Exhibit
10.1


 


OPERATING
AGREEMENT FOR


RESERVE
APPAREL GROUP, LLC


 


 





















 


OPERATING
AGREEMENT FOR


RESERVE
APPAREL GROUP, LLC


 


 


TABLE
OF CONTENTS


 


 


	
  ARTICLE 1 - Introduction

  	
   

  
	
  Section 1.1 Formation of
  Limited Liability Company

  	
   

  
	
  Section 1.2 Defined Terms

  	
   

  
	
  Section 1.3 Company Purpose

  	
   

  
	
  Section 1.4 Term.

  	
   

  
	
   

  	
   

  
	
  ARTICLE 2 - Members and Percentage Interests

  	
   

  
	
  Section 2.1 Name, Address
  and Capital Contribution of Members; Principal Office

  	
   

  
	
  Name, Address and Capital
  Contribution of Members

  	
   

  
	
  Principal Office

  	
   

  
	
  Statutory Agent

  	
   

  
	
  Section 2.2 Form of Capital
  Contributions

  	
   

  
	
  Section 2.3 Other Initial
  Contributions of Members.

  	
   

  
	
  Other Initial Contributions
  of Sport-Haley

  	
   

  
	
  Other Initial Contributions
  of Explorer Gear

  	
   

  
	
  Section 2.4 Member Loans or
  Services

  	
   

  
	
  Section 2.5 Repayment of
  Member Loans

  	
   

  
	
  Section 2.6 Capital and
  Capital Accounts

  	
   

  
	
  Section 2.7 Contribution of
  Additional Capital

  	
   

  
	
  Section 2.8 Admission of
  Additional Members

  	
   

  
	
  Section 2.9 Limitation on
  Liability

  	
   

  
	
  Section 2.10 No Individual
  Authority

  	
   

  
	
  Section 2.11 No Member
  Responsible for Other Member’s Commitment

  	
   

  
	
  Section 2.12 Member Expense
  Reimbursements

  	
   

  
	
   

  	
   

  
	
  ARTICLE 3 - Management and Control of Business

  	
   

  
	
  Section 3.1 Overall
  Management Vested in Members

  	
   

  
	
  Meetings of the Members.

  	
   

  
	
  Section 3.2 Management
  Committee and Operating Manager

  	
   

  
	
  Appointment of Management
  Committee

  	
   

  
	
  Management Committee
  Standard of Care

  	
   

  
	
  Duties of the Management
  Committee

  	
   

  
	
  Major Decisions

  	
   

  
	
  Decisions Reserved for
  Unanimous Consent of Members

  	
   

  
	
  Election of Operating
  Manager

  	
   

  
	
  Duties of Operating Manager

  	
   

  
	
  Operating Manager’s Standard
  of Care

  	
   

  
	
  Section 3.3 Compensation of
  Members

  	
   

  
	
  Section 3.4 Organization
  Expenses

  	
   

  



 


 


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  ARTICLE 4 - Accounting and Records

  	
   

  
	
  Section 4.1 Records and
  Accounting; Fiscal Year.

  	
   

  
	
  Section 4.2 Access to
  Accounting Records

  	
   

  
	
  Section 4.3 Annual and Tax
  Information

  	
   

  
	
  Section 4.4 Accounting
  Decisions

  	
   

  
	
  Section 4.5 Federal Income
  Tax Elections

  	
   

  
	
   

  	
   

  
	
  ARTICLE 5 - Allocations; Distributions; And
  Percentage Interests

  	
   

  
	
  Section 5.1 Allocation of
  Net Income, Net Loss or Capital Gains

  	
   

  
	
  Section 5.2 Distribution of
  Available Cash

  	
   

  
	
  Section 5.3 Allocation of
  Income and Loss and Distributions in Respect of Percentage Interests
  Transferred

  	
   

  
	
  Section 5.4 Special
  Allocations

  	
   

  
	
  Minimum Gain Chargeback

  	
   

  
	
  Member Minimum Gain
  Chargeback

  	
   

  
	
  Qualified Income Offset

  	
   

  
	
  Gross Income Allocation

  	
   

  
	
  Nonrecourse Deductions

  	
   

  
	
  Member Nonrecourse
  Deductions

  	
   

  
	
  Section 754 Adjustments

  	
   

  
	
  Section 5.5 Curative
  Allocations

  	
   

  
	
  Section 5.6 Tax Allocations,
  Code Section 704(c)

  	
   

  
	
  Section 5.7 Loss Limitation

  	
   

  
	
   

  	
   

  
	
  ARTICLE 6 - Changes In Members

  	
   

  
	
  Section 6.1 Dissolution
  Events

  	
   

  
	
  Change of Control of Sport-Haley

  	
   

  
	
  Change of Control of
  Explorer Gear

  	
   

  
	
  Section 6.2 Transfer and
  Assignment of Members’ Percentage Interest

  	
   

  
	
  Section 6.3 Further Restrictions
  on Transfer

  	
   

  
	
  Section 6.4 Substitute
  Members

  	
   

  
	
  Section 6.5 Effect of Transfer

  	
   

  
	
   

  	
   

  
	
  ARTICLE 7 - Dissolution

  	
   

  
	
  Section 7.1 Dissolution of
  the Company

  	
   

  
	
  Section 7.2 Winding Up and
  Order of Distribution

  	
   

  
	
  Section 7.3 Liquidator’s
  Standard of Care.

  	
   

  
	
  Section 7.4 Distribution in
  Kind

  	
   

  
	
  Section 7.5 Resignation

  	
   

  
	
   

  	
   

  
	
  ARTICLE 8 - Indemnification

  	
   

  
	
  Section 8.1 Indemnification
  of Organizers or Members

  	
   

  
	
  Section 8.2 Indemnification
  by Explorer Gear to Sport-Haley

  	
   

  
	
  Section 8.3 Indemnification
  by Sport-Haley to Explorer Gear

  	
   

  
	
   

  	
   

  
	
  ARTICLE 9 - Confidentiality

  	
   

  
	
  Section 9.1 Confidentiality
  Of Member and Company Proprietary Information.

  	
   

  



 


 


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  Section 9.2 Confidentiality
  of Callaway Information.

  	
   

  
	
  Section 9.3 Confidentiality
  of Wal-Mart and Other Customers’ Information.

  	
   

  
	
  Section 9.4 Confidentiality
  of Manufacturers’ Information

  	
   

  
	
   

  	
   

  
	
  ARTICLE 10 - Prohibited Transactions

  	
   

  
	
  Section 10.1
  Non-Competition.

  	
   

  
	
  Section 10.2
  Non-Solicitation of Member Employees.

  	
   

  
	
  Section 10.3 No Sales of
  Top-FliteÔ Apparel or Other Branded Apparel Outside
  Company.

  	
   

  
	
  Section 10.4 Remedies.

  	
   

  
	
   

  	
   

  
	
  ARTICLE 11 - Representations and Warranties

  	
   

  
	
  Section 11.1 Representations
  and Warranties of Explorer Gear

  	
   

  
	
  Section 11.2 Representations
  and Warranties of Sport-Haley

  	
   

  
	
   

  	
   

  
	
  ARTICLE 12 - Miscellaneous

  	
   

  
	
  Section 12.1 Callaway
  Approvals.

  	
   

  
	
  Section 12.2 Wal-Mart
  Approvals.

  	
   

  
	
  Section 12.3 Acknowledgment
  of Risk of Potential Sale or Assignment.

  	
   

  
	
  Section 12.4 Percentage
  Interests Subject to Change

  	
   

  
	
  Section 12.5 Sales Subject
  to Completion of Due Diligence

  	
   

  
	
  Section 12.6 Inventories.

  	
   

  
	
  Section 12.7 Performance
  Security.

  	
   

  
	
  Section 12.8 Arbitration of
  Disputes.

  	
   

  
	
  Section 12.9 Complete
  Agreement

  	
   

  
	
  Section 12.10 Governing Law

  	
   

  
	
  Section 12.11 Binding Effect

  	
   

  
	
  Section 12.12 Terms

  	
   

  
	
  Section 12.13 Headings

  	
   

  
	
  Section 12.14 Severability

  	
   

  
	
  Section 12.15 Multiple
  Counterparts

  	
   

  
	
  Section 12.16 Additional
  Documents and Acts

  	
   

  
	
  Section 12.17 No Third Party
  Beneficiary

  	
   

  
	
  Section 12.18 References to
  this Agreement

  	
   

  
	
  Section 12.19 Notices

  	
   

  
	
  Section 12.20 Amendments

  	
   

  



 


 


iii





















 


OPERATING
AGREEMENT FOR


RESERVE
APPAREL GROUP, LLC


 


Recitals


                THIS
OPERATING AGREEMENT is to be effective November 3, 2005 (the “Effective Date”)
between and among Sport-Haley, Inc., a Colorado corporation (“Sport-Haley”) and
Explorer Gear USA, Inc., a California corporation with a principal place of
business of 19418 Donora Avenue, Torrance, CA 90503 (“Explorer Gear”), and
those other persons who shall become Members in the future, in accordance with
and in agreement with the terms below, any of whom may be referred to as “Member,”
and all of whom collectively may be referred to as “Members.”


 


                The
Members agree as follows:


 


ARTICLE 1


Introduction


 


                Section 1.1 Formation of Limited
Liability Company. This Colorado limited liability company (the “Company”)
is formed by the Members and any and all persons who become additional and/or
substituted Members of the Company pursuant to Sections 2.8 and 6.4 hereof
(hereinafter referred to collectively as the “Members”) in accordance with and
pursuant to the Colorado Limited Liability Company Act (C.R.S. §§ 7-80-101
through 7-80-1101) (the “Act”), which in conjunction with Colorado
case law relating thereto shall be the controlling law for purposes of this
Agreement and shall be utilized in this or any other jurisdiction for purposes
of construing the terms and conditions herein contained. Articles of
Organization were filed with the Colorado Secretary of State on November 3,
2005. Upon execution of this Agreement, the Operating Manager shall execute
such further documents and take such further action as shall be appropriate to
comply with the requirements of law for the formation, continuation and
operation of a limited liability company wherever the Company transacts
business.


 


                In
the event of a direct conflict between the provisions of this Operating
Agreement and the mandatory provisions of the Act or the provisions of the
Articles of Organization of the Company, the provisions of the Act or the
Articles of Organization of the Company, as the case may be, will be
controlling.


 


                Section 1.2 Defined Terms. The terms used
in this Agreement with their initial letters capitalized, shall, unless the
context otherwise requires or unless otherwise expressly provided herein, have
the meanings specified in this Section 1.2. The singular shall include the plural
and the masculine gender shall include the feminine and neuter, and vice versa,
as the context requires. When used in this Agreement, the following terms shall
have the meanings set forth below:


 


a.     “Act” shall mean the Colorado Limited
Liability Company Act, as the same may be amended from time to time.


 


b.     “Additional Member” shall mean any person
or Entity admitted as a Member after the Effective Date of this Agreement
pursuant to Section 2.8 hereof.


 


c.     “Adjusted Capital Account Deficit” shall
mean, with respect to any Member, the deficit balance, if any, in such Member’s
Capital Account as of the end of the relevant fiscal year, after giving effect
to the following adjustments:


 


 





















 


(1)   Credit to such Capital Account any amounts
which such Member is obligated to restore or is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulation Sections
1.704-2(g)(1) and 1.704-2(i)(5); and


 


(2)   Debit to such Capital Account the items
described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).


 


The foregoing definition of
Adjusted Capital Account Deficit is intended to comply with the provisions of
Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.


 


d.     “Adjusted Capital Contribution” means, as
of any day, a Member’s Capital Contribution adjusted as follows:


 


(1)   Increased by the amount of any Company
liabilities which, in connection with distributions pursuant to Section 7.2
hereof, are assumed by such Member or are secured by any Company property
distributed to such Member; and,


 


(2)   Reduced by the amount of cash and the value
of any Company property distributed to such Member pursuant to Sections 5.2 and
7.2 and the amount of any liabilities of such Member assumed by the Company or
which are secured by any property contributed by such Member to the Company.


 


In the event any Member
transfers all or any portion of his interest in the Company in accordance with
the terms of this Agreement, his transferee shall succeed to the Adjusted
Capital Contribution of the transferor to the extent it relates to the
transferred interest.


 


e.     “Affiliate” shall mean any individual,
partnership, corporation, limited liability company, trust, or other Entity or
association, directly or indirectly, through one or more intermediaries,
controlling, controlled by, or under common control with a Member. The term “control,”
as used in the immediately preceding sentence, means, with respect to a
corporation the right to exercise, directly or indirectly, more than 50% of the
voting rights attributable to the controlled corporation, and, with respect to
any individual, partnership, trust, other Entity or association, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of the controlled Entity.


 


f.      “Agreement” shall mean this Operating
Agreement, as originally executed and as may be amended from time to time, and
any exhibits thereto, and the terms “hereof,” “hereto,” “hereby” and “hereunder,”
when used with reference to this Agreement, refer to this Agreement as a whole,
unless the context otherwise requires.


 


g.     “Articles” shall mean the Articles of
Organization filed with the Colorado Secretary of State to form the Company
pursuant to the Act.


 


h.     “Available Cash” of the Company shall mean
all cash funds of the Company on hand from time to time (other than cash funds
obtained as contributions to the capital of the Company by the Members and cash
funds obtained from Member Loans to the Company) after (i) payment of all
operating expenses of the Company (including, without limitation, Member
Expense Reimbursements pursuant to Section 2.12) as of such time, (ii)
provision for payment of all


 


 


2





















 


outstanding and unpaid
current obligations of the Company as of such time, and (iii) provision for a
working capital reserve in accordance with Section 5.2, c. below.


 


i.      “Bankruptcy” shall mean, and a Member
shall be deemed a “Bankrupt Member” upon (i) the entry of a decree or order for
relief against the Member by a court of competent jurisdiction, whether in the
United States, Canada or other country, in any involuntary case brought against
the Member under any bankruptcy, insolvency, or other similar law
(collectively, “Debtor Relief Laws”) generally affecting the rights of
creditors and relief of debtors now or hereafter in effect, (ii) the
appointment of a receiver, liquidator, assignee, custodian, trustee, or other
similar agent under applicable Debtor Relief Laws for the Member or for any
substantial part of its assets or property, (iii) the ordering of the winding
up or liquidation of the Member’s affairs, (iv) the filing of a petition in any
such involuntary bankruptcy case, which petition remains undismissed for a
period of 180 days, (v) the commencement by the Member of a voluntary case
under any applicable Debtor Relief Law now or hereafter in effect, (vi) the
consent by the Member to the entry of an order for relief in an involuntary
case under any such law or to the appointment of or the taking of possession by
a receiver, liquidator, assignee, trustee, custodian or other similar agent
under any applicable Debtor Relief Laws for the Member or for any substantial
part of its assets or property, or (vii) the making by a Member of any general
assignment for the benefit of its creditors.


 


j.      “Capital Account” shall generally refer to
the individual accounts established and maintained pursuant to Section 2.6
hereof. “Capital Account” shall mean, with respect to any Member, the capital
account maintained for such Member in accordance with the tax accounting
principles of Regulation Section 1.704-1(b)(2)(iv), or any successor provisions
thereto in amended or final Regulations. The foregoing definition and the other
provisions of this Agreement relating to the maintenance of Capital Accounts
are intended to comply with such Regulations and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the
Operating Manager shall determine that it is prudent to modify the manner in
which the Capital Accounts, or any debits or credits thereto (including,
without limitation, debits or credits relating to liabilities that are secured
by contributed or distributed property or that are assumed by the Company or
any of the Members) are computed in order to comply with such Regulations, the
Operating Manager may make such modification, provided that it is not likely to
have a material effect on the amounts distributable to any Member pursuant to
Section 7.2 upon the dissolution of the Company. The Operating Manager also
shall make any appropriate modifications in the event unanticipated events (for
example, the acquisition by the Company of oil or gas property) might otherwise
cause this Agreement not to comply with such Regulations.


 


k.     “Capital Contribution” shall mean the total
value of cash and agreed fair market value of property contributed and agreed
to be contributed to the Company by each Member, as shown in Exhibit A,
as the same may be amended from time to time. Any reference in this Agreement
to the Capital Contribution of a then Member shall include a Capital
Contribution previously made by any prior Member for the Percentage Interest of
such then Member, reduced by any distribution to such Member in return of “Capital
Contribution” as contemplated herein. Additional Capital Contributions may only
be made by a Member with the consent of all other Members.


 


Loans by any member to the
Company shall not be considered contributions to the capital of the Company. To
the extent that a Member contributes capital to the Company in the form of
services rendered, or services to be performed, the Company shall enter into an
agreement with such Member


 


 


3





















 


obligating the Member to
contribute services to the Company having a value as agreed between such person
and the Management Committee.


 


l.      “Change of Control” shall mean with
respect to an Entity a (i) change in ownership in one or a series of
transactions of 50% or more of the outstanding shares or ownership interests of
the Entity, (ii) merger, consolidation, reorganization or liquidation, or (iii)
a change in control of the type that would be required to be reported in
response to Item 6(e) of Schedule 14A promulgated under the Securities Exchange
Act of 1934, as amended (“Exchange Act”) whether or not the Entity is then
subject to such reporting requirement; provided that, without limitation, such
a change of control shall be deemed to have occurred if (A) any “person” (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than
a trustee or fiduciary holding securities under an employee benefit plan of the
Entity and other than a person who is a director of the Entity on the date
hereof, is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act) directly or indirectly, of securities or ownership
interests of the Entity representing 30% or more of its combined voting power
of the Entity’s then outstanding securities, (B) at any time following the
execution of this Agreement, a majority of the Entity’s Board of Directors (or
equivalent governing body) is not comprised of (i) individuals who on the date
of this Agreement were members of the Board plus (ii) any new directors whose
nomination for election by the Board or the Entity’s Stockholders was approved
by the vote of two-thirds of the directors then in office who either were
directors or whose nomination was previously so approved. Notwithstanding any
provisions to the contrary herein, a change of control shall not mean any
transaction or series of transactions wherein the Entity repurchases its own
securities or a “going private” transaction by the Entity or its affiliates,
within the meaning of Rule 13e-3 promulgated under the Exchange Act.


 


m.    “Code” shall mean the Internal Revenue Code
of 1986, as amended. All references herein to sections of the Code shall
include any corresponding provision or provisions of succeeding law.


 


n.     “Company” shall mean the limited liability
company formed in accordance with the provisions of the Articles of
Organization and this Agreement.


 


o.     “Company Minimum Gain” shall have the
meaning set forth in Regulation Section 1.704-2(d).


 


p.     “Entity” shall mean any association,
corporation, general partnership, limited partnership, limited liability
partnership, limited liability company, joint stock association, joint venture,
firm, trust, business trust, cooperative, and foreign associations of like
structure.


 


q.     “Initial Members” shall refer to
Sport-Haley and Explorer Gear.


 


r.      “License Agreement” shall mean the License
Agreement between Spalding Sports Worldwide, Inc. and Sport-Haley, Inc., dated
May 3, 2001, as amended by letter dated June 6, 2002, and as amended by the
Amendment No. 2 to License Agreement, dated June 6, 2003, the rights as
licensor of which have been assigned to Callaway Golf Company (“Callaway”).


 


s.     “Liquidator” shall mean the Operating
Manager or, if there is none, the Member or Members elected by the Members to
carry out the dissolution and liquidation of the Company and the Member’s
interest in the Company pursuant to Article 7.


 


 


4





















 


t.      “Management Committee” shall mean a
committee initially composed of four members, two members each to be appointed
by Sport-Haley and Explorer Gear, to perform the management functions set forth
herein and in Section 3.2, c., subject to the change of membership composition
set forth in Section 3.2, a.


 


u.     “Manager” or “Operating Manager” shall mean
a natural person over the age of eighteen who has been elected to the office of
Operating Manager in the manner provided herein.


 


v.     “Member Nonrecourse Debt” has the same
meaning as the term “partner nonrecourse debt” in Regulation Section
1.704-2(b)(4).


 


w.    “Member Nonrecourse Debt Minimum Gain” means
an amount, with respect to each Member Nonrecourse Debt, equal to the Company
Minimum Gain that would result if such Member Nonrecourse Debt were treated as
a Nonrecourse Liability, determined in accordance with Regulation Section
1.704-2(i)(3).


 


x.     “Member Nonrecourse Deductions” has the
same meaning as the term “partner nonrecourse deductions” in Regulation
Sections 1.704-2(i)(1) and 1.704-2(i)(2).


 


y.     The “Net Operating Cash Flow” for any
calendar quarterly period shall mean all of the cash received by the Company
from any source including, without limitation, distributions, rents, fees,
reimbursements and charges, as well as proceeds from the sale, financing or
refinancing of Company property, and decreased by all actual cash expenditures
for operations including, but not limited to, expenditures for principal and
interest on Company indebtedness, taxes, insurance, professional fees,
reasonable reserves (as determined by the Management Committee), repairs,
maintenance, landscaping, renovation and capital improvements, except to the
extent such expenditures are paid from reasonable reserves as determined in
good faith by the Management Committee.


 


z.     “Nonrecourse Deductions” shall have the
meaning set forth in Regulation Section 1.704-2(b)(1). The amount of
Nonrecourse Deductions for a Company fiscal year equals the net increase, if
any, in the amount of Company Minimum Gain during that fiscal year, determined
according to the provisions of Regulation Section 1.704-2(d).


 


aa.   “Nonrecourse Liability” has the meaning set
forth in Section 1.704-2(b)(3) of the Regulations.


 


ab.   “Operating Agreement” shall mean this
Agreement.


 


ac.   “Other Branded Sales” shall mean sales by the
Company of Top-FliteÔ Apparel or Other Branded
Apparel to customers other than Wal-Mart Stores, Inc. (“Wal-Mart”), as
introduced by Explorer Gear, and subject to approval by the Management
Committee, provided that if such sales are made without the prior approval of
the Management Committee, they will nevertheless be deemed Other Branded Sales
if subsequently approved by the Management Committee. All contracts, vendor
applications, purchase orders and the like for Other Branded Sales shall be in
the name of the Company or assigned to the Company.


 


 


5





















 


ad.   “Other Branded Apparel” shall mean apparel
manufactured, marketed and sold through licenses between Explorer Gear and
parties other than Callaway and with respect to apparel other than the
Top-FliteÔ Apparel.


 


ae.   “Percentage Interest” of a Member shall mean
the percentage set forth opposite the name of such Member under the column “Percentage
Interest” in Exhibit A hereto, as such percentage may be adjusted from
time to time pursuant to the terms hereof.


 


af.    “Principal Office” shall mean the office of
the Company, 4600 E. 48th Avenue, Denver, Colorado 80216, or such other address
as may be established pursuant to Section 2.1, b. hereof.


 


ag.   “Profits” and “Losses” shall mean, for each
fiscal year or other period, an amount equal to the Company’s taxable income or
loss for such year or period, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
taxable income or loss), with the adjustments required in accordance with
Regulation Section 1.704-1(b)(2)(iv). Any items which are specially allocated
pursuant to Section 5.4 or Section 5.5 shall not be taken into account in
computing Profits or Losses.


 


ah.   “Regulations” shall mean the Code of Federal
Regulations, including temporary and proposed regulations, relating to the
Code.


 


ai.    “Sport-Haley/Explorer Gear Acquisition”
shall mean a transaction between Explorer Gear or its Affiliates and
Sport-Haley, approved by Sport-Haley’s board of directors, involving either one
of, or a combination of, the following: (i) the purchase of substantially all
of Sport-Haley’s common stock and options; (ii) a merger transaction in which
Sport-Haley’s common stock and options are exchanged for cash; or a (iii) sale
of substantially all of Sport-Haley’s assets.


 


aj.    “Substitute Member” shall mean any person or
Entity who or which is admitted into Membership upon the written consent of all
Members pursuant to Section 6.4 hereof.


 


ak.   “Top-Flite Apparel” shall mean any apparel
bearing the Top-FliteÔ trademark, which is
manufactured, marketed and sold pursuant to and subject to the terms of the
License Agreement.


 


al.    “Wal-Mart” shall mean Wal-Mart Stores, Inc.,
a Delaware corporation, and its Affiliates.


 


am.  “Wal-Mart Sales” shall mean sales by the
Company to Wal-Mart of Top-FliteÔ Apparel or Other Branded
Apparel, subject to approval by the Management Committee, provided that if such
sales are made without the prior approval of the Management Committee they will
nevertheless be deemed Wal-Mart Sales if subsequently approved by the
Management Committee. All contracts, order commitments, vendor applications,
Work Process Manifests, purchase orders and the like for Wal-Mart Sales made by
the Company shall be in the name of the Company or assigned to the Company.


 


                Section 1.3 Company
Purpose. The initial business purpose of the Company is to market
and sell licensed Top-FliteÔ and Other Branded Apparel
in the United States to Wal-Mart and other large, discount


 


 


6





















 


store chains and any other mass market
outlets, as determined by the Management Committee. In addition, the Company
shall have unlimited power to engage in any business authorized by the Act. The
Company’s business also may encompass activities incidental or related to the
business set forth above, including investment of excess cash in short-term,
highly liquid and safe instruments pending its expenditure.


 


                Section 1.4
Term. This Agreement shall be effective as of the date first above
written and the Company shall continue until terminated or dissolved under this
Agreement.


 


ARTICLE 2


Members
and Percentage Interests


 


                Section 2.1 Name,
Address and Capital Contribution of Members; Principal Office; Agent.


 


a.     Name, Address and Capital Contribution
of Members. The Members, their respective addresses, their respective initial
Capital Contribution to the Company, and their respective Percentage Interest
in the Company are set forth on Exhibit A, attached hereto and made a
part hereof. The Members’ respective Percentage Interests in the Company are
subject to the conditions set forth in Section 12.4.


 


b.     Principal Office. The principal
office of the Company, and the office required by law for the keeping of
records shall be located at 4600 E. 48th Avenue, Denver, CO 80216, or such
other place within the State of Colorado as the Management Committee shall
determine. The Company shall at all times maintain a principal place of
business located within the State of Colorado.


 


c.     Statutory Agent. The agent for
service of process required by law shall be Steven W. McDonald, Berliner
McDonald P.C., 5670 Greenwood Plaza Blvd., Suite 418, Greenwood Village,
Colorado 80111-2408, or such other person as the Management Committee
shall determine, subject to the agent’s consent.


 


                Section 2.2 Form
of Capital Contributions. The Capital Contribution of the Initial
Member was paid in cash in the amount set forth on Exhibit A hereto. Any
future Capital Contribution shall be in such amounts and in such form as may be
agreed upon in writing by all of the Members. No Member shall be required to
make any Capital Contribution to the Company other than the Capital
Contribution required to be made by such Member under Section 2.1, a. hereof.


 


                Section 2.3
Other Initial Contributions of Members. In addition to the Capital
Contributions of the Members as set forth in Section 2.1, a., the Members shall
contribute the following services and or property, and be responsible for
performing the following tasks for the Company (“Other Initial Contributions”),
which shall not increase or decrease each Member’s Capital Account or
Percentage Interest. Other Contribution in addition to the Other Initial
Contributions (“Additional Other Contributions”) shall be as determined by the
Management Committee.


 


a.     Other Initial Contributions of
Sport-Haley. Sport-Haley shall initially contribute the following services
and or property to the Company:


 


(1)           licensed use of the Callaway-Top-Flite license for the
United States pursuant to the License Agreement. Explorer Gear acknowledges and
agrees that


 


 


7





















 


the Company’s use of
Sport-Haley’s exclusive license to manufacture and sell Top-FliteÔ Apparel in the
United States and the Territory (as defined in the License Agreement) is
subject to the approval of Callaway, as set forth in the attached Exhibit C,
and such use does not in any way constitute an assignment or sublicense of
Sport-Haley’s or Callaway’s rights under the License Agreement. Further, any
Change of Control of Sport-Haley or assignment or transfer of Sport-Haley’s
membership interest in the Company shall not constitute an assignment of the
Top-Flite license to the Company, unless approved by Sport-Haley’s present
management and Callaway;


 


(2)           with respect to the Wal-Mart Sales and Other Branded
Sales, subject to Member expense reimbursement pursuant to Section 2.12:


 


(a)           use of Sport-Haley warehouse facilities and
personnel (with such personnel serving as independent contractors of the
Company);


 


(b)           repackaging and staging the apparel
sold to Wal-Mart and other customers at Sport-Haley’s warehouse;


 


(c)           shipping and receiving of apparel to
be sold to Wal-Mart and other customers;


 


(d)           administrative, accounting,
invoicing, and collections services related to the Wal-Mart Sales and Other
Branded Sales;


 


(e)           customer service; and


 


(f)            maintaining sufficient commercial
general liability insurance related to the licensed sales of Top-FliteÔ Apparel
pursuant to and in accordance with the License Agreement.


 


b.     Other Initial Contributions of Explorer
Gear. Explorer Gear shall initially contribute the following services and
or property to the Company, subject to the Member expense reimbursement
pursuant to Section 2.12:


 


(1)           procuring Wal-Mart Sales and Other
Branded Sales for the Company through Explorer Gear’s contacts with Wal-Mart
and other large, discount store chains and other mass market outlets;


 


(a)           all sales of Top-FliteÔ Apparel shall
be subject to paying the appropriate royalties and fees to Callaway pursuant to
the License Agreement: 5% of net sales royalty, as defined in the License
Agreement, which accrues when the apparel is shipped, distributed or billed,
whichever occurs earliest; royalties are payable to Callaway by the Company 30
days after end of each fiscal quarter; in addition, a marketing fee equal to 1%
of the net sales of Top-FliteÔ Apparel is payable to
Callaway by the Company 30 days after end of each fiscal quarter;


 


8





















 


(2)           pricing of the Wal-Mart Sales and
Other Branded Sales, subject to Sport-Haley approval of all items and Callaway’s
approval with respect to pricing of Top-FliteÔ Apparel;


 


(3)           design of the Top-FliteÔ and Other
Branded Apparel, subject to Sport-Haley’s approval of all items and Callaway’s
approval of the design of the Top-FliteÔ Apparel;


 


(4)           arranging and/or contracting for the
sourcing and manufacturing of Top-FliteÔ and Other Branded Apparel
through existing or new sources, as approved by the Management Committee and
subject to Sport-Haley’s approval of all manufacturers/suppliers and Callaway’s
approval of the manufacturers and suppliers of the Top-FliteÔ Apparel, and
including quality control of apparel and relations and resolving issues related
to such manufacturers and suppliers; and


 


(5)           advertising and marketing efforts
related to the Company, subject to Sport-Haley’s approval of all advertising
and Callaway’s approval related to the Top-FliteÔ Apparel.


 


                Section 2.4 Member
Loans or Services. A Member Loan may be requested at any time if the
cash available to the Company is insufficient to (i) pay debt service on any
loan owed by the Company, (ii) pay taxes and assessments owed by the Company,
or (iii) pay other expenses which are not adequately funded by the cash flow of
the Company. The Members shall be entitled to contribute their Percentage
Interest of the Member Loan within ten (10) days of written request from the
Operating Manager, as approved by the Management Committee, and if any Member
fails or refuses to contribute its Percentage Interest of the Member Loan
within that time, the other Members shall be entitled to contribute that
portion of the Member Loan as well. Each Member Loan shall be due and payable
twelve months from the date of funding and shall bear interest at the rate of
two percent above the then current (as adjusted on a monthly basis) prime rate
as published in the “Money Rates” The Wall Street Journal
(the “Prime Rate”), commencing on the date the Company receives the Member Loan
proceeds. Loans or services by any Member to the Company shall not be
considered contributions to the capital of the Company.


 


                Section 2.5 Repayment
of Member Loans. No Member shall be entitled to any distributions
from the Company until all Member Loans are fully paid.


 


                Section 2.6 Capital
and Capital Accounts.


 


a.     The initial Capital Contribution of each
Member shall be as set forth on Exhibit A. No interest shall be paid on
any Capital Contribution.


 


b.     An individual capital account (the “Capital
Account”) shall be established and maintained on behalf of each Member,
including any Additional or Substituted Member who shall hereafter receive a
Percentage Interest in the Company. The Capital Account of each Member shall
consist of (1) the amount of cash such Member has contributed to the Company,
plus (2) the agreed fair market value of any property such Member has
contributed to the Company, net of any liabilities assumed by the Company or to
which such property is subject, plus (3) the amount of profits or income
(including tax-exempt income) allocated to such Member, less (4) the amount of
losses and deductions allocated to such Member, less (5) the amount of all cash
distributed to such Member,


 


 


9





















 


less (6) the fair market
value of any property distributed to such Member, net of any liability assumed
by such Member or to which such property is subject, less (7) such Member’s
share of any other expenditures which are not deductible by the Company for
federal income tax purposes or which are not allowable as additions to the
basis of Company property, and (8) subject to such other adjustments as may be
required under the Code. The Capital Account of a Member shall not be affected
by any adjustments to basis made pursuant to Section 741 of the Code but shall
be adjusted with respect to adjustments to basis made pursuant to Section 734
of the Code.


 


c.     No Member shall have the right to withdraw
its Capital Contribution or to demand and receive property of the Company or
any distribution in return for its Capital Contribution, except (i) as may be
specifically provided in this Agreement, or (ii) as may be required by law. No
Member shall receive out of Company property any part of its Capital
Contribution until (i) all liabilities of the Company have been paid or funds
in an amount necessary to pay such liabilities have been reserved for such
purpose, and (ii) the consent of all Members is obtained.


 


d.     Subject to the provisions of subsection c.
of this section, a Member may rightfully demand the return of its or its
Capital Contribution (i) on the dissolution of the Company, or (ii) as may
otherwise be provided in the Act.


 


e.     Except as is specifically provided
otherwise in this Agreement or in the Act, no Member shall have any liability
or obligation to restore a negative or deficit balance in such Member’s Capital
Account.


 


                Section 2.7 Contribution
of Additional Capital. In order to obtain additional funds or for
other business purposes, additional capital may be contributed to the Company,
but only upon the written consent of all Members.


 


                Section 2.8 Admission
of Additional Members. The Members may admit to the Company
Additional Member(s) who will participate in the profits, losses, available
cash flow, and ownership of the assets of the Company on such terms as are
determined by all of the Members. The admission of any such Additional
Member(s) shall require the written consent of all Members then having any
Percentage Interest in the Company, and such Additional Members shall be
allocated gain, loss, income or expense by such method as may be provided in
this Agreement, and if no method is specified, then as may be permitted by
Section 706(d) of the Code.


 


                Section 2.9 Limitation
on Liability. No Member shall be liable under a judgment, decree, or
order of the court, or in any other manner, for a debt, obligation or liability
of the Company, except as provided by law. Except as set forth in Section 2.4,
no Member shall be required to loan any funds to the Company. Except as may be
otherwise expressly provided herein, no Member shall be required to make any
contribution to the Company by reason of any negative balance in its capital
account, nor shall any negative balance in a Member’s capital account create
any liability on the part of the Member to any third party.


 


                Section 2.10
No Individual Authority. Except as may be expressly provided in
Article 3 hereof, no Member, acting alone, shall have any authority to act for,
or to undertake or assume, any obligation, debt, duty or responsibility on
behalf of, any other Member or the Company.


 


                Section 2.11
No Member Responsible for Other Member’s Commitment. In the event
that any Member (or any of such Member’s shareholders, partners, members,
owners, or Affiliates) has incurred any


 


 


10





















 


indebtedness or obligation prior to the date
hereof, neither the Company nor any other Member shall have any liability or
responsibility for or with respect to such indebtedness or obligation unless
such indebtedness or obligation is assumed by the Company pursuant to a written
instrument signed by all Members. Furthermore, neither the Company nor any
Member shall be responsible or liable for any indebtedness or obligation that
is hereafter incurred by any other Member (or any of such Member’s
shareholders, partners, members, owners, or Affiliates). In the event that a
Member (or any of such Member’s shareholders, partners, members, owners, or
Affiliates), whether prior to or after the date hereof, incurs (or has
incurred) any debt or obligation that neither the Company nor any of the other
Members is to have any responsibility or liability for, the Member who incurs
or has incurred such obligation shall indemnify and hold harmless the Company
and all other Members from any liability or obligation they may incur in respect
thereof.


 


                Section 2.12
Member Expense Reimbursements. The Operating Manager shall, on a
quarterly basis, reimburse the Members for their reasonable expenses incurred
in performing their relative tasks and making their relative contributions
specified above in Section 2.3. The expenses of each Member shall relate to
providing services and incurring third-party expenses in connection with
Company business only. Each Member shall provide to the Operating Manager, no
later than 15 days after the end of a fiscal quarter, a detailed schedule of
the expenses incurred by it in connection with its performance of duties in
Section 2.3. If the Operating Manager disputes the amount or propriety of any
tendered expenses, he shall submit the matter for consideration by the
Management Committee. The Operating Manager, individually or as directed by the
Management Committee, shall promptly reimburse the Members for their expenses.


 


ARTICLE 3


Management
and Control of Business


 


                Section 3.1 Overall
Management Vested in Members.


 


a.     Except as expressly provided otherwise
herein, management of the Company shall be vested in the Members, who shall
have the voting rights specified in paragraph d. of this Section 3.1. The
Members or any of their Affiliates may engage in other business activities of
any nature, except as prohibited by Article 10.


 


b.     Only the Operating Manager, acting alone,
shall be authorized to engage in acts or omissions on behalf of the Company
which are required for the Company to engage in its ordinary, day to day
operations. However, any proposed action or omission which is not within the
Company’s ordinary course of business and constitutes a “Major Decision” shall
be taken only upon being authorized by the Management Committee, except for
those matters, as defined in Section 3.2, c., (2) below, which require the
unanimous vote of all Members. The Members may from time to time adopt
resolutions which distinguish acts taken in, or outside of, the ordinary course
of business.


 


c.     If required by law, a Member shall be
qualified to do business in Colorado by obtaining a certificate of authority to
do so from the Secretary of State of the State of Colorado.


 


d.     Meetings of the Members.


 


(1)           Meetings of Members may be called by
any Member, upon reasonable notice to the other Member. A Member may waive
notice of any meeting, before or after the date of the meeting, by delivering a
signed waiver to the Company. A Member’s attendance at any meeting, in person
or by proxy waives objection to lack of notice or


 


 


11





















 


defective notice of the
meeting, unless the Member at the beginning of the meeting objects to holding
the meeting or transacting business at the meeting. Members may participate in
person or by telephone.


 


(2)           At any meeting of Members, each
Member entitled to vote shall have a number of votes equal to the Percentage
Interest owned by such Member. At any meeting of Members, presence of Members
entitled to cast at least a majority of the total votes of all Members entitled
to vote at such meeting constitutes a quorum. Action on a matter is approved if
it receives approval by at least a majority of the total number of votes
entitled to be cast by all Members in the Company entitled to vote at such
meeting or such greater number as may be required by law, by the Articles or by
this Agreement for the particular matter under consideration.


 


(3)           Upon the occurrence of a Dissolution
Event (as defined herein), a former Member shall not be entitled to any vote in
determining whether the Company shall purchase the Percentage Interest of such
former Member. Also, any assignee of a Member’s Percentage Interest in the
Company shall not be entitled to vote or participate on any matters at any
meeting unless such assignee become a Substitute Member as contemplated in
Section 6.4 hereof.


 


(4)           To the maximum extent permitted by
the Act, any action required or permitted to be taken at a Members’ meeting may
be taken without a meeting if the action is taken by all of the Members entitled
to vote on the action. The action must be evidenced by one or more written
consents describing the action to be taken, signed by all the Members entitled
to vote on the action.


 


                Section 3.2
Management Committee and Operating Manager. Notwithstanding the
provisions of Section 3.1 above, management of the business and property of the
Company shall be delegated by the Members to an Operating Manager or to the
Management Committee, as the case may be, as provided in this Section 3.2.


 


 


a.     Appointment of Management Committee.
The Members hereby delegate management of the business and operations of the
Company, as to matters set forth herein and in Section 3.2, c., (1), to a
Management Committee. The Management Committee shall be initially composed of
four members, two members each to be appointed by Sport-Haley and Explorer
Gear. In the event that Explorer Gear does not close on a Sport-Haley/Explorer
Gear Acquisition within 120 days from the Effective Date, the Members agree
that the Management Committee shall be composed of five members, three to be
appointed by Sport-Haley and two by Explorer Gear. The members of the
Management Committee shall serve until replaced by the Member which appointed
them. Management Committee members may be removed by the affirmative vote of
the Management Committee. Matters to be decided by the Management Committee
shall be approved by an affirmative vote of a majority of the members of the
Committee. The initial members of the Management Committee shall be Ronald J.
Norick, Donald W. Jewell, Benji Falkenstein and Gerard Lee. The Management
Committee shall meet no less than on a quarterly basis, pursuant to reasonable
notice to all members. Members of the Management Committee may participate in
such meetings by telephone. A majority of members (i.e., 3 members) of the
Committee present shall constitute a quorum. Unless otherwise provided by law,
any action required to be taken or which may be taken at a meeting of the
Management Committee may be taken without a meeting if one or


 


 


12





















 


more written consents,
setting forth the action authorized, shall be signed by each of the members of
the Management Committee entitled to vote with respect to the subject matter of
thereof and delivered to the Company. Such written consents shall have the same
effect as a meeting vote and may be described as such in any document.


 


b.     Management Committee Standard of Care.
A Management Committee member’s duty of care in the discharge of his or her
duties to the Company and the Members shall be consistent with the obligation
of good faith and fair dealing. In discharging his or her duties, a member of
the Management Committee shall be fully protected in relying in good faith upon
the records required to be maintained under Article 4 and upon such
information, opinions, reports or statements by any of the Company’s Members,
Operating Manager or agents thereof.


 


c.     Duties of the Management Committee. Except
for day to day operations delegated to the Operating Manager as set forth in
Section 3.2, e., and matters set forth in Section 3.2, c., (2) which require
unanimous consent of the Members, the Management Committee shall be delegated
by the Members the authority to make all “Major Decisions,” as defined herein.


 


(1)           Major Decisions. Major
Decisions shall include all matters not in the ordinary course of the Company’s
business, and those matters not specifically reserved for the Members’
unanimous consent and day to day, ordinary course matters reserved to the Operating
Manager, including:


 


(a)           all matters specified in this
Agreement that require affirmative vote of the Management Committee;


 


(b)           entering into any commitment or
agreement by which the Company shall be obligated to produce, pay, provide
services or other value in excess of $25,000;


 


(c)           paying or committing the Company to
pay any compensation or expense reimbursement to a Member;


 


(d)           entering into any loan, debt
instrument or credit facility, obligating the Company or its Members in an
amount exceeding $25,000;


 


(e)           determining the value of a Member’s
contribution of services or property;


 


(f)            establishing reasonable reserves
with respect to the Net Operating Cash Flow;


 


(g)           determining the Tax Distributions in
accordance with Section 5.2;


 


(h)           approving operating budgets for the
Company;


 


(i)            determining the scope or amount of
any Additional Other Contributions of the Members;


 


 


13





















 


(j)            approving or requesting Member
Loans;


 


(k)           determining disputes regarding Member
Expense Reimbursements;


 


(l)            approving all contracts,
commitments, purchase orders and the like for the sale of Top-FliteÔ Apparel and
Other Branded Apparel;


 


(m)          approving the marketing and
distribution of all apparel sold by the Company (subject also to Callaway’s
approval related to the licensed Top-FliteÔ Apparel);


 


(n)           approving competing business or
products of the Members pursuant to Section 10.1;


 


(o)           approving suppliers and manufacturing
sources for the manufacture of the Top-FliteÔ and Other Branded Apparel
sold by the Company;


 


(p)           authorizing the bringing and
defending of actions in law or at equity,


 


(q)           determining whether indemnification
or advancement of expenses is permissible pursuant to Section 8.1, d.,


 


(r)            determining suitable performance
security instruments and amounts, pursuant to Section 12.5, and


 


(s)           approving any delegations of
authority by the Operating Manager.


 


(2)           Decisions Reserved for Unanimous
Consent of Members. Notwithstanding the Member’s delegation of authority to
the Operating Manager and Management Committee, as set forth herein, the
following matters shall require the unanimous consent of all Members:


 


(a)           selection/removal of Operating
Manager or initial members of the Management Committee;


 


(b)           admitting new Members;


 


(c)           amending the Articles of
Organization;


 


(d)           amending the Operating Agreement;


 


(e)           approving compensation, if any, to
the members of the Management Committee and the Operating Manager;


 


(f)            conversion into another form of
entity; and,


 


(g)           dissolution


 


 


14





















 


d.     Election of Operating Manager. The
Operating Manager shall serve until removed or replaced by the Members. The
removal of the Operating Manager shall require the approval of Members holding
at least a majority of the Percentage Interests outstanding as of the time of
such removal. The Members shall appoint the initial Operating Manager within 30
days of the Effective Date. If the Members do not appoint an Operating Manager
by that time, or are unable to agree by that time, Tom Tomlinson shall serve as
the initial Operating Manager.


 


e.     Duties of Operating Manager. Except
to the extent certain powers and authorities are reserved by the Members, or to
the Management Committee, as set forth herein, the Operating Manager shall
perform the following duties and those matters as set forth herein:


 


(1)           The Operating Manager shall perform
all ministerial duties associated with day to day operation and performance of
the business of the Company and transactions and dealings in the ordinary
course of the Company’s business. The Operating Manager shall be responsible
for the day to day management and performance of its contracts with Wal-Mart
and other customers. The Operating Manager, or his or her designee (as approved
by the Management Committee), shall act as the central point of contact with
the customers. The Operating Manager shall implement the policies of the
Management Committee and shall have full authority to act on behalf of the
Company in connection with all contract matters relating to the daily operation
of the Company and performance of the contracts entered into with customers,
except as delegated to the Management Committee or the Members. The Operating
Manager shall have the power to expend Company funds in such amounts and for
such purposes as contemplated under the then-current budget approved by
the Management Committee.


 


(2)           The Operating Manager shall represent
the Company in all transactions with third parties, unless they shall have
designated in writing another person as representative of the Company. The
Operating Manager shall establish and maintain such checking, savings, and
other accounts as it may from time to time deem appropriate. The Operating
Manager shall act as the signatory on such bank and other accounts. In addition
to other duties which may be set out herein, the Operating Manager shall
diligently and faithfully devote such time to the Company business as may be
necessary to carry on and conduct said business for the greatest advantage of
the Company; shall render to the Members whenever reasonably requested by them,
a true and faithful account of all dealings and transactions relating to the
business of the Company; shall be required to make all payments of taxes,
insurance premiums and payments of principal and interest on any indebtedness
of the Company as may be necessary from time to time in order to protect and
preserve the interest of the Company in its assets to the extent that the funds
of the Company are sufficient therefor; shall prepare and file or cause to be
prepared and filed all tax returns and other returns and reports to any
governmental authority reasonably required for the carrying on of the business
of the Company; and shall do all other things and perform such other duties as
may be reasonably necessary to the successful day to day operation of the
Company.


 


(3)           Except for those matters reserved to
the Management Committee or which require the unanimous consent of the Members,
the Operating Manager shall have all necessary powers to carry out the
purposes, business, and objectives of the Company, including, but not limited
to, the right to enter into and carry out contracts of all kinds; to employ
employees, agents, consultants and advisors on behalf of the Company; to
delegate


 


 


15





















 


portions of his
responsibilities and authority to employees of the Company, or of Sport-Haley,
as expressly approved by the Management Committee. The Operating Manager may
deal with any related Affiliate or other related person, firm or Entity on
terms and conditions that would be available from an independent responsible
third party that is willing to perform. The Operating Manager shall not have
the authority to make any Major Decision, it being the Members’ intention that
all Major Decisions shall be approved in accordance with Section 3.2, c., (1)
by the Management Committee.


 


f.      Operating Manager’s Standard of Care.
The Operating Manager’s duty of care in the discharge of his or her duties to
the Company and the Members shall be consistent with the obligations of good
faith and fair dealing. In discharging his or her duties, a member of the
Management Committee shall be fully protected in relying in good faith upon the
records required to be maintained under Article 4 and upon such information,
opinions, reports or statements by any of the Company’s Members, Operating
Manager or agents thereof.


 


                Section 3.3 Compensation
of Members. The Members shall not be entitled to receive any
compensation for performing services for the benefit of the Company. The
members of the Management Committee and the Operating Manager shall be entitled
to receive such compensation as may be approved by all Members.


 


                Section 3.4 Organization
Expenses. The Company shall pay all expenses incurred in the
organization of the Company.


 


ARTICLE 4


Accounting
and Records


 


                Section 4.1 Records
and Accounting; Fiscal Year. The books and records of the Company
shall be kept, and the financial position and the results of its operations
recorded, in accordance with generally accepted accounting principles in the
United States. The books and records of the Company shall reflect all Company
transactions and shall be appropriate and adequate for the Company’s business. The
fiscal year of the Company for financial reporting and for federal income tax
purposes shall be the calendar year.


 


                Section 4.2 Access
to Accounting Records. All books and records of the Company shall be
maintained at the Company’s principal place of business, and each Member, and
its duly authorized representative, shall have access to them at such office of
the Company and the right to inspect and copy them at reasonable times.


 


                Section 4.3 Annual
and Tax Information. The Operating Manager shall use its best
efforts to cause the Company to deliver to each Member within 60 days after the
end of each fiscal year all information necessary for the preparation of such
Member’s federal income tax return. The Operating Manager shall also use its best
efforts to cause the Company to prepare, within 90 days after the end of each
fiscal year, a financial report of the Company for such fiscal year, containing
a balance sheet as of the last day of the year then ended, an income statement
for the year then ended, a statement of sources and applications of funds, and
a statement of reconciliation of the Capital Accounts of the Members.


 


                Section 4.4 Accounting
Decisions. All decisions as to accounting matters, except as
otherwise specifically set forth herein, shall be made by the Operating
Manager. The Operating Manager may rely upon the advice of its accountants as
to whether such decisions are in accordance with accounting methods followed
for federal income tax purposes.


 


 


16





















 


                Section 4.5 Federal
Income Tax Elections; Tax Matters Partner. The Company may make all
such elections for federal income tax purposes which are approved by the
Members. The Members appoint and delegate to Sport-Haley the authority to act
as the tax matters partner pursuant to Section 6231(a)(7) of the Code. Sport-Haley
shall inform the Members of all significant matters concerning tax matters that
come to its attention in its capacity as tax matters partner. Sport-Haley shall
not take any action contemplated by Sections 6222 through 6232 of the Code
without the consent of the Members. This provision is not intended to authorize
Sport-Haley, in its capacity as tax partner, to take any action left to the
determination of the individual Members under Sections 6222 through 6232 of the
Code.


 


ARTICLE 5


Allocations; Distributions; And
Percentage Interests


 


                Section 5.1 Allocation
of Net Income, Net Loss or Capital Gains. Except as may be expressly
provided otherwise in this Agreement, and subject to the provisions of §704(c)
of the Code, the net income, net loss or capital gains of the Company for each
fiscal year of the Company shall be allocated to the Members, pro rata in
accordance with their Percentage Interest.


 


                Section 5.2 Distribution
of Available Cash. Periodically, but not less frequently than at the
end of each calendar year, and subject to the provisions of Section 2.6, above,
the Available Cash of the Company, if any, shall be distributed to the Members
in accordance with this Article 5. Distributions of Available Cash shall be
made in the following order and priority:


 


a.     First, to the repayment of Member Loans, if
any, which payments shall be made pro rata in proportion to the principal
amount of the Member Loan outstanding to each Member. Each payment made on a
Member Loan shall be applied first to interest and then to principal.


 


b.     Second, the Company shall make
distributions of Available Cash, in an amount to be determined by the
Management Committee, to take into account the tax effect upon the Members of
the allocation of federal and state taxable income of the Company (“Tax
Distributions”). Specifically, for each taxable year of the Company, the
Company shall distribute by March 31st of the following year (which may include
distributions previously made during such calendar year), an amount (at the
sole discretion of the Management Committee) of at least equal to forty percent
(40%) of the Net Operating Cash Flow of the Company for such calendar year
allocated to each Member during such calendar year. If the Company reports
Losses for one or more years, the Tax Distributions shall not be payable until
such time as the Company has accumulated federal taxable income reportable by
the Members in subsequent years in amounts equal to the total of such Losses.


 


c.     Third, Available Cash shall be distributed
to the Members pro rata in accordance with their Percentage Interests. Available
Cash of the Company need not be distributed to the extent that such cash is
required for a reasonable working capital reserve for the Company, the amount
of such reasonable working capital reserve to be determined by the Management
Committee.


 


                Section 5.3 Allocation
of Income and Loss and Distributions in Respect of Percentage Interests
Transferred.


 


a.     If any Percentage Interest in the Company
is transferred, or is increased or decreased by reason of the admission of a
new Member or otherwise, during any fiscal year of the Company, each item of
income, gain, loss, deduction, or credit of the Company for such fiscal year
shall be assigned pro rata to each day in the particular period of such fiscal
year to which such item is


 


 


17





















 


attributable (i.e., the day on or during which it is accrued or otherwise
incurred) and the amount of each such item so assigned to any such day shall be
allocated to the Member based upon its respective Percentage Interest in the
Company at the close of such day. For the purpose of accounting convenience and
simplicity, the Company may treat a transfer of, or an increase or decrease in,
a Percentage Interest in the Company which occurs at any time during a calendar
month as having been consummated on the first day of month, regardless of when
during such month such transfer, increase, or decrease actually occurs.


 


b.     Distributions in respect of a Percentage
Interest in the Company shall be made only to the Members who, according to the
books and records of the Company, are the holders of record of the Percentage
Interests in respect of which such distributions are made on the actual date of
distribution. Neither the Company nor any Member shall incur any liability for
making distributions in accordance with the provisions of the preceding
sentence, whether or not the Company or the Member has knowledge or notice of
any transfer or purported transfer of ownership of a Percentage Interest in the
Company which has not been approved by unanimous consent of the Members. Notwithstanding
any provision above to the contrary, gain or loss of the Company realized in
connection with a sale or other disposition of any of the assets of the Company
shall be allocated solely to the parties owning Percentage Interests in the
Company as of the date such sale or other disposition occurs.


 


                Section 5.4 Special
Allocations. The following special allocations shall be made in the
following order:


 


a.     Minimum Gain Chargeback. Except as
otherwise provided in Regulation Section 1.704-2(f) and notwithstanding any
other provision of this Section 5.4, if there is a net decrease in Company
Minimum Gain during any Company fiscal year, each Member shall be specially
allocated items of Company income and gain for such fiscal year (and, if
necessary, subsequent fiscal years) in an amount equal to such Member’s share
of the net decrease in Company Minimum Gain, determined in accordance with
Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items to be so allocated shall be
determined in accordance with Regulation Sections 1.704-2(f)(6) and
1.704-2(j)(2). This Section 5.4, a. is intended to comply with the minimum gain
chargeback requirement in such Regulations and shall be interpreted
consistently therewith.


 


b.     Member Minimum Gain Chargeback. Except
as otherwise provided in Regulations Section 1.704-2(i)(4), notwithstanding any
other provision of this Section 5.4, if there is a net decrease in Member
Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during
any fiscal year, each Member who has a share of the Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated
items of Company income and gain for such fiscal year (and, if necessary,
subsequent fiscal years) in an amount equal to such Member’s share of the net
decrease in Member Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This
Paragraph is intended to comply with the minimum gain chargeback requirement in
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.


 


 


18





















 


c.     Qualified Income Offset. Except as
provided in this paragraph, in the event any Member unexpectedly receives any
adjustments, allocations or distributions described in Regulation Sections
1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5),
or 1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate, to
the extent required by such Regulations, the Adjusted Capital Account Deficit
of such Member as quickly as possible, provided that an allocation pursuant to
this Paragraph shall be made only if and to the extent that the Member would
have an Adjusted Capital Account Deficit after all other allocations provided
for in this Section 5.4 have been tentatively made as if this paragraph were
not in the Agreement.


 


d.     Gross Income Allocation. In the
event any Member has a deficit Capital Account at the end of any Company fiscal
year that is in excess of the sum of (i) the amount such Member is obligated to
restore and (ii) the amount such Member is deemed to be obligated to restore
pursuant to the penultimate sentence of Regulation Sections 1.704-2(g)(1) and
1.704-2(i)(5), such Member shall be specially allocated items of Company income
and gain in the amount of such excess as quickly as possible, provided that an
allocation pursuant to this paragraph shall be made only if and to the extent
that such Member would have a deficit Capital Account in excess of such sum
after all other allocations provided for in this Section 5.4 have been made as
if Section 5.4, c. and this Section 5.4, d. were not in the Agreement.


 


e.     Nonrecourse Deductions. Nonrecourse
Deductions for any fiscal year or other periods shall be allocated in
accordance with the Member’s Percentage Interests.


 


f.      Member Nonrecourse Deductions. Any
Member Nonrecourse Deductions for any fiscal year shall be specially allocated
to the Member who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable
in accordance with Regulations Section 1.704-2(i)(1).


 


g.     Section 754 Adjustments. To the
extent an adjustment to the adjusted tax basis of any Company asset, pursuant
to Code Section 734(b) or Code Section 743(b) is required, pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts
as the result of a distribution to a Member in complete liquidation of such
Member’s interest in the Company, the amount of such adjustment to Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Members in accordance with
their interests in the Company in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or
to the Member to whom such distribution was made in the event Regulations
Section 1.704-1(b)(2)(iv)(m)(4) applies.


 


                Section 5.5 Curative
Allocations. The special allocations set forth in Section 5.4 hereof
(the “Regulatory Allocations”) are intended to comply with certain requirements
of Regulation Section 1.704-1(b). It is the intent of the Members that, to the
extent possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Company
income, gain, loss or deduction pursuant to this Section 5.5. Therefore,
notwithstanding any other provision of this Section 5.5 (other than the Regulatory
Allocations), the Operating Manager shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner he or
she determines appropriate so that, after such offsetting allocations are made,
each Members Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Member would have had if the Regulatory
Allocations were not part of the Agreement and all Company items were allocated
pursuant to Section 5.1.


 


 


19





















 


                Section 5.6 Tax
Allocations, Code Section 704(c). In accordance with Code Section
704(c) and the Regulations thereunder, income, gain, loss and deduction with
respect to any property contributed to the capital of the Company shall, solely
for tax purposes, be allocated among the Members so as to take into account any
variation between the adjusted basis of the property for federal income tax
purposes and its fair market value determined in accordance with Regulations Section
1.704-1(b)(2)(iv). In the event the value of any Company asset is adjusted
pursuant to a revaluation permitted in Regulations Section 1.704-1(b)(2)(iv)(f), subsequent allocations of income, gain, loss and
deduction with respect to such assets shall take account of any variation
between the adjusted basis of such assets for federal income tax purposes and
its value in the same manner as under Code Section 704(c) and the Regulations
thereunder. Any elections or other decisions relating to such allocations shall
be made by the Operating Manager in any manner that reasonably reflects the
purpose and intention of this Agreement. Any elections or other decisions
relating to such allocations shall be made by the Operating Manager in any
manner that reasonably reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 5.6 are solely for purposes of federal, state and
local taxes and shall not affect, or in any way be taken into account in
computing any Member’s Capital Account or share of Profits, Losses, or other
items or distributions pursuant to any provision of this Agreement.


 


                Section 5.7 Loss
Limitation. Losses allocated pursuant to Section 5.1 hereof shall
not exceed the maximum amount of Losses that can be allocated without causing
any Member to have an Adjusted Capital Account Deficit at the end of any fiscal
year. In the event some but not all of the Members would have Adjusted Capital
Account Deficits as a consequence of an allocation of Losses pursuant to
Section 5.1 hereof, the limitation set forth in this Section 5.7 shall be
applied on a Member by Member basis and Losses not allocable to any Member as a
result of such limitation shall be allocated to the other Members in accordance
with the positive balances in such Member’s Capital Accounts so as to allocate
the maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Regulations.


 


ARTICLE 6


Changes
In Members


 


                Section 6.1 Dissolution
Events. The Bankruptcy or dissolution of a Member which is an
Entity, or the death or Bankruptcy of a Member which is an individual, or the
occurrence of any other event which terminates the continued membership of a
Member in the Company (a “Dissolution Event”), shall dissolve the Company
unless there are at least two remaining Members and the remaining Members
unanimously consent to the continuation of the business of the Company within
ninety (90) days of the Dissolution Event.


 


a.     Change of Control of Sport-Haley. A
Change of Control of Sport-Haley shall not, by itself, constitute a Dissolution
Event. However, in the event of such a Change of Control, if the new management
of Sport-Haley, or if Sport-Haley, as then constituted, is unable or unwilling
to proceed with the business of the Company, Explorer Gear shall be entitled to
purchase Sport-Haley’s membership and Percentage Interest in the Company at a
value to be negotiated at that time, subject to Callaway’s approval. This
provision is not intended to cause or permit an assignment or transfer of
Sport-Haley’s Top-FliteÔ license. In the event of
such a Change of Control of Sport-Haley and Explorer Gear purchases Sport-Haley’s
membership and Percentage Interest in the Company, Explorer Gear acknowledges
that the Company will not be permitted to continue the sale of Top-FliteÔ Apparel
without Sport-Haley’s written consent and continued consent by Callaway.


 


b.     Change of Control of Explorer Gear. A
Change of Control of Explorer Gear shall not, by itself, constitute a
Dissolution Event. However, in the event of such a Change of Control,


 


 


20





















 


if the new management of
Explorer Gear, or if Explorer Gear as then constituted, is unable or unwilling
to proceed with the business of the Company, Sport-Haley shall be entitled to
purchase Explorer Gear’s membership and Percentage Interest in the Company at a
value to be negotiated at that time.


 


                Section 6.2 Transfer
and Assignment of Members’ Percentage Interest. No Member shall be
entitled to assign, convey, sell, encumber or in any way alienate all or any
part of its Percentage Interest in the Company or his membership in the Company
except with the prior written consent of all other Members, which consent may
be given or withheld, conditioned or delayed, as the remaining Members may
determine in their sole discretion. Transfers in violation of this Section 6.2
shall only be effective to the extent set forth in Section 6.5, b. hereof.


 


                Section 6.3 Further
Restrictions on Transfer. No Member shall assign, convey, sell,
encumber or in any way alienate all or any part of its Percentage Interest in
the Company unless (1) such Interest is registered under applicable federal and
state securities laws, or the Member delivers an opinion of counsel
satisfactory to the Company that registration under such laws is not required,
and (2) the Percentage Interest to be sold or exchanged, when added to the
total of all other Percentage Interests sold or exchanged in the preceding
twelve (12) consecutive months prior thereto, would not result in the
termination of the Company under §708 of the Code.


 


                Section 6.4 Substitute
Members. A transferee of a Member’s Percentage Interest in the
Company shall have the right to become a Substitute Member if (1) the
requirements of Sections 6.2 and 6.3 hereof are met, (2) such person executes
an instrument satisfactory to the remaining Members accepting and adopting the
terms and provisions of this Agreement, and (3) such person pays any reasonable
expenses in connection with his or her admission as a Member.


 


                Section 6.5 Effect
of Transfer.


 


a.     Any permitted transfer of all or any
portion of a Member’s Percentage Interest in the Company will take effect on
the first day of the month following receipt by the Members of written notice
of transfer. Any transferee of a Percentage Interest in the Company shall take
subject to the restrictions on transfer imposed by this Agreement.


 


b.     Upon any transfer of a Member’s Percentage
Interest in the Company in violation of this Agreement, the transferee shall
have no right to participate in the management of the business and affairs of
the Company or to become a Member, but such transferee shall only be entitled
to receive the share of profits by way of income and the return of
contributions to which the transferor of such Percentage Interest in the
Company would otherwise be entitled.


 


ARTICLE 7


Dissolution


 


                Section 7.1
Dissolution of the Company. The Company shall be dissolved, its
assets liquidated, and its affairs wound up on the occurrence of any of the
following events:


 


(i)    By the unanimous written agreement of all
Members; or


 


(ii)   The entry of a decree of judicial dissolution
under Section 813 of the Act; or


 


 


21





















 


(iii)  The occurrence of a Dissolution Event followed
by the remaining Members’ failure to unanimously consent to the continuation of
the Company as provided herein; or


 


(iv)  At such earlier time as may be required by
applicable law.


 


                Section 7.2 Winding
Up and Order of Distribution. Upon the occurrence of any Dissolution
Event, and if the remaining Members do not elect carry on the business of the
Company, the Operating Manager (or if there is no Operating Manager, the Member
elected by holders of a majority of the remaining Percentage Interests) (the “Liquidator”),
shall use his best efforts to wind up ongoing business, dissolve the Company in
accordance with the Act, and shall apply and distribute the proceeds therefrom
in the following order:


 


a.     First, to the claims of creditors other
than the Members;


 


b.     Second, to the claims of the Members as
creditors; and


 


c.     The balance to the Members in accordance
with the positive balances in their Capital Accounts after all adjustments for
allocations and distributions for the taxable year of liquidation.


 


                Similarly,
upon the liquidation of any Member’s interest in the Company, liquidating
distributions shall be made in accordance with the positive Capital Account
balance of such Member as determined after taking into account all Capital
Account adjustments for the Company taxable year during which such liquidation
occurs by the end of such taxable year (or, if later, within ninety (90) days
after the date of such liquidation). For purposes of making distributions
hereunder, the Company taxable year shall be determined without regard to Code
Section 706(c)(2)(A).


 


                Section 7.3
Liquidator’s Standard of Care. The Liquidator’s standard of care in
the performance of his or her duties shall be limited to refraining from
engaging in grossly negligent or reckless conduct, intentional misconduct, or a
knowing violation of the law.


 


                Section 7.4 Distribution
in Kind. If the Liquidator shall determine that all or a portion of
the Company’s assets should be distributed in kind to the Members, he shall
obtain an independent appraisal of the fair market value of each such asset as
of a date reasonably close to the date of liquidation. Any unrealized
appreciation or depreciation with respect to such assets shall be allocated
among the Members (in accordance with the appropriate provisions of Article 5
hereof regarding the allocation of income and losses as if such assets had been
sold at such fair market value) and shall be taken into consideration in
determining the balance in the Members’ Capital Accounts as of the date of liquidation.
Distribution of any such assets in kind to a Member shall be considered a
distribution of an amount equal to the asset’s fair market value for purposes
of distribution under Section 7.2 hereof. The Liquidator, in his sole
discretion, may distribute any percentage of any asset in kind to any Member
even if such percentage exceeds the percentage in which such Member shares in
Net Operating Cash Flow so long as the sum of the cash and fair market value of
all the assets distributed to each Member equals the amount of distribution to
which each Member is entitled. No Member shall receive a distribution in kind
as otherwise permitted hereunder unless such Member consents to such
distribution.


 


                Section 7.5 Resignation.
Except as otherwise expressly provided herein, a Member may not resign from the
Company without violating this Agreement and any Member who resigns in
violation of this Agreement shall be liable to the Company for damages as
provided in the Act.


 


 


22





















 


ARTICLE 8


Indemnification


 


                Section 8.1 Indemnification
of Organizers or Members.


 


a.     To the greatest extent not inconsistent
with the laws and public policies of Colorado, the Company shall be required to
indemnify any Organizer, Member, Operating Manager or member of the Management
Committee (any such Organizer, Member, Manager or Management Committee member
who is a person, and any responsible officers, partners, shareholders,
directors, or managers of such Organizer or Member which is an Entity,
hereinafter being referred to as the “Individual”) made a party to any
proceeding because such Individual is or was a Member, Organizer, Operating
Manager or Management Committee member against all liability incurred by such
Individual in connection with any proceeding; provided that it shall be
determined in the specific case in accordance with subsection d. of this
Section that indemnification of such Individual is permissible in the
circumstances because the Individual has met the standard of conduct for
indemnification set forth in subsection c. of this Section. The Company shall
pay for or reimburse the reasonable expenses incurred by the Individual in
connection with any such proceeding in advance of final disposition thereof if (1)
the Individual furnishes the Company a written affirmation of the Individual’s
good faith belief that he or she has met the standard of conduct for
indemnification described in subsection c. of this Section, (2) the Individual
furnishes the Company a written undertaking, executed personally or on such
Individual’s behalf, to repay the advance if it is ultimately determined that
such Individual did not meet such standard of conduct, and (3) a determination
is made in accordance with subsection d. that based upon facts then known to
those making the determination, indemnification would not be precluded under
this Section. The undertaking described in subsection (ii) above must be a
general obligation of the Individual, subject to such reasonable limitations as
the Company may permit, but need not be secured and may be accepted without
reference to financial ability to make repayment. The Company shall indemnify a
Member, Manager, Organizer or Management Committee member who is wholly
successful, on the merits or otherwise, in the defense of any such proceeding,
as a matter of right, against reasonable expenses incurred by the Individual in
connection with the proceeding without the requirement of a determination as
set forth in subsection c. of this Section. Upon demand by a Member, Manager,
Organizer or Management Committee member for indemnification or advancement of
expenses, as the case may be, the Company shall expeditiously determine whether
the Member, Manager, Organizer or Management Committee member is entitled
thereto in accordance with this Section. The indemnification and advancement of
expenses provided for under this Section shall be applicable to any proceeding
arising from acts or omissions occurring before or after the adoption of this
Section.


 


b.     The Company shall have the power, but not
the obligation, to indemnify any Individual who is or was an employee or agent
of the Company to the same extent as if such Individual was a Member, Manager,
Organizer or Management Committee member.


 


c.     Indemnification of an Individual is
permissible under this Section only if (1) he conducted himself in good faith; (2)
he reasonably believed that his conduct was in or at least not opposed to the
Company’s best interest; (3) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful; and (4) he is not
adjudged in any such proceeding to be liable for negligence or misconduct in
the performance of duty. The termination of a proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its


 


 


23





















 


equivalent is not, of
itself, determinative that the Individual did not meet the standard of conduct
described in this subsection c.


 


d.     A determination as to whether indemnification
or advancement of expenses is permissible shall be made by any one of the
following procedures:


 


(1)           By a majority vote of the Management
Committee members who at the time of such vote are not parties to the
proceeding; or


 


(2)           By special legal counsel selected by
the Management Committee pursuant to a vote consistent with subsection d., (1)
above.


 


e.     Nothing contained in this Section shall
limit, preclude or be deemed exclusive of any other legal or contractual right
relating to indemnification of or advancement of expenses to any person who is
or was a Member, Manager, Organizer or Management Committee member of the
Company or is or was serving at the Company’s request as a director, officer,
partner, manager, trustee, employee, or agent of another foreign or domestic
company, partnership, association, limited liability company, corporation,
joint venture, trust, employee benefit plan, or other enterprise, whether
for-profit or not. Nothing contained in this Section shall limit the ability of
the Company to otherwise indemnify or advance expenses to any Individual. It is
the intent of this Section to provide indemnification to Members, Managers,
Organizers or Management Committee member to the fullest extent now or
hereafter permitted by the law consistent with the terms and conditions of this
Section. Indemnification shall be provided in accordance with this Section
irrespective of the nature of the legal or equitable theory upon which a claim
is made.


 


f.      For purposes of this Section:


 


(1)           The term “expenses” includes all
direct and indirect costs (including without limitation counsel fees,
retainers, court costs, transcripts, fees of, experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees and all other disbursements or out-of-pocket
expenses) reasonably incurred in connection with the investigation, defense,
settlement or appeal of a proceeding or establishing or enforcing a right to
indemnification under this Section, applicable law or otherwise.


 


(2)           The term “liability” means the
obligation to pay a judgment, settlement, penalty, fine, excise tax, or
reasonable expenses incurred with respect to a proceeding.


 


(3)           The term “party” includes an
Individual who was, is or is threatened to be made a named defendant or
respondent in a proceeding.


 


(4)           The term “proceeding” means any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal.


 


(5)           The Company may purchase and maintain
insurance for its benefit, the benefit of any Individual who is entitled to
indemnification under this section, or both, against any liability asserted
against or incurred by such Individual in any capacity or arising


 


 


24





















 


out of such Individual’s
service with the Company, whether or not the Company would have the power to
indemnify such Individual against such liability.


 


                8.2           Indemnification by
Explorer Gear to Sport-Haley. Explorer Gear and its Affiliates agree
to indemnify and hold Sport-Haley and the officers, directors and Affiliates
thereof (the “Sport-Haley Indemnitees”) harmless from and against any and all
claims, judgments, causes of action, liabilities, obligations, amounts paid in
settlement, damages, losses, deficiencies, costs, penalties, interest and
expenses, including, without limitation, costs of investigation, preparation
and defense, and attorneys’ fees and expenses, and, in cases of claims by more
than one Sport-Haley Indemnitee, without duplication of damages payable by
Explorer Gear and its Affiliates with respect to any indemnifiable event, and
net of any tax benefits or insurance proceeds received on account of such event
(collectively, “Losses”), arising out of, based upon, attributable to or
resulting from, directly or indirectly:


 


a.     any breach of a representation or warranty
on the part of Explorer Gear or its Affiliates contained in Article 11 of this
Agreement;


 


b.     any breach of any covenant or agreement to
be performed by Explorer Gear or its Affiliates pursuant to this Agreement; and


 


c.     to the extent caused by Explorer Gear or
its Affiliates, any third party claims relating to the design, manufacture,
shipment, importation, sale or use of the Top-FliteÔ Apparel made
and/or sold by the Company, or third party claims relating to the negligence,
product liability, breach of warranty or willful misconduct by the Company or
its employees, suppliers, subcontractors, independent contractors or agents,
including but not limited to Losses arising out of third party claims relating
to the development, manufacture, advertising, marketing, distribution, sale or
handling of the Top-FliteÔ Apparel made and/or sold by
the Company or any improper or unauthorized use of the Top-FliteÔ trademarks or
any breach or violation of any warranty, representation, term or condition of
the License Agreement by the Company.


 


                8.3           Indemnification by
Sport-Haley to Explorer Gear. Sport-Haley and its Affiliates agree
to indemnify and hold Explorer Gear and the officers, directors and Affiliates
thereof (the “Explorer Gear Indemnitees”) harmless from and against any and all
claims, judgments, causes of action, liabilities, obligations, amounts paid in
settlement, damages, losses, deficiencies, costs, penalties, interest and
expenses, including, without limitation, costs of investigation, preparation
and defense, and attorneys’ fees and expenses, and, in cases of claims by more
than one Explorer Gear Indemnitee, without duplication of damages payable by
Sport-Haley and its Affiliates with respect to any indemnifiable event, and net
of any tax benefits or insurance proceeds received on account of such event
(collectively, “Losses”), arising out of, based upon, attributable to or
resulting from, directly or indirectly:


 


a.     any breach of a representation or warranty
on the part of Sport-Haley or its Affiliates contained in Article 11 of this
Agreement; and


 


b.     any breach of any covenant or agreement to
be performed by Sport-Haley or its Affiliates pursuant to this Agreement.


 


ARTICLE 9


Confidentiality


 


                Section 9.1
Confidentiality Of Member and Company Proprietary Information. Each
Member agrees that, during the term of this Agreement and thereafter, it, and
its Affiliates, will maintain, and cause


 


 


25





















 


its officers, directors, employees, general
contractors and agents to maintain, the confidentiality of all patents,
licenses, license agreements, trade secrets, technology, know-how, customer
lists, customer contacts, manufacturing sources, financial projections,
business plans, designs, processes or materials with respect to any past,
present or future efforts, operations, research relating to either Member’s or
the Company’s business, products or activities (the “Proprietary Information”)
that has or becomes known to any Member, except for such information which (a)
such Member may be required to disclose (i) at the express direction of any
authorized governmental agency, (ii) pursuant to a subpoena or other court
process, or (iii) as otherwise required by law or regulation, or order of any
regulatory body; (b) prior to the date of this Agreement, has become generally
available to the public or was within the public domain at the time it was
disclosed; (c) was generally available or known to such other Member on a
non-confidential basis prior to its disclosure by the other Member hereunder;
or (d) prior to the date of this Agreement was lawfully received by such other
Member from a source other than the other Member or the Company.


 


                Section 9.2
Confidentiality of Callaway Information. Explorer Gear acknowledges
and agrees that it will maintain confidential all information made known to it
in connection with Sport-Haley’s License Agreement with Callaway, as amended,
and with respect to the Top-FliteÔ Apparel, other than any
information in the public domain or information known to Explorer Gear prior to
its disclosure by Sport-Haley.


 


                Section 9.3
Confidentiality of Wal-Mart and Other Customers’ Information. Sport-Haley
and Explorer Gear acknowledge and agree that they will maintain confidential
all information made known to them by Wal-Mart or other customers, other than
any information in the public domain or information known to them prior to its
disclosure.


 


                Section 9.4
Confidentiality of Manufacturers’ Information. Each member
represents that, to its knowledge, it has no pre-existing relationship
with any of the other member’s product manufacturers, suppliers or customers as
of the date of this Agreement. Each member acknowledges that the other member’s
relationships with such manufacturers, suppliers and clients constitutes a
valuable form of intangible property that is not in the public domain. Each
member further acknowledges that the other member’s source of manufacturers and
suppliers is confidential information. Accordingly, each member will maintain
confidential all information made known to it in connection with the other
member’s manufacturers and suppliers. Each member covenants that during this
Agreement and for a period of two (2) years following the termination of this
Agreement or the dissolution of the Company or the sale of the other member’s
Percentage Interest in the Company (whichever occurs last), it will not (i)
directly or indirectly communicate with the other member’s product
manufacturers, suppliers and clients and (ii) directly or indirectly purchase,
accept or otherwise obtain any product from such manufacturers and suppliers,
without obtaining the prior written consent of the member affiliated with the
product manufacturers, suppliers and clients, or in any way attempt to
circumvent the other member in any manner whatsoever.


 


ARTICLE 10


Prohibited
Transactions


 


                Section 10.1
Non-Competition. During the term of this Agreement and for a period
of one year thereafter, neither Member, or their Affiliates, shall, within the
United States or the Territory defined in the License Agreement, directly or
indirectly own, manage, operate, control, be employed by, participate in or be
connected in any manner with the ownership, management, operation or control of
any business in direct competition with the type of business conducted by the
Company or its products, except as approved by the Management Committee, except
that Explorer Gear shall not be prohibited from selling John Daly branded
apparel in the United States or Top-FliteÔ branded apparel in Canada.


 


 


26





















 


                Section 10.2
Non-Solicitation of Member Employees. During the term of this
Agreement and for a period of one year thereafter, neither Sport-Haley nor
Explorer Gear, nor their Affiliates, shall solicit for employment or employ any
employees, independent contractors, agents or Affiliates of the Company, or the
employees, independent contractors or agents of the other Member. During the
term of this Agreement and for a period of one year thereafter, Sport-Haley
shall not solicit for employment or employ any employees or independent
contractors of the manufacturers or suppliers of Explorer Gear or any employees
or independent contractors of any customer introduced to the Company by
Explorer Gear.


 


                Section 10.3
No Sales of Top-FliteÔ Apparel or Other Branded Apparel
Outside Company. During the term of this Agreement, neither Member
may sell Top-FliteÔ Apparel or Other Branded
Apparel (after Explorer Gear has agreed to sell any such Other Branded Apparel
through the Company) in the United States or the Territory defined in the
License Agreement applicable to Top-FliteÔ except through the Company.
Further, Explorer Gear, and its Affiliates, acknowledges that it may not sell
or attempt to sell Top-FliteÔ Apparel in the Territory
defined in the License Agreement at any time.


 


                Section 10.4
Remedies. The Members agree that a violation or threatened violation
of the provisions of Article 9 and 10 could cause irreparable harm to the
Company or, as the case may be, to one of its Members and there is no adequate
remedy at law for such violation or threatened violation. Accordingly, in the
event of an actual or threatened breach of the provisions of Article 9 and/or
10, the non-breaching Member shall be entitled to seek an injunction
restraining the breaching Member without proof of actual damages and without
the need to post any bond or other security. For purposes of this paragraph,
the parties consent to the personal and subject matter jurisdiction of the
state and federal courts located in Denver, Colorado. Nothing stated herein
shall be construed to prohibit either Member from pursuing any other remedies
available to such Member for such breach or threatened breach.


 


ARTICLE 11


Representations
and Warranties


 


                As
a material inducement to the execution of this Agreement, the parties represent
and warrant to each other that, as of the date hereof and during the term of
this Agreement, the following representations and warranties are true and
correct, as follows:


 


                Section 11.1
Representations and Warranties of Explorer Gear.


 


a.     Explorer Gear is a corporation duly
organized, validly existing, and in good standing under the laws of California.
Explorer Gear has all requisite corporate power to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. Without limiting the foregoing, Explorer Gear has
obtained or will obtain within 20 days of the Effective Date, the approvals and
consents of Wal-Mart necessary for the Company to receive and process orders
from Wal-Mart for Wal-Mart Sales as contemplated by this Agreement. Further,
Explorer Gear has the requisite power and authority to cause manufacturing
entities located in China affiliated with it or with Explorer Headgear, Inc. to
faithfully produce the Top-FliteÔ Apparel in the quantities
required and pursuant to the quality and design approved by Callaway, as
contemplated by this Agreement.


 


b.     Explorer Gear has all requisite legal and
corporate power to execute and deliver this Agreement and to carry out and
perform its obligations under the terms of this Agreement.


 


 


27





















 


c.     All corporate action on the part of
Explorer Gear, its directors and shareholders necessary for the performance of
its obligations under this Agreement has been taken or will be taken prior to
the Effective Date. This Agreement is a valid and binding obligation of
Explorer Gear, enforceable in accordance with its terms, subject to laws of
general application relating to Bankruptcy, insolvency and the Debtor Relief
Laws.


 


d.     Neither execution or delivery of this
Agreement or any other instrument to be executed in connection herewith, nor
its performance by Explorer Gear will conflict with, violate or result in a
breach of any term, condition or provision of, nor constitute a material
default under, or result in the acceleration of any material obligation under,
or permit the termination of, any indenture, material contract or other
material agreement to which Explorer Gear is a party or by which Explorer Gear
or its properties is subject or bound; nor will such execution, delivery or
performance by Explorer Gear result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of its properties or conflict with or
violate the provisions of any judgment, decree, order to which Explorer Gear is
subject or its Articles of Incorporation or Bylaws or, to the best of its
knowledge, any law or regulation.


 


e.     No consent, approval or authorization of,
or designation, declaration or filing with, any governmental authority on the
part of Explorer Gear is required in connection with the valid execution and
delivery of this Agreement or the consummation of any transaction contemplated
by this Agreement.


 


f.      No representation or warranty of Explorer
Gear nor any exhibit, document, statement, certificate or schedule furnished to
Sport-Haley pursuant hereto or in connection with the transactions contemplated
hereby, contains any untrue statement of a material fact, or omits to state a
material fact necessary to make statements or facts contained therein not
misleading in light of the circumstances under which they were made.


 


                Section 11.2
Representations and Warranties of Sport-Haley.


 


a.     Sport-Haley is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Colorado. Sport-Haley has all requisite corporate power to own and operate
its properties and assets, and to carry on its business as presently conducted
and as proposed to be conducted.


 


b.     Sport-Haley has all requisite legal and
corporate power to execute and deliver this Agreement and to carry out and
perform its obligations under the terms of this Agreement.


 


c.     All corporate action on the part of
Sport-Haley, its directors and shareholders necessary for the performance of
its obligations under this Agreement has been taken or will be taken prior to
the Effective Date. This Agreement is a valid and binding obligation of
Sport-Haley, enforceable in accordance with its terms, subject to laws of
general application relating to Bankruptcy, insolvency and the Debtor Relief
Laws.


 


d.     Neither execution or delivery of this
Agreement or any other instrument to be executed in connection herewith, nor
its performance by Sport-Haley will conflict with, violate or result in a
breach of any term, condition or provision of, nor constitute a material
default under, or result in the acceleration of any material obligation under,
or permit the termination of, any indenture, material contract or other
material agreement to which Sport-Haley is a party or by which


 


 


28





















 


Sport-Haley or its
properties is subject or bound; nor will such execution, delivery or
performance by Sport-Haley result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of its properties or conflict with or
violate the provisions of any judgment, decree, order to which Sport-Haley is
subject or its Articles of Incorporation or Bylaws or, to the best of its
knowledge, any law or regulation.


 


e.     No consent, approval or authorization of,
or designation, declaration or filing with, any governmental authority on the
part of Sport-Haley is required in connection with the valid execution and
delivery of this Agreement or the consummation of any transaction contemplated
by this Agreement.


 


f.      No representation or warranty of
Sport-Haley nor any exhibit, document, statement, certificate or schedule
furnished to Sport-Haley pursuant hereto or in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact, or omits
to state a material fact necessary to make statements or facts contained
therein not misleading in light of the circumstances under which they were
made.


 


ARTICLE 12


Miscellaneous


 


                Section 12.1
Callaway Approvals. The manufacture, sales and marketing of
Top-FliteÔ Apparel
contemplated by the Company are subject to Sport-Haley’s rights under the
License Agreement and subject to obtaining Callaway’s express written approval
of all matters required to be approved by Callaway pursuant to the License Agreement.
A non-exhaustive list of those matters requiring Callaway approval pursuant to
the License Agreement, as amended, is set forth in Exhibit B. The
parties acknowledge and agree that this Agreement shall be subject to the terms
set forth in the Indication of Consent given by Callaway, as amended, which is
set forth in Exhibit C and is incorporated herein by this reference.


 


                Section 12.2
Wal-Mart Approvals. With respect to the Wal-Mart Sales contemplated
under this Agreement, the Members shall use their best efforts to obtain the
necessary approvals of Wal-Mart for Sport-Haley, if necessary, and of the
Company, including submitting to Wal-Mart a vendor application.


 


                Section 12.3
Acknowledgment of Risk of Potential Sale or Assignment. Explorer
Gear acknowledges that Sport-Haley has explored, and continues to explore,
certain strategic alternatives, including the sale of a substantial portion or
all of its stock or assets, which would likely entail a Change of Control of
Sport-Haley and/or assignment of the License Agreement (subject to Callaway
consent) to an Entity other than Explorer Gear or its Affiliates. Current
management of Sport-Haley does not know, and can give no assurances to Explorer
Gear, whether such a sale or Change of Control would have an adverse effect on
the Company’s continued ability to operate, particularly as to sale of
Top-FliteÔ Apparel.


 


                Section 12.4
Percentage Interests Subject to Change. If, within 120 days from the
Effective Date of this Agreement, Explorer Gear does not complete and close
upon a Sport-Haley/Explorer Gear Acquisition, then the Percentage Interest of
the parties, as reflected in Exhibit A, shall be changed as follows,
notwithstanding the amount of cash initially contributed by each Member:
Sport-Haley, 51% and Explorer Gear, 49%.


 


                Section 12.5
Sales Subject to Completion of Due Diligence. Explorer Gear
acknowledges and agrees that because of Explorer Gear’s representations to
Sport-Haley concerning the urgency and need to quickly consummate this
Agreement in order for the Company to receive an order from Wal-Mart for
certain


 


 


29





















 


Wal-Mart Sales, Sport-Haley has been unable
to complete its due diligence review of Explorer Gear and matters pertaining to
the proposed business of the Company prior to the execution of this Agreement. Accordingly,
Explorer Gear agrees and understands that while the Company may receive an
order from Wal-Mart pertaining to certain Wal-Mart Sales prior to Sport-Haley’s
completion of due diligence, no Top-FliteÔ Apparel will be
manufactured, delivered or sold to Wal-Mart until Sport-Haley’s completion of
due diligence to its satisfaction. Sport-Haley agrees to conduct such due
diligence in good faith and to conclude such investigation no later than
fifteen business days after this Agreement is fully executed by both parties. If
the due diligence review discloses matters that are material and unsatisfactory
to Sport-Haley, if such matters cannot be reasonably rectified by Explorer Gear
within 10 days, Sport-Haley shall be entitled, in addition to other remedies
available under this Agreement and under applicable law, to terminate this
Agreement and the Company shall terminate and cancel any orders from Wal-Mart.


 


                Section 12.6
Inventories. Unless approved by the Management Committee, no on-hand
inventories of the Top-FliteÔ Apparel and Other Branded
Apparel subject to this Agreement shall be maintained at Sport-Haley’s
warehouse. Rather, the Members intend that inventories will be purchased only after
a sales contract for such apparel has been entered into by the Company and the
customer. The inventory subject to such sales contracts shall be maintained at
Sport-Haley’s warehouse for such time as necessary to repackage (if necessary)
and ship the units to the customer.


 


                Section 12.7
Performance Security. The Members shall each furnish a performance
bond or letter of credit, in such amounts to be determined by the Management
Committee, to provide security to the Company for their respective faithful
performance of their obligations under this Agreement.


 


                Section 12.8
Arbitration of Disputes. Except for breaches of the provisions of
Article 10, the Members agree that any controversy, claim or dispute arising
out of or relating to this Agreement or the breach, termination, enforcement,
interpretation or validity thereof, or arising out of the Company’s business,
including the determination of the scope or applicability of this agreement to
arbitrate (a “Dispute”), shall be determined by binding arbitration in Denver,
Colorado before a sole arbitrator, in accordance with the laws of the State of
Colorado for agreements made in and to be performed in Colorado. The
arbitration shall be conducted by the American Arbitration Association (“AAA”)
or other arbitration tribunal to which the parties agree, or by the AAA if the
parties cannot agree on another tribunal, and regardless of the forum, pursuant
to the AAA Commercial Arbitration Rules and, if applicable, Supplementary
Procedures for Large, Complex Disputes. The arbitrator shall, in the Award,
allocate all costs of the arbitration, including the fees of the arbitrator and
the reasonable costs and attorneys’ fees of the prevailing party, against the
party who did not prevail. Judgment on the Award may be entered in any court
having jurisdiction. The parties hereby irrevocably consent that the state and
federal courts located in the City and County of Denver, Colorado shall have
both subject matter and personal jurisdiction to enter such Award and to compel
arbitration.


 


                Section 12.9
Complete Agreement. This Agreement (including Exhibit C attached and
incorporated herein) and the Articles constitute the complete and exclusive
statement of agreement among the Members with respect to the subject matter
hereof. This Agreement and the Articles replace and supersede all prior
agreements by and among the Members or any of them. This Agreement and the
Articles supersede all prior written and oral statements and no representation,
statement, or condition or warranty not contained in this Agreement or the
Articles will be binding on the Members or have any force or effect whatsoever.


 


                Section 12.10
Governing Law. This Agreement and the rights of the parties
hereunder will be governed by, interpreted, and enforced in accordance with the
laws of the State of Colorado.


 


 


30





















 


                Section 12.11
Binding Effect. Subject to the provisions of this Agreement relating
to transferability, this Agreement will be binding upon and inure to the
benefit of the Members, and their respective distributees, successors and
assigns.


 


                Section 12.12
Terms. Common nouns and pronouns will be deemed to refer to the
masculine, feminine, neuter, singular and plural, as the identity of the person
or persons, firm or corporation may in the context require. Any reference to
the Code, the Act or other statutes or laws will include all amendments,
modifications, or replacements of the specific sections and provisions
concerned.


 


                Section 12.13
Headings. All headings herein are inserted only for convenience and
ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.


 


                Section 12.14
Severability. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under the present or future laws effective during the
term of this Agreement, such provision will be fully severable; this Agreement
will be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part of this Agreement; and the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal, invalid,
or unenforceable provision, there will be added automatically as a part of this
Agreement a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be legal, valid, and enforceable.


 


                Section 12.15
Multiple Counterparts. This Agreement may be executed in several
counterparts, each of which will be deemed an original but all of which will
constitute one and the same instrument.


 


                Section 12.16
Additional Documents and Acts. Each Member agrees to execute and
deliver such additional documents and instruments and to perform such
additional acts as may be necessary or appropriate to effectuate, carry out and
perform all of the terms, provisions, and conditions of this Agreement and the
transactions contemplated hereby.


 


                Section 12.17
No Third Party Beneficiary. This Agreement is made solely and
specifically among and for the benefit of the parties hereto, and their
respective successors and assigns subject to the express provisions hereof
relating to successors and assigns, and no other person will have any rights,
interest, or claims hereunder or be entitled to any benefits under or on
account of this Agreement as a third party beneficiary or otherwise.


 


                Section 12.18
References to this Agreement. Numbered or lettered articles,
sections and subsections herein contained refer to articles, sections and
subsections of this Agreement unless otherwise expressly stated.


 


                Section 12.19
Notices. Any notice to be given or to be served upon the Company or
any party hereto in connection with this Agreement must be in writing and will
be deemed to have been given and received when delivered to the address
specified by the party to receive the notice. Such notices will be given to a
Member at the address specified in Exhibit A hereto. Any Member or the
Company may, at any time by giving notice to the other Members and the Company
in the manner prescribed herein, designate any other address in substitution of
the foregoing address to which such notice will be given.


 


                Section 12.20
Amendments. All amendments to this Agreement will be in writing and
signed by all the Members.


 


 


31





















 


                IN
WITNESS WHEREOF, the undersigned Members of the Company have executed this
Agreement on the date set forth below, to be effective as of the Effective Date
above.


 


	
   

  	
  Reserve Apparel Group,
  LLC,

  	
   

  
	
   

  	
  a Colorado limited
  liability company

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: Sport-Haley, Inc.,
  Member

  
	
   

  	
   

  	
   

  
	
  Date: Nov. 3, 2005

  	
  By:

  	
  /s/ Donald W. Jewell

  
	
   

  	
   

  	
  Donald W. Jewell, Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  By: Explorer Gear USA,
  Inc., Member

  
	
   

  	
   

  	
   

  
	
  Date: October 19, 2005

  	
  By:

  	
  /s/ Gerard Lee

  
	
   

  	
   

  	
  Gerard Lee

  	
   

  
	
   

  	
   

  	
  Its: 

  	
  CEO/President

  	
   

  
	
   

  	
   

  	
   

  	
  Title

  
						



 


 


32





















 


EXHIBIT
A


 


	
   

  	
   

  	
   

  	
   

  	
  Percentage

  
	
  Member

  	
   

  	
  Capital Contribution

  	
   

  	
  Interest

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sport-Haley,
  Inc.

  	
   

  	
  $25,000 cash

  	
   

  	
  50%

  
	
  4600
  E. 48th Avenue

  	
   

  	
   

  	
   

  	
   

  
	
  Denver,
  CO 80216

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Explorer
  Gear USA, Inc.

  	
   

  	
  $25,00 cash

  	
   

  	
  50%

  
	
  19418 Donora Avenue

  	
   

  	
   

  	
   

  	
   

  
	
  Torrance, CA 90503

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  



 


 





















 


EXHIBIT
B


Matters
Requiring Approval of Callaway Pursuant to License Agreement


 


 





















 


Exhibit
C


Callaway
Golf Company Indication of Consent