MERCHANTS NATIONAL BANK
102 East 3rd Street
Post Office Box 248
Winona, Minnesota 55987-0248
(507) 457-1100
"Lender"

COMMERCIAL/AGRICULTURAL REVOLVING OR
DRAW NOTE-VARIABLE RATE

Borrower:                                   Hampshire Group, Limited
Address:                                    215 Commerce Blvd.
                                            P. O. Box 2667
                                            Anderson, SC  29621
Identification No.:                         06-0967107
Officer Initials:                           007
Interest Rate:                              Variable
Principal Amount/Credit Limit:              $3,000,000.00
Funding/Agreement Date:                     03/24/97
Maturity Date:                              Demand
Customer Number:
Loan Number:                                994267298-01

     PROMISE TO PAY For value received, Borrower promises to pay to the order of
Lender indicated above the principal amount of THREE MILLION AND NO/100 Dollars
($3,000,000.00) or, if less, the aggregate unpaid principal amount of all loans
or advances made by the Lender to the Borrower, plus interest on the unpaid
principal balance at the rate and in the manner described below. All amounts
received by Lender shall be applied first to late payment charges and expenses,
then to accrued interest, and then to principal or in any other order as
determined by Lender, in Lender's sole discretion, as permitted by law.

     INTEREST RATE: This Note has a variable rate feature. Interest on the Note
may change from time to time if the Index Rate identified below changes.
Interest shall be computed on the basis of 360 days per year. Interest on this
Note shall be calculated at a variable rate equal to * percent ( * %) per annum
over the Index Rate. The initial Index Rate is currently * percent (* %) per
annum. The initial interest rate on this Note shall be * percent (* %) per
annum. Any change in the interest rate resulting from a change in the Index Rate
will be effective on: SEE ATTACHED INTEREST RATE OPTION SCHEDULE

     INDEX RATE: The Index Rate for this Note shall be: WALL STREET PRIME OR
LIBOR RATE PLUS 1.95% - SEE ATTACHED INTEREST RATE OPTION SCHEDULE

     MINIMUM RATE/MAXIMUM RATE: The minimum interest rate on this Note shall be
n/a percent (n/a%) per annum. The maximum interest rate on this Note shall not
exceed TWENTY-ONE AND 750/1000 percent ( 21.750 %) per annum or the maximum
interest rate Lender is permitted to charge by law, whichever is less.

     POST-MATURITY RATE: X If checked, this loan is for a binding commitment of
at least $100,000.00 and after maturity, due to scheduled maturity or
acceleration, past due amounts shall bear interest at the lesser of: THE
INTEREST RATE AT THE TIME OF MATURITY, or the maximum interest rate Lender is
permitted to charge by law.

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     PAYMENT SCHEDULE: Borrower shall pay the principal and interest according
to the following schedule:

     INTEREST ONLY PAYMENTS BEGINNING APRIL 15, 1997 AND CONTINUING AT MONTHLY
TIME INTERVALS THEREAFTER. A FINAL PAYMENT OF THE UNPAID PRINCIPAL BALANCE PLUS
ACCRUED INTEREST IS DUE AND PAYABLE ON APRIL 15, 1998.

     All payments will be made to Lender at its address described above and in
lawful currency of the United States of America.

     RENEWAL: If checked X this Note is a renewal of loan number 994267298 , and
is not in payment of that Note.

     SECURITY: To secure the payment and performance of obligations incurred
under this Note, Borrower grants Lender a security interest in and pledges and
assigns to Lender all of Borrower's rights, title, and interest, in all monies,
instruments, savings, checking and other deposit accounts of Borrower's,
(excluding IRA, Keogh and trust accounts and deposits subject to tax penalties
if so assigned) that are now or in the future in Lender's custody or control.
Upon default, and to the extent permitted by applicable law, Lender may exercise
any or all of its right or remedies as a secured party with respect to such
property which rights and remedies shall be in addition to all other rights and
remedies granted to Lender including, without limitation, Lender's common law
right of set off. [ ] If checked, the obligations under this Note are also
secured by a lien and/or security interest in the property described in the
documents executed in connection with this Note as well as any other property
designated as security now or in the future.

     PREPAYMENT: This Note may be prepaid in part or in full on or before its
maturity date. If this Note contains more than one installment, all prepayments
will be credited as determined by Lender and as permitted by law. If this Note
is prepaid in full, there will be: X No prepayment penalty. ______ A prepayment
penalty of ____% of the principal prepaid.

     LATE PAYMENT CHARGE: If a payment is received more than n/a days late,
Borrower will be charged a late payment charge of n/a% of the unpaid late
installment.

     REVOLVING OR DRAW FEATURE: X This Note possesses a revolving feature, Upon
satisfaction of the conditions set forth in this Note, Borrower shall be
entitled to borrow up to the full principal amount of the Note and to repay and
reborrow from time to time during the term of this Note. _____ This Note
possesses a draw feature. Upon satisfaction of the conditions set forth in this
Note, Borrower shall be entitled to make one or more draws under this Note. The
aggregate amount of such draws shall not exceed the full principal amount of
this Note.

     Lender shall maintain a record of the amounts loaned to and repaid by
Borrower under this Note. The aggregate unpaid principal amount sown on such
record shall be rebuttable presumptive evidence of the principal amount owing
and unpaid on this Note. The Lender's failure to record the date and amount of
any loan or advance shall not limit or otherwise affect the obligations of the
Borrower under this Note to repay the principal amount of the loans or advances
together with all interest accruing thereon. Lender shall not be obligated to
provide Borrower with a copy of the record on a periodic basis. Borrower shall
be entitled to inspect or obtain a copy of the record during Lender's business
hours.

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     *CONDITIONS FOR ADVANCES: If there is no default under this Note, Borrower
shall be entitled to borrow monies or make draws under this Note (subject to the
limitations described above) under the following conditions:

THE CUSTOMER HAS THE FOLLOWING INTEREST RATE OPTIONS PER ADVANCE:
1.  WALL STREET PRIME FLOATING
2.  LIBOR RATE ONE MONTH RATE AS QUOTED IN THE WALL STREET JOURNAL, PLUS 1.95%.

     BORROWER ACKNOWLEDGES THAT BORROWER HAS READ, UNDERSTANDS, AND AGREES TO
THE TERMS AND CONDITIONS OF THIS NOTE INCLUDING THE PROVISIONS ON THE REVERSE
SIDE. BORROWER ACKNOWLEDGES RECEIPT OF AN EXACT COPY OF THIS NOTE.

NOTE DATE: MARCH 24, 1997

BORROWER: HAMPSHIRE GROUP, LIMITED             BORROWER:

/s/ Charles W. Clayton, Vice President
-----------------------------------------      --------------------------------


BORROWER:                                      BORROWER:

-----------------------------------------      --------------------------------

BORROWER:                                      BORROWER:

-----------------------------------------      --------------------------------

BORROWER:                                      BORROWER:

-----------------------------------------      --------------------------------


TERMS AND CONDITIONS

     1. DEFAULT: Borrower will be in default under this Note in the event that
Borrower or any guarantor or any other third party: (a) fails to make any
payment on this Note or any other indebtedness to Lender when due: (b) fails to
perform any obligation or breaches any warranty or covenant to Lender contained
in this Note or any other present or future written agreement regarding this or
any indebtedness of Borrower to Lender; (c) provides or causes any false or
misleading signature or representation to be provided to Lender: (d) allows the
collateral securing this Note (if any) to be lost, stolen, destroyed, damaged in
any material respect, or subjected to seizure or confiscation; (e) permits the
entry or service of any garnishment, judgment, tax levy, attachment or lien
against Borrower, any guarantor, or any of their property or the Collateral; (f)
dies, becomes legally incompetent, is dissolved or terminated, ceases to operate
its business, becomes insolvent, makes an assignment for the benefit of
creditors, fails to pay debts as they become due, or becomes the subject of any
bankruptcy, insolvency or debtor rehabilitation proceeding: or (g) causes Lender
to deem itself insecure for any reason, or Lender, for any reason, in good faith
deems itself insecure.

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     2. RIGHTS OF LENDER ON DEFAULT: If there is a default under this Note,
Lender will be entitled to exercise one or more of the following remedies
without notice or demand (except as required by law): (a) to cease making
additional advances under this Note: (b) to declare the principal amount plus
accrued interest under this Note and all other present and future obligations of
Borrower immediately due and payable in full; (c) to collect the outstanding
obligations of Borrower with or without resorting to judicial process; (d) to
take possession of any collateral in any manner permitted by law; (e) to require
Borrower to deliver and make available to Lender any collateral at a place
reasonably convenient to Borrower and Lender; (f) to sell, lease or otherwise
dispose of any collateral and collect any deficiency balance with or without
resorting to legal process; (g) to set-off Borrower's obligations against any
amounts due to Borrower including, but not limited to monies, instruments, and
deposit accounts maintained with Lender; and (h) to exercise all other rights
available to Lender under any other written agreement or applicable law.
Lender's rights are cumulative and may be exercised together, separately, and in
any order. Lender's remedies under this paragraph are in addition to those
available at common law, including, but not limited to, the right of set-off.

     3. DEMAND FEATURE: If this Note contains a demand feature, Lender's right
to demand payment, at any time, and from time to time, shall be in Lender's sole
and absolute discretion, whether or not any default has occurred.

     4. FINANCIAL INFORMATION: Borrower will provide Lender with current
financial statements and other financial information (including, but not limited
to, balance sheets and profit and loss statements) upon request.

     5. MODIFICATION AND WAIVER: The modification or waiver of any of Borrower's
obligations or Lender's rights under this Note must be contained in a writing
signed by Lender. Lender may perform any of Borrower's obligations or delay or
fail to exercise any of its rights without causing a waiver of those obligations
or rights. A waiver on one occasion will not constitute a waiver on any other
occasion. Borrower's obligations under this Note shall not be affected if Lender
amends, compromises, exchanges, fails to exercise, impairs or releases any of
the obligations belonging to any co-borrower or guarantor or any of its rights
against any co-borrower, guarantor or collateral.

     6. SEVERABILITY AND INTEREST LIMITATION: If any provision of this Note is
invalid, illegal or unenforceable, the validity, legality. and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Notwithstanding anything contained in this Note to the contrary, in no event
shall interest accrue under this Note, before or after maturity, at a rate in
excess of the highest rate permitted by applicable law, and if interest
(including any charge or fee held to be interest by a court of competent
jurisdiction) in excess thereof be paid, any excess shall constitute a payment
of, and be applied to, the principal balance hereof, and if the principal
balance has been fully paid, then such interest shall be repaid to the Borrower.

     7. ASSIGNMENT: Borrower will not be entitled to assign any of its rights,
remedies or obligations described in this Note without the prior written consent
of Lender which may be withheld by Lender in its sole discretion. Lender will be
entitled to assign some or all of its rights and remedies described in this Note
without notice to or the prior consent of Borrower in any manner.

     8. NOTICE: Any notice or other communication to be provided to Borrower or
Lender under this Note shall be in writing and sent to the parties at the
addresses described in this Note or such other address as the parties may
designate in writing from time to time.

     9. APPLICABLE LAW: This Note shall be governed by the laws of the state
indicated in Lender's address. Borrower consents to the jurisdiction and venue
of any court located in the state indicated in Lender's address in the event of
any legal proceeding pertaining to the negotiation, execution, performance or
                            
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enforcement of any term or condition contained in this Note or any related loan
document and agrees not to commence or seek to remove such legal proceeding in
or to a different court.

     10. COLLECTION COSTS: If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Note, Borrower agrees
to pay Lender's attorney's fees, to the extent permitted by applicable law, and
collection costs.

     11. RETURNED CHECK: if a check for payment is returned to Lender for any
reason, Lender will charge an additional fee of $15.00.

     12. MISCELLANEOUS: This Note is being executed for commercial/agricultural
purposes. Borrower and Lender agree that time is of the essence. Borrower waives
presentment, demand for payment, notice of dishonor and protest. If Lender
obtains a judgment for any amount due under this Note interest will accrue on
the judgment at the judgment rate of interest permitted by law. All references
to Borrower in this Note shall include all of the parties signing this Note. If
there is more than one Borrower, their obligations will be joint and several.
This Note and any related documents represent the complete and integrated
understanding between Borrower and Lender pertaining to the terms and conditions
of those documents.

     13. JURY TRIAL WAIVER: BORROWER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN
ANY CIVIL ACTION ARISING OUT OF, OR BASED UPON, THIS NOTE OR THE COLLATERAL
SECURING THIS NOTE.

     14. ADDITIONAL TERMS: PURPOSE: RENEW LINE OF CREDIT













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INTEREST RATE OPTION SCHEDULE

INTEREST RATE OPTION 1:

     Interest shall be calculated at a variable rate equal to no/100 percent
(0%) per annum over the Index Rate. The initial Index Rate on this note shall be
eight and 50/100 percent (8.50%) per annum. Any change in the Index Rate will be
effective on the date the Index Rate changes.

INTEREST RATE OPTION 2:

     The Index Rate is the LIBOR (London Inderbank Offering Rate) one month rate
as quoted in the Wall Street Journal. Interest shall be calculated at a variable
rate equal to 195/100 percent (1.95%) per annum over the Index rate. The initial
Index Rate on this note shall be 5.71875% per annum. Any change in the interest
rate resulting from a change in the Index Rate will be effective on the first
business day of each month as published in the Wall Street Journal.

























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