<PAGE>

                          REVOLVING CREDIT AGREEMENT

This Revolving Credit Agreement (the "Agreement") is made as of November 5,
1998, between SPORT-HALEY, INC., a Colorado corporation ("Borrower") and U.S.
BANK NATIONAL ASSOCIATION, a national banking association ("Bank").


                                   RECITALS:

i.    Borrower and Bank entered into a Business Loan Agreement dated as of
      May 17, 1998, pursuant to which Bank made available to Borrower a
      revolving credit facility of $9,000,000 and a revolving credit facility
      of $1,000,000 to Borrower's 52% owned subsidiary B & L Sportswear, Inc.
      (the "Prior Agreement");

ii.   Borrower has requested that Bank renew and extend the revolving credit
      facilities made available to Borrower and to B & L Sportswear, Inc.; and

iii.  Bank is willing to take such action for Borrower upon and subject to
      the terms and conditions in this Agreement and for B & L Sportswear,
      Inc., under a separate agreement and upon execution hereof this Agreement
      and such separate agreement will supersede the Prior Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants
contained in this Agreement, Borrower and Bank agree as follows:

1.    TERMS OF BORROWING

1.01  REVOLVING CREDIT LINE.  Subject to the following terms and conditions,
      Bank agrees to make a line of credit available to Borrower (the
      "Revolving Credit Line") in the maximum amount of $9,000,0000 (the
      "Maximum Line"), pursuant to which Bank will make loans to Borrower (each
      an "Advance") in such amounts as Borrower may request from time to time,
      the proceeds of which shall be used for working capital. Outstanding
      amounts borrowed by Borrower under its line of credit under the Prior
      Agreement shall be deemed Advances made and outstanding hereunder, and
      the aggregate outstanding principal balance of all such Advances and
      Advances made hereunder may not exceed the Maximum Line. Amounts borrowed
      under the Revolving Credit Line may be repaid prior to the Termination
      Date (defined below) without penalty and may be reborrowed subject to the
      terms hereof.

      Bank's commitment to make Advances hereunder is subject to the
      conditions in Section 4 below and the following limitations:

      a.   Bank's commitment to lend hereunder terminates on November 5,
           2000 (the "Termination Date"), if not sooner terminated under
           Section 8 below;

      b.   Bank shall not be obligated to make any Advance which would cause
           the outstanding principal balance of the Revolving Credit Line (the
           "Line Balance") to exceed the Maximum Line; and

      c.   Bank shall not be obligated to make any Advance if an Event of
           Default, as defined in Section 7 below, or an event which, with the
           giving of notice or lapse of time, or both, would become an Event of
           Default (a "Potential Default"), has occurred and has not been cured
           by Borrower or waived by Bank.


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<PAGE>

1.02  LINE NOTE.  Borrower's indebtedness to Bank for amounts borrowed under
      the Revolving Credit Line and for interest accrued thereon shall be
      evidenced by Borrower's promissory note to Bank, on Bank's standard form
      for commercial promissory notes and otherwise satisfactory to Bank, in
      the principal amount of the Maximum Line (the "Line Note").

1.03  INTEREST.  Borrower agrees to pay interest on the Line Balance from
      time to time as provided herein. Interest will accrue on the daily
      outstanding Line Balance at a fluctuating rate per annum equal at all
      times to the sum of the Reference Rate minus one half of one percent
      (0.5%), which rate will change when and as the Reference Rate
      changes. "Reference Rate" means the rate of interest per annum
      announced publicly from time to time as the Bank's "reference rate,"
      which may be a rate at, above or below the rate or rates at which the
      Bank lends to other parties and it is not necessarily the lowest rate
      charged by Bank on commercial loans. Accrued interest shall be due
      and payable (i) on the first day of each month, (ii) at maturity of
      the Line Note; and (iii) on demand after such maturity. After the
      occurrence of an Event of Default or after maturity of any acceleration
      of maturity of the Line Note, at Bank's option, the interest rate
      applicable to the Line Balance may be increased as provided in the Line
      Note and Borrower agrees to pay any such interest. Interest shall be
      computed using the actual number of days in the period for which such
      computation is made and a per diem rate equal to 1/360 of the fluctuating
      rate per annum.

1.04  REPAYMENT OF PRINCIPAL.  Borrower agrees to repay all Advances made
      hereunder. The Line Balance will be due and payable in full at the
      maturity of the Line Note, which will be November 5, 2000 subject to
      acceleration upon the occurrence of an Event of Default.

1.05  METHOD OF BORROWING.  Requests for Advances may be submitted by
      Borrower in writing or by telephone. Bank shall be entitled to honor any
      such request it reasonably believes to be genuine, whether or not the
      person making the request is named as an authorized person in any
      corporate resolution or instruction furnished Bank by Borrower. Advances
      shall be disbursed only by deposit to a demand deposit account maintained
      by Borrower at Bank. Proceeds of an Advance shall be disbursed on the
      Banking Day (as defined in the Colorado Uniform Commercial Code) Bank
      receives Borrower's request if such request is received before 2:00 p.m.
      Denver time on such day, and on the next Banking Day if received at or
      after 2:00 p.m. on such day, and in either case the conditions of
      Section 4 are met.

1.06  LETTERS OF CREDIT.  In the event and to the extent Bank issues a letter
      of credit (an "L/C") on behalf of Borrower under the Revolving Credit
      Line in lieu of an advance, the Maximum Line shall be considered
      utilized by the amount of such L/C. Borrower shall pay fees for any
      such L/C at the time of issuance and any renewal or extension according
      to Bank's schedule of fees relating to letters of credit in effect from
      time to time; and Borrower shall execute Bank's then current standard
      form application and agreement for such L/C. Amounts drawn under any
      such L/C and honored by Bank but not immediately reimbursed by Borrower
      to Bank shall become an Advance hereunder in such amount at such time
      evidenced by the Line Note and subject to all the terms of this
      Agreement, whether or not any Event of Default or Potential Default has
      occurred. No such L/C shall expire later than the Termination Date.

2.    COLLATERAL; GUARANTEES AND OTHER CREDIT SUPPORT

2.01  COLLATERAL. The repayment of all of Borrower's indebtedness to Bank
      shall be secured by first priority security interests (the "Security
      Interests") in all accounts, general intangibles, inventory and
      equipment (all such terms having the meanings given them in the
      Colorado Uniform Commercial Code) now owned or hereafter acquired by
      Borrower and in all proceeds thereof (the "Collateral"). The Security
      Interests shall be created and perfected by security agreements, UCC
      financing statements, and any other collateral documents deemed
      necessary or advisable by Bank in its sole discretion, each in form
      satisfactory to Bank, duly executed by Borrower (the "Collateral
      Documents"). Hereafter, Borrower shall from time to time execute and
      deliver to Bank such other documents in form and substance satisfactory
      to Bank, and perform such other acts, as Bank may reasonably request, to
      perfect and maintain valid Security Interests in the Collateral. In
      addition Borrower hereby grants to Bank a security interest in all
      Borrower's deposit accounts at Bank to secure all obligations of
      Borrower to Bank now or hereafter arising.


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<PAGE>


3.    REPRESENTATIONS AND WARRANTIES

To induce Bank to enter this Agreement, Borrower represents and warrants
as follows:

3.01  INCORPORATION.  Borrower is a corporation duly organized, validly
      existing, and in good standing under the laws of the State indicated at
      the beginning of this Agreement, and Borrower is duly qualified or
      licensed and in good standing to do business as a foreign corporation in
      all jurisdictions in which the nature of Borrower's business requires
      qualification.

3.02  BORROWER'S AUTHORIZATION.  The execution, delivery and performance by
      Borrower of this Agreement, the Line Note and the Collateral Documents
      are within Borrower's corporate powers, have been authorized by all
      necessary corporate action and do not and will not contravene Borrower's
      Articles of Incorporation or Bylaws, violate any provision of law or
      result in a breach of or default under any other agreement to which
      Borrower is a party.

3.03  LITIGATION.  There is no pending or threatened action, claim,
      investigation, lawsuit or proceeding against or affecting Borrower
      before any court, governmental agency, arbitrator or arbitration panel,
      which if decided adversely to Borrower would have a material adverse
      affect on the financial condition or operations of Borrower ("Material
      Litigation").

3.04  FINANCIAL CONDITION.  The audited balance sheet of Borrower as at June
      30, 1998, and the related statements of income and retained earnings for
      the fiscal year then ended, copies of which have been furnished to Bank,
      fairly present the financial condition of Borrower as at such date and
      the results of the operations of Borrower for the period ended on such
      date, all in accordance with generally accepted accounting principles
      ("GAAP") applied on a consistent basis, and since June 30, 1998 there
      has been no material adverse change in such condition or operations.

3.05  LIENS.  Borrower is the legal and beneficial owner of the property
      granted as collateral hereunder, free from any lien, encumbrance, or
      restriction whatsoever except the Bank's Security Interests and liens
      for taxes not yet due and payable, and Borrower has full power and
      authority to grant liens and the security interests in such property
      as collateral for its indebtedness.

3.06  VALID OBLIGATIONS.  This Agreement constitutes, and each of the Line
      Note and the Collateral Documents when delivered hereunder will be, a
      legal, valid and binding obligation of Borrower, enforceable against
      Borrower in accordance with its respective terms.

3.07  TAXES.  Borrower (i) has filed all tax reports and returns required to
      be filed, including but not limited to reports and returns concerning
      income, franchise, employment, sales and use, and property taxes;
      (ii) has paid all of its tax liabilities which were due on or prior to
      the date hereof; and (iii) is not aware of any pending investigation by
      any taxing authority or of any pending assessments or adjustments which
      would materially increase its tax liability.

3.08  REGULATION U.  Borrower is not engaged in the business of extending
      credit for the purpose of purchasing or carrying margin stock (within
      the meaning of Regulation U issued by the Board of Governors of the
      Federal Reserve System), and no proceeds of any Advance will be used to
      purchase or carry any margin stock or to extend credit to others for the
      purpose of purchasing or carrying any margin stock.

3.09  DISCLOSURE.  No information, exhibit or report furnished by Borrower to
      Bank in connection with the negotiation of this Agreement contains any
      material misstatement of fact or omitted to state a material fact
      necessary to make the statement contained therein not misleading.

3.10  ENVIRONMENTAL COMPLIANCE.  The ownership and operation of Borrower's
      properties have been and are in compliance with all applicable federal,
      state, and local environmental protection and hazardous waste disposal
      statutes and regulations. Borrower has not received any notice of claim
      under or violation of any such laws affecting Borrower's properties.


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<PAGE>


4.    CONDITIONS PRECEDENT

4.01  CONDITIONS PRECEDENT TO INITIAL ADVANCE.  The obligation of Bank to
      make its initial Advance is subject to the condition precedent that
      Bank shall have received on or before the day such Advance the
      following, each in form and substance satisfactory to Bank:

      i.   the Line Note and such Collateral Documents as may be specified by
           Bank, each duly executed by Borrower, and any fees specified above;

      ii.  copies of the Articles of incorporation and By-laws of Borrower,
           each certified by the Secretary of Borrower to be a true and
           correct copy thereof, including all amendments thereto, if any;

      iii. certified copies of the resolutions of the Board of Directors of
           Borrower approving this Agreement, the Line Note and the Collateral
           Documents, and of all documents evidencing other necessary
           corporate action and governmental approvals, if any, with respect
           to this Agreement, the Line Note and the Collateral Documents;

      iv.  a certificate of the Secretary of Borrower certifying the names
           and true signatures of the officers of Borrower authorized to sign
           this Agreement, the Line Note and the Collateral Documents;

      v.   a certificate of the Secretary of State of the State in which
           Borrower is incorporated certifying that Borrower is a corporation
           duly organized and in good standing under the laws of such State;
           and

      vi.  a year 2000 compliance representation letter on Bank's form.

4.02  CONDITIONS PRECEDENT TO ALL ADVANCES.  The obligation of Bank to make
      each Advance (including the initial Advance) shall be subject to the
      further conditions precedent that on the date of such Advance:

      i.   the following statements shall be true:

           (a)  the representations and warranties contained in Section 3 are
                correct on and as of the date of such Advance as though made
                on and as of such date; and

           (b)  no event has occurred and is continuing, or would result from
                such Advance, which constitutes an Event of Default or
                Potential Default;

           and Bank may request a certificate of an officer of Borrower
           stating the foregoing;

      ii.  Bank shall have received such other approvals, opinions or
           documents as Bank may reasonably request; and

      iii. Bank's legal counsel is reasonably satisfied as to all legal
           matters incident to the making of such Advance.

5.    AFFIRMATIVE COVENANTS.

So long as the Line Note or any Debt of Borrower to Bank remains unpaid or
Bank has any commitment to lend hereunder, Borrower will:

5.01  ACCOUNTING RECORDS.  Maintain adequate books and accounting records in
      accordance with GAAP, consistently applied, reflecting all financial
      transactions of Borrower.


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<PAGE>

5.02  INSPECTIONS.  At any reasonable time and from time to time, permit any
      agents or representatives of Bank to examine and make copies of and
      abstracts from records and books of account of Borrower, to visit and
      inspect the properties of Borrower and to discuss the affairs, finances
      and accounts of Borrower with any of its officers or directors.

5.03  MAINTENANCE OF PROPERTY.  Maintain and preserve all of its properties
      and assets necessary or useful in the performance of its business in
      good working order, repair and condition, ordinary wear and tear
      excepted.

5.04  INSURANCE.  Maintain insurance with responsible and reputable
      insurance companies in such amounts and covering such risks as is
      usually and customarily carried by companies engaged in similar
      businesses and owning similar properties, including, but not limited
      to, public liability, property damage and worker's compensation, and
      deliver to Bank, at Bank's request, schedules setting forth all
      insurance then in effect and copies of policies or certificates of
      insurance on property granted or pledged as collateral; cause Bank to
      be named loss payee and as additional insured on any insurance covering
      property granted or pledged as collateral, and furnish to Bank
      certificates indicating such status.

5.05  PAYMENT OF TAXES, LIENS.  Pay and discharge, before the same become
      delinquent, (i) all taxes, assessments and governmental charges or
      levies imposed upon Borrower or upon its property, and (ii) all lawful
      claims which, if unpaid, might by law become a lien upon its property,
      except any thereof which is being contested in good faith and by
      appropriate proceedings.

5.06  COMPLIANCE WITH LAWS.  Comply in all material respects with all
      applicable laws, rules, regulations and orders of any government
      authority, non-compliance with which would materially adversely affect
      its business or credit.

5.07  CORPORATE EXISTENCE.  Preserve and maintain its corporate existence and
      rights and franchises in its State of incorporation, and all licenses
      necessary to do business; and qualify and remain qualified and in good
      standing as a foreign corporation in each jurisdiction in which such
      qualification is necessary in view of its operation or ownership of its
      properties.

5.08  REPORTING.  Furnish Bank the following as soon as available and in any
      event:

      i.      Within one hundred twenty (120) days after the end of each
              fiscal year of Borrower, a copy of Borrower's report on form
              10K including the annual audited financial statements of
              Borrower as at the end of such fiscal year, including a balance
              sheet and income statement, audited by an independent Certified
              Public Accountant ("CPA") reasonably acceptable to Bank, with
              an unqualified opinion thereon by said CPA;

      ii.     Within forty five (45) days after the end of each fiscal
              quarter, a copy of Borrower's report on form 10Q including
              Borrower's internally prepared statement of financial condition
              as at the end of such quarter, including a balance sheet and
              income statement prepared substantially in accordance with GAAP;
              and

      iii.    From time to time such other information as Bank may reasonably
              request.

5.09  FINANCIAL CONDITION.  Maintain the financial condition of Borrower,
      determined in accordance with GAAP, so that Borrower's net worth less
      the value on Borrower's books of any intangible assets and less any
      accounts receivable from affiliates of Borrower ("Tangible Net Worth")
      will be not less than $20,000,000 at all times.

5.10  DEPOSIT ACCOUNTS.  Maintain all material deposit accounts at Bank.

5.11  NOTICE OF SIGNIFICANT EVENTS.  Promptly notify Bank in writing of 1)
      the occurrence of any Event of Default or Potential Default; 2) any
      change in its name, address, form of entity, or organizational or
      capital structure; or 3) the threat of or commencement of any Material
      Litigation.


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<PAGE>

6.    NEGATIVE COVENANTS

So long as the Line Note or any indebtedness of Borrower to Bank remains
unpaid or Bank has any commitment to lend hereunder, without the prior
written consent of Bank, Borrower will not:

6.01  USE OF FUNDS.  Use any of the amounts loaned to it by Bank pursuant to
      this Agreement for any purpose except for general short-term working
      capital.

6.02  DEBT.  Create, incur, assume or permit to exist any Debt except 1) Debt
      to Bank; and 2) Debt which is trade debt incurred by Borrower in the
      ordinary course of business on a short term basis for the acquisition
      of supplies or services.  "Debt" means (i) indebtedness for borrowed
      money or for the deferred purchase price of property or services, (ii)
      obligations as lessee under leases which shall have been or should be,
      in accordance with GAAP, recorded as capital leases, (iii) obligations
      under direct or indirect guaranties in respect of, and obligations
      (contingent or otherwise) to purchase or otherwise acquire, or
      otherwise assure a creditor against loss in respect of, indebtedness or
      obligations of others of the kinds referred to in clause (i) or (ii)
      above, and (iv) liabilities in respect of unfunded vested benefits
      under plans covered by Title IV of ERISA;

6.03  LIENS. Create or permit to exist any lien against any of Borrower's
      property except those created under the Collateral Documents, liens for
      taxes not yet due and payable, deposits or pledges in connection with
      or to secure payment of workmen's compensation, unemployment insurance
      or other social security or in connection with the good faith context
      of any tax lien;

6.04  MERGER OR SALE.  Merge into or consolidate with any corporation or other
      entity; or sell, lease, assign or otherwise transfer or dispose of all
      or any material portion of its assets except for sales of inventory in
      the ordinary course of business; or

6.05  NATURE OF BUSINESS.  Materially change the scope or nature of business.

7.    DEFAULT.

If any of the following events shall occur, it shall be an event of default
      ("Event of Default"):

7.01  NON-PAYMENT.  Borrower fails to pay any principal of the Line Note or
      any other sums payable by Borrower to Bank pursuant to this Agreement
      when due, or Borrower fails to pay any interest on the Line Note within
      10 days after any such interest is due;

7.02  REPRESENTATIONS.  Any representation or warranty made by Borrower
      herein or in connection herewith proves to have been incorrect in any
      material respect when made;

7.03  BREACH OF NEGATIVE COVENANTS.  Borrower fails to observe or comply with
      any of the covenants in Section 6 of this Agreement;

7.04  BREACH OF COVENANTS.  Borrower fails to perform or observe any other
      term, covenant or agreement contained in this Agreement (other than
      those referred to in Section 7.01 and 7.03) or in any Collateral
      Document or any non-monetary default occurs under the Note and such
      failure has not been cured within twenty (20) days after Bank has
      notified Borrower of such failure;

7.05  DEFAULT ON OTHER DEBT.  Borrower shall fail to pay any Debt of Borrower
      (other than Debt evidenced by the Line Note) or any interest or premium
      thereon when due (whether by scheduled maturity, required prepayment,
      acceleration, demand or otherwise) and such failure shall continue
      after the applicable grace period, if any, specified in the agreement
      or instrument relating to such Debt; or any other default or event under
      any agreement or instrument relating to any such Debt shall occur and
      shall continue after the applicable grace period, if any, specified in
      such agreement or instrument, if the effect of such default or event is
      to accelerate, or to permit the acceleration of, the maturity of such
      Debt; or any such Debt shall be


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<PAGE>

      declared to be due and payable, or required to be prepaid (other than
      by a regularly scheduled required prepayment), prior to the stated
      maturity thereof;

7.06  INSOLVENCY.  Borrower shall generally not pay its debts as such debts
      become due, or shall admit in writing its inability to pay its debts
      generally, or shall make a general assignment for the benefit of
      creditors; or any proceeding shall be instituted by or against Borrower
      seeking to adjudicate it a bankrupt or insolvent, or seeking
      liquidation, winding up, reorganization, arrangement, adjustment,
      protection, relief, or composition of it or its debts under any law
      relating to bankruptcy, insolvency or reorganization or relief of
      debtors, or seeking the entry of an order for relief or the appointment
      of a receiver, trustee, or other similar official for it or for any
      substantial part of its property and, if instituted against Borrower,
      shall remain undismissed for a period of thirty days; or Borrower shall
      take any corporate action to authorize any of the actions set forth
      above in this subsection;

7.07  JUDGMENTS.  Any judgment or order for the payment of money in excess of
      $100,000 shall be rendered against Borrower and either (i) enforcement
      proceedings shall have been commenced by any creditor upon such judgment
      or order or (ii) there shall be any period of 10 consecutive days during
      which a stay of enforcement of such judgment or order, by reason of a
      pending appeal or otherwise, shall not be in effect;

7.08  CHANGE IN MANAGEMENT.  Borrower's current Chief Executive Officer
      ceases to be employed by Borrower in such capacity, or the
      responsibility or authority of such officer is materially reduced; or

7.09  CHANGE IN CONTROL.  Any person, entity or group of persons acting
      together (not including the current principal shareholder(s) of
      Borrower) acquires a sufficient number of the shares of Borrower's
      voting common stock to enable such acquiring person, entity or group to
      elect a majority of Borrower's Board of Directors, or the resignation
      or removal of three or more of Borrower's current Directors occurs
      within a period of one month.

8.    REMEDIES

Upon the occurrence of any Event of Default, Bank shall have the right by
notice to Borrower:

8.01  FURTHER LOANS.  To terminate its commitment to make Advances;

8.02  ACCELERATION.  To declare the Line Balance and all interest accrued
      thereon and all other amounts payable under this Agreement to be
      immediately due and payable whereupon all such indebtedness of Borrower
      to Bank shall become and be immediately due and payable without
      presentment, demand, protest or further notice of any kind, all of
      which are hereby expressly waived by Borrower; and

8.03  OTHER RIGHTS.  To exercise any other rights or remedies available to it
      whether under the Collateral Documents, any Continuing Guaranty or at
      law or in equity.

9.    MISCELLANEOUS

9.01  WAIVER; AMENDMENTS.  No waiver by Bank or any amendment of any
      provision of this Agreement, nor any consent of Bank to any failure to
      comply with the terms hereof by Borrower, shall be effective unless made
      in writing and signed by Bank. No waiver by Bank of any default or of
      any right to enforce this Agreement shall operate as a waiver of any
      other default, or of the same default on a future occasion, or of the
      right to enforce this Agreement on any future occasion. No delay in or
      discontinuance of the enforcement of this Agreement, nor the acceptance
      by Bank of installments of principal or interest after the occurrence of
      any Event of Default, shall operate as a waiver of any default.

9.02  RIGHTS CUMULATIVE.  The rights and remedies herein provided are
      cumulative and not exclusive of any rights or remedies afforded by any
      security agreement, promissory note or other agreement executed in
      connection herewith, or provided by law. Bank's remedies may be exercised
      concurrently or separately, in any order, and the election of one remedy
      shall not be deemed a waiver of any other remedy.


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<PAGE>

9.03  EXPENSES.  Borrower will pay to Bank on demand all expenses, including
      reasonable fees and expenses of attorneys, paid or incurred by Bank
      in connection with the creation and perfection of Bank's security
      interests in collateral, the making or collection of Advances made
      pursuant to this Agreement, or the protection, preservation or
      enforcement of Bank's rights hereunder and in property pledged or
      granted as collateral.

9.04  SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and inure
      to the benefit of Borrower, Bank and their respective successors and
      assigns. However, Borrower shall not have the right to assign or
      otherwise transfer any rights in or under this Agreement without Bank's
      prior written consent. Bank reserves the right to sell, assign,
      transfer, negotiate or grant participations in the Advances provided for
      herein. In connection therewith Bank may disclose all documents and
      information which Bank now has or may hereafter acquire relating to the
      Advances, Borrower, Borrower's business or any of the Collateral.

9.05  GOVERNING LAW.  This Agreement shall be governed by and construed in
      accordance with the laws of the State of Colorado.

9.06  NOTICES.  All notices, requests and demands given to or made upon
      either party must be in writing and shall be deemed to have been given
      or made when personally delivered or two (2) days after having been
      deposited in the United States Mail, first class postage prepaid,
      addressed as follows:

      If to Borrower:   Sport-Haley, Inc.
                        Attn: Mr. Robert G. Tomlinson
                        Chairman and CEO
                        4600 East 48th Ave.
                        Denver, CO 80216

      If to Bank:       U.S. Bank National Association
                        918 Seventeenth St.
                        Denver, CO 80202
                        Attn: Terry L. Johnson

9.07  ACCOUNTING TERMS.  All accounting terms not specifically defined herein
      shall be construed in accordance with generally accepted accounting
      principles consistently applied, except as otherwise stated herein.

9.08  RECITALS.  The recitals to this Agreement and any definitions set forth
      therein are made a part hereof and incorporated in this Agreement.

9.09  ENTIRE AGREEMENT.  The following documents contain the entire agreement
      between the parties concerning the subject matter hereof: this Agreement,
      the Line Note and the Collateral Documents (collectively, the "relevant
      documents"). Any representation, understanding or promise concerning the
      subject matter hereof, which is not expressly set forth in any of the
      relevant documents, shall not be enforceable by any party hereto or its
      successors or assigns. In the event of any conflict or inconsistency
      between the terms of this Agreement and the terms of any other relevant
      document, the terms of this Agreement shall govern.

9.10  SEVERABILITY.  The unenforceability of any provision of this Agreement
      shall not affect the enforceability or validity of any other provision
      hereof.


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<PAGE>

9.11  JURY TRIAL WAIVER.  BANK AND BORROWER EACH IRREVOCABLY WAIVES ITS RIGHT
      TO A JURY TRIAL IN ANY ACTION OR PROCEEDING OF ANY ISSUE, CLAIM,
      COUNTERCLAIM OR OTHER CAUSE OF ACTION, WHETHER IN CONTRACT OR TORT,
      BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE CREDIT EXTENDED
      HEREUNDER, ANY COLLATERAL PROPERTY SECURING SUCH CREDIT, OR ANY OTHER
      AGREEMENT OR DEALINGS RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.

IN WITNESS WHEREOF, the parties have executed this Agreement the date first
stated above for the purposes set forth herein.


SPORT-HALEY, INC.                      U.S. BANK NATIONAL ASSOCIATION

By: /s/ [ILLEGIBLE]                    By: /s/ [ILLEGIBLE]
    ------------------------------         ------------------------------

Title: C.E.O.                          Title: Vice President
       ---------------------------            ---------------------------


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