SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
DMI FURNITURE, INC.
(Name of Issuer)
COMMON STOCK, $.10 PAR VALUE
(Title of Class of Securities)
233230 10 1
(CUSIP Number)
Joseph G. Hill
Secretary
DMI Furniture, Inc.
One Oxmoor Place
101 Bullitt Lane
Louisville, Kentucky 40222
(502)426-4351
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 2, 1996
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box. /__/
Check the following box if a fee is being paid with this
statement. / X /
<PAGE>
CUSIP NO. - 233230 10 1
(1) Name of reporting person. . . . . . . . . Donald D. Dreher
S.S. or I.R.S. No. of
above person. . . . . . . . . . . . . . . ###-##-####
(2) Check the appropriate box
if a member of a group
(see instructions). . . . . . . . . . . . (a)
(b) X
(3) SEC use only. . . . . . . . . . . . . . .
(4) Source of funds (see instructions). . . . 00, PF
(5) Check box if disclosure
of legal proceedings is
required pursuant to
Items 2(d) or 2(e). . . . . . . . . . . .
(6) Citizenship or place
of organization . . . . . . . . . . . . . U.S.
Number of shares beneficially
owned by each reporting person
with:
(7) Sole voting power. . . . . . . . . . . . . 519,093
(8) Shared voting power. . . . . . . . . . . . 1,567,200
(9) Sole dispositive power . . . . . . . . . . 519,093
(10) Shared dispositive power . . . . . . . . . 1,567,200
(11) Aggregate amount beneficially
owned by each reporting person . . . . . . 2,086,293
(12) Check box if the aggregate amount
in Row (11) excludes certain
shares (see instructions). . . . . . . . .
(13) Percent of class represented
by amount in Row (11). . . . . . . . . . . 41.6%
(14) Type of reporting person . . . . . . . . . IN
<PAGE>
CUSIP NO. - 233230 10 1
(1) Name of reporting person. . . . . . . . . Joseph G. Hill
S.S. or I.R.S. No. of
above person. . . . . . . . . . . . . . . ###-##-####
(2) Check the appropriate box
if a member of a group
(see instructions). . . . . . . . . . . . (a)
(b) X
(3) SEC use only. . . . . . . . . . . . . . .
(4) Source of funds (see instructions). . . . 00, PF
(5) Check box if disclosure
of legal proceedings is
required pursuant to
Items 2(d) or 2(e). . . . . . . . . . . .
(6) Citizenship or place
of organization . . . . . . . . . . . . . U.S.
Number of shares beneficially
owned by each reporting person
with:
(7) Sole voting power. . . . . . . . . . . . . 176,214
(8) Shared voting power. . . . . . . . . . . . 1,567,200
(9) Sole dispositive power . . . . . . . . . . 176,214
(10) Shared dispositive power . . . . . . . . . 1,567,200
(11) Aggregate amount beneficially
owned by each reporting person . . . . . . 1,743,414
(12) Check box if the aggregate amount
in Row (11) excludes certain
shares (see instructions). . . . . . . . .
(13) Percent of class represented
by amount in Row (11). . . . . . . . . . . 36.9%
(14) Type of reporting person . . . . . . . . . IN
<PAGE>
CUSIP NO. - 233230 10 1
(1) Name of reporting person. . . . . . . . . Pattco, Inc.
S.S. or I.R.S. No. of
above person. . . . . . . . . . . . . . .
(2) Check the appropriate box
if a member of a group
(see instructions). . . . . . . . . . . . (a)
(b) X
(3) SEC use only. . . . . . . . . . . . . . .
(4) Source of funds (see instructions). . . . WC
(5) Check box if disclosure
of legal proceedings is
required pursuant to
Items 2(d) or 2(e). . . . . . . . . . . .
(6) Citizenship or place
of organization . . . . . . . . . . . . . U.S.
Number of shares beneficially
owned by each reporting person
with:
(7) Sole voting power. . . . . . . . . . . . . 0
(8) Shared voting power. . . . . . . . . . . . 1,567,200
(9) Sole dispositive power . . . . . . . . . . 0
(10) Shared dispositive power . . . . . . . . . 1,567,200
(11) Aggregate amount beneficially
owned by each reporting person . . . . . . 1,567,200
(12) Check box if the aggregate amount
in Row (11) excludes certain
shares (see instructions). . . . . . . . .
(13) Percent of class represented
by amount in Row (11). . . . . . . . . . . 34.3%
(14) Type of reporting person . . . . . . . . . CO
<PAGE>
CUSIP NO. - 233230 10 1
(1) Name of reporting person. . . . . . . . . James A.
Patterson
S.S. or I.R.S. No. of
above person. . . . . . . . . . . . . . .
(2) Check the appropriate box
if a member of a group
(see instructions). . . . . . . . . . . . (a)
(b) X
(3) SEC use only. . . . . . . . . . . . . . .
(4) Source of funds (see instructions). . . . 00
(5) Check box if disclosure
of legal proceedings is
required pursuant to
Items 2(d) or 2(e). . . . . . . . . . . .
(6) Citizenship or place
of organization . . . . . . . . . . . . . U.S.
Number of shares beneficially
owned by each reporting person
with:
(7) Sole voting power. . . . . . . . . . . . . 0
(8) Shared voting power. . . . . . . . . . . . 1,567,200
(9) Sole dispositive power . . . . . . . . . . 0
(10) Shared dispositive power . . . . . . . . . 1,567,200
(11) Aggregate amount beneficially
owned by each reporting person . . . . . . 1,567,200
(12) Check box if the aggregate amount
in Row (11) excludes certain
shares (see instructions). . . . . . . . .
(13) Percent of class represented
by amount in Row (11). . . . . . . . . . . 34.3%
(14) Type of reporting person . . . . . . . . . IN
<PAGE>
CUSIP NO. - 233230 10 1
(1) Name of reporting person. . . . . . . . . . C. Edward
Glasscock
S.S. or I.R.S. No. of
above person. . . . . . . . . . . . . . . ###-##-####
(2) Check the appropriate box
if a member of a group
(see instructions). . . . . . . . . . . . (a)
(b) X
(3) SEC use only. . . . . . . . . . . . . . .
(4) Source of funds (see instructions). . . . PF
(5) Check box if disclosure
of legal proceedings is
required pursuant to
Items 2(d) or 2(e). . . . . . . . . . . .
(6) Citizenship or place
of organization . . . . . . . . . . . . . U.S.
Number of shares beneficially
owned by each reporting person
with:
(7) Sole voting power. . . . . . . . . . . . . 5,000
(8) Shared voting power. . . . . . . . . . . . 1,567,200
(9) Sole dispositive power . . . . . . . . . . 5,000
(10) Shared dispositive power . . . . . . . . . 1,567,200
(11) Aggregate amount beneficially
owned by each reporting person . . . . . . 1,572,200
(12) Check box if the aggregate amount
in Row (11) excludes certain
shares (see instructions). . . . . . . . .
(13) Percent of class represented
by amount in Row (11). . . . . . . . . . . 34.4%
(14) Type of reporting person . . . . . . . . . IN
<PAGE>
Item 1. Security and Issuer.
The class of equity securities to which this statement relates
is the common stock, $.10 par value (the "Common Stock"), of DMI
Furniture, Inc., a Delaware corporation (the "Issuer").
The Issuer's principal executive office is located at One
Oxmoor Place, 101 Bullitt Lane, Louisville, Kentucky 40202
Item 2. Identity and Background.
1. Donald D. Dreher
(a) Name: Donald D. Dreher
(b) Business Address: DMI Furniture, Inc.
One Oxmoor Place
101 Bullitt Lane
Louisville, Kentucky 40222
(c) Principal Occupation: Chairman, President and Chief
Executive Officer of the Issuer.
(d) During the last five years, Mr. Dreher has not been
convicted in a criminal proceeding.
(e) During the last five years, Mr. Dreher was not a
party to a civil proceeding of a judicial or
administrative body resulting in a judgment, decree
or final order enjoining future violations of, or
prohibiting or mandating activities subject to,
federal or state securities laws or finding any
violation with respect to such law.
(f) Mr. Dreher is a United States citizen.
2. Joseph G. Hill
(a) Name: Joseph G. Hill
(b) Business Address: DMI Furniture, Inc.
One Oxmoor Place
101 Bullitt Lane
Louisville, Kentucky 40222
(c) Principal Occupation: Vice President-Finance, Chief
Financial Officer, Secretary and Treasurer of the
Issuer.
(d) During the last five years, Mr. Hill has not been
convicted in a criminal proceeding.
<PAGE>
(e) During the last five years, Mr. Hill was not a
party to a civil proceeding of a judicial or
administrative body resulting in a judgment, decree
or final order enjoining future violations of, or
prohibiting or mandating activities subject to,
federal or state securities laws or finding any
violation with respect to such law.
(f) Mr. Hill is a United States citizen.
3. Pattco, Inc.
(a) Name: Pattco, Inc.
(b) State of Incorporation: Kentucky
(c) Principal Business: Venture capital and management
services.
(d) Business Address: 10000 Shelbyville Road
Suite 100
Louisville, KY 40223
(e) Principal Office: 10000 Shelbyville Road
Suite 100
Louisville, KY 40223
(f) During the last five years, Pattco, Inc. has not
been convicted in a criminal proceeding.
(g) During the last five years, Pattco, Inc. was not a
party to a civil proceeding of a judicial or
administrative body resulting in a judgment, decree
or final order enjoining future violations of, or
prohibiting or mandating activities subject to,
federal or state securities laws or finding any
violation with respect to such law.
4. James A. Patterson
(a) Name: James A. Patterson
(b) Business Address: Pattco, Inc.
10000 Shelbyville Road
Suite 100
Louisville, KY 40223
(c) Principal Occupation: Chairman and President of
Pattco, Inc.
(d) During the last five years, Mr. Patterson has not
been convicted in a criminal proceeding.
<PAGE>
(e) During the last five years, Mr. Patterson was not a
party to a civil proceeding of a judicial or
administrative body resulting in a judgment, decree
or final order enjoining future violations of, or
prohibiting or mandating activities subject to,
federal or state securities laws or finding any
violation with respect to such law.
(f) Mr. Patterson is a United States citizen.
5. C. Edward Glasscock
(a) Name: C. Edward Glasscock
(b) Business Address: Brown, Todd & Heyburn PLLC
3200 Providian Center
Louisville, Kentucky 40202-3363
(c) Principal Occupation: Attorney; Chairman of Brown,
Todd & Heyburn PLLC, a law firm.
(d) During the last five years, Mr. Glasscock has not
been convicted in a criminal proceeding.
(e) During the last five years, Mr. Glasscock was not a
party to a civil proceeding of a judicial or
administrative body resulting in a judgment, decree
or final order enjoining future violations of, or
prohibiting or mandating activities subject to,
federal or state securities laws or finding any
violation with respect to such law.
(f) Mr. Glasscock is a United States citizen.
Item 3. Sources and Amount of Funds or Other Consideration.
On May 2, 1996, Donald D. Dreher, Joseph G. Hill, Pattco,
Inc., and C. Edward Glasscock (the "Investor Group") entered into
a letter of intent with BT Capital Partners, Inc. ("BT") providing
that the Investor Group would purchase from BT 1,048,930 shares of
the Issuer's Series C Preferred Stock, par value $2.00 per share
("Preferred Shares") and 280,169 shares of the Issuer's Common
Stock (together, the "BT Shares") for an aggregate purchase price
of $1.6 million. The letter of intent provides that the purchase
of the BT Shares by the Investor Group must be completed no later
than July 1, 1996.
The individual members of the Investor Group intend to
finance the purchase of the BT Shares with personal funds.
It has not been currently determined whether the Investor
Group will organize a separate entity to hold the BT Shares,
whether the BT Shares will be subject to a voting trust or voting
agreement, and whether and to what extent additional persons will
join the Investor Group for the purpose of purchasing the BT
Shares.
<PAGE>
Item 4. Purpose of Transaction.
Donald D. Dreher and Joseph G. Hill, two of the four members
of the Investor Group, are currently two of the five members of the
Issuer's Board of Directors. Mr. Dreher is the Issuer's Chairman,
President and Chief Executive Officer, and Mr. Hill is the Issuer's
Vice-President-Finance, Chief Financial Officer, Secretary, and
Treasurer. In addition, the Preferred Shares owned by BT represent
51.9% of the outstanding shares of the Issuer's Preferred Shares.
Holders of Preferred Shares are entitled to elect up to two
additional directors to the Issuer's Board, a right that the
Issuer's Preferred Shareholders currently have not elected to
exercise. The Investor Group expects, by virtue of its acquisition
of a majority or of the Issuer's Preferred Shares, to exercise the
right of the Preferred Shareholders to elect two additional
directors to the Issuer's Board of Directors, which would result in
members of the Investor Group and their representatives holding
four positions on a seven-member board of directors of the Issuer.
Therefore, upon completion of the purchase of the BT Shares,
members of the Investor Group would be in a position to exert
significant influence over the conduct of the Issuer's business.
Each Preferred Share owned by BT is convertible into 1.227
shares of the Issuer's Common Stock. Therefore, the BT Shares
represent 280,169 currently outstanding shares of Common Stock,
1,287,031 Common Stock equivalents and, upon conversion, would
represent 34.3% of the outstanding Common Stock. Together with the
97,246 shares of Common Stock and the currently exercisable
employee stock options to purchase 603,061 shares of Common Stock
currently owned by members of the Investor Group, the Investor
Group would beneficially own a total of 2,267,507 shares or 43.9%
of the Issuer's Common Stock upon completion of the purchase of the
BT Shares. Members of the Investor Group have no current intention
to acquire additional shares of Common Stock through open market
purchases but may consider any offers from other holders of
Preferred Shares to sell Preferred Shares or Common Stock that may
be made from time to time.
Except as indicated above or as may be currently under
consideration by the Issuer's board of directors, members of the
Management Group have no current plans or proposals that relate to
or would result in: (i) the acquisition by any person of additional
securities of the Issuer, or the disposition of securities of the
Issuer, (ii) an extraordinary corporate transaction, such as a
merger, reorganization or liquidation involving the Issuer or any
of its subsidiaries, (iii) a sale or transfer of a material amount
of assets of the Issuer or any of its subsidiaries, (iv) any change
in the present board of directors or management of the Issuer,
including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board, (v) any
material change in the present capitalization or dividend policy of
the Issuer, (vi) any other material change in the Issuer's business
or corporate structure, (vii) changes in the Issuer's charter,
bylaws or instruments corresponding thereto or other actions which
may impede the acquisition of control of the Issuer by any person,
(viii) causing a class of securities of the Issuer to be delisted
from a national securities exchange or cease to be authorized to be
quoted in an inter-dealer quotation system of a registered national
<PAGE>
securities association, (ix) a class of equity securities of the
Issuer becoming eligible for termination of registration pursuant
to Section 12(g)(4) of the Securities Exchange Act of 1934, or (x)
any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
Upon completion of the acquisition of the BT Shares, members
of the Investor Group would beneficially own (i) 377,415 currently
outstanding shares of Common Stock, (ii) currently exerciseable
employee stock options to purchase 603,061 shares of Common Stock,
and (iii) 1,048,930 shares of Preferred Stock convertible into
1,287,031 shares of Common Stock, or a total of 2,267,507 shares or
43.8% of the Issuer's Common Stock.
Information concerning the beneficial ownership of the
individual members of the Investor Group is set forth in the
following paragraphs. Except for the proposed purchase of the BT
Shares described in Item 3 above, none of the members of the
Investor Group has engaged in any transactions in the Issuer's
Common Stock or securities convertible into the Issuer's Common
Stock during the past sixty days.
Donald D. Dreher owns 74,000 shares of Common Stock and
options to purchase 445,093 shares of Common Stock granted under
the Issuer's employee benefit plans. Mr. Dreher has sole voting
and dispositive power with respect to these shares. In addition,
Mr. Dreher shares voting and dispositive power with the other
members of the Investor Group with respect to the BT Shares,
consisting of 280,169 shares of Common Stock and 1,048,930 shares
of Preferred Stock convertible into 1,287,031 shares of Common
Stock. Mr. Dreher is the beneficial owner of a total of 2,086,293
shares or 41.6% of the Common Stock.
Joseph G. Hill owns 18,246 shares of Common Stock and
currently exerciseable options to purchase 157,968 shares of Common
Stock granted under the Issuer's employee benefit plans. Mr. Hill
has sole voting and dispositive power with respect to these shares.
In addition, Mr. Hill shares voting and dispositive power with the
other members of the Investor Group with respect to the BT Shares,
consisting of 280,169 shares of Common Stock and 1,048,930 shares
of Preferred Stock convertible into 1,287,031 shares of Common
Stock. Mr. Hill is the beneficial owner of 1,743,414 shares or
36.9% of the Common Stock.
Pattco, Inc. shares voting and dispositive power with the
other members of the Investor Group with respect to the BT Shares,
consisting of 280,169 shares of Common Stock and 1,048,930
Preferred Shares convertible into 1,287,031 shares of Common Stock.
Pattco, Inc. is the beneficial owner of a total of 1,567,200 shares
or 34.3% of the Common Stock. James A. Patterson may be deemed to
be the beneficial owner of the shares owned by Pattco, Inc. by
virtue of Mr. Patterson's ownership of a controlling interest in
Pattco, Inc.
<PAGE>
C. Edward Glasscock currently owns 5,000 shares of Common
Stock with respect to which he has sole voting and dispositive
power. Mr. Glasscock shares voting and dispositive power with the
other members of the Investor Group with respect to the BT Shares,
consisting of 280,169 shares of Common Stock and 1,048,930
Preferred Shares convertible into 1,287,031 shares of Common Stock.
Mr. Glasscock is the beneficial owner of 1,572,200 shares or 34.4%
of the Common Stock.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer.
Donald D. Dreher, Joseph G. Hill, Pattco, Inc. and C. Edward
Glasscock are parties to the letter of intent with BT described in
Item 3 pursuant to which they have agreed to purchase the BT
Shares. The Investor Group's obligation to purchase the BT Shares
is subject to negotiation and execution of a definitive stock
purchase agreement expected to include a limited number of
customary representations, warranties, covenants of the parties.
In the event the purchase of the BT Shares is not completed by July
1, 1996, BT would continue to own the BT Shares.
The parties have not determined (i) how the BT Shares or the
purchase price to be paid for them will be allocated among the
individual members of the Investor Group, (ii) whether and to what
extent additional persons may be added to the Investor Group to
purchase a portion of the BT Shares, (iii) whether the BT Shares to
be acquired by them will be held by them as individuals or by an
entity to be organized and owned by the members of the Investor
Group, or (iv) whether voting rights of all or a portion of the BT
Shares to be acquired will be subject to the terms of a voting
trust or voting agreement.
Mr. Dreher has entered into an employment agreement with the
Issuer for the period January 1, 1996 through December 31, 1998,
pursuant to which Mr. Dreher serves as Chairman, President and
Chief Executive Officer at an annual salary of $275,000 which is
reviewed annually. In addition, Mr. Dreher can earn a stock bonus
with respect to each year of his employment having a market value
equal to 59.3% of any cash bonus for such year earned by Mr. Dreher
pursuant to the formula contained in his employment agreement.
Mr. Hill has entered into an employment agreement with the
Issuer for the period April 1, 1995 through December 31, 1997,
pursuant to which he serves as Vice-President-Financing, Chief
Financial Officer of the Issuer at an initial annual salary of
$155,000 which is reviewed annually. In addition, Mr. Hill can
earn a stock bonus with respect to each year of his employment
having a market value equal to 45.45% of the bonuses earned by Mr.
Hill for such year pursuant to the formula contained in his
employment agreement, up to a maximum of 25% of weighted average
base salary.
<PAGE>
Mr. Dreher and Mr. Hill each have entered into a severance
agreement with the Issuer, which have been automatically renewed
through December 31, 2000. The severance agreements provide, among
other things, for the payment of certain compensation to them
following termination of employment other than for cause after a
change in control of the Issuer. These severance agreements are
described in greater detail on pages 11 and 12 of the Issuer's
Definitive Proxy Statement dated December 29, 1995, the applicable
portions of which are incorporated herein by reference.
Item 7. Material to be Filed as Exhibits.
Exhibit 99.1 Agreement to File as a Group
Exhibit 99.2 Letter of Intent dated May 2, 1996
Exhibit 99.3 Employment Agreement with Donald D. Dreher
is incorporated by reference to Exhibit 10.1 to the Issuer's
Current Report on Form 8-K dated April 22, 1996 (the "8-K").
Exhibit 99.4 Employment Agreement with Joseph G. Hill is
incorporated by reference to Exhibit 10.2 to the 8-K.
Exhibit 99.5 Severance Agreement with Donald D. Dreher
is incorporated by reference to the Issuer's 1993 10-K.
Exhibit 99.6 Severance Agreement with Joseph G. Hill is
incorporated by reference to the Issuer's 1993 10-K.
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement
is true, complete and correct.
/s/Donald D. Dreher
Date: May 13, 1996
/s/Joseph G. Hill
Date: May 13, 1996
PATTCO, INC.
By /s/ James A Patterson, Chairman
and President
Date: May 13, 1996
/s/James A. Patterson
Date: May 13, 1996
/s/ C. Edward Glasscock
Date: May 13, 1996
<PAGE>
EXHIBIT 99.1
Agreement to File as a Group
In accordance with Rule 13d-f promulgated under the Securities
Exchange Act of 1934, as amended, the persons below certify that
they have agreed and hereby memorialize their agreement to the
joint filing on behalf of each of them of a Statement on Schedule
13D (including amendments thereto) with respect to the common stock
of DMI Furniture, Inc. This Joint Filing Statement shall be
included as an exhibit to such joint filing.
Each person on whose behalf the Schedule 13D or any amendment
thereto is filed is responsible for the timely filing of such
Schedule 13D and any amendments thereto necessitated by the actions
or intentions of such person and for the completeness and accuracy
of the information pertaining to him or its or his or its actions
or intentions.
/s/Donald D. Dreher
Date: May 13, 1996
/s/Joseph G. Hill
Date: May 13, 1996
PATTCO, INC.
By /s/ James A Patterson, Chairman
and President
Date: May 13, 1996
/s/James A. Patterson
Date: May 13, 1996
/s/ C. Edward Glasscock
Date: May 13, 1996
<PAGE>
EXHIBIT 99.2
May 2, 1996
Mr. Joseph T. Wood
BT Capital Partners, Inc.
130 Liberty Street
25th Floor
New York, New York 10006
Gentlemen:
On the basis of our discussion with you over the past few
days, the undersigned (the "Organizers") hereby confirm our
interest and intent in causing a group of private investors
organized by us (the "Venture Group") to purchase from BT Capital
Partners, Inc. (the "Company"), on the terms and conditions set
forth herein, all of the 1,048,930 shares of the Series C Preferred
Stock and all of the 280,169 shares of the Common Stock (together,
the "Shares") of DMI Furniture, Inc., a Delaware corporation
("DMI"), owned by the Company.
1. Purchase Price. The purchase price for the Shares would
be $1,600,000, payable in cash or immediately available funds at
closing. Concurrently with the execution and delivery of this
letter, we will deposit $100,000 (the "Escrow Deposit") in an
account designated by you. The Escrow Deposit shall be applied to
the purchase price, if the closing occurs. If the closing does not
occur for any reason other than the Company's failure to enter into
a Definitive Agreement (unless such failure is caused by the
failure of the Venture Group to satisfy its obligations under
Section 2 hereof) and/or to close, if all of the conditions to the
closing specified in the Definitive Agreement have been satisfied,
the Escrow Deposit shall be retained by the Company. If the
closing does not occur due to the Company's failure to close under
the circumstances described above, the Escrow Deposit shall be
returned to the Venture Group.
2. Definitive Agreement. The Venture Group and the Company
will use commercially reasonable efforts to enter into a definitive
purchase and sale agreement (the "Definitive Agreement") within 30
days. When the Company has signed and returned to us the enclosed
duplicate of this letter, our counsel will prepare the Definitive
Agreement as promptly as possible. The Definitive Agreement will
set forth customary representations, warranties, and covenants by
the Venture Group and the Company, it being understood that the
only representations and warranties to be made by the Company will
be as to ownership by the Company free and clear of any liens and
authority to transfer the shares. The Definitive Agreement will
<PAGE>
also provide for appropriate remedies with respect to any
inaccuracy in any representation or warranty or any breach of any
covenant of the Venture Group or of the Company.
3. Closing. A closing will be held no later than July 1,
1996 at a time and place to be determined by the Venture Group and
reasonably acceptable to the Company, who shall give the Company
two business days notice of the closing date.
4. Standstill. Between now and the signing of a Definitive
Agreement, neither the Company, nor any principal, officer,
affiliate, representative or agent of the Company, will initiate,
continue, or participate in any negotiations or discussions with
any person or entity other than the Venture Group or some other
entity formed by the Venture Group relating to (a) the proposed
sale and purchase of all or a substantial portion of the Shares, or
(b) a merger, consolidation or other business combination involving
DMI.
5. Confidentiality. The Organizers and the Company
acknowledge and agree that, in connection with any transaction
involving the Shares, the Organizers and the Company may be
obligated to disclose certain information and materials relating to
DMI's business, customers, operations, properties, assets, and
financial affairs which is non-public and propriety in nature and
confidential (collectively, "Confidential Information"). The
Organizers and the Company agree that the Confidential Information
will be used solely in accordance with the provisions of applicable
securities laws. The Organizers and the Company will advise the
directors, officers, employees, associates, affiliates, agents and
representatives ("Related Parties") of the Company or the Venture
Group who will directly participate in the decision-making process
with respect to the purchase and sale of the Shares of the
obligation of confidentiality imposed by this Agreement and will
use reasonable care in the selection and assignment of personnel to
work with the Confidential Information and shall cause each such
person to comply with this Agreement. Notwithstanding the
foregoing, the Company may disclose any Confidential Information
pursuant to subpoena or other legal process, as required by law or
regulation, to the advisors, attorneys and accountants of the
Company and its affiliates, to regulators of the Company and its
affiliates and to the Company affiliates, provided however, that,
in the case of any disclosure pursuant to subpoena or legal
process, the Company will notify DMI of such an event a reasonable
time prior to any such disclosure in order to provide DMI a
reasonable opportunity to initial legal proceedings or otherwise
contest such disclosure.
6. Distributions. Any distribution on the Shares in the
form of a cash dividend, stock split, stock dividend,
recapitalization, merger, consolidation, asset sale, or otherwise
payable to holders of record of DMI's Preferred Stock or Common
Stock between the date of this letter and the closing shall be
payable to the Venture Group upon closing.
<PAGE>
7. Costs and Expenses. Each of the Venture Group and the
Company shall bear and be solely responsible for all its costs and
expenses incurred in connection with the negotiation and the
consummation of the transactions proposed herein, including,
without limitation, each party's legal and accounting fees.
8 Acceptance. Unless waived by the Organizers, the offer
to purchase the Shares pursuant to this Agreement will remain open
until 9:00 a.m. EDT on Friday, May 3, 1996.
9. Termination. The obligations of the Company and the
Venture Group hereunder shall terminate on July 1, 1996, if the
closing shall not have occurred.
* * * * *
If this letter correctly sets forth our understanding, please
sign and return to us the enclosed duplicate of this letter.
Sincerely,
/s/ Donald D. Dreher
/s/ Joseph G. Hill
PATTCO, INC.
By /s/ James A. Patterson,
Chairman and President
/s/ C. Edward Glasscock
Agreed and Acknowledged:
BT CAPITAL PARTNERS, INC.
By /s/ Joseph T. Wood
Title: Managing Director
Date: May 2, 1996
