<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
--- EXCHANGE ACT
COMMISSION FILE NO. 1-12888
SPORT-HALEY, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1111669
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4600 E. 48TH AVENUE, DENVER, COLORADO 80216
(Address of principal executive offices)
(303) 320-8800
(Issuer's telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days:
Yes X No
--- ---
State the number of shares outstanding in each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT FEBRUARY 9, 1999
COMMON STOCK, NO PAR VALUE 4,408,362
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS 3
CONSOLIDATED STATEMENTS OF INCOME &
COMPREHENSIVE INCOME 4
CONSOLIDATED STATEMENTS OF CASH FLOWS 5-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS 13-14
PART II - OTHER INFORMATION 15
SIGNATURES 16-17
</TABLE>
<PAGE>
SPORT-HALEY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1998
------------- -------------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,792 $ 6,502
Short-term investments and marketable securities 13 13
Accounts receivable, net of allowances of
$57,000 and $155,000, respectively 5,442 6,554
Inventories 17,399 17,893
Other current assets 1,260 1,403
------------- -------------
29,906 32,365
------------- -------------
Property and equipment 4,275 4,193
Property held under capital leases - 7
Less, accumulated depreciation (1,415) 1,455)
-------------- --------------
2,860 2,745
------------- -------------
Other assets:
Other assets 139 126
------------- -------------
$ 32,905 $ 35,236
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 201 $ 1,862
Note payable 600 500
Accrued income taxes - 318
Accrued commissions and other expenses 538 1,027
------------- -------------
1,339 3,707
Long-term liabilities:
Other - 4
------------- -------------
1,339 3,711
------------- -------------
Minority Interest (36) 60
-------------- -------------
Stockholders' equity:
Preferred stock, no par value; 1,500,000 shares
authorized; none issued and outstanding - -
Common stock, no par value;
15,000,000 shares authorized; 4,408,362 and
4,512,962 shares issued and outstanding, respectively 17,324 18,416
Additional paid in capital 728 598
Retained earnings 13,550 12,451
Accumulated other comprehensive income - -
------------- -------------
31,602 31,465
------------- -------------
Total Liabilities and Stockholders' Equity $ 32,905 $ 35,236
------------- -------------
------------- -------------
</TABLE>
Note: Taken from the audited balance sheet at that date.
3
<PAGE>
SPORT-HALEY, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
----------- ----------- ----------- ----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $ 5,640 $ 6,464 $ 13,136 $ 13,299
Cost of goods sold 3,713 4,059 8,322 8,317
----------- ----------- ----------- ----------
Gross profit 1,927 2,405 4,814 4,982
Selling, general and administrative expense 1,670 1,717 3,512 3,369
----------- ----------- ----------- ----------
Income from operations 257 688 1,302 1,613
Other income (expense):
Other income, net 112 193 231 352
----------- ----------- ----------- ----------
Income before income taxes and
minority interest 369 881 1,533 1,965
Minority interest income 85 - 98 -
Provision for income taxes 182 92 532 372
----------- ----------- ----------- ----------
Net income 272 789 1,099 1,593
----------- ----------- ----------- ----------
Other comprehensive income:
unrealized holding losses on
available for sale securities - - - (52)
----------- ----------- ----------- ----------
Comprehensive income $ 272 $ 789 $ 1,099 $ 1,541
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Basic earnings per common share $ 0.07 $ 0.17 $ 0.25 $ 0.33
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Diluted earnings per common share $ 0.07 $ 0.17 $ 0.25 $ 0.33
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
</TABLE>
4
<PAGE>
SPORT-HALEY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
1998 1997
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,099 $ 1,541
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 289 274
Amortization of investment premium - 26
Deferred taxes, net 8 -
Allowance for doubtful accounts 30 (11)
Stock option compensation 131 155
Realized loss on investment - 52
Cash provided (used) due to changes in assets and liabilities:
Short-term investments to maturity - 1,319
Accounts receivable 1,112 719
Inventory 494 (4,162)
Other current assets 133 (150)
Accounts payable (1,660) (366)
Accrued commissions and other expenses (489) 1,258
Accrued income taxes (317) -
Other liabilities (4) -
Minority interest (98) -
------------- -------------
Net cash provided by operating activities 728 655
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advance on note payable 100 -
Principal payments on capital lease obligation - (1)
Net proceeds from issuance of common stock 46 395
Repurchase of common stock (1,138) (2,488)
-------------- -------------
Net cash provided by financing activities $ (992) $ (2,094)
-------------- --------------
</TABLE>
5
<PAGE>
SPORT-HALEY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
1998 1997
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets $ (491) $ (311)
Disposal of assets 45 77
------------- -------------
Net cash used by investing activities (446) (234)
-------------- --------------
Net increase (decrease) in cash (710) (1,673)
CASH AND CASH EQUIVALENTS, BEGINNING 6,502 10,273
------------- -------------
CASH AND CASH EQUIVALENTS, ENDING $ 5,792 $ 8,600
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 694 $ 466
------------- -------------
------------- -------------
Interest $ 22 $ -
------------- -------------
------------- -------------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:
At December 31, 1997, the Company has unrealized holding losses on marketable
securities of approximately $181,000 of which $52,000 has been charged off in
the Company's statement of income at December 31, 1997.
6
<PAGE>
SPORT-HALEY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been
prepared by Sport-Haley, Inc. (the "Company") without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted as allowed by such
rules and regulations. The Company believes that the disclosures
are adequate to make the information presented not misleading.
It is suggested that these financial statements be read in
conjunction with the Company's annual consolidated financial
statements dated June 30, 1998. While management believes the
procedures followed in preparing these financial statements are
reasonable, the accuracy of the amounts are, in some respects,
dependent upon the facts that will exist, and procedures that
will be accomplished by the Company later in the year.
The management of the Company believes that the accompanying
unaudited condensed consolidated financial statements prepared
in conformity with generally accepted accounting principles,
which require the use of management estimates, contain all
adjustments (including normal recurring adjustments) necessary
to present fairly the operations and cash flows for the period
presented.
NOTE 2 INVENTORIES
Inventories at December 31, 1998 consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Raw materials $ 5,856,851
Finished goods 11,542,073
-------------
$ 17,398,924
-------------
-------------
</TABLE>
NOTE 3 INCOME TAXES
The components of the deferred tax asset and net deferred tax
liability recognized in the accompanying balance sheet as of
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Current Long-Term
------- ----------
<S> <C> <C>
Deferred tax (liability) $ - $ -
Deferred tax asset 108,342 14,142
------------- -------------
$ 108,342 $ 14,142
------------- -------------
------------- -------------
</TABLE>
7
<PAGE>
SPORT-HALEY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 INCOME TAXES (Continued)
The types of temporary differences between the tax bases of
assets and liabilities and the financial reporting amounts that
give rise to a significant portion of the deferred tax liability
and their appropriate tax effects at December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
Tax Effect
Difference Current Long-Term
---------- ------- ---------
<S> <C> <C> <C>
Loss on stock $ 221,153 $ 86,200 $ -
Allowance for doubtful accounts 56,774 22,142 -
Stock option compensation 525,918 - 205,109
Accumulated depreciation 489,660 - (190,967)
---------- -----------
$ 108,342 $ 14,142
---------- -----------
---------- -----------
</TABLE>
The components of income tax expenses are as follows:
<TABLE>
<CAPTION>
<S> <C>
Current:
Federal $ 466,600
State 73,800
-----------
540,400
-----------
Deferred:
Federal (6,817)
State (1,078)
-----------
(7,895)
-----------
$ 532,505
-----------
-----------
</TABLE>
NOTE 4 REPURCHASE OF COMMON STOCK
The repurchase of the Company's common stock is based upon the
Board of Director's belief the Company's common stock is under
priced given its earnings and prospects for future operations.
The shares may be purchased from time to time in open market
transactions at prevailing market prices. The Company has no
commitment or obligation to purchase all or any portion of the
shares. All shares purchased by the Company are canceled and
returned to the status of authorized but unissued common stock.
8
<PAGE>
SPORT-HALEY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 REPURCHASE OF COMMON STOCK (continued)
During December 1994, the Company's Board of Directors
authorized the repurchase of up to 150,000 shares of the
Company's issued and outstanding common stock. Additionally the
Board of Directors authorized increases of 150,000 common shares
during October 1996 and 1997, respectively, that may be
purchased, thus bringing the total common shares authorized for
repurchase under the plan to 450,000 shares. During September
1998, the Company's Board of Directors authorized another
increase of an additional 400,000 common shares that the Company
may repurchase thus bringing the total common shares authorized
for repurchase to 850,000. Through December 31, 1998, the
Company had repurchased a total of 572,000 shares of its common
stock at a cost of approximately $5.8 million.
NOTE 5 COMMON STOCK OPTIONS
At December 31, 1998, the Company had outstanding options to
purchase 436,099 shares of common stock at prices ranging from
$2.50 to $12.75, with expiration dates between March 15, 2002
and August 10, 2008. During the three months ended December 31,
1998, option holders exercised and purchased 5,108 shares of the
Company's common stock. The Company realized gross proceeds of
approximately $29,000.
During October 1998, the Compensation Committee of the Board of
Directors authorized the re-pricing of certain stock options,
previously granted under the Company's stock option plan, that
were deemed to be "out of the money" based upon the prevailing
quoted market prices of the Company's common stock.
Included in the Company's six months net income is a charge of
approximately $131,000 which is a result of applying Statement
of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK
BASED COMPENSATION.
9
<PAGE>
SPORT-HALEY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 EARNINGS PER SHARE
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 128, EARNINGS PER SHARE, (SFAS No. 128)
effective with the year ended June 30, 1998. SFAS No. 128
requires the presentation of basic and diluted net income per
common share. The following table provides a reconciliation of
the numerator and denominator of basic and diluted net income
per common share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1998
--------------------------------------
Net
Income Shares Per Share
------ ------ ---------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income available
to common shareholders $ 271,000 4,425,208 $ 0.07
--------
--------
Effect of Dilutive Securities
Warrants -
Options, net of future tax benefit -
---------- ---------
DILUTED EARNINGS PER SHARE $ 271,000 4,425,208 $ 0.07
---------- --------- --------
---------- --------- --------
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1998
---------------------------------------
Net
Income Shares Per Share
------ ------ ---------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income available
to common shareholders $1,099,000 4,463,597 $ 0.25
---------- --------- --------
Effect of Dilutive Securities
Warrants -
Options, net of future tax benefit -
---------- ---------
DILUTED EARNINGS PER SHARE $1,099,000 4,463,577 $ 0.25
---------- --------- --------
---------- --------- --------
</TABLE>
10
<PAGE>
SPORT-HALEY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 EARNINGS PER SHARE (continued)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1997
--------------------------------------
Net
Income Shares Per Share
------ ------ ---------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income available
to common shareholders $ 789,000 4,600,992 $ 0.17
--------
--------
Effect of Dilutive Securities
Warrants 17,242
Options, net of future tax benefit 42,615
---------- ---------
DILUTED EARNINGS PER SHARE $ 789,000 4,660,849 $ 0.17
---------- --------- --------
---------- --------- --------
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1997
---------------------------------------
Net
Income Shares Per Share
------ ------ ---------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income available
to common shareholders $1,541,000 4,630,563 $ 0.33
--------
--------
Effect of Dilutive Securities
Warrants 17,242
Options, net of future tax benefit 42,615
---------- ---------
DILUTED EARNINGS PER SHARE $1,541,000 4,690,420 $ 0.33
---------- --------- ---------
---------- --------- ---------
</TABLE>
NOTE 7 YEAR 2000 ISSUE
The Company is cognizant of the issues associated with the
programming code in existing computer systems as the year 2000
approaches. The "Year 2000" problem is pervasive and complex, as
virtually every computer operation will be affected in some way.
Many currently installed computer systems and software products
are coded to accept only two-digit entries in the date field.
These date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. Systems
not able to recognize the date correctly could generate
erroneous data or fail.
11
<PAGE>
SPORT-HALEY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 YEAR 2000 ISSUE (continued)
As a result, in slightly over one year computer systems and/or
software used by the Company will need to be tested and
upgraded, if necessary, to comply with such Year 2000
requirements. The Company continues to address this issue to
ensure the availability and integrity of its financial systems
and the reliability of its operational systems and is presently
evaluating and upgrading its software and hardware, so that its
computer systems will function properly with respect to Year
2000 and beyond. The costs associated with the Company's Year
2000 initiative are charged to expense as incurred and are not
material to its financial position and results of operations.
The Company has initiated discussions with significant suppliers
and financial institutions with whom the Company has a
relationship, to ensure those parties have appropriate plans to
remediate Year 2000 issues particularly where their systems
interface with the Company's systems or otherwise impact its
operations. The Company is assessing the extent to which its
operations are vulnerable, should those organizations fail to
properly remediate their computer systems.
12
<PAGE>
SPORT-HALEY, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's financial position improved marginally as a result of ongoing
profitability. The Company intends to rely on cash generated from operations and
investments to finance its working capital requirements for at least the next 12
months. To the extent such amounts are insufficient to finance the Company's
working capital requirements, the Company may also make periodic borrowings
under its revolving line of credit.
During the six months ended December 31, 1998, current assets and current
liabilities decreased by approximately $2.5 million and $2.4 million,
respectively. The decreases are primarily attributable to the use of current
assets to reduce current liabilities.
For the six months ended December 31, 1998, the Company spent approximately
$491,000 for property and equipment. These expenditures were for office
furniture and equipment.
The Company received proceeds of approximately $46,000 from the exercise of
stock options during the six months ended December 31, 1998. Stockholders'
equity increased by approximately $137,000 for the six month period. Net income
increased stockholders' equity by approximately $1.1 million while the Company
expended approximately $1.1 million to repurchase 112,000 shares of its common
stock.
RESULTS OF OPERATIONS
The Company's business is seasonal in nature, and therefore the results for any
one or more quarters are not necessarily indicative of the annual results or
continuing trends.
Net sales for the quarter ended December 31, 1998, were approximately $5.6
million, a decrease of approximately $824,000, or 13%, from net sales of $6.5
million for the same quarter in the prior fiscal year. Net sales for the six
months ended December 31, 1998 were $13.1 million. This is a decrease of
$163,000 or 1%, over the same six month period of the prior fiscal year.
Management attributes the decrease in net sales for the quarter ended December
31, 1998 to slower sales to golf professional shops, many of which had larger
spring inventories remaining from prior purchases than in past years.
The Company's gross profit declined approximately $478,000 and $168,000 for the
three months and the six months ended December 31, 1998. Gross profit as a
percentage of sales declined to 34% from 37% for the quarter ended December 31,
1998, and remained at 37% for the six month periods ended December 31, 1998 and
1997.
13
<PAGE>
SPORT-HALEY, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (Continued)
Selling, general and administrative expenses decreased by approximately
$47,000 or 3% for the quarter ended December 31, 1998, from $1.7 million for
the same quarter in the prior fiscal year. For the six months ended December
31, 1998, these costs increased by approximately $143,000, or 4% from $3.4
million in the same six month period in the prior fiscal year. The decrease
for the quarter ended December 31, 1998 reflects the efforts of the Company
to reduce the costs associated with selling, general and administrative
expenses. The increase for this six months can mainly be attributed to costs
incurred related to the corporate sales program, less the reduced costs
savings effect.
Other income decreased by approximately $81,000 and $121,000 for the three
months and the six months ended December 31, 1998 as compared to the same
quarter in the prior fiscal year. The decrease can be attributed to lower cash
balances available for investing, resulting in lower interest income. The lower
cash balances were the result of the Company's repurchase of its common stock on
the open market.
Income before provision for income taxes and minority interest decreased by
approximately $512,000, or 58%, for the quarter ended December 31, 1998, from
$881,000 for the same quarter in the prior fiscal year. Income before provisions
for income taxes decreased by approximately $432,000 or 22% for the six months
ended December 31, 1998, from $2.0 million in the same period in the prior
fiscal year.
The Company's effective tax rates for the quarters ended December 31, 1998 and
December 31, 1997 were approximately 40% and 10%, respectively. The effective
tax rates for the six month periods ended December 31, 1998 and 1997, were 33%
and 19%, respectively. The significant increase in the effective rate for the
current fiscal periods are primarily due to the reduction in certain stock
option tax deductions net of FASB 123-Accounting for Stock Based Compensation
book deductions.
Net income was $272,000 and $1.1 million for the three month and the six month
periods ended December 31, 1998. This represents a decrease of approximately
$517,000 or 66% and $442,000 or 29%, respectively, when compared to the same
three and six month periods in the prior fiscal year.
Earnings for the December 1998 fiscal quarter were effected by costs incurred
for the Company's new corporate sales program, less interest income, and a
higher effective tax rate.
The basic and diluted earnings per share were $.07 for the quarter ended
December 31, 1998. This compares to basic and diluted earnings per share of $.17
for the same quarter in the prior fiscal year. The six month basic and diluted
earnings per share at December 31, 1998 were $.25. This compares to basic and
diluted earnings per share of $.33 per share for the same six month period in
the prior fiscal year.
14
<PAGE>
SPORT-HALEY, INC.
PART II
OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS - None
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS- NONE
ITEM 3 DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4 SUBMISSION TO MATTERS TO A VOTE OF SECURITY HOLDERS - NONE
ITEM 5 OTHER INFORMATION - NONE
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
10.3.2 BUSINESS LOAN AGREEMENT, dated November 5, 1998, by and
between U.S. Bank National Association and the Company
and its 52% owned subsidiary B & L Sportswear, Inc.
27 FINANCIAL DATA SCHEDULE
(B) REPORTS ON FORM 8-K - NONE
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SPORT-HALEY, INC.
(Registrant)
Date: February 11, 1999 /s/ Robert G. Tomlinson
----------------- -----------------------
Robert G. Tomlinson
Chief Executive Officer
Date: February 11, 1999 /s/ Steve S. Auger
----------------- ------------------
Steve S. Auger
Chief Accounting Officer
16
<PAGE>
REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement (the "Agreement") is made as of November 5,
1998, between SPORT-HALEY, INC., a Colorado corporation ("Borrower") and U.S.
BANK NATIONAL ASSOCIATION, a national banking association ("Bank").
RECITALS:
i. Borrower and Bank entered into a Business Loan Agreement dated as of
May 17, 1998, pursuant to which Bank made available to Borrower a
revolving credit facility of $9,000,000 and a revolving credit facility
of $1,000,000 to Borrower's 52% owned subsidiary B & L Sportswear, Inc.
(the "Prior Agreement");
ii. Borrower has requested that Bank renew and extend the revolving credit
facilities made available to Borrower and to B & L Sportswear, Inc.; and
iii. Bank is willing to take such action for Borrower upon and subject to
the terms and conditions in this Agreement and for B & L Sportswear,
Inc., under a separate agreement and upon execution hereof this Agreement
and such separate agreement will supersede the Prior Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
contained in this Agreement, Borrower and Bank agree as follows:
1. TERMS OF BORROWING
1.01 REVOLVING CREDIT LINE. Subject to the following terms and conditions,
Bank agrees to make a line of credit available to Borrower (the
"Revolving Credit Line") in the maximum amount of $9,000,0000 (the
"Maximum Line"), pursuant to which Bank will make loans to Borrower (each
an "Advance") in such amounts as Borrower may request from time to time,
the proceeds of which shall be used for working capital. Outstanding
amounts borrowed by Borrower under its line of credit under the Prior
Agreement shall be deemed Advances made and outstanding hereunder, and
the aggregate outstanding principal balance of all such Advances and
Advances made hereunder may not exceed the Maximum Line. Amounts borrowed
under the Revolving Credit Line may be repaid prior to the Termination
Date (defined below) without penalty and may be reborrowed subject to the
terms hereof.
Bank's commitment to make Advances hereunder is subject to the
conditions in Section 4 below and the following limitations:
a. Bank's commitment to lend hereunder terminates on November 5,
2000 (the "Termination Date"), if not sooner terminated under
Section 8 below;
b. Bank shall not be obligated to make any Advance which would cause
the outstanding principal balance of the Revolving Credit Line (the
"Line Balance") to exceed the Maximum Line; and
c. Bank shall not be obligated to make any Advance if an Event of
Default, as defined in Section 7 below, or an event which, with the
giving of notice or lapse of time, or both, would become an Event of
Default (a "Potential Default"), has occurred and has not been cured
by Borrower or waived by Bank.
1
<PAGE>
1.02 LINE NOTE. Borrower's indebtedness to Bank for amounts borrowed under
the Revolving Credit Line and for interest accrued thereon shall be
evidenced by Borrower's promissory note to Bank, on Bank's standard form
for commercial promissory notes and otherwise satisfactory to Bank, in
the principal amount of the Maximum Line (the "Line Note").
1.03 INTEREST. Borrower agrees to pay interest on the Line Balance from
time to time as provided herein. Interest will accrue on the daily
outstanding Line Balance at a fluctuating rate per annum equal at all
times to the sum of the Reference Rate minus one half of one percent
(0.5%), which rate will change when and as the Reference Rate
changes. "Reference Rate" means the rate of interest per annum
announced publicly from time to time as the Bank's "reference rate,"
which may be a rate at, above or below the rate or rates at which the
Bank lends to other parties and it is not necessarily the lowest rate
charged by Bank on commercial loans. Accrued interest shall be due
and payable (i) on the first day of each month, (ii) at maturity of
the Line Note; and (iii) on demand after such maturity. After the
occurrence of an Event of Default or after maturity of any acceleration
of maturity of the Line Note, at Bank's option, the interest rate
applicable to the Line Balance may be increased as provided in the Line
Note and Borrower agrees to pay any such interest. Interest shall be
computed using the actual number of days in the period for which such
computation is made and a per diem rate equal to 1/360 of the fluctuating
rate per annum.
1.04 REPAYMENT OF PRINCIPAL. Borrower agrees to repay all Advances made
hereunder. The Line Balance will be due and payable in full at the
maturity of the Line Note, which will be November 5, 2000 subject to
acceleration upon the occurrence of an Event of Default.
1.05 METHOD OF BORROWING. Requests for Advances may be submitted by
Borrower in writing or by telephone. Bank shall be entitled to honor any
such request it reasonably believes to be genuine, whether or not the
person making the request is named as an authorized person in any
corporate resolution or instruction furnished Bank by Borrower. Advances
shall be disbursed only by deposit to a demand deposit account maintained
by Borrower at Bank. Proceeds of an Advance shall be disbursed on the
Banking Day (as defined in the Colorado Uniform Commercial Code) Bank
receives Borrower's request if such request is received before 2:00 p.m.
Denver time on such day, and on the next Banking Day if received at or
after 2:00 p.m. on such day, and in either case the conditions of
Section 4 are met.
1.06 LETTERS OF CREDIT. In the event and to the extent Bank issues a letter
of credit (an "L/C") on behalf of Borrower under the Revolving Credit
Line in lieu of an advance, the Maximum Line shall be considered
utilized by the amount of such L/C. Borrower shall pay fees for any
such L/C at the time of issuance and any renewal or extension according
to Bank's schedule of fees relating to letters of credit in effect from
time to time; and Borrower shall execute Bank's then current standard
form application and agreement for such L/C. Amounts drawn under any
such L/C and honored by Bank but not immediately reimbursed by Borrower
to Bank shall become an Advance hereunder in such amount at such time
evidenced by the Line Note and subject to all the terms of this
Agreement, whether or not any Event of Default or Potential Default has
occurred. No such L/C shall expire later than the Termination Date.
2. COLLATERAL; GUARANTEES AND OTHER CREDIT SUPPORT
2.01 COLLATERAL. The repayment of all of Borrower's indebtedness to Bank
shall be secured by first priority security interests (the "Security
Interests") in all accounts, general intangibles, inventory and
equipment (all such terms having the meanings given them in the
Colorado Uniform Commercial Code) now owned or hereafter acquired by
Borrower and in all proceeds thereof (the "Collateral"). The Security
Interests shall be created and perfected by security agreements, UCC
financing statements, and any other collateral documents deemed
necessary or advisable by Bank in its sole discretion, each in form
satisfactory to Bank, duly executed by Borrower (the "Collateral
Documents"). Hereafter, Borrower shall from time to time execute and
deliver to Bank such other documents in form and substance satisfactory
to Bank, and perform such other acts, as Bank may reasonably request, to
perfect and maintain valid Security Interests in the Collateral. In
addition Borrower hereby grants to Bank a security interest in all
Borrower's deposit accounts at Bank to secure all obligations of
Borrower to Bank now or hereafter arising.
2
<PAGE>
3. REPRESENTATIONS AND WARRANTIES
To induce Bank to enter this Agreement, Borrower represents and warrants
as follows:
3.01 INCORPORATION. Borrower is a corporation duly organized, validly
existing, and in good standing under the laws of the State indicated at
the beginning of this Agreement, and Borrower is duly qualified or
licensed and in good standing to do business as a foreign corporation in
all jurisdictions in which the nature of Borrower's business requires
qualification.
3.02 BORROWER'S AUTHORIZATION. The execution, delivery and performance by
Borrower of this Agreement, the Line Note and the Collateral Documents
are within Borrower's corporate powers, have been authorized by all
necessary corporate action and do not and will not contravene Borrower's
Articles of Incorporation or Bylaws, violate any provision of law or
result in a breach of or default under any other agreement to which
Borrower is a party.
3.03 LITIGATION. There is no pending or threatened action, claim,
investigation, lawsuit or proceeding against or affecting Borrower
before any court, governmental agency, arbitrator or arbitration panel,
which if decided adversely to Borrower would have a material adverse
affect on the financial condition or operations of Borrower ("Material
Litigation").
3.04 FINANCIAL CONDITION. The audited balance sheet of Borrower as at June
30, 1998, and the related statements of income and retained earnings for
the fiscal year then ended, copies of which have been furnished to Bank,
fairly present the financial condition of Borrower as at such date and
the results of the operations of Borrower for the period ended on such
date, all in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis, and since June 30, 1998 there
has been no material adverse change in such condition or operations.
3.05 LIENS. Borrower is the legal and beneficial owner of the property
granted as collateral hereunder, free from any lien, encumbrance, or
restriction whatsoever except the Bank's Security Interests and liens
for taxes not yet due and payable, and Borrower has full power and
authority to grant liens and the security interests in such property
as collateral for its indebtedness.
3.06 VALID OBLIGATIONS. This Agreement constitutes, and each of the Line
Note and the Collateral Documents when delivered hereunder will be, a
legal, valid and binding obligation of Borrower, enforceable against
Borrower in accordance with its respective terms.
3.07 TAXES. Borrower (i) has filed all tax reports and returns required to
be filed, including but not limited to reports and returns concerning
income, franchise, employment, sales and use, and property taxes;
(ii) has paid all of its tax liabilities which were due on or prior to
the date hereof; and (iii) is not aware of any pending investigation by
any taxing authority or of any pending assessments or adjustments which
would materially increase its tax liability.
3.08 REGULATION U. Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
3.09 DISCLOSURE. No information, exhibit or report furnished by Borrower to
Bank in connection with the negotiation of this Agreement contains any
material misstatement of fact or omitted to state a material fact
necessary to make the statement contained therein not misleading.
3.10 ENVIRONMENTAL COMPLIANCE. The ownership and operation of Borrower's
properties have been and are in compliance with all applicable federal,
state, and local environmental protection and hazardous waste disposal
statutes and regulations. Borrower has not received any notice of claim
under or violation of any such laws affecting Borrower's properties.
3
<PAGE>
4. CONDITIONS PRECEDENT
4.01 CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of Bank to
make its initial Advance is subject to the condition precedent that
Bank shall have received on or before the day such Advance the
following, each in form and substance satisfactory to Bank:
i. the Line Note and such Collateral Documents as may be specified by
Bank, each duly executed by Borrower, and any fees specified above;
ii. copies of the Articles of incorporation and By-laws of Borrower,
each certified by the Secretary of Borrower to be a true and
correct copy thereof, including all amendments thereto, if any;
iii. certified copies of the resolutions of the Board of Directors of
Borrower approving this Agreement, the Line Note and the Collateral
Documents, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect
to this Agreement, the Line Note and the Collateral Documents;
iv. a certificate of the Secretary of Borrower certifying the names
and true signatures of the officers of Borrower authorized to sign
this Agreement, the Line Note and the Collateral Documents;
v. a certificate of the Secretary of State of the State in which
Borrower is incorporated certifying that Borrower is a corporation
duly organized and in good standing under the laws of such State;
and
vi. a year 2000 compliance representation letter on Bank's form.
4.02 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of Bank to make
each Advance (including the initial Advance) shall be subject to the
further conditions precedent that on the date of such Advance:
i. the following statements shall be true:
(a) the representations and warranties contained in Section 3 are
correct on and as of the date of such Advance as though made
on and as of such date; and
(b) no event has occurred and is continuing, or would result from
such Advance, which constitutes an Event of Default or
Potential Default;
and Bank may request a certificate of an officer of Borrower
stating the foregoing;
ii. Bank shall have received such other approvals, opinions or
documents as Bank may reasonably request; and
iii. Bank's legal counsel is reasonably satisfied as to all legal
matters incident to the making of such Advance.
5. AFFIRMATIVE COVENANTS.
So long as the Line Note or any Debt of Borrower to Bank remains unpaid or
Bank has any commitment to lend hereunder, Borrower will:
5.01 ACCOUNTING RECORDS. Maintain adequate books and accounting records in
accordance with GAAP, consistently applied, reflecting all financial
transactions of Borrower.
4
<PAGE>
5.02 INSPECTIONS. At any reasonable time and from time to time, permit any
agents or representatives of Bank to examine and make copies of and
abstracts from records and books of account of Borrower, to visit and
inspect the properties of Borrower and to discuss the affairs, finances
and accounts of Borrower with any of its officers or directors.
5.03 MAINTENANCE OF PROPERTY. Maintain and preserve all of its properties
and assets necessary or useful in the performance of its business in
good working order, repair and condition, ordinary wear and tear
excepted.
5.04 INSURANCE. Maintain insurance with responsible and reputable
insurance companies in such amounts and covering such risks as is
usually and customarily carried by companies engaged in similar
businesses and owning similar properties, including, but not limited
to, public liability, property damage and worker's compensation, and
deliver to Bank, at Bank's request, schedules setting forth all
insurance then in effect and copies of policies or certificates of
insurance on property granted or pledged as collateral; cause Bank to
be named loss payee and as additional insured on any insurance covering
property granted or pledged as collateral, and furnish to Bank
certificates indicating such status.
5.05 PAYMENT OF TAXES, LIENS. Pay and discharge, before the same become
delinquent, (i) all taxes, assessments and governmental charges or
levies imposed upon Borrower or upon its property, and (ii) all lawful
claims which, if unpaid, might by law become a lien upon its property,
except any thereof which is being contested in good faith and by
appropriate proceedings.
5.06 COMPLIANCE WITH LAWS. Comply in all material respects with all
applicable laws, rules, regulations and orders of any government
authority, non-compliance with which would materially adversely affect
its business or credit.
5.07 CORPORATE EXISTENCE. Preserve and maintain its corporate existence and
rights and franchises in its State of incorporation, and all licenses
necessary to do business; and qualify and remain qualified and in good
standing as a foreign corporation in each jurisdiction in which such
qualification is necessary in view of its operation or ownership of its
properties.
5.08 REPORTING. Furnish Bank the following as soon as available and in any
event:
i. Within one hundred twenty (120) days after the end of each
fiscal year of Borrower, a copy of Borrower's report on form
10K including the annual audited financial statements of
Borrower as at the end of such fiscal year, including a balance
sheet and income statement, audited by an independent Certified
Public Accountant ("CPA") reasonably acceptable to Bank, with
an unqualified opinion thereon by said CPA;
ii. Within forty five (45) days after the end of each fiscal
quarter, a copy of Borrower's report on form 10Q including
Borrower's internally prepared statement of financial condition
as at the end of such quarter, including a balance sheet and
income statement prepared substantially in accordance with GAAP;
and
iii. From time to time such other information as Bank may reasonably
request.
5.09 FINANCIAL CONDITION. Maintain the financial condition of Borrower,
determined in accordance with GAAP, so that Borrower's net worth less
the value on Borrower's books of any intangible assets and less any
accounts receivable from affiliates of Borrower ("Tangible Net Worth")
will be not less than $20,000,000 at all times.
5.10 DEPOSIT ACCOUNTS. Maintain all material deposit accounts at Bank.
5.11 NOTICE OF SIGNIFICANT EVENTS. Promptly notify Bank in writing of 1)
the occurrence of any Event of Default or Potential Default; 2) any
change in its name, address, form of entity, or organizational or
capital structure; or 3) the threat of or commencement of any Material
Litigation.
5
<PAGE>
6. NEGATIVE COVENANTS
So long as the Line Note or any indebtedness of Borrower to Bank remains
unpaid or Bank has any commitment to lend hereunder, without the prior
written consent of Bank, Borrower will not:
6.01 USE OF FUNDS. Use any of the amounts loaned to it by Bank pursuant to
this Agreement for any purpose except for general short-term working
capital.
6.02 DEBT. Create, incur, assume or permit to exist any Debt except 1) Debt
to Bank; and 2) Debt which is trade debt incurred by Borrower in the
ordinary course of business on a short term basis for the acquisition
of supplies or services. "Debt" means (i) indebtedness for borrowed
money or for the deferred purchase price of property or services, (ii)
obligations as lessee under leases which shall have been or should be,
in accordance with GAAP, recorded as capital leases, (iii) obligations
under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or
otherwise assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clause (i) or (ii)
above, and (iv) liabilities in respect of unfunded vested benefits
under plans covered by Title IV of ERISA;
6.03 LIENS. Create or permit to exist any lien against any of Borrower's
property except those created under the Collateral Documents, liens for
taxes not yet due and payable, deposits or pledges in connection with
or to secure payment of workmen's compensation, unemployment insurance
or other social security or in connection with the good faith context
of any tax lien;
6.04 MERGER OR SALE. Merge into or consolidate with any corporation or other
entity; or sell, lease, assign or otherwise transfer or dispose of all
or any material portion of its assets except for sales of inventory in
the ordinary course of business; or
6.05 NATURE OF BUSINESS. Materially change the scope or nature of business.
7. DEFAULT.
If any of the following events shall occur, it shall be an event of default
("Event of Default"):
7.01 NON-PAYMENT. Borrower fails to pay any principal of the Line Note or
any other sums payable by Borrower to Bank pursuant to this Agreement
when due, or Borrower fails to pay any interest on the Line Note within
10 days after any such interest is due;
7.02 REPRESENTATIONS. Any representation or warranty made by Borrower
herein or in connection herewith proves to have been incorrect in any
material respect when made;
7.03 BREACH OF NEGATIVE COVENANTS. Borrower fails to observe or comply with
any of the covenants in Section 6 of this Agreement;
7.04 BREACH OF COVENANTS. Borrower fails to perform or observe any other
term, covenant or agreement contained in this Agreement (other than
those referred to in Section 7.01 and 7.03) or in any Collateral
Document or any non-monetary default occurs under the Note and such
failure has not been cured within twenty (20) days after Bank has
notified Borrower of such failure;
7.05 DEFAULT ON OTHER DEBT. Borrower shall fail to pay any Debt of Borrower
(other than Debt evidenced by the Line Note) or any interest or premium
thereon when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt; or any other default or event under
any agreement or instrument relating to any such Debt shall occur and
shall continue after the applicable grace period, if any, specified in
such agreement or instrument, if the effect of such default or event is
to accelerate, or to permit the acceleration of, the maturity of such
Debt; or any such Debt shall be
6
<PAGE>
declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated
maturity thereof;
7.06 INSOLVENCY. Borrower shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against Borrower
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, or other similar official for it or for any
substantial part of its property and, if instituted against Borrower,
shall remain undismissed for a period of thirty days; or Borrower shall
take any corporate action to authorize any of the actions set forth
above in this subsection;
7.07 JUDGMENTS. Any judgment or order for the payment of money in excess of
$100,000 shall be rendered against Borrower and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment
or order or (ii) there shall be any period of 10 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect;
7.08 CHANGE IN MANAGEMENT. Borrower's current Chief Executive Officer
ceases to be employed by Borrower in such capacity, or the
responsibility or authority of such officer is materially reduced; or
7.09 CHANGE IN CONTROL. Any person, entity or group of persons acting
together (not including the current principal shareholder(s) of
Borrower) acquires a sufficient number of the shares of Borrower's
voting common stock to enable such acquiring person, entity or group to
elect a majority of Borrower's Board of Directors, or the resignation
or removal of three or more of Borrower's current Directors occurs
within a period of one month.
8. REMEDIES
Upon the occurrence of any Event of Default, Bank shall have the right by
notice to Borrower:
8.01 FURTHER LOANS. To terminate its commitment to make Advances;
8.02 ACCELERATION. To declare the Line Balance and all interest accrued
thereon and all other amounts payable under this Agreement to be
immediately due and payable whereupon all such indebtedness of Borrower
to Bank shall become and be immediately due and payable without
presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by Borrower; and
8.03 OTHER RIGHTS. To exercise any other rights or remedies available to it
whether under the Collateral Documents, any Continuing Guaranty or at
law or in equity.
9. MISCELLANEOUS
9.01 WAIVER; AMENDMENTS. No waiver by Bank or any amendment of any
provision of this Agreement, nor any consent of Bank to any failure to
comply with the terms hereof by Borrower, shall be effective unless made
in writing and signed by Bank. No waiver by Bank of any default or of
any right to enforce this Agreement shall operate as a waiver of any
other default, or of the same default on a future occasion, or of the
right to enforce this Agreement on any future occasion. No delay in or
discontinuance of the enforcement of this Agreement, nor the acceptance
by Bank of installments of principal or interest after the occurrence of
any Event of Default, shall operate as a waiver of any default.
9.02 RIGHTS CUMULATIVE. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies afforded by any
security agreement, promissory note or other agreement executed in
connection herewith, or provided by law. Bank's remedies may be exercised
concurrently or separately, in any order, and the election of one remedy
shall not be deemed a waiver of any other remedy.
7
<PAGE>
9.03 EXPENSES. Borrower will pay to Bank on demand all expenses, including
reasonable fees and expenses of attorneys, paid or incurred by Bank
in connection with the creation and perfection of Bank's security
interests in collateral, the making or collection of Advances made
pursuant to this Agreement, or the protection, preservation or
enforcement of Bank's rights hereunder and in property pledged or
granted as collateral.
9.04 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of Borrower, Bank and their respective successors and
assigns. However, Borrower shall not have the right to assign or
otherwise transfer any rights in or under this Agreement without Bank's
prior written consent. Bank reserves the right to sell, assign,
transfer, negotiate or grant participations in the Advances provided for
herein. In connection therewith Bank may disclose all documents and
information which Bank now has or may hereafter acquire relating to the
Advances, Borrower, Borrower's business or any of the Collateral.
9.05 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado.
9.06 NOTICES. All notices, requests and demands given to or made upon
either party must be in writing and shall be deemed to have been given
or made when personally delivered or two (2) days after having been
deposited in the United States Mail, first class postage prepaid,
addressed as follows:
If to Borrower: Sport-Haley, Inc.
Attn: Mr. Robert G. Tomlinson
Chairman and CEO
4600 East 48th Ave.
Denver, CO 80216
If to Bank: U.S. Bank National Association
918 Seventeenth St.
Denver, CO 80202
Attn: Terry L. Johnson
9.07 ACCOUNTING TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting
principles consistently applied, except as otherwise stated herein.
9.08 RECITALS. The recitals to this Agreement and any definitions set forth
therein are made a part hereof and incorporated in this Agreement.
9.09 ENTIRE AGREEMENT. The following documents contain the entire agreement
between the parties concerning the subject matter hereof: this Agreement,
the Line Note and the Collateral Documents (collectively, the "relevant
documents"). Any representation, understanding or promise concerning the
subject matter hereof, which is not expressly set forth in any of the
relevant documents, shall not be enforceable by any party hereto or its
successors or assigns. In the event of any conflict or inconsistency
between the terms of this Agreement and the terms of any other relevant
document, the terms of this Agreement shall govern.
9.10 SEVERABILITY. The unenforceability of any provision of this Agreement
shall not affect the enforceability or validity of any other provision
hereof.
8
<PAGE>
9.11 JURY TRIAL WAIVER. BANK AND BORROWER EACH IRREVOCABLY WAIVES ITS RIGHT
TO A JURY TRIAL IN ANY ACTION OR PROCEEDING OF ANY ISSUE, CLAIM,
COUNTERCLAIM OR OTHER CAUSE OF ACTION, WHETHER IN CONTRACT OR TORT,
BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE CREDIT EXTENDED
HEREUNDER, ANY COLLATERAL PROPERTY SECURING SUCH CREDIT, OR ANY OTHER
AGREEMENT OR DEALINGS RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement the date first
stated above for the purposes set forth herein.
SPORT-HALEY, INC. U.S. BANK NATIONAL ASSOCIATION
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
------------------------------ ------------------------------
Title: C.E.O. Title: Vice President
--------------------------- ---------------------------
9
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<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,792
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<RECEIVABLES> 5,442
<ALLOWANCES> 57
<INVENTORY> 17,399
<CURRENT-ASSETS> 29,906
<PP&E> 4,275
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0
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<COMMON> 17,324
<OTHER-SE> 14,278
<TOTAL-LIABILITY-AND-EQUITY> 32,905
<SALES> 13,136
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