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                                                                     EXHIBIT 4.2


                                     FORM OF
               SUBORDINATED MANDATORY CONVERTIBLE PROMISSORY NOTE


THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS, AND
NO SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, ASSIGNED,
HYPOTHECATED OR DISPOSED OF ABSENT AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT OR ANY APPLICABLE STATE SECURITIES LAWS COVERING SUCH SECURITIES OR
SUCH TRANSFER IS MADE IN ACCORDANCE WITH AN AVAILABLE EXEMPTION UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, AND THE COMPANY
RECEIVES AN OPINION OF COUNSEL FROM THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT,
HYPOTHECATION, OR DISPOSITION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

THIS OBLIGATION IS NOT A DEPOSIT, IS NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, AND IS NOT SECURED.

THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE
SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973," AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT
TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.


                                     FORM OF
               SUBORDINATED MANDATORY CONVERTIBLE PROMISSORY NOTE

U.S. $_______________                                            April___, 2001


         FOR VALUE RECEIVED, the undersigned, FIRST SECURITY GROUP, INC., a
Tennessee corporation (the "Company"), hereby unconditionally promises to pay to
the order of _______________________ ("Holder"), the principal sum of
_________________________ and No/100 Dollars ($______________) together with
accrued and unpaid interest thereon, payable on the date and in the manner set
forth in this instrument (the "Note").

         1.       PRINCIPAL AND INTEREST REPAYMENT. The outstanding principal
amount of the Note and all accrued and unpaid interest thereon is due and
payable on October 15, 2001 (the "Maturity Date"). Interest on the unpaid
principal balance of this Note shall accrue at the rate of six percent (6%) per
annum commencing on April 15, 2001, and shall be payable on the Maturity Date.
Except as set forth in Section 6 below, Holder shall not be entitled to
accelerate payment of principal or interest hereunder. The principal amount of,
and all interest on, this Note shall be
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repaid solely in shares of the Company's $.01 par value common stock ("Shares"
or "Common Stock") as set forth in Section 2 below. No cash will be paid to
Holder in respect of the principal amount of or any interest on this Note.
Holder shall be required to take the common stock of the Company in satisfaction
of all of the Company's obligations under this Note.

         In no event shall the amount of interest due or payable under this Note
exceed the maximum rate of interest allowed by applicable law and, in the event
any such payment is inadvertently paid by Borrower or inadvertently received by
the Holder, then such excess sum shall be credited as a payment of principal,
unless Borrower shall notify the Holder in writing that Borrower elects to have
such excess sum returned to it forthwith. It is the express intent of the
parties hereto that Borrower not pay and the Holder not receive, directly or
indirectly, in any manner whatsoever, interest in excess of that which may be
lawfully paid by Borrower under applicable law.

         2.       MANDATORY CONVERSION.

                  2.1      At the Maturity Date (unless earlier converted as set
forth below) this Note, and all of the outstanding principal and interest
thereon, shall be converted into the Common Stock of the Company, whereupon this
Note shall be paid in full and all rights of the Holder herein and all
obligations of the Company hereunder shall be deemed satisfied and extinguished.
The number of shares of Common Stock into which this Note shall be converted
shall be determined by dividing the aggregate principal amount together with all
accrued interest due at the Maturity Date by the Conversion Price (as defined
below) in effect at the time of conversion. The Conversion Price shall be equal
to $10.00 ("Conversion Price"), subject to adjustment as set forth below.

                  2.2      The Company shall have the right exercisable in its
sole discretion at any time prior to the Maturity Date ("Early Conversion
Date"), to accelerate the conversion of this Note, and to convert the Note into
Shares of the Company as set forth in Section 2.1; provided, the Company shall
be deemed at any such Early Conversion Date to owe the interest that would have
accrued on the Note through the scheduled Maturity Date. Without limiting the
generality of the preceding sentence, if the regulatory agency the Company needs
approval to issue this Note does not issue such approval, or retracts such
approval in the future, this Note shall immediately be converted into Common
Stock as set forth in Section 2.1.

                  2.3      At the Maturity Date or upon the Early Conversion
Date, the Holder shall surrender this Note for cancellation at the address of
the Company set forth on the signature page hereto, and shall issue to Holder,
or cause its transfer agent to issue, a certificate to be issued in respect of
this Note for the full number of Shares to which the Holder is entitled,
rounding any fractional share that would result into the next highest full
Shares. No fractional Shares will be issued and no cash will be paid in respect
hereof or Shares issuable upon conversion.

                  2.4      In the event the Company should at any time or from
time to time after the date of issuance hereof fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or the determination of holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other


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securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of this Note shall be appropriately decreased so that the
number of shares of Common Stock issuable upon conversion of this Note shall be
increased in proportion to such increase of outstanding shares. The Conversion
Price set forth in Section 2.1 reflects the Company's 13 for 10 stock split in
the form of a stock dividend and payable to holders of record of Company Shares
at March 31, 2001, and no adjustment shall be made hereunder in respect of such
stock split.

                  2.5      If the number of shares of Common Stock outstanding
at any time after the date hereof is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for this Note shall be appropriately increased
so that the number of shares of Common Stock issuable on conversion hereof shall
be decreased in proportion to such decrease in outstanding shares.

         3.       PRIORITY OF NOTE.

                  3.1      This Note is hereby expressly subordinated, to the
extent and in the manner hereinafter set forth, in right of payment to the prior
payment in full of all the Company's "Senior Indebtedness," as hereafter
defined.

                  3.2      As used in this Note, the term "Senior Indebtedness"
shall mean the principal of and unpaid accrued interest on: (i) all indebtedness
of the Company outstanding on the date hereof to holders of its Senior
Indebtedness and all indebtedness owed to the Company's general creditors, and
(ii) any such indebtedness of any debentures, notes or other evidence of
indebtedness issued in exchange for or to refinance such Senior Indebtedness, or
any indebtedness arising from the satisfaction of such Senior Indebtedness by a
guarantor; provided, however, "Senior Indebtedness" shall exclude all
indebtedness that is designated as, or is pari passu, in priority with this
Note.

                  3.3      If there shall occur any receivership, insolvency,
assignment for the benefit of creditors, bankruptcy, reorganization or
arrangement with creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets, dissolution,
liquidation or other marshalling of assets and liabilities of the Company, or if
this Note shall be declared due and payable upon the occurrence of any default
with respect to any Senior Indebtedness, then (i) no amount shall be paid by the
Company in respect of the principal and interest on this Note at the time
outstanding, unless and until the principal of and interest on the Senior
Indebtedness shall be paid in full, and (ii) no claim or proof of claim shall be
filed with the Company by or on behalf of the Holder that shall assert any right
to receive any payments in respect of the principal of and interest on this
Note, except subject to the payment in full of the principal of and interest on
all of the Senior Indebtedness then outstanding. If an event of default occurs
that has been declared in writing with respect to any Senior Indebtedness, or in
the instrument under which any Senior Indebtedness is outstanding, permitting
the holder of


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such Senior Indebtedness to accelerate the maturity thereof, then, unless and
until such event of default shall have been cured or waived or shall have ceased
to exist, or all Senior Indebtedness shall have been paid in full, no payment
shall be made in respect of the principal of or interest on this Note. The
foregoing notwithstanding if any event described in the foregoing provisions of
this Section 3.3 occurs, the Company may in its sole discretion, require
conversion of this Note by designating an Early Conversion Date.

                  3.4      In the event that the Holder receives a payment from
the Company in violation of the terms of this Section 3, the Holder (a) shall
hold such money in trust for the benefit of the holders of the Senior
Indebtedness, and (b) shall, upon request of the holders of the Senior
Indebtedness, forthwith remit an amount equal to such payment to such holders,
or the payment in the exact received (but with any necessary endorsement to such
holders without recourse). After the Holder has received notice that a payment
has been made to the Holder in violation of the terms of this Section 3, the
Holder shall segregate such payment from (and shall not commingle such payment
with any of) the other funds of the Holder.

                  3.5      Subject to the rights, if any, of the holders of the
Senior Indebtedness under this Section 3 to receive cash, securities, or other
properties otherwise payable or deliverable to the Holder, nothing contained in
this Section 3 shall impair, as between the Company and the Holder, the
obligation of the Company, subject to the terms and conditions hereof, to pay to
the Holder the principal hereof and interest hereon as and when the same become
due and payable, or shall prevent the Holder, upon default hereunder, from
exercising all rights, powers and remedies otherwise provided herein or by
applicable law.

                  3.6      Subject to the payment in full of all Senior
Indebtedness and until this Note shall be paid in full, the Holder shall be
subrogated to the rights of the holders of Senior Indebtedness (to the extent of
payments or distributions previously made to such holders of Senior Indebtedness
pursuant to the provisions of Section 3.5 above) to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness. No
such payments or distributions applicable to the Senior Indebtedness shall, as
between the Company and its creditors, other than the holders of Senior
Indebtedness and the Holder, be deemed to be a payment by the Company to or on
account of this Note; and for purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness to which the Holder would be
entitled except for the provisions of this Section 3 shall, as between the
Company and its creditors, other than the holders of Senior Indebtedness and the
Holder, be deemed to be a payment by the Company to or on account of the Senior
Indebtedness.

         4.       REPRESENTATIONS OF THE HOLDER.

                  4.1      The Holder is an "Accredited Investor" as defined in
Regulation D under the Securities Act, and is acquiring this Note solely for its
own account for the purposes of investment and not with a view to making or
participating any distribution thereof. The Holder acknowledges that it is able
to bear indefinitely the financial risks associated with an investment in this
Note and that it has been given full access to such records of the Company and
to the officers of the Company as it has deemed necessary and appropriate to
evaluating its investment.


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                  4.2      The Holder has had the opportunity to obtain from the
Company any information, to the extent possessed by the Company or obtainable
without unreasonable effort and expense, necessary to evaluate the merits and
risks of this investment and has concluded, based on the information presented
to the Holder, the Holder's own understanding of investments of this nature and
of an investment in any of the Company's securities in particular, and the
advice of such consultants or counsel as the Holder has deemed appropriate, that
the Holder wishes to make the investment.

                  4.3      The Holder understands that no public market now
exists for the Note or the Shares of Common Stock into which it shall be
converted, or any other securities issued by the Company, and that the Company
has made no assurances that a public market will ever exist for the Note, the
Share into which it shall be converted, or any other securities issued by the
Company.

                  4.4      The Holder understands that the Shares into which the
Note shall be converted, and any securities issued in exchange therefore, shall
bear a legend to the following effect:

         THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE
         SECURITIES LAWS, AND NO SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
         SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR DISPOSED OF ABSENT AN
         EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR ANY APPLICABLE STATE
         SECURITIES LAWS COVERING SUCH SECURITIES OR SUCH TRANSFER IS MADE IN
         ACCORDANCE WITH AN AVAILABLE EXEMPTION UNDER THE SECURITIES ACT AND ANY
         APPLICABLE STATE SECURITIES LAWS, AND THE COMPANY RECEIVES AN OPINION
         OF COUNSEL FROM THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
         TO THE COMPANY STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT,
         HYPOTHECATION, OR DISPOSITION IS EXEMPT FROM THE REGISTRATION
         REQUIREMENTS OF SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

         THIS OBLIGATION IS NOT A DEPOSIT, IS NOT INSURED BY THE FEDERAL DEPOSIT
         INSURANCE CORPORATION, AND IS NOT SECURED.

         THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13)
         OF CODE SECTION 10-5-9 OF THE "GEORGIA SECURITIES ACT OF 1973," AND MAY
         NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT
         UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.

         5.       REGISTRATION, TRANSFER AND SUBSTITUTION OF THE NOTE. The
Company will keep at its principal office a register in which the Company will
provide for the registration of the Note and the registration of transfers of
the Note. The Company may treat the Person in whose name any Note is registered
on such register as the owner for thereof for all purposes.


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         6.       EVENTS OF DEFAULT. Each of the following conditions or events
shall constitute an event of default ("Event of Default"):

                  (a)      if the Company shall default in the payment of any
principal and interest by the conversion of this Note in accordance with the
terms hereof at the earlier of the Maturity Date or the Early Conversion Date;
or

                  (b)      in the event of any insolvency, receivership,
conservatorship, reorganization, readjustment of debt, marshaling of assets and
liabilities or similar proceedings or any liquidation or winding up of or
relating to the Company, whether voluntary or involuntary.

         7.       REMEDIES UPON DEFAULT. Upon the occurrence of any Event of
Default, the Holder may, at its option, by notice to the Company, declare all or
any part of the unpaid principal amount of the Note then outstanding to be
forthwith due and payable, and thereupon the Company shall issue the number of
Shares into which this Note is convertible at the Maturity Date, and Holder may
proceed to enforce delivery of such Shares in accordance with the terms hereof
in such manner as it or they may elect. This shall be the Holder's sole remedy
upon an Event of Default

         8.       MISCELLANEOUS.

                  8.1      Any notice, demand, request, waiver, or other
communication required by any provision of this Note shall be in writing and may
be delivered by personal service, sent by facsimile with confirmation of receipt
or sent by registered or certified mail, return receipt requested, with postage
thereon fully repaid and shall be effective upon receipt. All such
communications shall be addressed as follows:

         To the Company:           First Security Group, Inc.
                                   817 Broad Street
                                   Chattanooga, Tennessee 37402
                                   Attn: William L. Lusk, Jr.

         To the Holder:            ------------------------
                                   ------------------------
                                   ------------------------
                                   ------------------------


                  8.2      This Note, as such, shall not entitle any Holder to
any rights as a shareholder of the Company. The remedies herein provided are
cumulative and not exclusive of any remedies provided under law.

                  8.3      Any terms of this Note (including, without
limitation, the Maturity Date, the rate of interest and the conversion features)
may be waived or modified only in writing, signed by the Company and the Holder.


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                  8.4      THE COMPANY AND THE HOLDER BY ACCEPTING THIS NOTE,
EACH ACKNOWLEDGE THAT ANY DISPUTE OR CONTROVERSY BETWEEN THE COMPANY AND THE
HOLDER WOULD BE BASED ON DIFFICULT AND COMPLEX ISSUES OF LAW AND FACT.
ACCORDINGLY, THE HOLDER AND THE COMPANY HEREBY WAIVE TRIAL BY JURY IN ANY ACTION
OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT OR TRIBUNAL IN WHICH AN ACTION
MAY BE COMMENCED BY OR AGAINST THE COMPANY ARISING OUT OF THIS NOTE OR BY REASON
OF ANY OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE COMPANY AND ANY HOLDER OF
ANY KIND OR NATURE.

                  THE COMPANY, AND THE HOLDER BY ACCEPTING THIS NOTE, HEREBY
AGREE THAT THE FEDERAL COURT OF THE EASTERN DISTRICT OF TENNESSEE OR, AT THE
OPTION OF THE HOLDERS, ANY STATE COURT LOCATED IN HAMILTON COUNTY, TENNESSEE
SHALL HAVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE
COMPANY AND ANY HOLDER PERTAINING DIRECTLY OR INDIRECTLY TO THIS NOTE OR ANY
OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE COMPANY AND ANY HOLDER OF ANY KIND
OR NATURE.

                  8.5      THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.

                  8.6      Company hereby agrees to pay Holder's reasonable
costs in collecting and enforcing this Note, including reasonable attorneys'
fees and charges. In no event shall any officer, director, shareholder, or
director of the Company be personally liable for any amounts due and payable
pursuant to this Note.

                  8.7      This Note applies to, inures to the benefit of, and
binds the successors, assigns of the Holder and the Company, respectively. The
Company and any subsequent holder of this Note receives this Note subject to the
foregoing terms and conditions, and agrees to comply with the foregoing terms
and conditions for the benefit of the Company and any other holders.



                             SIGNATURES ON NEXT PAGE


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                  SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE



         IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.


COMPANY:

FIRST SECURITY GROUP, INC.


By:
   -----------------------------
Its:
   -----------------------------
Name:
   -----------------------------

Address:    First Security Group, Inc.
            817 Broad Street
            Chattanooga, Tennessee
            Attn: William L. Lusk, Jr.



NAME, ADDRESS AND TAXPAYER IDENTIFICATION NUMBER OF HOLDER:

Name:                          (please print)
         ---------------------
Address:
         -----------------------------
         -----------------------------
         -----------------------------
         -----------------------------

TIN:     _____________________