Document:

<PAGE>

                               SEVERANCE AGREEMENT

         Agreement made as of the 22nd day of November, 2000, between SunSource,
Inc., a Delaware corporation ("Company"), and Joseph M. Corvino ("Employee").

         WHEREAS, Employee is the Chief Financial Officer of the Company; and

         WHEREAS, the Company has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
Employee to his assigned duties without distraction; and

         WHEREAS, in consideration of Employee's continued employment with the
Company, the Company agrees that Employee shall receive the compensation set
forth in this Agreement against the adverse financial and career impact on
Employee in the event Employee's employment with the Company is terminated under
specified circumstances that may include a voluntary or involuntary termination
associated with a Change in Control (as defined herein);

         NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth and intending to be legally bound
hereby, the parties hereto agree as follows:

         1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:

         (a) "Beneficial Owner" and the correlative term "Beneficially Own" are
used herein within the meaning of Rule 13d-3 under the Securities Exchange Act
of 1934, as amended.

         (b) "Cause" shall mean a finding by the Company that Employee has: (i)
materially breached his employment or service contract, if any, with the
Company; (ii) materially failed to perform assigned duties (if Employee does not
have an employment agreement) and does not remedy such material breach within 30
days after receiving written notice specifying the details thereof; (iii) been
engaged in fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his employment or service or deliberate injury to
the Company; or (iv) disclosed trade secrets or confidential information of the
Company to persons not entitled to receive such information.

         (c) "Change of Control" means the occurrence of any one of the
following events:

                  (i) Any Person other than the management group of Maurice
Andrien, Joseph M. Corvino, Norman V. Edmonson, Max W. Hillman, Donald T.
Marshall, and John P. McDonnell, becomes a Beneficial Owner, directly or
indirectly, of securities of the Company representing 20% or more of the voting
power of the then outstanding securities of the Company.

<PAGE>

                  (ii) (A) A transaction is approved in which the stockholders
of the Company immediately before the transaction will not Beneficially Own in
the same relative percentages, immediately after the transaction, shares
entitling such stockholders to 75% or more of all votes to which all
stockholders of the surviving entity would be entitled in the election of
directors or other governing persons (excluding any election of directors by a
separate class vote), or where the members of the Board, immediately prior to
the transaction, would not, immediately after the transaction, constitute a
majority of the board of directors of the surviving entity, (B) the sale or
other disposition of all or substantially all of the assets of the Company,
SunSource Investments, Inc., or SunSub A Inc., or their respective successors in
interest or (C) a liquidation or dissolution of the Company, SunSource
Investments, Inc., or SunSub A Inc., or their respective successors in interest;
provided, however, that any such action with respect to SunSource Investments,
Inc. or SunSub A Inc. shall not constitute a change of control so long as the
Company continues to own, directly or indirectly, substantially all of the
assets thereof.

                  (iii) A majority of the Board shall cease for any reason to
consist of (A) individuals who on the effective date hereof are serving as
directors of the Company, or (B) individuals who subsequently become members of
the Board and whose nomination for election or election to the Board is
recommended or approved by a majority of the Board.

         (d) "Constructive Termination Without Cause" shall mean a termination
of Employee's employment by Employee following the occurrence, without his prior
written consent, of one or more of the following events: (1) a material
reduction in Employee's compensation; (2) a significant diminution in Employee's
duties, responsibilities, titles or position, or the assignment to Employee of
duties and responsibilities inconsistent with the title or positions held by
Employee on the date of this Agreement; (3) the required geographical relocation
of Employee out of the greater Philadelphia, Pennsylvania area; or (4) a change
in Employee's direct reports such that Employee does not report directly to the
President or Chief Executive Officer of the Company. A Constructive Termination
Without Cause will not take effect unless: (1) Employee has delivered written
notice to the Company within 60 days after acquiring knowledge of one of the
events described in this Subsection 1(d) that provides a basis for Constructive
Termination Without Cause, stating which one of these events has occurred; and
(2) within 30 days after receipt of such notice the Company has not remedied
such event and provided Employee with written notice of such remedy.

         (e) "Salary" shall mean Employee's base salary at the time of reference
exclusive of any and all bonuses, incentives and fringe benefits of any kind.
Employee's Salary as of the date of this Agreement is $240,000 per year.

         (f) "Termination Date" shall mean the date of Employee's termination of
employment with the Company.

         (g) "Termination of Employment" shall mean the termination of
Employee's employment by the Company.

         2. Severance Benefits upon Termination.

         (a) If upon or within one year following a Change of Control (i)
Employee suffers a Termination of Employment for any reason other than Cause,
death or disability (within the meaning of Section 22(e)(3) of the Internal
Revenue Code) of Employee or (ii) Employee suffers a Constructive Termination
Without Cause, the Company shall pay Employee his Salary for a period of
twenty-four (24) months from the Termination Date.

                                       2
<PAGE>

         (b) If within the three month period commencing one year following a
Change of Control Employee voluntarily terminates employment, the Company shall
pay Employee his Salary for a period of twenty-four (24) months from the
Termination Date; provided that Employee provides advance written notice of
termination to the Company no later than 275 days following the Change of
Control.

         (c) If either before a Change of Control or more than one year
following a Change of Control (i) Employee suffers a Termination of Employment
for any reason other than Cause, death or disability (within the meaning of
Section 22(e)(3) of the Internal Revenue Code) of Employee or (ii) Employee
suffers a Constructive Termination Without Cause, the Company shall pay Employee
his Salary for a period of twenty-four (24) months from the Termination Date.

         (d) Payments under this Section 2 shall be paid in accordance with the
Company's normal payroll practices, with the first payment commencing as soon as
practicable after Employee's Termination Date. In no event will interest be
credited on the unpaid balance to which Employee may become entitled. Payment
shall be made by mail to the last known address provided by Employee to Company
or, at Employee's option by direct deposit to Employee's account at a bank or
other financial instruction designated by Employee.

         (e) All payments hereunder to Employee shall cease upon the occurrence
of the earliest of:

                  (i) completion of payment to Employee of benefits described in
this Section 2;

                  (ii) the date Employee again becomes employed by the Company,
an affiliate of the Company or a successor in interest to either;

                  (iii) disclosure of confidential information described in
Section 8;

                  (iv) competition in violation of Section 9; or

                  (v) the death or disability (within the meaning of Section
22(e)(3) of the Internal Revenue Code) of Employee.

         (f) All benefits under this agreement including, but not limited to,
payments under this Section 2, acceleration of options under Section 3, and
other benefits under Section 5 shall be conditioned upon the execution and
continued acceptance of a release, in the form and substance of Attachment A. If
Employee has received benefits hereunder and subsequently repudiates the release
in any manner, he shall immediately repay (i) the amount of payments under
Section 2 and (ii) the value of any other benefits received hereunder.

                                       3
<PAGE>

         3. Acceleration of Options.

         (a) Except as set forth in Subsection (b) below, upon a Change of
Control, (i) all outstanding grants under the Company's 1998 Equity Compensation
Plan shall automatically accelerate and become fully exercisable, and (ii) the
restrictions and conditions on Employee's outstanding restricted stock, if any,
shall immediately lapse.

         (b) Notwithstanding anything herein to the contrary, in the event of a
Change of Control, the Company shall not have the right to take any actions
described in this Agreement (including without limitation actions described in
Subsection (a) above) that would make the Change of Control ineligible for
pooling of interests accounting treatment or that would make the Change of
Control ineligible for desired tax treatment if, in the absence of such action,
the Change of Control would qualify for such treatment and the Company intends
to use such treatment with respect to the Change of Control.

         4. Other Severance Benefits. The payment due under Section 2 hereof
shall be in lieu of any severance or similar payments or benefits accrued for
Employee, or to which Employee otherwise becomes entitled, through the
Termination Date under any other severance or similar plan, policy or program of
the Company, including the SunSource Severance Pay Plan. Anything contained
herein to the contrary notwithstanding, if Employee becomes entitled to any
severance or similar payments or benefits under any such other plan, policy or
program, any amounts otherwise due and payable hereunder shall be offset by the
amount of such other payments or benefits.

         5. Other Benefits.

         (a) Except as provided in Subsection (b) below, nothing in this
Agreement shall prevent or limit Employee's continuing or future participation
in or rights under any benefit, bonus, incentive or other plan or program
provided by the Company, and for which Employee may qualify, from the date
hereof through the Termination Date.

         (b) During the period in which Employee is entitled to payments under
Section 2, the Company shall (i) continue to provide Employee with the fringe
benefits listed in Attachment B, and (ii) continue Employee's coverage in the
Company's welfare benefit plans as available to similarly situated active
executives of the Company, to the extent permissible under the terms of such
plans and the applicable provisions of law, including the Internal Revenue Code,
until such time as Employee becomes entitled to a substantially similar welfare
benefit package at his new employer. Anything contained herein to the contrary
notwithstanding, the Company's obligation to provide medical and dental benefits
shall be limited to reimbursement of Employee's cost of COBRA continuation
coverage under the Company's medical and dental benefits plan. Nothing herein
shall alter the Company's right to amend, modify or terminate any such welfare
benefit plans.

         6. Set-Off. The Company's obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations shall be subject to
set-off, counterclaim, recoupment, defense or other right which the Company may
have against Employee.

                                       4
<PAGE>

         7. Taxes. Any payment required under this Agreement shall be subject to
all requirements of the law with regard to the withholding of taxes, filing,
making of reports and the like, and the Company shall use its best efforts to
satisfy promptly all such requirements.

         8. Confidential Information.

         (a) Employee will have possession of or access to confidential
information relating to the business of the Company, including writings,
equipment, processes, drawings, reports, manuals, invention records, financial
information, business plans, customer lists, the identity of or other facts
relating to prospective customers, inventory lists, arrangements with suppliers
and customers, computer programs, or other material embodying trade secrets,
customer or product information or technical or business information of the
Company. All such information, other than any information that is in the public
domain through no act or omission of Employee or which he is authorized to
disclose or required to disclose in connection with legal or administrative
proceedings, is referred to collectively as "Confidential Information." During
or after the Termination Date, Employee shall not (i) use or exploit in any
manner Confidential Information for himself or any person, partnership,
association, corporation or other entity other than the Company, (ii) remove any
Confidential Information, or any reproduction thereof, from the possession or
control of Company or (iii) treat Confidential Information other than in a
confidential manner.

         (b) All Confidential Information developed, created or maintained by
Employee, alone or with others while employed by the Company, and all
Confidential Information maintained by Employee thereafter, shall remain at all
times the exclusive property of the Company. Employee shall return to the
Company all Confidential Information, and reproductions thereof, whether
prepared by him or others, that are in his possession immediately upon request
and in any event upon the termination of his employment with the Company.

         (c) For purposes of this Section 8, the term "Company" shall include
the Company and its subsidiaries.

         9. Agreement Not to Compete. During the Restricted Period (defined
below), Employee shall not, at any time within the Territory (defined below),
directly or indirectly, engage in, or have any interest on behalf of himself or
others in, any firm, corporation or business (whether as an employee, officer,
director, agent, security holder, creditor, partner, joint venturer, beneficiary
under a trust, investor, consultant or otherwise) that engages within the
Territory in any of the business activities in which the Company shall have been
engaged at any time during the one year prior to the termination of Employee's
employment (the "Restricted Business"); provided, however, that nothing
contained herein shall prevent or prohibit Employee from owning of record or
beneficially up to 1% of the stock or equity of any corporation or other
business entity engaged in the Restricted Business if such corporation or other
entity is traded on the New York Stock Exchange, the American Stock Exchange or
the NASDAQ National Market. In addition, during the Restricted Period, Employee
shall not directly or indirectly solicit or otherwise encourage any of the
Company's employees to terminate their employment with the Company. The
"Restricted Period" means the period of one year following Employee's
Termination Date. The "Territory" means any part of North America in which the
Company engages in the Restricted Business during the Restricted Period. If a
court determines that the foregoing restrictions are too broad or otherwise
unreasonable under applicable law, including with respect to time or space, the
court is hereby requested and authorized by the parties hereto to revise the
foregoing restriction to include the maximum restrictions allowable under
applicable law. Employee acknowledges, however, that this Section 9 has been
negotiated by the parties hereto and that the geographical and time limitations,
as well as the limitation on activities, are reasonable in light of the
circumstances pertaining to the business of the Company. For purposes of this
Section 9, the term "Company" shall include the Company and its subsidiaries.

                                       5
<PAGE>

         10. Remedies. The Employee expressly acknowledges that the remedy at
law for any breach of Sections 8 or 9 will be inadequate and that upon any such
breach or threatened breach, the Company shall be entitled as a matter of right
to injunctive relief in any court of competent jurisdiction, in equity or
otherwise, and to enforce the specific performance of Employee's obligations
under these provisions without having to prove actual damage to the Company or
the inadequacy of a legal remedy. The rights conferred upon the Company by the
preceding sentence shall not be exclusive of, but shall be in addition to, any
other rights or remedies which the Company may have at law, in equity or
otherwise.

         11. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:

                      If to the Company, to:
                              SunSource, Inc.
                              3000 One Logan Square
                              Philadelphia, PA   19103
                              Attention:  President

                      If to Employee, to:

                              Joseph M. Corvino
                              1420 Ardleigh Circle
                              West Chester, PA 19380

or to such other names or addresses as the Company or Employee, as the case may
be, shall designate by notice to the other party hereto in the manner specified
in this Section. Any such notice shall be deemed delivered and effective when
received in the case of personal delivery, five days after deposit, postage
prepaid, with the U.S. Postal Service in the case of registered or certified
mail, or on the next business day in the case of overnight express courier
service.

         12. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.

         13. Contents of Agreement, Amendment and Assignment.

         (a) This Agreement supersedes all prior agreements, sets forth the
entire understanding between the parties hereto with respect to the subject
matter hereof and cannot be changed, modified, extended or terminated except
upon written amendment executed by Employee and the Company.

                                       6
<PAGE>

         (b) Nothing in this Agreement shall be construed as giving Employee any
right to be retained in the employ of the Company.

         (c) All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
representatives, successors and assigns of the parties hereto, except that the
duties and responsibilities of Employee hereunder shall not be assignable in
whole or in part.

         14. Severability. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.

         15. Remedies Cumulative; No Waiver. No right conferred upon the parties
by this Agreement is intended to be exclusive of any other right or remedy, and
each and every such right or remedy shall be cumulative and shall be in addition
to any other right or remedy given hereunder or now or hereafter existing at law
or in equity. No delay or omission by a party in exercising any right, remedy or
power hereunder or existing at law or in equity shall be construed as a waiver
thereof.

         16. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until twenty-four (24) months beyond the month in
which a Change in Control occurs (or, if later, twenty-four (24) months beyond
the consummation of the transaction which constitutes a Change in Control).

         17. Survivorship. The respective rights and obligations of the parties
under this Agreement shall survive any termination of the Employee's employment
to the extent necessary to the intended preservation of such rights and
obligations.

         18. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.

         IN WITNESS WHEREOF, the undersigned, intending to be legally bound,
have executed this Agreement as of the date first above written.

                                    SUNSOURCE, INC.

                                    By:  /s/ Maurice P. Andrien, Jr.
                                         ---------------------------
                                         President and CEO

                                    EMPLOYEE

                                         /s/ Joseph M. Corvino
                                         ---------------------------

                                       7
<PAGE>
                                  ATTACHMENT A
                                 GENERAL RELEASE

         Whereas ___________________________ (herein referred to as "Employee")
has been employed by SunSource, Inc. (herein collectively referred to as
"Employer") and because Employee and Employer desire to amicably terminate
Employee's employment with Employer, Employee and Employer agree as follows:

         1. In consideration of the promises of Employer set forth in paragraph
3 below, Employee, and his/her heirs, executors and administrators, intending to
be legally bound, hereby permanently and irrevocably terminates his/her
employment with Employer, effective          , 200 , and remises,
releases and forever discharges Employer, and its subsidiaries and affiliates,
and its and their officers, directors, shareholders, employees, agents, its and
their respective successors and assigns, heirs, executors, and administrators,
and any individual or organization related to Employer and against whom or which
Employee could claim (hereinafter referred to collectively as "Releasees") of
and from any and all actions and causes of actions, suits, debts, claims and
demands whatsoever in law or in equity, which he/she had, now has, or may have,
by reason of any matter, cause or thing whatsoever, from the beginning of
his/her employment with Employer up to and including the date of this General
Release (hereinafter "Agreement"), particularly, but without limitation, any
claims arising from or relating in any way to his/her employment relationship or
the termination of his/her employment relationship with Employer, including, but
not limited to, any claims which have been asserted, could have been asserted or
could be asserted now or in the future, including claims under any federal,
state, or local laws, including Title VII of the Civil Rights Act of 1964, as
amended, 42 U.S.C. 2000e et seq., the Age Discrimination in Employment Act, 29
U.S.C. 621 et seq., the American with Disabilities Act, 42 U.S.C. 12101 et seq.,
the Employee Retirement Income Security Act, 29 U.S.C. 1001 et seq. ("ERISA"),
any common law contract or tort claims now or hereafter recognized, and all
claims for attorney's fees and costs.

         2. Employee further agrees and covenants that neither he/she, nor any
person, organization or other entity on his/her behalf, will file, charge,
claim, sue or cause or permit to be filed, charged or claimed, any civil action,
suit or legal proceeding for personal relief (including any action for damages,
injunctive, declaratory, monetary or other relief) against Releasees involving
any matter occurring at any time in the past up to and including the date of
this Agreement or involving any continuing effects of any acts or practices
which may have arisen or occurred prior to the date of this Agreement. Employee
further agrees that if any person, organization, or other entity should bring a
claim against Releasees involving any such matter, he/she will not accept any
personal relief in any such action.

         3. In full consideration of Employee's execution of this General
Release, and his/her agreement to be legally bound by its terms, Employer agrees
to provide Employee with the attached Severance Agreement, to which he/she
acknowledges he /she would not otherwise be entitled.

         4. Except as set forth in this Agreement, it is expressly agreed and
understood that Employer does not have, and will not have, any obligation to
provide Employee at any time in the future with any payments, benefits or
considerations other than those recited in paragraph 3 above, other than any
vested benefits to which Employee may be entitled under the terms of Employer's
benefit plans.

<PAGE>

         5. Employee hereby agrees and recognizes that his/her employment
relationship with Releasees has been permanently severed and that Releasees have
no obligation, contractual or otherwise, to hire, rehire or re-employ him/her in
the future and Employee agrees not to seek re-employment with Releasees.

         6. Employee agrees and acknowledges that the agreement by Employer,
described herein, is not and shall not be construed to be an admission of any
violation of any federal, state or local statute or regulation, or of any duty
owed by Employer and that this Agreement is made voluntarily to provide an
amicable conclusion of his/her employment relationship with Employer.

         7. Employee agrees, covenants and promises that he/she has not
communicated or disclosed, and will not hereafter communicate or disclose the
terms of this General Release to any persons with the exception of members of
his/her immediate family and his/her attorney, and his/her accountant or tax
advisor, each of whom shall be informed of this confidentiality obligation and
shall be bound by its terms.

         8. Employee hereby certifies that:

         (a) he/she has read the terms of this Agreement, and that he/she
understands its terms and effects, including the fact that he/she has agreed to
release and forever discharge Releasees from any legal action arising out of his
employment relationship with Employer, the terms and conditions of that
employment relationship, and the termination of that employment relationship;

         (b) he/she has signed this Agreement voluntarily and knowingly in
exchange for the consideration described herein, which he/she acknowledges as
adequate and satisfactory to him/her;

         (c) he/she has been advised by Employer, through this document, to
consult an attorney prior to signing this Agreement;

         (d) Employer has provided Employee with at least days within which to
consider and sign this Agreement, and that Employee has signed on the date
indicated below after concluding that this Agreement is satisfactory to him/her;

         (e) Employee has the right to revoke this Agreement for a period of
seven (7) days following his/her execution of this Agreement by giving written
notice to the Employer to the attention of _______________________.

                                       2
<PAGE>

         (f) Neither Employer, nor any of its agents, representatives or
attorneys have made any representations to Employee concerning the terms or
effects of this Agreement and other than those contained herein;

         9. The parties hereto acknowledge that the undertakings of each of the
parties herein are expressly contingent upon the fulfillment and satisfaction of
the obligations of the other party as set forth herein.

         10. If any provision of this Agreement is deemed invalid, the remaining
provisions shall not be affected.

         IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties have executed the foregoing Agreement this           day of       ,    .

                                             EMPLOYEE

Witness:
         ---------------------------         -----------------------------------

                                             SUNSOURCE, INC.

Witness:                                     By:
        ----------------------------             -------------------------------

                                             Title:
                                                    ----------------------------

                                       3
<PAGE>

                                  ATTACHMENT B
                                 FRINGE BENEFITS

Auto Allowance                                                         $12,600
Health Club Reimbursement                                                1,100
Life Insurance  -  Tax Gross-Up                                         ______
                      [What Program?]<PAGE>

                                AMENDMENT NO. 4

                                       TO

                      REVOLVING CREDIT, TERM LOAN, GUARANTY
                             AND SECURITY AGREEMENT

         THIS AMENDMENT NO. 4 (this "Amendment") is entered into as of December
___, 2000, by and among SUNSOURCE INC., a corporation organized under the laws
of the State of Delaware ("SunSource"), SUNSOURCE TECHNOLOGY SERVICES INC., a
corporation organized under the laws of the State of Delaware ("STSI"), THE
HILLMAN GROUP, INC. ("Hillman"), a Delaware corporation, AXXESS TECHNOLOGIES,
INC. ("Axxess"), a Delaware corporation (SunSource, STSI, Hillman and Axxess,
each a "Borrower" and collectively "Borrowers"), the other Credit Parties (as
defined herein) which are now or which hereafter become a party hereto, the
financial institutions which are now or which hereafter become a party hereto
(collectively, the "Lenders" and individually a "Lender") and PNC BANK, NATIONAL
ASSOCIATION ("PNC"), as agent for Lenders (PNC, in such capacity, the "Agent").

                                   BACKGROUND

         Borrowers, the other Credit Parties, Lenders and Agent are parties to
that certain Revolving Credit, Term Loan, Guaranty and Security Agreement dated
as of December 15, 1999 (as amended, restated, supplemented or otherwise
modified from time to time, the "Loan Agreement") pursuant to which Agent and
Lenders provide Borrowers with certain financial accommodations.

         Borrowers and the other Credit Parties have requested that Agent and
Lenders amend the Loan Agreement and Agent and Lenders are willing to do so on
the terms and conditions hereafter set forth herein.

         NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrowers by Agent
and Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

         1. Definitions. All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Loan Agreement.

         2. Amendment to Loan Agreement. Subject to satisfaction of the
conditions precedent set forth in Section 3 below, the Loan Agreement is hereby
amended as follows:

         (a) Section 1.2 is amended by adding the following defined terms in
their appropriate alphabetical order to provide as follows:

         "Allied Capital" shall mean Allied Capital Corporation, a Maryland
         corporation.

<PAGE>

         "Allied Capital Subordinated Note" shall have the meaning given to the
         term "Debentures" in the Allied Investment Agreement.

         "Allied Capital Subordination Agreement" shall mean that certain
         Subordination Agreement dated as of December __, 2000 among Agent,
         Allied Capital and Credit Parties.

         "Allied Investment Agreement"" shall mean that certain Investment
         Agreement by and among the Borrowers, each of the other Credit Parties
         that is a party thereto and Allied Capital, dated as of December __,
         2000.

         "Amendment No. 4 Effective Date" shall mean December __, 2000.

         "Mexican Liquidation" shall mean the liquidation by SunSource of all or
         substantially all of the stock and/or assets of SunSource Integrated
         Services de Mexico for cash liquidation proceeds of at least
         $1,000,000.

         (b) Section 1.2 is amended by amending the following defined terms in
their entirety to provide as follows:

         "Applicable Percentage" shall mean (a) during the period from the
         Amendment No. 4 Effective Date through June 30, 2001, 2.75% with
         respect to the Revolving Interest Rate for Revolving Advances
         consisting of Eurodollar Rate Loans and 3.00% with respect to the Term
         Loan Rate for Eurodollar Rate Loans and (b) thereafter, as of any date
         of determination, a per annum rate equal to the rate set forth below
         for the applicable type of Eurodollar Rate Loans based upon the Fixed
         Charge Coverage Ratio for the most recently ended fiscal quarter for
         the four fiscal quarters then ended as follows:

<TABLE>
<CAPTION>
---------------------------   -------------------------------    --------------------------
Fixed Charge Coverage Ratio   Revolving Eurodollar Rate Loans    Term Eurodollar Rate Loans
---------------------------   -------------------------------    --------------------------
<S>                                        <C>                             <C>
less than 1.00 to 1.00                     3.25%                           3.50%
---------------------------   -------------------------------    --------------------------
1.00 - 1.09 to 1.00                        3.00%                           3.25%
---------------------------   -------------------------------    --------------------------
1.10 - 1.35 to 1.00                        2.75%                           3.00%
---------------------------   -------------------------------    --------------------------
1.36 - 1.50 to 1.00                        2.50%                           2.75%
---------------------------   -------------------------------    --------------------------
Greater than 1.50 to 1.00                  2.25%                           2.50%
---------------------------   -------------------------------    --------------------------
</TABLE>

         The Applicable Percentage shall be adjusted (up or down) prospectively
         on a quarterly basis as determined by the Fixed Charge Coverage Ratio
         and shall be effective for each calendar month commencing at least five
         (5) Business Days after the date of delivery to Agent of the quarterly
         unaudited or annual audited (as applicable) financial statements
         evidencing the need for an adjustment. Failure to timely deliver such
         financial statements shall, in addition to any other remedy provided
         for in this Agreement, result in an increase to the highest level set
         forth in the foregoing and until the first day of the first calendar
         month following the delivery of the required financial statements
         demonstrating that such an increase is not required. If a Default or
         Event of Default has occurred and is continuing at the time any
         reduction in the Applicable Percentage is to be implemented, that
         reduction shall be deferred until the first day of the first calendar
         month following the date on which such Default or Event of Default is
         waived or cured.

                                       2
<PAGE>

         "Earnings Before Interest and Taxes" shall mean for any period the sum
         of (i) net income (or loss) of Borrowers on a consolidated basis for
         such period (excluding extraordinary gains), plus (ii) all interest
         expense of Borrowers on a consolidated basis for such period, plus
         (iii) all charges against income of Borrowers on a consolidated basis
         for such period for federal, provincial, state and local taxes
         expensed, plus (iv) loss on the Harding Divestiture net of any tax
         benefit from such loss and loss on the Mexican Liquidation net of any
         tax benefit from such loss minus (v) all credits to income of Borrowers
         on a consolidated basis for such period for federal, provincial, state
         and local taxes credited and minus (vi) gain on contribution of Kar and
         A & H Bolt.

         "EBITDA" shall mean for any period the sum of (i) Earnings Before
         Interest and Taxes for such period plus (ii) depreciation expenses for
         such period, plus (iii) amortization expenses for such period plus (iv)
         non cash charges for such period related to the write-off of inventory
         step-up as a result of the application of Accounting Principles Board
         #16, Accounting for Business Combinations, for acquisitions consummated
         by SunSource or any other Credit Party.

         "Fixed Charge Coverage Ratio" shall mean and include, with respect to
         any fiscal period, the ratio of (a) EBITDA minus non-financed capital
         expenditures made by Borrowers on a consolidated basis during such
         period minus taxes paid in cash by Borrowers on a consolidated basis
         during such period to (b) all Senior Debt Payments and all Subordinated
         Debt Payments during such period, except for payments paid in calendar
         year 2001 of principal on the Axxess Subordinated Notes and of
         principal and interest on the Axxess Long Term Note.

         "Subordinated Debt Payments" shall mean and include all cash actually
         expended to make payments of principal and interest on the Junior
         Subordinated Debentures, the Axxess Subordinated Notes, Axxess Long
         Term Subordinated Note, SunSource Long Term Subordinated Guaranty,
         SunSource Subordinated Guaranties and the Allied Capital Subordinated
         Note.

         (c) Section 2.2(b)(iii) is hereby amended by deleting "one, two three
or six months" and inserting "one, two or three months" in its place and stead.

                                       3
<PAGE>

         (d) Section 2.4 is amended by adding the following at the end thereof:

         "Notwithstanding the foregoing, following the repayment of the Term
         Loan required by Section 2.14(e) hereof, the Term Loan shall be payable
         (subject to acceleration or termination of this Agreement) based upon
         equal quarterly installments of $125,000 each commencing on April 1,
         2001 and on the first day of each July, October, January and April
         thereafter until December 14, 2004 when the entire unpaid principal
         balance of the Term Loan shall be due and payable."

         (e) A new Section 2.14(e) is added immediately after Section 2.14(d) to
provide as follows:

         "(e) Upon execution of the Allied Investment Agreement, the Borrowers
         shall make a repayment of the (i) Term Loan in an amount sufficient to
         reduce the outstanding principal balance of the Term Loan to
         $2,500,000, such repayment shall be applied, to the outstanding
         principal installments of the Term Loan in the inverse order of the
         maturities thereof, and (ii) Revolving Advances in an amount equal to
         all proceeds remaining following the closing of the $30,000,000 loan
         under the Allied Investment Agreement and the repurchase of certain of
         the Axxess Subordinated Notes and of the Axxess Long Term Subordinated
         Note, subject to Borrowers' ability to reborrow Revolving Advances in
         accordance with the terms hereof."

         (f) Sections 6.6, 6.7 and 6.8 are hereby amended in their entirety to
provide as follows:

         "6.6. Fixed Charge Coverage Ratio. Maintain, with respect to Borrowers
         on a consolidated basis, a Fixed Charge Coverage Ratio of not less than
         the ratio as of the end of the applicable periods set forth below:

Period                                                                 Ratio
------                                                                 -----
Three months ending March 31, 2001                                  0.65 to 1.0
Four months ending April 30, 2001                                   0.70 to 1.0
Five months ending May 31, 2001                                     0.80 to 1.0
Six months ending June 30, 2001                                     1.00 to 1.0
Seven months ending July 31, 2001                                   1.00 to 1.0
Eight months ending August 31, 2001                                 1.00 to 1.0
Nine months ending September 30, 2001                               1.00 to 1.0
Ten months ending October 31, 2001                                  1.00 to 1.0
Eleven months ending November 30, 2001                              1.00 to 1.0
Twelve months ending December 31, 2001 and on the last day          1.00 to 1.0
of each month ending thereafter for the twelve month period
then ending

                                       4
<PAGE>

         Compliance with this Section 6.6 shall not be required if, at all times
         during the three month period preceding the test date, Undrawn
         Availability was in excess of $10,000,000; provided, however, if the
         Axxess Long Term Subordinated Note and Axxess Subordinated Notes have
         not been repaid in full, then the Undrawn Availability test for the
         three months ending March 31, 2001 shall be $16,000,000.

         6.7 Undrawn Availability. Maintain, with respect to Borrowers on a
         consolidated basis, at all items (i) during the period commencing on
         the Amendment No. 4 Effective Date and ending on May 15, 2001, at least
         $10,000,000 of Undrawn Availability (as calculated under Section
         2.1(a)(y)) and (ii) commencing May 16, 2001 and thereafter, at least
         $2,500,000 of Undrawn Availability (as calculated under Section
         2.1(a)(y)) including, without limitation, in either case, after giving
         effect to any payments made under the Junior Subordinated Debentures,
         the Axxess Subordinated Notes, the Axxess Long Term Subordinated Note,
         the SunSource Long Term Subordinated Guaranty, the SunSource
         Subordinated Guaranties and the Allied Capital Subordinated Note.

         6.8. Deferred Interest. In the event the Fixed Charge Coverage Ratio
         for the (i) three (3) month period ending March 31, 2001 is less than
         0.65 to 1.0, (ii) six (6) month period ending June 30, 2001 is less
         than 1.00 to 1.00, (iii) nine (9) month period ending on September 30,
         2001 is less than 1.05 to 1.00, (iv) four (4) fiscal quarter period
         ending on December 31, 2001 and on the last day of each fiscal quarter
         thereafter tested on a rolling four (4) quarter basis is less than 1.10
         to 1.00, Credit Parties shall exercise their right to defer interest
         due under the Junior Subordinated Debentures and prior to paying any
         such deferred interest under the Junior Subordinated Debentures prior
         to the end of such deferral period, Credit Parties shall obtain the
         written consent of Required Lenders to make such payment.
         Notwithstanding the foregoing, the Credit Parties may make regularly
         scheduled payments of interest on the Junior Subordinated Debentures on
         or prior to June 30, 2001 if Undrawn Availability with respect to
         Borrowers on a consolidated basis exceeds $10,000,000 after giving
         effect to each such payment."

         (g) Section 7.6 is amended in its entirety to provide as follows:

         "7.6 Capital Expenditures. Contract for, purchase or make any
         expenditure or commitments for fixed or capital assets (including
         capitalized leases) in any fiscal year in an aggregate amount for all
         Credit Parties in excess of $15,000,000."

                                       5
<PAGE>

         (h) Section 7.8 is amended in its entirety to provide as follows:

         "7.8 Indebtedness. Create, incur, assume or suffer to exist any
         Indebtedness (exclusive of trade debt) except in respect of (i)
         Indebtedness to Agent or to Lenders; (ii) Indebtedness incurred for
         capital expenditures permitted under Section 7.6 hereof; (iii)
         Indebtedness due under the Junior Subordinated Debentures as in effect
         on the date hereof, (iv) Indebtedness set forth in the financial
         statements delivered pursuant to Section 5.5 hereof, (v) Indebtedness
         due under the Axxess Subordinated Notes and Axxess Long Term
         Subordinated Note as each is in effect on the Joinder, Consent and
         Amendment No. 2 Effective Date and (vi) Indebtedness due under the
         Allied Investment Agreement as in effect on the Amendment No. 4
         Effective Date."

         (i) Section 7.11 is amended in its entirety to provide as follows:

         "7.11 Leases. Enter as lessee into any lease arrangement for real or
         personal property (unless capitalized and permitted under Section 7.6
         hereof) if, after giving effect thereto, aggregate annual rental
         payments for all leased property would exceed $18,000,000 in any one
         fiscal year in the aggregate for all Credit Parties."

         (j) Section 7.18 is amended in its entirety to provide as follows:

         "7.18. Junior Subordinated Debentures, the Axxess Subordinated Notes,
         Axxess Long Term Subordinated Note, SunSource Long Term Subordinated
         Guaranty, the SunSource Subordinated Guaranties and the Allied Capital
         Subordinated Note. At any time, directly or indirectly, pay, prepay,
         repurchase, redeem, retire or otherwise acquire, or make any payment on
         account of any principal of, interest on or premium payable in
         connection with the repayment or redemption of the Junior Subordinated
         Debentures, the Axxess Subordinated Notes, Axxess Long Term
         Subordinated Note, SunSource Long Term Subordinated Guaranty, the
         SunSource Subordinated Guaranties or the Allied Capital Subordinated
         Note, except for (a) payments of interest (subject to Section 6.8
         hereof) required by the terms of the Junior Subordinated Debentures as
         in effect on the Closing Date and (b) payments permitted by the (i)
         Axxess Subordination Agreement on the Axxess Subordinated Notes, Axxess
         Long Term Subordinated Note and the SunSource Subordinated Guaranties
         and (ii) Allied Capital Subordination Agreement on the Allied Capital
         Subordinated Note." Notwithstanding the foregoing, the Axxess
         Subordinated Notes and the Axxess Long Term Subordinated Note may be
         prepaid on or after the Amendment No. 4 Effective Date; provided that
         not more than $8,500,000 shall constitute payment in full of the Axxess
         Long Term Subordinated Note."

         (k) Section 9.12 is amended by deleting "fifteen (15) days" and
inserting "one (1) day" in its place and stead.

                                       6
<PAGE>

         (l) Section 10.12 is amended in its entirety to provide as follows:

         "10.12. an event of default has occurred and been declared under the
         Junior Subordinated Debentures, the Axxess Subordinated Notes, Axxess
         Long Term Subordinated Note, SunSource Long Term Subordinated Guaranty,
         SunSource Subordinated Guaranties or the Allied Investment Agreement,
         which default shall not have been cured or waived within any applicable
         grace period;"

         3. Conditions of Effectiveness. This Amendment shall become effective
as of the Amendment No. 4 Effective Date, provided that all of the following
conditions shall have been satisfied: (i) Agent shall have received four (4)
copies of this Amendment executed by all Credit Parties and Lenders; (ii) Agent
shall have received four (4) copies of the Allied Capital Subordination
Agreement executed by Allied Capital and the Credit Parties; (iii) Agent shall
have received an amount sufficient to reduce the outstanding principal balance
of the Term Loan to $2,500,000 shall have been remitted to Agent pursuant to
Section 2.14(e) of the Loan Agreement and (iv) Agent shall have received such
other certificates, instruments, documents, agreements and opinions of counsel
as may be required by Agent or its counsel (including all items provided to
Allied Capital in connection with the Allied Investment Agreement), each of
which shall be in form and substance satisfactory to Agent and its counsel.

         4. Representations, Warranties and Covenants. Each Borrower and each of
the other Credit Parties hereby represents, warrants and covenants as follows:

         (a) This Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of each Borrower and each of the
other Credit Parties and are enforceable against each Borrower and each of the
other Credit Parties in accordance with their respective terms.

         (b) Upon the effectiveness of this Amendment, each Borrower and each of
the other Credit Parties hereby reaffirms all covenants, representations and
warranties made in the Loan Agreement to the extent the same are not amended
hereby and agrees that all such covenants, representations and warranties shall
be deemed to have been remade as of the effective date of this Amendment.

         (c) No Event of Default has occurred and is continuing or would exist
after giving effect to this Amendment.

         (d) Each Borrower and each of the other Credit Parties has no defense,
counterclaim or offset with respect to the Loan Agreement or the Obligations.

         5. Effect on the Loan Agreement.

         (a) Upon the effectiveness of Section 2 hereof, each reference in the
Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
like import shall mean and be a reference to the Loan Agreement as amended
hereby.

                                       7
<PAGE>

         (b) Except as specifically amended herein, the Loan Agreement, and all
other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.

         (c) The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of Agent or any Lender,
nor constitute a waiver of any provision of the Loan Agreement, or any other
documents, instruments or agreements executed and/or delivered under or in
connection therewith.

         6. Governing Law. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York.

         7. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

         8. Counterparts; Facsimile Signatures. This Amendment may be executed
by the parties hereto in one or more counterparts, each of which shall be deemed
an original and all of which taken together shall constitute one and the same
agreement. Any signature received by facsimile transmission shall be deemed an
original signature hereto.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       8
<PAGE>

         IN WITNESS WHEREOF, this Amendment has been duly executed as of the day
and year first written above.

                    SUNSOURCE INC., as a Borrower
                    SUNSOURCE TECHNOLOGY SERVICES INC., as a Borrower
                    THE HILLMAN GROUP, INC., as a Borrower
                    AXXESS TECHNOLOGIES, INC., as Borrower
                    A & H HOLDING COMPANY, INC., as a Guarantor
                    SUNSOURCE CORPORATE GROUP, INC., as a Guarantor
                    SUNSOURCE INDUSTRIAL SERVICES COMPANY, INC., as a Guarantor
                    SUNSOURCE INVENTORY MANAGEMENT COMPANY, INC., as a Guarantor
                    SUNSOURCE INVESTMENT COMPANY, INC., as a Guarantor
                    SUNSUB A INC., as a Guarantor
                    SUNSUB C INC., as a Guarantor

                    By:    /s/ Joseph M. Corvino
                           -----------------------------
                    Name:  Joseph M. Corvino
                    Title: Vice President of each of the foregoing
                           corporations

                    SUNSUB HOLDINGS LLC

                    By:  SunSub C Inc., its sole member

                           By: /s/ Joseph M. Corvino
                               -----------------------------
                           Name: Joseph M. Corvino
                           Title: Manager

                    J. N. FAUVER (CANADA) LIMITED, as a Guarantor

                    By:    /s/ Joseph M. Corvino
                           -----------------------------
                    Name:  Joseph M. Corvino
                    Title: President

                    [SIGNATURES CONTINUED ON FOLLOWING PAGE]

                                       9
<PAGE>

                     1394066 ONTARIO INC., as a Guarantor

                     By:    /s/ Joseph M. Corvino
                            -----------------------------
                     Name:  Joseph M. Corvino
                     Title:

                     PNC BANK, NATIONAL ASSOCIATION, as Lender and as Agent

                     By:    /s/ Peter H. Schryver
                            -----------------------------
                     Name:  Peter H. Schryver
                     Title: Senior Vice President

                     BANK OF AMERICA BUSINESS CREDIT, as Co-Agent and Lender

                     By:    /s/ Richard Levenson
                            ----------------------------
                     Name:  Richard Levenson
                     Title: Senior Vice President

                     FIRSTAR BANK, N.A., as Co-Agent and Lender

                     By:    /s/ Donald K. Mitchell
                            -----------------------------
                     Name:  Donald K. Mitchell
                     Title: Vice President

                     FIFTH THIRD BANK, as Lender

                     By:    /s/ Ann Pierson
                            ----------------------------
                     Name:  Ann Pierson
                     Title: Corporate Banking Officer

                     LASALLE BUSINESS CREDIT, as Lender

                     By:    /s/ Stephen V. Riege
                            -----------------------------
                     Name:  Stephen V. Rieger
                     Title: Asst. Vice President/Regional Manager

                                     [SIGNATURES CONTINUED ON FOLLOWING PAGE]

                                       10
<PAGE>

                     IBJ WHITEHALL BUSINESS CREDIT CORPORATION, as Lender

                     By:    /s/ Andrew C. Sepe
                            -----------------------------
                     Name:  Andrew C. Sepe
                     Title: Assistant Vice President

                                       11

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