SC 13E3: Schedule filed to report going private transactions

Published on July 11, 2001


SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------


SCHEDULE 13E-3

(RULE 13e-100)
TRANSACTION STATEMENT UNDER SECTION 13(e) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 13e-3 THEREUNDER

SUNSOURCE INC.
-------------------------------------------------
(Name of the Issuer)

SunSource Inc.

Maurice P. Andrien, Jr. James P. Waters
Joseph M. Corvino Dennis G. Blake
Max W. Hillman, Jr. Richard A. Buller
Richard Hillman Kenneth H. Foskey
Stephen W. Miller Michael Mueller
George L. Heredia Mark Yeary
Gary L. Seeds John H. Marshall III
Terry R. Rowe John P. McDonnell

Allied Capital Corporation
--------------------------------------------------
(Names of Person(s) Filing Statement)

Common Stock
--------------------------------------------------
(Title of Class of Securities)
867948101
--------------------------------------------------
(CUSIP Number of Class of Securities)


Maurice P. Andrien, Jr. William L. Walton
SunSource Inc. Allied Capital Corporation
3000 One Logan Square 1919 Pennsylvania Ave., N.W.
Philadelphia, PA 19103 Washington, D.C. 20006
(215) 282-1290 (202) 331-1112

--------------------------------------------------
(Name, Address, and Telephone Numbers of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
with a copy to:

Thomas J. Sharbaugh Steven B. Boehm
Andrew Hamilton Cynthia M. Krus
Morgan Lewis & Bockius LLP Sutherland Asbill & Brennan LLP
1701 Market St. 1275 Pennsylvania Ave., N.W.
Philadelphia, PA 19103 Washington, D.C. 20004
(215) 963-5000 (202) 383-0100






This statement is filed in connection with (check the appropriate box):

a. [X] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the
Securities Exchange Act of 1934.

b. [_] The filing of a registration statement under the Securities
Act of 1933.

c. [_] A tender offer.

d. [_] None of the above.

Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [X]

Check the following box if the filing is a final amendment reporting the
results of the transaction: [_]



Calculation of Filing Fee
-------------------------
Transaction Valuation* Amount of Filing Fee**
---------------------- ----------------------

$71,590,405 $14,318.08



* The transaction valuation was determined based upon the 6,900,280
shares of common stock, par value $0.01 per share, proposed to be
acquired by the acquiror.

** The amount of the filing fee, calculated in accordance with Rule
0-11(c) of the Securities Exchange Act of 1934, as amended, equals
1/50th of one percent of the value of the securities proposed to be
acquired.

[X] Check the box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing with which the offsetting
fee was previously paid. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid: $14,318.08

(2) Form, Schedule or Registration Statement No.: Preliminary
Proxy Statement on Schedule 14A

(3) Filing Party: SunSource Inc.

(4) Date Filed: July 11, 2001




INTRODUCTION

This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule
13E-3") is being filed by: (1) SunSource Inc., a Delaware corporation
("SunSource") and the issuer of the equity securities which are the subject of
the transaction, (2) Allied Capital Corporation, a Maryland corporation
("Allied Capital") and (3) Maurice P. Andrien, Jr., Joseph M. Corvino, Max W.
Hillman, Jr., Richard Hillman, Stephen W. Miller, George L. Heredia, Gary L.
Seeds, Terry R. Rowe, James P. Waters, Dennis G. Blake, Richard A. Buller,
Kenneth H. Foskey, Michael Mueller, Mark Yeary, John H. Marshall III, John P.
McDonnell, each an individual and shareholder of SunSource (collectively, the
"Filing Persons").

This Schedule 13E-3 relates to the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of June 18, 2001, by and among Allied Capital,
SunSource and Allied Capital Lock Acquisition Corporation ("Merger Sub"),
pursuant to which Merger Sub will merge with and into SunSource, with SunSource
as the surviving corporation (the "Merger"). Under the terms and subject to the
conditions of the merger agreement, shareholders of SunSource will be entitled
to receive $10.375 in cash for each share of SunSource common stock held by
them as more fully described in the proxy statement on Schedule 14A. Upon
consummation of the merger, Allied Capital will own approximately 94% of
SunSource, and the Filing Persons will own approximately 6% of SunSource on a
fully diluted basis, taking into account the rollover options as described in
the Proxy Statement (as defined below).

Concurrently with the filing of this Schedule 13E-3, SunSource is
filing with the Securities and Exchange Commission a Preliminary Proxy
Statement on Schedule 14A dated July 11, 2001 (the "Proxy Statement"), relating
to the special meeting of shareholders of SunSource, and any adjournments or
postponements thereof, at which the shareholders of SunSource will consider and
vote upon, among other things, a proposal to approve and adopt the Merger
Agreement and approve the Merger. A copy of the Proxy Statement is attached
hereto as Exhibit (a)(1) and a copy of the Merger Agreement is included as
Appendix A to the Proxy Statement and incorporated by reference therefrom as
Exhibit (a)(1)(A) to this Schedule 13E-3.

Pursuant to General Instructions F and G of Schedule 13E-3, the Proxy
Statement on Schedule 14A was filed via EDGAR on July 11, 2001 and is
incorporated herein by reference. Capitalized terms used but not defined in
this Schedule 13E-3 shall have the meanings given to them in the Proxy
Statement. As of the date hereof, the Proxy Statement is in preliminary form
and is subject to completion or amendment.

By filing this Schedule 13E-3, none of the Filing Persons concedes that
Rule 13e-3 is applicable to the merger or the other transactions contemplated by
the merger agreement.

Item 1. SUMMARY TERM SHEET.

The information set forth under "Summary" and "Questions and Answers
about the Merger" in the Proxy Statement is incorporated herein by reference.

Item 2. SUBJECT COMPANY INFORMATION.

2


(a) NAME AND ADDRESS. The information set forth on the cover page to the
Proxy Statement and in the section entitled "Summary - Parties to the Merger" is
incorporated herein by reference.

(b) SECURITIES. The information set forth under "The SunSource Special
Meeting - Voting Information" in the Proxy Statement is incorporated herein by
reference.

(c) TRADING MARKET AND PRICE. The information set forth under "Price
Range of Common Stock" in the Proxy Statement is incorporated herein by
reference.

(d) DIVIDENDS. The information set forth under "Information Relating to
SunSource - Dividends" in the Proxy Statement is incorporated herein by
reference.

(e) PRIOR PUBLIC OFFERINGS. The information set forth under
"Transactions in Common Stock by Certain Persons - 1998 Public Offering" is
incorporated herein by reference.

(f) PRIOR STOCK PURCHASES. The information set forth under
"Transactions in Common Stock by Certain Persons" in the Proxy Statement is
incorporated herein by reference.

Item 3. IDENTITY AND BACKGROUND OF FILING PERSON.

(a)-(c) NAME AND ADDRESS, BUSINESS AND BACKGROUND OF ENTITIES AND
BUSINESS AND BACKGROUND OF NATURAL PERSONS. The information set forth under
"Management of SunSource", "Information about the Continuing Shareholders" and
"Management of Allied Capital" in the Proxy Statement is incorporated herein by
reference.

Item 4. TERMS OF THE TRANSACTION.

(a) MATERIAL TERMS. The information set forth under "Summary," "The
Merger Proposal" and "The Merger Agreement" is incorporated herein by reference.
Appendix A to the Proxy Statement and Exhibits (d)(1), (d)(2), (d)(3) and (d)(4)
to this Schedule 13E-3 also are incorporated herein by reference in their
entirety.

(b) DIFFERENT TERMS. The information set forth under "Summary - The
Merger Proposal," "Summary - Interests of SunSource's Officers and Directors in
the Merger," "Summary - Related Transactions," "The Merger Proposal - Interests
of Certain Persons in the Merger," "The Merger Proposal - Related Transactions"
and "The Merger Proposal - Change of Control Benefits" is incorporated herein by
reference. Appendix A to the Proxy Statement and Exhibits (d)(1), (d)(2),
(d)(3), (d)(4), (d)(7), (e)(1) and (e)(2) to this Schedule 13E-3 are
incorporated herein by reference.

(c) APPRAISAL RIGHTS. The information set forth under "The Merger
Proposal - Dissenters' Rights of Appraisal" in the Proxy Statement is hereby
incorporated by reference.

(d) PROVISIONS FOR UNAFFILIATED SECURITY HOLDERS. None.

(e) ELIGIBILITY FOR LISTING OR TRADING. Not Applicable.

3

Item 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS.

(a)-(c) TRANSACTIONS, SIGNIFICANT CORPORATE EVENTS, NEGOTIATIONS OR
CONTACTS. The information set forth under "The Merger Proposal - Background of
the Merger," "The Merger Agreement," "The Merger Proposal - Interest of Certain
Persons in the Merger," "The Merger Proposal - Related Transactions,"
"Information Relating to SunSource" and "Transactions in Common Stock by Certain
Persons" in the proxy statement is incorporated herein by reference. Exhibits
(d)(1), (d)(2), (d)(3), (d)(4), (d)(5), (d)(6), (e)(1) and (e)(2) to this
Schedule 13E-3 also are incorporated herein by reference in their respective
entireties.

(e) AGREEMENTS INVOLVING THE SUBJECT COMPANY'S SECURITIES. The
information set forth under "The SunSource Special Meeting - Voting
Information," "The Merger Proposal - Equity Purchase," "The Merger
Proposal-Interests of Certain Persons in the Merger," "The Merger Agreement,"
in the Proxy Statement is incorporated herein by reference. Appendix A to the
Proxy Statement and Exhibits (d)(1), (d)(2), (d)(3), (d)(4), (d)(5), (d)(6),
(e)(1) and (e)(2) to this Schedule 13E-3 also are incorporated herein by
reference in their respective entireties.

Item 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS.

(a) USE OF SECURITIES ACQUIRED. The information set forth under
"The Merger Proposal" and "Allied Capital's Reasons for the Merger" in the Proxy
Statement is incorporated herein by reference.

(b) PLANS.

(1)-(2) The information set forth under "The Merger Proposal,"
"The Merger Proposal - Related Transactions," "The Merger Agreement," and
"Information Relating to SunSource" in the Proxy Statement is incorporated
herein by reference.

(3) Not Applicable.

(4)-(5) The information set forth under "The Merger
Proposal," "The Merger Agreement," "The Merger Proposal - Interests of Certain
Persons in the Merger" and "The Merger Proposal - Related Transactions" in the
Proxy Statement is incorporated herein by reference. Exhibits (d)(1), (d)(2),
(d)(3), (d)(4), (d)(5), (d)(6) and (e)(1) to this Schedule 13E-3 also are
incorporated herein by reference in their respective entireties.

(6)-(8) The information set forth under "Summary," "The Merger
Agreement - Delisting and Deregistration of SunSource Common Stock" and "The
Merger Proposal - Trust Preferred Securities" in the Proxy Statement is
incorporated herein by reference.


Item 7. PURPOSES, ALTERNATIVES, REASONS AND EFFECTS IN A GOING-PRIVATE
TRANSACTION.

4

(a) PURPOSES. The information set forth under "The Merger Proposal" "The
Merger Proposal - SunSource's Reasons for the Merger" and "The Merger Proposal -
Allied Capital's Reasons for the Merger" in the Proxy Statement is incorporated
herein by reference.

(b) ALTERNATIVES. The information set forth under "The Merger Proposal -
Background to the Merger," and "The Merger Proposal - Fairness Opinion of
SunSource's Financial Advisor" in the Proxy Statement is incorporated herein by
reference.

(c) REASONS. The information set forth under "The Merger Proposal -
SunSource's Reasons for the Merger," "Allied Capital's Reasons for the Merger"
and "The Merger Proposal - Fairness Opinion of SunSource's Financial Advisor" in
the Proxy Statement is incorporated herein by reference.

(d) EFFECTS. The information set forth under "The Merger Proposal -
Interests of Certain Persons in the Merger," "The Merger Proposal - Related
Transactions," "The Merger Proposal - Change of Control Benefits," "The Merger
Agreement," and "The Merger Agreement - Material Federal Income Tax
Consequences" in the Proxy Statement is incorporated herein by reference.
Appendix A to the Proxy Statement and Exhibits (a)(1)(4) (d)(4), (d)(5), (d)(6),
(e)(1) and (e)(2) to this Schedule 13E-3 also are incorporated herein by
reference in their respective entireties.

Item 8. FAIRNESS OF THE TRANSACTION.

(a) FAIRNESS. The information set forth under "The Merger Proposal -
Reasons for the Recommendation of SunSource's Board of Directors," "The Merger
Proposal - Recommendation of SunSource's Board of Directors," "The Merger
Proposal - Allied Capital's Reasons for the Merger," "The Merger Proposal -
Belief of the Filing Persons in the Fairness of the Merger," "The Merger
Proposal - Fairness Opinion of SunSource's Financial Advisor" and "The
Merger-Interests of Certain Persons in the Merger" in the Proxy Statement is
incorporated herein by reference. Appendix B to the Proxy Statement is
incorporated herein by reference. Exhibits (c)(1), (c)(2) and (c)(3) to this
Schedule 13E-3 are incorporated herein by reference in their respective
entireties.

(b) FACTORS CONSIDERED IN DETERMINING FAIRNESS. The information set
forth under "The Merger Proposal - Reasons for the Recommendation of SunSource's
Board of Directors, " "The Merger Proposal - Recommendation of SunSource's Board
of Directors," "The Merger Proposal - Fairness Opinion of SunSource's Financial
Advisor," "The Merger Proposal - Belief of the Filing Persons in the Fairness of
the Merger" and "The Merger Proposal - Interests of Certain Persons in the
Merger" in the Proxy Statement is incorporated herein by reference. Appendix
B to the Proxy Statement also is incorporated herein by reference in its
entirety. Exhibits (c)(1), (c)(2) and (c)(3) to this Schedule 13E-3 are
incorporated herein by reference in their respective entireties.

(c) APPROVAL OF SECURITY HOLDERS. The information set forth under "The
SunSource Special Meeting - Voting Information," "The Merger Proposal -
Belief of the Filing Persons in the Fairness of the Merger" and in the Proxy
Statement is incorporated herein by reference. Exhibits (d)(1), (d)(4) and (f)
to this Schedule 13E-3 are incorporated herein by reference in their respective
entireties.

5
(d) UNAFFILIATED REPRESENTATIVES. The information set forth under "The
Merger Proposal - Background of the Merger," "The Merger Proposal - Reasons for
the Recommendation of SunSource's Board of Directors," "The Merger Proposal -
Interests of Certain Persons in the Merger" and "The Merger Proposal - Belief
of the Filing Persons in the Fairness of the Merger" in the Proxy Statement is
incorporated herein by reference. Appendix B to the Proxy Statement is
incorporated herein by reference in its respective entireties. Exhibit (c)(1)
to this Schedule 13E-3 is incorporated herein by reference in its entirety.

(e) APPROVAL OF DIRECTORS. The information set forth under "The Merger
Proposal - Reasons for the Recommendation of SunSource's Board of Directors,"
"The Merger Proposal - Recommendation of SunSource's Board of Directors," "The
Merger Proposal - Background of the Merger," "The Merger Proposal - Belief of
the Filing Persons in the Fairness of the Merger," and "The Merger-Interests of
Certain Persons in the Merger" in the Proxy Statement is incorporated herein by
reference.

(f) OTHER OFFERS. The information set forth under "The Merger Proposal -
Background of the Merger," "The Merger Proposal - Reasons for the
Recommendation of SunSource's Board of Directors" and "The Merger Proposal -
Recommendation of SunSource's Board of Directors" in the Proxy Statement is
incorporated herein by reference.

Item 9. REPORTS, OPINIONS, APPRAISALS AND NEGOTIATIONS.

(a)-(c) REPORT, OPINION OR APPRAISAL, PREPARER AND SUMMARY OF THE
REPORT, OPINION OR APPRAISAL AND AVAILABILITY OF DOCUMENTS. The information set
forth under "The Merger Proposal - Fairness Opinion of SunSource's Financial
Advisor" in the Proxy Statement is incorporated herein by reference. Appendix B
to the Proxy Statement also is incorporated herein by reference in its
entirety. Exhibits (c)(1), (c)(2) and (c)(3) are incorporated herein by
reference in their respective entireties.

Item 10. SOURCE OR AMOUNT OF FUNDS OR OTHER CONSIDERATION.

(a), (b), (d) SOURCE OF FUNDS, CONDITIONS, BORROWED FUNDS. The
information set forth in "The Merger Proposal - Financing the Merger" in the
Proxy Statement is incorporated herein by reference. Exhibit (b) to this
Schedule 13E-3 is hereby incorporated by reference in its entirety.

(c) EXPENSES. The information set forth under "The Merger Agreement
- -Termination; Fees" and "The Merger Agreement -- Expenses and Fees" in the
Proxy Statement is incorporated herein by reference.

Item 11. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.

(a) SECURITIES OWNERSHIP. The information set forth under "The Merger
Proposal -Interests of Certain Persons in the Merger," "The Merger Proposal -
Equity Purchase," "The Merger Proposal - Change of Control Benefits"
and "Information Relating to SunSource - Security Ownership of Certain
Beneficial Owners and Management of SunSource" in the Proxy Statement is
incorporated herein by reference.

6
(b) SECURITIES TRANSACTIONS. The information set forth under
"Transactions in Common Stock by Certain Persons" in the Proxy Statement is
incorporated herein by reference.

Item 12. THE SOLICITATION OR RECOMMENDATION.

(a) INTENT TO TENDER OR VOTE IN A GOING-PRIVATE TRANSACTION. The
information set forth under "The SunSource Special Meeting - Voting
Information," "The Merger Proposal-Interests of Certain Persons in the Merger"
and "The Merger Agreement" in the Proxy Statement is incorporated herein by
reference. Exhibits (d)(1) and (d)(4) to this Schedule 13E-3 also are
incorporated herein by reference in their respective entireties.

(b) RECOMMENDATIONS OF OTHERS. The information set forth under "The
Merger Proposal - Recommendation of SunSource's Board of Directors," "The Merger
Proposal - Fairness Opinion of SunSource's Financial Advisor" and "The Merger
Proposal - Belief of the Filing Persons in the Fairness of the Merger" in the
Proxy Statement is incorporated herein by reference.

Item 13. FINANCIAL STATEMENTS.

(a) FINANCIAL INFORMATION. The information set forth under "Selected
Consolidated Financial Data" and the Financial Statements set forth under "Index
to Financial Statements" in the Proxy Statement are incorporated herein by
reference.

(b) PRO FORMA INFORMATION. Not Applicable.

Item 14. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED.

(a), (b) SOLICITATIONS OR RECOMMENDATIONS, EMPLOYEES AND CORPORATE
ASSETS. The information set forth under "The SunSource Special Meeting," "The
Merger Proposal - Fairness Opinion of SunSource's Financial Advisor" and "The
Merger Agreement -Termination; Fees" in the Proxy Statement is incorporated
herein by reference.

Item 15. ADDITIONAL INFORMATION.

(a) OTHER MATERIAL INFORMATION. The information contained in the Proxy
Statement, all Appendices to the Proxy Statement and Exhibits to this
Schedule 13E-3 are incorporated herein by reference in their respective
entireties.

Item 16. EXHIBITS.

(a)(1)* Preliminary Proxy Statement on Schedule 14A filed with the
Securities and Exchange Commission on July 11, 2001.

(a)(1)(A)* Plan and Agreement of Merger dated as of June 18, 2001 by
and among SunSource Inc., Allied Capital Corporation and Allied
Capital Lock Acquisition Corporation, filed as Appendix A to
the Preliminary Proxy Statement on Schedule 14A as filed with
the Securities and Exchange Commission July 11, 2001.

(a)(2)* Press Release dated July 2, 2001 filed as Additional Proxy
Material on July 2, 2001.

(a)(5)* Press Release filed as Exhibit 99.1 to the Current Report on
Form 8-K as filed by SunSource Inc. with the Securities and
Exchange Commission on June 21, 2001.

(b) Amended and Restated Credit Agreement dated May 17, 2000, by and
among Allied Capital, as borrower, Bank of America, N.A., as
administrative agent, Banc of America Securities LLC, as sole
lead arranger and sole book manager, First Union National Bank,
as syndication Agent, Fleet National Bank, as documentation
Agent, Riggs Bank, N.A., as managing agent and Credit Lyonnais
New York Branch, Branch Banking & Trust Co., Chevy Chase Bank,
F.S.B. and Deutsche Bank AG, New York, as co-agents, filed as
exhibit f.2.e to Allied Capital's registration statement on
Form N-2 filed on Allied Capital's behalf with the Securities
and Exchange Commission on August 11, 2000 (File No. 333-43534).

(c)(1) Fairness opinion of Janney Montgomery Scott LLC, filed as
Appendix B to the Preliminary Proxy Statement on Schedule 14A
as filed with the Securities and Exchange Commission July 11,
2001.

(c)(2) Presentation to the Board of Directors of SunSource by Janney
Montgomery Scott LLC dated April 19, 2001.

(c)(3) Presentation to the Board of Directors of SunSource by Janney
Montgomery Scott LLC dated June 15, 2001.

(d)(1) Voting and Support Agreement.

(d)(2)+ Form of Equity Purchase Agreement.

(d)(3) Escrow Agreement dated as of June 18, 2001 by and among Max W.
Hillman, Jr., Richard P. Hillman, Gary Seeds, Dennis Blake
John McDonnell, Allied Capital Corporation and Citibank, N.A.

(d)(4) Form of Stockholders Agreement.

(d)(5) Termination Agreement dated as of June 18, 2001 by and among
SunSource, Lehman Brothers, Donald T. Marshall, John P.
McDonnell, Norman V. Edmonson, Harold Cornelius, Max W. Hillman,
Joseph M. Corvino and the respective S corporations of Marshall,
McDonnell, Edmonson, Cornelius, Hillman and Corvino.

(d)(6) Amendment of Rights Agreement dated as of June 18, 2001 by and
between SunSource and Registrar and Transfer Company.

(d)(7)** Series B preferred stock Certificate of Designation.

(e)(1)++ Employment Agreement by and between SunSource Inc. and Maurice
P. Andrien, Jr. entered into June 18, 2001.

(e)(2) Employment Agreement by and between SunSource Inc. and Stephen
W. Miller entered into June 18, 2001.

(f) Section 262 of the Delaware General Corporation Law,
incorporated by reference to Appendix C to the Preliminary Proxy
Statement on Schedule 14A as filed with the Securities and
Exchange Commission July 11, 2001.

- ---------------------------------
* Previously Filed.

** To be filed by amendment.

+ The following is a list of persons who entered into Equity
Purchase Agreements on June 18, 2001 and the material details in
which such Equity Purchase Agreements differ from the Form of
Equity Purchase Agreement attached hereto as Exhibit (d)(2):



Additional Shares of
Shares of SunSource stock Purchase SunSource stock to be Number of
Name to be purchased from Allied Capital Price contributed to SunSource Rollover Options
---- ----------------------------------- -------- ------------------------ ----------------

Maurice Andrien 0 $ 0 19,880 130,000
Joseph Corvino 0 $ 0 8,711 65,000
Max Hillman 23,202 $240,717 32,220 67,500
Steve Miller 0 $ 0 20,000 50,000
Richard Hillman 41,205 $427,500 0 20,000
George Heredia 0 $ 0 0 10,000
Gary Seeds 2,410 $ 25,000 0 12,500
Terry Rowe 3,855 $ 40,000 0 9,000
Jim Waters 2,410 $ 25,000 0 9,000
Dennis Blake 24,096 $250,000 0 9,000
Rick Buller 2,410 $ 25,000 175 8,000
Ken Foskey 2,410 $ 25,000 0 9,000
Michael Mueller 0 $ 0 0 10,000
Mark Yeary 0 $ 0 0 10,000
John McDonnell 57,831 $600,000 0 20,000
John Marshall 3,373 $ 35,000 0 4,000


++ The following is a list of persons who entered into Employment
Agreements on June 18, 2000 and the material details in which
such Employment Agreements differ from the Employment
Agreement attached hereto as Exhibit (e)(1):



Name Base Salary Term Other Material Differences
---- ----------- ---- --------------------------

Joseph M. Corvino $250,000 4 years No minimum on severance payments pursuant to Section 7(a).

Max W. Hillman $350,000 4 years No minimum on severance payments pursuant to Section 7(a).
Mr Hillman may not compete with SunSource for the longer
of (1) one year after termination, (2) two years after
termination if receiving payments under Section 7(a) or
(3) one year following a final determination that
employee violated Employment Agreement.


7


SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.


Date: July 11, 2001


SUNSOURCE INC.


By: /s/ MAURICE P. ANDRIEN, JR.
----------------------------------
Name: Maurice P. Andrien, Jr.
Title: Chief Executive Officer



By: /s/ JOSEPH M. CORVINO
----------------------------------
Name: Joseph M. Corvino
Title: Chief Financial Officer


ALLIED CAPITAL CORPORATION

By: /s/ G. CABELL WILLIAMS III
----------------------------------
Name: G. Cabell Williams III
Title: Managing Director

/s/ MAURICE P. ANDRIEN, JR.
----------------------------------
MAURICE P. ANDRIEN, JR.


/s/ JOSEPH M. CORVINO
----------------------------------
JOSEPH M. CORVINO


/s/ MAX W. HILLMAN
----------------------------------
MAX W. HILLMAN


/s/ RICHARD HILLMAN
----------------------------------
RICHARD HILLMAN


/s/ STEPHEN W. MILLER
----------------------------------
STEPHEN W. MILLER


/s/ GEORGE L. HEREDIA
----------------------------------
GEORGE L. HEREDIA


/s/ GARY L. SEEDS
----------------------------------
GARY L. SEEDS


/s/ TERRY R. ROWE
----------------------------------
TERRY R. ROWE


/s/ JAMES P. WATERS
----------------------------------
JAMES P. WATERS


/s/ DENNIS G. BLAKE
----------------------------------
DENNIS G. BLAKE


/s/ RICHARD A. BULLER
----------------------------------
RICHARD A. BULLER


/s/ KENNETH H. FOSKEY
----------------------------------
KENNETH H. FOSKEY


/s/ MICHAEL MUELLER
----------------------------------
MICHAEL MUELLER


/s/ MARK YEARY
----------------------------------
MARK YEARY


/s/ JOHN H. MARSHALL, III
----------------------------------
JOHN H. MARSHALL, III


/s/ JOHN P. MCDONNELL
----------------------------------
JOHN P. MCDONNELL


8
EXHIBIT INDEX

(a)(1)* Preliminary Proxy Statement on Schedule 14A filed with the
Securities and Exchange Commission on July 11, 2001.

(a)(1)(A)* Plan and Agreement of Merger dated as of June 18, 2001 by
and among SunSource Inc., Allied Capital Corporation and Allied
Capital Lock Acquisition Corporation, filed as Appendix A to
the Preliminary Proxy Statement on Schedule 14A as filed with
the Securities and Exchange Commission July 11, 2001.

(a)(2)* Press Release dated July 2, 2001 filed as Additional Proxy
Material on July 2, 2001.

(a)(5)* Press Release filed as Exhibit 99.1 to the Current Report on
Form 8-K as filed by SunSource Inc. with the Securities and
Exchange Commission on June 21, 2001.

(b) Amended and Restated Credit Agreement dated May 17, 2000, by and
among Allied Capital, as borrower, Bank of America, N.A., as
administrative agent, Banc of America Securities LLC, as sole
lead arranger and sole book manager, First Union National Bank,
as syndication Agent, Fleet National Bank, as documentation
Agent, Riggs Bank, N.A., as managing agent and Credit Lyonnais
New York Branch, Branch Banking & Trust Co., Chevy Chase Bank,
F.S.B. and Deutsche Bank AG, New York, as co-agents, filed as
exhibit f.2.e to Allied Capital's registration statement on
Form N-2 filed on Allied Capital's behalf with the Securities
and Exchange Commission on August 11, 2000 (File No. 333-43534).

(c)(1) Fairness opinion of Janney Montgomery Scott LLC, filed as
Appendix B to the Preliminary Proxy Statement on Schedule 14A
as filed with the Securities and Exchange Commission July 11,
2001.

(c)(2) Presentation to the Board of Directors of SunSource by Janney
Montgomery Scott LLC dated April 19, 2001.

(c)(3) Presentation to the Board of Directors of SunSource by Janney
Montgomery Scott LLC dated June 15, 2001.

(d)(1) Voting and Support Agreement.

(d)(2)+ Form of Equity Purchase Agreement.

(d)(3) Escrow Agreement dated as of June 18, 2001 by and among Max W.
Hillman, Jr., Richard P. Hillman, Gary Seeds, Dennis Blake,
John McDonnell, Allied Capital Corporation and Citibank, N.A.

(d)(4) Form of Stockholders Agreement.

(d)(5) Termination Agreement dated as of June 18, 2001 by and among
SunSource, Lehman Brothers, Donald T. Marshall, John P.
McDonnell, Norman V. Edmonson, Harold Cornelius, Max W. Hillman,
Joseph M. Corvino and the respective S corporations of Marshall,
McDonnell, Edmonson, Cornelius, Hillman and Corvino.

(d)(6) Amendment of Rights Agreement dated as of June 18, 2001 by and
between SunSource and Registrar and Transfer Company.

(d)(7)** Series B preferred stock Certificate of Designation.

(e)(1)++ Employment Agreement by and between SunSource Inc. and Maurice
P. Andrien, Jr. entered into June 18, 2001.

(e)(2) Employment Agreement by and between SunSource Inc. and Stephen
W. Miller entered into June 18, 2001.

(f) Section 262 of the Delaware General Corporation Law,
incorporated by reference to Appendix C to the Preliminary Proxy
Statement on Schedule 14A as filed with the Securities and
Exchange Commission July 11, 2001.

- ------------------------------
* Previously Filed.

** To be filed by amendment.

+ The following is a list of persons who entered into Equity
Purchase Agreements on June 18, 2001 and the material details in
which such Equity Purchase Agreements differ from the Form of
Equity Purchase Agreement attached hereto as Exhibit (d)(2):



Additional Shares of
Shares of SunSource stock Purchase SunSource stock to be Number of
Name to be purchased from Allied Capital Price contributed to SunSource Rollover Options
---- ----------------------------------- -------- ------------------------ ----------------

Maurice Andrien 0 $ 0 19,880 130,000
Joseph Corvino 0 $ 0 8,711 65,000
Max Hillman 23,202 $240,717 32,220 67,500
Steve Miller 0 $ 0 20,000 50,000
Richard Hillman 41,205 $427,500 0 20,000
George Heredia 0 $ 0 0 10,000
Gary Seeds 2,410 $ 25,000 0 12,500
Terry Rowe 3,855 $ 40,000 0 9,000
Jim Waters 2,410 $ 25,000 0 9,000
Dennis Blake 24,096 $250,000 0 9,000
Rick Buller 2,410 $ 25,000 175 8,000
Ken Foskey 2,410 $ 25,000 0 9,000
Michael Mueller 0 $ 0 0 10,000
Mark Yeary 0 $ 0 0 10,000
John McDonnell 57,831 $600,000 0 20,000
John Marshall 3,373 $ 35,000 0 4,000


++ The following is a list of persons who entered into Employment
Agreements on June 18, 2000 and the material details in which
such Employment Agreements differ from the Employment
Agreement attached hereto as Exhibit (e)(1):



Name Base Salary Term Other Material Differences
---- ----------- ---- --------------------------

Joseph M. Corvino $250,000 4 years No minimum on severance payments pursuant to Section 7(a).

Max W. Hillman $350,000 4 years No minimum on severance payments pursuant to Section 7(a).
Mr Hillman may not compete with SunSource for the longer
of (1) one year after termination, (2) two years after
termination if receiving payments under Section 7(a) or
(3) one year following a final determination that
employee violated Employment Agreement.



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