SUNSOURCE INC
EMPLOYMENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>7
<FILENAME>w54923ex10-7.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT


THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is entered into by and between
Joseph M. Corvino, ("YOU") and SunSource, Inc., a Delaware corporation (the
"COMPANY") and will be effective as of the "EFFECTIVE DATE" as stated in Section
13(c) of this Agreement.

         WHEREAS, you will be employed as a Senior Vice President of the
Company; and

         WHEREAS, the Company has hired you and is willing to continue your
employment based on your particular qualifications, on the condition that you
shall enter into this Agreement and shall fully perform all the responsibilities
and duties and strictly observe all of your obligations hereunder;

         NOW, THEREFORE, in consideration of your employment by the Company and
the compensation to be paid by the Company to you in connection therewith and
for other good and valuable consideration, you and the Company hereby agree as
follows:

1.       Position and Responsibilities.

         (a)      Position. The Company agrees to employ you as a Senior Vice
President of the Company throughout the Term (defined below). You shall report
to the Chairman of the Board of Directors. Your duties shall include managing
the transition of the Company's corporate headquarters from Philadelphia to
Cincinnati (and closing the Philadelphia office), managing financial reporting,
overseeing the effective management of lawsuits and environmental issues,
managing corporate governance, assisting in transitions related to tax and
treasury functions and mergers/acquisitions and performing other duties as may
from time to time be assigned by the Chairman of the Board.

         (b)      Responsibilities. You shall devote your full business efforts
and time to the Company and perform the responsibilities assigned to you in
accordance with the standards and policies that the Company may from time to
time establish. You shall not render services to any other person or entity or
serve on the board of directors of any other entity without the written consent
of the Chairman of the Board, and such consent will not be unreasonably
withheld. The Chairman will have the right to revoke such consent if at any time
during the Term the Chairman determines that such revocation is necessary to
protect the Company's legitimate business interests; provided however, that
nothing contained herein shall preclude you from engaging in appropriate civic,
charitable or religious activities or from devoting a reasonable amount of time
to private investments that do not interfere or conflict with your
responsibilities and are not injurious to the Company.. If the consent is
revoked, you will have a reasonable period of time in which to withdraw from the
activity or investment for which consent has been revoked. You and the Company
agree that your position is essential to the Company's success and that the
highest level of performance is required from you.




<PAGE>

2.       Term of Employment.

         (a)      Basic Rule. The Company agrees to employ you, and you agree to
remain in employment with the Company, from the Effective Date until the fourth
anniversary of such date (the "TERM"), unless your employment terminates earlier
pursuant to Section 5 below.

         (b)      Renewal of Term. On the fourth (4th) anniversary and on each
subsequent anniversary of the Effective Date, the Term shall be renewable for
additional one-year periods upon the mutual written agreement of both parties.

3.       Compensation.

         (a)      Base Compensation. You will be entitled to receive base
compensation during the Term ("BASE COMPENSATION"). Your Base Compensation for
the first year of the Term shall be at the annual rate of $250,000 per year and
your annual Base Compensation for the remainder of the Term shall not be less
than that amount. Base Compensation shall be paid in equal biweekly
installments, less deductions required by law. The Board will review and may
adjust your Base Compensation periodically, usually annually on or about
February 1st. Such review shall be in accordance with performance criteria to be
determined by the Company in its sole discretion.

         (b)      Bonus Compensation. You shall receive bonus compensation for
2001 in accordance with the performance targets established in January, 2001 by
the Company for 2001, payable during the first quarter of 2002. During the
remainder of the the Term, usually on an annual basis, you shall be eligible to
receive an additional cash payment of up to 80% of Base Compensation (less
deductions required by law) ("BONUS COMPENSATION"), which shall be determined
with reference to your performance in accordance with performance criteria to be
determined by the Board in its sole discretion for each calendar year.

         (c)      Stock Options and Deferred Compensation. During the Term, you
will be eligible to participate in the Company's Stock Option Plan and Deferred
Compensation Plan.

         (d)      Business Expenses. During the Term, the Company shall pay or
reimburse you for all ordinary and reasonable business-related expenses you
incur in the performance of your duties under this Agreement. The Company will
reimburse you for all such expenses upon the presentation by you of an itemized
account of such expenditures, together with supporting receipts and other
appropriate documentation.

4.       Employee Benefits.

         (a)      In General. During the Term, you shall be eligible to
participate in the employee benefit plans and executive compensation and
perquisite programs that the Company may provide, including but not limited to
health, and insurance plans and 401k, subject in each case to the generally
applicable terms and conditions of the plan or program in question and to the
determinations of any person or committee administering such plan or program.
The Company reserves the right to modify or terminate these plans at any time.
The Company will provide




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you during the Term with benefits and perquisites that are reasonably comparable
to those in effect immediately prior to the Effective Date.

         (b)      Paid Holidays. You shall be entitled to take ten (10) paid
holidays per year as specified by Company policy from time to time for all of
the Company's employees.

         (c)      Vacation. You shall be entitled to take five (5) weeks of
vacation per year.

5.       Termination of Employment. Upon the effective date of termination of
your employment with the Company (the "TERMINATION DATE"), you will not be
eligible for further compensation, benefits or perquisites under Sections 3 and
4 of this Agreement, other than those that have already accrued and, with regard
to Bonus Compensation, a pro rata share of your Bonus Compensation for that
year. Termination of your employment may occur under any of the following
circumstances:

         (a)      Company's Termination of Employment. The Company has the right
to terminate your employment at any time, with or without Cause. For all
purposes under this Agreement, "CAUSE" shall mean:

             (i)          A willful failure to substantially perform your duties
                          under this Agreement, other than failure resulting
                          from complete or partial incapacity due to physical or
                          mental illness or impairment;

             (ii)         A willful act which constitutes gross misconduct or
                          fraud and which is injurious to the Company;

             (iii)        Conviction of, or plea of "guilty" or "no contest" to
                          a felony; or

             (iv)         A material breach of any duty owed to the Company,
                          including the duty of loyalty and the confidentiality
                          agreement.

No act, or failure to act, by you shall be considered "willful" unless committed
without good faith and without a reasonable belief that the act or omission was
lawful and in the Company's best interest.

         (b)      Your Resignation from Employment. You have the right to resign
your employment with the Company at any time, with or without Cause or Good
Reason. You agree to provide the Company thirty (30) days prior written notice
of resignation. The Company may in its sole discretion place you on
administrative leave as of any date prior to the end of such thirty (30) day
notice period and request that you no longer be present on Company premises.
During any period of paid administrative leave, you will not be authorized to
act as a representative, or make any statements on behalf of, the Company.


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<PAGE>


         (c)      Death or Disability.

             (i)          Your employment shall be deemed to have been
                          terminated by you upon your (A) death or (B) inability
                          to perform your duties under this Agreement, even with
                          reasonable accommodation, for more than twenty-six
                          (26) weeks, whether or not consecutive, in any
                          twelve-month period ("DISABILITY"). Termination will
                          be effective upon the occurrence of such event.

             (ii)         If your employment ends as a result of death or
                          Disability, you or your estate will receive:

                          (A)          A payment for your accrued base salary
                                       and vacation and pro rata share of your
                                       bonus for that year; and

                          (B)          In accordance with the Stock Option Plan,
                                       your vested stock options and the
                                       acceleration of vesting of any options
                                       that would have vested during the
                                       one-year period after the date of death
                                       or disability.

6.       Defined Conditions:

         (a)      Change in Control. Change in Control shall mean the occurrence
of any of the following events after the Effective Date of this Agreement:

             (i)          the sale of substantially all of the assets of the
                          Company;

             (ii)         the acquisition by any person or group of persons
                          acting in concert (other than the Company or an
                          affiliate or an employee pension benefit plan of the
                          Company or a trust established under such plan) of
                          securities of the Company representing 50% or more of
                          the aggregate voting power of the Company's
                          then-outstanding common stock; or

             (iii)        a merger or acquisition of the Company in which the
                          voting equity securities of the Company (together with
                          all options to acquire such securities whether vested
                          or unvested) beneficially owned by Allied Capital
                          Corporation and the Minority Holders (as defined in
                          the Stockholders Agreement with respect to the
                          Company) is reduced below 51%.

Notwithstanding the foregoing, a transaction involving an acquisition or sale of
the Company or its assets solely between or among its affiliates would not
constitute a Change In Control.

         (b)      Good Reason. For purposes of this Agreement, Good Reason shall
mean that the Company:


                  (i)      has adversely changed your position from the position
                           specified in Section 1 of this Agreement;



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<PAGE>


                  (ii)     has adversely changed your duties or authority such
                           that they are no longer consistent with the duties
                           specified in Section 1 of the Agreement;

                  (iii)    has reassigned you to a work location that is more
                           than 75 miles from your present work location;

                  (iv)     has removed you from the Board of Directors of the
                           Company for any reason other than for Cause, if at
                           any time during the Term you have become a member of
                           the Board; or

                  (iv)     has materially breached this Agreement.


7.       Severance Payments.

         (a)      Termination Without Cause or Resignation for Good Reason.


         (1)      Amount of Severance Compensation. If during the Term the
Company terminates your employment without Cause, except as provided for in
Section 7(b), or you resign with Good Reason, the Company will pay you two times
your annual Base and Bonus Compensation and benefits as provided below
("Severance Compensation"). To receive such payments you must within forty-five
(45) days of your Termination Date sign a release of any and all claims in the
form provided by the Company. Such payments shall begin at the later of (a) the
first pay period following your Termination Date or (b) ten (10) days after you
deliver the signed release to the Company.

(2)      Payment of Severance Compensation. The Company shall pay the Severance
Compensation as follows:

                  (A)      continue to pay on a biweekly basis your Base
                           Compensation in accordance with the rate in effect on
                           the Termination Date, ;

                  (B)      pay you Bonus Compensation on the same annual
                           schedule as if you continued to be employed and
                           payments of such Bonus Compensation shall be
                           calculated on a pro rata basis using the rate for a
                           full calendar year that is equal to the greater of
                           either:

                           i)       the average of your annual bonuses for the
                                    preceding three years or,

                           ii)      the amount of the last annual bonus you
                                    received prior to the Termination Date.

                  (C)      pay your monthly COBRA payments for any period of
                           time that you have applied and qualify for COBRA
                           coverage, and continue



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<PAGE>


                           your life insurance and disability insurance coverage
                           to the extent permitted under the applicable benefit
                           plans

This Severance Compensation shall be subject to usual and required withholding.
In the event that your death occurs prior to the completion of payment of
Severance Compensation, the remainder of your Severance Compensation will be
paid in a single lump sum to your estate.

         (b)      Termination After Change in Control Or After the Term. If 1)
during the Term the Company terminates your employment without cause after a
Change In Control that occurs on or after the third anniversary of the Effective
Date or 2) after the Term expires the Company terminates your employment without
Cause or you resign your employment for Good Reason, or because of a reduction
in your Base Compensation, you will not be eligible for Severance Compensation
under Section 7(a), but, provided that you sign a release of any and all claims
in the form provided by the Company within forty-five (45) days your Termination
Date, you shall be entitled to:

                  (1)      Compensation. A lump sum paid within 30 days after
                           your Termination Date that is equal to the total of:

                           (A)      an amount equal to your Base Compensation
                                    for one (1) year which shall not be less
                                    than the greater of 1) the rate in effect on
                                    the Termination Date or 2) the rate in
                                    effect at the end of the Term, less
                                    deductions required by law; and

                           (B)      an amount equal to the greater of either:

                                    1)       the annual average of your last
                                             three annual bonuses prior to the
                                             Termination Date, or

                                    2)       the amount of the last annual bonus
                                             you received prior to the
                                             Termination Date.

                  (2)      COBRA Payments. The Company will pay your monthly
                           COBRA payments for any period of time that you have
                           applied and qualify for COBRA coverage and continue
                           your life insurance and disability income insurance
                           to the extent permitted under the applicable plans.

         (c)      No Mitigation. You shall not be required to mitigate the
amount of any payment contemplated by this Section 7, nor shall any such payment
be reduced by any earnings that you may receive from any other source.

8.       Other Obligations.


         You warrant that you are not subject to any other obligations that
would conflict with or inhibit your ability to perform your duties under this
Agreement. You further warrant that you have not and will not bring to the
Company or use in the performance of your responsibilities at



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<PAGE>


the Company any equipment, supplies, facility or trade secret information (that
is not generally available to the public) of any current or former employer or
organization other than the Company to which you provided services, unless you
have obtained written authorization for their possession and use.

9.       Confidential Information.

         You shall not disclose or use at any time, either during or after the
Termination Date, any confidential information ("CONFIDENTIAL INFORMATION")
(defined below) of the Company, whether patentable or not, which you learn as a
result of your employment with the Company, whether or not you developed such
information. Confidential Information shall include, without limitation,
information regarding the Company's, it customers' or its business partners'
trade secrets and:

         -        any information about existing and prospective investments;

         -        financing information and sources;

         -        patent applications, developmental or experimental work,
                  formulas, test data, prototypes, models, and product
                  specifications;

         -        financial information;

         -        financial projections and pro forma financial information;

         -        sales and marketing strategies, plans and programs and product
                  development information;

         -        employees' and consultants' benefits, perquisites, salaries,
                  stock options, compensation, formulas or bonuses, and their
                  non-business addresses and telephone numbers;

         -        organizational structure and reporting relationships; and

         -        business plans.

Information that is or later becomes publicly available in a manner wholly
unrelated to any breach of this Agreement by you will not be considered
Confidential Information as of the date it enters the public domain. If you are
uncertain whether something is Confidential Information you should treat it as
Confidential Information until you receive clarification from the Company that
it is not Confidential Information. Confidential Information shall remain at all
times the property of the Company. You may use or disclose Confidential
Information only:

         (a)      as authorized and necessary in performing your
responsibilities under this Agreement during your employment with the Company;
or


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<PAGE>


         (b)      with the Board's prior written consent; or

         (c)      in a legal proceeding between you and the Company to establish
the rights of either party under this Agreement, provided that you stipulate to
a protective order to prevent any unnecessary use or disclosure;

         (d)      with respect to employees whose home addresses or telephone
numbers are personally known to you, you may disclose on an occasional and
infrequent basis such information about a single employee to a person who is
known to and has a pre-existing relationship with such employee; you agree that
you will indemnify the Company for the defense of and any liability resulting
from any objection or claim based on such disclosure by such employee against
you or the Company; or

         (e)      subject to a compulsory legal process that requires disclosure
of such information, provided that you have complied with the following
procedures to ensure that the Company has an adequate opportunity to protect its
legal interests in preventing disclosure.

         Upon receipt of a subpoena that could possibly require disclosure of
Confidential Information, you shall provide a copy of the compulsory process and
complete information regarding the circumstances under which you received it to
the Company by hand delivery within a reasonable period of time, and generally
within twenty-four (24) hours. You will not make any disclosure until the latest
possible date for making such disclosure in accordance with the compulsory
process ("LATEST POSSIBLE DATE"). If the Company seeks to prevent disclosure in
accordance with the applicable legal procedures, and provides you with notice
before the Latest Possible Date that it has initiated such procedures, you will
not make disclosures of any Confidential Information that is the subject of such
procedures, until such objections are withdrawn or ruled on.

         You hereby acknowledge that any breach of this Section 9 would cause
the Company irreparable harm.

10.      Non-Solicitation.

         For two (2) years from the Termination Date, you will not, directly or
indirectly, individually or as part of or on behalf of any other person,
company, employer or other entity, hire or attempt to solicit for hire, any
persons who are employed by the Company in any capacity as a part of the sales
force or selling organization/division(s) of the Company, or employed in any
capacity in the Company in which their compensation exceeds $60,000 per year
(indexed by an inflationary factor tied to the consumer price index annually)
within six months of the Termination Date until at least six (6) months after
the person's employment with the Company ends ("COVERED EMPLOYEE"). If any
Covered Employee accepts employment with any person, company, employer or other
entity of which you are an officer, director, employee, partner, shareholder
(other than of less than 5% of the stock or equity of any corporation or
business entity) or joint venture, it will be presumed that the Covered Employee
was hired in violation of this provision ("PRESUMPTION"). This Presumption may
only be overcome by your showing by a preponderance of the evidence that you
were not directly or indirectly involved in soliciting or


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<PAGE>


encouraging the Covered Employee to leave employment with the Company. You agree
to notify any person or entity to which you provide services within one year of
the Termination Date of the terms of your obligations under this Section 10. The
parties agree that any breach of this Section 10 will entitle the Company to
injunctive relief enforcing this Section 10 and to damages equal to the greater
of the actual damages proven or liquidated damages of three times the amount of
the annual total compensation of any person solicited or hired in breach of this
Section 10. The parties are agreeing to liquidated damages as an option to
actual damages in recognition that the Company's employees are its most valuable
asset, but it is often difficult to prove the actual damages resulting from such
a breach.

11.      Indemnification.

         During the Term and at all times thereafter, you shall be indemnified
by the Company to the fullest extent permitted by the laws of the State of
Delaware from any claims or actions based upon any acts or omissions, or alleged
acts or omissions, by you which arise out of or are related to your employment
with the Company. You shall be a beneficiary of any directors' and officers'
liability insurance policy maintained by the Company as long as you remain an
officer or director.

12.      Return of Property.

         Upon termination of your employment with the Company for any reason,
you agree to immediately return to the Company all property belonging to the
Company. This includes all documents and other information prepared by you or on
your behalf or provided to you in connection with your duties under this
Agreement, regardless of the form in which such documents or information are
maintained or stored, including computer, typed, written, imaged, audio, video,
micro-fiche, electronic or any other means of recording or storing documents or
other information. You hereby warrant that you will not retain in any form any
such document or other information or copies thereof, except as provided in the
following sentence. You may retain a copy of this Agreement and information
describing any rights you may have after the Termination Date under any employee
benefit plan or other agreements.

13.      Miscellaneous Provisions.

         (a)      Notices. Unless otherwise provided herein, any notice or other
information to be provided to the Company will be sent by overnight delivery
with acknowledgement of receipt requested, to:

                  Chairman, Board of Directors
                  SunSource, Inc.
                  One Logan Square
                  Philadelphia, PA          cc:  Sally D. Garr, Esq.
                                                 Patton Boggs, LLP
                                                 2550 M Street, N.W.
                                                 Washington, D.C.  20037





                                      -9-
<PAGE>

Any notice or other information to be provided to you will be sent by overnight
delivery with acknowledgement of receipt requested, to:

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

         (b)      Dispute Resolution. You and the Company agree that any dispute
between you and the Company will be finally resolved by binding arbitration in
accordance with the Federal Arbitration Act ("FAA"). You and the Company agree
to follow the Dispute Resolution Procedures set forth in Attachment A to this
Agreement.

         (c)      Nature of Agreement. This Agreement and the attachments hereto
constitute the entire agreement between you and the Company and supercede all
prior agreements and understandings and any rights or obligations thereto
between you and the Company with respect to the subject matter hereof. In making
this Agreement, the parties warrant that they did not rely on any
representations or statements other than those contained in this Agreement. No
provision of this Agreement shall be modified, waived or discharged unless the
modification, waiver or discharge is agreed to in writing and signed by you and
by the Chairman of the Board for the Company. No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement
by the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time. Regardless of
the choice of law provisions of Delaware or any other jurisdiction, the parties
agree that this Agreement shall be otherwise interpreted, enforced and governed
by the laws of the State of Delaware. This Agreement shall be binding on the
Company's successors and assigns and on you, your heirs and personal
representatives. This Agreement will continue in effect until all obligations
under it are fulfilled. You may not assign this Agreement, either voluntarily or
involuntarily. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision hereof, which shall remain in full force and effect and this Agreement
shall be interpreted as if the unenforceable provision had not been included in
it. This Agreement may be executed in any number of counterparts each of which
shall be an original, but all of which together shall constitute one instrument.
This Agreement will be effective as of the Effective Time stated in Section 1.3
of The Agreement and Plan of Merger dated __________ between Allied Capital
Corporation, Allied Capital Lock Acquisition Corporation and SunSource, Inc.
("EFFECTIVE DATE"). The headings in this Agreement are for convenience only and
shall not effect the interpretation of this Agreement. You further certify that
you fully understand the terms of this Agreement and have entered into it
knowingly and voluntarily.



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<PAGE>




         IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its authorized officer, as of the day and year set
forth under their signatures below.

                                         SUNSOURCE, INC.


/s/ JOSEPH M. CORVINO                    By: /s/ MAURICE P. ANDRIEN, JR.
--------------------------------            ----------------------------------
EMPLOYEE

Date:  June 18, 2001                     Date:  June 18, 2001
     ---------------------------              --------------------------------


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                                                                    ATTACHMENT A



                          DISPUTE RESOLUTION PROCEDURES



The parties agree to make a good faith effort to informally resolve any dispute
before submitting the dispute to arbitration in accordance with the following
procedures:

                  (i)      The party claiming to be aggrieved shall furnish to
                           the other a written statement of the grievance, all
                           persons whose testimony would support the grievance,
                           and the relief requested or proposed. The written
                           statements must be delivered to the other party
                           within the time limits for bringing an administrative
                           or court action based on that claim.

                  (ii)     If the other party does not agree to furnish the
                           relief requested or proposed, or otherwise does not
                           satisfy the demand of the party claiming to be
                           aggrieved within 30 days and the aggrieved party
                           wishes to pursue the issue, the aggrieved party shall
                           by written notice demand that the dispute be
                           submitted to non-binding mediation before a mediator
                           jointly selected by the parties.

                  (iii)    If mediation does not produce a resolution of the
                           dispute and either party wishes to pursue the issue,
                           that party shall request arbitration of the dispute
                           by giving written notice to the other party within 30
                           days after mediation. The parties will attempt to
                           agree on a mutually acceptable arbitrator and, if no
                           agreement is reached, the parties will request a list
                           of nine arbitrators from the American Arbitration
                           Association and select by alternately striking names.
                           Regardless of whether the American Arbitration
                           Association administers the arbitration, the
                           arbitration will be conducted consistent with the
                           American Arbitration Association's National Rules for
                           Resolution of Employment Disputes ("RULES") that are
                           in effect at the time of the arbitration. If there is
                           any conflict between those Rules and the terms of the
                           Employment Agreement ("AGREEMENT"), including all
                           attachments thereto, the Agreement will govern. The
                           arbitrator shall have authority to decide whether the
                           conduct complained of under Subsection (a) above
                           violates the legal rights of the parties. In any such
                           arbitration proceeding, any hearing must be
                           transcribed by a certified court reporter and any
                           decision must be supported by written findings of
                           fact and conclusions of law. The arbitrator's
                           findings of fact must be supported by substantial
                           evidence on the record as a whole and the conclusions
                           of law and any remedy must be provided for by and
                           consistent with the laws of the Delaware and federal
                           law. The arbitrator



<PAGE>


                           shall have no authority to add to, modify, change or
                           disregard any lawful term of the Agreement. The
                           Company will pay the arbitrator's fee.

                  (iv)     Arbitration shall be the exclusive means for final
                           resolution of any dispute between the parties, except
                           that injunctive relief may be sought from any court
                           of competent jurisdiction located in the Delaware
                           when injunctive relief is necessary to preserve the
                           status quo or to prevent irreparable injury,
                           including, without limitation, any claims concerning
                           an alleged breach of Sections 9, 10, or 12 of the
                           Agreement or other misuse of Confidential
                           Information.




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