<PAGE>
                                                                    Exhibit 10.1


                                 THIRD AMENDMENT TO 
                               STOCKHOLDERS' AGREEMENT

         THIRD AMENDMENT TO STOCKHOLDERS' AGREEMENT (this "Amendment") dated as
                                                          -----------
of July 15, 1997 by and among FURNISHINGS INTERNATIONAL INC., a Delaware
corporation (the "Company"), Masco Corporation, a Delaware corporation
                  -------
("Masco"), 399 Venture Partners, Inc., a Delaware corporation ("399") and
  -----                                                         ---
Douglas C. Barnard, as Voting Trustee under the Voting Trust Agreement (the
"Trustee").
 -------


                                       RECITALS

         WHEREAS, the Company, Masco, 399 and the Management Stockholders are
parties to the Stockholders' Agreement dated as of August 5, 1996 by and among
the Company and its stockholders (as previously amended, the "Agreement");
                                                              ---------
(capitalized terms not otherwise defined herein are used as defined in the
Agreement);

         WHEREAS, 399 has the right, as the holder of HFG Common Stock
representing more than fifty percent (50%) of the HFG Common Stock on a
Fully-Diluted Basis then held by the Institutional Stockholders as a group,
pursuant to Section 7.4(a)(i) of the Agreement to take action on behalf of the
Institutional Stockholders; 

         WHEREAS, the Trustee has the right pursuant to Section 7.4(a)(iii) of
the Agreement to take action on behalf of the Management Stockholders; and

         WHEREAS, the parties hereto desire to amend the Agreement in order to
effect certain changes in the definition of "Permitted Transferee" and in the
weighted voting of the directors of the Company.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:

         SECTION 1.  AMENDMENTS

         1.1  DEFINITION OF PERMITTED TRANSFEREE.  Clause (i) of the definition
of "Permitted Transferee" is hereby amended and restated in its entirety so that
it reads as follows (with retroactive effect as necessary in order to
accommodate any previous transfers):
         
              "(i) with respect to any Stockholder who is a natural
         person, (A) the spouse or any lineal descendant (including
         by adoption and stepchildren) of such Stockholder, (B) any
         trust of which such Stockholder is the trustee (or any trust
         of which such Stockholder is not the trustee, or is not the
         only trustee, provided that each trustee other than the
         Stockholder has executed a Joinder Agreement, and provided,
         in the case of a Management Stockholder 

                                   

<PAGE>

                                                        THIRD AMENDMENT

         or an Additional Management Stockholder, that the Stockholder does 
         not transfer more than his or her beneficial interest in the
         Voting Trust with respect to any HFG Common Stock or Equity
         Equivalents that he or she wishes to transfer), so long as
         such trust is established solely for the benefit of one or
         more of the Stockholder and the other individuals specified
         in clause (A) above and has terms which are not inconsistent
         with the terms of this Agreement, (C) any partnership, all
         of the general partner(s) and limited partner(s) (if any) of
         which are one or more of the Stockholder and the other
         individuals specified in clause (A) above, or (D) any other
         trust or partnership established by any such Stockholder to
         the extent approved in writing by the Company (acting with
         an Affirmative Board Vote, including the consent of the
         Masco Director); provided, however, that the Chairman of the
         Company may permit any manager to give a specified number of
         shares of HFG Common Stock to his or her parents, to his or
         her spouse's parents, or to any thereof, so long as the
         total number of shares of HFG Common Stock transferred by
         all such managers pursuant to this proviso does not exceed
         1,000 shares in the aggregate (with appropriate adjustments
         for stock splits, stock dividends, and stock combinations)."

         1.2  WEIGHTED BOARD VOTING.  Section 5.4(a)(iii) of the Agreement is
hereby amended and restated in its entirety so that it reads as follows:

              "(iii)    each of the Institutional Directors will have
         a weighted vote of 12.25%, except that if and so long as
         both Richard M. Cashin, Jr. and David F. Thomas are
         Institutional Directors, their weighted votes will be
         increased to 22.25% each, with a corresponding reduction in
         the weighted votes of the other Institutional Directors to
         2.25% each; provided, however, that, in the event there are
                     --------  -------
         more than 50 stockholders of the Company, such weighting
         shall, upon notice to the Company from the Institutional
         Stockholders, be shifted to 4.75% for each of the
         Institutional Directors, with a corresponding shift in the
         weighting of each of the Disinterested Director's weighted
         vote from 3.75% to 11.25% (and thereafter the Institutional
         Stockholders shall have the right upon notice to the Company
         to increase the weighting back to its original position)."

         SECTION 2.  MISCELLANEOUS

         2.1  FURTHER ACTIONS.  Each of the parties hereto shall cooperate and
shall take further action and shall execute and deliver such further documents
as may be reasonably requested by any other party in order to carry out the
amendments set forth herein.

                                       2

<PAGE>

                                                             THIRD AMENDMENT

         2.2  GOVERNING LAW.  This Amendment shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of New York,
except to the extent that the General Corporation Law of the State of Delaware
applies as a result of the Company being incorporated in the State of Delaware,
in which case such General Corporation Law shall apply.

         2.3  HEADINGS.  The headings used in this Amendment  have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.

         2.4  COUNTERPARTS.  This Amendment  may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.

         2.5  CONSENT TO JURISDICTION; SERVICE OF PROCESS; WAIVER OF JURY
TRIAL.  The provisions of Sections 7.18 and 7.19 of the Agreement shall apply to
this Amendment as if repeated herein.





                     [Remainder of Page Intentionally Left Blank]



                                             3

<PAGE>



         IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the date first above written.
                        
                        
                        FURNISHINGS INTERNATIONAL INC.
                        
                        
                        
                        By:  /s/ Wayne B. Lyon
                           ----------------------------------------
                             Wayne B. Lyon
                             President and Chief Executive Officer


                        MASCO CORPORATION



                        By:  /s/ John R. Leekley
                           ----------------------------------------
                             John R. Leekley
                             Senior Vice President


                        399 VENTURE PARTNERS, INC.



                        By:  /s/ David F. Thomas
                           ----------------------------------------
                             David F. Thomas
                             President



                             /s/ Douglas C. Barnard
                          ----------------------------------------
                           Douglas C. Barnard, as Voting Trustee





[Signature Page to Third Amendment]