Sport-Haley Settles Class Action Suit

Sport-Haley, Inc. has signed a memorandum of understanding to settle the putative class action lawsuit brought against the company and certain officers and directors.

Pursuant to a settlement conference, on November 7, 2003, the parties to the class action reached a preliminary agreement to settle the action against all parties and began drafting a Memorandum of Understanding (the “MOU”) to set forth the parties' agreement in principle. Pursuant to the MOU, under the contemplated settlement, which is subject to further agreement between the parties, court approval and other contingencies, the Defendants will pay to the class a total of $1,000,000. The settlement amount is expected to be derived from proceeds of the Defendants' liability insurance coverage. Although the Defendants believe that it is probable that the parties will complete formal documentation of the settlement agreement and that the settlement will be approved by the court, there can be no assurance that completion of the settlement or court approval will occur. In the event that the settlement is not completed, the litigation process will resume.

The Defendants continue to maintain that they have meritorious defenses to the class action claims, but have agreed to the settlement for practical and other reasons. The Defendants have incurred significant costs and expenses, including the uses of the Company's resources and executive time, defending the class action. Of those expenses, a considerable portion is not recoverable by applicable insurance. If the settlement is not completed and approved, such unrecoverable expenses may continue to negatively impact the Company's financial position and the results of its operations.

Kevin M. Tomlinson, the Chief Executive Officer of the Company, said, “We believe that the settlement terms are in the best interests of our current and former shareholders and the Company itself. We are also pleased to resolve this matter so that we can more fully devote our efforts to directing the business affairs of the Company.”