Document:

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                               EXHIBIT 3(b) & 4(b)

                                     BYLAWS
                                       OF
                               DMI FURNITURE, INC.

                                   1. OFFICES

         1.1 REGISTERED OFFICE. The Corporation shall have and maintain in
Delaware a registered office which shall be the business office of the
Corporation's registered agent in Delaware.

         1.2 OTHER OFFICES. The Corporation may have such other offices at such
places, both within and without Delaware, as the Board of Directors may from
time to time designate or as the business of the Corporation may from time to
time require.

                          2. MEETINGS OF STOCKHOLDERS

         2.1 MEETING PLACE. All meetings of the stockholders shall be held at
such place, either within or without Delaware, as the Board of Directors may
from time to time designate and as stated in the notice of the meeting.

         2.2 ANNUAL MEETINGS. An annual meeting of the stockholders shall be
held for the election of directors at such date and time during each fiscal year
of the Corporation as the Board of Directors shall designate and as stated in
the notice of the annual meeting. In addition to the election of directors, the
stockholders shall transact such other business as may properly be brought
before the meeting.

         2.3 SPECIAL MEETINGS. Unless otherwise prescribed by law, by the
Corporation's Certificate of Incorporation, or by these Bylaws, special meetings
of the stockholders may be called for any purpose or purposes by (a) the
Chairman of the Board, if any, or (b) the President or the Secretary upon the
written request of a majority of the members of the Board of Directors.

         2.4 MEETING NOTICES.

                  (a) Except as otherwise provided by law, by the Corporation's
Certificate of Incorporation, or by these Bylaws, written notice of any annual
or special meeting of the stockholders shall state the place, date, and time
thereof and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, and shall be given to each stockholder of record entitled
to vote at such meeting not less than ten nor more than sixty days before the
meeting.

                  (b) Notice of any meeting of stockholders (whether annual or
special) to act upon an amendment to the Corporation's Certificate of
Incorporation, upon a reduction of the Corporation's stated capital, upon a plan
of merger or consolidation involving the Corporation, or upon a sale of all or
substantially all of the Corporation's assets shall be given to each stockholder
of record entitled to vote at such meeting not less than ten nor more than sixty
days before

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the date of such meeting. Any such notice shall be accompanied by a copy of the
proposed amendment or of the plan of reduction, merger, consolidation, or sale.

         2.5 LIST OF STOCKHOLDERS. At least ten days (but not more than fifty
days) before any meeting of the stockholders, the officer or transfer agent in
charge of the stock transfer books of the Corporation shall prepare and make a
complete alphabetical list of the stockholders entitled to vote at the meeting,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. The list so prepared shall be maintained at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held, and shall be open to inspection by any
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten days before the meeting. The list shall
remain open throughout the meeting and may, except as otherwise provided by law,
be inspected by any stockholder or proxy of a stockholder who is present in
person at such meeting.

         2.6 PRESIDING OFFICERS; ORDER OF BUSINESS.

                  (a) The Chief Executive Officer, if any, shall preside at all
meetings of the stockholders at which the Chief Executive Officer is present. If
the Chief Executive Officer is not present at a meeting of the stockholders, the
following officer or person shall preside (in descending order of preference):
(1) the Chairman of the Board, if any, (2) the President, (3) a Vice President
or director specifically designated by the Board of Directors to preside at the
meeting, or (4) a stockholder chosen at the meeting by stockholders present in
person or by proxy who own a majority of the shares of capital stock of the
Corporation entitled to vote and represented at the meeting.

                  (b) If present at the meeting, the Secretary of the
Corporation shall serve as secretary of the meeting. If the Secretary of the
Corporation is not present at the meeting, a person designated by the officer or
person presiding over the meeting shall serve as secretary of the meeting.

                  (c) Unless otherwise ordered by the officer or person
presiding over the meeting, the following order of business shall be observed
insofar as is practicable and consistent with the purposes of the meeting:

                           (1) Call of the meeting to order.

                           (2) Presentation of proof of mailing of notice of the
meeting and, if the meeting is a special meeting, the call thereof.

                           (3) Presentation of proxies.

                           (4) Determination and announcement that a quorum is
present.

                           (5) Reading and approval (or waiver thereof) of the
minutes of the previous meeting.

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                           (6) Reports, if any, of officers of the Corporation.

                           (7) Election of directors, if the meeting is an
annual meeting or a meeting called for such purpose.

                           (8) Consideration of the specific purpose or purposes
for which the meeting has been called (other than the election of directors).

                           (9) Transaction of such other business as may
properly come before the meeting.

                           (10) Adjournment.

         2.7 QUORUM; ADJOURNMENTS.

                  (a) Except as otherwise provided by law, by the Corporation's
Certificate of Incorporation, or by these Bylaws, the holders of a majority of
the shares of capital stock of the Corporation issued and outstanding and
entitled to vote at any given meeting present in person or by proxy shall be
necessary to, and shall constitute a quorum for, the transaction of business at
all meetings of the stockholders.

                  (b) If a quorum is not present in person or by proxy at any
meeting of stockholders, the stockholders entitled to vote thereat, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time, without notice of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken, until a quorum is
present in person or by proxy.

                  (c) If a meeting is adjourned in accordance with Section
2.7(b) of these Bylaws and a quorum is present in person or by proxy at such
adjourned meeting, the stockholders may transact at the adjourned meeting any
business which might have been transacted at the original meeting. But if the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
adjourned meeting.

         2.8 VOTING.

                  (a) At any meeting of stockholders, every stockholder having
the right to vote on a particular subject matter shall be entitled to vote in
person or by proxy on that subject matter. Except as otherwise provided by law
or by the Corporation's Certificate of Incorporation, each stockholder of record
shall be entitled to one vote (on each matter submitted to a vote) for each
share of capital stock registered in his or her name on the books of the
Corporation.

                  (b) As to the election of directors, the candidate or
candidates, up to the number of directors to be elected, receiving the highest
number of votes shall be elected.

                  (c) As to all other matters and except as otherwise provided
by law or by the Corporation's Certificate of Incorporation, the vote of the
holders of a majority of the issued and

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outstanding shares of the capital stock of the Corporation entitled to vote on
that matter, present in person or by proxy, shall decide any question brought
before the meeting.

         2.9 ACTION BY CONSENT. Any action required or permitted to be taken at
any meeting of the stockholders may be taken without a meeting, without prior
notice and without a vote, if a written consent in lieu of such meeting, setting
forth the action so taken, is signed before or after such action by the holders
of issued and outstanding shares of the capital stock of the Corporation having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. All written consents shall be filed with the minutes of
the meetings of the stockholders.

                             3. BOARD OF DIRECTORS

         3.1 NUMBER OF DIRECTORS. Subject to any provision of the Corporation's
Certificate of Incorporation governing the number of the Corporation's
directors, the exact number of the Corporation's directors may be fixed,
increased, or decreased from time to time by a resolution adopted by the vote of
the directors at the meeting, or by consent in lieu of a meeting, at which, or
by which, the time and place of the annual meeting of stockholders are
designated. Directors need not be stockholders or residents of Delaware.

         3.2 CLASSIFICATION AND TERMS. In accordance with Section 141(d) of the
General Corporation Law of the State of Delaware and consistent with the
establishment of classes of directors pursuant to a Bylaw of the Corporation as
heretofore adopted by a vote of the stockholders, and subject to the provisions
of the Corporation's Certificate of Incorporation, as adopted and amended by
votes of the Stockholders, the Board of Directors shall be divided into classes
and categories of directors as follows:

                  (a) The first class ("Class I") shall consist of not more than
six directors who shall be elected by the stockholders entitled at the time to
vote for the election of Directors. Beginning with the Corporation's 1992 annual
meeting of stockholders, all Class I directors shall be elected to serve for a
term of one year and until their successors have been elected and qualified;
provided, however, that nothing contained in this paragraph shall shorten the
term of an incumbent Category A or Category B director elected to a three-year
term expiring after the Corporation's 1991 annual meeting of stockholders.

                  (b) The second class ("Class II") shall consist of the
greatest integral number of directors that does not exceed one-fifth (1/5) of
the total number of directors, or two directors, whichever is greater. In
accordance with Paragraph 4 of Part II of Article Fourth of the Corporation's
Restated Certificate of Incorporation, as amended, all Class II directors shall
be elected by the holders of Series C Preferred Stock to serve for one-year
terms and until their successors have been elected and qualified.

                  (c) Except as otherwise expressly provided in Sections 3.2 and
3.3, all other rights and obligations of the directors shall be equal,
regardless of class or category.

         3.3 PART II OF ARTICLE FOURTH VACANCIES.

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                  (a) Part II of Article Fourth of the Corporation's Restated
Certificate of Incorporation, as amended ("Part II"), provides the holders of
the Series C Preferred Stock of the Corporation, voting as a single class,
certain rights to elect a majority of the members of the Board of Directors upon
the occurrence of certain events (the "Trigger Events"). This Section 3.3
effectuates the creation of vacancies on the Corporation's Board of Directors
referred to in Subparagraph 5B(iv) of Part II.

                  (b) As of the day next-preceding the day of the commencement
of a Special Meeting (the "Special Meeting") of the holders of the Series C
Preferred Stock and the Common Stock of the Corporation called pursuant to
Subparagraph 5B(iii) of Part II certain Class I directors (the "Terminated
Directors") (determined in accordance with the method hereinafter set forth)
shall cease to serve as directors of the Corporation. First, the number of
Terminated Directors shall be determined by subtracting (i) the number of Class
II directors from (ii) a number equal to the number of directors constituting a
majority of the whole Board. Second, Class I directors in decreasing age order
shall cease to serve to the extent necessary to create a sufficient number of
vacancies on the Board of Directors to allow the holders of the Series C
Preferred Stock to elect the number of directors determined in accordance with
the next preceding sentence.

                  (c) At the Special Meeting, the holders of the Series C
Preferred Stock shall elect the number of directors necessary to fill the
vacancies created by Section 3.3(b) and no holder of any securities of the
Corporation other than Series C Preferred Stock shall have any right to vote on
the filling of such vacancies.

                  (d) Unless sooner terminated in accordance with Subparagraph
5B(ii) of Part II, each director elected by the holders of the Series C
Preferred Stock to fill the vacancies created by this Section 3.3 shall serve
until the next election of directors and until his successor shall have been
elected and qualified. If a Trigger Event exists as of the next election of
directors, then the holders of the Series C Preferred Stock shall be entitled to
elect his successor at such election. If no Trigger Event exists at the next
election of directors, then the successor shall be elected by the stockholders
entitled at that time to vote for the election of directors. If a director
ceases to serve as a director pursuant to paragraph 5B(ii) of Part II, the
vacancy shall be filled as set forth in Section 3.7.

                  (e) If at the time of the occurrence of a Trigger Event, a
vacancy or vacancies exist as to the Class II directors whom the holders of the
Series C Preferred Stock are entitled to elect, the holders of Series C
Preferred Stock shall be entitled to fill such vacancy or vacancies at the
Special Meeting in the manner provided in Section 3.3(c)

         3.4 CHIEF EXECUTIVE OFFICER; CHAIRMAN. The Board of Directors may from
time to time select from among its members a Chief Executive Officer and a
Chairman of the Board who shall serve during the pleasure of the Board of
Directors. The Chief Executive Officer, if any, shall preside at all meetings of
the Board of Directors. If there is no Chief Executive Officer or if the Chief
Executive Officer is not present at the meeting, the following shall preside (in
descending order of preference): (1) the Chairman of the Board, if any, (2) the
President, or (3) a director selected by a majority of the directors present at
a meeting at which a quorum is present.

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         3.5 MEETINGS. The Board of Directors may hold meetings, both regular
and special, either within or without Delaware. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as the Board
shall from time to time determine. Special meetings of the Board of Directors
may be called by the Chairman of the Board or by the President on two days'
notice to each director, either personally or by telephone or telegram, or on
seven days notice to each director by mail or overnight courier. The President
or the Secretary shall call a special meeting of the Board of Directors in like
manner and on like notice at the written request of any two directors.

         3.6 QUORUM AND VOTING. Except as otherwise provided by law or by the
Corporation's Certificate of Incorporation, a majority of the total number of
directors shall constitute a quorum for the transaction of business, and the
vote of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors. If less than a quorum is
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present.

         3.7 VACANCIES. Except as otherwise provided in these Bylaws, vacancies
and newly created directorships may be filled by a majority of the directors
then in office, although less than a quorum, or by the sole remaining director.
When one or more directors shall resign from the Board of Directors, effective
at a future date, a majority of the directors then in office, including those
who have so resigned, shall have power to fill such vacancy or vacancies, the
vote thereon to take effect when such resignation or resignations shall become
effective. Each director so chosen shall hold office until the earliest end of
his or her tenure as prescribed by these Bylaws, the Corporation's Certificate
of Incorporation or otherwise by law.

         3.8 ACTION BY CONSENT. Any action required or permitted to be taken at
any meeting of the Board of Directors may be taken without a meeting and without
prior notice if a written consent in lieu of such meeting, setting forth the
action so taken, is signed either before or after such action by all directors.
All written consents shall be filed with the minutes of the proceedings of the
Board of Directors.

         3.9 TELEPHONE MEETINGS. The Board of Directors may participate in
meetings by means of conference telephone or similar communications equipment,
whereby all directors participating in the meeting can hear each other at the
same time, and participation in any such meeting shall constitute presence in
person by such director at such meeting. A written record shall be made of all
actions taken at any meeting conducted by means of a conference telephone or
similar communications equipment.

         3.10 DIRECTORS' AGE QUALIFICATION. A person shall not be elected a
director in or after the month in which that person becomes 72 years old.
Notwithstanding the preceding sentence, a director in office may be elected to
one additional term of not more than one year after the director becomes 72
years old, but before the month in which that director becomes 73 years old, if
nominated by all of the directors then in office who otherwise would meet the
age qualification requirements of this section.

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                                 4. COMMITTEES

         4.1 ESTABLISHMENT OF COMMITTEES. The Board of Directors may, by
resolution duly adopted by a majority of the whole Board, appoint such committee
or committees as it shall deem advisable and with such limited authority as the
Board of Directors shall from time to time determine.

         4.2 MISCELLANEOUS.

                  (a) The Board of Directors shall have the power at any time
and from time to time to fill vacancies in, to change the membership of, or to
discharge any committee.

                  (b) Unless prohibited by law, the provisions of Section 3.8
("Action by Consent") and of Section 3.9 ("Telephone Meetings") shall apply to
all committees from time to time created by the Board of Directors.

                                  5. OFFICERS

         5.1 POSITIONS. The Corporation may have a Chief Executive Officer and a
Chairman of the Board, and shall have a President, one or more Vice Presidents,
a Secretary, and a Treasurer, all of whom shall be chosen by the Board of
Directors. The Corporation may also have such assistant officers as the Board of
Directors may deem necessary, all of whom shall be elected by the Board of
Directors. Any number of offices may be held by the same person.

         5.2 RIGHTS AND DUTIES--GENERAL. The election of any officer of the
Corporation shall not of itself create any contract rights for any such officer
with respect to that officer's position or employment by the Corporation. All
officers of the Corporation shall exercise such powers and perform such duties
as the Board of Directors may from time to time direct.

         5.3 TERM OF OFFICE; REMOVAL. Each officer of the Corporation shall hold
office at the pleasure of the Board of Directors and any officer may be removed,
with or without cause, at any time. The Board of Directors may fill any vacancy
in any office for the unexpired portion of the office term.

         5.4 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, if any, shall
perform such executive, supervisory, and management function and duties as the
Board of Directors may from time to time assign.

         5.5 CHAIRMAN OF THE BOARD. The Chairman of the Board, if any, shall
perform such executive, supervisory, and management functions and duties as the
Board of Directors may from time to time assign.

         5.6 PRESIDENT. The President shall:

                  (a) Subject to the direction of the Board of Directors, have
general charge and authority over the business of the Corporation;

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                  (b) Have authority acting alone, except as otherwise directed
by the Board of Directors, to sign and deliver any document on behalf of the
Corporation; and

                  (c) Have such other powers and duties as the Board of
Directors may assign.

         5.7 VICE PRESIDENT(S). The Vice President, or if there be more than one
Vice President, the Vice Presidents in the order of their seniority by
designation (or if not designated, in the order of their seniority of election),
shall perform the duties of the President in his absence. The Vice President(s)
shall have such other powers and duties as the Board of Directors or the Chief
Executive Officer, if any, or the President, if there is no Chief Executive
Officer, may assign.

         5.8 SECRETARY. The Secretary shall:

                  (a) Issue notices of all meetings for which notice is required
to be given;

                  (b) Keep the minutes of all meetings and have charge of the
corporate record books; and

                  (c) Have such other duties and powers as the Board of
Directors or the Chief Executive Officer, if any, or the President, if there is
no Chief Executive Officer, may assign.

         5.9 TREASURER. The Treasurer shall:

                  (a) Have the custody of all funds and securities of the
Corporation;

                  (b) Keep adequate and correct accounts of the Corporation's
affairs and transactions; and

                  (c) Have such other duties and powers as the Board of
Directors or the Chief Executive Officer, if any, or the President, if there is
no Chief Executive Officer, may assign.

                                   6. NOTICES

         6.1 WRITTEN NOTICE--FORM; DELIVERY. Any written notice required or
permitted to be given to any director, officer, stockholder, or committee member
shall be either personally delivered or given by first-class mail or overnight
courier with postage prepaid, in any case addressed to the recipient at his or
her address as it appears in the records of the Corporation. Personally
delivered notices shall be deemed given at the time they are delivered at the
address of the named recipient as it appears in the records of the Corporation,
mailed notices shall be deemed given at the time they are deposited in the
United States mail, and notices given by overnight courier shall be deemed given
at the time they are delivered to the courier. Notice to a director may also be
given by telegram sent to his or her address as it appears on the records of the
Corporation and shall be deemed given at the time delivered at such address.

         6.2 WAIVER; EFFECT OF ATTENDANCE. Whenever any notice is required to be
given by law, by the Corporation's Certificate of Incorporation, or by these
Bylaws, a written waiver

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thereof, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be the equivalent of the giving of such
notice. Any stockholder who attends a meeting of stockholders in person, or who
is represented at such meeting by a proxy, or any director or committee member
who attends a meeting of the Board of Directors or of a committee thereof, shall
be deemed to have had timely and proper notice of the meeting, unless such
stockholder (or his or her proxy), director, or committee member attends for the
express purpose of objecting to the transaction of any business on the grounds
that the meeting is not lawfully called or convened.

                               7. INDEMNIFICATION

The Corporation shall indemnify each person who may be indemnified (individually
an "Indemnitee" and collectively the "Indemnitees") pursuant to Section 145
("Section 145") of the General Corporation Law of the State of Delaware, as
amended from time to time (or any successor provision thereto), to the fullest
extent permitted by Section 145. In each and every situation in which the
Corporation may do so under Section 145, the Corporation hereby obligates itself
to so indemnify the Indemnitees, and in each case, if any, in which the
Corporation must make certain investigations on a case-by-case basis before
indemnification, the Corporation hereby obligates itself to pursue such
investigations diligently, it being the specific intention of these Bylaws to
obligate the Corporation to indemnify each Indemnitee to the fullest extent
permitted by law at any time and from time to time. To the extent not prohibited
by Section 145 (or any other provision of the General Corporation Law of the
State of Delaware, as amended from time to time), the Indemnitees shall not be
liable to the Corporation except for their own individual willful misconduct or
actions taken in bad faith.

                             8. GENERAL PROVISIONS

         8.1 REGISTERED STOCKHOLDERS. Except as otherwise provided by law, the
Corporation shall be entitled to recognize the exclusive right of a person who
is registered on its books as the owner of shares of its capital stock to
receive dividends or other distributions (to the extent otherwise distributable
or distributed), to vote (in the case of voting stock) as such owner, and to
hold liable for calls and assessments a person who is registered on its books as
the owner of shares of its capital stock. The Corporation shall not be bound to
recognize any other person's equitable or legal claim to, or interest in, such
shares. The Corporation (or its transfer agent) shall not be required to send
notices or dividends to a name or address other than the name or address of the
stockholders appearing on the stock ledger maintained by the Corporation (or by
the transfer agent or registrar, if any), unless any such stockholder shall have
notified the Corporation (or the transfer agent or registrar, if any), in
writing, of another name or address at least ten days before the mailing of such
notice or dividend.

         8.2 DIVIDENDS. Subject to the provisions of the Corporation's
Certificate of Incorporation and of the General Corporation Law of the State of
Delaware, as amended from time to time, the Board of Directors may declare
dividends upon the capital stock of the Corporation at any regular or special
meeting, and such dividends may be paid in cash, in property, or in shares of
the capital stock of the Corporation.

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         8.3 FISCAL YEAR. Subject to change at any time at the direction of the
Board of Directors, the fiscal year of the Corporation shall end on the Saturday
nearest August 31 in each calendar year.

         8.4 AMENDMENT OF BYLAWS. As provided by the Corporation's Certificate
of Incorporation, the Board of Directors shall have the power to make, alter,
and repeal these Bylaws, and to adopt new bylaws, in all cases by an affirmative
vote of a majority of the whole Board of Directors, provided that notice of the
proposal to make, alter, or repeal these Bylaws, or to adopt new bylaws, is
included in the notice of the meeting of the Board of Directors at which such
action takes place.<PAGE>   1

                                  Exhibit 10(a)
                               DMI FURNITURE, INC.

                1993 LONG TERM INCENTIVE STOCK PLAN FOR EMPLOYEES

1.       DESCRIPTION OF PLAN; EFFECTIVENESS AND TERMINATION

         (a) NAME AND BACKGROUND. This is the 1993 Long Term Incentive Stock
Plan for Employees (this "Plan") adopted by DMI Furniture, Inc. (the "Company").
This Plan is an addition to certain prior stock option plans of the Company, the
first of which was adopted by the Board of Directors of the Company (the
"Board") on August 11, 1978, approved by the Stockholders on October 9, 1978,
and has since expired. The second plan was an amendment to the first plan,
adopted by the Board on December 1, 1981 and January 14, 1982. The amendments to
this plan were approved by the Stockholders on January 14, 1982 and February 15,
1984. The third plan was adopted by the Board on November 29, 1988 and approved
by the Stockholders on February 23, 1989. Each prior plan of the Company
provided for grants of stock options to key employees of the Company.

         (b) PURPOSE AND TYPE OF AWARDS. The purpose of this Plan is to
encourage stock ownership by certain officers and other key employees of the
Company, including directors of the Company who are also employees (collectively
with their legal representatives, the "Participants"), thereby encouraging them
to remain in the employ of the Company and enhancing their identity of interest
with the Company. It is the intention of the Company that there be issued
pursuant to the Plan: (i) non-qualified stock options ("NSOs"); (ii) incentive
stock options ("ISOs") which are intended to satisfy the requirements for tax
qualified status under the Internal Revenue Code of 1986, as amended (the
"Code"); (iii) performance shares ("Performance Shares") or performance units
("Performance Units"); (iv) stock appreciation rights ("SARs"); and (v)
restricted shares ("Restricted Shares"). Any grant of any option, stock, right
or award made under the Plan shall hereinafter be referred to as an "Award."

         (c) COMPLIANCE WITH CERTAIN SECURITIES AND TAX PROVISIONS. It is the
intent of the Company that (i) all transactions involving equity securities
issued or issuable under this Plan by persons subject to Section 16 of the
Exchange Act qualify for the exemption provided by Rule 16b-3 under the Exchange
Act, and that cash-only Plan interests held by such persons that might otherwise
be deemed to be "derivative securities," as defined under Rule 16a-1(c) under
the Exchange Act, be excluded under Rule 16a-1(c)(3)(i) by virtue of this Plan's
compliance with Rule 16b-3; and (ii) all Options issued as ISOs under Section 6
of this Plan qualify as "incentive stock options" under Section 422 of the Code.
Accordingly, if any provision of this Plan or any agreement entered into
pursuant hereto does not comply with the requirements of Rule 16b-3 and Section
422 as then applicable to such a transaction or cash-only Plan interest or
Option, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements with respect to such transaction,
cash-only Plan interest or Option.

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         (d) EFFECT ON OTHER PLANS. Participation in this Plan shall not affect
an employee's eligibility to participate in any other benefit or incentive plan
of the Company, and any Awards made pursuant to this Plan shall not be used in
determining the benefits provided under any other plan of the Company unless
specifically provided in an agreement entered into pursuant to this Plan or such
other plan.

         (e) EFFECTIVENESS. This Plan will take effect upon adoption by the
Board and subsequent approval by the stockholders of the Company within twelve
(12) months after this Plan is adopted by the Board.

         (f) TERMINATION. This Plan shall terminate on the tenth (10th)
anniversary of its effectiveness and no Award may be made under this Plan after
that date. The Board may amend, alter, suspend or terminate this Plan or the
Committee's authority to grant Awards under this Plan, except that any such
amendment, alteration, suspension or termination shall be subject to the
ratification or approval of the Company's stockholders within one year after the
Board action if such stockholder ratification or approval is required by any
federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Common Stock may then be listed or
quoted, or if the Board otherwise, in its discretion, determines for any other
reason to submit such changes to this Plan to stockholders for approval or
ratification. The amendment, alteration, suspension or termination of this Plan
shall not, without the consent of such Participant, affect a Participant's
rights under an Award previously granted.

2.       SHARES SUBJECT TO PLAN.

         (a) NUMBER OF SHARES. Awards under the Plan may be made for an
aggregate of the greater of (i) 600,000 shares of the Company's authorized but
unissued or reacquired Common Stock, $0.10 par value (the "Common Stock"), or
(ii) ten percent (10%) of the combined number of shares of Common Stock issued
and outstanding at any one time or subject to issuance at any one time upon the
exercise or conversion of any warrant, option, preferred stock or other similar
security. Shares of Common Stock subject to an Award are herein referred to as
the "Shares." The Shares are in addition to 267,560 shares of Common Stock which
have been issued or are subject to options under prior plans of the Company. The
limitations established by each of the preceding sentences of this subsection
are subject to adjustment as provided in Section 12 hereof.

         (b) AVAILABILITY OF SHARES. If any ISO or NSO (collectively, "Options")
or SAR expires or terminates for any reason during the term of this Plan and
prior to its exercise in full, or if Restricted Shares or SARs are forfeited for
any reason, the number of Shares related to such Award shall again become
available for the grant of Awards thereafter.

3.       ADMINISTRATION OF THE PLAN.

         (a) COMMITTEE. This Plan will be administered by the Compensation
Committee (the "Committee") appointed by the Board. The Committee will consist
of from three to five directors not employed by the Company who will serve at
the pleasure of the Board.

<PAGE>   3

         (b) MEMBERSHIP AND MEETINGS. All members of the Committee shall be
"disinterested persons" within the meaning of Rule 16b-3 promulgated pursuant to
the provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Committee will hold meetings when a quorum is present at such times
and places as it may determine. A quorum shall consist of a majority of the
Committee. A majority of the Committee present and voting at a meeting at which
a quorum is present, or acts reduced to and approved in writing by a majority of
the members of the Committee at any other time, shall be valid acts of the
Committee. No director while a member of the Committee shall be eligible to
receive an Award under this Plan.

         (c) AUTHORITY. Without limiting the foregoing, the Committee shall have
the full and final authority, in its sole discretion and from time to time, to:

                  (i) make and adopt rules and regulations for the
administration of this Plan;

                  (ii) conclusively interpret the provisions of this Plan and
decide all questions of fact arising in its application;

                  (iii) determine the officers and key employees to whom Awards
shall be made under this Plan;

                  (iv) determine the type of Award to be made and the amount,
size and terms of each such Award (including, but not limited to, any exercise
price, grant price, or purchase price, any restriction or condition, any
schedule for lapse of restrictions or conditions relating to transferability or
forfeiture, exercisability, or settlement of an Award, and waivers or
accelerations thereof, and waiver of performance conditions relating to an
Award, based in each case on such conditions as the Committee shall determine);

                  (v) determine the time when Awards will be granted;

                  (vi) prescribe from time to time the form, and the terms,
provisions and conditions (not inconsistent with this Plan) of any agreements to
be entered into under this Plan;

                  (vii) determine whether, to what extent and under what
circumstances cash or Shares or a combination thereof payable or deliverable
with respect to an Award will be deferred automatically, at the election of the
Committee, or at the election of the Participant;

                  (viii) modify, extend or renew any Award or accept the
surrender of any Award (in the case of an Option, to the extent not theretofore
exercised) and authorize the granting of a new Award in substitution therefor;

                  (ix) modify any Option so as to specify a lower exercise
price or accept the surrender of any Option and authorize the granting of a new
Option in substitution therefore specifying a lower price; notwithstanding this
subsection, no modification of an Award which adversely affects a Participant
shall be made without the consent of the Participant; and

<PAGE>   4

                  (x) make all other determinations necessary or advisable for
the administration of this Plan.

         (d) DELEGATION. The Committee may designate persons other than its
members to carry out its responsibilities under such conditions or limitations
as it may set, other than its authority with regard to benefits granted to
employees who are officers or directors of the Company for purposes of Section
16 of the Exchange Act.

         (e) NON-UNIFORM DETERMINATION. The Committee's determinations under
this Plan (including without limitation determinations of the Participant to
receive Awards, the form, amount and timing of such Awards, the other terms,
provisions and conditions thereof, the terms of the agreements evidencing
Awards, and the establishment of values and performance targets) need not be
uniform, and may be made by the Committee selectively among persons who receive,
or are eligible to receive Awards under this Plan, whether or not such persons
are similarly situated.

         (f) INDEMNIFICATION. The interpretation and construction by the
Committee any provision of this Plan or of any Award made hereunder shall be
final. The members of the Committee shall be indemnified by the Company to the
full extent permitted by applicable law and the Company's Certificate of
Incorporation and By-laws. In addition, each Participant, by his or her
participation in this Plan, releases each member of the Committee of and from
all losses, costs, damages and other liabilities and obligations, including
attorneys fees, arising in connection with this Plan, its administration and all
Awards hereunder, except only damages which a Participant can show arose
directly from a member's willful misconduct or fraud.

4.       PARTICIPANTS.

         (a) ELIGIBILITY. Eligible Participants in this Plan shall be such
officers and other key employees of the Company as may be selected from time to
time by the Committee. Neither Directors of the Company who are not otherwise
officers or employees of the Company, nor members of the Committee, shall be
eligible to participate in this Plan. A Participant who is granted an Award may
be granted more than one Award.

         (b) FACTORS. In making any determination as to employees to whom Awards
shall be granted and as to the number of Shares to be subject to such Awards,
the Committee shall take into account the duties of the respective employees,
their present and potential contributions to the success of the Company, and
such other factors as the Committee shall deem relevant in connection with
accomplishing the purpose of this Plan.

         (c) OTHER AGREEMENTS. Additionally, the Committee shall take into
account whether any employment or other agreement entered into between the
Company and an employee, who is or may be a Participant, provides for the
issuance to the Participant of equity in the Company of a nature equivalent to
any type of Award, and whether an Award should be made to such Participant to
satisfy the Company's obligations under such an agreement, all in accordance
with the terms and conditions of this Plan.

<PAGE>   5

5.       TERMS AND CONDITIONS OF AWARDS UNDER THIS PLAN.

         Awards under this Plan may be in the form of ISOs, NSOs, Performance
Shares, Performance Units, SARs and Restricted Shares, either separately or in
such combination as the Committee may in its discretion deem appropriate.

6.       STOCK OPTIONS.

         ISOs and NSOs shall be evidenced by stock option agreements which shall
contain in substance and/or incorporate by reference the terms and conditions
set forth in this Section 6. ISOs may be granted under the Plan covering an
aggregate of 600,000 Shares. If a Participant is issued Options hereunder or
under another Company stock option plan which are exercisable for the first time
in any one calendar year and which cover Common Stock having an aggregate Fair
Market Value (as defined in subsection (a)(ii) below) exceeding $100,000 as of
the date of issue, such options shall not be treated as tax-qualified incentive
stock options to the extent of the excess. Such options shall be so disqualified
in reverse order of grant.

         (a)      OPTION PRICE.

                  (i) The purchase price per Share deliverable upon the exercise
of an Option shall not be less than 100% of the Fair Market Value (as defined in
subsection (ii) below) of the Shares on the day the Option is granted, as
determined by the Committee; provided, however, that (A) in the event the
Participant is granted an ISO, and, immediately prior to the grant of the Award,
is the beneficial owner of more than ten (10) percent of the Company's
outstanding voting stock, the price per Share payable on the exercise of the
Option will be not less than one hundred ten (110%) percent of the Fair Market
Value per Share of the outstanding Shares on the date the Option is granted; and
(B) in the event the Participant is granted a NSO, the price per Share payable
on the exercise of the Option will be not less than fifty (50%) percent of the
Fair Market Value per Share of the outstanding Shares on the date the Option is
granted. Subject to the foregoing, the Committee in fixing the price per Share
will have full authority and discretion.

                  (ii) The Fair Market Value of Shares shall be the closing
price of such Shares on the exchange on which such Shares are traded, as
reported on the date of grant, or, if no closing price is reported on that date,
the closing bid price on the most recent trading day immediately preceding the
date of the grant.

         (b)      EXERCISE OF OPTION.

                  (i) Each Option Agreement shall state the period or periods of
time within which the Option may be exercised by the Participant, in whole or in
part, which shall be such period or periods of time as may be determined by the
Committee at the time of grant, PROVIDED THAT, the exercise period shall not end
later than (A) five years after the date of the grant of an ISO to a Participant
who, immediately prior to the grant of the Award, is the beneficial owner of
more than ten (10) percent of the Company's outstanding voting stock, or (B)
otherwise, ten

<PAGE>   6

years after the date of the grant of the Option. Each Option shall in any event
expire immediately upon the termination of the applicable exercise period set
forth above and shall be void and unexercisable thereafter.

                  (ii) To qualify for an exemption under Section 16(b) of the
Exchange Act, at least six (6) months must elapse from the date of grant of an
Option to the date of disposition of the Option (other than upon exercise
thereof) or the Common Stock issuable upon exercise thereof.

         (c)      PAYMENT FOR SHARES.

                  (i) The price payable on the exercise of any Option in whole
or in part shall be equal to the Option price multiplied by the number of Shares
as to which the Option is exercised, and shall be paid in cash or by certified
check, along with any applicable tax withholding.

                  (ii) If permitted by the Committee, in its sole discretion,
payment in full or in part may be made in the form of Common Stock owned by the
Participant for at least six (6) months prior to the date the Option is
exercised (based on the Fair Market Value of the Common Stock on such date). The
Committee, in its sole discretion, may also permit certain Participants to
exercise any Option or portion thereof and tender the Shares so acquired at
their Fair Market Value in payment of the Option price, and to exercise other
Options immediately and successively. Except with respect to the successive
exercise of Options, Shares delivered in payment of the Option price shall be
evidenced by negotiable stock certificates registered either in the sole name of
the Participant or the names of the Participant and spouse, or by any
combination of cash or Shares. No Shares shall be issued unless the Participant
has fully complied with the provisions of this Plan.

                  (iii) With respect to any Participant subject to Section 16(b)
of the Exchange Act, any election by a Participant to pay the exercise price in
Shares or other Common Stock shall be made during the period beginning on the
third (3rd) business day following the release for publication of quarterly or
annual financial information required to be prepared and disseminated by the
Company pursuant to the requirements of the Exchange Act and ending on the
twelfth (12th) business day following such date. This condition shall be deemed
to be satisfied when the specified financial data appears on or in a wire
service, financial news service, or newspaper of general circulation or is
otherwise first made publicly available.

         (d)      RIGHTS UPON TERMINATION OF EMPLOYMENT.

                  (i) In the event that a Participant ceases to be an employee
of the Company for any reason other than death, disability, retirement
(including early retirement) or involuntary separation without cause, all
Options granted to such Participant shall terminate forthwith or at such other
time as determined by the Committee.

<PAGE>   7

                  (ii) In the event employment ceases because a Participant dies
or becomes disabled prior to expiration of any unexercised Option, such
Participant shall have the right to exercise the Option during its term within a
period of twelve (12) months after the date employment so ceased (and the Option
shall expire at the end of such period), to the extent that the Option was
exercisable on the date employment ceased due to death or disability, or during
such other period and subject to such terms as may be determined by the
Committee.

                  (iii) In the event employment ceases because a Participant is
involuntarily separated without cause or retires prior to expiration of any
unexercised Option, such Participant shall have the right to exercise the Option
during its term within a period of three (3) months after the date employment so
ceased (and the Option shall expire at the end of such period), to the extent
that the Option was exercisable on the date employment ceased, or during such
other period and subject to such terms as may be determined by the Committee.

                  (iv) As used in this Plan, (A) "disability" shall have the
meaning set forth in Section 22(e)(3) of the Code, and (B) the phrase
"involuntary separation without cause" means a termination of employment by the
Company for reasons other than substantial failure to perform duties, material
violation of Company policies, unethical activities, misconduct, fraud, or
illegal act; provided that, an "involuntary separation without cause" does not
include a resignation or a voluntary separation from employment, in either case
initiated by the Participant.

7.       STOCK APPRECIATION RIGHTS.

             Awards may be made from time to time in the form of SARs, which
shall be evidenced by stock appreciation rights agreements which shall contain
in substance and/or incorporate by reference the following terms and conditions:

         (a) AWARD. Each SAR shall entitle the Participant, subject to terms and
conditions determined by the Committee, to receive upon exercise thereof all or
a portion of the excess of (i) the Fair Market Value of a specified number of
Shares of the Company at the time of exercise, as determined by the Committee,
over (ii) a specified price which shall not be less than 100% of the Fair Market
Value of the Shares at the time the SAR was granted, or, if connected with a
previously granted Option, not less than 100% of the Fair Market Value of the
Shares at the time such Option was granted. An SAR may be granted in connection
with all or any portion of a previously or contemporaneously granted Option or
not in connection with an Option.

         (b) TERM. SARs shall be granted for a period of not less than one (1)
year nor more than ten (10) years and shall be exercisable in whole or in part
at such time or times and subject to such other terms and conditions as shall be
prescribed by the Committee at the time of grant; provided that no SAR shall be
exercisable, in whole or in part, during the six-month period starting with the
date of grant.

         (c)      RIGHTS UPON TERMINATION OF EMPLOYMENT.

                  (i) In the event that a Participant ceases to be an employee
of the Company for any reason other than death, disability, retirement
(including early retirement) or involuntary

<PAGE>   8

separation without cause, all SARs granted to such grantee shall terminate
forthwith or at such other time as determined by the Committee.

                  (ii) In the event employment ceases because a Participant dies
or becomes disabled without having fully exercised such Participant's SARs, the
Participant shall have the right to exercise the SARs during their term within a
period of twelve (12) months after the date employment ceased due to death or
disability (and the SAR shall expire at the end of such period), to the extent
that the right was exercisable on the date employment so ceased, or during such
other period and subject to such terms as may be determined by the Committee.

                  (iii) In the event employment ceases because a Participant is
involuntarily separated without cause or retires prior to expiration of his or
her SARs, the Participant shall have the right to exercise the SARs during their
term within a period of three (3) months after the date employment so ceased
(and the SAR shall expire at the end of such period), to the extent that the
SARs were exercisable on the date employment ceased, or during such other period
and subject to such other terms as determined by the Committee.

         (d) SECTION 16(b) COMPLIANCE. The Committee may establish such
additional terms and conditions, without limiting the foregoing, as it
determines to be necessary or desirable to avoid "short-swing profit" liability
in connection with an SAR under Section 16(b) of the Exchange Act.

         (e) PAYMENT. Upon exercise of an SAR, payment shall be made solely in
cash.

         (f) INCENTIVE STOCK OPTIONS. SARs may be granted in connection with an
ISO, but shall not be granted in a manner or form which will result in the
failure of such ISO to qualify as an "incentive stock option" under Section 422
of the Code, or regulations thereunder.

8.       PERFORMANCE SHARES AND PERFORMANCE UNITS.

             Performance Shares and Performance Units shall be evidenced by
performance agreements which shall contain in substance and/or incorporate by
reference the following terms and conditions:

         (a) PERFORMANCE PERIOD. At the time of each Award of Performance Shares
or Performance Units, the Committee shall establish with respect to such Award a
performance period of not less than two nor more than five years.

         (b) VALUATION. At the time of each Award, the Committee shall establish
with respect to such Award a number of Shares or a value for each unit, which
shall not thereafter change or which may be fixed or varied thereafter and
determinable from criteria specified by the Committee at the time of the Award.

         (c) PERFORMANCE TARGETS.

<PAGE>   9

                  (i) At the time of each Award, the Committee shall establish
maximum and minimum performance targets to be achieved with respect to each such
Award during the performance period. The Participant shall be entitled to
delivery of all Performance Shares or to payment with respect to all Performance
Units awarded if the maximum target is achieved during the performance cycle,
but shall be entitled to delivery of a portion of Performance Shares or to
payment with respect to all Performance Units awarded according to the level of
achievement of performance targets, as specified by the Committee, for
performance during the performance period which meets or exceeds the minimum
target but fails to meet the maximum target.

                  (ii) The performance targets established shall relate to
performance of the Company, any constituent company, or any division or unit
thereof and may be established in terms of growth in gross revenue, earnings per
share, ratio of earnings to shareholders' equity or to total assets or such
other performance targets as may be determined by the Committee in its
discretion. Multiple targets may be used and may have the same or different
weight, and they may relate to absolute performance, or relative performance as
measured against other time periods or other corporations, divisions or units.
Targets for the same performance period may be different for Performance Shares
and for Performance Units.

         (d) ADJUSTMENTS. At any time prior to delivery of Performance Shares or
Performance Units, the Committee may adjust previously established performance
targets and other terms and conditions, including the Company's or other
corporations' financial performance for Plan purposes, to reflect major
unforeseen events such as changes in laws, regulations or accounting practices,
mergers, acquisitions or divestitures or extraordinary, unusual or non-recurring
items or events.

         (e) DELIVERY OR PAYMENT. Following the conclusion of each performance
period, the Committee shall determine the extent to which performance targets
have been attained for such period as well as the extent to which the other
terms and conditions established by the Committee have been met. The Committee
shall determine what, if any, Shares are due on a Performance Shares Award and
what, if any, payment is due on a Performance Unit Award. At the discretion of
the Committee, a Performance Unit Award may be paid in Shares.

         (f) TERMINATION OF EMPLOYMENT.

                  (i) In the event that a Participant holding a Performance
Award ceases to be an employee of the Company prior to the end of the applicable
performance period by reason of death, disability, retirement (including, with
the consent of the Company, early retirement) or involuntary separation without
cause, the Participant's Performance Shares or Performance Units, to the extent
earned under the applicable performance targets, shall be deliverable or payable
at the end of the performance period in proportion to the active service of the
Participant during the performance period, as determined by the Committee.

                  (ii) Upon any other termination of employment, participation
shall terminate forthwith and all outstanding Awards held by the Participant
shall be canceled unless the Committee determines otherwise.

<PAGE>   10

9.       RESTRICTED SHARES.

         Restricted Shares awarded under this Plan shall be in the form of
Shares restricted as to transfer and subject to forfeiture, and shall be
evidenced by restricted share agreements which shall contain in substance and/or
incorporate by reference the following terms and conditions:

         (a) RESTRICTION PERIOD. Restricted Shares awarded pursuant to this Plan
shall be subject to such terms, conditions, and restrictions, including without
limitation prohibitions against transfer, substantial risks of forfeiture and
attainment of performance objectives, for such period or periods of time as
shall be determined by the Committee at the time of grant.

         (b) RESTRICTION UPON TRANSFER. Restricted Shares awarded, and the right
to vote such Restricted Shares and to receive dividends thereon, may not be
sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise
encumbered, except as herein provided, during the restriction period applicable
to such Restricted Shares. Notwithstanding the foregoing, and except as
otherwise provided in this Plan, the Participant shall have all the other rights
of a shareholder including but not limited to, the right to receive dividends
and the right to vote such Restricted Shares.

         (c) CERTIFICATES. Each certificate issued in respect of Restricted
Shares awarded to a Participant shall be deposited with the Company or its
designee, and shall bear the following legend:

             "This certificate and the shares of stock represented
             hereby are subject to the terms and conditions (including
             forfeiture and restrictions against transfer) contained
             in the DMI Furniture, Inc. 1993 Long Term Incentive Stock
             Plan for Employees and an Agreement entered into between
             the registered owner and DMI Furniture, Inc. Release from
             such terms and conditions shall obtain only in accordance
             with the provisions of this Plan and Agreement, a copy of
             each of which is on file in the office of the Secretary of
             DMI Furniture, Inc."

         (d) LAPSE OF RESTRICTIONS. Each Restricted Share Agreement shall
specify the terms and conditions upon which any restrictions upon Restricted
Shares awarded under this Plan shall lapse, as determined by the Committee at
the time of grant. Upon the lapse of such restrictions, certificates(s) free of
any restrictive legend shall be issued to the Participant.

         (e) TERMINATION PRIOR TO LAPSE OF RESTRICTIONS. In the event that a
Participant ceases to be an employee of the Company for any reason prior to the
lapse of restrictions applicable to any Restricted Shares awarded to such
Participant, all Restricted Shares as to which there still remain unlapsed
restrictions shall be forfeited by such Participant to the Company without
payment of any consideration by the Company, and the Participant shall not
thereafter have any further rights or interest in such shares or certificates.

<PAGE>   11

10.      NONTRANSFERABILITY.

         An Award (other than Performance Shares or Restricted Shares no longer
subject to risk of forfeiture) shall not be assignable or transferable otherwise
than by will or the laws of descent and distribution or pursuant to a "qualified
domestic relations order" (as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder), and may be exercised,
during the lifetime of the Participant, only by such Participant or his or her
guardian or legal representative.

11.      CHANGE IN CONTROL.

         Upon a Change in Control in the Company, each Option, Performance Unit
and SAR previously granted and not exercised shall become immediately
exercisable to the same extent and in the same manner as if it had become
exercisable in accordance with the provisions of this Plan and the agreement
under which it was originally issued. Upon a Change in Control in the Company,
each Restricted Share previously granted and still subject to forfeiture in
accordance with the provisions of this Plan and the agreement under which it was
originally issued, shall not thereafter be subject to forfeiture. For purposes
of this Plan, a "Change in Control" of the Company shall be deemed to have
occurred if:

         (a) Any "person" (as that term is used in Sections 13(d) and 14(d) of
the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing twenty (20%) percent or more of the combined voting power of the
Company's then outstanding capital stock, unless such person is the Company, any
subsidiary of the Company, a related benefit plan or trust or another
corporation in which shareholders of the Company own fifty percent (50%) or more
of such corporation's voting stock;

         (b) During any period of two (2) consecutive years individuals who at
the beginning of such period constitute the Board cease for any reason to
constitute a majority of the Board, unless the nomination of each new director
for election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who were directors at the
beginning of the period;

         (c) Upon the consummation of (i) any merger or consolidation of the
Company in which the Company would not be the surviving corporation, or pursuant
to which Common Stock is converted to cash, securities or other property, other
than a merger of the Company in which holders of Shares have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (ii) any sale, lease, exchange or transfer (in one
transaction or series of related transactions) of all, or substantially all, of
the assets of the Company; or

<PAGE>   12

         (d) Any person (other than the Company itself) publicly announces an
intention to take or to consider taking actions which, if consummated, would
constitute a Change in Control of the Company.

12.      ADJUSTMENTS.

         In the event of any change in the outstanding Common Stock by reason of
a stock dividend or distribution, recapitalization, merger, consolidation,
split-up, combination, exchange or shares or the like, the Committee shall
adjust the number of Shares which may be issued under this Plan and shall
provide for an equitable adjustment of any outstanding Award or the number or
kind of Shares issuable pursuant to an outstanding Award under this Plan.

13.      GENERAL RESTRICTIONS.

         The Company's obligations with respect to each Award under this Plan
shall be subject to the requirement that, if at any time the Committee shall
determine that (a) the listing, registration or qualification of the Shares
subject or related thereto upon any securities exchange or under any state or
federal law, (b) the consent or approval of any government regulatory body, or
(c) an agreement by the recipient of an Award with respect to the disposition of
Shares is necessary or desirable as a condition of or in connection with the
granting of such Award or the issue or purchase of Shares thereunder, such Award
may not be consummated in whole or in part unless such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.

14.      RIGHTS TO TERMINATE EMPLOYMENT.

         Nothing in this Plan or any agreement entered into pursuant to this
Plan shall confer upon the Participant the right to continue in the employment
of the Company or affect any right which the Company may have to terminate the
employment of such Participant.

15.      RIGHTS OF A STOCKHOLDER.

         No Participant shall have any rights as a stockholder of the Company
(a) with respect to any Shares subject to an Award until, in the case of an
Option, such Option has been exercised, and in all cases, a certificate with
respect to the Shares subject to such Award has been issued to the Participant,
or (b) with respect to SARs or Performance Units. No adjustment in Shares
subject to an Award or in SARs or Performance Units shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights, except only as to Shares subject to an Award for
which the record date is prior to the date such Shares have been purchased and
issued.

16.      PURCHASE FOR INVESTMENT.

         Unless the Shares subject to an Award are registered under the
Securities Act of 1933, as amended (the "Securities Act"), and comply with all
other laws, regulations and rules applicable

<PAGE>   13

thereto, the issuance of such Shares will be conditioned on obtaining
appropriate representations, warranties, and acknowledgements of the Participant
that:

         (a) Participant's acquisition of such Shares is and will be for
investment, and not with a view to public resale or distribution thereof;

         (b) Such Shares are not registered under the Securities Act and may not
be sold or otherwise transferred unless such Shares have been registered under
the Securities Act or in connection with the sale or other transfer counsel
satisfactory to the Company delivers to the Company a written opinion that the
sale or other transfer is exempt from registration under the Securities Act, and
is being made in compliance with any other applicable law, including all
applicable states securities laws;

         (c) All certificates for Shares delivered under this Plan shall be
subject to such stop-transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange or system upon which the
Common Stock is then listed, and any applicable federal, state or foreign
securities law; and

         (d) The Committee may cause a legend or legends to be put on all
certificates evidencing such Shares to make appropriate reference to the
foregoing restrictions.

17.      TAX WITHHOLDING.

         Whenever the Company proposes or is required to issue or transfer
Shares under this Plan, the Company shall have the right to require the
Participant to remit to the Company an amount sufficient to satisfy all federal,
state and/or local tax withholding requirements prior to the delivery of any
certificate for such Shares or, in the discretion of the Committee, the Company
may withhold from the Shares to be delivered Shares sufficient to satisfy all or
a portion of such tax withholding requirements. Whenever under this Plan
payments are to be made in cash, such payments shall be net of an amount
sufficient to satisfy all federal, state and/or local tax withholding
requirements. In addition, in all cases the Company shall have the right to take
whatever action it deems necessary to protect its interests with respect to tax
liabilities.

18.      REFERENCES TO SPECIFIC LAWS.

         All references herein to specific provisions of statutes, rules or
regulations shall include all future amendments thereto and all provisions which
replace such referenced provisions.

19.      GOVERNING LAW.

         To the extent that the federal laws do not otherwise control, this Plan
shall be governed by and construed in accordance with the laws of the state of
Delaware.

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