**Exhibit 10.1**

 

**EXECUTIVE EMPLOYMENT AGREEMENT**

 

EXECUTIVE EMPLOYMENTAGREEMENT, effective January 1, 2004, by and between SPORT-HALEY, INC., aColorado corporation (the “Company”) and MARK MALEY (the “Executive”).

 

WHEREAS, the Company desiresto employ the Executive on a full-time basis, and the Executive desires to beso employed by the Company, from and after the date of this 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 theExecutive in the position described on Schedule 1 hereto as an executiveofficer of the Company.  The Executiveaccepts such employment and agrees to perform the duties and responsibilitiesassigned to him pursuant to this Agreement.

 

**Section 1.2****  Duties and Responsibilities.**  TheExecutive shall hold the position with the Company which is specified onSchedule 1, which is attached hereto and incorporated 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 performthe duties set forth on Schedule 1 while employed as an executive officer,and such further duties as may be determined and assigned to him fromtime-to-time by the Chief Executive Officer or the Board of Directors of theCompany.

 

**Section 1.3****  Working Facilities.**  The Executive shall befurnished with facilities and services suitable to the position and adequatefor the performance 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.

 

**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.  The Company willreimburse the Executive for all such expenses upon the presentation by theExecutive, from time-to-time, of an itemized account of such expenditures.

 

**Section 1.6****  Relocation Expenses.**  Except as set forth in thisSection 1.6, until the Executive completes his relocation to Denver,Colorado, on or before May 31, 2005 the Company shall pay to the Executive (i)all expenses incurred by the Executive for temporary living quarters while the

 

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Executiveis relocating 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 the Company an itemized account of suchexpenditures, and repayment of such expenses by the Company shall be amortizedthroughout the effective term of this 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 ofthis Agreement, the Executive shall be entitled to participate in all existingbenefit plans provided to the Company’s executive employees including, to theextent now or hereafter in effect, medical, health, dental, vision, disability,life insurance and death benefit plans, in accordance with the terms of suchplans.

 

**ARTICLE II**

 

**COMPENSATION**

 

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

 

**Section 2.2****  Bonus and Bonus Plan Participation.**  TheExecutive shall be entitled to receive a bonus at such time or times as may bedetermined by the Board of Directors and Compensation Committee of theCompany.  The Executive shall also beentitled to receive bonuses of up to 40% of the Executive’s base salary inaccordance with the provisions of the Company-wide bonus plan as in effect fromtime to time, at the discretion and approval of the Compensation Committee.

 

**ARTICLE III**

 

**TERM OF EMPLOYMENT AND TERMINATION**

 

**Section 3.1****  Term.**  This Agreement shall be for a term which isspecified on Schedule 1, commencing on its effective date, subject,however, to termination during such period as provided in this Article.  Provided that the Executive is in compliancewith all of his obligations hereunder, the term of the Executive’s employmentshall be extended automatically for one additional year at the end of each yearof the term or extended term of this Agreement on the same terms and conditionsas contained in this Agreement, unless either the Company or the Executiveshall, at least 90 days prior to the expiration of the initial term or of anyrenewal term, give written notice of the intention not to renew thisAgreement.  If the Company gives suchwritten notice of non-renewal, the provisions of

 

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Section 3.3shall apply; if the Executive gives such written notice of non-renewal, theprovisions of Section 3.5 shall apply. Automatic renewals shall be effective in subsequent years on the sameday of the same month as the original effective day and month of thisAgreement.

 

**Section 3.2****  Termination by the Company With Cause.**  TheCompany may terminate the Executive, at any time, upon ten days’ written noticeand opportunity for Executive to remedy any non-compliance with the terms ofthis Agreement (if such non-compliance is capable of being remedied; if not,the Company’s notice of termination shall be effective immediately), for Cause.  In such event, the Board of Directors 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 date of such termination, theCompany’s obligation to pay compensation and benefits shall terminate, at whichtime the Company shall be responsible for compensating the Executive for anyvacation time not taken.  Subject tothis exception and the obligation of the Company to compensate the Executivethrough the notice period, no other compensation shall be payable to theExecutive should this Agreement be terminated pursuant to thisSection 3.2.

 

As used herein, the term“Cause” shall be limited to any of the following from and after the datehereof: (i) any willful breach of any material written policy of the Companythat results in material and demonstrable liability or loss to the Company;(ii) the engaging by Executive in conduct involving moral turpitude that causesmaterial and demonstrable injury, monetarily or otherwise, to the Company,including, but not limited to, misappropriation or conversion of assets of theCompany (other than immaterial assets); (iii) conviction of or entry of a pleaof nolo contendere to a felony; or (iv) a material breach of this Agreement byengaging in action in violation of the restrictive covenants in thisAgreement.  No act or failure to act bythe Executive shall be deemed “willful” if done, or omitted to be done, by himin good faith and with the reasonable belief that his action or omission was inthe best interests of the Company.

 

**Section 3.3****  Termination by the Company Without Cause.**  TheCompany may terminate the Executive’s services without cause at any time upon90 days’ written notice.  In such event,in addition to compensating the Executive during such 90-day notice period, theCompany shall be obligated to compensate the Executive with severance pay equalto twelve additional months’ compensation as of the date of suchtermination.  Accordingly, in the eventthe Company terminates this Agreement without cause or chooses not to renewthis Agreement upon its expiration, the Executive shall receive an aggregate offifteen months’ salary from and after the date of the Executive’s receipt of anotice of termination through and including the date of termination.  In addition to the foregoing, the Executiveshall receive a bonus which shall be equivalent to 50% of the annual bonus lastreceived by the

 

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Executive,if any.  Such bonus provision shall bein addition to the compensation and severance package hereinabove specified.

 

**Section 3.4****  Termination by the Executive With Cause.**  TheExecutive may terminate his employment with the Company at any time, upon tendays’ written notice and opportunity for the Company to remedy anynon-compliance, by reason of (i) the Company’s material failure to perform itsduties pursuant to this Agreement, or (ii) any material diminishment in theduties and responsibilities, working facilities, or benefits as described inArticle I of this Agreement.  TheExecutive 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 3.4, except as otherwise providedin Section 3.7(a), but shall be entitled to the compensation provided inSection 3.3 upon a determination that the Company has failed to performits duties pursuant to this Agreement and that such failure is material or adetermination that the duties and responsibilities, working facilities, orbenefits as described herein have been materially diminished. Suchdetermination shall be made by the Board of Directors in their best good faith.

 

**Section 3.5****  Termination by the Executive Without Cause.**  TheExecutive, without cause, may terminate this Agreement upon 90 days’ writtennotice to the Company.  In such event,the Executive 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 termination. The Executive shall not be entitled to the severance compensation andother benefits described in Section 3.7 below in the event of terminationof this Agreement pursuant to this Section 3.5, except as described inSection 3.7(a), and shall not be entitled to the compensation provided inSection 3.3.

 

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

 

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

 

(a)                                  Notwithstandingany other provisions hereof, in the event of a non-negotiated change in controlof the Company and either the Executive or the Company terminate this Agreementwithin 60 days of such non-negotiated change in control, the Executive shallreceive severance compensation, payable in a lump sum within 30 days of suchnon-negotiated change in control, equal to three times his annual salary andincentive or bonus payments, if any, as shall have been paid to the Executiveduring the most recent 12-month period concluded prior to the date of histermination or resignation.  If thetotal amount of the non-negotiated change of control compensation were toexceed three times the

 

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Executive’s basecompensation (the average annual taxable compensation of the Executive for thefive years preceding the year in which the change of control occurs), theCompany and the Executive will reduce the lump sum compensation to be receivedby the Executive in order to avoid the imposition of the golden parachute taxas provided in the Tax Reform Act of 1984, as amended by the Tax Reform Act of1986.  The foregoing provisions shallnot apply in the event of a negotiated change in control of the Company.

 

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

 

(c)                                  So long as theExecutive is receiving severance compensation pursuant to thisSection 3.7, the Executive shall be entitled to continue to participate,at the Company’s cost, in all existing benefit plans provided to the Company’sexecutive employees at the time of the Executive’s termination orresignation.  Such plans shall include,but are not limited to, then-existing medical, health, dental, vision,disability, life insurance and death benefit plans.  If the terms of such plans expressly prohibit the Executive fromcontinuing as a participant in such plans following the date of resignation ortermination, the Company will provide the Executive with benefits equivalentto, or exceeding, those offered by the then-existing benefit plans offered tothe Company’s executive employees, all at the Company’s cost, for the durationof the Executive’s right to severance compensation hereunder.

 

Any compensation to be paidto the Executive under the foregoing provisions of this Section 3.7 shallbe subject to the Executive complying with the non-compete provisions ofSection 4.1(c) below.  In the eventthe Executive does not so comply, the Company shall be released from anyobligations 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 of termination or non-renewalby either party without cause in accordance with Sections 3.3 or 3.5 of thisAgreement, any and all options granted to the Executive to purchase CommonStock of the Company will vest and become exercisable on a

 

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pro-ratedbasis from the date of grant to the date of termination of this Agreement basedon the number of months during which this Agreement has been in effect from thedate of grant and the Company’s established thirty six month vestingperiod.  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.

 

**ARTICLE IV**

 

**CONFIDENTIALITY AND COMPETITION**

 

**Section 4.1****  Further Obligations of the Executive During and AfterEmployment.**

 

(a)                                  The Executiveagrees that during the term of his employment under this Agreement, he willengage in no other business activities which are or may be competitive with, orwhich might place him in a competing position to that of, the Company or anysubsidiary of the Company.

 

(b)                                 The Executiverealizes that during the course of his employment, the Executive will haveproduced and/or have access to confidential business plans, information,business opportunity records, notebooks, data, formula, specifications, tradesecrets, customer lists, account lists and inventions of the Company and itsaffiliates.  Therefore, during orsubsequent to his employment by the Company, or by an affiliate, the Executiveagrees to hold in confidence and not to directly or indirectly disclose or useor copy or make lists of any such information, except to the extent authorizedby the Company in writing.  All records,files, business plans, documents, equipment and the like, or copies thereof,relating to Company’s business, or the business of an affiliated company, whichthe Executive shall prepare, or use, or come into contact with, shall remainthe sole 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 hisemployment by the Company, the Executive will have access to trade secrets andconfidential information about the Company, its business plans, its businessaccounts, its business opportunities, its expansion plans into other geographicareas and its methods of doing business. The Executive agrees that for a period of twelve months aftertermination or resignation of his employment (except if the Executiveterminates this Agreement for cause under Section 3.4 hereof or withoutcause under Section 3.5 hereof), he will not, directly or indirectly,compete with the Company

 

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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-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 Executive amounts required under Section 3.3 orSection 3.7 hereof.

 

(d)                                 In the eventthis Agreement is terminated by the Company without cause pursuant toSection 3.3, then Executive shall have the right to terminate thenon-compete agreement contained in Section 4.1(c) by releasing the Companyfrom its obligation to pay Executive any severance compensation, employeebenefits or other form of compensation which might otherwise be payable underthis Agreement.  Executive shall makesuch election upon five days’ written notice to the Company.  The Executive’s obligations under thenon-compete agreement and the Company’s obligation to pay severancecompensation, employee benefits and other compensation shall all terminate asof the effective date of the notice described above.

 

(e)                                  In the event acourt of competent jurisdiction finds any provision of this Section 4.1 tobe so overbroad as to be unenforceable, then such provision shall be reduced inscope by the court, but only to the extent deemed necessary by the court torender the provision reasonable and enforceable, it being the Executive’sintention to provide the Company with the broadest protection possible againstharmful competition.

 

**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 Executive.  If no insurance policy is in effect, “totaldisability” shall mean a medically determinable physical or mental conditionwhich in the opinion of two independent physicians renders the Executive unableto perform substantially all of the duties required 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.  Ifthe Executive becomes totally disabled during the term of this Agreement, hisfull salary shall be continued for 360 days from the date of the disablinginjury 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

 

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infull for the remaining term or renewed term of this Agreement, but in no eventfor a period exceeding one year.

 

**ARTICLE VI**

 

**GENERAL MATTERS**

 

**Section 6.1****  Governing Law.**  This Agreement shall begoverned by the laws of the State of Colorado and shall be construed inaccordance 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 thesingular shall include the plural, and the plural shall income the singular,and the masculine and neuter shall include the feminine, wherever the contextso requires.

 

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

 

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

 

**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 thisAgreement shall be January 1, 2004.

 

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| SPORT-HALEY,  INC.        | EXECUTIVE              |
|---------------------------|------------------------|
|                      |                   |
|                      |                   |
| By: /s/ Kevin M Tomlinson |                   | /s/ Mark Maley |   |
| Kevin  M. Tomlinson,      | Mark  Maley, Executive |
| Chief  Executive Officer  |                   |
|                           |                        |  |  |

 

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**SPORT-HALEY, INC.**

 

**EXECUTIVE EMPLOYMENT AGREEMENT**

 

**Schedule 1**

 

**Duties and Compensation**

 
| Executive:                    |   | Mark  Maley                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|-------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Position:                     |   | Vice  President – Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| Base  Salary:                 |   | $135,000  per year, payable bi-weekly                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                          |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 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,  2004 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/  Kevin M Tomlinson        |   | By: | /s/  Mark Maley |   |
|                          | Kevin  M. Tomlinson           |   | Mark  Maley, Executive |
|                          | Chief  Executive Officer      |   |
|                          |                          |
| Date:  February 22, 2004 | Date:  February 22, 2004 |
|                               |                               |  |  |  |  |

 

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