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Exhibit 10(b)    
    


THIRD AMENDMENT TO SECOND AMENDED AND

RESTATED CREDIT AGREEMENT  


        THIS THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT ("Third Amendment ") is executed as of the
       day of May, 2003 (the "Third Amendment Effective Date"), by DMI FURNITURE, INC. a Delaware corporation
("Borrower"), the Lenders from time to time party to the Agreement (as hereinafter defined) and BANK ONE, NA, a national banking association having its
principal office in Chicago, Illinois, as agent for the Lenders (the "Agent"). 


Recitals  


        1.     Borrower,
the Lenders from time to time party thereto and the Agent are parties to a Second Amended and Restated Credit Agreement, dated as of November 22, 2002,
as amended by a First Amendment to Second Amended and Restated Credit Agreement, dated as of January 24, 2003, as further amended by a Second Amendment to Second Amended and Restated Credit
Agreement, dated as of February 28, 2003 (the "Agreement"). 


        2.     Borrower,
Lenders and the Agent desire to amend the Agreement to modify the definition of "Borrowing Base" and to increase each Lender's Revolving Commitment. Subject to
the terms and conditions stated in this Third Amendment, the Lenders and the Agent are willing to modify and amend the Agreement, as provided in this Third Amendment. 


Agreement  


        NOW, THEREFORE, in consideration of the premises, the mutual covenants and agreements herein, and each act performed and to be performed hereunder, Borrower, the
Lenders and the Agent agree as follows: 


        1.    Definitions.    All terms used in this Third Amendment that are defined in the Agreement, and that are not
otherwise defined herein, shall have the same meanings in this Third Amendment as are ascribed to them in the Agreement. 



        2.    Amendments to the Agreement.    The following definitions, as set forth in Article I of the Agreement,
are amended, and as so amended, restated as of the Third Amendment Effective Date to read in their respective entireties as follows: 



"Borrowing
Base" means, at any date a determination thereof is to be made, an amount equal to the sum of: (i) Eighty Percent (80%) of (a) the net book value (as determined in accordance
with Agreement Accounting Principles) of Eligible Accounts minus (b) an amount equal to the net book value of all Eligible Accounts owed by
account debtors for goods supplied by Borrower for use in showroom or displays for which extended payment terms (i.e., payment terms which are longer than customarily extended for purchases of
inventory from Borrower on account) were given to the account debtor by the Borrower, determined as of the last day of the fiscal quarter of Borrower preceding the date of determination;
(ii) Fifty Percent (50%) of the Eligible Finished Goods Inventory Value and the Eligible Wood Stock Inventory Value; (iii) Twenty-Five Percent (25%) of the Eligible
Miscellaneous Inventory Value; and (iv) (a) during the period beginning on the last day of the third Fiscal Month of each fiscal year of the Borrower and ending on the second to last day
of the sixth Fiscal Month of the same fiscal year of the Borrower, the sum of $1,000,000.00, (b) during the period beginning on the last day of the seventh Fiscal Month of fiscal year 2003 of
the Borrower, and ending on the second to last day of the eighth Fiscal Month of fiscal year 2003 of the Borrower, the sum of $1,000,000.00, and during the period beginning on the last day of the
eighth Fiscal Month of fiscal year 2003 of the Borrower and to and including the end of fiscal year 2003 of the Borrower, the sum of $2,000,000.00, and (c) during the period 






 

beginning
on the last day of the seventh Fiscal Month of each fiscal year of the Borrower (except for fiscal year 2003 of the Borrower) and ending on the second to last day of the tenth Fiscal Month
of the same fiscal year of the Borrower, the sum of $1,000,000.00 (all of the foregoing as determined on the basis of the information contained in the most recent Borrowing Base Certificate provided
to the Agent or as determined by the Agent upon an inspection of the Borrower's books and records and inventory by the Agent or any other representative of the Lenders); provided, however, the
Borrowing Base shall be $0 commencing five (5) calendar days after the Borrower's failure to furnish to the Agent a monthly Borrowing Base Certificate within the period of time required under
Section 6.1 and continuing until the Agent shall have received a properly completed and certified Borrowing Base Certificate. 


"Maximum
Availability" means, as of any date of determination, the lesser of: (i) $24,000,000.00; or (ii) the Borrowing Base, minus the LC Obligations in respect of Facility LCs." 




        2.    Lenders' Commitments.    From and after the Third Amendment Effective Date, each Lender's respective Revolving
Commitment is as follows: 



	Commitment/Pro Rata Share
 
	 	Bank One, NA
	 	Fifth Third Bank, Kentucky, Inc.

	Revolving Commitment	 	$	15,600,000.00	 	$	8,400,000.00





        3.    Representations and Warranties.    Borrower represents and warrants to the Lenders that: 



        (a)(i)   The
execution, delivery and performance of this Third Amendment and all agreements and documents delivered pursuant hereto by Borrower have been duly
authorized by all necessary corporate action, as applicable, and do not and will not violate any provision of any law, rule, regulation, order, judgment, injunction, or writ presently in effect
applying to Borrower, or the Articles of Incorporation of Borrower, or result in a breach of or constitute a default under any material agreement, lease or instrument to which Borrower is a party or
by which Borrower or any of the properties of Borrower may be bound or affected; (ii) no authorization, consent, approval, license, exemption or filing of a registration with any court or
governmental department, agency or instrumentality is or will be necessary to the valid execution, delivery or performance by Borrower of this Third Amendment and all
agreements and documents delivered pursuant hereto; and (iii) this Third Amendment and all agreements and documents delivered pursuant hereto by Borrower are the legal, valid and binding
obligations of Borrower, as a signatory thereto, and enforceable against Borrower in accordance with the terms thereof. 



        (b)   After
giving effect to the amendments contained in this Third Amendment, the representations and warranties contained in Article V of the Agreement are true and
correct on and as of the Third Amendment Effective Date with the same force and effect as if made on and as of the Third Amendment Effective Date, except that the reference to the financial statements
in Section 5.4 of the Agreement shall be to the most recent financial statements of Borrower provided to the Agent prior to the Third Amendment Effective Date. 


        (c)   No
Event of Default has occurred and is continuing or will exist under the Agreement as of the Third Amendment Effective Date. 




        4.    Conditions.    The obligation of the Lenders and the Agent to execute and to perform this Third Amendment shall
be subject to full satisfaction of all of the following conditions precedent on or before the Third Amendment Effective Date: 



        (a)   The
Borrower shall have delivered to the Agent copies, certified as of the Third Amendment Effective Date, of such corporate documents and resolutions of Borrower
evidencing necessary action by Borrower to authorize the execution and performance of this Third Amendment and all other agreements or documents delivered pursuant hereto. 



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        (b)   This
Third Amendment shall have been duly executed by Borrower and delivered to the Agent and executed by the Agent and the Lenders. 


        (c)   Borrower
shall have executed and delivered to the Age nt for the benefit of Bank One an Amended and Restated Revolving Note in form and substance the same as  Exhibit A to this Third Amendment. 



        (d)   Borrower
shall have executed and delivered to the Agent for the benefit of Fifth Third Bank, Kentucky, Inc. an Amended and Restated Revolving Note in form and
substance the same as Exhibit B to this Third Amendment. 


        (e)   Concurrently
with execution of this Third Amendment, Borrower shall have paid to Bank One an amendment fee as provided in the letter agreement between Borrower and Bank
One dated May       , 2003. 




        5.    Binding on Successors and Assigns.    All of the terms and provisions of this Third Amendment shall be binding
upon and inure to the benefit of the parties hereto, their respective successors, assigns and legal representatives. 


        6.    Governing Law/Entire Agreement/Survival.    This Third Amendment is a contract made under, and shall be governed
by and construed in accordance with, the laws of the State of Indiana applicable to contracts made and to be performed entirely with such state and without giving effect to the choice of law
principals of such state. This Third Amendment constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior
agreements and understandings, commitments, inducements or conditions, whether expressed or implied, oral or written. All covenants, agreements, undertakings, representations and warranties made in
this Third Amendment shall survive the execution and delivery of this Third Amendment, and shall not be affected by any investigation made by any party. 


        IN
WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be duly executed and delivered as of the Third Amendment Effective Date. 



	 	 	BANK ONE, NA, as a Lender, the LC Issuer, the Enhancement Issuer and the Agent
	

 	
 	

By:	

 
	 	 	 	
 Robert E. McElwain, First Vice President
	

 	
 	

FIFTH THIRD BANK, KENTUCKY, INC.
	

 	
 	

By:	

 
	 	 	 	
 Edward B. Martin, Vice President
	

 	
 	

DMI FURNITURE, INC.
	

 	
 	

By:	

 
	 	 	 	
 Phillip J. Keller, Vice President-Finance and Chief Financial Officer




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GUARANTOR CONSENT  


        The undersigned, being a guarantor of payment of the Obligations (the "Guarantor") unconditionally consents to the execution and performance of the Third
Amendment to Second Amended and Restated Credit Agreement by Borrower and agrees that the same shall not impair, diminish, terminate or affect in any way, or provide any defense to the validity or
enforcement of the Second Amended and Restated Guaranty, dated as of November 22, 2002 (the "Guaranty"), and hereby acknowledges, affirms and agrees that the Guaranty is in favor of the Agent
for the benefit of the Lenders under the Agreement. 



	Dated:  May       , 2003	 	DMI MANAGEMENT, INC.
	

 	
 	

By:	

 
	 	 	 	

	 	 	Printed:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	





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EXHIBIT A    
    


AMENDED AND RESTATED REVOLVING NOTE


(Revolving Loan) 



	U.S. $15,600,000.00	 	May       , 2003            





        FOR
VALUE RECEIVED, on or before the Facility Termination Date, DMI FURNITURE, INC., a Delaware corporation ("Maker"), unconditionally promises to pay to the order of BANK ONE,
NA, a national banking association having its principal office in Chicago, Illinois ("Bank") at the office of the Agent, at Bank One Center/Tower, 111 Monument Circle, Fourth Floor, P.O. Box
7700, Indianapolis, Indiana 46277-0119, the principal sum of Fifteen Million Six Hundred Thousand Dollars ($15,600,000.00), or, if less, the aggregate unpaid principal amount of all
Advances by Bank under the Revolving Loan under the terms of the Second Amended and Restated Credit Agreement, dated as of November 22, 2002, by and between Maker, the Lenders from time to time
party thereto, and Bank One, NA, a national banking association having its principal office in Chicago, Illinois, as Agent for the Lenders, as amended pursuant to a First Amendment to Second Amended
and Restated Credit Agreement, dated as of January 24, 2003, as further amended pursuant to a Second Amendment to Second Amended and Restated Credit Agreement, dated as of February 28,
2003, and as further amended pursuant to a Third Amendment to Second Amended and Restated Credit Agreement, dated as of May       , 2003 (referred to herein, as the same has been and
may hereafter be modified, amended, restated, and/or extended from time to time and at any time, as the "Credit Agreement"), together with interest thereon at the rates as provided in the Credit
Agreement. Capitalized terms used herein but not defined herein shall have the meaning ascribed thereto in the Credit Agreement. 



        This
Amended and Restated Revolving Note (this "Note") amends, restates, and replaces that certain Amended and Restated Revolving Note dated as of February 28, 2003, executed by
the Maker to the order of Bank. 


        Interest
accruing on the principal balance of this Note outstanding from time to time shall be due and payable by Maker on such dates and in accordance with the terms of the Credit
Agreement. All amounts received on this Note shall be applied in accordance with the terms of the Credit Agreement. 


        This
Note is one of the "Revolving Notes" referred to in the Credit Agreement, to which reference is made for the conditions and procedures under which advances, payments, readvances and
repayments may be made prior to the maturity of this Note, for the terms upon which Maker may make prepayments from time to time and at any time prior to the maturity of this Note and the terms of any
prepayment premiums or penalties which may be due and payable in connection therewith, and for the terms and conditions upon which the maturity of this Note may be accelerated and the unpaid balance
of principal and accrued interest thereon declared immediately due and payable. 


        If
at any time the outstanding principal balance of this Note exceeds the Maximum Availability, Maker shall immediately make a principal payment on this Note in an aggregate principal
amount equal to such excess. 


        If
any installment of interest due under the terms of this Note falls due on a day which is not a Business Day, the due date shall be extended to the next succeeding Business Day and
interest will be payable at the applicable rate for the period of such extension. 


        All
amounts payable under this Note shall be payable without relief from valuation and appraisement laws, and with all collection costs and attorneys' fees. 


        The
holder of this Note, at its option, may make extensions of time for payment of the indebtedness evidenced by this Note, or reduced the payments thereon, release any collateral
securing 


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payment
of such indebtedness or accept a renewal Note or Notes therefor, all without notice to Maker or any endorser(s) and Maker and all endorsers hereby severally consent to any such extensions,
reductions, releases and renewals, all without notice, and agree that any such action shall not release or discharge any of them from any liability hereunder. Maker and endorser(s), jointly and
severally, waive demand, presentment for payment, protest, notice of protest and notice of nonpayment or dishonor of this Note and each of them consents to all extensions of the time of payment
thereof. 


        MAKER AND BANK (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG MAKER AND BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR ANY OTHER LOAN DOCUMENT. THIS PROVISION IS A MATERIAL
INDUCEMENT TO BANK TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE LOAN DOCUMENTS. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
INDIANA WITHOUT REGARD TO ITS CHOICE OR CONFLICTS OF LAWS PROVISIONS. MAKER AGREES THAT
THE COURTS OF THE STATE OF INDIANA LOCATED IN INDIANAPOLIS, INDIANA, AND THE FEDERAL COURTS LOCATED IN THE SOUTHERN DISTRICT OF INDIANA, MARION COUNTY, HAVE JURISDICTION OVER ANY AND ALL ACTIONS AND
PROCEEDINGS INVOLVING THIS NOTE OR ANY OTHER AGREEMENT MADE IN CONNECTION HEREWITH AND MAKER HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES TO SUBMIT TO THE JURISDICTION OF SUCH COURTS FOR PURPOSES OF
ANY SUCH ACTION OR PROCEEDING. MAKER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF AN Y SUCH ACTION OR PROCEEDING, INCLUDING ANY CLAIM
THAT SUCH COURT IS AN INCONVENIENT FORUM, AND CONSENTS TO SERVICE OF PROCESS PROVIDED THE SAME IS IN ACCORDANCE WITH THE TERMS HEREOF. FINAL JUDGMENT IN ANY SUCH PROCEEDING AFTER ALL APPEALS HAVE BEEN
EXHAUS TED OR WAIVED SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT.


        Executed
and delivered as of the       day of May, 2003. 



	 	 	DMI FURNITURE, INC., a Delaware corporation
	

 	
 	

By:	

 
	 	 	 	
 Phillip J. Keller, Vice President—Finance Chief Financial Officer
	

 	
 	

 	

("Maker")




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EXHIBIT B    
    


AMENDED AND RESTATED REVOLVING NOTE  


(Revolving Loan) 



	U.S. $8,400,000.00	 	May       , 2003            





        FOR
VALUE RECEIVED, on or before the Facility Termination Date, DMI FURNITURE, INC., a Delaware corporation ("Maker"), unconditionally promises to pay to the order of FIFTH THIRD
BANK, KENTUCKY, INC. ("Bank") at the office of the Agent, at Bank One Center/Tower, 111 Monument Circle, Fourth Floor, P.O. Box 7700, Indianapolis, Indiana 46277-0119, the
principal sum of Eight Million Four Hundred Thousand Dollars ($8,400,000.00), or, if less, the aggregate unpaid principal amount of all Advances by Bank under the Revolving Loan under the terms of the
Second Amended and Restated Credit Agreement, dated as of November 22, 2002, by and between Maker, the Lenders from time to time party thereto, and Bank One, NA, a national banking association
having its principal office in Chicago, Illinois, as Agent for the Lenders, as amended pursuant to a First Amendment to Second Amended and Restated Credit Agreement, dated as of January 24,
2003, as further amended pursuant to a Second Amendment to Second Amended and Restated Credit Agreement, dated as of February 28, 2003, and as further amended pursuant to a Third Amendment to
Second Amended and Restated Credit Agreement, dated as of May    , 2003 (referred to herein, as the same has been and may hereafter be modified, amended, restated, and/or extended from time
to time and at any time, as the "Credit Agreement"), together with interest thereon at the rates as provided in the Credit Agreement. Capitalized terms used herein but not defined herein shall have
the meaning ascribed thereto in the Credit Agreement. 


        This
Amended and Restated Revolving Note (this "Note") amends, restates, and replaces that certain Revolving Note dated as of February 28, 2003, executed by the Maker to the order
of Bank. 


        Interest
accruing on the principal balance of this Note outstanding from time to time shall be due and payable by Maker on such dates and in accordance with the terms of the Credit
Agreement. All amounts received on this Note shall be applied in accordance with the terms of the Credit Agreement. 


        This
Note is one of the "Revolving Notes" referred to in the Credit Agreement, to which reference is made for the conditions and procedures under which advances, payments, readvances and
repayments may be made prior to the maturity of this Note, for the terms upon which Maker may make prepayments from time to time and at any time prior to the maturity of this Note and the terms of any
prepayment premiums or penalties which may be due and payable in connection therewith, and for the terms and conditions upon which the maturity of this Note may be accelerated and the unpaid balance
of principal and accrued interest thereon declared immediately due and payable. 


        If
at any time the outstanding principal balance of this Note exceeds the Maximum Availability, Maker shall immediately make a principal payment on this Note in an aggregate principal
amount equal to such excess. 


        If
any installment of interest due under the terms of this Note falls due on a day which is not a Business Day, the due date shall be extended to the next succeeding Business Day and
interest will be payable at the applicable rate for the period of such extension. 


        All
amounts payable under this Note shall be payable without relief from valuation and appraisement laws, and with all collection costs and attorneys' fees. 


        The
holder of this Note, at its option, may make extensions of time for payment of the indebtedness evidenced by this Note, or reduced the payments thereon, release any collateral
securing payment of such indebtedness or accept a renewal Note or Notes therefor, all without notice to Maker or any endorser(s) and Maker and all endorsers hereby severally consent to any such
extensions, 


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reductions,
releases and renewals, all without notice, and agree that any such action shall not release or discharge any of them from any liability hereunder. Maker and endorser(s), jointly and
severally, waive demand, presentment for payment, protest, notice of protest and notice of nonpayment or dishonor of this Note and each of them consents to all extensions of the time of payment
thereof. 


        MAKER AND BANK (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG MAKER AND BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR ANY OTHER LOAN DOCUMENT. THIS PROVISION IS A MATERIAL
INDUCEMENT TO BANK TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE LOAN DOCUMENTS. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
INDIANA WITHOUT REGARD TO ITS CHOICE OR CONFLICTS OF LAWS PROVISIONS. MAKER AGREES THAT
THE COURTS OF THE STATE OF INDIANA LOCATED IN INDIANAPOLIS, INDIANA, AND THE FEDERAL COURTS LOCATED IN THE SOUTHERN DISTRICT OF INDIANA, MARION COUNTY, HAVE JURISDICTION OVER ANY AND ALL ACTIONS AND
PROCEEDINGS INVOLVING THIS NOTE OR ANY OTHER AGREEMENT MADE IN CONNECTION HEREWITH AND MAKER HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES TO SUBMIT TO THE JURISDICTION OF SUCH COURTS FOR PURPOSES OF
ANY SUCH ACTION OR PROCEEDING. MAKER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING, INCLUDING ANY CLAIM
THAT SUCH COURT IS AN INCONVENIENT FORUM, AND CONSENTS TO SERVICE OF PROCESS PROVIDED THE SAME IS IN ACCORDANCE WITH THE TERMS HEREOF. FINAL JUDGMENT IN ANY SUCH PROCEEDING AFTER ALL APPEALS HAVE BEEN
EXHAUSTED OR WAIVED SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT.


        Executed
and delivered as of the    day of May, 2003. 



	 	 	DMI FURNITURE, INC., a Delaware corporation
	

 	
 	

By:	

 
	 	 	 	
 Phillip J. Keller, Vice President—Finance Chief Financial Officer
	

 	
 	

 	

("Maker")




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Exhibit 10(b)


EXHIBIT A

EXHIBIT B