SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

|X| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required]

For the fiscal year ended December 31, 1997

|_| Transition Report Pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]

For the transition period from _____________ to _____________

                         Commission file number 0-12362

                             BERGER HOLDINGS, LTD.
             (Exact name of registrant as specified in its charter)

           Pennsylvania                                  23-2160077
 (State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                        Identification No.)

 805 Pennsylvania Boulevard, Feasterville, PA               19053
   (Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code:  215-355-1200

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to section 12(g) of the Act:

                               Title of each class

                          Common Stock, $.01 par value

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  securities  Exchange  Act of
1934  during the  preceding  12 months  (or for such  shorter  periods  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. YES |X| NO |_|

     Indicate by check mark if disclosure of delinquent  files  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
<PAGE>

     As of March 30, 1998,  5,361,973  shares of Common Stock of the  registrant
were  outstanding and the aggregate market value of the Common Stock (based upon
the  average  of high and low bid  prices of the  Common  Stock on the  National
Association of Securities Dealers Automatic  Quotation System on March 31, 1998)
of the registrant, held by nonaffiliates was approximately $17,400,000.(1)

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

     Yes      |X|               No      |_|

Documents Incorporated By Reference: None

--------------------

(1) Such  figure  excludes  the  shares of Common  Stock  held by the  Company's
executive  officers and directors.  The information  provided shall in no way be
construed as an admission  that any person whose  holdings are excluded from the
figure is not an affiliate or that any person whose  holdings are included is an
affiliate and any such admission is hereby disclaimed.

















                                     -2-
<PAGE>

         PART I


Item 1. Business

         Background

     Berger Holdings,  Ltd. collectively with its subsidiaries,  (the "Company")
was  incorporated in the  Commonwealth of Pennsylvania on August 28, 1979. Prior
to 1983, the Company operated under the name "Life Care Communities Corporation"
as a private  concern,  which developed life care communities on a fee basis for
non-profit entities.  During 1983, the Company  successfully  completed a public
offering in which funds were raised for the principal  purpose of developing and
constructing proprietary life care facilities.

     During 1987,  the Company  conducted an  assessment of its business and the
life care industry,  in general. As a result of such assessment,  the management
of the Company recommended,  and on May 5, 1988 the shareholders  approved,  the
Company's  withdrawal  from the life care  industry  in order to seek  alternate
investment  opportunities.  This withdrawal was effectuated  through the sale of
the Company's minority interests in certain joint ventures.  Subsequent to these
transactions  the  Company  had  assets  consisting  solely of cash and  minimal
liabilities.

     The  Company  identified  Berger  Bros  Company  ("Berger")  as a favorable
candidate for acquisition, and on May 30, 1989 acquired approximately 85% of the
common  stock of  Berger,  through a plan of  reorganization  (the "1989 Plan of
Reorganization"),  in exchange  for shares of the  Company's  common  stock (the
"Common Stock")  representing  approximately 29% of the outstanding Common Stock
after the effective date of the 1989 Plan of Reorganization. Subsequently during
1989,  the Company  acquired an additional 15% of the common stock of Berger and
issued,  in  exchange   therefor,   shares  of  the  Common  Stock  representing
approximately  an additional 5% of the  outstanding  Common Stock at the time of
such subsequent acquisition.  In connection with such acquisitions,  the Company
changed its name to Inovex Industries, Inc.

     In 1990,  the Company  changed its name to Berger  Holdings,  Ltd. so as to
identify the Company more closely with its principal operating subsidiary.

     On December 6, 1991, the Company filed a petition for reorganization  under
Chapter 11 of the United States  Bankruptcy Code in the United States Bankruptcy
Court for the Eastern District of Pennsylvania (the "Bankruptcy Court").

     On December 29, 1992, the Bankruptcy  Court entered an order confirming the
Third Amended Joint Plan of Reorganization (the "Plan of Reorganization) subject
to approval of a settlement  agreement (the "Settlement  Agreement") between the
Company and its primary  secured  lender.  The Settlement  Agreement was entered
into on February 19, 1993 and approved by the Bankruptcy Court on April 1, 1993.
The effective date of the Plan of Reorganization was April 13, 1993. The Chapter
11 case was closed February 28, 1994.



                                     -3-
<PAGE>

     In connection with the bankruptcy proceedings,  certain unsecured creditors
of the Company elected to convert their debt into shares of the Common Stock. An
aggregate  of 390,540  shares of Common Stock was issued to such  creditors.  In
addition,  holders  of the  common  stock of  Graywood  Products  Company,  Inc.
("Graywood")  and holders of the  Company's  then  outstanding  Preferred  Stock
converted such stock into shares of the Common Stock.

     On August 21, 1997, the Company's wholly-owned subsidiary, Berger Financial
Corp.,  a Delaware  Corporation  ("Berger  Financial")  refinanced  its existing
working  capital and term loans with loans from Summit Bank,  N.A. (the "Bank").
The working capital loan (the "Working Capital Loan") obtained from the Bank was
increased to $3,500,000,  which is secured by the Company's accounts  receivable
and inventory.  The working  capital loan bears interest at the Bank's base rate
of interest plus one-half percent.  Concurrently,  the Company borrowed from the
Bank $1,300,000 (the "Additional Loan"),  which is repayable over 36 months with
interest at the Bank's base rate of interest  plus one percent.  The  Additional
Loan is secured by  equipment  of the Company.  The  refinancing  resulted in an
interest  rate  reduction of in excess of 250 basis points when  compared to the
former Credit Facility.

     On January 2, 1998 the term of the Working Capital Loan was extended for an
additional  three years to December  31,  2000.  Also on such date,  the Working
Capital Loan was increased to $7,000,000 to help fund the Obdyke Acquisition (as
described  below) in January 1998.  The  Additional  Loan was also  increased to
$1,960,000 at such time.

         Product Lines

     The Company is principally  engaged in the manufacture and  distribution of
metal roof drainage products  ("RDP").  Since 1993, Berger has also engaged in a
program of internal development and product expansion.  Internal development has
been  characterized  chiefly by the modernization and modification of production
facilities,  machinery and equipment and the expansion of existing product lines
to  emphasize   copper-based  RDP.   External   development  has  been  directed
principally  towards  increasing the sales volume and market  penetration of the
Company's  products  through the Obdyke  Acquisition (as described below) and an
expanded  product  line which now  includes  Real-Tool  Snow  Guards (as defined
below) for metal standing seam roofs.

     The  Company's RDP product line,  consisting of gutters,  downspouts,  snow
guards,  trim coil and associated  accessories and fittings,  is manufactured by
the Company at its two suburban Philadelphia  facilities.  The Company sells RDP
through its sales and  telemarketing  representatives  principally  to wholesale
distributors who sell directly to roofing and general contractors for use in the
repair and replacement of roof drainage systems in existing buildings, primarily
residential.

     The raw materials used in manufacturing RDP are aluminum, steel and copper.
Supplies of these materials,  in either coil, sheet or bar form, are procured by
the Company from various  domestic and foreign  suppliers.  Although the Company
believes that adequate available sources of supply exist at customarily accepted
market  prices,  trade  restrictions,  work  stoppages  or  adverse  weather  or
political conditions may affect the prices and availability of these materials.


                                     -4-
<PAGE>

Rapid increases in prices of raw materials would be expected to adversely affect
the operations of the Company because the cost of raw materials  constitutes the
largest single element of the Company's cost of sales.

     The Company is largely dependent for its raw material  requirements for its
RDP products on the following three suppliers:  Commonwealth (aluminum);  Revere
(copper);  and  Coilplus-Pennsylvania,  Inc. (galvanized and painted steel). The
remaining raw materials are provided by a large number of small  suppliers.  All
raw  materials  procured  by the  Company,  as well as  finished  products,  are
strictly  scrutinized for quality control using industry and internal guidelines
and standards.

Acquisitions

     On January 2, 1998, the Company  consummated the  acquisition  (the "Obdyke
Acquisition")  of the Roof Drainage  Division (the  "Acquired  Division") of its
main  competitor,  Benjamin  Obdyke,  Inc.  ("Obdyke").  Sales for the  Acquired
Division  totaled  $19,700,000 in 1997. The total cost of this  acquisition  was
$11,379,000,  of which $10,000,000 was paid in cash at closing.  The balance was
satisfied by issuing  125,000  shares of the Common  Stock and an $879,000  note
which is repayable over a two-year  period.  In addition,  the Company issued to
the seller a warrant  to  purchase  50,000  shares of the  Common  Stock.  These
warrants can be exercised over a one-year  period at a price of $4.25 per share.
The assets purchased from Obdyke included $1,402,000 of equipment and $2,392,000
of  inventory.  The  remaining  balance  of  $7,585,000  has  been  assigned  to
intangible  assets,  which include  non-compete  agreements,  customer lists and
goodwill.  This  acquisition  was funded in part  through the issuance of 40,000
shares of the Company's Series A Convertible  Preferred Stock at $100 per share,
$2,500,000  of 12.25%  debentures  due  quarterly  and an increase in the credit
facility  with Summit Bank by  $4,160,000.  A portion of the proceeds from these
financings was also used for other corporate purposes.

     On February 7, 1997,  the Company  consummated  the  purchase of all of the
outstanding  shares  of  the  Common  Stock  of  Real-Tool,   Inc.,  a  Virginia
corporation. As consideration,  the Company paid $900,618 in cash on the closing
date,  issued 100,000 Common Shares,  and issued a note for $750,000  payable in
quarterly  installments  over the next year ending January 15, 1998.  Concurrent
with the purchase,  the Company  entered into a royalty  agreement with the sole
shareholder of Real-Tool, Inc. Under this agreement,  which expires in 2012, the
Company is required to pay royalties of 6% of revenues with a minimum of $75,000
annually, through 2002.

     Subsequent to 2002,  the Company has the option to increase the  percentage
of  royalties  paid  to  this  individual  and  eliminate  the  minimum  payment
requirement.

Competition

     The  Company's  business is highly  competitive.  In general,  the building
products market is highly  fragmented.  The Company competes with numerous small
and large manufacturers and fabricators.  Some of the Company's competitors have
substantially greater resources than the Company. The Company competes primarily
in the Northeast/Mid-Atlantic region. During the past two years, the Company has
implemented an advertising and marketing program to expand its geographic range


                                     -5-
<PAGE>

of operations  to a more national  level.  Competition  is primarily  based upon
product quality, completeness of product lines, service and price.

Geographic Market

     The Company's  products are  principally  sold throughout the states in the
Northeast/Mid-Atlantic  region.  Approximately 85% of the Company's products are
used in the renovation of existing houses in the Northeast/Mid-Atlantic  region.
Sales to this region are  particularly  important for RDP sales,  because of the
large concentration of older homes located within this region.

Major Customers

     During 1997,  no  individual  customer  accounted  for more than 10% of the
Company's sales.  However, one customer accounted for 7.3% of sales. The Company
has no ongoing  contracts for sales of RDP, but rather  services  customers on a
per-order basis.

Seasonal Nature of the Business

     The  building   products   industry  is  seasonal,   particularly   in  the
Northeast/Mid-Atlantic  region of the  United  States  where  inclement  weather
during the winter months usually reduces the level of building  activity in both
the home-building and home improvement markets.  Typically,  the Company's sales
volume is lowest during the months of December, January and February.

Inventory Practices

     The Company's policy is to obtain,  fabricate and/or manufacture  inventory
in sufficient volume in order to provide a reasonable inventory level to support
minimum and maximum levels based on customers historical demand.  Because of the
nature of the RDP market,  in which an order  generally must be filled within 48
to 72 hours of placement, the Company does not have any substantial backlog.

Employees

     As of December 31, 1997, the Company  employed 94  individuals,  of whom 14
were  employed in sales and  marketing;  68 were employed in  manufacturing  and
delivery;  and 12  were  employed  in  administration.  Approximately  60 of the
Company's  employees are  represented by one of two labor unions.  The Company's
labor  contract with The  International  Brotherhood  of Teamsters,  Chauffeurs,
Warehousemen  and Helpers of America,  Local 169 expires  December 31, 2001. The
Company  also has a contract  with the  Teamsters  Local  Union 107,  which also
expires December 31, 2001. The Company believes that its employee  relations are
good.

Government Regulation

     The Company is subject to numerous federal and state  regulations  relating
to, among other things,  the operations of its manufacturing  facilities,


                                     -6-
<PAGE>

the storage and disposal of environmentally  sensitive materials, the control of
emission  levels,  employee  safety  and  health,  employee  wages  and  general
environmental  matters. The Company believes that these regulations are complied
with properly. There are no outstanding notices from federal or state regulatory
bodies or agencies indicating a failure to comply with any of these regulations.

Year 2000

     The Company has conducted,  and is continuing to conduct,  an assessment of
the effect that the "Year  2000"  problem  may have upon the  operations  of the
Company. Although the Company is not totally Year 2000 compliant, the Company is
working  towards  correcting  this  problem.  The Company  does not consider any
issues  discovered  at this time likely to result in a material  effect on
the Company, its business or financial results.

Item 2. Properties

     The Company owns a 115,000 square foot operating  facility in Feasterville,
Pennsylvania. The corporate and sales offices occupy space at the same location.
Due to the need for more space in connection  with the Obdyke  Acquisition,  the
Company has entered into a lease agreement on a 90,000 square foot manufacturing
facility in Southampton, PA.

     The Company has a mortgage  liability on the  Feasterville  facility in the
principal amount of approximately  $1,612,000 at December 31, 1997. The mortgage
is being repaid in monthly installments of approximately $17,400 with a maturity
date of May 2016.  The  mortgagee  retains  the right to declare  the  remaining
balance due at any time after April 23, 2001, with 60 days prior notice.

Item 3. Legal Proceedings

     As of the date hereof,  there are no legal  proceedings  presently  pending
against the Company.

Item 4. Submission of Matters to a Vote of Security Holders

         Not applicable.










                                     -7-
<PAGE>

                                     PART II

Item 5. Market for the Company's Common Stock and Related Stockholder Matters

     The Company's Common Stock is traded in the over-the-counter  market and is
included for  quotation  on the Nasdaq  SmallCap  Market  operated by the Nasdaq
Stock Market, Inc. under the symbol "BGRH."

     The following table sets forth certain information with respect to the high
and low bid prices of the  Company's  Common Stock  during 1996 and 1997.  These
quotations reflect inter-dealer prices,  without retail mark-ups,  mark-downs or
commissions and may not represent actual transactions.

                                    High                       Low

     1996

     First Quarter                $ 1 1/8                  $    13/16
     Second Quarter                 1 9/16                        7/8
     Third Quarter                  1 13/16                 1     1/4
     Fourth Quarter                 2 1/4                   1    9/16

     1997

     First Quarter                  4 3/8                   1   53/64
     Second Quarter                 4 1/16                  3
     Third Quarter                  3 7/8                   3
     Fourth Quarter                 4 1/4                   3     1/4


     On December 31, 1997, there were  approximately  1,346 holders of record of
shares of Common Stock.

     On December 31, 1997 the Registrant  consummated  the sale of 25,000 shares
of its Series A Convertible Preferred Stock to Tandem Capital, the consideration
for such shares was $2,500,000.  Such shares are convertible into shares of the
Common Stock in accordance with the conversion  ratio set forth in the Statement
with Respect to Shares of the  Registrant  attached  hereto as Exhibit 3(f). The
sale of such shares was exempt from  registration  under the  Securities  Act of
1933, as amended, pursuant to Section 4(2) thereof.

Dividend Policy

     The Company has not paid any cash  dividends  on its Common  Stock to date,
and does not anticipate paying cash dividends in the foreseeable future.

     The Company will pay out a 10% dividend quarterly  beginning May 1, 1998 on
40,000 preferred shares,  with a face value of $4,000,000,  issued in connection
with the acquisition.



                                     -8-
<PAGE>

Item 6. Selected Financial Data

<TABLE>
        Selected Financial Data For Berger Holdings, Ltd. and Subsidiary
<CAPTION>

                               Year Ended December 31
        -----------------------------------------------------------------




                                1997               1996               1995                1994               1993

<S>                          <C>                <C>                <C>                <C>                <C>
Net Sales                    $20,748,017        $19,745,890        $15,653,321        $16,595,918        $11,938,804
Cost of Sales                 16,196,776         15,587,221         13,738,061         14,413,877         10,495,647
                             -----------        -----------        -----------        -----------        -----------
Gross Profit                   4,551,241          4,158,669          1,915,260          2,182,041          1,443,157
                             -----------        -----------        -----------        -----------        -----------
Selling, Administrative
  and General Expenses         2,963,614          2,389,285          2,225,685          2,119,700          1,629,681
                             -----------        -----------        -----------        -----------        -----------
Income (Loss) from             1,587,627          1,769,384           (310,425)            62,341           (186,524)
Operations

Interest Expense                (581,624)          (619,178)          (570,420)          (520,908)          (480,535)
Other Income (Expense)            14,374              4,295             30,984             (2,084)              -
                             -----------        -----------        -----------        -----------        -----------

Income (Loss) from Continuing
  Operations before Extraordinary
  & Reorganization Items
  and Income Tax Benefit     $ 1,020,377        $ 1,154,501          ($849,861)         ($460,651)         ($667,059)
Income Tax Benefit             1,000,000            500,000               -                  -                  -
Reorganization Items                -                  -                  -                  -              (110,408)
                             -----------        -----------         ----------         -----------       -----------

Income (Loss) before
  Extraordinary Item         $ 2,020,377        $ 1,654,501          ($849,861)         ($460,651)         ($777,467)
Extraordinary Item                  -                  -                  -               948,207          1,151,270
                             -----------        -----------         ----------         ----------        -----------
Net Income (Loss)            $ 2,020,377        $ 1,654,501          ($849,861)          $487,556           $373,803
                             ===========        ===========         ==========         ==========        ===========

BASIC EARNINGS (LOSS)
PER COMMON SHARE:

Income (Loss) before
  Extraordinary Item               $0.40              $0.44             ($0.26)            ($0.15)            ($0.33)

Extraordinary Item                  0.00               0.00               0.00               0.32               0.49
                             -----------        -----------         ----------        -----------        -----------
Net Income (Loss)                  $0.40              $0.44             ($0.26)             $0.17              $0.16
                             ===========        ===========         ==========        ===========        ===========

TOTAL ASSETS                 $19,751,213        $12,292,861         $9,885,339        $10,352,762        $10,054,125
                             -----------        -----------         ----------        -----------        -----------
LONG TERM DEBT AND
  REDEEMABLE PREFERRED STOCK  $6,022,147*        $3,721,719         $1,676,713         $3,873,299         $4,982,501
                             -----------        -----------         ----------        -----------        -----------
SHAREHOLDERS' EQUITY         $12,493,271        $ 7,655,336         $4,635,369         $5,171,321         $3,849,600
                             ===========        ===========         ==========        ===========        ===========

<FN>
* Long-Term Debt includes a $2,000,000
debenture used for the Obdyke Acquisition
and at December 31, 1997 was in our cash
account.
</FN>
</TABLE>


                                     -9-
<PAGE>

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Results of Operations

     The Company's  results of operations for the years ended December 31, 1997,
1996 and 1995  represent  the  consolidated  operations  of the  Company and its
subsidiaries, Berger Financial and Berger.

     Net sales  increased to  $20,748,017  in 1997 from  $19,745,890 in 1996 and
from  $15,653,321 in 1995.  The Company's  acquisition of Real Tool is the major
factor  contributing to the increase in revenues from 1996 to 1997. The increase
in 1996 over 1995 is primarily due to a stronger  economy and a more  aggressive
advertising program.

     The Company's gross profit, as a percentage of revenues, was 21.9% in 1997,
21.1% in 1996 and 12.2% in 1995.  The  changes  in the  Company's  gross  profit
percentages are related to changes in the sales level and the Company's  ability
to absorb fixed overhead. The increase in 1997 of the gross profit percentage is
attributable to the increased sales volume and production efficiencies. In 1995,
the gross profit  percentage was down primarily due to the decrease in sales and
the inability to absorb overhead effectively.

     Selling, administrative and general expenses, as a percentage of net sales,
increased  to 14.3% in 1997  from  12.1%  in 1996  and  14.2% in 1995.  The 1997
increase is primarily  due to the  advertising  of the newly  acquired Real Tool
product line and national advertising of its copper products.

     The income from operations was $1,587,627 in 1997 compared to $1,769,384 in
1996 and a loss from operations of $310,425 in 1995. The 1997 decrease in income
was  primarily  due  to  costs  associated  with  an  extensive   marketing  and
advertising campaign designed to promote its products on a national level.

     Interest expense decreased to $581,624 in 1997 compared to $619,178 in 1996
and $570,420 in 1995. The decrease in interest  expense for 1997 was a result of
lower interest rates.

     Due to the  factors  described  above,  income from  continuing  operations
decreased to $1,020,377 in 1997 from  $1,154,501 in 1996,  mainly as a result of
the  introduction  cost of the Real Tool product line. The improvement from 1995
to 1996 levels was the result of increased sales and improved profit margins.

     The net income was $2,020,377 in 1997 as compared to $1,654,501 in 1996 and
a net loss of $849,861 in 1995.  The Company  recognized  a deferred  tax asset,
which improved net income by $1,000,000 in 1997 and $500,000 in 1996.

     During the first quarter of 1998, which historically is the slowest period,
the Company will report record revenues, due to the Obdyke Acquisition. However,
first quarter net income will be adversely  affected by start up costs  relating
to the Obdyke Acquisition.

                                     -10-
<PAGE>

Future Capital Expenditures

     Along with operating cash flow  anticipated to be received from  operations
in 1998, the proceeds of recent financing obtained from Summit Bank, and through
the sale of the  preferred  stock and  debentures  to Tandem  Capital and Argosy
Investment Partners, all as discussed below, are anticipated to be sufficient to
cover the Company's capital expenditure needs for 1998.

     The  Company  anticipates  that  it may,  in the  future,  need  to  obtain
additional  financing  to  accomplish  the  following:  the  redemption  of  the
preferred stock issued to Tandem Capital and Argosy Investment Partnership,  and
the  satisfaction  of  the  debentures  issued  to  Tandem  Capital  and  Argosy
Investment  Partners.  Specifically  with  respect  to the  preferred  stock and
debentures,  the  Company  anticipates  redeeming  such  instruments  before the
interest  due  and  dividend  payable,  respectively,   under  such  instruments
increases  substantially.  Such substantial increases will occur on December 31,
2002 and January 2, 2003 with  respect to the  preferred  stock issued to Tandem
Capital and Argosy Investment Partners, respectively and on January 2, 2001 with
respect to the debentures  issued to both Tandem  Capital and Argosy  Investment
Partners.

Liquidity and Capital Resources

     At December 31,  1997,  the working  capital of the Company was  $8,656,066
(resulting  in a ratio of  current  assets to  current  liability  of 8.0 to 1),
compared to $4,428,272  (5.8 to 1) at December 31, 1996. The increase in working
capital is primarily  from  $4,381,413 of proceeds  received from Tandem Capital
prior to December 31, 1997, earmarked for, among other purposes, the acquisition
of Obdyke's metal roof drainage division on January 2, 1998.

     At December 31, 1997, current  liabilities  totalled  $1,235,795  primarily
consisting of $713,116 of accounts  payable and accrued expenses and $522,679 of
current maturities of long-term debt. Current liabilities  increased $319,989 as
compared to 1996.  The change in current  liabilities is primarily the result of
an increase  of  $274,962 in current  maturities  of  long-term  debt.  Accounts
payable increased $140,226 and accrued expenses decreased $95,199 in 1997.

     At December 31, 1997 obligations to Summit Bank totaled $2,661,007 compared
to the  obligations  under the prior  credit  facility for December 31, 1996 and
1995 which totaled $2,220,051 and $2,010,754, respectively.

     In 1997,  the Company  raised  $187,875 of additional  capital  through the
exercise of 188,500 stock warrants and options,  issued through previous private
placements and employee stock option grants.

     Cash flow used in operating activities for the year ended December 31, 1997
was  $464,917 as compared to $20,622  provided by operating  activities  for the
year ended  December 31, 1996. The cash used in operating  activities  increased
due to the  construction  of new office  space,  which was financed from working
capital.

     Net cash used in investing activities totaled $1,553,333 for the year ended
December 31,  1997,  primarily  as a result of the  acquisition  of Real Tool as
compared to net cash used in investing activities of $444,706 for the year ended
December 31, 1996.

     Net cash provided by financing  activities  totaled $5,192,888 for the year
ended  December  31,  1997,  as compared  to  $1,489,361  provided by  financing
activities in the year ended  December 31, 1996.  This  difference was primarily
the result of proceeds received from the issuance of preferred stock, debentures
and the exercise of stock warrants and options.  No known negative  impacts will
result from the financing for the acquisitions for Real Tool and Obdyke.


                                     -11-
<PAGE>

Item 8. Financial Statement and Supplementary Data

     Attached  at pages  F-1  through  F-24  are the  financial  statements  and
financial statement schedules identified in Item 14 hereof.

Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

     None.























                                     -12-
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

     The following are the Executive Officers and Directors of the Company as of
the date of this report. The Company's By-Laws,  as amended in 1993, provide for
the  classification of Directors into three classes,  as nearly equal in numbers
as possible,  with one class being elected at each annual  meeting for a term of
three years.  The terms of Class I directors  will expire in 2000,  the terms of
Class II directors in 1998 and the terms of Class III directors in 1999. Francis
E. Wellock, Jr. is the son-in-law of Joseph F. Weiderman; otherwise, there is no
family  relationship  among any of the  Company's  officers  or  directors.  The
current  directors  of the Company will serve until their terms expire and until
their successors in office are elected or appointed and qualified.

                        EXECUTIVE OFFICERS AND DIRECTORS

Name                      Age  Position(s)

Theodore A. Schwartz      68   Chairman of the Board of Directors,
(Class III)                    Chief Executive Officer (Principal
                               Executive Officer)

Joseph F. Weiderman       56   President, Chief Operating Officer,
(Class III)                    Secretary, Treasurer and Director

Paul L. Spiese, III       46   Vice President and Director
(Class II)

Francis E. Wellock, Jr.   33   Chief Financial Officer (Principal Financial and
                               Accounting Officer)

Jacob I. Haft, M.D.       61   Director
(Class III)

Dr. Irving Kraut          80   Director
(Class I)

Larry Falcon              58   Director
(Class II)

Jay Seid                  37   Director
(Class I)

John Paul Kirwin          42   Director
(Class III)

                                     -13-
<PAGE>

     THEODORE A. SCHWARTZ was elected a Director of the Company  effective  June
1987 and served as President of the Company from May 5, 1988 to May 30, 1989 and
from July 17,  1990 to January  15,  1991.  From May 30,  1989 to  present,  Mr.
Schwartz  has served as Chairman of the Board of Directors  and Chief  Executive
Officer of the Company.  Mr. Schwartz holds a B.S. in Economics from the Wharton
School of Business and spent 35 years in the  investment  field prior to joining
Berger.

     JOSEPH F.  WEIDERMAN was elected a Director of the Company on June 1, 1990,
served as Chief Financial Officer,  Secretary and Treasurer of the Company since
February 1990, and was elected President of the Company on January 15, 1991. Mr.
Weiderman  holds a Bachelor  of  Science  Degree in  Accounting  and a Master of
Business Administration Degree in Finance from LaSalle University.  Prior to his
joining the Company,  Mr.  Weiderman had served for over  fourteen  years as the
Chief Financial  Officer of Harry Levin,  Inc., a multi-store  retailer of major
appliances and furniture.

     PAUL L.  SPIESE,  III was  elected a Director  of the  Company on March 30,
1991.  Mr.  Spiese  joined  Berger as Plant  Manager  in 1985 and was named Vice
President  -  Manufacturing  of the  Company  in July 1990.  Previously,  he was
employed by Hurst Performance, Inc. as a Plant Manager.

     FRANCIS E. WELLOCK,  JR. was hired as Controller of the Company on June 10,
1991 and was  elected  Vice  President  Finance and Chief  Financial  Officer on
August 19, 1996.  Mr.  Wellock holds a Bachelor of Science  Degree in Accounting
from Saint Joseph's University. Prior to joining the Company, Mr. Wellock worked
as a CPA for a Public Accounting Firm.

     JACOB I. HAFT,  M.D.  was elected a Director of the Company in  conjunction
with the  Company's  acquisition  of  Berger  in 1989.  Dr.  Haft has  practiced
medicine, with a specialization in cardiology, for over twenty-five years. Since
1974,  Dr.  Haft has been a  Cardiologist  at St.  Michael's  Medical  Center in
Newark,  New Jersey. In addition,  Dr. Haft is currently a Clinical Professor of
Medicine at the New Jersey  College of Medicine and  Dentistry  and Professor of
Medicine at the Seton Hall University Post Graduate School of Medicine. Dr. Haft
has several  professional  certifications,  is a member of various  professional
societies and associations and has published many scholarly  articles and books.
Dr. Haft currently  serves on the Cardiac  Services  Committee of the New Jersey
Department of Health.

     LARRY FALCON was elected as a Director of the Company in November  1985 and
acted as Chairman of the Board from  September  3, 1986 to June 1, 1987.  He has
served as President of the Residential  Division of The Kaplan  Organization,  a
real estate developer, since 1985.

     DR. IRVING KRAUT was elected as a Director at the Company in July 1993. Dr.
Kraut was a practicing  orthodontist  from 1948 to 1991. Since that time, he has
served as a consultant to  orthodontists  in his capacity as President of Irving
Kraut,  D.D.S., P.A. Since 1978, Dr. Kraut has served as a director of Princeton
Research Lands, Inc., a private real estate company.


                                     -14-
<PAGE>

     JAY SEID was elected as a Director of the Company on December 15, 1997. Mr.
Seid is a Vice President of Bachow & Associates,  a venture capital firm.  Prior
to joining Bachow in December  1992, Mr. Seid was President and General  Counsel
of Judicate, Inc. Previously he was an attorney specializing in corporate law at
Wolf, Block,  Schorr and Solis-Cohen in Philadelphia.  Mr. Seid graduated with a
B.A. from Rutgers University and received a J.D. from New York University School
of Law.

     JOHN PAUL KIRWIN was  elected as a Director of the Company on December  15,
1997.  Mr. Kirwin is a principal in Argosy  Investment  Partners,  L.P., a small
business investment  company.  Mr. Kirwin is also a principal in Odyssey Capital
Group,  L.P.,  a  private  investment  fund.  Mr.  Kirwin  was a  corporate  and
securities  attorney  for  14  years,  including  six  years  as  a  partner  at
McCausland, Keen & Buckman, until joining Odyssey full time in January 1996. Mr.
Kirwin holds a Juris Doctris, Order of the Coif, from the National Law Center of
George Washington University and a Bachelor of Arts from Dickinson College.


























                                     -15-
<PAGE>

Item 11. Executive Compensation

     The following table shows the annual  compensation of each of the Company's
executive officers for the years 1997, 1996 and 1995.


<TABLE>
                                             SUMMARY COMPENSATION TABLE

<CAPTION>
                                                                                 Long-Term
                                                                                Compensation
                                         Annual Compensation                       Awards
-------------------------- --------- ------------ ----------- ---------------- -------------- ----------------

          (a)                 (b)         (c)         (d)           (e)              (g)            (i)
   Name & Principal          Year      Salary($)   Bonus($)   Other Annual        Options/       All other
       Position                                               Compensation        SARs (#)     Compensation
                                                                    ($)                             ($)

<S>                        <C>          <C>         <C>              <C>         <C>              <C>
Theodore A. Schwartz       1997         $131,561    $10,000          0               -            $12,770 1
Chairman & Chief           1996          131,955     31,854          0           200,000           11,273
Executive Officer          1995          124,865       0             0           150,000           10,699

Joseph F. Weiderman        1997         $127,512    $10,000          0               -             $2,507 2
President and Chief        1996          118,435     42,470          0           200,000            2,242
Operating Officer          1995          109,346       0             0           150,000            1,877

Paul L. Spiese, III        1997         $ 93,767    $10,000          0               -             $1,879 3
Vice President             1996           88,015     29,980          0           200,000            1,856

Francis E. Wellock, Jr.    1997         $ 75,132    $10,000          0               -             $  514 4
Chief Financial            1996           55,818      5,000          0           180,000           $   49
Officer

---------------------------
<FN>
1 Represents premiums paid by the Company for life insurance for the benefit of Mr. Schwartz.
2 Represents premiums paid by the Company for life insurance for the benefit of Mr. Weiderman.
3 Represents premiums paid by the Company for life insurance for the benefit of Mr. Spiese.
4 Represents premiums paid by the Company for life insurance for the benefit of Mr. Wellock.
</FN>
</TABLE>














                                     -16-
<PAGE>

     The following table shows (1) the number and value of options  exercised by
the Company's  executive officers during fiscal year 1997 and (2) the number and
value of unexercised options held by the Company's executive officers at the end
of 1997:
<TABLE>
                                  AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                                               AND FY-END OPTION VALUES
           -----------------------------------------------------------------------------------------------------------

<CAPTION>
                (a)                (b)              (c)                          (d)                        (e)

                                                                                            Value of Unexercised In
                                                              # of Unexercised Options at   the-Money Options/SARs
                              Shares Acquired  Value                   FY-End(#)            at FY-End ($)
               Name           on Exercise (#)  Realized($)      Exercisable/Unexercisable   Exercisable/Unexercisable



           -----------------------------------------------------------------------------------------------------------

           <S>                       <C>            <C>                  <C>                <C>
           Theodore A.               0              0                    256,633/250,000    $610,000/$570,000
           Schwartz

                                                                         213,643/250,000    $507,000/$570,000
           Joseph F.                 0              0
           Weiderman

           Paul L. Spiese,           0              0                    204,043/250,000    $486,000/$570,000
           III



           Francis E.                0              0                      85,000/180,000   $201,875/$410,625
           Wellock, Jr.

           -----------------------------------------------------------------------------------------------------------
</TABLE>



     During 1997,  members of the Company's Board of Directors who were not also
executive officers of the Company were paid $250 per Board meeting attended.  An
aggregate of $2,750 was paid to directors  for their  services.  No director was
paid more than $750.

Employment Agreements

Theodore A. Schwartz, Joseph F. Weiderman & Paul L. Spiese, III

     Pursuant to Employment  Agreements amended as of December 15, 1997, Messrs.
Schwartz,  Weiderman  and  Spiese  are  employed  by the  Company  as its  Chief
Executive  Officer,  President and Chief Operating Officer and Vice President of
Manufacturing,  respectively.  These  agreements,  originally for a term of five
years,  have been extended for two additional  years and now expire December 31,
2000. The agreements provide for base annual salaries of $150,000,  $150,000 and
$105,000,  respectively.  In addition to their salaries,  the agreements provide
that Messrs. Schwartz,  Weiderman and Spiese shall be entitled to a bonus at the
discretion  of the  Board  of  Directors.  If,  at the  end of the  term  of the
agreement,  the  Company  and Messrs.  Schwartz,  Weiderman  and Spiese have not
agreed to an  extension of these  agreements  for a minimum  additional  term of
three  years,  the Company is  obligated  to pay them an amount  equal to 50% of
their then annual  salary in weekly  installments  over a six month  period (the
"Severance Payment"). In the event that the three officers are unable to perform
their duties under the agreement for an aggregate period of more than 180 days

                                     -17-
<PAGE>

in any 365 day period,  the Company may terminate any one of the three
officers'  employment upon 90 days notice.  In this event, the Company
is  obligated  to pay Messrs.  Schwartz,  Weiderman or Spiese his full
salary for a period of 12 months.  At the end of this 12 month period,
the Company is obligated to pay the sum of $1,000 per week, subject to
certain reductions set forth in the agreement, for a period of 3 years
and then $500 per week for the remainder of their lives.

     Messrs.  Schwartz,  Weiderman  and Spiese are also entitled to the use of a
car  provided by the Company and life  insurance to benefit the  beneficiary  of
their respective choices in the face amount of $500,000.  During the term of the
agreement, and so long as the any one of the three officers receives a Severance
Payment,  they are  prohibited  directly  or  indirectly  from  engaging  in any
business which is the same as, similar to or in competition with the business of
the Company. In addition,  the amended agreement stipulates that during 1999 and
2000, the stock options granted for those years will be 100,000 for each year.

Francis E. Wellock, Jr.

     Pursuant  to an  Employment  Agreement  dated as of December 15, 1997,  Mr.
Wellock is  employed  by the  Company as its Vice  President  of  Finance.  This
agreement  is for a term of four and one half  years and  expires  December  31,
2000. The agreement provides for a base annual salary of $90,000. In addition to
his salary, the agreement provides that Mr. Wellock shall be entitled to a bonus
at the  discretion of the Board of Directors.  If, at the end of the term of the
agreement,  the Company and Mr.  Wellock have not agreed to an extension of such
agreement for a minimum additional term of three years, the Company is obligated
to pay Mr.  Wellock an amount  equal to 50% of his then annual  salary in weekly
installments  over a six month period (the  "Severance  Payment").  In the event
that Mr.  Wellock is unable to perform  his duties  under the  agreement  for an
aggregate  period of more than 180 days in any 365 day  period,  the Company may
terminate  Mr.  Wellock's  employment  upon 90 days notice.  In such event,  the
Company  is  obligated  to pay Mr.  Wellock  his full  salary for a period of 12
months. At the end of this 12 month period,  the Corporation is obligated to pay
Mr. Wellock the sum of $1,000 per week,  subject to certain reductions set forth
in the  agreement,  for a period  of three  years and then $500 per week for the
remainder of Mr. Wellock's life.

     Mr.  Wellock is also  entitled to the use of a car  provided by the Company
and receives life insurance to benefit the beneficiary of his choice in the face
amount of $500,000. During the term of the agreement, and so long as Mr. Wellock
receives the Severance Payment, Mr. Wellock is prohibited directly or indirectly
from engaging in any business which is the same as, similar to or in competition
with the business of the Company. In addition,  the amended agreement stipulates
that during  1999 and 2000,  the stock  options  granted for those years will be
75,000 for each year.




                                     -18-
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

Principal Shareholders
     The following table sets forth, as of December 31, 1997,  information  with
respect to the beneficial  ownership of the Company's  directors,  all directors
and executive  officers as a group,  and all persons  believed by the Company to
beneficially own more than 5% of the outstanding Common Stock based upon filings
with the Securities and Exchange Commission.  Unless otherwise  indicated,  such
ownership is believed to be direct, with sole voting and investment power.

Name and Address                            Shares Owned
of Outstanding                              Beneficially              Percentage
Beneficial Owner                            and of Record             of Shares

Theodore A. Schwartz                        415,225 (1)                  7.40%

Joseph F. Weiderman                         345,090 (2)                  6.15%

Paul L. Spiese, III                         294,726 (3)                  5.29%

Jacob I. Haft, M.D.                         136,700 (4)                  2.46%

Larry Falcon                                 52,791 (5)                    *

Dr. Irving Kraut                            262,533 (6)                  4.83%

Jay Seid                                     21,500                        *

John Paul Kirwin                                  0                        *

Francis E. Wellock, Jr.                     115,750 (7)                  2.13%

Tandem Capital                              588,235 (8)                  9.89%

Argosy Investment Partners, L.P.            352,941 (8)                  6.18%

All Directors and Executive
Officers as a group (9 persons)           2,585,491                     35.76%

* = less than 1%





                                     -19-
<PAGE>

(1) Includes  1,500 shares of Common Stock  registered to Mr.  Schwartz as joint
tenant with Janice L. Bredt and  options to  purchase  251,250  shares of Common
Stock.

(2)   Includes options to purchase 210,643 shares of Common Stock.

(3)   Includes options to purchase 204,726 shares of Common Stock.

(4)   Includes options to purchase 52,414 shares of Common Stock.

(5) Consists solely of options to purchase shares of Common Stock.

(6)   Includes options to purchase 70,000 shares of Common Stock.

(7)   Includes options to purchase 85,000 shares of Common Stock.

(8)  Consists  solely  of  shares  of  Series  A  Convertible   Preferred  Stock
convertible into Common Stock

Item 13. Certain Relationships and Related Transactions


     Theodore A. Schwartz, Joseph F. Weiderman and Paul L. Spiese, III

     The Company holds Promissory Notes (the "Notes") made by Messrs.  Schwartz,
Weiderman  and Spiese  totaling  $175,083,  $152,000 and $100,833  respectively,
which bear  interest at a rate of six percent per annum.  The Notes require that
the principal and accrued  interest be paid on or before  November 21, 2001. The
proceeds  of the Notes were used by Messrs.  Schwartz,  Weiderman  and Spiese to
purchase  securities of the Company in the Company's 1993 private placements and
warrant  exercise of 1996.  These securities were purchased on the same terms as
other  investors  in  the  private  placements.  The  largest  aggregate  amount
outstanding  under each of the Notes during the year ended December 31, 1997 was
$175,083,  $152,000  and  $100,833  respectively,  all of  which  are  currently
outstanding.









                                     -20-
<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) The following documents are filed as a part of this report:

1.  Financial  statements - attached at pages F-1 through F-24 are the financial
statements and financial  schedules set forth below,  and which are incorporated
by reference in Item 8:

Berger Holdings, Ltd.

Reports of Independent Auditors on Financial Statements
of Berger Holdings, Ltd. and Subsidiary for 1997, 1996 and 1995             F-1

Consolidated Balance Sheets of Berger Holdings, Ltd.
and Subsidiary as of December 31, 1997 and 1996                             F-2

Consolidated Statements of Operations of Berger
Holdings, Ltd. and Subsidiary for the years ended
December 31, 1997, 1996, and 1995                                           F-4

Consolidated Statements of Stockholders' Equity of
Berger Holdings, Ltd. and Subsidiary for the years
ended December 31, 1997, 1996 and 1995                                      F-5

Consolidated Statements of Cash Flows of Berger Holdings,
Ltd. and Subsidiary for the years ended December 31, 1997,
1996 and 1995                                                               F-6

Notes to Consolidated Financial Statements of Berger
Holdings, Ltd. and Subsidiary                                               F-8













                                     -21-
<PAGE>

                          Independent Auditor's Report


                                                               February 13, 1998

Stockholders and Board of Directors
Berger Holdings, Ltd. and Subsidiary
Feasterville, Pennsylvania


     We have  audited the  accompanying  consolidated  balance  sheets of BERGER
HOLDINGS,  LTD. AND  SUBSIDIARY as of December 31, 1997 and 1996 and the related
consolidated  statements of operations,  of  stockholders'  equity,  and of cash
flows listed under Item 14(a)(2) of the Company's annual report on Form 10-K for
each of the three years in the period ended December 31, 1997.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedules based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the  financial  position of BERGER
HOLDINGS,  LTD. AND SUBSIDIARY as of December 31, 1997 and 1996, and the results
of their operations,  stockholders'  equity and cash flows for each of the three
years in the  period  ended  December  31,  1997 in  conformity  with  generally
accepted accounting principles.


/S/ GOLDENBERG ROSENTHAL FRIEDLANDER
Goldenberg Rosenthal Friedlander


Jenkintown, Pennsylvania

                                     F-1
<PAGE>
<TABLE>
                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS

<CAPTION>
                                                                 December 31

    ASSETS                                                   1997           1996

<S>                                                         <C>              <C>
Current assets
    Cash                                                    $ 4,411,347      $ 1,236,709
    Accounts receivable, net of allowance for doubtful
       accounts of $43,000 in 1997 and 1996                   1,655,327        1,569,741
    Inventories                                               2,652,466        2,133,895
    Prepaid and other current assets                            372,721          153,733
    Deferred income taxes                                       800,000          250,000
                                                            -----------      -----------
    Total current assets                                      9,891,861        5,344,078



 Property and equipment, net                                  6,110,128        6,080,755



 Other assets
    Deferred income taxes                                       700,000          250,000
    Construction in progress, equipment deposits
       and other assets                                         918,304          145,654

 Patents, covenant not to compete agreements,
    and deferred loan acquisition costs, net of
    accumulated amortization of $32,551 in 1997                 608,271              -

 Goodwill, net of accumulated amortization of
    $550,254 in 1997 and $393,530 in 1996                     1,522,649          472,374
                                                            -----------      -----------
                                                            $19,751,213      $12,292,861
                                                            ===========      ===========
</TABLE>

 (continued)


                 See notes to consolidated financial statements
                                     F-2
<PAGE>

<TABLE>
                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS


(continued)
<CAPTION>
                                                                   December 31

   LIABILITIES AND STOCKHOLDERS' EQUITY                       1997            1996 *

<S>                                                       <C>             <C>
Current liabilities
   Current maturities of long-term debt                   $    522,679    $    247,717
   Accounts payable                                            251,093         110,867
   Accrued expenses                                            462,023         557,222
                                                          ------------    ------------
   Total current liabilities                                 1,235,795         915,806

Note payable, bank                                           1,447,675       1,574,456

Long-term debt, net of current maturities                    4,574,472       2,147,263
                                                          ------------    ------------
   Total liabilities                                         7,257,942       4,637,525
                                                          ------------    ------------

Stockholders' equity
   Series A convertible
      preferred stock, $.01 par value
         ($2,500,000 liquidation value)
      Authorized         5,000,000 shares
      Issued and outstanding    25,000  shares                     250           -
   Common stock, $.01 par value
      Authorized        20,000,000 shares
      Issued and outstanding 5,228,973 shares in 1997
                             4,858,150 shares in 1996           52,289          48,581
   Additional paid-in capital                               19,562,462      16,753,862
   Accumulated deficit                                      (6,613,814)     (8,634,191)
                                                          ------------    ------------

                                                            13,001,187       8,168,252
   Less common stock subscribed                               (507,916)       (512,916)
                                                          ------------    ------------

                                                            12,493,271       7,655,336
                                                          ------------    ------------

                                                          $ 19,751,213    $ 12,292,861
                                                          ============    ============
</TABLE>

* Reclassified to conform with the presentation for 1997

                 See notes to consolidated financial statements
                                     F-3
<PAGE>
<TABLE>
                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<CAPTION>
                                          Year Ended December 31

                                   1997              1996             1995

<S>                                         <C>               <C>               <C>
 Net sales                                  $  20,748,017     $  19,745,890     $  15,653,321

 Cost of sales                                 16,196,776        15,587,221        13,738,061
                                            -------------     -------------     -------------
 Gross profit                                   4,551,241         4,158,669         1,915,260
                                            -------------     -------------     -------------
 Selling, administrative and general
    expenses                                    2,963,614         2,389,285         2,225,685
                                            -------------     -------------     -------------


 Income (loss) from operations                  1,587,627         1,769,384          (310,425)
                                            -------------     -------------     -------------

 Other (expense) income
    Interest expense                             (581,624)         (619,178)         (570,420)
    Other income, net                              14,374             4,295            30,984
                                            -------------     -------------     -------------
                                                 (567,250)         (614,883)         (539,436)
                                            -------------     -------------     -------------

 Income (loss) before income taxes              1,020,377         1,154,501          (849,861)

 Provision for income tax benefit               1,000,000           500,000              -
                                            -------------     -------------     -------------

  Net income (loss)                         $   2,020,377     $   1,654,501     $    (849,861)
                                            =============     =============     =============

 Basic earnings (loss) per share                    $0.40             $0.44            ($0.26)
                                            =============     =============     =============
 Dilutued earnings (loss) per share                 $0.31             $0.44            ($0.26)
                                            =============     =============     =============
</TABLE>












                 See notes to consolidated financial statements
                                     F-4
<PAGE>

<TABLE>
                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995



<CAPTION>
                                         Series A Convertible                                                     Common Stock
                                           Preferred Stock          Common Stock                                   Subscribed
                                                                                      Additional
                                            Number                Number               Paid-in     Accumulated  Number
                                           of Shares  Amount     of Shares    Amount   Capital      Deficit    of Shares    Amount

<S>                                          <C>     <C>       <C>          <C>      <C>          <C>          <C>       <C>
Balance, January 1, 1995                         -   $ -        3,191,439   $31,914  $14,778,238  ($9,438,831)  200,000  $200,000

Shares issued in exchange for equipment          -     -          100,000     1,000      111,500       -           -         -

Shares issued in private placements              -     -          240,000     2,400      199,009       -           -         -

Net loss for the year ended December 31, 1995    -     -             -          -           -      (849,861)       -         -
                                             ------  -------   ----------    ------  -----------  ----------   --------  --------

Balance, December 31, 1995                       -     -        3,531,439    35,314   15,088,747 (10,288,692)   200,000   200,000

Debt converted to common shares                  -     -          175,000     1,750      173,250       -           -         -

Warrants exercised at $1.50 per share, net of costs
   associated with raising funds                 -     -          966,250     9,662    1,415,079       -        247,500   371,250

Warrants exercised at $1.00 per share            -     -           52,500       525       51,975       -           -         -

Shares issued in exchange for services           -     -          133,000     1,330       24,870       -           -         -

Shares retired                                   -     -              (39)      -            (59)      -           -         -

Reduction of common stock subscribed             -     -             -          -            -                  (58,334)  (58,334)

Net income for the year ended December 31, 1996  -     -             -          -            -     1,654,501       -         -
                                             ------  -------   ----------    ------  -----------  ----------   --------  --------

Balance, December 31, 1996                       -     -        4,858,150    48,581   16,753,862  (8,634,191)   389,166   512,916

Series A convertible preferred stock         25,000   250            -          -      2,254,123       -           -         -

Common shares issued                             -     -          182,500     1,825      330,363       -           -         -

Warrants exercised at $.90 per share             -     -           70,000       700       62,300       -           -         -

Warrants exercised at $1.00 per share            -     -          110,000     1,100      108,900       -           -         -

Stock based compensation                         -     -             -          -         38,700       -           -         -

Shares issued in connection with employee        -     -            8,500        85       14,790       -           -         -

Shares retired                                   -     -             (177)       (2)        (576)      -           -         -

Reduction of common stock subscribed             -     -             -          -            -         -         (3,333)  (5,000)

Net income for the year ended December 31, 1997  -     -             -          -            -     2,020,377       -         -
                                             ------  -------   ----------    ------  -----------  ----------   --------  --------

Balance, December 31, 1997                   25,000  $250       5,228,973   $52,289  $19,562,462 ($6,613,814)   385,833  $507,916
                                             ======  =======   ==========    ======  ===========  ==========   ========  ========
</TABLE>




                 See notes to consolidated financial statements
                                     F-5
<PAGE>

<TABLE>
                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>
                                                                   Year Ended December 31

                                                                1997           1996             1995

<S>                                                       <C>              <C>           <C>
 Cash flows from operating activities
    Net income (loss)                                     $  2,020,377     $ 1,654,501   $    (849,861)
                                                          ------------     -----------   -------------
    Adjustments to reconcile net income (loss)
       to net cash provided by (used in)
       operating activities
          Deferred income tax                              (1,000,000)        (500,000)           -
          Depreciation and amortization                       847,189          732,066         719,245
          (Increase) decrease in assets
             Accounts receivable                                5,577         (348,676)         18,366
             Inventories                                     (459,116)        (540,253)        288,254
             Other current and long-term
                assets                                     (1,923,971)        (149,019)       (126,915)
          Increase (decrease) in accounts
             payable and accrued expenses                      45,027         (827,997)        416,118
                                                          ------------     -----------   -------------

    Total adjustments                                      (2,485,294)      (1,633,879)      1,315,068
                                                          ------------     -----------   -------------

    Net cash provided by (used in) operating
       activities                                            (464,917)          20,622         465,207
                                                          ------------     -----------   -------------

 Cash flows from investing activities
    Payment for purchase of Real-Tool Inc.                   (900,618)            -               -
    Acquisition of property and equipment,
       net of retirements                                    (652,715)        (444,706)       (226,986)
                                                          ------------     -----------   -------------

    Net cash used in investing activities                  (1,553,333)        (444,706)       (226,986)
                                                          ------------     -----------   -------------

 Cash flows from financing activities
    Net proceeds (repayments) from
       working capital line                                  (126,781)         209,297            -
    Proceeds from issuance of convertible                        -             175,000            -
    Proceeds from long-term debt                            4,050,000             -               -
    Loan and mortgage repayments                           (1,347,889)         (85,402)       (347,589)
    Gross proceeds from issuance of stock,
       private placements, stock warrants
       and stock options                                    2,820,370        1,264,696         239,000
    Costs of raising capital                                 (202,812)         (74,230)        (37,591)
                                                          ------------     -----------   -------------

    Net cash provided by (used in)
       financing activities                                 5,192,888        1,489,361        (146,180)
                                                          ------------     -----------   -------------

 Net increase in cash                                       3,174,638        1,065,277          92,041

 Cash, beginning of year                                    1,236,709          171,432          79,391
                                                          ------------     -----------   -------------

 Cash, end of year                                        $ 4,411,347      $ 1,236,709   $     171,432
                                                          ============     ===========   =============
</TABLE>





                 See notes to consolidated financial statements
                                     F-6
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

 (continued)
                                               Year Ended December 31

                                            1997            1996      1995
 SUPPLEMENTAL DISCLOSURE OF CASH
    FLOW INFORMATION

       Cash paid during the year for int   582,000         619,000   570,000



 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
    AND FINANCING ACTIVITIES

The Company  purchased all of the Common stock of Real Tool Inc for  $1,667,395.
In conjunction with this purchase the following was recorded:

          Cash paid for assets                             900,618
          Note payable for acquisition                     750,000
          Common Stock issued                              200,000
                                                       -----------
                                                       $ 1,850,618
          Less: fair value of assets acquired
             Inventory                                     (91,163)
             Accounts receivable                           (59,455)
             Equipment                                     (32,605)
                                                       -----------
                                                       $ 1,667,395
                                                       ===========



       In 1996, the Company entered into capital leases aggregating $91,657.


       In 1996, the Company applied $455,388 of deposits to equipment.


       In 1995,  the Company  issued  100,000  shares of common  stock valued at
          $112,500 as a partial payment on an equipment deposit.














                 See notes to consolidated financial statements
                                     F-7
<PAGE>


                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     1. BUSINESS ORGANIZATION

     Berger Holdings,  Ltd.  ("Company") was incorporated in the Commonwealth of
Pennsylvania on August 28, 1979.

     The  Company  operates  from  a  manufacturing  facility  in  Feasterville,
Pennsylvania. The Company produces aluminum, galvanized and copper roof drainage
and solid vinyl home siding products. The roof metal drainage products represent
over 95% of the Company's  revenues.  Berger sells to wholesale building product
distributors  throughout the United States,  its territories and Canada,  but is
specifically  concentrated  in the  Northeast  corridor.  The Company  routinely
grants credit to these distributors.

     2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

           Principles of Consolidation

     The  financial  statements  include  the  accounts  of the  Company and its
wholly-owned  subsidiary,  Berger Financial  Corporation (a Delaware corporation
formed in 1994) and Berger  Financial's  wholly-owned  subsidiary,  Berger  Bros
Company, a Pennsylvania  corporation.  All significant intercompany transactions
and balances have been eliminated.

           Property and Equipment and Depreciation and Amortization

     Property  and  equipment  are  stated  at  cost.  For  financial  reporting
purposes,  depreciation  is  computed  on  the  straight-line  method  over  the
estimated useful lives of the assets.  For income tax purposes,  depreciation is
computed using accelerated methods.

     Maintenance  and repair  costs,  which do not improve or extend the life of
the  respective  assets,  are  charged  to  operations  as  incurred.  Leasehold
improvements are amortized over the shorter of the lease term or useful life.

     When an asset is sold,  retired,  or otherwise disposed of, the cost of the
property and the related accumulated depreciation is removed from the respective
accounts and any resulting gains or losses are included in income.

           Revenue Recognition

     The Company records revenues on its products when goods are shipped.

           Goodwill

     Goodwill is  amortized  using the  straight-line  method over 10-14  years.
Goodwill charged to operations was $156,724 in 1997 and $78,800 in both 1996 and
1995.
                                     F-8
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Earnings (Loss) Per Share

     In February  1997,  Statement of  Financial  Accounting  Standards  No. 128
"Earnings per Share" was issued.  This  pronouncement is effective for financial
statements issued after December 15, 1997. This statement requires  presentation
of "Basic" earnings per share, which is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding,
and when  applicable,  "Diluted"  earnings  per share which gives  effect to all
dilutive (both vested and non-vested), potential common shares.

     Basic and diluted earnings (loss) per share for the years 1995 through 1997
are as follows:
<TABLE>
<CAPTION>
                                         1997                   1996                   1995
                                    -----------------      -----------------      -----------------

<S>                                   <C>                    <C>                   <C>
  Basic earnings (loss) per share
    Income (loss) available to
        common stockholders           $2,020,377             $1,654,501            (  $  849,861 )
                                    -----------------      -----------------      -----------------

    Weighted average common
      shares outstanding               5,057,828              3,720,149                3,326,412
                                    -----------------      -----------------      -----------------

  Basic earnings (loss) per share     $     0.40             $     0.44            ( $      0.26 )
                                    =================      =================      =================

  Diluted earnings (loss) per share
     Weighted average common
        shares outstanding             5,057,828              3,720,149                3,326,412

     Add:  effect of vested and
   non-vested dilutive securities      1,500,498                   -                        -
     Add:  effect of convertible
        preferred shares                   1,612                   -                        -
                                     -----------------      ----------------      ----------------
                                       6,559,937              3,720,149                3,326,412
                                    ==================      ================      ================

  Diluted earnings (loss) per share   $     0.31             $     0.44            ( $      0.26 )
                                    ==================      ================      ================
</TABLE>

     Stock equivalents which were exercisable at prices greater than the average
market price of the common  shares  during the year have been  excluded from the
computation  since the effect would be  anti-dilutive.  As of December 31, 1997,
there were 115,000 options meeting this criterion.

                                     F-9
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

           Management's Judgments and Accounting Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

     3. INVENTORIES

     Inventories  are valued at the lower of cost or market.  Cost is determined
using the first-in, first-out method ("FIFO").

     As of December 31, 1997 and 1996, inventories consist of the following:

                                           1997                 1996
                                     ---------------      ----------------

  Raw materials                         $1,422,501            $1,291,490
  Finished goods                         1,215,959               816,719
  Packaging materials and supplies          60,006                71,686
  Less provision for obsolescence   (       46,000 )     (        46,000 )
                                     ---------------      ----------------

                                        $2,652,466            $2,133,895
                                     ===============      ================


     4. PROPERTY AND EQUIPMENT

     As of December 31, 1997 and 1996,  property and  equipment  consists of the
following:

                                           1997                   1996
                                     -----------------      -----------------

  Land                               $     485,000           $    485,000
  Building                               3,842,865              3,842,865
                                     -----------------      -----------------

  Subtotal (carried forward)             4,327,865              4,327,865
                                     -----------------      -----------------







                                      F-10
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     4. PROPERTY AND EQUIPMENT

                                           1997                   1996
                                     -----------------      -----------------

  Subtotal (brought forward)               4,327,865              4,327,865

  Machinery                                5,295,593              5,058,444
  Furniture and fixtures                     503,011                442,107
  Trucks and autos                           567,477                482,462
  Dies                                       631,366                517,101
  Leasehold improvements                     881,571                744,596
                                     -----------------      -----------------
                                          12,206,883             11,572,575
  Less accumulated depreciation
      and amortization                     6,096,755              5,491,820
                                     -----------------      -----------------

                                         $ 6,110,128           $  6,080,755
                                     =================      =================

     Depreciation  expense for the years ended December 31, 1997,  1996 and 1995
was $690,786, $653,266 and $640,445, respectively.

     Total cost of machinery  under capital leases included above as of December
31, 1997 and 1996 was $ 177,283 and $243,493, respectively.

     5. OTHER ASSETS

     As of December 31, 1997 and 1996, other assets consist of the following:

                                             1997                   1996
                                        -------------         --------------

Construction in progress                    $500,000                  -
Equipment deposit                            405,093               $109,711
Other assets                                  13,211                 35,943
                                        -------------         --------------

                                            $918,304               $145,654
                                        =============         ==============










                                     F-11
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     6. LONG-TERM DEBT

     As of  December  31,  1997  and  1996,  long-term  debt  consisted  of  the
following:

<TABLE>
<CAPTION>
                                                                          1997                 1996
                                                                     ---------------      ----------------

<S>                                                                     <C>                 <C>
  Term loan, payable in 36 monthly installments of $21,667
        plus  interest at prime plus 1% (prime was 8.5% as of December 31, 1997)
        through  September  2000,  and a balloon  payment  of $  520,000  due in
        October, 2000. This loan is collateralized by machinery and
        equipment.
                                                                        $1,213,332          $
                                                                                                   -

  12.25%subordinated  debenture  , due  January  2,  2003,  interest  is payable
        quarterly commencing February 1, 1998 through maturity (see Note 16)
                                                                         2,000,000                 -

  Note payable in connection with acquisition of Real Tool,
        Inc. product line.  Due in quarterly installments of
        $187,500 plus interest at 5.69% through January 1998
        (see Note 14)                                                      187,500                 -

  Mortgage note  payable,  principal  and  interest  due in monthly  payments of
        approximately  $17,400 through May, 2016 with a call date any time after
        April 23,  2001 upon 60 days  prior  notice.  Interest  is based on U.S.
        Treasury  Bill rates and adjusted  every 5 years.  The current  interest
        rate is 10.2%.
                                                                         1,612,218             1,659,046

  Notes payable and capital leases, due in monthly installments of approximately
        $4,000,  including  interest,  ranging from 7.25% to 11.0% through 2000;
        collateralized by certain equipment.
                                                                            84,101                90,339

  Notes repaid in current period (See Note 7)                                  -                 645,595
                                                                     ---------------      ----------------

                                                                         5,097,151             2,394,980

  Less current maturities                                                  522,679               247,717
                                                                     ---------------      ----------------

                                                                        $4,574,472            $2,147,263
                                                                     ===============      ================
</TABLE>

                                     F-12
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




6. LONG-TERM DEBT (continued)

     Scheduled  annual  maturities of long-term debt as of December 31, 1997 are
as follows:

          Year Ending December 31

                    1998                              $   522,679
                    1999                                  338,110
                    2000                                  776,950
                    2001                                   66,939
                    2002                                   66,000
                 Thereafter                             3,326,473
                                                   ----------------

                                                       $5,097,151
                                                   ================


     7. NOTE PAYABLE, BANK

     The Company has available a $3,500,000 revolving line-of-credit expiring in
August,  2000.  This line is  secured  by  accounts  receivable,  inventory  and
property and equipment.  Interest is based on prime plus 1/2%.  Borrowings under
this  facility  are  based  on  a  formula   defined  in  the  agreement.   This
line-of-credit  is  subject  to certain  financial  covenants  as defined in the
agreement. As of December 31, 1997, $1,447,675 was outstanding on this loan.

     In 1996 the Company has a term loan  working  capital  line with  available
credit  aggregating  $3,500,000.  This  line-of-credit was repaid in full during
1997. For financial statement purposes this line was classified as follows as of
December 31, 1996:

  Note payable, bank                       $1,574,456
  Term note (see Note 6)                      645,595
                                       ----------------

                                           $2,220,051
                                       ================











                                     F-13
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     8. ACCRUED EXPENSES

     As of  December  31,  1997  and  1996,  accrued  expenses  consist  of  the
following:

<TABLE>
<CAPTION>
                                                                       1997                1996
                                                                   --------------      -------------

<S>                                                                   <C>                 <C>
  Payroll and related expenses                                        $  89,702           $122,685
  Volume rebates                                                        329,518            270,988
  Insurance, real estate taxes, freight and miscellaneous
                                                                         19,803            136,736
  Professional fees                                                      23,000             26,813
                                                                   --------------      -------------

  Total accrued expenses                                               $462,023           $557,222
                                                                   ==============      =============
</TABLE>


     9. INCOME TAXES

     The  Company  accounts  for the  recognition  of  deferred  tax  assets and
liabilities  based on the expected  future tax  consequences of events that have
been  included  in the  financial  statements  or  tax  returns.  The  provision
(benefit) for (from)  deferred  income taxes results from temporary  differences
which  consist of  different  tax bases for assets  and  liabilities  than their
reported  amounts  in the  financial  statements.  Such  differences  result  in
recognition  of income  or  expense  in  different  years for tax and  financial
statement purposes.  The sources of these differences and the tax effect of each
as of December 31, 1997, 1996 and 1995 were as follows:

<TABLE>
<CAPTION>
                                                        1997                1996                1995
                                                   ----------------    ---------------     ---------------

<S>                                               <C>                 <C>                 <C>
  Inventory reserves                                  $    18,400        $    18,400         $    24,000
  Net operating loss carryforwards                      2,004,000          2,390,000           2,400,000
  Depreciation                                    (       125,000 )   (      135,000 )    (      120,000 )
                                                   ----------------    ---------------     ---------------

      Subtotal                                          1,897,400          2,273,400           2,304,000
  Valuation allowance                             (       397,400 )   (    1,773,400 )    (    2,304,000 )
                                                   ----------------    ---------------     ---------------

      Total net deferred tax asset                     $1,500,000        $   500,000       $        -
                                                   ================    ===============     ===============
</TABLE>












                                     F-14
<PAGE>

                                       BERGER HOLDINGS, LTD. AND SUBSIDIARY
                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     9. INCOME TAXES (continued)

     The valuation allowance  decreased by $1,376,000,  $530,600 and $-0- during
the years ended  December 31, 1997,  1996 and 1995,  respectively.  The 1996 and
1995 gross amounts have been changed to reflect  revised  information  regarding
the  availability  of net operating loss carry  forwards.  These changes did not
affect the net balances reported.  The net deferred asset has been recognized on
the balance sheet as follows:

                                         December 31
                            --------------------------------------
                                   1997                 1996
                            ------------------      --------------

  Current portion              $   800,000            $250,000
  Noncurrent portion               700,000             250,000
                            ------------------      --------------

                                $1,500,000            $500,000
                            ==================      ==============

     As of December 31, 1997, the Company had  carryforward net operating losses
of approximately $5,000,000,  expiring through 2010. In addition, investment tax
credits of  approximately  $5,000 are available to apply  against  future income
taxes, if any, and expire in 2000.

     Provision for income taxes for 1997 and 1996 were as follows:

                                                     1997              1996
                                               ---------------   ---------------

  Current, federal and state at statutory rates  $   376,000        $   500,000
  Deferred, reduction of valuation allowance    (  1,376,000 )   (    1,000,000)
                                               ---------------   ---------------

  Deferred tax benefit                            $1,000,000         $  500,000
                                               ===============   ===============

     No provision  for federal or state income  taxes was  recognized  for 1995.
Certain gains which were recognized as a result of the Company's  emergence from
bankruptcy  are not  considered  taxable  income  for  either  federal  or state
purposes.  Additionally,  gains recognized from exchanging debt for common stock
are not considered taxable income.  However, these gains reduce prior years' net
operating loss carryforwards.




                                     F-15
<PAGE>


                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     10. STOCK OPTIONS

     Under various plans, the Company may grant stock options to key executives,
directors,  management personnel, other employees and consultants.  Transactions
under the various stock option plans for the period indicated were as follows:


<TABLE>
<CAPTION>
                                                    1997                  1996                 1995
                                                ---------------      ----------------      ---------------

<S>                                            <C>                  <C>                    <C>
   Outstanding as of beginning of
      year                                          2,261,998             1,205,167              515,167

   Options granted                                    195,750             1,065,000              690,000

   Options exercised or canceled               (        8,500 )     (         8,169 )               -
                                                ---------------      ----------------      ---------------

   Outstanding as of December 31                    2,449,248             2,261,998            1,205,167
                                                ===============      ================      ===============

   Exercisable as of December 31                    1,179,248               736,998              505,167
                                                ===============      ================      ===============
</TABLE>


     The following table summarizes  information about stock options outstanding
as of December 31, 1997:

<TABLE>
<CAPTION>
                                          Weighted
                                           Average
                        Number            Remaining         Weighted                             Weighted
   Range of               Of              Years of           Average            Number            Average
   Exercise             Options          Contractual        Exercise          Of Options         Exercise
     Price            Outstanding           Life              Price           Exercisable          Price
-----------------   -----------------  -----------------  ---------------   -----------------  ---------------

<S>                       <C>                     <C>             <C>             <C>                  <C>
    $1.00-$1.99           2,259,248               8.91            $1.55           1,029,248            $1.51
    $3.00-$3.99             160,000               7.13            $3.58             120,000            $3.60
    $4.00-$4.55              30,000               5.00            $4.55              30,000            $4.55
                    -----------------                                       -----------------

                          2,449,248                                               1,179,248
                    =================                                       =================
</TABLE>





                                     F-16
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     10. STOCK OPTIONS (continued)

     In October 1995, the Financial  Accounting Standards Board issued SFAS 123,
"Accounting  for Stock-Based  Compensation"  ("SFAS No. 123") which is effective
for the  Company in 1996.  As  permitted  under SFAS No.  123,  the  Company has
elected  not to  adopt  the  fair  value  based  method  of  accounting  for its
stock-based  compensation  plans.  The Company will continue to account for such
compensation under the provisions of Accounting Principles Board Opinion No. 25.
Had  compensation  cost for the Company's  stock-based  compensation  plans been
determined based on the fair value at the grant dates for awards granted in 1997
and 1996 consistent with SFAS No. 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                      1997              1996
                                                                 ----------------  ----------------

<S>                                           <C>                  <C>               <C>
  Net income                                  As reported            $2,020,377        $1,654,501
                                              Pro forma              $1,792,942        $1,564,510

  Basic earnings per share                    As reported          $        .40      $        .44
                                              Pro forma            $        .35      $        .42

  Diluted earnings per share                  As reported          $        .31      $        .44
                                              Pro forma            $        .27      $        .42
</TABLE>

     The fair value of the options  granted in 1997 and 1996 used to compute pro
forma net income and earnings per share  disclosures  is the  estimated  present
value at the grant date using the  Black-Scholes  option  pricing model with the
following weighted average  assumptions:  dividend yield 0%; expected volatility
of 29% in 1997 and 83% in 1996; risk free interest rate of 6.2% in 1997 and 6.5%
in 1996;  it is expected  that the options  will be exercised  immediately  upon
vesting.

     11. CAPITAL STOCK AND WARRANTS

     In December,  1997 the Company issued 25,000 shares of Series A Convertible
Preferred  Stock  for  $100  per  share.  These  shares  have a $100  per  share
liquidating preference.  Each share is convertible at any time into 23.53 common
shares. Dividends on the preferred shares are cumulative, provided at $10.00 per
share per annum and payable  quarterly  commencing  March 31, 1998. On the fifth
anniversary of the original  issue of the preferred  shares the dividend rate is
scheduled to increase to $20.00 per share.

     The shares are  redeemable at the Company's  option from January 2, 2000 to
January 2, 2003,  if the  Company's  common  stock's  average sale price exceeds
$9.00 per share over a period specified in the agreement.  Subsequent to January
2, 2003 the  preferred  shares  are  redeemable  at the  Company's  option.  The
redemption price is $105 per share.
                                     F-17
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     11. CAPITAL STOCK AND WARRANTS (continued)

     In connection  with the  acquisition of Real Tool,  Inc. the Company issued
100,000 shares of common stock.

     In connection  with the funding of the acquisition of certain product lines
of Benjamin  Obdkye,  Inc. (see Note 16), among other uses an additional  15,000
shares of Series A Preferred Stock were issued in 1998.

     In  1997  and  1996,  the  Company   issued  82,500  and  133,000   shares,
respectively of common stock in exchange for consulting services.  Additionally,
in 1996 the Company issued  convertible  debt  aggregating  $175,000,  which was
converted into 175,000 shares of common stock.

     The  following   summarizes   shares  issued  in  connection  with  private
placements during 1995:

<TABLE>
<CAPTION>
                                                     Number                Capital             Shares
                    Date                            Of Units               Raised              Issued
---------------------------------------------   -----------------      ----------------      ------------

<S>                                                   <C>       <C>        <C>                  <C>
  October, 1995                                       240       (a)        $  239,000           240,000

<FN>
     (a) In connection with the placement of these units,  the placement  agents
     were granted  warrants to purchase up to 112,500  shares at $1.00 per share
     (effective August, 1995) which were exercised prior in December, 1997.
</FN>
</TABLE>

     As of December 31, 1997,  total  outstanding  warrants  were  375,000.  The
exercise  price of these  warrants  ranged  from  $1.00 to $2.00  and  expire at
various dates through 1999.

     Stock warrant transactions are summarized as follows:

                                                                  Stock
                                                                Warrants
                                                              ---------------

  Outstanding, January 1, 1996                                    1,174,317

      Issued                                                        495,000
      Exercised                                              (    1,018,750 )
      Forfeited                                              (       95,567 )
                                                              ---------------

  Outstanding, December 31, 1996                                    555,000

      Exercised                                              (      180,000 )
                                                              ---------------

  Outstanding, December 31, 1997                                    375,000
                                                              ===============

                                     F-18
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     11. CAPITAL STOCK AND WARRANTS (continued)

     During 1996, $58,334 due from officers for stock subscribed,  relating to a
1993 private placement,  were forgiven. The balance due on certain subscriptions
of $116,666  can be forgiven at the  discretion  of the Board of Directors or if
during  the  period  1998  through  1999,  operating  earnings  goals are met as
follows:

     1) If per  share  operating  earnings  are at least  110% of 1996 per share
operating earnings, $58,333 will be forgiven or,

     2) If per  share  operating  earnings  are at least  120% of 1996 per share
operating earnings, the entire balance will be forgiven.

     There was no forgiveness in 1997 for these subscriptions.

     12. COMMITMENTS AND CONTINGENCIES

     The Company leases certain real property and equipment under noncancellable
operating leases. Under certain leasing arrangements,  the Company pays property
taxes, insurance and maintenance related to the leased property.

     Rent  expense  for the years ended  December  31,  1997,  1996 and 1995 was
$185,000, $106,000 and $103,000, respectively.

     As of December  31,  1997,  minimum  rental  commitments  under  long-term,
noncancellable operating leases are as follows:

      Year Ending December 31

                 1998                         $  560,000
                 1999                            522,000
                 2000                            519,000
                 2001                            518,000
                 2002                            506,000
              Thereafter                          66,000
                                           ---------------

                                              $2,691,000
                                           ===============

     The Company's  current  involvement  in legal  proceedings  are those which
arise in the ordinary  course of  business.  In the opinion of  management,  the
outcome  of these  matters  will  not  have a  material  adverse  effect  on the
financial position of the Company.



                                     F-19
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     12. COMMITMENTS AND CONTINGENCIES (continued)

     The  Company  participates  in  a  multi-employer   pension  plan  covering
substantially  all of its union employees.  The union employees  comprise 67% of
the Company's  workforce which are represented by two unions.  The Company makes
monthly payments as required into the multi-employer  plan trust established for
union employees.  Under the Employee  Retirement Income Security Act of 1974, as
amended by the  Multi-Employer  Pension Plan Amendments Act of 1980, an employer
is liable  for a  proportionate  part of the  plan's  unfunded  vested  benefits
liability.  The Company's share of the unfunded  liability  related to Local 107
Multi-Employer  Pension  Plan,  is  $58,000.  Local 169  unfunded  liability  is
unknown.

     The Company's union agreements expire in December 2001.

     The Company has entered into an agreement through December 31, 1997, with a
shareholder to provide management support,  strategic planning and assistance in
raising capital.  Under the terms of the agreement,  the Company provided 75,000
unregistered  shares,  in 1996,  and paid this  consultant  $75,000 in 1995. The
Company  revised this  contract,  effective  January 1, 1997.  Under the revised
contract,  the Company  issued  37,500 shares of common stock in 1997 to satisfy
obligations under this contract.

     During 1997,  the Company  entered into an  agreement  with First  Colonial
Securities Group,  Inc.  ("FCSG") to provide corporate  financing and investment
banking services. In connection with this agreement the Company granted to FCSG,
100,000  common stock options  exercisable  at prices ranging from $3.25 - $4.55
per share.  In accordance  with SFAS 123 (See Note 10),  compensation of $38,700
was recognized in 1997, which was charged to additional paid in capital.

     The Company is currently expanding its facility. The total cost anticipated
on this expansion  including  furniture is $1,400,000.  As of December 31, 1997,
approximately $580,000 of deposits were made towards this expansion.

     During  1996,  the  Company  entered  into an  agreement  with  Focus  Tech
Investments, Inc. ("FTI") to provide financial public relations services through
March 31,  1997.  In  exchange  for these  services  the Company  issued  58,000
unregistered  shares of common stock in 1996 and 18,000  unregistered  shares of
common stock in 1997.










                                     F-20
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     13. CONCENTRATION OF CREDIT RISK ARISING FROM CASH DEPOSITS

     The Company maintains cash balances at a financial  institution  located in
the Delaware  Valley area.  The accounts at the  institution  are insured by the
Federal  Deposit  Insurance  Corporation  up to $100,000.  During the year,  the
Company's cash balances periodically exceed the insured limit.

     14. ACQUISITION

     On February 7, 1997,  the Company  purchased a 100%  interest in Real-Tool,
Inc., a Virginia Corporation. Consideration for this acquisition was as follows:

  Cash                                                             $  900,618
  Note payable (see Note 6)                                           750,000
  Common stock (100,000 shares @$2.00 per share)                      200,000
                                                   ----------------------------
                                                                    1,850,618

  Less:  identifiable tangible assets            (                    183,223 )
                                                 ------------------------------

  Intangible assets acquired                                        1,667,395
                                                 ==============================

  The intangible assets acquired have been recorded as follows:
           Non-compete rights                                      $  100,000
           Patents                                                    360,395
           Goodwill                                                 1,207,000
                                                 ------------------------------

                                                                  $ 1,667,395
                                                 ==============================

     Amortization of these assets is provided on the  straight-line  method over
the remaining life of the patent of 14 years.

     Concurrent with the purchase,  the Company entered into a royalty agreement
with the sole shareholder of Real-Tool, Inc. Under this agreement, which expires
in 2012,  the  Company is  required to pay  royalties  of 6% of revenues  with a
minimum of $75,000 annually, through 2002.

     Subsequent  to 2002,  the  Company  has the option to either  increase  the
percentage  of  royalties  paid to this  individual  and  eliminate  the minimum
payment requirement, or continue this contract in its current form.


                                     F-21
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     15. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following  methods and assumptions were used to estimate the fair value
of each class of financial  instruments  for which it is practicable to estimate
that value.

     Accounts Receivable and Accounts Payable

     The carrying amount  approximates  fair value because of the short maturity
of those instruments.

     Long-Term Debt

     The fair value of the Company's  long-term  debt is estimated  based on the
current  rates  available  to  the  Company  for  debt  of  the  same  remaining
maturities.  As  of  December  31,  1997,  the  carrying  value  of  this  debt,
aggregating $6,544,000 approximates the fair value.

     16. SUBSEQUENT EVENTS

     In January  1998,  the Company  acquired  the roof  drainage  manufacturing
segment of Benjamin Obdkye,  Inc.  Consideration  for the purchase  included the
following:

  Cash                                                        $10,000,000
  Note payable                                              $     879,000
  Common stock                                            125,000  shares

     In connection with the  Acquisition,  the Company agreed to repurchase,  at
the option of Benjamin Obdyke,  Inc., all of the Common Stock issued to Benjamin
Obdyke, Inc. with regard to the acquisition. Such option is exercisable upon the
second anniversary of the acquisition.

     The Company also issued 50,000 common stock warrants which are  exercisable
at any time until  December 31, 1999.  The exercise  price of these  warrants is
$4.17.

     In order to fund this  acquisition,  and provide  funds for other  coporate
puposes, the Company has completed the following transactions:

     Increased credit facility with current bank by $4,160,000

     Issued 40,000 shares of Series A  Convertible  Preferred  Stock at $100 per
share (Of this amount 25,000 shares were issued in December 1997 [See Note 11]).
These shares have a $100 per share liquidating preference.

                                     F-22
<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     16. SUBSEQUENT EVENTS (continued)

     Issued 2,500,000 of 12.25% debentures,  due January 2003 ($2,000,000 issued
prior to December 31, 1997 [See Note 6]). This debt is  subordinated to the bank
loan.

     Both the preferred  stock and debentures  were issued to Tandem Capital and
Argosy Investment  Partners.  L.P.. As a further  inducement to obtain financing
from Tandem  Capital and Argosy  Investment  Partners,  L.P. the Company  issued
300,000 common stock warrants,  exercisable at $4.25 per share expiring  January
2, 2003.

     17. ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT YET EFFECTIVE

     As of December 31, 1997,  there were no accounting  pronouncements  issued,
but not yet  effective  which  would  have a  material  effect on the  financial
statements of the Company.





























                                     F-23
<PAGE>

2.  Financial  statement  schedules  -  The  following   consolidated  financial
statement schedules are included herein:

Schedule IX --Consolidated Short-Term Borrowings

All other  schedules for which  provision is made in the  applicable  accounting
regulations of the Securities and Exchange Commission are not required under the
related  instructions  or are included in the financial  statements or the notes
thereto and therefore have been omitted.

3.  Exhibits

<TABLE>
<CAPTION>
Exhibit
Number            Title                                       Method of Filing

<S>               <C>                                <C>
2(a)              Debtor's Third Amended             Incorporated by reference to Exhibit
                  Joint Plan of                      1 of the Company's Current Report on
                  Reorganization                     Form 8-K filed on March 31, 1993 (the
                                                     "March 1993 8-K")

2(b)              Third Amended Disclosure           Incorporated by reference to Exhibit
                  Statement for Debtor's             2 of the March 1993 8-K
                  Amended Joint Plan of
                  Reorganization

2(c)              Settlement Agreement by            Incorporated by reference to Exhibit
                  and between the Registrant         4 of the March 1993 8-K
                  and Meridian Bank

3(a)              Articles of Incorporation          Incorporated by Reference to
                  and Bylaws                         Exhibit 3 of the Registration
                  Bylaws                             Statement on Form S-18 filed February
                                                     15, 1983 (File No. 2-81851-W) (the
                                                     "1983 Registration Statement")

3(b)              Articles of Amendment              Incorporated by reference to
                  dated November 29                  Exhibit 3(b) of the Annual
                                                     Report on Form 10-K for the
                                                     year  ended   December  31,
                                                     1989 (the "1989 Form 10-K")

3(c)              Articles of Amendment              Incorporated by reference to
                  effective July 30, 1990            Exhibit 3(c) to Amendment No. 1
                                                     to the Registration Statement on Form S-1
                                                     filed on October 15, 1990 ("Pre-Effective
                                                     Amendment No. 1") (33-35898)
</TABLE>

                                     -22-
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number            Title                                       Method of Filing

<S>               <C>                                <C>
3(d)              Amended and Restated               Incorporated by reference to Exhibit 3(d)
                  By laws                            of the Registration Statement on Form S-1
                                                     filed June 16, 1993 (the "1993 Form S-1")
                                                     (33-64468)

3(e)              Articles of Amendment              Incorporated by reference to Exhibit 3(e)
                  dated July 22, 1993                of the Annual Report on Form 10-K for the
                                                     year ended December 31, 1993 (the "1993
                                                     Form 10-K")

3(f)              Articles of Amendment              Filed herewith
                  dated December 29, 1997

4(a)              Form of 1993                       Incorporated by reference to Exhibit 4(g)
                  Private Placement                  of the 1993 Form S-1

4(b)              Form of Consulting                 Incorporated by reference to Exhibit 4(h)
                  Warrant by and between             of the 1993 Form S-1
                  the Company and Universal
                  Solutions, Inc.

4(c)              Form of 1993                       Incorporated by reference to Exhibit 4.9
                  Private Placement Warrant          of the Registration Statement on Form S-3
                  No. 2                              filed January 21, 1994 (the "Form S-3")
                                                     (33-82152)

4(d)              Form of Consulting                 Incorporated by reference to Exhibit 4.10
                  Warrant                            of the Form S-3

10(a)             Lease Agreement                    Incorporated by reference to Exhibit 10(i)
                  between Berger Bros.               of the 1989 Form 10-K
                  Company and Feasterville
                  Associates dated May 30, 1989
</TABLE>




                                     -23-
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number            Title                                       Method of Filing

<S>               <C>                                <C>
10(b)             Addendum to Lease                  Incorporated by reference to
                  Agreement between                  Exhibit 10(j) of the 1989
                  Berger Bros. Company               Form 10-K
                  and Feasterville
                  Associates dated
                  May 30, 1989

10(c)             Cobra Ridge Vent                   Incorporated by reference to
                  Sale Agreement                     Exhibit 10(r) of the Annual Report on
                                                     Form 10-K for the year ended December 31,
                                                     1993

10(d)             Employment Agreement               Filed Herewith
                  between Berger Holdings,
                  Ltd. and Theodore
                  A. Schwartz

10(e)             Employment Agreement               Filed Herewith
                  between Berger Holdings,
                  Ltd. and Joseph
                  F. Weiderman

10(f)             Employment Agreement               Filed Herewith
                  between Berger Holdings,
                  Ltd. and Paul L. Spiese, III

10(g)             Stock Purchase Agreement,          Incorporated by Reference to Exhibit 2.1 of
                  dated as of February 7, 1997,      the Company's Report on Form 8-K filed
                  by and between Berger Holdings,    on February 20, 1997 (the "February 1997
                  Ltd. and Roger M. Cline            8-K")

10(h)             Amendment to Stock Purchase        Incorporated by Reference to Exhibit 2.2 of
                  Agreement, dated as of February    of the February 1997 8-K
                  7, 1997, by and between Berger
                  Holdings, Ltd. and Roger M.
                  Cline

10(i)             Asset Purchase Agreement           Incorporated by reference to Exhibit 2.1 of
                  dated as of December 3,            Company's Report on Form 8-K filed on
                  1997, by and among the             January 20, 1998, as amended (the "January
                  Registrant, Obdyke and the         1998 Form 8-K")
                  Shareholders of Obdyke
</TABLE>
                                     -24-
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number            Title                                       Method of Filing

<S>               <C>                                <C>
10(j)             Preferred Stock Purchase           Incorporated by reference to Exhibit 2.2 to
                  Agreement, dated as of             the January 1998 Form 8-K
                  December 17, 1997, by
                  and among the Registrant,
                  Tandem and Argosy

10(k)             Debenture Purchase                 Incorporated by reference to Exhibit 2.3 to
                  Agreement, dated as of             the January 1998 Form 8-K
                  December 17, 1997, by
                  and among the Registrant,
                  Tandem and Argosy

10(l)             Amended and Restated Loan          Incorporated by reference to the Exhibit 2.4 to
                  and Security Agreement, dated      the January 1998 Form 8-K
                  as of January 2, 1998, by
                  and among Berger Financial
                  Corp., a Delaware corporation,
                  Berger Bros. Company, a
                  Pennsylvania corporation and
                  Summit

21                Subsidiaries of the                Incorporated by reference to
                  Company                            Exhibit 22 to the 1989 Form 10-K

23                Consent of Independent             Filed Herewith
                  Accountants

27                Financial Data Schedule            Filed Herewith (EDGAR version only)
</TABLE>


          All other  exhibits  for  which  provision  is made in the  applicable
     regulations  of the  Securities  and Exchange  Commission  are not required
     under the related  instructions or are inapplicable and therefore have been
     omitted. (b) Reports on Form 8K:

          No Reports on Form 8K were filed  during the last  quarter  covered by
     this report.






                                     -25-
<PAGE>

                                   SIGNATURES

          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
     the Registrant has duly caused this Form 10-K to be signed on its behalf by
     the undersigned, thereunto duly authorized on the 30th day of March, 1998.
     BERGER HOLDINGS, LTD.

                                           By:      /S/ THEODORE A. SCHWARTZ
                                                    Theodore A. Schwartz
                             Chief Executive Officer

          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
     this report has been signed below by the following persons on behalf of the
     Registrant and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
Signature                                   Title                                       Date

<S>                                         <C>                                         <C>
/S/ THEODORE A. SCHWARTZ                    Chief Executive Officer                     March 30, 1998
Theodore A. Schwartz                        and Chairman of the Board
                                            (Principal Executive Officer)

/S/ PAUL L. SPIESE, III                     Director                                    March 30, 1998
Paul L. Spiese, III                         Vice President

/S/ JOSEPH F. WEIDERMAN                     President, Chief  Operating                 March 30, 1998
Joseph F. Weiderman                         Officer and Director

/S/LARRY FALCON                             Director                                    March 30, 1998
Larry Falcon

                                            Director                                    March __, 1998
Jacob I. Haft, M.D.

/S/ DR. IRVING KRAUT                        Director                                    March 30, 1998
Dr. Irving Kraut

/S/JAY SEID                                 Director                                    March 30, 1998
Jay Seid

________________                            Director                                    March __, 1998
John Paul Kirwin

/S/ FRANCIS E. WELLOCK, JR.                 Chief Financial Officer                     March 30, 1998
Francis E. Wellock, Jr.                     (Principal Financial and
                                             Accounting Officer)
</TABLE>

                                     -26-
<PAGE>
STBOR97
                      BERGER HOLDINGS, LTD. AND SUBSIDIARY



SCHEDULE IX - CONSOLIDATED SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
                                                    STATED          MAX. AMT.      AVG. AMT.       WTD. AVG.
                                       BALANCE     AVERAGE         OUTSTANDING    OUTSTANDING      INT. RATE
                                      AT END OF    INTEREST          DURING         DURING           DURING
YEAR ENDED DECEMBER 31, 1997           PERIOD        RATE            PERIOD         PERIOD           PERIOD
----------------------------         -----------   ------------    -----------    -----------      ----------

<S>                                   <C>          <C>              <C>            <C>                <C>
REVOLVING CREDIT LINE / TERM LOAN     $2,661,000   PRIME +2.35%     $3,514,000     $2,934,000         10.48%


YEAR ENDED DECEMBER 31, 1996
----------------------------

REVOLVING CREDIT LINE / TERM LOAN     $2,220,000   PRIME +3.25%     $3,470,000     $2,683,000         11.52%


YEAR ENDED DECEMBER 31, 1995
----------------------------

REVOLVING CREDIT LINE / TERM LOAN     $2,011,000   PRIME +3.5%      $2,894,000     $2,608,000         12.31%
</TABLE>
<PAGE>

                                                                    Exhibit 3(f)

                        STATEMENT WITH RESPECT TO SHARES

                                       OF

                              BERGER HOLDINGS, LTD.

                  RESOLVED,  that pursuant to the powers expressly  delegated to
the Board of  Directors  by Article 6 of the  Articles of  Incorporation  of the
Corporation,  as amended,  the Corporation hereby establishes and designates one
series of  preferred  stock and fixes and  determines  as set forth  herein  the
relative rights and preferences thereof as follows:

                  SECTION 1. DESIGNATION. There shall be established a series of
preferred  stock,  which  shall  consist  of  40,000  shares  of the  authorized
preferred  stock and shall be designated  Series A Convertible  Preferred  Stock
(herein referred to as the "Preferred Stock").

                  SECTION 2. DIVIDENDS.

                  (A) The  holders  of  Preferred  Stock  shall be  entitled  to
receive  dividends  (the  "Preferred  Dividend")  payable in cash at the rate of
$10.00 per share per annum or such rate as modified  under  Section  2(b) herein
(the  "Dividend  Rate") on a  cumulative  basis from the actual date of original
issue of each share of Preferred Stock (the "Original  Issue Date"),  whether or
not declared,  out of funds legally  available  therefor,  payable  quarterly in
arrears on the first day of each  February,  May,  August,  and November in each
year (each a "Dividend Payment Date"). Payments shall commence on the first such
date to occur after the Original Issue Date. Each such Preferred  Dividend shall
be  payable  to the  holders  of record of the  Preferred  Stock at the close of
business on the  preceding  December  31, March 31, June 30, and  September  30,
respectively.  Each dividend shall be declared by the Board of Directors no more
than fifteen (15) days prior to its respective record date. Payments shall equal
$2.50 per share on each  Dividend  Payment  Date or such lesser  amount as shall
result from any proration in respect of any partial quarterly period. The amount
of Preferred  Dividends  payable upon the  occurrence of any event  described in
Sections  3, 5 or 7 hereof  shall be  computed  by  multiplying  the  applicable
Dividend Rate by a fraction,  the numerator of which shall be the number of days
since the preceding Dividend Payment Date to the date of payment of such partial
Preferred Dividend and the denominator of which shall be 360.

                  (B) Beginning on the fifth  anniversary  of the Original Issue
Date,  the Dividend  Rate shall be adjusted by  increasing  the Dividend Rate to
$20.00  per  share  per  annum,  with the  quarterly  Preferred  Dividend  being
increased to $5.00 per share.



<PAGE>


                  (C) So  long  as any of the  shares  of  Preferred  Stock  are
outstanding,  no dividends (other than dividends or distributions paid in shares
of or options,  warrants or rights to subscribe for or purchase shares of Common
Stock) shall be declared or paid or set apart for payment by the  Corporation or
other  distribution  of cash or other  property  declared  or made  directly  or
indirectly by the Corporation or any affiliate or any person acting on behalf of
he  Corporation  or any of its  affiliates  with respect to any shares of Common
Stock or other capital stock over which the  Preferred  Stock has  preference or
priority in the payments of dividends  or in the  distribution  of assets on any
liquidation,  dissolution or winding up of the Corporation ("Junior Stock"), nor
shall any shares of Junior  Stock be redeemed,  purchased or otherwise  acquired
(other  than a (i)  purchase  or other  acquisition  of  Common  Stock  made for
purposes of any employee  incentive or benefit  plan of the  Corporation  or any
subsidiary  or (ii) the  purchase  of up to 125,000  shares of Common  Stock (as
adjusted  for stock  splits or stock  dividends)  pursuant  to the "Put  Option"
contained in the Asset Purchase  Agreement  dated as of December 3, 1997, by and
among the Corporation  and the parties  thereto) for any  consideration  (or any
moneys be paid to or made available for a sinking-fund for the redemption of any
shares of any such  stock)  directly or  indirectly  by the  Corporation  or any
affiliate  or any  person  acting  on behalf  of the  Corporation  or any of its
affiliates  (except by conversion into or exchange for Junior Stock),  nor shall
any other cash or other property  otherwise be paid or distributed to or for the
benefit of any holder of shares of Junior Stock in respect thereof,  directly or
indirectly,  by the  Corporation or any affiliate or any person acting on behalf
of the  Corporation  or any of its  affiliates  unless in each case (x) the full
Preferred Dividends (including all accumulated, accrued and unpaid dividends) on
all outstanding shares of Preferred Stock shall have been paid or such dividends
have been  declared and set apart for payment for the current  dividend  periods
with respect to the  Preferred  Stock and (y)  sufficient  funds shall have been
paid or set apart for the payment of the full Preferred Dividend for the current
dividend period with respect to the Preferred Stock.

                  (D) If and whenever a quarterly Preferred Dividend is not paid
on a Dividend  Payment Date (whether or not  declared),  then the amount of such
Preferred  Dividend remaining in arrears and unpaid from time to time shall bear
interest from such Dividend Payment Date until the date it is paid in full at an
annual rate equal to ten percent (10%). Interest payable in respect of Preferred
Dividends  which are in arrears shall be computed on the basis of twelve (12) 30
- - day months and a 360-day  year. No payment shall be applied to the Preferred
Dividend due on a Dividend Payment Date unless and until all arrears,  including
interest  thereon,  with respect to  accumulated,  accrued but unpaid  Preferred
Dividends shall have been paid.


<PAGE>

               SECTION 3. LIQUIDATION, DISSOLUTION, OR WINDING UP.

                  (A) In the event of any liquidation,  dissolution,  or winding
up of the  Corporation,  whether  voluntary or  involuntary,  the holders of the
Preferred  Stock  shall be  entitled  to be paid  first out of the assets of the
Corporation  available for distribution to holders of the Corporation's  capital
stock of all classes and before any sums shall be paid or any assets distributed
among the holders of shares of any other class or series of capital stock of the
Corporation,  including  Common Stock,  an amount per share equal to One Hundred
Dollars  ($100.00) plus an amount equal to all the accrued but unpaid  Preferred
Dividends  (whether or not declared),  and the amount equal to all interest,  if
any, on any  Preferred  Dividends in arrears,  in each case to the date of final
distribution to such holders (the "Preference Amount"). Until the holders of the
Preferred Stock have been paid the Preference Amount in full, no payment will be
made to any holder of Junior Stock upon the liquidation,  dissolution or winding
up of the Corporation. If the assets of the Corporation shall be insufficient to
permit  the  payment  in full  to the  holders  of the  Preferred  Stock  of the
Preference Amounts, then the entire assets of the Corporation available for such
distribution  shall be  distributed  ratably  among the holders of the Preferred
Stock in  proportion  to the  Preference  Amount each such  holder is  otherwise
entitled to receive. After payment of the Preference Amount shall have been made
in full to the  holders  of the  Preferred  Stock  or funds  necessary  for such
payment shall have been set aside by the Corporation in trust for the account of
holders of the Preferred  Stock so as to be available for such payment,  holders
of the Preferred Stock shall not be entitled to participate in the  distribution
of any remaining assets of the Corporation.

                  (B) Any  consolidation,  merger or a statutory  share exchange
(other than a (i) merger with a wholly-owned subsidiary of the Corporation, (ii)
or a mere reincorporation  transaction,  or (iii) a merger pursuant to which the
Corporation is the surviving  entity and the  capitalization  of the Corporation
remains  unchanged)  in which the  outstanding  shares of  capital  stock of the
Corporation  are exchanged  for  securities  or other  consideration  of or from
another  corporation,  or a sale of all or substantially all the assets or stock
of the Corporation, shall be deemed to be a liquidation, dissolution, or winding
up of the affairs of the  Corporation  within the meaning of this Section 3, and
shall  entitle the holders of the  Preferred  Stock to receive on the  effective
date of such event the Preference Amount, in cash, securities or other property;
provided,  however,  that  any  such  event  shall  not  be  so  regarded  as  a
liquidation,  dissolution,  or winding up of the affairs of the Corporation with
respect to the Preferred Stock if the holders of  seventy-five  percent (75%) of
the outstanding shares of the Preferred Stock approve such event or elect not to
have any such event deemed to be a  liquidation,  dissolution,  or winding up of
the  affairs  of  the  Corporation  by  giving  written  notice  thereof  to the
Corporation at least ten (10) days prior to the effective date of such event.

                  (C) Whenever the  distribution  provided for in this Section 3
shall be paid in property other than cash, the value of such distribution  shall
be the fair value thereof  determined in good faith by the Board of Directors of
the Corporation.

                  SECTION 4. VOTING RIGHTS.

                  (A) Except as  otherwise  required by law, or as  specifically
provided  herein,  the holders of Preferred  Stock shall have full voting rights
and powers,  and the holders of shares of Preferred Stock and Common Stock shall
vote  together  as a single  class  on all  matters  submitted  to a vote of the
stockholders of the Corporation;  provided, however, that solely with respect to
the right to elect and remove  directors,  the holders of Preferred  Stock shall
not be entitled to vote  pursuant to this Section  4(a),  but the  provisions of
Section 4(b) and (c) shall  govern the rights of the holders of Preferred  Stock
with respect to the election or removal of  directions.  In any vote pursuant to
the preceding sentence, each holder of Preferred Stock shall be entitled to that
number of votes  equal to the number of shares of Common  Stock  which  would be
issuable  upon  conversion  of such shares of  Preferred  Stock,  as provided in
Section 5(a) hereof (the "As  Converted  Number of Shares") of such holder (with
fractional  shares rounded up or down to the nearest whole number) at the record
date for the determination of stockholders  entitled to vote on such matters or,
if no such  record  date is  established,  at the date such vote is taken or any
written consent of stockholders is solicited. The holders of the Preferred Stock
shall be entitled to notice of any stockholders'  meeting in accordance with the
Bylaws of the Corporation.



<PAGE>


                  (B) The holders of the Preferred Stock,  voting  separately as
one class,  shall have the exclusive and special right at all times to elect two
(2)  directors  (the  "Preferred  Directors")  to the Board of  Directors of the
Corporation provided, however, that so long as any shares of Preferred Stock are
outstanding,  the Board of  Directors  shall not  consist  of more than nine (9)
members.  The Preferred Directors shall be elected by the vote of the holders of
seventy-five  percent  (75%),  and  removed  by  the  vote  of  the  holders  of
seventy-five  percent (75%), of the shares of Preferred Stock then  outstanding.
The right of holders of the Preferred  Stock  contained in this Section 4(b) may
be exercised either at a special meeting of the holders of Preferred Stock or at
any annual or special  meeting of the  stockholders  of the  Corporation,  or by
written  consent of such holders in lieu of a meeting.  Upon the written request
of the  holders of record of at least a  majority  of the  Preferred  Stock then
outstanding,  the Secretary of the  Corporation  shall call a special meeting of
the holders of Preferred  Stock for the purpose of (i)  removing  any  Preferred
Director elected pursuant to this Section 4(b) and/or (ii) electing  director(s)
to fill a vacancy of the directorship  authorized to be filled by the holders of
Preferred Stock pursuant to this Section 4(b). Such meeting shall be held at the
earliest practicable date.

At any  meeting  held for the  purpose  of  electing  or  removing  a  Preferred
Director,  the  presence,  in person or by proxy,  of the  holders  of record of
seventy-five  percent (75%) of the  Preferred  Stock then  outstanding  shall be
required to  constitute a quorum of the  Preferred  Stock for such  election.  A
vacancy in the  directorship  to be elected by the  holders of  Preferred  Stock
pursuant to this Section  4(b) may be filled only by vote or written  consent in
lieu of a meeting of the holders of seventy-five  percent (75%) of the shares of
Preferred  Stock  then  outstanding  and  may  not be  filled  by the  remaining
directors.



<PAGE>

                  (C) If and whenever four (4) quarterly  dividends  (whether or
not  consecutive)  payable on the  Preferred  Stock  shall be in arrears  (which
shall, with respect to any such quarterly dividend,  mean that any such dividend
has not been paid in full),  whether  or not earned or  declared,  the number of
directors  then  constituting  the Board of  Directors  shall be  increased to a
number  which allows for holders of the  Preferred  Stock to elect a majority of
the entire  Board of Directors at a special  meeting of  stockholders  called as
hereinafter  provided.  Whenever all arrears in dividends on the Preferred Stock
(together with interest on dividends in arrears  pursuant to Section 2(d) above)
shall have been paid and dividends  thereon for the current  quarterly  dividend
period  shall have been paid or  declared  and set apart for  payment,  then the
right of the holders of the Preferred Stock to elect such  additional  directors
shall cease (but  subject  always to the same  provision  of the vesting of such
special voting rights in the case of any similar  future  arrearages in four (4)
quarterly  dividends),  and the  terms  of  office  of all  persons  elected  as
additional  directors  by the holders of the  Preferred  Stock  pursuant to this
Section 4(c) shall forthwith  terminate and the number of the Board of Directors
shall be reduced  accordingly.  At any time after such  additional  voting power
shall have been so vested in the holders of the Preferred  Stock,  the Secretary
of the Corporation  may, and upon the written request of any holder of Preferred
Stock  (addressed to the Secretary at the principal  office of the  Corporation)
shall,  call a special  meeting of the  holders of the  Preferred  Stock for the
election of the additional  directors to be elected by them as herein  provided,
such call to be made by notice  similar  to that  provided  in the Bylaws of the
Corporation for a special meeting of the  stockholders or as required by law. If
any such special  meeting  required to be called as above  provided shall not be
called by the  Secretary  within  twenty  (20) days  after  receipt  of any such
request,  then any holder of  Preferred  Stock may call such  meeting,  upon the
notice above provided, and for that purpose shall have access to the stock books
of the Corporation.  The additional  Preferred  Directors elected at any special
meeting shall hold office until the next annual meeting of the  stockholders  or
special  meeting held in lieu  thereof if such office shall not have  previously
terminated as above  provided.  If any vacancy shall occur among the  additional
Preferred  Directors,  a successor  shall be elected by the Board of  Directors,
upon the nomination of the then remaining  Preferred  Directors or the successor
of such  remaining  directors,  to serve  until the next  annual  meeting of the
stockholders  or special  meeting held in place thereof if such office shall not
have previously terminated as above provided.

          SECTION 5. CONVERSION RIGHTS. The holders of the Preferred Stock shall
     have the following conversion rights:

                  (A) RIGHT TO CONVERT.  Each share of Preferred  Stock shall be
convertible  at any time,  and from time to time,  at the  option of the  holder
thereof, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing One Hundred Dollars  ($100.00) (the "Numerator") by
the Conversion Price (as defined below) in effect at the time of conversion. The
conversion  price at which  shares of Common  Stock  shall be  deliverable  upon
conversion of Preferred Stock without the payment of additional consideration by
the holder thereof (the "Conversion  Price")  initially shall be Four and 25/100
Dollars ($4.25).  Such initial Conversion Price, and the rate at which shares of
Preferred  Stock may be converted into shares of Common Stock,  shall be subject
to  adjustment  as  provided  below.  The  conversion  rights of the  holders of
Preferred  Stock  shall  terminate  (i) in the  event  of a  liquidation  of the
Corporation,  at the close of business on the first full day  preceding the date
fixed for the payment of any amounts distributable on liquidation to the holders
of Preferred  Stock;  and (ii) in the event shares of Preferred Stock are called
for  redemption  pursuant  to Section 7 hereof,  at the close of business on the
Redemption Date (as defined in Section 7(a) below), unless the Corporation shall
default in making payment in full of the Redemption Price.

                  (B)  ADJUSTMENT  TO  CONVERSION   PRICE  UPON   OCCURRENCE  OF
EXTRAORDINARY  COMMON STOCK EVENT. Upon the happening of an Extraordinary Common
Stock Event (as  hereinafter  defined),  the Conversion  Price for the Preferred
Stock,  simultaneously  with the  happening of such  Extraordinary  Common Stock
Event, shall be adjusted by multiplying the then-effective Conversion Price by a
fraction,  the  numerator of which shall be the number of shares of Common Stock
outstanding  immediately prior to such Extraordinary  Common Stock Event and the
denominator  of which shall be the number of shares of Common Stock  outstanding
immediately  after such  Extraordinary  Common Stock  Event,  and the product so
obtained  thereafter  shall be the Conversion Price for the Preferred Stock. The
Conversion  Price,  as so adjusted,  shall be readjusted in the same manner upon
the  happening  of  any   successive   Extraordinary   Common  Stock   Event(s).
"Extraordinary  Common Stock  Event"  shall mean (i) the issuance of  additional
shares of Common Stock as a dividend or other distribution on outstanding Common
Stock,  (ii) a stock split or subdivision of outstanding  shares of Common Stock
into a greater number of shares of Common Stock,  or (iii) a reverse stock split
or combination  of  outstanding  shares of Common Stock into a smaller number of
shares of Common Stock.
<PAGE>


                  (C) RECAPITALIZATION OR RECLASSIFICATION.  If the Common Stock
issuable upon the  conversion  of the Preferred  Stock shall be changed into the
same or a  different  number of shares of any class or  classes  of stock of the
Corporation, whether by recapitalization,  reclassification, or otherwise (other
than a subdivision or  combination  of shares or stock dividend  provided for in
Section 5(b) hereof, or a reorganization, merger, share exchange, consolidation,
or sale of assets  provided for in Section 5(d)  hereof),  then and in each such
event  the  holder  of each  share of  Preferred  Stock  shall  have  the  right
thereafter to convert such share into the kind and amount of shares of stock and
other   securities   and  property   receivable   upon  such   recapitalization,
reclassification,  or other  change by holders of the number of shares of Common
Stock  into  which  such share of  Preferred  Stock  might  have been  converted
immediately prior to such  recapitalization,  reclassification,  or change,  all
subject to further adjustment as provided herein.

                  (D)   CAPITAL   REORGANIZATION,    MERGER,   SHARE   EXCHANGE,
CONSOLIDATION,  OR SALE OF  ASSETS.  If at any time or from  time to time  there
shall be a capital reorganization of the Common Stock, including a merger, share
exchange,  consolidation,  or sale of all or substantially  all of assets of the
Corporation (other than a subdivision or combination of shares or stock dividend
provided for in Section 5(b) hereof or a  recapitalization  or  reclassification
provided for in Section 5(c) hereof),  then,  as a part of such  reorganization,
provision  shall be made so that the holders of the Preferred  Stock  thereafter
shall be entitled to receive,  upon  conversion  of each share of the  Preferred
Stock,  the number of shares of stock or other securities or property to which a
holder  of the  number  of shares of Common  Stock  into  which  such  shares of
Preferred  Stock might have been  converted  immediately  prior to such  capital
reorganization   would  have  been  entitled  to  receive.  In  any  such  case,
appropriate  adjustment  shall be made in the  application  of the provisions of
this Section 5 with respect to the rights of the holders of the Preferred  Stock
after  the  reorganization  to the end that the  provisions  of this  Section  5
(including  adjustment of the Conversion  Price then in effect and the number of
shares  acquired upon  conversion  of the  Preferred  Stock) shall be applicable
after  that  event  in as  nearly  equivalent  a manner  as may be  practicable.
Notwithstanding  the foregoing,  in the case of a consolidation,  merger,  share
exchange, or sale of all or substantially all the assets of the Corporation, the
provisions of Section 3(b) shall apply to the Preferred  Stock, and this Section
5(d) shall not apply, unless, as provided in Section 3(b) the holders of seventy
five percent (75%) of the outstanding  shares of Preferred Stock elect that such
event shall not be deemed to be a liquidation,  dissolution, or winding upof the
affairs of the Corporation.

                  (E) CERTAIN DILUTIVE ISSUES.

          (I) SPECIAL  DEFINITIONS.  For  purposes  of this  Section  5(e),  the
     following definitions apply:


<PAGE>


          (1)  "Options"  shall mean rights,  options,  or warrants to subscribe
     for,  purchase or otherwise  acquire  either  Common  Stock or  Convertible
     Securities (as defined below), except for (A) currently exercisable options
     and warrants to purchase an  aggregate of 1,539,248  shares of Common Stock
     outstanding on the Original  Issue Date (the  "Outstanding  Options");  (B)
     options to  purchase  an  aggregate  of  1,270,000  shares of Common  Stock
     granted or provided for but not  exercisable  as of the Original Issue Date
     (the "Agreed Options"), (C) rights or options to acquire up to an aggregate
     of  250,000  shares of Common  Stock  which may be  granted  to  employees,
     directors or consultants to the Corporation at an exercise price of no less
     than the Fair Market  Value (as defined in Section  5(h) below) on the date
     of grant (the "Future  Options")  and (D) warrants to purchase an aggregate
     of 350,000  shares of Common Stock granted and reserved for issuance on the
     Original Issue Date (the "Current Warrants").

          (2) "Convertible Securities" shall mean any evidences of indebtedness,
     shares of stock  (other than  Common  Stock and  Preferred  Stock) or other
     securities convertible into or exchangeable for Common Stock.

          (3)  "Additional  Shares of Common  Stock"  shall  mean all  shares of
     Common Stock issued (or deemed to be issued pursuant to Section  5(e)(iii))
     by the  Corporation  after the  Original  Issue Date,  other than shares of
     Common  Stock  issued or  issuable  upon (i) upon  conversion  of shares of
     Preferred Stock or as a dividend or distribution on Preferred  Stock,  (ii)
     upon the exercise of the  Outstanding  Options;  (iii) upon the exercise of
     the Agreed Options,  (iv) upon the exercise of any Future  Options,  or (v)
     upon the exercise of the Current Warrants.

          (II) NO ADJUSTMENT OF CONVERSION  PRICE.  Any provision  herein to the
     contrary  notwithstanding,  no adjustment in the number of shares of Common
     Stock into which shares of Preferred Stock is convertible shall be made, by
     adjustment in the  Conversion  Price,  unless the  consideration  per share
     (determined  pursuant to Section 5(e)(v) hereof) for an Additional Share of
     Common Stock issued or deemed to be issued by the  Corporation is less than
     the Conversion  Price in effect on the date of, and  immediately  prior to,
     the issue of such Additional Shares of Common Stock.

          (III) ISSUE OF OPTIONS AND  CONVERTIBLE  SECURITIES.  In the event the
     Corporation  at any time or from time to time after the Original Issue Date
     shall issue any  Options or  Convertible  Securities  or shall fix a record
     date for the  determination  of  holders  of any class of  securities  then
     entitled to receive any such Options or  Convertible  Securities,  then the
     maximum number of shares (as set forth in the instrument  relating  thereto
     without  regard  to  any  provisions  contained  therein  for a  subsequent
     adjustment  of such number) of Common Stock  issuable  upon the exercise of
     such  Options  or,  in the  case  of  Convertible  Securities  and  Options
     therefor, the conversion or exchange of such Convertible Securities,  shall
     be deemed to be Additional  Shares of Common Stock issued as of the time of
     such issue or, in case such a record date shall have been fixed,  as of the
     close of business on such record date,  provided that Additional  Shares of
     Common  Stock  shall  not  be  deemed  to  have  been  issued   unless  the
     consideration per share (determined  pursuant to Section 5(e)(v) hereof) of
     such  Additional  Shares of Common Stock would be less than the  Conversion
     Price in effect on the date of and immediately prior to such issue, or such
     record  date,  as the case may be,  and  provided  that in any such case in
     which Additional Shares of Common Stock are deemed to be issued:

          (1) no further  adjustments in the Conversion Price shall be made upon
     the subsequent  issue of  Convertible  Securities or shares of Common Stock
     upon the  exercise  of such  Options  or  conversion  or  exchange  of such
     Convertible Securities;

<PAGE>


          (2) if such Options or Convertible  Securities by their terms provide,
     with the passage of time or otherwise,  for any increase or decrease in the
     consideration  payable to the  Corporation,  or decrease or increase in the
     number of shares of Common Stock issuable upon the exercise,  conversion or
     exchange  thereof,  the  Conversion  Price computed upon the original issue
     thereof (or upon the occurrence of a record date with respect thereto), and
     any subsequent adjustments based thereon,  shall, upon any such increase or
     decrease  becoming  effective,  be  recomputed  to reflect such increase or
     decrease  insofar as it affects such Options or the rights of conversion or
     exchange under such Convertible Securities, provided, however, that no such
     adjustment of the  Conversion  Price shall affect  Common Stock  previously
     issued upon conversion of shares of Preferred Stock;

          (3)  upon  the  expiration  of  any  such  Options  or any  rights  of
     conversion or exchange  under such  Convertible  Securities  that shall not
     have been exercised,  the Conversion Price computed upon the original issue
     thereof (or upon the occurrence of a record date with respect thereto), and
     any subsequent adjustments based thereon,  shall, upon such expiration,  be
     recomputed as if:

          (A) in the case of Convertible Securities or Options for Common Stock,
     the only Additional Shares of Common Stock issued were the shares of Common
     Stock,  if any,  actually  issued upon the  exercise of such Options or the
     conversion or exchange of such Convertible Securities and the consideration
     received   therefor  was  the   consideration   actually  received  by  the
     Corporation  for the issue of all such Options,  whether or not  exercised,
     plus the  consideration  actually  received  by the  Corporation  upon such
     exercise,  or for the issue of all such  Convertible  Securities  that were
     actually converted or exchanged, plus the additional consideration, if any,
     actually received by the Corporation upon such conversion or exchange, and

          (B) in the  case of  Options  for  Convertible  Securities,  only  the
     Convertible  Securities,  if any, actually issued upon the exercise thereof
     were  issued at the time of issue of such  Options,  and the  consideration
     received  by the  Corporation  for the  Additional  Shares of Common  Stock
     deemed to have been then issued was the consideration  actually received by
     the  Corporation  for  the  issue  of  all  such  Options,  whether  or not
     exercised,  plus the  consideration  deemed  to have been  received  by the
     Corporation  (determined pursuant to Section 5(e)(v)) upon the issue of the
     Convertible  Securities  with respect to which such  Options were  actually
     exercised;

          (4) no  readjustment  pursuant  to Section  5(e)(iii)(2)  or (3) above
     shall have the effect of increasing the Conversion Price to an amount which
     exceeds  the  lower  of (a)  the  Conversion  Price  prior  to the  initial
     adjustment to which the readjustment  applies,  or (b) the Conversion Price
     that would have resulted  from any issuance of Additional  Shares of Common
     Stock between the date of the initial adjustment date and such readjustment
     date; and


<PAGE>


          (5) in the event of any change in the number of shares of Common Stock
     issuable  upon the  exercise,  conversion  or  exchange  of any  Option  or
     Convertible  Security,  including,  but not limited to, a change  resulting
     from the  antidilution  provisions  thereof,  the Conversion  Price then in
     effect shall forthwith be readjusted to such Conversion Price as would have
     been obtained had the adjustment which was initially made upon the issuance
     of such unexercised Option or unconverted  Convertible Security,  been made
     upon the basis of such subsequent  change,  but no further adjustment shall
     be made for the  actual  issuance  of Common  Stock  upon the  exercise  or
     conversion of any such Option or Convertible Security.

          (IV) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL SHARES
     OF  COMMON  STOCK.  In the  event  the  Corporation  at any time  after the
     Original  Issue  Date  shall  issue  Additional   Shares  of  Common  Stock
     (including  Additional  Shares of Common Stock deemed to be issued pursuant
     to Section  5(e)(iii)),  without  consideration or for a consideration  per
     share  less  than  the  Conversion  Price  in  effect  on the  date  of and
     immediately  prior to such issue,  then and in such event,  the  Conversion
     Price  shall  be  reduced  to a  price  (calculated  to the  nearest  cent)
     determined by multiplying the then current  Conversion  Price by a fraction
     the numerator of which shall be the sum of

          (A) the number of shares of Common Stock outstanding immediately prior
          to such issue, plus

          (B)  the  number  of  shares  of  Common  Stock  which  the  aggregate
     consideration   received  by  the  Corporation  for  the  total  number  of
     Additional  Shares  of  Common  Stock  so  issued  would  purchase  at  the
     Conversion Price in effect immediately prior to such issuance

and the denominator of which shall be the sum of

          (X) the number of shares of Common Stock outstanding immediately prior
     to such issue, plus

          (Y) the number of such Additional Shares of Common Stock so issued.

For the purpose of the above  calculation,  the number of shares of Common Stock
outstanding  shall be calculated on a fully diluted  basis,  as if all shares of
Preferred  Stock and all other  Convertible  Securities had been fully converted
into  shares  of  Common  Stock  immediately  prior  to such  issuance,  and any
outstanding  warrants,  options or other  rights for the  purchase  of shares of
stock or Convertible  Securities had been fully exercised  immediately  prior to
such  issuance,  and the resulting  securities  fully  converted  into shares of
Common Stock,  if so convertible  as of such date.  This  calculation  shall not
include, however, any Additional Shares of Common Stock issuable with respect to
shares of  Preferred  Stock,  Convertible  Securities  or  outstanding  options,
warrants or other rights for the purchase of shares or  Convertible  Securities,
solely as a result of  adjustment of the  Conversion  Price  resulting  from the
issuance of Additional Shares of Common Stock causing such adjustment.

          The provisions of this Section 5(e)(iv) do not apply if the provisions
     of any of Section 5(b), (c) or (d) apply.


<PAGE>


          (V) DETERMINATION OF CONSIDERATION.  The consideration received by the
     Corporation for the issue of any Additional  Sharesof Common Stock shall be
     computed as follows:

          (1) CASH, PROPERTY, AND OTHER CONSIDERATION. Such consideration shall:

          (A)  insofar as it consists  of cash,  be  computed  as the  aggregate
     amount  of cash  received  by the  Corporation  excluding  amounts  paid or
     payable for accrued interest or accrued dividends;

          (B)  insofar  as  it  consists  of   property,   services,   or  other
     consideration other than cash, be computed at the fair value thereof at the
     time of such issue,  as determined in good faith by the Board of Directors;
     and

          (C) in the event Additional Shares of Common Stock are issued together
     with other  shares or  securities  or other assets of the  Corporation  for
     consideration  which covers both, be the proportion of the consideration so
     received,  computed  as  provided  in  clauses  (a)  and (b)  above,  as is
     determined in good faith by the Board of Directors.

          (2) OPTIONS AND CONVERTIBLE  SECURITIES.  The  consideration per share
     received by the Corporation for Additional Shares of Common Stock deemed to
     have been issued pursuant to Options and Convertible  Securities,  shall be
     deemed  to be  the  sum  of the  consideration  paid  for  such  Option  or
     Convertible  Security, if any, plus the lowest consideration per share then
     payable  upon the  exercise  of  Options,  as set forth in the  instruments
     relating to such Options or Convertible  Securities,  without regard to any
     provision  contained  therein  designed  to protect  against  dilution.  If
     Options or Convertible Securities are issued together with other securities
     or instruments of the  Corporation,  the Board of Directors shall determine
     in good  faith  the  amount  of  consideration  paid  for  such  Option  or
     Convertible Securities.

          (F)  CERTIFICATE AS TO  ADJUSTMENTS.  In each case of an adjustment or
     readjustment  of  the  Conversion   Price  of  the  Preferred   Stock,  the
     Corporation  will  furnish  each  holder  of  the  Preferred  Stock  with a
     certificate  prepared  by the Chief  Financial  Officer of the  Corporation
     showing such  adjustment  or  readjustment  and stating in detail the facts
     upon which such adjustment or readjustment is based.

          (G)  EXERCISE OF  CONVERSION  PRIVILEGE.  To exercise  its  conversion
     privilege,  a holder of Preferred Stock shall surrender the  certificate(s)
     representing the shares being converted to the Corporation at its principal
     office,  accompanied  by written  notice to the  Corporation at that office
     that such stockholder elects to convert such shares (a "Conversion

<PAGE>


Notice").  The Conversion Notice also shall state the name(s) and address(es) in
which  the  certificate(s)  for  shares  of  Common  Stock  issuable  upon  such
conversion  shall be issued.  The  certificate(s)  for shares of Preferred Stock
surrendered for conversion shall be accompanied by proper assignment  thereof to
the Corporation or in blank. The date when the Conversion  Notice is received by
the  Corporation  together with the  certificate(s)  representing  the shares of
Preferred Stock being  converted shall be the "Conversion  Date." As promptly as
practicable  after the Conversion Date, the Corporation  shall issue and deliver
to the  holder of the  shares of  Preferred  Stock  being  converted,  or on its
written  order,  such  certificate(s)  as it may  request of the number of whole
shares of Common Stock  issuable upon the conversion of such shares of Preferred
Stock in accordance  with the provisions of this Section 5 and cash, as provided
in Section 5(h), in respect of any fraction of a share of Common Stock  issuable
upon such  conversion.  Such  conversion  shall be deemed to have been  effected
immediately  prior to the close of business on the Conversion  Date, and at such
time the rights of the holder as a holder of the  converted  shares of Preferred
Stock shall cease and the  person(s)  in whose  name(s) any  certificate(s)  for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the  holder(s) of record of the shares of Common  Stock  represented
thereby.

                  (H) CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of
Common Stock or scrip  representing  fractional  shares shall be issued upon the
conversion of shares of Preferred  Stock.  Instead of any  fractional  shares of
Common Stock that  otherwise  would be issuable  upon  conversion of a series of
Preferred  Stock,  the  Corporation  shall pay to the  holder  of the  shares of
Preferred  Stock  that were  converted  a cash  adjustment  in  respect  of such
fractional  shares in an amount  equal to the same  fraction  of the Fair Market
Value  price  per share of the  Common  Stock at the  close of  business  on the
Conversion  Date.  "Fair Market  Value" shall mean (i) in the case of a security
listed or admitted to trading on any securities exchange, the last reported sale
price,  regular way (as  determined  in  accordance  with the  practices of such
exchange),  on such day, or if no sale takes  place on such day,  the average of
the  closing  bid and asked  prices  on such day (and in the case of a  security
traded on more than one  national  securities  exchange,  at such  price or such
average,  upon the  exchange  on which the  volume of  trading  during  the last
calendar year was the greatest),  (ii) in the case of a security not then listed
or admitted to trading on any securities exchange,  the last reported sale price
on such day, or if no sale takes  place on such day,  the average of the closing
bid and asked prices on such day, as reported by a reputable  quotation  service
designated by the  Corporation,  (iii) in the case of a security not then listed
or  admitted  to  trading  on any  securities  exchange  and as to which no such
reported  sale price or bid and asked prices are  available,  the average of the
reported  high bid and low asked  prices on such day, as reported by a reputable
quotation service, or the Wall Street Journal, or if there are no bids and asked
prices on such day,  the  average  of the high bid and low asked  prices,  as so
reported,  on the most  recent  day (not more than 30 days  prior to the date in
question)  for which  prices  have been so  reported,  and (iv) in the case of a
security  determined  by the  Corporation's  Board of Directors as not having an
active quoted market or in the case of other property, such fair market value as
shall be determined by the Board of Directors.  The  determination as to whether
any  fractional  shares are  issuable  shall be based  upon the total  number of
shares of Preferred Stock being converted at any one time by any holder thereof,
not upon each share of Preferred Stock being converted.

                  (I) RESERVATION OF COMMON STOCK.  The Corporation at all times
shall reserve and keep available out of its  authorized  but unissued  shares of
Common Stock,  solely for the purpose of effecting the  conversion of the shares
of the Preferred  Stock,  such number of its shares of Common Stock as from time
to time shall be sufficient to effect the conversion of all  outstanding  shares
of the Preferred Stock.



<PAGE>


                  SECTION 6. RESTRICTIONS AND LIMITATIONS; VOTING AS A CLASS. So
long as any shares of  Preferred  Stock remain  outstanding,  in addition to any
other  vote or  consent  of  stockholders  required  by law or the  Articles  of
Incorporation,  the  Corporation  will  not take  any of the  following  actions
without the  affirmative  vote or consent  (with each share of  Preferred  Stock
being  entitled  to one vote) of the  holders of at least  seventy-five  percent
(75%) of the outstanding  shares of the Preferred Stock,  given in writing or by
resolution adopted at a meeting called for such purpose:

                  (A)  amend  the  Articles  of  Incorporation  or Bylaws of the
Corporation if such amendment would:

                  (I) reduce the Dividend Rate on the Preferred  Stock  provided
                  for herein, make such dividends noncumulative,  defer the date
                  from which  dividends  will accrue,  cancel accrued and unpaid
                  dividends,  or change  the  relative  seniority  rights of the
                  holders of the Preferred  Stock as to the payment of dividends
                  in relation to the holders of any other  capital  stock of the
                  Corporation;

                  (II) reduce the amount payable to the holders of the Preferred
                  Stock  upon  the   voluntary   or   involuntary   liquidation,
                  dissolution  or winding up of the  Corporation,  or change the
                  relative  seniority  of  the  liquidation  preferences  of the
                  holders of the Preferred Stock;

                  (III)  reduce  the  Redemption  Price  specified  in Section 7
                  hereof with respect to the Preferred Stock;

                  (IV) cancel or modify the  conversion  rights of the Preferred
                  Stock provided for in Section 5 hereof; or

                  (V)  adversely  affect  any  of  the  rights,  preferences  or
                  privileges  provided  for herein for the benefit of any shares
                  of  Preferred  Stock;  provided  that no  issuance  of  equity
                  securities  which shall have been approved  under Section 6(d)
                  hereof (or which does not require  approval under such Section
                  6(d)) shall be deemed to have such an adverse effect.

                  (B) redeem,  purchase or  otherwise  acquire for value (or pay
into or set aside for a sinking  fund for such  purpose)  any share or shares of
Preferred  Stock  otherwise than by redemption of Preferred  Stock in accordance
with Section 7 hereof or by conversion in accordance with Section 5 hereof;

                  (C) redeem,  purchase or otherwise acquire (or pay into or set
aside for a sinking fund for such  purpose) any share or shares of Junior Stock,
except for (i) a purchase or other acquisition of Common Stock made for purposes
of any employee  incentive or benefit plan of the Corporation or any subsidiary,
or (ii) the  purchase of up to 125,000  shares of Common  Stock (as adjusted for
stock splits or stock dividends)  pursuant to the "Put Option"  contained in the
Asset  Purchase  Agreement  dated as of  December  3,  1997,  by and  among  the
Corporation and the parties thereto.


<PAGE>


                  (D) authorize or issue, or obligate itself to issue, any other
equity  security  (i) senior to or on a parity  with the  Preferred  Stock as to
dividend  rights or redemption  rights or liquidation  preferences or (ii) which
entitles the holders  thereof to voting rights equal to at least twenty  percent
(20%) of the outstanding voting power of all capital stock of the Corporation or
to elect directors which constitute twenty percent (20%) or more of the Board of
Directors;

                  (E) effect any sale,  lease,  assignment,  transfer,  or other
conveyance of all or  substantially  all of the assets of the Corporation or any
of its subsidiaries, or any consolidation or merger involving the Corporation or
any of its subsidiaries,  except (i) merger with wholly-owned  subsidiary of the
Corporation, (ii) a mere reincorporation transaction, or (iii) a merger pursuant
to which the Corporation is the surviving entity and the  capitalization  of the
Corporation  remains  unchanged,  or (iv) upon an  election  by the  holders  of
Preferred Stock pursuant to Section 3(b) hereof;

                  (F)  increase  or  decrease   (other  than  by  redemption  or
conversion)  the total number of  authorized  shares of  Preferred  Stock (which
shall not  prohibit  the  increase or decrease by the  Corporation  of the total
number of authorized shares of preferred stock); or

                  (G)  effect any  change in the  rights or  limitations  of the
Common Stock, or any recapitalization of the Corporation.

<PAGE>
                  SECTION 7. REDEMPTION.

                  (A)  REDEMPTION  AT THE OPTION OF THE  CORPORATION.  Shares of
Preferred  Stock shall not be redeemable by the Corporation at any time prior to
the second anniversary of the Original Issue Date. On and after the second (2nd)
anniversary  of the Original Issue Date, at the option of the  Corporation,  the
Corporation may fix a date (the "Redemption  Date") on which it shall redeem all
(but not less than all) of the then  outstanding  shares of  Preferred  Stock by
paying in cash, out of funds legally available therefor,  to the holders thereof
and in respect of each such share of Preferred  Stock,  the Redemption Price (as
defined below),  (i) at any time prior to the fifth  anniversary of the Original
Issue Date but only in the event that the average bid price of the Common  Stock
of the Corporation exceeds Nine Dollars ($9.00) per share (without giving effect
to any stock splits,  stock  dividends or  recapitalizations  after the Original
Issue Date),  with respect to each of the twenty (20)  consecutive  Trading Days
(as defined below)  immediately  preceding the date of the Redemption Notice (as
defined in Section 7(b) below),  or (ii) at any time after the fifth anniversary
of the Original  Issue Date. A holder of Preferred  Stock may elect,  by written
notice  delivered  to the  Corporation  not less than ten (10) days prior to the
Redemption Date, to waive its right to have redeemed all (but not less than all)
of the shares of  Preferred  Stock held by such holder  which are eligible to be
redeemed on such  Redemption  Date,  provided that on such  Redemption Date each
such  share  of  Preferred  Stock  which  is not  redeemed  shall  be  converted
automatically into shares of Common Stock at the Conversion Price then in effect
on such  Redemption  Date.  The term "Trading Day" shall mean any day other than
Saturday or Sunday on which national  securities  exchanges are open for trading
and trades in Corporation  Common Stock occur. The term "Redemption Price" shall
mean an amount per share equal to (A) for any redemption  pursuant to clause (i)
above,  the Preference  Amount  (determined as provided in Section 3(a) hereof);
and (B) for any  redemption  pursuant  to clause (ii)  above,  One Hundred  Five
Dollars  ($105.00) plus an amount equal to all the accrued but unpaid  Preferred
Dividends  (whether or not declared),  and the amount equal to all interest,  if
any, on any Preferred Dividends in arrears, in each case to the Redemption Date.

                  (B)  PROCEDURES FOR  REDEMPTION OF PREFERRED  STOCK.  At least
thirty (30) days but not more than  forty-five (45) days prior to the Redemption
Date the Corporation  shall mail a written notice,  first class postage prepaid,
to each holder of record at the close of business on the business day  preceding
the day on which notice is given, of the Preferred Stock to be redeemed,  at the
address last shown on the records of the Corporation for such holder,  notifying
such holder of the redemption to be effected,  specifying (i) that all shares of
Preferred  Stock shall be redeemed from such holder,  (ii) the Redemption  Date,
(iii) the Redemption Price, (iv) the place at which payment may be obtained, (v)
advising  such  holder of its right to elect to waive its right to have all (but
not less than all) such shares redeemed and that, if such election is made, such
shares  of  Preferred   Stock  which  are  not   redeemed   shall  be  converted
automatically into shares of Common Stock at the Conversion Price then in effect
(setting  forth such  Conversion  Price),  and (vi)  calling upon such holder to
surrender to the  Corporation,  in the manner and at the place  designated,  its
certificate  or  certificates  representing  the  shares  to  be  redeemed  (the
"Redemption  Notice"). On or after the Redemption Date, each holder of Preferred
Stock to be redeemed  shall  surrender to the  Corporation  the  certificate  or
certificates representing such shares, in the manner and at the place designated
in the  Redemption  Notice,  and thereupon the  Redemption  Price of such shares
shall  be  payable  to the  order  of the  person  whose  name  appears  on such
certificate  or  certificates   as  the  owner  thereof  and  each   surrendered
certificate shall be canceled. From and after each Redemption Date, unless there
shall  have been a default in payment  of the  Redemption  Price,  any shares of
Preferred  Stock redeemed on such  Redemption  Date shall not be entitled to any
further rights as Preferred  Stock and shall not be deemed  outstanding  for any
purpose.  If the funds of the  Corporation  legally  available for redemption of
shares of Preferred Stock on any Redemption Date are  insufficient to redeem the
total  number of shares of  Preferred  Stock to be redeemed on such date,  those
funds which are legally  available  will be used to redeem the maximum  possible
number of such  shares  ratably  among the holders of such shares to be redeemed
based upon the number of shares of Preferred Stock held by each such holder. The
shares of Preferred Stock not redeemed shall remain  outstanding and entitled to
all the rights and  preferences  provided  herein.  At any time  thereafter when
additional funds of the Corporation are legally  available for the redemption of
shares of  Preferred  Stock such funds  will be used  immediately  to redeem the
balance of the shares which the  Corporation has become obliged to redeem on any
Redemption  Date, but which it has not redeemed,  it being  understood  that any
such redemption  shall not constitute a waiver by a holder of Preferred Stock of
any rights derived from the failure to redeem on the Redemption Date.

                  SECTION  8. NO  REISSUANCE  OF  CONVERTIBLE  PREFERRED  STOCK;
STATUS OF STOCK.  No share of Preferred  Stock  acquired by the  Corporation  by
reason of redemption,  purchase, conversion, or otherwise shall be reissued, and
all such  shares  shall be  restored to the status of  authorized  but  unissued
shares of preferred  stock,  without  designation  as to rights,  limitations or
preferences.

<PAGE>


                  SECTION 9. NO DILUTION OR  IMPAIRMENT.  The  Corporation  will
not,  by   amendment   of  its   Articles  of   Incorporation   or  through  any
reorganization,  transfer  of assets,  consolidation,  merger,  share  exchange,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Preferred
Stock  set  forth  herein,  but will at all  times in good  faith  assist in the
carrying  out of all such terms and in the  taking of all such  action as may be
necessary  or  appropriate  in order to protect the rights of the holders of the
Preferred Stock against dilution or other impairment.

                  SECTION 10. NOTICES OF RECORD DATE. In the event of any:

                  (A) taking by the  Corporation  of a record of the  holders of
any class of securities for the purpose of determining  the holders  thereof who
are  entitled to receive any  dividend  or other  distribution,  or any right to
subscribe for,  purchase,  or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right; or

                  (B)   capital   reorganization   of   the   Corporation,   any
reclassification  or  recapitalization  of the capital stock of the Corporation,
any merger, consolidation, or share exchange of the Corporation, or any transfer
of  all  or  substantially  all  the  assets  of the  Corporation  to any  other
corporation, or any other entity or person; or

                  (C) voluntary or involuntary dissolution, liquidation, or
winding up the Corporation;

then and in each such event the Corporation  shall mail or cause to be mailed to
each holder of Preferred Stock a notice  specifying (i) the record date for such
dividend,   distribution,   or  right  and  a  description   of  such  dividend,
distribution,  or  right,  (ii)  the  date on  which  any  such  reorganization,
reclassification,   recapitalization,  transfer,  consolidation,  merger,  share
exchange,  dissolution,  liquidation,  or  winding  up  is  expected  to  become
effective,  and  (iii)  the  time,  if any,  that is to be  fixed as to when the
holders of record of Common  Stock (or other  securities)  shall be  entitled to
exchange  their shares of Common Stock (or other  securities)  for securities or
other  property   deliverable   upon  such   reorganization,   reclassification,
recapitalization,  transfer, consolidation, merger, share exchange, dissolution,
liquidation,  or winding up. Such notice  shall be mailed at least ten (10) days
prior to the date specified in such notice on which such action is to be taken.

<PAGE>

                                                                      Exhibit 23

                       CONSENT OF INDEPENDENT ACCOUNTANTS


          We  hereby   consent  to  the   incorporation   by  reference  in  the
     Registration  Statement on Form S-3 of Berger  Holdings,  Ltd.  (Commission
     File No.  33-64705)  and the  Registration  Statement on Form S-3 of Berger
     Holdings, Ltd. (Commission File No. 333-15725) of our report dated February
     13, 1998, which appears beginning on page F-1 of this Annual Report on Form
     10-K of Berger Holdings, Ltd. for the year ended December 31, 1997.


                        /S/ GOLDENBERG ROSENTHAL FRIEDLANDER, LLP
                        Goldenberg Rosenthal Friedlander, LLP


     Jenkintown, Pennsylvania
     February 13, 1998




















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