Exhibit 10(M)--Employment Agreement



 



Exhibit 10(m)



EXTENSION AND RENEWAL OF



EMPLOYMENT AGREEMENT



     THIS AGREEMENT, as of this September 1, 2001 by and between DMI
FURNITURE, INC., a Delaware corporation (“DMI” or the “Corporation”) and JOSEPH
G. HILL (“Employee”).


     WHEREAS, Employee and DMI have entered into an Employment Agreement
dated as of September 1, 1986, which has been amended from time to time and
extended and renewed for additional terms through September 1, 2001;


     WHEREAS, the Employment Agreement, as amended, extended and renewed to
date, is intended to complement the terms of the Amendment to Employment
Agreement and Officer Severance Agreement dated as of May 19, 1988 between the
Employee and DMI (the “Officer Severance Agreement”), which provides for the
payment of certain benefits to Employee in certain circumstances following a
“change in control” of DMI (as defined in the Officer Severance Agreement).


     WHEREAS, Employee and DMI desire to amend, renew and extend the
Employment Agreement between them for an additional term expiring on September
1, 2003; and


     NOW, THEREFORE, intending to be legally bound hereby and in
consideration of the mutual undertakings hereinafter set forth, DMI and Employee
agree as follows, effective September 1, 2001;


     1.     Employment. DMI or its successors hereby employs Employee and Employee
hereby accepts employment as Executive Vice President, Operations of DMI for a
period commencing September 1, 2001 and ending September 1, 2003.


     2.     Duties of Employee. Employee further agrees as follows:


            (a)  To perform well and faithfully all such duties as are assigned to him
by the Board of Directors or the Chief Executive Officer of DMI; and


            (b)  To devote the time and attention to the performance of all matters
necessary and appropriate to the discharge of the duties so assigned to him in
the operation of DMI, it being the intention of this provision to require that
Employee serve as a “full-time” employee of DMI, to devote his best efforts to
the performance of the duties of him; and


            (c)  Not to invest or otherwise be involved in any business or other
activity that competes with the business of DMI other than nominal investments
as a passive investor in publicly traded companies.


     3.     Compensation. As compensation for his services pursuant to this
Agreement, Employee shall be paid as follows:


            (a) Salary. A minimum salary of $200,000 per year payable at the rate of
$8,333.33 semi-monthly during the period between September 1, 2001 and August
31, 2002. A minimum salary of $225,000 per year payable at the rate of $9,375
semi-montly during the period between September 1, 2002 and August 31, 2003.


            (b) Cash Bonus, fiscal years 2002 and 2003. For the Corporation’s fiscal
year 2002 and 2003, Employee shall receive an incentive bonus, the amount of
which is the sum of the subsections (i) through (iii):



	 	 	 	(i) Net income. Net income shall mean the net income as reported
to the Securities and Exchange Commission on form 10K excluding
(a) any gains or losses resulting from the sale, conversion or
other disposition of capital assets; (b) accruals made in
accordance with general accepted accounting.



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	 	 	 	(ii) principles to recognize the costs associated with the
permanent closure of an operation and the carrying costs prior to
the sale of the assets of that

(iii) operation; (c) gain or loss resulting from non-operational
litigation; and (d) charges or credits resulting from the
adoption of a change in accounting principle.




	 	 	 	 	 
	Net Income	 	Bonus
	
	 	

	<$900,000
	 	 	-0-	 
	
	
	
	

	$.9-$1.3M
	 	$	20,000	 
	
	
	
	

	$1.3-$1.7M
	 	$	30,000	 
	
	
	
	

	$1.7-$2.2M
	 	$	40,000	 
	
	
	
	

	$2.2-$2.6M
	 	$	50,000	 
	
	
	
	

	$2.6-$3.0M
	 	$	60,000	 
	
	
	
	

	$3.0-$3.6M
	 	$	72,000	 
	
	
	
	

	$3.6-$4.0M
	 	$	84,000	 



          
        (ii)  Return
on Assets. Return on Assets (ROA) is net income (as defined in (i))
divided by total assets as of the beginning of the fiscal year.



	 	 	 	 	 	 
	Return on Assets	 	Bonus
	
	 	

	 	<2%
	 	-0-	 
	
	
	
	

	 	2%-3%
	 	$	7,000	 
	
	
	
	

	 	3%-4%
	 	$	10,500	 
	
	
	
	

	 	4%-5%
	 	$	14,000	 
	
	
	
	

	 	5%-6%
	 	$	17,500	 
	
	
	
	

	 	6%-7%
	 	$	21,000	 
	
	
	
	

	 	7%-8%
	 	$	24,500	 
	
	
	
	

	 	>8%
	$	28,000	 



     (iii)  Sales
Growth.



	 	 	 	 	 	 
	Revenue Growth	 	Bonus
	
	 	

	<0%
	 	 	-0-	 
	
	
	
	

	 	0%-5%
	 	$	6,500	 
	
	
	
	

	 	5%-10%
	 	$	9,300	 
	
	
	
	

	 	10%-12.5%
	 	$	12,100	 
	
	
	
	

	 	12.5%-15%
	 	$	15,800	 
	
	
	
	

	 	15%-17.5%
	 	$	18,600	 
	
	
	
	

	 	17.5%-20%
	 	$	23,300	 
	
	
	
	

	 	>20%
	 	$	28,000	 



            (c) 
Bonus Payments. Any bonus under this paragraph 3 shall be paid within
one hundred thirty days of the end of the fiscal year.


     4.     Fringe
Benefits. DMI will provide Employee with fringe benefits as follows:


            (a)  DMI will maintain, without contribution by Employee, life insurance
with


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       (b)  benefits payable as designated by Employee in a face amount equal to
three times Employee’s annual base salary rate hereunder provided however the
face amount of life insurance benefits is not to exceed $750,000.


     
       (c)  DMI will maintain health insurance at least as comprehensive as
provided for other key and executive employees.


     
       (d)  DMI will maintain, without contribution by Employee, travel accident
insurance with benefits payable as designated by Employee in a face amount equal
to $250,000 death benefits for accidental death in the course of travel.


     
       (e)  DMI will provide Employee with an automobile comparable to those
furnished to other key executives, or its cash equivalent of $675 per month, for
Employee’s business related use.


     
       (f)  Employee shall receive reimbursement for expenses incurred by him in
connection with Medical Care for Employees, his spouse and his dependents,
provided, however, that the amount paid by DMI to Employee pursuant to this
subsection in any fiscal year during the term of this Agreement shall not exceed
$2,000. For the purpose of this subsection the term “Medical Care” means amounts
paid for the diagnosis, care, medication, treatment, or prevention of disease,
or for the purpose of affecting any structure or function of the body (including
amounts paid for accident or health insurance), or for transportation primarily
for and essential to Medical Care. Payments hereunder may be made from time to
time as requested by Employee with or without requiring proof of the medical
expenses in questions, in the discretion of the Board of Directors, and it is
not necessary that such medical expenses have already been paid by Employee, his
spouse, or his aforesaid dependents, but merely that, if not yet paid, there
exists an obligation to pay them. Premiums paid by DMI under any group accident
or health insurance policy that may be maintained by DMI covering or for the
benefit of some or all of its employees, and payments made by insurers pursuant
to said policy, shall not to any extent be regarded as payments made pursuant to
this subsection.


     
       (f)  Employee shall receive annual reimbursement for expenses incurred by
him in connection with personal or tax financial planning, not to exceed $2,000
per year.


       
     (g)  Employee shall be entitled to participate in any benefit plan of a type
not specifically covered by this Agreement and established by DMI for key
employees during the term of Employee’s employment hereunder on a basis
consistent with his age, position, responsibilities, and level of compensation.


       
     (h)  Employee shall be reimbursed for his reasonable out-of-pocket travel
and business expenses, including but not limited to, membership in private clubs
for business purposes. All such club memberships will be approved by a majority
of outside members of the Board of Directors.



	 	5.	 	Vacation. Employee shall be entitled to a four-week vacation with pay
in each 12-month period ending August 31. A maximum of one week of
annual paid vacation shall be cumulative and will not be deemed waived
if not taken during the applicable 12-month period. Employee’s paid
vacation shall be pro-rated based on the number of months he has
remained employed by DMI during any fiscal year during which this
Agreement expires or is terminated.



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     6.     Other
Board of Directors Action. Nothing in this Agreement shall be
deemed to prevent the Board of Directors of DMI from taking any action it may
deem, in its sole discretion, to be desirable to make the terms and conditions
of this Employment Agreement more beneficial to Employee, or to add further
benefits to his employment with DMI, provided that Employee agrees to such
changes and additions.


     7.     Termination. This Agreement shall terminate and, except to the extent
previously accrued or as otherwise provided in the Officer Severance Agreement,
all rights and obligations of DMI and Employee under this Agreement shall be
void, upon the earliest to occur of any of the following:


     
       (a)  Expiration of the period of employment set forth in paragraph 1,
providing that the Corporation has served the Employee with Notice, not less
than 90 days prior to the expiration of the term of this agreement, of the
Corporation’s decision to not renew the agreement. If the Corporation does not
serve the Employee with this Notice of non-renewal, then this agreement
automatically renews and extends for a period of an additional one year period
through the end of the following fiscal year of the Corporation. In the event
the Corporation gives notice of non-renewal, and the Corporation fails to
negotiate other employment arrangements with Employee, Employee will receive a
severance payment in the amount of $115,000 on October 1, 2003, providing
Employee delivers a release of liability in substantially the same form as
attached here as “Exhibit A”.


       
     (b)  Death of Employee;


     
       (c)  Mental or physical illness or disability of Employee that shall
incapacitate him, for a period of 90 successive days or for an aggregate period
of 120 days during any 12 calendar months, from fully performing the duties
assigned to him hereunder and in the good faith determination of the Board of
Directors and upon written notice to Employee.


     
       (d)  If Employee (i) is found guilty of having committed against DMI any
criminal act, including criminal fraud, or (ii) is found guilty of having
committed any criminal act involving moral turpitude, or (iii) the willful and
continued failure by the Employee to substantially perform the Employee’s duties
with DMI after a written demand for substantial performance is delivered to the
Employee by the Board, which demand specifically identifies the manner in which
the Board believes that the Employee has not substantially performed his duties;
or (iv) the willful engaging by the Employee in gross misconduct materially and
demonstrably injurious to the Corporation. For the purposes of this definition,
no act, or failure to act on the Employee’s part shall be considered “willful”
unless done or omitted to be done by the Employee other than in good faith and
without reasonable belief that the Employee’s action or omission was in the best
interests of DMI. The Employee shall not be deemed to have been terminated for
Cause (as defined in the Officer Severance Agreement) unless and until DMI has
delivered a Notice of Termination, as provided therein.


     
       (e)  Voluntary cessation by Employee of his duties and responsibilities
under this agreement.


     
       If DMI terminates Employee’s employment other than for Cause (as defined in
the Officer Severance Agreement), and a change in control (as defined in the
Officer Severance Agreement) occurs within 9 months thereafter, then Employee
shall be entitled to all benefits


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provided under the Officer Severance Agreement.


     Otherwise, if Employee’s employment hereunder is terminated for any other
reason than those specified in subparagraphs (a) through (e) of this paragraph
7, then DMI shall remain liable to Employee and shall pay Employee in full
settlement of DMI’s obligations hereunder: (i) the full amount of the balance of
his base salary as provided in subparagraph 3(a) above, to the expiration date
of this Agreement or to such expiration date as may have been extended by action
of the Board of Directors pursuant to subparagraph 7(a), in a lump sum; plus
(ii) an amount equal to the cash bonus and the stock bonus that would have been
payable to Employee pursuant to subparagraph 3(b) above had Employee remained
employed until the end of DMI’s fiscal year, multiplied by a fraction, the
numerator of which is the number of complete calendar months during which
Employee was employed during the fiscal year and the denominator of which is 12.
The payments based upon the cash bonus and the stock bonus shall be paid within
130 days of the delivery to DMI of the financial statements upon which they
shall be based.


     8.     Coordination
with Officer Severance Agreement. For the purposes of the
Officer Severance Agreement, this Agreement shall constitute a renewal and
extension of the Employment Agreement dated as of September 1, 1986 between
Employee and DMI. If any provision of this Agreement may be viewed as
conflicting with a provision of the Officer Severance Agreement, and the
provision at issue does not specifically state that it is intended to supersede
the Officer Severance Agreement, the Officer Severance Agreement shall control.


     9.     Non-competition. If this Agreement is terminated for any reason
specified in subparagraphs (a) through (e) of Paragraph 7, Employee shall
refrain, for a period of one year after the termination of this Agreement, from
carrying on a business that competes with a business conducted by DMI within the
geographic areas described as follows:



	 	 	 	The 50 states of the United States of America and Puerto Rico,
except for the states of Washington, Oregon, Idaho, Colorado,
Wyoming, North Dakota and South Dakota.



For the purposes of this paragraph, a business shall be deemed carried on by
Employee if carried on by a proprietorship, partnership, association, or
corporation, or other business entity with which Employee is connected, except
that Employee shall not be deemed to be connected with a business competitive to
that conducted by DMI to the extent that Employee is merely a passive investor
therein or not engaged in the business operations thereof as an officer,
director, employee, agent, consultant, sales representative, or other provider
of personal services in a capacity that would enable him to use his knowledge or
DMI’s trade secrets, customer lists, sources of supply or unique business
methods to compete against DMI. It is agreed that in the event of a breach or a
threatened breach of the foregoing, no adequate remedy exists at law to protect
DMI’s interests and that DMI shall be entitled to appropriate injunctive relief.
Should the foregoing covenant be adjudged to any extent invalid by any court of
competent jurisdiction, such covenant shall be deemed modified to the extent
necessary to make it enforceable.


     10.     Place
of Employment. DMI agrees that the principal location at which
Employee is to render his services hereunder will continue to be Louisville,
Kentucky.


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     11.     Notices. Any notice to DMI or Employee hereunder may be given by
delivering it to, or by depositing it in the United States mail, postage
pre-paid and by certified mail, addressed to the parties at the following
addresses:



	 
	DMI:
	Mr. Donald D. Dreher

DMI Furniture, Inc.

One Oxmoor Place

101 Bullitt Lane

Louisville, KY 40222

with a required copy to:
	 
	Chairman, Compensation/Stock Option Committee

DMI Furniture, Inc.

One Oxmoor Place

101 Bullitt Lane

Louisville, KY 40222
	 
	Employee:
	Mr. Joseph G. Hill

5506 Apache Road

Louisville, KY 40207



     12.     Entire
Agreement. This Agreement and the Officer Severance Agreement
(a) contain the complete and entire understanding and agreement of DMI and
Employee respecting the subject matter hereof; (b) supersede and cancel all
understandings or agreements, oral or written, respecting the employment of
Employee in connection with the business of DMI; and (c) may not be modified
except by an instrument in writing executed by DMI and Employee.


     13.     Waiver
of Breach. The waiver by either party, of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach of either party.


     14.     Assignment. Employee may not assign his rights or obligations under
this agreement. The rights and obligations of DMI shall inure to the benefit of
and shall be binding upon the successors and assigns of DMI.


     15.     Captions. All captions and headings used herein are for convenient
reference only and do not form part of this Agreement.


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     IN WITNESS WHEREOF, DMI and Employee have caused this Agreement to be duly
executed and delivered on the day and year first above written, but effective
September 1, 1999.



	 	 	 
	 	 	
DMI FURNITURE, INC.
	 
	 
	ATTEST:______________________	 	
By_______________________________________________________________________
		 	

	 	 	
Donald D. Dreher

Chairman of the Board, President, and

Chief Executive Officer






	 	 	 
	 	 	
_____________________________________________
	 	 	
Joseph G. Hill



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