EMPLOYMENT AGREEMENT

     EMPLOYMENT  AGREEMENT,  dated as of this 1st day of January,  1998, between
Hampshire Group, Limited, a Delaware corporation (the "Company"),  and Ludwig G.
Kuttner (the "Executive").

                                R E C I T A L S:

     WHEREAS,  the Executive  currently  serves as President and Chief Executive
Officer of the  Company,  and the  Company  recognizes  that the future  growth,
profitability  and success of the Company's  business will be substantially  and
materially enhanced by the continued employment of the Executive by the Company;

     WHEREAS,  the Company  desires to continue to employ the  Executive and the
Executive has indicated his willingness to continue to provide his services,  on
the terms and conditions set forth herein;

     NOW, THEREFORE, on the basis of the foregoing premises and in consideration
of the mutual  covenants and  agreements  contained  herein,  the parties hereto
agree as follows:

     Section  1.  Employment.  Subject  to the  terms and  conditions  contained
herein,  the Executive shall serve as the President and Chief Executive  Officer
of the Company  and, in such  capacity,  shall  report  directly to the Board of
Directors of the Company (the "Board of  Directors")  and shall have such duties
as are  typically  performed  by a president  and chief  executive  officer of a
corporation.  In the  performance  of his  duties,  the  Executive  shall not be
required to reside at any  location  other than Keene,  Virginia,  although  the
Executive  understands and agrees that he may be required to travel from time to
time for business reasons.

     Section 2. Term. The Executive's employment hereunder shall commence on the
date hereof and shall continue until  terminated by the Company or the Executive
pursuant to Section 6 hereof.

     Section 3. Compensation. During the Employment Term, the Executive shall be
entitled to the following compensation and benefits:

          (a) Salary.  As  compensation  for the  performance of the Executive's
     services  hereunder,  the Company  shall pay to the Executive a salary (the
     "Salary") of $400,000 per annum with increases,  if any, as may be approved
     by the Board of Directors.  The Salary shall be payable in accordance  with
     the payroll  practices  of the Company as the same shall exist from time to
     time. In no event shall the Salary be decreased during the Employment Term.

          (b) Bonus.  The Executive  shall be entitled to receive an annual cash
     bonus (the  "Bonus")  equal to 7% of the  Company's  net  earnings  for the
     fiscal year with respect to which the Bonus is payable,  as  determined  by
     the Company's independent auditors and disclosed in the Company's financial
     statements.

          (c) Benefits. In addition to the Salary and Bonus, the Executive shall
     be entitled to participate in health, insurance, pension and other benefits
     provided  to  other  senior  executives  of the  Company  on  terms no less
     favorable  than those  available to such senior  executives of the Company,
     provided that the Company shall maintain,  at the Company's expense, a life
     insurance  policy  for the  benefit of the  Executive,  in the amount of $1
     million  payable upon the Executive's  death to the  Executive's  surviving
     spouse or, if there is no surviving spouse, to the Executive's  estate. The
     Executive  shall also be  entitled  to the same  number of  vacation  days,
     holidays,  sick days and other  benefits as are generally  allowed to other
     senior  executives of the Company in accordance  with the Company policy in
     effect from time to time.
<PAGE>
          (d)  Deferred  Compensation.  The  Company  shall  maintain a deferred
     compensation account (the "Deferred  Compensation  Account") in the name of
     the  Executive,  which shall be credited by the Company  with  $100,000 per
     annum.  The amounts accrued in the Deferred  Compensation  Account shall be
     credited with interest at 110% of the Applicable Federal Long Term Interest
     Rate,  provided  that the  Executive  shall have the right to diversify the
     deemed  investment  of the  Deferred  Compensation  Account  into  notional
     investment  funds,  in the same  manner  afforded  to  participants  in the
     Company's Voluntary Deferred Compensation Plan for Directors and Executives
     (the "DC Plan"). The Deferred Compensation Account shall be administered in
     a  manner  consistent  with the  provisions  of the DC  Plan.  All  amounts
     credited to the  Deferred  Compensation  Account  shall be fully vested and
     payable in accordance with the terms thereof.

          (e)  Automobile.  The  Company  shall  provide the  Executive,  at the
     Company's expense,  with an automobile and a chauffeur,  in accordance with
     prior Company practices.

     Section 4.  Exclusivity.  During the Employment  Term, the Executive  shall
devote his full time to the business of the Company,  shall faithfully serve the
Company,  shall in all  respects  conform  to and  comply  with the  lawful  and
reasonable directions and instructions given to him by the Board of Directors in
accordance  with the  terms of this  Agreement,  shall use his best  efforts  to
promote and serve the interests of the Company and shall not engage in any other
business  activity,  whether  or not  such  activity  shall  be  engaged  in for
pecuniary  profit,  except  that  the  Executive  may (i)  continue  to  operate
agriculture  businesses in Keene, Virginia and (ii) make personal investments in
businesses that are not competitive with the business of the Company.

     Section 5.  Reimbursement  Expenses.  The  Executive is authorized to incur
reasonable expenses in the discharge of the services to be performed  hereunder,
including  expenses  for travel,  entertainment,  lodging  and similar  items in
accordance with the Company's expense  reimbursement  policy, as the same may be
modified  by the  Board of  Directors  from  time to  time.  The  Company  shall
reimburse  the Executive  for all such proper  expenses in  accordance  with the
financial policy of the Company, as in effect from time to time.

     Section 6.  Termination of Employment.

          (a) Death. The Executive's  employment shall  automatically  terminate
     upon his  death  and upon  such  event,  the  Executive's  estate  shall be
     entitled  to receive  (i) all  compensation  accrued  but unpaid  hereunder
     through the date of death,  including  Salary,  "Accrued  Bonus" as defined
     below,  and unreimbursed  expenses,  and (ii) the Termination  Benefit,  as
     defined below.  For purposes of this Agreement,  "Accrued Bonus" shall mean
     the sum of (a) any  Bonus  earned  in  respect  of the  fiscal  year of the
     Company first preceding the year of termination  which has not been paid at
     the time of termination  ("Prior Year Bonus"),  and (b) with respect to the
     year of  termination,  a pro rata portion of the Bonus that would have been
     payable to the Executive for that year, based on the number of days elapsed
     in such year as of the date of such termination,  such amount to be paid as
     soon as practicable  after the  determination of the Company's net earnings
     for  such  year  ("Pro  Rata  Bonus").  For  purposes  of  this  Agreement,
     "Termination Benefit" shall mean an amount equal to (1) the annual average,
     with respect to the  5-calendar  year period  ending with the calendar year
     immediately  preceding  the  year  in  which  the  Executive's   employment
     terminates, of the sum of the Executive's Salary, Bonus and the amounts (if
     any)  realized by the  Executive  upon the  exercise  of any Company  stock
     options,  (2) multiplied by 2. The Termination Benefit shall be paid to the
     Executive's  estate in 24 equal monthly  installments;  provided,  however,
     that if a Change of Control  (as  defined in Section  6(f)  hereof)  occurs
     during such 24 month period,  the balance of the Termination  Benefit as of
     the date of the Change of Control shall be paid to the  Executive's  estate
     in a lump sum on the closing date of the  transaction  which  constitutes a
     Change of Control.
<PAGE>
          (b) Disability.  The Company may terminate the Executive's  employment
     in the event of the  Executive's  Disability (as defined  below),  provided
     that,  at the  time of such  termination,  the  Company  maintains,  at the
     Company's expense, a disability insurance policy (the "Disability Insurance
     Policy") which provides for payments to the Executive of $120,000 per annum
     until the earlier of (i) termination of the Executive's  disability (within
     the meaning of the Disability  Insurance  Policy) or (ii) the attainment by
     the Executive of age 65. For purposes of this Agreement, "Disability" shall
     mean the  Executive's  inability,  for a period of at least 180 consecutive
     days, to perform the duties required of him under this Agreement because of
     illness,  incapacity, or physical or mental disability. Upon termination of
     the  Executive's  employment  pursuant to this Section 6(b),  the Executive
     shall be entitled to receive from the Company all compensation  accrued but
     unpaid hereunder through the date of termination, including Salary, Accrued
     Bonus and unreimbursed  expenses. The Executive and his eligible dependents
     shall continue to be covered under the Company's medical and life insurance
     plans in which the Executive and such  dependents  participated on the date
     of the  termination  of  the  Executive's  employment  as a  result  of his
     Disability, for the period provided in such plans.

          (c) Cause. The Company may terminate the Executive's employment at any
     time for Cause.  In the event of termination  pursuant to this Section 6(c)
     for Cause,  the  Company  shall  deliver to the  Executive  written  notice
     setting  forth  the  basis  for  such   termination,   which  notice  shall
     specifically set forth the nature of the Cause which is the reason for such
     termination.  Termination of the Executive's  employment hereunder shall be
     effective upon delivery of such notice of termination. For purposes of this
     Agreement,  "Cause" shall mean: (i) the  Executive's  failure (except where
     due to  Disability)  to perform  his duties  under  this  Agreement,  which
     failure amounts to extended and continuous  neglect,  (ii) continued use by
     the  Executive  of  non-prescription   drugs,   including  alcohol,   which
     materially interferes with the performance of the Executive's duties to the
     Company,  (iii)  the  commission  by the  Executive  of an act of  fraud or
     embezzlement  against  the  Company  or  any  of its  affiliates,  or  (iv)
     conviction  of  the  Executive  for  the  commission  of  a  felony.   Upon
     termination of the Executive's employment for Cause, the Executive shall be
     entitled to receive  from the Company all  compensation  accrued but unpaid
     hereunder  through the date of termination,  including  Salary,  Prior Year
     Bonus and unreimbursed expenses, but excluding any Pro Rata Bonus.

          (d)  Without  Cause.   The  Company  may  terminate  the   Executive's
     employment  at any time without  Cause.  If the  Executive's  employment is
     terminated by the company without Cause, the Executive shall be entitled to
     receive from the Company (i) all compensation  accrued but unpaid hereunder
     through  the  termination  date,   including  Salary,   Accrued  Bonus  and
     unreimbursed  expenses,  (ii) the Termination Benefit,  payable in 24 equal
     monthly  installments  and (iii) for a period  of 18 months  following  the
     termination  date,  continued  life and health  insurance  coverage for the
     Executive and his eligible dependents.

          (e)  Resignation.  The Executive shall have the right to terminate his
     employment  by  giving  to the  Company a  90-days'  advance  notice of his
     resignation.  Upon  the  Executive's  resignation  from  the  company,  the
     Executive  shall be entitled to receive  from the Company all  compensation
     accrued but unpaid  hereunder  through the date of  termination,  including
     Salary, Prior Year Bonus and unreimbursed  expenses,  but excluding any Pro
     Rata Bonus.

          (f) Change of Control. The Executive shall have the right to terminate
     his employment by giving to the Company a notice of his resignation  within
     180 days following a Change of Control.  In the event of termination of the
     Executive's  employment  pursuant to this Section 6(f), the Executive shall

<PAGE>
     be entitled to receive  from the Company (i) all  compensation  accrued but
     unpaid hereunder through the date of termination,  including Salary,  Bonus
     and unreimbursed expenses,  and (ii) the Termination Benefit,  payable in a
     single lump sum on the closing date of the transaction  that  constitutes a
     Change of Control.

     For purposes of this Agreement, a "Change of Control" shall mean:

               (i) The  acquisition by any  individual,  entity or group (within
          the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
          Act of  1934,  as  amended  (the  "Exchange  Act"))  (a  "Person")  of
          beneficial  ownership  (within  the meaning of  Rule13d-3  promulgated
          under  the  Exchange  Act)  of 50% or  more of  either  (1)  the  then
          outstanding  shares of common stock of the Company  (the  "Outstanding
          Company  Common  Stock") or (2) the combined  voting power of the then
          outstanding   voting  securities  of  the  Company  entitled  to  vote
          generally  in the  election of  directors  (the  "Outstanding  Company
          Voting  Securities");  provided,  however,  that for  purposes of this
          subsection  (i), the  following  acquisitions  shall not  constitute a
          Change of Control:  (1) any acquisition directly from the Company, (2)
          any  acquisition by the Company or any  corporation  controlled by the
          Company,  (3) any acquisition by any shareholder of the Company who on
          the date  hereof  owns 5% or more of the  Outstanding  Company  Common
          Stock  or  (4)  any  acquisition  by  any  corporation  pursuant  to a
          transaction which complies with clauses (1), (2) and (3) of subsection
          (iii) of this Section 6(f); or

               (ii) Individuals who, as of the date hereof, constitute the Board
          of  Directors  (the  "Incumbent   Board")  cease  for  any  reason  to
          constitute  at least a majority of the Board of  Directors;  provided,
          however,  that any  individual  becoming a director  subsequent to the
          date  hereof  whose  election,  or  nomination  for  election  by  the
          Company's shareholders,  was approved by a vote of at least a majority
          of  the  directors  then  comprising  the  Incumbent  Board  shall  be
          considered  as though such  individual  were a member of the Incumbent
          Board,  but excluding,  for this purpose,  any such  individual  whose
          initial  assumption  of  office  occurs  as a result  of an  actual or
          threatened election contest with respect to the election or removal of
          directors or other  actual or  threatened  solicitation  of proxies or
          consents  by  or on  behalf  of a  Person  other  than  the  Board  of
          Directors; or
 
               (iii)  Consummation of a reorganization,  merger or consolidation
          or sale or other disposition of all or substantially all of the assets
          of the  Company (a  "Business  Combination"),  in each  case,  unless,
          following such Business  Combination,  (1) all or substantially all of
          the  individuals   and  entities  who  were  the  beneficial   owners,
          respectively,  of the outstanding Company Common Stock and Outstanding
          Company  Voting   Securities   immediately   prior  to  such  Business
          Combination  beneficially own,  directly or indirectly,  more than 50%
          of, respectively,  the then outstanding shares of common stock and the
          combined  voting  power  of the  then  outstanding  voting  securities
          entitled to vote  generally in the election of directors,  as the case
          may be, of the  corporation  resulting from such Business  Combination
          (including,  without  limitation,  a corporation  which as a result of
          such transaction  owns the Company or all or substantially  all of the
          Company's assets either directly or through one or more  subsidiaries)
          in substantially the same proportions as their ownership,  immediately
          prior to such Business  Combination of the Outstanding  Company Common
          Stock and Outstanding  Company Voting Securities,  as the case may be,
          (2) no Person (excluding any corporation  resulting from such Business
          Combination  or any  shareholder of the Company on the date hereof who
          owns 5% or more of the Outstanding Company Common Stock), beneficially

<PAGE>
          owns, directly or indirectly,  50% or more of, respectively,  the then
          outstanding  shares of common stock of the corporation  resulting from
          such  Business  Combination  or the combined  voting power of the then
          outstanding voting securities of such corporation except to the extent
          that such ownership existed prior to the Business  Combination and (3)
          at least a majority  of the members of the board of  directors  of the
          corporation  resulting from such Business  Combination were members of
          the  Incumbent  Board  at the  time of the  execution  of the  initial
          agreement,  or of the action of the Board of Directors,  providing for
          such Business Combination; or

               (iv)  Approval by the  shareholders  of the Company of a complete
          liquidation or dissolution of the Company.

          (g)   Gross-Up.   Anything   in  this   Agreement   to  the   contrary
     notwithstanding,  in the  event it shall be  determined  that any  payment,
     distribution,  waiver of  Company  rights,  acceleration  of vesting of any
     stock  options  or other  awards,  or any other  payment  or benefit in the
     nature of compensation to or for the benefit of the Executive,  alone or in
     combination  (whether such payment,  distribution,  waiver  acceleration or
     other benefit is made pursuant to the terms of this  Agreement or any other
     agreement, plan or arrangement providing payments or benefits in the nature
     of  compensation  to or for the benefit of the  Executive,  but  determined
     without regard to any additional payments required under this Section 6(g))
     (a "Payment") would be subject to the excise tax imposed by Section 4999 of
     the Internal  Revenue Code (or any successor  provision) or any interest or
     penalties  are  incurred by the  Executive  with respect to such excise tax
     (such  excise tax,  together  with any such  interest  and  penalties,  are
     hereinafter  collectively  referred  to as  the  "Excise  Tax"),  then  the
     Executive shall be entitled to an additional payment (a "Gross-Up Payment")
     in an amount  such that after  payment by the  Executive  of all taxes with
     respect to the  Gross-Up  Payment  (including  any  interest  or  penalties
     imposed  with respect to such taxes)  including,  without  limitation,  any
     income and  employment  taxes (and any interest and penalties  imposed with
     respect  thereto)  and Excise Tax imposed upon the  Gross-Up  Payment,  the
     Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
     imposed upon the Payments.

          (h) No Set Of f Against  Deferred  Compensation  Account.  The Company
     shall  have no right to set off any  claim  which it may have  against  the
     Executive  against amounts  credited to the Deferred  Compensation  Account
     (and deemed earnings thereon).

     Section 7. Nondisclosure of Confidential Information. The Executive, except
in connection with his employment hereunder, shall not disclose to any person or
entity or use, either during the Employment Term or at any time thereafter,  any
information not in the public domain or generally known in the industry,  in any
form, acquired by the Executive while employed by the Company or any predecessor
to the Company's  business or, if acquired  following the Employment  Term, such
information which, to the Executive's knowledge, has been acquired,  directly or
indirectly,  from any person or entity  owing a duty of  confidentiality  to the
Company or any of its  subsidiaries  or  affiliates.  The  Executive  agrees and
acknowledges that all of such information,  in any form, and copies and extracts
thereof,  are and shall remain the sole and  exclusive  property of the Company,
and upon  termination of his employment  with the Company,  the Executive  shall
return to the  Company  the  originals  and all  copies of any such  information
provided to or acquired by the Executive in connection  with the  performance of
his  duties  for the  Company,  and  shall  return  to the  Company  all  files,
correspondence   and/or  other   communications   received,   maintained  and/or
originated by the Executive during the course of his employment.
<PAGE>
     Section 8.  Injunctive  Relief.  Without  intending  to limit the  remedies
available to the Company, the Executive acknowledges that a breach of any of the
covenants  contained  in  Section 7 hereof may  result in  material  irreparable
injury to the Company or its  subsidiaries  or affiliates  for which there is no
adequate remedy at law, that it will not be possible to measure damages for such
injuries  precisely and that,  in the event of such a breach or threat  thereof,
the Company shall be entitled to obtain a temporary  restraining  order and/or a
preliminary   or  permanent   injunction,   without  the  necessity  of  proving
irreparable  harm or injury as a result of such breach or  threatened  breach of
Section  7  hereof,  restraining  the  Executive  from  engaging  in  activities
prohibited  by  Section  7  hereof  or  such  other  relief  as may be  required
specifically to enforce any of the covenants in Section 7 hereof.

     Section 9.  Successors  and Assigns;  No  Third-Party  Beneficiaries.  This
Agreement shall inure to the benefit of, and be binding upon, the successors and
assigns of each of the parties,  including,  but not limited to, the Executive's
heirs and the personal  representatives  of the  Executive's  estate;  provided,
however,  that neither  party shall  assign or delegate  any of the  obligations
created  under this  Agreement  without the prior  written  consent of the other
party.  Nothing in this  Agreement  shall confer upon any person or entity not a
party to this Agreement,  or the legal representatives of such person or entity,
any rights or  remedies of any nature or kind  whatsoever  under or by reason of
this Agreement.

     Section 10. Waiver and  Amendments.  Any waiver,  alteration,  amendment or
modification  of any of the terms of this Agreement  shall be valid only if made
in writing and signed by the parties hereto;  provided,  however,  that any such
waiver,  alteration,  amendment or modification is consented to on the Company's
behalf by the Board of Directors.  No waiver by either of the parties  hereto of
their rights  hereunder  shall be deemed to  constitute a waiver with respect to
any  subsequent   occurrences  or  transactions  hereunder  unless  such  waiver
specifically states that it is to be construed as a continuing waiver.

     Section 11. Governing Law; Arbitration; Jurisdiction.

          (a) This  Agreement  shall be governed by and  construed in accordance
     with the laws of the State of New York  applicable to contracts made and to
     be performed entirely within such state.

          (b) Any disputes  arising under this  Agreement,  except those arising
     under Section 7, shall be resolved  solely by  arbitration in New York, New
     York in accordance with the Rules of the American Arbitration  Association.
     Any  arbitration  award  shall  include a  determination  as to whether the
     Company or the  Executive  shall bear all of the costs of the  arbitration,
     including  reasonable  attorneys'  fees. It is the intention of the Company
     and the  Executive  that the party who does not prevail in the  arbitration
     will bear such costs.

          (c)  The  Company  and  the  Executive  shall  submit  solely  to  the
     jurisdiction  of the Federal Courts or New York State Courts sitting in New
     York County,  New York with respect to any disputes arising under Section 7
     or 8 of this Agreement.

     Section 12. Notices.

          (i) All  communications  under this Agreement  shall be in writing and
     shall be delivered by hand or mailed by overnight  courier or by registered
     or certified mail, postage prepaid:

               (1) if to the Executive,  at Estouteville  Farm, Keene,  Virginia
          22946,  or at such other address as the  Executive may have  furnished
          the Company in writing,
<PAGE>
               (2) if to the Company, at Hampshire Group,  Limited, 215 Commerce
          Blvd., P.O. Box 2667,  Anderson,  South Carolina 29622, marked for the
          attention  of  Secretary,  or at such  other  address  as it may  have
          furnished in writing to the Executive.

          (ii) Any notice so addressed shall be deemed to be given; if delivered
     by hand, on the date of such delivery;  if mailed by courier,  on the first
     business  day  following  the  date  of  such  mailing;  and if  mailed  by
     registered or certified  mail, on the third  business day after the date of
     such mailing.

     Section 13. Section Headings.  The headings of the sections and subsections
of this Agreement are inserted for  convenience  only and shall not be deemed to
constitute  a part  thereof,  affect  the  meaning  or  interpretation  of  this
Agreement or of any term or provision hereof.

     Section  14.  Entire  Agreement.  This  Agreement  constitutes  the  entire
understanding  and agreement of the parties  hereto  regarding the employment of
the Executive.  This Agreement  supersedes all prior negotiations,  discussions,
correspondence,   communications,  understandings  and  agreements  between  the
parties relating to the subject matter of this Agreement.

     Section  15.  Severability.  In the  event  that  any part or parts of this
Agreement shall be held illegal or unenforceable by any court or  administrative
body  of  competent  jurisdiction,  such  determination  shall  not  effect  the
remaining  provisions  of this  Agreement  which shall  remain in full force and
effect.

     Section 16.  Counterparts.  This  Agreement  may be executed in one or more
counterparts,  each of  which  shall  be  deemed  an  original  and all of which
together shall be considered one and the same agreement.

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.


HAMPSHIRE GROUP, LIMITED

By:  /s/ Charles W. Clayton
------------------------------------------
Name:  Charles W. Clayton
Title: Vice President

/s/  Ludwig G. Kuttner
-------------------------------------------
Ludwig G. Kuttner

<PAGE>
                                UNANIMOUS CONSENT
                     STOCK OPTION AND COMPENSATION COMMITTEE
                            HAMPSHIRE GROUP, LIMITED


     We, the  undersigned,  constituting  all of the members of the Stock Option
and  Compensation  Committee  of Hampshire  Group,  Limited  ("Company")  hereby
unanimously  approve the Employment  Agreement between the Company and Ludwig G.
Kuttner, dated as of January 1, 1998, a copy of which is annexed hereto and made
a part hereof.

     IN WITNESS WHEREOF,  we have executed this Unanimous Consent as of April 1,
1998.


/s/ Herbert Elish
---------------------------
Herbert Elish


/s/ Harvey L. Sperry
----------------------------
Harvey L. Sperry