copies ofinvoices from the Employee’s counsel. Such invoices may be redacted topreserve the attorney-client privilege or attorney-client confidentiality.

 

(c) So long as the Employee is receivingseverance compensation pursuant to this Section 3.7, the Employee shall beentitled to continue to participate, at the Company’s cost, in all existingbenefit plans provided to the Company’s Employee employees at the time of theEmployee’s termination or resignation. Such plans shall include, but are notlimited to, then-existing medical, health, dental, vision, disability, lifeinsurance and death benefit plans. If the terms of such plans expresslyprohibit the Employee from continuing as a participant in such plans followingthe date of resignation or termination, the Company will provide the Employeewith benefits equivalent to, or exceeding, those offered by the then-existingbenefit plans offered to the Company’s Employee employees, all at the Company’scost, for the duration of the Employee’s right to severance compensationhereunder.

 

Any compensation to be paid to the Employee underthe foregoing provisions of this Section 3.7 shall be subject to theEmployee complying with the non-compete provisions of Section 4.1(c) below.In the event the Employee does not so comply, the Company, without waiving anyrights or remedies, shall be released from any obligations to the Employeeunder this Section 3.7.

 

**Section 3.8****  Options.** In the event of a non-negotiated change incontrol of the Company and either the Employee 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 tothe Employee to purchase Common Stock of the Company shall become fully vestedand exercisable 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 theEmployee 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

 

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Agreementwould become vested and exercisable at a rate of 555.55 shares per month foreach month during which this Agreement is in effect. In the event thisAgreement is terminated by the Company for cause, options will vest and beexercisable pursuant to the terms of the applicable Stock Option Plan or anysuccessor plan under which such options are granted (the “Plan”) regardingtermination of employment for cause. This provision shall serve as acontractual modification of any option grants or agreements between theEmployee and the Company and is hereby incorporated by reference into each suchoption grant or agreement.

 

**ARTICLE IV**

**CONFIDENTIALITY AND COMPETITION**

 

**Section 4.1**** Further Obligations of the Employee During and After Employment.**

 

(a) The Employee agrees that during the term ofhis employment under this Agreement, he will engage in no other businessactivities which are or may be competitive with, or which might place himin a competing position to that of, the Company or any subsidiary of theCompany.

 

(b) The Employee realizes that during thecourse of his employment, the Employee will have produced and/or have access toconfidential 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, theEmployee agrees to hold in confidence and not to directly or indirectlydisclose or use or copy or make lists of any such information, except to theextent authorized by the Company in writing. All records, files, businessplans, documents, equipment and the like, or copies thereof, relating toCompany’s business, or the business of an affiliated company, which theEmployee shall prepare, or use, or come into contact with, shall remain thesole property of the Company, or of an affiliated company, and shall not beremoved from the Company’s or the affiliated company’s premises without itswritten consent, and shall be promptly returned to the Company upon terminationor resignation of employment with the Company or its affiliated companies.

 

(c) Because of his employment by the Company,the Employee will have access to trade secrets and confidential informationabout the Company, its business plans, its business accounts, its businessopportunities, its expansion plans into other geographic areas and its methodsof doing business. The Employee agrees that for a period of nine months aftertermination or resignation of his employment (except if the Employee terminatesthis Agreement for cause under Section 3.4 hereof or without cause under Section 3.5hereof), he will not, directly or indirectly, compete with the Company or itsaffiliates in the business of designing, merchandising, marketing orcontracting for the manufacture of men’s and

 

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women’sgolf apparel and golf outerwear within the United States. This non-competeagreement shall be void and of no further force or effect in the eventtermination occurs under Section 3.3 or Section 3.7 hereof and theCompany fails to pay the Employee amounts required under Section 3.3 or Section 3.7hereof.

 

(d) In the event a court of competentjurisdiction finds any provision of this Section 4.1 to be so overly broadas to be unenforceable, then such provision shall be reduced in scope by thecourt, but only to the extent deemed necessary by the court to render theprovision reasonable and enforceable, it being the Employee’s intention toprovide the Company with the broadest protection possible against harmfulcompetition.

 

**ARTICLE V**

**DISABILITY AND ILLNESS**

 

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

 

(a) Definition of Total Disability. Forpurposes of this Agreement, the terms “totally disabled” and “total disability”shall mean disability as defined in any total disability insurance policy orpolicies, if any, in effect with respect to the Employee. If no insurancepolicy is in effect, “total disability” shall mean a medically determinablephysical or mental condition which in the opinion of two independent physiciansrenders the Employee unable to perform substantially all of the dutiesrequired pursuant to this Agreement. Total disability shall be deemed to haveoccurred 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 Employeebecomes totally disabled during the term of this Agreement, his full salaryshall be continued for 360 days from the date of the disabling injury or onsetof the disability illness.

 

**Section 5.2**** Illness.** Ifthe Employee is unable to perform the services required under thisAgreement by reason of illness or physical injury not amounting to totaldisability, as defined in this Article, the compensation otherwise payable tothe Employee under this Agreement shall be continued in full for the remainingterm or renewed term of this Agreement, but in no event for a period exceedingone year.

 

**ARTICLE VI**

**GENERAL MATTERS**

 

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

 

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**Section 6.2**** No Waiver.** Noprovision of this Agreement may be waived except by an agreement inwriting signed by the waiving party. A waiver of any term or provision shallnot be construed as a waiver of any other term or provision.

 

**Section 6.3**** Amendment.** ThisAgreement may be amended, altered or revoked at any time, in whole or inpart, by filing with this Agreement a written instrument setting forth suchchanges, signed by each of the parties.

 

**Section 6.4**** Benefit.** ThisAgreement shall be binding upon the Employee and the Company, and shall not beassignable by the Company without the Employee’s written consent.

 

**Section 6.5**** Construction.**Throughout this Agreement the singular shall include the plural, and the pluralshall includes the singular, and the masculine and neuter shall include thefeminine, wherever the context so requires.

 

**Section 6.6**** Text to Control.**The headings of articles and sections are included solely for convenience ofreference. 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 is declared by any court of competentjurisdiction to be invalid for any reason, such invalidity shall not affect theremaining provisions. On the contrary, such remaining provisions shall be fullyseverable, and this Agreement shall be construed and enforced as if suchinvalid provisions had not been included in the Agreement.

 

**Section 6.8**** Authority.** Theofficer executing this Agreement on behalf of the Company has been empoweredand directed to do so by the Board of Directors and Compensation Committee ofthe Company.

 

**Section 6.9**** Effective Date.**The effective date of this Agreement shall be February 7, 2006.

 

 

 
| SPORT-HALEY, INC. | Employee:                       |
|------------------------|---------------------------------|
|                   |                            |
|                   |                            |
| By:                    | /s/ Donald W. Jewell            | ** ** | /s/ Michael D. Doris |   |
|                   | Donald W. Jewell,               | Michael D. Doris |
|                   | Interim Chief Executive Officer |   |
|                        |                                 |  |  |  |

 

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**SPORT-HALEY, INC.**

 

**EMPLOYMENT AGREEMENT**

 

**Schedule 1**

 

**Duties and Compensation**

 
| Employee:                     |   | Michael D. Doris                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|-------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Position:                     |   | Regional Sales Manager                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Base Salary:                  |   | $ 110,000 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:                        |   | At the sole discretion of the Compensation Committee                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Term:                         |   | February 7, 2006, through February 6, 2007, subject to  renewal terms of one (1) year as described in Section 3.1 of the  Employment Agreement                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| Stock Options:                |   | The Company’s Stock Option Plan has expired. When and if the Company  creates a new stock option plan, the Employee may 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: |   | The employee will use his best efforts and entire time during usual  business hours to promote and solicit the sale of the company’s products  actively and diligently throughout the United States and will manage and  oversee the Company’s independent sales representatives in the Western United  States.                                                                                                                                                                                                                                                              |

 

 
| APPROVED:                   |                            |             |
|-----------------------------|---------------------------------|------------------|
|                        |                            |             |
| THE COMPANY:                | Employee:                       |
|                        |                            |             |
|                        |                            |             |
| By:                         | /s/ Donald W. Jewell            |             | By: | /s/ Michael D. Doris |   |
|                        | Donald W. Jewell                | Michael D. Doris |
|                        | Interim Chief Executive Officer |             |   |
|                        |                            |
| Date: February 7, 2006 | Date: February 7, 2006     |
|                             |                                 |                  |  |  |  |  |  |

 

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