<PAGE>   1
                                  EXHIBIT 10(f)

                        AMENDMENT TO EMPLOYMENT AGREEMENT

                                       AND

                           OFFICER SEVERANCE AGREEMENT


         This is an Amendment to Employment Agreement and Officer Severance
Agreement (this "Agreement") dated as of May 19, 1988 between Joseph G. Hill
(the "Officer") and DMI Furniture, Inc. (the "Corporation").

                                    RECITALS

         A. The Corporation considers it essential to the best interests of its
stockholders to foster the continuous employment of key management personnel. In
this connection, the Board of Directors of the Corporation (the "Board")
recognizes that, as is the case with many publicly held corporations, the
possibility of a change in control of the Corporation may exist and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Corporation and its stockholders.

         B. The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the possibility of a
change in control of the Corporation, and to promote objectivity in the face of
any pending change of control of the Corporation.

                                    AGREEMENT

         NOW THEREFORE, to induce the Officer to remain in the employ of the
Corporation, the Corporation agrees that the Officer shall receive the severance
benefits set forth in this Agreement if his employment with the Corporation is
terminated in the circumstances described below:


         1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:

                  (a) CAUSE. Termination by the Corporation of the Officer's
employment for "Cause" shall mean termination upon (i) the willful and continued
failure by the Officer to substantially perform the Officer's duties with the
Corporation after a written demand for substantial performance is delivered to
the Officer by the Board, which demand specifically identifies the manner in
which the Board believes that the Officer has not substantially



                                     - 65 -
<PAGE>   2

performed his duties; or (ii) the willful engaging by the Officer in gross
misconduct materially and demonstrably injurious to the Corporation; or (iii)
the Officer's Disability. For purposes of this definition, no act, or failure to
act on the Officer's part shall be considered "willful" unless done or omitted
to be done by the Officer not in good faith and without reasonable belief that
the Officer's action or omission was in the best interests of the Corporation.
The Officer shall not be deemed to have been terminated for Cause unless and
until the Corporation has delivered a Notice of Termination.

                  (b) CHANGE IN CONTROL. For purposes of this Agreement, a
"change in control" of the Corporation shall be deemed to have occurred if any
of the following occur:

                           (i) Any "person," as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Corporation, any trustee or other fiduciary
holding securities under an employee benefit plan of the Corporation, or any
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of stock of
the Corporation, or any of the existing Series C Preferred stockholders), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing 40%
or more of the combined voting power of the Corporation's then outstanding
securities.

                           (ii) During any period of two consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board cease to constitute at
least a majority thereof. If the election or nomination for election by the
Corporation's stockholders of a new director (other than a director designated
by a person who has entered into an agreement with the Corporation to effect a
transaction described in clause (i), (iii) or (iv) of this Section) was approved
by a vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, that director shall not be
counted for purposes of the preceding sentence.

                           (iii) The stockholders of the Corporation approve a
merger or consolidation of the Corporation with any other corporation, other
than (A) a merger or consolidation which would result in the voting securities
of the Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 80% of the combined voting power of the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation, or (B) a merger or consolidation effected to
implement a recapitalization of the Corporation (or similar transaction) in
which no person" (as hereinabove defined) acquires more than 40% of the combined
voting power of the Corporation's then outstanding securities.

                           (iv) The stockholders of the Corporation approve a
plan of complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the Corporation's
assets.



                                     - 66 -
<PAGE>   3

                           (v) Any other transaction which is of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act occurs.

                  (C) DATE OF TERMINATION. "Date of Termination" shall mean the
date specified in the Notice of Termination, or, if the Officer's employment is
terminated by the Corporation, the date on which a Notice of Termination is
given. In the case of a termination by the Officer the Date of Termination shall
not be less than 15 nor more than 65 days from the date such Notice of
Termination is given.

                  (d) DISABILITY. The Officer shall be deemed to have terminated
his employment due to a "Disability" if a mental or physical illness or
disability of the Officer incapacitates him from fully performing the duties
assigned to him for a period of 90 successive days or for an aggregate period of
120 days during any 12 calendar-month period.

                  (e) NOTICE OF TERMINATION. Any termination by the Corporation
or by the Officer shall be communicated by written notice of such termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States certified or registered mail, return
receipt requested, postage prepaid, addressed (i) if to the Officer, to 5506
Apache Road, Louisville, Kentucky 40207, (ii) if to the Corporation to:
Corporate Offices, 10400 Linn Station Road, Suite 100, Louisville, Kentucky
40223 (all notices to the Corporation shall be directed to the attention of the
Board with a copy to the Secretary of the Corporation), or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt. Any Notice of Termination delivered by the Corporation prior to the
occurrence of a Change of Control shall be deemed notice of termination without
Cause unless and until there has been delivered to the Officer a copy of a
resolution duly adopted by the affirmative vote of not less than 3/4 of the
entire membership of the Board at the meeting of the Board called and held for
that purpose (after reasonable notice to the Officer and an opportunity for the
Officer, together with his counsel, to be heard before the Board), finding that
in the good faith opinion of the Board, the Officer was guilty of conduct
constituting Cause and specifying the particulars thereof in detail.

                  (f) EMPLOYMENT AGREEMENT. "Employment Agreement" shall mean
the agreement so styled between the Officer and the Corporation dated April 1,
1986 and any renewal or extension thereof.

         2. TERM. This Agreement shall commence on January 1, 1988, and shall
continue until the later of (a) December 31, 1990, or (b) two years following a
Change in Control which occurs prior to December 31, 1990; PROVIDED, HOWEVER,
that commencing on January 1, 1991, the term of this Agreement shall
automatically be extended for additional periods equal to the relative periods
possible for the initial term unless, not later than September 30 of the year
preceding expiration, the Corporation shall have given notice that it does not
wish to extend this Agreement.



                                     - 67 -
<PAGE>   4

         3. TERMINATION OF EMPLOYMENT.

                  (a) GENERAL. Except as provided in Section 3(b), the Officer
shall be entitled to the benefits provided in Section 4 upon the termination of
the Officer's employment after a Change in Control that occurs during the term
of this Agreement. If during the term of this Agreement the Corporation
terminates the Officer's employment other than for Cause, and a Change in
Control occurs within 9 months thereafter, then the Officer shall be entitled to
all benefits hereunder.

                  (b) TERMINATION BY EMPLOYEE. If the Officer dies or terminates
his own employment during the 60-day period immediately following a Change in
Control that occurs during the term of this Agreement, his right to receive
payments or benefits under this Agreement shall be determined solely in
accordance with the provisions of Section 5. Continued employment after that
60-day period shall not constitute a waiver of the Officer's right to
subsequently terminate his employment.

         4. COMPENSATION UPON TERMINATION.

                  (a) AMOUNT. If the Officer's employment is terminated in the
circumstances described in Section 3(a), then the Officer shall be paid as
severance compensation:

                           (i) The unpaid balance of the Officer's full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given; AND

                           (ii) An amount equal to (A) three times the Officer's
annual base salary (as specified in section 3(a) of the Employment Agreement if
then in effect) in effect at the time the Notice of Termination is given
(present valued to a lump sum using the interest rate then applicable to
six-month certificates of deposit at Liberty National Bank & Trust Company,
Louisville, Kentucky, rather than being treated as though paid over 36 months),
plus (B) the most recent cash bonus paid to the Officer.

                           (iii) All legal fees and expenses incurred by the
Officer resulting from termination (including all such fees and expenses, if
any, incurred in contesting any such termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement or in connection with
any tax audit to the extent attributable to the application or attempted
application of Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), to any payment hereunder).

                  (b) MANNER OF PAYMENT. All payments required by Section 4(a)
shall be made within 5 days after the later of (i) the Date of Termination, (ii)
the date a Change in Control occurs or (iii) with respect to legal fees, the
date they are incurred. Payment shall be made in a lump sum in cash unless the
Officer by written notice specifies payment over a longer period.



                                     - 68 -
<PAGE>   5

                  (c) MITIGATION, OFFSET OR REDUCTION. The Officer shall not be
required to mitigate the amount of any payment provided for in this Section 4 by
seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 4 be reduced by any compensation earned by
the Officer as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Officer to the
Corporation, or otherwise, except (i) as provided in Section 6, or (ii)
compensation received by the Officer from the Corporation pursuant to the last
literary paragraph of section 7 of the Employment Agreement if he is terminated
by the Corporation prior to a Change in Control, which amount shall offset
dollar for dollar any payments due hereunder.

         5. OFFICER COOPERATION INCENTIVE. If the Officer terminates his
employment for any reason within the 60-day period immediately following a
Change in Control, the Corporation shall pay the Officer his full base salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which he is entitled under any
plan, agreement or arrangement of the Corporation at the time such payments are
due and the Corporation shall have no further obligations to the Officer under
this Agreement.

         6. REDUCTION IN AMOUNTS PAYABLE. In no event shall any amount payable
under any provision of this Agreement equal or exceed an amount which would
cause the Corporation to forfeit, pursuant to Section 280G(a) of the Code, its
deduction for any or all such amount payable. Pursuant to this Section 6, the
Corporation's Compensation Committee has the power to reduce severance benefits
payable under this Agreement (beginning by first reducing benefits attributable
to the payment of legal fees), if such benefits alone or in conjunction with
termination benefits provided under any other plan or agreement between the
Officer and the Corporation, would cause the Corporation to forfeit otherwise
deductible payments; provided, however, that no benefits payable under this
Agreement shall be reduced pursuant to this Section 6 to less than $1.00 below
the amount of benefits which the Corporation can properly deduct under Section
280G(a) of the Code.

         7. SUCCESSORS; BINDING AGREEMENT.

                 (a) The Corporation shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. Failure of the Corporation to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Officer to compensation from the
Corporation in the same amount and on the same terms to which the Officer would
be entitled hereunder pursuant to the provisions of Sections 4, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination and the date Notice of
Termination is given. As used in this Agreement, "Corporation" shall mean the
Corporation as defined above and any successor to its business or assets as
aforesaid or which assumes and agrees to perform this Agreement by operation of
law, or otherwise.



                                     - 69 -
<PAGE>   6

                 (b) This Agreement shall inure to the benefit of and be
enforceable by the Officer and his personal or legal representatives, executors,
administrators, beneficiaries, heirs, distributees, and legatees. If the Officer
should die while any amount would still be payable to the Officer hereunder had
the Officer continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Officer's personal or legal representatives, heirs, distributees, beneficiaries,
legatees or other designees, as appropriate.

         8. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Officer and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The laws of
Delaware shall govern the validity, interpretation, construction and performance
of this Agreement. All references to sections of the Exchange Act or the Code
shall be deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law. The obligations of the Corporation
under Section 4 shall survive the expiration of the term of this Agreement.

         9. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

         10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

         11. AMENDMENTS; ENTIRE AGREEMENT. This Agreement and the Employment
Agreement sets forth the entire agreement of the parties hereto in respect of
the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto including, without limitation, the last literary paragraph
of section 7 of the Employment Agreement, to the extent it relates to payments
to be made after a Change in Control; and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and cancelled.




                                     - 70 -
<PAGE>   7



         IN WITNESS WHEREOF, the Officer and the Corporation have executed three
originals of this Agreement as of May 19, 1988, but actually on the dates set
forth below.

                                  DMI FURNITURE, INC.


       /s/ Joseph G. Hill         By: /s/ Donald D. Dreher
   ------------------------           -----------------------
         Joseph G. Hill                 Donald D. Dreher
                                        President and Chief Executive Officer

Date:       May 20, 1988          Date:         May 20, 1988
     ----------------------             ----------------------------









                                     - 71 -