<PAGE>   1

                                                                    EXHIBIT 10.2


                                    AGREEMENT


             This Agreement (this "Agreement") is entered into this 3rd day of
April, 2000, by and among Krause's Furniture, Inc., a Delaware corporation (the
"Company"), General Electric Capital Corporation, a New York corporation
("GECC"), and Japan Omnibus Ltd., an international business corporation
incorporated under the laws of the British Virgin Islands ("JOL").

                                    RECITALS
             GECC has purchased from the Company Notes dated (i) as of August
14, 1997, as amended as of March 31, 1999 and January 11, 2000, in the
outstanding principal amount of $5,501,091.20 (the "Initial Note"), (ii) as of
August 14, 1997, as amended as of March 31, 1999 and January 11, 2000, in the
outstanding principal amount of $2,500,000 (the "August 1997 Note") and (iii) as
of December 30, 1997, as amended as of March 31, 1999 and January 11, 2000, in
the outstanding principal amount of $2,500,000 (collectively with the Initial
Note and the August 1997 Note, the "GECC Notes").

             JOL has purchased from the Company Notes dated (i) as of August 14,
1997, as amended as of March 31, 1999 and January 11, 2000, in the outstanding
principal amount of $500,000 (the "JOL August 1997 Note") and (ii) as of
December 30, 1997, as amended as of March 31, 1999 and January 11, 2000, in the
outstanding principal amount of $1,000,000 (together with the JOL August 1997
Note, the "JOL Notes"; the JOL Notes and the GECC Notes are referred to herein
collectively as the "Notes").

             The Company, GECC and JOL are parties to a Supplemental Securities
Purchase Agreement dated as of August 14, 1997 (as amended on September 14,
1999, December 14, 1999 and January 11, 2000, the "Supplemental Purchase
Agreement") relating to the Notes. Capitalized terms used herein without
definition have the meanings set forth in the Supplemental Purchase Agreement.

             The Company, GECC and JOL desire to amend certain provisions of the
Supplemental Purchase Agreement.

             NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:

1. Effective as of March 26, 2000, Sections 6.2(a), 6.2(b) and 6.2(c) of the
Supplemental Purchase Agreement shall be amended in their entirety to read as
follows:

                        (a)  The Company will not permit its Consolidated Net
Worth at the end of any fiscal quarter to be less than the amount set forth
below for such fiscal quarter, provided that, upon any public or private
offering of capital stock of the Company for the Company's account, the amounts
set forth below for fiscal quarters subsequent to such offering shall be
adjusted upward by an amount equal to the net proceeds of any such offering
multiplied by 0.9:




                                    Page 24
<PAGE>   2

<TABLE>
<CAPTION>
            Year             Q1            Q2            Q3             Q4
            ----           -------       -------       -------        -------
            <S>            <C>           <C>           <C>            <C>
            1999            N/A           N/A           8.8 MM         4.0 MM
            2000            9.2 MM       11.2 MM       10.1 MM        10.8 MM
            2001           17.5 MM       20.0 MM       22.0 MM        26.0 MM
            2002           29.0 MM       32.0 MM       35.0 MM        40.0 MM
            2003           40.0 MM       40.0 MM         N/A           N/A
</TABLE>

                        (b)  The Company and its Subsidiaries will not incur,
create, assume or permit to exist any Indebtedness at the end of any fiscal
quarter if such Indebtedness would result in a ratio of Consolidated Total
Indebtedness to Consolidated Net Worth of more than the amount for such fiscal
quarter indicated set forth below:

<TABLE>
<CAPTION>
            Year             Q1            Q2            Q3             Q4
            ----           -------       -------       -------        -------
            <S>            <C>           <C>           <C>            <C>
            1999            N/A           N/A          3.75           7.50
            2000           3.20          2.85          3.30           2.85
            2001           1.30          1.10          1.00           1.00
            2002           1.00          1.00          1.00           1.00
            2003           1.00          1.00            N/A           N/A
</TABLE>


                        (c)  The Company will not permit its Fixed Charge Ratio
at the end of any fiscal quarter to be less than the amount set forth below for
such fiscal quarter:

<TABLE>
<CAPTION>
            Year             Q1            Q2            Q3             Q4
            ----           -------       -------       -------        -------
            <S>            <C>           <C>           <C>            <C>
            1999            N/A           N/A            0.75           0.005
            2000             0.65          0.74          0.84           1.05
            2001             1.20          1.20          1.20           1.35
            2002             1.30          1.30          1.30           1.50
            2003             1.40          1.40          N/A           N/A
</TABLE>

2. Effective as of March 26, 2000, the defined term "Consolidated Net Worth" set
forth in Section 11.1 of the Supplemental Purchase Agreement shall be amended in
its entirety to read as follows:

                        "`Consolidated Net Worth' shall mean the consolidated
        stockholders' equity of the Company and its Subsidiaries determined in
        accordance with generally accepted accounting principles consistently
        applied (it being understood and agreed that (x) the Notes and any other
        Subordinated Indebtedness which is not subordinated to the Notes shall
        not be treated as equity for this purpose and (y) the Company's Series A
        Convertible Preferred Stock, par value $0.001 per share, shall be
        treated as equity for this purpose."




                                    Page 25
<PAGE>   3

3. The Company acknowledges and agrees that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that GECC and JOL shall be entitled to an injunction to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
they may be entitled at law or equity.

4. This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become effective when
one or more of the counterparts have been signed by each party and delivered to
the other parties, it being understood that all parties need not sign the same
counterpart.

5. This Agreement may be amended as to GECC, JOL and their successors and
assigns, and the Company may take any action herein prohibited, or omit to
perform any act required to be performed by it, if the Company shall obtain the
written consent of the registered holders of not less than 66 2/3% of the
aggregate outstanding principal amount of the Notes then held by GECC, JOL and
their successors or assigns; provided, however, that without the written consent
of the holder or holders of all Notes at the time outstanding, no amendment to
or waiver of any terms of this Agreement shall change or affect the interest
rate, maturity, principal amount, time of payment, currency of payment, or the
amount or allocation of any prepayments of any Note. This Agreement may not be
waived, changed, modified, or discharged orally, but only by an agreement in
writing signed by the party or parties against whom enforcement of any waiver,
change, modification or discharge is sought or by parties with the right to
consent to such waiver, change, modification or discharge on behalf of such
party. Notwithstanding anything in this Agreement to the contrary, no provision
of this Section 5 may be waived, changed or modified.

6. All covenants and agreements contained herein shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns. This
Agreement may be assigned by GECC or JOL to any transferee of Notes. This
Agreement may not be assigned by the Company.

7. The Company agrees to pay GECC and JOL for all reasonable outside legal fees
in connection with this Agreement.

8. This Agreement shall terminate upon the repayment in full of all amounts of
principal, interest and other sums due and payable on all Notes.

9. Each of the parties hereto agrees that it will make no statement regarding
the transactions contemplated hereby which is inconsistent with the press
release agreed to by the parties hereto. Notwithstanding the foregoing, each of
the parties hereto may, in documents required to be filed by it with the
Commission or other regulatory bodies, make such statements with respect to the
transactions contemplated hereby as each may be advised is legally necessary
upon advice of its counsel.

10. This Agreement shall be effective upon delivery of original signature pages
or facsimile copies thereof executed by each of the parties hereto.

11. The Company represents and warrants that other than the parties executing
this Agreement no consent, approval or waiver of any other person or entity is
required for the effectiveness or enforceability of this Agreement.



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<PAGE>   4

12. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY CONSENTS TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS
OF THE STATE OF NEW YORK AND OF THE UNITED STATES OF AMERICA, IN EACH CASE
LOCATED IN THE COUNTY OF NEW YORK, FOR ANY ACTION, PROCEEDING OR INVESTIGATION
IN ANY COURT OR BEFORE ANY GOVERNMENTAL AUTHORITY ("LITIGATION") ARISING OUT OF
OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY (AND
AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS),
AND FURTHER AGREES THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY
U.S. REGISTERED MAIL TO ITS RESPECTIVE ADDRESS SET FORTH IN THIS AGREEMENT SHALL
BE EFFECTIVE SERVICE OF PROCESS FOR ANY LITIGATION BROUGHT AGAINST IT IN ANY
SUCH COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN THE COURTS OF THE
STATE OF NEW YORK OR THE UNITED STATES OF AMERICA, IN EACH CASE LOCATED IN THE
COUNTY OF NEW YORK, AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVES
AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE
PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY
LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.






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<PAGE>   5

             IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized.


                                    KRAUSE'S FURNITURE, INC.

                                    By:/s/ Daniel L. Felsenthal
                                       -------------------------------------
                                        Name:Robert A. Burton
                                        Title:  Executive Vice President
                                                   and Chief Financial Officer


                                    GENERAL ELECTRIC CAPITAL CORPORATION

                                    By: /s/ George L. Hashbarger Jr.
                                       -------------------------------------

                                        Name:George L. Hashbarger, Jr.
                                        Title:  Senior Vice President/
                                                Department Operations Manager


                                    JAPAN OMNIBUS LTD.

                                    By:________________________________________
                                        Name:
                                        Title:




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