<PAGE>   1
                                                                  EXHIBIT 10.2

                               AMENDMENT NO. 1 TO
                          LOAN AND SECURITY AGREEMENT

    THIS AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (the "Amendment"),
dated this 22nd day of December, 1997, is made by and among

    DAN RIVER INC., a Georgia corporation (the "Borrower");

    The lenders and other financial institutions that are parties to the Loan
Agreement hereinafter described (the "Lenders");

    FLEET CAPITAL CORPORATION, a Rhode Island corporation, as agent for the
Lenders under the Loan Agreement (in such capacity, the "Agent"); and

    DAN RIVER FACTORY STORES, INC. a Georgia corporation (the "Guarantor"),

    to the Loan and Security Agreement, dated February 3, 1997 (as amended,
modified, restated or supplemented from time to time, the "Loan Agreement").
All capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Loan Agreement.

                                    RECITALS

    A.      Pursuant to the Loan Agreement, each Lender has severally agreed to
make Revolver Loans to the Borrower up to an amount of such Lender's Revolver
Commitment and to make its Term Loan Advance in an amount equal to such
Lender's Term Loan Commitment.

    B.      The Term Loan and each Lender's Term Loan Advance has been paid in
full and, pursuant to Section 6.5 of the Loan Agreement, the Agent has
released its Liens in the Equipment Collateral and the Owned Real Property.

    C.      The Borrower has sold, or will shortly close the sale of, its 
Wetumpka Plant and all of the Inventory located therein and has requested that 
the Agent release its Lien in such Inventory, and the Lenders have granted
such request and have authorized and instructed the Agent to release its Lien
in such Inventory on behalf of the Lenders.

    D.      The Borrower, the Guarantor, the Agent and the Lenders wish to enter
into this Amendment for the purposes of making certain changes to the Loan
Agreement and consenting to the Agent's release of its Lien in the Inventory
located at the Wetumpka Plant, all as more particularly set forth herein.


<PAGE>   2
                             STATEMENT OF AGREEMENT

    NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
expressly acknowledged, the Borrower, the Guarantor, the Lenders and the
Agent hereby agree as follows:

                                   ARTICLE I

                          AMENDMENTS TO LOAN AGREEMENT

    The Loan Agreement is hereby amended as follows:

    1.1     Revolver Loans.  Section 1.1.1 is amended in its entirety to read as
follows:

            1.1.1  Revolver Loans.  Each Lender agrees, severally to the 
    extent of its Revolver Commitment and not jointly with the other
    Lenders, upon the terms and subject to the conditions set forth herein, to
    make Revolver Loans to Borrower on any Business Day during the period from
    the date hereof through the day before the Commitment Termination Date, not
    to exceed in aggregate principal amount outstanding at any time such
    Lender's Revolver Commitment at such time, which Revolver Loans may be
    repaid and reborrowed in accordance with the provisions of this Agreement;
    provided, however, that Lenders shall have no obligation to Borrower
    whatsoever to make any Revolver Loan if at the time of the proposed funding
    thereof the aggregate principal amount of all of the Revolver Loans and
    Swingline Loans then outstanding exceeds, or would exceed after the funding
    of such Revolver Loan, either the Borrowing Base or the aggregate amount of
    the Revolver Commitments then in effect. Each Borrowing of Revolver Loans
    shall be funded by Lenders on a Pro Rata basis in accordance with their
    respective Revolver Commitments.  The Revolver Loans shall bear interest as
    set forth in Section 2.1 hereof.  Each Revolver Loan shall, at the option
    of Borrower, be made or continued as, or converted into, part of one or
    more Borrowings that, unless specifically provided herein, shall consist
    entirely of Base Rate Loans or LIBOR Loans."

    1.2     Term Loan Facility.  Section 1.2 is deleted and in lieu thereof is
substituted the phrase "RESERVED".

    1.3     Use of Proceeds.  Section 1.4 is amended by deleting the word "and"
at the end of Section 1.4(i), deleting the period at the end of Section 1.4(ii)
and substituting a semi-colon therefor, and adding a new Section 1.4(iii) as
follows:

    "(iii)  All Swingline Loans made after the effective date of Amendment No.
1 to this Agreement shall be used solely for Borrower's general working
capital needs in a manner consistent with the provisions of this Agreement
and Applicable Law and for any other purposes not inconsistent with this
Agreement."

    1.4     Swingline Facility.  A new Section 1.5 is added as follows:



<PAGE>   3


    1.5     Swingline Subfacility.

            1.5.1  Swingline Loans.  Swingline Lender agrees, upon the terms and
    subject to the conditions set forth herein, to make Swingline Loans to
    Borrower on any Business Day during the period from the date hereof through
    the day before the Commitment Termination Date, not to exceed in aggregate
    principal amount outstanding at any time the Swingline Commitment at such
    time, which Swingline Loans may be repaid and reborrowed in accordance with
    the provisions of this Agreement; provided, however, that Swingline Lender
    shall have no obligation to Borrower whatsoever to make any Swingline Loan
    if at the time of the proposed funding thereof the aggregate principal
    amount of all of the Revolver Loans and Swingline Loans then outstanding
    exceeds, or would exceed after the funding of such Swingline Loan, either
    the Borrowing Base or the aggregate amount of the Revolver Commitments then
    in effect.  All Swingline Loans shall be Base Rate Loans and shall bear
    interest from the date advanced until paid (whether at stated maturity, on
    acceleration, or otherwise) at the interest rate that is applicable to
    Revolver Loans outstanding that are Base Rate Loans as set forth in Section
    2.1(i) hereof.  There shall be no minimum amount for Borrowings of
    Swingline Loans hereunder.

            1.5.2  Swingline Note.  Borrower shall execute and deliver to
    Swingline Lender, on the effective date of Amendment No. 1 to this
    Agreement, a promissory note substantially in the form of Exhibit A-3
    attached hereto and made a part hereof (such promissory note, being
    hereinafter referred to as the "Swingline Note"), to evidence the Swingline
    Loans to Borrower, in an original principal amount equal to the amount of
    the Swingline Commitment. The Swingline Note shall provide for payment of
    the Swingline Loans evidenced thereby as specified in Section 4 hereof."

    1.5     Interest Rate.  Section 2.1.1, Rates of Interest - Revolver Loans, 
is amended in its entirety to read as follows:

            "2.1.1 Rates of Interest - Revolver Loans.  Subject to the 
    provisions of Sections 2.1.8 and 2.1.9 of this Agreement, Borrower agrees 
    to pay interest on the unpaid principal amount of the Revolver Loans
    outstanding from the respective dates such principal amounts are advanced
    until paid (whether at stated maturity, on acceleration, or otherwise) at a
    variable rate per annum equal to the applicable rate indicated below:

                     (i)  For Revolver Loans made or outstanding as Base Rate 
    Loans, the Base Rate in effect from time to time; or

                     (ii)  For Revolver Loans made or outstanding as LIBOR Rate
    Loans, the relevant Adjusted LIBOR Rate for the applicable Interest Period
    selected by Borrower in conformity with this Agreement plus the Applicable
    Percentage."

    1.6     Rates of Interest - Term Loan.  Section 2.1.2 is deleted and in lieu
thereof is substituted the phrase "RESERVED".



<PAGE>   4


    1.7     Adjustment in Rates of Interest.  Section 2.1.7 is deleted and in 
lieu thereof is substituted the phrase "RESERVED".

    1.8     Manner of Borrowing and Funding Revolver Loans and Swingline Loans.
Section 3.1 is amended in its entirety to read as follow:

            "3.1 Manner of Borrowing and Funding Revolver Loans and Swingline
    Loans. Borrowings under the Commitments established pursuant to Sections
    1.1 and 1.5 hereof shall be made and funded as follows:

            3.1.1 Notice of Borrowing.

                     (i)  Whenever Borrower desires to make a Borrowing under 
            this Agreement (other than a Borrowing resulting from a
            conversion or continuation pursuant to Section 2.1.4), Borrower
            shall give Agent prior written notice (or telephonic notice
            promptly confirmed in writing) of such Borrowing request (a "Notice
            of Borrowing"), which shall be in the form of Exhibit C annexed
            hereto and signed by an authorized officer of Borrower.  Such
            Notice of Borrowing shall be given by Borrower no later than 11:00
            a.m., Charlotte, North Carolina time, at the office of Agent
            designated by Agent from time to time (a) on the Business Day of
            the requested funding date of such Borrowing, in the case of Base
            Rate Loans, and (b) at least two (2) Business Days prior to the
            requested funding date of such Borrowing, in the case of LIBOR Rate
            Loans.  Notices received after 11:00 a.m., Charlotte, North
            Carolina time, shall be deemed received on the next Business Day.
            Notice of Borrowing (or telephonic notice thereof) shall be
            irrevocable and shall specify (a) the principal amount of the
            Borrowing, (b) the date of Borrowing (which shall be a Business
            Day), (c) what portion of any requested Loans are to be Base Rate
            Loans or LIBOR Rate Loans, (d) in the case of LIBOR Rate Loans, the
            duration of the Interest Period to be applicable thereto, and (e)
            the account of Borrower to which the proceeds of such Borrowing are
            to be disbursed. Borrower may not request any LIBOR Rate Loans if a
            Default or Event of Default exists.

                     (ii)  Unless payment is otherwise timely made by Borrower,
            the becoming due of any amount required to be paid under this
            Agreement or any of the other Loan Documents as principal
            (including the repayment to Agent of any drawings under a Letter of
            Credit or Letter of Credit Guaranty or any other Letter of Credit
            Obligations or to Swingline Lender of any Swingline Loans), accrued
            interest, fees or other charges shall be deemed irrevocably to be a
            request for a Swingline Loan or a Revolver Loan, as determined by
            Agent, each on the due date of, and in an aggregate amount required
            to pay, such principal, accrued interest, fees or other charges,
            and the proceeds of such Revolver Loan or Swingline Loan may be
            disbursed by way of direct payment of the relevant Obligation and
            shall bear interest as Base Rate Loans. Neither Agent nor any
            Lender shall have any obligation to Borrower to honor any deemed
            request for a Revolver Loan or a Swingline Loan, but may do so in
            their discretion and without regard to the existence of, and
            without being deemed to have waived, any Default or Event of
            Default or Overadvance Condition.

<PAGE>   5


                     (iii)  As an accommodation to Borrower, Agent and Lenders 
            may permit telephonic requests for Borrowings and electronic
            transmittal of instructions, authorizations, agreements or reports
            to Agent by Borrower; provided, however, that Borrower shall
            confirm each such telephonic request for a Borrowing of LIBOR Rate
            Loans by delivery of the required Notice of Borrowing to Agent by
            facsimile transmission promptly, but in no event later than 5:00
            p.m., Charlotte, North Carolina time, on the same day.  Unless
            Borrower specifically directs Agent and Lenders in writing not to
            accept or act upon telephonic or electronic communications from
            Borrower, neither Agent nor any Lender shall have any liability to
            Borrower for any loss or damage suffered by Borrower as a result of
            Agent's or any Lender's honoring of any requests, execution of any
            instructions, authorizations or agreements or reliance on any
            reports communicated to it telephonically or electronically and
            purporting to have been sent to Agent or Lenders by Borrower
            (except to the extent that such loss or damage results as a
            consequence of the gross negligence or willful misconduct of Agent
            or any Lender) and neither Agent nor any Lender shall have any duty
            to verify the origin of any such communication or the identity or
            authority of the Person sending it.

                     (iv)  Any Notice of Borrowing for a Base Rate Loan received
            by Agent from Borrower pursuant to this Section 3.1 shall be deemed
            a request for (a) a Swingline Loan if and to the extent that the
            aggregate amount of the Swingline Loans then outstanding are less 
            than $10,000,000, and (b) a Revolver Loan for the balance of the 
            Base Rate Loan requested in such Notice of Borrowing.

            3.1.2  Fundings By Lenders of Revolver Loans. Subject to its receipt
    of notice from Agent of a Notice of Borrowing as provided in Section 3.1.1,
    each Lender shall timely honor its Revolver Commitment by funding its Pro
    Rata share of each Borrowing of Revolver Loans that is properly requested
    or deemed requested by Borrower and that Borrower is entitled to receive
    under this Agreement.  Agent shall notify Lenders of each Notice of
    Borrowing of Revolver Loans by 12:00 noon, Charlotte, North Carolina time,
    on the proposed funding date in the case of Revolver Loans that are Base
    Rate Loans or by 12:00 noon, Charlotte, North Carolina time, at least two
    (2) Business Days before the proposed funding date in the case of Revolver
    Loans that are LIBOR Rate Loans.  Each Lender shall deposit with Agent an
    amount equal to its Pro Rata share of the Borrowing of Revolver Loans
    requested by Borrower at Agent's designated bank in immediately available
    funds not later than 2:00 p.m., Charlotte, North Carolina time, on the date
    of funding of such Borrowing, unless Agent's notice to Lenders is received
    after 12:00 noon, Charlotte, North Carolina time, on the proposed funding
    date of a Revolver Loan that is a Base Rate Loan, in which event Lenders
    shall deposit with Agent their respective Pro Rata shares of the requested
    Borrowing on or before 11:00 a.m., Charlotte, North Carolina time, of the
    next Business Day.  Subject to its receipt of such amounts from Lenders and
    provided each of the applicable conditions set forth in Section 10 is
    satisfied, Agent shall make the proceeds of the Revolver Loans received by
    it available to Borrower by disbursing such proceeds in accordance with
    Borrower's disbursement instructions set forth in the applicable Notice of
    Borrowing.  Unless Agent shall have been notified in writing by a Lender

<PAGE>   6


    prior to the proposed time of funding that such Lender does not intend to
    deposit with Agent an amount equal to such Lender's Pro Rata share of the
    requested Borrowing of Revolver Loans, Agent may assume that such Lender
    has deposited or promptly will deposit its share with Agent and Agent may
    in its discretion disburse a corresponding amount to Borrower on the
    applicable funding date.  If a Lender's Pro Rata share of such Borrowing is
    not in fact deposited with Agent, then, if Agent has disbursed to Borrower
    an amount corresponding to such share, such Lender agrees to pay, and in
    addition Borrower agrees to repay, to Agent forthwith on demand such
    corresponding amount, together with interest thereon, for each day from the
    date such amount is disbursed by Agent to or for the benefit of Borrower
    until the date such amount is paid or repaid to Agent, (a) in the case of
    Borrower, at the interest rate applicable to such Borrowing and (b) in the
    case of such Lender, at the Federal Funds Rate.  If such Lender repays to
    Agent such corresponding amount, such amount so repaid shall constitute a
    Revolver Loan, and if both such Lender and Borrower shall have repaid such
    corresponding amount, Agent shall promptly return corresponding amount in
    same day funds.

            3.1.3  Fundings By Swingline Lender of Swingline Loans: Repayment of
    Swingline Loans.

                     (i)  Subject to its receipt of notice from Agent of a 
            Notice of Borrowing as provided in Section 3.1.1, Swingline
            Lender shall timely honor its Swingline Commitment by funding a
            Borrowing of Swingline Loans that is properly requested or deemed
            requested by Borrower and that Borrower is entitled to receive
            under this Agreement.  Agent shall notify Swingline Lender of each
            Notice of Borrowing of Swingline Loans by 12:00 noon, Charlotte,
            North Carolina time, on the proposed funding date.  Swingline
            Lender shall deposit with Agent an amount equal to the Borrowing of
            Swingline Loans requested by Borrower at Agent's designated bank in
            immediately available funds not later than 2:00 p.m., Charlotte,
            North Carolina time, on the date of funding such Borrowing, unless
            Agent's notice to Swingline Lender is received after 12:00 noon,
            Charlotte, North Carolina time, on the proposed funding date of a
            Swingline Loan, in which event Swingline Lender shall deposit with
            Agent the requested Borrowing on or before 11:00 a.m., Charlotte,
            North Carolina time, of the next Business Day.  Subject to its
            receipt of such amount from Swingline Lender and provided each of
            the applicable conditions set forth in Section 10 is satisfied,
            Agent shall make the proceeds of the Swingline Loan received by it
            available to Borrower by disbursing such proceeds in accordance
            with Borrower's disbursement instructions set forth in the
            applicable Notice of Borrowing.  Agent shall not request Swingline
            Lender to make any Swingline Loan (a) Agent shall have received
            written notice from any Lender that one or more of the applicable
            conditions precedent set forth in Section 10 hereof will not be
            satisfied on the requested funding date for the applicable
            Borrowing or (b) the requested Borrowing would exceed the amount of
            availability on the funding date. Swingline Lender shall not
            otherwise be required to determine whether the applicable
            conditions precedent set forth in Section 10 hereof have been
            satisfied or the requested Borrowing would exceed the amount of
            Availability on the funding date applicable thereto prior to making
            any Swingline Loan.

<PAGE>   7


                     (ii)  Each Borrowing of a Swingline Loan shall be due and 
            payable on the earlier to occur of (a) the Commitment Termination 
            Date, or (b) effective immediately upon Agent's giving of a Payment
            Direction Notice, the receipt by Agent or Borrower of any proceeds
            of any of the Collateral, to the extent of such proceeds. 
            Swingline Lender may, at any time, in its sole discretion by
            written notice to Borrower and Agent, demand repayment of its
            outstanding Swingline Loans by way of a Borrowing of Revolver
            Loans, in which case Borrower shall be deemed to have requested a
            Borrowing of Revolver Loans comprised entirely of Base Rate Loans
            in the amount of such outstanding Swingline Loans. Each Lender
            hereby irrevocably agrees to make its Pro Rata share of such
            Revolver Loans immediately upon any such request or deemed request
            in the amount and in the manner specified in the preceding sentence
            and on the same such date notwithstanding (i) the amount of the
            requested Revolver Loans may not comply with any of the conditions
            to a Borrowing specified in Section 10 or any other provision of
            this Agreement,

            (ii) whether a Default, Event of Default or Overadvance Condition
            then exists, (iii) failure of any such request or deemed request
            for Revolver Loans to be made by the time otherwise required in
            Section 3.1.2 hereof, (iv) the date of the Borrowing, or (v) any
            reduction in the Revolver Commitments or termination of the
            Commitments relating thereto immediately prior to such Borrowing or
            contemporaneous therewith.  In the event that any such Borrowing
            cannot for any reason be made on the date otherwise required above
            (including, without limitation, as a result of the commencement of
            a proceeding under the Bankruptcy Code with respect to Borrower),
            then each Lender hereby agrees that it shall forthwith fund (as of
            the date such Borrowing would otherwise have occurred, but adjusted
            for any payments received from Borrower on or after such date and
            prior to such purchase) from Swingline Lender such participations
            in the outstanding Swingline Loans as shall be necessary to cause
            each such Lender to share in such Swingline Loans ratably based
            upon its respective Revolver Commitment (determined before giving
            effect to any termination of the Commitments pursuant to the terms
            hereof); provided, however, (i) all interest payable on the
            Swingline Loans shall be for the account of Swingline Lender until
            the date as of which the respective participation is purchased, and
            (ii) at the time any purchase of participations pursuant to this
            sentence is actually made, the purchasing Lender shall be required
            to pay to Swingline Lender interest on the principal amount of such
            participation purchased for each day from and including the day
            upon which the Borrowing would otherwise have occurred to but
            excluding the date of payment for such participation, at the rate
            equal to, if paid within two (2) Business Days of the date of such
            Borrowing, the Federal Funds Rate, and thereafter at a rate equal
            to the Base Rate.

                     (iii)  If any amounts received by Swingline Lender in 
            respect of any Swingline Loans are later required to be returned 
            or repaid by Swingline Lender to Borrower or any other Obligor or 
            their respective representatives or successors-in-interest, whether
            by court order, settlement or otherwise, the other Lenders shall, 
            upon

<PAGE>   8
            demand by Swingline Lender with notice to Agent, pay to Agent
            for the account of Swingline Lender, an amount equal to each other
            Lender's Pro Rata share of all such amounts required to be returned
            by Swingline Lender.

            3.1.4  Disbursement Authorization.  Borrower hereby irrevocably
    authorizes Agent to disburse the proceeds of each Revolver Loan and
    Swingline Loan requested, or deemed to be requested pursuant to Section
    3.1.1, as follows:  (i) the proceeds of each Revolver Loan and Swingline
    Loan requested under Section 3.1.1(i) shall be disbursed by Agent in
    accordance with the terms of the written disbursement letter from Borrower
    in the case of the initial Borrowing, and, in the case of each subsequent
    Borrowing, by wire transfer to such bank account as may be agreed upon by
    Borrower and Agent from time to time or elsewhere if pursuant to a written
    direction from Borrower; and (ii) the proceeds of each Revolver Loan and
    Swingline Loan requested under Section 3.1.1 (ii) shall be disbursed by
    Agent by way of direct payment of the relevant interest or other
    Obligation. "

    1.9     Number of LIBOR Rate Loans.  Section 3.3.1 is amended in its 
entirety to read as follows:

            "3.3.1 Number of LIBOR Rate Loans.  In no event may the number of
    LIBOR Rate Loans outstanding in respect of the Revolver Loans at any time
    exceed six (6)."

    1.10    Repayment of Revolver Loans.  Section 4.2.1(i) is amended in its
entirety to read as follows:

            "(i)  Any portion of the Revolver Loans consisting of the principal
    amount of Base Rate Loans shall be paid by Borrower to Agent, for the Pro
    Rata benefit of Lenders, unless converted to a LIBOR Rate Loan in
    accordance with this Agreement, immediately upon the earlier of (a)
    effective immediately upon Agent's giving of a Payment Direction Notice,
    the receipt by Agent or Borrower of any proceeds of any of the Collateral,
    to the extent that such proceeds are not used to repay any Swingline Loans
    then outstanding as required by Section 3.1.3(ii) hereof, or (b) the
    Commitment Termination Date."

    1.11    Repayment of Swingline Loans.  A new Section 4.2.3 is added as
follows:

            "4.2.3 Repayment of Swingline Loans.  The outstanding principal
    amounts of the Swingline Loans shall be due and payable in accordance with
    the provisions of Section 3.1.3(ii) hereof."

    1.12    Lien on Owned Real Property.  Section 6.4 is deleted in its entirety
and in lieu thereof is substituted the phrase "RESERVED".

    1.13    Release of Liens in Equipment Collateral and Owned Real Property.
Section 6.5 is deleted in its entirety and in lieu thereof is substituted the
phrase "RESERVED", all parties hereto hereby acknowledging that the Liens of
the Agent in the Equipment Collateral and the Owned Real Property have been
released by the Agent in accordance with the provisions of such Section.

    1.14    Administration of Equipment Collateral.  Section 7.4 is deleted in 
its entirety and in lieu thereof is substituted the phrase "RESERVED".


<PAGE>   9


    1.15    Environmental Matters.  Section 9.1.14 is deleted in its entirety 
and in lieu thereof is substituted the phrase "RESERVED".

    1.16    Consolidated Net Worth.  Section 9.3.2 is amended in its entirety to
read as follows:

            "9.3.2  Consolidated Net Worth.  Borrower shall maintain at all 
    times a Consolidated Net Worth equal to the sum of (i) $131,964,000, plus 
    (ii) one hundred percent (100%) of the net income after taxes of Borrower 
    and its Subsidiaries for the fiscal year ending January 3, 1998 and each 
    fiscal year thereafter (but shall not decrease by any net losses)."

    1.17    Project Loan Documents.  Section 11.1.9 is deleted in its entirety 
and in lieu thereof is substituted the phrase "RESERVED".

    1.18    Definitions.  Appendix A is amended as follows:

            (i)      New definitions are added in the proper alphabetical order
as follows:

            "Applicable Percentage - for any day and for any LIBOR Rate Loan, 
    the rate per annum set forth below opposite the applicable Level then in
    effect:

<TABLE>
<CAPTION>
                                                   Applicable
                                                 Percentage for
                     Level                       LIBOR Rate Loan
                     -----                       ---------------
                     <S>                               <C>
                     Level I                           1.50%
                     Level II                          1.24%
                     Level III                         1.0%
                     Level IV                          0.75%
                     Level V                           0.50%

</TABLE>

    The Applicable Percentage shall, in each case, be determined after receipt
by Agent of the financial statements as of the end of each fiscal quarter of
Borrower and its Subsidiaries and for that portion of the fiscal year of
Borrower and its Subsidiaries then ended which are required to be delivered
to Agent in accordance with the provisions of Section 9.1.3 (ii) of the
Agreement, and shall be adjusted effective on the first day of the fiscal
quarter following the receipt by Agent of such financial statements (each, an
"Adjustment Date").  Such Applicable Percentage shall be effective from such
Adjustment Date until the next such Adjustment Date.  Commencing upon the
effectiveness of Amendment No. 1 to this Agreement, the initial Applicable
Percentage shall be based on Level IV until the first Adjustment Date
occurring thereafter.

    Level - as at the determination thereof at the end of each fiscal quarter
of Borrower and its Subsidiaries, the level set forth below corresponding to
the Funded Indebtedness for Money Borrowed/Consolidated EBITDA Ratio as of
the end of such fiscal quarter:

<PAGE>   10

<TABLE>
<CAPTION>

                     Level                Ratio
                     -----                -----
                     <S>              <C>
                     Level I          greater than or equal to 3.0
                     Level II         greater than or equal to 2.50 but <3.0
                     Level III        greater than or equal to 2.0 but <2.50
                     Level IV         greater than or equal to 1.3 but <2.0
                     Level V          <1.3

</TABLE>

    Funded Indebtedness for Money Borrowed - that portion of Indebtedness for
Money Borrowed of Borrower and its Subsidiaries consisting of the Loans
outstanding under this Agreement and all Subordinated Debt.

    Funded Indebtedness for Money Borrowed/Consolidated EBITDA Ratio - on the
determination thereof as of the end of any fiscal quarter, the ratio of (i)
the aggregate principal balance of all Funded Indebtedness for Money Borrowed
outstanding as of the end of such fiscal quarter to (ii) Consolidated EBITDA
of Borrower and its Subsidiaries for the four (4) fiscal quarters then
ending.

    Swingline Lender - Fleet, in its capacity as Swingline Lender under the
Agreement, and its successors and assigns.

    Swingline Commitment - the sum of Ten Million Dollars ($10,000,000)."

(ii) The definition of "Borrowing" is amended in its entirety to read as
follows:

    "Borrowing - a borrowing of a Revolver Loan made on the same day by Lenders
or a Swingline Loan made by Swingline Lender."

(iii) The definition of "Borrowing Base" is amended in its entirety to read
as follows:

            "Borrowing Base - at any date of the determination thereof, an 
    amount equal to the sum of (a) the Accounts Borrowing Base, plus (b) the
    Inventory Borrowing Base, less (c) 100% of the undrawn face amount of any
    Letters of Credit and Letter of Credit Guaranties outstanding on such date,
    less (d) the sum of the following (without duplication) not to exceed,
    however, in the aggregate at any one time the sum of One Million Dollars
    ($1,000,000), unless an Event of Default exists, (i) all amounts or other
    charges which are then due and payable by Borrower to any landlord of any
    premises where any Collateral is located or to any processor, finisher or
    other Person which may have a claim against any Collateral, if and to
    the extent such landlord, processor, finisher or other Person has not
    executed in favor of Agent a waiver of its claims in respect of such
    Collateral provided such amounts are net of any reserves imposed with
    respect to Eligible Inventory with respect to such matters, (ii) any taxes
    assessed upon the Collateral which are then due and payable by Borrower and
    which are not being contested in accordance with Section 9.1.1 of the
    Agreement, and (iii) the costs of any casualty

<PAGE>   11


    insurance which is required to be maintained by Borrower pursuant to
    Section 7.1.2 of the Agreement which are then due and payable by Borrower,
    provided that Agent shall first have given Borrower at least ten (10) days
    written notice of such amounts prior to the imposition of such reserves
    pursuant to this clause (d), and less (e) any amounts which Agent or
    Lenders may pay pursuant to any of the Loan Documents for the account of
    Borrower and its Subsidiaries and which have not been reimbursed by
    Borrower."

    (iv)    The definition of "Commitment" is amended in its entirety to read as
    follows:

            "Commitment - at any date for any Lender, including Swingline 
    Lender, such Lender's Revolver Commitment and Swingline Commitment and
    "Commitments" means all Revolver Commitments and the Swingline Commitment."


    (v)     The definition of "Inventory Borrowing Base" is amended by deleting
    the classification of Inventory called the "Wetumpka Plant Inventory".

    (vi)    The definition of "Loan" is amended in its entirety to read as
follows:

            "Loan - a Revolver Loan or a Swingline Loan or all or any of them as
    the context may require."

    (vii)   The definition of "Notes" is amended in its entirety to read as
follows:

            "Notes - the Revolver Notes and the Swingline Note or all or any of
    them as the context may require."

    (viii)  The definitions of "Overadvance" and "Overadvance Condition" are
    amended in their entirety to read as follows:

            "Overadvance - a Revolver Loan made by Lenders, or a Swingline Loan
    made by Swingline Lender, when an Overadvance Condition exists or would
    result from the making of such Revolver Loan or Swingline Loan.

            Overadvance Condition - at any date, a condition such that the
    principal amount of the Revolver Loans and Swingline Loans outstanding to
    Borrower on such date exceeds the Borrowing Base on such date."

    (ix)    The definition of "Required Lenders" is amended in its entirety to
read as follows:

            "Required Lenders - at any date of determination thereof, Lenders
    having Revolver Commitments representing at least 66-2/3 % of the aggregate
    Revolver Commitments at such time; provided, however, that if any Lender
    shall have failed to fund its Pro Rata share of any Borrowing of Revolver
    Loans in accordance with the terms of the Agreement, then, for so long as
    such failure continues, the term "Required Lenders" shall mean Lenders
    (excluding such Lender whose failure to fund its Pro Rata share of any
    Borrowing of Revolver Loans has not been cured) having Revolver Commitments

<PAGE>   12


    representing at least 66 2/3 % of the aggregate Revolver Commitments at
    such time; provided, further, however, that if the Revolver Commitments
    have been terminated, the term "Required Lenders" shall mean Lenders
    (excluding each Lender whose failure to fund its Pro Rata share of any
    Borrowing of Revolver Loans has not been cured) holding Revolver Loans
    representing at least 66-2/3 % of the aggregate principal amount of
    Revolver Loans outstanding at such time."

    (x) The definitions of "Pending Revolver Loans", "Settlement Date",
"Settlement Loan" and "Settlement Report" are deleted.

    1.19    Term Loan References.  All references to the Term Loans and the Term
Notes in the Loan Agreement are deleted and shall be disregarded.

    1.20    Exhibit A-3.  Exhibit A-3 attached hereto is made Exhibit A-3 to the
Loan Agreement.

                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

    The Borrower hereby represents and warrants to the Agent and each Lender
that:

    2.1     Compliance with the Loan Agreement.  As of the execution of this
Amendment, the Borrower and each of its Subsidiaries are in compliance with
all of the terms and provisions set forth in the Loan Agreement and the other
Loan Documents to be observed or performed by the Borrower and each of its
Subsidiaries, except where the failure of the Borrower and its Subsidiaries
has been waived in writing by the Required Lenders or, with the written
consent of the Required Lenders, the Agent.

    2.2     Representations in Loan Agreement.  The representations and 
warranties of the Borrower set forth in the Loan Agreement are true and
correct in all material respects as of the date of this Amendment except to the
extent that such representations and warranties relate solely to or are
specifically expressed as of a particular date or period which is past or
expired.

    2.3     No Event of Default.  No Default or Event of Default exists.

                                  ARTICLE III

              MODIFICATION OF LOAN DOCUMENTS; RELEASE OF INVENTORY
                          COLLATERAL AT WETUMPKA PLANT

    3.1     Loan Documents.  The Loan Agreement and each of the other Loan
Documents are amended to provide that any reference to the Loan Agreement in
the Loan Agreement or any of the other Loan Documents shall mean the Loan
Agreement as amended by this Amendment, and as it is further amended,
modified, restated or supplemented from time to time.


<PAGE>   13


    3.2     Consent by the Guarantor.  The Guarantor hereby consents to, and
agrees to be bound by, the Agent's release of its Lien in the Inventory
located at the Wetumpka Plant and each of the amendments to the Loan
Agreement set forth herein, and confirms that the Guaranty Agreement and the
Guarantor Security Agreement to which the Guarantor is a party each remains
in full force and effect, enforceable against the Guarantor in accordance
with its respective terms.

    3.3     Release of Inventory Collateral at Wetumpka Plant.  The Lenders 
hereby consent to the release of the Lien of the Agent for the benefit of the
Lenders in all Inventory located at the Wetumpka Plant and hereby authorize and
instruct the Agent to execute, deliver and record such documents as shall be
necessary to release and terminate of record the Agent's Lien in such
Inventory.

                                   ARTICLE IV

                                    GENERAL

    4.1     Full Force and Effect.  As expressly amended hereby, the Loan
Agreement shall continue in full force and effect in accordance with the
provisions thereof.  As used in the Loan Agreement, "hereinafter", "hereto",
"hereof" or words of similar import, shall, unless the context otherwise
requires, mean the Loan Agreement as amended by this Amendment.

    4.2     Applicable Law.  This Amendment shall be governed by and construed 
in accordance with the internal laws and judicial decisions of the State of
North Carolina.

    4.3     Counterparts.  This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which
when taken together shall constitute but one and the same instrument.

    4.4     Expenses.  The Borrower shall reimburse the Agent for all reasonable
legal fees and expenses incurred by the Agent in connection with the
preparation, execution and delivery of this Amendment and the release of the
Agent's lien in the Inventory located at the Wetumpka Plant authorized
hereby.

    4.5     Headings.  The headings in this Amendment are for the purpose of
reference only and shall not affect the construction of this Amendment.


<PAGE>   14


    IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered as of the date first above written.

                                         BORROWER:

                                         DAN RIVER INC.



                                         By:---------------------------
                                         Title:------------------------

                                         GUARANTOR:

                                         Dan River Factory Stores, Inc.



                                         By:---------------------------
                                         Title:------------------------


                                         AGENT:

                                         FLEET CAPITAL CORPORATION, as Agent



                                         By:---------------------------
                                         Title:------------------------


                                         LENDERS:

                                         FLEET CAPITAL CORPORATION



                                         By:---------------------------
                                         Title:------------------------



<PAGE>   15



                                         WACHOVIA BANK, N.A. (formerly known as
                                           WACHOVIA Bank of Georgia, N.A.)


                                         By:---------------------------
                                         Title:------------------------

                                         NATIONSBANK, N.A.


                                         By:---------------------------
                                         Title:------------------------

                                         FIRST UNION COMMERCIAL
                                           CORPORATION


                                         By:---------------------------
                                         Title:------------------------

                                         THE FIRST NATIONAL BANK OF
                                         CHICAGO



                                         By:---------------------------
                                         Title:------------------------

                                         TRANSAMERICA BUSINESS CREDIT
                                         CORPORATION



                                         By:---------------------------
                                         Title:------------------------

                                         BANKBOSTON, N.A. (f/k/a First
                                         National Bank of Boston)


                                         By:---------------------------
                                         Title:------------------------



<PAGE>   16


                                  EXHIBIT A-3

                                 SWINGLINE NOTE


$10,000,000                                               December 22, 1997
                                                      Charlotte, North Carolina


    FOR VALUE RECEIVED, the undersigned, DAN RIVER INC., a Georgia corporation
(hereinafter "Borrower"), hereby promises to pay to the order of FLEET
CAPITAL CORPORATION, a Rhode Island corporation (hereinafter "Swingline
Lender"), in such coin or currency of the United States which shall be legal
tender in payment of all debts and dues, public and private, at the time of
payment, the principal sum of Ten Million Dollars ($10,000,000), or such
lesser sum as may constitute the outstanding principal amount of all
Swingline Loans made pursuant to the terms of the Loan Agreement (as such
term is defined below), together with interest from and after the date hereof
on the unpaid principal balance outstanding, and, to the extent permitted by
Applicable Law, accrued interest at the rates of interest in effect from time
to time and on the dates as set forth in the Loan Agreement.

    This Swingline Note (the "Note") is the Swingline Note referred to in, and
is issued pursuant to, that certain Loan and Security Agreement, dated
February 3, 1997, by and among Borrower, Fleet Capital Corporation, as agent
(in such capacity, the "Agent") for Swingline Lender and the other financial
institutions from time to time parties thereto ("Lenders"), and the Lenders
(hereinafter, as amended from time to time, the "Loan Agreement "), and is
entitled to all of the benefits and security of the Loan Agreement and the
Loan Documents executed and delivered in connection therewith. All of the
terms, covenants and conditions of the Loan Agreement and the other Loan
Documents are hereby made a part of this Note and are deemed incorporated
herein in full. All capitalized terms used herein, unless otherwise
specifically defined in this Note, shall have the meanings ascribed to them
in the Loan Agreement.

    Upon the occurrence of an Event of Default and for so long as such Event of
Default shall exist, the principal balance of, all accrued and unpaid
interest on, and all other amounts owing under, this Note shall become, or
may be declared to be, immediately due and payable in the manner and with the
effect as provided in the Loan Agreement.  In the event that this Note is not
paid when due, whether at the stated maturity date, by acceleration or
otherwise, Borrower agrees to pay, in addition to principal and interest, all
costs of collection, including reasonable attorneys' fees and expenses.

    Time is of the essence of this Note. To the fullest extent permitted by
Applicable  Law, Borrower, for itself and its legal representatives,
successors and assigns, expressly waives presentment, demand, protest, notice
of dishonor, notice of non-payment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, diligence in
collection, and all other notices of any kind.

    This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of North Carolina and is intended to take effect
as an instrument under seal.


<PAGE>   17


    IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed and
delivered in Charlotte, North Carolina, on the date first above written.

ATTEST:                                       DAN RIVER INC.
                                     ("Borrower")


--------------------------                            By:--------------------
    Secretary                        Title:-----------------------

    [CORPORATE SEAL]