Form: S-2

January 22, 1998

Documents

EXHIBIT 10.1

Published on January 22, 1998


Exhibit 10.1
AMENDED AND RESTATED
CREDIT AGREEMENT

AMONG

SDI OPERATING PARTNERS, L.P.,
AND ITS SUBSIDIARIES AS SET FORTH
ON SCHEDULE 1 ATTACHED HERETO
("BORROWERS"),


SDI PARTNERS I, L.P.,
SUNSOURCE INC., SUNSUB A INC. and
SUNSUB B INC.
("GUARANTORS"),


CORESTATES BANK, N.A.
for itself and as Agent,


THE BANK OF NOVA SCOTIA
for itself and as Documentation Agent


and


THE BANKS SET FORTH ON SCHEDULE 2 ATTACHED HERETO

("BANKS")




September 30, 1997



TABLE OF CONTENTS



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SECTION ONE - DEFINITIONS...........................................................................3
1.1. Definitions.......................................................................3
1.2. Rules of Construction............................................................13

SECTION TWO - REVOLVING CREDIT LOAN................................................................13
2.1. (a) The Facility............................................................13
(b) Amendment and Restatement...............................................13
(c) Authority of the Company................................................14
(d) Optional Increase of Commitment.........................................14
2.2. Promissory Notes.................................................................14
2.3. Banks' Participation.............................................................14
2.4. Use of Proceeds..................................................................15
2.5. Repayment........................................................................15
2.6. Interest.........................................................................15
2.7. Advances.........................................................................20
2.8. Reduction and Termination of Commitment; Voluntary and Mandatory
Prepayment.......................................................................22
2.9. Prepayment.......................................................................22
2.10. Funding Costs; Loss of Earnings..................................................23
2.11. Payments.........................................................................23
2.12. Commitment Fee...................................................................23
2.13. Swing Line Loans.................................................................23
2.14. Regulatory Changes in Capital Requirements.......................................25
2.15. Taxes............................................................................26

SECTION THREE - LETTERS OF CREDIT..................................................................28
3.1. (a) Availability of Letters of Credit.......................................28
(b) Evergreen Letters of Credit.............................................28
3.2. Commitment Availability..........................................................29
3.3. Approval and Issuance............................................................29
3.4. Obligations of the Borrowers.....................................................29
3.5. Payment by Banks on Letters of Credit............................................30
3.6. Collateral.......................................................................31
3.7. General Terms of Credits.........................................................31

SECTION FOUR - REPRESENTATIONS AND WARRANTIES......................................................33
4.1. Organization and Good Standing...................................................33
4.2. Power and Authority; Validity of Agreement.......................................33
4.3. No Violation of Laws or Agreements...............................................34


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4.4. Material Contracts...............................................................34
4.5. Compliance.......................................................................34
4.6. Litigation.......................................................................34
4.7. Title to Assets..................................................................34
4.8. Partnership Interests............................................................35
4.9. Capital Stock....................................................................35
4.10. Accuracy of Information; Full Disclosure.........................................35
4.11. Taxes and Assessments............................................................36
4.12. Indebtedness.....................................................................36
4.13. Management Agreements............................................................37
4.14. Subsidiaries and Investments.....................................................37
4.15. ERISA............................................................................37
4.16. Fees and Commissions.............................................................38
4.17. No Extension of Credit for Securities............................................38
4.18. Hazardous Wastes, Substances and Petroleum Products..............................38
4.19. Solvency.........................................................................38
4.20. Foreign Assets Control Regulations...............................................39
4.21. Investment Company Act...........................................................39

SECTION FIVE - CONDITIONS..........................................................................39
5.1. First Advance....................................................................39
5.2. Subsequent Advances..............................................................41
5.3. Additional Condition to Banks' Obligations.......................................41

SECTION SIX - AFFIRMATIVE COVENANTS................................................................41
6.1. Existence and Good Standing......................................................41
6.2. Quarterly Financial Statements...................................................41
6.3. Annual Financial Statements......................................................42
6.4. Cash Flow Projections............................................................42
6.5. Public Information...............................................................42
6.6. Books and Records................................................................42
6.7. Properties; Insurance............................................................42
6.8. Notices to Banks.................................................................43
6.9. Taxes............................................................................43
6.10. Costs and Expenses...............................................................43
6.11. Compliance; Notification.........................................................43
6.12. ERISA............................................................................44
6.13. Capitalization Ratio.............................................................44


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6.14. Fixed Charge Coverage Ratio......................................................45
6.15. Leverage Ratio...................................................................45
6.16. Management Changes...............................................................45
6.17. Subsequent Credit Terms..........................................................45
6.18. Use of Proceeds..................................................................45
6.19. Successor Agent..................................................................45
6.20. Transactions Among Affiliates....................................................46
6.21. Other Information................................................................46

SECTION SEVEN - NEGATIVE COVENANTS.................................................................46
7.1. Indebtedness.....................................................................46
7.2. Guaranties.......................................................................46
7.3. Loans............................................................................47
7.4. Liens and Encumbrances...........................................................47
7.5. Additional Negative Pledge.......................................................47
7.6. Restricted Payments..............................................................47
7.7. Transfer of Assets...............................................................48
7.8. Acquisitions and Investments.....................................................48
7.9. Use of Proceeds..................................................................48
7.10. Amendment of Documents...........................................................48
7.11. Payment of Senior Notes..........................................................49

SECTION EIGHT - RIGHT OF SETOFF....................................................................49

SECTION NINE - DEFAULT.............................................................................49
9.1. Events of Default................................................................49
9.2. Remedies.........................................................................51

SECTION TEN - THE BANKS............................................................................51
10.1. Application of Payments..........................................................51
10.2. Setoff...........................................................................52
10.3. Modifications and Waivers........................................................52
10.4. Obligations Several..............................................................52
10.5. Banks' Representations...........................................................53
10.6. Investigation....................................................................53
10.7. Powers of Agent; Rights and Duties of Documentation Agent........................53
10.8. General Duties of Agent, Immunity and Indemnity..................................53
10.9. No Responsibility for Representations or Validity, etc...........................53



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Page
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10.10. Action on Instruction of Banks; Right to Indemnity................................53
10.11. Employment of Agents..............................................................54
10.12. Reliance on Documents.............................................................54
10.13. Agent's Rights as a Bank..........................................................54
10.14. Expenses..........................................................................54
10.15. Resignation of Agent..............................................................54
10.16. Successor Agent...................................................................54
10.17. Collateral Security...............................................................55
10.18. Enforcement by Agent..............................................................55

SECTION ELEVEN - GUARANTY..........................................................................55
11.1. Guaranty.........................................................................55
11.2. Bankruptcy.......................................................................55
11.3. Nature and Term of Guaranty......................................................55
11.4. Rights and Remedies of Agent.....................................................56
11.5. Actions by Agent Not Affecting Guaranty..........................................56
11.6. Payment in Accordance with Promissory Notes and Credit Agreement.................56
11.7. Payments Under Guaranty..........................................................57
11.8. Waivers and Modifications........................................................57
11.9. Waiver...........................................................................57
11.10. Subordination of Rights of Subrogation............................................57
11.11. No Setoff by Guarantors...........................................................58
11.12. Continuing Guaranty; Transfer of Promissory Note..................................58
11.13. Representations and Warranties; Covenants.........................................58

SECTION TWELVE - MISCELLANEOUS.....................................................................58
12.1. Indemnification..................................................................58
12.2. Participations and Assignments...................................................58
12.3. Binding and Governing Law........................................................59
12.4. Survival.........................................................................59
12.5. No Waiver; Delay.................................................................59
12.6. Modification.....................................................................60
12.7. Headings.........................................................................60
12.8. Notices..........................................................................60
12.9. Payment on Non-Business Days.....................................................60
12.10. Time of Day.......................................................................60
12.11. Severability......................................................................60
12.12. Counterparts......................................................................60

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Page
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12.13. Consent to Jurisdiction and Service of Process....................................60
12.14. WAIVER OF JURY TRIAL..............................................................61
12.15. ACKNOWLEDGMENTS...................................................................61
12.16. Complete Agreement................................................................61


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LIST OF EXHIBITS


Schedule 1: The Subsidiaries party to this Agreement

Schedule 2: The Lenders, their respective addresses and Maximum Principal
Amounts

Exhibit A: Advance/Credit Request Form

Exhibit B: Form of Promissory Note(s)

Exhibit C: Funding Costs and Loss of Earnings Calculation

Exhibit D: Agent's Letter of Credit Application

Exhibit E: Disclosure Pursuant to Representations and Warranties

Exhibit F: Form of Covenant Compliance Certificate



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AMENDED AND RESTATED
CREDIT AGREEMENT


THIS AMENDED AND RESTATED CREDIT AGREEMENT is made this 30th
day of September, 1997, by and among SDI OPERATING PARTNERS, L.P. (the
"Company"), a Delaware limited partnership with offices at 3000 One Logan
Square, Philadelphia, Pennsylvania 19103, and its subsidiaries identified on
Schedule 1 attached hereto on a joint and several basis (the "Subsidiaries")
(the Company and the Subsidiaries, collectively, the "Borrowers"); SDI PARTNERS
I, L.P. ("SDIPI"), a Delaware limited partnership with offices at 501 Silverside
Road, Suite 17, Wilmington, DE 19809, the sole general partner of the Company,
SUNSOURCE INC., a Delaware corporation with offices at 3000 One Logan Square,
Philadelphia, PA 19103, SUNSUB A INC. ("SunSub A") a Delaware corporation with
offices at 3000 One Logan Square, Philadelphia, PA 19103, and SUNSUB B INC.,
("SunSub B") a Delaware corporation with offices at 3000 One Logan Square,
Philadelphia, PA 19103 (SDIPI, SunSource Inc., SUNSUB A and SUNSUB B
collectively, the "Guarantors"); and CORESTATES BANK, N.A., a national banking
association with offices at Broad and Chestnut Streets, Philadelphia,
Pennsylvania 19107, for itself and as administrative agent for the Banks
identified below ("Agent"); THE BANK OF NOVA SCOTIA, a Canadian chartered bank,
with offices at 1 Liberty Plaza, New York, New York 10006 (the "Documentation
Agent"), and the banks identified on Schedule 2 attached hereto (the Agent, the
Documentation Agent and the banks identified on Schedule 2, individually a
"Bank" and collectively the "Banks").

W I T N E S S E T H:

WHEREAS, the Company is a limited partnership, the sole
general partner of which is SDIPI and the sole limited partner of which is
SunSub A Inc.,

WHEREAS, as of the partner vote of September 25, 1997,
effective on September 30, 1997 (the "Effective Time"), the partners of
SunSource L.P., a Delaware limited partnership, agreed to convert said limited
partnership to corporate form in the manner and as set forth in the Securities
and Exchange Commission Form S-4 Registration Statement dated December 31, 1996,
as amended, at the Effective Time, and SunSource L.P. will be known as SunSource
Inc., a Delaware corporation (the "Conversion");

WHEREAS, the Company, SDIPI, the Agent and certain of the
Banks (the "Existing Banks") are parties to that certain Credit Agreement dated
December 22, 1992 (as amended, the "Existing Credit Agreement"), and the Company
issued Ninety-Five Million Dollars ($95,000,000) in privately-placed notes
pursuant to note purchase agreements (the "Existing Note Purchase Agreements");

WHEREAS, the Company has requested, and Agent and the Banks
have agreed, to amend and restate the Existing Credit Agreement to accommodate
the Conversion, to increase the aggregate availability under the Commitment to
Ninety Million Dollars ($90,000,000), which may be increased by an additional
Twenty Million Dollars ($20,000,000) upon the request of






Borrowers and agreement of the Banks, to add certain Banks as lenders, to amend
the covenants and to revise the Existing Credit Agreement in certain additional
respects, all on the terms and conditions as set forth herein;

WHEREAS, SunSource Inc. is a newly-formed Delaware corporation
beneficially owned by (i) the former public holders of B interests of SunSource
L.P., (ii) Lehman/SDI, Inc., a Delaware corporation, which is an indirect
wholly-owned subsidiary of Lehman Brothers Holdings Inc., a Delaware
corporation, and (iii) the current or former management employees of SunSource
Inc. and the Company;

WHEREAS, SunSub A is the sole limited partner of the Company
and the sole limited partner of SDIPI;

WHEREAS, SunSub B a Guarantor, is a Delaware corporation, a
wholly-owned subsidiary of SunSource Inc., and the sole general partner of
SDIPI;

WHEREAS, the Company is one of the largest wholesale
distributors of industrial products and services in the United States, and it is
organized in three segments: industrial services, hardware merchandising and
glass merchandising;

WHEREAS, the Conversion will include the issuance of: (i)
common stock by SunSource Inc.; and (ii) Trust Preferred Securities and Trust
Common Securities of SunSource Capital Trust (the "Trust"), a Delaware statutory
business trust;

WHEREAS, the assets of the Trust are the Junior Subordinated
Debentures (as defined below) to be issued by SunSource Inc.;

WHEREAS, payments of interest and principal on the Junior
Subordinated Debentures to the Trust will be used to make distributions on the
Trust Preferred Securities and Trust Common Securities in accordance with the
terms set forth in the Declaration of Trust of the Trust and the "Terms of
Common Securities" for the Trust and "Terms of Preferred Securities" for the
Trust;

WHEREAS, in connection with its issuance on the date hereof by
the Company of Sixty Million Dollars ($60,000,000) in privately-placed notes
pursuant to a Note Purchase Agreement dated the date hereof, Borrowers desire to
obtain a NINETY MILLION DOLLAR ($90,000,000) revolving credit facility, which
amount may be increased by up to an additional TWENTY MILLION DOLLARS
($20,000,000) upon the request of Borrowers and agreement of the Banks pursuant
to certain terms and conditions set forth herein, such facility to be used for
general corporate purposes including working capital, the financing of
acquisitions, transaction expenses, payments of up to approximately $14,500,000
to the former holders of the A interests of SunSource L.P. pursuant to the
Conversion; and the repayment of debt, including under the

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Existing Credit Agreement and under Existing Note Purchase Agreements and make
whole payments thereunder; and

WHEREAS, the Banks are willing to provide a revolving credit
commitment and to participate in the issuance by Agent of letters of credit for
the account of Borrowers in the maximum principal amount of NINETY MILLION
DOLLARS ($90,000,000), which amount may be increased by up to an additional
TWENTY MILLION DOLLARS ($20,000,000) upon the request of the Company and the
agreement of the Banks, subject to the terms and conditions hereof;

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

SECTION ONE
DEFINITIONS

1.1. Definitions. When used in this Agreement, the following
terms shall have the respective meanings set forth below. Certain terms relating
to interest rates are defined in Paragraph 2.6 and shall have the respective
meanings set forth therein.

"Accumulated Funding Deficiency" has the meaning ascribed to
that term in Section 302 of ERISA.

"Additional Commitment" shall have the meaning set forth in
Paragraph 2.1(d)(i) hereof.

"Adjusted EBITDAR" means, for any fiscal period of SunSource
Inc. and its Consolidated Subsidiaries, EBITDA plus rent expense (as determined
in accordance with GAAP) minus Capital Expenditures.

"Advance/Credit Request Form" means the certificate in the
form attached hereto as Exhibit A to be delivered by the Company to Agent as a
condition of each Advance and the issuance of each Letter of Credit.

"Advance" means a borrowing under the Commitment pursuant to
Paragraph 2.7 hereof.

"Affiliate" means: (i) any person who or entity which directly
or indirectly owns, controls or holds ten percent (10%) or more of the
outstanding common stock in SunSource Inc.; (ii) any entity of which ten percent
(10%) or more of the outstanding common stock or beneficial interest is directly
or indirectly owned, controlled, or held by SunSource Inc. or an Affiliate;
(iii)

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any entity which directly or indirectly is under common control with SunSource
Inc.; (iv) any officer, director or partner of SunSource Inc. or any Affiliate;
or (v) any immediate family member of any person who is an Affiliate. For
purposes of this definition, the term "control" means the possession, directly
or indirectly of the power to direct or cause the direction of the management
and policies of an entity, whether through the ownership of voting securities,
by contract, or otherwise.

"Agent" means CoreStates Bank, N.A. in its capacity as
administrative agent for the Banks hereunder, and its successors and assigns in
such capacity.

"Agreement" means this Amended and Restated Credit Agreement
and all exhibits and schedules hereto, as each may be amended, modified or
supplemented from time to time.

"Bank" means individually and "Banks" means, collectively, the
banks identified on Schedule 2 attached hereto as such Schedule may be amended
from time to time, their respective successors and assigns and any additional
banks which become parties to this Agreement after the date hereof in accordance
with Paragraph 12.2 hereof, but shall not include any such Bank which is
replaced pursuant to the terms hereof after the date hereof.

"Banks' Applicable Share" means, as of any date of
determination, with respect to any Net Cash Proceeds which are required or
permitted to be used by Borrowers to reduce the Commitment pursuant to this
Agreement, (i) the portion of such Net Cash Proceeds which bears the same
relationship to the entire amount of such Net Cash Proceeds as the amount of the
Commitment on the date of determination bears to the sum of the outstanding
principal amount of the Senior Notes plus the amount of the Commitment on the
date of determination, plus (ii) such amount of the Net Cash Proceeds which has
been offered to the holders of the Senior Notes pursuant to Paragraph 4.8 of the
Note Purchase Agreement as a prepayment, but as to which such offer has not been
accepted.

"Borrowers" mean, jointly and severally, SDI Operating
Partners, L.P., a Delaware limited partnership and its Subsidiaries as set forth
on Schedule 1 hereto.

"Business Day" means any day not a Saturday, Sunday or a day
or which banks are required or permitted to be closed under the laws of the
Commonwealth of Pennsylvania.

"Capital Expenditures" means, for any period, amounts accrued
or incurred for fixed assets or improvements, replacements, substitutions or
additions thereto, which have a useful life of more than one (1) year, including
direct or indirect acquisition costs of such assets.

"Capital Leases" means capital leases and subleases, as
defined in Statement 13 of the Financial Accounting Standards Board dated
November 1976, as amended and updated from time to time.

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"Capitalization Ratio" means, as of any date of determination,
the ratio of Funded Debt to Total Capital.

"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendment
and Reauthorization Act of 1986, as amended from time to time.

"Change of Control" means if at any time after the date of
this Agreement: (a) SunSource Inc. ceases to own, directly or indirectly, all of
the general and limited partnership interests in the Company and SDIPI; or
(b)(i) any person or group within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and the rules and
regulations promulgated thereunder shall have beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act), directly or indirectly, of securities of
SunSource Inc. (or other securities convertible into such securities)
representing twenty percent (20%) or more of the combined voting power of all
securities of SunSource Inc. entitled to vote in the election of directors,
other than Lehman Affiliates and the management group of Norman V. Edmonson,
Donald T. Marshall, John P. McDonnell, Harold J. Cornelius, Max W. Hillman and
Joseph M. Corvino (hereinafter called a "Controlling Person"); or (ii) a
majority of the Board of Directors of SunSource Inc. shall cease for any reason
to consist of (1) individuals who on the date hereof are serving as directors of
SunSource Inc. or (2) individuals who subsequently become members of the Board
if such individuals' nomination for election or election to the board is
recommended or approved by a majority of the Board of Directors of SunSource
Inc. For purposes of clause (b)(i) above, a person or group shall not be a
Controlling Person if such person or group holds voting power in good faith and
not for the purpose of circumventing Paragraph 9.1(f) as an agent, bank, broker,
nominee, trustee, or holder of revocable proxies given in response to a
solicitation pursuant to the 1934 Act, for one or more beneficial owners who do
not individually, or, if they are a group acting in concert, as a group, have
the voting power specified in clause (b)(i) above.

"Code" means the Internal Revenue Code of 1986, as amended
from time to time and regulations in effect from time to time.

"Commitment" means the sum of (i) the maximum aggregate
principal amount which Banks, on a several basis, have agreed to advance under
Section Two hereof, including the Swing Line Commitment (subject to the
$5,000,000 sublimit set forth therein) and (ii) the available amount under
Letters of Credit issued pursuant to Section Three hereof (subject to the
$20,000,000 sublimit set forth therein) in which Banks have agreed to
participate, such Commitment being in the aggregate Ninety Million Dollars
($90,000,000) on the date hereof subject to increase at the Company's request
and agreement of the Banks pursuant to Paragraph 2.1(d) hereof.

"Conversion" means the conversion of SunSource L.P., a
Delaware limited partnership, to the corporate form of SunSource Inc., a
Delaware corporation as set forth in

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SunSource Inc.'s Registration Statement on Form S-4, filed with the Securities
and Exchange Commission on December 31, 1996, as amended.

"Default" means an event or circumstance which, with the
giving of notice or the passage of time or both, would constitute an Event of
Default.

"Distributions Paid on Trust Securities" means all amounts
payable by the Trust to the holders of the Trust Preferred Securities and Trust
Common Securities.

"Documentation Agent" shall mean The Bank of Nova Scotia.

"EBITDA" means, for any fiscal period of SunSource Inc. and
its Consolidated Subsidiaries, Net Income plus (i) GP Management Fees, (ii)
Interest Expense (including all interest paid on the Junior Subordinated
Debentures (whether paid in cash or in kind)), (iii) all provisions for income
taxes, (iv) depreciation and amortization expense, and (v) extraordinary losses,
minus extraordinary gains, as each such item is determined in accordance with
GAAP. For purposes of this definition, extraordinary losses shall include the
restructuring charge of Four Million Nine Hundred Thousand Dollars ($4,900,000),
net of deferred income tax benefits and Conversion transaction charges of Two
Million One Hundred Fifty Thousand Dollars ($2,150,000) incurred during 1996,
and Conversion transaction charges (including make whole provisions and other
costs), not to exceed Eight Million Dollars ($8,000,000) to be incurred in 1997.

"Environmental Control Statutes" means any federal, state or
local laws governing control, storage, removal, spill, release or discharge of
Hazardous Substances including without limitation CERCLA, the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and the Hazardous and Solid Waste Amendments of 1984, the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1976, the Hazardous
Materials Transportation Act, the Emergency Planning and Community Right to Know
Act of 1986, the National Environmental Policy Act of 1975, the Oil Pollution
Act of 1990, any similar or implementing state law, in each case, including all
amendments thereto and all rules and regulations promulgated thereunder and
permits issued in connection therewith.

"Environmental Material Adverse Effect" means a material
adverse effect on the business, financial condition or prospects of Borrowers,
taken as a whole, greater than or equal to $1,000,000 per single event or
$5,000,000 in the aggregate for all such environmental events as a result of any
condition, circumstance or contingency.

"EPA" means the United States Environmental Protection Agency,
or any successor thereto.

"ERISA Affiliate" means, when used with respect to an Employee
Benefit Plan, ERISA, the PBGC or a provision of the Code pertaining to employee
benefit plans, any Person

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that is a member of any group of organization within the meaning of Code Section
414(b), (c), (m) or (o) of which any Borrower or Guarantor is a member.

"ERISA" means the Employee Retirement Income Security Act of
1974, all amendments thereto and all rules and regulations in effect at any
time.

"Event of Default" means an event described in Paragraph 9.1
hereof.

"Existing Credit Agreement" means that certain Credit
Agreement among the Company, SDIPI, the Agent and certain of the Banks dated
December 22, 1992, as amended.

"Existing Note Purchase Agreement(s)" means those note
purchase agreements dated December 15, 1992, as amended, issued by the Company
for Ninety-Five Million Dollars ($95,000,000) in privately-placed notes.

"Financial Standby Letter of Credit" means a Letter of Credit
pursuant to which the beneficiary may draw following a default under an
obligation to pay money to the beneficiary.

"Fixed Charges" means, at any date of determination for the
most recently ended Rolling Period of SunSource Inc. and its Consolidated
Subsidiaries, the sum of (i) Interest Expense (including interest paid on the
Junior Subordinated Debentures to the extent paid in cash); (ii) GP Management
Fees; (iii) rent expense; (iv) scheduled maturities paid on Funded Debt
(excluding the Loan); (v) cash dividends paid by SunSource Inc.; and (vi)
Partnership Distributions, all as determined in accordance with GAAP.

"Fixed Charge Coverage Ratio" means, at any date of
determination, the ratio of Adjusted EBITDAR to Fixed Charges for the most
recently ended Rolling Period.

"Funded Debt" means, at any date of determination of SunSource
Inc. and its Consolidated Subsidiaries, the sum of the following in such period,
without duplication: (i) Indebtedness for borrowed money; (ii) Indebtedness
evidenced by notes, debentures or similar instruments; (iii) Capital Leases;
(iv) guarantees of Indebtedness or Capital Leases; and (v) Letters of Credit and
letter of credit reimbursement obligations. For purposes of this definition,
Funded Debt does not include the Junior Subordinated Debentures.

"GAAP" shall mean generally accepted accounting principles,
which shall be (i) applied in accordance with the Statement on Auditing
Standards No. 69 "The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles in the Independent Auditor's Report," (SAS 69) or
superseding pronouncements, issued by the Auditing Standards Board of the
American Institute of Certified Public Accountants and (ii) in the form and
content of any requirements for financial statements filed with the Securities
and Exchange Commission, in all cases applied on a consistent basis. The
requirement that such principles be applied on a

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consistent basis shall mean that the accounting principles observed in a current
period are comparable in all material respects to those applied in a preceding
period except such changes in accounting principles approved by the Guarantor's
outside auditors.

"GP Management Fees" shall mean management fees due SDIPI from
the Company which arose or accrued prior to the Conversion notwithstanding that
any such amount may not be due or payable until after the Conversion.

"Guarantors" means collectively SunSource Inc., a Delaware
corporation, SDIPI, SunSub A and SunSub B.

"Hazardous Substance" means petroleum products and items
defined in the Environmental Control Statutes as "hazardous substances",
"hazardous wastes", "pollutants" or "contaminants" and any other toxic,
reactive, corrosive, carcinogenic, flammable or hazardous substance or other
pollutants.

"Indebtedness" of any person means and includes all
obligations of such person which, in accordance with GAAP, shall be classified
on a balance sheet of such person as liabilities of such person and in any event
shall include all (i) obligations of such person for borrowed money or which
have been incurred in connection with acquisition of property or assets, (ii)
obligations secured by any lien upon property or assets owned by such person,
notwithstanding that such person has not assumed or become liable for the
payment of such obligations, (iii) 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 of property, (iv) Capital Leases, (v) guarantees
and (vi) letters of credit and letter of credit reimbursement obligations.

"Interest Expense" means for any fiscal period, the interest
expense of SunSource Inc. and its Consolidated Subsidiaries, as determined in
accordance with GAAP for such period.

"Indenture" means the Indenture dated as of September 5, 1997
between SunSource Inc. and Bank of New York, as trustee, providing for the
issuance of the Junior Subordinated Debentures.

"Junior Subordinated Debentures" means the unsecured
subordinated obligations of SunSource Inc. which will be deposited in the Trust
as trust assets upon the Conversion and the terms of which are included in the
Indenture.

"Letters of Credit" means each Performance Standby Letter of
Credit and each Financial Standby Letter of Credit, issued pursuant to Section
Three of this Agreement by the Agent and in which the Banks shall participate,
with such terms as may be agreed by Borrowers, the applicable beneficiary and
Agent at the time of issuance thereof.

-8-


"Lehman Affiliates" means Lehman Brothers Capital Partners I,
L.P., LBI Group, Inc., Lehman Ltd. I Inc., Lehman/SDI, Inc. and Lehman Brothers
Holdings Inc.

"Leverage Ratio" means as of any date of determination of
SunSource Inc. and its Consolidated Subsidiaries the ratio of Funded Debt as of
such date to EBITDA for the most recently ended Rolling Period.

"Loan" or "Loans" means the outstanding principal balance of
Indebtedness for Advances, plus the outstanding principal balance of
Indebtedness for Advances on Swing Line Loans under Paragraph 2.13 of this
Agreement, plus the unreimbursed amount of any draws on Letters of Credit, in
each case, together with interest accrued thereon and fees and expenses incurred
in connection therewith.

"Local Authorities" means individually and collectively the
state and local governmental authorities and administrative agencies which
govern the commercial or industrial facilities or businesses owned or operated
by Borrowers.

"Material Adverse Change" means a material adverse change in
the business, financial condition or prospects of Borrowers taken as a whole as
a result of any condition, circumstance or contingency, either singly or in the
aggregate.

"Material Adverse Effect" means a material adverse effect on
the business, financial condition or prospects of Borrowers taken as a whole as
a result of any condition, circumstance or contingency, either singly or in the
aggregate.

"Maximum Principal Amount" means the maximum principal amount
of the Commitment which each Bank has agreed to lend or to participate in the
issuance of Letters of Credit as set forth on Schedule 2 attached hereto.

"Net Cash Proceeds" of (A) any sale of assets shall mean the
cash proceeds received by the seller in such a transaction less (i) the
reasonable costs of the transaction, (ii) indebtedness secured by any lien on
such assets which is paid from such proceeds and (iii) any tax payment required
to be made as a result of the gain (if any) on such sale; and (B) any other
prepayment of the Loan and Senior Notes shall mean the total amount of such
payment to the Banks and the holder of the Senior Notes.

"Net Income" means, for any period, SunSource Inc. and its
Consolidated Subsidiaries' gross revenue for such period (excluding
extraordinary gains and losses) less all expenses and other proper charges
(including taxes on income), in each case as determined in accordance with GAAP.

-9-


"Net Worth" means, as of any date of determination, Total
Assets minus Total Liabilities in SunSource Inc. and its Consolidated
Subsidiaries, as stated on the financial statements most recently delivered to
Banks pursuant to Paragraphs 5.1(e)(i), 6.2, and 6.3 hereof, as applicable.

"Note Purchase Agreement" means the Note Purchase Agreement
dated as of the date hereof between the Company and Teachers Insurance and
Annuity Association of America providing for the issuance of the Senior Notes,
as amended, modified or supplemented from time to time pursuant to the terms
thereof and hereof.

"Partnership Agreement" means individually, as noted, and
"Partnership Agreements" means collectively the Amended and Restated Agreement
of Limited Partnership of the Company dated February 1, 1987, and the Amended
and Restated Agreement of Limited Partnership of SDIPI dated February 5, 1987,
as each may be amended to date and from time to time hereafter in accordance
with its terms and the provisions hereof.

"Partnership Distributions" means amounts payable by the
Company to SunSource Inc. and SDIPI pursuant to Section 5.02 of the Company's
Partnership Agreement, to fund Tax Distributions, including without limitation
those which arose or accrued prior to the Conversion notwithstanding that any
such amounts may not be due or payable until after the Conversion.

"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.

"Performance Standby Letter of Credit" means a Letter of
Credit pursuant to which the beneficiary may draw following a default by
Borrowers under an obligation, other than an obligation to pay money, owed to
the beneficiary.

"Permitted Investments" means (i) investments in commercial
paper maturing in 180 days or less from the date of issuance which is rated Al
or better by Standard & Poor's Corporation or Pl or better by Moody's Investors
Services, Inc.; (ii) investments in direct obligations of the United States of
America or obligations of any agency thereof which are guaranteed by the United
States of America, provided that such obligations mature within twelve (12)
months of the date of acquisition thereof; (iii) investments in certificates of
deposit maturing within one (1) year from the date of acquisition thereof issued
by a bank or trust company organized under the laws of the United States or any
state thereof, having capital, surplus and undivided profits aggregating at
least $1,000,000,000 and the long-term deposits of which are rated Al or better
by Moody's Investors Services, Inc. or equivalent by Standard & Poor's
Corporation; (iv) money market funds invested in vehicles of the types set forth
in subsections (i) through (iii); and (v) other investments not to exceed
$500,000 in the aggregate made from the date hereof to the Termination Date.

-10-


"Plan" means any pension benefit or welfare benefit plan as
defined in section 3(1), (2) or (3) of ERISA covering employees of Borrowers or
any ERISA Affiliate.

"Pro Rata Share" means as to a Bank the ratio which the
outstanding principal balance of its portion of the Loan hereunder bears to the
aggregate outstanding principal balance of the Loan at any time; or if no
indebtedness is outstanding hereunder, its percentage share of the Commitment.

"Promissory Notes" means collectively the Promissory Notes in
the form of Exhibit B attached hereto to be delivered by Borrowers to Banks
pursuant to Paragraph 5.1(a) hereof, as the same may be amended or modified or
extended or restated from time to time.


"Required Banks" means those Banks (which may include Agent)
holding sixty-six and two-thirds percent (66-2/3%) or more of the amount of the
Commitment or, if indebtedness is outstanding hereunder, sixty-six and
two-thirds percent (66-2/3%) or more of the Loan.

"Restricted Payments" means (i) any dividend or distribution
on, or the purchase, redemption, prepayment or other retirement of the common
securities of SunSource Inc.; (ii) the payment of principal or interest on or
the purchase, redemption, prepayment or other retirement of the Junior
Subordinated Debentures; and (iii) Tax Distributions.

"Rolling Period" means, as of any date, the most recent four
(4) consecutive fiscal quarters of SunSource Inc. and its Consolidated
Subsidiaries completed on or before such date.

"Sale of Material Assets" means any sale, transfer or other
disposition of Borrowers' assets in transactions in which the total
consideration paid or payable to Borrowers (including without limitation all
cash, liabilities assumed and the fair market value of any stock provided in
such transaction) is, in the aggregate, as to all such transactions after the
date of this Agreement, greater than Fifteen Million Dollars ($15,000,000).

"Senior Notes" means the Company's 7.66% Senior Notes due 2002
issued in an original aggregate principal amount of Sixty Million Dollars
($60,000,000) pursuant to the Note Purchase Agreement.

"Subsidiary" or "Subsidiaries" means any corporation of which
the Company, directly or indirectly, owns more than fifty percent (50%) of any
class or classes of securities. The Subsidiaries of the Company on the date
hereof are set forth on Schedule 1 attached hereto.
The Subsidiaries, collectively with the Company, are the Borrowers.

"SunSource Inc. and its Consolidated Subsidiaries" means
SunSource Inc. and its consolidated subsidiaries as defined in accordance with
GAAP.
-11-


"Swing Line Commitment" means the obligation of the Agent to
make the Swing Line Loan pursuant to Paragraph 2.13 hereof in the aggregate
principal amount of Five Million Dollars ($5,000,000).

"Swing Line Loan" means an Advance under the Swing Line
Commitment made by the Agent on behalf of the Banks pursuant to Paragraph 2.13
hereof.

"Tax Distributions" shall mean those distributions which are
payable to the former B interest holders in SunSource L.P. pursuant to the
Company's Partnership Agreement, including any payments which are due and
payable after the Conversion.

"Termination Date" means the earlier of (i) September 30, 2002
or (ii) the date on which the Commitment is terminated pursuant to Paragraphs
2.8 and 9.2 hereof.

"Total Assets" means, as of any date of determination, all
assets of SunSource Inc. and its Consolidated Subsidiaries, as set forth on
SunSource Inc.'s financial statements most recently delivered to Banks pursuant
to Paragraphs 5.1, 6.2 and 6.3 hereof, as defined in accordance with GAAP.

"Total Capital" means, at any date of determination of
SunSource Inc. and its Consolidated Subsidiaries, the sum of the following: (i)
Funded Debt; (ii) the outstanding principal amount of Junior Subordinated
Debentures; and (iii) Net Worth.

"Total Liabilities" means, as of any date of determination,
all liabilities and deferred items of SunSource Inc. and its Consolidated
Subsidiaries, as set forth on SunSource Inc.'s financial statements most
recently delivered to Banks pursuant to Paragraphs 5.1, 6.2 and 6.3 hereof, as
defined in accordance with GAAP.

"Trade Notes" means Indebtedness of the Company secured by the
Company's inventory of glass and window products pursuant to financing plans in
the normal course of business for value received.

"Trust" shall mean SunSource Capital Trust, a Delaware
statutory business trust, which is the issuer of the Trust Preferred Securities
to the former holders of the A interests in SunSource L.P. and the Trust Common
Securities to SunSource Inc.

"Trust Preferred Securities" means the preferred securities
issued by the Trust pursuant to the Conversion.

"Trust Common Securities" means the common securities issued
by the Trust pursuant to the Conversion.

-12-



1.2. Rules of Construction.

(a) GAAP. Except as otherwise provided herein,
financial and accounting terms used in the foregoing definitions or elsewhere in
this Agreement shall be defined in accordance with GAAP. If Borrowers or
Required Banks determine that a change in GAAP from that in effect on the date
hereof has altered the treatment of certain financial data to their detriment
under this Agreement, such party may, by written notice to the other within
thirty (30) days after the effective date of such change in GAAP, request
renegotiation and the parties agree to negotiate in good faith to modify such
financial covenants affected by such change to reflect equitably such change. If
Borrowers and Required Banks have not agreed on revised covenants within thirty
(30) days after the delivery of such notice, then, for purposes of this
Agreement, GAAP will mean generally accepted accounting principles on the date
just prior to the date on which the change occurred that gave rise to the
notice.

(b) Use of Term "Consolidated". Any term defined in
Paragraph 1.1 hereof, when modified by the word "Consolidated," shall have the
meaning given to such term herein as to SunSource Inc. on a consolidated basis
with its Subsidiaries and all other entities whose accounts, financial results
or position, for either federal income tax or financial accounting purposes, are
consolidated with those of SunSource Inc. in accordance with GAAP.

SECTION TWO
REVOLVING CREDIT LOAN

2.1. (a) The Facility. From time to time prior to the
Termination Date, subject to the provisions below, each Bank on a several basis
up to its Maximum Principal Amount shall make Advances to Borrowers on a joint
and several basis and Borrowers may repay and reborrow under the Commitment an
aggregate principal amount not to exceed at any time outstanding the aggregate
Commitment as from time to time in effect less (i) outstanding Advances, (ii)
the amount of any Swing Line advances outstanding under Paragraph 2.13 hereof;
and (iii) the aggregate amount of all amounts available under and unreimbursed
draws with respect to Letters of Credit.

(b) Amendment and Restatement. This Agreement amends
and restates, replaces and supersedes the Existing Credit Agreement; provided,
however, that the execution and delivery of this Agreement shall not in any
circumstance be deemed to have terminated, extinguished, or discharged the
Company's Indebtedness under the Existing Credit Agreement, all of which
Indebtedness and the guaranties therefor shall continue under and be governed by
this Agreement and the other Loan Documents. This Agreement IS NOT A NOVATION.

(c) Authority of the Company. Each of the Borrowers
hereby irrevocably authorizes and requests that SunSource Inc. execute all
Advance/Credit Request

-13-


Forms, make all elections as to interest rates and take any other actions
required or permitted of Borrowers hereunder, on its respective behalf, in each
case with the same force and effect as if such Borrower had executed such
Advance/Credit Request Form, made such election or taken such other action
itself.

(d) Optional Increase of Commitment.

(i) For a period of up to one hundred twenty
(120) days after the date of this Agreement, and in the absence of a Default or
Event of Default hereunder, Borrowers shall have the right to request that the
Commitment be increased by up to Twenty Million Dollars ($20,000,000) (the
"Additional Commitment"). Borrowers shall request such Additional Commitment
from Agent in writing thirty (30) days before the requested date of such
increase. Agent shall first offer such Additional Commitment to the Banks on the
basis of their respective Pro Rata Shares. Banks shall respond to Agent's offer
within five (5) Business Days. Any amount of the Additional Commitment not
agreed to be loaned by Banks shall then be offered to those Banks which have
agreed to increase their respective Commitments on a pro rata basis. Such Banks
shall respond to Agent's offer within five (5) Business Days. Any portion of the
Additional Commitment not agreed to be loaned by such Banks may then be offered
to other banks not party to this Agreement on such terms and conditions as
Borrowers and Agent may agree.

(ii) Banks shall have no obligation to agree to
increase their Pro Rata Share of the Commitment. Banks hereby acknowledge that
the Commitment may be increased by the Additional Commitment, and that no
approval of any Bank is required for such increase. Appropriate amendment
documentation, amended promissory notes, resolutions, certificates and opinions
will be executed to make available the Additional Commitment.

2.2. Promissory Notes. The Indebtedness of Borrowers to each
Bank under the Loan will be evidenced by a Promissory Note executed by Borrowers
in favor of such Bank in the form of Exhibit B hereto. The original principal
amount of each Bank's Promissory Note will be the amount identified in Schedule
2 attached hereto as its respective Maximum Principal Amount; provided, however,
that notwithstanding the face amount of each such Promissory Note, Borrowers'
liability under each such Promissory Note shall be limited at all times to its
actual indebtedness, principal, interest and fees, then outstanding hereunder.

2.3. Banks' Participation. Banks shall participate in the Loan
in the Maximum Principal Amounts and percentages set forth in Schedule 2
attached hereto.

2.4. Use of Proceeds. Funds advanced under the Loan shall be
used by the Borrowers solely for general corporate purposes, including working
capital, acquisition financing, transaction expenses, payments of up to
$14,500,000 to the former holders of the A interests in SunSource L.P. pursuant
to the Conversion, and repayment of certain Indebtedness,

-14-


including Indebtedness under the Existing Credit Agreement and Existing Note
Purchase Agreements and make whole payments under the Existing Note Purchase
Agreements.

2.5. Repayment. The aggregate outstanding principal balance
under the Loan on the Termination Date shall be due and payable in full on the
Termination Date, subject to earlier payments required pursuant to Paragraph
2.8(c) and (d) hereof in connection with reductions of the amount of the
Commitment (including voluntary reductions, reductions by Banks following an
Event of Default and reductions required in connection with certain sales of
assets). Notwithstanding the immediately preceding sentence, the aggregate
outstanding balance of the Promissory Notes shall be due and payable on the date
of Banks' notice to Borrowers of the occurrence of an Event of Default,
termination of the Commitment and acceleration of the Loan.

2.6. Interest. Portions of the Loan shall bear interest on the
outstanding principal amount thereof in accordance with the following
provisions:

Definitions. As used in this Paragraph 2.6, the following
words and terms shall have the meanings specified below:

"Adjusted Libor Rate" shall mean, for any Interest Period, as
applied to a Portion, the rate per annum (rounded upwards, if necessary to the
next 1/100 of 1%) determined pursuant to the following formula:

Adjusted Libor Rate = Libor Rate
----------------------
1 - Reserve Percentage

For purposes hereof, "Libor Rate" shall mean, as applied to a Portion, the rate
which appears on the Telerate page 3750 at approximately 9:00 a.m. Philadelphia
time two (2) London Business Days prior to the commencement of such Interest
Period for the offering to leading banks in the London Interbank Market of
deposits in United States Dollars or alternate currency ("Eurodollars") or, if
such rate does not appear on the Telerate page 3750, the rate which appears (or,
if two or more such rates appear, the average rounded up to the nearest 1/100 of
1% of the rates which appear) on the Reuters Screen LIBO Page as of 11:00 a.m.
London time two (2) London Business Days prior to the commencement of the
Interest Period in amounts substantially equal to such Portion as to which
Borrowers may elect the Adjusted Libor Rate to be applicable with a maturity of
comparable duration to the Interest Period selected by Borrowers.

"Applicable Margin" shall mean, with respect to each Portion
bearing interest at the Adjusted Libor Rate, the percentage per annum set forth
in the appropriate column below that corresponds to the Leverage Ratio;
provided, however, that Borrowers shall be deemed to be in Level I as of the
date of this Agreement, and shall not be eligible for Levels II and III until
Agent shall have received SunSource Inc.'s and its Consolidated Subsidiaries'
financial statements for the period ended December 31, 1997 to be delivered
pursuant to Paragraph 6.2 hereof.

-15-


Level Leverage Ratio Applicable Margin
- ----- -------------- -----------------

I less than 3.25 to 1 1.50%
but greater than
or equal to 2.75 to 1

II less than 2.75 to 1 1.25%
but greater than
or equal to 2.25 to 1

III less than 2.25 to 1 1.00%

The Applicable Margin shall adjust automatically, as
appropriate, on the day following delivery of a quarterly Compliance Certificate
in accordance with Paragraph 6.2 or 6.3 hereof, provided, that in the event that
a quarterly compliance certificate has not been delivered within ten (10) days
after the date required by Paragraph 6.2 or 6.3, then the Applicable Margin
shall adjust to Level I as of the latest date of required delivery; provided,
further, however, that the Applicable Margin shall readjust retroactively to the
date such certificate was required to be delivered by Paragraph 6.2 or 6.3 if
the Applicable Margin shall increase based on such Compliance Certificate and
shall readjust on the day after delivery of such delinquent Compliance
Certificate if the Applicable Margin shall decrease or remain the same based on
the ratio set forth in such Compliance Certificate.

"Base Rate" shall mean the highest of (i) the Federal Funds
Rate plus one half of one percent (1/2%) per annum, or (ii) the Prime Rate.

"Federal Funds Rate" means for any day the effective rate of
interest for such day, as announced from time to time by the Board of Governors
of the Federal Reserve System as shown in publication H.15 as the "Federal Funds
Rate."

"Interest Period" means a period of one (l), two (2), three
(3) or six (6) months' duration, as Borrowers may elect, during which the
Adjusted Libor Rate is applicable; provided, however, that (a) interest shall
accrue from and including the first day of each Interest Period to, but
excluding, the day on which any Interest Period expires; (b) any Interest Period
which would otherwise end on a day which is not a London Business Day shall be
extended to the next succeeding London Business Day unless such London Business
Day falls in another calendar month, in which case such Interest Period shall
end on the next preceding London Business Day; and (c) with respect to an
Interest Period which begins on the last London Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period), the Interest Period shall end on the
last London Business Day of a calendar month.

-16-


"London Business Day" shall mean any Business Day on which
banks in London, England are open for business.

"Portion" shall mean a portion of a Loan as to which Borrowers
have elected a specific interest rate and, in the case of a Portion bearing
interest at a rate based upon the Adjusted Libor Rate, an Interest Period.

"Prime Rate" shall mean the rate of interest announced by
Agent from time to time as its prime rate.

"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System, comprising Part 204 of Title 12, Code
of Federal Regulations, as amended and as may be amended from time to time, and
any successor thereto.

"Reserve" shall mean, for any day, that reserve (expressed as
a decimal) which is in effect (whether or not actually incurred) with respect to
a Bank on such day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor or any other banking authority to which a Bank
is subject including any board or governmental or administrative agency of the
United States or any other jurisdiction to which a Bank is subject), for
determining the maximum reserve requirement (including without limitation any
basic, supplemental, marginal or emergency reserves) for Eurocurrency
liabilities as defined in Regulation D.

"Reserve Percentage" shall mean, for a Bank on any day, that
percentage (expressed as a decimal) prescribed by the Board of Governors of the
Federal Reserve System (or any successor or any other banking authority to which
a Bank is subject, including any board or governmental or administrative agency
of the United States or any other jurisdiction to which a Bank is subject), for
determining the reserve requirement (including without limitation any basic,
supplemental, marginal or emergency reserves) for deposits of United States
Dollars in a nonUnited States or an international banking office of a Bank used
to fund a Portion bearing interest based on the Adjusted Libor Rate or any loan
made with the proceeds of such deposit. The Adjusted Libor Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.

(a) Interest on Loan.

(i) At the Company's election in accordance with
the provisions of Paragraph 2.6(c) below, in the absence of an Event of Default
or Default hereunder, and prior to maturity, any Portion of the Loan shall bear
interest at any one of the following rates:


(A) Base Rate. The Base
Rate, such rate to change when and
as the Base Rate changes.

-17-


(B) Adjusted Libor-Based
Rate. The Adjusted Libor Rate plus
the Applicable Margin.

(ii) Notwithstanding the foregoing, upon the
occurrence and during the continuance of an Event of Default or Default
hereunder, including after maturity and before and after judgment, Borrowers
hereby agree to pay to Banks interest on the outstanding principal balance of
the Loan at the rate of two percent (2%) per annum in excess of the rates then
available to and elected by the Company for each Portion then outstanding, and
with respect to Portions bearing interest based on the Adjusted Libor Rate, at
the end of the applicable Interest Periods and thereafter, such Portions shall
bear interest at the rate of two percent (2%) per annum in excess of the Base
Rate, such rate to change when and as the Base Rate changes.

(b) Procedure for Determining Interest Periods and
Rates of Interest.

(i) If the Company elects the Base Rate to be
applicable to a Portion, the Company must notify Agent of such election prior to
one o'clock (1:00) p.m. Philadelphia time one (1) Business Day prior to the date
of the proposed application of such rate. If the Company elects the Adjusted
Libor Rate to be applicable to a Portion, the Company must notify Agent of (A)
such election and (B) the Interest Period selected prior to one o'clock (1:00)
p.m. Philadelphia time at least three (3) London Business Days prior to such
Advance or the commencement of the proposed Interest Period. If Company does not
provide the applicable notice for the Adjusted Libor Rate, then the Borrowers
shall be deemed to have requested that the Base Rate apply to any Portion as to
which the Interest Period is expiring and to any new Advance of the Loan until
Borrowers shall have given proper notice of a change in or determination of the
rate of interest in accordance with this Paragraph 2.6(b).

(ii) Borrowers shall not elect more than five (5)
different Portions (other than Portions bearing interest at the Base Rate) to be
applicable to the Loan at one time.

(c) Payment and Calculation of Interest. Interest
shall be due and payable on the last day of each Interest Period for each
Portion bearing interest based on the Adjusted Libor Rate; provided, however,
that with respect to Portions which bear interest at the Adjusted Libor Rate
having Interest Periods in excess of three (3) months, the Borrowers shall pay
interest on the ninetieth (90th) day of the Interest Period and on the last day
of the Interest Period. With respect to Portions which bear interest at the Base
Rate, the Borrowers shall pay interest on the last Business Day of each month
commencing on the first such date after the first Advance which bears interest
at the Base Rate. Interest shall be calculated in accordance with the provisions
of Paragraph 2.6(b) hereof; interest based on the Base Rate shall be calculated
on the basis of the actual number of days elapsed over a year of three hundred
sixty-five (365) or three hundred sixty-six (366) days, as the case may be, and
interest based on the Adjusted Libor Rate shall be calculated on the basis of
the actual number of days elapsed over a year of three hundred sixty (360) days.

-18-



(d) Reserves. If at any time when a Portion is
subject to the Adjusted Libor Rate, and a Bank is subject to and incurs a
Reserve, Borrowers hereby agree to pay within five (5) Business Days of demand
thereof from time to time, as billed by Agent on behalf of itself or a Bank,
such additional amount as is necessary to reimburse such Bank for its costs in
maintaining such Reserve to the extent such costs are not reflected in the
Reserve Percentage used to determine the Adjusted Libor Rate. Such amount shall
be computed by taking into account the cost incurred by the Bank in maintaining
such Reserve in an amount equal to such Bank's ratable share of the Portion on
which such Reserve is incurred. The determination by Agent on behalf of any Bank
of such costs incurred and the allocation, if any, of such costs among Borrowers
and other customers which have similar arrangements with such Bank shall be
prima facie evidence of the correctness of the fact and the amount of such
additional costs. Upon notification to Borrowers of any payment required
pursuant to this Paragraph 2.6(d), Borrowers may, subject to the payment of all
amounts due under this provision as of such date and the provisions of Paragraph
2.10, repay the Portion with respect to which such payment is required.

(e) Special Provisions Applicable to Adjusted Libor
Rate. The following special provisions shall apply to the Adjusted Libor Rate:

(i) Change of Adjusted Libor Rate. The Adjusted
Libor Rate may be automatically adjusted by Agent on a prospective basis to take
into account the additional or increased cost of maintaining any necessary
reserves for Eurodollar deposits or increased costs due to changes in applicable
law or regulation or the interpretation thereof occurring subsequent to the
commencement of the then applicable Interest Period, including but not limited
to changes in tax laws (except changes of general applicability in corporate
income tax laws) and changes in the reserve requirements imposed by the Board of
Governors of the Federal Reserve System (or any successor), excluding the
Reserve Percentage, and any Reserve which has resulted in a payment pursuant to
Paragraph 2.6(d), that increase the cost to Banks of funding the Loan or a
Portion thereof bearing interest at the Adjusted Libor Rate. Agent shall give
the Borrowers notice of such a determination and adjustment, which determination
shall be prima facie evidence of the correctness of the fact and the amount of
such adjustment. Borrowers may, by notice to Agent, (A) request Agent to furnish
to Borrowers a statement setting forth the basis for adjusting such Adjusted
Libor Rate and the method for determining the amount of such adjustment; and/or
(B) repay the Portion of the Loan with respect to which such adjustment is made,
subject to the requirements of Paragraph 2.10 hereof.

(ii) Unavailability of Eurodollar Funds. In the
event that Borrowers shall have requested the rate based on the Adjusted Libor
Rate in accordance with Paragraph 2.6(c) hereof and any Bank shall have
reasonably determined that Eurodollar deposits equal to the amount of the
principal of the Portion and for the Interest Period specified are unavailable,
or that the rate based on the Adjusted Libor Rate will not adequately and fairly
reflect the cost of making or maintaining the principal amount of the Portion
specified by the Borrowers during the Interest Period specified or that by
reason of circumstances affecting

-19-


Eurodollar markets, adequate and reasonable means do not exist for ascertaining
the Adjusted Libor Rate applicable to the specified Interest Period, Agent shall
promptly give notice of such determination to the Borrowers that the rate based
on the Adjusted Libor Rate is not available. A determination by such Bank
hereunder shall be prima facie evidence of the correctness of the fact and
amount of such additional costs or unavailability. Upon such a determination,
the Banks' obligation to advance or maintain Portions at the Adjusted Libor Rate
shall be suspended until Agent shall have notified the Borrowers and Banks that
such conditions shall have ceased to exist, and the Base Rate shall be
applicable to all Portions.

(iii) Illegality. In the event that it becomes
unlawful for a Bank to maintain Eurodollar liabilities sufficient to fund any
Portion of the Loan bearing interest at the rate based on the Adjusted Libor
Rate, then such Bank shall immediately notify the Borrowers thereof (with a copy
to Agent) and such Bank's obligations hereunder to make or maintain Advances
bearing interest based on the Adjusted Libor Rate shall be suspended until such
time as such Bank may again cause the rate based on the Adjusted Libor Rate to
be applicable to its share of any Portion of the outstanding principal balance
of the Loan and such Bank's share of any Portion shall then be subject to the
Base Rate.

2.7. Advances.

(a) At the time the Company provides the requisite
notices set forth in Paragraph 2.6(b) hereof relating to the election of
interest rates, the Company shall give Agent written notice of each requested
Advance under the Commitment, specifying the date, amount and purpose thereof.
The Company shall give Agent three (3) London Business Days notice of an Advance
for an Adjusted Libor Rate Loan, one (1) Business Day notice of an Advance for a
Base Rate Loan, and same day notice of an Advance for a Swing Line Loan. Such
notices shall be in the form of the Advance/Credit Request Form attached hereto
as Exhibit A, shall be certified by the chief financial officer or controller of
SunSource Inc. and shall contain the following information and representations,
which shall be deemed affirmed and true and correct as of the date of the
requested Advance:

(i) the aggregate amount of the requested
Advance, which for Base Rate Loans and Adjusted Libor Rate Loans shall be in
multiples of $100,000 but not less than the lesser of $2,000,000 or the
unborrowed balance of the Commitment;

(ii) confirmation of the interest rate(s) the
Borrowers have elected to apply to the above Advance and, if more than one
interest rate has been elected, the amount of the Portion as to which each
interest rate shall apply;

(iii) confirmation of Borrowers' compliance with
Paragraphs 6.13 through 6.15 and Section Seven hereof after giving effect to
such Advance of the Loan;

-20-


(iv) statements that the representations and
warranties set forth in Section Four hereof are true and correct in all material
respects as of the date thereof; no Event of Default or Default has occurred and
is then continuing; and there has been no Material Adverse Change since the date
of the quarterly and audited annual financial statements most recently delivered
by Borrowers to Banks pursuant to Paragraphs 5.1(e), 6.2 and 6.3 of this
Agreement; and

(b) (i) Upon receiving a request for an Advance in
accordance with subparagraph (a) above, Agent shall request by written notice to
Banks that each Bank advance funds to Agent so that each Bank participates in
the requested Advance in the same percentage as it participates in the
Commitment. Each Bank shall advance its applicable percentage of the requested
Advance to Agent by delivering federal funds immediately available at Agent's
offices prior to twelve o'clock (12:00) noon Philadelphia time on the date of
the Advance. Subject to the satisfaction of the terms and conditions hereof,
Agent shall make the requested Advance available to the Borrowers by crediting
such amount to the Company's or applicable Borrowers' deposit account with Agent
not later than two o'clock (2:00) p.m. Philadelphia time on the day of the
requested Advance; provided, however, that in the event Agent does not receive a
Bank's share of the requested Advance by such time as provided above, Agent
shall not be obligated to advance such Bank's share.

(ii) Unless Agent shall have been notified by a
Bank prior to the date such Bank's share of any such Advance is to be made by
such Bank that such Bank does not intend to make its share of such requested
Advance available to Agent, Agent may assume that such Bank has made such
proceeds available to Agent on such date, and Agent may, in reliance upon such
assumption (but shall not be obligated to), make available to the Borrowers a
corresponding amount. If such corresponding amount is not in fact made available
to Agent by such Bank on the date the Advance is made, Agent shall be entitled
to recover such amount on demand from such Bank together with interest thereon
in respect of each day during the period commencing on the date such amount was
made available to the Borrowers and ending on (but excluding) the date Agent
recovers such amount, at a rate per annum, equal to the effective rate for
overnight federal funds in New York as reported by the Federal Reserve Bank of
New York for such day (or, if such day is not a Business Day, for the next
preceding Business Day). If such Bank fails to pay such amount to Agent upon
demand, Agent may demand repayment thereof from Borrowers, together with
interest accrued thereon at the rate per annum applicable to the Advance which
such Bank failed to fund.

(c) Each request for an advance pursuant to this
Paragraph 2.7 shall be irrevocable and binding on the Borrowers. In the case of
any requested Advance which is to be based upon the Adjusted Libor Rate, the
Borrowers shall indemnify each Bank against any loss, cost or expense incurred
by such Bank as a result of any failure to fulfill on or before the date of the
requested Advance the applicable conditions thereto set forth in Section Five
hereof, including, without limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or redeployment
of deposits or other funds acquired by such

-21-


Bank to fund the requested Advance when such Advance, as a result of such
failure, is not made on such date, as calculated by Agent in accordance with
Exhibit C attached hereto.

2.8. Reduction and Termination of Commitment; Voluntary and
Mandatory Prepayment.

(a) Voluntary. Borrowers shall have the right at any
time and from time to time, upon three (3) Business Days prior written notice to
Agent, to reduce the Commitment in whole or in part to be shared among the Banks
based on each Bank's respective Pro Rata Share in increments of Five Million
Dollars ($5,000,000) without penalty or premium.

(b) Default. Pursuant to Paragraph 9.2 hereof, upon
the occurrence of any Event of Default hereunder Required Banks shall have the
right to terminate the Commitment at any time, in their discretion and upon
notice to Borrowers (and the Commitment shall terminate automatically without
notice if an Event of Default described in Paragraph 9.1(h) shall occur).

(c) Mandatory Prepayments; Sale of Assets. In
connection with any Sale of Material Assets, the Commitment shall be
automatically and permanently reduced by the Banks' Applicable Share of the
amount by which the Net Cash Proceeds thereof exceed the amounts permitted to be
sold pursuant to Paragraph 7.7 hereof; provided that in connection with any
amounts due under this provision, the holder of the Senior Notes is
simultaneously offered a prepayment so that the amount paid to the Banks equals
the Banks' Applicable Share of the Net Cash Proceeds required to be paid as set
forth above.

(d) Payments. On the effective date of each reduction
permitted or required by clauses (a) and (c) of this Paragraph 2.8, Borrowers
shall make a payment of the Loan in an amount, if any, by which the aggregate
outstanding principal balance of the Loan plus the undrawn amount of all Letters
of Credit exceeds the amount of the Commitment as then so reduced, together in
all cases with accrued interest on the amount so paid, and if a Portion is paid
prior to the last day of an Interest Period, Borrowers shall also pay any
funding costs and loss of earnings and anticipated profits which may arise in
connection with such prepayment or repayment, as required by Paragraph 2.10
hereof.

(e) Reductions Permanent. Any termination or
reduction of the Commitment shall be permanent, and the Commitment cannot
thereafter be restored or increased without the written consent of all Banks.

2.9. Prepayment. Borrowers may prepay the outstanding Advances
at any time without premium or penalty and may reborrow under the Commitment
upon the terms and conditions set forth therein; provided, however, that (i)
Borrowers shall give Agent one (1) Business Days' notice of a payment on a
Portion bearing interest at the Base Rate; and (ii)

-22-


Portions bearing interest at the Adjusted Libor Rate may only be paid on the
last day of the applicable Interest Period.

2.10. Funding Costs; Loss of Earnings. In connection with any
prepayment or repayment of a Portion bearing interest based on the Adjusted
Libor Rate made on other than the last day of the applicable Interest Period,
whether such prepayment or repayment is voluntary, mandatory, by demand,
acceleration or otherwise, Borrowers shall pay to Banks all funding costs and
loss of earnings and anticipated profits which may arise in connection with such
prepayment or repayment, as calculated by Agent in accordance with Exhibit C
attached hereto.

2.11. Payments. All payments of principal, interest, fees and
other amounts due hereunder, including any prepayments thereof, shall be made by
Borrowers to Agent in immediately available funds before twelve o'clock (12:00)
noon Philadelphia time on any Business Day at the principal office of Agent set
forth at the beginning of this Agreement. Borrowers hereby authorize Agent to
charge Borrowers' accounts with Agent for all payments of principal, interest
and fees when due hereunder.

2.12. Commitment Fee. Borrowers shall pay to Agent for the
benefit of Banks a commitment fee on the average daily amount of the unused
portion of the Commitment at the rate of .375 percent per annum. Such fee shall
be paid from the date hereof through the Termination Date, which fee shall be
payable at the offices of Agent quarterly in arrears on the last day of each
January, April, July and October, as billed by Agent. Banks shall share in such
commitment fee in the same proportion as they participate in the Commitment. The
Commitment fee shall be calculated on the basis of the actual number of days
elapsed over a year of three hundred sixty (360) days.

2.13. Swing Line Loans.

(a) Swing Line Commitment. Subject to the terms and
conditions hereof, Agent, on behalf of the Lenders, may in Agent's discretion
from the date hereof through and including the Termination Date make Swing Line
Loans to Borrowers on a joint and several basis from time to time in an
aggregate principal amount at any one time outstanding not to exceed Five
Million Dollars ($5,000,000), provided, that, no Swing Line Loan shall be made
if after giving effect to the making of such Loan and the simultaneous
application of the proceeds thereof, such Swing Line Loan shall exceed the
aggregate Commitment as from time to time in effect less (i) outstanding
Advances, (ii) the amount of any prior Swing Line advances outstanding under
this Paragraph, and (iii) the aggregate amount of all amounts available under
and unreimbursed draws with respect to Letters of Credit. Except as otherwise
may be agreed upon from time to time between the Company and the Agent,
Borrowers shall give Agent written notice of each requested Advance of a Swing
Line Loan. Such notice of a requested Advance of a Swing Line Loan shall be
certified by chief financial officer or controller of SunSource Inc. and shall
be in the form of the Advance/Credit Request Form attached hereto as Exhibit A.
Within

-23-


the foregoing limits, the Borrowers may repay and reborrow under the Swing Line
Commitment prior to the Termination Date, subject to and in accordance with the
terms and limitations hereof.

(b) Interest. The interest rate applicable to a Swing
Line Loan shall be the Base Rate and shall be paid to the Agent for its own
account on the last day of each month.

(c) Payment. Each Swing Line Loan shall be due and
payable on the earlier of: (i) the Termination Date and (ii) one (1) Business
Day after the date on which Agent shall have demanded payment thereof; provided,
however, that the Borrowers may pay the Swing Line Advance on any date in their
discretion with same day notice to the Agent without premium or penalty.

(d) Procedure for Swing Line Loans. Subject to the
terms and conditions hereof, the Borrowers may borrow under the Swing Line
Commitment on any Business Day prior to the Termination Date. Except as
otherwise may be agreed upon from time to time between the Company and the
Agent, the Borrowers shall give Agent irrevocable notice, which notice must be
received by the Agent prior to one o'clock (1:00) p.m., Philadelphia time, on
the requested date, specifying in the notice (a) the amount requested to be
borrowed and (b) the requested borrowing date. The proceeds of each Swing Line
Loan will be made available by the Agent to the Borrowers by the Agent crediting
the account of the Borrowers with such proceeds on the requested borrowing date.

(e) Allocating Swing Line Loans; Swing Line Loan
Participation.

(i) The Agent, may in its sole and absolute
discretion, direct that all Swing Line Loans owing to it be refunded by
delivering a notice (a "Notice of Swing Line Refunding") to each Bank and,
unless an Event of Default described in Paragraph 9.1(h) (an "Insolvency Event
of Default") in respect of a Borrower has occurred, to the Borrowers, each such
Notice of Swing Line Refunding shall be deemed to constitute delivery by the
Company of an Advance/Credit Request Form of a Loan to bear interest at the Base
Rate in an amount equal to the amount of the Swing Line Loans outstanding on
such date. Unless an Insolvency Event of Default shall have occurred (in which
case the procedures of Paragraph 2.13(e)(ii) shall apply), each Bank (including
the Agent in its capacity as a Bank) shall (i) make a Loan to Borrowers in an
amount equal to such Bank's percentage share of the Commitment of the aggregate
principal amount of the Swing Line Loans outstanding on the date of delivery of
the applicable Notice of Swing Line Refunding and (ii) make the proceeds of its
Loan available to the Agent for the account of the Agent at the office of the
Agent prior to twelve o'clock (12:00) noon, Philadelphia time, in funds
immediately available to the Agent on the Business Day next succeeding the date
such notice is given. The proceeds of such Loans shall be immediately applied to
repay the outstanding Swing Line Loans.

(ii) If an Insolvency Event of Default occurs
prior to an Advance pursuant to a Notice of Swing Line Refunding, each Bank
(other than the Agent) shall,

-24-


on the date a Loan would have been made pursuant to such Notice of Swing Line
Refunding (the "Refunding Date"), purchase an undivided participating interest
in the outstanding Swing Line Loans in an amount equal to (i) such Bank's Pro
Rata Share times (ii) the aggregate principal amount of the Swing Line Loans
then outstanding which were to have been repaid with Loans (the "Swing Line
Participation Amount"). On the Refunding Date, each Bank shall transfer to the
Agent, in immediately available funds, such Bank's Swing Line Participation
Amount.

(iii) Whenever, at any time after the Agent has
received from any Bank such Bank's Swing Line Participation Amount, the Agent
receives any payment on account thereof, the Agent will distribute to such Bank
its participating interest in such amount (appropriately adjusted, in the case
of interest payments, to reflect the period of time during which such Bank's
participating interest was outstanding and funded) in like funds as received;
provided, however, that in the event such payment received by the Agent is
required to be returned, such Bank will return to the Agent any portion thereof
previously distributed by the Agent to it in like funds as such payment is
required to be returned by the Agent.

(iv) Each Bank's obligation to make Loans
pursuant to Paragraph 2.13(a) and to purchase participating interests shall be
absolute and unconditional and shall not be affected by any circumstances
including, without limitation, (i) any setoff counterclaim, recoupment, defense
or other right which such Bank may have against any other Bank or any Borrower,
or any Borrower may have against any Bank or any other person, as the case may
be, for any reason whatsoever; (ii) the occurrence or continuance of a Default
or Event or Event of Default; (iii) any adverse change in the condition
(financial or otherwise) of the Borrowers or the Guarantors; (iv) any breach of
this Agreement by any party hereto; (v) the failure to satisfy any condition to
the making of any Loan hereunder; or (vi) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.


2.14. Regulatory Changes in Capital Requirements. If any Bank
shall have determined that the adoption or the effectiveness after the date
hereof of any law, rule, regulation or guideline regarding capital adequacy, or
any change in any of the foregoing or in the interpretation or administration of
any of the foregoing by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by such Bank (or any lending office of such Bank) or such Bank's holding company
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, has
or would have the effect of reducing the rate of return on such Bank's capital
or on the capital of such Bank's holding company if any, as a consequence of
this Agreement, the Commitment, Advances, Letters of Credit or the Loan made by
such Bank pursuant hereto to a level below that which such Bank or its holding
company would have achieved but for such adoption, change or compliance (taking
into consideration such Bank's policies and the policies of such Bank's holding
company with respect to capital adequacy) by an amount deemed by such Bank to be
material, then from time to time the Borrowers shall pay to such Bank, within
five (5) Business Days after receiving such

-25-


Bank's demand therefor and the certificate referred to below, such additional
amount or amounts as will compensate such Bank or its holding company for any
such reduction suffered, which amount, if not paid within such period of five
(5) Business Days, shall bear interest from the date due until payment in full
thereof at the rate provided in Paragraph 2.6(a)(ii) hereof. Such Bank will
notify the Borrowers of any event occurring after the date of this Agreement
that will entitle such Bank to compensation pursuant to this Paragraph 2.14 as
promptly as practicable after it obtains knowledge thereof.

A certificate of such Bank setting forth in detail such amount
or amounts as shall be necessary to compensate such Bank or its holding company
as specified above and describing the calculation of such amount shall be
delivered to the Borrowers and shall be conclusive absent manifest error. For
purposes of the application of this Paragraph 2.14 to Borrowers and in
calculating any amount that may be necessary to compensate a Bank under this
Paragraph 2.14, such Bank shall determine the applicability of this provision to
Borrowers and calculate the amount payable to such Bank hereunder in a manner
consistent with the manner in which it shall apply and calculate similar
compensation payable to it by other borrowers having provisions in their credit
agreements comparable to this Paragraph 2.14.

Failure on the part of any Bank to demand compensation for
increased costs or reduction in amounts received or receivable or reduction in
return on capital with respect to any period shall not constitute a waiver of
such Bank's right to demand compensation with respect to any other period.

2.15. Taxes.

(a) Net Payment by Borrowers. Except as provided
below, all payments by Borrowers hereunder shall be made without deduction for
and free and clear of all taxes, levies, imposts, or charges and all liabilities
(including penalties, interest, additions to tax and expenses) arising therefrom
or with respect thereto.

(i) U. S. Withholding Taxes. Borrowers and Agent
shall be entitled to deduct and withhold United States withholding taxes with
respect to all payments to be made hereunder to a Bank as may be required by
United States law. Within (30) days after the date of any payment of withheld
taxes by Borrowers to the applicable taxing authority, Borrowers will furnish to
Agent the original or a certified copy of a receipt or other documents
reasonably acceptable to Agent evidencing such payment. Any Bank that is (or
that has granted an assignment or participation to any lender that is) organized
under the laws of a jurisdiction other than the United States (or any political
subdivision thereof) shall provide on the date of this Agreement and from time
to time thereafter if requested by Borrowers or Agent or required by the
Internal Revenue Service of the United States, (i) a facially complete Internal
Revenue Service Form 4224 (or any successor form) certifying that all payments
made to such Bank are effectively connected with its conduct of a trade or
business in the United States and will be includible in its gross income, (ii) a
facially complete Internal Revenue Service Form 1001 (or

-26-

any successor form) certifying as to its status for purposes of determining the
applicability of a reduced rate of United States withholding taxes with respect
to all payments to be made hereunder to such Bank pursuant to a double tax
treaty obligation of the United States, or (iii) other facially complete
documents satisfactory to Agent and Borrowers indicating that all payments that
will be made to such Bank are exempt from or subject to a reduced rate of United
States withholding tax. Unless the Borrowers and Agent have received such forms
or such documents validly indicating that payments hereunder are not subject to
United States withholding tax or are subject to such withholding tax at a
reduced rate, Borrowers or Agent shall withhold taxes from such payments to such
Bank at the applicable statutory rate.

(ii) Other Taxes. The general prohibition against
reduction of payments contained in this Paragraph 2.15(a) shall exclude any tax
imposed on or measured by the net income of a Bank pursuant to the laws of the
jurisdiction in which the principal office or applicable lending office of such
Bank is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the principal office or applicable
lending office of such Bank is located (all such non-excluded taxes, levies,
imposts, charges and liabilities being hereinafter referred to as "Taxes"). If
any Taxes shall be required by law to be deducted or paid from or in respect of
any sum payable hereunder or under any Promissory Note to any Bank, then
Borrowers shall be required to pay an additional amount such that after making
all required deductions or payments for such Taxes (including deductions and
payments applicable to additional sums payable under this Paragraph
2.15(a)(ii)), but taking into account any credit, deduction or offset available
in any other jurisdiction as a result of such payment (as determined and
certified by such Bank's tax or accounting department to Borrowers in good
faith), such Bank receives an amount equal to the sum it would have received had
no such deductions or payments been made. Payment of any additional amounts
required by this Paragraph 2.15(a)(ii) shall be made at the time of payment of
the amounts otherwise required to be paid by Borrowers if the Taxes have been
withheld by Borrowers, or otherwise within thirty (30) days from the date such
Bank makes written demand therefor.

(b) Participants and Assignees. Any Bank that enters
into any participation or assignment permitted by Paragraph 12.2 hereof shall
give Borrowers and Agent immediate notice of such assignment or participation,
describing the terms thereof and indicating the identity and country of
residence of each of the participants or assignees. Notwithstanding any other
provision contained herein to the contrary, the Borrowers and the Agent shall be
entitled to deduct and withhold United States withholding taxes with respect to
all payments to be made hereunder to or for such Bank or Assignee as may be
required by United States law due to such assignment or participation. Each Bank
hereby indemnifies and holds harmless Borrowers and Agent from and against any
tax, interest, penalty or other expense that Borrowers or Agent may incur as a
consequence of any failure to withhold United States taxes applicable because of
any participation or assignment that is not fully disclosed to them as required
hereunder.
-27-


SECTION THREE
LETTERS OF CREDIT

3.1. (a) Availability of Letters of Credit. Subject to the
terms and conditions set forth herein, Banks shall from time to time prior to
the Termination Date participate in the issuance by Agent of Letters of Credit
for the account of Borrowers on the following terms and conditions:

(i) at the time of the issuance of each Letter of
Credit, the face amount of such Letter of Credit together with the undrawn
amount of any outstanding Letters of Credit and the amount of any unreimbursed
draws under Letters of Credit shall not exceed Twenty Million Dollars
($20,000,000);

(ii) at the time of the issuance of each Letter of
Credit, the face amount of such Letter of Credit shall not exceed the aggregate
Commitment as from time to time in effect less (i) outstanding Advances, (ii)
the amount of any Swing Line advances outstanding under Paragraph 2.13 hereof,
and (iii) the aggregate amount of all amounts available under and unreimbursed
draws with respect to Letters of Credit.

(iii) the final expiration date of each Letter of
Credit shall be on or before the earlier of (A) the date one (1) year from the
date of its issuance or (B) the Termination Date;

(iv) there shall not exist at the time of issuance of
the Letter of Credit, or as a result thereof, any Default or Event of Default;
and

(v) each Letter of Credit issued under this Section
Three shall be required by Borrowers in their ordinary course of business.

(b) Evergreen Letters of Credit. Notwithstanding the
provisions of Paragraph 3.1(a)(iii) which requires that the final expiration of
each Letter of Credit be within one year of issuance, Banks hereby agree that
Agent may issue, upon the Borrowers' request if required by a proposed
beneficiary, a Letter of Credit which by its terms may be extended for
additional periods of up to one year each provided that (x) the final expiration
date of each such Letter of Credit is on or before the Termination Date and (y)
extensions of such Letters of Credit shall be available upon request from
Borrowers to Agent at least forty-five (45) days before the then-effective
expiration date.

(c) Existing Letters of Credit. Reference is made to
certain letters of credit issued by CoreStates Bank prior to the date of
execution hereof, as identified on the Advance/Credit Request Form delivered on
the date of this Agreement (the "Existing Letters of Credit"). Borrowers and
Banks agree that as of the date of this Agreement, subject to receipt by Agent
of the Advance/Credit Request Form dated the date hereof duly completed and
executed

-28-


with respect thereto, all such Existing Letters of Credit shall hereafter be
Letters of Credit under this Agreement, as if originally issued hereunder.

3.2. Commitment Availability. The Commitment as from time to
time in effect shall be reduced by the undrawn amount of all outstanding Letters
of Credit. Such Commitment amount shall be restored but simultaneously reduced
by the amount of any Advances under Paragraph 2.7 which are made to Borrowers to
reimburse Agent for draws under the Letters of Credit as required pursuant to
Paragraph 3.4 hereof.

3.3. Approval and Issuance.

(a) Borrowers shall provide Agent not less than five (5)
Business Days' prior written notice of each request for the issuance of a
Financial Standby Letter of Credit or a Performance Standby Letter of Credit by
delivery of an Advance/Credit Request Form and Agent's Letter of Credit
Application in the form attached hereto as Exhibit D. Each Advance/Credit
Request Form submitted by Borrowers to Agent requesting the issuance of a
Performance or Financial Standby Letter of Credit shall be certified by the
chief financial officer or controller of SunSource Inc. and represent as to the
matters set forth in Paragraph 2.7(a) hereof.

(b) Agent will promptly provide to Banks written or
telephonic notice of Agent's receipt of the Advance/Credit Request Form and the
Letter of Credit Application which shall state (i) the amount of the Performance
or Financial Standby Letter of Credit requested and (ii) the expiration date of
the Performance or Financial Standby Letter of Credit.

3.4. Obligations of the Borrowers.

(a) Borrowers agree to pay to Agent in connection with
each Letter of Credit issued hereunder: (i) immediately upon the demand of Agent
on behalf of all Banks, the amount paid by each Bank with respect to such Letter
of Credit; (ii) immediately upon demand of Agent, the amount of any draft
presented purporting to be drawn under such Letter of Credit provided that the
draft and accompanying documents conform to the terms of the Letter of Credit
but subject to the terms of Paragraph 3.7 hereof (whether or not Agent has at
such time honored such draft) and any other amounts paid thereunder (it being
understood that Agent is not required to make demand upon or proceed against any
Bank or other party or to resort to any collateral before obtaining payment from
Borrowers); (iii) on the date of issuance thereof and quarterly thereafter in
advance, a fee for the benefit of Banks, in accordance with each Bank's Pro Rata
Share, of a rate equal to the then Applicable Margin under Paragraph 2.6 hereof,
on the face amount of each Financial Standby Letter of Credit and each
Performance Standby Letter of Credit, provided, however, that if a Letter of
Credit is canceled, the Agent shall rebate to Borrowers any portion of the
applicable LC Fee (as defined below) paid on account of any quarter after the
quarter in which the Letter of Credit is terminated; (iv) on the date of
issuance of each Letter of Credit a fee (the "LC Fee") to the Agent on its own
behalf equal to one-eighth of

-29-


one percent (1/8%) per annum of the face amount of such Letter of Credit; and
(v) interest on any Indebtedness outstanding with respect to such Letter of
Credit, whether for funds paid on drafts on such Letter of Credit, or otherwise
(but such indebtedness shall not include undrawn balances of such Letter of
Credit issued hereunder) calculated at the rate and paid at the times and in the
manner set forth for the calculation of interest and payment thereof on the Loan
in Paragraph 2.6(a)(i)(A) hereof based on the Base Rate. Interest under clause
(v) above shall accrue on amounts paid on a Letter of Credit (if not reimbursed
by Borrowers on the same day) from the date of payment by Agent, whether or not
demand is made, until such amounts are reimbursed by Borrowers whether before,
at or after demand.

(b) In the absence of a Default or an Event of Default
and subject to the provisions of Paragraph 2.7 hereof, Banks hereby agree to
make Advances to Borrowers under the Commitment to fund the payments required
under Paragraphs 3.4(a)(i) and (ii) hereof. If any payment by the Agent of a
draft drawn under a Letter of Credit is for any reason (including without
limitation the occurrence or continuation of a Default or an Event of Default
hereunder) not reimbursed prior to or on the date such payment is made, the
Agent in its sole and absolute discretion may direct that all amounts due under
drafts drawn under a Letter of Credit be refunded by delivery of a notice (a
"Drawing Refunding") to each Bank and to Borrowers and such Drawing Refunding
shall constitute delivery by the Company of an Advance/Credit Request Form in an
amount equal to the drawings to be refunded, which shall bear interest at the
rate set forth in Paragraph 2.6(a)(i)(A) for Advances bearing interest based on
the Base Rate until paid in full.

3.5. Payment by Banks on Letters of Credit.

(a) With respect to each Letter of Credit issued
hereunder, each Bank agrees that it is irrevocably obligated to pay to Agent,
for each such Letter of Credit, such Bank's Pro Rata Share of each and every
payment made or to be made by Agent under such Letter of Credit (each such
payment to be made, a "LOC Contribution"). Each Bank's LOC Contribution shall be
due from such Bank immediately upon, and in any event no later than the same day
as, receipt of written notice (which may be sent by telex) from Agent that (i)
it has made a payment or (ii) a draft has been presented purporting to be drawn
on a Letter of Credit issued hereunder. Such payment shall be made at Agent's
offices in immediately available federal funds.

(b) The obligation of each Bank to make its LOC
Contribution hereunder is absolute, continuing and unconditional, and Agent
shall not be required first to make demand upon or proceed against Borrowers or
any guarantor or surety, or any others liable with respect to the applicable
Letter of Credit and shall not be required first to resort to any collateral.
LOC Contributions shall be made without regard to termination of this Agreement
or the Commitment, the existence of a Default or an Event of Default, the
acceleration of indebtedness hereunder or any other event or circumstance.

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3.6. Collateral.

(a) If Borrowers shall have deposited with Agent cash
collateral or U.S. Treasury securities with maturities no more than ninety (90)
days from the date of deposit ("U.S. Treasury Bills") (discounted in accordance
with customary banking practice to present value to determine amount) in an
amount equal at all times to one hundred three percent (103%) of the outstanding
undrawn amount of all Letters of Credit, such cash or U.S. Treasury Bills and
all interest earned thereon to constitute cash collateral for all such Letters
of Credit, on or before the Termination Date and shall have irrevocably paid in
full the Loan and all other indebtedness, liabilities and obligations of
Borrowers to Banks under this Agreement (including all indebtedness and fees due
and owing under this Section Three other than for undrawn balances of Letters of
Credit and other fees and liabilities not yet accrued thereunder), Borrowers
shall be entitled upon the termination of the Commitment to the termination of
all covenants of Borrowers under this Agreement (except under this Section
Three).

(b) On the Termination Date, the termination of the
Commitment (other than voluntary termination of the Commitment by Borrowers in
compliance with subparagraph (a) above) or the occurrence of an Event of
Default, the Agent may require (and in the case of an Event of Default occurring
under Paragraph 9.1(h) it shall be required automatically) that Borrowers
deliver to Agent, unless previously delivered to Agent under subparagraph (a)
above, cash or U.S. Treasury Bills with maturities of not more than ninety (90)
days from the date of delivery (discounted in accordance with customary banking
practice to present value to determine amount) in an amount equal at all times
to one hundred three percent (103%) of the outstanding undrawn amount of all
Letters of Credit, such cash or U.S. Treasury Bills and all interest earned
thereon to constitute cash collateral for all such Letters of Credit. At such
time as such cash collateral or U.S. Treasury Bills is required to be and has
not been deposited, Agent in its sole and absolute discretion on behalf of Banks
shall be entitled to (x) liquidate such collateral it may hold at such time as
is necessary or appropriate in its sole judgment so as to create such cash
collateral, and (y) direct by delivery of a notice (a "Cash Collateral Notice")
to each Bank and to Borrowers and such Cash Collateral Notice shall constitute
delivery by the Company of an Advance/Credit Request Form in an amount equal to
the Cash Collateral due under this Paragraph 3.6(b) which shall bear interest at
the rate set forth in Paragraph 2.6(a)(ii) for Advances bearing interest based
on the Base Rate.

(c) Any cash collateral deposited under subparagraphs
(a) and (b) above, and all interest earned thereon, shall be held by Agent and
invested and reinvested at the expense and the written direction of Borrowers,
in U.S. Treasury Bills with maturities of no more than thirty (30) days from the
date of investment.

3.7. General Terms of Credits. The following terms and
conditions apply with respect to each Letter of Credit (a "Credit")
notwithstanding anything to the contrary contained herein:

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(a) Borrowers assume all risks of the acts or omissions
of the beneficiary of each Credit with respect to the use of the Credit or with
respect to the beneficiary's obligations to Borrowers. None of the Banks nor any
of their officers or directors shall be liable or responsible for (and the Banks
hereby agree to indemnify and hold the Agent and any issuer of a Credit harmless
(subject to Paragraph 10.8 hereof) with respect to): (i) the use which may be
made of the Credit or for any acts or omissions of the beneficiary in connection
therewith; (ii) the accuracy, truth, validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents should in fact
prove to be in any or all respects false, misleading, inaccurate, invalid,
insufficient, fraudulent or forged; (iii) any other circumstances whatsoever in
making or failing to make payment under a Credit; or (iv) any inaccuracy,
interruption, error or delay in transmission or delivery of correspondence or
documents by post, telegraph or otherwise. In furtherance and not in limitation
of the foregoing, Agent may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary.

(b) To the extent any failure to comply with the
provisions of this Section 3.7(b) could have a Material Adverse Effect,
Borrowers agree to procure or to cause the beneficiaries of each Letter of
Credit to procure promptly any necessary import and export or other licenses for
the import or export or shipping of any goods referred to in or pursuant to a
Credit and to comply and to cause the beneficiaries to comply with all foreign
and domestic governmental regulations with respect to the shipment and
warehousing of such goods or otherwise relating to or affecting such Credit,
including governmental regulations pertaining to transactions involving
designated foreign countries or their nationals, and to furnish such
certificates in that respect as Agent may at any time reasonably require, and to
keep such goods adequately covered by insurance in amounts, with carriers and
for such risks as shall be customary in the industry and to cause Banks'
interest to be endorsed on such insurance and to furnish Agent at its request
with reasonable evidence thereof. Should such insurance (or lack thereof) upon
said goods for any reason not be reasonably satisfactory to Agent, Agent may
(but is not obligated to) obtain, at Borrowers' expense, insurance satisfactory
to Agent.

(c) In connection with each Credit, neither any Bank nor
any of their correspondents shall be responsible for: (i) the existence,
character, quality, quantity, condition, packing, value or delivery of the
property purporting to be represented by documents; (ii) any difference in
character, quality, quantity, condition or value of the property from that
expressed in documents; (iii) the time, place, manner or order in which shipment
of the property is made; (iv) partial or incomplete shipment referred to in such
Credit; (v) the character, adequacy or responsibility of any insurer, or any
other risk connected with insurance; (vi) any deviation from instructions,
delay, default or fraud by the beneficiary or any one else in connection with
the property or the shipping thereof; (vii) the solvency, responsibility or
relationship to the property of any party issuing any documents in connection
with the property; (viii) delay in arrival or failure to arrive of either the
property or any of the documents relating thereto; (ix) delay in giving or
failure to give notice of arrival or any other notice; (x) any breach of
contract between

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the Letter of Credit beneficiaries and Borrowers; (xi) any laws, customs, and
regulations which may be effective in any jurisdiction where any negotiation
and/or payment of such Credit occurs; (xii) failure of documents (other than
documents required by the terms of the Credit) to accompany any draft at
negotiation; or (xiii) failure of any person to note the amount of any document
or draft on the reverse of such Credit or to surrender or to take up such Credit
or to forward documents other than documents required by the terms of the
Credit. In connection with each Credit, no Bank shall be responsible for any
error, neglect or default of any of their correspondents. None of the above
shall affect, impair or prevent the vesting of any of the Banks' rights or
powers hereunder. If a Credit provides that payment is to be made by the issuing
Bank's correspondent, neither the issuing Bank nor such correspondent shall be
responsible for the failure of any of the documents specified in such Credit to
come into the Agent's hands, or for any delay in connection therewith, and
Borrowers' obligation to make reimbursements shall not be affected by such
failure or delay in the receipt of any such documents.

(d) Notwithstanding but without limiting any of the
foregoing, with respect to any Credit, Borrowers shall have a claim against
Agent, and Agent shall be liable to Borrowers, to the extent, but only to the
extent, of any direct, as opposed to indirect or consequential, damages suffered
by Borrowers caused by the Agent's willful misconduct or gross negligence.

(e) To the extent not inconsistent with this Agreement,
the Uniform Customs and Practices for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, are hereby made a part of
this Agreement with respect to obligations in connection with each Credit.

SECTION FOUR
REPRESENTATIONS AND WARRANTIES

Each of the Borrowers and each of the Guarantors represents
and warrants, as follows:

4.1. Organization and Good Standing. Each of the Company and
SDIPI is a limited partnership duly formed and validly existing under the laws
of the state of Delaware, and has the power and authority to carry on its
business as now conducted. Each Subsidiary and each Guarantor (other than SDIPI)
is duly organized and existing and in good standing, under the laws of the
jurisdiction of its incorporation, and has the power and authority to carry on
its business as now conducted. Each of the Borrowers and Guarantors is qualified
to do business in all other states in which the failure to qualify would have a
Material Adverse Effect.

4.2. Power and Authority; Validity of Agreement. Each of the
Borrowers and Guarantors has the power and authority under Delaware law and
under its organizational documents to enter into and perform this Agreement, the
Promissory Notes and all other

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agreements, documents and actions required hereunder, to the extent each is a
party thereto; and all actions necessary or appropriate for Borrowers' and
Guarantors' execution and performance of this Agreement, the Promissory Notes,
and all other agreements, documents and actions required hereunder, to the
extent it is a party hereto, have been taken, and, upon their execution, the
same will constitute the valid and binding obligations of Borrowers and
Guarantors to the extent each is a party thereto, enforceable in accordance with
their terms.

4.3. No Violation of Laws or Agreements. The making and
performance of this Agreement, the Promissory Notes, and the other documents,
agreements and actions required of Borrowers and Guarantors hereunder, to the
extent it is a party thereto, will not violate any provisions of any law or
regulation, federal, state or local, or the respective organizational documents
of Borrowers or Guarantors or result in any breach or violation of, or
constitute a default under, any agreement or instrument by which either
Borrowers, Guarantors or their respective property may be bound, including
without limitation the Note Purchase Agreement and the Indenture.

4.4. Material Contracts. None of the Guarantors or Borrowers
is a party to or in any manner obligated under any contracts material to their
respective business except this Agreement, their organizational documents, the
Senior Notes and the Note Purchase Agreement pursuant to which they were issued,
the Indenture, and the agreements identified on Exhibit E hereto and there
exists no material default under any of such contracts.

4.5. Compliance. Each of the Guarantors and Borrowers is in
compliance in all material respects with all applicable laws and regulations,
federal, state and local (including without limitation those administered by the
Local Authorities) material to the conduct of its business and operations;
Guarantors and Borrowers possess all the material franchises, authorizations,
patents, copyrights, trademarks, permits and licenses necessary or required in
the conduct of their respective businesses, and, except as may be described on
Exhibit E, the same are valid, binding, enforceable and subsisting without any
material defaults thereunder; and, except as described on Exhibit E, no
authorization, consent, approval, waiver, license or exemptions from, nor any
filing, declaration or registration with, any court, governmental agency or
regulatory authority (federal, state or local) or non-governmental entity, under
the terms of contracts or otherwise, is required by reason of or in connection
with Borrowers' and Guarantors' execution and performance of this Agreement, the
Promissory Notes and all other agreements, documents and actions required
hereunder to the extent each is a party hereto and thereto.

4.6. Litigation. Except as set forth on Exhibit E hereto,
there are no actions, suits, proceedings or claims which are pending or, to the
best of Guarantors' and Borrowers' knowledge or information, threatened against
any of the Guarantors or Borrowers which, if adversely resolved, would be
reasonably likely to have a Material Adverse Effect.

4.7. Title to Assets. Except as set forth on Exhibit E hereto,
each Borrower and Guarantor has good and marketable title to substantially all
of its properties and assets as

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reflected in the financial statements of SunSource Inc. and its Consolidated
Subsidiaries most recently delivered to Banks pursuant to Paragraphs 5.1(e), 6.2
and 6.3 hereof, free and clear of any liens and encumbrances, except the
security interests permitted pursuant to Paragraph 7.4 hereof and all such
assets are in good order and repair and fully covered by the insurance required
pursuant to Paragraph 6.7 hereof.

4.8. Partnership Interests. The number and percentage of
partnership interests in the Company and SDIPI and the ownership thereof are
accurately set forth on Exhibit E attached hereto; all such interests are
validly existing and the creation and sale thereof are in compliance with all
applicable federal and state securities and other applicable laws; the ownership
thereof is free and clear of any liens and encumbrances or other contractual
restrictions except as set forth in the Partnership Agreements, and SDIPI is the
general partner of the Company.

4.9. Capital Stock. The number of shares and classes of the
capital stock of each Subsidiary, SunSub A and SunSub B and the ownership
thereof effective upon the Conversion are accurately set forth on Exhibit E
attached hereto; all such shares are validly existing, fully paid and
non-assessable, and the issuance and sale thereof are in compliance with all
applicable federal and state securities and other applicable laws; and the
shareholders' ownership thereof is free and clear of any liens or encumbrances
or other contractual restrictions.

4.10. Accuracy of Information; Full Disclosure.

(a) All information furnished to Banks concerning the
financial condition of SunSource Inc. and its Consolidated Subsidiaries,
including SunSource L.P. and its Consolidated Subsidiaries', SDIPI's, and the
Guarantors' respective annual financial statements for the period ending
December 31, 1996, and SunSource L.P. and its Consolidated Subsidiaries'
consolidated interim financial statement for the period ending June 30, 1997,
copies of which have been furnished to Banks, have been prepared in accordance
with GAAP (except that the annual financial statements of SDIPI were prepared on
a tax basis, not a GAAP basis) and fairly present the financial condition of
SDIPI, Guarantors and SunSource L.P. and its Consolidated Subsidiaries as of the
dates and for the periods covered and discloses liabilities of SDIPI, Guarantors
and SunSource L.P. and its Consolidated Subsidiaries required to be disclosed
under GAAP and, except on the date hereof for the effect of the Conversion,
there has been no Material Adverse Change from the date of such statements to
the date hereof; and

(b) All financial statements and other documents
furnished by SunSource L.P., SDIPI, Guarantors and SunSource Inc. and its
subsidiaries to the Banks in connection with this Agreement and the Promissory
Notes do not and will not contain any untrue statement of material fact or omit
to state a material fact necessary in order to make the statements contained
therein not misleading. Borrowers and Guarantors have disclosed to the Banks in
writing any and all facts which materially and adversely affect the business,
properties, operations or condition, financial or otherwise, of Guarantors and
Borrowers or the Borrowers' or

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Guarantors' ability to perform their respective obligations under this Agreement
and the Promissory Notes.

4.11. Taxes and Assessments.

(a) Each of Guarantors and the Company has duly and
timely filed all information and tax returns and reports with all federal,
state, local or foreign governmental taxing authorities, bodies or agencies; and
all taxes, including without limitation income, gross receipt, sales, use,
excise and any other taxes, and any governmental charges, penalties, interest or
fines with respect thereto, due and payable by Guarantors, the Company and the
other Borrowers, have been paid, withheld or reserved for in accordance with
GAAP or, to the extent they relate to periods on or prior to the date of the
financial statements delivered from time to time pursuant to Paragraphs 5.1(e),
6.2 and 6.3 hereof (the "Financial Statements"), are reflected as a liability on
the Financial Statements in accordance with GAAP.

(b) Each of the Guarantors and the Borrowers has
properly withheld all amounts determined by them to be required by law to be
withheld for income taxes and unemployment taxes including without limitation,
all amounts required with respect to social security and unemployment
compensation, relating to its employees, and has remitted such withheld amounts
in a timely manner to the appropriate taxing authority, agency or body.

(c) As of the date of this Agreement, none of the
federal income tax information returns of SDIPI or the Company has been audited.
Except as set forth on Exhibit E hereto, neither Guarantors nor Borrowers have
entered into any agreements for the extension of time for the assessment of any
tax or tax delinquency, nor has any of them received outstanding and unresolved
notices from the Internal Revenue Service or any other state, local or foreign
taxing authority, agency or body of any proposed examination or of any proposed
change in reported information which may result in a deficiency or assessment
against Guarantors or Borrowers and there are no suits, actions, claims,
investigations, inquiries or proceedings now pending against Guarantors or
Borrowers in respect of taxes, governmental charges or assessments.

4.12. Indebtedness. Guarantors and Borrowers have no presently
outstanding Indebtedness or obligations including contingent obligations and
obligations under leases of property from others, except the Senior Notes, the
Junior Subordinated Debentures, the Indebtedness and obligations described
either on Exhibit E hereto or in Guarantors' or Borrowers' financial statements
which have been furnished to Banks and Indebtedness permitted to be incurred
pursuant to Paragraph 7.1 hereof. There exists no default with respect to the
payment of principal or interest under any such outstanding Indebtedness. The
Indebtedness under the Senior Notes ranks pari passu and equal to the
Indebtedness to Banks hereunder, without any priority. The Junior Subordinated
Debentures rank junior and are subordinated to the Indebtedness to Banks, and
all other Indebtedness of the Borrowers and Guarantors ranks either pari passu
or junior to the Indebtedness to the Banks.

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4.13. Management Agreements. The Company is a party to no
other material management or consulting agreements for the provision of services
to the Company, except as described in Exhibit E hereto.

4.14. Subsidiaries and Investments. Borrowers have no
Subsidiaries or Affiliates, or investments in or loans to any other individuals
or business entities, except as described in Exhibit E hereto and except as are
permitted to be acquired or created pursuant to Paragraph 7.8 hereof.

4.15. ERISA. Each Plan maintained by Guarantors or Borrowers
and each ERISA Affiliate is, as of its most recently completed annual report, in
compliance in all material respects with all applicable provisions of ERISA and
the regulations promulgated thereunder; and, except as set forth in Exhibit E
hereto:

(a) Neither Guarantors, Borrowers nor any ERISA
Affiliate maintains or contributes to or has maintained or contributed to any
multiemployer plan (as defined in Section 4001 of ERISA) under which Guarantors,
Borrowers, or any ERISA affiliate could have any withdrawal liability;

(b) Neither Guarantors, Borrowers, nor any ERISA
Affiliate, sponsors or maintains any Plan under which there is an Accumulated
Funding Deficiency, whether or not waived;

(c) The aggregate liability for accrued benefits and
other ancillary benefits under each Plan that is or will be sponsored or
maintained by Guarantors, Borrowers or any ERISA Affiliate (determined on the
basis of the actuarial assumptions prescribed for valuing benefits under
terminating single-employer defined benefit plans under Title IV of ERISA) does
not exceed the aggregate fair market value of the assets under each such defined
benefit pension Plan;

(d) Neither Guarantors, Borrowers nor any ERISA
Affiliate has liability arising out of or relating to a failure of any Plan to
comply with the provisions of ERISA or the Code;

(e) There does not exist any unfunded liability
(determined on the basis of actuarial assumptions utilized by the actuary for
the Plan in preparing the most recent Annual Report) of Guarantors, Borrowers or
any ERISA Affiliate under any plan, program or arrangement providing
post-retirement life or health benefits; and

(f) The matters described on Exhibit E attached
hereto referencing clauses (a) through (e) of this Paragraph 4.15, would not,
either singly or in the aggregate, have a Material Adverse Effect.

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4.16. Fees and Commissions. Borrowers owe no fees or
commissions of any kind, and know of no claim for any fees or commissions, in
connection with Borrowers' obtaining the Commitment or the Loan from Banks,
except those provided herein or the letters with the Agent and the Documentation
Agent referred to in Paragraph 5.1(g) hereof.

4.17. No Extension of Credit for Securities. Guarantors and
Borrowers are not now, nor at any time have they been, engaged principally, or
as one of their important activities, in the business of extending or arranging
for the extension of credit, for the purpose of purchasing or carrying any
margin stock or margin securities; nor will the proceeds of the Loan be used by
Borrowers directly or indirectly, for such purposes.

4.18. Hazardous Wastes, Substances and Petroleum Products.
Except as set forth in Exhibit E hereto:

(a) Each of the Guarantors and the Borrowers: (i) has
received all permits and filed all notifications necessary to carry on their
respective business(es); and (ii) is in compliance in all respects with all
Environmental Control Statutes except with respect to immaterial instances of
noncompliance of which it has no knowledge.

(b) Neither Guarantors nor Borrowers have given any
written or oral notice, nor has it failed to give required notice, to the
Environmental Protection Agency ("EPA") or any state or local agency with regard
to any actual or imminently threatened removal, spill, release or discharge of
Hazardous Substances on properties owned, leased or operated by SDIPI,
Guarantors or Borrowers or used in connection with the conduct of its business
and operations.

(c) Neither Guarantors nor Borrowers have received
notice that it is potentially responsible for the performance of or payment of
costs relating to clean-up or remediation of any actual or imminently threatened
spill, release or discharge of Hazardous Substances pursuant to any
Environmental Control Statute.

4.19. Solvency. To the best of SunSource Inc.'s knowledge,
SunSource Inc. and its Consolidated Subsidiaries are, on a consolidated basis,
upon the Conversion and after receipt and application of the first Advance will
be, solvent such that (i) the fair value of their assets (including without
limitation the fair salable value of the goodwill and other intangible property
of SunSource Inc. and its Consolidated Subsidiaries) is greater than the total
amount of their liabilities, including without limitation, contingent
liabilities, (ii) the present fair salable value of their assets (including
without limitation the fair salable value of the goodwill and other intangible
property of SunSource Inc. and its Consolidated Subsidiaries) is not less than
the amount that will be required to pay the probable liability on their debts as
they become absolute and matured, and (iii) they are able to realize upon their
assets and pay their debts and other liabilities, contingent obligations and
other commitments as they mature in the normal course of business. SunSource
Inc. and its Consolidated Subsidiaries (i) do not intend to, and do not

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believe that they will, incur debts or liabilities beyond their ability to pay
as such debts and liabilities mature, or (ii) are not engaged in a business or
transaction, or about to engage in a business or transaction, for which their
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice and industry in which they are engaged.
For purposes of this Paragraph 4.19, in computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be computed
at the amount which, in light of all the facts and circumstances existing at
such time, represents the amount that reasonably can be expected to become an
actual matured liability.

4.20. Foreign Assets Control Regulations. Neither the
borrowing by the Borrowers of the Loan nor their use of the proceeds of any
Advance thereof will violate the Foreign Assets Regulations, the Foreign Funds
Control Regulations, the Transactions Control Regulations, the Cuban Assets
Control Regulations, the Iranian Transaction Regulations, or the Iraqi Sanctions
Regulations of the United States Treasury Department (31 C.F.R. Subtitle B,
Chapter V, as amended).

4.21. Investment Company Act. Neither the Borrowers nor
Guarantors are directly or indirectly controlled by or acting on behalf of any
person which is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

SECTION FIVE
CONDITIONS

5.1. First Advance. The obligation of Banks to make the first
Advance under the Loan or issue a Letter of Credit shall be subject to Banks'
receipt of the following documents, each in form and substance satisfactory to
Banks:

(a) Promissory Notes. The Promissory Notes duly
executed by Borrowers in favor of Banks.

(b) Authorization Documents. A certificate of the
secretary (or secretary of the general partner, as applicable) of (i) the
Company, (ii) each Subsidiary, and (iii) each Guarantor, attaching and
certifying as to (i) the certificate or articles of incorporation and bylaws or
partnership agreement, as applicable, of such entity; (ii) resolutions or other
evidence of authorization by the board of directors of such entity, if
applicable, authorizing its execution and full performance of this Agreement,
the Promissory Notes, and all other documents and actions required hereunder;
and (iii) incumbency certificates setting forth the name, titles and specimen
signature of each officer of such entity (or each officer of the general partner
of such entity, as applicable) who is authorized to execute the Loan Documents
on behalf of such entity.

(c) Opinion of Counsel. An opinion letter from
counsel for Borrowers and Guarantors in form and substance reasonably
satisfactory to Banks.

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(d) Insurance. Certificates of insurance with respect
to all of Borrowers' fire, casualty, liability and other insurance covering its
respective property and business.

(e) Financial Information. A certificate signed by
the chief financial officer or controller of SunSource Inc. attaching (i) A pro
forma schedule of assets and liabilities of SunSource Inc. and its Consolidated
Subsidiaries setting forth all SunSource Inc.'s and its Consolidated
Subsidiaries' Indebtedness, certified as accurate by the chief financial officer
of SunSource Inc.; (ii) cash flow projections for SunSource Inc. and its
Consolidated Subsidiaries on a consolidated basis, for the three (3) year period
immediately following the date hereof, satisfactory to Agent and certified as
reasonable by the chief financial officer or controller of SunSource Inc. (such
cash flow projections shall take into account the transactions contemplated by
this Agreement and shall identify the sources of cash the Company intends to use
to meet its cash needs during such three year period); and (iii) financial
projections for SunSource Inc. and its Consolidated Subsidiaries for the period
from closing through December 31, 2001 on a consolidated basis satisfactory to
Agent; and with respect to the matters set forth in Paragraph 4.19 hereof.

(f) Advance Request. A completed Advance/Credit
Request Form required under Paragraph 2.7(a), hereof, and any other documents or
information reasonably required by Banks in connection therewith.

(g) Fees. Payment of the fees required by Section 2
hereof; and execution by the Borrowers of letters of agreement with the Agent
and the Documentation Agent with respect to payment of an annual administrative
agency and certain other fees.

(h) Officer's Certificate. A certificate signed by
the chief financial officer or controller of SunSource Inc. stating: (i) that
there exists no Default or Event of Default hereunder, (ii) except for the
Conversion, that there has been no Material Adverse Change in the financial
condition, assets, nature of the assets, operations or prospects of the
Borrowers and Guarantors since June 30, 1997, and (iii) that there exists no
default under any Indebtedness of Borrowers or Guarantors.

(i) The Conversion. A certificate of the chief
financial officer or controller of SunSource Inc. with respect to the completion
of the Conversion as outlined in SEC Form S-4 Registration Statement dated
December 31, 1996, as amended, simultaneously with the first Advance under the
Loan.

(j) Senior Notes. Borrowers shall, simultaneously
with the Conversion, have executed the Note Purchase Agreement, issued the
Senior Notes, received Sixty Million Dollars ($60,000,000) in proceeds thereof,
and provided copies of the Note Purchase Agreement to Banks.

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(k) Tax Forms. A facially complete Internal Revenue
Service Form 4224 from each of The Bank of Nova Scotia and each other non-U.S.
Bank certifying as to such Bank's entitlement to exemption from, or reduction
of, United States withholding tax on payments to be made hereunder or under the
Promissory Notes.

(l) Other Documents. The Declaration of Trust of the
Trust, the Indenture, and such additional documents as Banks reasonably may
request.

5.2. Subsequent Advances. The obligation of Banks to make
additional Advances under the Loan shall be subject to Banks' receipt of a
completed Advance/Credit Request Form.

5.3. Additional Condition to Banks' Obligations. It shall be a
condition to Banks' obligation hereunder to make any Advance that the
representations and warranties set forth herein shall be true and correct as if
made on the date of such Advance, that no Event of Default or Default shall have
occurred and be continuing on the date of such Advance or be caused by such
Advance, that all fees required pursuant to Section 5 hereof have been paid as
and when due, and there shall have been no Material Adverse Change since the
date hereof.

SECTION SIX
AFFIRMATIVE COVENANTS

Guarantors and Borrowers covenant and agree that so long as
the Commitment of Banks to Borrowers or any indebtedness of Borrowers to Banks
is outstanding hereunder, each of the Guarantors and Borrowers will (and with
respect to Paragraph 6.12, Borrowers will cause each ERISA Affiliate) to:

6.1. Existence and Good Standing. Preserve and maintain its
existence as a limited partnership or corporation, as applicable, and its good
standing in all states in which it conducts business and the validity of all its
material franchises, licenses and permits required in the conduct of its
business.

6.2. Quarterly Financial Statements. Furnish Banks within
forty-five (45) days of the end of each quarterly fiscal period hereafter, other
than the last quarterly fiscal period in the fiscal year, with unaudited
quarterly consolidated financial statements of SunSource Inc. and its
Consolidated Subsidiaries, in form and substance as required by GAAP, including
for each such quarter (i) a consolidated balance sheet, (ii) a consolidated
statement of income, (iii) a consolidated statement of cash flow and (iv) a
certificate in the form of Exhibit F attached hereto executed by the chief
financial officer or controller of SunSource Inc. showing the calculation of the
covenants set forth in Paragraphs 6.13 through 6.15 and Section Seven hereof
prepared in accordance with GAAP consistently applied and stating that the
financial statements fairly

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present the financial condition of SunSource Inc. and its Consolidated
Subsidiaries as of the date and for the periods covered and that as of the date
of such certificate there exists no violation of any provision of this Agreement
or the happening of any Event of Default or Default.

6.3. Annual Financial Statements. Furnish Banks within ninety
(90) days after the close of each fiscal year commencing with fiscal 1997 with
audited consolidated annual financial statements of SunSource Inc. and its
Consolidated Subsidiaries, including the financial statements, certificate in
the form of Exhibit F attached hereto and information required under Paragraph
6.2 hereof, which consolidated financial statements shall be prepared in
accordance with GAAP. The financial statements delivered pursuant to the
preceding sentence shall be certified without qualification (except with respect
to changes in GAAP as to which SunSource Inc.'s independent certified public
accountants have concurred) by an independent certified public accounting firm
satisfactory to Banks; and SunSource Inc. shall cause Banks to be furnished, at
the time of the completion of the annual audit, with a certificate signed by
such accountants showing the calculation of the covenants set forth in
Paragraphs 6.13 through 6.15 hereof and stating that to the best of their
knowledge there exists no violations of any provisions of this Agreement or the
happening of any Event of Default or Default hereunder.

6.4. Cash Flow Projections. Furnish to Banks, on or before
March 31 of each year, commencing with fiscal year 1998, cash flow projections
of SunSource Inc. and its Consolidated Subsidiaries on a consolidated basis for
the twelve (12) month period ending on December 31 of such year.

6.5. Public Information. Deliver to Banks, promptly upon
transmission thereof, copies of all such financial statements, proxy statements,
notices and reports as the Company shall send to its limited partners or to the
holders of the Senior Notes or the Junior Subordinated Debentures, copies of all
registration statements (without exhibits), and all annual, quarterly or other
reports which the Company or the Guarantors files with the Securities and
Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission) including without
limitation, Form 10Q and Form 10K; and copies of all auditors' annual management
letters delivered to SunSource Inc., the Company or a Guarantor.

6.6. Books and Records. Keep and maintain satisfactory and
adequate books and records of account in accordance with GAAP and make or cause
the same to be made available to Banks or their agents or nominees at any
reasonable time during normal business hours upon reasonable notice for
inspection and to make extracts thereof and permit Agent or any Bank to discuss
contents of same with senior officers of SunSource Inc., Borrowers or a
Guarantor and also with outside auditors and accountants of SunSource Inc.,
Borrowers or a Guarantor.

6.7. Properties; Insurance. Keep and maintain all of its
property and assets in good order and repair and materially covered by insurance
with reputable and financially sound insurance companies against such hazards
and in such amounts as is customary in the industry,

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under policies requiring the insurer to furnish reasonable notice to Banks and
opportunity to cure any non-payment of premiums prior to termination of
coverage; and, as required above, furnish Banks with certificates of such
insurance.

6.8. Notices to Banks. Notify Banks in writing immediately of
(i) the institution of any litigation, the commencement of any administrative
proceedings, the happening of any event or the assertion or threat of any claim
which might reasonably be expected to have a Material Adverse Effect, (ii) the
occurrence of any Event of Default or Default hereunder or (iii) any notice
delivered to the Trustee from SunSource Inc. or the holder of any Senior
Indebtedness (as defined in the Indenture) in respect of Section 14.06 of the
Indenture.

6.9. Taxes. Pay and discharge all taxes, assessments or other
governmental charges or levies imposed on it or any of its property or assets
prior to the date on which any penalty for non-payment or late payment is
incurred, unless the same are (a) being contested in good faith by appropriate
proceedings and (b) are covered by appropriate reserves maintained in cash or
cash equivalents in accordance with GAAP.

6.10. Costs and Expenses. Pay or reimburse Agent for all
reasonable out-of-pocket costs and expenses (including but not limited to
reasonable attorneys' fees and disbursements) Agent may pay or incur in
connection with the preparation and review of this Agreement and all waivers,
consents and amendments in connection therewith and all other documentation
related thereto and the making of the Loan hereunder; and pay or reimburse Banks
for all reasonable out-of-pocket costs and expenses (including but not limited
to reasonable attorneys' fees and disbursements) Banks may pay or incur in
connection with the collection or enforcement of the same, including without
limitation any fees and disbursements incurred in defense of or to retain
amounts of principal, interest or fees paid. All obligations provided for in
this Paragraph 6.10 shall survive any termination of this Agreement or the
Commitment and the repayment of the Loan.

6.11. Compliance; Notification.

(a) Except to the extent that noncompliance would not
have a Material Adverse Effect, comply in all respects with all local, state and
federal laws and regulations applicable to its business, including without
limitation the Environmental Control Statutes, the Securities Act, and all laws
and regulations of the Local Authorities, and the provisions and requirements of
all franchises, permits, licenses and other like grants of authority held by
Borrowers or Guarantors; and notify Banks immediately in detail of any actual or
alleged failure to comply with, failure to perform, breach, violation or default
under any such laws or regulations or under the terms of any of such franchises,
permits, certificates, licenses or grants of authority, or of the occurrence or
existence of any facts or circumstances which with the passage of time, the
giving of notice or otherwise could create such a failure, breach, violation or
default or could occasion the termination of any of such franchises, permits,
certificates, licenses

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or grants of authority, except to the extent that such matter would not have a
Material Adverse Effect.

(b) With respect to the Environmental Control
Statutes, promptly notify Agent when, in connection with the conduct of
Borrowers' businesses or operations, any person (including, without limitation,
EPA or any state or local agency) provides oral or written notification to
Borrowers or Guarantors or Borrowers or Guarantors otherwise become aware of a
condition with regard to an actual or imminently threatened removal, spill,
release or discharge of hazardous or toxic wastes, substances or petroleum
products that requires notification to the applicable governmental authority
under an Environmental Control Statute and would have an Environmental Material
Adverse Effect; and notify Banks in detail promptly upon the receipt by
Borrowers or Guarantors of an assertion of liability under the Environmental
Control Statutes, of any actual or alleged failure to comply with or perform,
breach, violation or default under any such statutes or regulations or of the
occurrence or existence of any facts, events or circumstances which with the
passage of time, the giving of notice, or both, could create such a breach,
violation or default and would have an Environmental Material Adverse Effect.

(c) With respect to each disclosure previously made
to Agent pursuant to Exhibit E attached hereto or Paragraph 6.11(b) hereof
regarding alleged or actual liability under Environmental Control Statutes, not
later than twenty (20) days after the last day of each fiscal quarter, deliver
to Agent a report describing (i) the estimated dollar amount, when initially
determined, of any such liability (including costs of investigation and
remediation) and if any such initial estimate with respect to a disclosed matter
shall be modified thereafter by more than $1,000,000, the modified dollar
amount; and (ii) any information or change in circumstances regarding actual or
alleged liability under Environmental Control Statutes of Borrowers or
Guarantors, if the effect thereof would be to increase liability in connection
with the investigation or remediation with respect thereto by more than
$1,000,000.

6.12. ERISA. (a) Comply, and cause any Plan maintained for the
employees of SDIPI, Guarantors or Borrowers to comply, in all material respects
with the provisions of ERISA; (b) not incur any material Accumulated Funding
Deficiency or any material liability to the PBGC (as established by ERISA); (c)
permit any event to occur (i) as described in Section 4042 of ERISA or (ii)
which may result in the imposition of a lien on its properties or assets; and
(d) notify Banks in writing promptly after it has come to the attention of
senior management of Guarantors or Borrowers of the assertion or threat of any
"reportable event" or other event described in Section 4042 of ERISA (relating
to the soundness of a Plan), except those with respect to which the PBGC has
waived the 30 day notice rule, or the PBGC's ability to assert a material
liability against it) or impose a lien on Guarantors' or Borrowers' properties
or assets.

6.13. Capitalization Ratio. Maintain a Capitalization Ratio
not to exceed: (i) with respect to the last day of each of the first two fiscal
quarters in each fiscal year, sixty-two percent (62%) and (ii) with respect to
the last day of each of the last two fiscal quarters of each fiscal year, sixty
percent (60%).

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6.14. Fixed Charge Coverage Ratio. Maintain as of the last day
of each fiscal quarter set forth in the left hand column, for the Rolling Period
ending on such date, a Fixed Charge Coverage Ratio for SunSource Inc. and its
Consolidated Subsidiaries of not less than the amount set forth in the right
hand column:

Period Minimum Ratio
------ -------------

Date of Agreement through 3/31/98 1.00
6/30/98 through 12/31/98 1.25
3/31/99 through 9/30/99 1.40
12/31/99 and the last day of each fiscal quarter thereafter 1.50

6.15. Leverage Ratio. Maintain on the last day of each
fiscal quarter a Leverage Ratio of not greater than 3.25:1.

6.16. Management Changes. Notify Banks in writing within
thirty (30) days after any change of its management group as described in the
"Change of Control" definition.

6.17. Subsequent Credit Terms.

(a) Notify Bank in writing not less than five (5)
Business Days prior to its entering into any amendment or modification of any
credit arrangement, whether now in effect or hereafter incurred, pursuant to
which Borrowers or Guarantors agree to financial covenants which are more
restrictive to Borrowers or Guarantors than those contained in sections Six and
Seven hereof. Upon entering into any such amendment or modification, and with
respect to the covenants in the Note Purchase Agreements, the corresponding
covenants, terms and conditions of this Agreement are and shall be deemed to be
automatically and immediately amended to conform with and to include the
applicable covenants, terms and/or conditions of such other agreement; provided,
however, that the foregoing shall not be applicable to or be deemed to affect
any provision of this Agreement to the extent that any amendment or modification
is less restrictive than the corresponding provisions of this Agreement.

(b) Borrowers and Guarantors hereby agree promptly to
execute and deliver any and all such documents and instruments and to take all
such further actions as Agent may, in its sole discretion, deem necessary or
appropriate to effectuate the provisions of this Paragraph 6.17.

6.18. Use of Proceeds. Use the proceeds of the Loan only for
the purposes set forth in Paragraph 2.4 hereof.

6.19. Successor Agent. In the event of the appointment of any
successor Agent pursuant to Paragraph 10.15 hereof, execute and deliver any
documents reasonably requested by

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Banks to effectuate and confirm the transfer to such successor Agent of all
rights, powers, duties, obligations and property vested in its predecessor Agent
hereunder.

6.20. Transactions Among Affiliates. Cause all transactions
between and among Affiliates to be on an arms-length basis and on such terms and
conditions as are customary in the applicable industry between and among
unrelated entities.

6.21. Other Information. Provide Banks with any other
documents and information, financial or otherwise, reasonably requested by Banks
from time to time.

SECTION SEVEN
NEGATIVE COVENANTS

So long as the Commitment or any Indebtedness of Borrowers to
Banks remains outstanding hereunder, each of Borrowers and Guarantors covenants
and agrees that it will not:

7.1. Indebtedness. Borrow any monies or create any
Indebtedness except (i) borrowings from Banks hereunder; (ii) Indebtedness
evidenced by the Senior Notes not to exceed Sixty Million Dollars ($60,000,000)
aggregate principal amount outstanding at any time, which shall rank equally and
are pari passu with the obligations to the Banks hereunder; (iii) Indebtedness
under the Junior Subordinated Debentures, not to exceed One Hundred Five Million
Five Hundred Thousand Dollars ($105,500,000) principal amount outstanding at any
time (but not including any amounts which constitute Compounded Interest, as
defined in the Indenture), which shall be subordinate and junior to the
obligations to the Banks hereunder; (iv) trade Indebtedness in the normal and
ordinary course of business for value received, of which no more than Five
Million Dollars ($5,000,000) shall be outstanding at any time under Trade Notes;
(v) Indebtedness and obligations incurred or assumed to purchase or lease fixed
or capital assets, provided, however, that the total principal amount of such
Indebtedness and obligations incurred in any calendar year shall not exceed in
the aggregate Seven Million Five Hundred Thousand Dollars ($7,500,000); (vi)
borrowings from the Company by its Subsidiaries to the extent the Company is
permitted to make such loans pursuant to Paragraph 7.3(i) hereof; (vii)
Indebtedness outstanding on the date hereof and disclosed on Exhibit E hereto,
but without any increase in the outstanding principal amount thereof; (viii) up
to an additional Ten Million Dollars ($10,000,000) aggregate principal amount
outstanding at any time (which shall include the revolving credit facility with
the Bank of Nova Scotia); and (ix) unsecured promissory notes in favor of
sellers of assets or stock in acquisitions otherwise permitted pursuant to
Paragraph 7.8 hereof not to exceed Ten Million Dollars ($10,000,000); provided,
however, that Indebtedness of Subsidiaries under clauses (v) and (viii) hereof
shall in no event exceed in the aggregate outstanding at any time Five Million
Dollars ($5,000,000).

7.2. Guaranties. Guarantee or assume or agree to become liable
in any way, either directly or indirectly, for any additional Indebtedness or
liability of others (except

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hereunder and with respect to the Senior Notes and to endorse checks or drafts
in the ordinary course of business), except that (i) Borrowers may guarantee
Indebtedness which in the aggregate shall not exceed Five Million Dollars
($5,000,000) outstanding at any time and (ii) any entity may guarantee debt of
another entity otherwise permitted hereunder.

7.3. Loans. Make any loans or advances to others provided that
the Company may make loans and advances to (i) the Subsidiaries not to exceed
Seven Million Five Hundred Thousand Dollars ($7,500,000) in aggregate
outstanding principal amount at any time, and (ii) to its sales personnel in the
ordinary course of business.

7.4. Liens and Encumbrances. Create, permit or suffer the
creation of any liens, security interests, or any other encumbrances on any of
its property, real or personal, except (i) liens arising in favor of sellers or
lessors for indebtedness and obligations incurred to purchase or lease fixed or
capital assets permitted under Paragraph 7.1(v) hereof, provided, however, that
such liens secure only the indebtedness and obligations created thereunder and
are limited to the assets purchased or leased pursuant thereto; (ii) liens for
taxes, assessments or other governmental charges, federal, state or local, which
are then being currently contested in good faith by appropriate proceedings and
are covered by appropriate reserves maintained in cash or cash equivalents and
in accordance with GAAP; (iii) pledges or deposits to secure obligations under
workmen's compensation, unemployment insurance or social security laws or
similar legislation; (iv) deposits to secure performance or payment bonds, bids,
tenders, contracts, leases, franchises or public and statutory obligations
required in the ordinary course of business; (v) deposits to secure surety,
appeal or custom bonds required in the ordinary course of business and (vi)
liens and security interests securing up to Five Million Dollars ($5,000,000) of
Indebtedness outstanding under Trade Notes.

7.5. Additional Negative Pledge. Agree or covenant with or
promise any person or entity other than Banks and the holders of the Senior
Notes that it will not pledge its assets or properties or otherwise grant any
liens, security interests or encumbrances on its property on terms similar to
those set forth in Paragraph 7.4 hereof.

7.6. Restricted Payments. Make any Restricted Payments;
provided, however that so long as there exists no Event of Default or Default
under this Agreement and no Event of Default or Default will result therefrom:
(i) SunSource Inc. may pay dividends on its common stock; (ii) SunSource Inc.
may make regularly scheduled interest payments on the Junior Subordinated
Debentures as in effect on the date hereof; and (iii) SunSource Inc. may make
Tax Distributions; provided further that if the Leverage Ratio immediately prior
to and after giving effect to such purchase is less than 2.25 to 1, as set forth
in a certificate of the chief financial officer or controller of SunSource Inc.
and delivered to Agent, then SunSource Inc. may purchase or redeem its common
stock or purchase Trust Preferred Securities, provided a like amount of the
Junior Subordinated Debentures are simultaneously purchased.

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7.7. Transfer of Assets. Sell, lease, transfer or otherwise
dispose of all or any portion of its assets, real or personal, other than such
transactions made on an arm's length basis in the normal and ordinary course of
business for value received; provided, however, that in the absence of a Default
or an Event of Default, and, if a Default or Event of Default would not result
therefrom, Borrowers may (i) sell assets other than in transactions made on an
arm's length basis in the normal and ordinary course of business for value
received in the aggregate after the date hereof for all such transactions up to
Fifteen Million Dollars ($15,000,000) and (ii) consummate a Sale of Material
Assets, provided that the Commitment shall be permanently reduced and the Loan
shall be repaid in connection therewith pursuant to Paragraphs 2.8(c) and (d)
hereof by an amount equal to the Banks' Applicable Share received by Borrowers
on account of such sale(s), to the extent such sale(s), in the aggregate, exceed
Fifteen Million Dollars ($15,000,000).

7.8. Acquisitions and Investments. (a) Purchase or otherwise
acquire any part or amount of the capital stock or assets of, or make any
investments in, any other entity or corporation, except Permitted Investments;
(b) create, acquire or maintain any Subsidiary not listed on Schedule I hereto,
except: (i) A & H Holding Company, Inc., (ii) if the Subsidiary is either
directly or indirectly owned by A & H Holding Company, Inc. or (iii) if the
Subsidiary executes a joinder to this Agreement and the Promissory Notes to
become a joint and several obligor hereunder and delivers such opinions and
certificates as Agent shall reasonably request; (c) enter into any new business
activities or ventures not directly related to its present business; or (d)
merge or consolidate with or into any other entity or corporation, except that
SunSub A, SunSub B, SunSource Inc. or SDIPI may be merged into the Company if
the Company is the surviving entity; provided, however, that in the absence of a
Default or an Event of Default hereunder, and if a Default or Event of Default
would not result therefrom, Borrowers may make acquisitions (by merger or
purchase) of substantially all but not less than substantially all of other
entities or corporations in the same or substantially the same business as
Borrowers. Borrowers shall provide to Agent a cash flow projection from the date
of any proposed acquisition with a purchase price exceeding Ten Million Dollars
($10,000,000), showing prospective compliance with Paragraphs 6.13 through 6.15
and Section Seven of this Agreement through the Termination Date.

7.9. Use of Proceeds. Use any of the proceeds of the Loan,
directly or indirectly, to purchase or carry margin securities within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System;
or engage as its principal business in the extension of credit for purchasing or
carrying such securities.

7.10. Amendment of Documents. (a) Without the consent of
Agent, which consent shall not be withheld unreasonably, amend or permit any
amendments to: Borrowers' or Guarantors' organizational documents (including
without limitation the Partnership Agreements); the Declaration of Trust; the
Indenture; the Terms of Common Securities of the Trust; the Terms of Preferred
Securities of the Trust; the Preferred Securities Guaranty; and (b) with respect
to those provisions of the Note Purchase Agreement relating to financial
covenants

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(Paragraph 5.12 through 5.14), events of default (Section 8), mandatory or
voluntary prepayments (Paragraphs 4.2, 4.3, 4.4, 4.7 and 4.8) and all
definitions related thereto, any amendment, waiver or consent thereto shall
require the simultaneous amendment, waiver or consent of the Banks or Required
Banks, as applicable, to the corresponding provision in this Agreement.

7.11. Payment of Senior Notes. Make any payment of principal
on the Senior Notes except if simultaneously with such payment a reduction of
Commitment and prepayment to the extent of Bank's Applicable Share of such
payment is made pursuant to Paragraph 2.8 hereof.

SECTION EIGHT
RIGHT OF SETOFF

After and during the continuation of any Event of Default
hereunder, each Bank is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to setoff and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Bank to or for the credit or the
account of the Borrowers against any and all of the obligations of the Borrowers
now or hereafter existing under this Agreement and the Promissory Note held by
such Bank; provided that to the extent not prohibited by applicable law or
affecting the Banks' or holder of the Senior Notes' right to retain such funds,
Banks shall retain Banks' Applicable Share of the Net Cash Proceeds of any
amount so recovered and the remainder shall be shared with the holder of the
Senior Notes. Each Bank agrees promptly to notify the Borrowers and Agent after
any such setoff and application made by such Bank; provided, however, that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Bank under this Section Eight are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which such Bank may have.

SECTION NINE
DEFAULT

9.1. Events of Default. Each of the following events shall be
an Event of Default hereunder:

(a) If any Borrower or Guarantor shall fail to pay
(i) any installment of principal, or interest when due or (ii) fees, costs,
expenses or any other sum payable to Banks hereunder or otherwise within 5 days
after notice from Agent it is due;

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(b) If any representation or warranty made herein or
in connection herewith or in any statement, certificate or other document
furnished hereunder is incorrect, false or misleading in any material respect
when made;

(c) If any Borrower or Guarantor shall default in the
payment or performance of any obligation or Indebtedness to another, either
singly or in the aggregate in excess of $1,000,000, whether now or hereafter
incurred;

(d) If there shall be a default in or failure to
observe at any test date the covenants set forth in Paragraphs 6.13 through 6.15
or Section Seven hereof;

(e) If any Borrower or Guarantor shall default in the
performance of any other agreement or covenant contained herein (other than as
provided in subparagraphs (a), (b) or (d) above) or in any document executed or
delivered in connection herewith, and such default shall continue uncured for
twenty (20) days after the earlier of (i) any Borrower having actual knowledge
of such default, and (ii) notice thereof to Borrowers given by Agent pursuant to
the direction of Required Banks;

(f) If a Change of Control shall occur;

(g) If custody or control of any substantial part of
the property of any Borrower or Guarantor shall be assumed by any governmental
agency or any court of competent jurisdiction at the instance of any
governmental agency; if any material license or franchise shall be suspended,
revoked or otherwise terminated; if any governmental regulatory authority or
judicial body shall make any other final non-appealable determination the effect
of which would be to affect materially and adversely the operations of any
Borrower or Guarantor as now conducted;

(h) If any Borrower or Guarantor: becomes insolvent,
bankrupt or generally fails to pay its debts as such debts become due; is
adjudicated insolvent or bankrupt; admits in writing its inability to pay its
debts; or shall suffer a custodian, receiver or trustee for it or substantially
all of its property to be appointed and if appointed without its consent, not be
discharged within thirty (30) days; makes an assignment for the benefit of
creditors; or suffers proceedings under any law related to bankruptcy,
insolvency, liquidation or the reorganization, readjustment or the release of
debtors to be instituted against it and if contested by it not dismissed or
stayed within thirty (30) days; if proceedings under any law related to
bankruptcy, insolvency, liquidation, or the reorganization, readjustment or the
release of debtors is instituted or commenced by any Borrower; if any order for
relief is entered relating to any of the foregoing proceedings; if any Borrower
or Guarantor shall call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or if any Borrower or Guarantor shall by
any act or failure to act indicate its consent to, approval of or acquiescence
in any of the foregoing;

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(i) any event or condition shall occur or exist with
respect to any activity or substance regulated under the Environmental Control
Statutes and as a result of such event or condition, any Guarantor or Borrower
has incurred or in the opinion of the Borrowers are reasonably likely to incur a
liability in excess of $1,000,000 during any consecutive twelve (12) month
period;

(j) if any judgment, writ, warrant or attachment or
execution or similar process which calls for payment or presents liability in
excess of $1,000,000 shall be rendered, issued or levied against any Guarantor
or Borrower or its respective property and such process shall not be paid,
waived, stayed, vacated, discharged, settled, satisfied or fully bonded within
sixty (60) days after its issuance or levy; provided, however that if a
judgment, writ, warrant or attachment or execution or similar process relates to
federal or state taxation, then an Event of Default shall occur if the same
shall not be paid, waived, stayed, vacated, discharged, settled, satisfied or
fully bonded within one hundred twenty (120) days after its issuance or levy; or

(k) If SunSource Inc. makes a payment of principal or
interest on or purchases or redeems the Junior Subordinated Debentures and the
Trust does not immediately use such funds to make Distributions Paid on Trust
Securities.

9.2. Remedies. Upon the happening and during the continuation
of any Event of Default, at the election of Required Lenders, and by notice by
Agent to Borrowers (except if an Event of Default described in Paragraph 9.1(h)
shall occur in which case acceleration shall occur automatically without
notice), Required Lenders may declare the entire unpaid balance, principal,
interest and fees, of all indebtedness of Borrowers to Banks, hereunder or
otherwise, to be immediately due and payable. Upon such declaration, the
Commitment shall immediately and automatically terminate and Banks shall have no
further obligation to make any advances and the immediate right to enforce or
realize on any collateral security granted therefor in any manner or order they
deem expedient without regard to any equitable principles of marshaling or
otherwise. In addition to any rights granted hereunder or in any documents
delivered in connection herewith, Banks shall have all the rights and remedies
granted by any applicable law, all of which shall be cumulative in nature.

SECTION TEN
THE BANKS

This Section sets forth the relative rights and duties of
Agent, Documentation Agent and Banks respecting the Loan and does not confer any
enforceable rights on Borrowers against Banks or create on the part of Banks any
duties or obligations to the Borrowers.

10.1. Application of Payments. Agent shall apply all payments
of principal, interest, commitment fee or other amounts hereunder made to Agent
by or on behalf of Borrowers, to Banks on the basis of their Pro Rata Shares of
the outstanding principal balance of

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the Loan hereunder, and shall apply the fees paid to the Agent on its own behalf
upon the issuance of each Letter of Credit in Paragraph 3.4 hereof.

10.2. Setoff. In the event a Bank, by exercise of its right of
setoff, or otherwise, receives any payment of the indebtedness owing to it
hereunder in an amount greater than its Pro Rata Share of such payment based
upon the Banks' respective shares of the Loan outstanding immediately before
such payment, such Bank shall purchase a portion of the Loan hereunder owing to
each other Bank so that after such purchase each Bank shall hold its Pro Rata
Share of Loan then outstanding hereunder, provided that if all or any portion of
such excess payment is thereafter recovered from such Bank, such purchase shall
be rescinded and the purchase price restored to the extent of any such recovery,
but without interest.

10.3. Modifications and Waivers. No modification or amendment
hereof, consent hereunder or waiver of Event of Default shall be effective
except by written consent of the Required Banks, provided, however, (A) that the
written consent of all Banks shall be required to: (i) decrease the rate of
interest or fees due hereunder, (ii) increase or, other than in the case of pro
rata reductions pursuant to Paragraph 2.8 hereof, decrease the amount of the
Commitment or the Banks' respective Pro Rata Shares thereof, (iii) modify, amend
or waive compliance with the dates of payment of principal, interest or fees
hereunder, (iv) modify, amend or waive compliance with the commitment fee, (v)
modify, amend, waive or release any Guarantor from the provisions of Section
Eleven hereof; or (vi) amend or modify the provisions of the definition of
Required Banks or this Paragraph 10.3; (B) with respect to: (i) Paragraphs 6.13,
6.14 and 6.15 and Section Seven hereof; (ii) any of the Events of Default set
forth in Paragraph 9.1 hereof; (iii) the mandatory and voluntary prepayment
provisions of Paragraph 2.8 hereof; and (iv) any of the definitions relating to
the matters described in clauses (i) through (iii) above, the holders of the
Senior Notes shall have simultaneously amended, waived or modified the
corresponding provision to the Note Purchase Agreement; and (C) that any
amendment pursuant to Paragraph 2.1(d) shall not require the consent of any
Bank, each of which hereby agrees to execute such amendment to implement the
Additional Commitment. The Borrowers hereby agree to execute such further
documents including without limitation amendments to this Agreement, and the
Promissory Note(s), and certificates and deliver such opinions as the Agent and
its counsel shall so request to implement any termination or replacement
contemplated hereby. Any amendment or waiver made pursuant to this Section 10.3
shall apply to and bind all of the Banks and any future holder of any Promissory
Notes. No modification or waiver of any provision of this Agreement or any
Promissory Note, nor any consent to any departure by the Borrowers herefrom or
therefrom, shall in any case be effective unless the same be in writing, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No notice to or demand on the
Borrowers in any case shall entitle the Borrowers to any other or further notice
or demand in any similar or other circumstances.

10.4. Obligations Several. The obligations of the Banks
hereunder are several, and each Bank hereunder shall not be responsible for the
obligations of the other Banks

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hereunder, nor, will the failure of one Bank to perform any of its obligations
hereunder relieve the other Banks from the performance of their respective
obligations hereunder.

10.5. Banks' Representations. Each Bank represents and
warrants to the other Banks that (i) it has been furnished all information it
has requested for the purpose of evaluating its proposed participation under
this Agreement; and (ii) it has decided to enter into this Agreement on the
basis of its independent review and credit analysis of Borrowers, this Agreement
and the documentation in connection therewith and has not relied for such
analysis on any information or analysis provided by any other Bank.

10.6. Investigation. No Bank shall have any obligation to the
others to investigate the condition of the Borrowers or any other matter
concerning the Loan.

10.7. Powers of Agent; Rights and Duties of Documentation
Agent. Agent shall have and may exercise those powers specifically delegated to
Agent herein, together with such powers as are reasonably incidental thereto.
The parties hereby agree that Documentation Agent, in its capacity as
Documentation Agent hereunder, shall not have any obligations, rights or duties
hereunder.

10.8. General Duties of Agent, Immunity and Indemnity. In
performing its duties as Agent hereunder, Agent will take the same care as it
takes in connection with loans in which it alone is interested, subject to the
limitations on liabilities contained herein; provided that Agent shall not be
obligated to ascertain or inquire as to the performance of any of the terms,
covenants or conditions hereof by Borrowers. Neither Agent nor any of its
directors, officers, agents or employees shall be liable for any action or
omission by any of them hereunder or in connection herewith except for gross
negligence or willful misconduct. Subject to such exception, each of the Banks
hereby indemnifies Agent on the basis of such Bank's Pro Rata Share, against any
such liability, claim, loss or expense.

10.9. No Responsibility for Representations or Validity, etc.
Each Bank agrees that Agent shall not be responsible to any Bank for any
representations, statements, or warranties of Borrowers herein. Agent will
promptly deliver to Banks such reports, notices and material information which
it receives from Borrowers. Neither Agent nor any of its directors, officers,
employees or agents shall be responsible for the validity, effectiveness,
sufficiency, perfection or enforceability of this Agreement or any documents
relating thereto.

10.10. Action on Instruction of Banks; Right to Indemnity.
Agent shall in all cases be fully protected in acting or refraining from acting
hereunder in accordance with written instructions to it signed by Required Banks
unless the consent of all the Banks is expressly required hereunder in which
case Agent shall be so protected when acting in accordance with such
instructions from all the Banks. Such instructions and any action taken or
failure to act pursuant thereto shall be binding on all the Banks, provided that
except as otherwise provided herein, Agent may act hereunder in its own
discretion without requesting such instructions.

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Agent shall be fully justified in failing or refusing to take any action
hereunder unless it shall first be specifically indemnified to its satisfaction
by the other Banks on the basis of their respective Pro Rata Shares, against any
and all liability and expense which it may incur by reason of taking or
continuing to take any such action.

10.11. Employment of Agents. In connection with its activities
hereunder, Agent may employ agents and attorneys-in-fact and shall not be
answerable, except as to money or securities received by it or its authorized
agents, for the default or misconduct of agents or attorneys-in-fact selected
with reasonable care.

10.12. Reliance on Documents. Agent shall be entitled to rely
upon any paper or document believed by it to be genuine and correct and to have
been signed or sent by the proper person or persons and upon the opinion of its
counsel with respect to legal matters.

10.13. Agent's Rights as a Bank. With respect to its share of
the indebtedness hereunder, Agent shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
Agent. Each of the Banks may accept deposits from, lend money to, and generally
engage in any kind of banking or trust business with Borrowers as if it were not
Agent or a Bank hereunder.

10.14. Expenses. Each of the Banks shall reimburse Agent, from
time to time at the request of Agent, for its Pro Rata Share of any expenses
incurred by Agent in connection with the performance of its functions hereunder,
provided however that in the event Banks shall reimburse Agent for expenses for
which Borrowers subsequently reimburse Agent, Agent shall remit to each Bank the
respective amount received from such Bank against such expenses.

10.15. Resignation of Agent. Agent may at any time resign its
position as Agent, without affecting its position as a Bank, by giving written
notice to Banks and Borrowers. Such resignation shall take effect upon the
appointment of a successor agent in accordance with this Paragraph. In the event
Agent shall resign, Banks shall appoint a bank as successor agent. If within
thirty (30) days of the Agent's notice of resignation no successor agent shall
have been appointed by Banks and accepted such appointment, then Agent, in its
discretion may appoint any other bank as a successor agent.

10.16. Successor Agent. The successor Agent appointed pursuant
to Paragraph 10.15 shall execute and deliver to its predecessor and Banks an
instrument in writing accepting such appointment, and thereupon such successor,
without any further act, deed or conveyance, shall become fully vested with all
the properties, rights, duties and obligations of its predecessor Agent. The
predecessor Agent shall deliver to its successor Agent forthwith all collateral
security, documents and moneys held by it as Agent, if any, whereupon such
predecessor Agent shall be discharged from its duties and obligations as Agent
under this Agreement.

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10.17. Collateral Security. Agent will hold, administer and
manage any collateral security pledged from time to time hereunder either in its
own name or as Agent, but each Bank shall hold a direct, undivided pro-rata
beneficial interest therein, on the basis of its Pro Rata Share, by reason of
and as evidenced by this Agreement.

10.18. Enforcement by Agent. All rights of action under this
Agreement and under the Promissory Notes and all rights to the collateral
security, if any, hereunder may be enforced by Agent and any suit or proceeding
instituted by Agent in furtherance of such enforcement shall be brought in its
name as Agent without the necessity of joining as plaintiffs or defendants any
other Banks, and the recovery of any judgment shall be for the benefit of Banks
subject to the expenses of Agent.

SECTION ELEVEN
GUARANTY

11.1. Guaranty. Each Guarantor hereby irrevocably, absolutely
and unconditionally guarantees and becomes surety for the full, prompt and
punctual payment to Banks, as and when due, whether at maturity, by acceleration
or otherwise, of any and all Indebtedness, liabilities and obligations of the
Borrowers to Banks created at any time under, or pursuant to the terms of, this
Agreement and of the Promissory Notes, whether for principal, interest,
premiums, fees, expenses or otherwise (all such indebtedness, liabilities and
obligations being called in this Section Eleven collectively the "Obligations"),
together with any and all reasonable expenses, including attorneys' fees and
disbursements, which may be incurred by Agent in enforcing any and all rights
against Guarantors under this Agreement (herein the "Expenses").

11.2. Bankruptcy. Without limiting Guarantors' obligations
hereunder and notwithstanding any purported termination of this Section Eleven
or this Agreement, if any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation, dissolution, assignment for the benefit
of creditors, or similar event with respect to the Borrowers or any additional
guarantor or endorser of all or any of the Obligations and Expenses shall occur,
and such occurrence shall result in the return of (or if in such event a Bank
shall be requested to return) any payment or performance of any of the
Obligations or Expenses, then the obligations of each Guarantor hereunder shall
be reinstated with respect to such payment or performance returned or requested
to be returned and with respect to all further obligations arising as a result
of such return or request, and each Guarantor shall thereupon be liable
therefor, without any obligation on the part of any Bank to contest or resist
any such return.

11.3. Nature and Term of Guaranty. The obligations of each
Guarantor under this Section Eleven shall be independent, absolute, irrevocable
and unconditional and shall remain in full force and effect until the
Obligations and all other amounts payable hereunder shall have been paid in full
(subject, however, to reinstatement under Paragraph 11.2 hereof).

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11.4. Rights and Remedies of Agent. Agent, acting on behalf of
Banks may proceed to exercise any right or remedy which it may have under this
Section Eleven against Guarantors without first pursuing or exhausting any
rights or remedies which it may have against the Borrowers, any additional
guarantor or against any other person or entity or any collateral security, and
may proceed to exercise any right or remedy which it may have under this Section
Eleven without regard to any actions or omissions of any other person or entity,
in any manner or order, without any obligation to marshal in favor of Guarantors
or other persons or entities and without releasing any of Guarantors'
obligations hereunder with respect to any unpaid Obligations and Expenses. No
remedy herein conferred upon or reserved to Agent is intended to be exclusive of
any other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Section Eleven or now or hereafter existing at law or in equity.

11.5. Actions by Agent Not Affecting Guaranty. Agent, acting
on behalf of Banks, or Banks, in accordance with Paragraph 10.3 of this
Agreement, may, at any time or from time to time, in such manner and upon such
terms as Banks may deem proper, extend or change the time of payment or the
manner or place of payment of, or otherwise modify or waive any of the terms of,
or release, exchange, settle or compromise any or all of the Obligations and
Expenses or any collateral security therefor, or subordinate payment of the
same, or any part thereof, to the payment of any other indebtedness, liabilities
or obligations of Borrowers which may at any time be due or owing to Banks or
anyone, or elect not to enforce any of Banks' rights with respect to any or all
of the Obligations and Expenses or any collateral security therefor, all without
notice to, or further assent of, Guarantors and without releasing or affecting
Guarantors' obligations under this Section Eleven.

11.6. Payment in Accordance with Promissory Notes and Credit
Agreement. This Section Eleven shall be construed as guaranteeing that the
Obligations and Expenses shall be paid strictly in accordance with the terms of
the Promissory Notes and this Agreement, regardless of any non-perfection of any
collateral security for the Obligations; any invalidity or unenforceability of
this Agreement, the Promissory Notes or any of the Obligations; the voluntary or
involuntary liquidation, dissolution, sale or other disposition of all, or
substantially all of the assets, marshaling of assets and liabilities,
receivership, insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with creditors or readjustment of, or
other similar proceedings affecting Borrowers, Guarantors or any additional
guarantor or endorser of any or all of the Obligations and Expenses or any of
the assets of any of them, or any contest of the validity of this Section Eleven
in any such proceeding; or any law, regulation or decree now or hereafter in
effect in any jurisdiction which might in any manner affect any of such terms or
provisions or any of the rights of Agent with respect thereto or which might
cause or permit Borrowers or any additional guarantor or endorser of the
Obligations and Expenses to invoke any defense to, or any alteration in the
time, amount or manner of payment of any or all of the Obligations and Expenses
or performance of this Section Eleven.

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11.7. Payments Under Guaranty. All payments by Guarantors
hereunder shall be made in immediately available funds and in lawful money of
the United States of America to Agent at its office at Broad and Chestnut
Streets, Philadelphia, PA 19107 or at such other location as Agent shall specify
by notice to Guarantors.

11.8. Waivers and Modifications. No failure or delay on the
part of Agent in exercising any power or right under this Section Eleven against
Guarantors shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power preclude any other or further exercise
thereof or the exercise of any other right or power under this Section Eleven.
No modification or waiver of any provision of this Section Eleven, nor consent
to any departure therefrom, shall, in any event, be effective unless the same is
in writing signed by Agent and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to,
or demand on Guarantors, in any case, shall entitle the Guarantors to any other
or further notice or demand in similar or other circumstances.

11.9. Waiver. Each Guarantor hereby waives promptness,
diligence, presentment, demand, notice of acceptance and any other notice with
respect to any of the Obligations and this Section Eleven, except notice of
demand for payment hereunder.

11.10. Subordination of Rights of Subrogation. Guarantors
shall not exercise any rights which Guarantors may acquire by way of subrogation
under this Section Eleven, applicable law or otherwise, by any payment made
hereunder or otherwise, until all of the Obligations and Expenses and all other
amounts payable hereunder (including amounts which may become due following a
reinstatement hereof under Paragraph 11.2 hereof) shall have been paid in full
in cash. If any amount shall be paid to any Guarantor on account of such rights
at any time when all the Obligations and Expenses shall not have been paid in
full (including amounts which may become due following a reinstatement hereof
under Paragraph 11.2 hereof), such amount paid to such Guarantor shall be held
in trust for the benefit of Banks and shall forthwith be paid to Agent to be
credited and applied against the Obligations and Expenses, whether matured or
unmatured, in accordance with the terms of the Promissory Notes and this
Agreement; provided, however, that to the extent not prohibited by applicable
law or affecting the Banks' or holder of the Senior Notes right to retain such
funds, Banks shall retain Banks' Applicable Share of the Net Cash Proceeds of
any amount so recovered and the remainder shall be shared with the holder of the
Senior Notes. If any Guarantor shall make payment to Agent of all or any part of
the Obligations and Expenses and all of the Obligations and Expenses shall be
paid in full, Agent shall, at such Guarantor's request, execute and deliver to
such Guarantor appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer, by subrogation,
to Guarantor of an interest in the Obligations resulting from such payment by
Guarantor.

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11.11. No Setoff by Guarantors. No setoff, counterclaim,
reduction, or diminution of any obligation, or any defense of any kind or nature
which Guarantors have or may have against Borrowers or any Bank shall be
available hereunder to Guarantors.

11.12. Continuing Guaranty; Transfer of Promissory Note.
Except as provided in Paragraph 11.2. hereof, this Section Eleven is a
continuing guaranty and shall (i) remain in full force and effect until the
Obligations and Expenses and all other amounts payable under this Section Eleven
shall have been paid in full (subject, however, to reinstatement under Paragraph
11.2 hereof), (ii) be binding upon Guarantors and the successors and assigns of
Guarantors, and (iii) inure to the benefit of Banks, and be enforceable by Agent
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (iii), any Bank may, to the extent permitted in this
Agreement endorse, assign or otherwise transfer its Promissory Notes to any
other person or entity, and such other person or entity shall thereupon become
vested with all the rights in respect thereof granted to such Bank herein or
otherwise.

11.13. Representations and Warranties; Covenants. By signing
in the place provided below, each Guarantor hereby makes the representations and
warranties set forth in this Agreement and hereby agrees to the covenants and
other agreements of the Guarantors to the extent set forth in this Agreement.


SECTION TWELVE
MISCELLANEOUS

12.1. Indemnification. Each Borrower and each Guarantor hereby
agrees to defend Agent and each Bank and its directors, officers, agents,
employees and counsel (each an "Indemnified Party") from, and hold each of them
harmless against, any and all losses, liabilities (including without limitation
settlement costs and amounts, transfer taxes, documentary taxes, or assessments
or charges made by any governmental authority other than taxes imposed on the
net income of a Bank), claims, damages, interests, judgments, costs, or
expenses, including without limitation reasonable fees and disbursements of
counsel, incurred by any of them arising out of or in connection with or by
reason of this Agreement, the Commitment or the making of the Loan, including
without limitation, any and all losses, liabilities, claims, damages, interests,
judgments, costs or expenses relating to or arising under any Environmental
Control Statute or the application of any such Statute to any of Borrowers' or
Guarantors' properties or assets, provided, that neither the Borrowers nor the
Guarantors shall be liable for any portion of such losses, liabilities, claims,
damages, interests, judgments, costs and expenses resulting from the gross
negligence or willful misconduct of an Indemnified Party. All obligations
provided for in this Paragraph 12.1 shall survive any termination of this
Agreement or the Commitment and the repayment of the Loan.

12.2. Participations and Assignments. Each Borrower hereby
acknowledges and agrees that a Bank may at any time: (a) grant participations in
its right, title and interest therein or

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in or to this Agreement (collectively, "Participations") to any other lending
office or to any other bank, lending institution or other entity which has the
requisite sophistication to evaluate the merits and risks of investments in
Participations (collectively, "Participants"); provided, however, that: (i) all
amounts payable by Borrowers hereunder shall be determined as if such Bank had
not granted such Participation; and (ii) any agreement pursuant to which any
Bank may grant a Participation: (x) shall provide that such Bank shall retain
the sole right and responsibility to enforce the obligations of Borrowers
hereunder including, without limitation, the right to approve any amendment,
modification or waiver of any provisions of this Agreement; (y) such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement without the consent of the
Participant if such amendment, modification or waiver would reduce the principal
of or rate of interest on the Loan or postpone the date fixed for any payment of
principal of or interest on the Loan or release the guaranty provided for
herein; and (z) shall not relieve such Bank from its obligations, which shall
remain absolute, to make Advances hereunder and (b) assign its right, title and
interest therein or in and to this Agreement in an aggregate amount of at least
the lesser of (i) Five Million Dollars ($5,000,000) or (ii) its remaining
interest in the Loan, to a third party with the prior written consent of the
Agent and in the absence of a Default or an Event of Default, the Company, which
consent of the Company shall not be unreasonably withheld (provided, however,
that a Bank may assign up to one hundred percent (100%) of its interests and
consent shall not be required in connection with (i) an assignment from a Bank
to its affiliate or another Bank or (ii) a pledge by a Bank to its Federal
Reserve Bank) and upon payment to Agent of a transfer fee in the amount of
$3,500.

12.3. Binding and Governing Law. This Agreement and all
documents executed hereunder shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that Borrowers may not assign this Agreement without the
prior written consent of Banks, and shall be governed as to their validity,
interpretation and effect by the laws of the Commonwealth of Pennsylvania.

12.4. Survival. All agreements, representations, warranties
and covenants of Borrowers contained herein or in any documentation required
hereunder shall survive the execution of this Agreement and the making of the
Loan hereunder and except for Paragraphs 6.10 and 12.1 which provide otherwise
and any amounts which may arise under Paragraphs 2.6(d), 2.7(c) and 2.10 hereof,
will continue in full force and effect as long as any indebtedness or other
obligation of Borrowers to any Bank remains outstanding.

12.5. No Waiver; Delay. If Banks or any of them shall waive
any power, right or remedy arising hereunder or under any applicable law, such
waiver shall not be deemed to be a waiver upon any other Bank or the later
occurrence or recurrence of any of said events with respect to any Bank. No
delay by Banks in the exercise of any power, right or remedy shall, under any
circumstances, constitute or be deemed to be a waiver, express or implied, of
the same and no course of dealing between the parties hereto shall constitute a
waiver of Banks' powers,

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rights or remedies. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.

12.6. Modification/Waiver. Except as otherwise provided in
this Agreement, no modification or amendment hereof, or waiver or consent
hereunder, shall be effective unless made in a writing signed by appropriate
officers of the parties hereto.

12.7. Headings. The various headings in this Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or any provision hereof.

12.8. Notices. Any notice, request or consent required
hereunder or in connection herewith shall be deemed satisfactorily given if in
writing (including by facsimile transmissions) and delivered by hand or mailed
(registered or certified mail) to the Banks to the attention of the individuals
and at the respective addresses or telecopier numbers set forth in Schedule 2 to
this Agreement and to Borrowers and Guarantors to the attention of the Chief
Financial Officer, SunSource Inc. at the address of Borrowers set forth on page
1 hereof and at telecopy number 215-282-1309 or such other addresses or
telecopier numbers as may be given by any party to the others in writing.

12.9. Payment on Non-Business Days. Whenever any payment to be
made hereunder shall be stated to be due on a day other than a Business Day,
such payment may be made on the next succeeding Business Day, provided however
that such extension of time shall be included in the computation of interest due
in conjunction with such payment or other fees due hereunder, as the case may
be.

12.10. Time of Day. All time of day restrictions imposed
herein shall be calculated using Agent's local time.

12.11. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.

12.12. Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if all the signatures on such
counterparts appeared on one document, and each such counterpart shall be deemed
to be an original.

12.13. Consent to Jurisdiction and Service of Process. Each
Borrower and Guarantor irrevocably appoints each and every officer of SunSource
Inc. as its attorney upon whom may be served any notice, process or pleading in
any action or proceeding against it arising out of or in connection with this
Agreement, the Promissory Notes or any document executed or action taken in
connection therewith; and each Borrower hereby consents that any

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action or proceeding against it be commenced and maintained in any court within
the Commonwealth of Pennsylvania or in the United States District Court for the
Eastern District of Pennsylvania by service of process on any such officer; and
each Borrower agrees that the courts of the Commonwealth of Pennsylvania and the
United States District Court for the Eastern District of Pennsylvania shall have
jurisdiction with respect to the subject matter hereof and the person of each
Borrower. Notwithstanding the foregoing, a Bank, in its absolute any discretion
may also initiate proceedings in the courts of any other jurisdiction in which
each Borrower may be found or in which any of its properties may be located.

12.14. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE PROMISSORY NOTE OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF
ANY BANK OR AGENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH BANK'S
ENTERING INTO THIS AGREEMENT.

12.15. ACKNOWLEDGMENTS. EACH BORROWER AND GUARANTOR
ACKNOWLEDGES THAT IT HAS HAD THE ASSISTANCE OF COUNSEL IN THE REVIEW AND
EXECUTION OF THIS AGREEMENT AND, SPECIFICALLY, PARAGRAPH 12.14 HEREOF, AND
FURTHER ACKNOWLEDGES THAT THE MEANING AND EFFECT OF THE FOREGOING WAIVER OF JURY
TRIAL HAVE BEEN FULLY EXPLAINED TO EACH BORROWER AND GUARANTOR BY SUCH COUNSEL.

12.16. Complete Agreement. This Agreement sets forth the
complete agreement of the parties hereto with respect to the matters addressed
herein, and supersedes any prior

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written agreement or any prior or simultaneous oral agreements between the
parties with respect to the same subject matter.

IN WITNESS WHEREOF, the undersigned, by their duly authorized
partners or officers, as applicable, have executed this Agreement the day and
year first above written.

SDI OPERATING PARTNERS, L.P.,

By: SDI Partners I, L.P., its general partner


By: SUNSUB B INC., its general partner


By: _______________________________
Name:
Title:



SUNSOURCE INC., as Guarantor, and for purposes of making
the representations and warranties, and agreeing to the
covenants and other agreements as set forth in the
Agreement

By: ________________________
Name:
Title:



SUNSUB B INC., as Guarantor, and for purposes of making the
representations and warranties, and agreeing to the
covenants and other agreements as set forth in the
Agreement


By: ________________________
Name:
Title:

[EXECUTIONS CONTINUED]


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SUNSUB A INC., as Guarantor, and for purposes of making the
representations and warranties, and agreeing to the
covenants and other agreements as set forth in the
Agreement

By: ________________________
Name:
Title:



SDI PARTNERS I, L.P., as Guarantor, and for purposes of
making the representations and warranties and agreeing to
the covenants and other agreements as set forth in the
Agreement


By: SUNSUB B INC., its general partner


By: _______________________
Name:
Title:



CORESTATES BANK, N.A., individually and in its capacity as
Agent hereunder


By: _____________________________________
Name:
Title:

[EXECUTIONS CONTINUED]



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THE BANK OF NOVA SCOTIA

By: _____________________________
Name:
Title:



FIFTH THIRD BANK

By: _____________________________
Name:
Title:



SUNTRUST BANK, ATLANTA

By: _____________________________
Name:
Title:

By: _____________________________
Name:
Title:



THE FUJI BANK, LIMITED
NEW YORK BRANCH

By: _____________________________
Name:
Title:



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