<PAGE>

EXHIBIT (N)
                              EXTENSION AND RENEWAL OF

                                EMPLOYMENT AGREEMENT




     THIS AGREEMENT, as of this 9th day of October, 1997 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 December 31, 1998;

     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 renew and extend the Employment
Agreement between them for an additional term expiring on August 31, 1999; 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 October 9, 1997;

     1.   EMPLOYMENT.  DMI or its successors hereby employs Employee and
Employee hereby accepts employment as Vice President-Finance and Chief Financial
Officer of DMI for a period commencing October 9, 1997 and ending August 31,
1999.

     4.   DUTIES OF EMPLOYEE.  Employee further agrees as follows:

          (g) 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

          (h) 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

          (i) To refrain from investment or other involvement 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 $170,000 per year payable at the
rate of $7,083.33 semi-monthly during the term of this Agreement.  Each year, on
the anniversary date of this Agreement, the Compensation Committee of the
Corporation's Board of Directors will review increases in the cost of living and
may negotiate upward revisions to salary with the Employee.

          (b)  CASH BONUS.


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               (i)  ADJUSTED NET PRE-TAX INCOME.  For each of the Corporation's
fiscal years during the term of this Agreement, Employee shall receive an
incentive bonus based on the "adjusted net pre-tax income" for said fiscal year.
For the purposes of this subsection, "adjusted net pre-tax income" shall mean
the pre-tax income as reported to the Securities and Exchange Commission on Form
10-K excluding as expenses all dividends paid by the Corporation to the holders
of any class of its preferred stock, as well as all interest paid by the
Corporation in connection with any funds borrowed for the redemption of 675,000
shares of  preferred stock at $2.49 per share or $1,680,750 on August 28, 1989
and any future redemptions of preferred stock, and also excluding (i) any gains
or losses resulting from the sale, conversion or other disposition of capital
assets; (ii) accruals made in accordance with general accepted accounting
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
operation; (iii) gain or loss resulting from non-operational litigation; and
(iv) charges or credits resulting from the adoption of a change in accounting
principle.

          Employee shall receive a fractional share of the adjusted net pre-tax
income calculated as follows:  X = (.0075 + .0045 {Y}) x Z where X equals the
bonus earned, Y equals the adjusted net pre-tax income expressed in millions of
dollars rounded to three decimal places, and Z equals the adjusted net pre-tax
income.

<TABLE>
<CAPTION>
<S>                                                         <C>
          Example:

          Reported income before income tax                 $1,525,169
          Add back: Interest on borrowing for
                    Preferred stock redemption                 201,500

          Deduct:   Gain on sale of building                  {156,000}
                                                            ----------
          Adjusted pre-tax income                           $1,570,369
          then:
          X =  (.0075 + (.0045 x 1.570)) x $1,570,369
          X =  (.0075 + .0071) x $1,570,369
          X =  .0146 x $1,570,369
          X =  $22,927
</TABLE>

               (ii)  CASH BONUS PREMIUM.  In lieu of a cash bonus plan for asset
management as provided by prior Employment Agreements between Employee and the
Corporation, Employee shall be paid a 33.33% cash premium of amounts earned
under Section 3(b)(i) of this Agreement.

          (c)  STOCK BONUS.  For each fiscal year during the term of this
Agreement, Employee shall be eligible to earn a stock bonus as provided herein.
All stock granted pursuant to this bonus shall be granted as of the date upon
which the cash bonus earned by Employee is paid to him and shall be valued at
the bid price of the Corporation's common stock as listed by NASDAQ on the last
day of the fiscal year.  To the extent feasible, stock (or other equity
securities of the Corporation) granted pursuant to this bonus shall be issued
under a plan meeting the terms and conditions of Rule 16b-3 under the Exchange
Act.

          Employee shall have the option to receive a grant for shares of common
stock with a value equal to 45.45% of Employee's Cash Bonus, and Cash Bonus
Premium to a maximum Stock Bonus of 25% of Employee's weighted average base
salary.

          Employee may decline to exercise the right to receive any stock grant
by so advising the Corporation within 10 days of the date upon which he is
advised of his bonus.  The grant of stock referred to herein is subject to the
Corporation's shareholders having approved the issuance of sufficient shares of
stock to permit the grant of these shares.  The Corporation agrees to seek such
approval, as and to the extent, required.


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                                                                        Page 82
<PAGE>

          (d)  BONUS PAYMENTS.  Any bonus under this paragraph 3 shall be paid
within one hundred thirty days of the end of the fiscal year.

          For any fiscal year of DMI during which the period of Employee's
employment set forth in paragraph 1 (or any extension thereof) expires before
completion of the fiscal year, Employee shall receive a cash bonus and a stock
bonus equal to the bonuses that would have been due Employee under paragraphs
3(b) and 3(c) 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.

     5.   FRINGE BENEFITS.  DMI will provide Employee with fringe benefits as
          follows:

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

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

          (h) 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.

          (i) 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.

          (j) 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.


                                      E-41
                                                                        Page 83
<PAGE>

          (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.

     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,
unless the period of employment is extended by the Board of Directors, in which
event termination shall occur upon the expiration of the period of employment as
extended by the Board of Directors;

          (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.


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<PAGE>


          (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 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 subparagraphs 3(b) and 3(c)
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 office Severance Agreement shall control.


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     10.  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 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 extend invalid by any court of competent
jurisdiction, such covenant shall be deemed modified to the extend necessary to
make it enforceable.

     11.  PLACE OF EMPLOYMENT.  DMI agrees that the principal location at which
Employee is to render his services hereunder will continue to be Louisville,
Kentucky.

     12.  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, 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




                                     E-44
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<PAGE>


          EMPLOYEE:
          Mr. Joseph G. Hill
          5506 Apache Road
          Louisville, KY 40207

     13.  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.

     14.  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.

     15.  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.

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

     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, 1996.


                              DMI FURNITURE, INC.



ATTEST:                       By
       ---------------------      -------------------------------------------
                                                   Donald D. Dreher
                                                   Chairman of the
                                                   Board, President, and
                                                   Chief Executive Officer


                                                   --------------------------
-----------------------------------------------    Joseph G. Hill


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