<PAGE>   1
Exhibit 10(n)
                            EXTENSION AND RENEWAL OF

                              EMPLOYMENT AGREEMENT




         THIS AGREEMENT, as of this 1st day of September, 1999 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 October 9, 1997, which has been amended from time to time and
extended and renewed for additional terms through August 31, 1999;

         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 September 2, 2000; 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, 1999;

         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 September 1, 1999 and ending September 2,
2000.

         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 $175,000 per year payable at the rate
of $7,291.67 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.


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<PAGE>   2

         (b) CASH BONUS. For the Corporation's fiscal years during the term of
this Agreement, Employee shall receive an incentive bonus, the amount of which
is the sum of the following sections (i) through

         (c) (vi):

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

                                    Net Income                 Bonus
                                    ----------                 -----
<S>                                 <C>                       <C>
                                    less than $900,000          -0-
                                    $.9-$1.3M                 $15,000
                                    $1.3-$1.7M                $22,000
                                    $1.7-$2.2M                $30,000
                                    $2.2-$2.6M                $37,000
                                    $2.6-$3.0M                $44,000
                                    $3.0-$3.6M                $55,000

</TABLE>

                  (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.
<TABLE>
<CAPTION>

                                    ROA                         Bonus
                                    ---                         -----
<S>                                <C>                        <C>
                                    less than 2%                -0-
                                    2%-3%                     $ 5,000
                                    3%-4%                     $ 7,500
                                    4%-5%                     $10,000
                                    5%-6%                     $12,500
                                    6%-7%                     $15,000
                                    7%-8%                     $17,500
                                    greater than 8%           $20,000

</TABLE>

                  (iii) Sales Growth.
<TABLE>
<CAPTION>

                                          Sales Growth         Bonus
                                          ------------         -----
<S>                                 <C>                      <C>
                                    less than 0%                -0-
                                    0%-5%                     $ 3,500
                                    5%-10%                    $ 5,000
                                    10%-12.5%                 $ 6,500
                                    12.5%-15%                 $ 8,500
                                    15%-17.5%                 $10,000
                                    17.5%-20%                 $12,500
                                    greater than 20%          $15,000
</TABLE>



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                  (iv)     INVESTOR RELATIONS/STOCK PERFORMANCE. Employee shall
                           prepare an investor relations program and submit it
                           for approval by the Board of Directors. Employee
                           shall prepare quarterly program reports and submit
                           those reports to the Board. At the conclusion of the
                  (v)      fiscal year, the Compensation Committee and Board
                           will review the success of the program and determine
                           the amount of bonus, if any, due Employee under this
                           component. Factors that
                  (vi)     will be considered include but are not limited to
                           change in market price, trading volume, price vs.
                           industry multiples, micro-cap market conditions, etc.
                           The maximum bonus available for the fiscal year under
                           this section is $15,000.

                  (v) STRATEGIC ISSUES. At the conclusion of the fiscal year,
the Board will make a subjective evaluation of Employee's participation and
performance on long term strategic issues. The Board may award a bonus based on
this evaluation up to a maximum bonus under this section of $15,000.

                  (vi) ADDED RESPONSIBILITY. The Chief Executive Officer shall
prepare a report for the Board outlining the scope and performance of added
responsibilities as outlined by the CEO and Board. The Board may award a bonus
based on this report up to a maximum bonus under this section of $20,000.

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

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

            (a) 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.

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

            (c) 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.

            (d) 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.

            (e) 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

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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.

         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:


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                  (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 120 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.

                  (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 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.


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         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.

         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 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




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<PAGE>   7

                  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

         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, 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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