EX-(D)(3)ESCROW AGREEMENT

EXHIBIT D.3

ESCROW AGREEMENT


THIS ESCROW AGREEMENT ("Escrow Agreement" or "Agreement") is made and
entered into this 18th day of June, 2001, by and among Max W. Hillman, Jr.,
Richard P. Hillman, Gary Seeds, Dennis Blake, and John McDonnell
(collectively, the "Purchasers"), Allied Capital Corporation, a Maryland
corporation and its successors ("Allied Capital"), and Citibank, N.A., a
national banking association duly organized and validly existing under the
laws of the United States of America, acting in its capacity as escrow agent
(the "Escrow Agent").

WITNESSETH THAT:

WHEREAS, Allied Capital has executed, simultaneously with the
execution of this Escrow Agreement, an Agreement and Plan of Merger, dated as
of June 18, 2001 (the "Merger Agreement"), pursuant to which a subsidiary of
Allied Capital shall merge with and into SunSource Inc., a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth therein (the "Merger").

WHEREAS, pursuant to the terms of the Merger Agreement, a Company
Recapitalization (as that term is defined in the Merger Agreement) will take
place immediately prior to the Effective Time (as that term is defined in the
Merger Agreement) of the Merger, pursuant to which Purchasers will purchase a
number of shares of Company Common Stock (as that term is defined in the
Merger Agreement) from Allied Capital pursuant to the terms of the Equity
Purchase Agreements, dated June 18, 2001, and entered into by each respective
Purchaser and Allied Capital simultaneously with the execution of this Escrow
Agreement (the "Equity Purchase Agreement").

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WHEREAS, the Merger Agreement contemplates the execution and delivery
of this Escrow Agreement and the deposit by the Purchasers with the Escrow
Agent of cash funds in the aggregate amount of $1,543,217 in the proportions
set forth on Exhibit D.

NOW, THEREFORE, in consideration of the premises, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed as follows:

1. Appointment of Escrow Agent. The Purchasers and Allied
Capital each hereby appoint Citibank, N.A. as Escrow Agent to receive, hold,
administer and deliver the Escrow Fund (as hereinafter defined) in accordance
with this Escrow Agreement, and the Escrow Agent hereby accepts such
appointment, subject solely to and upon the terms and conditions set forth
herein.

2. Establishment of Escrow Fund. Purchasers herewith deposit
with the Escrow Agent, and the Escrow Agent hereby acknowledges receipt from
Purchasers of cash funds in the aggregate amount of $1,543,217 (the
"Deposit"). All cash earnings, interest and income from the Deposit which may,
from time to time, be held by the Escrow Agent pursuant to the terms hereof
are the property of the Purchasers, and are hereinafter referred to as the
"Escrow Earnings." The Escrow Earnings shall be distributed on a quarterly
basis commencing on September 30, 2001, to the Purchasers in the same
proportion as shown on Exhibit D. The Deposit and the Escrow Earnings
(collectively sometimes referred to herein as the "Escrow Fund") shall be held
by the Escrow Agent in accordance with the terms and conditions hereinafter
set forth. It is the parties' intention that the Escrow Agent shall dispose of
the Escrow Fund in accordance with the express provisions of this Escrow
Agreement, and shall not make, be required to make or be liable in any manner
for its failure to make, any determination

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under the Merger Agreement, or any other agreement (except as expressly
provided herein), including, without limitation, any determination of whether
either the Purchasers or Allied Capital are entitled to delivery of payment of
any or all of the Escrow Fund or to any other right or remedy thereunder. The
Escrow Agent shall have no duty to solicit the Deposit.

3. Investment of Escrow Fund by Escrow Agent. The Escrow Agent
shall invest and reinvest the funds held in the Escrow Fund as Max W. Hillman,
Jr. or John McDonnell, each acting as the representative of all the Purchasers
(each, acting solely, or both acting together, the "Representative") shall
direct by the furnishing of a written direction of investment to the Escrow
Agent (a "Written Direction"); provided, however, that no investment or
reinvestment may be made except in the following:

(a) direct obligations of the United States of America
or obligations the principal of and the interest on which are
unconditionally guaranteed by the United States of America;

(b) any money market fund substantially all of which is
invested in the foregoing investment categories, including any money
market fund managed by Escrow Agent and any of its affiliates (i.e.,
Citifunds US Treasury Reserve; Citifunds Cash Reserve).

If Escrow Agent has not received a Written Direction at any
time that an investment decision must be made, Escrow Agent shall invest the
Escrow Fund, or such portion thereof as to which no Written Direction has been
received, in Citifunds Cash Reserve. Each of the foregoing investments shall
be made in the name of Escrow Agent on behalf of the Purchasers. Except in the
case of (b) above, no investment shall be made in any instrument or security
that has a maturity of greater than 30 calendar days except that for 30
calendar days

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following the date of this Agreement, investments may be made in any
instrument or security that has a maturity of no greater than 60 calendar
days. Notwithstanding anything to the contrary contained herein, Escrow Agent
may (but shall have no obligation), without notice to the Purchasers or Allied
Capital, sell or liquidate any of the foregoing investments at any time if the
proceeds thereof are required for any release of funds permitted or required
hereunder, and Escrow Agent shall not be liable for or responsible for any
loss, cost or penalty resulting from any such sale or liquidation. With
respect to any cash received by Escrow Agent for deposit into the Escrow Fund
or any Written Direction received by Escrow Agent with respect to investment
of any funds in the Escrow Fund after twelve o'clock p.m., New York City time,
the Escrow Agent shall not be required to invest such funds or to effect such
investment instruction until the next day upon which banks in New York City
are open for business.

The parties to this Agreement acknowledge that non-deposit investment
products are not obligations of, or guaranteed by, the Escrow Agent nor any of
its affiliates, are not FDIC insured, and are subject to investment risks,
including the possible loss of principal amount invested. Only deposits in the
United States are subject to FDIC insurance.

4. Release of Escrow Fund. The Escrow Agent shall hold the
Escrow Fund until it delivers the Escrow Fund as provided in this Section 4,
as follows:

(a) If the Escrow Agent receives irrevocable written
instructions in the form of Exhibit A signed by each Purchaser and
Allied Capital, stating that the consummation of the Merger shall
occur, the Escrow Agent shall promptly deliver the Escrow Fund in
accordance with said instructions.

(b) If the Escrow Agent receives written instructions
signed by each Purchaser and Allied Capital stating that the
consummation of the Merger did not occur and

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directing payment of the Escrow Fund to either the Purchasers or
Allied Capital, the Escrow Agent shall promptly deliver the Escrow
Fund in accordance with such instructions.

(c) Except as set forth in (a) or (b) above, the Escrow
Agent shall distribute the Escrow Fund upon notice from either the
Purchasers or Allied Capital only in accordance with the procedures
set forth in this subsection (c) below.

(i) Upon written notice from a Representative
of the Purchasers, with evidence of service on Allied
Capital, that the Company has accepted an Acquisition
Proposal (as defined in the Merger Agreement, in accordance
with Section 6.9 of the Merger Agreement, and evidence of
such acceptance ("Acquisition Proposal Notice"), Escrow
Agent shall, fifteen (15) calendar days after receipt of
such notice, deliver the Escrow Fund to the Purchasers in
the proportion shown on Exhibit D.

(ii) Upon written notice from Allied Capital to
Escrow Agent, with evidence of service on the Purchasers,
that Allied Capital has terminated the Merger Agreement due
solely to a Purchaser's material breach of his Equity
Purchase Agreement, or Voting Agreement (as defined in the
Merger Agreement), or the failure of his Employment
Agreement to be in full force and effect pursuant to Article
VIII of the Merger Agreement by virtue of his resignation or
refusal to perform the terms of his Employment Agreement
(other than due to his death or disability), such notice in
either event naming such Purchaser ("Allied Capital's
Notice"), Escrow Agent shall deliver only that portion of
the Escrow Fund including interest thereon, indicated on
Exhibit D which corresponds to such

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Purchaser (or, if more than one, such Purchasers) who have
committed the material breach (the "Breaching Purchaser") to
Allied Capital fifteen (15) calendar days after receipt of
Allied Capital's Notice unless the applicable Breaching
Purchaser shall, prior to the expiration of the aforesaid
15-day period, give written notice to Escrow Agent with a
copy to Allied Capital of his countervailing claim to the
Escrow Fund ("Purchaser's Rebuttal Notice") in which case
the provisions of Section 4(c)(iv) will apply with respect
to the disputed portion of the Escrow Fund. Any distribution
of the Escrow Fund to Allied Capital pursuant to this Clause
(ii) shall be deemed liquidated damages for the breach. The
remaining portion of the Escrow Fund shall be delivered to
the non-breaching Purchasers in the proportion shown on
Exhibit D at the end of such 15-day period.

(iii) Upon written notice from a Representative
to Escrow Agent, with evidence of service on Allied Capital,
that the Merger Agreement has been terminated for any reason
(the "Purchasers' Notice"), Escrow Agent shall deliver the
Escrow Fund to the Purchasers in the proportions specified
in Exhibit D, fifteen (15) calendar days after receipt of
Purchasers' Notice, unless Allied Capital shall, prior to
the expiration of the aforesaid 15-day period, give notice
to Escrow Agent and the Purchasers as provided in Section
4(c)(ii) ("Allied Capital's Rebuttal Notice"), in which
event the procedures set forth in Section 4(c)(ii) shall
apply (as if the Allied Capital Rebuttal Notice constituted
an Allied Capital Notice).

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(iv) After timely receipt by Escrow Agent of a
Purchaser's Rebuttal Notice under Section 4(c)(ii), Escrow
Agent shall not deliver the disputed portion of the Escrow
Fund until such time as Escrow Agent receives (a) a written
agreement signed by the applicable Breaching Purchaser and
Allied Capital providing instructions as to the disposition
of the Escrow Fund or (b) a certified copy of an order or
judgment which has become final (meaning that the order or
judgment is no longer subject to appeal or review) by a
court of the State of Delaware or of the United States
located in the State of Delaware ("Delaware Court") with
respect to the disposition of the applicable Breaching
Purchaser's or Allied Capital's claim which is presented to
the Escrow Agent by the prevailing party. Escrow Agent shall
deliver the Escrow Fund in accordance with said agreement,
order or judgment.

(v) Notwithstanding the foregoing, after
receipt by Escrow Agent of Allied Capital's Rebuttal Notice
or a Purchaser's Rebuttal Notice, Escrow Agent may (a)
deposit the disputed portion of the Escrow Fund with a new
Escrow Agent agreed to in writing by Allied Capital and the
Breaching Purchaser(s) or (b) commence an action in
interpleader in the Delaware Court and deposit the Escrow
Fund with such court.

(d) All deliveries of funds by the Escrow Agent to
Allied Capital or the Purchasers as provided for herein shall be by
wire transfer in immediately available funds to the accounts
specified in Exhibit B or otherwise designated by Allied Capital or
one of the Purchasers, as the case may be. In the event funds
transfer instructions are given (other than in writing at the time of
execution of this Agreement), whether in writing, by

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telecopier or otherwise, the Escrow Agent is authorized to seek
confirmation of such instructions by telephone call back to the
applicable person or persons designated in Exhibit C attached hereto,
and the Escrow Agent may rely upon the confirmations of anyone
purporting to be the person or persons so designated in Exhibit C
attached hereto. To ensure accuracy of the instructions the Escrow
Agent receives, the Escrow Agent may record such call backs. If the
Escrow Agent is unable to verify the instructions, or is not
satisfied with the verification it receives, it is hereby authorized
to not execute such instruction until all issues have been resolved.
The persons and telephone numbers for call backs may be changed by
the applicable party only in writing signed by such party or an
authorized representative, actually received and acknowledged by the
Escrow Agent. The parties agree to notify the Escrow Agent of any
errors, delays or other problems within thirty (30) calendar days
after receiving notification that a transaction has been executed. If
it is determined that the transaction was delayed or erroneously
executed as a result of the Escrow Agent's error, the Escrow Agent's
sole obligation is to pay or refund such amounts as may be required
by applicable law. In no event shall the Escrow Agent be responsible
for any incidental or consequential damages or expenses in connection
with the instruction. Any claim for interest payable will be at the
Escrow Agent's published savings account rate in effect in New York
City, New York.

(e) Notwithstanding anything to the contrary in this
Escrow Agreement:

(1) The Escrow Agent may deposit the Escrow
Fund with the clerk of the Delaware Court upon commencement
of an action in the nature of interpleader or in the course
of any court proceedings.

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(2) If at any time the Escrow Agent receives a
final written non-appealable order of the Delaware Court
presented to the Escrow Agent by the prevailing party, or
written instructions signed by both Allied Capital and the
Purchasers, directing delivery or payment of any part of the
Escrow Fund, or instructions as set forth in accordance with
Section 4(c), the Escrow Agent shall comply with such order
or instructions.

(3) Upon any delivery or deposit of the Escrow
Fund as provided in this Section 4(e), the Escrow Agent
shall thereupon be released and discharged from any and all
further obligations arising in connection with this
Agreement.

5. Escrow Agent

(a) The Escrow Agent shall be entitled to reimbursement
for all reasonable fees, expenses, disbursements and advances
incurred or made by it in performance of its duties hereunder
(including reasonable fees, expenses and disbursements of its
counsel). Such reimbursement for fees, expenses, disbursements and
advances shall be paid by Allied Capital whether or not the Merger is
consummated; the Escrow Agent fee shall be as indicated on Exhibit E
attached hereto (the "Escrow Agent Fee") which shall be paid by
Allied Capital upon execution of this Agreement. All invoices
hereunder will be sent by the Escrow Agent to Allied Capital.

(b) The Escrow Agent shall have no liability or
obligation with respect to the Escrow Fund except for the Escrow
Agent's willful misconduct, bad faith or gross negligence. The Escrow
Agent's sole responsibility shall be for the safekeeping, investment
and disbursement of the Escrow Fund in accordance with the terms of
this Agreement. The Escrow Agent shall have no implied duties or
obligations and shall not

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be charged with knowledge or notice of any fact or circumstance not
specifically set forth herein or not given in compliance with this
Agreement. Escrow Agent may conclusively rely upon any instrument
(whether in its original or facsimile form), and shall have no
liability for acting in accordance with such instrument, not only as
to its due execution, validity and effectiveness, but also as to the
truth and accuracy of any information contained therein, which the
Escrow Agent shall in good faith believe to be genuine, to have been
signed or presented by the person or parties purporting to sign the
same and to conform to the provisions of this Agreement. In no event
shall the Escrow Agent be liable for incidental, indirect, special,
consequential or punitive damages. The Escrow Agent shall not be
obligated to take any legal action or commence any proceeding in
connection with the Escrow Fund, any account in which the Escrow Fund
is deposited, or this Agreement, or to appear in, prosecute or defend
any such legal action or proceeding. The Escrow Agent may consult
legal counsel selected by it in the event of any dispute or question
as to the construction of any of the provisions hereof or of any
other agreement or of its duties hereunder, or relating to any
dispute involving any party hereto, and shall incur no liability and
shall be fully indemnified from any liability whatsoever in acting in
accordance with the opinion, advice or instruction of such counsel.
Allied Capital, shall promptly pay, upon demand, the reasonable fees
and expenses of any such counsel.

(c) The Escrow Agent is authorized, in its sole
discretion, to comply with orders issued or process entered by the
Delaware Court with respect to the Escrow Fund, without determination
by the Escrow Agent of such court's jurisdiction in the matter;
provided, however, that such Court order or process must be presented
to the Escrow Agent in writing by the prevailing party. If any
portion of the Escrow Fund is at any time

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attached, garnished or levied upon under order of the Delaware Court,
or in case the payment, assignment, transfer, conveyance or delivery
of any such property shall be stayed or enjoined by any court order
of the Delaware Court, or in case any order, judgment or decree of
the Delaware Court shall be made or entered by any Court affecting
such property or any part thereof, then and in any such event, the
Escrow Agent is authorized, upon presentation of such Court order by
the prevailing party to the Escrow Agent, in its sole discretion, to
rely upon and comply with any such order, writ, judgment or decree
which it is advised by legal counsel selected by it is binding upon
it without the need for appeal or other action; and if the Escrow
Agent complies with any such order, writ, judgment or decree, it
shall not be liable to any of the parties hereto or to any other
person or entity by reason of such compliance even though such order,
writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.

(d) From and at all times after the date of this
Agreement, Allied Capital shall, to the fullest extent permitted by
law and to the maximum extent contemplated herein, fully indemnify
and hold harmless Escrow Agent, its affiliates and their respective
directors, officers, employees, subsidiaries, affiliates and agents
(collectively, the "Indemnified Parties") against any and all
actions, claims (whether or not valid), losses, judgments, damages,
liabilities, costs and expenses of any kind or nature whatsoever
(including without limitation reasonable attorney's fees, costs and
expenses) incurred by or asserted against any of the Indemnified
Parties from and after the date hereof, whether direct, indirect or
consequential, as a result of or arising from or in any way relating
to any claim, demand, suit, action or proceeding (including any
inquiry or investigation) by any person, whether threatened or
initiated, asserting a claim for any legal or equitable

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remedy against any person under any common law or equitable cause or
otherwise, arising from or in connection with the negotiation,
preparation, execution, performance or failure of performance of this
Agreement or any transactions contemplated herein, whether or not any
such Indemnified Party is a party to any such action, proceeding,
suit or the target of any such inquiry or investigation; provided,
however, that no Indemnified Party shall have the right to be
indemnified hereunder for any liability finally determined by the
Delaware Court, subject to no further appeal, to the extent such
liability resulted from the gross negligence, bad faith or willful
misconduct of such Indemnified Party. If any such action or claim
shall be brought or asserted against any Indemnified Party, such
Indemnified Party shall promptly notify Allied Capital in writing,
and Allied Capital shall assume the defense thereof with counsel
reasonably satisfactory to the Escrow Agent, including the employment
of counsel and the payment of all expenses. Such Indemnified Party
shall, in its sole discretion, have the right to employ separate
counsel (who may be selected by such Indemnified Party in its sole
discretion) in any such action and to participate in the defense
thereof, and the fees and expenses of such counsel shall be paid by
such Indemnified Party, except that Allied Capital shall be required
to pay such fees and expenses if (a) Allied Capital agrees to pay
such fees and expenses, (b) Allied Capital shall fail to assume the
defense of such action or proceeding or shall fail, in the reasonable
discretion of such Indemnified Party, to employ counsel satisfactory
to the Indemnified Party in any such action or proceeding, (c) Allied
Capital or Purchasers are the plaintiff in any such action or
proceeding, (d) the named or potential parties to such action or
proceeding (including any potentially impleaded parties) include both
the Indemnified Party and Allied Capital and/or the Purchasers, and
the Indemnified Party

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shall have been advised by counsel that there may be one or more
legal defenses available to it which are different from or additional
to those available to Allied Capital or the Purchasers, or (e) Escrow
Agent shall have reasonably and in good faith concluded, based upon
the advice of counsel, that there is a conflict of interest between
Allied Capital or Purchasers and the Escrow Agent in the conduct of
the defense of such action. Allied Capital shall be liable to pay
fees and expenses of counsel pursuant to the preceding sentence. All
such fees and expenses payable by Allied Capital pursuant to the
foregoing sentence shall be paid from time to time as incurred, both
in advance and after the final disposition of such action or claim.
All of the foregoing losses, damages, costs and expenses of the
Indemnified Parties shall be payable by Allied Capital, upon demand
by such Indemnified Party; provided, however, that in the event that
Allied Capital pays any amount of such fees and expenses, and the
action, claim, suit, demand or proceeding arises solely from the
conduct or actions of a Purchaser or Purchasers, each referred to as
an "Accountable Purchaser," then in such event, Allied Capital shall
have the right to reimbursement for such payment from the Accountable
Purchasers, jointly and severally. The obligations of Allied Capital
and the Accountable Purchasers under this Section 5(d) shall survive
any termination of this Agreement and the resignation or removal of
the Escrow Agent shall be independent of any obligation to the Escrow
Agent.

The parties agree that the payment by Allied Capital of any
claim by the Escrow Agent for indemnification shall not impair,
limit, modify, or affect as between Allied Capital and the
Purchasers, the respective rights and obligations of Allied Capital
and the Purchasers.

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(e) The Escrow Agent shall not be subject to, nor
required to comply with, any other agreement between or among any or
all of the Purchasers and Allied Capital or to which the Purchasers
or Allied Capital is a party, even though reference thereto may be
made herein, or to comply with any direction or instruction (other
than those contained herein or delivered in accordance with this
Escrow Agreement) from any Purchaser or Allied Capital or any entity
acting on its behalf. The Escrow Agent shall not be required to, and
shall not, expend or risk any of its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder. Escrow Agent shall not be responsible for monitoring the
compliance by Purchasers, Allied Capital or the Company, and shall
not be responsible for any failure by the Purchasers, Allied Capital
or the Company to comply, with any of the obligations relating to the
Merger, including, without limitation, obligations under applicable
securities laws or under the Merger Agreement.

The Escrow Agent shall not incur any liability for not
performing any act or fulfilling any duty, obligation or
responsibility hereunder by reason of any occurrence beyond the
control of the Escrow Agent (including but not limited to any act or
provision of any present or future law or regulation or governmental
authority, any act of God or war, or the unavailability of the
Federal Reserve Bank wire or telex or other wire or communication
facility).

Unless otherwise specifically set forth herein, the Escrow
Agent shall proceed as soon as practicable to collect any checks or
other collection items at any time deposited hereunder. The Escrow
Agent shall notify Allied Capital of any checks or deposits from
Purchasers that have not been paid and are in collection. All such
collections shall be

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subject to the Escrow Agent's usual collection practices or terms
regarding items received by the Escrow Agent for deposit or
collection. The Escrow Agent shall not be required, or have any duty,
to notify anyone of any payment or maturity under the terms of any
instrument deposited hereunder, nor to take any legal action or
enforce payment of any check, note or security deposited hereunder or
to exercise any right or privilege which may be afforded to the
holder of any such security.

In the event of any ambiguity or uncertainty hereunder or in
any notice, instruction, court order or judgment, or other
communication received by the Escrow Agent hereunder, the Escrow
Agent may, in its sole discretion, refrain from taking any action
other than retain possession of the Escrow Fund, unless the Escrow
Agent receives written instructions, signed by the party whose
signature is otherwise required for disbursement under the terms of
this Agreement, which eliminates such ambiguity or uncertainty.

In the event of any dispute between or conflicting claims by
or among Allied Capital and the Purchasers and/or any other person or
entity with respect to any Escrow Fund, the Escrow Agent shall be
entitled, in its sole discretion, to refuse to comply with any and
all claims, demands or instructions with respect to such Escrow Fund
so long as such dispute or conflict shall continue, and the Escrow
Agent shall not be or become liable in any way to Allied Capital and
the Purchasers for failure or refusal to comply with such conflicting
claims, demands or instructions. The Escrow Agent shall be entitled
to refuse to act until, in its sole discretion, either (i) such
conflicting or adverse claims or demands shall have been determined
by a final order, judgment or decree of the Delaware Court, presented
in writing to the Escrow Agent by the prevailing party, which



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order, judgment or decree is not subject to appeal, or settled by
agreement between the conflicting parties as evidenced in a writing
satisfactory to the Escrow Agent or (ii) the Escrow Agent shall have
received security or an indemnity satisfactory to it sufficient to
hold it harmless from and against any and all losses which it may
incur by reason of so acting. The Escrow Agent may, in addition,
elect, in its sole discretion, to commence an interpleader action or
seek other judicial relief or orders as it may deem, in its sole
discretion, necessary. The costs and expenses (including reasonable
attorney's fees and expenses) incurred in connection with such
proceeding shall be paid by Allied Capital; provided, however, that
in the event that Allied Capital pays any amount of such fees and
expenses and is the prevailing party, then in such event, Allied
Capital shall have the right to collect such payment, jointly and
severally, from the Purchasers whose actions were determined by the
Delaware Court to be in violation of this Agreement. Allied Capital
and Purchasers shall use their reasonable best efforts to resolve any
such disputes or conflicting claims in an effort to determine the
proper disbursement of the Escrow Fund.

6. Successor Escrow Agent. The Escrow Agent (and any successor
Escrow Agent) may at any time resign as such by delivering notice of its
resignation to the Purchasers and Allied Capital, and delivering the Escrow
Fund to a successor Escrow Agent jointly designated by the Purchasers and
Allied Capital in writing, or if the parties cannot agree on the successor
Escrow Agent within thirty (30) calendar days of the notice, to the Delaware
Court, whereupon the resigning Escrow Agent shall be discharged of and from
any and all further obligations arising in connection with this Agreement.
After the resignation of any Escrow Agent, the provision of the Agreement
limiting the liability of the Escrow Agent and indemnifying the

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Escrow Agent against liabilities, costs, fees and expenses (including legal
fees and expenses) shall continue to inure to the benefit of the resigned
Escrow Agent with respect to any action or omission taken or made by it while
it was the Escrow Agent under this Escrow Agreement.

7. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be deemed effective when
delivered by hand, or when telecopied with receipt confirmed, or when properly
delivered by a nationally recognized commercial overnight delivery service,
prepaid, as follows:

If to Allied Capital:

Allied Capital Corporation
1919 Pennsylvania Avenue, N.W.
Washington, DC 20006
ATTN: Daniel L. Russell
FAX: 202/659-2053

With a concurrent copy to:

Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2415
ATTN; James D. Darrow
FAX: 202/637-3593

If to the Purchasers:

The Hillman Group, Inc.
10590 Hamilton Avenue
Cincinnati, OH 45231
ATTN: Debbie Haidet - RE: Max W. Hillman, Jr.
FAX: 513-851-5585

And to

The Hillman Group, Inc.
10590 Hamilton Avenue
Cincinnati, OH 45231
ATTN: Debbie Haidet - RE: Richard P. Hillman
FAX: 513-851-5585

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And to

The Hillman Group, Inc.
10590 Hamilton Avenue
Cincinnati, OH 45231
ATTN: Debbie Haidet - RE: Gary Seeds
FAX: 513-851-5585

And to

The Hillman Group, Inc.
10590 Hamilton Avenue
Cincinnati, OH 45231
ATTN: Debbie Haidet - RE: Dennis Blake
FAX: 513-851-5585

And to

John McDonnell
23600 Edgeview Court
Barrington, IL 60010
FAX: 847-304-8108


If to the Escrow Agent:

Citibank, N.A.
120 Broadway 2nd Floor
New York, NY 10271
ATTN: Kerry McDonough
FAX: 212/266-4550

With a concurrent copy to:

Patterson, Belknap, Webb & Tyler LLP
1133 Avenue of the Americas
New York, NY 10036
ATTN: Herman H. Raspe, Esq.
FAX: 212/336-2222

Such notice addresses and telecopy numbers may be changed upon
written notice to the other parties hereto.

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8. Severability. Any provision of this Escrow Agreement which
may be determined by the Delaware Court to be prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability in any jurisdiction without
invalidating or rendering unenforceable the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
It is expressly understood, however, that the parties hereto intend each and
every provision of this Escrow Agreement to be valid and enforceable and
hereby knowingly waive all rights to object to any provision of this Escrow
Agreement.

9. Assignment. This Escrow Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their respective
successors and assigns, and shall not be enforceable by or inure to the
benefit of any third party. No party may assign any of its rights or
obligations under this Escrow Agreement without the written consent of the
other parties or except as specifically contemplated herein. Any assignment in
violation of this Section 9 shall be null and void.

10. Amendments; Termination. This Escrow Agreement may only be
modified or terminated by a writing signed by all of the parties hereto, and
no waiver hereunder shall be effective unless in writing signed by the party
to be charged.

11. Counterparts. This Escrow Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument. This Escrow
Agreement may be executed and delivered in counterpart signature pages and
delivered via facsimile transmission, and any such counterpart executed and
delivered via facsimile transmission shall be deemed an original for all
intents and purposes.

19


12. Governing Law. This Escrow Agreement shall be governed by
and constituted under the laws of the State of Delaware, without regard to
Delaware conflict of laws principles. Any judicial proceeding brought against
any of the parties to this Escrow Agreement relating to a dispute arising out
of this Escrow Agreement will be brought exclusively in the Delaware Court and
by its execution and delivery of this Escrow Agreement, each party hereto
accepts the exclusive jurisdiction of the Delaware Court, and hereby waives
any right it may have to a jury trial, or objection to venue or inconvenient
forum. The provisions of this Section 12 shall survive termination of this
Escrow Agreement.

13. Miscellaneous.

(a) The rights and remedies conferred upon the parties
hereto shall be cumulative, and the exercise or waiver of any such
right or remedy shall not preclude or inhibit the exercise of any
additional rights or remedies. The waiver of any right or remedy
hereunder shall not preclude the subsequent exercise of such right or
remedy.

(b) Each of Allied Capital and the Purchasers hereby
represents and warrants (i) that this Escrow Agreement has been duly
authorized, executed and delivered on its behalf and constitutes its
legal, valid and binding obligation, and (ii) that the execution,
delivery and performance of this Escrow Agreement by it does not
violate any applicable law or regulation and does not breach or
violate any other agreements it is a party to.

(c) This Escrow Agreement shall constitute the entire
agreement of the parties with respect to the subject matter hereof
and supersedes all prior oral or written agreements in regard
thereto.

20


(d) This Agreement shall terminate upon the
distribution of all Escrow Funds held hereunder. The provisions of
Sections 5, 6 and 12 shall survive termination of this Escrow
Agreement and/or the resignation or removal of the Escrow Agent.

(e) The Escrow Agent does not have any interest in the
Escrow Fund deposited hereunder but is serving as escrow holder only
and having only possession thereof. Allied Capital shall pay or
reimburse the Escrow Agent upon request for any transfer taxes or
other taxes relating to the Escrow Fund incurred in connection
herewith and shall indemnify and hold harmless the Escrow Agent any
amounts that it is obligated to pay in the way of such taxes. Any
payments of income from this Escrow Account shall be subject to
withholding regulations then in force with respect to United States
taxes. The parties hereto will provide the Escrow Agent with
appropriate W-9 forms for tax I.D. number certifications, or W-8
forms for non-resident alien certifications. It is understood that
the Escrow Agent shall be responsible for income reporting only with
respect to income earned on investment of funds which are a part of
the Escrow Fund and is not responsible for any other reporting. Any
income taxes generated from the Escrow Fund shall be paid by the
Purchasers in the same proportion as shown on Exhibit D, and the
Escrow Agent shall deliver Form 1099 with the respective amounts to
and in the name of each Purchaser.

21



IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first above-written:

ALLIED CAPITAL CORPORATION



BY: /s/ JOAN SWEENEY
-------------------------------
NAME: Joan Sweeney
-----------------------------
TITLE: Managing Director
----------------------------

/s/ MAX W. HILLMAN, JR.
----------------------------------
Max W. Hillman, Jr., individually
and acknowledging the appointment
as a representative hereunder

----------------------------------
Tax ID Number

/s/ RICHARD P. HILLMAN
----------------------------------
Richard P. Hillman

----------------------------------
Tax ID Number

/s/ GARY SEEDS
----------------------------------
Gary Seeds

----------------------------------
Tax ID Number

/s/ DENNIS BLAKE
----------------------------------
Dennis Blake

----------------------------------
Tax ID Number

/s/ JOHN MCDONNELL
----------------------------------
John McDonnell, individually
and acknowledging the appointment
as a representative hereunder


22


----------------------------------
Tax ID Number


CITIBANK, N.A.


BY: /s/ JOHN P. HOWARD
-------------------------------
NAME: John P. Howard
-----------------------------
TITLE: Vice President
----------------------------


23



STATE OF OHIO:
ss:
COUNTY OF HAMILTON:




I, Sandra R. Harrod, a Notary Public in and for said County, in the
State aforesaid, DO HEREBY CERTIFY that Max W. Hillman, Jr. personally came
before me and is the same person whose name is subscribed to the foregoing
agreement, who, has appeared before me this day in person and acknowledged that
he signed and delivered the said agreement as his own free and voluntary act
for the uses and purposes therein set forth.

Given under my hand and Notarial Seal this 21st day of June, 2001.

/s/ SANDRA R. HARROD
--------------------
Notary Public


My commission expires: 12-12-04



24


STATE OF OHIO:
ss:
COUNTY OF HAMILTON:




I, Sandra R. Harrod, a Notary Public in and for said County, in the
State aforesaid, DO HEREBY CERTIFY that Richard P. Hillman, Jr. personally came
before me and is the same person whose name is subscribed to the foregoing
agreement, who, has appeared before me this day in person and acknowledged that
he signed and delivered the said agreement as his own free and voluntary act
for the uses and purposes therein set forth.

Given under my hand and Notarial Seal this 21st day of June, 2001.

/s/ SANDRA R. HARROD
--------------------
Notary Public


My commission expires: 12-12-04


25

STATE OF OHIO:
ss:
COUNTY OF HAMILTON:




I, Sandra R, Harrod, a Notary Public in and for said County, in the
State aforesaid, DO HEREBY CERTIFY that Gary Seeds personally came before me
and is the same person whose name is subscribed to the foregoing agreement,
who, has appeared before me this day in person and acknowledged that he signed
and delivered the said agreement as his own free and voluntary act for the uses
and purposes therein set forth.

Given under my hand and Notarial Seal this 21st day of June, 2001.

/s/ SANDRA R. HARROD
--------------------
Notary Public


My commission expires: 12-12-04


26



STATE OF OHIO:
ss:
COUNTY OF HAMILTON:




I, Sandra R. Harrod, a Notary Public in and for said County, in the
State aforesaid, DO HEREBY CERTIFY that Dennis Blake personally came before me
and is the same person whose name is subscribed to the foregoing agreement,
who, has appeared before me this day in person and acknowledged that he signed
and delivered the said agreement as his own free and voluntary act for the uses
and purposes therein set forth.

Given under my hand and Notarial Seal this 21st day of June, 2001.

/s/ SANDRA R. HARROD
--------------------
Notary Public


My commission expires: 12-12-04


27



STATE OF ILLINOIS:
ss:
COUNTY OF LAKE:




I, Patti M. Day, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that John McDonnell, personally came before me and
is the same person whose name is subscribed to the foregoing agreement, who,
has appeared before me this day in person and acknowledged that he signed and
delivered the said agreement as his own free and voluntary act for the uses and
purposes therein set forth.

Given under my hand and Notarial Seal this 21st day of June, 2001.

/s/ PATTI M. DAY
--------------------
Notary Public


My commission expires: 2-19-03


28