SECURITIES AND EXCHANGE COMMISSION
            WASHINGTON, D.C. 20549

                   FORM 10-Q

 (Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934

 For the quarterly period ended March 31, 1999
                      or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934

e transition period from ____________ to ____________

        Commission File Number 0-12362
               Berger Holdings, Ltd.
ct Name of Registrant as Specified in its Charter)

             Pennsylvania              23-2160077
 (State or Other Jurisdiction       (I.R.S. Employer
corporation or Organization)      Identification Number)

5 Pennsylvania Boulevard, Feasterville, PA       19053
ddress of Principal Executive Offices)         (Zip Code)

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

   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  period
that the  Registrant was required to file such  reports,  and (2) has been
subject to such filing requirements for the past ninety days.
                YES X        NO _____

   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 _____

   As  of  May  11,  1999, the Registrant had outstanding 5,404,515 shares 
of its common stock, par value $0.01 per share (the "Common Stock").

 
                                      1
<PAGE>

                                    BERGER HOLDINGS, LTD.

INDEX
                                                                  Page
PART I   FINANCIAL INFORMATION
         
     Item 1.  Condensed Consolidated Balance
                    Sheets at March 31, 1999 and
                    December 31, 1998                               3

                    Condensed Consolidated Statements of
                    Operations for the three month periods
                    ended March 31, 1999 and 1998                   5

                    Condensed Consolidated Statements
                    of Cash Flows for the three month periods
                    ended March 31, 1999 and 1998                   6

                    Notes to Condensed Consolidated
                    Financial Statements                            7

         Item 2.  Management's Discussion and
                    Analysis of Financial Condition
                    and Results of Operations                       8

         Item 3.  Quantitative and Qualitative Disclosures
                    About Market Risk                              11

PART II   OTHER INFORMATION

         Item 1.  Legal Proceedings                                11

         Item 2.  Changes in Securities and Use of Proceeds        11

         Item 3.  Defaults Upon Senior Securities                  11

         Item 4.  Submission of Matters to a Vote of
                    Security Holders                               11

         Item 5.  Other Information                                11
         Item 6.  Exhibits and Reports on Form 8-K                 11

SIGNATURES                                                         12
                                       2

<PAGE>
<TABLE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
              ASSETS                                   March 31,    December 31,
                                                        1999            1998
                                                      (unaudited)    (audited)
<S>                                                  ------------  -------------
Current Assets
                                                      <C>            <C>        
     Cash .......................................     $   262,522    $   149,885
                                                                         
     Trade accounts receivable, net of
       allowance for doubtful accounts of
       $30,000 in 1999 & 1998                           3,786,756      3,928,858
     Inventories (Note 2)                               6,322,610      6,552,420
     Prepaid and other assets                             417,674        283,744
     Deferred income taxes                                510,000        484,000

    Total current assets                               11,299,562     11,398,907
   
    Property and equipment, net (Note 3)               10,912,116      9,789,015
    Deferred income taxes                               1,731,201      1,731,201
    Other assets                                        3,451,253      4,342,283
    Goodwill, net                                       7,011,939      7,325,798


     Total Assets ...............................     $34,406,071    $34,587,204

</TABLE>

                                       3

<PAGE>

<TABLE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
                      CONDENSED CONSOLIDATED BALANCE SHEETS


<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY                 March 31,      December 31,
                                                       1999            1998
                                                    (unaudited)     (audited)
<S>                                                -------------  --------------
Current Liabilities
                                                    <C>             <C>         
     Current maturities of long term debt           $  2,016,717    $  2,062,286
     Accounts payable                                  1,617,116         960,953
     Accrued expenses                                    944,445       1,141,933

     Total current liabilities                         4,578,277       4,165,172

Long term debt (Note 5)                               18,012,567      14,560,307
Redeemable common stock, 125,000 shares                  500,000         500,000
Commitments and contingencies                               -              -    

Stockholders' Equity
     Series A convertible preferred stock, 
     $.01 par value
      $4,000,000 liquidation value in 1998
      Authorized 5,000,000 shares
      Issued and outstanding 40,000 shares in 1998          --               400
     
     Common  stock  $.01 par  value
      Authorized 20,000,000 shares
      Issued  and outstanding
      5,404,515 shares in 1999
      5,301,330 shares in 1998                            54,045          53,013
   
      Additional paid-in-capital                      17,113,582      21,114,214
      Deficit                                        (5,369,483)     (5,322,986)

                                                      11,798,144      15,844,641
     
     Less common stock subscribed                      (482,916)       (482,916)

     Total shareholders' equity                       11,315,228      15,361,725

     Total liabilities and stockholders' equity     $ 34,406,071    $ 34,587,203

</TABLE>

                                       4

<PAGE>

<TABLE>

             BERGER HOLDINGS, LTD. AND SUBSIDIARY
        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>

                                                                Three Months Ended March 31,
                                                                    1999             1998
                                                                  (unaudited)    (unaudited)

<S>                                                              <C>            <C>        
Net sales                                                        $ 8,207,982    $ 7,014,455
Cost of sales                                                      6,608,654      5,789,081

Gross profit                                                       1,599,327      1,225,374

Selling, general and administrative expenses                       1,201,479      1,090,081

Income from operations                                               397,849        135,293

Other (expenses) income
     Interest expense                                               (473,773)      (308,094)
     Interest income                                                   3,427            589
     Proceeds from insurance recovery                                   --          118,701

                                                                    (470,346)      (188,804)

Loss before provision for
   income tax benefit and preferred stock dividend                   (72,497)       (53,511)

  Tax benefit (Note 4)                                               26,000           --

Loss before preferred stock dividend                                 (46,497)       (53,511)

Preferred stock dividend                                                --          100,000

Net loss available to common stockholders                        $   (46,497)   $  (153,511)
Basic earnings per share                                         $     (0.01)   $     (0.03)

     Weighted average common shares outstanding                    5,507,705      5,356,561

Diluted earnings per share                                       $     (0.01)   $     (0.03)

     Weighted average common shares outstanding                    5,507,705      5,356,561
     Add: effect of vested and non-vested dilutive securities      1,148,160      1,390,240
     Add: effect of convertible debt and preferred stock             941,177        941,177

     Diluted weighted average common shares outstanding            7,597,042      7,687,978

</TABLE>

                                      5

<PAGE>

<TABLE>

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

<CAPTION>
                                                                          Three Months Ended March 31,
                                                                            1999              1998
                                                                           (unaudited)     (unaudited)
<S>                                                                       ------------     -----------
Cash flows from operating activities 
                                                                          <C>             <C>     
     Net income                                                           $  (46,497)        (53,511)

     Adjustments to reconcile net income to net cash
       provided by operating activities
         Deferred income tax                                                 (26,000)          --
         Depreciation and amortization                                       472,181         380,105
         Decrease in accounts receivable allowance                             --            (13,000)
     Decrease (increase) in assets, net of the effects of an acquisition
         Accounts receivable                                                 142,102      (1,219,010)
         Inventories                                                         229,810         327,533
         Other current and long-term assets                                 (179,461)       (888,183)
     Increase in liabilities
         Accounts payable and accrued expenses                               458,675       1,536,700

Net cash provided by (used in) operating activities                        1,050,810         (39,366)

Cash flows from investing activities
     Acquisition of property and equipment                                  (344,863)       (212,203)
     Payment for acquisitions                                                  --         (10,000,000)
Net cash used in investing activities                                       (344,863)     (10,212,203)

Cash flows from financing activities
     Dividends paid                                                            --            (100,000)
     Net proceeds (repayment) working capital line                           (48,230)       3,612,390
     Net proceeds (repayment) equipment term loan                           (132,999)         648,668
     Proceeds from long term debt                                              9,028          339,527
     Repayments of long term debt                                           (421,109)         (19,135)
     Net proceeds from issuance of stock                                         --         1,455,250
Net cash provided by (used in) financing activities                         (593,310)       5,936,700

Net increase (decrease) in cash                                              112,637       (4,314,869) 
Cash, beginning of period                                                    149,885        4,411,347

Cash, end of period                                                     $    262,522      $    96,478


Supplemental Disclosure of Cash Flow Information

Cash paid during the period for interest                                $    473,773      $    308,094
                                                                        ------------      -------------
</TABLE>

                                       6

<PAGE>

                      BERGER HOLDINGS, LTD. AND SUBSIDIARY
              Notes to Condensed Consolidated Financial Statements


Note 1.   Basis of Presentation:

         The accompanying  unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted  accounting  principles
for interim  financial  information  and the  instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial statements. In the opinion of management,  all adjustments (consisting
solely  of  normal  recurring   accruals)   considered   necessary  for  a  fair
presentation have been included.


Note 2.   Inventories:

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

         Components  of  inventories  at March 31,  1999 and  December  31, 1998
consist of the following:


                                   March 31,     December 31,
                                     1999            1998
                                -------------   -------------
<TABLE>

<S>                               <C>            <C>        
Raw materials                     $ 3,559,637    $ 3,951,194
Finished goods                      2,788,475      2,624,451
Packaging material and supplies       120,498
                                                     122,775
Less provision for obsolescence      (146,000)
                                                    (146,000)
                                  -----------    -----------

     Total inventories            $ 6,322,610    $ 6,552,420
                                  ===========    ===========

</TABLE>


         All  inventory  is  currently  used in the  business  of the  Company's
subsidiary, Berger Bros Company.


Note 3.   Property, Plant and Equipment:

         Property,  plant and  equipment  is  recorded  at cost.  Costs of major
additions and betterments are capitalized;  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.

         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 on accelerated methods.

                                       7
<PAGE>

Note 4.   Income Taxes:

         Consolidated  income tax  (benefit)  for the three month  periods ended
March 31, 1999 and 1998 are ($26,000) and zero, which result in an effective tax
rate of 36% and 0%, respectively. The rate of tax benefit in relation to pre-tax
loss in 1999 is consistent  with the year end effective rate prior to the change
in the valuation  allowance.  The absence of a tax benefit in 1998 is due to the
recognition  of a valuation  allowance  for the tax  benefit  related to the net
operating loss.

Note 5.   Long Term Debt:

         During the first quarter of 1999,  and effective as of January 1, 1999,
the Company converted 40,000 shares of its Series A Convertible  Preferred Stock
(the "Series A Preferred Stock") to 10% Subordinated  Convertible Debentures due
December 31, 2003 ("10% debentures").  The 10% debentures are convertible at any
time into shares of the  Company's  common  stock,  $0.01 par value,  at $4.25 a
share,  or 23.53  shares of common stock for each $100  principal  amount of 10%
debentures   outstanding   on  the   conversion   date,   subject  to  specified
anti-dilution adjustments.

         Simultaneously with the conversion of the Series A Preferred Stock, the
Company extended the exercise date on 300,000 common stock warrants from January
2, 2003 to December  31, 2003;  and  extended  the  maturity  date on its 12.25%
debentures  from January 2, 2003, to December 31, 2003. The increase in interest
rates to 20% and 19.25%,  respectively,  on the 12.25%  debentures were extended
from January 2, 2001 for  $2,000,00 of the 12.25%  debenture to January 2, 2002;
and were extended  from January 3, 2001 for $500,000 of the 12.25%  debenture to
January 2, 2002.  The interest  rate  decrease from 19.25% to 14% on $500,000 of
the  12.25%  debenture  will be  extended  to January  2, 2003  rather  than the
original date of January 3, 2002.

ITEM 2.   Management's Discussion and Analysis of Financial Condition and 
Results of Operation

Results of Operations


         The  financial  statements  include the accounts of the Company and its
wholly-owned   subsidiary,   Berger  Financial  Corporation   ("Financial")  and
Financial's  wholly-owned  subsidiary,  Berger Bros  Company.  All  intercompany
transactions and balances have been eliminated.

         Sales for the three month  period  ended  March 31, 1999 (the  "Current
Quarter") were $8,207,982,  an increase of 17.0%, or $1,193,527,  as compared to
$7,014,455  for the three month  period  ended  March 31, 1998 (the  "Comparable
Quarter").  This increase was primarily due to the  acquisition of the assets of
Sheet Metal  Manufacturing Co., Inc. (the "Sheet Metal Acquisition") on December
7, 1998. This is the fifth  consecutive  quarter in which the Company has posted
record sales versus the Comparable Quarter.

         During the Current Quarter,  the Company reported a net loss of $46,497
on net sales of $8,207,982 as compared to a net loss of $153,511 (which included
a one time  insurance  recovery of $118,701) on net sales of $7,014,455  for the
Comparable Quarter. The net loss for the Comparable Quarter, adjusted to exclude
the  effect to an  insurance  gain  recognized  in 1998,  was  $272,212;  so for
comparative  purposes,  the Company actually reported a 73.4% improvement in net
results.

         Income  from  operations  in the  Current  Quarter is  $397,849  versus
$135,293 in the  Comparable  Quarter,  an increase of 194.1%.  This  substantial
increase can be attributed to a larger  concentration  of higher margin products
such as the growth in copper sales  generated both internally and from the Sheet
Metal Acquisition.

                                       8
<PAGE>

         Cost of Sales was  $6,608,654  in the  Current  Quarter as  compared to
$5,789,081 in the  Comparable  Quarter.  As a percentage  of net sales,  Cost of
Sales  decreased to 80.5% in the Current  Quarter  from 82.5% in the  Comparable
Quarter.  This  decrease  is  attributable  to a change  in  product  sales  mix
generated by the Sheet Metal  Acquisition  and accretive  economies of scale now
being realized by the Company,  even during the Company's  historically  slowest
quarter of the year.

         Selling,  general and  administrative  expenses were  $1,201,479 in the
Current  Quarter as compared  to  $1,090,081  in the  Comparable  Quarter.  This
increase in expenses was primarily due to additional  costs  incurred to support
business  growth and the Sheet Metal  Acquisition,  including  the hiring of key
support  personnel.  As  a  percentage  of  net  sales,  selling,   general  and
administrative  expenses decreased to 14.6% in the Current Quarter,  compared to
15.5% in the Comparable Quarter, which reflects the accretive economies of scale
resulting from the Sheet Metal Acquisition. This improvement in Selling, general
and  administrative  expenses  as a  percentage  of sales  represents  the fifth
consecutive quarter that the Company has improved over Comparable Quarters.


Liquidity and Capital Resources

         During the first quarter of 1999,  and effective as of January 1, 1999,
the  Company  converted  40,000  shares  of  Series  A  Preferred  Stock  to 10%
Debentures.  The 10% debentures  are  convertible at any time into shares of the
Company's Common Stock,  $0.01 par value, at $4.25 a share, or into 23.53 shares
of Common Stock for each $100 principal amount of 10% debentures  outstanding on
the conversion date, subject to specified anti-dilution adjustments.

         Simultaneously with the conversion of the Series A Preferred Stock, the
Company extended the exercise date on 300,000 common stock warrants from January
2, 2003 to December  31, 2003;  and  extended  the  maturity  date on its 12.25%
debentures  from January 2, 2003, to December 31, 2003. The increase in interest
rates to 20% and 19.25%,  respectively,  on the 12.25%  debentures were extended
from January 2, 2001 for  $2,000,00 of the 12.25%  debenture to January 2, 2002;
and were extended  from January 3, 2001 for $500,000 of the 12.25%  debenture to
January 2, 2002.  The interest  rate  decrease from 19.25% to 14% on $500,000 of
the  12.25%  debenture  will be  extended  to January  2, 2003  rather  than the
original date of January 3, 2002.

         At March 31, 1999, working capital was $6,721,285, resulting in a ratio
of current  assets to current  liabilities  of 2.47 to 1, as compared to working
capital of $7,233,735 and a ratio of 2.74 to 1 at December 31, 1998.

         Current  liabilities at March 31, 1999 totaled  $4,578,277,  consisting
primarily of $2,561,561 in accounts  payable and accrued expenses and $2,016,717
in current  maturities of long-term  debt.  At December 31, 1998,  total current
liabilities  were  $4,165,172,  consisting  primarily of  $2,102,886 in accounts
payable and accrued  expenses and $2,062,286 in current  maturities of long-term
debt.  This increase is primarily due to the Company's  investments in inventory
through accounts payable to support the upcoming busy season.

         At March 31, 1999, the Company had shareholders' equity of $11,315,228,
as compared to  $15,361,725  at December  31, 1998.  This  decrease is primarily
attributable to the conversion of 40,000 shares of Series A Preferred Stock into
subordinated convertible debentures.

         Cash  provided  by  operating  activities  in the  Current  Quarter was
$1,050,810 as compared to $39,366 used in the Comparable Quarter. The difference
between  periods is primarily due to Accounts  Receivable  decreasing  and Other
Assets not increasing as drastically  as the  Comparable  Quarter.  Increases to
both of these assets in the  Comparable  Quarter were due to the  acquisition of
the Roof Drainage  Division of the Company's main  competitor,  Benjamin Obdyke,
Inc.  (the "Obdyke  Acquisition")  and the  construction  of new office space in
1998.

                                      9

<PAGE>

         Net cash used in investing  activities  totaled $344,863 in the Current
Quarter,  as  compared  to  $10,212,203  used in the  Comparable  Quarter.  This
decrease is primarily  attributable to the cash used for the Obdyke  Acquisition
in 1998.

         Net cash used in financing activities was $593,310 in the Current 
Quarter, as compared to $5,936,700 provided in the Comparable Quarter.  This 
difference is due to the increased borrowing needed to support the Obdyke
Acquisition.  Availability under the Working Capital Loan as of March 31, 1999 
was $2,923,937.



Year 2000 Readiness Disclosure

         The  Company is aware of the  issues  with the Year 2000  problem.  The
"Year 2000" matter relates to whether computer hardware,  software and equipment
will properly recognize date sensitive  information  referring to the Year 2000.
Potential  computer system and equipment  failures  arising from years beginning
with "20' rather than "19" are a known risk.

The Company  currently  has a program  underway to  remediate  by the end of the
second quarter of 1999 all of the Company's  significant  computer  systems that
are not Year 2000  compliant.  The  program  to ensure  its Year 2000  readiness
includes  the  following:  identifying  all  systems  which may not be Year 2000
compliant;  correcting or replacing those systems which are not Year 2000 ready;
testing the new or corrected systems to make sure they will operate according to
Year 2000 requirements; and inquiring of vendors and customers of the Company to
assess their Year 2000 readiness.  The Company has identified  certain  critical
software and hardware systems that need to be replaced or updated in order to be
Year 2000 compliant.  The Company has replaced or is in the process of replacing
such systems and intends to complete the replacement during the third quarter of
1999.

         The Company has been  inquiring of certain key  suppliers  and business
partners about their Year 2000 readiness.  While no assurances can be given that
key suppliers and business partners will remedy their own Year 2000 issues,  the
Company  to date has not  identified  any  material  impact  on its  ability  to
continue  normal  business  operations with suppliers or other third parties who
fail to address the Year 2000 issue.

         Actual costs associated with  implementation of the Company's Year 2000
program  are  not  expected  to be  material  to the  Company's  operations  and
financial  condition.  Costs of approximately  $300,000,  primarily for software
have been or are expected to be incurred and capitalized.  As of March 31, 1999,
approximately $275,000 of costs have been expended.

         The Company  will  continue to monitor and  evaluate  the impact of the
Year 2000 issue on its  operations.  Until the Company has  completed  the final
testing part of its program,  the risks from potential Year 2000 failures cannot
be fully  assessed.  Due to this  situation,  the Company cannot now begin final
contingency plans. These plans will be developed as potential Year 2000 failures
are identified in the final testing stages. Nevertheless,  if remediation is not
accomplished  successfully in a timely fashion and successful  contingency plans
are not  implemented,  the  Company  believes  the Year 2000 issue  could have a
material adverse effect on the Company.

                                       10

<PAGE>

ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk.

         For  information  regarding  the company's  exposure to certain  market
risks, see Item 7A, Quantitative and Qualitative  Disclosures About Market Risk,
in the  Company's  Annual  Report on Form 10-K for the year ended  December  31,
1998.  There have been no  significant  changes  since  December 31, 1998 in the
Company's portfolio of financial instruments or market risk exposures.


                           PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

         None.

Item 2 - Changes in Securities and Use of Proceeds.

         None.

Item 3 - Defaults Upon Senior Securities.

         None.

Item 4 - Submission of Matters to a Vote of Securities Holders.

         None.

Item 5 - Other Information.

         Not applicable.

Item 6 - Exhibits and Reports on Form 8-K.

         (a) 10.1 Exchange  Agreement,  entered into as of January 1, 1999,
                  by  and  between  Sirrom  Capital   Corporation  d/b/a  Tandem
                  Capital, a Tennessee corporation,  Argosy Investment Partners,
                  L.P., a Pennsylvania partnership,  and the Company.  (Pursuant
                  to Item 601 (b)(2) of  Regulation  S-K of the  Securities  and
                  Exchange Commission,  Schedule 5.1 to this Agreement, the only
                  schedule to this Agreement,  is not filed herewith and will be
                  furnished to the Commission on request.)
             27   Financial Data Schedule (EDGAR only).

          (b)      Form 8-K/A, filed February 22, 1999, containing Items 2 and 7
                  (amends Form 8-K filed December 22, 1998, containing Items
                  2 and 7).

                                       11

<PAGE>

                                    Signatures


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                               BERGER HOLDINGS, LTD.




                                            By:/s/ JOSEPH F. WEIDERMAN
                                            Joseph F. Weiderman
                                            President and
                                            Chief Operating Officer


                                            By:/s/ FRANCIS E. WELLOCK, JR.
                                            Francis E. Wellock, Jr.
                                            Chief Financial Officer

                                            Date:  May 14, 1999

                                       12

<PAGE>


                                                                 Exhibit 10.1






                               EXCHANGE AGREEMENT

                                     Between

                           SIRROM CAPITAL CORPORATION,
                              d/b/a TANDEM CAPITAL

                        ARGOSY INVESTMENT PARTNERS, L.P.,
                                  AS INVESTORS

                                       And

                              BERGER HOLDINGS, LTD.

                           Dated as of January 1, 1999



<PAGE>

                                TABLE OF CONTENTS


ARTICLE I - EXCHANGE       -1-
         Section 1.1       Items to be Exchanged     -1-
         Section 1.2        Registration Rights; Closing.     -2-

ARTICLE  II -  REPRESENTATIONS  AND  WARRANTIES  OF THE  COMPANY -3- Section 2.1
         Corporate Status -3- Section 2.2 Authorization, Absence of Conflicts-3-
         Section 2.3 Validity and Binding Effect -4- Section 2.4 Survival -4-

ARTICLE  III -  REPRESENTATIONS  AND  WARRANTIES OF THE INVESTOR -4- Section 3.1
         Corporate  Status;  Residence -4- Section 3.2 Authorization -4- Section
         3.3 Validity and Binding  Effect -5- Section 3.4  Accredited  Investor;
         Investment Intent -5- Section 3.5 Survival -5-

ARTICLE IV - COVENANTS OF THE COMPANY       -5-
         Section 4.1       Prior Covenants  -5-
         Section 4.2       No Dividends     -5-
         Section 4.3       Limitation on Activities  -6-

ARTICLE V - SUBORDINATION OF DEBENTURES     -7-
         Section 5.1       Subordination    -7-
         Section 5.2       Liquidation, etc -7-
         Section 5.3       Default on Senior Indebtedness or Outstanding 
                           Debentures     -8-
         Section 5.4       Subrogation      -8-
         Section 5.5       Company's Obligations Not Impaired -8-

ARTICLE  VI - RESTRICTIONS ON TRANSFER -9- Section 6.1 Legends,  Restrictions on
         Transfer -9- Section 6.2 Notice of  Intention to Transfer;  Opinions of
         Counsel -9-

ARTICLE VII - EVENTS OF DEFAULT; REMEDIES   -10-
         Section 7.1       Events of Default-10-
         Section 7.2       Acceleration of Maturities-11-

ARTICLE VIII - AMENDMENTS, WAIVERS AND CONSENTS      -12-
         Section 8.1       Consent Required -12-
         Section 8.2       Solicitation of Debenture Holders  -12-
         Section 8.3       Effect of Amendment or Waiver      -12-

                                       i

ARTICLE IX - INTERPRETATION OF AGREEMENT; DEFINITIONS         -13-
         Section 9.1       Definitions      -13-
         Section 9.2       Accounting Principles     -14-

ARTICLE X - MISCELLANEOUS  -15-
         Section 10.1      Expenses; Stamp Tax Indemnity      -15-
         Section 10.2      Powers and Rights Not Waived; Remedies Cumulative-15-
         Section 10.3      Notices  -15-
         Section 10.4      Successors and Assigns    -17-
         Section 10.5      Survival of Covenants and Representation    -17-
         Section 10.6      Severability     -17-
         Section 10.7      Governing Law    -18-
         Section 10.8      Captions, Counterparts    -18-
         Section 10.9      Continuing Obligations    -18-
         Section 10.10     Entire Agreement -18-

                                       ii

<PAGE>

                               EXCHANGE AGREEMENT

         This EXCHANGE  AGREEMENT (the  "Agreement")  entered into as of the 1st
day of January,  1999, is by and between SIRROM CAPITAL CORPORATION d/b/a TANDEM
CAPITAL, a Tennessee  corporation,  ("Tandem"),  and ARGOSY INVESTMENT PARTNERS,
L.P., a Pennsylvania limited partnership ("Argosy"),  (each of Tandem and Argosy
being  referred  to  as,  individually,  an  "Investor"  and  collectively,  the
"Investors"),  and  BERGER  HOLDINGS,  LTD.,  a  Pennsylvania  corporation  (the
"Company").

                                   WITNESSETH:

         WHEREAS,  the Company  and the  Investors  are parties to that  certain
Preferred Stock Purchase Agreement dated as of December 17, 1997 (the "Preferred
Stock Purchase  Agreement") pursuant to which the Company issued and sold to the
Investors an aggregate of 40,000 shares of the authorized but unissued  Series A
Convertible  Preferred  Stock (the  "Preferred  Stock") for a purchase  price of
$100.00 per share, or an aggregate purchase price of $4,000,000;

         WHEREAS, the Company and the Investors have agreed to exchange the 
Preferred Stock for the Debentures (as defined below); and

         WHEREAS,   contemporaneously  with  such  exchange  (i)  certain  stock
purchase  warrants  dated as of December  31, 1997 and January 2, 1998 are being
amended and restated solely to extend the exercise dates thereof from January 2,
2003 to December 31, 2003 and (ii) the  Investors  are  surrendering  debentures
originally  issued on December  31,  1997 and  January 2, 1998 in  exchange  for
amended and  restated  debentures  (as more fully  defined in Section  5.1,  the
"Original  Debentures") which (x) extend the maturity dates thereof from January
2, 2003 to December 31, 2003 and (y) provide for the interest rates to change in
accordance with Section 1.2(d) of this Agreement.

         NOW,  THEREFORE,  in  mutual  consideration  of the  premises  and  the
respective  representations,  warranties,  covenants  and  agreements  contained
herein, the parties agree as follows:

                              ARTICLE I - EXCHANGE

Section 1.1       Items to be Exchanged .

         The Company and the  Investors  hereby agree that the  Preferred  Stock
shall be  exchanged  for Four  Million  and  no/100ths  Dollars  ($4,000,000.00)
aggregate principal amount of the Company's Subordinated  Convertible Debentures
(the  "Debentures")  due on the date (the "Maturity  Date") which is the earlier
of: (1) December 31,  2003;  or (2) the end of business on the date  immediately
preceding the effectiveness of a Sale Event.

                                       1

<PAGE>

         The  Debentures  shall be dated as of  January  1, 1999 (the  "Issuance
Date") and bear interest from the Issuance Date until the Maturity  Date, at the
rate of 10% per annum,  subject to increase upon the failure to occur of certain
events described  therein.  Interest is payable  quarterly by automatic debit on
the  first  day of  each  February,  May,  August  and  November  in  each  year
(commencing February 1, 1999) and on the Maturity Date, to bear such other terms
and to be  substantially  in the form attached  hereto as Exhibit A. Interest on
the Debentures shall be computed on the basis of a 360-day year of twelve 30-day
months.  The term  "Debentures"  as used herein  shall  include  each  Debenture
delivered  pursuant to this Agreement.  The terms which are  capitalized  herein
shall have the meanings set forth in Section 9.1 hereof unless the context shall
otherwise require.

Section 1.2        Registration Rights; Closing.

         (a) The  term  "Conversion  Shares"  as it is used in the  Registration
Rights  Agreement  is hereby  amended to mean shares of the common  stock of the
Company (the "Common  Stock")  issuable  upon  conversion  of the  Debentures as
provided in Section 1 of the Debentures.

         (b) Subject to the terms and conditions  hereof and on the basis of the
representations   and  warranties   hereinafter   set  forth,   the  Company  is
contemporaneously  herewith issuing and delivering (i) to Tandem,  and Tandem is
hereby accepting from the Company,  Debentures in the aggregate principal amount
of $2,500,000  in exchange for the 25,000 shares of the Preferred  Stock held by
Tandem and (ii) to  Argosy,  and Argosy is hereby  accepting  from the  Company,
Debentures in the aggregate  principal  amount of $1,500,000 in exchange for the
15,000 shares of the Preferred  Stock held by Argosy.  The  Investors,  in their
capacity  as  holders of  Outstanding  Debentures,  consent to the  transactions
contemplated by this Agreement and by the Debentures.

         (c) Delivery of the  Debentures  in exchange  for the  surrender of the
certificates  evidencing the Preferred  Stock together with executed blank stock
powers attached thereto (the "Closing") is being made contemporaneously with the
execution hereof at the offices of Wolf, Block,  Schorr and Solis-Cohen LLP, 111
South 15th Street, Philadelphia,  Pennsylvania 19102 at 10:00 A.M., Philadelphia
time, on March __, 1999 (the "Closing Date").  The  certificates  evidencing the
Preferred Stock shall be canceled.  The Debentures delivered to the Investors on
the Closing Date are being  delivered  to the  Investors in the form of a single
Debenture as to each  Investor for the full amount set forth in Section  1.2(b),
registered in the respective Investor's name and, in the form attached hereto as
Exhibit A.

         (d)  Contemporaneously  with the Closing: (i) the Company is exchanging
certain  stock  purchase  warrants  dated as of December 31, 1997 and January 2,
1998 for amended and restated stock purchase warrants  substantially in the form
of Exhibit B attached  hereto  extending the exercise dates thereof from January
2, 2003 to December 31, 2003 and (ii) the Investors are surrendering  debentures
originally  issued on December  31,  1997 and  January 2, 1998 in  exchange  for
amended and restated  debentures  substantially in the forms of Exhibits C and D
which (x) extend the maturity dates thereof from January 2, 2003 to December 31,
2003 and (y) provide  for the  interest  rates to change (A) as to Tandem,  from

                                       2

<PAGE>


12.25% to 20% as of January 2, 2003 rather than as of January 2, 2001 and (B) as
to Argosy, from 12.25% to 19.25% as of January 2, 2002 rather than as of January
3, 2001 and from  19.25% to 14% as of January 2, 2003  rather than as of January
3, 2002. The warrants and debentures being exchanged and surrendered pursuant to
this subsection 1.2(d) shall be canceled.

         ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company hereby represents and warrants to each Investor as follows:

Section 2.1       Corporate Status .

         The Company is a  corporation  duly  organized,  validly  existing  and
subsisting  under  the  laws of the  Commonwealth  of  Pennsylvania  and has the
corporate power to own and operate its  properties,  to carry on its business as
now  conducted  and to enter  into and to  perform  its  obligations  under this
Agreement,  the  Debentures,  the  Registration  Rights  Agreement and any other
document  executed  and  delivered  by the  Company in  connection  herewith  or
therewith (collectively, the "Operative Documents"). The Company is qualified to
do business and is in good standing in each state or other jurisdiction in which
such qualification is necessary under applicable provisions of law, except where
the  failure to so qualify  would not have a  Materially  Adverse  Effect on the
financial condition or results of operations of the Company.

Section 2.2       Authorization, Absence of Conflicts .

         The Company has full legal right, power and authority to enter into and
perform its  obligations  under this  Agreement  and any of the other  Operative
Documents   without  the  consent  or  approval  of  any  other  person,   firm,
governmental  agency or other legal  entity.  The execution and delivery of this
Agreement,  the issuance of the Debentures hereunder, the execution and delivery
of each other document in connection  herewith or therewith to which the Company
is a party,  and the  performance  by the Company of its  obligations  hereunder
and/or  thereunder are within the corporate  powers of the Company and have been
duly authorized by all necessary  corporate action properly taken, have received
all necessary governmental  approvals, if any were required, and do not and will
not contravene or conflict with (a) the Articles of  Incorporation  or Bylaws of
the Company, as amended,  (b) any material agreement to which the Company or any
of its  Subsidiaries  is a party or by which any of them or their  properties is
bound,  or  constitute  a  default  thereunder,  or result  in the  creation  or
imposition of any lien, charge,  security interest, or encumbrance of any nature
upon any of the  property  or assets of the  Company or any of its  subsidiaries
pursuant to the terms of any such  agreement or  instrument,  or (c) violate any
provision of law or any applicable judgment,  ordinance,  regulation or order of
any court or governmental agency. The officer(s)  executing this Agreement,  the
Debentures and the Operative  Documents,  is duly authorized to act on behalf of
the Company.

                                       3

<PAGE>

Section 2.3 Validity and Binding Effect .

         Each  of the  Operative  Documents  is the  legal,  valid  and  binding
obligation of the Company,  enforceable  against the Company in accordance  with
its  terms,  except  as such  enforceability  may be  limited  by the  effect of
bankruptcy,  insolvency or similar laws affecting creditors' rights generally or
by general principles of equity.

Section 2.4       Survival .

         The  representations  and  warranties of the Company  contained in this
Agreement shall survive the Closing in accordance with Section 10.5 hereof.

         ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

         Each  Investor,  severally  and not jointly,  hereby  represents to the
Company as follows:

Section 3.1       Corporate Status; Residence .

         The Investor is a corporation or partnership duly organized and validly
existing  under the laws of its  respective  jurisdiction  and has the corporate
power  to own and  operate  its  properties,  to carry  on its  business  as now
conducted and to enter into and to perform its obligations  under this Agreement
and any other  document  executed or  delivered  by the  Investor in  connection
herewith.

Section 3.2       Authorization .

         The Investor has full legal  right,  power and  authority to enter into
and perform its obligations under this Agreement and any other document executed
and  delivered by the Investor in  connection  herewith,  without the consent or
approval of any other person,  firm,  governmental agency or other legal entity.
The execution and delivery of this Agreement and any other document executed and
delivered by the Investor in connection  herewith,  and the  performance  by the
Investor of its obligations hereunder and/or thereunder are within the corporate
powers of the Investor,  have received all necessary governmental  approvals, if
any were  required,  and do not and will not contravene or conflict with (a) the
organizational  documents of the Investor,  (b) any material  agreement to which
the  Investor is a party or by which it or any of its  properties  is bound,  or
constitute a default thereunder,  or result in the creation or imposition of any
lien,  charge,  security  interest or  encumbrance of any nature upon any of the
property or assets of the Investor  pursuant to the terms of any such  agreement
or instrument,  or (c) violate any provision of law or any applicable  judgment,
ordinance,  regulation  or  order  of any  court  or  governmental  agency.  The
officer(s)  executing  this  Agreement  and  any  other  document  executed  and
delivered by the Investor in connection  herewith,  is duly authorized to act on
behalf of the Investor.

                                       4

<PAGE>

Section 3.3       Validity and Binding Effect .

         This  Agreement  and any other  document  executed and delivered by the
Investor in connection  herewith are the legal, valid and binding obligations of
the Investor, enforceable against it in accordance with their respective terms.

Section 3.4       Accredited Investor; Investment Intent .

         Each Investor is an "accredited  investor"  under Rule 501(a) under the
Securities Act of 1933 (the "Securities  Act").  Tandem is an investment company
registered  under the  Investment  Company Act of 1940, as amended and has a net
worth in excess of One Million Dollars ($1,000,000).  Argosy is a Small Business
Investment  Company, as the term is defined in Section 103 of the Small Business
Investment Act of 1958, 15 U.S.C.A.  ss.662, and has a total capital of at least
One Million Dollars ($1,000,000).  Each Investor is acquiring the Debentures for
its own account,  for  investment,  and not with a view to the  distribution  or
resale  thereof,  in whole or in part, in violation of the Securities Act or any
applicable  state  securities law, and the Investor has no present  intention of
selling, negotiating or otherwise disposing of the Debentures.

Section 3.5       Survival .

         The  representations  and warranties of the Investor  contained in this
Agreement shall survive the Closing in accordance with Section 10.5 hereof

                      ARTICLE IV - COVENANTS OF THE COMPANY

         From and after the Closing  Date and  continuing  so long as any amount
remains unpaid on any of the Debentures:

Section 4.1       Prior Covenants .

         The covenants set forth in Article V of the  Preferred  Stock  Purchase
Agreement  (other than Section 5.2  (relating to the payment of dividends on the
Preferred  Stock)  which is hereby  terminated)  shall  remain in full force and
effect.  References therein to "the Preferred Stock " and "as long as any shares
of the  Preferred  Stock remain  outstanding"  or other similar  language  shall
hereinafter  mean  the  Debentures  and so  long  as any of the  Debentures  are
outstanding.

Section 4.2       No Dividends .

         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  Company or
other  distribution  of cash or other  property  declared  or made  directly  or
indirectly by the Company or any affiliate or any Person acting on behalf of the
Company or any of its  affiliates  with respect to any shares of Common Stock or
other capital stock  (provided that the issuance of such other capital stock has

                                       5

<PAGE>

been  approved  under  subsection  4.3(c)  below to the extent such  approval is
required by such  subsection)  over which the Preferred  Stock had preference or
priority in the payments of dividends  or in the  distribution  of assets on any
liquidation,  dissolution  or winding up of the  Company (or would have had such
preference or priority were the Preferred Stock still  outstanding) (the "Junior
Stock")  unless in each case (x) all interest  payments on the  Debentures  have
been  paid in full as of the date of each  such  proposed  distribution  and (y)
sufficient  funds  shall have been paid or set apart for the payment of the full
interest payment for the current quarter with respect to the Debentures.

Section 4.3       Limitation on Activities .

         In  addition to any other vote or consent of  shareholders  required by
law or the Articles of Incorporation  of the Company,  the Company will not take
any of the following  actions  without the written  consent of the holders of at
least  seventy-five  percent  (75%) of the  aggregate  principal  amount  of the
Debentures then outstanding:

         (a) redeem, purchase or otherwise acquire for value (or pay into or set
aside for a sinking fund for such  purpose)  any  Debentures  otherwise  than by
redemption of the  Debentures in accordance  with Section 2 of the Debentures or
by conversion in accordance with Section 1 of the Debentures;

         (b) redeem, purchase or otherwise acquire (or pay into or set aside for
a sinking fund for such purpose) any share or shares of the 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 Company 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 a certain "Put Option"  contained in a certain
Asset Purchase  Agreement dated as of December 3, 1997, by and among the Company
and the parties thereto;

         (c) authorize or issue, or obligate itself to issue, any other security
(i)  senior to or in  parity  with the  Debentures  as to  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 Company or to elect directors which  constitute  twenty
percent (20%) or more of the Board of Directors;

         (d) effect any sale, lease,  assignment,  transfer, or other conveyance
of  all  or  substantially  all  of the  assets  of  the  Company  or any of its
subsidiaries, or any consolidation or merger involving the Company or any of its
subsidiaries,  except (A) merger with a Wholly-owned  subsidiary of the Company,
(B) a mere  reincorporation  transaction,  or (C) a merger pursuant to which the
Company is the surviving  entity and the  capitalization  of the Company remains
unchanged; or

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

                                       6

<PAGE>

                     ARTICLE V - SUBORDINATION OF DEBENTURES

Section 5.1       Subordination

         Notwithstanding  anything to the  contrary in this  Agreement or in the
Debentures,  the indebtedness  evidenced by the Debentures,  including principal
and interest,  shall be subordinate  and junior to: (i) the prior payment of the
indebtedness of the Company for borrowed money (except such  indebtedness of the
Company other than the Debentures which is expressly stated to be subordinate or
junior in any respect to other  indebtedness  of the Company)  outstanding as of
the date of this  Agreement and set forth on Schedule 5.1 hereto  (including any
obligations of the Company under any guaranty or suretyship  agreement  relating
to indebtedness for borrowed money by Subsidiaries of the Company), constituting
borrowed money from financial institutions approved by the Board of Directors of
the Company and  designated as being senior to the  Debentures  (but only to the
extent  so  designated),  together  with  all  obligations  issued  in  renewal,
deferral,   extension,   refunding,   amendment  or  modification  of  any  such
indebtedness  including,  without  limitation,  any and all  indebtedness now or
hereafter  owing by the Company to Summit Bank,  N.A.,  and its  successors  and
assigns  (collectively,  the "Senior  Indebtedness");  and (ii) the indebtedness
evidenced by the  debentures  originally  issued in January 1998 pursuant to the
Debenture  Purchase  Agreement  dated as of December 17, 1997,  by and among the
Company, Tandem and Argosy and as amended by the amended and restated debentures
of even date herewith (the "Outstanding Debentures").

 .ection 5.2       Liquidation, etc

         (a) Upon any  distribution  of assets of the Company in connection with
any  dissolution,  winding  up,  liquidation  or  reorganization  of the Company
(whether in  bankruptcy,  insolvency,  or  receivership  proceedings  or upon an
assignment for the benefit of creditors or otherwise), the holders of all Senior
Indebtedness  and the Outstanding  Debentures shall first be entitled to receive
payment in full of the  principal  thereof,  premium,  if any,  and interest due
thereon, and all costs and expenses (including attorneys' fees) related thereto,
before the holders of the Debentures shall be entitled to receive any payment on
account  of the  principal  of or  interest  on or any other  amount  owing with
respect to the Debentures  (other than payment in shares of capital stock of the
Company as reorganized or readjusted,  or securities of the Company or any other
corporation  provided for by a plan of  reorganization  or  readjustment,  which
stock and securities are subordinated to the payment of all Senior  Indebtedness
and the Outstanding Debentures and securities received in lieu thereof which may
at the time be  outstanding).  Under  the  circumstances  provided  herein,  the
holders of the Senior Indebtedness and the Outstanding Debentures shall have the
right to  receive  and  collect  any  distributions  made  with  respect  to the
Debentures  until  such  time as the  Senior  Indebtedness  and the  Outstanding
Debentures  are paid in full,  and  shall  have the  further  right to take such
actions as may be deemed  necessary  or required to so receive and collect  such
distributions including making or filing any proofs of claim relating thereto.

                                       7

<PAGE>

         (b) Without in any way  modifying  the  provisions of this Article V or
affecting the  subordination  effected  hereby if such notice is not given,  the
Company shall give prompt  written  notice to each Investor of any  dissolution,
winding up,  liquidation  or  reorganization  of maker  (whether in  bankruptcy,
insolvency or receivership  proceedings or upon an assignment for the benefit of
creditors or otherwise).

 .ection 5.3       Default on Senior Indebtedness or Outstanding Debentures

         The  Company  shall  not  declare  or pay any  dividends  or  make  any
distributions  to the holders of capital  stock of the  Company,  or purchase or
acquire for value,  any of the  Debentures  if any default has  occurred  and is
continuing  with  respect to the  payment  of  principal  of,  premium if any or
interest on any Senior Indebtedness or the Outstanding Debentures.

 .ection 5.4       Subrogation

         Upon the prior payment in full of both the Senior  Indebtedness and the
Outstanding  Debentures,  the Investors shall be subrogated to the rights of the
holders of the Senior  Indebtedness  and the  Outstanding  Debentures to receive
payments  or  distributions  of assets of the Company  applicable  to the Senior
Indebtedness  and the  Outstanding  Debentures  until all  amounts  owing on the
Debentures  shall be paid in full, and for the purpose of such  subrogation,  no
payments or distributions to the Investors otherwise payable or distributable to
the holders of the Senior  Indebtedness or the Outstanding  Debentures shall, as
between  the  Company,  its  creditors,  other  than the  holders  of the Senior
Indebtedness and the Outstanding Debentures,  and the Investors, be deemed to be
payment by the Company to or on account of the Debentures,  it being  understood
that the  provisions  of this  Article  V are and are  intended  solely  for the
purpose of defining the relative  rights of the Investors,  on the one hand, and
the holders of the Senior  Indebtedness and the Outstanding  Debentures,  on the
other hand.

Section 5.5       Company's Obligations Not Impaired

         (a)  Nothing  contained  in  this  Article  V or in the  Debentures  is
intended to or shall  impair,  as between the  Company  and the  Investors,  the
obligation  of the  Company,  which is absolute  and  unconditional,  to pay the
Investors the  principal of and interest on the  Debentures as and when the same
shall become due and payable in accordance with the terms of the Debentures,  or
is intended to or shall affect the relative  rights of the Investors  other than
with  respect  to the  holders of the Senior  Indebtedness  and the  Outstanding
Debentures,  nor, except as expressly provided in this Article V, shall anything
herein or therein prevent the Investors from  exercising all remedies  otherwise
permitted by  applicable  law upon the  occurrence  of an Event of Default under
this Agreement or under the Debentures.
         (b) If any payment or distribution  shall be received in respect of the
Debentures  in  contravention  of the terms of this  Article V, such  payment or
distribution shall be held in trust for the holders of the Senior  Indebtedness,
and shall be immediately delivered to such holders in the same form as received.

                                       8

<PAGE>

                      ARTICLE VI - RESTRICTIONS ON TRANSFER

Section 6.1       Legends, Restrictions on Transfer

         The Debentures have not been registered under the Securities Act or any
state securities laws. Each Debenture issued pursuant to this Agreement  (except
as  permitted  by this  Article  VI) shall  bear a legend in  substantially  the
following form:

THIS  DEBENTURE HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS
AMENDED (THE  "SECURITIES  ACT") OR ANY APPLICABLE  STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE  SECURITIES ACT OR SUCH  APPLICABLE  STATE  SECURITIES  LAWS, OR (ii) IN THE
OPINION OF COUNSEL REASONABLY  ACCEPTABLE TO THE COMPANY  REGISTRATION UNDER THE
SECURITIES  ACT OR SUCH  APPLICABLE  STATE  SECURITIES  LAWS IS NOT  REQUIRED IN
CONNECTION WITH SUCH TRANSFER.
         The  provisions of this Article VI shall be binding upon all subsequent
holders of the  Debentures  unless in the opinion of counsel to any such holder,
specified  in Section 6.2 below,  the  Debentures  are no longer  subject to the
restrictions described herein.

 .ection 6.2       Notice of Intention to Transfer; Opinions of Counsel

         The  Debentures  shall not be  transferable  except upon the conditions
specified  in this  Article  VI.  Each holder of any  Debenture,  by  acceptance
thereof, agrees, prior to any transfer of such Debenture, to give written notice
to the Company of such  holder's  intention to effect such  transfer and briefly
describe the manner of the proposed  transfer.  Such notice of intended transfer
shall be  accompanied  by, if  applicable,  an opinion of counsel to such holder
reasonably  satisfactory to the Company,  to the effect that registration  under
the Securities Act of such Debenture in connection  with such proposed  transfer
is not  required.  If in the opinion of such counsel,  the proposed  transfer of
such Debenture may be effected without registration of such Debenture, under the
Securities  Act,  such holder  shall be entitled to transfer  such  Debenture in
accordance with the terms of the notice delivered by such holder to the Company.
The Company will promptly upon such transfer  deliver new Debentures not bearing
a legend of the  character  set forth in Section  6.1,  unless in the opinion of
such counsel  subsequent  disposition  by such holder of the Debentures to be so
transferred may require  registration  under the Securities Act. If the proposed
transfer of such  Debenture  may not be effected  without  registration  of such
Debenture  under the Securities Act, the holder thereof shall not be entitled to
transfer such Debenture, in the absence of an effective registration statement.

                    ARTICLE VII - EVENTS OF DEFAULT; REMEDIES

Section 7.1       Events of Default

                                       9

<PAGE>

         The occurrence of any one of the following  shall  constitute an "Event
of Default" under this Agreement:

         (a) Default  shall  occur in the  payment of interest on any  Debenture
when the same shall have become due,  which Default shall  continue for five (5)
days; or

         (b) Default  shall occur in the making of any payment of the  principal
of any Debenture or the premium, if any, by the Company thereon at the expressed
or any  accelerated  maturity  date or at any  date  fixed  by the  Company  for
prepayment, which Default shall continue for five (5) days; or

         (c)  Default  shall  be  made in the  payment  of the  principal  of or
interest on any  Indebtedness  (other than the Debentures) of the Company or any
subsidiary of the Company and such Default shall  continue  beyond the period of
grace, if any, allowed with respect thereto; or

         (d)  Default  or the  happening  of any  event  shall  occur  under any
contract,  agreement,  lease,  indenture  or other  instrument  under  which any
Indebtedness (other than the Debentures) of the Company or any subsidiary of the
Company may be issued and such Default or event shall (i) result in liability of
more than $100,000 and (ii)  continue for a period of time  sufficient to permit
the acceleration of the maturity of any such  Indebtedness of the Company or any
subsidiary of the Company outstanding thereunder; or

         (e)  Default  shall  occur  in the  observance  or  performance  of any
covenant or agreement  contained in Sections 5.11 or 5.13 of the Preferred Stock
Purchase  Agreement,  and such  Default  shall  continue  after five (5) days of
notice thereof to the Company; or

         (f) Default shall occur in the  observance or  performance of any other
provision  of this  Agreement  or  Article  V of the  Preferred  Stock  Purchase
Agreement  (other than Section  5.12) which is not remedied  within  thirty (30)
days  after the  earlier  of (i) the date on which  the  Company  first  obtains
knowledge of such Default and (ii) the date on which written  notice  thereof is
given to the Company by the holder of any Debenture; or

         (g) Any representation or warranty made by the Company herein or in the
Preferred Stock Purchase  Agreement (to the extent that such  representation  or
warranty has survived as of the applicable  date in accordance with the terms of
this Agreement or the Preferred Stock Purchase  Agreement,  as  applicable),  or
made by the Company in any statement or certificate  furnished by the Company in
connection with the  consummation of the issuance and delivery of the Debentures
or furnished by the Company pursuant  hereto,  is untrue in any material respect
as of the date of the issuance or making thereof; or

<PAGE>

         (h) Final judgment or judgments for the payment of money aggregating in
excess of $100,000,  is or are outstanding against the Company or any subsidiary
of the Company or against  any  property or assets of either and any one of such
judgments  has  remained  unpaid,  unvacated,  unbonded or unstayed by appeal or
otherwise for a period of thirty (30) days from the date of its entry; or

         (i) The Company or any subsidiary of the Company  becomes  insolvent or
bankrupt,  is  generally  not  paying  its debts as they  become due or makes an
assignment for the benefit of creditors, or the Company or any subsidiary of the
Company  applies for or consents to the  appointment  of a  custodian,  trustee,
liquidator, or receiver for the Company or such Subsidiary or for the major part
of the property of either; or

         (j) A custodian,  trustee, liquidator, or receiver is appointed for the
Company or any  subsidiary  of the Company or for the major part of the property
of either and is not discharged  within sixty (60) days after such  appointment;
or

         (k) Bankruptcy, reorganization,  arrangement or insolvency proceedings,
or other  proceedings for relief under any bankruptcy or similar law or laws for
the  relief  of  debtors,  are  instituted  by or  against  the  Company  or any
subsidiary  of the  Company  and,  if  instituted  against  the  Company  or any
subsidiary of the Company,  are  consented to or are not dismissed  within sixty
(60) days after such institution.

Section 7.2       Acceleration of Maturities

         When any Event of Default  described  in  paragraph  (a), (b) or (c) of
Section 7.1 has happened and is continuing, any holder of any Debenture may, and
when any Event of Default described in paragraphs (d) through (i), inclusive, of
said Section 7.1 has happened and is  continuing  the holder or holders of fifty
percent  (50%)  or  more of the  principal  amount  of  Debentures  at the  time
outstanding may, by notice to the Company,  declare the entire principal and all
interest  accrued on all  Debentures to be, and all Debentures  shall  thereupon
become, forthwith due and payable,  without any presentment,  demand, protest or
other notice of any kind,  all of which are hereby  expressly  waived.  When any
Event of Default  described in paragraph (j) or (k) of Section 7.1 has occurred,
then all outstanding Debentures shall immediately become due and payable without
presentment,  demand or notice of any kind,  all of which are  hereby  expressly
waived. Upon the Debentures becoming due and payable as a result of any Event of
Default as  aforesaid,  the  Company  will  forthwith  pay to the holders of the
Debentures  the entire  principal  and interest  accrued on the  Debentures.  No
course of dealing on the part of any  Debenture  holder nor any delay or failure
on the part of any  Debenture  holder to exercise  any right shall  operate as a
waiver of such right or otherwise  prejudice  such holder's  rights,  powers and
remedies.  The Company further agrees, to the extent permitted by law, to pay to
the  holder or  holders  of the  Debentures  all costs and  expenses,  including
reasonable attorneys' fees, incurred by them in the collection of any Debentures
upon any Default hereunder or thereon.

<PAGE>

                 ARTICLE VIII - AMENDMENTS, WAIVERS AND CONSENTS

Section 8.1       Consent Required .

         Any term, covenant,  agreement or condition of this Agreement may, with
the consent of the Company,  be amended or  compliance  therewith  may be waived
(either  generally  or in a  particular  instance  and either  retroactively  or
prospectively), if the Company shall have obtained the consent in writing of the
holders of at least seventy-five  percent (75%) in aggregate principal amount of
the Debentures  then  outstanding;  provided that without the written consent of
the  holders  of  all  of the  Debentures  then  outstanding,  no  such  waiver,
modification,  alteration or amendment  shall be effective (a) which will change
the time of payment of the  principal  of or the  interest on any  Debenture  or
reduce the principal amount thereof or change the rate of interest thereon,  (b)
which will  change the  percentage  of holders  of the  Debentures  required  to
consent to any such  amendment,  modification or waiver of any of the provisions
of this Article VIII [Amendments, etc.] or Article VII [Defaults; Remedies].

Section 8.2       Solicitation of Debenture Holders .

         The Company will not,  directly or indirectly,  pay or cause to be paid
by remuneration,  whether by way of supplemental or additional interest,  fee or
otherwise,  to  any  holder  of the  Debentures  as  consideration  for or as an
inducement to the entering into by any holder of the Debentures of any waiver or
amendment  of any of the terms and  provisions  of this  Agreement  unless  such
remuneration is concurrently paid, on the same terms,  ratably to the holders of
all of the Debentures then outstanding.

Section 8.3       Effect of Amendment or Waiver .

         Any such  amendment or waiver shall apply equally to all of the holders
of the Debentures and shall be binding upon them, upon each future holder of any
Debenture and upon the Company,  whether or not such  Debenture  shall have been
marked to indicate such  amendment or waiver.  No such amendment or waiver shall
extend to or affect any obligation not expressly amended or waived or impair any
right consequent thereon.


              ARTICLE IX - INTERPRETATION OF AGREEMENT; DEFINITIONS

Section 9.1       Definitions .

         Unless the context otherwise requires,  the terms hereinafter set forth
when used herein shall have the following meanings and the following definitions
shall be equally  applicable to both the singular and plural forms of any of the
terms herein defined:

<PAGE>

         "Debentures"  shall  mean  those  debentures  issued  initially  to the
Investors in accordance  with this Agreement and dated as of January 1, 1999, as
more fully described in Section 1.1 herein.

         "Default"  shall mean any event or condition,  the  occurrence of which
would,  with the lapse of time or the giving of notice,  or both,  constitute an
Event of Default as defined in Section 7.1.

         "Event of Default" shall have the meaning set forth in Section 7.1 
hereof.

         "Indebtedness"  of any Person shall mean and include all obligations of
such Person which in  accordance  with GAAP shall be  classified  upon a balance
sheet of such  Person as  liabilities  of such  Person,  and in any event  shall
include all (a) obligations of such Person for borrowed money or which have been
incurred  in  connection  with  the  acquisition  of  property  or  assets,  (b)
obligations secured by any lien or other charge upon property or assets owned by
such  Person,  even though such Person has not assumed or become  liable for the
payment of such  obligations,  (c)  obligations  created  or  arising  under any
conditional  sale or other title  retention  agreement  with respect to property
acquired by such Person,  notwithstanding  the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the Event of Default are
limited to repossession or sale or property,  (d) capitalized  rentals,  and (e)
guaranties  of  obligations  of  others  of the  character  referred  to in this
definition.

         The term  "knowledge"  shall mean, with respect to a particular fact or
other  matter,  if a  director  or  executive  officer  of  the  Company  or any
subsidiary of the Company is actually,  or has been, aware of such fact or other
matter, after reasonable inquiry under the circumstances.

         "Materially Adverse Effect" shall mean a materially adverse effect upon
the business, assets, liabilities, financial condition, results of operations or
business prospects,  in each case of the Company and its subsidiaries taken as a
whole, or upon the ability of the Company to perform its obligations  under this
Agreement, the Debentures or the other Operative Documents.

         "Operative Documents" shall have the meaning set forth in Section 2.1
 hereof.

         "Person" shall mean an individual,  partnership,  corporation, trust or
unincorporated organization, and a government or agency or political subdivision
thereof

         "Registration Rights Agreement" shall mean the Registration Rights
 Agreement by and among the Company, Tandem and Argosy.

<PAGE>

         "Sale Event" shall mean any  consolidation,  merger or statutory  share
exchange (other than (i) a merger with a Wholly-owned subsidiary of the Company,
(ii) a  reincorporation  transaction  or (iii) a merger  pursuant  to which  the
Company is the surviving  entity and the  capitalization  of the Company remains
unchanged) in which the  outstanding  shares of capital stock of the Company 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  Company;
provided,  however, that any such event shall not be regarded as a Sale Event if
the holders of seventy-five  percent (75%) of the aggregate  principal amount of
the Debentures then outstanding approve such event or elect not to have any such
event deemed to be a Sale Event by giving written notice to the Company at least
ten (10) days prior to the effective date of such event.

         "Security" shall have the same meaning as in Section 2(l) of the 
Securities Act.

         The  term  "subsidiary  "  shall  mean,  as to  any  particular  parent
corporation,  any corporation of which more than 50% (by number of votes) of the
Voting  Stock  shall be  owned by such  parent  corporation  and/or  one or more
corporations which are themselves subsidiaries of such parent corporation.

         "Voting  Stock"  shall  mean  Securities  of any class or  classes  the
holders of which are ordinarily,  in the absence of  contingencies,  entitled to
elect a majority  of the  corporate  directors  (or Persons  performing  similar
functions).

         "Wholly-owned"  when  used in  connection  with any  subsidiary  of the
Company  shall mean a  subsidiary  of which all of the  issued  and  outstanding
shares of stock (except shares required as directors'  qualifying  shares) shall
be owned by the Company and/or one or more of its Wholly-owned subsidiaries.

Section 9.2       Accounting Principles .

         Where the  character  or amount  of any asset or  liability  or item of
income or expense is required to be  determined  or any  consolidation  or other
accounting  computation  is  required  to be  made  for  the  purposes  of  this
Agreement,  the same  shall  be done in  accordance  with  GAAP,  to the  extent
applicable,  except where such principles are inconsistent with the requirements
of this Agreement.

<PAGE>

                            ARTICLE X - MISCELLANEOUS

Section 10.1      Expenses; Stamp Tax Indemnity .

         Whether  or  not  the  transactions   herein   contemplated   shall  be
consummated,  the  Company  agrees  to pay  directly  (a) the  reasonable  fees,
expenses and  disbursements  of Investors'  counsel,  not to exceed Two Thousand
Dollars ($2,000) per Investor,  incurred in connection with the entering into of
this Agreement and the issuance of the Debentures  and the  consummation  of the
transactions contemplated hereby and (b) so long as an Investor holds any of the
Debentures,  all  out-of-pocket  expenses  including,  but  not  limited  to the
reasonable fees,  expenses and  disbursements of Investors'  counsel relating to
any, amendment,  waiver or consent pursuant to the provisions hereof (whether or
not  the  same  are  actually  executed  and  delivered),   including,   without
limitation,  any  amendments,  waivers or consents  resulting from any work-out,
restructuring or similar proceedings  relating to the performance by the Company
of its  obligations  under this Agreement and the  Debentures.  The Company also
agrees  that it will pay and save the  Investors  harmless  against  any and all
liability with respect to stamp and other taxes, if any, which may be payable in
connection with the execution and. delivery of this Agreement or the Debentures.
The Company agrees to protect and indemnify each Investor  against any liability
for any and all brokerage fees and commissions  payable or claimed to be payable
to any Person  retained  by the  Company  in  connection  with the  transactions
contemplated by this Agreement.

Section 10.2      Powers and Rights Not Waived; Remedies Cumulative .

         No delay or failure on the part of the holder of any  Debenture  in the
exercise of any power or right shall operate as a waiver thereof;  nor shall any
single or partial  exercise of the same  preclude any other of further  exercise
thereof,  or the  exercise  of any other  power or  right,  and the  rights  and
remedies of the holder of any Debenture are  cumulative to and are not exclusive
of any rights or remedies any such holder would otherwise have, and no waiver or
consent,  given or extended  pursuant to Article IX hereof,  shall  extend to or
affect any obligation or right not expressly waived or consented to.

Section 10.3      Notices .

         All communications provided for hereunder shall be in writing and shall
be delivered  personally,  or mailed by registered mail, or by prepaid overnight
air courier, or by facsimile communication, in each case addressed:

                  If to Tandem:             Tandem Capital, Inc.
                                            500 Church Street, Suite 200
                                            Nashville, Tennessee 37219
                                            Fax: (615) 726-1208
                                            Attention: Craig Macnab

<PAGE>
                  with a copy to:           Sherrard & Roe, PLC
                                            424 Church Street, Suite 2000
                                            Nashville, Tennessee 37219
                                            Fax: (615) 742-4539
                                            Attention: Donald I.N.McKenzie, Esq.

                  If to Argosy:             Argosy Investment Partners, L.P.
                                            950 West Valley Road, Suite 2902
                                            Wayne, Pennsylvania 19087
                                            Fax: (610) 964-9524
                   Attention: John Paul Kirwin, III, Principal

                  with a copy to:           McCausland, Keen & Buckman
                                            Radnor Court
                                            259 Radnor-Chester Road,
                                            Suite 160
                                            Radnor, Pennsylvania 19087-5240
                                            Fax: (610) 341-1099
                                            Attention: Robert H. Young, Jr.

                  If to the Company:        Berger Holdings, Ltd.
                                            805 Pennsylvania Blvd.
                                            Feasterville, Pennsylvania 19053
                                            Fax:  (215) 355-7738
                                            Attention:  President

                  with a copy, if on
                  or before July 4,
                  1999, to:                 Wolf, Block, Schorr, and 
                                             Solis-Cohen LLP
                                            12th Floor, Packard Building
                                            111 South 15th Street
                                            Philadelphia, Pennsylvania 19102
                                            Fax:  (215) 977-2334
                                            Attention:  Jason M. Shargel, Esq.

                  and, if after
                  July 4, 1999, to: Wolf, Block, Schorr, and Solis-Cohen LLP
                                            22nd Floor
                                            1650 Arch Street
                                            Philadelphia, Pennsylvania 19103
                                            Fax:  (215) 977-2334
                                            Attention:  Jason M. Shargel, Esq.

<PAGE>

or such other address as an Investor or the  subsequent  holder of any Debenture
initially issued to an Investor may designate to the Company in writing, or such
other  address as the Company may in writing  designate to the Investors or to a
subsequent holder of the Debentures initially issued to the Investors, provided,
however,  that a notice sent by overnight air courier shall only be effective if
delivered at a street  address  designated for such purpose by such person and a
notice  sent by  facsimile  communication  shall  only be  effective  if made by
confirmed transmission at a telephone number designated for such purpose by such
person  or,  in  either  case,  as an  Investor  or a  subsequent  holder of any
Debentures  initially  issued to an  Investor  may  designate  to the Company in
writing or at a telephone number herein set forth in the case of the Company.

Section 10.4      Successors and Assigns .

         The  Investors'  interests in this  Agreement,  the  Debentures and the
other Operative Documents may be endorsed, assigned and/or transferred (in whole
or in part) by the  Investors,  and any such holder and/or  assignee of the same
shall succeed to and be possessed of the rights and powers of the Investor under
all of the same to the extent  transferred  and assigned.  The Company shall not
assign any of its rights nor delegate  any of its duties  under this  Agreement,
the  Preferred  Stock  Agreement  or any of the  other  Operative  Documents  by
operation of law or otherwise  without the prior express  written consent of the
Investors, and in the event the Company obtains such consent, this Agreement and
the other Operative Documents shall be binding upon such assignee.

Section 10.5      Survival of Covenants and Representation .

         All  representations  and  warranties  made  by  the  Company  and  the
Investors  herein  shall  survive the  Closing,  and shall be  extinguished  and
eliminated on June 30, 1999. All covenants made by the Company herein (including
those referred to in Article IV above) shall survive the Closing and delivery of
the Operative Documents in accordance with their respective terms so long as any
amounts are outstanding under the Debentures. The representations and warranties
set forth in the Preferred  Stock Purchase  Agreement shall survive as set forth
therein  without any  modification  as a result of the execution and delivery of
this Agreement.

Section 10.6      Severability .

         Should any part of this Agreement for any reason be declared invalid or
unenforceable,  such  decision  shall not affect the  validity of any  remaining
portion,  which  remaining  portion  shall remain in force and effect as if this
Agreement had been executed with the invalid or  unenforceable  portion  thereof
eliminated  and it is hereby  declared the intention of the parties  hereto that
they  would have  executed  the  remaining  portion  of this  Agreement  without
including  therein any such part, parts or portion which may for any reason,  be
hereafter declared invalid or unenforceable.

<PAGE>

Section 10.7      Governing Law .

         This  Agreement and the Debentures  issued and sold hereunder  shall be
governed by and construed in accordance  with Tennessee  law,  without regard to
its conflict of law rules.

Section 10.8      Captions, Counterparts .

         The  descriptive  headings  of the  various  Sections  or parts of this
Agreement  are for  convenience  only  and  shall  not  affect  the  meaning  or
construction of any of the provisions hereof.  This Agreement may be executed in
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

Section 10.9      Continuing Obligations .

         Notwithstanding   anything  to  the  contrary  set  forth  herein,  the
Investors  confirm  and  acknowledge  that the  Debentures  and the  Outstanding
Debentures  are  Company's  Obligations  to  Creditor  within the meaning of the
Subordination  Agreements  dated as of January 2, 1998,  among Summit Bank,  the
Company and the Investors, as amended, which Subordination  Agreements remain in
full force and effect.

Section 10.10     Entire Agreement .

                  This Agreement constitutes the entire agreement of the parties
with regard to the exchange of the Debentures for the Preferred Stock.


<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and  delivered by their duly  authorized  officers as of the date first
written above.

                                     COMPANY:

                                     BERGER HOLDINGS, LTD.


                                     By:   /s/ Joseph F. Weiderman
                                           Name: Joseph F. Weiderman
                                           Title:  President


                                     INVESTORS:

                                     SIRROM CAPITAL CORPORATION
                                     d/b/a TANDEM CAPITAL


                                     By: /s/ Craig Macnab
                                     Craig Macnab, Vice President


                                     ARGOSY INVESTMENT PARTNERS, L.P.

                                       By:  Argosy Associates, L.P.,
                                            its general partner

                                            By:  Argosy Associates, Inc.,
                                                 its general partner

                                            By: ./s/ John Paul Kirwin III
                                                Name: John Paul Kirwin III
                                                      Title: Vice President

<PAGE>

EXHIBIT A

                                    DEBENTURE

THIS  DEBENTURE HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS
AMENDED (THE  "SECURITIES  ACT") OR ANY APPLICABLE  STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE  SECURITIES ACT OR SUCH  APPLICABLE  STATE  SECURITIES  LAWS, OR (ii) IN THE
OPINION OF COUNSEL REASONABLY  ACCEPTABLE TO THE COMPANY  REGISTRATION UNDER THE
SECURITIES  ACT OR SUCH  APPLICABLE  STATE  SECURITIES  LAWS IS NOT  REQUIRED IN
CONNECTION WITH SUCH TRANSFER.

                              Berger Holdings, Ltd.

            Subordinated Convertible Debenture Due December 31, 2003

No. S-1                                              Dated as of January 1, 1999
$1,500,000

         For value received,  Berger Holdings,  Ltd., a Pennsylvania corporation
(the "Company"), hereby promises to pay to Argosy Investment Partners, L.P., 950
West Valley Road, Suite 2902, Wayne,  Pennsylvania 19087, or registered assigns,
on the 31st day of December,  2003 (the "Regular  Maturity Date") (or before the
Regular  Maturity  Date upon the  occurrence  of a Sale Event or a redemption or
conversion of this Debenture in accordance with the terms hereof (each an "Early
Termination  Date"),  as the case may be), the  principal  amount of One Million
Five Hundred Thousand Dollars  ($1,500,000) and to pay interest (computed on the
basis of a 360-day year of twelve 30-day  months) on the  principal  amount from
time to time  remaining  unpaid hereon at the rate of 10% per annum from January
1,  1999  (the  "Issue  Date")  until  the  Regular  Maturity  Date or the Early
Termination  Date,  payable  in each  case  quarterly  on the  first day of each
February,  May, August, and November in each year,  commencing February 1, 1999,
and on the Regular  Maturity  Date or the Early  Termination  Date.  The Company
agrees to pay  interest  (computed on the same basis) on overdue  principal  and
premium,  if  any,  and (to  the  extent  legally  enforceable)  on any  overdue
installment of interest, at the stated rate plus 3% per annum (or, in each case,
at the highest rate permitted by applicable law, whichever is less) until paid.
         Both the principal  hereof and interest hereon are payable to the order
of the holder hereof at its address registered on the books of the Company or by
federal  funds wire  transfer  to a bank  account  designated  in writing by the
holder to the Company in coin or currency of the United  States of America which
at the time of  payment  shall be legal  tender  for the  payment  of public and
private debts. If any amount of principal, premium, if any, or interest on or in
respect of this  Debenture  becomes  due and  payable on any date which is not a
Business Day, such amount shall be payable on the next  preceding  Business Day.
"Business Day" means any day other than a Saturday, Sunday, statutory holiday or
other  day on  which  banks in  Tennessee  are  required  by law to close or are
customarily closed.

<PAGE>

         This Debenture is one of the Subordinated Convertible Debentures due on
or before December 31, 2003 of the Company in the aggregate  principal amount of
Four Million  Dollars  ($4,000,000),  issued under and pursuant to the terms and
provisions of an Exchange Agreement,  dated as of January 1, 1999 (the "Exchange
Agreement"), entered into by the Company with the original investors referred to
therein,  and this  Debenture and the holder  hereof are  entitled,  equally and
ratably with the holders of all other Debentures  outstanding under the Exchange
Agreement,  to all the benefits provided for thereby or referred to therein, and
to which  Exchange  Agreement  reference  is hereby  made for all such terms and
provisions.  The terms which are capitalized  herein shall have the meanings set
forth in the Exchange Agreement unless the context shall otherwise require.

         This Debenture is  subordinated  to certain other  indebtedness  of the
Company to the extent and with the effect set forth in the Exchange Agreement.

         If an Event of Default occurs and is continuing,  the principal of this
Debenture and the other Debentures  outstanding under the Exchange Agreement may
be declared  due and  payable in the manner and with the effect  provided in the
Exchange Agreement.

         This  Debenture  is  registered  on the  books  of the  Company  and is
transferable only by surrender thereof at the principal office of the Company at
805 Pennsylvania Blvd., Feasterville,  Pennsylvania 19053, or such other address
as the Company shall have advised the holders of the Debenture in writing,  duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered  holder of this Debenture or its attorney duly  authorized in writing
and in accordance with the provisions of Section 6.2 of the Exchange  Agreement.
Payment of or on account of  principal,  premium,  if any,  and interest on this
Debenture  shall be made only to or upon the order in writing of the  registered
holder.

         The Debentures are  convertible  and redeemable and holders thereof are
entitled to certain notices, as set forth more fully below.

         Section 1         Conversion  Rights.  The holders of the Debentures
shall have the following  conversion rights:

         (a) Right to Convert.  The Debentures 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 the common  stock of the  Company  (the
"Common Stock"),  as is determined by dividing the aggregate principal amount of
the Debentures  tendered to the Company for conversion (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 the Debentures 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  the
Debentures  may be converted  into shares of Common  Stock,  shall be subject to
adjustment  as  provided  below.  The  conversion  rights of the  holders of the
Debentures shall terminate (i) in the event of a liquidation of the Company,  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 the
Debentures;  and (ii) in the event the  Debentures  are  called  for  redemption
pursuant to this Note,  at the close of business on the first full day preceding
the date fixed for such  redemption,  unless the Company shall default in making
payment in full of the redemption price.

<PAGE>

         (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   Debentures,
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  Debentures.  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.

         (c) Recapitalization or Reclassification.  If the Common Stock issuable
upon  the  conversion  of the  Debentures  shall be  changed  into the same or a
different  number of shares of any  class or  classes  of stock of the  Company,
whether  by  recapitalization,  reclassification,  or  otherwise  (other  than a
subdivision or  combination of shares or stock dividend  provided for in Section
1(b) above, or a reorganization,  merger, share exchange, consolidation, or sale
of assets  provided for in Section 1(d) below),  then and in each such event the
holders  of the  Debentures  shall have the right,  at any time  thereafter,  to
convert  the  Debentures  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   Debentures   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  Company
(other than a subdivision or  combination  of shares or stock dividend  provided
for in Section 1(b) above or a recapitalization or reclassification provided for
in Section 1(c) above), then, as a part of such reorganization,  provision shall
be made so that the holders of the  Debentures  thereafter  shall be entitled to
receive,  upon  conversion of the  Debentures,  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 Debentures 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 1(d) with respect to the rights of the holders of the Debentures
after the  reorganization  to the end that the  provisions  of this Section 1(d)
(including  adjustment of the Conversion  Price then in effect and the number of
shares  acquired upon conversion of the  Debentures)  shall be applicable  after
that  event  in  as  nearly   equivalent   a  manner  as  may  be   practicable.

<PAGE>

Notwithstanding  the foregoing,  in the case of a consolidation,  merger,  share
exchange,  or sale of all or  substantially  all the assets of the Company,  the
provisions  of  Section  1.1  of  the  Exchange  Agreement  shall  apply  to the
Debentures,  and this  Section  1(d) shall not apply,  unless,  as  provided  in
Section 1.1 of the Exchange Agreement, the holders of seventy-five percent (75%)
of the aggregate  principal amount of the Debentures then outstanding elect that
such event shall not be deemed to be a Sale Event.

         (e)      Certain Dilutive Issues.

                           (i)      Special  Definitions.   For  purposes  of 
this  Section  1(e),  the  following definitions apply:

                                            (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  December  31,  1997 (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 December 31, 1997 (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 Company at an exercise  price of no
          less than the Fair Market  Value (as defined in Section 1(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 December 31, 1997 (the "Current Warrants").

                                            (2)      "Convertible   Securities"
          shall mean any evidences of indebtedness (other than the  Debentures),
          shares  of  stock  (other  than  Common  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 1(e)(iii) by the Company after 
          December 31, 1997 other than shares of Common Stock issued or issuable
          upon (i) upon conversion of the Debentures,  (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 the Debentures are convertible shall
be made, by adjustment in the Conversion  Price,  unless the  consideration  per
share (determined pursuant to Section 1(e)(v) hereof) for an Additional Share of
Common  Stock  issued or deemed  to be  issued by the  Company  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  Company  at any time or from time to time  after
December 31, 1997 shall issue any Options or Convertible Securities or shall fix

<PAGE>

a record date for the  determination  of holders of any class of securities then
entitled to receive anysuch 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  1(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;

                                             (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
Company,  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 the Debentures;

                                            (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  Company  for the  issue  of all  such
Options,  whether or not exercised,  plus the consideration actually received by
the  Company  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 Company 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 Company for the

<PAGE>

Additional  Shares of Common  Stock  deemed  to have  been then  issued  was the
consideration  actually  received  by the  Company  for the  issue  of all  such
Options,  whether or not exercised,  plus the consideration  deemed to have been
received by the Company (determined  pursuant to Section 1(e)(v)) upon the issue
of the  Convertible  Securities with respect to which such Options were actually
exercised;

                                                     (4)      no readjustment
pursuant  to  Section  1(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

                                                     (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 Company 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 1(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 Company 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.

<PAGE>

                                             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 the  Debentures  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 the Debentures,  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 1(e)(iv) do not apply if the provisions of any of Section 1(b), (c)
or (d) apply.

                                    (v)     Determination  of  Consideration.
The consideration received by the Company for the issue of any Additional Shares
of 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 Company  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 Company 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 Company 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 Company,  the Board of Directors  shall  determine in good
faith  the  amount  of  consideration   paid  for  such  Option  or  Convertible
Securities.

<PAGE>

                  (f)  Certificate  as  to  Adjustments.  In  each  case  of  an
adjustment  or  readjustment  of the  Conversion  Price of the  Debentures,  the
Company will furnish each holder of the Debentures  with a certificate  prepared
by the Chief  Financial  Officer  of the  Company  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  the  Debentures   shall  surrender  the
certificate(s) representing the Debentures being converted to the Company at its
principal  office,  accompanied  by written notice to the Company at that office
that such holder elects to convert such Debentures (a "Conversion 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 the Debentures  surrendered for conversion shall
be accompanied by proper assignment thereof to the Company or in blank. The date
when  the  Conversion  Notice  is  received  by the  Company  together  with the
certificate(s)   representing  the  Debentures  being  converted  shall  be  the
"Conversion  Date." As promptly as practicable  after the  Conversion  Date, the
Company shall issue and deliver to the holder of the Debentures 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  Debentures in
accordance  with the  provisions  of this  Section 1 and cash,  as  provided  in
Section 1, 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  Debentures  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 the Debentures.  Instead of any fractional  shares of Common Stock
that otherwise would be issuable upon  conversion of any of the Debentures,  the
Company  shall  pay to the  holder of  Debentures  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  Company,  (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

<PAGE>

question)  for which  prices  have been so  reported,  and (iv) in the case of a
security  determined by the Company'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
Debentures being converted at any one time by any holder thereof,  not upon each
Debenture being converted.

         (i) Reservation of Common Stock. The Company 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  Debentures,  such
number of its shares of Common Stock as from time to time shall be sufficient to
effect the conversion of all outstanding Debentures.

         Section 2         Redemption.

         (a) Redemption at the Option of the Company.  The Debentures  shall not
be  redeemable  or otherwise  subject to  prepayment  by the Company at any time
prior to the  first  anniversary  of the  Issue  Date.  On and  after  the first
anniversary of the Issue Date and at any time prior to the Maturity Date, at the
option of the  Company,  the Company may fix a date (the  "Redemption  Date") on
which it shall  redeem  all (but  not  less  than  all) of the then  outstanding
Debentures  by paying in cash to the holders  thereof and in respect of each One
Hundred  Dollars  ($100.00) in principal  amount of  Debentures  tendered to the
Company for redemption, the Redemption Price (as defined below), but only in the
event  that the  average  bid price of the Common  Stock  exceeds  Nine  Dollars
($9.00) per share (without giving effect to any stock splits, stock dividends or
recapitalizations  after December 31, 1997),  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 2(b)  below).  A holder of the
Debentures may elect,  by written notice  delivered to the Company 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  Debentures  held by such  holder  which are
eligible  to be  redeemed  on  such  Redemption  Date,  provided  that  on  such
Redemption  Date each such  Debenture  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 the Common Stock occur. The term "Redemption  Price" shall mean an
amount per One Hundred Dollars ($100.00) in principal amount of Debentures equal
to (A) for any redemption  pursuant to clause (i) above,  an amount equal to One
Hundred Dollars ($100.00) plus an amount equal to all interest payments then due
but unpaid (including interest thereon);  and (B) for any redemption pursuant to
clause (ii) above,  One Hundred Five Dollars  ($105.00)  plus an amount equal to
all interest payments then due but unpaid (including interest thereon),  in each
case up to and including the Redemption Date.

         (b) Procedures for Redemption of the  Debentures.  At least thirty (30)
days but not more than  forty-five  (45) days prior to the  Redemption  Date the
Company 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  Debentures  to be redeemed,  at the address last
shown on the records of the Company for such  holder,  notifying  such holder of
the  redemption  to be effected,  specifying  (i) that all  Debentures  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  Debentures  which are
not redeemed shall be converted automatically into shares of Common Stock at the

<PAGE>

Conversion Price then in effect (setting forth such Conversion  Price), and (vi)
calling upon such holder to  surrender to the Company,  in the manner and at the
place designated, the Debentures to be redeemed (the "Redemption Notice"). On or
after the  Redemption  Date,  each holder of the Debentures to be redeemed shall
surrender to the Company  Debentures,  in the manner and at the place designated
in the Redemption  Notice, and thereupon the Redemption Price of such Debentures
shall be payable to the order of the person whose name appears on the  Company's
register of  Debentures  as the owner  thereof and,  upon payment in full of the
Redemption Price, each surrendered Debenture shall be discharged. From and after
each Redemption  Date,  unless there shall have been a default in payment of the
Redemption  Price, any of the Debentures  redeemed on such Redemption Date shall
not be  entitled  to any further  rights as  Debentures  and shall not be deemed
outstanding for any purpose.

         Section 3         Notices of Record Date.  In the event of any:

         (a) taking by the  Company  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 Company,  any  reclassification  or
recapitalization of the capital stock of the Company, any merger, consolidation,
or share exchange of the Company,  or any transfer of all or  substantially  all
the  assets of the  Company  to any other  corporation,  or any other  entity or
person; or

         (c)      voluntary or involuntary dissolution, liquidation, or winding
up the Company;

then and in each such event the Company shall mail or cause to be mailed to each
holder  of the  Debentures  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.

         If the  indebtedness  represented by this Debenture or any part thereof
is placed in the hands of attorneys for collection after an Event of Default, or
the enforcement of any rights under the Exchange  Agreement,  the Company agrees
to pay the principal,  premium if any, and interest due and payable hereon,  and
an amount equal to all costs of collecting this Debenture,  including reasonable
attorneys' fees and expenses.
         Section 4 No Dilution or Impairment. The Company 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 Debentures 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  Debentures  against  dilution or other
impairment.


<PAGE>

         This  Debenture  and  said  Exchange  Agreement  are  governed  by  and
construed in accordance with the laws of Tennessee.

[Corporate Seal]                            BERGER HOLDINGS, LTD.

ATTEST:                                     By:

------------------------                    
      ----------------------------
Secretary                                   Joseph F. Weiderman, President


<PAGE>


EXHIBIT B

THIS  WARRANT  HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS
AMENDED (THE  "ACT"),  OR ANY  APPLICABLE  STATE  SECURITIES  LAW AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT AND SUCH APPLICABLE
STATE SECURITIES LAWS SHALL HAVE BECOME  EFFECTIVE WITH REGARD THERETO,  OR (II)
IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY,  REGISTRATION UNDER THE ACT
AND SUCH  APPLICABLE  STATE  SECURITIES  LAWS IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED TRANSFER.

Warrant No. RA-1

           This Stock Purchase Warrant Amends, Restates and Supersedes
            the Stock Purchase Warrant Dated as of December 31, 1997
                     in favor of Sirrom Capital Corporation

                   AMENDED AND RESTATED STOCK PURCHASE WARRANT

         This  Warrant  is  issued  this 1st day of  January,  1999,  by  BERGER
HOLDINGS,  LTD., a Pennsylvania  corporation (the "Company"),  to SIRROM CAPITAL
CORPORATION  d/b/a Tandem  Capital,  a Tennessee  corporation  ("Tandem"  which,
together  with any  subsequent  assignee  or  transferee  hereof is  hereinafter
referred to collectively as "Holder" or "Holders").

                                   AGREEMENT:                    

A.   Issuance of Warrant; Term.  For and in consideration of SIRROM CAPITAL
CORPORATION  d/b/a  Tandem  Capital,  purchasing  from the  Company  its  12.25%
Subordinated Debenture due December 31, 2003, in the initial principal amount of
Two  Million  Dollars  (the  "Debenture")  pursuant  to the terms of a Debenture
Purchase  December 17, 1997,  among the  Company,  Tandem and Argosy  Investment
Partners,  L.P. ("Argosy") (the "Debenture Purchase Agreement"),  and other good
and  valuable  consideration,  the receipt and  sufficiency  of which are hereby
acknowledged,  the Company  hereby  grants to Holder the right to  purchase  Two
Hundred Forty Thousand (240,000) shares of the Company's common stock, par value
$.01 per share (the "Common  Stock").  The shares of Common Stock  issuable upon
exercise of this Warrant are hereinafter referred to as the "Shares." The number
of such  shares  and the  Exercise  Price (as  defined  below)  are  subject  to
adjustment as provided  herein.  The term "Warrant" as used herein includes this
Warrant and any warrants delivered in exchange therefor as provided herein. This
Warrant shall be  exercisable  at any time and from time to time during the term
commencing on the date hereof and ending at 5:00 p.m.  Eastern  Standard Time on
December 31, 2003.
B.


<PAGE>

C.   Exercise Price. The exercise price (the "Exercise  Price") per share for
which all or any of the Shares may be  purchased  pursuant  to the terms of this
Warrant shall be Four Dollars and  Twenty-Five  Cents ($4.25),  as adjusted from
time to time pursuant to Section 7 hereof.
D.
E.   Exercise.
F.

1.    Manner of Exercise.  This Warrant may be exercised by the Holder  hereof
(but only on the conditions hereinafter set forth) as to all or any increment or
increments  of one  hundred  (100)  Shares (or the balance of the Shares if less
than  100),  upon  delivery  to  the  Company  at  the  following  address:  805
Pennsylvania  Blvd.,  Feasterville,  Pennsylvania 19053 or such other address as
the Company shall  designate in a written  notice to the Holder  hereof,  of the
Notice of Exercise in the form of Annex A hereto, duly completed and executed on
behalf of the Holder,  together  with this Warrant and payment to the Company of
the  aggregate  Exercise  Price of the Shares so purchased.  The Exercise  Price
shall be payable,  at the option of the Holder,  (i) by certified or bank check,
(ii) by the  surrender  by the  Holder for  cancellation  of  Debentures  or any
portion  thereof having an outstanding  principal  balance at least equal to the
aggregate  Exercise Price, or (iii) by a combination of (i) and (ii) above. Upon
exercise  of this  Warrant  as  aforesaid,  the  Company  shall as  promptly  as
practicable,  and in any event  within  ten (10) days  thereafter,  execute  and
deliver to the Holder of this  Warrant a  certificate  or  certificates  for the
total number of whole  Shares for which this Warrant is being  exercised in such
names and  denominations as are requested by such Holder.  If this Warrant shall
be exercised  with  respect to less than all of the Shares,  the Holder shall be
entitled  to receive a new Warrant  covering  the number of Shares in respect of
which this Warrant shall not have been exercised, which new Warrant shall in all
other  respects be identical to this Warrant.  The Company  covenants and agrees
that it will pay when due any and all state and federal issue taxes which may be
payable in respect of the issuance of this Warrant or the issuance of any Shares
upon exercise of this Warrant.

1.     Conversion  Rights.  In lieu of  exercising  this  Warrant  pursuant to
Section  3(a) above,  the Holder  shall have the right to require the Company to
convert this  Warrant,  in whole or in part and at any time or times into Shares
(the "Conversion Right"), upon delivery to the Company at its address in Section
3(a) or such other address as the Company shall designate in a written notice to
the Holder hereof, of the Notice of Exercise,  with the election to convert duly
completed and executed on behalf of the Holder, together with this Warrant. Upon
exercise  of the  Conversion  Right,  the  Company  shall  deliver to the Holder
(without  payment by the Holder of any  Exercise  Price)  that  number of Shares
which is equal to the  quotient  obtained by  dividing  (x) the net value of the
number of Shares  into which this  Warrant  is being  converted  at the time the
Conversion Right is exercised  (determined by subtracting the aggregate Exercise
Price for the  Shares  into which this  Warrant is being  converted  immediately
prior to the exercise of the Conversion Right from a number equal to the product
of (i) the Fair Market Value (as such term is defined in Section 7(e)) per share
as at such  time,  multiplied  by (ii) that  number of Shares  purchasable  upon
exercise of this Warrant (or portion hereof that is being  converted at the time
the  Conversion  Right is  exercised)  immediately  prior to the exercise of the
Conversion  Right (taking into account all  applicable  adjustments  pursuant to
Section  7)),  by (y) the Fair Market  Value per share.  Any  references  in any

<PAGE>

Warrants to the  "exercise"  of this  Warrant,  and the use of the term exercise
herein,  shall be deemed to include  (without  limitation)  any  exercise of the
Conversion Right.
2.
B.       Covenants and Conditions.  The above provisions are subject to the
following:
C.
1.       Securities Laws Compliance.  Neither this Warrant nor the Shares have
been registered  under the Securities Act of 1933, as amended  ("Securities
Act") or any state  securities  laws  ("Blue Sky Laws").  This  Warrant has been
acquired for investment  purposes and not with a view to  distribution or resale
in violation of the  registration  provisions of the Securities  Act; except for
the transfer of the Warrant to one or more  wholly-owned  subsidiaries of Sirrom
Capital Corporation,  which subsidiary(s) shall be an "accredited  investor," as
defined in Rule 501(a) under the Securities Act, this Warrant may not be sold or
otherwise transferred without (i) an effective  registration  statement for such
Warrant under the Securities Act and such  applicable  Blue Sky Laws, or (ii) an
opinion of counsel,  which opinion and counsel shall be reasonably  satisfactory
to the Company and its counsel,  that  registration  is not  required  under the
Securities  Act or  under  any  applicable  Blue Sky Laws  (the  Company  hereby
acknowledges  that Sherrard & Roe, PLC is acceptable  counsel).  Transfer of the
Shares  issued upon the exercise of this Warrant shall be restricted in the same
manner and to the same extent as the Warrant and the  certificates  representing
such Shares shall bear substantially the following legend:
2.
                  THE SHARES OF COMMON  STOCK  REPRESENTED  BY THIS  CERTIFICATE
                  HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
                  AMENDED (THE "ACT"),  OR ANY APPLICABLE  STATE  SECURITIES LAW
                  AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION  STATEMENT
                  UNDER THE ACT AND SUCH APPLICABLE  STATE SECURITIES LAWS SHALL
                  HAVE  BECOME  EFFECTIVE  WITH REGARD  THERETO,  OR (II) IN THE
                  OPINION OF COUNSEL  ACCEPTABLE  TO THE  COMPANY,  REGISTRATION
                  UNDER SUCH ACT AND SUCH  APPLICABLE  STATE  SECURITIES LAWS IS
                  NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.

The Holder  hereof and the Company  agree to execute  such other  documents  and
instruments as counsel for the Company  reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any Shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws.

1.       Covenants of the Company.  The Company covenants and agrees that all 
shares of Common  Stock which may be issued upon  exercise of this  Warrant
will,  upon  issuance and payment  therefor,  be legally and validly  issued and
outstanding,  fully paid and nonassessable,  free from all taxes, liens, charges

<PAGE<

with respect to the issuance  thereof.  The Company  further  covenants  that it
shall at all times  during the term of this Warrant  reserve and keep  available
for issuance  upon the exercise of this  Warrant such number of  authorized  but
unissued  shares of Common Stock as will be sufficient to permit the exercise in
full of this Warrant and,  from time to time,  will take all steps  necessary to
amend its Articles of Incorporation to provide sufficient  reserves of shares of
its Common Stock for issuance upon exercise of the Warrant.
2.
B.     Transfer of Warrant.
C.
1.       Warrant Register.  The Company will maintain a warrant register
containing  the names and address of the Holder or  Holders.  Any Holder of
this  Warrant or any  portion  thereof  may  change its  address as shown on the
warrant  register by written notice to the Company  requesting such change.  Any
notice or written communication  required or permitted to be given to the Holder
may be delivered  or given by  registered  or  certified  mail to such Holder as
shown on the warrant register and at the address shown on the warrant  register.
Until this Warrant is  transferred on the warrant  register of the Company,  the
Company  may treat the Holder as shown on the warrant  register as the  absolute
owner of this  Warrant  for all  purposes,  notwithstanding  any  notice  to the
contrary.
2.
3.     Transferability.Subject to compliance with the provisions of Section 4(a)
hereof, this Warrant may be transferred,  in whole or in part, to any person, by
presentation  of  the  Warrant  to the  Company  together  with  the  Notice  of
Assignment in the form of Annex B hereto, duly endorsed for transfer.  Upon such
presentation for transfer,  the Company shall promptly execute and deliver a new
Warrant or Warrants in the form hereof in the name of the assignee(s) and in the
denominations specified in such instructions in the Assignment Form. The Company
shall  pay all  expenses  incurred  by it in  connection  with the  preparation,
issuance and delivery of new Warrants under this Section 5. 
4. 
D.    Warrant Holder
Not Shareholder; Rights Offering. Except as otherwise provided herein, this
Warrant  does not confer upon the Holder,  as such,  any right  whatsoever  as a
shareholder of the Company. Notwithstanding the foregoing, if the Company should
offer to all of the Company's  shareholders the right to purchase any securities
of the Company, then all Shares of Common Stock that are subject to this Warrant
shall be deemed to be  outstanding  and owned by the Holder and the Holder shall
be entitled to participate in such rights offering.
E.
F.    Adjustment  of Exercise Price and Number of Shares Issuable.  The Exercise
Price and the number of shares  purchasable  hereunder are subject to adjustment
from time to time as follows:
G.
1.        Stock  Splits,  Recapitalization,  Etc.  If all or any portion of this
Warrant shall be exercised  subsequent to any stock split,  stock dividend,
recapitalization,  combination of shares of the Company,  or other similar event
occurring after the date hereof,  then the Holder  exercising this Warrant shall
receive,  for the aggregate price paid upon such exercise,  the aggregate number
and class of shares  which such Holder  would have  received if this Warrant had
been exercised  immediately prior to the record date for such stock split, stock
dividend, recapitalization, combination of shares, or other similar event.

<PAGE>

2.
3.   Merger,  Etc.If the Company at any time merges or consolidates with or into
any other corporation or enters into a similar  transaction (other than a merger
in which the Company is the surviving  corporation  and in connection with which
there  is no  reclassification  or other  change  in the  Common  Stock or other
securities  of the Company or any issuance of stock,  securities  or property to
the holders of its outstanding  shares of Common Stock),  then the Company shall
notify the Holder of any such event and, effective upon the record or other date
of determination  of persons  affected by such merger,  consolidation or similar
transaction, the securities which the Holder would be entitled to receive on the
exercise  hereof  shall  include  the kind and  amount of  securities,  cash and
property that would have been held by the Holder if on such  determination  date
the Holder had been the holder of record of the securities,  cash and properties
issuable upon exercise of the Warrant on such  determination  date (or the right
thereto  prior to the  effective  date  thereof).  In the  event of any  merger,
consolidation or similar transaction referred to above in this Section 7(b), the
Company  shall,  and  shall  cause  any  successor  corporation  as a  condition
precedent  to such  transaction  to,  execute and deliver to each Holder " a new
Warrant (i)  providing  that the owner of such Warrant,  upon exercise  thereof,
shall have the right to purchase the securities as adjusted as described  above,
and (ii)  containing  provisions for  subsequent  adjustments in a manner and on
terms as nearly equivalent as may be practicable to the adjustments provided for
in this Section  7(b).  
4. 
5.     Adjustment  on Certain  Dilutive  Issues.  
6.    
6.1       Definitions. For purposes of this Section 7(c), the following
definitions apply:
6.2 
     (a)  "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 January 2, 1998 (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  January  2,  1998  (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 January 2,
     1998 (the "Current Warrants").
     
          (a) "Convertible Securities" shall mean any evidences of indebtedness,
          shares of stock  (other than Common Stock and the  Company's  Series A
          Convertible  Preferred Stock (the "Series A Preferred')) or other
          securities convertible into or exchangeable for Common Stock.

<PAGE>

          (a) "Additional  Shares of Common Stock" shall mean all shares of
          Common  Stock  issued  (or  deemed to be issued  pursuant  to  Section
          7(c)(iii)) by the Corporation after January 2, 1998, other than shares
          of Common Stock issued or issuable upon (i) upon  conversion of shares
          of Series A Preferred Stock or as a dividend or distribution on Series
          A Preferred Stock, (ii) upon the exercise of the Outstanding  Options;
          (iii) upon the exercise of the Agreed Options,  (iv) upon the exercise
          of any ISOs, or (v) upon the exercise of the Current Warrants.

 1.1       Adjustment  of  Exercise   Price.  In  the  event  that  the
 consideration  per  share  (determined  pursuant  to  Section  7(c)(v)
 hereof) for an Additional Share of Common Stock issued or deemed to be
 issued by the Company is less than the Exercise Price in effect on the
 date of, and immediately  prior to, the issue of such Additional Share
 of Common  Stock,  then the  Exercise  Price and the  number of shares
 shall be adjusted as provided herein.

1.2 

1.3       Issue of Options  and Convertible  Securities.  In the event the
Company at any time or from time to time after the Warrant
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 herefor, 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
7(c)(v) hereof) of such Additional Shares of Common Stock
would be less than the Exercise 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:
1.4 
          (a) no further  adjustments in the Exercise 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;

          (a) 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  Company,  or
          decrease  or  increase  in the  number of shares of Common  Stock
          issuable upon the exercise,  conversion or exchange thereof,  the
          Exercise  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

<PAGE>


          Securities,  provided,  however,  that no such  adjustment of the
          Exercise Price shall affect Common Stock  previously  issued upon
          exercise or conversion of this Warrant;

          (a)   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 Exercise 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:

          (i)  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 Company for the issue of all such Options,  whether or
          not exercised, plus the consideration actually received by the Company
          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 Company
          upon such conversion or exchange, and

          (i)  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 Company  for the  Additional  Shares of
          Common  Stock  deemed to have been then  issued was the  consideration
          actually  received by the  Company for the issue of all such  Options,
          whether or not exercised,  plus the consideration  deemed to have been
          received by the Company (determined  pursuant to Section 7(c)(v)) upon
          the issue of the  Convertible  Securities  with  respect to which such
          Options were actually exercised;

          (a)  no readjustment pursuant to Section 7(c)(iii)(2) or (3) above 
          shall have the effect of  increasing  the Exercise  Price to an amount
          which exceeds the lower of (a) the Exercise Price prior to the initial
          adjustment  to which the  readjustment  applies,  or (b) the  Exercise
          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

          (a)  in the eventof 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 Exercise Price
          then in effect shall forthwith be readjusted to such Exercise 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.

<PAGE>


1.1  Adjustment of Exercise  Price Upon Issuance of Additional  Shares of Common
Stock.  In the event the Company at any time after the Warrant  Issue Date shall
issue Additional  Shares of Common Stock (including  Additional Shares of Common
Stock deemed to be issued pursuant to Section 7(c)(iii)),  without consideration
or for a  consideration  per share less than the Exercise Price in effect on the
date of and  immediately  prior  to such  issue,  then  and in such  event,  the
Exercise  Price shall be reduced to a price  (calculated  to the  nearest  cent)
determined  by  multiplying  the then current  Exercise  Price by a fraction the
numerator of which shall be the sum of 1.2
                                    (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 Company for
                  the total  number  of  Additional  Shares  of Common  Stock so
                  issued  would   purchase  at  the  Exercise  Price  in  effect
                  immediately prior to such issuance

and the denominator of which shall be the sum of

                 (x)     the number of shares of Comm 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
Series A Preferred 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
this  Warrant  or to shares of Series A  Preferred,  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 Exercise Price
resulting  from the issuance of  Additional  Shares of Common Stock causing such
adjustment.

         The provisions of this Section  7(c)(iv) do not apply if the provisions
of any of Section 7(a) or (b) apply.

<PAGE>


1.1  Determination of Consideration.  The consideration  received by the Company
for the issue of any  Additional  Shares of Common  Stock  shall be  computed as
follows:
1.2
     (a)   Cash, Property, and Other Consideration.  Such consideration shall:

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

     (i)  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

     (i)  in the event  Additional  Shares of Common  Stock are issued  together
          with other  shares or  securities  or other  assets of the Company 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.

     (a)  Options  and  Convertible  Securities.  The  consideration  per  share
          received by the Company 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 Company,  the
          Board of  Directors  shall  determine  in good  faith  the  amount  of
          consideration paid for such Option or Convertible Securities.

1. Certificate as to Adjustments. In each case of any adjustment or readjustment
pursuant  to  Section  7(a)-(c)  of the  Exercise  Price or the number of shares
issuable pursuant to this Warrant, the Company shall forthwith notify the Holder
or Holders of this Warrant of each such adjustment,  setting forth in reasonable
detail  the  event  requiring  the  adjustment  and the  method  by  which  such
adjustment was calculated.
2. 
3. No Fractional Shares; Fair Market Value. If any
adjustment  pursuant to Section  7(a)-(c)  would  create a  fractional  share of
Common  Stock or a right to acquire a  fractional  share of Common  Stock,  such
fractional  share shall be disregarded  and the number of shares subject to this
Warrant  shall be the next  higher  number of  shares,  rounding  all  fractions

<PAGE>


upward. "Fair Market Value" per share of Common Stock 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  Company,  (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  Company'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. 
4. 
B. Certain Notices. In case at any time the Company  shall  propose to:
C. 
1. declare any cash  dividend upon its Common
Stock; 
2. 
3. declare any dividend upon its Common Stock payable in stock or make
any special  dividend or other  distribution to the holders of its Common Stock;
4. 
5. offer for  subscription  to the  holders  of any of its  Common  Stock any
additional  shares  of  stock in any  class or  series  or other  rights;  
6. 
7. reorganize,  or reclassify the capital stock of the Company, or consolidate,
merge or otherwise  combine  with,  or sell of all or  substantially  all of its
assets to, another corporation; 
8. 
9. voluntarily dissolve, liquidate or wind up of the affairs of the Company; or 
10. 
11. redeem or purchase any shares of its capital stock or securities convertible
12. into its capital  stock;  
13.
14. then, in any one or more of said cases, the Company shall give to the Holder
of the Warrant, by certified or registered  mail, (i) at least twenty (20) days'
prior  written  notice of the date on which the books of the Company shall close
or a record  shall be taken  for such  dividend,  distribution  or  subscription
rights or for determining rights to vote in respect of any such  reorganization,
reclassification,  consolidation,  merger,  sale,  dissolution,  liquidation  or

<PAGE>


winding  up,  and  (ii) in the  case of such  reorganization,  reclassification,
consolidation,  merger, sale,  dissolution,  liquidation or winding up, at least
twenty  (20)  days'  prior  written  notice of the date when the same shall take
place. Any notice required by clause (i) shall also specify,  in the case of any
such  dividend,  distribution  or  subscription  rights,  the date on which  the
holders of Common Stock shall be entitled  thereto,  and any notice  required by
clause (ii) shall specify the date on which the holders of Common Stock shall be
entitled  to  exchange  their  Common  Stock for  securities  or other  property
deliverable upon such reorganization,  reclassification,  consolidation, merger,
sale,  dissolution,  liquidation  or  winding  up,  as the case may be. 
15.  
D. Registration  Rights.  The shares of Common Stock issuable upon exercise of 
this Warrant shall be "Registrable Securities" under that certain Registration
Rights Agreement, dated as of the Warrant  Issue date, among the Company, Tandem
and Argosy, and the Holder of this Warrant shall be entitled to the benefits of
the Registration  Rights Agreement in accordance with its terms. 
E. 
F. Governing Law
and  Amendments.  The  corporate  law of  Pennsylvania  shall  govern all issues
concerning  the  relative  rights of the  Company  and the holders of its Common
Stock. In all other matters,  this Warrant shall be construed and enforced under
the laws of the State of Tennessee. No amendment or modification hereof shall be
effective except in a writing executed by each of the Company and the Holder. 
G.
H. Equity Participation. This Warrant is issued in connection with the Debenture
Purchase  Agreement.  It is  intended  that this  Warrant  constitute  an equity
participation under and pursuant to T.C.A. ss.47-24-101, et seq. and that equity
participation  be permitted  under said statutes and not constitute  interest on
the  Debenture.  If  under  any  circumstances  whatsoever,  fulfillment  of any
obligation  of this  Warrant,  the Debenture  Purchase  Agreement,  or any other
agreement  or  document  executed  in  connection  with the  Debenture  Purchase
Agreement, shall violate the lawful limit of any applicable usury statute or any
other  applicable  law with regard to  obligations of like character and amount,
then the obligation to be fulfilled shall be reduced to such lawful limit,  such
that in no event shall there occur,  under this Warrant,  the Debenture Purchase
Agreement,  or any other document or instrument  executed in connection with the
Debenture  Purchase  Agreement,  any  violation of such lawful  limit,  but such
obligation  shall be fulfilled to the lawful  limit.  If any sum is collected in
excess of the lawful limit, such excess shall be applied to reduce the principal
amount of the Debenture.


<PAGE>

         IN WITNESS WHEREOF, Berger Holdings, Ltd. has caused this Warrant to be
executed by its duly authorized officer as of the date first above written.
A.
B.                                       BERGER HOLDINGS, LTD.
C.
D.                                       By: __________________________
F.
G.                                       Name:_________________________
H.
I.                                       Title:________________________
J.
K.HOLDER:
L.
M.SIRROM CAPITAL CORPORATION
N.d/b/a Tandem Capital
O.
P.
Q.By:____________________________
R.  Craig Macnab, Vice President
S.


<PAGE>



                                     ANNEX A

                               NOTICE OF EXERCISE

To:      BERGER HOLDINGS, LTD.

(1)      The undersigned hereby:

         [Initial and complete one]

         (a)               _____ elects to purchase  __________ shares of Common
                           Stock  of  BERGER  HOLDINGS,  LTD.,  pursuant  to the
                           provisions  of Section 3(a) of the attached  Warrant,
                           and tenders herewith payment of the purchase price in
                           full for such shares in the amount of $__________; or

         (b)               _____  elects  to  exercise   this  Warrant  for  the
                           purchase  of  __________   shares  of  Common  Stock,
                           pursuant to the conversion right set forth in Section
                           3(c) of the attached Warrant.

(2)      In  exercising  this  Warrant,  the  undersigned  hereby  confirms  and
         acknowledges  that  the  shares  of  Common  Stock  to be  issued  upon
         conversion  thereof  are being  acquired  solely for the account of the
         undersigned,  and for  investment,  and that the  undersigned  will not
         offer,  sell or  otherwise  dispose of any such shares of Common  Stock
         except under  circumstances  that will not result in a violation of the
         Securities Act of 1933, as amended,  or any applicable state securities
         laws.

(3)      Please issue a certificate(s)  representing said shares of Common Stock
         in the name of the  undersigned  or in such other name as is  specified
         below:

                                                     ___________________________
                                                     (Name)

                                                     ___________________________
                                                     (Name)

(4)      Please issue a new Warrant for the unexercised  portion of the attached
         Warrant  in the name of the  undersigned  or in such  other  name as is
         specified below:

                                                     ___________________________
                                                     (Name)

_____________________________                        ___________________________
(Date)                                               (Signature)


<PAGE>



                                     ANNEX B

                                 ASSIGNMENT FORM

         FOR VALUE RECEIVED,  the undersigned  registered  owner of this Warrant
hereby  sells,  assigns and transfers  unto the Assignee  named below all of the
rights of the undersigned  under the within Warrant,  with respect to the number
of shares of Common Stock set forth below:

Name of Assignee                Address                            No. of Shares







and does hereby irrevocably constitute and appoint Attorney ____________________
to make such transfer on the books of BERGER HOLDINGS,  LTD., maintained for the
purpose, with full power of substitution in the premises.

         The  undersigned  also  represents  that,  by  assignment  hereof,  the
Assignee  acknowledges  that this  Warrant  and the shares of stock to be issued
upon exercise hereof or conversion thereof are being acquired for investment and
that the Assignee will not offer,  sell or otherwise  dispose of this Warrant or
any shares of stock to be issued  upon  exercise  hereof or  conversion  thereof
except  under  circumstances  which  will  not  result  in a  violation  of  the
Securities  Act of  1933,  as  amended  (the  "Securities  Act"),  or any  state
securities laws.  Further,  the Assignee has acknowledged  that upon exercise of
this  Warrant,  the Assignee  shall,  if  requested  by the Company,  confirm in
writing,  in a form  satisfactory  to the  Company,  that the shares of stock so
purchased  are  being  acquired  for  investment  and  not  with a  view  toward
distribution  or resale  in  violation  of the  registration  provisions  of the
Securities Act or any state securities laws.



Dated:________________________                       ___________________________
                                                     Signature of Holder


<PAGE>



EXHIBIT C



                                                DEBENTURE

THIS  DEBENTURE HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS
AMENDED (THE  "SECURITIES  ACT") OR ANY APPLICABLE  STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE  SECURITIES ACT OR SUCH  APPLICABLE  STATE  SECURITIES  LAWS, OR (ii) IN THE
OPINION OF COUNSEL REASONABLY  ACCEPTABLE TO THE COMPANY  REGISTRATION UNDER THE
SECURITIES  ACT OR SUCH  APPLICABLE  STATE  SECURITIES  LAWS IS NOT  REQUIRED IN
CONNECTION WITH SUCH TRANSFER.

                              Berger Holdings, Ltd.

               12.25% Subordinated Debenture Due December 31, 2003

          This Debenture Amends, Restates and Supersedes the Debenture
      Dated as of December 31, 1997 in favor of Sirrom Capital Corporation

No. RA-1                                                        January 1, 1999
$2,000,000

         For value received,  Berger Holdings,  Ltd., a Pennsylvania corporation
(the "Company"),  hereby promises to pay to Sirrom Capital Corporation at Tandem
Capital,  Inc. 500 Church Street,  Suite 200,  Nashville,  Tennessee  37219,  or
registered assigns,  on the 31st day of December,  2003, the principal amount of
Two Million Dollars ($2,000,000) and to pay interest (computed on the basis of a
360-day year of twelve 30-day months) on the principal  amount from time to time
remaining unpaid hereon at the rate of (a) 12.25% per annum from the date hereof
until  January 1,  2003,  and (b) 20% per annum  from  January  2,  2003,  until
maturity, payable in each case quarterly on the first day of each February, May,
August, and November in each year, commencing February 1, 1999, and at maturity.
The  Company  agrees to pay  interest  (computed  on the same  basis) on overdue
principal and premium,  if any, and (to the extent legally  enforceable)  on any
overdue  installment  of interest,  at the stated rate plus 3% per annum (or, in
each case, at the highest rate permitted by applicable  law,  whichever is less)
until paid.

         Both the principal  hereof and interest hereon are payable to the order
of the holder hereof at its address registered on the books of the Company or by
federal  funds wire  transfer  to a bank  account  designated  in writing by the
holder to the Company in coin or currency of the United  States of America which
at the time of  payment  shall be legal  tender  for the  payment  of public and
private debts. If any amount of principal, premium, if any, or interest on or in
respect of this  Debenture  becomes  due and  payable on any date which is not a

<PAGE>

Business Day, such amount shall be payable on the next  preceding  Business Day.
"Business Day" means any day other than a Saturday, Sunday, statutory holiday or
other  day on  which  banks in  Tennessee  are  required  by law to close or are
customarily closed.

         This  Debenture  is one  of  the  12.25%  Subordinated  Debentures  due
December  31,  2003  of  the  Company  in  the  aggregate  principal  amount  of
$2,500,000,  issued  under  and  pursuant  to the terms  and  provisions  of the
Debenture  Purchase  Agreement,  dated as of December  17, 1997 (the  "Debenture
Agreement") and amended and restated  pursuant to the terms and provisions of an
Exchange Agreement,  dated as of January 1, 1999 (the "Exchange Agreement") both
of which  entered into by the Company with the original  purchasers  referred to
therein,  and this  Debenture and the holder  hereof are  entitled,  equally and
ratably with the holders of all other Debentures outstanding under the Debenture
Agreement,  to all the benefits provided for thereby or referred to therein, and
to which  Debenture  Agreement  reference  is hereby made for all such terms and
provisions.

         This Debenture is  subordinated  to certain other  indebtedness  of the
Company to the extent and with the effect set forth in the Debenture Agreement.

         If an Event of Default, as defined in the Debenture  Agreement,  occurs
and is  continuing,  the principal of this  Debenture  and the other  Debentures
outstanding under the Debenture Agreement may be declared due and payable in the
manner and with the effect provided in the Debenture Agreement.

         This  Debenture  is  registered  on the  books  of the  Company  and is
transferable only by surrender thereof at the principal office of the Company at
805 Pennsylvania Blvd., Feasterville,  Pennsylvania 19053, or such other address
as the Company shall have advised the holders of the Debenture in writing,  duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered  holder of this Debenture or its attorney duly  authorized in writing
and in accordance with the provisions of Section 7.2 of the Debenture Agreement.
Payment of or on account of  principal,  premium,  if any,  and interest on this
Debenture  shall be made only to or upon the order in writing of the  registered
holder.

         If the  indebtedness  represented by this Debenture or any part thereof
is placed in the hands of attorneys for collection after an Event of Default, or
the enforcement of any rights under the Debenture Agreement,  the Company agrees
to pay the principal,  premium if any, and interest due and payable hereon,  and
an amount equal to all costs of collecting this Debenture,  including reasonable
attorneys' fees and expenses.

         This Debenture,  the Debenture Agreement and the Exchange Agreement are
governed by and construed in accordance with the laws of Tennessee.

[Corporate Seal]                                 BERGER HOLDINGS, LTD.

ATTEST:                                          By:

----------------------------                     -------------------------------
Secretary                                        Joseph F. Weiderman, President
         

<PAGE>

EXHIBIT D



                                    DEBENTURE

THIS  DEBENTURE HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS
AMENDED (THE  "SECURITIES  ACT") OR ANY APPLICABLE  STATE SECURITIES LAW AND MAY
NOT BE TRANSFERRED UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE  SECURITIES ACT OR SUCH  APPLICABLE  STATE  SECURITIES  LAWS, OR (ii) IN THE
OPINION OF COUNSEL REASONABLY  ACCEPTABLE TO THE COMPANY  REGISTRATION UNDER THE
SECURITIES  ACT OR SUCH  APPLICABLE  STATE  SECURITIES  LAWS IS NOT  REQUIRED IN
CONNECTION WITH SUCH TRANSFER.

                              Berger Holdings, Ltd.

               12.25% Subordinated Debenture Due December 31, 2003

               This Debenture Amends, Restates and Supersedes the
           Debenture Dated as of December 31, 1997 in favor of Argosy
                            Investment Partners, L.P.

No. RA-2                                                         January 1, 1999
$500,000

         For value received,  Berger Holdings,  Ltd., a Pennsylvania corporation
(the "Company"), hereby promises to pay to Argosy Investment Partners, L.P., 950
West Valley Road, Suite 2902, Wayne,  Pennsylvania 19087, or registered assigns,
on the 31st day of December, 2003, the principal amount of Five Hundred Thousand
Dollars  ($500,000) and to pay interest (computed on the basis of a 360-day year
of twelve  30-day  months) on the principal  amount from time to time  remaining
unpaid  hereon at the rate of (a) 12.25% per annum  from the date  hereof  until
January 1, 2002,  (b) 19.25% per annum from  January 2, 2002,  until  January 1,
2003 and (c) 14% per annum from January 2, 2003, until maturity, payable in each
case quarterly on the first day of each February,  May, August,  and November in
each year,  commencing February 1, 1999, and at maturity.  The Company agrees to
pay interest  (computed on the same basis) on overdue principal and premium,  if
any,  and (to the extent  legally  enforceable)  on any overdue  installment  of
interest, at the stated rate plus 3% per annum (or, in each case, at the highest
rate permitted by applicable law, whichever is less) until paid.

         Both the principal  hereof and interest hereon are payable to the order
of the holder hereof at its address registered on the books of the Company or by
federal  funds wire  transfer  to a bank  account  designated  in writing by the
holder to the Company in coin or currency of the United  States of America which
at the time of  payment  shall be legal  tender  for the  payment  of public and

<PAGE>

private debts. If any amount of principal, premium, if any, or interest on or in
respect of this  Debenture  becomes  due and  payable on any date which is not a
Business Day, such amount shall be payable on the next  preceding  Business Day.
"Business Day" means any day other than a Saturday, Sunday, statutory holiday or
other  day on  which  banks in  Tennessee  are  required  by law to close or are
customarily closed.

         This  Debenture  is one  of  the  12.25%  Subordinated  Debentures  due
December  31,  2003  of  the  Company  in  the  aggregate  principal  amount  of
$2,500,000,  issued  under  and  pursuant  to the terms  and  provisions  of the
Debenture  Purchase  Agreement,  dated as of December  17, 1997 (the  "Debenture
Agreement") and amended and restated  pursuant to the terms and provisions of an
Exchange Agreement,  dated as of January 1, 1999 (the "Exchange Agreement") both
of which  entered into by the Company with the original  purchasers  referred to
therein,  and this  Debenture and the holder  hereof are  entitled,  equally and
ratably with the holders of all other Debentures outstanding under the Debenture
Agreement,  to all the benefits provided for thereby or referred to therein, and
to which  Debenture  Agreement  reference  is hereby made for all such terms and
provisions.

         This Debenture is  subordinated  to certain other  indebtedness  of the
Company to the extent and with the effect set forth in the Debenture Agreement.

         If an Event of Default, as defined in the Debenture  Agreement,  occurs
and is  continuing,  the principal of this  Debenture  and the other  Debentures
outstanding under the Debenture Agreement may be declared due and payable in the
manner and with the effect provided in the Debenture Agreement.

         This  Debenture  is  registered  on the  books  of the  Company  and is
transferable only by surrender thereof at the principal office of the Company at
805 Pennsylvania Blvd., Feasterville,  Pennsylvania 19053, or such other address
as the Company shall have advised the holders of the Debenture in writing,  duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered  holder of this Debenture or its attorney duly  authorized in writing
and in accordance with the provisions of Section 7.2 of the Debenture Agreement.
Payment of or on account of  principal,  premium,  if any,  and interest on this
Debenture  shall be made only to or upon the order in writing of the  registered
holder.

         If the  indebtedness  represented by this Debenture or any part thereof
is placed in the hands of attorneys for collection after an Event of Default, or
the enforcement of any rights under the Debenture Agreement,  the Company agrees
to pay the principal,  premium if any, and interest due and payable hereon,  and
an amount equal to all costs of collecting this Debenture,  including reasonable
attorneys' fees and expenses.

         This Debenture,  the Debenture Agreement and the Exchange Agreement are
governed by and construed in accordance with the laws of Tennessee.

[Corporate Seal]                                 BERGER HOLDINGS, LTD.

ATTEST:                                          By:

----------------------------                     -------------------------------
Secretary                                        Joseph F. Weiderman, President

<PAGE>