<PAGE>
 
                      THIRD AMENDMENT TO CREDIT AGREEMENT
                      -----------------------------------


          THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as
of September 27, 1996, by and among BUSH INDUSTRIES, INC., a Delaware
corporation (the "Borrower"), the Lenders party to the Credit Agreement
described below, the Issuing Bank referred to in the Credit Agreement described
below and MELLON BANK, N.A., a national banking association, as agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"Agent").

                                   RECITALS:

          A.  The Borrower, the Lenders, the Issuing Bank and the Agent are
parties to that certain Credit Agreement dated as of July 26, 1995 (as amended
pursuant to that certain First Amendment to Credit Agreement dated as of
September 1, 1996 and that certain Second Amendment to Credit Agreement dated as
of January 1, 1996, the "Credit Agreement").

          B.  The Chase Manhattan Bank, a Lender under the Credit Agreement, and
Chemical Bank, a Lender under the Credit Agreement, have completed a merger
transaction.  The surviving entity, The Chase Manhattan Bank, has ratified and
affirmed its obligations under, and remains a party to, the Credit Agreement,
both individually, and as successor to Chemical Bank and The Chase Manhattan
Bank, N.A.

          C.  The parties desire to make certain further amendments to the
Credit Agreement.

          NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:

          Section 1.  Certain Definitions.  In addition to words and terms
          ---------   -------------------                                 
defined elsewhere in this Amendment, capitalized terms used in this Amendment
and not otherwise defined herein have the meaning set forth in the Credit
Agreement.

          Section 2.  Amendments to Credit Agreement.  The Credit Agreement is
          ---------   ------------------------------                          
hereby amended in the following respects:

          (a)  Section 1.01 Definitions.  Section 1.01 of the Credit Agreement
               ------------------------                                       
is hereby amended by adding the following definitions in the appropriate
alphabetical order:

               "Bush PA Loans" shall have the meaning set forth in Section
7.05(i) hereof.

               "Bush PA Note" shall have the meaning set forth in Section
7.05(i) hereof.

               "DOC" shall mean the Department of Commerce of the Commonwealth
of Pennsylvania.
<PAGE>
 
               "DOCED" shall mean the Department of Community and Economic
Development of the Commonwealth of Pennsylvania.

               "EIDCO" shall mean EIDCO, Inc., a Pennsylvania corporation.

               "Erie Project" shall mean the approximately 1 million square foot
facility being constructed by Bush PA and located at 2455 Robison Road, Erie,
Pennsylvania.

               "Erie Project Financing" shall mean the up to $12,000,000 in
loans obtained, directly or indirectly, by Bush PA from PIDA, DOC, DOCED, and/or
MELF, including without limitation certain Sunny Day Loans, and used in
connection with the construction of, and/or purchase of equipment for, the Erie
Project.

               "MELF" shall mean Machinery and Equipment Loan Fund.

               "PIDA" shall mean the Pennsylvania Industrial Development
Authority.

               "Significant Assets" shall mean all accounts receivable,
inventory, plant, property and equipment of Bush PA.

               "Sunny Day Loan" shall mean any loan or other extension of credit
the proceeds of which are derived from a loan fund established by the
Commonwealth of Pennsylvania and administered by the DOCED or such other agency
or instrumentality of the Commonwealth of Pennsylvania.

               "Trade-Related Accounts Payables" shall mean all Indebtedness of
Bush PA incurred by Bush PA in conducting its business, and owing to a third-
party trade creditor, in the ordinary course.

          (b)  Section 2.01(a).  Section 2.01(a) is hereby amended by deleting
               ---------------                                                
"$75,000,000" in the last sentence and inserting "$85,000,000" in its place,
such that the last sentence of Section 2.01(a) reads in its entirety as follows:

               "The sum of the Revolving Credit Committed Amounts of the Lenders
shall not exceed $85,000,000 at any time."

          (c)  Section 2.02.  Section 2.02 is hereby amended by deleting
               ------------                                             
"0.8333333333333" in the first sentence and inserting "0.8529411764706" in its
place, such that the first sentence of Section 2.02 reads in its entirety as
follows:

               "The Borrower shall pay to the Agent for the account of each
               Lender a commitment fee (the "Revolving Credit Commitment Fee")
               equal to 0.125% per annum (based on a year of 360 days and actual
               days elapsed), for each day from and including the date hereof to
               but not including the Revolving Credit Maturity Date, on the
               amount (not less than zero) equal to (a) 0.8529411764706 times
                                                                       -----
               such Lender's Revolving Credit Committed Amount on each

                                       2
<PAGE>
 
              such day minus (b) the sum of (i) the aggregate principal amount
                       -----
              of such Lender's Revolving Credit Loans outstanding on each such
              day plus (ii) such Lender's Pro Rata share of the aggregate Letter
                  ----
              of Credit Exposure on each such day."

          (d) New Section 7.01(d).  Section 7.01 is hereby amended by adding a
              -------------------                                             
new subsection (d) after Section 7.01(c), which Section 7.01(d) reads in its
entirety as follows:

              "(d)  Percentage of Trade-Related Account Payables.  The aggregate
                    --------------------------------------------                
              Trade-Related Account Payables of Bush PA at any time outstanding
              shall not exceed at any time fifteen percent (15%) of the
              aggregate value of the Significant Assets of Bush PA."

          (e) Section 7.02(e).  Section 7.02(e) is hereby amended to read in its
              ---------------                                                   
entirety as follows:

              "(e) Liens on property of the Borrower or Bush PA to secure
              Indebtedness of the Borrower or Bush PA permitted by Section
              7.03(g) or Section 7.03(l) hereof; provided, that such liens are
                                                 --------
              confined solely to the property purchased or financed by such
              Indebtedness, improvements thereto and proceeds thereof."

          (f) Section 7.03(g).  Section 7.03(g) is hereby amended to read in its
              ---------------                                                   
entirety as follows:

              "(g) Indebtedness for borrowed money incurred by the Borrower or
              Bush PA from time to time and payable to a Governmental Authority
              (other than the Erie Project Financing); provided, (i) that such
                                                       --------
              Indebtedness enables the Borrower or Bush PA to obtain or utilize
              favorable tax treatment or bears interest at a rate that is less
              than interest rates generally available at such time in the
              commercial market for comparable Indebtedness, and (ii) such
              Indebtedness is on terms and conditions (other than applicable
              interest rates) no more favorable to the holders thereof than are
              applicable to the Lenders with respect to Indebtedness hereunder."

          (g) Section 7.03(j).  Section 7.03(j) is hereby amended by deleting
              ---------------                                                
the word "and" after the semi-colon at the end of Section 7.03(j).

          (h) Section 7.03(k).  Section 7.03(k) is hereby amended by deleting
              ---------------                                                
the period at the end of Section 7.03(k) and adding a semi-colon followed by the
word "and" in its place at the end of Section 7.03(k).

          (i) New Section 7.03(l).  Section 7.03 is hereby
              -------------------                         

                                       3
<PAGE>
 
amended by adding a new subsection (l) after Section 7.03(k), which Section
7.03(l) reads in its entirety as follows:

              "(l) Indebtedness for borrowed money incurred, directly or
              indirectly, by the Borrower or Bush PA constituting the Erie
              Project Financing; provided, that the total amount of such
                                 --------
              Indebtedness shall not at any time exceed $12,000,000."
 
          (j) Section 7.04(f).  Section 7.04(f) is hereby amended by deleting
              ---------------                                                
the period at the end of Section 7.04(f) and adding a semi-colon in its place at
the end of Section 7.04(f).

          (k) New Sections 7.04(g), (h) and (i).  Section 7.04 is hereby amended
              ---------------------------------                                 
by adding new subsections (g) and (h) and redesignating prior subsection (g) as
new subsection (i), such that new subsections (g), (h) and (i) read in their
entirety as follows:

              "(g) Guaranty Equivalents from time to time entered into by the
              Borrower, provided that (i) in each case the Deemed Obligor is
              Bush PA, (ii) in each case the Guaranty Equivalents are executed
              in favor of the Commonwealth of Pennsylvania, or any duly
              authorized political subdivision, agency, authority, bureau,
              commission, department, or other instrumentality of the State of
              Pennsylvania, and (iii) in each case the Assured Obligations of
              Bush PA constitute liabilities for worker's compensation claims;

              (h) Guaranty Equivalents from time to time entered into by
              Borrower guaranteeing the obligations of Bush PA under the Erie
              Project Financing; and

              (i) Other Guaranty Equivalents from time to time entered into by
              the Borrower, provided that the maximum aggregate potential
              obligation of Borrower under Guaranty Equivalents described in
              this Section 7.04(i) shall not at any time exceed $2,000,000."

          (l) Section 7.05(h).  Section 7.05(h) is hereby amended by deleting
              ---------------                                                
the period at the end of Section 7.05(h) and replacing it with a semi-colon."

          (m) Section 7.05(i).  Section 7.05(i) is hereby amended to read in its
              ---------------                                                   
entirety as follows:

              "(i) Loans from the Borrower to Bush PA ("Bush PA Loans"),
              provided that (i) the Bush PA Loans shall be evidenced by a single
              demand note (the "Bush PA Note"), and (ii) the Bush PA Note shall
              be assigned by the Borrower to the Agent for the benefit of the
              Lenders; and"

          (n) New Section 7.05(j).  Section 7.05 is hereby amended by adding new
              -------------------                                               
subsection (j) after Section 7.05(i), which Section 7.05(j) reads in its
entirety as follows:

                                       4
<PAGE>
 
              "(j) Loans from the Borrower to its Subsidiaries set forth in
              Schedule 7.05(j) attached hereto and made a part hereof, such
              Subsidiaries being Subsidiaries of Borrower that are not
              Significant Subsidiaries of Borrower as of August 24, 1996,
              provided that the aggregate amount of all such Loans at any time
              outstanding shall not exceed $15,000,000, and provided further
              that no such Loans shall be permitted to be made to any such
              Subsidiary under this Section 7.05(j) after such Subsidiary
              becomes a Significant Subsidiary of Borrower."

          (o) Section 7.07.  Section 7.07 is hereby amended by adding the
              ------------                                               
following at the end of Section 7.07:

              "Notwithstanding the foregoing, Bush PA shall be permitted to
              enter into a sale-leaseback transaction in which it may deed the
              Erie Project to EIDCO and enter into a lease-purchase or similar
              agreement with EIDCO to lease back such property; provided, that
                                                                --------
              (i) Bush PA's rent obligations to EIDCO are fair and reasonable;
              and (ii) the rent payments are remitted by Bush PA (or Borrower)
              or EIDCO to cover debt service on the Erie Project Financing."

          (p)  New Section 7.08(d).  Section 7.08 is hereby amended by adding a
               -------------------                                             
new subsection (d) which reads in its entirety as follows:

              "(d) Lease-purchase or similar agreements for the leasing of the
              Erie Project by Bush PA in connection with the transactions
              authorized in Section 7.07 hereof; provided, that (i) Bush PA is
                                                 --------
              the lessee, (ii) EIDCO is the lessor, (iii) the leased property is
              the Erie Project, (iv) Bush PA's rent obligations to EIDCO under
              such lease or similar agreement are fair and reasonable, and (v)
              such lease or similar agreement provides that EIDCO will deed all
              of the property back to Bush PA upon the satisfaction of all
              mortgages or other agreements securing the Erie Project
              Financing."

          (q) Section 7.09(b).  Section 7.09(b) is hereby amended to read in its
              ---------------                                                   
entirety as follows:

              "(b) The Borrower may (w) acquire all or substantially all of the
              properties or assets of any going concern or going line of
              business, (x) acquire all or substantially all of the properties
              or assets of any other Person, (y) acquire all or substantially
              all of the capital stock or other equity interests in or of any
              other Person, and (z) agree, become or remain liable (contingently
              or otherwise) to do any of the foregoing

                                       5
<PAGE>
 
              (collectively, "Acquisitions") provided that (i) no Event of
              Default or Potential Default shall occur and be continuing or
              shall exist at such time or after giving effect to such
              transaction, (ii) the business or properties so acquired shall be
              within the Borrower's line of business or a related line of
              business or shall use production or manufacturing technology used
              in the Borrower's line of business, and (iii) as of the end of
              each Fiscal Year of the Borrower, the aggregate consideration
              (determined in accordance with GAAP) paid by the Borrower in
              connection with all Acquisitions shall not exceed: (A) during
              Fiscal Year 1995 (inclusive of Acquisitions made in Fiscal Year
              1995 prior to the date hereof), and amount equal to (1)
              $27,500,000 minus (2) the aggregate amount of all Capital
                          -----
              Expenditures made by the Borrower during such Fiscal Year to the
              extent permitted by Section 7.13 hereof; (B) during Fiscal Year
              1996, an amount equal to (1) $45,000,000 minus (2) the aggregate
                                                       -----
              amount of all Capital Expenditures made by the Borrower during
              such Fiscal Year to the extent permitted by Section 7.13 hereof;
              and (C) for each Fiscal Year thereafter, an amount equal to (1)
              $20,000,000 minus (2) the aggregate amount of all Capital
                          -----
              Expenditures made by the Borrower during such Fiscal Year to the
              extent permitted by Section 7.13 hereof; provided, that the amount
                                                       --------
              set forth in clause (C) above shall be increased for Fiscal Year
              1997 by the amount (not to exceed $20,000,000), if any, by which
              the aggregate amount of (x) Capital Expenditures of the Borrower
              and its consolidated Subsidiaries during Fiscal Year 1996 plus (y)
                                                                        ----
              the aggregate amount of all consideration (determined in
              accordance with GAAP) paid by the Borrower during Fiscal Year 1996
              in connection with the Acquisitions is less than $45,000,000 (in
              the case of Acquisitions made during Fiscal Year 1996); provided
                                                                      --------
              further, that the amount set forth in clause (C) above shall be
              -------
              increased for each Fiscal Year commencing with Fiscal Year 1998 by
              the amount (not to exceed $15,000,000), if any, by which the
              aggregate amount of (x) Capital Expenditures of the Borrower and
              its consolidated Subsidiaries during the immediately proceeding
              Fiscal Year plus (y) the aggregate amount of all consideration
                          ----
              (determined in accordance with GAAP) paid by the Borrower during
              the immediately preceding Fiscal Year in connection with the
              Acquisitions is less than $20,000,000."

          (r) Section 7.09(e).  Section 7.09(e) is hereby amended by deleting
              ---------------                                                
"95%" in the first sentence and inserting "85%", such that the first sentence of
Section 7.09(e) reads in its entirety as follows:

              "The Borrower may enter into a transaction to purchase 464,095
              shares of ColorWorks stock (out

                                       6
<PAGE>
 
              of a total of 691,595 shares) for $11.6534 per share or
              $5,408,295.00, with approximately 85% of the purchase price of
              $5,408,295.00 to be paid with treasury shares of Borrower and the
              remaining percentage of the purchase price to be paid in cash, on
              substantially the other terms set forth in the letter of intent
              dated November 30, 1995 among the Borrower and the persons named
              therein, provided that no Event of Default or Potential Default
              shall occur and be continuing or shall exist at such time or after
              giving effect to such transaction. The transactions permitted by
              this Section 7.09(e) shall not be deemed to be an Acquisition for
              purposes of Sections 7.09(b) and 7.13 hereof. The Borrower may
              enter into a transaction to purchase the remaining outstanding
              shares of ColorWorks stock for a total purchase price (together
              with the value of all other consideration given) not to exceed
              $4,000,000; provided, that no Event of Default or Potential
                          --------
              Default shall occur and be continuing or shall exist at such time
              or after giving effect to such transaction."

          (s) Section 7.13(a).  Section 7.13(a) is hereby amended to read in its
              ---------------                                                   
entirety as follows:

              "(a) The Borrower shall not, and shall not permit any Subsidiary
              to, make any Capital Expenditures on or after the date hereof,
              except for Capital Expenditures such that as of the end of each
              Fiscal Year of the Borrower, Capitalized Expenditures of the
              Borrower and its Consolidated Subsidiaries, determined on a
              consolidated basis, for such Fiscal Year, shall not exceed the
              following amounts: (a) during Fiscal Year 1995 (inclusive of
              Capital Expenditures made in Fiscal year 1995 prior to the date
              hereof), an amount equal to (i) $27,500,000 minus (ii) the
                                                          -----
              aggregate amount of all consideration (determined in accordance
              with GAAP) paid by the Borrower during such Fiscal Year in
              connection with Acquisitions permitted by Section 7.09(b) hereof;
              (b) during Fiscal Year 1996, an amount equal to (i) $45,000,000
              minus (ii) the aggregate amount of all consideration (determined
              -----
              in accordance with GAAP) paid by the Borrower during such Fiscal
              Year in connection with Acquisitions permitted by Section 7.09(b)
              hereof; and (c) for each Fiscal Year thereafter, an amount equal
              to (i) $20,000,000 minus (ii) the aggregate amount of all
                                 -----
              consideration (determined in accordance with GAAP) paid by the
              Borrower during such Fiscal Year in connection with Acquisitions
              permitted by Section 7.09(b) hereof; provided, that the amount set
                                                   --------
              forth in clause (c) above shall be increased for

                                       7
<PAGE>
 
              Fiscal Year 1997 by the amount (not to exceed $20,000,000), if
              any, by which the aggregate amount of (x) Capital Expenditures of
              the Borrower and its consolidated Subsidiaries during Fiscal Year
              1996 plus (y) the aggregate amount of all consideration
                   ----
              (determined in accordance with GAAP) paid by the Borrower during
              Fiscal Year 1996 in connection with the Acquisitions is less than
              $45,000,000 (in the case of Acquisitions made during Fiscal Year
              1996); provided further, that the amount set forth in clause (c)
                     ----------------
              above shall be increased for each Fiscal Year commencing with
              Fiscal Year 1998 by the amount (not to exceed $15,000,000 in any
              Fiscal Year), if any, by which the aggregate amount of (x) Capital
              Expenditures of the Borrower and its consolidated Subsidiaries
              during the immediately preceding Fiscal Year plus (y) the
                                                           ----
              aggregate amount of all consideration (determined in accordance
              with GAAP) paid by the Borrower during the immediately preceding
              Fiscal Year in connection with the Acquisitions is less than
              $20,000,000."

          (t) Section 7.13 (b).  Section 7.13(b) is hereby amended to read in
              ----------------                                               
its entirety as follows:

              "(b) ColorWorks shall not make any Capital Expenditures, except
              for Capital Expenditures such that as of the end of each Fiscal
              Year of ColorWorks, Capital Expenditures of ColorWorks for such
              Fiscal Year shall not exceed the following amounts: (i) during
              Fiscal Year 1996, an amount equal to $3,000,000; (ii) for each
              Fiscal Year thereafter, an amount equal to $2,000,000; provided,
                                                                     --------
              that the amount set forth in clause (ii) above shall be increased
              for Fiscal Year 1997 by the amount, if any, by which the aggregate
              amount of Capital Expenditures of ColorWorks for Fiscal Year 1996
              is less than $3,000,000. Capital Expenditures of ColorWorks
              permitted by this Section 7.13(b) shall not be included for
              purposes of Section 7.13(a)."

          (u) Signature Pages.  The Signature Pages are hereby amended by
              ---------------                                            
deleting the amounts and percentages designated for the Committed Amount and
Commitment Percentage, respectively, for each Lender and inserting the amounts
and percentages set forth in the following table as the Committed Amount and
Commitment Percentage, respectively, for each Lender:
<TABLE>
<CAPTION>
 
Lender                    Committed Amount          Commitment Percentage
------                    ----------------          ----------------------
<S>                       <C>                       <C>
MELLON BANK                    $40,000,000                 47.05882352941%
N.A., as Agent                                   
                                                 
BRANCH BANKING                 $10,000,000                 11.76470588235%
AND TRUST                                        
COMPANY                                          
                                                 
THE CHASE                      $35,000,000                 41.17647058824%
MANHATTAN                                          
</TABLE>

                                       8
<PAGE>
 
BANK
(individually,
and as
successor to
Chemical Bank and
The Chase Manhattan
Bank, N.A.)

          Section 3.  Representations and Warranties of the Borrower.  The
          ---------   ----------------------------------------------      
Borrower hereby represents and warrants to the Agent and each Lender as follows:

               (a)  Power and Authorization.  The Borrower has
                    -----------------------                   
          full power and authority to execute, deliver, and perform its
          obligations under and take all actions contemplated to be performed by
          it under, this Amendment and all such action has been duly and validly
          authorized by all necessary corporate proceedings on its part.

               (b) Execution and Binding Effect. This Amendment has been duly
                   ----------------------------  
          and validly executed and delivered by the Borrower. This Amendment
          constitutes the legal, valid and binding obligation of the Borrower
          enforceable against the Borrower in accordance with its terms, except
          as the enforceability hereof may be limited by bankruptcy, insolvency
          or other similar laws of general application affecting the enforcement
          of creditors' rights or by general principles of equity limiting the
          availability of equitable remedies.

               (c)  Absence of Events of Default.  No event has occurred and is
                    ----------------------------                               
          continuing and no condition exists which constitutes an Event of
          Default or Potential Default.

               (d)  Representations and Warranties Being True and Correct.  The
                    -----------------------------------------------------      
          representations and warranties contained in Article IV of the Credit
          Agreement or in any other Loan Document are true and correct in all
          material respects on and as of the date hereof with the same effect as
          though such representations and warranties had been made on and as of
          the date hereof, except to the extent that any such representation or
          warranty (including any Schedule referred to therein) relates solely
          and specifically to a prior date and except to the extent that any
          such representation and warranty (including any Schedule referred to
          therein) is not true and correct in any material respect solely and
          specifically as a result of activities or actions expressly permitted
          to be taken by the Borrower or any of its Subsidiaries pursuant to
          Article VII of the Credit Agreement.

          Section 4.  Conditions to Effectiveness of Amendment. This Amendment,
          ---------   ----------------------------------------                 
and the rights and obligations created herein,

                                       9
<PAGE>
 
are subject to the satisfaction, immediately prior to or concurrently with the
execution of this Amendment, of the following conditions precedent:

              (a)  Corporate Action.  The Agent shall have received, with a
                   ----------------                                        
          counterpart for each Lender, certificates by the Secretary or
          Assistant Secretary of the Borrower dated as of the date of this
          Amendment as to (i) true copies of all corporate action taken by the
          Borrower relative to this Amendment and any other Loan Documents
          executed in connection with this Amendment, and (ii) the incumbency
          and signature of the officers of the Borrower executing this Amendment
          and such other Loan Documents, together with satisfactory evidence of
          the incumbency of such Secretary or Assistant Secretary.

              (b) Officers' Certificates. The Agent shall have received, with a
                  ----------------------
          counterpart for each Lender, a certificate dated the date of this
          Amendment and signed by a Responsible Officer of the Borrower,
          certifying that the representations and warranties contained in this
          Amendment are true and correct as of the date of execution and
          delivery hereof.

               (c) Amendment Fee; Legal Fees. The Borrower agrees to reimburse
                   -------------------------
          the Agent for reasonable fees and expenses of its counsel, Reed Smith
          Shaw & McClay, incurred in connection with this Amendment, and the
          Agent shall have received from the Borrower reimbursement for all such
          reasonable fees and expenses required to be paid.

              (d) Exchange of Revolving Credit Note. Mellon shall have received
                  ---------------------------------
          a new Revolving Credit Note in the principal amount of $40,000,000
          conforming to the requirements of the Credit Agreement, duly executed
          by the Borrower. The Chase Manhattan Bank shall have received a new
          Revolving Credit Note in the principal amount of $35,000,000
          conforming to the requirements of the Credit Agreement, duly executed
          by the Borrower. Upon receipt of such new Revolving Credit Notes by
          Mellon and The Chase Manhattan Bank, Mellon and The Chase Manhattan
          Bank shall mark the prior $30,000,000, $20,000,000 and $15,000,000
          Revolving Credit Notes, respectively, previously executed by the
          Borrower in connection with the execution of the Credit Agreement
          "exchanged" and return such prior Revolving Credit Notes to the
          Borrower.

              (e) Assignment of ColorWorks Note. The Agent shall have received
                  -----------------------------
          an assignment of the ColorWorks Note to the Agent for the benefit of
          the Lenders, duly executed by the Borrower as required by Section
          7.05(h) of the Credit Agreement. Such assignment shall be made
          pursuant to a Pledge Agreement in form and substance reasonably
          acceptable to the Agent and the Required Lenders.

              (f)  Assignment of Bush PA Note.  The Agent shall
                   --------------------------                  

                                       10
<PAGE>
 
          have received an assignment of the Bush PA Note to the Agent for the
          benefit of the Lenders, duly executed by the Borrower as required by
          Section 7.05(i) of the Credit Agreement. Such assignment shall be made
          pursuant to a Pledge Agreement in form and substance reasonably
          acceptable to the Agent and the Required Lenders.

              (g) Significant Subsidiary Guaranty. The Agent shall have received
                  -------------------------------
          a Significant Subsidiary Guaranty conforming with the requirements of
          the Credit Agreement, duly executed by Bush PA in favor of the Agent
          for the benefit of the Lenders.

              (h) Other Documents. The Agent shall have received, with copies
                  ---------------
          and executed counterparts for each Lender, executed copies of all such
          security agreements, pledge agreements or other agreements as the
          Agent or Lenders may reasonably deem necessary, all such agreements
          being duly executed by the Borrower.

          Section 5.  Miscellaneous.
          ---------   ------------- 

          (a)  Except as amended hereby, the provisions of the Credit Agreement
are hereby ratified and confirmed in all respects by the parties hereto and
shall remain in full force and effect as between such parties.

          (b)  This Amendment shall be deemed to be a contract under the laws of
the Commonwealth of Pennsylvania and for all purposes shall be construed in
accordance with and governed by the laws of such Commonwealth, without regard to
conflicts of law principles.

          (c)  This Amendment may be executed in as many counterparts as may be
deemed necessary and convenient and by the separate parties hereto on separate
counterparts, each of which when so executed and delivered shall be deemed to
constitute an original, but all such separate counterparts shall constitute but
one and the same instrument.

          IN WITNESS WHEREOF, the parties hereto by their officers hereunto duly
authorized have executed this Amendment as of the date and year first written
above.

                                      BUSH INDUSTRIES, INC.



                                      By:    /s/ Neil Frederick
                                          -----------------------
                                      Title: Treasurer
                                                        
                                                        
                                      MELLON BANK, N.A.,
                                      individually and as Agent
                                          

                                      By:    /s/ Mike Anselmo
                                           ----------------------- 
                                      Title: Vice President



                                       11
<PAGE>
                                                                 
                                       BRANCH BANKING AND TRUST  
                                        COMPANY                  
                                                                 
                                                                 
                                                                 
                                      By:    /s/ Hoyt Almond
                                          ------------------------
                                      Title: Senior Vice President


                                      THE CHASE MANHATTAN BANK,       
                                        individually and as 
                                        successor 
                                        to Chemical Bank and The      
                                        Chase Manhattan Bank, N.A.    
                                                                      
                                                                      
                                      By:    /s/ Robert McArdle
                                          -------------------------
                                      Title: Vice President

                                       12
<PAGE>
 
                                SCHEDULE 7.05(j)

                    Non-Significant Subsidiaries of Borrower
                    ----------------------------------------

          The following is a list of Subsidiaries of Borrower that are not
Significant Subsidiaries of Borrower and the advances Borrower has made to such
Subsidiaries as of August 24, 1996 for purposes of Section 7.05(j) of the Credit
Agreement:


Non-Significant Subsidiary                  Amount of Advances
--------------------------                  ------------------
<TABLE>
<CAPTION>
 
<S>                                         <C>
Bush Industries of Ohio, Inc.               $0
 
Bush Management, Inc.                       $0
    (Assume charges to Bush Industries,
    Inc., from Bush Management, Inc.
    equal advances from Bush Industries,
    Inc. to Bush Management, Inc.)
 
Bush Service Group Inc.                     $1,503,799
ColorWorks, Inc.                            $5,616,508
Bush Technologies, Inc.                     $0
Bush Industries De Mexico, S.A. DE C.V.     $  345,592
Bush Commercial De Mexico, S.A. DE C.V.     $0
                                            ----------
    TOTAL                                   $7,465,899
</TABLE>

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