Document:

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                                                                     EXHIBIT 4.2

THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT AND IN THE LOAN
AGREEMENT, DATED AS OF OCTOBER 30, 2003, BETWEEN SOURCE INTERLINK COMPANIES,
INC., AND EACH OF ITS SUBSIDIARIES PARTY THERETO AND HILCO CAPITAL LP OR ITS
AFFILIATE, COPIES OF WHICH WILL BE MADE AVAILABLE UPON REQUEST.

                        SOURCE INTERLINK COMPANIES, INC.
               AMENDED AND RESTATED COMMON STOCK PURCHASE WARRANT

No. 2B                                                          October 30, 2003

                                                  Warrant to Purchase __________
                                                          Shares of Common Stock

            SOURCE INTERLINK COMPANIES, INC., a Missouri corporation (the
"Company"), for value received, hereby certifies that ____________, or its
registered assigns (the "Holder"), is entitled to purchase from the
______________ (__________) duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock, par value $.01 per share, of the Company
(the "Common Stock"), at a purchase price per share equal to $8.04 (the
"Purchase Price"), at any time or from time to time but prior to 5:00 P.M., New
York City time, on October 30, 2008 (the "Expiration Date"), all subject to the
terms, conditions and adjustments set forth below in this warrant. This warrant
is one of a series of warrants of like tenor issued in substitution of a warrant
(the "Original Warrant") originally issued to Hilco Capital LP (each a "Warrant"
and collectively, the "Warrants", such term to include any warrant or warrants
issued in substitution therefor). As used herein, the term "Holders" shall mean
and include the Holder and each other person who are he record holders of any of
the Warrants. Notwithstanding anything in this Warrant to the contrary, the
Holder shall in no event be entitled to receive upon exercise of this Warrant
more shares of Common Stock than an amount of shares equal to 20% of the total
amount of shares of Common Stock outstanding immediately prior to the issuance
of this Warrant, minus one.

            This Warrant, is issued pursuant to the terms of a certain Loan
Agreement, dated as of October 30, 2003, (as amended or otherwise modified from
time to time, the "Loan Agreement"), between the Company and certain of its
subsidiaries, as Borrowers, Hilco Capital LP and certain other lenders from time
to time named therein. Capitalized terms used herein and

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not otherwise defined herein shall have the meanings assigned such terms in the
Loan Agreement.

            1. DEFINITIONS. As used herein, unless the context otherwise
requires, the following terms shall have the meanings indicated:

            "Additional Shares of Common Stock" shall mean all shares (including
treasury shares) of Common Stock issued or sold or, pursuant to Section 3.3 or
3.4, deemed to be issued by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than:

            (a) (i) shares issued upon the exercise of the Warrants, or (ii)
such number of additional shares as may become issuable upon the exercise of the
Warrants by reason of adjustments required pursuant to the anti-dilution
provisions applicable to the Warrants as in effect on the date hereof,

            (b) (i) shares issued upon the exercise of options granted or to be
granted under the Company's stock option plans as in effect on the date hereof
or under any other employee stock option or purchase plan or plans adopted or
assumed after such date by the Company's Board of Directors and approved by its
stockholders; provided in each such case that the exercise or purchase price for
any such share shall not be less than 95% of the fair market value (determined
in good faith by the Company's Board of Directors) of the Common Stock on the
date of grant, and (ii) such additional number of shares as may become issuable
pursuant to the terms of any such plans by reason of adjustments required
pursuant to anti-dilution provisions applicable to such securities in order to
reflect any subdivision or combination of Common Stock, by reclassification or
otherwise, or any dividend on Common Stock payable in Common Stock, and

            (c) (i) shares issued upon the exercise or conversion of options or
any other securities convertible into or exchangeable for shares of Common Stock
outstanding as of the date hereof, including without limitation shares issuable
upon exercise of those securities on or prior to the date hereof, (ii) such
additional number of shares as may become issuable upon the exercise of any such
securities by reason of adjustments required pursuant to anti-dilution
provisions applicable to such securities as in effect on the date hereof, but
only if and to the extent that such adjustments are required as the result of
the original issuance of the Original Warrant, and (iii) such additional number
of shares as may become issuable upon the exercise of any such securities by
reason of adjustments required pursuant to anti-dilution provisions applicable
to such securities as in effect on the date hereof, in order to reflect any
subdivision or combination of Common Stock, by reclassification or otherwise, or
any dividend on Common Stock payable in Common Stock.

            (d) (i) up to 150,000 shares of Common Stock issuable upon the
exercise or conversion of options which may be issued to Melvyn Phillips and
(ii) up to 75,000 shares of Common Stock issuable upon the exercise or
conversion of options which may be issued in connection with the transactions
described in the DEYCO Letter of Intent in favor of an entity to be formed to
manage and/or acquire DEYCO as described in the DEYCO Letter of Intent.

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            "Appraised Fair Value" shall mean, with respect to any security or
other property, the fair value (as of a date which is within 20 days of the date
as of which the determination is to be made) determined in good faith, by an
independent investment banking firm selected jointly by the Company and Hilco
Capital LP or, if that selection cannot be made within ten days, by an
independent investment banking firm selected by the American Arbitration
Association in accordance with its rules, and provided further, that the Company
shall pay all of the fees and expenses of any third parties incurred in
connection with determining the Appraised Fair Value. Such independent banking
firm shall determine Appraised Fair Value assuming a sale between a willing
buyer and a willing seller, both of whom have full knowledge of all relevant
facts bearing on such decision, and neither of whom is under any compulsion to
sell or to buy. Such Appraised Fair Value determination, in the case of any
security issued or issuable by the Company, shall not be discounted by virtue of
the illiquid nature of such securities or the fact that such securities do not
constitute a majority of the Common Stock outstanding but instead shall be
deemed to have been sold as part of a transaction in which 100% of the Common
Stock outstanding on a Fully Diluted Basis has been sold to a single purchaser.

            "Business Day" shall mean any day other than a Saturday or a Sunday
or any day on which national banks are authorized or required by law to close in
Illinois. Any reference to "days" (unless Business Days are specified) shall
mean calendar days.

            "Commission" shall mean the Securities and Exchange Commission or
any successor agency having jurisdiction to enforce the Securities Act.

            "Common Stock" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any stock into which such
Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.

            "Company" shall have the meaning assigned to it in the introduction
to this Warrant, such term to include any corporation or other entity which
shall succeed to or assume the obligations of the Company hereunder in
compliance with Section 3.

            "Convertible Securities" shall mean any evidences of indebtedness,
shares of stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Additional Shares of Common
Stock.

            "Current Market Price" shall mean, on any date specified herein, the
average of the daily Market Price during the 10 consecutive trading days
commencing 15 trading days before such date, except that, if on any such date
the shares of Common Stock are not listed or admitted for trading on any
national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the Market Price on such date.

            "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations thereunder, or any
successor statute.

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            "Expiration Date" shall have the meaning assigned to it in the
introduction to this Warrant.

            "Fair Value" shall mean, on any date specified herein (i) in the
case of cash, the dollar amount thereof, (ii) in the case of a security, the
Current Market Price, and (iii) in all other cases, the fair value thereof (as
of a date which is within 20 days of the date as of which the determination is
to be made) determined jointly by the Company and Hilco Capital LP; provided,
however, that if such parties are unable to reach agreement within a reasonable
period of time, the Fair Value shall be equal to Appraised Fair Value.

            "Fully Diluted Basis" means all shares of Common Stock outstanding
and any shares of Common Stock issuable upon exercise or conversion of Options
or Convertible Securities (including, without limitation, this Warrant), whether
such right is exercisable or convertible immediately or only after the passage
of time.

            "Holder" shall have the meaning assigned to it in the introduction
to this Warrant.

            "Loan Agreement" shall have the meaning assigned to in the
introduction to this Warrant.

            "Market Price" shall mean, on any date specified herein, the amount
per share of the Common Stock, equal to (i) the last reported sale price of such
Common Stock, regular way, on such date or, in case no such sale takes place on
such date, the average of the closing bid and asked prices thereof regular way
on such date, in either case as officially reported on the principal national
securities exchange on which such Common Stock is then listed or admitted for
trading, (ii) if such Common Stock is not then listed or admitted for trading on
any national securities exchange but is designated as a national market system
security by the NASD, the last reported trading price of the Common Stock on
such date, (iii) if there shall have been no trading on such date or if the
Common Stock is not so designated, the average of the closing bid and asked
prices of the Common Stock on such date as shown by the NASD automated quotation
system, or (iv) if such Common Stock is not then listed or admitted for trading
on any national exchange or quoted in the over-the-counter market, the Appraised
Fair Value of such Common Stock.

            "NASD" shall mean the National Association of Securities Dealers,
Inc.

            "Obligations" shall have the meaning set forth in the Loan
Agreement, in so far as such obligations are for the payment of money.

            "Options" shall mean any rights, options or warrants to subscribe
for, purchase or otherwise acquire either Additional Shares of Common Stock or
Convertible Securities.

            "Other Securities" shall mean any stock (other than Common Stock)
and other securities of the Company or any other Person (corporate or otherwise)
which the Holder of this Warrant at any time shall be entitled to receive, or
shall have received, upon the exercise of this Warrant, in lieu of or in
addition to Common Stock, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Stock or other
Securities pursuant to Section 4 or otherwise.

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            "Person" shall mean any individual, firm, partnership, corporation,
trust, joint venture, association, joint stock company, limited liability
company, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof, and shall
include any successor (by merger or otherwise) of such entity.

            "Proposed Offering" shall mean an underwritten public offering of
Common Stock by the Company occurring on or prior to March 15, 2004.

            "Purchase Price" shall have the meaning assigned to it in the
introduction to this Warrant.

            "Registration Rights Agreement" shall mean the Warrantholders Rights
Agreement dated as of the date hereof, as amended or otherwise modified from
time to time.

            "Restricted Securities" shall mean (i) any Warrants bearing the
applicable legend set forth in Section 10.1, (ii) any shares of Common Stock (or
Other Securities) issued or issuable upon the exercise of this Warrant which are
(or, upon issuance, will be) evidenced by a certificate or certificates bearing
the applicable legend set forth in such Section, and (iii) any shares of Common
Stock (or Other Securities) issued subsequent to the exercise of any of this
Warrant as a dividend or other distribution with respect to, or resulting from a
subdivision of the outstanding shares of Common Stock (or Other Securities) into
a greater number of shares by reclassification, stock splits or otherwise, or in
exchange for or in replacement of the Common Stock (or Other Securities) issued
upon such exercise, which are evidenced by a certificate or certificates bearing
the applicable legend set forth in such Section.

            "Rights" shall have the meaning assigned to it in Section 3.10.

            "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time, and the rules and regulations thereunder, or any successor
statute.

            "Warrant" shall have the meaning assigned to it in the introduction
to this Warrant.

            "Warrant Shares" shall mean any and all shares of Common Stock
issued upon exercise of this Warrant.

            2. EXERCISE OF WARRANT.

            2.1. Manner of Exercise; Payment of the Purchase Price. (a) This
Warrant may be exercised by the Holder hereof, in whole or in part, at any time
or from time to time prior to 5:00 p.m., New York City time, on the Expiration
Date, by surrendering to the Company at its principal office this Warrant, with
the form of Election to Purchase Shares attached hereto as Exhibit A (or a
reasonable facsimile thereof) duly executed by the Holder and accompanied by
payment of the Purchase Price for the number of shares of Common Stock specified
in such form.

            (b) Payment of the Purchase Price may be made as follows (or by any
combination of the following): (i) in United States currency by cash or delivery
of a certified

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check or bank draft payable to the order of the Company or by wire transfer to
the Company, (ii) by cancellation of all or any part of the unpaid principal
amount of Loans held by the Holder in an amount equal to the Purchase Price,
(iii) by cancellation of such number of shares of Common Stock otherwise
issuable to the Holder upon such exercise as shall be specified in such Election
to Purchase Shares, such that the excess of the aggregate Current Market Price
of such specified number of shares on the date of exercise over the portion of
the Purchase Price attributable to such shares shall equal the Purchase Price
attributable to the shares of Common Stock to be issued upon such exercise, in
which case such amount shall be deemed to have been paid to the Company and the
number of shares issuable upon such exercise shall be reduced by such specified
number, or (iv) by surrender to the Company for cancellation certificates
representing shares of Common Stock of the Company owned by the Holder (properly
endorsed for transfer in blank) having a Current Market Price on the date of
Warrant exercise equal to the Purchase Price.

            2.2. When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to, and the
Purchase Price shall have been received by, the Company as provided in Section
2.1, and, to the extent permitted by law, at such time the Person or Persons in
whose name or names any certificate or certificates for Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in Section 2.3
shall be deemed to have become the holder or holders of record thereof for all
purposes.

            2.3. Delivery of Stock Certificates, etc.; Charges, Taxes and
Expenses. (a) As soon as practicable after each exercise of this Warrant, in
whole or in part, and in any event within seven (7) Business Days thereafter,
the Company shall cause to be issued in the name of and delivered to the Holder
hereof or, subject to Section 10, as the Holder may direct,

            (i) a certificate or certificates for the number of shares of Common
      Stock (or Other Securities) to which the Holder shall be entitled upon
      such exercise plus, in lieu of issuance of any fractional share to which
      the Holder would otherwise be entitled, if any, a check for the amount of
      cash equal to the same fraction multiplied by the Exercise Price per share
      on the date of Warrant exercise, and

            (ii) in case such exercise is for less than all of the shares of
      Common Stock purchasable under this Warrant, a new Warrant or Warrants of
      like tenor, for the balance of the shares of Common Stock purchasable
      hereunder.

            (b) Issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the initial Holder
hereof for any issue or transfer tax or other incidental expense, in respect of
the issuance of such certificates, all of which such taxes and expenses shall be
paid by the Company.

            2.4. Exercise Disputes. In the case of any dispute with respect to
the number of shares to be issued upon exercise of this Warrant, the Company
shall promptly issue such number of shares of Common Stock that is not disputed
and shall submit the disputed determinations or arithmetic calculations to the
Holder via facsimile within five (5) Business Days of receipt of the Holder's
Election to Purchase Shares. If the Holder and the Company are

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unable to agree as to the determination of the number of issuable shares within
five (5) Business Days of such disputed determination or arithmetic calculation
being submitted to the Holder, then the Company shall, in accordance with this
Section, submit via facsimile the disputed determination to an independent
reputable accounting firm of national standing, selected by the Company and
reasonably acceptable to the Holder. The Company shall cause such accounting
firm to perform the determinations or calculations and notify the Company and
the Holder of the results within forty-eight (48) hours from the time it
receives the disputed determinations or calculations. Such accounting firm's
determination shall be binding upon all parties absent manifest error. The
Company shall, on the next Business Day, issue certificate(s) representing the
appropriate number of shares of Common Stock in accordance with such accounting
firm's determination and this Section. All fees and expenses of such
determinations and calculations shall be borne by the Company.

            2.5. Company to Reaffirm Obligations. The Company shall, at the time
of each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to such Holder all
rights to which such Holder shall continue to be entitled after such exercise in
accordance with the terms of this Warrant, provided that if the Holder of this
Warrant shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford such rights to the Holder.

            2.6. Tax Basis. The Company and the Holder shall mutually agree as
to the tax basis of this Warrant for purposes of the Internal Revenue Code of
1986, as amended, and the treatment of this Warrant under such Code by each of
the Company and the Holder shall be consistent with such agreement.

            3. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.

            3.1. Adjustment of Number of Shares. Upon each adjustment of the
Purchase Price as a result of the calculations made in this Section 3 and
subject to the limitation of the amount of shares set forth in the introductory
paragraph to this Warrant, this Warrant shall thereafter evidence the right to
receive, at the adjusted Purchase Price, that number of shares of Common Stock
(calculated to the nearest one-hundredth) obtained by dividing (i) the product
of the aggregate number of shares covered by this Warrant immediately prior to
such adjustment and the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price by (ii) the Purchase Price in effect
immediately after such adjustment of the Purchase Price.

            3.2. Adjustment of Number of Shares.

            3.2.1. Issuance of Additional Shares of Common Stock. In case the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 3.3 or 3.4 but excluding
Additional Shares of Common Stock purchasable upon exercise of Rights referred
to in Section 3.10) without consideration or for a consideration per share less
than the Current Market Price in effect immediately prior to such issue or sale,
then, and in each such case, subject to Section 3.8, the Purchase Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Purchase Price by a
fraction

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            (a) the numerator of which shall be the sum of (x) the number of
      shares of Common Stock outstanding immediately prior to such issue or sale
      and (y) the number of shares of Common Stock which the aggregate
      consideration received by the Company for the total number of such
      Additional Shares of Common Stock so issued or sold would purchase at such
      Current Market Price, and

            (b) the denominator of which shall be the number of shares of Common
      Stock outstanding immediately after such issue or sale, provided that, for
      the purposes of this Section 3.2.1, (i) immediately after any Additional
      Shares of Common Stock are deemed to have been issued pursuant to Section
      3.3 or 3.4, such Additional Shares shall be deemed to be outstanding, and
      (ii) treasury shares shall not be deemed to be outstanding.

Notwithstanding anything to the contrary contained herein, no adjustment to
Purchase Price shall be required for any sale of Additional Shares of Common
Stock pursuant to the Proposed Offering if the Purchase Price adjustment under
this section as a result of such sales pursuant to the Proposed Offering would
be less than an amount equal to ten percent of Market Price as computed on the
date of the initial sale of Common Stock pursuant to the Proposed Offering.

            3.2.2. Extraordinary Dividends and Distributions. In case the
Company at any time or from time to time after the date hereof shall declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of other or additional stock or other securities or
property or Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on the Common Stock other
than (a) a dividend payable in Additional Shares of Common Stock or (b) a
regularly scheduled cash dividend (at a rate not in excess of the rate of the
last regularly scheduled cash dividend theretofore paid) payable out of
consolidated earnings or earned surplus, determined in accordance with generally
accepted accounting principles, or (c) a dividend of Rights referred to in
Section 3.10 hereof, then, in each such case, subject to Section 3.8, the
Purchase Price in effect immediately prior to the close of business on the
record date fixed for the determination of holders of any class of securities
entitled to receive such dividend or distribution shall be reduced, effective as
of the close of business on such record date, to a price determined by
multiplying such Purchase Price by a fraction

            (x) the numerator of which shall be the Current Market Price in
      effect on such record date or, if the Common Stock trades on an
      ex-dividend basis, on the date prior to the commencement of ex-dividend
      trading, less the Fair Value of such dividend or distribution applicable
      to one share of Common Stock, and

            (y) the denominator of which shall be such Current Market Price,

provided that, in the event that the amount of such dividend as so determined is
equal to or greater than 10% of such Current Market Price or in the event that
such fraction is less than 9/10ths, in lieu of the foregoing adjustment,
adequate provision shall be made so that the Holder shall receive, upon Warrant
exercise, a pro rata share of such dividend based upon the maximum number of
shares of Common Stock at the time issuable to the Holder (determined without
regard to whether the Warrant is exercisable at such time.)

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            3.3. Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities of the Company entitled to receive, any
Options or Convertible Securities (whether or not the rights thereunder are
immediately exercisable, but exclusive of options or convertible securities
excluded from the definition of Additional Shares of Common Stock), then, and in
each such case, the maximum number of Additional Shares of Common Stock (as set
forth in the instrument relating thereto, without regard to any provisions
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue, sale, grant or assumption or, in case such a record date shall have been
fixed, as of the close of business on such record date (or, if the Common Stock
trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), provided that such Additional Shares of Common Stock shall
not be deemed to have been issued unless (i) the consideration per share
(determined pursuant to Section 3.5) of such shares would be less than the
Current Market Price in effect on the date of and immediately prior to such
issue, sale, grant or assumption or immediately prior to the close of business
on such record date (or, if the Common Stock trades on an ex-dividend basis, on
the date prior to the commencement of ex-dividend trading), as the case may be,
and (ii) such Additional Shares of Common Stock are not purchasable pursuant to
Rights referred to in Section 3.10, and provided, further, that in any such case
in which Additional Shares of Common Stock are deemed to be issued

            (a) whether or not the Additional Shares of Common Stock underlying
      such Options or Convertible Securities are deemed to be issued, no further
      adjustment of the Purchase Price shall be made upon the subsequent issue
      or sale of Convertible Securities or shares of Common Stock upon the
      exercise of such Options or the conversion or exchange of such Convertible
      Securities, except in the case of any such Options or Convertible
      Securities which contain provisions requiring an adjustment, subsequent to
      the date of the issue or sale thereof, of the number of Additional Shares
      of Common Stock issuable upon the exercise of such Options or the
      conversion or exchange of such Convertible Securities by reason of (x) a
      change of control of the Company, (y) the acquisition by any Person or
      group of Persons of any specified number or percentage of the voting
      securities of the Company or (z) any similar event or occurrence, each
      such case to be deemed hereunder to involve a separate issuance of
      Additional Shares of Common Stock, Options or Convertible Securities, as
      the case may be;

            (b) if such Options or Convertible Securities by their terms
      provide, with the passage of time or otherwise, for any increase in the
      consideration payable to the Company, or decrease in the number of
      Additional Shares of Common Stock issuable, upon the exercise, conversion
      or exchange thereof (by change of rate or otherwise), the Purchase Price
      computed upon the original issue, sale, grant or assumption thereof (or
      upon the occurrence of the record date, or date prior to the commencement
      of ex-dividend trading, as the case may be, with respect thereto), and any
      subsequent adjustments based thereon, shall, upon any such increase or
      decrease becoming effective, be recomputed to reflect such increase or
      decrease insofar as it affects such Options, or

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      the rights of conversion or exchange under such Convertible Securities,
      which are outstanding at such time;

            (c) upon the expiration (or purchase by the Company and cancellation
      or retirement) of any such Options which shall not have been exercised or
      the expiration of any rights of conversion or exchange under any such
      Convertible Securities which (or purchase by the Company and cancellation
      or retirement of any such Convertible Securities the rights of conversion
      or exchange under which) shall not have been exercised, the Purchase Price
      computed upon the original issue, sale, grant or assumption thereof (or
      upon the occurrence of the record date, or date prior to the commencement
      of ex-dividend trading, as the case may be, with respect thereto), and any
      subsequent adjustments based thereon, shall, upon such expiration (or such
      cancellation or retirement, as the case may be), be recomputed as if:

                  (i) in the case of Options for Common Stock or Convertible
            Securities, the only Additional Shares of Common Stock issued or
            sold were the Additional Shares of Common Stock, if any, actually
            issued or sold upon the exercise of such Options or the conversion
            or exchange of such Convertible Securities and the consideration
            received therefor was the consideration actually received by the
            Company for the issue, sale, grant or assumption of all such
            Options, whether or not exercised, plus the consideration actually
            received by the Company upon such exercise, or for the issue or sale
            of all such Convertible Securities which were actually converted or
            exchanged, plus the additional consideration, if any, actually
            received by the Company upon such conversion or exchange, and

                  (ii) in the case of Options for Convertible Securities, only
            the Convertible Securities, if any, actually issued or sold upon the
            exercise of such Options were issued at the time of the issue or
            sale, grant or assumption of such Options, and the consideration
            received by the Company for the Additional Shares of Common Stock
            deemed to have then been issued was the consideration actually
            received by the Company for the issue, sale, grant or assumption of
            all such Options, whether or not exercised, plus the consideration
            deemed to have been received by the Company (pursuant to Section
            3.5) upon the issue or sale of such Convertible Securities with
            respect to which such Options were actually exercised;

            (d) no readjustment pursuant to subdivision (b) or (c) above shall
      have the effect of increasing the Purchase Price by an amount in excess of
      the amount of the adjustment thereof originally made in respect of the
      issue, sale, grant or assumption of such Options or Convertible
      Securities; and

            (e) in the case of any such Options which expire by their terms not
      more than 30 days after the date of issue, sale, grant or assumption
      thereof, no adjustment of the Purchase Price shall be made until the
      expiration or exercise of all such Options, whereupon such adjustment
      shall be made in the manner provided in subdivision (c) above.

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            3.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.

            3.5. Computation of Consideration. For the purposes of this Section
3,

            (a) the consideration for the issue or sale of any Additional Shares
      of Common Stock shall, irrespective of the accounting treatment of such
      consideration,

                  (i) insofar as it consists of cash, be computed at the net
            amount of cash received by the Company, without deducting any
            expenses paid or incurred by the Company or any commissions or
            compensations paid or concessions or discounts allowed to
            underwriters, dealers or others performing similar services in
            connection with such issue or sale,

                  (ii) insofar as it consists of property (including securities)
            other than cash, be computed at the Fair Value thereof at the time
            of such issue or sale, and

                  (iii) in case Additional Shares of Common Stock are issued or
            sold together with other stock or securities or other assets of the
            Company for a consideration which covers both, be the portion of
            such consideration so received, computed as provided in clauses (i)
            and (ii) above, allocable to such Additional Shares of Common Stock,
            such allocation to be determined in the same manner that the Fair
            Value of property not consisting of cash is to be determined as
            provided in the definition of `Fair Value' herein;

            (b) Additional Shares of Common Stock deemed to have been issued
      pursuant to Section 3.3, relating to Options and Convertible Securities,
      shall be deemed to have been issued for a consideration per share
      determined by dividing

                  (i) the total amount, if any, received and receivable by the
            Company as consideration for the issue, sale, grant or assumption of
            the Options or Convertible Securities in question, plus the minimum
            aggregate amount of additional consideration (as set forth in the
            instruments relating thereto, without regard to any provision
            contained therein for a subsequent adjustment of such consideration
            to protect against dilution) payable to the Company upon the
            exercise in full of such Options or the conversion or exchange of
            such Convertible Securities or, in the case of Options for
            Convertible Securities, the exercise of such Options for Convertible
            Securities and the conversion or exchange of such

                                       11
<PAGE>

            Convertible Securities, in each case computing such consideration as
            provided in the foregoing subdivision (a),

            by

                  (ii) the maximum number of shares of Common Stock (as set
            forth in the instruments relating thereto, without regard to any
            provision contained therein for a subsequent adjustment of such
            number to protect against dilution) issuable upon the exercise of
            such Options or the conversion or exchange of such Convertible
            Securities; and

            (c) Additional Shares of Common Stock deemed to have been issued
      pursuant to Section 3.4, relating to stock dividends, stock splits, etc.,
      shall be deemed to have been issued for no consideration.

            3.6. Adjustments for Combinations, etc. In case the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Purchase Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.

            3.7. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Section 4) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Section 3, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this Section 3 with respect to the Purchase Price and the number
of shares purchasable upon Warrant exercise shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable upon the exercise of the Warrants, so as
to protect the holders of the Warrants against the effect of such dilution.

            3.8. De Minimis Adjustments. If the amount of any adjustment of the
Purchase Price required pursuant to this Section 3 would be less than one tenth
(1/10) of one percent (1%) of the Purchase Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate a change in the Purchase
Price of at least one tenth (1/10) of one percent (1%) of such Purchase Price.
All calculations under this Warrant shall be made to the nearest one-hundredth
of a share.

            3.9. Abandoned Dividend or Distribution. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution (which results in an adjustment to the
Purchase Price under the terms of this Warrant) and shall, thereafter, and
before such dividend or distribution is paid or delivered to

                                       12
<PAGE>

shareholders entitled thereto, legally abandon its plan to pay or deliver such
dividend or distribution, then any adjustment made to the Purchase Price and
number of shares of Common Stock purchasable upon Warrant exercise by reason of
the taking of such record shall be reversed, and any subsequent adjustments,
based thereon, shall be recomputed.

            3.10. Shareholder Rights Plan. Notwithstanding the foregoing, in the
event that the Company shall distribute "poison pill" rights pursuant to a
"poison pill" shareholder rights plan (the "Rights"), the Company shall, in lieu
of making any adjustment pursuant to Section 3.2.1 or Section 3.2.2 hereof, make
proper provision so that each Holder who exercises a Warrant after the record
date for such distribution and prior to the expiration or redemption of the
Rights shall be entitled to receive upon such exercise, in addition to the
shares of Common Stock issuable upon such exercise, a number of Rights to be
determined as follows: (i) if such exercise occurs on or prior to the date for
the distribution to the holders of Rights of separate certificates evidencing
such Rights (the "Distribution Date"), the same number of Rights to which a
holder of a number of shares of Common Stock equal to the number of shares of
Common Stock issuable upon such exercise at the time of such exercise would be
entitled in accordance with the terms and provisions of and applicable to the
Rights; and (ii) if such exercise occurs after the Distribution Date, the same
number of Rights to which a holder of the number of shares into which the
Warrant so exercised was exercisable immediately prior to the Distribution Date
would have been entitled on the Distribution Date in accordance with the terms
and provisions of and applicable to the Rights.

            4. CONSOLIDATION, MERGER, ETC.

            4.1. Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date hereof shall (a)
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) permit any
other Person to consolidate with or merge into the Company and the Company shall
be the continuing or surviving Person but, in connection with such consolidation
or merger, the Common Stock or Other Securities shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (c) transfer all or substantially all of its properties or assets
to any other Person, or (d) effect a capital reorganization or reclassification
of the Common Stock or Other Securities, (other than a capital reorganization or
reclassification resulting in the issue or Additional Shares of Common Stock for
which adjustment in the Purchase Price is provided in section 3.2.1 or 3.2.2),
then, and in the case of each such transaction, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this
Warrant, the Holder of this Warrant, upon the exercise hereof at any time after
the consummation of such transaction, shall be entitled to receive (at the
aggregate Purchase Price in effect at the time of such consummation for all
Common Stock or Other Securities issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Stock or Other Securities issuable
upon such exercise prior to such consummation, the highest amount of securities,
cash or other property to which such Holder would actually have been entitled as
a shareholder upon such consummation if such Holder had exercised this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in Sections 3 through 5, provided that if a purchase, tender or exchange offer
shall have been made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock, and if the Holder so designates in

                                       13
<PAGE>

a notice given to the Company on or before the date immediately preceding the
date of the consummation of such transaction, the Holder of this Warrant shall
be entitled to receive upon surrender of this Warrant the highest amount of
securities, cash or other property to which it would actually have been entitled
as a shareholder if the Holder of this Warrant had exercised this Warrant prior
to the expiration of such purchase, tender or exchange offer and accepted such
offer, subject to adjustments (from and after the consummation of such purchase,
tender or exchange offer) as nearly equivalent as possible to the adjustments
provided for in Sections 3 through 5.

            4.2. Assumption of Obligations. Notwithstanding anything contained
in this Warrant or in the Loan Agreement to the contrary, the Company shall not
effect any of the transactions described in clauses (a) through (d) of Section
4.1 unless, prior to the consummation thereof, each Person (other than the
Company) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the Holder of
this Warrant, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant), (b) the obligations of the
Company to the Holder under the Registration Rights Agreement and (c) the
obligation to deliver to the Holder such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this Section 4, the
Holder may be entitled to receive. Nothing in this Section 4 shall be deemed to
authorize the Company to enter into any transaction not otherwise permitted by
the Loan Agreement.

            5. OTHER DILUTIVE EVENTS. In case any event shall occur as to which
the provisions of Section 3 or Section 4 hereof are not strictly applicable or
if strictly applicable would not fairly protect the purchase rights represented
by this Warrant in accordance with the essential intent and principles of such
Sections, then, in each such case, the Company shall appoint a firm of
independent certified public accountants of recognized national standing (which
shall be reasonably acceptable to the Holder), which shall give their opinion on
the adjustment, if any, on a basis consistent with the essential intent and
principles established in Section 3, necessary to preserve, without dilution,
the purchase rights represented by this Warrant. Upon receipt of such opinion,
the Company shall promptly mail a copy thereof to the Holder and shall make the
adjustments described therein.

            6. NO DILUTION OR IMPAIRMENT. The Company shall not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company shall (a) not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of stock, free from all liens, security
interests, encumbrances, taxes, preemptive rights and charges on the exercise of
the Warrants from time to

                                       14
<PAGE>

time outstanding, (c) not take any action which results in an increase of the
total number of shares of Common Stock (or Other Securities) issuable after the
action upon the exercise of this Warrant if that total number of issuable shares
would exceed the total number of shares of Common Stock (or Other Securities)
then authorized by the Company's certificate of incorporation and available for
the purpose of issue upon such exercise, and (d) shall not issue any capital
stock of any class which is preferred as to dividends or as to the distribution
of assets upon voluntary or involuntary dissolution, liquidation or winding-up,
unless the rights of the holders thereof shall be limited to a fixed sum or
percentage of par value or a sum determined by reference to a formula based on a
published index of interest rates, an interest rate publicly announced by a
financial institution or a similar indicator of interest rates in respect of
participation in dividends and to a fixed sum or percentage of par value in any
such distribution of assets.

            7. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities) issuable upon
the exercise of this Warrant (e.g., by reason of the issuance of Additional
Shares of Common Stock or Convertible Securities), the Company at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms of this Warrant and prepare a certificate, signed by the Chairman of the
Board, President or one of the Vice Presidents of the Company, and by the Chief
Financial Officer, the Treasurer or one of the Assistant Treasurers of the
Company, setting forth such adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding on a
Fully Diluted Basis and (c) the Purchase Price in effect immediately prior to
such issue or sale and as adjusted and readjusted (if required by Section 3) on
account thereof. The Company shall forthwith mail a copy of each such
certificate to each holder of a Warrant and shall, upon the written request at
any time of any holder of a Warrant, furnish to such holder a like certificate.
The Company shall also keep copies of all such certificates at its principal
office and shall cause the same to be available for inspection at such office
during normal business hours by any holder of a Warrant or any prospective
purchaser of a Warrant designated by the holder thereof. The Company shall upon
the request in writing of Hilco Capital LP (at the Company's expense), retain
independent public accountants of recognized national standing selected by the
Board of Directors of the Company to make any computation required in connection
with adjustments under this Warrant.

            8. NOTICES OF CORPORATE ACTION. In the event of:

            (a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or

            (b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company, any consolidation or
merger involving the Company and any other Person, any transaction or series of
transactions in which more than 50%

                                       15
<PAGE>

of the voting securities of the Company are transferred to another Person, or
any transfer, sale or other disposition of all or substantially all the assets
of the Company to any other Person, or

            (c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,

the Company shall mail to the Holder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, and (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, sale, disposition, dissolution, liquidation or winding-up is to take
place and the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 45 days prior to the date
therein specified.

            9. REGISTRATION OF COMMON STOCK. If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company shall, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered or approved, as
the case may be. The Holder's rights regarding registration of the Warrant
Shares under the Securities Act shall be governed by the Registration Rights
Agreement.

            10. RESTRICTIONS ON TRANSFER.

            10.1. Restrictive Legends. Except as otherwise permitted by this
Section 10, this Warrant (including any Warrant issued upon the transfer of this
Warrant) shall be stamped or otherwise imprinted with a legend in substantially
the following form:

      THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT
      HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
      THE SECURITIES LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR
      OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT
      TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT
      AND SUCH LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD,
      TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
      CONDITIONS SPECIFIED IN THIS WARRANT.

Except as otherwise permitted by this Section 10, each certificate for Common
Stock (or Other Securities) issued upon the exercise of this Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:

                                       16
<PAGE>

      THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY
      STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
      PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
      APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO
      THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. SUCH SECURITIES
      MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE
      WITH THE CONDITIONS SPECIFIED IN CERTAIN COMMON STOCK PURCHASE WARRANT
      ISSUED BY THE COMPANY PURSUANT TO THE LOAN AGREEMENT, DATED AS OF OCTOBER
      30, 2003, BETWEEN THE COMPANY AND CERTAIN OF THE COMPANY'S SUBSIDIARIES,
      THE HOLDER AND CERTAIN OTHER LENDERS FROM TIME TO TIME PARTY THERETO. THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO AND HAVE
      THE BENEFIT OF A WARRANTHOLDERS RIGHTS AGREEMENT DATED AS OF OCTOBER 30,
      2003 AMONG SOURCE INTERLINK COMPANIES, INC. AND THE HOLDER. COMPLETE AND
      CORRECT COPIES OF SUCH WARRANT AND WARRANTHOLDERS RIGHTS AGREEMENT ARE
      AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE AND WILL BE FURNISHED TO
      THE HOLDER OF SUCH SECURITIES UPON WRITTEN REQUEST AND WITHOUT CHARGE.

            10.2. Transfer to Comply With the Securities Act. Restricted
Securities may not be sold, assigned, pledged, hypothecated, encumbered or in
any manner transferred or disposed of (a "Transfer"), in whole or in part,
except in compliance with the provisions of the Securities Act and state
securities or Blue Sky laws and the terms and conditions hereof.

            10.3. Termination of Restrictions. The restrictions imposed by this
Section 10 on the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) when such securities are
sold pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, or (c) when, in the opinion of both counsel for the Holder and
counsel for the Company, such restrictions are no longer required or necessary
in order to protect the Company against a violation of the Securities Act upon
any sale or other disposition of such securities without registration
thereunder. Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the Holder shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing the applicable legends
required by Section 9.1.

            10.4. Exempt Transfers. The restrictions on the transfer of this
Warrant or the Warrant Shares set forth in this Section 10 shall not apply to
transfers to or from an affiliate of the Holder.

            11. REPRESENTATIONS OF COMPANY.

                                       17
<PAGE>

            11.1. Organization and Qualification. The Company is a corporation
duly organized and validly existing in good standing under the laws of the
jurisdiction in which it is incorporated, and has the requisite corporate power
to own its properties and to carry on its business as now being conducted. The
Company is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted by
it makes such qualification necessary, except where the failure to so qualify is
not reasonably likely to result in a Material Adverse Change.

            11.2. Authorization; Enforcement; Compliance with Other Instruments.
(a) The Company has the requisite corporate power and authority to enter into
and perform its obligations under this Warrant and the Registration Rights
Agreement and to issue the Warrant Shares in accordance with this Warrant, (b)
the execution and delivery of this Warrant and the Registration Rights Agreement
by the Company and the consummation by it of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of this Warrant
and the reservation for issuance and the issuance of the Warrant Shares, upon
exercise of this Warrant, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, (c) the Registration Rights
Agreement and this Warrant have been duly executed and delivered by the Company,
and (d) the Registration Rights Agreement and this Warrant constitute the valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.

            11.3. Capitalization. As of October 27, 2003, the authorized capital
stock of the Company consists of 40,000,000 shares of Common Stock, par value
$0.01 per share, of which as of such date, 18,770,391 shares are issued and
outstanding, and 2,000,000 shares of Preferred Stock, of which as of such date
hereof, zero (0) shares are issued and outstanding. This Warrant represents
approximately _____ of all issued and outstanding shares as of October 30, 2003.
All of the outstanding shares of capital stock have been validly issued and are
fully paid and nonassessable. No shares of capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as contemplated by this Warrant and
for the securities listed on Schedule 11.3 attached hereto, as of the date
hereof, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, and (ii) there are no agreements or arrangements under which the
Company or any of its subsidiaries is obligated to register the sale of any of
their securities under the Securities Act (except the Registration Rights
Agreement and the Registration Rights Agreements listed on Schedule 11.3
attached hereto). There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
this Warrant or, upon exercise of this Warrant, the issuance of Warrant Shares,
except for anti-

                                       18
<PAGE>

dilution provisions which have been validly waived on or prior to the date
hereof in respect of the issuance of this Warrant and, upon exercise of this
Warrant, the issuance of Warrant Shares.

            11.4. Issuance of Warrants and Warrant Shares. This Warrant is duly
authorized and, upon issuance in accordance with the terms hereof, will be
validly issued, fully paid and non-assessable, free from all taxes, liens and
charges with respect to the issue thereof, and shall not be subject to
preemptive rights or other similar rights of stockholders of the Company. The
Warrant Shares have been duly authorized and reserved for issuance upon exercise
of this Warrant, and upon such exercise, will be validly issued, fully paid and
non-assessable, free from all taxes, liens and charges with respect to the issue
thereof, and will not be subject to preemptive rights or other similar rights of
stockholders of the Company.

            11.5. No Conflicts. The execution, delivery and performance of the
Registration Rights Agreement and this Warrant by the Company, and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance of the Warrant Shares) will not (i)
result in a violation of any organizational documents governing the Company or
(ii) violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or affected. The
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental or regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Registration Rights Agreement or this
Warrant in accordance with the terms hereof or thereof. All consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof.

            11.6. Investment Company Status. The Company is not and, upon
issuance of this Warrant or the Warrant Shares, will not be an "investment
company," a company controlled by an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended.

            12. Availability of Information. So long as the Company shall not
have filed a registration statement pursuant to Section 12 of the Exchange Act
or a registration statement pursuant to the requirements of the Securities Act,
the Company shall, at any time and from time to time, upon the request of any
holder of Restricted Securities and upon the request of any Person designated by
such holder as a prospective purchaser of any Restricted Securities, furnish in
writing to such holder or such prospective purchaser, as the case may be, a
statement as of a date not earlier than 12 months prior to the date of such
request of the nature of the business of the Company and the products and
services it offers and copies of the Company's most recent balance sheet and
profit and loss and retained earnings statements, together with similar
financial statements for such part of the two preceding fiscal years as the
Company shall have been in operation, all such financial statements to be
audited to the extent

                                       19
<PAGE>

audited statements are reasonably available, provided that, in any event the
most recent financial statements so furnished shall include a balance sheet as
of a date less than 16 months prior to the date of such request, statements of
profit and loss and retained earnings for the 12 months preceding the date of
such balance sheet, and, if such balance sheet is not as of a date less than six
months prior to the date of such request, additional statements of profit and
loss and retained earnings for the period from the date of such balance sheet to
a date less than six months prior to the date of such request. If the Company
shall have filed a registration statement pursuant to the requirements of
Section 12 of the Exchange Act or a registration statement pursuant to the
requirements of the Securities Act, the Company shall timely file the reports
required to be filed by it under the Securities Act and the Exchange Act
(including but not limited to the reports under Sections 13 and 15(d) of the
Exchange Act referred to in subparagraph (c) of Rule 144 adopted by the
Commission under the Securities Act)) and will take such further action as any
holder of Restricted Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Restricted Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 and Rule 144A under the Securities Act, as
such rules may be amended from time to time, or (b) any other rule or regulation
now existing or hereafter adopted by the Commission. Upon the request of any
holder of Restricted Securities, the Company will deliver to such holder a
written statement as to whether it has complied with such requirements.

            13. RESERVATION OF STOCK, ETC. The Company shall at all times
reserve and keep available, solely for issuance and delivery upon exercise of
this Warrant, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of this Warrant at the time outstanding. All
shares of Common Stock (or Other Securities) issuable upon exercise of this
Warrant shall be duly authorized and, when issued upon such exercise or
conversion, shall be validly issued and, in the case of shares, fully paid and
nonassessable, with no liability on the part of the holders thereof, and, in the
case of all securities, shall be free from all taxes, liens, security interests,
encumbrances, taxes, preemptive rights and charges. The transfer agent for the
Common Stock, which may be the Company ("Transfer Agent"), and every subsequent
Transfer Agent for any shares of the Company's capital stock issuable upon the
exercise of any of the purchase rights represented by this Warrant, are hereby
irrevocably authorized and directed at all times until the Expiration Date to
reserve such number of authorized and unissued shares as shall be requisite for
such purpose. The Company shall keep copies of this Warrant on file with the
Transfer Agent for the Common Stock and with every subsequent Transfer Agent for
any shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by this Warrant. The Company shall supply such
Transfer Agent with duly executed stock certificates for such purpose. All
Warrants surrendered upon the exercise of the rights thereby evidenced shall be
canceled, and such canceled Warrants shall constitute sufficient evidence of the
number of shares of stock which have been issued upon the exercise of such
Warrants. Subsequent to the Expiration Date, no shares of stock need be reserved
by the Company in respect of any unexercised portion of this Warrant.

            14. REGISTRATION AND TRANSFER OF WARRANTS.

            14.1. Warrant Register; Ownership of Warrants. This Warrant shall be
numbered and shall be registered in a warrant register (the "Warrant Register")
as it is issued and

                                       20
<PAGE>

transferred, which Warrant Register shall be maintained by the Company at its
principal office or, at the Company's election and expense, by a warrant agent
or the Company's transfer agent. The Company shall be entitled to treat the
registered Holder of this Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in this Warrant on the part of any other Person, and
shall not be affected by any notice to the contrary, except that, if and when
this Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer thereof as the owner of this Warrant for all
purposes. Subject to Section 10, a Warrant, if properly assigned, may be
exercised by a new holder without a new Warrant first having been issued.

            14.2. Transfer of Warrants. Subject to compliance with Section 10,
if applicable, this Warrant and all rights hereunder are transferable in whole
or in part, without charge to the Holder hereof, upon surrender of this Warrant
with a properly executed Form of Assignment attached hereto as Exhibit B at the
principal office of the Company. Upon any partial transfer, the Company shall at
its expense issue and deliver to the Holder a new Warrant of like tenor, in the
name of the Holder, which shall be exercisable for such number of shares of
Common Stock with respect to which rights under this Warrant were not so
transferred.

            14.3. Replacement of Warrants. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office
and cancellation thereof, the Company at its expense shall execute and deliver,
in lieu thereof, a new Warrant of like tenor.

            14.4. Adjustments To Purchase Price and Number of Shares.
Notwithstanding any adjustment in Purchase Price or the number or kind of shares
of Common Stock purchasable upon exercise of this Warrant, any Warrant
theretofore or thereafter issued may continue to express the same number and
kind of shares of Common Stock as are stated in this Warrant, as initially
issued.

            14.5. Fractional Shares. Notwithstanding any adjustment pursuant to
Section 3 in the number of shares of Common Stock covered by this Warrant or any
other provision of this Warrant, the Company shall not be required to issue
fractions of shares upon exercise of this Warrant or to distribute certificates
which evidence fractional shares. In lieu of fractional shares, the Company
shall make payment to the Holder, at the time of exercise of this Warrant as
herein provided, in an amount in cash equal to such fraction multiplied by the
Current Market Price of a share of Common Stock on the date of Warrant exercise.

            15. PUT RIGHTS. At any time and from time to time after (i) the
occurrence of a Event of Default, (ii) the payment in full of the entire
principal balance of the Promissory Note or (iii) four (4) years from the
Closing Date, the Holder may deliver one or more written notices to the Company
(each, a "Put Notice") of its intention to require the Company to purchase for
cash a portion of the Warrant and the Warrant Shares then owned by the Holder
not to exceed an aggregate amount of _______ shares of Common Stock (the "Put
Portion"). Each Put Notice shall specify the exact number of shares to be
subject to such purchase request

                                       21
<PAGE>

provided that the sum of all shares, when taken together with all prior shares
purchased by the Company in connection with any prior Put Notice, do not exceed
the Put Portion. Within thirty (30) days of receipt of such a Put Notice, the
Company shall purchase the portion of the Warrant and the Warrant Shares then
owned by the Holder specified in such Put Notice for a cash purchase price equal
to the "Redemption Price". As used herein, the "Redemption Price" shall be equal
to the greater of (a) the Current Market Price, determined as of the date of
delivery of such notice, of the number of shares of Common Stock represented by
the portion of the Warrant and Warrant Shares which are subject to the Put
Notice minus, without duplication, the unpaid Purchase Price for any previously
unissued Warrant Shares which are required to be purchased pursuant to the Put
Notice and (b) the Appraised Fair Value, determined as of the date of delivery
of such notice, of the portion of the Warrant and Warrant Shares subject to the
Put Notice minus, without duplication, the unpaid Purchase Price for any
previously unissued Warrant Shares which are required to be purchased pursuant
to the Put Notice. The Holder may exercise its rights under this Section at any
time and from time to time on or after the occurrence of any of the events
described in clauses (i), (ii) or (iii) above. If for any reason the Issuer
shall fail to pay its obligations under this Section when due, interest at a per
annum rate equal to four (4.0) percent above the interest rate that would
otherwise be applicable under Section 2.6 of the Loan Agreement, compounded
daily, shall accrue on the unpaid principal amount of such unpaid obligations
until paid in full in cash. Following any such default in payment, the Company
shall promptly issue to the Holder a demand note in the principal amount equal
to any unpaid amounts, bearing interest at a rate per annum equal to four (4.0)
percent above the interest rate that would be otherwise applicable under Section
2.6 of the Loan Agreement, compounded daily, with the Company required to use
any available cash to pay any accrued interest and unpaid principal on such
note. So long as any obligations shall remain outstanding under the Revolver
Loan Agreement, such note shall be subordinated to the payment and performance
of the obligations of Company under the Revolver Loan Agreement in such manner
as to constitute "Subordinated Indebtedness" under the Revolver Loan Agreement.
Such rights shall be in addition to all other rights and remedies available to
the Holder upon a breach by the Company of its obligations under this Section.

            16. Call Right. At anytime following January 31, 2008, so long as
the Company has fully repaid all Obligations owing under the Loan Agreement, the
Company shall have the right to purchase from the Holder a portion of the
unexercised Warrant representing the lesser of (x) ___________ shares of Common
Stock or (y) the remaining balance of the unexercised Warrant (such lesser
amount, the "Maximum Call Amount") by providing written notice to the Holder
(the "Call Notice"). The Company shall not deliver a Call Notice to any Holder
of a Warrant, without concurrently providing all Holders with a Call Notice. The
Company shall be entitled to only one Call Notice and such Call Notice shall
specify the number of shares of Common Stock subject to such call right up to
the Maximum Call Amount. Any exercise by the Company of its call right shall be
irrevocable. In every case of a call of less than the Maximum Call Amount from
all Holders, the number of shares of Common Stock to be purchased from each
Holder shall be equal to the aggregate number of shares of Common Stock that are
the subject to the Call Notice(s) times a fraction, the numerator of which is
the number of shares of Common Stock then issuable upon exercise of the Warrant
held by the individual Holder and the denominator of which is the number of
shares of Common Stock then issuable upon exercise of all outstanding Warrants.
The closing of the purchase by the Company, and the sale by the Holder, of the
portion of the unexercised Warrant specified in the Call Notice,

                                       22
<PAGE>

following exercise by the Company of its call right (the "Call Closing") shall
be held at the principal office of Hilco Capital LP or its legal counsel within
30 days of Holder's receipt of the Company's Call Notice. At the Call Closing,
Holder shall deliver the unexercised portion of the Warrant to the Company
against receipt from the Company of the aggregate Call Price (as defined below)
therefor in cash by wire transfer of immediately available funds to Holder's
designated account. To the extent that the Call Notice is for less than the
entire balance of the unexercised Warrant, the Holder shall be entitled to
receive an amended and restated warrant for the unpurchased balance of the
Warrant remaining after such call which shall be on terms and conditions
identical to this Warrant except for the inclusion of any further call rights.
As used herein: "Call Price" shall mean an amount equal to the greater of (a)
the Current Market Price, determined as of the date of delivery of a Call
Notice, of the number of shares of Common Stock represented by the Call Notice
minus, without duplication, the unpaid Purchase Price for the unexercised
portion of the Warrant represented by the Call Notice and (b) the Appraised Fair
Value, determined as of the date of delivery of a Call Notice, of the number of
shares of Common Stock represented by the Call Notice minus, without
duplication, the unpaid Purchase Price for the unexercised portion of the
Warrant represented by the Call Notice. If Holder tenders this Warrant at the
Call Closing and the Company fails to tender payment of the required aggregate
Call Price at the Call Closing, then the Company's call right shall thereupon
terminate and be of no force or effect, notwithstanding its previous exercise
thereof, and the Company shall indemnify Holder against all costs, expenses
(including without limitation reasonable attorneys' fees), losses and damages
paid, suffered or incurred by Holder as a result of the Company's exercise of
such call right and failure to tender such aggregate Call Price.

            17. REMEDIES; SPECIFIC PERFORMANCE. The Company stipulates that
there would be no adequate remedy at law to the Holder of this Warrant in the
event of any default or threatened default by the Company in the performance of
or compliance with any of the terms of this Warrant and accordingly, the Company
agrees that, in addition to any other remedy to which the Holder may be entitled
at law or in equity, the Holder shall be entitled to seek to compel specific
performance of the obligations of the Company under this Warrant, without the
posting of any bond, in accordance with the terms and conditions of this Warrant
in any court of the United States or any State thereof having jurisdiction, and
if any action should be brought in equity to enforce any of the provisions of
this Warrant, the Company shall not raise the defense that there is an adequate
remedy at law. Except as otherwise provided by law, a delay or omission by the
Holder hereto in exercising any right or remedy accruing upon any such breach
shall not impair the right or remedy or constitute a waiver of or acquiescence
in any such breach. No remedy shall be exclusive of any other remedy. All
available remedies shall be cumulative.

            18. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing contained in
this Warrant shall be construed as conferring upon the Holder hereof any rights
as a shareholder of the Company or as imposing any obligation on the Holder to
purchase any securities or as imposing any liabilities on the Holder as a
shareholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.

            19. NOTICES. All notices and other communications (and deliveries)
provided for or permitted hereunder shall be made in writing by hand delivery,
telecopier, any

                                       23
<PAGE>

nationally-recognized courier guaranteeing overnight delivery or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

If to the Company:               Source Interlink Companies, Inc.
                                 27500 Riverview Center Blvd.
                                 Suite 400
                                 Bonita Springs, Florida  34134
                                 Attention: Chief Executive Officer
                                 Fax: (239) 949-7689

with copies to:                  Tripp Scott
                                 110 Southeast Sixth Street, 15th Floor
                                 Fort Lauderdale, Florida  33301
                                 Attention: Garry W. Johnson
                                 Fax: (954) 760-4915

If to Holder:

with copies to:                  Latham & Watkins LLP
                                 Suite 5800, Sears Tower
                                 233 S. Wacker Drive
                                 Chicago, Illinois 60606
                                 Attn: Philip Perzek
                                 Fax No. (312) 993-9767

            All such notices and communications (and deliveries) shall be deemed
to have been duly given: at the time delivered by hand, if personally delivered;
when receipt is acknowledged, if telecopied; on the next Business Day, if timely
delivered to a courier guaranteeing overnight delivery; and five days after
being deposited in the mail, if sent first class or certified mail, return
receipt requested, postage prepaid; provided, that the exercise of any Warrant
shall be effective in the manner provided in Section 2.

            20. AMENDMENTS. This Warrant and any term hereof may not be amended,
modified, supplemented or terminated, and waivers or consents to departures from
the provisions hereof may not be given, except by written instrument duly
executed by the party against which enforcement of such amendment, modification,
supplement, termination or consent to departure is sought.

            21. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Warrant otherwise
requires: (1) words of any

                                       24
<PAGE>

gender shall be deemed to include each other gender; (2) words using the
singular or plural number shall also include the plural or singular number,
respectively; (3) the words "hereof", "herein" and "hereunder" and words of
similar import when used in this Warrant shall refer to this Warrant as a whole
and not to any particular provision of this Warrant, and Section and paragraph
references are to the Sections and paragraphs of this Warrant unless otherwise
specified; (4) the word "including" and words of similar import when used in
this Warrant shall mean "including, without limitation," unless otherwise
specified; (5) "or" is not exclusive; and (6) provisions apply to successive
events and transactions.

            22. GOVERNING LAW. This Warrant shall be governed by and construed
in accordance with the laws of the State of New York (without giving effect to
the conflict of laws principles thereof).

            23. COSTS AND ATTORNEYS' FEES. In the event that any action, suit or
other proceeding is instituted concerning or arising out of this Warrant by the
Holder and the Holder is the prevailing party in such action, suit or other
proceeding, the Company shall pay all of the Holder's costs and reasonable
attorneys' fees incurred in each and every such action, suit or other
proceeding, including any and all appeals or petitions therefrom.

            24. JUDICIAL PROCEEDINGS. Any legal action, suit or proceeding
brought against the Company with respect to this Warrant may be brought in any
federal court of the Southern District of New York or any state court located in
New York County, State of New York, and by execution and delivery of this
Warrant, the Company hereby irrevocably and unconditionally waives any claim (by
way of motion, as a defense or otherwise) of improper venue, that it is not
subject personally to the jurisdiction of such court, that such courts are an
inconvenient forum or that this Warrant or the subject matter may not be
enforced in or by such court. The Company hereby irrevocably and unconditionally
consents to the service of process of any of the aforementioned courts in any
such action, suit or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, at its address set forth or provided for in
Section 18, such service to become effective 10 days after such mailing. Nothing
herein contained shall be deemed to affect the right of any party to serve
process in any manner permitted by law or commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction to enforce
judgments obtained in any action, suit or proceeding brought pursuant to this
Section.

            25. REGISTRATION RIGHTS AGREEMENT. The shares of Common Stock (and
Other Securities) issuable upon exercise of this Warrant (or upon conversion of
any shares of Common Stock issued upon such exercise) shall constitute
Registrable Securities (as such term is defined in the Registration Rights
Agreement). Each holder of this Warrant shall be entitled to all of the benefits
afforded to a holder of any such Registrable Securities under the Registration
Rights Agreement and such holder, by its acceptance of this Warrant, agrees to
be bound by and to comply with the terms and conditions of the Registration
Rights Agreement applicable to such holder as a holder of such Registrable
Securities.

                            [Signature Page Follows]

                                       25
<PAGE>

            IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed and delivered as of the date first above written.

                                      SOURCE INTERLINK COMPANIES, INC.

                                      By: ______________________________________
                                      Name: Marc Fierman
                                      Title: Chief Financial Officer & Secretary

<PAGE>

                                                                    EXHIBIT A to
                                                   Common Stock Purchase Warrant

                           ELECTION TO PURCHASE SHARES

            The undersigned hereby irrevocably elects to exercise the Warrant to
purchase ____ shares of Common Stock, par value $_______ per share ("Common
Stock"), of Source Interlink Companies, Inc. and hereby [makes payment of
$________ therefor] [or] [makes payment therefor by application pursuant to
Section 2.1(b)(ii) of the Warrant of $_______ aggregate principal amount of
Notes (as defined in the Warrant)] [or] [makes payment therefor by reduction
pursuant to Section 2.1(b)(iii) of the Warrant of the number of shares of Common
Stock otherwise issuable to the Holder upon Warrant exercise by ___ shares] [or]
[makes payment therefor by delivery of the following Common Stock Certificates
of the Company (properly endorsed for transfer in blank) for cancellation by the
Company pursuant to Section 2.1(b)(iv) of the Warrant, certificates of which are
attached hereto for cancellation [list certificates by number and amount]]. The
undersigned hereby requests that certificates for such shares be issued and
delivered as follows:

ISSUE TO:_______________________________________________________________________
                                     (NAME)

________________________________________________________________________________
                          (ADDRESS, INCLUDING ZIP CODE)

________________________________________________________________________________
                  (SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)

DELIVER TO:_____________________________________________________________________
                                     (NAME)

________________________________________________________________________________
                          (ADDRESS, INCLUDING ZIP CODE)

                  If the number of shares of Common Stock purchased (and/or
reduced) hereby is less than the number of shares of Common Stock covered by the
Warrant, the undersigned requests that a new Warrant representing the number of
shares of Common Stock not so purchased (or reduced) be issued and delivered as
follows:

ISSUE TO:_______________________________________________________________________
                                (NAME OF HOLDER)

________________________________________________________________________________
                          (ADDRESS, INCLUDING ZIP CODE)

DELIVER TO:_____________________________________________________________________
                                (NAME OF HOLDER)

________________________________________________________________________________
                          (ADDRESS, INCLUDING ZIP CODE)

Dated: _____________, 200_                         HOLDER

                                                   By___________________________
                                                     Name:
                                                     Title:

<PAGE>

                                                                    EXHIBIT B to
                                                   Common Stock Purchase Warrant

                                   ASSIGNMENT

            FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Stock, par value $_____ per share ("Common Stock") of Source
Interlink Companies, Inc. represented by the Warrant, with respect to the number
of shares of Common Stock set forth below:

Name of Assignee                     Address                       No. of Shares

and does hereby irrevocably constitute and appoint Source Interlink Companies,
Inc. to make such transfer on its books maintained for that purpose, with full
power of substitution in the premises.

Dated: _______________, 200_

                                                   By___________________________
                                                     Name:
                                                     Title:

<PAGE>

                                  SCHEDULE 11.3

              OUTSTANDING OPTIONS, WARRANTS, SCRIPTS, SUBSCRIPTION

                       COMMITMENT RIGHTS, AND COMMITMENTS

As of October 27, 2003, Source Interlink Companies, Inc. has outstanding options
issued under its stock based employee compensation plans for the purchase of
5,049,689 shares of its common stock.

As of October 27, 2003, Source Interlink Companies, Inc. has outstanding
warrants for the purchase of 33,644 shares of its common stock.

As of October 27, 2003, Source Interlink Companies, Inc. has outstanding
commitments to issue warrants for the purchase of 225,000 shares of its common
stock.<PAGE>
                                                                    Exhibit 10.1

                                                                  EXECUTION COPY

                       SETTLEMENT AND SEPARATION AGREEMENT

      SETTLEMENT AND SEPARATION AGREEMENT, dated this 27th day of August, 2004
(this "Agreement"), by and among John A. Williams, an individual resident of the
State of Georgia ("Williams"), and The John A. Williams Irrevocable Trust Dated
January 27, 1995 (the "Trust"), on the one hand, and Post Properties, Inc., a
Georgia corporation (the "Company"), Post GP Holdings, Inc., a Georgia
corporation ("Holdings"), Post Apartment Homes, L.P., a Georgia limited
partnership ("Post Apartment Homes") and Post Services, Inc., a Georgia
corporation ("Services"), on the other.

      WHEREAS, certain disputes have arisen between Williams and the Company,
including disputes relating to various policies and the Company's management,
and disputes relating to certain payments which Williams believes are due to him
from the Company and certain payments which the Company believes are due to it
from Williams and his son, John A. Williams, Jr.;

      WHEREAS, Williams and the Company are party to: (i) a Master Employment
Agreement dated March 25, 2002 (the "Employment Agreement") among Williams, the
Company, Holdings, as general partner of Post Apartment Homes, and Services; and
(ii) a Noncompetition Agreement dated as of July 22, 1993 among Williams, the
Company and Post Apartment Homes, as amended as of June 1, 1998 (the
"Noncompetition Agreement");

      WHEREAS, Williams, the Company, and the other parties thereto desire to
terminate the Employment Agreement and the Noncompetition Agreement, and to
enter into this Agreement to settle and resolve all disputed matters between
them;

      WHEREAS, Post Apartment Homes and the Trust desire to continue, as set
forth below, the Split Dollar Insurance Agreement between such parties dated
December 23, 1998, as amended on September 29, 1999 (the "Split Dollar
Agreement");

      WHEREAS, the Company, Services and Holdings, each acting through its Board
of Directors, have determined that their interests and the interests of their
respective Affiliates and shareholders would best be served by resolving all
disputes with Williams on the terms set forth in this Agreement and receiving
the rights and benefits provided to it in this Agreement; and

      WHEREAS, Holdings, as general partner of Post Apartment Homes, has
determined that the interests of the partners of Post Apartment Homes would best
be served by resolving all disputes with Williams on the terms set forth in this
Agreement.

      NOW, THEREFORE, in consideration of the foregoing, and the mutual
representations, warranties, covenants and agreements set forth herein, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound, the parties hereto hereby agree as follows:

<PAGE>

      1. Employment Agreement. Effective at 12:01 a.m., Atlanta, Georgia time,
on the date first set forth above (the "Effective Time"), the Employment
Agreement will be terminated and discharged and will be of no further force or
effect, and, subject to the following sentence, all rights, duties, obligations
and liabilities thereunder, including any provisions that otherwise would
expressly survive termination thereof, will be terminated and extinguished. Any
provisions of the Employment Agreement intended to remain in effect from and
after the Effective Time are expressly set forth in their entirety in this
Agreement.

      2. Noncompetition Agreement; Trade Secrets; Confidential Information;
Nonsolicitation of Employees.

      (a) Effective at the Effective Time, the Noncompetition Agreement will be
terminated and discharged and will be of no further force or effect, and all
rights, duties, obligations and liabilities thereunder, including any provisions
that otherwise would expressly survive termination thereof, will be terminated
and extinguished. Any provisions of the Noncompetition Agreement intended to
remain in effect from and after the Effective Time are expressly set forth in
their entirety in this Agreement.

      (b) Williams agrees that he will continue to hold in a fiduciary capacity
 the Company and its Affiliates, and shall not directly or
indirectly use or disclose, any Trade Secret that Williams may have acquired
prior to the Effective Time for so long as such information remains a Trade
Secret.

      (c) In addition to and not in limitation of the provisions of paragraph
2(b) above, Williams agrees that for a period commencing at the Effective Time
and expiring on the second anniversary of the Effective Time, he will hold in a
fiduciary capacity for the benefit of the Company and its Affiliates, and shall
not directly or indirectly use or disclose, any "Confidential or Proprietary
Information" (as such term is hereinafter defined) that Williams may have
acquired (whether or not developed or compiled by Williams and whether or not
Williams was authorized to have access to such Confidential or Proprietary
Information) during the term of, in the course of, or as a result of his
employment by the Company or any of its Affiliates, at any time prior to the
Effective Time. Williams shall be entitled to assume that any Person, other than
Williams or his employees, who has made such information publicly available had
the right to do so, unless Williams knows that such is not the case.

      (d) Williams will not, during the period commencing at the Effective Time
and expiring on the second anniversary of the Effective Time, seek to employ on
his own behalf or on behalf of any other Person which engages, directly or
indirectly, in the development, operation, management, leasing, or landscaping
of a "Multifamily Property" (as such term is hereinafter defined), any person
who was employed as an employee of the Company or any of its Affiliates in an
executive, managerial or supervisory capacity at any time prior to the Effective
Time by the Company or any of its Affiliates and who has not thereafter ceased
to be employed by the Company or any of its Affiliates for a period of at least
one (1) year.

                                       2
<PAGE>

      3. Lump Sum Payment. Upon execution of this Agreement, in full and final
satisfaction, settlement and discharge of any and all amounts (whether disputed
or undisputed) that (i) the Company believes are owed to it, or any of its
Affiliates or Associates which are not natural persons, by Williams and John A.
Williams, Jr., and (ii) Williams believes are owed to him by the Company and any
of its Affiliates or Associates which are not natural persons, the Company will
pay to Williams by wire transfer of immediately available funds to an account
specified in writing by Williams, a lump sum amount of $150,000.

      4. Payments and Benefits to Williams. Upon execution of this Agreement,
the Company shall pay to Williams the sum of $135,000, by wire transfer of
immediately available funds to an account specified in writing by Williams, in
full and final satisfaction, settlement and discharge of any and all payments,
perquisites, benefits and services to which Williams is entitled under the
Employment Agreement as of the Effective Time. Commencing at the Effective Time,
in lieu of all payments, perquisites, benefits and services paid to or provided
by the Company to Williams pursuant to the Employment Agreement, the Company
shall make the following payments and provide the following benefits to
Williams:

      (a) Commencing at the Effective Time and continuing until the first to
occur of May 31, 2013 or Williams' death, the Company will pay to Williams an
annual amount of $400,000, payable in accordance with the Company's payroll
procedures then in effect with respect to its executive officers; provided,
however, in the event Williams dies prior to May 31, 2013, there shall be an
additional lump sum payment equal to $150,000. The severance payments described
herein are made in consideration for the relinquishment of Williams' rights
under the Employment Agreement and, accordingly, pursuant to Rev. Ruling 58-301,
the severance payments are not subject to tax withholdings.

      (b) Commencing at the Effective Time and continuing until the first to
occur of May 31, 2013 or Williams' death, the Company shall continue to make
available to Williams for his personal use, under the existing agreement between
the Company and NetJets Inc. (Contract No. 1012158), a Falcon 2000 for 100 hours
in each consecutive 12-month period starting on July 1, 2004. The Company's
obligations pursuant to this paragraph 4(b) shall include all management fees,
hours, fuel, tax and flight adjustment charges, insurance (including war risk
insurance) and expenses, such as domestic and international positioning and
other fees, onboard catering, ground transportation charges and other charges
directly related to Williams' use of the airplane; provided, however, that
Williams shall promptly pay or reimburse the Company for (1) any international
positioning and other international fees, (2) crew expenses, (3) onboard
catering charges and (4) ground transportation charges, if and to the extent
that such amounts, in the aggregate, exceed $100,000 during any such consecutive
12-month period. In the event a new or amended contract is entered into between
the Company and NetJets Inc., the terms of such contract shall be no less
favorable to Williams than the terms of Contract No. 1012158 in effect as of
June 30, 2004. In the event that a Falcon 2000 airplane is no longer available,
it shall be replaced by an airplane having features, amenities and technical
specifications not less than those associated with the Falcon 2000 identified in

                                       3
<PAGE>

Contract No. 1012158. For purposes of calculating the value of benefits provided
under this paragraph 4(b) by the Company to Williams or for his benefit,
Williams shall be deemed a "retired employee" of the Company within the meaning
of Treasury Reg. Section 1.61-21(g) promulgated under the Internal Revenue Code
of 1986, as amended.

      (c) Commencing at the Effective Time, the Company will make available to
Williams, his spouse and dependent children (up to the age of 23) for his
lifetime and, if he has a spouse at his death, to her for her lifetime, and to
Williams' dependent children for as long as they remain dependent children (but
in no event past age 23), coverage under the group health plan (including
medical, hospitalization, vision, dental, prescription and other coverages
provided under the group health plan) in which the Company's senior executives
continue to participate, or if such coverage cannot reasonably be effected under
the terms of such plan, the Company will reimburse (or, at the election of
either Williams, his surviving spouse or surviving dependent children, in their
sole discretion, pay directly to a provider for their benefit) Williams and such
surviving spouse and dependent children for their healthcare expenses to the
same extent such expenses would have been reimbursed under the terms of such
plan as it was in effect immediately prior to the Effective Time, all subject to
the condition that Williams (or, in the event of his death, his spouse or
dependent children) pays the Company for such coverage the lesser of (i) the
same proportional share of the premiums for such coverage as he paid or, but for
Williams' death, would have paid for such coverage immediately prior to the
Effective Time, or (ii) the then current employee share of premiums paid by the
Company's senior executives for such coverage. The foregoing notwithstanding,
Williams shall not participate in any of the disability or life insurance plans
or policies applicable to senior executive officers or other employees of the
Company or its Affiliates.

      (d) Within thirty calendar days following the Effective Time, Williams, at
his own expense, will completely vacate (i) his office space at 4401 Northside
Parkway, Atlanta, Georgia, and (ii) his garage space and other reserved parking
spaces at or related to such location.

      (e) Williams may retain all furnishings located in his first floor office
space at 4401 Northside Parkway, Atlanta, Georgia, and shall be entitled to
remove such furnishings at his expense and without interference from the Company
or its Affiliates, directly or indirectly. The aggregate value of such
furnishings, as reflected on any Forms W-2 or 1099, as applicable, will not
exceed $100,000.

      (f) Except as otherwise expressly stated in this Agreement and except for
any payments, perquisites and benefits accruing prior to the Effective Time, all
other payments, perquisites and benefits provided to or on behalf of the Company
or its Affiliates shall cease as of the Effective Time, and after the Effective
Time the Company and its Affiliates shall have no obligations to provide to
Williams any of the payments, perquisites, benefits and services identified in
Section 2 of the Employment Agreement.

      (g) In accordance with applicable law and any applicable terms of this
Agreement, the Company (and its Affiliates) shall provide Williams with such
Forms W-

                                       4
<PAGE>

2 or 1099 (or other tax forms as may be required by applicable law) in
connection with all payments, benefits, perquisites or services provided by the
Company to Williams under this Agreement.

      5. Stock Options; Partnership Units; Retirement Plans.

      (a) Notwithstanding any provision in any option agreement or option plan
to the contrary, all stock options to purchase shares of the Company's stock
previously granted to Williams, and all rights Williams has to exercise such
options shall remain outstanding and fully exercisable for the full term thereof
regardless of any provision to the contrary in any such agreement or plan
restricting the time period for exercise following termination of employment or
death. Any stock options previously granted to Williams which have not yet
vested as of the Effective Time shall fully vest at the Effective Time.

      (b) Nothing contained in this Agreement shall in any way modify, limit or
terminate the rights of Williams, the Company or any other Person pursuant to
the Second Amended and Restated Agreement of Limited Partnership of Post
Apartment Homes, as amended and restated or superceded (the "Limited Partnership
Agreement") and all rights Williams or any Affiliates of Williams have to
transfer, convey, sell or convert partnership units in Post Apartment Homes
("Units") into securities of the Company in accordance with the terms and
conditions of the Limited Partnership Agreement, shall remain in full force and
effect. Notwithstanding anything contained in this Agreement or the Limited
Partnership Agreement to the contrary, Post Apartment Homes and Holdings, as
general partner of Post Apartment Homes, shall accept the form of Notice of
Redemption in the form attached to this Agreement as Exhibit A in lieu of the
form attached as Exhibit E to the Limited Partnership Agreement.

      (c) Notwithstanding anything in this Agreement to the contrary, nothing in
this Agreement shall impair or affect any vested rights Williams has in any
retirement or investment plan or deferred compensation plan, including without
limitation, the Company's Employee Stock Purchase Plan, 401(k) Plan, Profit
Sharing Plan and Dividend Reinvestment Plan.

      6. Standstill Covenants. Williams agrees that during the period commencing
at the Effective Time and ending on the seventh anniversary of the Effective
Time (the "Standstill Expiration Date"), without the prior written consent of
the Company's Board of Directors as expressed in a resolution duly adopted by
the Board of Directors, neither he, nor any Person acting at his direction,
will, directly or indirectly:

      (a) make, engage or participate in, directly or indirectly, any
"solicitation" (as such term is used in the proxy rules of the Securities and
Exchange Commission (the "SEC")) of proxies or consents (whether or not relating
to the election or removal of directors) of matters presented to Company
shareholders; seek to advise, encourage or influence any Person with respect to
the voting of any Voting Securities (other than members of Williams' immediate
family, or for the benefit of such Persons, employees, Affiliates or Associates
or others to whom he owes a fiduciary duty in

                                       5
<PAGE>

connection with the voting of any Voting Securities); initiate, propose or
"solicit" (as such term is used in the proxy rules of the SEC) shareholders of
the Company for the approval of shareholder proposals whether made pursuant to
Rule 14a-8 or Rule 14a-4 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or otherwise, or cause or encourage or attempt to cause or
encourage any other Person to initiate any such shareholder proposal; otherwise
communicate with the Company's shareholders or others pursuant to Rule
14a-1(l)(2)(iv) under the Exchange Act in connection with the solicitation of
proxies or consents of matters presented to Company shareholders; or participate
in any "shareholder access" proposal which may be adopted by the SEC, whether in
accordance with proposed Rule 14a-11 or otherwise, and which involves the
Company;

      (b) seek or propose, or make any public statement with respect to, any
merger, consolidation, business combination, tender or exchange offer, sale or
purchase of assets, sale or purchase of securities, dissolution, liquidation,
restructuring, recapitalization or similar transactions of or involving the
Company or any of its Affiliates;

      (c) acquire, offer or propose to acquire, or agree to acquire (except by
way of stock dividends, stock splits, reverse stock splits or other
distributions or offerings made available to holders of Voting Securities
generally or otherwise involuntarily or as a result of or pursuant to any action
of or by the Company or its agents or designees), directly or indirectly,
whether by purchase, tender or exchange offer, through the acquisition of
control of another Person, by joining a partnership, limited partnership,
syndicate or other "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) or otherwise, any Voting Securities; provided, however, Williams
may acquire Voting Securities upon (i) the exercise or other exchange or
conversion of stock options held by him, (ii) the conversion into shares of the
Company's common stock of Units beneficially owned by Williams or his
Affiliates, or (iii) the issuance or distribution of securities offered under
the terms of any shareholder rights or similar plan of the Company;

      (d) form, join or participate in a "group" (within the meaning of Section
13(d)(3) of the Exchange Act) with respect to any Voting Securities;

      (e) act, alone or in concert with others, to control or seek to control,
or intentionally influence or seek to influence, the management, Board of
Directors or policies of the Company;

      (f) seek, alone or in concert with others, election or appointment to or
representation on, or nominate or propose the nomination of any candidate to,
the Company's Board of Directors, or seek the removal of any member of the
Company's Board of Directors;

      (g) make any publicly disclosed proposal, public statement or public
inquiry, or publicly disclose any intention, plan or arrangement (whether
written or oral) inconsistent with the foregoing, or make or disclose any
request to amend, waive or terminate any provision of paragraph 6 of this
Agreement;

                                       6
<PAGE>

      (h) enter into any arrangements, understanding or agreements (whether
written or oral) with, or finance, or intentionally advise, assist or encourage,
any other Person in connection with any of the foregoing or make any investment
in or enter into any arrangement with, any other Person with the intent of
enabling, assisting or encouraging that Person to engage, or propose to engage,
in any of the foregoing; or

      (i) otherwise intentionally take, or solicit, or cause or encourage others
to take, any action inconsistent with any of the foregoing.

Notwithstanding anything to the contrary in this paragraph 6, Williams shall
not, directly or indirectly, be restricted in any manner in his ability to (x)
vote any Voting Securities beneficially owned or controlled by him in his sole
discretion, (y) sell, gift, transfer or convey any Voting Securities
beneficially owned or controlled by him in his sole discretion or (z) engage in
casual conversation with natural persons (so long as such natural persons are
not acting on behalf of any other Person) regarding any of the matters
identified or described in this paragraph 6; provided, however, Williams shall
not engage is such casual conversations with the intent of violating paragraphs
6(a), (b), (c), (e) or (f) above or with the intent of soliciting, causing or
encouraging others to take any action inconsistent with paragraphs 6(a), (b),
(c), (e) or (f) above. Notwithstanding anything to the contrary in this
paragraph 6, so long as Williams or his Affiliates shall own or control any
Units, Williams shall be permitted to make or participate in a bona fide offer
to acquire the Company, provided that (i) such offer is for all shares of the
Company's outstanding common stock, any outstanding shares of the Company's
preferred stock, and all Units, in each case excluding such shares of common
stock, preferred stock and Units as are beneficially owned or controlled by the
Company or the party or parties making or participating in such offer and their
Affiliates; (ii) the consideration offered to the holders of (x) the Company's
common stock consists solely of cash and/or shares of common stock and (y) the
Company's preferred stock consists of cash, shares of common stock and/or shares
of preferred stock, in the cases of both clauses (x) and (y) of a
publicly-traded corporation that is then listed on the New York Stock Exchange
or traded on the Nasdaq National Market, and has been so listed or traded for a
period of not less than one consecutive year, and is eligible to register its
securities on Form S-3 under the Securities Act of 1933, as amended (the
"Securities Act"); (iii) the consideration offered to the holders of Units
consists solely of the consideration described in clause (ii) above and/or units
of a real estate investment trust operating partnership or other assets
permitting the holders of Units to effect a tax-free exchange; (iv) any cash
portion of the purchase price is fully financed; (v) no series of debt
securities publicly issued and no series or class of preferred stock publicly
issued by any corporation whose shares of common stock constitute all or a
portion of the consideration being offered is then rated below investment grade
by any one of Moody's Investors Service, Standard and Poor's Ratings Services,
Duff & Phelps Credit Rating Co. or Fitch Ratings, and if any of the foregoing
then no longer provide credit rating services, by any other credit rating agency
which is then considered a major U.S. credit rating agency; and (vi) any
corporation whose shares of common stock constitute all or a portion of the
consideration is eligible to register its securities on Form S-3 under the
Securities Act, as such eligibility requirements are then in effect (an offer
meeting all conditions contained in clauses (i) through (vi) above is referred
to herein as a "Qualifying Offer"). Nothing contained in this paragraph 6 shall

                                       7
<PAGE>

limit or restrict Williams' ability to engage or participate in a solicitation
of proxies or to seek Board of Directors representation for himself or others,
if done in good faith in support of, and integral to, a Qualifying Offer which
Williams has previously made or participated in and which is then currently
pending.

      7. Resignation as Director and Officer. By Williams' execution of this
Agreement and the execution of this Agreement by all other parties hereto,
Williams hereby resigns, upon such execution by all parties hereto, (i) as a
member and as Chairman Emeritus of the Company's Board of Directors, (ii) as a
member of all committees of the Board of Directors on which he then serves,
(iii) as a director of any direct or indirect subsidiary and other Affiliates of
the Company on whose Board of Directors he then serves and as a member of all
committees of any such Board of Directors on which he then serves, (iv) if
applicable, as a trustee of (or any similar position with) any benefit plans
maintained by, or for the benefit of employees of, the Company or any such
subsidiary, (v) if applicable, as an officer of the Company, its direct and
indirect subsidiaries and other Affiliates, and (vi) from any other positions he
holds with, or at the request of, the Company, or any of its direct or indirect
subsidiaries or other Affiliates.

      8. Life Insurance.

      (a) Concurrently with the execution of this Agreement, the Company shall
pay, or cause to be paid, the outstanding principal balance of $1,529,213.01
together with a Prepayment Premium of $30,584.26 to Wells Fargo Bank, National
Association ("Wells Fargo") pursuant to that certain Credit Agreement dated
October 28, 2003 by and between the Trust and Wells Fargo (the "Credit
Agreement"), whereupon the Credit Agreement and all Wells Fargo-related
collateral assignments shall be terminated, and in connection therewith shall
also pay to Wells Fargo, Williams and/or the Trust, as applicable, Termination
Costs of $27,008.85 (consisting of a Redeployment Cost of $17,008.85 to Wells
Fargo incurred in connection with such prepayment and $5,000.00 of legal costs
to each of Williams and the Trust in connection therewith). It being the
expectation of the parties hereto that the Company's payment of Prepayment
Premium and Termination Costs pursuant to this paragraph, having been incurred
by the Company to restore the parties to the positions they would have been in
if all premiums on all policies subject to the Split Dollar Agreement had been
made as originally contemplated, should not result in taxable compensation to
Williams or a taxable gift from Williams to the Trust, the parties hereto agree
to take tax reporting positions consistent with that expectation. In the event
that the Internal Revenue Service ("IRS") or the Georgia Department of Revenue
("DOR") notifies Williams and/or the Trust in writing that it takes the position
that any of the Company's payment of Prepayment Premiums or Termination Costs
pursuant to this paragraph 8 results in taxable compensation to Williams and/or
a taxable gift from Williams to the Trust, for federal or state tax purposes,
the Company will pay to Williams the amount indicated in such IRS and/or DOR
notification (including any applicable interest and penalties) together with
applicable income, gift, and estate tax gross-up payments with respect to the
amounts so payable to the IRS and/or the DOR, within five days following receipt
of a copy of said notification together with a written request for payment from
or for the benefit of

                                       8
<PAGE>

Williams ("Payment Request"), calculated on the same terms
as described in Sections 5 and 6 of the Agreement for Continuation of Split
Dollar Arrangement and Compliance with Sarbanes-Oxley dated as of October 28,
2003, between Post Apartment Homes and the Trust (the "Split Dollar Continuation
Agreement"), which agreement shall survive the execution of this Agreement. The
Payment Request shall certify that Williams will (i) not further challenge the
position so taken by the IRS and/or DOR; (ii) not take any subsequent tax
reporting position inconsistent with the position so taken by the IRS and/or
DOR; (iii) pay to the IRS and/or DOR the amount of tax requested by the IRS
and/or DOR. Neither Williams nor the Trust shall be required to challenge the
IRS and/or DOR notification except as provided below with respect to penalties.
Notwithstanding the foregoing, to the extent the amount indicated in such IRS
and/or DOR notification includes penalties, Williams agrees to permit the
Company to contest the imposition of any such penalties on his behalf with legal
representation by Steve Parker and/or Tony Turner, Cohen Pollock Merlin Axelrod
& Small, P.C., with the cost of such representation to be paid by the Company.
If such contest of the imposition of penalties results in amounts owed by
Williams and/or the Trust in excess of those contained in the notification, for
interest or otherwise, the Company will promptly pay all such amounts to
Williams and/or the Trust, as applicable (and any penalty amount not eliminated
by such contest), together with applicable gross-up payments, as if such
additional amounts had been included in the original notification. If such
contest has not been resolved within 90 days following the date of the Payment
Request, the Company will within five days after such 90 day period pay to
Williams and/or the Trust, as applicable, the amount of the penalty plus any
interest owed as a result of the delay caused by such contest, together with
applicable gross-up payments. The Company's obligation to make tax gross-up
payments (inclusive of applicable interest and penalties) pursuant to this
paragraph shall survive both the termination or expiration of this Agreement and
the Split Dollar Continuation Agreement.

      (b) The portion of the Wells Fargo loan repayment allocated to principal
shall be treated as if the Company had paid such amount as its portion of
premiums on the Policies under the Split Dollar Agreement, and such amount shall
be included in computing the total premiums paid by the Company to determine the
Company's share of any proceeds received with respect to the Policies. Such
deemed payments, however, shall be reduced by the amount, if any, which may be
attributable to any interest or other penalties or amounts attributable to such
deemed payments because of the timing of such payments under the Split Dollar
Agreement. In no event shall the Company or any of its Affiliates be entitled to
a pro-ration or refund of any payments previously made by the Company or any of
its Affiliates related to the Premium Financing and/or the Policies or otherwise
made under the Split Dollar Continuation Agreement, except as provided for under
the Split Dollar Agreement and Collateral Assignments listed in paragraph 8(d)
below. Capitalized terms used in this paragraph 8 and not otherwise defined in
this Agreement shall have the meanings ascribed to them in the Split Dollar
Continuation Agreement. The parties hereto acknowledge that the purpose of this
paragraph 8(b) is to restore the parties to the positions they would have been
in if all premiums on all policies subject to the Split Dollar Agreement had
been made as originally contemplated, and if the Split Dollar Continuation
Agreement had never gone into effect; that the Split Dollar Continuation
Agreement was intended as an

                                       9
<PAGE>

interim and temporary solution pending resolution of certain legal uncertainties
surrounding the payment of premiums under the Split Dollar Agreement; and that
neither the Split Dollar Continuation Agreement nor this Agreement is intended
to materially modify the provisions of the Split Dollar Agreement as in effect
prior to the date of the Split Dollar Continuation Agreement. In particular, the
parties hereto acknowledge that, notwithstanding the provisions of the Split
Dollar Agreement as originally in effect, at all times since March 25, 2002, by
reason of the provisions of the Employment Agreement, the Split Dollar Agreement
is terminable only upon the first to occur of the following: (i) May 31, 2013;
(ii) the prior written consent of all parties to the Split Dollar Agreement or
(iii) the death of Williams. Notwithstanding anything contained in this
Agreement or any other agreement to the contrary, the obligations of the
Company, Williams and the Trust under the Split Dollar Agreement, this paragraph
8 and the collateral assignments listed in paragraph 8(d) below shall survive
the termination of this Agreement or the determination or declaration that this
Agreement or any provision of this Agreement or the Split Dollar Agreement is no
longer in full force and effect.

      (c) Concurrently with the execution of this Agreement, the Company shall
pay to Williams the sum of $36,223.10 by wire transfer of immediately available
funds to an account specified in writing by Williams, representing the gift tax
gross-up specified in Section 6 of the Split Dollar Continuation Agreement owing
to Williams with regard to the June 1, 2004 premium payments made by Wells Fargo
under the Credit Agreement.

      (d) Subject to paragraph 8(a) and 8(b) above, commencing at the Effective
Time, the Company will continue to provide, or cause to be provided to, Williams
and the Trust with a split dollar life insurance program of up to $31,000,000 on
the same terms and conditions previously agreed to in writing by the Company,
Williams and the Trust, pursuant to the terms of the (i) Split Dollar Insurance
Agreement dated March 15, 1990 between the Company and John T. Glover, in his
capacity as Trustee under agreement with John A. Williams, dated September 29,
1988; (ii) Split-Dollar Insurance Agreement dated December 23, 1998 by and
between John T. Glover, as Trustee under an Irrevocable Agreement of Trust
executed by John A. Williams as Grantor dated January 27, 1995, and Post
Apartment Homes, as amended on September 29, 1999; (iii) Collateral Assignment
dated February 17, 1999 by Owner of certain life insurance policies referenced
therein upon the life of John A. Williams in favor of Post Apartment Homes; (iv)
Supplemental Collateral Assignment Accompanying First Amendment to Split Dollar
Insurance Agreement dated September 1, 1999 by Owner of certain life insurance
policies referenced therein upon the life of John A. Williams in favor of Post
Apartment Homes; and (v) Split Dollar Continuation Agreement. The Company and
Post Apartment Homes, on the one hand, and Williams, on the other hand, shall
pay their respective portion of the annual renewal premiums (Williams to pay an
amount equal to his then economic benefit and the Company and Post Apartment
Homes to pay the balance) owed to each insurance company that has issued the
split dollar life insurance policies referenced on Exhibit A to the Split Dollar
Continuation Agreement when due, without benefit of payment extensions, grace
periods or, except as noted below, "dividend offset" or policy loans. In the
event the Company or Post Apartment Homes, on the one hand, or Williams, on the
other hand, fail to make any such annual

                                       10
<PAGE>

premium payment when due, the other party shall be entitled to specific
performance pursuant to paragraph 13 of this Agreement; provided, however,
neither the Company, Holdings, Services or Post Apartment Homes shall be
required to make such annual premium payments for any policy identified on
Exhibit A to the Split Dollar Continuation Agreement for any year in which the
then current inforce illustration for that policy for that year, prepared by the
policy issuer in question, reflects that such policy has reached and remains at
the "dividend offset" or "vanishing" point pursuant to which the policy issuer
projects that sufficient cash value of paid-up additions has accrued along with
projected dividends in such policy to pay all future annual premiums owed on
that policy for the remainder of Williams' life, nor shall they have any
obligation to make such annual premium payments on any policy after May 2013
regardless of whether that policy has reached the dividend offset or vanishing
point. Inforce illustrations will be obtained annually from each insurer of the
policies identified on Exhibit A to the Split Dollar Continuation Agreement
until June 1, 2013 to determine whether additional annual premiums are required
to continue any such policy under the dividend offset or vanishing point
provision. For example, assume the Mass Mutual policy #11,551,443 has reached
dividend offset in policy year 11 (2008) once annual premiums for policy year 11
have been paid in full. This means the inforce illustration for that policy
reflects no additional annual premiums will be required from the policy holder
(e.g., the Company/Post Apartment Homes and Williams/Trust) commencing with the
policy renewal in year 12 (2010). All future premiums on that policy which come
due will be paid from that policy's paid-up additions and/or dividends. However,
if a subsequent inforce illustration (e.g. for 2012) reflects insufficient
paid-up additions and projected dividends to maintain the dividend offset
provision for the remainder of Williams' life and an additional premium is
required to once again reach the dividend offset, then the Company/Post
Apartment Homes and Williams/Trust each will be required to pay its
proportionate share of the annual premium in year 2012 (based on Williams paying
a portion of the premium equal to his economic benefit and Company/Post
Apartment Homes paying the balance) as so indicated.

      The Company, Holdings, Services and Post Apartment Homes agree to execute
such consents as may reasonably be necessary to permit Williams or the Trust to
borrow from the cash value of any policy set forth on Exhibit A to the Split
Dollar Continuation Agreement, to the extent necessary by Williams or the Trust
to make annual premium payments on any policy for which annual premiums are no
longer being funded by the Company or Post Apartment Homes and which has not
reached and does not remain at the dividend offset or vanishing point, subject
to the collateral assignments. All parties agree to execute such additional
documentation as may be reasonably requested in order to give effect to the
provisions of this paragraph 8.

      9. Mutual Releases; Non-Disparagement; Litigation.

      (a) Subject to the further provisions of this paragraph 9(a), the Company,
on behalf of itself, each of its Affiliates which the Company controls and which
is not a natural person and each of their respective officers listed on Exhibit
B hereto (each, including the Company, a "Company Party", and collectively, the

                                       11
<PAGE>

"Company Parties"), hereby irrevocably and unconditionally releases, acquits,
and forever discharges Williams, his spouse, children, heirs, executors,
administrators and each of Williams' Affiliates which Williams controls and
which is not a natural person, and their respective officers listed on Exhibit C
hereto (each, including Williams, a "Williams Party", and collectively, the
"Williams Parties") and each natural person identified on Exhibit D hereto
(together with the Williams Parties, the "Williams Releasees"), from and with
respect to any and all disputes, complaints, claims, counterclaims, actions,
causes of action, liabilities, suits or damages (collectively "Claims"), whether
at law or in equity, statutory or otherwise, whether known or unknown, asserted
or unasserted, of every kind and nature whatsoever, that any Company Party ever
had, now has, or hereafter can, will or may have against any of the Williams
Releasees for, upon, or by reason of any matter, cause of action, or thing,
whatsoever from the beginning of the world to the date hereof, but expressly
excluding (i) any Claim relating to the performance of such parties' obligations
under this Agreement or for breach of or to enforce this Agreement, (ii) all
rights and obligations of all parties under the Limited Partnership Agreement,
(iii) all rights and obligations of the parties under any agreements relating to
Williams' split dollar life insurance program referred to in paragraph 8 above,
(iv) any Claims or other matters substantially unrelated to, or not arising from
or out of, the business, affairs, operations, assets, properties, policies or
practices of the Company or its Affiliates and (v) a specific matter with
respect to one of the Williams Releasees as set forth on Exhibit D hereto. The
foregoing notwithstanding, the release provided for in this paragraph 9(a) to
any natural person identified on Exhibit D hereto shall terminate forty-five
calendar days after the date of execution of this Agreement and be of no further
force or effect, unless prior to such forty-fifth day such natural person shall
have delivered to the Company a corresponding release in the form of Exhibit E
hereto, in which case the release of such natural person as provided in this
paragraph 9(a) shall continue in full force and effect in perpetuity.

      (b) Subject to the further provisions of this paragraph 9(b), Williams, on
behalf of himself and the other Williams Parties, hereby irrevocably and
unconditionally releases, acquits, and forever discharges each of the Company
Parties and each natural person identified on Exhibit F hereto (together with
the Company Parties, the "Company Releasees") from and with respect to any and
all Claims, whether at law or in equity, statutory or otherwise, whether known
or unknown, asserted or unasserted, of every kind and nature whatsoever, that
any Williams Party ever had, now has, or hereafter can, will or may have against
any of the Company Releasees for, upon, or by reason of any matter, cause of
action, or thing, whatsoever from the beginning of the world to the date hereof,
but expressly excluding (i) any Claim relating to the performance of such
parties' obligations under this Agreement or for breach of or to enforce this
Agreement, (ii) all rights and obligations of all parties under the Limited
Partnership Agreement, (iii) all rights and obligations of the parties under any
agreements relating to Williams' split dollar life insurance program referred to
in paragraph 8 above and (iv) any Claims or other matters substantially
unrelated to, or not arising from or out of, the business, affairs, operations,
assets, properties, policies or practices of the Company or its Affiliates. The
foregoing notwithstanding, the release provided for in this paragraph 9(b) to
any natural person identified on Exhibit F hereto shall terminate forty-five
calendar days after the date of execution of this Agreement and be of no further

                                       12
<PAGE>

force or effect, unless prior to such forty-fifth day such natural person shall
have delivered to Williams a corresponding release in the form of Exhibit E
hereto, in which case the release of such natural person as provided in this
paragraph 9(b) shall continue in full force and effect in perpetuity.

      (c) The release provided for in paragraph 9(b) above specifically includes
any Claims which any of the Williams Parties have or have had under applicable
state or federal law regarding employment discrimination or wages, including,
but not limited to, Title VII of the Civil Rights Act of 1964, as amended; 42
U.S.C. Section 1981; the Age Discrimination in Employment Act, as amended (the
"Age Discrimination Act"); the Americans with Disabilities Act; the Family and
Medical Leave Act (including any reinstatement rights thereunder); and the
Employee Retirement Income Security Act, as amended. The releases in paragraphs
9(a) and 9(b) above specifically include any claims for attorneys' fees or
expenses of litigation arising out of any dispute relating to any Claim released
herein.

      (d) Effective at the Effective Time and continuing until the Standstill
Expiration Date, Williams, on behalf of himself and each of his Affiliates which
he controls and is not a natural person, and their respective officers listed on
Exhibit C hereto while they are serving as officers, agrees that he and they
will not, and will not solicit, cause or encourage others to, make any comments
or statements regarding any of the Company Parties, which are derogatory or
detrimental to any of the Company Parties. The foregoing shall not apply to
compelled testimony, either by legal process, subpoena or otherwise.

      (e) Effective at the Effective Time and continuing until the Standstill
Expiration Date, the Company, on behalf of itself and each of its Affiliates
which the Company controls and is not a natural person, and each of their
respective officers listed on Exhibit B hereto while they are serving as
officers, agrees that it and they will not, and will not solicit, cause or
encourage others to, make any comments or statements regarding any of the
Williams Parties which are derogatory or detrimental to any of the Williams
Parties. The foregoing shall not apply to compelled testimony, either by legal
process, subpoena or otherwise.

      (f) Effective at the Effective Time and continuing until the Standstill
Expiration Date, Williams, on behalf of himself and each of his Affiliates which
he controls and is not a natural person, and each of their respective officers
listed on Exhibit C hereto while they are serving as officers, agrees that he
and they (i) will not initiate any litigation or other legal proceedings against
any of the Company Parties, other than with respect to those matters covered by
clauses (i) through (iv) in paragraph 9(b) above, and (ii) will not solicit,
cause or encourage others to initiate or continue litigation or other legal
proceedings against any of the Company Parties.

      (g) Effective at the Effective Time and continuing until the Standstill
Expiration Date, the Company, on behalf of itself and each of its Affiliates
which the Company controls and is not a natural person, and each of their
respective officers listed on Exhibit B hereto while they are serving as
officers, agrees that it and they (i) will not

                                       13
<PAGE>

initiate any litigation or other legal proceedings against any of the Williams
Parties, other than with respect to those matters covered by clauses (i) through
(iv) in paragraph 9(a) above, and (ii) will not solicit, cause or encourage
others to initiate or continue litigation or other legal proceedings against any
of the Williams Parties.

      (h) The provisions of paragraphs 9(d), 9(e), 9(f) and 9(g) above shall not
apply to matters relating to or arising out of a Qualifying Offer.

      10. Press Release. Promptly after the execution of this Agreement by all
parties hereto, the Company and Williams will issue a joint press release in the
form attached hereto as Exhibit G.

      11. Representations. Williams represents and warrants to the Company that
he has had the opportunity to discuss this Agreement with an attorney, and he
has been advised by the Company to do so. Williams covenants and agrees that he
has been given at least twenty-one days to contemplate the terms of this
Agreement before executing it and that if he chooses to execute it in fewer than
twenty-one days he does so of his own free will and volition. Notwithstanding
any provision contained herein to the contrary, after execution of this
Agreement Williams has seven days to revoke his release of all Claims under the
Age Discrimination Act by delivering written notice to the Company of his
intention to revoke his release of Claims under the Age Discrimination Act;
provided, however, if Williams delivers such written notice to the Company, the
Company shall be relieved of all obligations to make the payments required by
paragraph 4(a) above and all obligations to provide the benefits required by
paragraph 4(b) above.

      12. Company Covenant.

      (a) No change in the control, ownership or operations or assets of the
Company or any of its Affiliates (however defined) shall have any effect
whatsoever on the obligations of the parties to this Agreement.

      (b) As used in this paragraph 12, the term "Code" shall mean the Internal
Revenue Code of 1986, as amended.

      (c) As used in this paragraph 12, the term "Gross Up Payment" shall mean a
payment to or on behalf of Williams which shall be sufficient to pay (i) any
excise tax described in paragraph 12(d) in full, (ii) any federal, state and
local income tax and social security and other employment tax on the payment
made to pay such excise tax as well as any excise and other additional taxes on
such payment, (iii) any interest or penalties assessed by the IRS on Williams
(or his estate) which are related to the payment of such excise tax unless such
interest or penalties are attributable to Williams' willful misconduct or gross
negligence and (iv) any federal, state and local income tax and social security
tax and other employment tax on the payment made to pay such interest or
penalties as well as any excise and additional taxes on such payment.

      (d) If the Company or the Company's independent accountants determine that
any payments and benefits made available to Williams (or his estate) by the
Company or an Affiliate of the Company will result in Williams (or his estate)
being

                                       14
<PAGE>

subject to an excise tax under Section 4999 of the Code (or any successor
provision thereof) or if such an excise tax is assessed against Williams (or his
estate) as a result of any such payments and other benefits, the Company shall
make a Gross Up Payment to or on behalf of Williams (or his estate) as and when
any such determination or assessment is made, provided Williams (or his estate)
takes such action (other than waiving Williams' (or the estate's) right to any
payments or benefits in excess of the payments or benefits which Williams has
expressly agreed to waive under this paragraph 12(d)) as the Company reasonably
requests under the circumstances to mitigate or challenge such tax; provided,
however, if the Company or the Company's independent accountants make such a
determination and, further, determine that Williams (or his estate) will not be
subject to any such excise tax if Williams (or his estate) waives his (or its)
right to receive part of such payments or benefits and such part does not exceed
$25,000, Williams (or his estate) shall irrevocably waive his (or its) right to
receive such part if an independent accountant or lawyer retained by Williams
(or his estate) and paid by the Company agrees with the determination made by
the Company or the Company's independent accountants with respect to the effect
of such reduction in payments or benefits. Any determinations under this
paragraph 12(d) shall be made in accordance with Section 280(g) of the Code,
including any successor provision thereof, and any applicable related
regulations (whether proposed, temporary or final) and any related IRS rulings
and any related case law, and if the Company reasonably requests that Williams
(or his estate) take action to mitigate or challenge, or to mitigate and
challenge, any such tax or assessment (other than waiving Williams' right to any
payments or benefits in excess of the payments or benefits which Williams has
expressly agreed to waive under this paragraph 12(d)) and Williams (or his
estate) complies with such request, the Company shall provide Williams (or his
estate) with such information and such expert advice and assistance from the
Company's independent accountants, lawyers and other advisors as Williams (or
his estate) may reasonably request and shall pay for all expenses incurred in
effecting such compliance and any related fines, penalties interest and other
assessments.

      (e) If, in the event of either (x) an actual change in the ownership or
effective control of the Company or in the ownership of a substantial portion of
the assets of the Company (as contemplated under Section 280G of the Code) or
(y) a publicly announced transaction or event which, if consummated or
completed, would reasonably be expected to result in a change in the ownership
or effective control of the Company or in the ownership of a substantial portion
of the assets of the Company (as contemplated under Section 280G of the Code),
Williams' (or his estate's) accountants advise Williams (or his estate) in
writing (with a copy of any such writing furnished promptly to the Company) that
any of the payments and benefits made available to Williams (or his estate) by
the Company or an Affiliate of the Company (whether under this Agreement or
otherwise) will result in Williams (or his estate) being subject to an excise
tax under Section 4999 of the Code (or any successor provision thereof) and the
Company or its accountants have not made such a determination pursuant to
paragraph 12(d) above, then Williams (or his estate), may, in his or its
discretion (as applicable) and upon written notice to the Company, request a
meeting with the Company's accountants (which meeting shall be held within 20
days following the receipt of such notice by the Company) in order to seek to
resolve such differences, and the Company shall request

                                       15
<PAGE>

that its accountants attend such meeting. If the Company's accountants do not
attend such meeting or do not agree with the position of Williams' (or his
estate's) accountants after attending such meeting, Williams or his estate may
request in writing that the Company seek a private ruling or other determination
from the IRS to determine whether or not Williams (or his estate) will be
subject to such excise tax.

      (f) Following receipt by the Company of a written request from Williams
(or his estate) that the Company seek a private ruling or other determination
from the IRS pursuant to paragraph 12(e) above, the Company will submit a
private ruling or other request for a determination to the IRS no later than 90
calendar days from the date of the receipt of the request from Williams (or his
estate). Prior to such submission to the IRS, the Company will furnish Williams
(or his estate) and his (or his estate's) accountants with a draft of such
submission, affording them with a reasonable opportunity to review and to
provide comments to the Company on the submission, which the Company will
consider in good faith. Upon receipt of written notice from Williams (or his
estate) that Williams (or his estate) has requested such a ruling or
determination from the IRS, the Company will reserve an amount sufficient to
satisfy its obligations under paragraph 12(d) above unless and until the IRS
shall have ruled or otherwise made a determination with respect to whether or
not Williams (or his estate) is required to pay such excise tax. In the event
the IRS determines that Williams (or his estate) is required to pay such excise
tax, the Company shall pay Williams (or his estate) the amount required to be
paid pursuant to paragraph 12(d) above, and shall reimburse Williams (or his
estate) for its reasonable expenses (including attorneys' and other
professionals' fees and expenses) incurred in connection with paragraphs 12(e)
and 12(f).

      (g) If any action at law or in equity is necessary for Williams (or his
estate) to enforce or interpret the terms of this paragraph 12, the Company
shall pay Williams' (or his estate's) reasonable expenses (including attorneys'
and other professionals' fees and expenses) with respect to such action. The
provisions of this paragraph 12 shall survive the termination or expiration of
this Agreement, unless this Agreement shall be terminated by reason of any
breach or default on the part of Williams or the Trust as finally determined by
a court of competent jurisdiction with time for appeal having expired.

      13. Specific Performance. Each of Williams and the Trust, on the one hand,
and the Company, Holdings, Post Apartment Homes, and Services, on the other,
acknowledges and agrees that irreparable harm to the other would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached and that such
injury would not be compensable in damages. It is accordingly agreed that each
party hereto (the "Moving Party") will be entitled to specific performance of,
and injunctive relief to prevent any violation of, the terms hereof and the
other party or parties, as the case may be, hereto will not take action,
directly or indirectly, in opposition to the Moving Party seeking such relief on
the grounds that any other remedy or relief is available at law or in equity.

                                       16
<PAGE>

      14. Expenses. All fees and expenses incurred in connection with the
negotiation and execution of this Agreement and all related matters will be
borne by the party incurring such fees and expenses.

      15. Certain Definitions. As used in this Agreement:

      (a) "Affiliates" and "Associates" and derivatives thereof have the
meanings set forth in Rule 12b-2 under the Exchange Act, and includes Persons
who become Affiliates or Associates of another Person after the date of this
Agreement;

      (b) "Confidential or Proprietary Information" means any secret,
confidential or proprietary information of the Company or any of its Affiliates
not otherwise included in the definition of "Trade Secret". The term
"Confidential or Proprietary Information" does not include information that has
become generally available to the public by the act of one who has the right to
disclose such information without violating any right of the Company or any of
its Affiliates;

      (c) "Multifamily Property" means any real property on which an upscale
multifamily residential-use development has been constructed or is now or
hereafter proposed to be constructed (for example, and not by way of limitation,
a property of the type managed (whether or not owned) by the Company);

      (d) "Person" means any individual, partnership, corporation, limited
liability company, group, syndicate, trust, government or agency thereof, or any
other association or entity;

      (e) "Trade Secret" means any trade secret as such term is defined in the
Georgia Trade Secrets Act, O.C.G.A. 10-1-760, et seq.; and

      (f) "Voting Securities" means the Company's common stock, any preferred
stock issued by the Company and entitled to vote in the election of directors of
the Company, and any other securities entitled to vote in the election of
directors, or any securities convertible into, or exercisable or exchangeable
for, the Company's common stock or other securities entitled to vote in the
election of directors of the Company (including, without limitation, Units),
whether or not subject to the passage of time or other contingencies.

      16. No Waiver. Any waiver by any party of a breach of any provision of
this Agreement will not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions will not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.

      17. Successors and Assigns. All the terms and provisions of this Agreement
will inure to the benefit of and will be enforceable by and against the
successors and assigns of the parties hereto.

                                       17
<PAGE>

      18. Entire Agreement; Amendments. This Agreement (and the Exhibits hereto)
contain the entire understanding of the parties with respect to its subject
matter. Except with respect to other agreements specifically referred to herein
as remaining in effect subsequent to the Effective Time, there are no
restrictions, agreements, promises, representations, warranties, covenants or
undertakings whether oral or written other than those expressly set forth
herein. This Agreement may be amended only by a written instrument duly executed
by the parties or their respective successors or assigns.

      19. Headings. The paragraph headings contained in this Agreement are for
reference purposes only and will not effect in any way the meaning or
interpretation of this Agreement.

      20. Notices. All notices and other communications hereunder will be in
writing and will be given by hand delivery (including by local or overnight
courier service) or by facsimile, receipt confirmed, to the respective parties
as follows:

      If to Williams or the Trust:

                 John A. Williams
                 Corporate Holdings, LLC
                 Suite 400
                 One Overton Park
                 3625 Cumberland Boulevard
                 Atlanta, Georgia  30339
                 Fax: (770) 818-4101

      with a copy to:

                 McKenna Long & Aldridge LLP
                 Suite 5300
                 303 Peachtree Street
                 Atlanta, Georgia  30308
                 Fax: (404) 527-4198
                 Attention: Leonard A. Silverstein, Esq.

      If to the Company, Holdings, Post Apartment Homes, or Services:

                 c/o Post Properties, Inc.
                 4401 Northside Parkway
                 Suite 800
                 Atlanta, Georgia  30327
                 Fax: (404) 846-7880
                 Attention: Sherry W. Cohen, Executive V.P. & Corporate
                            Secretary

                                       18
<PAGE>

      with copies to:

                 King & Spalding LLP
                 191 Peachtree Street
                 Atlanta, Georgia  30303
                 Fax: (404) 572-5100
                 Attention:  John J. Kelley, III, Esq.

                 Skadden, Arps, Slate, Meagher & Flom LLP
                 Four Times Square
                 New York, New York  10036
                 Fax: (212) 735-2000
                 Attention: Daniel E. Stoller, Esq.

or to such other address or fax number as the person to whom notice is given may
have previously furnished to the others in writing in the manner set forth
above.

      21. Governing Law. This Agreement will be governed by and construed and
enforced in accordance with the laws of the State of Georgia, without reference
to the conflict of laws principles thereof.

      22. Counterparts. This Agreement may be executed in counterparts, each of
which will be an original, but each of which together will constitute one and
the same Agreement.

      23. No Admission of Liability. This Agreement shall not be construed as an
admission of liability of any party or any admission that any party has acted in
any way wrongfully toward the other. The parties specifically deny and disclaim
any such liability and wrongful conduct.

      24. Rule of Construction. This Agreement has been negotiated by all
parties, and all parties have participated in the drafting of the language of
this Agreement. No rule of construction of contracts requiring that provisions
be construed against the drafter of an agreement shall be applied to this
Agreement.

      25. Joint and Several Responsibility. The Company, Holdings, Post
Apartment Homes and Services shall be jointly and severally liable to Williams
and the Trust for all payments and benefits due to or for the benefit of
Williams and/or the Trust under the terms of this Agreement.

      26. Severability. In the event any portion or clause of this Agreement is
deemed invalid or unenforceable in a court of law, the remainder of this
Agreement shall be severed from the invalid or unenforceable portion.

      27. Attorneys' Fees. In any subsequent litigation or other action or
proceeding to enforce the terms of this Agreement, whether initiated by
Williams, the Trust, the Company, Holdings, Post Apartment Homes, or Services,
the prevailing party shall be entitled to recover its reasonable attorneys' fees
and costs, other professionals'

                                       19
<PAGE>

fees and costs, expert witness fees and costs, and court or similar costs, from
the other party. The provisions of this paragraph 27 shall survive the
termination or expiration of this Agreement.

      28. No Setoff. The obligations of the Company, Holdings, Post Apartment
Homes, and Services to make the payments specified in this Settlement Agreement
shall be absolute, and any claim by the Company, Holdings, Post Apartment Homes,
or Services against Williams and/or the Trust shall not operate as a defense to
or setoff of any payment obligation by the Company, Holdings, Post Apartment
Homes, or Services.

      29. Director and Officer Liability Coverage. The Company, Holdings, Post
Apartment Homes and Services and their respective Affiliated entities shall
maintain in effect continuing director and officer liability insurance coverage
for the benefit of Williams, as a former director and officer, on terms no less
favorable to Williams than those provided to any other former director or
officer of such entity. Except as specifically provided in this paragraph 29,
neither the Company, Holdings, Post Apartment Homes nor Services shall have any
obligation to maintain any such continuing director and officer liability
insurance coverage for the benefit of Williams. In addition, the Company,
Holdings, Post Apartment Homes and Services and their respective Affiliated
entities shall indemnify Williams against actual or threatened actions,
investigations, claims, suits or proceedings, including shareholder derivative
actions, as a former director and officer, on terms no less favorable to
Williams than those provided to any other former director or officer of such
entity.

      30. Other Covenants.

      (a) Simultaneously with the execution and delivery of this Agreement,
Williams is selling to Post Apartment Homes all securities of Services owned by
him beneficially or of record pursuant to that certain Purchase and Sale
Agreement attached hereto as Exhibit H.

      (b) Williams hereby irrevocably withdraws his demand for a special meeting
of shareholders of Services, made pursuant to a letter dated July 28, 2004 from
Williams to Services.

      (c) Williams hereby irrevocably withdraws his request to examine books and
records of Services, made pursuant to a letter from Williams to Services dated
July 30, 2004, as such request may have been thereafter modified or
supplemented.

      (d) Simultaneously with the execution and delivery of this Agreement,
Williams is selling to Post Apartment Homes all securities of Addison Circle
Access, Inc., a Delaware corporation, owned by him beneficially or of record
pursuant to that certain Purchase and Sale Agreement attached hereto as Exhibit
I.

                                       20
<PAGE>

      IN WITNESS WHEREOF, and intending to be legally bound hereby, each of the
undersigned parties has executed or caused this Agreement to be executed on the
date first above written.

ATTEST:                                 POST PROPERTIES, INC.

/s/ Sherry W. Cohen                      /s/ David P. Stockert
-------------------------------------   ---------------------------------------
Name:  Sherry W. Cohen                  Name:  David P. Stockert
Title: EVP and Secretary                Title: President and Chief Executive
            [Corporate Seal]                   Officer

ATTEST:                                 POST GP HOLDINGS, INC.

/s/ Sherry W. Cohen                      /s/ David P. Stockert
-------------------------------------   ---------------------------------------
Name:  Sherry W. Cohen                  Name:  David P. Stockert
Title: EVP and Secretary                Title: President
            [Corporate Seal]

ATTEST:                                 POST APARTMENT HOMES, L.P.

/s/ Sherry W. Cohen                     By: Post GP Holdings, Inc., its
-------------------------------------   General Partner
Name:  Sherry W. Cohen
Title: EVP and Secretary
            [Corporate Seal]
                                        /s/ David P. Stockert
                                        ---------------------------------------
                                        Name:  David P. Stockert
                                        Title: President

ATTEST:                                 POST SERVICES, INC.

/s/ Sherry W. Cohen                     /s/ David P. Stockert
-------------------------------------   ---------------------------------------
Name:  Sherry W. Cohen                  Name:  David P. Stockert
Title: EVP and Secretary                Title: President
            [Corporate Seal]

NOTARY:                                 /s/ John A. Williams
                                        ---------------------------------------
                                        JOHN A. WILLIAMS
/s/ JoAnn Willoughby
-------------------------------------
Name:  JoAnn Willoughby
Title: Executive Assistant
            [Notarial Seal]

NOTARY:                                 THE JOHN A. WILLIAMS
                                        IRREVOCABLE TRUST DATED
/s/ JoAnn Willoughby                    JANUARY 27, 1995
-------------------------------------
Name:  JoAnn Willoughby                 /s/ B. Wilmont Williams
Title: Executive Assistant              ---------------------------------------
            [Notarial Seal]             Name:  B. Wilmont Williams, Trustee
                                        Title: Trustee

                                       21
<PAGE>

                                                                       Exhibit A

                          Form of Notice of Redemption

                              NOTICE OF REDEMPTION

      The undersigned Limited Partner (the "Transferor") hereby irrevocably (i)
redeems ________ Common Partnership Units (the "Units") in Post Apartment Homes,
L.P. (the "Partnership") in accordance with the terms of the Second Amended and
Restated Agreement of Limited Partnership of Post Apartment Homes, L.P., as
amended (the "Agreement"), and the Redemption Right referred to therein, (ii)
surrenders such Units and all right, title and interest therein, and (iii)
directs that the Cash Amount or REIT Shares Amount (as determined by the General
Partner) deliverable upon exercise of the Redemption Right be delivered to the
address specified below, and if REIT Shares are to be delivered, such REIT
Shares be registered and placed in the name(s) and at the address(es) specified
below. The undersigned hereby represents, warrants, certifies and agrees (a)
that the undersigned has good, marketable and unencumbered title to such Units,
free and clear of the rights or interests of any other person or entity, (b)
that the undersigned has the full right, power and authority to redeem and
surrender such Units as provided herein, and (c) that the undersigned has
obtained the consent or approval of all persons or entities, if any, having the
right to consent to or approve such redemption and surrender.(1)

      In the event that either Post Properties, Inc. or the General Partner (the
"Transferee") acquires the Units in the Partnership offered for redemption
hereunder pursuant to Section 8.6 of the Agreement, then the Transferor and the
Transferee, by its acceptance of the Units, does hereby recognize, acknowledge
and agree that the Transferee shall succeed to all of the rights and obligations
of the Transferor arising from and after the date hereof with respect to such
Units, including, without limitation, the right to receive all distributions
from the Partnership (with respect to such Units and the shares of Net Income,
Net Losses, Recapture Income, and any other items of income, gain, loss,
deduction and credit of the Partnership attributable to such Units, except that
the Transferee shall not succeed to (and the Transferor shall retain) the
Transferor's obligations under Section 13.3 of the Agreement to make capital
contributions to the Partnership with respect to such Units. Accordingly, the
Transferor shall continue to be treated as holding such Units solely for the
purposes of applying Sections 6.1(B)(4) and 13.3 of the Agreement, and the
Transferor shall indemnify and hold the Transferee wholly harmless from and
against any liability whatsoever with respect to the obligations of the
Transferor under Section 13.3 of the Agreement.

--------------------
(1) To the extent that the Company's Registration Statement on Form S-3 (No.
33-81772) ceases to be effective or is subject to a stop order issued by the
Securities and Exchange Commission temporarily suspending the effectiveness of
such Registration Statement, this form may be modified to add appropriate
representations to support a valid private placement of REIT Shares in
connection with a Unit redemption. Notwithstanding the foregoing, to the extent
that any REIT Shares issued to Williams or one of his Affiliates pursuant to a
Unit redemption are freely tradable pursuant to Rule 144(k) at the time of
issuance, the Company will cause such shares to be issued free of any
restrictive legends.

<PAGE>

      All capitalized terms used herein without definition have the meanings set
forth in the Agreement.

Dated: _________________

       Name of Limited Partner: _______________________________________________

                                      _________________________________________
                                             (Signature of Limited Partner)

                                      _________________________________________
                                             (Street Address)

                                      _________________________________________
                                             (City, State, and Zip Code)

                                      Signature Guaranteed by:

                                      _________________________________________

If REIT Shares are to be issued, issue to: _____________________________________

Please insert social security or identifying number: ___________________________

Name: _______________________________________

Address: ____________________________________

                                             ACKNOWLEDGED AND AGREED:

                                             POST APARTMENT HOMES, L.P.

                                             By: POST GP HOLDINGS, INC.
                                             General Partner

                                             By: _______________________________
                                                 Name:
                                                 Title:

                                             Attest: ___________________________
                                                     Name:
                                                     Title:

                                                     [CORPORATE SEAL]

<PAGE>

                                             By: POST LP HOLDINGS, INC., a
                                                 Limited Partner, for itself and
                                                 as attorney-in-fact for Limited
                                                 Partners (other than Post LP
                                                 Holdings, Inc.)

                                             By: _______________________________
                                                 Name:
                                                 Title:

                                             Attest: ___________________________
                                                   Name:
                                                   Title:

                                                   [CORPORATE SEAL]

<PAGE>

                                                                       Exhibit B

                             Company Officers

                               Sherry W. Cohen
                               John B. Mears
                               Christopher J. Papa
                               Arthur J. Quirk
                               Thomas D. Senkbeil
                               David P. Stockert
                               Thomas L. Wilkes

<PAGE>

                                                                       Exhibit C

                                Williams Officers

                                 John A. Williams, Jr.
                                 Mark A. Johnson
                                 Susan D. Porter
                                 Jo Ann Willoughby

<PAGE>

                                                                       Exhibit D

                          Additional Williams Releasees

                              Walter C. Butler, III
                              Margaret C. Condon
                              Richard A. Denny, III
                              Brian Drummond
                              W. Daniel Faulk, Jr.*

----------------------
*  Notwithstanding the provisions of paragraph 9(a), it is understood and agreed
   by all parties that any release by any Company Party in favor of W. Daniel
   Faulk, Jr. shall expressly exclude any and all of Mr. Faulk's obligations
   under that certain Promissory Note, dated December 12, 1999, pursuant to
   which Mr. Faulk promises to make certain payments to Post Apartment Homes
   L.P.

<PAGE>

                                                                       Exhibit E

                                 Form of Release

                                     RELEASE

      In consideration of obtaining a Release from the [Williams/Company]
Parties as set forth in paragraph [9(a)/9(b)] of that certain Settlement and
Separation Agreement, dated August 27, 2004 (the "Settlement Agreement"), by and
among John A. Williams, an individual resident of the State of Georgia
("Williams"), and The John A. Williams Irrevocable Trust Dated January 27, 1995,
on the one hand, and Post Properties, Inc., a Georgia corporation (the
"Company"), Post GP Holdings, Inc., a Georgia corporation, Post Apartment Homes,
L.P., a Georgia limited partnership, and Post Services, Inc., a Georgia
corporation, on the other, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the undersigned hereby
irrevocably and unconditionally releases, acquits, and forever discharges each
of the [Williams/Company] Parties from and with respect to any and all disputes,
complaints, claims, counterclaims, actions, causes of action, liabilities, suits
or damages (collectively "Claims"), whether at law or in equity, statutory or
otherwise, whether known or unknown, asserted or unasserted, of every kind and
nature whatsoever, that the undersigned ever had, now has, or hereafter can,
will or may have against any [Company/Williams] Party for, upon, or by reason of
any matter, cause of action, or thing, whatsoever from the beginning of the
world to the date of the Settlement Agreement, but expressly excluding (i) all
rights and obligations of all parties under the Post Apartment Homes, L.P.
Limited Partnership Agreement and (ii) any Claims or other matters substantially
unrelated to, or not arising from or out of, the business, affairs, operations,
assets, properties, policies or practices of the Company, or its Affiliates.
Capitalized terms used in this Release and not otherwise defined in this Release
shall have the meanings ascribed to them in the Settlement Agreement.

      The undersigned represents and warrants that [he/she] has had the
opportunity to discuss the terms of this Release with an attorney, that the
undersigned understands its terms and that the undersigned has executed and
delivered this Release freely, voluntarily and without coercion.

                                Name (Signature): ___________________________

                                  Name (Print): _____________________________

                                      Dated: _____________ ____, 2004

<PAGE>

                                                                       Exhibit F

                          Additional Company Releasees

                               Lori K. Addicks
                               Robert L. Anderson
                               Janet M. Appling
                               S. Glenn Austin
                               Arthur M. Blank
                               Herschel M. Bloom
                               Carl D. Bonner
                               Patricia R. Carlson
                               Douglas Crocker II
                               Walter M. Deriso, Jr.
                               Russell R. French
                               John T. Glover
                               Robert C. Goddard, III
                               John Hooks
                               M. Catherine Howell
                               Janie S. Maddox
                               Nicholas B. Paumgarten
                               Charles E. Rice
                               Linda J. Ricklef
                               Glen P. Smith
                               David P. Stockert
                               L. Barry Teague
                               S. Jamie Teabo
                               Todd T. Tibbitts
                               Laura J. Vanloh
                               Ronald de Waal

<PAGE>

                                                                       Exhibit G

                              Form of Press Release

                  POST PROPERTIES AND JOHN WILLIAMS RESOLVE ALL
                             OUTSTANDING DIFFERENCES

      -- Williams Steps Down From Board of Directors of Post Properties --

ATLANTA, August 27, 2004 -- Post Properties, Inc. (NYSE: PPS), an Atlanta-based
real estate investment trust, and John A. Williams, the Company's founder and
Chairman Emeritus, jointly announced today that they have entered into a
settlement agreement resolving all their outstanding differences.

Under the terms of the agreement, Mr. Williams' Employment Agreement and
Noncompetition Agreement have been terminated. In addition, Mr. Williams
resigned from Post Properties' Board of Directors effective immediately. The
Company agreed to continue to provide Mr. Williams with certain payments and
benefits until May 31, 2013, which would have been the approximate expiration
date of the Employment Agreement.

The agreement provides for customary standstill covenants by Mr. Williams for a
period of seven years. The parties also exchanged mutual releases and agreed to
non-disparagement and no litigation covenants.

In February 2003, the Company recorded a charge for the present value of the
estimated payments under Mr. Williams' Employment Agreement. Because the present
value of the estimated payments under the settlement agreement approximates the
Company's remaining accrued charge under the Employment Agreement, the Company
does not currently anticipate an additional accrual in connection with this
settlement.

Robert C. Goddard, III, the Company's Chairman of the Board, said, "We are
extremely pleased that we have been able to put our differences behind us, and
that the Board and management can focus their full attention on the Company's
business and improving value for the benefit of all shareholders. This past year
and a half has been a challenging period for the Company, but I believe we have
emerged with a Board of Directors which is united in its determination to help
the Company realize the value of its assets. Post Properties owes much to John
Williams, and we wish him well in the future."

Mr. Williams said, "This was the right time for an amicable parting. My activism
has resulted in positive changes at Post Properties, particularly in the
important area of corporate governance. And, with three new recently-elected,
independent directors in place, I am now comfortable leaving my position on the
Post Properties Board of Directors. I intend to pursue my own interests in real
estate investment and development, and I will always maintain a deep affection
for Post."

                          [INSERT STANDARD PARAGRAPHS]

<PAGE>

                                                                       Exhibit H

                 STOCK TRANSFER, RELEASE AND INDEMNITY AGREEMENT

      STOCK TRANSFER AGREEMENT, dated as of August 27, 2004 (this "Agreement"),
between John A. Williams (the "Seller"), an individual resident of the State of
Georgia, Post Apartment Homes, L.P. (the "Purchaser"), a Georgia limited
partnership and Post Services, Inc., a Georgia corporation (the "Company").

                                   BACKGROUND

      The Seller is the owner of Fifty Five (55) shares (the "Shares") of Voting
Common Stock, $.01 par value per share, of the Company. The Purchaser desires to
purchase the Shares from the Seller, and the Seller desires to sell the Shares
to the Purchaser, on the terms and conditions set forth below. In connection
with such purchase and sale, the parties to this Agreement also desire to enter
into a mutual release and to provide certain indemnities.

      NOW, THEREFORE, the parties hereto for good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged hereby agree as follows:

            1. Sale of Shares; Purchase Price.

                  (a) Subject to the terms and conditions set forth herein, the
Purchaser shall purchase the Shares from the Seller, and the Seller shall sell
the Shares to the Purchaser, for a total price of Eleven Thousand Dollars
($11,000.00) (the "Purchase Price").

                  (b) The Seller has delivered to the Purchaser certificate
number 1 of the Company representing 1 share of Voting Common Stock and
certificate number 4 of the Company representing 54 shares of Voting Common
Stock each accompanied by an executed stock transfer power duly endorsed in
blank, free and clear of all liens, claims, charges, security interests, and
encumbrances of any kind whatsoever against delivery by the Purchaser of a check
in the amount of the Purchase Price.

            2. Representations and Warranties of Seller. The Seller represents
and warrants that:

                  (a) The Seller owns the Shares, of record and beneficially,
free and clear of all liens, claims, charges, security interests, and
encumbrances of any kind whatsoever.

                  (b) The Seller has full right, power and authority to execute,
deliver and perform this Agreement and to carry out the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Seller and constitutes a valid, binding obligation of the
Seller, enforceable against the Seller in accordance with its terms (except as
such enforceability may be limited by laws affecting creditor's rights
generally).

<PAGE>

                  (c) The Seller has in connection with the transactions
contemplated hereby and all aspects thereof, dealt directly with the Purchaser
and has no arrangement or understanding with or obligation to any broker or
other intermediary.

            3. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants that:

                  (a) The Purchaser has full right, power and authority to
execute, deliver and perform this Agreement and to carry out the transactions
contemplated hereby. This Agreement has been duly and validly executed by the
Purchaser, constitutes a valid obligation of the Purchaser, is legally binding
on the Purchaser and is enforceable against the Purchaser in accordance with its
terms (except as such enforceability may be limited by laws affecting creditors'
rights generally).

                  (b) The Purchaser is acquiring the Shares for its own account
(and not for the account of others) for investment and not with a view to the
distribution or resale thereof.

                  (c) Purchaser understands that the Shares have not been
registered under the Act or under any state securities laws and, therefore,
cannot be resold unless they are registered thereunder or unless an exemption
from registration is available. Purchaser has reviewed the form of the
certificate representing such Shares and understand that it bears a legend
reflecting the foregoing restrictions.

            4. Mutual Release.

                  (a) Subject to the further provisions of this paragraph 5(a),
the Purchaser and the Company (collectively, the "Company Parties"), hereby
irrevocably and unconditionally release, acquit, and forever discharge the
Seller, his spouse, children, heirs, executors and administrators (together, the
"Seller Parties"), from and with respect to any and all disputes, complaints,
claims, counterclaims, actions, causes of action, liabilities, suits or damages
(collectively "Claims"), whether at law or in equity, statutory or otherwise,
whether known or unknown, asserted or unasserted, of every kind and nature
whatsoever, that the Company Parties ever had, now has, or hereafter can, will
or may have against any of the Seller Parties for, upon, or by reason of any
matter, cause of action, or thing, whatsoever from the beginning of the world to
the date hereof relating to the Company, but expressly excluding (i) any Claim
relating to the performance of such parties' obligations under this Agreement or
for breach of or to enforce this Agreement and (ii) any Claims or other matters
substantially unrelated to, or not arising from or out of, the business,
affairs, operations, assets, properties, policies or practices of the Company.

                  (b) Subject to the further provisions of this paragraph 5(b),
the Seller, on behalf of himself and the other Seller Parties, hereby
irrevocably and unconditionally releases, acquits, and forever discharges each
of the Company Parties from and with respect to any and all Claims, whether at
law or in equity, statutory or otherwise, whether known or unknown, asserted or
unasserted, of every kind and nature whatsoever,

<PAGE>

that any Seller Party ever had, now has, or hereafter can, will or may have
against any of the Company Parties for, upon, or by reason of any matter, cause
of action, or thing, whatsoever from the beginning of the world to the date
hereof relating to the Company, but expressly excluding (i) any Claim relating
to the performance of such parties' obligations under this Agreement or for
breach of or to enforce this Agreement, and (ii) any Claims or other matters
substantially unrelated to, or not arising from or out of, the business,
affairs, operations, assets, properties, policies or practices of the Company.

            5. Indemnification.

                  (a) The Company and the Purchaser shall jointly and severally
indemnify to the fullest extent permitted by the Georgia Business Corporation
Code, and to the extent that applicable law from time to time in effect shall
permit indemnification that is broader than provided in this Agreement, then to
the maximum extent authorized by law, the Seller, if he is made a party to a
proceeding because he is or was a director or officer of the Company, against
liability, incurred in the proceeding, if he acted in good faith and, while
acting in an official capacity as a director or officer, acted in a manner he
reasonably believed to be in the best interest of the Company, and in all other
cases, acted in a manner he reasonably believed was not opposed to the best
interest of the Company, and with respect to any criminal proceeding, if he had
no reasonable cause to believe his conduct was unlawful.

                  (b) The Company and the Purchaser shall jointly and severally
pay for or reimburse the reasonable expenses incurred by the Seller if he
becomes party to a proceeding, if in advance of disposition of a proceeding:

                        (i) the Seller furnishes the Company and the Purchaser a
                  written affirmation of his good faith belief that he has met
                  the standard of conduct set forth in Section 6(a) above; and

                        (ii) the Seller furnishes the Company and the Purchaser
                  a written undertaking, executed personally on his behalf to
                  repay any advances if it is ultimately determined that he is
                  not entitled to indemnification.

To the extent not otherwise defined, terms used in this Section 6 shall have the
meanings set forth in Section 14-2-850 of the Georgia Business Corporation Code.

            6. Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns.

            7. Governing Law. This Agreement shall in all respects be governed
by the laws of the State of Georgia without giving effect to the principles of
conflicts of law thereof.

<PAGE>

            8. Entire Agreement. This Agreement constitutes the entire
arrangement between the parties with respect to the Shares and cannot be
changed, modified, discharged or terminated except by a writing signed by the
party against whom enforcement of any change, modification, discharge or
termination is sought.

            9. Assignment. Neither party may assign their rights or delegate
their duties hereunder without the prior written consent of the other party.

            10. Captions. The captions used in this Agreement are for
convenience only and shall not be deemed as, or construed as, a part of this
Agreement.

            11. Attorneys Fees. In any subsequent litigation or other action or
proceeding to enforce the terms of this Agreement, whether initiated by Seller,
the Company or the Purchaser, the prevailing party shall be entitled to recover
its reasonable attorneys' fees and costs, other professionals' fees and costs,
expert witness fees and costs, and court or similar costs, from the other party.

            12. Counterparts; Facsimile Execution. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
and all of which shall constitute one and the same instrument. Facsimile
execution and delivery of this Agreement is legal, valid and binding execution
and delivery for all purposes.

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

                                      SELLER:

                                      ________________________________________
                                      John A. Williams

                                      PURCHASER:

                                      POST APARTMENT HOMES, L.P.

                                      By: Post GP Holdings, Inc., its general
                                          partner

                                      By: ____________________________________
                                          Sherry W. Cohen
                                          Executive Vice President
                                          and Secretary

                                      THE COMPANY:

                                      POST SERVICES, INC.

                                      By: ____________________________________
                                          Sherry W. Cohen
                                          Executive Vice President
                                          and Secretary

<PAGE>

                                                                       Exhibit I

                 STOCK TRANSFER, RELEASE AND INDEMNITY AGREEMENT

      STOCK TRANSFER AGREEMENT, dated as of August 27, 2004 (this "Agreement"),
between John A. Williams (the "Seller"), an individual resident of the State of
Georgia and Post Apartment Homes, L.P. (the "Purchaser"), a Georgia limited
partnership and Addison Circle Access, Inc., a Delaware corporation (the
"Company").

                                   BACKGROUND

      The Seller is the owner of Twenty Four (24) shares (the "Shares") of
Voting Common Stock, $.01 par value per share, of the Company. The Purchaser
desires to purchase the Shares from the Seller, and the Seller desires to sell
the Shares to the Purchaser, on the terms and conditions set forth below. In
connection with such purchase and sale, the parties to this Agreement also
desire to enter into a mutual release and to provide certain indemnities.

      NOW, THEREFORE, the parties hereto for good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged hereby agree as follows:

               1. Sale of Shares; Purchase Price.

                  (a) Subject to the terms and conditions set forth herein, the
Purchaser shall purchase the Shares from the Seller, and the Seller shall sell
the Shares to the Purchaser, for a total price of Two Thousand Four Hundred
Dollars ($2,400) (the "Purchase Price").

                  (b) The Seller has delivered to the Purchaser certificate
number 005 of the Company representing 24 shares of Voting Common Stock which is
accompanied by an executed stock transfer power duly endorsed in blank, free and
clear of all liens, claims, charges, security interests, and encumbrances of any
kind whatsoever against delivery by the Purchaser of a check in the amount of
the Purchase Price.

               2. Representations and Warranties of Seller. The Seller
represents and warrants that:

                  (a) The Seller owns the Shares, of record and beneficially,
free and clear of all liens, claims, charges, security interests, and
encumbrances of any kind whatsoever.

                  (b) The Seller has full right, power and authority to execute,
deliver and perform this Agreement and to carry out the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Seller and constitutes a valid, binding obligation of the
Seller, enforceable against the Seller in accordance with its terms (except as
such enforceability may be limited by laws affecting creditor's rights
generally).

<PAGE>

                  (c) The Seller has in connection with the transactions
contemplated hereby and all aspects thereof, dealt directly with the Purchaser
and has no arrangement or understanding with or obligation to any broker or
other intermediary.

                  3. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants that:

                  (a) The Purchaser has full right, power and authority to
execute, deliver and perform this Agreement and to carry out the transactions
contemplated hereby. This Agreement has been duly and validly executed by the
Purchaser, constitutes a valid obligation of the Purchaser, is legally binding
on the Purchaser and is enforceable against the Purchaser in accordance with its
terms (except as such enforceability may be limited by laws affecting creditors'
rights generally).

                  (b) The Purchaser is acquiring the Shares for its own account
(and not for the account of others) for investment and not with a view to the
distribution or resale thereof.

                  (c) Purchaser understands that the Shares have not been
registered under the Act or under any state securities laws and, therefore,
cannot be resold unless they are registered thereunder or unless an exemption
from registration is available. Purchaser has reviewed the form of the
certificate representing such Shares and understand that it bears a legend
reflecting the foregoing restrictions.

                  4. Mutual Release.

                  (a) Subject to the further provisions of this paragraph 5(a),
the Purchaser and the Company (collectively, the "Company Parties"), hereby
irrevocably and unconditionally release, acquit, and forever discharge the
Seller, his spouse, children, heirs, executors and administrators (together, the
"Seller Parties"), from and with respect to any and all disputes, complaints,
claims, counterclaims, actions, causes of action, liabilities, suits or damages
(collectively "Claims"), whether at law or in equity, statutory or otherwise,
whether known or unknown, asserted or unasserted, of every kind and nature
whatsoever, that the Company Parties ever had, now has, or hereafter can, will
or may have against any of the Seller Parties for, upon, or by reason of any
matter, cause of action, or thing, whatsoever from the beginning of the world to
the date hereof relating to the Company, but expressly excluding (i) any Claim
relating to the performance of such parties' obligations under this Agreement or
for breach of or to enforce this Agreement and (ii) any Claims or other matters
substantially unrelated to, or not arising from or out of, the business,
affairs, operations, assets, properties, policies or practices of the Company.

                  (b) Subject to the further provisions of this paragraph 5(b),
the Seller, on behalf of himself and the other Seller Parties, hereby
irrevocably and unconditionally releases, acquits, and forever discharges each
of the Company Parties

<PAGE>

from and with respect to any and all Claims, whether at law or in equity,
statutory or otherwise, whether known or unknown, asserted or unasserted, of
every kind and nature whatsoever, that any Seller Party ever had, now has, or
hereafter can, will or may have against any of the Company Parties for, upon, or
by reason of any matter, cause of action, or thing, whatsoever from the
beginning of the world to the date hereof relating to the Company, but expressly
excluding (i) any Claim relating to the performance of such parties' obligations
under this Agreement or for breach of or to enforce this Agreement, and (ii) any
Claims or other matters substantially unrelated to, or not arising from or out
of, the business, affairs, operations, assets, properties, policies or practices
of the Company.

            5. Indemnification. The Company and the Purchaser shall jointly and
severally indemnify the Seller for any and all actions taken as a director,
officer, employee or agent of the Company to the fullest extent permitted by the
General Corporation Law of Delaware. Notwithstanding the foregoing, to the
extent that the General Corporation Law of Delaware from time to time in effect
shall permit indemnification that is broader than provided in this Agreement,
then the Company and the Purchaser shall jointly and severally indemnify the
Seller to the maximum extent authorized by law. In addition, the Company and the
Purchaser shall jointly and severally advance certain expenses to the Seller in
accordance with Section 145 of the General Corporation Law of Delaware;
provided, that, in connection with the advancement of any such expenses, the
Seller must provide an undertaking to repay any such expenses if it shall
ultimately be determined that the Seller is not entitled to be indemnified by
the Company or the Purchaser.

            6. Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs, personal
representatives, successors and assigns.

            7. Governing Law. This Agreement shall in all respects be governed
by the laws of the State of Georgia without giving effect to the principles of
conflicts of law thereof.

            8. Entire Agreement. This Agreement constitutes the entire
arrangement between the parties with respect to the Shares and cannot be
changed, modified, discharged or terminated except by a writing signed by the
party against whom enforcement of any change, modification, discharge or
termination is sought.

            9. Assignment. Neither party may assign their rights or delegate
their duties hereunder without the prior written consent of the other party.

            10. Captions. The captions used in this Agreement are for
convenience only and shall not be deemed as, or construed as, a part of this
Agreement.

            11. Attorneys Fees. In any subsequent litigation or other action or
proceeding to enforce the terms of this Agreement, whether initiated by Seller,
the Company

<PAGE>

or the Purchaser, the prevailing party shall be entitled to recover its
reasonable attorneys' fees and costs, other professionals' fees and costs,
expert witness fees and costs, and court or similar costs, from the other party.

            12. Counterparts; Facsimile Execution. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original,
and all of which shall constitute one and the same instrument. Facsimile
execution and delivery of this Agreement is legal, valid and binding execution
and delivery for all purposes.

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

                                      SELLER:

                                      ____________________________________
                                      John A. Williams

                                      PURCHASER:

                                      POST APARTMENT HOMES, L.P.

                                      By: Post GP Holdings, Inc., its
                                          general partner

                                      By: ________________________________
                                          Sherry W. Cohen
                                          Executive Vice President
                                          and Secretary

                                      THE COMPANY:

                                      ADDISON CIRCLE ACCESS, INC.

                                      By: ________________________________
                                          Sherry W. Cohen
                                          Executive Vice President
                                          and Secretary

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