Document:

Exhibit 10.4

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT
AGREEMENT, effective December 20, 2004, by and between SPORT-HALEY, INC., a
Colorado corporation (the “Company”) and George E. Tomlinson (the “Employee”).

 

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

 

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

 

ARTICLE I

 

EMPLOYMENT DUTIES AND BENEFITS

 

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

 

Section 1.2  Duties and Responsibilities. The Employee shall hold the position with
the Company which is specified on Schedule 1, which is attached hereto and
incorporated herein by reference.  The
Employee is employed pursuant to the terms of this Agreement and agrees to
devote full-time to the business of the Company. The Employee shall perform the
duties set forth on Schedule 1 while employed as an Employee, and such further
duties as may be determined and assigned to him from time-to-time by the Chief
Executive Officer and/or the Board of Directors of the Company. The Employee
shall at all times perform, faithfully, industriously, and to the best of the
Employee’s ability, experience, and talent, all duties that may be required of
the employee pursuant to the express and implicit terms of this Agreement, to
the reasonable satisfaction of the Company. In spite of anything in this
agreement to the contrary, it is expressly understood and agreed that the
Employee shall not have the authority to enter into any contracts or
commitments on behalf of the Company, except for commitments to established
sales customers in the ordinary course of business, without the written consent
of the Chief Executive Officer of the Company.

 

Section 1.3  Working Facilities. The Employee shall be furnished with
facilities and services suitable to the position and adequate for the
performance of the Employee’s duties under this Agreement.

 

Section 1.4  Vacations. The Employee shall be entitled each year to
a reasonable vacation of not less than three weeks in accordance with the
established practices of the Company now or hereafter in effect for Employee
personnel, during which time the Employee’s compensation shall be paid in full.

 

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Section 1.5  Expenses. The Employee may incur reasonable expenses
for promoting the domestic and international business of the Company in all
respects, including expenses for entertainment, travel and similar items,
provided that such expenses do not exceed the budgets established by the
Company for such items. The Company will reimburse the Employee for all such
expenses upon the presentation by the Employee, from time-to-time, of an
itemized account of such expenditures.

 

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

 

ARTICLE II

 

COMPENSATION

 

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

 

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

 

ARTICLE
III

 

TERM OF EMPLOYMENT AND TERMINATION

 

Section 3.1  Term. This Agreement shall be for a term which is
specified on Schedule 1, commencing on its effective date, subject, however, to
termination during such period as provided in this Article.  Provided that the Employee is in compliance
with all of his obligations hereunder, at the expiration of the initial term,
unless either the Company or the Employee shall, at least 90 days prior to the
expiration of the initial term or of any renewal term, give written notice of
the intention not to renew this Agreement, this Agreement will be extended for
a renewed term of one year, on the same terms and conditions as contained in
this Agreement. If the Company gives such written notice of non-renewal, the

 

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provisions of Section 3.3 shall apply; if the
Employee gives such written notice of non-renewal, the provisions of Section
3.5 shall apply. Renewed terms shall be effective in subsequent years on the
same day of the same month as the original effective day and month of this
Agreement.

 

Section 3.2  Termination by the Company With Cause. The Company may terminate the Employee, at
any time, upon ten days’ written notice and opportunity for Employee to remedy
any non-compliance with the terms of this Agreement (if such non-compliance is
capable of being remedied; if not, the Company’s notice of termination shall be
effective immediately), for Cause. In such event, the Board of Directors shall
provide in writing to the Employee an opinion of the Board of Directors, signed
by each member voting in favor of termination of the Employee, which shall
specify with particularity the basis for such termination. Upon the date of
such termination, the Company’s obligation to pay compensation and benefits
shall terminate, at which time the Company shall be responsible for
compensating the Employee for any vacation time not taken. Subject to this
exception and the obligation of the Company to compensate the Employee through
the notice period, no other compensation shall be payable to the Employee
should this Agreement be terminated pursuant to this Section 3.2.

 

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

 

Section 3.3  Termination by the Company Without Cause. The Company may terminate the Employee’s
services without cause at any time upon 90 days’ written notice.  In such event, in addition to compensating
the Employee during such 90-day notice period, the Company shall be obligated
to compensate the Employee with severance pay equal to six additional months’
compensation as of the date of such termination. Accordingly, in the event the
Company terminates this Agreement without cause or chooses not to renew this
Agreement upon its expiration, the Employee shall receive an aggregate of nine
months’ salary from and after the date of the Employee’s receipt of a notice of
termination through and including the date of termination.

 

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Section 3.4  Termination by the Employee With Cause. The Employee may terminate his employment
with the Company at any time, upon ten days’ written notice and opportunity for
the Company to remedy any non-compliance, by reason of (i) the Company’s
material failure to perform its duties pursuant to this Agreement, or (ii) any
material diminishment in the duties and responsibilities, working facilities,
or benefits as described in Article I of this Agreement. The Employee shall not
be entitled to the severance compensation and other benefits described in
Section 3.7 below in the event of termination of this Agreement pursuant to
this Section 3.4, except as otherwise provided in Section 3.7(a), but shall be
entitled to the compensation provided in Section 3.3 upon a determination that
the Company has failed to perform its duties pursuant to this Agreement and
that such failure is material or a determination that the duties and
responsibilities, working facilities, or benefits as described herein have been
materially diminished. Such determination shall be made by the Board of
Directors in their best good faith.

 

Section 3.5  Termination by the Employee Without Cause. The Employee, without cause, may terminate
this Agreement upon 90 days’ written notice to the Company.  In such event, the Employee shall not be
required to render the services required under this Agreement following such
90-day period.  Compensation for vacation
time not taken by the Employee shall be paid to the Employee at the date of
termination. The Employee shall not be entitled to the severance compensation
and other benefits described in Section 3.7 below in the event of termination
of this Agreement pursuant to this Section 3.5, except as described in Section
3.7(a), and shall not be entitled to the compensation provided in Section 3.3.

 

Section 3.6  Termination upon Death of the Employee. In addition to any other provision relating
to termination, this Agreement shall terminate upon the Employee’s death.  In such event, all unpaid compensation and
bonuses, compensation for vacation time not taken by the Employee and all
expense reimbursements due to the Employee shall be paid to the Employee’s
estate.

 

Section 3.7  Severance Compensation and Continuation of
Benefits.

 

(a)
Notwithstanding any other provisions hereof, in the event of a non-negotiated
change in control of the Company and either the Employee or the Company
terminate this Agreement within 60 days of such non-negotiated change in
control, the Employee shall receive severance compensation, payable in a lump
sum within 30 days of such non-negotiated change in control, equal to three
times his annual salary and incentive or bonus payments, if any, as shall have
been paid to the Employee during the most recent 12-month period concluded
prior to the date of his termination or resignation. If the total

 

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amount of the non-negotiated change of
control compensation were to exceed three times the Employee’s base compensation
(the average annual taxable compensation of the Employee for the five years
preceding the year in which the change of control occurs), the Company and the
Employee will reduce the lump sum compensation to be received by the Employee
in order to avoid the imposition of the golden parachute tax as provided in the
Tax Reform Act of 1984, as amended by the Tax Reform Act of 1986. The foregoing
provisions shall not apply in the event of a negotiated change in control of
the Company.

 

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

 

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

 

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

 

Section 3.8  Options. In the event of a non-negotiated change in
control of the Company and either the Employee or the Company terminate this
Agreement within 60 days of such non-negotiated change in control as provided
in Section 3.7(a) of this Agreement, any and all options granted to the
Employee to purchase Common Stock of the Company shall become fully vested and
exercisable on the date of termination of this Agreement. In the event of
termination or non-renewal by either party without cause in

 

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accordance with Sections 3.3 or 3.5 of this
Agreement, any and all options granted to the Employee to purchase Common Stock
of the Company will vest and become exercisable on a pro-rated basis from the
date of grant to the date of termination of this Agreement based on the number
of months during which this Agreement has been in effect from the date of grant
and the Company’s established thirty six month vesting period. For example,
options granted to purchase 20,000 shares on the effective date of this
Agreement would become vested and exercisable at a rate of 555.55 shares per
month for each month during which this Agreement is in effect. In the event
this Agreement is terminated by the Company for cause, options will vest and be
exercisable pursuant to the terms of the applicable Stock Option Plan or any
successor plan under which such options are granted (the “Plan”) regarding
termination of employment for cause. This provision shall serve as a
contractual modification of any option grants or agreements between the
Employee and the Company and is hereby incorporated by reference into each such
option grant or agreement.

 

ARTICLE IV

 

CONFIDENTIALITY AND COMPETITION

 

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

 

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

 

(b)
The Employee realizes that during the course of his employment, the Employee
will have produced and/or have access to confidential business plans,
information, business opportunity records, notebooks, data, formula,
specifications, trade secrets, customer lists, account lists and inventions of
the Company and its affiliates. Therefore, during or subsequent to his
employment by the Company, or by an affiliate, the Employee agrees to hold in
confidence and not to directly or indirectly disclose or use or copy or make
lists of any such information, except to the extent authorized by the Company
in writing. All records, files, business plans, documents, equipment and the
like, or copies thereof, relating to Company’s business, or the business of an
affiliated company, which the Employee shall prepare, or use, or come into
contact with, shall remain the sole property of the Company, or of an
affiliated company, and shall not be removed from the Company’s or the
affiliated company’s premises without its written consent, and shall be
promptly returned to the Company upon termination or resignation of employment
with the Company or its affiliated companies.

 

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(c)
Because of his employment by the Company, the Employee will have access to
trade secrets and confidential information about the Company, its business plans,
its business accounts, its business opportunities, its expansion plans into
other geographic areas and its methods of doing business. The Employee agrees
that for a period of nine months after termination or resignation of his
employment (except if the Employee terminates this Agreement for cause under
Section 3.4 hereof or without cause under Section 3.5 hereof), he will not,
directly or indirectly, compete with the Company or its affiliates in the
business of designing, merchandising, marketing or contracting for the
manufacture of men’s and women’s golf apparel and golf outerwear within the
United States. This non-compete agreement shall be void and of no further force
or effect in the event termination occurs under Section 3.3 or Section 3.7
hereof and the Company fails to pay the Employee amounts required under Section
3.3 or Section 3.7 hereof.

 

(d)
In the event a court of competent jurisdiction finds any provision of this
Section 4.1 to be so overly broad as to be unenforceable, then such provision
shall be reduced in scope by the court, but only to the extent deemed necessary
by the court to render the provision reasonable and enforceable, it being the
Employee’s intention to provide the Company with the broadest protection
possible against harmful competition.

 

ARTICLE V

 

DISABILITY AND ILLNESS

 

Section 5.1  Disability and Salary Continuation.

 

(a)
Definition of Total Disability. 
For purposes of this Agreement, the terms “totally disabled” and “total
disability” shall mean disability as defined in any total disability insurance
policy or policies, if any, in effect with respect to the Employee. If no
insurance policy is in effect, “total disability” shall mean a medically
determinable physical or mental condition which in the opinion of two independent
physicians renders the Employee unable to perform substantially all of the
duties required pursuant to this Agreement. Total disability shall be deemed to
have occurred on the date of the disabling injury or onset of the disabling
illness, as determined by the two independent physicians.

 

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

 

Section 5.2  Illness. If the Employee is unable to perform the
services required under this Agreement by reason of illness or physical injury
not amounting to total disability, as defined in this

 

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Article, the compensation otherwise payable
to the Employee under this Agreement shall be continued in full for the
remaining term or renewed term of this Agreement, but in no event for a period
exceeding one year.

 

ARTICLE VI

 

GENERAL MATTERS

 

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

 

Section 6.2  No Waiver. No provision of this Agreement may be waived
except by an agreement in writing signed by the waiving party.  A waiver of any term or provision shall not
be construed as a waiver of any other term or provision.

 

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

 

Section 6.4  Benefit. This Agreement shall be binding upon the
Employee and the Company, and shall not be assignable by the Company without
the Employee’s written consent.

 

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

 

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

 

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

 

Section 6.8  Authority. The officer executing this Agreement on
behalf of the Company has been empowered and directed to do so by the Board of
Directors and Compensation Committee of the Company.

 

Section 6.9  Effective Date. The effective date of this Agreement shall
be December 20, 2004.

 

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  SPORT-HALEY,
  INC.

  	
  Employee:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:
  

  	
  /s/
  Donald W. Jewell

  	
   

  	
  /s/
  George E. Tomlinson

  	
   

  
	
   

  	
  Donald
  W. Jewell,

  	
  George
  E. Tomlinson

  
	
   

  	
  Chief
  Executive Officer

  	
   

  
					

 

9

 

SPORT-HALEY, INC.

 

EMPLOYMENT AGREEMENT

 

Schedule 1

 

Duties and Compensation

 

	
  Employee:

  	
  George
  E. Tomlinson

  
	
   

  	
   

  
	
  Position:

  	
  Director
  - Operations and Production

  
	
   

  	
   

  
	
  Base
  Salary:

  	
  $95,000
  per year, payable bi-weekly

  
	
   

  	
   

  
	
  Bonus:

  	
  At
  the sole discretion of the Compensation Committee

  
	
   

  	
   

  
	
  Term:

  	
  December
  20, 2004 through December 19, 2005, subject to renewal terms of one (1) year
  as described in Section 3.1 of the Employment Agreement

  
	
   

  	
   

  
	
  Stock
  Options:

  	
  The
  Company’s Stock Option Plan has expired. When and if the Company creates a
  new stock option plan, the Employee may be allowed to participate in such
  plan and receive grants of options in amounts at the discretion and subject
  to approval of the Compensation Committee. Such options to purchase shares
  typically vest in increments of one-third per year and are issued with an
  exercise price of not less than 85% of the fair market value of the Company’s
  Common Stock on date of grant, such date to be determined by the Compensation
  Committee.

  
	
   

  	
   

  
	
  Duties
  and Responsibilities:

  	
  Manage,
  supervise and coordinate the Company’s warehouse, embroidery, production and
  customer service operations under the direction of the Company’s Chief
  Executive Officer.

  

 

	
  APPROVED:

  	
   

  
	
   

  	
   

  
	
  THE
  COMPANY:

  	
  Employee:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/Donald
  W. Jewell

  	
   

  	
  By:

  	
  /s/George
  E. Tomlinson

  	
   

  
	
   

  	
  Donald
  W. Jewell, Chief Executive

  	
   

  	
  George
  E. Tomlinson, Employee

  
	
   

  	
  Officer

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:
  December 20, 2004

  	
  Date:
  December 20, 2004

  
						

 

10Exhibit 10.5

 

EMPLOYMENT AGREEMENT

 

EMPLOYMENT
AGREEMENT, effective December 20, 2004, by and between SPORT-HALEY, INC., a
Colorado corporation (the “Company”) and Barry L. Hyman (the “Employee”).

 

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

 

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

 

ARTICLE I

 

EMPLOYMENT DUTIES AND BENEFITS

 

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

 

Section 1.2  Duties and Responsibilities. The Employee shall hold the position with
the Company which is specified on Schedule 1, which is attached hereto and
incorporated herein by reference.  The
Employee is employed pursuant to the terms of this Agreement and agrees to
devote full-time to the business of the Company. The Employee shall perform the
duties set forth on Schedule 1 while employed as an Employee, and such further
duties as may be determined and assigned to him from time-to-time by the Chief
Executive Officer and/or the Board of Directors of the Company. The Employee
shall at all times perform, faithfully, industriously, and to the best of the
Employee’s ability, experience, and talent, all duties that may be required of
the employee pursuant to the express and implicit terms of this Agreement, to
the reasonable satisfaction of the Company. In spite of anything in this
agreement to the contrary, it is expressly understood and agreed that the
Employee shall not have the authority to enter into any contracts or
commitments on behalf of the Company, except for commitments to established
sales customers in the ordinary course of business, without the written consent
of the Chief Executive Officer of the Company.

 

Section 1.3  Working Facilities. The Employee shall be furnished with
facilities and services suitable to the position and adequate for the
performance of the Employee’s duties under this Agreement.

 

Section 1.4  Vacations. The Employee shall be entitled each year to
a reasonable vacation of not less than two weeks in accordance with the
established practices of the Company now or hereafter in effect for Employee
personnel, during which time the Employee’s compensation shall be paid in full.

 

1

 

Section 1.5  Expenses. The Employee may incur reasonable expenses
for promoting the domestic and international business of the Company in all
respects, including expenses for entertainment, travel and similar items, provided
that such expenses do not exceed the budgets established by the Company for
such items. The Company will reimburse the Employee for all such expenses upon
the presentation by the Employee, from time-to-time, of an itemized account of
such expenditures.

 

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

 

ARTICLE II

 

COMPENSATION

 

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

 

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

 

ARTICLE III

 

TERM OF EMPLOYMENT AND TERMINATION

 

Section 3.1  Term. This Agreement shall be for a term which is
specified on Schedule 1, commencing on its effective date, subject, however, to
termination during such period as provided in this Article.  Provided that the Employee is in compliance
with all of his obligations hereunder, at the expiration of the initial term,
unless either the Company or the Employee shall, at least 90 days prior to the
expiration of the initial term or of any renewal term, give written notice of
the intention not to renew this Agreement, this Agreement will be extended for
a renewed term of one year, on the same terms and conditions as contained in
this Agreement. If the Company gives such written notice of non-renewal, the

 

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provisions of Section 3.3 shall apply; if the
Employee gives such written notice of non-renewal, the provisions of Section
3.5 shall apply. Renewed terms shall be effective in subsequent years on the
same day of the same month as the original effective day and month of this
Agreement.

 

Section 3.2  Termination by the Company With Cause. The Company may terminate the Employee, at
any time, upon ten days’ written notice and opportunity for Employee to remedy
any non-compliance with the terms of this Agreement (if such non-compliance is
capable of being remedied; if not, the Company’s notice of termination shall be
effective immediately), for Cause.  In
such event, the Board of Directors shall provide in writing to the Employee an
opinion of the Board of Directors, signed by each member voting in favor of
termination of the Employee, which shall specify with particularity the basis
for such termination. Upon the date of such termination, the Company’s
obligation to pay compensation and benefits shall terminate, at which time the
Company shall be responsible for compensating the Employee for any vacation
time not taken. Subject to this exception and the obligation of the Company to
compensate the Employee through the notice period, no other compensation shall
be payable to the Employee should this Agreement be terminated pursuant to this
Section 3.2.          

 

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

 

Section 3.3  Termination by the Company Without Cause. The Company may terminate the Employee’s
services without cause at any time upon 90 days’ written notice.  In such event, in addition to compensating
the Employee during such 90-day notice period, the Company shall be obligated
to compensate the Employee with severance pay equal to six additional months’
compensation as of the date of such termination. Accordingly, in the event the
Company terminates this Agreement without cause or chooses not to renew this
Agreement upon its expiration, the Employee shall receive an aggregate of nine
months’ salary from and after the date of the Employee’s receipt of a notice of
termination through and including the date of termination.

 

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Section 3.4  Termination by the Employee With Cause. The Employee may terminate his employment
with the Company at any time, upon ten days’ written notice and opportunity for
the Company to remedy any non-compliance, by reason of (i) the Company’s
material failure to perform its duties pursuant to this Agreement, or (ii) any
material diminishment in the duties and responsibilities, working facilities,
or benefits as described in Article I of this Agreement. The Employee shall not
be entitled to the severance compensation and other benefits described in
Section 3.7 below in the event of termination of this Agreement pursuant to
this Section 3.4, except as otherwise provided in Section 3.7(a), but shall be
entitled to the compensation provided in Section 3.3 upon a determination that
the Company has failed to perform its duties pursuant to this Agreement and
that such failure is material or a determination that the duties and
responsibilities, working facilities, or benefits as described herein have been
materially diminished. Such determination shall be made by the Board of
Directors in their best good faith.

 

Section 3.5  Termination by the Employee Without Cause. The Employee, without cause, may terminate
this Agreement upon 90 days’ written notice to the Company.  In such event, the Employee shall not be
required to render the services required under this Agreement following such
90-day period.  Compensation for vacation
time not taken by the Employee shall be paid to the Employee at the date of
termination. The Employee shall not be entitled to the severance compensation
and other benefits described in Section 3.7 below in the event of termination
of this Agreement pursuant to this Section 3.5, except as described in Section
3.7(a), and shall not be entitled to the compensation provided in Section 3.3.

 

Section 3.6  Termination upon Death of the Employee. In addition to any other provision relating
to termination, this Agreement shall terminate upon the Employee’s death. In such
event, all unpaid compensation and bonuses, compensation for vacation time not
taken by the Employee and all expense reimbursements due to the Employee shall
be paid to the Employee’s estate.

 

Section 3.7  Severance Compensation and Continuation of
Benefits.

 

(a)
Notwithstanding any other provisions hereof, in the event of a non-negotiated
change in control of the Company and either the Employee or the Company
terminate this Agreement within 60 days of such non-negotiated change in
control, the Employee shall receive severance compensation, payable in a lump
sum within 30 days of such non-negotiated change in control, equal to three
times his annual salary and incentive or bonus payments, if any, as shall have
been paid to the Employee during the most recent 12-month period concluded
prior to the date of his termination or resignation. If the total

 

4

 

amount of the non-negotiated change of
control compensation were to exceed three times the Employee’s base compensation
(the average annual taxable compensation of the Employee for the five years
preceding the year in which the change of control occurs), the Company and the
Employee will reduce the lump sum compensation to be received by the Employee
in order to avoid the imposition of the golden parachute tax as provided in the
Tax Reform Act of 1984, as amended by the Tax Reform Act of 1986. The foregoing
provisions shall not apply in the event of a negotiated change in control of
the Company.

 

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

 

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

 

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

 

Section 3.8  Options. In the event of a non-negotiated change in
control of the Company and either the Employee or the Company terminate this
Agreement within 60 days of such non-negotiated change in control as provided
in Section 3.7(a) of this Agreement, any and all options granted to the
Employee to purchase Common Stock of the Company shall become fully vested and
exercisable on the date of termination of this Agreement.  In the event of termination or non-renewal by
either party without cause 

 

5

 

in accordance with Sections 3.3 or 3.5 of
this Agreement, any and all options granted to the Employee to purchase Common
Stock of the Company will vest and become exercisable on a pro-rated basis from
the date of grant to the date of termination of this Agreement based on the
number of months during which this Agreement has been in effect from the date
of grant and the Company’s established thirty six month vesting period. For
example, options granted to purchase 20,000 shares on the effective date of
this Agreement would become vested and exercisable at a rate of 555.55 shares
per month for each month during which this Agreement is in effect.  In the event this Agreement is terminated by
the Company for cause, options will vest and be exercisable pursuant to the
terms of the applicable Stock Option Plan or any successor plan under which
such options are granted (the “Plan”) regarding termination of employment for
cause. This provision shall serve as a contractual modification of any option
grants or agreements between the Employee and the Company and is hereby
incorporated by reference into each such option grant or agreement.

 

ARTICLE IV

 

CONFIDENTIALITY AND COMPETITION

 

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

 

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

 

(b)
The Employee realizes that during the course of his employment, the Employee
will have produced and/or have access to confidential business plans,
information, business opportunity records, notebooks, data, formula,
specifications, trade secrets, customer lists, account lists and inventions of
the Company and its affiliates. Therefore, during or subsequent to his
employment by the Company, or by an affiliate, the Employee agrees to hold in
confidence and not to directly or indirectly disclose or use or copy or make
lists of any such information, except to the extent authorized by the Company in
writing. All records, files, business plans, documents, equipment and the like,
or copies thereof, relating to Company’s business, or the business of an
affiliated company, which the Employee shall prepare, or use, or come into
contact with, shall remain the sole property of the Company, or of an
affiliated company, and shall not be removed from the Company’s or the
affiliated company’s premises without its written consent, and shall be
promptly returned to the Company upon termination or resignation of employment
with the Company or its affiliated companies.

 

6

 

(c)
Because of his employment by the Company, the Employee will have access to
trade secrets and confidential information about the Company, its business
plans, its business accounts, its business opportunities, its expansion plans
into other geographic areas and its methods of doing business. The Employee
agrees that for a period of nine months after termination or resignation of his
employment (except if the Employee terminates this Agreement for cause under
Section 3.4 hereof or without cause under Section 3.5 hereof), he will not,
directly or indirectly, compete with the Company or its affiliates in the
business of designing, merchandising, marketing or contracting for the
manufacture of men’s and women’s golf apparel and golf outerwear within the
United States. This non-compete agreement shall be void and of no further force
or effect in the event termination occurs under Section 3.3 or Section 3.7
hereof and the Company fails to pay the Employee amounts required under Section
3.3 or Section 3.7 hereof.

 

(d)
In the event a court of competent jurisdiction finds any provision of this
Section 4.1 to be so overly broad as to be unenforceable, then such provision
shall be reduced in scope by the court, but only to the extent deemed necessary
by the court to render the provision reasonable and enforceable, it being the
Employee’s intention to provide the Company with the broadest protection
possible against harmful competition.

 

ARTICLE V

 

DISABILITY AND ILLNESS

 

Section 5.1  Disability and Salary Continuation.

 

(a)
Definition of Total Disability. For purposes of this Agreement, the
terms “totally disabled” and “total disability” shall mean disability as defined
in any total disability insurance policy or policies, if any, in effect with
respect to the Employee. If no insurance policy is in effect, “total disability”
shall mean a medically determinable physical or mental condition which in the
opinion of two independent physicians renders the Employee unable to perform
substantially all of the duties required pursuant to this Agreement. Total
disability shall be deemed to have occurred on the date of the disabling injury
or onset of the disabling illness, as determined by the two independent
physicians.

 

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

 

Section 5.2  Illness. If the Employee is unable to perform the
services required under this Agreement by reason of illness or physical injury
not amounting to total disability, as defined in this

 

7

 

Article, the compensation otherwise payable
to the Employee under this Agreement shall be continued in full for the
remaining term or renewed term of this Agreement, but in no event for a period
exceeding one year.

 

ARTICLE VI

 

GENERAL MATTERS

 

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

 

Section 6.2  No Waiver. No provision of this Agreement may be waived
except by an agreement in writing signed by the waiving party. A waiver of any
term or provision shall not be construed as a waiver of any other term or
provision.

 

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

 

Section 6.4  Benefit. This Agreement shall be binding upon the
Employee and the Company, and shall not be assignable by the Company without
the Employee’s written consent.

 

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

 

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

 

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

 

Section 6.8  Authority. The officer executing this Agreement on
behalf of the Company has been empowered and directed to do so by the Board of
Directors and Compensation Committee of the Company.

 

Section 6.9  Effective Date. The effective date of this Agreement shall
be December 20, 2004.

 

8

 

 

	
  SPORT-HALEY,
  INC.

  	
  Employee:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Donald W. Jewell

  	
   

  	
  /s/Barry L. Hyman

  	
   

  
	
   

  	
  Donald
  W. Jewell,

  	
  Barry
  L. Hyman

  
	
   

  	
  Chief
  Executive Officer

  	
   

  
					

 

9

 

SPORT-HALEY, INC.

 

EMPLOYMENT AGREEMENT

 

Schedule 1

 

Duties and Compensation

 

	
  Employee:

  	
   

  	
  Barry
  L. Hyman

  
	
   

  	
   

  	
   

  
	
  Position:

  	
   

  	
  Regional
  Sales Manager

  
	
   

  	
   

  	
   

  
	
  Base
  Salary:

  	
   

  	
  $95,000
  per year, payable bi-weekly, plus an override of 0.2% on the Company’s gross
  annualized sales, less discounted sales of more than 50% from original
  suggested wholesale sales price, returns and credits

  
	
   

  	
   

  	
   

  
	
  Bonus:

  	
   

  	
  At
  the sole discretion of the Compensation Committee

  
	
   

  	
   

  	
   

  
	
  Term:

  	
   

  	
  December
  20, 2004 through December 19, 2005, subject to renewal terms of one (1) year
  as described in Section 3.1 of the Employment Agreement

  
	
   

  	
   

  	
   

  
	
  Stock
  Options:

  	
   

  	
  The
  Company’s Stock Option Plan has expired. When and if the Company creates a
  new stock option plan, the Employee may be allowed to participate in such
  plan and receive grants of options in amounts at the discretion and subject
  to approval of the Compensation Committee. Such options to purchase shares
  typically vest in increments of one-third per year and are issued with an
  exercise price of not less than 85% of the fair market value of the Company’s
  Common Stock on date of grant, such date to be determined by the Compensation
  Committee.

  
	
   

  	
   

  	
   

  
	
  Duties
  and Responsibilities:

  	
   

  	
  The
  employee will use his best efforts and entire time during usual business
  hours to promote and solicit the sale of the company’s products actively and
  diligently throughout the United States and will manage and oversee the
  Company’s independent sales representatives in the Eastern United States.

  

 

 

	
  APPROVED:

  	
   

  
	
   

  	
   

  
	
  THE
  COMPANY:

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Donald W. Jewell

  	
   

  	
  By:

  	
  /s/Barry
  L. Hyman

  	
   

  
	
   

  	
  Donald
  W. Jewell, Chief Executive

  	
   

  	
  Barry
  L. Hyman

  
	
   

  	
  Officer

  	
   

  
	
   

  	
   

  
	
  Date:
  December 20, 2004

  	
  Date:
  December 20, 2004

  
						

 

10

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